make a smaller coin. What the natives are very anxious to have, and a thing which they think a great deal of, is the subsidiary coin, especially the copper coins.

Q. You do not believe it would make any difference if the new coin was as small or smaller than the American cent?-A. I do not think it would do any harm to make it as small as that, but I do not think it should be any smaller.

Q. I have been told that they would want a big one.-A. The dollar is what they fix their minds on for size and fineness. I do not think it would make any difference about the cent.

Q. Now, a few questions in regard to banking. Do you think there is sufficient paper currency at present to meet the needs of trade?—A. The natives do not like paper as a rule, preferring the Mexican dollars. Paper here has been used more by Chinamen for easy transportation. Paper is not a favorite money with the native.

Q. But is there not some desire for it for banking? A. Yes; we would always prefer it in Manila.

Q. I have been informed that the Spanish-Filipino Bank found great difficulty in retiring their notes because people feared that if they were retired they would not be issued again and that notes for 5 pesos would become very scarce.-A. I never heard of that. In Manila there is no scarcity of notes; if you don't get Spanish Bank notes, you get American notes.

Q. Would there not be some deficiency if the American forces here were largely reduced? Would not some of the American currency go back to the United States, and would there not be some demand for a bank-note issue here?-A. There might be. There is some demand, of course, for a local bank note, as the American bank notes could not be issued here. That is a question which I have not studied. The Spanish bank is the only one which has the right to issue notes. While the troops are here there will always be a circulation of American notes. Q. Would there be objections to uniform regulation of all banks doing business in the islands? Is there any objection to the same rules regulating reserves, etc., and requiring inspections, being enforced on all banks in the islands?-A. I do not think so; I do not think they would object to that at all. There are only three banks here, the Banco Español Filipino, the Hongkong and Shanghai Banking Corporation, and the Chartered Bank of India, Australia, and China. They would be only too glad to welcome the inspection, as it would prove their good standing. The merchants, of course, rely upon these three banks.

Q. Do the English banks, so far as you are informed, loan much money or discount commercial paper?-A. They do where there is exchange. The English banks are what might be called exchange banks. They have their connections all over the world. They loan money to merchants with the practical understanding that the money from the produce is to go through their hands. They do not loan money for the purpose of getting the mere interest on it. They rely mainly on getting their profit on the exchange.

Q. Then they do not loan much to a local merchant in Manila, for instance?-A. No; it is not a practice within their range.

drawn

Q. Then they do not advance much to business men on paper within the islands?-A. The Spanish bank does to some extent, but

they are limited to what they may loan to each man and what they may loan in the city, by the rules and regulations.

Q. Has it come under your observation whether there is at any one season of the year a larger demand for capital or currency than at other seasons? A. Yes. For instance, while the tobacco and sugar seasons are on it requires a good deal at one certain time. I forget the exact time of the year. The sugar season, I believe, comes about in November and the tobacco season in August.

Q. At these times would there be some advantage in greater freedom of note issue if the exclusive privileges of the Spanish Bank could be eliminated? Would there be some advantage in having a certain elasticity in the issue of bank notes?-A. Not until you have educated the natives up to the bank notes of the country. All the money which goes out goes among the natives of the country, and the natives do not understand paper money.

Q. I think you said something before the Schurman Commission about the advantages of establishing an agricultural bank. What sort of an agricultural bank do you mean in that interview?-A. An agricultural bank would be a great benefit to the country, but it has its difficulties. When a man borrows money there is some risk. The small planter is not much considered; it is the big planter whom the banks would deal with. The bankers would have to be very good men, who are acquainted with the country; and, on the other hand, the natives would have to be educated up to the banks. An agricultural bank would certainly be to the benefit of the country. The other banks would welcome it gladly, as it would relieve them of the big loans they are compelled to make through the merchants.

Q. You do not think it is liable to be undertaken by a private bank unless some Government support is given to it?-A. It would not pay. An institution of that kind must be run by intelligent men-by highsalaried men. It would not pay to run as a private institution, so far as I can see. We have gone into that somewhat since my report to the Schurman Commission. Q. Is your reason or belief that it would not pay based upon the costs of management alone, or would there be large losses?-A. There is a risk in advancing so much money on loans. The titles of many of the lands here are not clear. I think the future may be good for a bank of that kind, but it will be some time before a bank of that kind would be a success.

Q. Are you speaking purely of a small bank?-A. Yes.

Q. How would a bank get on which loaned only small amounts to cultivators, accepting returns from the crops, having a mortgage, if they took one at all, only as a sort of a safeguard?-A. The merchants do that now. There is no need of a bank of that kind, for the reason that the merchants advance the money to the estate holders on their crops-only to the large ones, however. The small man is the one who suffers.

Q. Could he be relieved if the Government could establish a fund and loan him in small amounts, like 200 pesos, to buy new tools, etc., and take his promise that it should be repaid when the crop was harvested?-A. It would be a benefit, but I think the Government would have to be very careful and see that the money all came in again. If the Government simply said, We are going to benefit these men, the

native would begin to think he had a soft thing on. proposition here is a very hard one.

The banking

Q. How would it operate if the method were adopted which has been adopted in Russia by the Bank of Russia, in France by the Bank of France, and, I think, to some extent in Germany, by requiring a loan of that kind to be guaranteed by a syndicate of farmers in a given locality, who would indorse each of these notes? Do you think that a private corporation could be induced to loan upon these conditions?-A. No; it would not work. You can not put them on the same basis as our farmers. They are below the Russian peasant in finance. The head men would say, "All right; I will indorse your note if you pay me so much," naming some sum of money. It would lay the whole country open to fraud and cheat.

Q. In other words, it would not abolish high charges, in your opinion?-A. No, sir.

Q. That is all.

EXHIBIT No. II.

Interview with Mr. T. E. Sansom, acting agent, in charge of Manila branch of the Chartered Bank of India, Australia, and China, September 23, 1901.

Mr. CONANT. Mr. Sansom, I would like to invite your attention to the report of the Philippine Commission for last year in what they say in regard to currency. The following is an extract:

It seems to be desirable that some substitute for the Mexican dollar, as well as for the Spanish-Filipino dollar, should be provided which would be uniform in its relation to the United States dollar and would commend itself to general public use as being substantially what they have long been accustomed to. We have interviewed a large number of leading business men of the islands and they substantially all concur in the opinion that it would be injurious to business to place the islands immediately upon an absolute gold standard.

As a solution of the problem, it has been suggested, and the suggestion has met the approval of the business men here generally, that the United States dollar or a theoretical United States-Filipino gold peso of the value of half a dollar, like the theoretical gold yen which is the unit currency in Japan, should be made the standard of value, but that a silver United States-Filipino peso, containing a small percentage less silver than the Mexican dollar, should be coined which would be receivable in business transactions as the equivalent of 50 cents in United States money, together with convenient subsidiary coins of the same character. The amount of silver in the peso should be such a percentage less than that in the Mexican dollar that its intrinsic value would not at any time warrant its export from the islands; but its convertibility into American money at uniform fixed rates, guaranteed by the United States, would make it a convenient and useful currency for ordinary business transactions in

the islands.

Now, let me ask you what your views are in regard to that recommendation?

Mr. SANSOM. I am in favor of it. The amount of silver in the proposed new coin should be made low enough to prevent its export to China. It should contain less than 50 cents (United States currency) worth of silver.

Q. Do you think the natives would object to taking it if it contained ess silver than the Mexican dolllar?-A. I do not think so.

Q. The plan of the commission involves measures to maintain the value of the coin at 50 cents gold. Do you think that would be sufficient? A. Yes; I take it that 50 cents gold would be a standard, similar to the currency system in India now.

Q. You have given considerable attention to conditions in British India, have you not?-A. Yes; I have been in the East sixteen years. Q. What is the system there?-A. The sovereign is really the standard, at 15 rupees to the pound, but the silver rupee forms the actual coinage, as they can not get the sovereign into circulation among the natives.

Q. What was the step recently taken by the Indian government in regard to the gold reserve?-A. They have accumulated a large gold

reserve.

Q. Has there been much difficulty in maintaining the gold value of the rupee?-A. No, sir; not latterly.

Q. There was some difficulty at first, in 1893, was there not?—A. Yes; but the mints were only closed in 1893. The experiment began then. Owing to the very heavy "home charges," i. e., annua' sterling liabilities of the Indian government, it is a very much more difficult problem in India than it would be here where there are are no "home charges" due in gold.

Q. Within the last few years, then, the rupee has been kept steady at the exchange fixed by law?-A. Yes. The limit of fluctuation has been confined to the cost of shipping gold, i. e., freight, insurance, and interest.

Q. Now, you state that you favor the plan of the commission. Do you think it would be a wise policy to try to make American money-gold and paper-the only money in the islands?-A. No; because in the first place it would double money values; and besides, the native likes

the silver coin.

Q. How would it affect the wage-earner?-A. He, would expect more dollars.

Q. Do I understand that in your opinion it would raise the price of goods? A. Yes; local products and wages.

Q. Would it not raise the local prices?-A. Yes; local prices for wages, food, everything produced here.

Q. It would raise local prices for all articles?-A. Well, no; only for articles produced here.

Q. If the plan of the commission was adopted, should any safeguard be adopted to insure the parity of the silver with the gold standard?— A. Yes; a moderate gold reserve. The principal thing would be to be very careful not to coin too many Filipino dollars. Keep them scarce. Because I think that in time American currency notes will increase in circulation here and to a certain extent displace a portion of the silver currency.

Q. How large a gold reserve do you think necessary; any fixed percentage of the silver, any fixed amount?-A. No; not a fixed percentge; with a strictly moderate issue of local pesos a small percentage would be sufficient, but if the issue was unnecessarily large a larger percentage of gold would be required as a reserve.

Q. In your opinion, how large a gold reserve would be necessary-A. I could not tell you; it would depend upon the amount of local currency issued.

Q. Any particular percentage?-A. Possibly. The right amount would be between two and three million gold dollars. It would depend, of course, entirely upon the amount of silver coined.

Q. In the case of an extensive issue of silver coin?-A. You would want a bigger gold reserve. If the issue of silver coinage was kept small, the people could not spare it for export. Everybody must have a certain amount of silver coin for personal use.

Q. If that system was adopted and the Government decided to coin a distinctive silver coin and maintain a gold reserve, as you suggest, what course do you think ought to be taken with regard to the Mexican dollar?-A. Stop the importation, in the first place, and recoin first the Spanish coins, because there is always a chance of exporting the Mexican coinage if Chinese exchange goes high enough to warrant the banks in so doing.

Q. That is, you believe the insular government could buy silver and make its own coins and gradually introduce them into circulation, and that the Mexicans would gradually leave the country?-A. No; I do I do not believe the insular government should buy silver bullion. There is probably enough silver here now, at any rate to begin with, and introducing the new coin will take time.

Q. Would not the effect be, if they coined their own silver and gradually began putting it out, to drive out the Mexicans?-A. No. Assuming that this 50-cent gold is made the standard; when they make that the standard they must allow every peso coin here to be received as half a gold dollar. It would be robbery otherwise.

Q. Would it not be proper to declare that after a given date, two or three years after, the Mexican dollar should cease to be legal tender?A. Yes; but the government must redeem them at 50 cents, half a gold dollar. Of course, if their value in China at that time was over half a gold dollar they would probably be largely exported.

Q. You think it would not be sound public policy to discriminate against them? The insular government, you must remember, is not the maker of the Mexican coin.-A. But it is the money of the country, and was so for many years before the American occupation. Under the proposed scheme of a 45-cent peso the government would make a large profit on the recoinage. The insular government, with its large deposits of pesos in the local banks (which deposits are repayable by law in the same coin), is really the biggest owner of the Mexican dollar in the islands.

Q. It would of course involve a change, and time would be required for it, but you do not mean to say that there should never come a time when the Mexican coins, which we have never coined here, should cease to be legal tender?-A. Certainly not; but the government first must stop the importation and take over what is in the islands. Because the Spaniards had not enough coins and used other countries' coins puts them all on the same footing. I believe foreign silver coins have been in circulation here for a hundred years or more.

Q. Now, if a gold reserve was established do you think it would be advisable to pay gold for silver at the official ratio to all comers or only furnish it in the manner they do at the Bank of France, in those cases where the payment is considered to be a legitimate commercial payment?-A. In France they have a very large volume of silver currency which is not received by other countries in settlement of international