ful, of course, but when you say silver certificates they would, I understand, be all equally redeemable in gold.

Q. They would be issued if you had free coinage?—Yes; but they would be simply certificates of deposit.

Q. We have both gold and silver certificates in the United States and they simply relieve the people from carrying coin?-A. Yes, sir. Q. Have you any suggestion to make of your own as to what kind of supervision should be necessary by the United States over banks?— A. It is not the custom in Great Britain or her colonies for banks to be inspected, and we do not see the necessity for it here. We have, however, so far cheerfully submitted to Government inspection in Manila and given every assistance to the officers appointed to make the inspection and shall continue to do so as long as it is necessary. We would mention as one great drawback to the inspection that we keep a very large cash balance here, and every time it is moved it has to be handled by natives and a loss is almost certain to ensue.

Q. You are aware that all American banks make reports to the Comptroller five times a year and they are published in full once a year?-A. The accounts of this bank as a whole are published twice a year. We should not like our Manila statements published separately.

Q. In the case of the American banks, they don't publish the entire reports except once a year, but, I think, in New York all banks publish their balance sheets weekly?-A. They are banks themselves. We are a branch of a bank.

Q. You would not object so much to furnishing a statement providing it was not made public?-A. No; we have already furnished statistics at the request of the Government having no bearing whatever on the stability of the bank, but have asked that they may not be published. Q. I believe the Spanish law required banks to have a cash reserve of 25 per cent of their deposits?-A. I didn't know the Spanish law required that.

Q. The United States law requires that. Do you object to that?A. Certainly not; we should not consider it safe to allow our funds to get below that.

Q. You hold that in currency?-A. Yes; both in United States and local currency.

Q. You don't count gold and bills on deposit elsewhere?-A. Actual cash.

Q. Well, in regard to the issue of notes, your bank issues no notes here?-A. No; our charter allows us to issue the amount of our capital, but we can use the whole of it in Hongkong and China.

Q. You do issue notes in China?-A. We issue the amount allowed by our charter, and by special ordinances are allowed to continue issuing notes beyond that amount by depositing with the Government dollar for dollar.

Q. What do you deposit?-A. Coin; dollar for dollar. If we issue a $100 note we deposit $100 with the Government.

Q. If American banks were authorized to issue notes, would it be an objection?-A. Not at all. Business is considerably hampered at present by the insufficiency of local currency notes.

Q. In your business do you loan money to merchants on domestic bills?-A. There are no domestic bills here, as the term is understood in America; but merchants in Manila, having provincial businesses, are often drawn on at short usances, and such bills we from time to time discount.

Q. So you don't loan money to a manufacturer here on a note given him by some purchaser of his goods?-A. There are no such bills offering.

Q. It is done by the San Francisco banks, is it not?-A. It may be, but in San Francisco banking business is slightly different. We being an exchange bank like to advance on what you might call liquid security. We don't want to lock our money up for months.

Q. What class of business could an American bank get if one were established?-A. They could advance money on mortgages, and on products in the hands of dealers who required to hold them.

Q. That would not be a legitimate part of the business of a commercial bank unless it set aside a small percentage of its capital for that purpose.-A. There is not much else to be done that I can see.

Q. Would not an American bank get such business as between American houses here and American houses in the States?-A. No doubt a good deal of it. At present there are not very many American firms established here.

Q. As a banker located here, you have no objection to the establishment of American banks here and to their issuing notes?-A. None whatever.

Q. You have a clearing arrangement with the Spanish-Filipino bank? A. Yes, sir.

Q. Is there any clearing house here?-A. No; we just send men across to the other banks with checks from time to time during the day.

Q. And they pay you in actual coin?-A. When we demand it. If the balance gets too big I can draw a check on them and send it over and get it cashed.

Q. What policy have you been pursuing in regard to the notes of the Spanish-Filipino bank? I understand that they have been trying to draw them in from circulation, but without success?-A. As to the first question we receive them readily. There is a great demand for them and we rarely have more than a few hundred dollars in hand. As to the second question I could not answer that exactly, but we have difficulty in getting notes from them. It looks as if they wish to reduce their circulation.

Q. You have no special fear that an American bank would be allowed to issue notes that were not safe?-A. No.

Q. Is there now or likely to be much demand for bank notes in the business of the islands?-A. I should think so, as the present money is rather cumbersome; but when a shipment of money is made down to the provinces to pay for products it is made in hard dollars.

Q. Are there some seasons when the demand for money is much greater that at others?-A. Yes. A good sugar crop makes a big demand for money toward the end of each year.

Q. Would bank notes enable the country to get along with less coin at such times?-A. Yes; if the notes were readily taken by the natives in the provinces.

Q. Would not the issue of these notes, provided they had the required reserve, help business when money was in special demand?A. Yes; if they carried with them the confidence of the public.

Q. An American bank would not be permitted to issue in excess of its capital, but its regular circulation might be below its capital. Then at special times it might issue up to its limit?-A. Yes.

Q. In your opinion, what security should be provided for those

notes if they were allowed?-A. I consider that at least one-third of the amount of notes issued should be held in cash or first-class securities. The shareholders, as is the case in this bank, being also made liable for the note issue, appears to me a wise provision.

Q. If the Government of the United States should decide to authorize a national bank, under the American law, to issue notes here, either through branches of some American bank or through an American bank having its head office here, would you desire that the regulations placed upon the note issue should apply to all the banks, or are you entirely indifferent upon the subject? A. Although at the moment it does not seem likely that we shall require to avail ourselves of the privileges of a note issue in Manila, we should like to have the option of doing so at any future time.

Q. Now, will you just tell me a few things about your exchange methods and your charges? I have heard complaint made that your charges were excessive.-A. That is not so. Complaints have been made, but I do not think they were justified.

Q. What is your usual charge for exchange on London?-A. We fix our rates according to local conditions.

Q. Your exchange rate includes the fluctuations in silver?-A. It includes everything, but in normal times it would follow the fluctuations of silver more closely than it does now.

Q. I mean that you can not entirely disregard that element?-A. No; not entirely.

Q. Your charge for exchange would include something beyond what it would if this was a gold-standard country?-A. I do not think so. Q. The commission charged would be less?-A. There is no such thing as commission in our transactions. The rate is quoted, and it covers all expenses.

Q. Would your exchange vary if this was a gold-standard country?A. Yes; in the same way that the exchange of New York on London varies.

Q. You make a charge for transmittal?-A. Everything is included in the rate.

Q. Is there not a pretty well-defined allowance for that charge independent of the fluctuations of silver?-A. We are not bound down by any hard-and-fast rules that I know of.

Q. I have heard that drafts upon New York and London were sometimes bought by your bank and other English banks at a premium?— A. Premium is not quoted on drafts on London. They are bought at the current rate of exchange. Drafts on New York have been bought at par, premium, or discount, according to the rate of the day.

Q. But you have to transmit more money to London than you receive?-A. As a general rule.

Q. So you make a profit by selling a draft on London?-A. There is a difference in exchange between buying and selling which constitutes our profit.

Q. Have you handled many of the drafts on the Treasury or checks of the disbursing officers?-A. We have bought a good many.

Q. By what methods?-A. We have lately been taking them at par. Q. Both drafts upon New York and checks in favor of individual officers upon the Treasury?-A. Yes.

Q. I have heard complaints from officers that they could not cash certain classes of paper without paying a considerable commission.

A. These complaints, I think I may safely say, arise from a want of knowledge of the laws of exchange.

Q. They must have been refused something they wanted.-A. To give you an instance: A gentleman was in this morning who had several checks on New York, and he asked me to give him gold for them and place them to his credit here. I don't get repaid this money for one month. What I charged him was simply interest. On explaining the matter in that way he was satisfied.

Q. Were they Treasury checks?-A. They were not Treasury checks. We run a certain amount of risk in taking them.

Q. Is it usual for banks in different countries to charge for collecting checks?-A. Yes, in England banks always charge for it. I take it it is the same in America. If I went into a San Francisco bank with a check on New York I should expect to be charged according to the exchange ruling between the two places.

Q. If the officer had brought in a Government check would you have charged him for it?-A. Not if he would take local currency. Then I would give him par.

Q. At two to one?-A. Yes.

Q. I suppose your bank is more particular about accepting new depositors than most of the American banks are?-A. To what class of depositors do you refer-in what way?

Q. That you require more formality-A. I think we are rather freer.

Q. There was an arrangement at one time, I think, was there not, between your bank and the War Department, by which you delivered United States currency here without charge for cable drafts upon New York? A. It still exists and is being carried out. In that case we are only out of the money a very short time. As soon as we pay over the money the cable is sent and there is not much delay before being paid. Q. It saves you the expense of exporting gold from here to New York? A. Yes, sir.

Q. Has that system operated to help the currency situation here?A. I think so. The military government imported gold for some time, but it now suits them better to take it from the banks. A good deal of gold has been leaving the country lately and we are getting a little short.

Q. Why does it leave?-A. Because it suits the Chinese to export it. Q. Is the Government rate upon Mexican dollars responsible for the outward flow of gold to some extent?-A. They are running a dual currency, and the superior will always leave the country.

Q. The difficulty is in making the Mexican dollars worth 50 cents when they are not worth that?-A. That is practically it.

Q. What would be the effect of that policy naturally?-A. The effect of it would be to drive out the superior money.

Q. Would it be a wise thing for the insular government to lower the valuation of the Mexican dollar in gold?-A. I should not like to see any disturbance at present, until we get on a proper currency basis. You see, there was a great deal of difficulty at first about it. The rate was always fluctuating and caused endless annoyance, and hard things were said about the banks. Then the arrangement was made to maintain the ratio of 2 to 1 by the Government being prepared to take over the gold from the banks at that rate. Shortly after it was found that the banks could take it over at the same rate

on their own account and the Government were very glad to let them do so.

Q. For the purpose of promoting trade the ratio is giving satisfaction? A. Yes.

Q. Is there any way of reducing to a mathematical demonstration the argument that your charges are not heavy?-A. The best proof I can give you that our charges are not heavy is the fact that our business is steadily increasing.

Q. About how much gold have you on hand now, for instance? This is not to be given for publication. If it is published at all it will be in the United States.-A. Nearly $2,000,000.

Q. What is the average of your deposits in Manila?-A. I could not tell that offhand.

Q. Have you any criticisms to make upon the existing system of taxing banks here?-A. We still pay under the old Spanish system. Q. You pay tax on the net profits, do you?-A. Yes, sir.

Q. This is determined separately for the Manila branch?-A. Not at present. We pay the same proportion that we paid under the Spanish law.

Q. How did you determine how much was to be paid?-A. It was on the proportion of the net profits of the whole bank.

Q. Would it not be desirable to have some means of ascertaining what the net profits of the Manila branch amounted to-something you could define here?-A. A statement of profit and loss is prepared half yearly by the Manila branch.

Q. You don't pay any tax on the share capital of the bank?-A. No. Q. Spanish law provides such a tax, I believe, but in the case of foreign banks their capital is not here?-A. No; only a certain amount of the capital is allotted to us here.

Q. I have heard a criticism made that the stamp tax on checks tended to force the use of checks to "bearer" instead of "to order."—A. At present people are obliged to give checks to bearer, because the stamp tax that an "order" check demands is so excessive.

Q. What is the rate?-A. An "order" check for $1,000 Mexican costs 60 cents; for $20,000 Mexican costs $15; above $20,000 Mexican, 15 cents per $200.

Q. Do you use them at all?-A. Very rarely.

Q. Have you ever considered the subject of agricultural loans here?— A. No; I can not say that I have. I presume you mean loans against growing crops. In agricultural countries where we have banks as a rule the loans are made to the native producers by the exporting firms who want to buy the products. We advance against produce when it reaches the port of exportation.

Q. But the houses who do this charge a very high rate of interest, do they not? Could you tell me what rate you charge them?-A. It varies; 6 or 7 per cent.

Q. And as high as 10 per cent?-A. A very rare occasion if it is. It might be in some very risky business. It is not a safe rate.

Q. Do you consider that it would be safe for the banks to loan money at a lower rate to these houses?-A. It would be a mistake to lower the rates that we charge now.

Q. Well, but the European banks loan money to patrons as low as 2 per cent?-A. Conditions here are very different. We pay higher rates on deposits than European banks do.

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