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The transactions of the Government in respect to the Panama Canal, with which, either by reason of personal participation or by reason of examination of reports made to me, I am familar, and with respect to which I infer that the committee desires my evidence, cover a period beginning May 9, 1904, and continuing down to the present date. In order that I may make my evidence with respect to them intelligible, it is necessary for me to refer to a great many documents, laws, orders, and correspondence. The different transactions to be touched

upon are numerous. I shall have to test your patience by detail, and I fear that my statement will be quite long. I have written out my statement, and it is being printed, with exhibits.

I crave the indulgence of the committee, that I be not interrupted by questions until my statement is concluded; then I shall be glad to submit to the cross-examination of the committee upon every subject touched upon in the statement, or any other connected with the Panama Canal, or the Panama Railroad, in respect to which I can furnish the committee any information. I am quite sure that if the committee will postpone its questions, it will be found that the range of crossexamination will be much more limited than if questions are put in advance of my completed statement. This method will certainly, therefore, shorten the valuable time of the committee, of which I shall, in any event, have to consume more than I would wish.


In the first place, I shall not attempt to discuss at all the engineering and technical questions with reference to the type of the canal. I have expressed my opinion in a letter to the President in favor of a lock canal and strongly adhere to it. This committee has had before it able engineers on both sides of the question, and has had full explanations made to it thereon.

With respect to the type of the canal I can only urge with great deference that it is of the highest importance that the question be decided with as much promptness as the subject will permit. The

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present law —the Spooner Act, so called--certainly intended to provide for the construction of a lock canal. The extent of the financial pro. vision made in the act, when compared with the recommendations of the first Walker Commission, leave no doubt that the intention of Congress was to appropriate money for a canal at a 90-foot level, with the necessary locks. If Congress decides to reverse this policy and votes / in favor of a sea-level canal, then the President is anxious to know it, as soon as possible and to begin the work at once.

If Congress decides in favor of a lock canal, or if it chooses not to. make any decision at all and is willing to leave the situation as it is upon the law as it is, the President will not hesitate to adopt the plan recommended by the minority, with some possible modifications, and proceed to the speedy construction of the great waterway at an 85-foot level. I am advised from the Isthmus that Mr. Stevens's work has so far progressed that he will soon be in a position where he must delay all work, or substantially all, until the decision is reached. I have been advised by Mr. Tawney that the time is near at hand when we must be ready with our estimates for the money needed in the construction of the canal for the year ending June 30, 1907. They must be included in the sundry civil bill. Mr. Shonts and Mr. Stevens think that the character of the estimates will materially differ as the type of canal fixed upon is lock or sea-level.

I am quite aware of the gravity of the question and of the serious character of a mistake, if mistake it be, in the recommendation of the minority of the consulting board as to the Gatun dam, and while I do not share, I sympathize with the anxiety which must affect any menber of this committee if he has real doubt in regard to the stability of the structure which is the distinguishing and indispensable feature of that plan. But however great the responsibility it must be met, and I submit with great respect that it must be promptly met, in order that there shall be no unnecessary delay in pushing the work.


The subjects which I shall discuss are:

First. The government of the Zone; its judicial system, and what is needed in the way of additional legislation by Congress.

Second. The Hay-Varilla treaty and the political relations between the United States and the Republic of Panama, and the necessity and reasons for the issuing of the Executive order of December 3, with its modifications, as a modus vivendi.

Third. The Executive order or modus vivendi of December 3, 1904; the reasons for its necessity and adoption.

Fourth. The currency agreement of June 20, 1904, and the bankers' agreement of April 9, 1905; the necessity for them; their effect, and the proper course to be taken with respect to the future financial operations of the Government on the Isthmus.

Fifth. Authority of the President, acting through the Commission or other agent, to make temporary arrangements with the Republic of Panama.

Sixth. The old Commission; its work, and the reasons for its retirement; the reorganization; the new Commission and its work. · Seventh. The Panama Railroad; its condition at the time of the transfer; the acquisition of the outstanding shares of stock by the

MAY 19 1906

Government in the spring of 1905; the question of the continuance of the steamship line; the question of rates; the congestion of traffic, and the Pacific Mail.

Eighth. The relations of William Nelson Cromwell to the Government's construction of the canal and the assistance which he has rendered.

Ninth. The circumstances leading to the severance of Mr. Wallace from the canal enterprise.

Tenth. The Markel contract.

Eleventh. The revocable license to the Union Oil Company for the construction of a pipe line from Panama to Colon.

Twelfth. The question of labor.
Thirteenth. Shall the canal be built by contract?



With the permission of the committee I shall take the foregoing subjects up in their order, but before doing so it would be of assistance, I think, to give a short chronology of the events which are met in the consideration of the subjects above outlined for consideration. June 28, 1902.- The Spooner Act, providing for the construction of

the canal, was approved. Appended hereto for convenience, and

marked "Exhibit I." February 26, 1904.-Ratifications of the Hay-Varilla treaty were ex

changed at Washington and the treaty took effect. Appended

hereto and marked "Exhibit 2." March 3, 1904.—The President appointed and the Senate confirmed

the seven members of the Isthmian Canal Commission under the Spooner Act, with Admiral Walker as chairman. The Commis

sion immediately organized. April 28, 1904.--Congress by law directed the President to take pos

session of the zone of land, the control of which was ceded, under the Hay-Varilla treaty, to the United States, and directed that until the expiration of the Fifty-eighth Congresss, i. e., March 4, 1905, the government of the Zone and the exercise of the powers under the Hay-Varilla treaty should be vested in the persons

and exercised in the manner which the President should direct. April 28, 1904. - The Fifty-eighth Congress adjourned its first session. May 4, 1904.—The tangible property of the French Panama Canal

Company on the Isthmus was transferred to the United States and

possession given. May 7, 1904.—The French Panama Canal Company assigned to Messrs.

Day and Russell, agents of the United States in Paris, 68,887 shares of the stock of the Panama Railroad Company out of a

total of 70,000 shares. May 9, 1904.—The President, exercising the powers conferred upon

him by the act of April 28, 1904, directed that the Isthmian Canal Commission should constitute the legislature of the Zone, and Governor Davis should be its executive, and that all of the

powers exercised by the Commission under either the Spooner Act or the act for the government of the Zone should be exercised under the

supervision and direction of the Secretary of War. May 11, 1904.-—Governor Davis arrived on the Isthmus and began his

duties as governor, and for a time took general charge of the engineering work and the canal properties.

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