Memorandum of Conversation with Secretary of State Dean Acheson, Congressman Frank Karsten, and Philander P. Claxton

0162 m. Colyarison DEPARTMENT OF STATE 863 Memorandum of Conversation 186-a DATE: July 10, 1951 SUBJECT: Investigation of China Lobby the E PARTICIPANTS: The Secretary Representative Frank M. Karsten Mr. P. P. Claxton, Jr. - H COPIES TO: S - Mr. Battle L - Mr. McJennett FE - Mr. Rusk H - Mr. Claxton 1-1493 Representative Frank Karsten of Missouri called at 11:00 a.m. at his request. He stated that he had been interested for six months or more in the China lobby and the possibility that it might be worth- while for his Subcommittee of the House Expenditures Committee to look into it. He said that be felt it was an amorphous group, probably not closely organized, but very active. He mentioned in the course of the conversation that he had talked to Secretary Marshall, Secretary Snyder, Marriner S. Ecoles of the Federal Reserve Board, and Mr. Murphy of the White House, and that he wished 'to obtain my views. He explained that the jurisdiction of his Committee to investigate would arise from the misuse of United States funds advanced to China which might have been returned to this country for purposes of the China lobby. I mentioned to Mr. Karsten that there have been a good many rumors about fortunes made by Chinese bankers and others out of funds transferred by the United States to China for such purposes as the stabilization of currency. I referred to a memorandum in the China White Paper which outlined the financial transaction by which these profits vere made. I pointed out, however, the transactions if they took place at all were so complex that it would be substantially im- possible to show that the profits actually realized had in fact come from the American financial eid. I pointed out that even if this were DECLASSIFIED proven E. O. 11652, Sec. 3(E) and 5-12-76 S(D) or (b) Dept. of State letter, Ban LI-HC NARS Dake 6.25.76