Foreign Relations of the United States, 1961–1963, Volume I, Vietnam, 1961

73. Memorandum From the Secretary of Defense’s Assistant for Special Operations (Lansdale) to the Deputy Secretary of Defense (Gilpatric)¹

Washington, June 26, 1961.

SUBJECT

• Special Financial Group (SFG) to Viet-Nam

The first report from Colonel Ed Black on the progress of the SFG has just been received by me. It touches on contention between Defense and ICA, about which Cottrell is aware already. I am passing copies of this memorandum to the Defense members of the Viet-Nam Task Force for their information and to pass to Cottrell. Colonel Black’s report follows:

• “1. First week devoted primarily to USOM briefings. Spent first afternoon with Ambassador and Country Team and one morning with MAAG. Administrative and other arrangements for our group are handled by Gardiner (USOM).
• “2. Brief initial meeting with the Vietnamese occurred 23 June, followed by an hour and half ARVN briefing given personally by Gen. Khanh. President Diem has arranged four-day trip for US and VN groups 24-27 June. Will visit Ban Me Thuot, Nha Trang, Hue, Tourane and villages in vicinity of each stop. First real opportunity to mix with the Vietnamese group occurred at stag dinner 23 June. Thuan returned Saigon 23 June and obviously VN are stalling until he reports to Diem on Washington trip.
• “3. Staley has right philosophy and instincts. Have stressed over-riding importance of understanding VN point of view so as to establish true communication between U.S. and Vietnamese groups. Staley agrees and has established good rapport with Thuc (Yu Quoc Thuc, Dean of the Law School, University of Saigon, whom President Diem appointed to head the Vietnamese economic group to work with Staley). Staley is determined to remove any economic obstacles to prompt solution of security problem which he considers must receive first priority. Within U.S. group Defense and State support Staley’s humanistic approach, whereas Treasury and ICA press for hard negotiation to make the Vietnamese bear larger share financial burden.
• “4.

  Have urged Staley to hold joint press conference with Thuc for purpose of making following points to VN and world press.

  • “a. Staley group one of a series of follow-up actions stemming from Vice President’s trip.
  • “b. Staley-Thuc have agreed. to a completely joint study and have merged their groups for this purpose.
  • “c. One of first things Joint US-VN Group did was make trip together to see situation at village level.
  • “d. Solution of security problem prerequisite of any successful program of economic development.
  • “e. Joint group will develop emergency economic program to provide immediate support to military operations at village level.
  • “f. Confident that Viet-Nam will win battle against Communists, the joint group is also preparing 3-5 year outline plan for economic and social development.

  “Ambassador has now concurred and USIS is arranging press conference after we return to Saigon.

• “5. Staley proposes four-part joint US-VN report which he and Thuc would submit to their respective Presidents as follows:
  • “Part 1. Military-security problem and financial measures required by both governments to insure its rapid and successful solution.
  • “Part 2. Emergency program of economic development designed to provide immediate support to military effort.
  • “Part 3. Outline of a 3-5 year economic development program with priorities of effort indicated.
  • “Part 4. Recommendations as to method and joint organization for implementation of over-all program.
• “6. Appears to me that unless pressure is brought upon Treasury, ICA and State in Washington to take more liberal view of U.S. piaster support for initial 20,000-man increase priceless weeks will be lost and success of Staley mission may be jeopardized. Important to understand Ambassador is handling this particular negotiation entirely separately from Special Financial Group’s effort. Obviously if Vietnamese get impression that U.S. is unwilling to take generous view of financing first 20,000-man increment, Staley will find it difficult to convince them we are sincerely trying to help save Viet-Nam from Communism. Somehow ICA and Treasury in Washington must be made to understand that the Vietnamese consider they should receive some credit on fiscal balance sheet for Vietnamese casualties in daily fight against Viet Cong. Help is urgently needed at Washington end as positions are frozen here. MAAG, favoring liberal approach and USOM with hard nosed position provide little prospect for any meeting of the minds within country.”

1. Source: Washington National Records Center, RG 330, OSD Files: FRC 71 A 6489, Viet-1. Secret. Copies also sent to McNamara, Heinz, and Levy. The source text bears the stamped notation: “(SecDef has seen)”.