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Mr. WALLACE. No, sir; that is, of course, something that is common to all forms of canals.

Senator ANKENY. I understand in comparison it is, but it would not forbid operating the sea-level canal ?

Mr. WALLACE. No; not at all. What would happen there would be this: In these low sections this slope is very flat, so that the wash might change that slope a little, so that it might be one of the elements that might go to make up your cost of maintenance in a long series of years.

Senator ANKENY. In the way of continual dredging? Mr. WALLACE. In the way of dredging, yes; but it would be very slight.

Senator ANKENY. What would you do with the material that you dredged?

Mr. WALLACE. Carry it out to sea and dump it. Of course you will have to have with any type of canal, whether a lock or a sea-level canal, a certain number of dredges in case bars are formed at the mouths of streams that enter the canal, where they are not properly diverted, or to take care of points which may shoal up, due to various causes.

Senator ANKENY. It is not a serious matter?
Mr. WALLACE. No, sir.

Senator ANKENY. It is definable, to use an earlier expression of yours?

Mr. WALLACE. Yes, sir.
Senator TALIAFERRO. And it is common to both types?

Mr. WALLACE. Yes, sir; it is common to both types. Right on that point, I have seen estimates here based on the number of cubic yards that are excavated.

Senator ANKENY. Yes.

Mr. WALLACE. Showing that it would cost a great deal more to maintain a sea-level canal than a lock canal, because a greater number of yards had been excavated to make the sea-level canal. The amount of wash into a canal does not depend upon the material that has been dug out of it to make it. It seems to me that should be very plain to anyone. What it does depend upon is the nature and extent of the washable surface and the amount of rainfall that you have. Whether you have taken out a hundred thousand or a hundred million yards of stuff to make the canal has nothing to do with the amount of dirt that is going to wash back into the canal. The surface that the water flows over, its character and extent, and the amount of rainfall are the factors that make up the amount that is going back into the canal.

Senator TALIAFERRO. And its susceptibility to wash?
Mr. WALLACE. Yes; I say, its character.

Senator ANKENY. In connection with this sea-level canal there have been many objections, which you see by the reports, to its width, and reference has been made to the difficulty of two ships passing. Suppose that the old proposition or plan was in operation, could not this widening go on without interruption of the traffic. In other words, could we carry on our traffic on a limited scale, we will say, for argument's sake, and go on with the additional work of widening without interruption of that traffic to any great extent?

your traffic.

Mr. WALLACE. Your canal could be widened or deepened, or anything that you please, without necessarily making any disturbance of

Senator ANKENY. If we find it inadequate?
Mr. WALLACE. Yes, sir.

Senator ANKENY. We anticipate a great traffic there, which we have a right to do, I think, from all the circumstances; but if, in the wisdom of Congress or of the Commission, it should be widened later, it could be done without interruption of the traffic that we have; am I right?

Mr. WALLACE. You are right; yes, sir.

Senator ANKENY. If the sea-level canal was adopted, where would you put the power plant that you propose to use for lighting and power?

Mr. WALLACE. I would put it at Gamboa. That is very near to the center of the Isthmus, and is what you might call the center of gravity of the work.

Senator ANKENY. That would necessarily be this dam proposition again, would it not? Mr. WALLACE. Yes, sir.

Senator ANKENY. Now, let us leave that and come to another point. I think by pictures, you see, and you must pardon me if I digress a little. Under which proposition the majority or the minority, or the sea level or the lock canal, which ever way you wish to distinguish them, is there the greater danger from enemies? Which type bas the lesser risk, in other words?

Mr. WALLACE. It seems to me that there is no question but that the sea-level canal is the safer.

Senator ANKENY. The sea-level canal is safer than the other?

Mr. WALLACE. Much safer than the other against anything that might happen to it, either by act of God or act of man, in time of peace or war.

Senator ANKENY. A sea-level canal would be the better plan, for that?

Mr. WALLACE. Yes, sir.

Senator ANKENY. Now again I will digress a little. What is your estimate of the submerged lands, under the lock proposition? Have you made any!

? Mr. WALLACE. Well, that is a very difficult matter to make an estimate about.

Senator ANKENY. I know it is difficult, but it has to be fixed.

Mr. WALLACE. While the franchise or the law says that that valuation shall be the same as it was before we took possession, those things do not work out that way in practice.

Senator ANKENY. Not in their courts.

Mr. WALLACE. Not in their courts nor in our courts down there. We wanted to get some land right up alongside of Ancon here that belonged to a man named Diaz. General Davis can tell you the details about it. I do not remember them all. That property I do not believe cost that old gentleman over $5,000. When we went down there it was not worth over $5,000. He could not have sold it to a Panamanian for over that.

We had a commission come down there from the States, under the law; they formed part of it and we formed part of it. We had two

men coming down from the States, joined with the Panamanians. I do not remember certainly, but my recollection is that the valuation on that property was about $50,000----about ten times what it was supposed to be worth. We tried for months-General Davis did-to buy some property at Corozal that belonged to the Shubers, that bad been in litigation with the old French canal company, and they wanted a thousand dollars an acre for this land that was what we call manglares or swamps [indicating on map], lands that we did not think were worth over $5 an acre.

Senator ANKENY. We had a specimen of that in your hospital matter there, if you remember it.

Mr. WALLACE. Yes, sir.

Senator DRYDEN. They are becoming Americanized, I see. (Laughter.

Mr. WALLACE. They are, very, very rapidly. [Laughter.]

The result was that at Corozal I was not able to utilize ground that was very suitable for buildings. There were buildings on it that the French had there, and we went in and arbitrarily fixed them up and put our men in them. It was maintaining a status quo. We did not put any new buildings on that property.

In this territory down here there are banana plantations sindicating on map]. Senator ANKENY. And they will be submerged? Mr. WALLACE. Yes, sir. Senator ANKENY. Under the lock system?

Mr. WALLACE. Yes, sir. And these towns existing along the Panama Railroad [indicating on map].

Senator ANKENY. Approximately, what damage will this Government have to pay if we take those people's lands? That is a hypothetical question, but we want to know that.

Mr. WALLACE. From my knowledge of the people down there and the way they work-I mean the way they work us [laughter]

Senator ANKENY. That is the difficulty.
The CHAIRMAN. They do work us, too. [Laughter.]

Mr. WALLACE. They do. On the whole situation, I should judge it would cost $25,000,000 to pay for the land which will be submerge by that 85-foot dam project on the lock plan.

Senator ANKENY. I understand that you would recommend that this be done under the contract system?

Mr. WALLACE. Yes, sir.
Senator ANKENY. That is unequivocal?

Mr. WALLACE. The object of that is this: Simply to get it so that one man can be put down there and do it.

Senator ANKENY. I understand.

Mr. WALLACE. That is all. If we could do that work the way a railroad company or a private corporation would do it, why I would not say so; but from my experience with it, from the utter impossibility of the United States Government carrying on a constructive enterprise in a common-sense, business-like manner, it looks to me as if the only way there was out of it was to put it in the hands of a general contractor. Then, that general contractor, having no interest in it except to get it done, and as quickly as possible

Senator ANKENY. And to get his money?

Mr. WALLACE. And to get his money, can put a man in charge of that work there, and can use methods which it is impossible for us as a Government to use.

Senator MORGAN. Would you turn over the railroad to the general contractor?

Mr. WALLACE. The whole business, lock, stock, and barrel.

Senator Morgan. How would you arrange about the commercial traffic on the railroad between the seas ?

Mr. WALLACE. The great business of the world is carried on by private railroad corporations to-day; and it would be the easiest thing in the world to specify the rates that that contractor shall charge, and you can hold him to his duties as a common carrier a great deal easier than you can hold one of the transcontinental American railroads to its duties as a common carrier. And the proposition is so simple; it is simply taking freight from one dock and landing it on another 47 or 50 miles

away. Senator MORGAN. And having the control of the railroad he could conduct his canal work without injury to the commerce?

Mr. W'ALLACE. Without any injury to the commerce whatever; and he should be required to do that. If we are spending three hundred millions of dollars to afford the world an uninterrupted line of traffic across that Isthmus at the lowest possible rate, and we can do that through that railroad, and do it now, why should we not use that railroad for that purpose? And as the contractor's work is to be to accomplish that result, he should be required to do it as he goes along, and there is no reason why he could not do it. That railroad is capable of handling and can be made capable of handling any amount of tonnage that will ever pass through that Isthmus, and doing it quickly and doing it economically.

Senator MORGAN. I would like to ask you whether there is not still some complaint in regard to the railroad rates across the Isthmus?

Mr. WALLACE. I do not know. I have not been in touch with it lately, Senator.

Senator MORGAN. I gather my information from the common source of information in this country---the newspapers.

Mr. WALLACE. What I understand is this: The rates across that Isthmus were made in this wise: There was through billing from New York to San Francisco by the way of the Panama Railroad Steamship Line and the Panama Railroad to the Pacific Mail. That rate was very low, and the average rate across the Isthmus, as nearly as I could figure it when I was there, was about $1.92 a ton. In other words, the competition of the transcontinental railroad lines forced the Panama rate down to that figure. The Panama Railroad did not regulate the rate of the through transcontinental lines, but the through transcontinental lines regulated the rate that the Panama Railroad could charge. They could only get what they could out of what was left.

Senator MORGAN. That was very natural, because they control it?

Mr. WALLACE. Yes; all of the ports along the western Pacific coast; each of them bore a different rate across the Panama Railroad. For instance, the railroad rate was dependent upon what the stuff was and where it came from. In other words, coffee from one port might bear $6 a ton and from another port sta ton for its passage across the railroad. What regulated those rates was what it cost to take that stuff

around Cape Horn. In other words, the Panama Railroad charged on that traffic what that traffic would bear, up to the last mill

. I understand those rates have been cut in two, and there have been some minor adjustments, but there is no reason why that service should not be rendered to every body, and to everybody alike, and there is nothing that you are going to do to develop our trade relations with those South American countries that will help out any more or any better than to make out the lowest possible rate that you can on the railroad across that Isthmus and let those people have the benefit of it. That will develop their country and their purchasing power and increase our trade.

Senator MORGAN. The railroad is under the operation and control of a New York corporation?

Mr. WALLACE. Yes, sir.
Senator MORGAN. That corporation fixes all the rates?
Mr. WALLACE. Yes, sir.

Senator MORGAN. The Commission does not fix the rates; can not fix the rates?

Mr. WALLACE. Yes, sir.
Senator MORGAN. It has been the work of the corporation?
Mr. WALLACE. Yes, sir.

Senator MORGAN. So that the officers of that corporation are the most important officers on the Isthmus to-day connected with the movement of commercial business, and also supplies to the Isthmus of every kind that are necessary to conduct the canal work?

Mr. WALLACE. That is true. And the officers that control the railroad in New York, with very few exceptions, have never been down there. They do not know what they have got.

Senator MORGAN. In the contract plan that you suggest, it would be necessary to put the control of this railroad, rates and all, in the hands of the contractor, seeing that he did not charge too much?

Mr. WALLACE. Yes, sir. Senator MORGAN. That would be the programme? Mr. WALLACE. Yes, sir. There is one thing I want to say, if you will pardon me for mentioning it, and that is that the United States Government and myself are the only stockholders in the Panama Railroad. I bought a share of stock in order to qualify myself as a director in the Panama Railroad. I gave the United States my check for it. They bought back an option on that stock, and took my check and cashed it. And they have got my money and they have got the stock. [Laughter.]

Senator MORGAN. The Government seems to be doing pretty well in the railroad business. [Laughter.]

Mr. WALLACE. But, technically, I happen to be the only stockholder of the Panama Railroad, except the United States Government.

Senator MORGAN. You delivered up your share of stock, did you not, to the Government?

Mr. WALLACE. The Government has it.
The CHAIRMAN. And your money, too? [Laughter.]

Mr. WALLACE. Yes, sir. But that, of course, is neither here nor there.

Senator MORGAN. So that, if you were really a stockholder in the Panama Railroad Company and also a director, you would have a very potential voice in the management of the rate question?

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