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Rh (10) Although an effort must be made to give Bay Vien an opportunity to save face, the Binh Xuyen must be stripped of their power.

(11) Based on the above, General Collins considered that there were only two solutions to this problem — acceptance of the proposal of Bao Dai, or for Bao Dai to return and assume the Premiership. General Collins did not consider the latter to be a desirable solution.

d. In response to a question, General Collins stated that the current situation in South Viet-Nam was definitely not engineered by the French. However, he could not speak for French support from Paris. General Collins emphasized that civil could break out at any moment and that either side could be responsible.

e. General Collins stated that the U.S. has a moral obligation in relation to the 500,000 Vietnamese refugees and that it would be difficult for the U.S. to withdraw from Viet-Nam.

f. In reference to the Sainteny mission, General Collins stated that General Ely has threatened to resign over this issue. He indicated that the French business people have not adjusted to the concept of a Free Viet-Nam. He thought that the French would just as soon see an indefinite partition of Viet-Nam but that the U.S. should force the issue of French support for a legally constituted Vietnamese Government.

With reference to the two problems primarily of military interest, General Collins stated that:

a. We should not provide one nickel more than the 100 million dollars currently available for support of the FEC. They might reduct their forces but would not withdraw.

b. The current dispositions of the FEC are sound.

c. The FEC is a strong, stabilizing influence in South Viet-Nam.

d. Implementation of Article IV of the Manila Pact would require ground forces to stabilize the front and give the U.s. Air and Navy forces something to shoot at.

e. Air and Naval forces will alone result in a victory in this area in the event of overt aggression.

f. Integration of Sect forces as he has proposed (DA IN 130977) (TAB B) has not been agreed to by the French.

g. This integration will now cost approximately 40 million dollars rather than the 25 milliion as previously stated. REPRODUCTION OF THIS DOCUMENT IN WHOLE OR IN PART IS PROHIBITITED EXCEPT WITH PERMISSION OF THE ISSUING OFFICERh