FOREIGN RELATIONS, 1934, VOLUME III



  Mr. Hornbeck made to Mr. Lamont this morning by telephone a
statement as follows:
                                                    June 18, 1934.
  I have talked the matter over with the Secretary and he with the
President. They have not hitherto had occasion and have not at this
moment undertaken to make any intensive study of the history and the
implications of the Consortium project and would not wish to make
a commitment or to have the views or opinion of the Administration
cited conclusively in any discussions of the matter at this stage. They
are not adversely disposed in regard to the Consortium and its possi-
bilities as an agency for cooperative action. The Administration feels
that the present would not be an opportune moment for withdrawal
by the American banking group. We would prefer to see at this time
no change with regard to the life of the Consortium. We are not ready
to suggest activity. We feel that we are in a period when the best
procedure is not to make alterations in the general set-up. Perhaps
the most important of the uncertain factors during the next few
months is that of the Naval Conference. When there becomes avail-
able more and clearer evidence with regard to what really are Japan's
intention and plan of procedure with regard to China and the Far
Eastern situation in general, everybody will be in better position to
judge with regard to what seems possible and practicable on the part
of other countries. We would not wish to see an organization like
the Consortium made an instrument whereby money would be made
available from this and other countries only to be made use of ulti-
mately by the Japanese for purposes of essentially exclusive advantage
to themselves. Also, we would not desire that the American banking
group take the lead in steps intended to bring the Consortium into
action. We feel that nothing should be done which would make it
appear either to Japan or to China that the United States is leading
or wishes to lead in bringing about action by the Consortium; that it
would be best to persevere in an attitude of watchful waiting until
China invites or appears ready to invite action and Japan or Great
Britain takes the lead in suggesting a favorable response by the
Consortium.
  In brief, with an open mind as regards future developments and
possibilities, the attitude of the Administration on the subject of the
Consortium is one of good will and watchful optimism.

893.15/22
  The Under Secretary of State (Phillips) to J. P. Morgan & Co.

                                     WASHINGTON, June 18, 1934.
  SIRS: The receipt is acknowledged of your letter of June 13 refer-
ring to the possibility of participation by American interests in
financing in China.
  It is believed that, with regard to the China Consortium, the views
of the Department have been adequately expressed by Mr. Hornbeck



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