893.51/6–1245
Memorandum by Mr. Paul F. McGuire of the Division of Financial Affairs to the Director of the Office of Financial and Development Policy (Collado)
In connection with Mr. Morgenthau’s complaints about Ambassador Hurley and the Department on the Chinese gold matter, I should like to say, just for the record (our own files, perhaps) that I cannot see that either the Ambassador or the Department have any apologies to make to Mr. Morgenthau.
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The real thing that obviously hurt Mr. Morgenthau’s feelings was Ambassador Hurley’s pointing out that his opinion on the stabilization fund was not asked until after the gold was gone, so that all our bargaining power was gone. The gold was, in fact, lost on May 16, three days before Mr. Morgenthau’s message reached the Department for transmission. Everyone concerned knows that the gold was lost because Secretary Morgenthau discovered he had made a commitment a year ago which he had forgotten all about, and decided that as a matter of personal honor he must live up to that commitment without any bargaining.
The whole show was run by Mr. Morgenthau and his Far East staff; the Department was merely tolerated as a bystander until Mr. Morgenthau asked us to come to his rescue on May 15. I doubt very much that Mr. Morgenthau would have taken kindly to efforts of the Department to keep Chungking informed of the day to day development [Page 1104] of Mr. Morgenthau’s discomfiture, or the real reason for the sudden dénouement. He has been very insistent upon his right to communicate directly with Ambassador Hurley on all financial matters relating to China, which he considers to be his very special preserve. It was only natural for the Department not to interfere, particularly when it would probably only have added to Mr. Morgenthau’s embarrassment.
For that matter, the Department took exactly the same position taken by Hurley, namely, that the gold should be provided only if a stabilization fund was established as a quid pro quo. In preliminary discussions with Treasury, we were assured that there was no outstanding commitment to give up the gold, so that we were in a position to bargain with the Chinese. Only on May 8 was this illusion shattered, when Dr. Soong produced the letter in which Mr. Morgenthau had signed the gold away a year ago. After that, it seemed only gentlemanly forbearance for the Department to forego relating this tragi-comic development to General Hurley, and let Mr. Morgenthau work his own way out of the predicament as best he could, providing him with a boost at his request with Mr. Grew’s letter of May 16.
The Department did finally transmit the whole story to the Ambassador in as judicious a fashion as possible in its instruction no. 162 of June 7.84 No doubt when this instruction is received, the Ambassador will understand the peculiar course of events, but his initial reaction, expressed in his telegram to Morgenthau, was entirely justified. It could scarcely have been otherwise in the absence of information about the forgotten ghost letter.
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