balances. Here the proposition would have to be as small a silver currency as we could get along with.

Q. I have heard the suggestion that that would result in the Chinese withdrawing the gold and exporting it to Hongkong?-A. Are you speaking of gold paper or gold coin?

Q. Gold coin. You mean the American paper currency might be paid in exchange?-A. Yes; because the Chinese would always export gold for melting purposes, but United States paper currency would not have the same attraction.

Q. Do you think that danger would be largely done away with if paper currency were paid instead of gold?-A. Yes; I do. I think that having paper currency in reserve and a strictly moderate coinage of Filipino dollars, no more than is necessary, would prevent any risk of a run on the reserve, except demands by banks to meet the conditions of trade.

Q. You believe, then, that if there was a fixed reserve and gold or paper was drawn out or exported and silver locked up, that when the silver was needed gold would be brought in by the banks to draw the silver out? A. Yes; because the banks could not coin their own dollars and must procure them from the Government reserve.

Q. The banks would have to bring in the gold and get the silver in order to meet the demands of their depositors, would they not, for current funds, if there was a scarcity of silver coins?-A. Yes.

Q. And as their silver stock was reduced by the demands of customers and depositors they would bring in gold in order to draw silver from the Treasury?-A. Yes; and the converse when trade was dull and the banks had big silver balances.

Q. Is not that in accordance with the natural law of money all over the world?-A. It is at least true in the East.

Q. Do you consider that the supply of silver currency now in the islands is redundant?-A. The large silver balances held by the banks at present looks as if such was the case, but on considering all the circumstances the position is probably the other way about. From inquiries made from old residents familiar with business in the provinces I gather that actual coin is scarce in many places; also that practical barter largely prevails. When peace is an actual fact and all the islands are reopened to trade and cultivation, a considerable amount of silver currency is likely to be absorbed. The 4,000,000 pesos recoined into 5, 10, and 20 centavos would allow less than half a peso per head of population. If the commission's proposed system is established I quite admit that United States paper currency will displace a certain amount of silver pesos, but for hoarding, silver (unless gold can be obtained) will be preferred, being proof against fire, ants, and damp. Further, the improved conditions that would accrue from the expected large investments of American capital in mines, railways, etc., would cause an increased demand for silver pesos for wages, etc. All Asiatics, except possibly the Japanese, prefer metal to paper, and I understand that the natives here hoard money to a considerable extent.

Q. Are you familiar with the methods of the Bank of Java?-A. I spent three years in Batavia, from 1886 to 1889, but I am not very familiar with the methods there.

Q. Is it your opinion that the natives here would object to a silver coin because it was new and unfamiliar, independent of the question

of weight?-A. I do not think so; but I have had no experience with the Philippine natives of the provinces. Yet, I do not think they would. Q. There are at least three or four kinds of silver dollars which were in circulation here before the American occupation, were there not? A. Yes; the Alfonso dollar, which is about 8 per cent worse than the Mexican; the Mexican silver dollar, and the old Spanish Carlos dollar.

Q. Do you think there is a sufficient quantity of subsidiary silver in the islands?-A. No; it is the great need at present. Copper coins of one hundredth of a peso are also needed.

Q. Would it have a good effect if there was a new distinctive coinage to make a very large proportion in half pesos and pesetas rather than pesos?-A. Yes; a large quantity of 5, 10, and 20 cent pieces, especially, are wanted, and they need be only 800 fine.

Q. Those denominations are wanted more than half pesos, are they?A. Yes; probably one-third the silver currency at present is half pesos. We already have too many half pesos.

Q. Let me ask you this: Do you believe that a distinctive silver coin would be a source of gratification to the people of the Philippine Islands as a matter of pride?-A. I do not know. It is very necessary to make the silver pesos issue as small as possible to obviate the chance of heavy calls on the gold currency reserve, but large amounts of fractional currency are greatly needed.

Q. That would be regulated by the demand upon the gold reserve. Have an intelligent minister of finance here, and if he found that the demand was heavy-if he found that he had no silver coins in his reserve he would be justified in increasing the amount, would he not? A. Yes. When the Government wish to start this recoinage, they should draw out 1,000,000 pesos from the banks, recoin and pay them into the bank, and keep on doing this until they found that there was enough issued, and instruct the banks to collect the other coins as rapidly as they were received from the public and only pay out the new coins.

Q. You are talking of the conditions when the recoinage would be going on. But suppose the recoinage had been completed and the Mexican coinage has practically disappeared. If any increase was needed then it would be indicated by the demands upon the Treasury gold fund; that is, if there were large demands upon the gold fund, it would indicate that there was too much silver, but if, on the other hand, there was no demand on the gold reserve, they would then be justified in coining more silver?-A. Yes.

Q. What do you think would be the effect of authorizing the Treasury to issue paper certificates for silver?-A. A very good thing at present, because the English banks have no silver notes, and we could use them as notes if of convenient denominations. There is no means of getting silver notes here. The Spanish Bank has in circulation only about two millions, and the other banks are not allowed to issue any. Q. Is your bank allowed to issue notes in China?-A. Yes; we have an authorized issue of $8,000,000, which is all issued in that country, the Straits Settlements, and Siam.

BANKING.

Q. In regard to banking here, I suppose you realize that some effort is likely to be made to establish American banks?-A. Yes; I think they are needed here.

Q. Do you think, then, that the English banks and the Spanish banks would not object to or oppose the establishment of American banks? A. The Chartered Bank would not.

Q. You have no objection to uniform regulation of banking for all banks here?-A. What do you mean by uniform regulations?

Q. I mean that the supervision and reports required, as well as the reserves required, and the conditions governing the issue of notes, should be the same for the same classes of banks. The reserves may, of course, be quite different for a savings bank and for what is called a commercial bank, but a commercial bank, whether English, Spanish, or American, would be subject to the same regulations as all other banks of the same class. You have no objection to that?-A. No; we are inspected already.

Q. Yes; but have you any objections to it?-A. No.

Q. What regulation of banking do you think would be proper as applicable to all the commercial banks here? What would you sug gest, including those already in existence?-A. Of course I am against all these regulations, as we have never had them in England, and I think we could get along very well without them. I would not want to suggest any.

Q. I think you are required by Spanish law to keep a reserve of 25 per cent cash of your liabilities?-A. I do not know; we always keep a large reserve.

Q. Do you keep it in Manila?-A. Yes.

Q. Do you object to the requirement that a cash reserve of 25 per cent should be kept?-A. No; not for our demand liabilities. We should for our own protection have to keep a larger reserve than an American bank doing a purely local business. We also take money on fixed deposit for three, six, and twelve months. We should object to being tied to keep a fixed proportion of cash, as the liability depends on the nearness of the due dates.

Q. The existing law of the United States does not permit branches of national banks; but if Congress should change the law, branches would become legal, and would they not come into competition with your bank?-A. No.

Q. What classes of banking business are done by your establishment?-A. Buying and selling foreign bills of exchange. That is our principal business.

Q. You do not buy many domestic bills on other places in the islands?-A. We can not, because we only have one branch, which is at Cebu.

Q. Do you discount bills where both people live in Manila?-A. We discount bills very little.

Q. Why? A. Because it is a difficult matter to tell the standing of people in a place like this.

Q. Does not the Spanish-Filipino Bank do so?-A. I believe so, but they know the people better, and are not strangers, like we are.

Q. Do not the branches of the English banks in Central and South America do a good deal of discounting?--A. I do not know.

Q. Then you do not think an American bank would be limited to the same class of business by considerations of safety?-A. They would be able to do American business that we can not touch, as they could find out better about the people; i. e., the new Americans starting here.

Q. You would not object to their getting that class of business?A. We would be glad indeed for them to take it.

Q. It would possibly mean more exchange for you?-A. No; I do not think so.

Q. Would not American houses here buy more largely in Europe as business extended, and wouldn't you get a small part, at least, of that business? A. Possibly.

Q. At any rate, you don't think you would be injured?-A. No. Q. Even if they got the new American bills of exchange?-A. No; we should doubtless get a share.

Q. Do you think that an enlargement of facilities for using bank notes is desirable here? I am not talking about the coinage so much as after we have a regular coinage established. Would not a credit note have some value?-A. I would rather have an American Government note. If the American currency here is to consist entirely of paper, we do not want more paper.

Q. Is there not a season of the year when there is much more demand for money than at other seasons?-A. Yes; during the tobacco and sugar seasons.

Q. Whom does the money go to?-A. Native tobacco growers in the north and sugar people in the south and north.

Q. They are people who do business on a small scale, are there not?— A. Well, the large firms take out $200,000 or so and go there and buy. I do not know how they do it.

Q. I presume they deal with small dealers?-A. I suppose so.

Q. Then your bank would not issue bank notes even if the law were made on more liberal terms?-A. No; the British treasury would not allow it. We are limited to the amount of our capital of £800,000. We have all we are allowed to issue now out in China, the Straits, and Siam, and could not spare any for the Philippines.

Q. It has been represented that the rates of exchange were very high between here and other points.-A. Which points, silver points or gold points?

Q. Well, for the United States-that your charge for cashing a Treasury draft on the United States and selling exchange on New York was exorbitant?-A. If you have a draft on New York we buy at the face value, and if you buy from us on New York we charge 1 per cent premium.

Q. Do you ever pay a premium for drafts on New York?-A. No; but if it were not for the Government's artificial par of 2 to 1, bills on New York would command a premum.

Q. In buying at the face value do you do that, however small the draft, or do you charge a small commission?-A. No; we take a draft; that is, of course, from people we know. We take no drafts from people we do not know.

Q. If a man brought to you a check of or by a United States disbursing officer and it was properly identified as genuine?-A. We can not cash this class. There is too much risk in it. We had a lot on the City of Rio Janeiro, and we shall have very much trouble to recover the amount so that we are not now cashing any more.

WAR 1901-VOL 1, PT I-17

Q. You would probably get them all back some time?-A. If they were issued in duplicate, it would be no trouble, we could cash them at once, but they are not issued in duplicate, and we lost about $3,000 United States currency on the Rio, and we have stopped handling them.

Q. Do you know whether the Hongkong and Shanghai Bank pursues the same policy?-A. I do not know. If they were made in duplicate, there would be no trouble in getting them cashed here.

Q. There has been a good deal of complaint made by army officers that there was no place where they could lawfully deposit funds, but this is, of course, not a matter which concerns you. You would not object to receiving public funds?-A. No; the fault lies with the army regulations.

Q. Have you a minimum limit for deposit on current account?—A. $125 gold, $250 Mexican.

Q. Is there any difficulty in a man who has that amount of money opening an account?-A. No; all he has to do is to get some one to introduce him some one that knows him. If he is an officer, of course his uniform introduces him.

Q. What do you mean by that minimum limit? Is a man permitted occasionally to go below it?-A. Yes; it is simply to begin with. The opening of the account costs something, as do also the depositor's check and paying-in books.

Q. Have you any suggestions to make regarding modifying the banking laws in the islands?-A. I would like to know what the banking laws are. One thing that is very necessary for business is in connection with the neutral go-down warrants. Suppose you are a merchant and you have a go-down warrant from Smith, Bell & Co. for hemp, and you indorse that to me. That ought to be perfect security if I advance you money on the hemp, but under the Spanish law it is not. If you fail, the hemp which it represents has to go to the pool for the other creditors; I have no preferential claim.

Q. What was the reason that the banks recently became involved in that large hemp fraud? Did not that illustrate the wisdom of the Spanish law? As I recall the matter, the same quantity of hemp was hypothecated to several different banks. Was not that the case?-A. Yes; duplicate liens were used and other gross frauds perpetrated.

Q. If a prior lien had been recognized, it would have fallen to the bank first making the loan?-A. The hemp represented by neutral godown warrants was only hypothecated once, there being only one document of title in existence.

Q. That is a question of Spanish or local commercial law; it does not pertain to the regulation of banks by Congress?-A. No; it was a legal question.

Q. In respect to the regulation of banks, you have no special suggestions to make?-A. No; I believe in freedom, as in British colonies. I would like to point out that by the form of return furnished us by the Government bad debts have to be included with the good ones. This is an unsound system. They should be stated separately.

Q. You do not care about the issuance of notes, because you do not issue any?-A. No.

Q. Have you any further suggestions to make?-A. I would suggest that arrangements be made to impress stamps on check books.

Q. What is the rate here?-A. Two cents on bearer check, but on order checks ad valorem. If you have a check payable to Mr. Conant