Mr. CROMWELL. This subject has been very deeply considered by these gentlemen; not only by the gentlemen present, but by distinguished men in the Isthmus. It was considered by their convention; and a bill has been prepared by the Government, submitted, and is under consideration. That bill is very intelligent. I suggest Mr. Arias read and explain to you the measure pending. The convention is standing ready; the bill is here; if this form is acceptable it will be cabled there and probably passed. In other words, we have the measure on the table, and this conference may put it in shape where it will be adopted.

The bill which you hold is the original bill presented in March last by the Government, as a Government measure, to the convention then assembled as a lawmaking body. That measure was not passed. It stopped at the reading of the first clause. It, however, developed a strong support. Then there was introduced, April 25, a second measure, called the "Balboa bill," called by that name because the draftsman designated the new dollar as the "Balboa" dollar, and that was passed. Secretary TAFT. Was that a gold dollar or a silver?

Mr. CROMWELL. Silver. Those two measures were on the table of the convention when the whole subject was referred to a second committee, taking up both measures. That committee, only two or three weeks ago, gave its support and recommended the adoption of the original bill, with a few changes. That is the state of affairs to-day. It came on for debate; it was debated, and it failed to pass because of the tie vote, the total membership being 32, 16 voting for and 16 against. You will see, then, that the state of legislation is this-that that measure which you hold, slightly amended, has received the indorsement of one-half of the legislature.

Secretary TAFT. The "balboa" bill, so called, provided, as our friend says, for a gold standard of 50 cents, with a silver coin, the parity of which was to be maintained with that 50 cents gold. Was there any provision in that bill for a security to the world that it was to be maintained?

Mr. ARIAS. There was to be a fund of $100,000 that was to be kept in the treasury intact.

Mr. CROMWELL. The essence of this bill is to establish the gold dollar of the United States standard. The issue is limited to a conversion of the outstanding silver coinage, and the ratio is maintained by the conversion at a fixed figure, in the bill named at 225, but it may be amended later on to a different figure.

Secretary Taft then read the bill, during which the following remarks were made: Secretary TAFT. (After section 2.) In other words, the bill proposes the actual coinage of a dollar which shall be equal in fineness and size to that of the United States, with different insignia?

Mr. CROMWELL. Yes.

Secretary TAFT. But that the United States dollar itself shall be legal tender exactly as your own?

Mr. CROMWELL. Yes.

Secretary TAFT. (After section 6.) Now that limits the power of the Government to issue fractional currency beyond the amount of Colombian dollars, half dollars, quarter dollars, and ten-cent pieces that there are now in circulation in the Isthmus? Mr. CROMWELL. Yes, sir.

Secretary TAFT. That is, you can not recoin anything that is not the product of the present coin in circulation in the Isthmus.

Mr. CROMWELL. No, sir.

Secretary TAFT. You could not send out under that and buy a lot of silver in Bogota and recoin it?

Mr. CROMWELL. No, sir.

Mr. CONANT. Mr. Arias explains that his theory is the Panama money would not be used to any considerable extent in the Canal Zone, and the two countries would make their money interchangeable. But the result would be that the Panama peso would be twice the size of the United States peso.

Secretary TAFT. (After section 8.) In other words, the Government obligates itself to maintain the legal parity of gold and silver and leaves to the Executive the power to determine what measures are necessary.

You would wish to facilitate the exchange of the old coin for the new, and in order to do so you want to furnish to those who want to exchange a slight motive for making the exchange-that is, to give them a little more than the coin is worth in ordinary exchange.

Mr. ARIAS. We want to make the conversion as economically as possible. If you take the Colombian money and move it to New York and exchange it for bullion, you would be at a loss. At that rate between the two values there is a difference in

favor of the Government of about 4 per cent, but that does not cover the expense of shipping and reshipping the coin. Secretary TAFT. How are you going to induce them to bring the money in?

Secretary TAFT. We have had this same question in the Philippines, where we had the Mexican money, which corresponds, so far as our desire to get rid of it is concerned, with your Colombian money. In the islands we have also had the Spanish-Filipino money, which has circulated on an equality with the Mexican money at its intrinsic value. The difficulty that we have had is in inducing anybody to give us that Mexican or Spanish-Filipino money and turn it over to us in order that we might return our new dollar, and the reason why it is difficult to induce them is that whether you abolish the legal-tender character of the money or not, it still buys things in the market. They go down to the abaca provinces, and they can buy as many pounds of hemp with the Mexican dollar as they can with the new dollar. It is the ignorance of the people as to the exact value of the coinage that enables the speculators-the exporters-to go down and buy at Mexican rates and turn around and sell at gold rates at Manila. Therefore there is every motive for those men not to turn over the old money at all.

Mr. ARIAS. But the Colombian dollar has not the merit of the Mexican. Secretary TAFT. But it is money that buys things. As long as your ignorant people of the 350,000 see a big, round silver dollar with Colombia on it, which has heretofore purchased things, they will not be affected by the declaration of legal tender.

Mr. ARIAS. But, for instance: I pay my employees in Colombian silver; then my man goes to the retailer and buys his goods; but the retailer will have to pay to the big merchants, and that is not good for them to exchange.

Secretary TAFT. You mean the retailer will not take the money?

Mr. ARIAS. Yes.

Secretary TAFT. But he will take it—for the purpose of purchasing with the cheap money.

Mr. ARIAS. We rely more on the condition of silver itself to keep its parity than upon the powers we give to the Government. Here is a country where we never have a scarcity of silver, and never an abundance.

Secretary TAFT. The question of maintaining parity depends something on your security. You ought to have a good strong reserve, merely to demonstrate your good faith. We keep in our Treasury $150,000,000 gold, but we never have to touch it. That is not because of our making a paper declaration, but by setting aside the fund. It is to give assurance to the world that we have enough, and more than enough. Our Philippine geld reserve is about $7,000,000, with an 18,000,000-peso issue. It must be admitted that the use by the United States of a large fund, in which it recognizes and enforces and stands back of your currency, will itself help

you.

Mr. ARIAS. What objections have you to the soundness of the silver currency of ours?

Secretary TAFT. The only objection is the absence of any other except a general pledge of the Government to maintain the parity.

Mr. ARIAS. We give the Government full power. In two years from now, when the legislature convenes, we shall have the experience to tell just what conditions are needed.

Secretary TAFT. Here is the United States Government. Its word is usually regarded as good, but in order to back that up with security it takes $150,000,000 of gold; so with the Philippine government, which has authority to borrow $10,000,000 in order to maintain the parity, nevertheless it has thought it wise to buy silver, and we have in our Treasury $7,000,000 to maintain the parity of 18,000,000 pesos. Mr. CONANT. It is made a trust fund, specifically applied.

Judge MAGOON. About this question of maintaining the parity; as I understand it, you are relying, first, upon the limitation of the coinage of silver, and, second, upon the ability of the Government to maintain it. Now, the limitation in the proposed law is only as to the Colombian silver in circulation in Panama. Would it not be better to fix a certain amount rather than a variable amount? It would be difficult to prevent the bringing in of Colombian silver into Panama if it were a profitable industry. You are relying on a limitation, but have not specifically limited the amount of silver which your Government may coin.

Mr. ARIAS. If you should find when we collect the silver that it is too much, we have power to contract the currency. If we find that difference, then instead of returning our dollar for the Colombian silver we would throw up the difference.

Secretary TAFT. That bill in many respects is admirable. It is just exactly what we want, because we want to have a currency there that will assist us and we want to have a currency to assist you. If you could place the actual limit on the amount of silver you will coin, and then leave to us to say to you when additional coinage is needed to meet the demands of Admiral Walker, representing the canal, that would be well. Suppose he would need double the amount. Say that at the instance of the United States Government you would issue an additional sum of $3,000,000, with the provision that you should use to secure the parity thereof, say, 20 to 25 per cent by depositing it at interest with an accepted trust company in New York for the benefit of your Government. You will observe that it is to our interest that we should use that coin to maintain the parity, and if we agree, as we must agree, in the estimates in our dealings to make that good by announcing it as worth so much and paying our laborers in that way, we enable you to secure the parity, and you aid us by depositing 20 to 25 per cent, not for the first three million but for any additional to be issued for the benefit of Admiral Walker.

BRIEF OF A CONFERENCE HELD IN THE OFFICE OF THE SECRETARY OF WAR ON THE

AFTERNOON OF JUNE 18, 1904, BETWEEN THE SECRETARY OF WAR AND A DELEGATION

FROM THE REPUBLIC OF PANAMA.

After a general discussion of the three paragraphs constituting the proposed agreement between the United States and the Republic of Panama for a monetary system, Mr. Cromwell stated:

Mr. CROMWELL. The essential points, Mr. Secretary, are a gold standard with the United States gold coins circulating now. Next, that we will issue a limited money for the first conversion up to 3,000,000 half-dollar pesos, and that on January 1, 1906, we will issue additional coinage as you may call for it, up to the limit of 3,000,000 half-dollar pesos more; that we will secure a guaranty of the parity, first, by a deposit of 15 per cent at each time from the beginning to the end of the series; and, second, that the Commission shall open its reserve funds to the amount necessary to insure this parity. That is the essence of our proposal. Now we put that in writing. If you accept it, Mr. Secretary, we are going to cable it to Panama to-night, and the convention is in session and is waiting solely for this, and they are anxious to get home. The cables are asking us almost every hour to get this conclusion, and we want them to receive your response. They will hold a session Monday morning, and they probably will pass the law in the form that is reported to-night.

After a general discussion of proposed amendments, Secretary Taft read the draft of the agreement, with amendments, as follows:

First. That the issue of silver coin of the Republic in exchange for Colombian silver coin in circulation in the Republic within a period to be fixed by the latter, shall be limited in the aggregate to the conversion of three million pesos, Colombian silver coins.

Second. That after the first day of July, 1905 (changed from the first day of January, 1906), there shall be coined and issued by the Republic such additional amount of silver coin, to the limit in the aggregate to the value of 1,500,000 pesos-equivalent to three million half-dollar pesos-as may be deemed by the President of the United States necessary or advisable in the construction or operation of the Isthmian Canal, and as may be requested by him of the executive power of the Republic.

Third. To guarantee the parity of such silver coin with the gold coin the Republic shall create a reserve fund by the deposit with a responsible banking institution in the United States of a sum equal in gold to fifteen per cent of the amount of the silver coin by it issued and as the same is issued, together with an amount equal to the seigniorage on the silver coins issued under the preceding provision 2. Arrangements shall be made between the Government of Panama and the Isthmian Canal Commission for selling at reasonable rates and on such terms as will tend to maintain the parity of the silver coins of Panama, drafts upon the reserve fund set aside under the previous paragraph, and upon the funds of the Isthmian Canal Commission.

The coin of the Republic shall be legal tender in the Canal Zone. The United States shall employ such silver coins in its disbursements in the Canal Zone and in the Republic so far as the United States may find it practicable and convenient.

The silver coinage herein referred to shall be executed by the Government of Panama at the mints of the United States, at the usual and legal rates.

Nothing in the convention shall be construed to restrict the rights of the Republic to reduce its silver currency after the opening of the Isthmian Canal to commerce, to such amount as it may deem advisable, and thereupon reduce and withdraw pro rata the reserve fund corresponding to such reduction of the silver coinage issue.

Mr. CROMWELL. There should be some memorandum embodying this and an exchange between the two Governments.

Secretary TAFT. The only authority I have is to act for the Commission. The authority which the Secretary of State would have is an authority which necessarily involves the treaty-making power and goes to the Senate. Now, we do not want to do that. The Post-Office Department makes a lot of arrangements which never go to the Senate at all, and this, I think, might properly be made by me as Secretary of War, representing the Isthmian Canal Commission with your Government. They have the disbursement of $150,000,000 for this very purpose, and I do not see why it is not sufficient security for you, if you adopt that law, to say that we will subscribe to its terms.

Mr. CROMWELL. I think there is another view. Under the Spooner law all authority is vested in the Government. The President thereafter delegates, so to speak, some of his powers to yourself as Secretary of War, and charges you with certain broad duties in a letter of instructions, and I consider that you really act as the representative of the President under his letter of instructions given to you, and which he in turn derives from the Spooner law.

Secretary TAFT. Well, if you are satisfied, I will simply say-directed to these gentlemen-that if this is enacted into law by the Republic of Panama, in behalf of the Panama Canal, and exercising the authority imposed upon me by the President, I will, in behalf of the Canal Commission, see that the terms binding upon me shall be carried out. What do you say to that, Admiral?

Admiral WALKER. Yes, sir.

Secretary TAFT. Suppose, now, I just address a letter to these gentlemen, or to the minister-I don't care which-saying that after a conference and an examination of the terms which we have agreed upon, and representing the Canal Commission by virtue of the power imposed upon me by the President of the United States, I consent and agree on behalf of the Isthmian Canal Commission and the Government, so far as I have the power, that the terms therein imposed upon the Canal Commission in the United States and the Government of the United States shall be complied with upon the enactment of the law by the Republic of Panama.

Mr. CROMWELL. That is correct, Mr. Secretary, although we may perhaps want to put it in a little more precise form.

(At the suggestion of Mr. Cromwell, the members of the conference party signed their initials on the margin of the proposed agreement opposite the several amendments inserted. Mr. Cromwell then stated that the party would call Monday morning and give the Secretary of War a clean copy of the agreement.)

AGREEMENT BETWEEN THE SECRETARY OF WAR, ACTING FOR THE CANAL COMMISSION, AND THE COMMISSION OF PANAMA.

Messrs. RICARDO ARIAS AND EUSEBIO A. MORALES,

JUNE 20, 1904.

Special Fiscal Commissioners of the Republic of Panama. GENTLEMEN: I understand that there is now pending in the Convention of the Republic of Panama, exercising legislative power for the Republic, a bill to establish a monetary standard and to provide for the coinage necessary in the Republic. The Isthmian Canal Commission, whose action, by direction of the President of the United States, I am authorized to supervise and direct, is vitally interested in the maintenance in the Canal Zone of a stable currency, based upon the gold standard. I conceive it to be of common benefit to the Republic and to the Isthmian Canal Commission that the currency used in the Republic and in the Canal Zone should be the same. I am informed that the Convention of the Republic has under consideration a measure which in substance provides:

I. That the monetary unit of the Republic shall be a gold peso of the weight of 1 gram 672 milligrams, and of nine hundred one-thousandths fineness, divisible into 100 cents, to be issued as and when considered by the Republic necessary or convenient for its requirements.

II. That the present gold dollar of the United States of America and its multiples shall also be legal tender in the Republic of Panama for its nominal value as equivalent to one gold peso of the Republic.

III. That fractional silver coins shall be issued by the Republic, of various denominations, all to be of an alloy composed of nine hundred one-thousandths of pure silver and one hundred one-thousandths of copper, the declared value of the same bearing

a ratio to the same weight of gold of approximately one to thirty-two, and that such fractional silver currency shall be legal tender in all transactions.

IV. That the silver to be coined shall be in fractional denominations of the gold peso or dollar and, except as hereinafter specifically provided, shall be coined only in exchange or conversion of the Colombian silver peso and fractional currency now legally in circulation in the Republic, and that the amount thus converted shall not exceed $3,000,000 of such Colombian silver pesos.

V. That after July 1, 1905, there shall be coined and issued by the Republic such additional amount of fractional silver currency to the limit in the aggregate in value of 1,500,000 pesos or gold dollars, equivalent to 3,000,000 half-dollar pieces, as may be deemed by the Secretary of War of the United States necessary or advisable in the construction of the Isthmian Canal and as may be requested by him of the executive power of the Republic.

VI. The Republic of Panama, in order to secure the legal parity and equivalence with the gold standard of such fractional silver coins, shall create a reserve fund by deposit with a responsible banking institution in the United States of a sum in lawful currency of the United States equivalent to 15 per cent of the nominal value of the silver fractional currency issued by the Republic, and as the same is issued, together with an amount equal to the seigniorage on the silver coins issued at the request of the Secretary of War as aforesaid, less all necessary costs of coinage and transportation.

VII. That after conference with the Isthmian Canal Commission or its representatives or fiscal agents, the Republic of Panama will take such steps with respect to exchange by drafts upon its reserve fund as will tend to prevent the disturbance of the legal parity of the silver fractional currency of the Republic of Panama with the gold standard.

VIII. That the Republic of Panama shall cause its coinage to be executed at the mints of the United States.

Assuming that legislation will be enacted substantially to the foregoing effect, I agree on behalf of the Isthmian Canal Commission and by direction of the President of the United States

First. That the Isthmian Canal Commission will make the gold and silver coin of the Republic of Panama legal tender within the Canal Zone by appropriate legislation. Second. That it will employ such gold and silver coin of the Republic in its disbursements in the Canal Zone and in the Republic as the Canal Commission shall find practicable and convenient.

Third. The Isthmian Canal Commission shall cooperate with the Republic of Panama to maintain the parity of the fractional silver coinage of the Republic of Panama with the gold standard by sale of drafts upon its funds at reasonable rates and on terms which will tend to prevent the disturbance of such parity.

Fourth. It is mutually agreed that nothing herein contained shall be construed to restrict the right of the Republic to reduce its silver currency after the opening of the canal to commerce to such an amount as it may deem advisable, and thereupon to reduce and withdraw, pro rata, the reserve fund corresponding to the reduction of the amount of silver coinage outstanding.

Will you please confirm your accord with the foregoing?
Very respectfully,

WM. H. TAFT, Secretary of War.

SPECIAL FISCAL COMMISSION OF THE REPUBLIC OF PANAMA,

Hon. Wм. H. TAFT,

Secretary of War, Washington, D. C.

New York, June 20, 1904.

SIR: Pursuant to the powers conferred upon us by the general directions of the Government of the Republic of Panama, and subject to the enactment by the Republic of the necessary legislation, we hereby declare our complete accord with the convention embodied in your communication of this date, and agree to the same as therein set forth.

We are, dear sir, very truly, yours,

RICARDO ARIAS,
EUSOBIO A. MORALES,

Special Fiscal Commissioners of the Republic of Panama.