These communications were transmitted to the British Foreign Office, prompting a reply from Mr. Balfour on August 14, 1918, wherein he inquired whether it was the intention of the American Government to enter the $100,000,000 loan to China for currency reform which was then under consideration and toward which Japan had already made two separate advancements; and whether it was the intention of the United States to confine activities to administrative loans or to include industrial and railway enterprises as well. Lord Reading made inquiry of the State Department and determined that both types of loans had been considered.

It is obvious from these communications that both Japan and Great Britain wished to retain their special interests in regard to the existing railway and industrial loans, and balked at their being pooled with those of the consortium. But England was ready enough from the beginning to forego these. The United States held "that industrial as well as administrative loans should be included in the new arrangement, for the reason that, in practice, the line of demarcation between those various classes of loans often is not easy to draw."

Everything went along smoothly until Japan was consulted, and then it was found that while she was willing enough to enter into a consortium for the whole of China, she was emphatically unwilling to have Manchuria and Mongolia included. From the very beginning, the American, British, and French banking-groups and governments most decidedly refused to accede to Japan's demands in this matter, declaring that such a rendering would simply open up the sores of spheres-of-interests and concession-hunting, and completely nullify the purposes and intentions of the consortium. The Japanese argument is amusing. When Japan first encroached upon Manchuria and Mongolia, it was because of danger to her safety from Czarist Russia. Now she was face to face with Bolshevist Russia, and she trembled for her safety in these terms:

Furthermore, the recent development of the Russian situation, exercising as it does an unwholesome influence upon the Far East, is a matter of grave concern to Japan; in fact, the conditions in Siberia, which have been developing with such alarming precipitancy of late, are by no means far from giving rise to a most serious situation, which may at any time take a turn threatening the safety of Japan and the peace of the Far East, and ultimately place the entire Eastern Asia at the mercy of the dangerous activities of extremist forces. Having regard to these signals of the imminent character of the situation, the Japanese Government all the more keenly feel the need of adopting measures calculated to avert any such danger in the interest of the Far East as well as of Japan. Now, South Manchuria and Mongolia are the gate by which this direful influence may effect its penetration into Japan and the Far East to the instant menace of their security. The Japanese Government are convinced that, having regard to the vital interests which Japan, as distinct from the other Powers, has in the regions of South Manchuria and Mongolia, the British Government will appreciate the circumstances which compelled the Japanese Government to make a special and legitimate reservation indispensable to the existence of the state and its people....

The utter fallacy of this is obvious. The consortium was not a miracle-worker. Its efforts would necessarily extend over a series of years; its principals were as opposed to Bolshevism as Japan was. But there was Japan,—bureaucratic, imperialistic Japan,—shedding tears over the prospect of what might happen to her people from Bolshevism if the consortium were permitted to take a share in the development of Manchuria and Mongolia,—to which she has no right other than that of her might.

No pressure such as could be said to be in the nature of an ultimatum to join the consortium was exerted, of course, but it was obvious that unless Japan withdrew her objections the consortium would not materialize. Japan made an effort to get the other powers to make some written statement or accept her formula securing to her these special rights; but the others were adamant. Japan specified just what she feared,—the construction of other railroads.

The United States replied:

The American Government cannot but acknowledge, however, its grave disappointment that the formula proffered by the Japanese Government is in terms so exceedingly ambiguous and in character so irrevocable that it might be held to indicate a continued desire on the part of the Japanese Government to exclude the American, British, and French banking groups from participation in the development, for the benefit of China, of important parts of that republic, a construction which could not be reconciled with the principle of the independence and territorial integrity of China.

It is interesting to note that in all these communications, the Japanese Government is constantly referring to its own special interests and dangers, whereas the others repeat and repeat their concern for the integrity of China. It may be, after all, that the Japanese Government is the more honest, though America's stand is unchallengeable.

I have dwelt sufficiently, I believe, with the emanations from behind departmental doors. The human elements are much more interesting. Suffice it to say that Japan held out for a long, long time, and things seemed hopeless. At last, after an understanding with all those concerned outside Japan, Mr. Thomas W. Lamont went to the Far East as spokesman for the other powers, to carry on negotiations with Japan.