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business, but I mean would the issuing of notes affect them at all-the issuing of notes by American banks!

Ballas. Yes, sir; it would affect them, because instead of being one, and instead of having the monopoly, there would be three or four.

Judge IDE. Well, suppose their issue was limited to a million and a half notes, and there was not currency enough to do the business of the islands conveniently, it would be desirable to have more currency, would it not?

BALBAS. It would not affect us; but it would have the effect of making the people hoard up their hard money and use bills for circulating currency.

Judge IDE. There is a shortage of paper in these islands now, it seems to me.

BALBAS. Every day we have calls for from $50,000 to $60,000 in paper, which we can not supply.

Judge IDE. Suppose that Congress should pass a law providing that the national banking system of the United States should be extended to these islands, so that American banks could be established here, with a privilege of issuing currency under the same restrictions that are authorized in the United States, a deposit of Government bonds to the amount of the currency; would they regard that as any invasion of their rights—I mean that part of it which relates to the issuing of currency?

BALBAS. Do you ask me that question as a director of the bank?

Judge IDE. Well, what we want to do is to have this bank properly treated; absolutely fairly. We want to invade no right which belongs to this bank, and at the same time in a Government function, like that of issuing currency, we wish to have it so exercised that the people shall have adequate currency and adequate security for that currency. We want to combine those two things, treating them fairly and securing adequate currency and adequate safety for that currency.

BALBAS. In any event, the interests of the bank would suffer in a degree—and I am speaking now as a director-because it would have competition; but as an individual I am against all sorts of monopolies.

Judge IDE. They have no monopoly of the banking business here? BALBAS. Only the notes.

Judge IDE. And if the American banks that came here would have a right, on proper legislation being made, to come here and go into a banking business; but I am only speaking now on the subject of issuing currency, and it does not seem to me now that that law would interfere with them at all if they were authorized to issue that million and a half of currency and keep it in circulation under proper safeguards. Perhaps I might see difficulty to them on further inspection, but I do not now see it.

BALBAS. The principles in poor countries has been, in regard to several banks issuing paper currency, that the Government has had finally to step in and stop the issue of currency because it has depreciated to such an extent. That has happened in Buenos Ayres and the Peninsula also, but I believe that if the amount of paper money issued by the banks was restricted, I do not think it would prejudice our interests to any great extent, but if it was allowed to be issued to any extent it would.

Judge IDE. Well, if any money is issued here, under our national banking law, by banks authorized under the United States law—under a banking law to be hereafter enacted-extending our national banking system here now, because there is no law under which our national banking system can be extended outside the limits of the United States; but if the system should be extended here, the banks established here under that law could issue only such an amount of currency as was supported by Government bonds purchased and deposited with the Treasury Department at Washington, or, if the law so should provide, with the treasurer of the islands, and this doubtless will be under the restrictions of the Treasury Department of the United States. It is impossible for paper money issued under our national banking law ever to become depreciated at all unless the Government of the United States goes to smash; there are the bonds back of it.

BALBAS. But notwithstanding that, the general public like hard money, and if there was a great amount of paper money and very little metallic money, the paper money-does not matter how good it waswould suffer a discount.

Judge IDE. It never has in the United States since we have got matters adjusted, after the close of our civil war—since we resumed specie payments.

Balbas. Yes, that is true; but in the United States the laboring classes are very well paid, which they are not here; besides, they are educated. Here the faboring classes are ignorant and poorly paid and suspicious; therefore they like hard money.

Judge IDE. Well, there are thirty or forty million dollars of hard money in the islands besides American gold and silver.

Balbas. I can not quite understand that. I have heard it said before; some told me twenty-eight and others thirty.

Judge IDE. Of what kind of money?
BALBAS. Hard money; United States money.
Judge IDE. No, no; not United States money; Mexican money-
Mexican and insular, Mexican and Spanish.

BALBAS. I can not believe that it is true, however.

Judge IDE. Well, I understood Señor La Rosa to give an estimate of about $10,000,000.

BALBAS. That is in metal money; in hard money. He says one year before the Americans came here that was the estimate that was made by the intendencia-$10,000,000.

Judge IDE. We have on deposit in the banks here nearly $9,000,000 of insular currency now, to the credit of the insular government.

BALBAS. That is something that the Spanish Government never had here.

Judge IDE. Now, I can state in general terms, perhaps, what we want to do. We want to be able to make recommendations to Congress in regard to the banking question here, and we want to make those recommendations on such a basis that we shall not embargo any just rights which your bank has, and at the same time we wish to make it clear that the United States Government in legislating here will be just and fair, and that he knows that his rights will be protected, and at the same time he thinks personally he is opposed to monopolies. He does not care if there are other banks here. He has said to Generals Otis, Greene, and Blanco before, and when the question comes up with his


board of directors he will say he is opposed to monopolies, and he is also assured that any legislation the United States Government may bring in that regard will be framed so as to protect their own individual rights. He has nothing to fear.

On the other hand, Mr. La Rosa says, it will be well to take into account not only the banking interests of the country in making these recommendations to Congress, but also the social state of society. They are a poor and ignorant lot, and consequently from the great amount of paper money issued here the metal money will be sent to China and hoarded up and withdrawn from circulation, and consequently the paper money will be depreciated. That is one of the conditions of the country here.

Both the gentlemen say that personally they thank you very much for all the kind words that you have expressed for them.

Judge IDE. Of course our Government recognizes that their bank is one of the institutions of the country; it is not a foreign bank—it is the bank here in the country; but I think that they can rely upon the control that our Government will exercise over other banks to make sure that no more money will be authorized to be issued from those banks than is needed for the business of the country. I wish you would say to them that we thank them for coming in to-day, and we have received valuable information, and Mr. Conant and I, and perhaps the commission, would like to talk over some of the matters suggested here and have a later interview with them or such committee appointed by their bank.

BALBAS. He will be very pleased to wait upon you any day which you may name.

Judge IDE. We will inform him as soon as we can, and be glad again to meet him.


Letter addressed to the Spanish-Filipino Bank by the Secretary of

Finance of the Philippine Government and the reply thereto.


Manila, P. I., September 24, 1901. MY DEAR SIRS: The subject of legislation upon the banking system of the Philippine Islands is likely to be taken up at the next session of the Congress of the United States, which begins in December. Instructions have already reached the civil government from the War Department to prepare suggestions on this subject, and especially to adopt measures which will insure the safety of public funds and of all notes which may be allowed to circulate as money.

It seems desirable to the insular government that the regulations governing similar classes of banks in these islands, and especially the regulations governing the issue of circulating notes, should as nearly as possible be uniform and should apply not only to your bank, but

to any other which may be established here. The change in conditions is such, since the transfer of sovereignty in these islands from Spain to the United States, that there is a strong demand for American banks and for the issue of circulating notes upon the American system. There is no desire to infringe upon the privileges of your institution so far as they are compatible with the commercial interests and the government of these islands. It is probable, however, that the Congress of the United States will refuse to consider the privilege of note issue, pertaining to your establishment, to be exclusive.

The subject of enacting a uniform banking law is likely to be considered at 'Washington, whether the insular government so advises or not; but I think I may safely state that any regulations governing banks of issue will be enforced with absolute impartiality and with the same rigor upon new banks as upon old.

In view of these considerations, I desire to submit to you a statement of the conditions which, in my opinion, should govern the issue of circulating notes in these islands. It is to be understood that any such suggestions must have the ratification of the Executive Government at Washington and the Congress of the United States before they can be embodied into law, and it is not in the power of the insular government to assure you positively that these suggestions will be enacted into law. It will be obvious to you, however, that agreement between the representatives of your establishment and the insular government upon recommendation to the War Department at Washington will be more likely than the absence of such agreement to secure what is desired.

The conditions which I believe should be accepted by your bank in regard to the issue of circulating notes are conditions which, for the most part, govern all banks of issue in the United States and are supported by official and public opinion in that country. The conditions which I therefore suggest for your consideration are these:

The privilege of issuing notes to circulate as money shall not be limited to any one bank.

The total amount of circulation shall not exceed the total amount of the paid-up capital.

The circulating notes shall have a prior claim over all other obligations of the bank, in case of failure or liquidation, except obligations to the Government of the United States or that of the islands.

Bonds of the United States or of the insular government to the amount of $50,000 shall be deposited by the bank in the custody of the insular treasury or the Treasury of the United States, as may be prescribed by Congress or the insular government. This is in accordance with the national banking act of the United States, which requires any national bank issuing circulating notes to deposit such bonds to the amount of 25 per cent of its authorized capital, but such deposit need not be more than $50,000. These bonds remain the property of the bank while in the custody of the treasury. The interest

The interest upon them is regularly paid to the bank by checks from the Treasury at Washington, and in case of failure the bonds would be sold in the open market and the proceeds of such sale used as a part of the assets of the bank for paying its notes. The proposition herewith submitted to you is much more generous than that extended to banks in the United States by the American law, which requires bonds to be depos

ited in the Treasury to the full face value of the circulating notes which are issued. It is recognized that this requirement of American law would subject you to a larger investment in such bonds than you might desire to make. A more liberal system of note issue is therefore proposed in the case of your bank than that prescribed for banks in the United States, and a liberal system in this respect may be recommended in regard to other banks established in these islands, but not in any case more liberal than the proposition submitted in respect to your establishment.

All notes shall be issued by the Comptroller of the Currency at Washington, and plates and dies for making notes shall be in his custody, in order to prevent issues in violation of law.

The notes shall not be legal tender.

The circulation actually outstanding shall pay a tax of one-half of 1 per cent per annum.

All banks shall be subject to such additional taxation as may be provided by general laws.

A cash reserve shall be held against notes outstanding equal to 25 per cent of the total amount of such notes, but half of such reserve may consist of gold bills upon foreign countries or deposits in domestic or foreign banks having the sanction of the insular government.

Of this reserve of 25 per cent the bank shall keep one-fifth, amounting to 5 per cent of its outstanding circulation, in the custody of the Comptroller of the Currency of the United States, or his representative in the Philippine Islands, for the purpose of redeeming notes which may be received for public dues or from other banks.

The bank shall, if requested by the insular government, enter into a clearing arrangement with other banks in the Philippine Islands for the mutual exchange of obligations.

You will observe that the requirements regarding the cash reserve are less severe than the Spanish law now in force, which requires that the reserve be held entirely in idle cash in the vaults of the bank.

There are certain other conditions relating to the making of reports, the right of visitation, and similar matters of supervision, which will probably be enforced upon all banks by American law; but as they have to a large extent been enforced by Spanish law, and would not affect your earnings or financial condition, I do not think it necessary to enter more specifically into them at this time.

If these conditions are acceptable to your establishment, I am willing to make a recommendation to the Government of the United States that the limit of your circulation be fixed at an amount exclusive of that portion of your issues prior to the year 1884 which has not been presented for redemption, provided that you pay a part of the face value of such outstanding issues into the insular treasury, such payment to be held only as a guaranty for the redemption of the notes in case they are presented. If the other conditions which I have suggested are acceptable, I shall be glad to discuss with you in more detail the arrangements regarding the taking up or cancellation of your old issues.

I would be pleased, if agreeable to you, to have a response at the earliest practicable moment to this communication, as a representative of the War Department specially charged with the consideration of

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