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 Catholic church claims and proposed agri 
 
 3 1924 023 441 672 
 
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 http://www.archive.org/details/cu31924023441672 
 
CATHOLIC CHURCH CLAIMS AND PROPOSED AGRICULTURAL 
 BANK IN THE PHILIPPINE ISLANDS. 
 
 Committee on Insular Affairs, 
 
 House of Representatives, 
 Washington, D. C, Monday, January 7, 1907. 
 The committee met at 10.30 a. m., Hon. Henry Allen Cooper, chair- 
 man, presiding. 
 
 The Chairman. Gentlemen of the committee, we are here this 
 morning for the purpose of hearing the Secretary of War on the 
 proposition set forth in the message of the President, to pay the claims 
 of the Roman Catholic Church m the Philippine Islands, and also 
 for the purpose of hearing Governor Ide concerning the proposed 
 agricultural bank in the Philippine Islands. We vfill be glad first 
 to hear Secretary Taft concerning the Catholic Church claims. 
 
 STATEMENT OF HON. WM. H. TAFT, SECEETABY OF WAR. 
 
 CATHOLIC CHURCH CLAIMS. 
 
 Secretary Taft. Mr. Chairman, I am very much pleased to be given 
 an opportunity for this, and I think that the subject-matter is one that 
 calls for prompt action. 
 
 These claims have really been pending for three or four years. I 
 attempted to adjust them when I went to Rome to discuss with the 
 authorities of the church the question, of the' purchase of the friars' 
 lands. I attempted to bring into the contract which we hoped to 
 make there the, settlement of these claims by reference to arbitration. 
 That was in 1902, and while additional claims have accrued since that, 
 I think that the bulk of them were incurred, or arose, before I went to 
 Rome at all. 
 
 The claims are for the occupation of property belonging to the 
 church — that is, the Roman Catholic Church — for damages inflicted 
 during occupancy. As you gentlemen know, there was but one church 
 in the Philippine Islands when we went there, and that was the 
 Roman Catholic Church. Np other church was permitted. It was 
 so intimately connected with the Government that the separation of 
 church and state, which was incident to our going there, became a 
 matter o| the greatest difficulty. A good many questions arose that 
 have not yet been settled. It was hoped that if we could make a con- 
 tract at Rome all of them would have been put in the way of settle- 
 ment by arbitration. One very important question that is pending 
 is the separation of the various charitable trusts into those which are 
 
2 HEAEINGS BEFORE COMMITTEE ON INSULAE AFFAIES. 
 
 strictly religious trusts and those which are civil trusts to be admin- 
 istered by (the civil government. Litigation is now pending over the 
 administi^ation of Certain trust funds to determine whether the eccle- 
 siastics who 'vf^rjdj in charge of the trust funds before we went there 
 were reallj^ acting as civil agents for the civil government or were 
 acting as representatives of the church in the administration of them. 
 
 owisrEESHip or buildings. 
 
 Then another question which has just recently been decided and 
 which affects the character of these claims is who was the owner of 
 the parish churches and the conventos which were in every village in 
 the islands. I suppose that .there are 600 or 700 of those towns, and 
 in every one of them there is a great church building unless it has 
 been destroyed by the war — and what is really a rectory, but what 
 is known there technically as a " convento," that is, the priest's house. 
 It is the largest house in the village. It is the house where much of 
 the entertainment goes on, and the only house that afforded any rea- 
 sonable shelter and comfort to the A.nier'ican troops when they were 
 stationed in these towns and villages. 
 
 No question was made in Spanish days as to the title to these 
 churches and conventos. Nor did anj? arise with any vim or bitterness 
 until there was a schism in the church. Under an excommunicated 
 priest named Aglipay a new church was formed, known as the Inde- 
 pendent Philippine Catholic Church, which continued all the cere- 
 monies of the Roman Catholic Church, coupled with a declaration of 
 independence of Vatican control. During the war the friars, who had 
 occupied most of the parishes as parish priests, were driven into 
 Manila. There were some forty of them — perhaps sixty^ — killed. 
 Three hundred were imprisoned, and the feeling with respect to 
 them — not as against the church, but as against them as political 
 quantities — was so bitter that it was very dangerous for them to go 
 out into the parishes at all, and we are anxious that they should not, 
 because it meant disturbance. 
 
 Now, the result of all that was that a great many of these build- 
 ings (the churches and conventos that I have described) were aban- 
 doned, and there was no authorized occupant of them, and in those 
 towns in which the Aglipayan schism had great sway the Aglipayans 
 moved into the churches and just took possession, and they did so fre- 
 quently under resolutions of the municipal councils authorizing this 
 to be done, on the theory that the municipalities owned the churches 
 and the conventos. That was based on the proposition that the 
 churches were built on the plaza, which was municipal or public 
 property. As a matter of fact, it will probably turn out that the 
 churches were built first and that the plaza was then built long after- 
 wards. But it appeared to be public property, and there had been no 
 change of title. 
 
 Under the Spanish concordat the Spanish Government was pledged 
 to furnish churches and conventos and to contribute to the salaries of 
 the priests, and so the claim was made by these Aglipayans, who had 
 moved into the churches and taken possession of them, tliat the_y were 
 there under authority of the lawful owner, to wit, the municipality, 
 and they declined to get out on the demand of the Roman Catholic 
 
HEARINGS BBFOBE COMMITTEE ON INSXJLAE AEPAmS. 6 
 
 authorities. The Roman Catholic authorities thought that the execu- 
 tive was very lacliing in proper respect for vested rights because we 
 did not send the constabulary there to put them out. But we ex- 
 plained that the issue was a matter of title to the property and that it 
 must be tested in the courts, and special acts were passed for the pur- 
 pose of speedily bringing that question into the courts. The supreme 
 court in a test case decided 
 
 TITLE DECIDED BY SUPREME COURT OF THE PHILIPPINES. 
 
 The Chairman. The supreme court of the Philippines? 
 
 Secretary Taft. Yes, sir. The supreme court of the Philippines 
 has decided what I always thought to be the law — and I did not 
 hesitate to say so in official documents — to wit, that without respect 
 to the legal title of that land, in equity the land belonged to the Ro- 
 man Catholic Church, and the buildings on it belonged to the Roman 
 Catholic Church, as having been in use for the benefit of the Roman 
 Catholic Church in the village in which the church and conventos 
 were constructed. The supreme court of the islands has decided 
 that to be the law, and the claims which are made here and the pay- 
 ment of which is recommended are claims for occupancy of those 
 churches and those conventos by the troops of the United States dur- 
 ing the period from our occupancy in 1898 down to the time when the 
 claims were presented and the report made. 
 
 It is just a civil claim. There is not the slightest doubt of the 
 liability of the Government for the rent, at least after the occupancy 
 ceased to be one of emergency during the train of war, because the 
 property was theirs. The occupancy was ours, and there was an im- 
 plied contract to pay. 
 
 Mr. Crumpacker. Mr. Secretary, does not the law recognize a lia- 
 bility where a belligerent takes the property of a noncombatant, even 
 in emergencies? 
 
 Secretary Tapt. Yes. 
 
 Mr. Ceumpackek. Do these claims cover the period when their 
 legality was pending in the courts ? 
 
 Secretary Taft. Yes, sir. 
 
 Mr. Crumpacker. Ought not that claim to begin after the supreme 
 court in Manila had determined the ownership ? 
 
 Secretary Taft. No; the supreme court at Manila did not deter- 
 mine the ownership until just now, but they determined the owner- 
 ship as of the time covered by these claims. 
 
 Mr. Crumpacker. What investigation has been made respecting 
 the rents ? 
 
 Secretary Taft. I am coming to that. 
 
 Mr. Parsons. May I ask a question there? Do these claims cover 
 any period before 1899, when the insurrection began? 
 
 Secretary Taft. No, sir. I should say, however, that they do for 
 the cathedral of Manila. Before the 4th of February, 1899, you re- 
 member, we did not have any occupancy of the islands except the 
 city of Manila, and we used the cathedral of Manila for the custody 
 of Spanish prisoners, and inflicted considerable damage on the cathe- 
 dral. The amount here charged is upward of $6,000 — a very small 
 amount, I think, for an occupancy of so many months and under 
 circumstances inflicting so much damage on the cathedral. 
 
4 HEAEINGS BEFOEE COMMITTEE ON INSTJLAE AEFAIES. 
 
 Mr. Olmsted. May I ask one question while your statement is in- 
 terrupted ? You said that 300 of these priests were imprisoned. By 
 whom were they imprisoned ? 
 
 Secretary Taft. By Aguinaldo. 
 
 Mr. Olmsted. Not by our people ? 
 
 Secretary Taft. Oh, no, sir. 
 
 Mr. Olmsted. Would not that lend color to the thought that we 
 were protecting their property? If Aguinaldo was attacking the 
 priests, did not their property need our protection ? 
 
 Secretary Taft. Undoubtedly. If it had not been for us I do not 
 know what would have happened to the friars. 
 
 Mr. Jones. When was this decision of the supreme court of the 
 Philippine Islands of which you speak rendered ? 
 
 Secretary Taft. It was rendered, I think, about six weeks ago. 
 
 Mr. Jones. Was it unanimous in the court ? 
 
 Secretary Taft. Yes, sir. I should qualify that. I say it was 
 unanimous, but I understand that there was one member of the court 
 who had doubt about it — a Virginian. 
 
 Mr. Jones. Judge Carson? 
 
 Secretary Taft. Yes. But whether he has handed down a dis- 
 senting opinion or not, I do not know. 
 
 Mr. Jones. Mr. Secretary, that was the question as to the own- 
 ership of all the church property as between the Roman Catholic 
 Church and the independent native church involved in that decision. 
 
 Secretary Taft. Yes, sir; as I understand it, a typical case in ref- 
 erence to — it related to several towns. 
 
 The Chairman. On what theory did the Aglipayans claim title 
 to those churches ? 
 
 Secretary Taft. They did not claim title to them. They took pos- 
 session, but they claimed to be protected and to be holding under the 
 title of the municipalities. 
 
 Mr. Jones. I have always understood that in those localities where 
 the Aglipayans constituted the vast majority of the membership of 
 the church they have claimed ownership) on the ground that the 
 churches were not built by the Roman Catholic Church, but were 
 built by contributions from the natives and work performed by the 
 natives. 
 
 Secretary Taft. That is true. 
 
 Mr. Jones. And that the churches therefore belonged to them and 
 not to the Roman Catholic Church. 
 
 Secretary Taft. No ; you will find that when you get into the liti- 
 gation that that enters into the question of whether the municipality 
 owns the churches or the Roman Catholic Church. Their theory is 
 this: That these were municipal churches, and that all the people 
 contributed by contributions of labor, just as they would by taxes, 
 to the municipality, and, therefore, that the churches and conventos 
 belonged to the municipality for such religious worship as the people 
 of the municipality preferred, and that they might change from 
 the Roman Catholic Church to the Aglipayan Church if they chose. 
 
 Mr. Jones. Do you know whether or not in this particular case the 
 membership of that church was composed mostly of natives Avho be- 
 longed to the independent church or of those who belonged to the 
 Roman Catholic Church? 
 
HEARINGS BEFORE COMMITTEE ON INSXJLAE AFFAIRS. 
 
 Secretary Taft. I do not know as it would make any difference. 
 Doubtless the question arose between the municipality and the Roman 
 Catholic Church. 
 
 Mr. Jones. I understand that your opinion was, before this case 
 was decided, that the people in possession of the churches should not 
 be disturbed. 
 
 Secretary Taft. Yes, sir. 
 
 Mr. Jones. If they belonged to the independent church, they were 
 in the majority. They had the priests and they were in control of 
 the church, and they were not to be disturbed. 
 
 Secretary Taft. It was not because they were in the majority, but 
 because they were in possession ; and' as it was a question of posses- 
 sion, it was not for the executive to pass on that subject. 
 
 Mr. Jones. But, as a matter of fact, when they were in possession 
 they were in the majority, usually? 
 
 Secretary Taft. Yes, sir. 
 
 Mr. Crumpackee. This test case having been decided by the su- 
 preme court, was it a case which had been appealed ? 
 
 Secretary Taft. No; it was heard in the supreme court by a 
 special act. 
 
 Mr. Parsons. What did the concordat require as to the erection 
 of churches? Did it i-equire the Spanish Government to erect 
 churches in the Philippines? 
 
 Secretary Taft. Yes, sir. We must very clearly understand what 
 Catholicism was in the islands. The Vatican turned over to the 
 Spanish King almost complete control of the church in the Philip- 
 pines, in view of his obligation to see that churches were erected and 
 the priests were paid, and I think that that may possibly explain the 
 reason why the monastic orders that had their headquarters in Spain 
 exercised such control over the church in the Philippines — rather 
 more, probably, than in any other place where the Vatican had 
 churches. 
 
 Mr. Parsons. Has there been any contention that the title to any 
 of these churches belonged to the monastic orders ? 
 
 Secretary Taft. No, sir; well, there are churches, or rather con- 
 ventos, that do belong to them, but these are parish churches. I want 
 to say that many of the claims are of this character, but they are dis- 
 tinguished by the Judge- Advocate-General in his review. You will 
 find that there are claims on behalf of some of the monastic orders 
 for occupancy of some of their buildings, but that is a much smaller 
 part of the amount, and it is not included in the $363,000. 
 
 Mr. Gilbert. Has the War Department any copy of the record of 
 that test case? 
 
 Secretary Taft. No, sir; not yet. It will doubtless come. I have 
 had a letter from one of the judges, telling me the general lines of 
 the decision; but that is all. It is from that letter that I under- 
 stood thei'e would probably be filed a dissenting opinion. 
 
 The Chairifan. The court consists of seven members ? 
 
 Secretary Taft. Yes, sir. 
 
 The Chairman. And there were six concurring in the majority 
 opinion ? 
 
 Secretary Taft. Yes, sir. There is the chief justice, who is a 
 Filipino; there are four Americans and two more Filipinos. Three 
 Americans and three Filipinos sustained that view. 
 
6 HEARINGS BEFORE COMMITTEE OlST INSUtAR AFFAIRS. 
 
 Mr. Jones. Do you know what is the religious complexion of the 
 court ? 
 
 Secretary Tatt. Three are Protestants, one an American Catholic, 
 and three Filipino Catholics. 
 
 Mr. Jones. The Filipino Catholics, however, do not belong to the 
 independent church ; they all belong to the Koman Catholic Church, 
 so that there are four Eoman Catholics and three Protestants on the 
 court ? 
 
 Secretary Taet. Yes, sir. 
 
 AGGREGATE OF CLAIMS. 
 
 The Chairman. What was the aggregate of the claims, Mr. Sec- 
 retary, originally? 
 . Secretary Taft. You mean for this 
 
 The Chairjian. Occupancy, etc. 
 
 Secretary Taft. I think they went up to $2,000,000. 
 
 The Chairman. There was a commission appointed, I believe, to 
 investigate and report? 
 
 PROCEDURE IN INVESTIGATION OF CLAIMS. 
 
 Secretary Taft. Judge Crumpacker asked me what the form of 
 procedure was with reference to these claims. As soon as I reached 
 the islands, in 1902, or very shortly after that, I called on Mon- 
 seigneur Guidi, who was apostolic delegate, and asked him to present 
 the claims. Then I requested the Secretary of War to direct the 
 commanding general over there to delegate somebody to look into 
 the question of the claims, and all the officers spread all over the 
 island were directed to investigate the question of the claims. There- 
 after, when I came back, I directed the appointment of a board on 
 church claims, consisting of officers, and that board sat and consid- 
 ered the claims. It considered the evidence presented by the agent 
 who had been selected to look into them (an army officer) , and it has 
 made its report on that evidence thus presented. 
 
 The Chairman. Can you give the names of that board ? 
 
 Secretary Taft. Colonel Hull, of the Judge- Advocate's Corps, was 
 the chief. Colonel Brodie, of the Military Secretary's office, was 
 another, and then there was Major Gibson, who acted as recorder of 
 the board, of the General Staff. I think that the officer who made 
 the investigation and conferred a great deal with Monseigneur Guidi 
 was Major Fremont, but there were other officers, too, so engaged. 
 
 INFLUENCE OF THE CHURCH. 
 
 The truth is that one of the great disasters to the Philippines has 
 been the destruction of the Eoman Catholic churches. The church 
 there is an instrument for the preservation of peace and good order. 
 It is of the utmost governmental importance, and should be sus- 
 tained. I am looking at it purely from a secular standpoint. Now, 
 the church must have sustained a loss — I have an estimate from the 
 board, which was ordered to make a recommendation — and the dam- 
 age sustained in the train of war by the churches amounted to 
 $600,000, in round numbers. The damage by the insurgents $800,000, 
 
HEABINGS BEFORE COMMITTEE ON INSULAP. AFFAIRS. 7 
 
 and that in addition the churches were robbed of articles of cult and 
 ornamentation amounting to $300,000, and all that in addition to this 
 $363,000. 
 
 The Chairman. This $363,000 was the amount which the board 
 found to be due? 
 
 Secretary Taft. Yes, sir; the amount they found was due from 
 the Government. I think that you have had precedents in your ap- 
 propriations for charitable and church organizations during the civil 
 war, in which you assisted the churches and the educational institu- 
 tions that were destroyed in the train of war, on the ground that their 
 management was loyal. I do not think it would be at all unfair — - 
 indeed, I think it would be greatly to the interest of the Govern- 
 ment — if you were to increase this amount of $363,000 so as to include 
 some elements of that kind. The church has been thrown on its 
 beam ends by this destruction, by reason of the fact that the support 
 of its priests has now been withdrawn. They are a people very de- 
 pendent on their church, very much influenced for good by their 
 church, and yet they have never contributed to the church as people 
 in this country are in the habit of doing. The consequence is that 
 these losses which the church has sustained it is almost impossible for 
 the church to repair, and that is what I had in mind. I think that 
 the President points that out in his letter of transmittal. In my let- 
 ter to the President I say : 
 
 The sum reported by the board of officers is very small in proportion to the 
 actual loss suffered by the Roman Catholic Church in the islands. A great 
 deal of destruction was done during the war of the insurrection, both in the 
 train of war and by the deliberate plan of the insurrectos to injure the build- 
 ings that they thought might be useful to the American forces. I have dii'ected 
 the commanding-general of the Philippine Division to reconvene the same board, 
 or convene another for the purpose of reporting on the total damages to the 
 Roman Catholic churches in the islands by reason of the war, and the damage 
 inflicted to the property of the chiirch by the insurrectos. I have done so be- 
 cause I conceive that it might be well in the public interest, under precedents 
 already set in this country by Congressional assistance to educational and re- 
 ligious institutions suffering from the destruction of war in the South, that a 
 sum additional to that herein recommended for payment might be appropriated 
 to aid the church, the authorities of which were always loyal to the United 
 States in the islands during the insurrection. 
 
 The Roman Catholic Church is exceedingly important in the secular life of 
 the islands as a restraining and uplifting influence for the Philippine people, 
 and the deplorable condition in which it finds itself by reason of the destruc- 
 tion of the war of the insurrection appeals strongly to anyone interested, as the 
 Government of the United States is, in the maintenance of order and the moral 
 welfare of the people. 
 
 Of course I do not know how that will strike the committee or 
 Congress. Personally I would not hesitate, and would be glad if 
 the responsibility were my own, to bring about an appropriation 
 larger than the claims here jsresented of $363,000. But, with re- 
 spect to that sum, there is not the slightest doubt that the Govern- 
 ment owes it and ought to pay it as promptly as possible. 
 
 RECOMMENDATION OF BOARD. 
 
 The Chairman. I do not know that you mentioned the original 
 amount of the claims presented to the board. It was approximatelv 
 $2,000,000. 
 
 Secretary Taft. And they reduced it to $363,000. I do not know 
 whether you have my communication here or not. 
 
O HEAEINGS BEFORE COMMITTEE ON INSTJLAE. AFFAIRS. 
 
 The Chairman. I have one statement which shows the character 
 of one of the reductions. For instance, the claim of a bishop for 
 ^554,785 Spanish— about $227,000 in gold— for a church occupied 
 by insurgents and shelled by United States artillery, set on fire, and 
 destroyed. Colonel Hull and his associates say that no recovery can 
 be had on that claim. That sort of reduction brought the total 
 down from $2,000,000 or over to $363,000. 
 
 Secretary Taft. You have the printed document, have you not? 
 Perhaps it is a Senate document. 
 
 The Chairman. I have the President's message (S. Doc. No. 11). 
 
 Secretary Tatt. And you will jBnd on page 2 of that document 
 the rules which I laid down to govern the board in reaching the con- 
 clusion which they did reach. 
 
 LOYALTY or CI-IimCH. 
 
 Mr. Jones. Mr. Secretary, I observe that the President speaks of 
 the loyalty of the authorities of the church to the United States 
 Government. Has there not been some question as to that? 
 
 Secretary Tapt. Only as to the native priests; not with reference 
 to the church authorities. 
 
 Mr. Jones. It seems to me that I have seen it stated in one of the 
 histories of the Philippine Islands that this head of the independent 
 church, Archbishop Aglipay, was sent by the Catholic authorities 
 to Aguinaldo with a proposition that they would join with him 
 against the United States — something to that effect. Have you 
 not heard that statement? 
 
 Secretary Taet. No, sir; I am quite sure that that is not true. 
 What did happen is this, that Aglipay was sent, possibly, or went, 
 at any rate, with the idea of intervening to save the friars. It is 
 possible that the church had something of that sort in mind, but the 
 excommunication of Aglipay arose, as I understand it, from his re- 
 fusal to obey the order of the Archbishop of Manila to present him- 
 self and come away from Aguinaldo. He first exercised his function 
 as a kind of pope at Aguinaldo's court, and then became subsequently 
 a partisan and guerrilla leader of the guerrillas of northern Luzon. 
 
 Mr. Jones. Yes; but my understanding is that prior to this time 
 of the beginning of the insurrection that they sent to Aguinaldo and 
 said to him, " You stand in with the Spanish forces, and so the Span- 
 ish Government will make certain concessions to the Philippines," and 
 that he was the means of communication between the church authori- 
 ties and Aguinaldo. 
 
 Secretary Taft. No ; I think that you will find this to be the case, 
 and it is always well to bear it in mind, that Aguinaldo's govern- 
 ment — such government as he had — was in existence for a number of 
 months — perhaps eight months — when the course to be pursued by 
 this country was altogether uncertain, and we were not at war with 
 him, and when, therefore, the anxiety of the church to prevent acts 
 of confiscation which were passed by the parliament called by Agui- 
 naldo was A^'hat the church wanted to prex'cut, and they may have 
 desired to use Aglipay for that purpose. But that was all before 
 February, I'SOO, when there was in the Philippines not only Agui- 
 naldo's forces, but the forces of the United States. 
 
HEARINGS BEFORE COMMITTEE ON INSULAR AEFAIES. 9 
 
 Mr. Jones. My information is that it was prior to that time. 
 
 Secretary Taft. So that it could not be called an act of disloyalty 
 if the church was trying to prevent the property of the church from 
 being confiscated at that time. 
 
 Mr. Jones. This was about the time, as I understand it, when 
 Aguinaldo was supposed to be acting with the United States, and we 
 desired to secure his assistance and cooperation against the Spanish 
 forces ? 
 
 Secretary Taft. Yes. 
 
 Mr. Jones. They took the Spanish side ? 
 
 LOSSES DUE TO INSUEEECTION. 
 
 Secretary Taft. Oh, naturally. In the Spanish war there was no 
 doubt that the church authorities were all in favor of Spain and not 
 of the United States. That was a condition of war. I am referring 
 now to the losses sustained by the church. The church did not sus- 
 tain any considerable loss during the Spanish war. The losses sus- 
 tained were the losses sustained in the insurrection which followed in 
 1899. The general who was one of the insurrectos — what was his 
 name? 
 
 Mr. Jones. Luna? 
 
 Secretary Taft. Yes; Luna. Luna pursued this policy. He had 
 an impression that the Americans were dependent on the churches 
 and conventos for places of occupation, and as he marched north, be- 
 ing driven north by McArthur's forces and Lawton's forces, he 
 destroyed with powder, as far as he could, every church and every 
 convento in the line of his march, and it was during that time that 
 so much loss was inflicted. A similar policy was pursued elsewhere, 
 but he was the one who introduced it. 
 
 The Chairman. But this commission does not propose to pay for 
 such damages? 
 
 Secretary Taft. Such losses are not included in this total. 
 
 The Chairman. Where is the testimony taken before that com- 
 mission ? 
 
 Secretary Taft. It is on the sea. i ought to explain to the com- 
 mittee the situation with respect to that. I have the correspondence. 
 It is an instance of how some things Avork. I directed, in order 
 that the committee might consider this other equity which I think 
 exists, that a report of general losses be made in order to give the 
 committee an idea of the losses which the church had sustained and 
 the causes of those losses, and they cabled me that they could not 
 do it unless the evidence which had been sent here was returned to 
 them, and I then directed that the evidence be sent back. I thought 
 that between the adjournment of Congress and its meeting again 
 there would be plenty of time. Well, it seems that this evidence 
 was in a dry-goods box, and that The Military Secretary, instead of 
 sending it by mail, turned it over to the Quartermaster-General for 
 transportation by him, and that the quartermaster who had charge 
 of it, not being aware of the character of the freight, concluded 
 that it might just as well go by slow freight, and it went by a tramp 
 steamer Avhich had been employed by the Quartermaster's Depart- 
 ment, and it took three months to get from Washington to Manila. 
 
10 HBAEINGS BEFORE COMMITTEE ON INSULAR AFFAIRS. 
 
 In the meantime we spent a good deal of money in cables trying 
 to find out how it was that it went by the steamer Satsima. 
 
 The Chairman. It went by the Suez Canal, did it not? 
 
 Secretary Taitt. Yes, sir; it went by the Suez Canal, but it did 
 not reach Manila until the 3d of December. I rather warmed up 
 the wires with cables on the subject when I found out what had 
 been done, and it was mailed or sent by transport on the 4th of this 
 month, I think, and it will be here, I hope, by the 4th or 5th of 
 February. 
 
 Mr. Olmsted. Will there be in that record, Mr. Secretary, the 
 details showing the items of which this $363,000 is composed ? 
 
 Secretary Taft. Yes, sir. There is a report here showing that 
 detail, which I have transmitted. 
 
 The Chairman. I have it right here. 
 
 Mr. Olmsted. Does that show the items in detail and the amounts ? 
 
 Secretary Taet. Yes, sir. It has the claims as presented by the 
 church authorities and the recommendations of the board. I think 
 that the reports of the officers themselves are in this batch of 
 papers. They are so voluminous as to have to be carried in a dry- 
 goods box. 
 
 payment op money. 
 
 Mr. Olmsted. In the event that Congress should appropriate this 
 money, to whom should it be made payable ? 
 
 Secretary Taft. I think that it should be made payable to the head 
 of the church in the Philippines. 
 
 Mr. Olmsted. With or without any requirement as to the putting 
 up of churches or conventos in the islands ? 
 
 Secretary Taft. I think that it ought to. I suppose that you 
 might limit its use to the construction of churches in the islands if 
 you choose. Of course, it is a debt due, and I suppose that the people 
 who are entitled to it are entitled to use it as they choose after they 
 get it, but, being a governmental debtor, perhaps you can impose any 
 restriction you choose. 
 
 Mr. Olmsted. I want to know what you think as to whether it 
 would be wise or not. 
 
 Secretary Taft. I doubt it as to what is legally due. 
 
 Mr. Crumpacker. I understand the situation to be this : This com- 
 mission has investigated and reported these claims, and reported a 
 liability of $363,000 on the basis of a liability which is shown for the 
 appropriation and occupation of the property of noncombatants in 
 time of war. 
 
 Secretary Taft. Yes, sir. Understand me that this claim covers 
 a period long after any war. This comes down to 1905, I think. 
 
 Mr. Crumpacker. The property occupied by our troops and dam- 
 aged, as I understand, in the way of occupancy? 
 
 Secretary Taft. Yes, sir. 
 
 Mr. Crumpacker. The commission rejected all claims for damages 
 that were inflicted by the insurrectionary forces ? 
 
 Secretary Taft. Yes, sir. 
 
 Mr. Crumpacker. All claims for damages inflicted by our forces as 
 necessary incidents to this Avar? 
 
 Secretary Taft. Yes, sir. 
 
HEARINGS BEFORE COMMITTEE ON INSXJLAE AFFAIRS. 11 
 
 Mr. Cetjmpacker. As, for instance, occupancy of church property ? 
 
 Secretary Taft. Yes, sir. To illustrate: There was a church at 
 Guadaloupe containing a most valuable library. It was built, as all 
 those churches are, very like a fortress, and the insurrectos occupied 
 it, and our military had to train their artillery against it, and the 
 church and library were destroyed, and everything else. 
 
 Mr. Ceumpacker. I do not believe that Congress has ever recog- 
 nized claims of that character. It is one of the incidents of war and 
 property destroyed incidentally during the activities of war. I do 
 not have in mind an instance of where Congress has made any recom- 
 pense in such a case, but your idea is 
 
 Secretary Taft. My impression is that Congress allowed a claim 
 for William and Mary College. 
 
 Mr. Crtjmpackee. That was for occupancy, was it not? 
 
 Secretary Taft. No; I think that it was destruction of buildings, 
 was it not, Mr. Jones ? 
 
 Mr. Jones. There have been several claims of that kind paid by 
 Congress. 
 
 Mr. Olmsted. That was a claim paid to the Methodist Church. 
 
 Secretary Taft. Yes, sir. 
 
 Mr. Jones. There have been several claims paid for churches in 
 the South ; two or three dozen of them. 
 
 Mr. Olmsted. I understand that this $363,000 is for occupancy 
 after the activities of war had ceased. 
 
 Secretary Taft. Yes. 
 
 Mr. Jones. And for damages done during that occupancy. 
 
 Mr. Cetjmpacker. Is it limited to this question? 
 
 Secretary Taft. It is limited to occupation during peace, but it 
 is for occupancy and for damage accruing through that occupancy. 
 
 Mr. Cetjmpacker. The question for the committee to determine is 
 whether it will pay this, and whether it will pay anything for dam- 
 ages inflicted by the insurrectionary forces; second, whether it 
 will allow anything for damages in subduing the insurrectionary 
 forces. That is the problem. 
 
 Secretarjr Taft. Yes, sir ; that is the proposition. 
 
 Mr. Jones. And also to whom the monev will be paid, if it be paid. 
 
 Mr. Crtjmpackee. If \ye add anything to these two factors that I 
 have suggested, I think that it will be simply a recognition of a sort 
 of an equitable claim, a rather vague one, and we might impose con- 
 ditions. In relation to this $363,000, I do not think that it would be 
 proper to impose conditions at all. 
 
 Secretary Taft. I doubt if it would. Now, with reference to that. 
 Properly speaking, these claims, considering the character of the 
 ownership of the property — I mean from the legal standpoint — sup- 
 pose the claims are due to the Roman Catholic Church, but they arose 
 from the destruction of property that was held by the Roman Cath- 
 olic Church in trust for congregations in the particular villages 
 where the destruction was effected. Generally under the canon law 
 of the Roman Catholic Church the title of these churches is in the 
 bishop of the diocese, and, generally, claims of that sort would be 
 paid to the bishop of the diocese, though I think that it would be 
 better, as a matter of general policj^ if we could reach the conclusion 
 that it was right to pay it generally to the head of the church in the 
 
12 HEARINGS BEFOEE COMMITTEE ON INSULAR AFFAIRS. 
 
 islands, because it would be more likely to have fairer application and 
 distribution. But of course that is a matter that addresses itself to 
 the committee 
 
 Mr. OL:NtSTED. That is what I wanted to get at. I know very little 
 ■of the interrjal workings of that church, but I know that the Bishop of 
 Harrisburg, where I live, has control of the church property. It 
 stands in his name. 
 
 Secretary Taft. Yes, sir; it generally stands in his name without 
 any words at all. And it was decided in the " Ohio case," you re- 
 member, where Archbishop Purcell and his brother, Father Edward, 
 established a kind of a banking ^place and involved themselves in an 
 enormous debt, which they could not pay out of the funds which they 
 had. The question then arose as to whether the church property, 
 which stood in the name of the archbishop without any trust on its 
 face at all, was subject to the debts thus incurred, and the supreme 
 court of Ohio decided that it was not. They could follow the money 
 into the church in which it had been put, but thej^ could not take the 
 money belonging to the church, though in the name of the bishop. 
 
 Mr. Olmsted. Suppose instead of a Philippine church building it 
 had been the church building at Harrisburg that had been occupied, 
 the church Avhose property stands in the name of the bishop ; that 
 would be the part of the organization that suffered the loss. Now, 
 then, if that loss is to be paid, ought we not to make provision to see 
 that it goes to the church of Harrisburg, or to the equivalent organiza- 
 tion in the Philippines ? 
 
 Secretary Taft. You could do that by making it payable to the 
 bishop of the diocese, for payment to the particular church. 
 
 Mr. Olmsted. Would that not be the proper way ? 
 
 Secretary Taft. It would certainly not be an improper way. 
 
 The Ci-iAiEMAN. I have read the claim No. 13. It says : " Bishop 
 Eucker has abandoned this claim for action taken on another claim." 
 
 Secretary Taft. That is true. All the bishops appeared before this 
 board and filed claims in their respective dioceses. 
 
 The Chairman. There is another important point revealed here. 
 Claim No. 16. This is the language of the commission you ap- 
 pointed: "As the destruction was an incident of war, it is recom- 
 mended that nothing be paid." 
 
 Mr. Ceumpacker. They followed the law. 
 
 Secretary Taft. They did. Thej^ followed the rules as I gave them 
 in my letter printed here. 
 
 Mr. Grahaji. You say that it would be decidedly improper to pay 
 this money over 
 
 Secretary Taft. No, sir ; it would not be improper. It would add 
 very much to the convenience if you could give it all to the head 
 of the church, so that it might be spent with discretion and aid the 
 entire church in the islands. 
 
 The Chairman. Do you mean to Archbishop Harty by name, as 
 archbishop of the Philippines? 
 
 Secretary Taft. It might be paid to him. But whether you can 
 do it legally or not is, perhaps, a matter of doubt. They can make 
 a large fund go much further, if they have it in one fund, than if it 
 is in driblets. 
 
 The Chairman. Are these claims in such a form so that if we 
 make an award in accordance with the findings of this commission 
 
HEARINGS BEFORE COMMITTEE ON INSULAR AFFAIRS. 13 
 
 we could specify the amount to go to each bishop by looking through 
 the record ? 
 
 Secretary Taft. Oh, yes ; because you can tell. It is all with refer- 
 ence to the towns, and the towns are shown by the report to be in 
 particular dioceses. 
 
 Mr. Ckumpackbr. Suppose that we should make this appropriation, 
 and should instruct the money to be paid to the head of the church in 
 the archipelago, that is not the depository of titles ; the titles belong to 
 the bishops. 
 
 Secretary Taft. Yes; where there is a local diocese there is gen- 
 erally a legal title. 
 
 Mr. CRtiMPACKEE. In a legal sense, if the money were paid to the 
 bishop it would not be paid to the person who has suffered the loss. 
 
 Secretary Taft. You could do this, because in the Roman Catholic 
 Church the Pope is the head of the church, and has all the bishops 
 under him; you pay it to the persons whom the head of the church 
 would designate as proper persons to receive it in the islands. 
 
 Mr. Crumpacker. Now, Mr. Secretary, that is the ecclesiastical 
 .'iide of the question. We are dealing now with the law side of it, 
 and so far as the law and jurisprudence go it would seem to me that 
 the bishops are the only ones who have any claim against the Govern- 
 ment, and payment to anyone else would extinguish every claim. 
 
 Mr. Olmsted. Suppose there was a mortgage or judgment, then 
 the payment to any other authority would not release the claim of 
 the bishop. 
 
 Secretary Taft. I have no doubt that whatever way you do it, the 
 matter could be so arranged that the Government would secure full 
 release from everybody. If you would leave it to the action, for in- 
 stance, of the War Department, to see that the release of all possible 
 claimants should be filed before the money was paid, the Government 
 could in this way be entirely protected. In other words, no money 
 would be paid to any town until the bishop of that town should ac- 
 knowledge receipt and direct its payment to some one. 
 
 Mr. Olinisted. How many dioceses are there? 
 
 Secretary Taft. The diocese of Nueva Segina, the diocese of 
 Manila, the diocese of Nueva Caceres, the diocese of Iloilo, or Jaro, 
 as it is called, and the diocese of Cebu. 
 
 Mr. Graham. It would not be much of a task to put it into the 
 hands of the bishop ? 
 
 Mr. Etjckee. As I understand, the total amount of these losses is 
 something like $2,500,000? 
 
 Secretary Taft. Yes, sir. 
 
 Mr. RucKEE. The amount recommended by the commission was 
 based upon the legal liability. It is $360,000. 
 
 Secretary Taft. Yes. 
 
 Mr. RuoKEE. Your suggestion, and also the President's suggestion, 
 is that we might in equity allow a larger sum to cover some claims 
 which are not legal, but which have a strong equity. 
 
 Secretary Taft. You will find, in looking into the claims, that the 
 church authorities have had great difficulty in getting evidence. 
 Time has passed and the conditions were so disturbed that it was 
 difficult for them to secure that character of legal evidence that the 
 commission necessarily required in passing on the question. 
 
14 HEARINGS BEFOEE COMMITTEE ON INSULAE AFFAIRS. 
 
 Mr. RucKEE. I was going to ask to what extent you would recom- 
 mend this generosity on the part of tlie Government toward those 
 people who seemed to have claims based on equity? 
 
 Secretary Taft. As one very much interested in the Philippine 
 Islands, I would be glad to see the claim doubled. 
 
 Mr. RucKER. Assuming that Congress would double the amount 
 of the legal liability of the Government, leaving the sum of $360,000 
 to be distributed among these claimants in proportion to the equities, 
 by whom would the payment be made ? 
 
 Secretary Taft. I would be glad to leave it to the archbishop of 
 Manila. He is the most successful administrator of the church. 
 He is a man who has entered into the spirit of the business. 
 
 Mr. RucKER. Would you think it safe to leave that large amount 
 of money, upon which there is no legal liability, but a very great 
 equity, to him and allow him to determine the equities of the dif- 
 ferent claimants? 
 
 Secretary Taft. I think probably he could do that better than any- 
 body else. 
 
 Mr. RucKER. Don't you think he should make suggestions as to 
 where the stronger equities are and let Congress determine the ques- 
 tion as to payment ? 
 
 Secretary Taft. I think that with respect to the amount that may 
 be allowed merely as an equity, Congress ought to impose a trust 
 with respect to its distribution. 
 
 Mr. Parsons. Have you received the second report of the board of 
 officers ? 
 
 Secretary Taft. I have only a cablegram, which I would be glad 
 to read and leave with the committee, if I may be permitted to do so. 
 
 The cablegram was read as follows : 
 
 [Extract fi-om cablegram received at the War Department January 4, 1907, 9.20 n. m.] 
 
 The Military Secretary, Washington: 
 
 Board chiii-cli claims reported .January 3. Papers forwarded by registered 
 mail same day. Owing to limited time, estimate is of hurried nature and not a 
 real determination of the facts involved. All sums expressed in dollars. United 
 States currency. Estimate train of war, $597,715 ; damages by insurgents. 
 $802,180. In addition church claims for loss by robbery, etc., articles of cult 
 and ornamentation amounting to $298,150. On this item board reports not in 
 the possession of adequate facts on which to base estimate of actual money loss ; 
 also church claims for cash seized by insurgents or as contribution to the so- 
 called national loan, $57,467, and for value of supplies, same cause, $8,500. No 
 estimate of actual loss made under last two heads on account of limited evi- 
 dence and nature of claims. 
 
 * * ^ * * * * 
 
 Wood. 
 
 Secretary Taft. I have a previous telegram in which General 
 Wood says he thinks the board had visited everj' part of the island 
 in an attempt to make up those claims except one diocese. They had 
 expected to visit this one in January. 
 
 The Chairman. A second time? 
 
 Secretary Taft. Yes. Of course I shall transmit to Congress at 
 once this evidence as soon as it comes back. Its delay has made a 
 most exasperating condition of affairs. 
 
 Mr. RucKER. When is it likely to be here ? 
 
 Secretary Taft. Not before the first week in February. 
 
HEARINGS BEFOEE COMMITTEE ON" INSXTLAB AFFAIRS. 15 
 
 The Chairman. On -what boat was it ? 
 
 Secretary Taft. It is on a transport coming direct by way of San 
 Francisco. I will have it forwarded by express when it reaches San 
 Francisco. 
 
 Mr. Parsons. There will be a formal report in regard to the 
 claims ? 
 
 Secretary Taft. Yes. 
 
 occupation of cathedral at 3IANILA. 
 
 The Chairman. How long did our troops occupy the cathedral in 
 Manila ? 
 
 Secretary Taft. Seven months. You will find it in the first re- 
 port. The rental is at the rate of ?300 per month, amounting to 
 ¥=10,500, and the damages are estimated at ¥1,050. I think that is 
 a very small rental for a building like the cathedral. 
 
 The Chairman. The damage to the woodwork was only $500? 
 
 Secretary Taft. Yes. 
 
 The Chairman. That speaks well for the troops. 
 
 Mr. RucKER. If it was in America the claim would be bigger 
 than that. 
 
 Secretary Taft. Certainly the buildings occupied by the Govern- 
 ment since in Manila have involved the payment of vastly higher 
 rentals than $750 per month. 
 
 Mr. RucKER. They are becoming Americanized over there. 
 
 Secretary Taft. Yes. 
 
 Mr. Gilbert. The cathedral is. quite an imposing structure, is it 
 not? 
 
 Secretary Taft. Yes; it is a very large one. It has somewhat the 
 form of a fortress, and they used it as a prison. 
 
 friar claims. 
 
 Mr. Parsons. The judge-advocate says there is a separate claim 
 in regard to the friar cases. Does he mean that there will be still 
 another report in addition to the report of the commission? 
 
 Secretary Taft. I think that is a small matter. It is sometime 
 since I have looked at it, and my impression is it has reference to a 
 separate report made by him. Two reports were submitted, one 
 covering the church property and the second covering the friar 
 property. I think that has reference to a report he is to make on 
 the friar property. [Reading:] " The first report will be considered 
 alone in this report. A second report will be made in respect to the 
 friar cases." This does include a statement of the friar cases, but 
 when examined separation can be made. 
 
 Mr. Parsons. The $260,000 claim referred to the church claims 
 alone ? 
 
 Secretaiy Taft. Yes. 
 
 Mr. Parsons. There will be additional claims for the friar prop- 
 erty? 
 
 Secretary Taft. Yes; but they do not amount to a great deal. 
 
 Mr. Parsons. Those claims have no reference to the friar lands? 
 
 Secretary Taft. No; the friar lands are a different thing from 
 buildings and churches. The friar lands are agricultural lands, and 
 
16 HEARINGS BEFOEE COMMITTEE ON INSULAB APFAIKS. 
 
 the only buildings bought in connection with those lands were the 
 plantation buildings. They had nothing to do with property owned 
 by the friars, because the friars owned some business property in 
 Manila. 
 
 The Chairman. We will continue the hearing to-morrow morning 
 at 10 a. m. on the question of the proposed agricultural bank in the 
 Philippines. 
 
 Adjourned. 
 
 CoaiMITTEE ON Insulae ArrAIRS, 
 
 House or Representatives, 
 
 Tuesday^ January 8, 1907. 
 
 STATEMENT OP HOIT. HBBTBY C. IDE, EX-GOVEBNOE OE THE 
 PHILIPPINE ISLANDS. 
 
 The Chairman. Governor, just a word about yourself, personally. 
 You were in the Philippine Islands for how long? 
 
 Governor Idb. I went out with the Taft Commission in April, 
 1900, and I was a member of the Commission until the 20th day of 
 September, 1906. I was made secretary of finance and justice upon 
 the organization of the civil government and performed the duties 
 of that office down to the time that I left. Governor Wright went 
 away in October, 1905. Having been made vice-governor a year or 
 two before, I performed the duties of acting governor-general and 
 was subsequently made governor-general, so that during the last year 
 I had the duties of governor-general and secretary of finance and 
 justice to perform. 
 
 That has been my connection with the civil government in the 
 Philippines. I left there on the 26th of September, 1906, and arrived 
 at San Francisco about the 1st of November last. 
 
 The Chairman. During your residence in the Philippines you 
 have traveled over the archipelago i^retty thoroughly, have you not ? 
 
 Governor Ide. Yes; I have been in nearly every province at one 
 time or another, and in many of them several times. 
 
 The Chairman. What is being done toward carrying out the pro- 
 visions of the railroad act which we passed here two or three years 
 ago? 
 
 PHILIPPINE railroads. 
 
 Governor Ide. To state it as briefly as I can, advertisements were 
 published in the Manila papers and also in papers in the United 
 States, for tenders upon certain defined lines and within certain 
 limitations, such as were substantially marked out by the act of 
 Congress. Advertisements were issued for tenders for between 1,100 
 and 1,200 miles of railroad. 
 
 The conditions that the railroad corporations were to comply with 
 were set forth in the advertisements, which were made in accordance 
 with legislation by the Philippine Commission. The bids were to be 
 opened on the 20th day of December, 1905. On that day they were 
 duly opened, and it was found that for quite a number of the lines 
 for which we had asked competition no bids had been tendered, par- 
 ticularly lines that would run from central Luzon over across the 
 
HEARINGS BEFORE COMMITTEE ON INSULAR APEAIRS. l7 
 
 mountains in a northeasterly direction and down the Cagayan Val- 
 ley to Aparri ; and likewise lines in Leyte and Samar. The last two 
 quite probably were not bid for because of the disturbed conditions 
 in those provinces, although they are very rich and promising, and 
 ultimately will furnish very excellent support, in my opinion, for 
 railroads. But it was found that the bids departed in many material 
 respects from the conditions laid down in the advertisements, and to 
 such an extent that the different bidders were not competing for the 
 same thing, as one would be bidding for the construction of roads on 
 certain terms not authorized, and the other on other terms not au- 
 thorized ; and, therefore, some modifications that were deemed expedi- 
 ent were made in the advertisements, and readvertisements occurred, 
 and the tenders were to be opened on the 20th day of January, 1906. 
 ^Vhen they were opened it was found that there were practically but 
 two bidders — one of these for lines in Luzon and the other for lines in 
 Panay, Cebu, and Negros. The bids then were within the limitations 
 of the advertisements. The Visayan bids, which were those for Cebu, 
 Negros, and Panay, required a guaranty — such a guaranty as the 
 act of Congress authorized, which was 4 per cent upon the first- 
 mortgage bonds that should be issued and sold at not less than par, 
 the whole proceeds of which should be devoted to the construction 
 and equipment of the roads, the sums that might be paid by the 
 Government under that guaranty to constitute a lien charge upon 
 the property of the road, m the nature of a mortgage, and to be con- 
 tinued for a period of not more than thirty years. 
 
 THE VISAYAN SYNDICATE. 
 
 The tenders of the Visayan syndicate, as I might call them for 
 brevity, were accepted, and an act was passed authorizing the governor- 
 general to execute a concession to the Visayan syndicate. That syn- 
 dicate transferred its rights to a corporation formed, I think, under 
 the laws of New Jersey, and the concession was executed by the 
 governor- general about the 1st of July, 1906 — actually on the 10th 
 day of July. It requires the railroad company to complete its sur- 
 veys within six months and to complete 100 miles of the roads within 
 twelve months after the completion and approval of the surveys. 
 Immediate notice was given to them to commence their surveys. The 
 surveys should be practically finished by this time. They practically 
 have been finished. A force of surveyors was brought over in the 
 spring, and the Visayan roads have been surveyed. The engineers 
 advertised for ties throughout the Philippine Islands, and they have 
 made their contracts for iron and other supplies. 
 
 In the month of November Governor-General Smith, who was in 
 the southern islands at that time, opened the work in Cebu by throw- 
 ing the first shovelful of dirt, so that those three southern railroads, 
 aggregating 295 miles, are now in actual process of construction. The 
 roads have been established and the work is going on. The other 
 concession which was made in the island of Luzon had relation also 
 to the existing system of the Manila and Dagupan Railway. The 
 first tender was for another road that should proceed north from 
 Dagupan, their present northern terminus, to the northern end of 
 the island of Luzon. It required a guaranty upon that portion of 
 lA— 07— 2 
 
18 HEAEINGS BEFORE COMMITTEE ON INSULAK APFAIES. 
 
 the road. The other portion of the road tendered for, being through 
 the more thickly settled portions of Batangas and Cavite, Tayabas, 
 and Ambos Camarines and Albay, was such that no guaranty 
 was necessary. The road will probably be profitable from the outset. 
 It was the opinion of the Commission that it was better for the 
 islands not to burden themselves with guaranties any further than 
 was indispensably necessary. The syndicate making a tender for 
 roads in Luzon was willing to construct all the roads involved in its 
 tender except the road from San Fernando north without a guaranty. 
 That would give them about 30 miles farther north than they now go, 
 terminating at San P^ernando, in the province of La Union, and in 
 the nature of things the demands of commerce would be such that 
 they would ultimately build extensions farther north as a feeder to 
 their main lines and to supply those regions. The award was made 
 on the basis that they should not be required to build from San Fer- 
 nando north, but that they should build the other lines without any 
 guarantj^ Their tender, however, contained certain conditions that 
 the Commission deemed unwise to incorporate in legislation. Trust- 
 ing to memory, I will say that one of them was that no compet- 
 ing lines should every be authorized. Another one was that the pres- 
 ent quite high rates of the Manila and Dagupan Railroad for trans- 
 portation of freight and passengers should be permanent and be ap- 
 plicable to the new lines also. 
 
 RAILROADS WITHOUT GUARANTY. 
 
 The Chairman. Governor, will j'ou please indicate on the map that 
 part of the islands where the roads will be built without a guaranty. 
 
 Governor Ide. Yes, sir. The present road runs from Manila to 
 Dagupan, and the line that is now to be built goes to San Fernando, 
 the capital of the province of La Union. The original tender re- 
 quested them to go to the capital of Ilocos Norte, so that the road 
 built now will extend from Dagupan to San Fernando. And they 
 also are to build a branch that goes to the province of Benguet. This 
 line to Benguet is also to be built without a guaranty. There is also 
 a line from Manila that goes south, covering a portion of Cavite, and 
 through the province of Batangas and down to Lucena, the capital of 
 the province of Tayabas. 
 
 Another portion that is not now to be constructed is through this 
 portion of Tayabas through mountains down through the Camarines. 
 The number of inhabitants in this region is very small. A road 
 would be very expensive of construction, and the earnings of the line 
 would not be large. In the Camarines a road starts upon the west 
 coast and goes to the capital, and then comes down through the 
 Camarines and down through the province of Albay up to Bataan, 
 where the United States Government has purchased coal mines. 
 Communication from the province of Albay to Manila will not be by 
 rail, but by steamer, water transportation being comparatively cheap, 
 and the construction expense through the mountains being such that 
 at present it is not warranted. Those are the lines that are to be 
 built without a guaranty. They are 430 miles in length, and the 
 contract has been made through the Speyer syndicate, as it is called, 
 and that syndicate has secured control of the existing Manila and 
 Dagupan Railroad, and it has branches, so that all of the railroads 
 
HEARINGS BEPOKB COMMITTEE ON INSULAR AFFAIRS. 19 
 
 in the island of Luzon will be under one management, and by the 
 terms of the franchise and of the agreement which has been made the 
 old charter of the Manila and Dagupan Railway is abrogated and 
 the existing railroads come under the new charter, so that there is but 
 one system governing the roads in Luzon. 
 
 THE SPBYEE PROPOSAL. 
 
 I mentioned some of the difficult conditions in the Sjieyer pro- 
 posal. If they were to eliminate the right of the government to 
 establish competing lines, and also make permanent the existing high 
 rates, the government would be bound for all time, as the concession 
 is a permanent one, so that it would be practically in the hands of 
 that corporation, and the Commission did not think that that was an 
 advisable thing to do. It would be better for us to go without rail- 
 roads than to tie our hands in the future. Negotiations were entered 
 into that resulted in modifications of the tender. As it was left, the 
 government has a right to regulate tariffs freely, subject, of course, 
 to the same regulations and rules that apply everywhere — that they 
 can not confiscate property. And there is no restriction upon the 
 right of the government to grant franchises for competing parallel 
 lines, so that in that respect the public is undoubtedly well protected. 
 
 Another provision that the Speyer syndicate insisted upon was 
 that the low rate of taxation that has been placed upon this property 
 and upon their earnings should be perpetual. That was not deemed 
 advisable, and in the end a rate of one-half of 1 per cent per hun- 
 dred upon gross earnings was imposed as a tax for thirty years, 1^ 
 per cent for the succeeding fifty j^ears, and after that time the rate 
 of taxation was to be fixed by the government of the Philippine 
 Islands. It should be remembered, also, that the act of Congress pro- 
 vides that every charter that is granted by the Philippine government 
 shall be subject to modification or repeal or change by the Congress 
 of the United States, so that it is all in the hands of Congress. Even 
 if we had not made the special provision as to regulating the rates, 
 and , as to parallel lines and other matters, the Congress has abso- 
 lute control over these things, and in the franchises that are thus 
 granted, the provisions of the act of Congress are specifically re- 
 ferred to and made a part of the grants, which undoubtedly would 
 not be necessary, as the Commission must necessarily legislate under 
 the authority given by the act of Congress. This franchise was ap- 
 proved by the Commission about the 1st of July, and the conces- 
 sion was executed by the governor-general. This franchise differs 
 from the other one in some respects. It has no guaranty. 
 
 The Chairman. T\Tiere will that go into effect? "WTiere is that 
 located ? 
 
 THE SPETER SYNDICATE FRANCHISE. 
 
 Governor Ide. This applies to the whole of the Speyer syndicate 
 francise, coming down from San Fernando, through Dagupan to 
 Manila, from Manila down to Cavite and Batangas and Tayabas, 
 with branches in the Province of La Laguna and elsewhere, and 
 through the Camarines down through Albay. As I said, it differs 
 from the Visayan concession in that there is no guaranty and in that 
 it absorbs the existing railroad system into the new one; and, like- 
 
20 HEAEINGS BEFORE COMMITTEE ON INSTJLAE, AFFAIRS. 
 
 wise, in that instead of having six months for completing its surveys, 
 it has twelve months. But it agrees to build 150 miles within two 
 years and 75 miles per year after that, at least. As a matter of fact, 
 however, the work of making the surveys is already underway, and 
 was before the matter was finally consummated and brought into 
 formal conditions. And the local manager, Mr. Higgins, who is the 
 manager of the Manila and Dagupan Eailroad [the existing road], 
 and who has, in accordance with the law, been made the agent in the 
 islands upon whom processes may be served and upon whom notices 
 may be served, had agreed before I came away, so far as he had power 
 to make an agreement, that that portion of the road that goes from 
 Dagupan up to the province of Benguet should be finished in time 
 for the coming hot season [April and May], and the whole work is 
 moving on. 
 
 But that syndicate is represented in the islands by Mr. Higgins, 
 and he has had very long experience there, and he was much more 
 shy of binding himself to complete the work within a comparatively 
 short time — a certain number of miles — than the other syndicate was, 
 which is composed of and managed by Americans who have had less 
 experience with the difficulties of fulfilling contracts rigidly in trop- 
 ical countries where great difficulties are experienced from torrential 
 downpours of tropical rain, and also from the uncertainty of obtain- 
 ing skilled labor. But still they were all very confident when I 
 came away that the liberal time that had been given to the Speyer 
 syndicate was given out of abundant caution on their part and that 
 the road would be built very much earlier than the time specified. 
 These concessions have been accepted by the syndicates and the work 
 actively entered upon, so that we can see now very plainly that it is 
 a mere question of only two or three years before we will have a very 
 large extension of our railway system! 
 
 VISATAN RAILROADS. 
 
 The Chairman. You spoke of the Visayan Islands, Leyte, Negros, 
 and others. Will you please point those out on the map to the com- 
 mittee ? 
 
 Governor Ide. This is Panay [indicating], this is Negros, this is 
 Cebu, this is Bohol, and this is Leyte, and this is Samar. 
 
 The Chairman. "Where will the roads run in those islands ? 
 
 Governor Ide. The road in the island of Panay runs 95 miles from 
 the city of Iloilo along through the island and through the province 
 of Capiz to its capital, Capiz, and on to Batan, a little beyond on 
 the north side of the island. The line on the island of Negros runs 
 108 miles from Escalante, where there is a harbor in the northeast 
 portion of the island, across the island, coming down to San Juan 
 de Hog, where sugar plantations are largely located. There is no 
 harbor here, and this road will enable their sugar to be taken across 
 to the harbor at Escalante. The road in the island of Cebu runs 
 60 miles from Danao along the coast quite a distance down to Argao, 
 with the right to build twenty more across the island. 
 
 EFFECT OF CONSTRUCTION OF RAILROADS. 
 
 The Chairman. What effect upon the people has the surveying 
 for those railroads had in the islands? How do the people receive 
 the news of the proposed construction? 
 
HEAKINGS BEFORE COMMITTEE ON INSULAK AFFAIRS. 21 
 
 Governor Ide. Eemarkably well. The island of Cebu has perhaps 
 been in as unsatisfactory a condition industrially as have any of the 
 islands for a year or two, for several reasons. It is not a very large 
 island. It has over 600,000 people. It has an excessive population 
 for an island of that size, and the unwise policy was pursued many 
 years ago of burning off the trees and tall grass from the forests and 
 hillsides for the purpose of cultivation, and they have gone on burn- 
 ing until the hills have been denuded and the rainfall runs rapidly 
 away, and for that reason droughts are liable to occur. The rain 
 is not fairly well distributed throughout the year droughts will occur. 
 When the Taft party, of which several members of this committee 
 were members, visited Cebu they undoubtedly noticed that the condi- 
 tions industrially were unsatisfactory there. The people were poor, 
 but it is almost impossible to induce them to go aAvay to live. The 
 Filipino does not like to leave his home. He is not venturesome like 
 the American people, but a great many of the inhabitants were in- 
 duced last year to leave the island of Cebu and go over to Leyte and 
 assist in harvesting and planting. 
 
 Mr. Fuller. "VVliat are the dimensions of that island? 
 
 Governor Ide. I can not state offhand, now. 
 
 But as soon as the rains came nearly all of these people that had left 
 Cebu and gone to Leyte came back where their families and relatives 
 Avere. It is very difficult to get the very dense population to move 
 from the region where it is not needed to another region where it 
 would be most useful. When the railroads were being surveyed and 
 opened, the people of Cebu — I mention that because of the particular 
 industrial conditions there — have manifested pleasure and satisfac- 
 tion. 
 
 The Chairman. How large is the city of Cebu? 
 
 Governor Ide. The city of Cebu has about 40,000 inhabitants. The 
 people there saw that the building of the railroad was going to open 
 up their country more or less, and would furnish means of transporta- 
 tion, which at present are very poor very largely by reason of the 
 death of their draft animals from rinderpest and also because a 
 large amount of money would be distributed in the employment of 
 labor and in the purchase of local supplies that would be raised in the 
 vicinity, and the governor of Cebu and the municipal officials have all 
 taken an active interest in the railroads, and are looking forward to 
 great material benefits, which they will, undoubtedly, sooner or later 
 get. ' Very little difficulty was experienced in getting the cooperation 
 of the people in that enterprise. 
 
 PHILIPPINE AGRICULTURAL BANK. 
 
 The Chairsian. We will now leave the subject of the railroads 
 and hear you briefly on the proposed agricultural bank. We will call 
 on you later for a more elaborate discussion of it. 
 
 What do you think of the proposed agricultural bank, its advis- 
 ability, etc. ? What are the great needs of the islands, etc. ? 
 
 Governor Ide. The needs are tremendous. There can be no ques- 
 tion about that. We have practically 8,000,000 people, more or less, 
 in the islands. The money consists of our Philippine currency, of 
 which, speaking in round numbers, ¥=34,000,000 have been coined. 
 The old currency, the Mexican and Spanish-Filipino, has been driven 
 
22 HEAEINGS BEFORE COMMITTEE ON INSULAB AFFAIES. 
 
 out of the islands, and when I say that it has been driven out I mean 
 that there is none in circulation. You see none of it anywhere. 
 Business is all done in the Philippine currency. There is a Spanish- 
 Filipino bank which by the terms of its Spanish charter has power 
 to issue bank notes for three times the amount of its paid-up capital, 
 but the Commission has so legislated by way of heavy taxation upon 
 any paper money that may be issued in excess of the paid-up capital 
 that it is practically impossible for the bank to issue paper money 
 in excess of the amount of its paid-up capital. That question, I 
 suppose, may come before this committee. The bank insists that we 
 have robbed them of a most valuable right, and, of course, the right 
 to issue paper money to three times the amount of their capital is a 
 valuable one. As the matter stands now they can issue paper money 
 only to the amount of their paid-up capital, which is a million and a 
 half pesos. The only money in circulation now issued under the 
 authority of the Government is the ?34,000,000 of our new money 
 and a million and a half of the paper money of the Spanish-Filipino 
 Bank. 
 
 The Chairman. The 34,000,000 would be equivalent to 17,000,000 
 in gold. 
 
 CUEEENCY USED IN THE PHILIPPINES. 
 
 Governor Ide. Yes, sir. We are doing business on a gold standard 
 entirely. There is a certain amount of United States currency in 
 the islands. Very little of it, however, is used in the ordinary busi- 
 ness of the islands. Banks keep a considerable portion of it on hand 
 because it is useful for shipment abroad. Our Filipino currency is 
 not intended to be shipped abroad. If a man desires to make a ship- 
 ment abroad he comes to our treasurer with Filipino paper money, 
 and we give him United States money without charge, making the 
 exchange on a basis of two to one, maintaining the parity of our 
 coins in that way and by sales of drafts on New York. The insular 
 treasury also has a certain amount of United States money. The 
 quartermasters make their payments mainly in local currency, in the 
 Filipino currency. 
 
 The paymasters in the Army also use the Filipino money very 
 largely, and it is also used quite extensively in the Navy, because the 
 people who spend money there like to have money that is known 
 there. It is the money of the country. So that j'ou can see that for 
 7,000,000 or 8,000,000 people the amount of currency in the islands 
 is very small indeed, and that is the amount of money that is there. 
 There are other banks, but they have no authority by law to issue 
 paper money. The Spanish-Filipino Bank claims a monopoly, ex- 
 isting for a certain number of years, in that respect, under a charter 
 granted by the Spanish Government. The existing laws are liberal 
 enough. The Spanish law allowed loans on real estate, and the 
 establishment of mortgage banks. I have made a very careful ex- 
 amination of the law, and I am satisfied that there is nothing in the 
 way of existing law that prohibits the establishment of a mortgage 
 bank by private capital. We have had all these years to test the proba- 
 bility of private capital occupying the field. A private bank can not 
 be established on the cooperative plan, because the people have not 
 the money to put into it. Nor can the government establish out of 
 its own funds an agricultural bank, because it has not sufficient 
 
HEARINGS BEFORE COMMITTEE ON INSULAR AFFAIRS. 23 
 
 money to do it. It is entirely impracticable. Nor can private capi- 
 tal of residents of the islands meet this need. They have not the 
 requisite revenues, nor has private enterprise from abroad been will- 
 ing to come into the field. 
 
 1 have been very conservative on the subject of an agricultural 
 bank. Banks would not come in because their charters did not allow 
 them, with the exception of the Spanish-Filipino Bank, to issue loans 
 upon real estate. But, as you can see, its capacity is comparatively 
 small, and the titles to real estate were so uncertain that I could not 
 see my way clear to recommend the government to go into that busi- 
 ness, even if it had the money, and the same conditions applied that 
 applied to private banks. But conditions have changed very materi- 
 ally in certain respects. In the first place, the establishment of the 
 Torrens system of land registration gives a method of securing an 
 absolute title which can not be assailed and is substantially like a cer- 
 tificate of shares in a bank or railway, and its transfer is made in the 
 same way, by surrendering the certificate and the issuing of a new 
 one, and the title is unassailable. So that it would be entirely possible 
 for a bank organized with suitable restrictions to run no risks what- 
 ever on its titles — its real estate titles. In the next place 
 
 REGISTRATION OF LAND TITLES. 
 
 Mr. Parsons. How extensively has the Torrens system been 
 adopted in the islands ? 
 
 Governor Idb. I can not give you at this moment the full statistics 
 as to this. But 2,467 applications had been filed down to June 30, 
 1906, of which 814 had been filed within the last ten months, or an 
 average of 81 per month. The value of the land covered by these last 
 814 applications amounted to nearly P=10,000,000. The Torrens sys- 
 tem has, in my opinion, made more rapid progress in the Philippine 
 Islands than anywhere else that it has ever been adopted in the same 
 length of time. 
 
 Mr. Ceujipacker. Was there any system of registration before you 
 adopted the Torrens system? 
 
 Governor Ide. There was a system, but it was adopted only com- 
 paratively recently, and the war came about before a very large 
 number of titles had been registered and a great portion of the orig- 
 inal deeds, as well as the few records, were burned in the war. A 
 great many of the titles stood upon occupancy or possession, or upon 
 imperfect Spanish grants, and a great many records of those that 
 had been recorded were burned. The titles secured under that sys- 
 tem were assailable. Under the present system they are unassailable ; 
 and I might remark, in that connection, that some of the single 
 claims that have been presented before the court of land registration, 
 while appearing as single claims, involve a thousand or two thousand 
 claims ; that is, a large alleged landowner submits his claim and the 
 occupants are cited to appear and defend their rights, or show that 
 the land is theirs. They claim it on the ground that they and their 
 ancestors have occupied it from time immemorial; but it usually 
 turns out that they have occupied it simply as tenants and paid rent 
 for it until the disturbance arose. 
 
 The first point, then, is that our titles are such now that a bank 
 can loan money upon real estate titles that are absolutely certain — 
 
24 HBABINGS BEFORE COMMITTEE ON INSULAR AFFAIRS. 
 
 more certain than in most of the States of the Union, as far as the 
 titles are concerned. 
 
 The next proposition that has had a very strong effect upon my 
 mind has been that they have had a system in Egypt" that has worked 
 out extremely satisfactorily and effectively where the conditions, 
 while in some respects different from those in the Philippines, were 
 in many particulars similar. Under that system capital is furnished 
 by private individuals, who established an agricultural bank. The 
 government — I am only very briefly stating it, from memory, and 
 Doctor Jenks and Doctor Kemmerer will give you much more full 
 information if you care for it on that subject — the government, by 
 stringent law, prohibits all loaning by the bank except on Torrens 
 titles, and prescribes the interest that may be charged to the debtor. 
 
 INTEREST RATES IN THE PHILIPPINES. 
 
 The Chairman. At that point I want to ask what is the rate of 
 interest in the Philippines to-day ; how does it run ? 
 
 Governor Ide. It varies very much indeed. The agriculturists, 
 whom we hope this bank would benefit more than anyone else, pay 
 preposterous rates of interest — 20, 30, or 40 per cent per year or more, 
 and sometimes as high as 100 per cent. But they pay in another way 
 also, and suffer more still. The usurer requires as his security that 
 the crops shall be sold to him, the prices to be fixed by him. He 
 might probably under the administration of our couits — if he were 
 the man who had authority to fix the prices — be required to be a just 
 judge, and not to decide in his own favor arbitrarily and unreason- 
 ably, but the debtor is not able to go into court, and he knows no 
 principle of law of that kind, and the effect is that the real rate of 
 interest is more than 100 per cent in a great many cases and, of 
 course, this keeps the debtor under the harrow all the time. 
 
 AGRICULTURAL BANK OF EGYPT. 
 
 Under the system of the Agricultural Bank of Egypt the capital 
 is furnished by jarivate individuals, and the management of the 
 bank is conducted veYy largely under governmental supervision. 
 The collections are made by government officials — tax collectors. A 
 rate of interest is guaranteed to the capitalists who furnish the 
 money, of 3 per cent or 4 per cent, and the difference between that 
 and the rate at which the money may be loaned — 8, 9, or 10 per cent — 
 is sufficient to pay all the expenses, and the losses, if any — and not 
 merely the rate that the government guaranteed, but likewise a 
 considerable additional rate — so that it forms an attractive induce- 
 ment for investors. That is, they are sure of a reasonable return, 
 and have the opportunity, if good management is exercised, of se- 
 curing a considerably larger return. 
 
 Now, while the banks have been unwilling, as I say, to make ad- 
 vances on real estate in the Philippine Islands, they have also mainty 
 been prohibited by their charters from so doing or by the regulations 
 from their home officers. Yet the manager of one of the large banks 
 has offered to procure the necessary capital for an agricultural bank 
 with a government guaranty, something like that which we make in 
 the case of the railroads. 
 
HEAKINGS BEFORE COMMITTEE ON INSULAR AFFAIRS. 25 
 
 FINANCIAL CONDITION OF THE PPIILIPPINE GOVERNMENT. 
 
 I am perpared to make a showing as to whether the government can 
 sustain such a guaranty as that under such a bill as is proposed here, 
 if it is desired to go into that subject now. 
 
 The Chairman. I wish that you would give the financial condition 
 of the treasury now, and the maximum burden that would be imposed 
 on the treasury in the event of it having to pay the full guaranty. 
 
 Governor Ide. Well, speaking in round numbers, the government 
 finished the fiscal year ended June 30, 1906, with all obligations met, 
 including the interest on bonds, and every other obligation ; stood even 
 on that day with practically $1,300,000 gold to the good in the treas- 
 ury. The budget for the fiscal year 1907 has been made upon the basis 
 that the income would be substantially what it was last year. Last 
 year the custom's receipts fell off very materially, for reasons that I 
 could explain if necessary here, btit which do not affect the general 
 situation except favorably, and it is estimated that the customs re- 
 ceipts may fall off to some extent this year, but the internal-revenue 
 law is constantly producing larger and larger returns, so that I think 
 that there is no doubt whatever that if there should be any decrease in 
 the customs receipts the increase in the internal-revenue receipts 
 would make up for this. 
 
 It would be a very conservative statement to say that the entire re- 
 ceipts for the coming year will be as large as they were last year. On 
 the other hand, the expenses have been very materially reduced, and 
 the estimate of expenses is made by taking the actual appropriation 
 bills that have been passed — passed substantially before I came away. 
 The insular aj)propriation bills had been passed, and the appropria- 
 tion bill for the city of Manila was well under way and has since been 
 passed. The result of that budget — and this is a conservative state- 
 ment; there is no question about that at all — is that there will be at 
 the end of the year a surplus of ?=2,932,000 — that is, approximately 
 $1,500,000 gold — from the operations of the year, and I am not in- 
 cluding in that the present surplus that we have. So that there 
 would be at the end of the year a surplus of nearly $3,000,000 gold, 
 practically, provided we continued to construct our public works out 
 of the bond issue that Congress has authorized. My recommendation, 
 which is embraced in my report as secretary of finance and justice, is 
 that we keep in reserve a permanent fund of substantially $2,000,000 
 gold to meet contingencies and emergencies like any great pestilence, 
 or any great loss of crops, or any other great misfortune that may 
 come, and also to make sure of meeting the guaranty on the Visayan 
 railroads. So that the government will maintain itself this year 
 out of its revenues, and will have a million and a half dollars gold 
 to the good, besides a million three hundred thousand dollars that it 
 has to the good now. 
 
 Now, if the Visayan roads were to be built at a cost of $40,000 
 gold per mile, including equipment, which is the estimate of the 
 engineers of the roads, but which is more than the government ex- 
 pert, Mr. Monitor, estimates, and the government had to pay the 
 whole guaranty of 4 per cent on that cost of 295 or 300 miles — you 
 will observe that I am taking the outside limit in every case — it 
 would pay $480,000 gold per year. In the first place, it will be sev- 
 
26 HEARINGS BEFORE COMMITTEE ON INSULAR AFFAIRS. 
 
 eral years before the whole of the road will be in operation, and there- 
 fore before the whole of the guaranty would be required. It is not 
 called for except as far as the road is built. There will probably be 
 no call at all during this coining year. In the second place, Mr. 
 Monitor, our expert, who has made a very careful investigation, feels 
 that the earnings of those lines will be such that they never will call 
 on the government for the guaranty. But assuming the worst phase 
 of the situation, with 300 miles built at $40,000 a mile, and the earn- 
 ings such that we would have to pay the whole guaranty, amounting 
 to $480,000, you can see very well that with the million and a half 
 surplus per year we could live very well indeed, and also could, if the 
 necessity arose, expend a considerable sum as a guaranty upon an 
 agricultural bank. My opinion is that if the agricultural bank is 
 properly managed — and there are, of course, losses common to every- 
 thing — we will never be obliged to make good the guaranty. There 
 is also to be considered the profits of $6,000,000 or more that will 
 accrue to the insular treasury from the recoinage of the Philippine 
 currency recently authorized. 
 
 SUCCESS OF AGRIQULTUEAL BANK OF EGYPT. 
 
 The Chairman. It is true, is it not, that the government of Egypt 
 has never had to contribute a dollar toward its agricultural bank? 
 
 Governor Ide. That is as I understand it. 
 
 The Chairman. Not from the very beginning ? 
 
 Governor Ide. I understand that they have never been obliged to 
 contribute from their guaranty, and that the excess earnings in opera- 
 tion have been suiScient to warrant most satisfactory dividends to 
 stockholders, and that there have been practically no losses. Mr. 
 Kemmerer can state that more fully. That is my understanding. 
 
 operation of proposed PHILIPPINE AGRICULITTRAL BANK. 
 
 Mr. Crumpacker. What is your idea as to distributing money to 
 the people in the other parts of the islands by local exchanges or 
 branch banks? I understand that some of the people conduct their 
 enterprises on a very small scale. If they proposed to borrow 1P50, 
 !P100, or ?=200, would they have to go to Manila to the bank, or 
 would agents of the bank have to go out and examine the property 
 on which the money ^^'as proposed to be loaned ? This would be very 
 expensive, unless you had some system of carrying the facilities 
 out to the various communities throughout the archipelago. 
 
 Governor Ide. There is a first draft of a law covering the details 
 of the organization, in which all those contingencies are provided 
 for. The inspections are made bj' local governmental and bank au- 
 thorities on the sjiot. The governmental agents are people who 
 are engaged in the employment of the government, and as the govern- 
 ment stands back of the guai-nnty it has the right to have a voice in 
 deciding as to whether a loan shall be made or not. 
 
 Mr. Crumpacker. Then applications for loans can be made in the 
 several communities? 
 
 Governor Ide. Applications can be made to local agents. They 
 will be reported to Manila. The direct administration must be local, 
 in order to be satisfactory. If this bank performs the function that 
 
HEAE.IKGS BEFORE COMMITTEE ON INSULAB AFFAIRS. 27 
 
 we want it to perform, it will help the small owner; he is the man 
 who needs the help. 
 
 Mr. Parsons. When you say " small owner " what do you mean ? 
 Owning how many 'acres? 
 
 Governor Ide. I mean the man who owns comparatively few hec- 
 tares. A hectare is about 2| acres. The producers who do not need 
 the help would undoubtedly absorb the capital of any bank if they 
 could get it. 
 
 Mr. Ceumpackee. They are the larger operators, who can be accom- 
 modated under existing conditions without great extortion ? 
 
 Governor Ide. The existing conditions are such that the banks will 
 not lend on real estate, excepting the Spanish-Filipino Bank, and its 
 capital is only one million and a half. 
 
 Mr. Fuller. Why have such extortionate rates of interest been 
 permitted ? 
 
 Governor Ide. You have this alternative: Shall a man be able to 
 get money by paying extortionate rates, or shall he be unable to get 
 it at all? 
 
 Mr. Garrett. As a matter of contract — a contract agreement. 
 
 Mr. RucKEE. There is no criminal statute down there against usury, 
 is there ? 
 
 Governor Ide. No. 
 
 Mr. RucKER. I think that that is one of the best things to do first. 
 
 You think that the capitalists and the money buyers are on a 25 per 
 cent basis. 
 
 Mr. Fuller. This proposed system, you think, will do away with 
 that, and give money to a man at a reasonable rate of interest. 
 
 need op proposed bank. 
 
 Governor Ide. It is just what they need. It is just what we want 
 to see done. I am entirely free to say that everything depends upon 
 the conservatism of the management. If it is managed sufficiently 
 carefully, sufficiently conservatively, I think that it will be a tre- 
 mendous boon to the people of the islands, and that the losses may 
 be made very small, and perhaps I might say, probably none. My 
 figures here have been effective in demonstrating that if we have to 
 pay for all the guaranty that is contemplated here, and also the full 
 guaranty on the railroads, we would still be able to do it ; and every- 
 body knows that the increased prosperity of the islands, the increased 
 means of transportation, the increased production that will come, 
 enabling the agriculturists to get money, means an increase of busi- 
 ness. It means an increase of internal-revenue income, so that we 
 should constantly be becoming in better and better condition to take 
 care of these obligations, provided we have to meet them. 
 
 SOURCE OF PHILIPPINE REVENUES. 
 
 Mr. Crumpacker. Your revenues are chiefly customs and excise 
 taxes, are they not ? 
 
 Governor Ide. Yes; they are the principal source of revenue for 
 the insular government. The ice plant, which is a government insti- 
 tution, gives to us practically $200,000 gold net income every year 
 above all expenses of operation. 
 
28 HEARINGS BEFORE COMMITTEE ON INSULAR AITAIES. 
 
 Mr. Ckumpackee. Have you any ad valorem land tax ? 
 
 Governor Ide. Yes ; but not for insular purposes. The land tax is 
 a burden. It is a kind of tax that is entirely new in the islands. It 
 was introduced by the Philippine Commission, and, of course, is not 
 popular with those who have before escaped the burden of it. It is 
 more popular, undoubtedly, than it otherwise would be by reason of 
 the provision that the whole of it is to be expended locally in the 
 place where it is raised. It all goes to the respective provinces and 
 municipalities. 
 
 PHILIPPINE INXEENAL-EEVENTJE LAW. 
 
 Mr. Parsons. Has the agitation against the internal-revenue tax 
 ceased ? 
 
 Governor Ide. Substantially, yes. The internal-revenue law has 
 proven to be a wise measure, and is indispensable for our revenues. 
 It does awajf with many other taxes. Before it went into effect the 
 little shopkeeper and driver of carabao, and the little dealers of 
 every kind, were taxed on substantially everything they did. There 
 was a great multiplication of such taxes, but now the burden is placed 
 largely on alcoholic liquors and tobacco products, and this tax has 
 become a very large source of revenue. The opposition to the in- 
 ternal-revenue law cam6 mainly from the liquor and tobacco dealers 
 and manufacturers. In view of the fact, however, that the cigar and 
 cigarette business of the islands is as large as it was before the passage 
 of the law in question, the tobacco men are becoming somewhat recon- 
 ciled to the changed conditions. They collect the tax from the per- 
 sons to whom they sell their goods by adding to the price the amount 
 of the tax. The liquor industry has suffered somewhat. There has 
 been some diminution of the consumption of alcoholic liquors. The 
 liquor dealers are principally responsible for this, because they were 
 so opposed to the law that they added three or four times the amount 
 of the tax to the price of their commodities, so that it diminished 
 their sales. This has been the principal agitation against the law. 
 The law has settled the problem of our fiscal system for the present. 
 
 land inheritance. 
 
 Mr. Garrett. As to the laws of inheritance, where does the land 
 descend ? 
 
 Governor Ide. It descends directly in the line of the family and 
 belongs to the family and the descendants. 
 
 Mr. Garrett. Is there much making of wills there? 
 
 Governor Ide. Yes, sir. There is more or less making of wills, 
 just about as there is in other countries. 
 
 ABILITY OF PHILIPPINE GOVERNMENT TO MEET ITS OBLIGATIONS. 
 
 The purpose of my making a statement as to our financial condi- 
 tion was to show that if we should have the worst contingency possi- 
 ble — that is, if we should have to pay the whole of such sum as may be 
 agreed upon as the extent of the liability of the government — that we 
 would still be able to finance it perfectly well and even then have a 
 considerable surplus left. But, on the other hand, it is to be remem- 
 
HBABINGS BEFOEE COMMITTEE ON INSULAE ATEAIBS. 29 
 
 bered that if this proposed bank is properly conducted, it is not 
 going to lend any very large sums at the outset. It is going 
 to take certain regions tentatively, just as was done in Egypt, and 
 then extend its business gradually as it sees it can safely do so. It 
 will exercise the utmost caution and care and pay the money where 
 it will come back again. 
 
 The Chairman. I think, Governor, that we will suspend your 
 hearing at this point. 
 
 Mr. RucKER. Pardon me, I would like to ask one question before 
 the governor concludes. What amount of capital do you recommend 
 for that bank ? 
 
 Governor Idb. I think that the bank ought ultimatelv to have a 
 capital of $10,000,000. 
 
 SCOPE OF PROPOSED BANK. 
 
 Mr. Rttcker. There would be only one bank in the entire archi- 
 pelago ? 
 
 Governor Ioe. There would be only one bank, but this bank would 
 be so organized that it would reach over every part of the archipelago. 
 
 Mr. RucKEK. So aa.to have authorities in any part of the islands? 
 
 Governor Ide. The authority that you are to give will be put in 
 the hands of the Philippine Commission to attend to the details of 
 such legislation. 
 
 Mr. RucKER. Is it your idea that the bank as authorized would be 
 given power to loan money in all parts of the islands ? 
 
 Governor Idb. Yes; as to this I have no doubt. 
 
 Mr. RucKER. Now, as to the value of the property given as secur- 
 ity ; by whom will that be determined ? 
 
 Governor Idb. That will probably be determined by the agent of the 
 bank, aided by the treasurer of the province, who is an American, and 
 by certain municipal officers living in the town in which land is 
 located. 
 
 Mr. RuoKBR. Would not much of this land be very remote from the 
 town where the treasurer of the province resided? 
 
 Governor Ide. Yes, sir. 
 
 INVESTIGATION OF SECTJRITT. 
 
 Mr. RtJCKER. Would he have to go and inspect the land personally ? 
 
 Governor Ide. Not necessarily. He has in his office a record of 
 the valuation of every single piece of property, for the purpose of 
 taxation, and he would know the valuation that has been made this 
 year for that purpose. He has that to start with. He knows the 
 land, and he would be able through the proper machinery, I suppose, 
 to secure a sufficient inspection of it. 
 
 Mr. RucKBE. By whom is the land valued for taxes ? 
 
 Governor Ide. It is valued, in the first place, by the municipal 
 authorities, by a municipal board that is appointed for that purpose, 
 which is composed of Filipinos in practicalUy every case, and they 
 know a great deal more about what the land is worth than any Amer- 
 ican can know. The owner has a right to appeal to a provincial 
 board, and then there is beyond that the right of appeal to the 
 insular equalization board. 
 
30 HEARINGS BEFOEE COMMITTEE ON INSUI/AB AITAIES. 
 
 Mr. EucjiEE. As I understand it, if these officers charged with the 
 dutj^ of assessing see fit to assess high, and the local officers make the 
 same sort of a recommendation, it is possible within one year's time 
 that a multiplicity of agents act on the proposition. Are the board 
 of inspectors, the employees, and officers scattered throughout the en- 
 tire group of islands to be paid out of the revenues of the bank ? If 
 so, they would have no desire whatever, because the government 
 would 
 
 Governor Ide. In the first place, I would assume that no valuators 
 for the bank are going to be bound at all by the valuation that is 
 made for the purpose of taxation. That is simply a starting point. 
 They would have that for getting a certain kind of estimate, and 
 then they would make their own investigations. The bank has a 
 margin of 6 23er cent and a 4 per cent guaranty. Out of that total of 
 10 per cent they can afford to pay their employees to be diligent in 
 behalf of the bank and still have enough left to prevent the govern- 
 ment guaranties from being called upon, and also to produce an 
 additional income, 
 
 EFFECT OF AGRICULTURAL BANK IN EGYPT. 
 
 In Egypt the people were shiftless, thriftless, tremendously loaded 
 down with debts, addicted to gambling, and wasted their substance 
 until they were in the hands of the usurers. The result of the agri- 
 cultural bank has been that the Government has made them prac- 
 tically a new people. And it has now how many millions? 
 
 Mr. Kemmerer. From $35,000,000 to $40,000,000. 
 
 Governor Ide. From $35,000,000 to $40,000,000, and the margin 
 between the government guaranty rates and the rates on which the 
 loans are made is sufficient for efficient service and substantial profits. 
 
 The Chairman. It has very greatly changed the character of the 
 peasants, has it not? 
 
 Governor Ide. Yes; it is said to have changed greatly the character 
 of the peasants. 
 
 MONEY LENDERS IN THE PHILIPPINE ISLANDS. 
 
 Mr. KuGKER. You say that the rate of interest charged by the usur- 
 ers goes from 20 to 40 per cent and sometimes as high as 100 per cent. 
 By whom are these loans made — by Americans or Filipinos ? 
 
 Governor Ide. Those are made quite largely by the big trading, ex- 
 porting, and transporting companies. They will furnish money for 
 the purpose of keeping the producer along. 
 
 Mr. RucKER. Are they controlled by the native people or by Amer- 
 icans ? 
 
 Governor Ide. They are not Americans. Those large houses are 
 mainly the old houses that were there during Spanish times. Verj^ 
 few of them are controlled by Americans. 
 
 PROBABILITY OF SUCCESS OF PROPOSED BANK. 
 
 Mr. RucKER. Do you think that the resources of the islands and 
 their possibilities are ample to justify the conclusion that the Govern- 
 ment would not be called upon for any part of this guaranty ? 
 
HEARINGS BEFORE COMMITTEE ON INSULAR AFFAIRS. 31 
 
 Governor Ide. Yes, sir ; I think so. 
 
 Mr. EucKEE. That being apparent to one who has studied the situ- 
 ation there, what reason is there that private capital has not gone 
 into that field? 
 
 Governor Ide. There is a very great difference between private 
 capital going in where there is no guaranty at all and no government 
 machinery to help it and private capital going in where there is a 
 certainty of 3 per cent or 4 per cent return and government agents 
 engaged in procuring the necessary information and aiding in mak- 
 ing collections. 
 
 Mr. EucKEE. What I am trying to get at is this: After studying 
 the conditions there you are satisfied, as you seem to be, that the 
 government would never be called upon for any part of that 4 per 
 cent guaranty that is proposed. This being so, why would not a 
 man with capital be willing to make such an investment? 
 
 Governor Ide. That is it exactly. He is willing to make an invest- 
 ment under those conditons, but an investment under those condi- 
 tions is very different from the conditions where there is no guaranty 
 of any kind whatever. And, again, a private individual would also 
 have the expense of locking after his loans and securities. He would 
 have to organize his machinery in order to make the loans and inspect 
 the titles to the land. 
 
 Mr. EucKEE. I can not see the difference, where a man has the 
 capital for the purpose and knows that it will pay at least 4 per cent. 
 
 Governor Ide. Perhaps I could illustrate in another way. I think 
 that probably this committee — although I do not know certainly — 
 recommended the guaranty on the railroads in the Philippines. Now, 
 the same argument that is now suggested would have prohibited the 
 granting of any guaranty upon the railroads in the islands, because 
 private capital would see that they would get sure returns, but they 
 did not come in and invest until they understood that the government 
 guaranty was established. Instead of being started first on a large 
 scale, the Egyptian Agricultural Bank was started on the small 
 capital of £10,000 Egyptian, which was gradually increased by the 
 government, and then the whole was passed over to the Bank of 
 Egypt, and then passed over to the bank especially organized for that 
 purpose. The money did not come in before except through local 
 usurers, but with the government guaranty it flowed freely into the 
 bank. Each year sees more and more money being put in. Now, 
 whether private capitalists ought to see their way clear to going in 
 there is for every man to judge for himself. As for myself, if I 
 had the money I would not put it into a private, individual enterprise 
 with no governmental machinery organized to assist me. On the 
 contrary, I would feel that it was a very unsafe thing for me to make 
 such an investment except under the scheme proposed here. The rail- 
 road men who asked for a guaranty stated that, while they did not 
 expect the government to be called upon at all to make the guaranty 
 good, it would make a great difference in the selling price of their 
 bonds. 
 
 Mr. EucKEE. That is a New Jersey syndicate, I believe. 
 
 Governor Ide. No ; it is two syndicates. 
 
 Mr. EucKEE. Organized in New Jersey, I understood you to say. 
 
 Governor Ide. One with a charter obtained under the laws of New 
 Jersey, and one with a charter under the laws of M^'est Virginia. 
 
32 HEABINGS BEFOKE COMMITTEE ON INSULAB AEEAIES. 
 
 Mr. RucKER. I should rather think that they will call on the gov- 
 ernment for the guaranty. 
 
 Governor Ide. One of them can not, because there is no guaranty. 
 We have a very good expert that supervises the construction in behalf 
 of the government, and if we have to pay I think that it will be, 
 perhaps, because Ave ought to. I think that it will not be for any 
 other reason. But I am not a sufficient railway expert to give an 
 opinion that would be of value, but Mr. Molitos, our expert, who is 
 a practical railway man, and who has been ever since he was a boy, 
 and who is a very competent man, is of the opinion that we will not 
 have to paj' a cent, and yet the Americans would not build a railroad 
 in the Visayan Islands without a guaranty. And it would affect the 
 willingness of capitalists to put their money into an agricultural bank 
 if they could depend iipon their inA^estments being sure of a 3 or 4 
 per cent interest. 
 
 NECESSITY or ESTABLISHMENT OF AGEICULTURAL BANK. 
 
 Mr. RucKER. This bank is deemed essential because of the con- 
 dition the agriculturists of the islands are in, and their condition, I 
 understand, is pretty bad. Is that right ? 
 
 Governor Ide. That is right. 
 
 Mr. RucKEE. Is their condition to-day worse than it was five 
 years ago? 
 
 Governor Ide. I do not think so. I think that it is better than 
 it was five years ago. 
 
 CONDITIONS IN THE PHILIPPINES. 
 
 Mr. RucKER. You having had advanced opportunities for obser- 
 vation and knowledge over there, the question I want to get at in 
 a tangible way, for my own guidance, is whether the condition of 
 these islands is better than, or worse than, it was five years ago. 
 
 Governor Ide. I intended to say that, in my opinion, it is materially 
 better now than then. 
 
 Mr. RuCKER. So that they seem to be making progress, and possibly 
 will get along so well that they will soon be en]oying their pros- 
 perity thoroughly. 
 
 Governor Ide. That depends upon what you call prosperity. I 
 would differ a little from your inference. I would not say that they 
 would soon be enjoying prosperity. The people are too poor. In 
 some provinces 95 per cent of their animals have been destroyed. I 
 would not say that they would soon be prosperous. 
 
 Mr. RucKER. But they have been gaining in prosperity? 
 
 Governor Ide. There is evidence that their conditions are slowly 
 and gradually improving. With new facilities the means of obtain- 
 ing money will accelerate that process very much. 
 
 advisability of a usury law. 
 
 Mr. RucKER. Don't you think that if you could get the Philippine 
 government, or Congress, if proper, to pass an act to prevent usury 
 that would send some of these 10-percenters to the penitentiary that 
 it would be a great help to the Filipinos ? 
 
HEARINGS BBFOBE COMMITTEE ON TNSUI.AB APPAIES. 33 
 
 Governor Ide. I do not. I think that a usury law in the Philip- 
 pines is at present most undesirable. The law regulates the rate of 
 interest where no contract fixes it, but it is impossible to go among a 
 people who are wretchedly poor and undertake to make them pros- 
 perous by punishing men who have a little capital and who will let 
 the people have it upon exorbitant rates and who control the prices of 
 their products. 
 
 Mr. RucKER. I can not see how people situated as those people are 
 can be able to pay such enormous rates of interest and still prosper. 
 I can not quite comprehend that. It would seem as though it were 
 better to have those usurers put out of business. 
 
 Governor Ide. I do not want to be understood as saying that every- 
 body who is engaged in agriculture in the Philippine Islands is bor- 
 rowing money and paying these high rates of interest. I mean that 
 they could earn much more if they could purchase machinery and 
 cattle and could employ more assistants. It is entirely impossible to 
 apply to a country that is as poor as the Philippine Islands the same 
 principles as can be applied to one that is abounding in wealth, as 
 here in the United States, and if mistakes have been made in the Phil- 
 ippines, as they undoubtedly have, it has come from trying to apply 
 the same conditions there as would be profitable and useful here at 
 home. 
 
 Mr. RucKEE. Have you any data that you can insert in your 
 remarks hereafter showing the percentage of landowners in the Phil- 
 ippines that are free from mortgages? 
 
 Governor Ide. There are no such statistics. 
 
 Mr. RucKER. Are you prepared to give a rough estimate of what 
 per cent of the landowners have mortgages ? 
 
 Governor Ide. I have not the slightest basis on which to make 
 such an estimate. There are no statistics of this kind, as far as I 
 know. 
 
 OWNERSHIP OP PHILIPPINE LANDS. 
 
 There is one fact in which you may be interested, perhaps. Every 
 person who owns land is obliged to give his own valuation of his 
 property in his statement for purposes of taxation. Last year 
 there were over 2,000,000 of those applications or statements filed. 
 Now, I mention that fact to show the distribution of the land and 
 the very large number of landowners that there are there. There 
 are 2,000,000 applications out of a population of 8,000,000 people. 
 Of course many persons have put in applications each for several, 
 or in some cases many parcels, but at the same time the supposition 
 that some people have had that the Filipinos are liable to be a land- 
 less people in their own country is not very well founded in fact. 
 I suppose that a larger proportion of the Filipinos own their own 
 land — that is, claim to own it, and have such titles that if they 
 took the proper steps they would have them protected — ^than is 
 true in the United States — a very much larger proportion. 
 
 Mr. RucKER. I am obliged to you, Governor, for your replies to 
 my inquiries. 
 
 I A— 07 3 
 
34 HEABINGS BEFORE COMMITTEE ON INSULAR AFFAIRS. 
 
 STATEMENT OP EDWIN WALTER KEMMEEER. 
 
 The Ci-iAiEJiAN. Please state your business or profession. 
 
 Mr. Kemmeeer. I am assistant professor of political economy in 
 Cornell University. 
 
 The Chairman. Have you visited the Philippine Islands? 
 
 Mr. Ke^imerer. I have. 
 
 The Chairman. When? 
 
 Mr. Kejimerer. I was in the Philippines from August 1, 1903, 
 to February 10, 1906. 
 
 The Chairman. In what capacity? 
 
 Mr. Kemmerer. I went out there as adviser to the Philippine 
 Commission in matters relating to the reform of the Philippine 
 currency system, and that continued to be my work during those 
 two and a half years. My official title after the passage of the 
 Philippine gold standard act in October, 1903, was that of chief of 
 the division of the currency. 
 
 The Chairman. Have you visited Egypt? 
 
 Mr. Kemmerer. I have. 
 
 The Chairman. How recently? 
 
 Mr. I\JEMMERER. I was in Egypt in March of last year. 
 
 The Chairman. In an official or representative capacity? 
 
 Mr. Kemmerer. I was there as a representative of the Philippine 
 government and of the Secretary of War as a special commissioner 
 to Egypt to investigate the subject of the Agricultural Bank of 
 Egypt. 
 
 The Chairman. "V^Tio appointed you to go there for that purpose? 
 
 Mr. Kemjierer. I was appointed by the Philippine Commission. 
 
 Mr. Crumpackee. Was your appointment approved by Secretarv 
 Taft? 
 
 Mr. Kemmerer. I believe it was. 
 
 The Chairman. Allien did you go ? 
 
 Mr. Kemmbree. I left Manila on February 10, 1906, and arrived in 
 Egypt about the middle of March, having stopped over in the Straits 
 Settlements about two weeks for the purpose of studying the cur- 
 rency reform then in progress there. 
 
 The Chaieman. Will you tell us what you saw concerning the 
 workings of the Agriculture Bank of Egypt. 
 
 agricultural bank of EGYPT. 
 
 Mr. Kemjieree. I had been very much interested for some time in 
 the Agricultural Bank of Egypt. Inmiediately after arriving in the 
 Philippine Islands Secretary Taft, who was then the governor, asked 
 me to make a report to the Philippine Commission on the subject of 
 the advisability of establishing a government agriculture bank in the 
 Philippines. I looked over somewhat in detail the experience of 
 other countries with regard to agricultural banks and came to the con- 
 clusion that the system employed in Egj'pt would be the best for the 
 Philippines and the one most readily adaiDtable to conditions there. I 
 sent for the reports of the Agricultural Bank of Egypt and its rules 
 and regulations, and went over the subject with considerable care. 
 In February, 1905, I made a report to the Philippine government. 
 
HEARINGS BEFORE COMMITTEE ON INSULAR AFFAIRS. 35 
 
 copies of which you have here, on " The advisability of establishing 
 a government agricultural bank in the Philippines." 
 
 In February of last year, when I was about to return to the United 
 States, I was appointed by the Philippine Commission special com- 
 missioner to Egypt. I arrived there in March and devoted two 
 weeks to an investigation on the ground of the subject of land credit 
 in Egypt. I had letters to the Earl of Cromer, and through him ob- 
 tained letters to the manager of the National Bank of Egypt and to 
 the manager of the Agricultural Bank of Egypt, as well as to a num- 
 ber of Khedival advisers, business men, and other persons who were 
 informed on the subject. Some of the persons I interviewed were 
 bankers who were competitors of the Agricultural Bank of Egypt. 
 1 also went out into the field and visited one of the most important 
 branches of the Agricultural Bank of Egypt. 
 
 The results of my investigation are embodied in the report which 
 you have here to-day on the "Agricultural Bank of Egypt," and 
 rather full details are given there. 
 
 In my report on " The advisability of establishing an agricul- 
 tural bank in the Philippines" there are a number of appendices, 
 including all the reports of the Earl of Cromer up to that time, and 
 in the report on the Agricultural Bank of Egypt these items are 
 brought up to date. The annual reports of the bank are given, to- 
 gether with the annual balance sheets and copies of the forms used 
 in the negotiation of loans. The subject is a large one, and perhaps 
 a word in regard to the development of the bank may serve as intro- 
 ductory. 
 
 THE NATIONAL BANK OF EGYPT. 
 
 The Chairman. The National Bank of Egypt was a separate insti- 
 tution from the Agricultural Bank of Egypt? 
 
 Mr. Kemmeeee. Yes; although the two institutions are closely 
 related. The Earl of Cromer had for some time prior to 1894 been 
 of the opinion that the small peasant landowners of Egypt were 
 naturally much more thrifty and reliable than they had been given 
 credit for. They had been charged extravagant rates of interest 
 on their petty loans; perhaps not such high rates as at present pre- 
 vail in the Philippines, but, on the whole, very little lower — the 
 rates running from 30 to 50 per cent. Furthermore, it was a common 
 practice in Egypt, as it is at present in the Philippines, for the 
 lender to compel the borrower to sell him his crops at prices fixed by 
 the lender, prices which were often absurdly low. 
 
 The Earl of Cromer finally urged the government to make an ex- 
 periment in the line of government advances to agriculturists. Ac- 
 cordingly in 1894 the government made certain sales of seed to them. 
 The prices theretofore charged the peasants for seed had been enor- 
 mous, and the quality of the seed bad, being inferior. The government 
 sold a better grade of seed to the cultivators at lower prices than those 
 prevailing in the market, with a provision that payment should be 
 made in three or four installments after the crops were gathered. 
 The amount of seed thus sold in 1894 was small, being only about 
 27,000 bushels. The experiment was successful, and little difficulty 
 was experienced in making collections. 
 
 In 1895 the amount of seed thus sold was increased to about 44,000 
 bushels, and in 1896 to over 46,000 bushels. In 1895 the Earl of 
 
36 HEAEINGS BEFOEE COMMITTEE ON INSULAE AFFAIRS. 
 
 Cromer suggested that the government try the experiment of advanc- 
 ing money to some of these petty cultivators, and accordingly be- 
 tween February and July, 1896, advances were made to the sum of 
 7,700 pounds Egyptian, or $38,500. A pound Egyptian is $5 of our 
 money. The advances were made for the crop season, and, with the 
 exception of $100, the whole of the capital and interest was paid by 
 the end of November. 
 
 OEGANIZATION OF AGRICULTURAL BANK OF EGYPT. 
 
 This success encouraged the Earl of Cromer to push the experi- 
 ment still further, and so in 1898 the National Aggiciiltu rftj- Bank of 
 Egypt was organized. One of the main reasons which induced the 
 Earl of Cromer to favor the the creation of this bank, as he person- 
 ally told me, was the desire to provide an institution which would 
 extend agricultural credit facilities among the peasants. That was the 
 main reason for the establishment of the National Bank of Egypt, 
 although the operations of the bank were by no means limited to 
 agricultural loans. The bank started with a comparatively small 
 capitalization, and limited its agricultural loans at first to one dis- 
 trict of Egyi^t. During the spring and summer of 1899 the bank 
 made 1,580 advances to peasants, amounting in all to about $24,000, 
 and every cent of the money due in the year was collected by the 
 government tax collectors. The bank's agricultural loans extended 
 so rapidly and were so successful that on June 1, 1902, the Agricul- 
 tural Bank of Egypt was organized to take over the agricultural 
 loans of the National Bank of Egypt. 
 
 The Agricultural Bank of Egypt started with an authorized capi- 
 tal of $12,500,000 and a paid-up capital of $6,250,000. The capital 
 was increased until at the present time it amounts to over $50,000,000, 
 inclusive of debentures. This phenominal growth in the short period 
 of a little over three years is strong .evidence of the financial success 
 of the bank. 
 
 BENEFICIAL EFFECTS OF EGYPTIAN BANIi. 
 
 One of the great benefits which the bank conferred upon the peas- 
 ants was the driving out of many usurers who had been exacting 
 exorbitant rates of interest. An improvement in agriculture soon 
 became evident. As previously stated, the bank's operations were at 
 first limited to one district. They have since been extended to cover 
 all of Lower Egypt and some parts of Upper Egypt. At the close 
 of 1905 there were over 185,000 loans outstanding. No loan exceeds 
 $2,500. The average size of the loans is about $155. 
 
 Mr. Ceumpackee. What is the population of Egypt ? 
 
 Mr. Kemmeeee. It is between nine and ten million, principally an 
 agricultural population, with over 1,000,000 small landholders. 
 
 Th6 peasants have used the money wisely on the whole. There 
 have been some abuses, of course. The bank has materially reduced 
 the market rate of interest. 
 
 The next question, perhaps, that comes up is. How has the bank 
 succeeded as regards the interest of the stockholders? What has 
 been its financial success? The Earl of Cromer's primary object in 
 bringing about the establishment of the bank was to benefit the 
 
HEABINGS BEFORE COMMITTEE ON INSTJLAB AFFAIRS. 37 
 
 Egyptian peasant. The bank has, however, paid handsomely as a 
 financial enterprise. 
 
 There is a certain amount of common stock. Its par value is £5. 
 It is quoted on the London market, and its present price, according to 
 the latest English financial papers received, is £10. It therefore 
 stands at twice its par value. The cumulative preferred stock pays 
 4 per cent dividends. Its par value is £10, and it has stood above par 
 in the London market most of the time. The debentures pay 3^. per 
 cent; their price on the London market varied between £88| and £91 
 during the month of November, 1906, the last month for which I 
 have been able to obtain quotations. The 4 per cent cumulative pre- 
 ferred stock has paid dividends every year. The common stock has 
 paid dividends of 4, 6, and 7^ per cent, respectively, during the past 
 three years. The founders' shares receive a certain residuum after all 
 the expenses have been paid. They have a par value of £5. Their 
 market price last March, when I was in Egypt, was about £950. From 
 the standpoint of the stockholder, therefore, the bank has been emi- 
 nently successful. 
 
 From the government's point of view the bank has had a like suc- 
 cess. The government guarantees the principal and interest at the 
 rate of 3 per cent. The government has never been called upon to pay 
 a single cent. The Earl of Cromer has said once or twice that he did 
 not believe there was any prospect of the government being called 
 upon to make good its guaranty, and anyone acquainted with his 
 work knows that he is ultraconservative in such matters. I talked 
 with a number of bankers in Egypt and found none who had any idea 
 that the government would ever be called upon to pay any part of the 
 guaranty. 
 
 RATE OF INTEREST ON LOANS OF EGYPTIAN BANK. 
 
 Mr. Ceumpackee. What was the legal maximum rate ? 
 
 Mr. KemmeHee. The rate was 9 per cent, but recently the bank 
 asked to increase the size of its capital considerably and the govern- 
 ment agreed to the proposition on condition that as soon as the loans 
 amounted to $35,000,000 the bank should reduce the rate of interest to 
 8 per cent, and it has since been so reduced. 
 
 One of the important features of the bill as proposed for the 
 Philippines is that it provides for an automatic reduction in the rate 
 of interest in proportion as the reserve fund accumulates, so that 
 there will be no difficulty in that direction. According to the records 
 the bank has made large profits. According to the reports of the 
 Earl of Cromer and according to the idea of bankers and busi- 
 ness men in Egypt there is no probability that the Agricultural Bank 
 of Egypt will ever call upon the government to make good its guar- 
 antee. If you look over the annual report of the bank it will bear 
 out that view most emphatically. 
 
 EFFECT OF EGYPTIAN BANK ON PEASANTS. 
 
 The Chairman. What has been the effect of the working of the 
 bank upon the character of the peasants of Egypt ? 
 
 Mr. Kemmeree. Of course it is very difficult in a country like 
 Egpyt, where conditions have been changing so much since the 
 
38 HEADINGS BEFORE COMMITTEE ON INSULAE AFFAIRS. 
 
 English went there to ansAver that question positively. I suppose 
 thr.t Egypt is one of the finest examples to-day of a good colonial 
 government — due principally to the extraordinary ability of the 
 Earl of Cromer. There have been so many changes that it would 
 be difficult to say to what extent Egyptian prosperity is due to one 
 measure or to another. I think that all agree, however, that the 
 Agricultural Bank of Egypt has been an important factor in the 
 remarkable prosperity Egypt has experienced during recent years. 
 The condition of the peasants to-day is prosperous. 
 
 Mr. Parsons. Since the establishment of the Agricultural Bank of 
 Egypt have there been any comparatively hard times ? 
 
 Mr. Kemjierer. No; T think not. I make mention of that point 
 in my report. It is not exactly fair to judge the entire future of 
 the bank by what it has done during the last three or four years, 
 because those years have undoubtedly been years of remarkable pros- 
 perity. I do not suppose they are fairly representative of long pe- 
 riods of time, but the success of the bank has been so great that 
 even if it had been half as successful it would still have been a 
 success. 
 
 COMPARISON or FILIPINO AND EGYPTIAN PEASANTS. 
 
 Mr. Crumpacker. How would the standard as to industry among 
 the native Filipino farmers compare with that of the native Egyp- 
 tian agriculturists? 
 
 Mr. Kemmerer. That is a difiicult question to answer. I have 
 not been around the islands very much, and my views on that sub- 
 ject are not worth much. It is my opinion, however, from what I 
 have read, from the reports I have received, and the observations 
 I have made that probably the Filipino is more intelligent and more 
 resourceful than the Egyptian, but that the Egyptian, on the other 
 hand, is probably more thrifty and industrious. The Egyptian 
 peasants have in the past often been characterized as being shiftless 
 and lazy. The Earl of Cromer believed that the peasant had not 
 been given a fair chance. Since he has been given a reasonable op- 
 portunity there is no question but that he has improved wonder- 
 fully. I believe that when the Filipino is given a chance he is likely 
 also to improve in this respect. 
 
 Mr. Webber. Does the Egyptian own the land ordinarily? 
 
 Mr. Kemjierer. Theoretically he does not. There are two or three 
 forms of land tenure there. There are a number of conditions that 
 complicate matters of land tenure. The Egj'ptian tenure is, how- 
 ever, for all practical purposes a fee simjale. 
 
 WAGES IN EGXPT. 
 
 ^Ir. Larrinaca. Have you heard something about the wages paid 
 on the Suez Canal as being 20 cents a day in former times? How 
 does that comiDare with the wages at the present time? 
 
 Mr. KEjrMERER. I have not looked up the subject of wages in 
 Egypt. The expenses of the peasant are lower and the wages are 
 lower than in European countries. Just what the general rate of 
 wages for that kind of labor in Egypt is I do not know. There are 
 so many j^etty landed proprietors and the peasants work so much 
 on shares that a knowledge of the rate of money wages would not be 
 as important for Egypt as it is for a country like our own. 
 
HEAEINGS BEFORE COMMITTEE ON INSULAK AJPFAffi'S. 89 
 
 VOLUME OF MONEY IN EGYPT. 
 
 Mr. Gakrett. Can you state the volume of the circulating medium 
 in Egj^pt; 
 
 Mr. Kemmeree. About $100,000,000, or a little over $10 per capita. 
 The per capita circulation in the Philippines is about $2. 
 
 The amount of circulating medium in a country I do not think 
 is as important a criterion of the prosperity of a country as a great 
 many other items. For instance, we all feel that the United States 
 is, on the whole, a more prosperous country than France, but France 
 has a much greater per capita circulation than we have. Other fac- 
 tors must be taken into consideration, such as the rapidity with 
 which money circulates and the proportion of exchanges affected by 
 means of checks before two countries can be satisfactorily compared 
 on the basis of their per capita circulation. 
 
 Mr. Gaerett. There is, then, a very much less per capita circula- 
 tion in Egypt than in the Philippines?, 
 
 Mr. Kemmeree. Yes; and undoubtedly Egypt is a much more 
 prosperous country than the Philippines. 
 
 Mr. RucKER. From your examination and report and the impres- 
 sions that you have gained, you are prepared to assert that this agri- 
 cultural bank has been a success from a banker's standpoint, it be- 
 ing capable of mathematical demonstration, but are you prepai'ed 
 to assert whether or not it has been beneficial to the masses of the 
 peasants in raising the standard of their industry and contributing 
 to their prosperity ? 
 
 LESSENING OF USURY IN EGYPT. 
 
 Mr. Kemjmeeee. My opinion is — and I think it is corroborated by 
 the opinion of most business men and officials in Egypt — that the 
 bank has lessened usury very much and has materially improved 
 the conditions of the Egyptian peasants generally. 
 
 I do not mean to imply that the Egyptians by means of the bank 
 have gotten out of debt. They have shifted their debts, I believe, 
 from the usurer to the bank and have materially reduced the rate 
 of interest they are paying. I doubt very much if there has been 
 any appreciable reduction in the total amount of their indebtedness. 
 The Egyptian peasant is working on credit just as before, but it is a 
 much more equitable and satisfactory kind of credit. 
 
 PEOBABLE success OF BANK IN THE PHILIPPINES. 
 
 Another point I wish to make is this : I do not think you can say 
 that a system of this kind would have in the Philippines as re- 
 markable a success as it has had in Egypt. The conditions are par- 
 ticularly favorable in Egypt for such an institution as I have pointed 
 out in my rejjort, but I think the great success of the experiment in 
 Egypt is presumptive evidence that it would be a success in the 
 Philippines. If conservatively managed by private enterprise on pri- 
 vate capital and properly examined and controlled by the govern- 
 ment, I firmly believe it would prove highly successful in the Philip- 
 pines at the present time. 
 
 Mr. Webber. Did you go out among the peasants in Egypt and 
 talk to the masses to find out what they had to say? 
 
40 HEABINGS BEFORE COMMITTEE ON INSTJLAE AFFAIRS. 
 
 Mr. Kemmerer. I did not, as my time was too limited. Further- 
 more, I did not l^now the language, and the best I could do was to 
 go out and talk with some of the agents of the bank, as well as with 
 the bank's competitors and with other business men. 
 
 EFFECT OF EGYPTIAN BANK ON PEASANTRY. 
 
 Mr. Webber. What evidence have you that the Egyptian peasants 
 themselves have been benefited, or claim to have been benefited ? Are 
 their homes better, are their clothes better, and do they get more of 
 the pleasure of life? 
 
 Mr. Kemmerer. Their condition has improved greatly in recent 
 years. No one can deny that. 
 
 Mr. Webber. "Wliat evidence did you see of it? 
 
 Mr. Kemmerer. I was never in Egypt before, and can not per- 
 sonally make a comparison of the condition of the peasantry during 
 different periods of time. I base my opinion upon what I have read, 
 upon mj interviews with people in Eg3rpt whose opinions are worthy 
 of great respect, and upon the remarkable degree in which the peas- 
 ants have availed themselves of the privileges offered by the bank. 
 
 Mr. Hubbard. Did you see the Earl of Cromer and get his view? 
 
 Mr. Kemmerer. His opinion of the matter, as shown in his reports, 
 was that the bank had been a most imjjortant factor in the uplifting 
 of the peasantry. 
 
 The Chairman. The condition of the Egyptian peasantry since 
 that country came under England is one of greater security. 
 
 Mr. Kemmerer. That is undoubtedly true. 
 
 Mr. Garrett. How does the gambling that is characteristic of the 
 Filipino compare with that of the EgyjDtian? 
 
 Mr. Kemmerer. I do not know. When I was in the Philippines 
 I heard a good deal of the gambling instincts of the Filipinos, but I 
 think perhaps that it is a little overdrawn. The recent success of the 
 Philippine Moral Progress League would tend to substantiate this 
 opinion. I have heard little or nothing with regard to gambling 
 among the Egyptian peasants. 
 
 Mr. Webber. Are the Egyptians under the new system buying 
 more goods, or better clothes, or producing more crops than before? 
 
 Mr. Kemmerer. Yes. The figures, such as imports and exports, the 
 increase in the tax receipts — although there has been a decided reduc- 
 tion in the tax rates — together with such matters as railroad freight 
 carried, and items of that kind, all taken together are indicative of 
 improved conditions. I think no one in Egypt will deny that Egypt 
 has been going through a period of great prosperity recently. Some 
 people fear it is not stable, it has been so remarkable. 
 
 Mr. Parsons. Do your figures and reports indicate that the most 
 profitable part of the business of the Agricultural Bank of Eg;\'pt 
 have been from loans to the comparatively large landowners? Tak- 
 ing the figures of 1902, they show that 76 per cent of the loans was 
 to owners of 20 or more acres, and that out of 1,000,000 landowners 
 there were only about 33,000 that owned 20 or more acres each. 
 
 Mr. Kemmerer. But it shows that there is a very large and in- 
 creasing proportion of peasant proprietors in Egypt. In 1894 78 
 per cent of the landowners were proprietors of small estates of less 
 
HEAMNGS BEFORE COMMITTEE ON INSULAB AFFAIRS. 41 
 
 than 5 acres in area; in 1904 the proportion had increased to 86 
 per cent. 
 
 It shows that the proportion of the total land owned by petty hold- 
 ers, though small, is increasing, and that the petty landholders are to 
 a great extent taking advantage of the privileges offered by the bank. 
 The maximum loan, it should be remembered, is but $2,500. The 
 average size of all loans is only about $155. Even $2,500 is not a 
 large amount for a person owning a large estate. 
 
 Mr. Parsons. It is a good deal to a man who owns 50 acres. 
 
 Mr. Kemmeree. You must remember that 50 acres in the delta of 
 Egypt has a productivity that is simply incomparable with anything 
 we have in this country. 
 
 Mr. Webber. They raise several crops a year? 
 
 Mr. Kemmeree. Yes. 
 
 Mr. Parsons. The agricultural bank in the Philippines, if estab- 
 lished, would loan to the larger landowners. The expense would 
 be less if they did, and would there not be a tendency on the part of 
 the bank to prefer the loan of the large landowners, whereas you are 
 attempting to provide a bank that will loan to the small landholders ? 
 
 ]\lr. Kemmeree. There would be that tendency there is no doubt, 
 because the cost of negotiating a small loan is about as great as the 
 cost of negotiating a large one, but the Philippine government and all 
 the jaersons interested in the agricultural bank proposition for the 
 Philippines are anxious to have the bank show particular considera- 
 tion to the small landowner. The bill as drawn for the Philippines 
 contains a number of provisions intended to avoid that diiSculty. It 
 says that only a limited amount of the bank's funds can be loaned to 
 large landowners — only 25 per cent in loans above $2,500; second, 
 that no loans above $2,500 shall be made without the express permis- 
 sion of the secretary of finance and justice; third, that the bank shall 
 in all cases show special favor to the small landowner. The gov- 
 ~ ernment, moreover, by its system of supervision and control, ought 
 to be in position to enforce these regulations. 
 
 taxation or mortgages in the Philippines. 
 
 Mr. "Webber. Is there a land tax in the Philippines? 
 
 Mr. Kemjierer. Yes. 
 
 Mr. "\A^ebber. Suppose that under this proposed law or banking sys- 
 tem a Filipino has a farm and it is mortgaged for about all it is worth, 
 is that mortgage taxed ? 
 
 Mr. Kemmerer. As to those details I could not answer. 
 
 The Chairman. That is one. of the things they have had up in my 
 State and it is still unsettled. 
 
 Governor Ide. There is no tax upon personal property in the 
 islands. The land tax is assessed upon the value of the land. No 
 mortgage or personal property is taxed. 
 
 The Chairman. We will continue the hearing to-morrow, and I 
 trust that all of the members of the committee will be present. Sec- 
 retary Taft thinlrs that this is one of the most important subjects 
 ever before the committee. 
 
 Thereupon the committee adjourned to AYednesday. January 9 
 1907. 
 
42 HEABINGS BEFORE COMMITTEE ON INSTJLAE AFEAIBS. 
 
 CoMaiiTTEE ON Insular Affaies, 
 
 House of Repeesentatives, 
 
 Wednesday, January 9, 1907. 
 
 STATEMENT OF PBOF. E. W. KEMMEEER— Continued. 
 
 The CiiAiEMAN. Professor Kemmerer, you can begin now, and pro- 
 ceed at your discretion. 
 
 Mr. Kemmeeee. I covered in a very brief way at the last session 
 the work of the Agriculutral Bank of Egypt, the relation of the 
 Agricultural Bank of Egypt to the Egyptian fellaheen, and its 
 influence among them, the success of the bank as a financial enter- 
 prise, the profits realized, and the general financial condition and 
 reputation of the institution. I also touched upon the relations 
 existing between the bank and the government upon the subject of 
 the government's guaranty, and stated that the general consensus of 
 opinion seemed to be that there was no probability whatever that the 
 Egyptian government would ever be called upon to make good its 
 guaranty. 
 
 THE " fellaheen." 
 
 The Chairman. Now, right there, in order that readers of this tes- 
 timony may understand you, won't you, please, define the term " fel- 
 laheen? " 
 
 Mr. Kemmeeee. The term " fellaheen " is the plural of the word 
 fellah, and it refers to the peasant land proprietors of Egypt. 
 
 The Chaieman. So that " peasants " would be a fair equivalent ? 
 
 Mr. Kemmeeee. A fair equivalent, I think. 
 
 The Chaieman. So, I think that you had better use the Avord 
 " peasant." I know how those who read the testimony might be . 
 bothered with the words " fellah " and " fellaheen." 
 
 EXTENT OF PEASANT POPULATION OF EGYPT. 
 
 Mr. Webbee. I would like to know what percentage of the 8,000,000 
 or 9,000,000 Egyptians are of that class? 
 
 Mr. Kemjieeee. In 1905 the agricultural population of Egypt com- 
 prised about 61 per cent of the total population. A large proportion 
 of them are small landholders, having farms of less than 50 acres, 
 while others, almost or altogether landless, are laborers. Many petty 
 landowners supplement their earnings by laboring also on large es- 
 tates. The total number of landholders in Egypt in 1905 was 
 1,052,418; of this number, 902,018 were holders of estates of less than 
 5 acres, and only 12,038 were holders of estates of over 50 acres. The 
 great bulk of the farms in the Philippines, as in Egypt, are very 
 small. Fifty per cent of the occupied agricultural land in the Philip- 
 pines is held in petty farms of less than 2i acres in area ; 35.7 per cent 
 of the agricultural holdings in the Philippines is comprised of farms 
 smaller in area than a lot 194 feet square, and all but 4.8 per cent of 
 the holdings is comprised of farms of less than 12i- acres in area. 
 
 Mr. Webber. Are any of the bankers Egyptians ? 
 
HEARINGS BEFORE COMMITTEE ON INSULAR AFFAIRS. 43 
 
 Mr. Kejimeeee. The subordinate officials in all of the 72 branches 
 of the bank are Egyptians, but the heads of the central establishment 
 and the traveling inspectors are Englishmen. 
 
 COLLECTION 01" LOANS IN EGYPT. 
 
 One other point that I wish to bring up here is the subject of bad 
 debts. The subject of an agricultural bank is never broached but 
 that it is suggested that a great number of the loans are liable to 
 prove uncollectible or that there is liable to be a great amount of 
 delay in the collections ; that a large number of foreclosures are liable 
 to be necessary, with consequent hardships to the borrowers. This 
 is a real difficulty. It is a difficulty that had been previously real- 
 ized to some extent by the Credit Foncier, the private land bank in 
 Egypt, which for many years has loaned money to large cultivators in 
 Egypt, and which is still doing a large and thriving business. It was 
 a difficulty which the authorities of the Agricultural Bank expected to 
 encounter. Accordingly, the bank was careful in character of the 
 contract forms used, careful in the investigations made of the financial 
 standing of prospective borrowers, careful in its investigations of the 
 securities offered, and in every other step in the negotiation of the 
 loan contract. As a result of the great care exercised, the bank has 
 had a phenomenal success in this respect. The results, in fact, are 
 alm'ost unbelievable. 
 
 When you consider that there are at the present time, or were last 
 year, about 185,000 borrowers, most of them petty landowners scat- 
 tered throughout Egypt, that the average size of their loans was 
 about $156 of our money, that none of the loans run above $2,500, and 
 that a great number of them are for petty sums, such as $5, $10, or 
 $20 ; when you consider further that this institution has been running 
 since 1902 and that it took over many petty loans of the National 
 Bank of Egypt that originated years before, the statement made to 
 me by the manager, and substantiated by the governor of the Na- 
 tional Bank of Egypt, will appeal to you, I think, as very striking. 
 The manager said to me : " Going over our records as carefully as 
 we can, I believe it is a safe statement that we have not £i of 
 indebtedness on our books in a total indebtedness of about $35,000,- 
 000 which we will not collect. There have been lapses, but the lapses 
 have all been made good. We have," he said, " one petty loan which 
 we will not be able to collect from the borrower, but the government 
 agent who made the loan is responsible for it, by reason of his 
 neglect to comply with the bank's rules, and we will collect it from 
 him." 
 
 FORECLOSURES. 
 
 Now, as to foreclosures, you would expect with so many petty loans 
 to have a great number of foreclosures, selling out of farms, and all 
 that. The manager told me that up to the time that I was there, in 
 March, 1906, foreclosure proceedings had been begun in only 350 
 cases — the total number of loans outstanding at that time you will 
 recall was 185,000 — and a considerable number of loans had already 
 been paid off — and that in all of those 350 cases but four (|p^the 
 foreclosure proceedings had been stopped before they were con- 
 summated because settlement had been made. This is certainly a 
 
44 HEAEINGS BEFORE COMMITTEE ON INSULAR AFFAIRS. 
 
 remarkable showing for a bank of this kind, whose loans are mostly 
 in small amounts to petty land owners; it is due largely, of course, 
 to the great care taken by the bank's officers, in the character of the 
 securities they took, in the character of the borrowers to whom they 
 loaned, and in the negotiation of the loan contract to avoid fraud. 
 
 ENFORCEMENT OF COLLECTIONS. 
 
 It often happens that when collections are attempted to be made, a 
 considerable number of borrowers can not pay. The reason for these 
 delays is often the lateness of the crops, and this lateness prevents 
 the cultivator from making his payment at the time the loan becomes 
 due. Wlien the collector goes out to collect the land tax and the 
 annuity due the bank and finds that the borrower can not pay 
 the money due the bank, for one reason or another, he reports the 
 matter to the bank. The bank shortly sends out a special native 
 agent to see what can be done. If this agent can do nothing, then 
 the bank refers the matter to a special collection department created 
 to deal with such cases. This department sends out a lawyer's let- 
 ter — a threatening letter — and these letters result generally in the 
 collection of from 60 to 70 per cent of the delinquencies. Then, to the 
 borrowers who are still delinquent, the bank sends out one of its 
 English agents to make inquiries. If it is found that the reason for 
 nonpayment is sickness, failure of crops, for which the borrower is 
 not himself responsible, or other unavoidable reason, the agent 
 recommends that a certain delay be permitted in the collection of the 
 loan. He is given wide discretion in the matter, and his recom- 
 mendations are almost always followed. If it is found that the case 
 is simply one where the man does not wish to make the payment, or 
 is slack in his work, the agent recommends the immediate enforce- 
 ment of the payment. He can recommend any course which he 
 deems advisable, as, for example, the enforcement of a partial pay- 
 ment, or of a payment of interest without the installment of the 
 principal. The result of this system has been, as I say, that bad 
 debts are not a factor in the bank's operations. This covers the sub- 
 ject in a general way. Full details will be found in my report on 
 " The Agricultural Bank of Egypt," which you have in your hands. 
 
 I will be glad to take up any specific questions the members of the 
 committee may v.'ish to ask. 
 
 OPINION OF EARL OF CROMER AS TO EGYPTIAN BANK. 
 
 The Chairman. Did you have conversations with the Earl of 
 Cromer ? 
 
 Mr. Kemmerer. I did. 
 
 The Chairman. How long has he been in Egypt? 
 
 Mr. Kemmerer. He went there shortly after the Arabi revolt in 
 1882 or 1883. He has accordingly been there, about twenty-three years. 
 
 The Chairman. His administration has been recognized as most 
 remarkably successful ? 
 
 Mr. Kbmjeerer. I should say that the Earl of Cromer is recog- 
 nized generally throughout the world as one of the world's great 
 administrators. 
 
HEABINGS BEFORE COMMITTEE ON INSULAR AFFAIRS. 45 
 
 The Chairman. What did he tell you concerning the bank? What 
 did he give you by way of opinion as to the success or nonsuccess of 
 the bank ? IVhat did he say about it generally ? 
 
 Mr. Kemmeeee. He said that from the beginning he had had more 
 confidence in the Egyptian peasants than had the average English- 
 man or the average European who lived in Egypt. He had not 
 thought that the Egyptians had been given a fair chance, and had 
 been of the opinion that if they were given a fair chance and treated 
 properly, if their property were not taken away from them by exces- 
 sive and unjust taxes, or by excuses for taxes, they would prove to be 
 a much more productive, provident, and thrifty class of people than 
 had been generally supposed. He said that he had again and again 
 urged capitalists to come into Egypt and to make something of an 
 attempt in the line of agricultural loans to small land holders, but that 
 they had invariably refused on the ground that they did not believe 
 that it would be a safe venture because of the thriftless character of 
 the ]Deasants and of the unsettled conditions. 
 
 With the aid of his colleagues he finally pushed the matter and 
 began to make government loans as an experiment. The loans, he 
 said, had proved such a success that he urged the formation of the 
 National Bank of Egypt, with the principal purpose of providing 
 an institution which would make advances to the peasants on the 
 security of their lands and crops. The agricultural loans of the 
 National Bank of Egypt, he said, had been such a success that it be- 
 came desirable to establish the Agricultural Bank of Egypt. The 
 proposition of extending agricultural credit to the Egyptian peasants, 
 he said, was one of his pet hobbies, and that he was naturally proud 
 of the success of the undertaking. I told him that I had heard a 
 great deal of the successful features of agricultural credit in Egypt, 
 and asked him if he could tell me of any features in the Egyptian 
 plan that he thought could be improved upon — of any mistakes that 
 they had made which might serve as a lesson to us in formulating a 
 plan for the Philippines. He thought that that was a rather honest 
 sort of a question for a representative of another country to ask, but 
 he answered it in the spirit in which it was propounded. He said 
 that if any mistake had been made he thought that it was in fixing 
 the rate of interest as high as they did without making provisions for 
 its gradual reduction. 
 
 EFFECT OF COMPETITION ON EGYPTIAN BANK. 
 
 The Chairman. Did you say that the rate was fixed at 9 per cent? 
 
 Mr. Kemmerer. The rate was fixed at 9 per cent. 
 
 The Chairman. I think you said that as a result of the workings 
 of the bank competition appeared and the bank has been obliged to 
 reduce the rate to 8 per cent. 
 
 Mr. Kemmerer. The point is this: Other banks can not compete 
 with the Agricultural Bank of Egypt in loaning money in small 
 sums to peasant proprietors. The cost of collecting the annuities and 
 the risks involved are such that private concerns can not compete 
 with the bank in this branch of the business. The Agricultural Bank 
 of Egypt was organized particularly to make this class of loans. Its 
 original maximum loan was £300, or $1,500. The maximum was later 
 
46 HEARINGS BEFOEE COMMITTEE ON INSULAR AFFAIRS. 
 
 extended to $2.r)00. As the bank proved a success, private enter- 
 prises began to enter the field to capture the larger agricultural 
 loans. Private concerns could not compete with the bank on the 
 smaller loans, because they could not utilize the services of Govern- 
 ment tax collectors to collect annuities, but they are competing more 
 and more with the bank with regard to its larger loans — loans, say, 
 of from $1,000 to $2,500. It is largely on account of the success of 
 the Agricultural Bank of Egypt that there has been such a great 
 increase in the number of land-credit associations in Egypt in recent 
 years. 
 
 The bank has just reduced its rate of interest from 9 per cent to 8 
 per cent, but even at that rate it seems quite probable that it will lose 
 a considerable part of its business with the larger landowners and, 
 as time goes on, will confine its operations more and more to small 
 loans. Of course this result is most desirable for the small land- 
 owners. The rate of interest on all classes of agricultural loans in 
 Egypt is declining. Another probable result of this competition is 
 that the bank will not make such large profits in the future as it has 
 in the past. 
 
 CHARACTER OF EGYPTIAN PEASANTS. 
 
 The Chairman. I understand that the Earl of Cromer told you 
 that formerly there was a general impression that the peasants of 
 Eg-ypt were a shiftless and thriftless class, who would not make good 
 debtors for an agxicultural bank. 
 
 Mr. Kemmerer. Yes, sir; he said that that opinion was held by 
 a good many prior to the time the Government began its experiments 
 in the direction of extending agricultural credit to the peasants. 
 
 The Chairman. Now, then, is not that impression pretty general? 
 Has it not been pretty general concerning the peasants in the Philip- 
 pines ? 
 
 Mr. Kemmerer. I think that that impression is to a great extent 
 responsible for the fact that private enterprise has not come into the 
 Philippines at all to extend loans to agriculturists. 
 
 The Chairman. Right in that connection, let me ask if the thrift- 
 lessness of the peasants has not been found to have been largely at- 
 tributable to the hopelessness of their situation, to the uncertainty 
 of the tenure of their land titles, and the enormous rates of interest 
 they were charged, making them practically slaves to the usurers and 
 tax collectors? 
 
 Mr. Kemmerer. Yes, sir. If a peasant had money, he had no guar- 
 anty that he would be able to use it himself. It was taken away from 
 him under the guise of taxes, and he had no guaranty that he would 
 be able to keep land if he bought it. Property rights were so insecure 
 that there was little incentive for thrift on the part of the peasants. 
 The same thing was true in the Philippines, to a considerable extent, 
 according to common opinion, until very recently — until the Ameri- 
 can occupation. 
 
 THE CACIQUES. 
 
 The Chairman. They have a class of men over there called the 
 cadiques, have they not? 
 Mr. Kemmerer. Yes, sir. 
 
HEAEINGS BEFORE COMMITTEE ON INSULAR AEEAIBS. 47 
 
 The Chairman. In a degree, at least in their tyranny over the 
 peasants, they resemble the old feudal lords of mediaeval days. 
 That is, they can compel the people to work for them or to give them 
 this or that article without compensation. Such is the testimony 
 taken by us in the islands. 
 
 Mr. Kemmeeer. Yes; I think that is true to a considerable ex- 
 tent. 
 
 The Chairman. And as a result, the peasants of the Philippine 
 Islands for three hundred years have been practically ignorant of 
 the fact that they had any rights. They were accorded certain 
 privileges, but when it came to rights they knew nothing about 
 them, really? 
 
 Mr. Kemmerer. To a considerable extent. I think, however, it 
 must be remembered that conditions differ very materially in differ- 
 ent parts of the islands. I suppose that in some districts that was 
 very emphatically true, but in other districts it was not true to any- 
 thing like the same extent. The cacique, as I understand him, is 
 a sort of a cross between a feudal lord and a petty political boss. 
 
 Mr. EucKEE. Has that condition been all removed from the Phil- 
 ippines ? 
 
 Mr. Kemmerer. I do not think it has entirely. These caciques 
 exist to-day and they wield a very great control in many parts of 
 the islands. I should say that caciquism has not died out by any 
 means. I ought to guard my statements in this connection, however, 
 by saying that my work limited me very largely to Manila, and mj' 
 opinion on this subject is based more largely upon my reading and 
 upon common report in the islands than upon my own personal 
 observations. 
 
 Mr. Garrett. Beginning on page 13 of your report, the special 
 report on the subject-matter, and continuing on page 14, 1 notice that 
 you state that the Earl of Cromer expresses the opinion that the 
 fellahs (peasants) are much less improvident than was generally 
 imagined ; and then, continuing the discussion on whether the estab- 
 lishment of this bank has resulted in a decrease of the indebtedness of 
 the peasantry, you say that the opinion was expressed by the manager 
 of a large banking institution in Cairo that there was considerable 
 evidence that the peasants were using the credit obtained from the 
 agricultural bank as a means, further means, of extending their loans 
 with the usurers. And then you say that one of the district agents 
 said : " Thfere is no question but that the fellah supplements his loans 
 from the bank largely by loans from the usurer." Now, beginning 
 there with the first paragraph on page 14, I want to ask whether the 
 statement contained in there was the conclusion of that district agent, 
 or whether it is j^our conclusion ? 
 
 Mr. Kemmerer. That was the conclusion of the district agent, and 
 should have been printed in smaller type, as was designated in the 
 corrected manuscript forwarded to Manila for printing. The whole 
 of the first paragraph on page 14, except the last sentence, is a quota- 
 tion from the district agent referred to above. 
 
 Mr. Garrett. Your expression in the following paragraph, of 
 course, you say is a mere guess. 
 
48 HEABINGS BBPOEB COMMITTEE ON INSULAR AJ-FAIES. 
 
 MAXIMUM EATE OF INTEREST ON PHILIPPINE LOANS. 
 
 The Chairman. Now, what would you say as to the maximum 
 rate of interest which should be allowed by the law, if we pass one ? 
 
 Mr. Kemmerer. My idea is as expressed in the bill drafted for the 
 Philippine government in -this report, i. e., that the maximum rate 
 fixed by Congress should be at least 10 per cent. It may be that the 
 Philippine government will be able to negotiate with a private con- 
 cern at a less rate, but I do not think that it ought to be tied down to 
 anything below 10 per cent. I believe that if that maximum were 
 fixed by Congress and if the Philippine government were able to 
 make an arrangement with a private concern for -a lower rate, it 
 should be permitted to do so. I am sure the Philippine Commission 
 would make every reasonable effort to have the rate fixed as low as 
 possible. 
 
 The Chairman. Do you think that the law, if one be passed, should 
 provide that the Philippine Commission can, in its discretion, fix the 
 rate at anything below 10 per cent ? 
 
 Mr. Kemmerer. I should think so; yes. 
 
 discrimination in interest rates. 
 
 The Chairman. Do you think that there ought to be any oppor- 
 tunity left there for discrimination between debtors? Should not 
 the same rate be fixed for all debtors, large or small, without oppor- 
 tunity for discrimination? 
 
 Mr. Kemmerer. That is the condition in Egypt at the present 
 time, as I understand it. The question might arise whether in trying 
 to make negotiations with private concerns it would be well to tie the 
 Philippine government down to any such specific arrangement as 
 that. I think the Philippine Commission would take the position 
 of requiring a uniform rate of interest, if that position were a pos- 
 sible one to maintain. I question, however, whether it would be wise 
 for Congress to tie them down to any specific regulations with regard 
 to that matter. 
 
 The Chairman. Do you think that any institution under the con- 
 trol of the government should permit any sort of discrimination 
 between debtors? Should they not be on an equality — a man that 
 borrows $500 should pay no higher rate than one who borrows 
 $2,000 from a bank having a government guaranty and making col- 
 lections by government tax collectors? 
 
 Mr. Kemmerer. There is certainly very much more expense pro- 
 portionately in negotiating and collecting petty loans than in ne- 
 gotiating and collecting large loans. There is a great difference in 
 the trouble and expense and often a great difference in the risk 
 involved. It will take as much trouble and clerical help and as 
 much time to negotiate, carry through, and collect a loan of a few 
 hundred pesos as it will one of a numljer of thousand pesos. As I 
 have sf>id before, I think that, as far as possible, the banks should be 
 induced to favor the small man, even at the expense of some loss. 
 
 Mr. Webber. Do you think that principle should prevail ? Should 
 not we always keep in mind the principle of " the greatest good to the 
 greatest number? " 
 
 Mr. KJBMMERER. I think we should. 
 
HEARINGS BEFORE COMMITTEE ON INSULAR AFFAIRS. 49 
 
 Mr. Webber. Without reference to the particular expense because 
 of the smallness of the loan ? 
 
 Mr. KJEMMEEER. I think we should always keep in mind the prin- 
 ciple of " the greatest good to the greatest number " in a proposition 
 of this kind. It is of course barely possible that the Philipjpine 
 government might have some difficulty in negotiating with private 
 concerns to take this matter up, and a consideration of that kind 
 might be a vital One as to the government's success or failure in ne- 
 gotiating with private concerns relative to the concession. I doubt 
 whether it would, but I should say that a question of that kind would 
 be one upon which Governor Ide, or men who are much more familiar 
 with that phase of the situation than I am, could pass a more val- 
 uable opinion. 
 
 Mr. Hubbard. Would not it almost of necessity follow that to fix 
 a cast-iron rule here requiring that all these loans should be on an 
 absolute equality, would be to make the bank favor the large loans 
 and refuse the small loans as far as they could — that is, that they 
 would necessarily seek the larger loans because, proportionately, 
 on those there would be a much larger profit if the large loan was 
 to be executed at the same rate as the small one? The small loan is 
 necessarily very much more expensive, and in our banking practice, 
 whatever may be the law in relation to usury, a man who borrows 
 $500 for six months will pay more than the man who borrows $6,000. 
 
 The Chairman. Supposing the Post- Office Department should 
 charge a man who sends one letter 10 cents for a stamp, and a man 
 who sends a thousand letters 2 cents each for postage stamps. 
 
 Mr. Hubbard. The two things are not at all alike. 
 
 The Chairman. You are speaking of a private bank, which is in 
 business simply for the purpose of making money. A govern- 
 ment institution which is in business primarily to accommodate the 
 country, and also to make money, must perform its functions so as 
 to effect both objects. 
 
 Mr. Hubbard. If you are speaking of a government institution, 
 that is one thing. A government institution is primarily for the 
 benefit of the agriculture of the Philippines. That is one question. 
 If, on the other hand, you are to seek to induce private capital to 
 go in and establish an agricultural bank, giving it privileges of such 
 a, character that capital will deem it proper to go in and take the 
 risks contingent upon those conditions, you then are dealing purely 
 with a private enterprise. 
 
 The Chairman. We can settle this by asking what rate of interest 
 the law fixed for the Agricultural Bank of Egypt. It was fixed at 
 10 per cent, was it not ? 
 
 Mr. Kemmeree. Yes, sir ; that is my understanding. 
 
 The Chairman. And the bank has been a wonderful success for 
 the stockholders and for the peasants of Egypt. 
 
 Mr. Kemmerer. Yes, sir. 
 
 The Chairman. It was such a success that they were willing to 
 have the rate reduced to 8 per cent ? 
 
 Mr. Kemmerer. Yes, sir. They asked the privilege of increasing 
 their stock, and the privilege was granted by the government on 
 condition that they would agree to reduce their rate of interest to 
 8 per cent from the beginning of the year succeeding that at the end 
 
 lA— 07 4 
 
50 HEARINGS BBFOBB COMMITTEE ON INSULAR AEFAIKS. 
 
 of which the loans outstanding should have reached $35,000,000. 
 They agreed to the condition, their loans have since passed the 
 $35,000,000 mark, and the rate of interest has recently been reduced. 
 
 The Chairman. Why would not a rule that would be a just and 
 proper one to apply in Egypt be a just and proper rule to apply in the 
 Philippines, and meet with success there ? 
 
 Mr. Kemmeeer. I am inclined to think, as I said before, that it 
 would be desirable in the Philippines to have a uniform rate of in- 
 terest. The only point of difference seems to be whether it would 
 be wise for Congress to impose such a regulation upon the Philippine 
 government, or whether it would be better to allow the Philippine 
 government to use its discretion in the matter. 
 
 The Chairman. What I am getting at is this: AVhether a pro- 
 ducer who pays a rate of 9 per cent interest on money borrowed to 
 raise a crop is not put at a very great disadvantage if his competitor 
 pays only 4 per cent on the same amount of money ? 
 
 Mr. EJ53IMERER. In the Philippine Islands to-day 9 per cent would 
 be a very low rate of interest to the sugar planter. The bill as pro- 
 posed provides that as soon as this bank shall prove itself successful, 
 as soon as it shall show that the risks involved in such loans are not 
 as great as is generally supposed, if it is able to make such a showing, 
 it will accumulate a surplus, and in proportion as- it accumulates a 
 surplus, the maximum rate of interest it is permitted to charge will 
 automatically go down. The reduced rate of interest will not only 
 apply to future loans, but will be retroactive, and will apply also to 
 all loans still outstanding. People who borrow money when the 
 risk is comparatively great, and when the demand for funds is 
 large, should pay reasonably high ^tes of interest, but later on, 
 if experience demonstrates that the lisaaj^ ai'e not great, and if good 
 profits are realized by the bank, then the surplus will accumulate, 
 the rate of interest will be reduced, and all classes will have the 
 benefit of the reduced rate. 
 
 LIMIT OF AMOUNT OE THIRD-CLASS LOANS. 
 
 Mr. Garrett. The bill as drafted limits to 25 per cent the amount 
 that can be loaned in third-class loans ? 
 
 Mr. Kemmeree. There are a number of limitations in the bill pro- 
 posed for the Philippine government to pass which are intended to 
 make the bank favor small landowners as against large ones. The 
 amount that can be loaned in large sums is limited to 25 per cent. 
 Large amounts can be loaned only on the express permission of the 
 secretary of finance and justice. The bank is enjoined to show special 
 favor to small landowners, and it is believed that the character of 
 the government suiDervision and control which would be given Avould 
 be such as to practically compel the bank to heed those directions. 
 
 Mr. Gilbert. Can you give me a brief statement of the system of 
 land tenure in Egpyt? What interest do these peasants of Egypt 
 have in the land? 
 
 LAND TENURE IN EGYPT. 
 
 Mr. Kemmerer. There are several classes of land tenure in Egypt. 
 The question of land tenure in Egypt from a theoretical and legal 
 standpoint is a very complicated one, but for all practical purposes 
 
HEARINGS BEFORE COMMITTEE ON INSULAR AFEAIKS. 51 
 
 the great bulk of Egyptian agricultural land may be considered to be 
 held in fee simple. The bank has not had any cases of trouble with 
 poor land titles. 
 
 CLASSES OF LOANS BY EGYPTIAN BANK. 
 
 Mr. Gilbert. What rule was adopted by the bank for the purpose 
 of securing loans to smaller borrowers ? 
 
 Mr. Kemmeeer. The bank has two classes of loans — one which it 
 calls "A" loans, and the other " B " loans. A " B " loan must not ex- 
 ceed $2,500, is secured by first mortgage on land of a value at least 
 double the amount of the advance, and is recoverable in twenty and a 
 half years at the latest. An "A" loan must not exceed $100, is secured 
 usually by a chattel mortgage on crops, and is recoverable in fifteen 
 months at the most. 
 
 Mr. Gilbert. That is what I wanted to get at. 
 
 Mr. RucKEE. How are the loans secured on the crops? On what 
 sort of title is it secured ? 
 
 Mr. Kemmeeer. I do not know just the character of the instru- 
 ment. There is a note given, and the crops to be harvested are 
 pledged as security. The exact forms used are given in my report. 
 
 Mr. Webber. It is what we call a chattel mortgage ? 
 
 Mr. Kemmerbr. Yes; a chattel mortgage. 
 
 The Chairman. NoW, Professor, I think we will call on Professor 
 Jenks, if you have nothing further to suggest. 
 
 Mr. Kemmerer. Nothing, unless there are some questions. 
 
 Mr. EucKER. Just one moment, please. You are familiar with the 
 details of the bill now before this committee, I suppose. Possibly 
 you drafted the bill. 
 
 Mr. Kemmerer. Yes ; I drafted the bill. 
 
 maximum amount or individual loans. 
 
 Mr. RucKEE. In this bill there is a provision that the maximum 
 amount of loans made to one person is $15,000. In the Egyptian 
 bank the maximum amount is $2,500. Why was that difference 
 made? What is the reason for increasing the maximum there? 
 
 Mr. Kemmerer. In the first draft of this bill I placed the maximum 
 amount at $2,500, as in Egypt, but I talked the matter over with 
 several business men in the Philippines and with one banker who is 
 interested in the matter and who may possibly wish to finance the 
 affair if it goes through, and they all took the position that it would 
 be desirable to raise the size of the maximum authorized loan. In 
 Negros, for example, there are a number of large sugar plantations, 
 and these plantations employ large numbers of persons and require 
 considerable capital to run them. It was thought advisable to make 
 provision in the bill to enable the bank, if it so wished, to reach 
 some of those large sugar estates, not only because it would assist the 
 proprietors of estates themselves, but because it would also assist a 
 large number of persons who live on the estates and who are depend- 
 ent upon the estates for a livelihood. When the limit was raised a 
 provision was put in the bill to the effect that not over 25 per cent 
 of the capital should be advanced in loans of $2,500 or upward and 
 
52 HEABINGS BEFORE COMMITTEE ON INSULAE APFAIBS. 
 
 that no loan above $2,500 should be made except upon the express 
 permission, in writing, of the secretary of finance and justice. 
 
 Mr. Rtjckee. That is, 25 per cent o'f the capital stock? 
 
 Mr. Kemmeeee. Yes, sir. 
 
 STATEMENT OF PEOF. JEREMIAH W. JENKS, OF COBNELL UNI- 
 
 VEKSITY. 
 
 The Chairman. What is your profession ? 
 
 Mr. Jenks. T am professor of political economy and politics in 
 Cornell University. 
 
 The Chairman. How long have you been connected with the uni- 
 versity ? 
 
 Mr. Jenks. Since 1891. 
 
 The Chairman. Have you been in the Philippines ? 
 
 Mr. Jenks. Yes, sir ; I have been there twice. 
 
 The Chairman. And also in Egypt? 
 
 Mr. Jenks. Yes; once. 
 
 The Chairman. When were you in the Philippines ? 
 
 Mr. Jenks. The first time was in the spring of 1902. In the 
 summer of 1901 I was appointed by the Secretary of War (Secretary 
 Root) a special commissioner to visit the English and Dutch colonies 
 in the Orient, and look into the conditions, as far as I could, of the 
 monetary systems, of labor, taxation, and police, with reference to 
 showing whether the experience of these English and Dutch colonies 
 would be helpful to the Philippine government with relation to pro- 
 posed measures of legislation for those islands. 
 
 agricultural loans in EGYPT, INDIA, AND BURMA. 
 
 On the way to India I stopped in Egypt, and while there I noticed 
 the conditions of the country as best I could in the short time that I 
 had, although that was not, strictly speaking, an English colony. 
 Of course I noticed that they were making agricultural loans, and 
 that Lord Cromer seemed to think the loan system one of the best 
 things that they were doing for the development of Egypt. In con- 
 sequence, at that time — of course, before the Agricultural Bank of 
 Egypt was founded — I made a report on the agricultural loan system 
 and suggested that, in my judgment, something of that kind would 
 be extremely useful for the Philippines. 
 
 Later on, in northern India and in Burmah, I found that the same 
 need of helping the poor man (the peasant, the small landed pro- 
 prietor) was felt, but that they did not have in India anything like 
 the same efficient system of loans as in Egypt. The need, neverthe- 
 less, was felt, and they were making loans there through the govern- 
 ment officials. 
 
 I went from India, where I spent something like two months, to 
 Burma, to the Federated Malay States, the Straits Settlements, 
 Sumatra, and Java ; from there to the Philippines, where I prepared 
 ray report. 
 
 The Chairman. Wliat did you learn when you were in Egypt as 
 to the condition of the peasants ? 
 
 Mr. Jenks. There is not much to be added to what was suggested 
 by Professor Kemmerer. 
 
HEARINGS BEFORE COMMITTEE ON INSULAR AFPAIBS. 53 
 
 EFrECT OF EGYPTIAN BANK ON PEASANTS. 
 
 I was there in the fall of 1901. At that time the National Bank 
 of Egypt had been making loans for about two years on a 10 per cent 
 rate. They had loaned in 1899 £E.31,500, the equivalent of something 
 more than $150,000 of our money; in 1900, £E.137,781, some $688,905, 
 and the loans since that time have been rapidly increasing. The 
 system that was then used by the National Bank of Egypt was after- 
 wards adopted, practically, by the Agricultural Bank of Egypt. 
 This system was the same that has been since followed. A careful in- 
 vestigation was made of the credit of the smaller landowners when 
 the loans were made, and it was found that the bank was meeting 
 with practically no losses, while the effect of making these loans was 
 good, not only in helping the economic conditions of the country, but 
 also from an educational point of view. It was very evident that it 
 was improving the general character of the peasants themselves, both 
 industrially and educationally. 
 
 The Chairman. Did you meet Lord Cromer while in Egypt ? 
 
 Mr. Jenks. Yes ; several times. 
 
 The Chairman. What did he say to you ? 
 
 OPINION OF LORD CROMER ON EGYPTIAN BANK. 
 
 Mr. Jenks. Practically the same thing that has been reported to 
 you already by Professor Kemmerer, that the agricultural loan 
 system was one of the things in which he had been most interested 
 and that it promised to be of very great good to Egypt. Of course, 
 he said, he considered it an experiment still and would so continue 
 to consider it for three or four years more. As you know, he is a 
 very conservative man. However, so far there seems to be no sign 
 of the business of the bank falling away. 
 
 USURY IN EGYPT. 
 
 The Chairman. T\1iile in Egypt you heard of the usurious rates 
 of interest charged the peasants, did you not? 
 
 Mr. Jenks. Yes, sir. 
 
 The Chairman. What were they there? 
 
 Mr. Jenks. From 2 per cent a month to 5 per cent a month. They 
 were practically the same there as throughout all the East. They 
 were the same in Egypt as in northern India and in Burma, rates of 
 from 2 per cent to 5 per cent a month — sometimes even higher 
 than that. It seems to me that it amounts to this — the usurer 
 takes all that he can get. 
 
 There is another point in tjiis connection that has not as yet been 
 brought out, I believe. In many cases the poor landholder prefers 
 to deal even on worse terms with the usurers rather than with gov- 
 ernment officials or with the representatives of a large bank, because 
 he is treated in a more considerate way personally. In northern 
 Burma and in Java, for example, I found this statement made : That 
 when money was loaned a man by a usurer — often a Chinaman or an 
 Arab — if' he could not pay it at exactly the proper time the usurer 
 would say, " Why, that makes no difference," and perhaps would 
 extend the loan and lend the man a little more money;, and in that 
 
54 HEARINGS BEPOEE COMMITTEE ON INSULAK APPAIES. 
 
 way lead him on until he practically got control of his property. 
 The same thing is true in Egypt. The government has had to 
 take very great pains to keep the usurers from getting control 
 of the property of the peasants. In Burma and India the rule is, 
 when a loan is made by the government, that an official is sent to 
 collect the money when it is due, just as a tax collector, and the pay- 
 ment of the interest and loan is enforced. There is not so great con- 
 sideration in the collection of the loan as is shown on the part of the 
 usurer, so that in a good many instances when the government would 
 make the loan at 8 per cent and the usurer would charge 40 per cent 
 or 50 per cent, the borrower preferred the usurer. 
 
 One of the chief advantages of the government taking control of 
 the system in some form or other is to teach the people regularity 
 in the matter of the payment of their loans, and also give them some 
 idea of the way in which they ought to manage their business affair^. 
 In some cases they are practically children, so far as knowledge of 
 business is concerned, and act on impulse. 
 
 AGEICULTtJEAL LOANS IN INDIA AND BURMA. 
 
 The Chairman. Have they anything analogous to the Agricultural 
 Bank in Burma or India ? 
 
 Mr. Jenks. No; but the matter has been thoroughly studied in 
 India, particularly in southern India — Madras. Bills have been pre- 
 pared on the subject, but there is no institution of that kind yet estab- 
 lished, as far as I know. The loans that have been made in India 
 have been made through government officials and out of the govern- 
 ment treasury, in individual cases, where it seemed to be necessary, 
 and where they thought that it could be done. Of course the gov- 
 ernment in Burma is, practically, very paternal in a good many cases. 
 
 character of BURMESE. 
 
 The Chairman. Is it your impression that the natives of Burma 
 are the equal of the natives of the Philippines ? 
 
 Mr. Jenks. I should be inclined to think that the natives of Bur- 
 ma are more like the Filipinos in personal characteristics than are the 
 natives of Egypt. They are a people who take great delight in hav- 
 ing a good time, in entertainments and the pleasures of life. The 
 men are very generally lazj' and improvident and addicted to gam- 
 bling. The women, on the other hand, are apt to be saving and in- 
 dustrious. 
 
 The Chairman. Are you familiar with Egyptian finance? 
 
 Mr. Jenks. My familiarity^ is largely one obtained from reading 
 and from talking with other people. I have had only a compara- 
 tively short experience in those countries. For example, I was in 
 Burma less than a month, in the Philippines for onty three months 
 during my two visits, and in Egypt only three weeks; while one can 
 get impressions in this way, these impressions are not, after all, as 
 good as the knowledge of people who have lived in those countries 
 for a long time. I have also, natm'ally, in connection with my uni- 
 versity work, where I have to teach on these subjects, tried to fa- 
 miliarize myself with the conditions by reading and by talking with 
 people who are authorities. 
 
HEABINGS BEPOEE COMMITTEE ON INSULAE AFFAIES. 55 
 
 COMPARISON OF FILIPINO AND EGYPTIAN PEASANTS. 
 
 The Chairman. What is your opinion of the Filipino peasants as 
 compared with the Egyptian |)easants? 
 
 Mr. Jenks. I should say here, again, that my opinion is limited by 
 the brevity of my experience in these countries. I think that the 
 Egyptians are a little steadier in their habits than are the Filipinos. 
 At any rate they are a little less inclined to squander their money. 
 At the same time an improvement in the condition of the Egyptians 
 has been noticed during the last ten or fifteen years, and it certainly 
 is the opinion of the officials in Burma and northern India that the 
 native Indians and the native Burmese have learned a good deal in 
 the way of better business habits from contact with the officials in 
 the negotiation of their loans. Lord Cromer said that the Egyptians 
 were generally considered indolent and thriftless, but there had been 
 little difficulty in collecting loans. I have no reason to doubt that 
 the same effect would be likely to follow in the Philippines if we 
 were to adopt a similar system there. If we were to put in the way 
 of the Filipinos an opportunity of improving their condition some- 
 what, and get them into the habit of paying at regular intervals 
 small sums on their debts, I think that the effect would be the same 
 on the Filipinos as it has been on the Egyptians, Indians, and 
 Burmese. 
 
 The Chairman. You think that necessarily the establishment of 
 the proposed bank would have a great educational effect upon the 
 people ? 
 
 Mr. Jenks. I have been of the opinion that the educational effect 
 would be as good as the economic effect. 
 
 The Chairman. They would become more intelligent, of course. 
 
 Mr. Jenks. Decidedly so, of course. If their habits improve, their 
 economic condition will also improve. 
 
 The Chairman. It will teach them system, regularity, and punctu- 
 ality. 
 
 Mr. Jenks. Yes. 
 
 The Chairman. Are you familiar with the provisions of the bill 
 now before the committee? 
 
 Mr. Jenks. Reasonably so. Yes ; I have read it with a good deal 
 of care. 
 
 character of LEOISLATION advisable for PHILIPPINE AGRICULTURAL 
 
 BANK. 
 
 The Chairman. Will you, in a general way, please give your ideas 
 as to what legislation we ought to enact in this connection? 
 
 Mr. Jenks. It has seemed to me that there were two things that 
 ought to be kept in mind. In the first place, if we are aiming at hav- 
 ing an agricultural bank there we want to be sure to get it. That is 
 the first thing. So far as I can gather from what I have read and 
 from talking with others, people are not very anxious to put their 
 capital into the Philippines in a venture of this kind. It seems to 
 me that any bill which is passed by Congress should leave a good deal 
 of discretion with the Philippine Commission in the matter of neo'o- 
 tiation. It is my opinion that if restrictions are imposed too rigidly 
 by Congress capitalists might hesitate to invest in the bank, and this 
 
56 HEARINGS BEFORE COMMITTEE ON INSULAR ATPAIRS. 
 
 would result in our not getting any bank at all. So that I should 
 say in the first place that care ought to be taken not to place too many 
 restrictions upon the Philippine Commission. It is essential that 
 they have a pretty free hand in the negotiations. Then, after that, 
 it is my opinion that the general purpose of the act itself should be 
 safeguarded — that is, the benefiting of the agricultural interests in 
 the Philippines, particularly the small landowners in the country dis- 
 tricts. 
 
 Those are the two general principles that, in my judgment, ought 
 always to be kept in mind in framing the proposed legislation. 
 
 I do not know whether you care to have me consider in any detail 
 the provisions of the bill or not. I understand that the bill before 
 us was prepared originally by Doctor Kemmerer, after consultation 
 with others in the Philippines, for the Philippine Commission, and 
 therefore it naturally includes many conditions which ought to be 
 adopted there in all probability, provided the negotiations can be 
 made with the bank in such a way that they can be adopted easily. 
 It might be that here and there some of them would have to be 
 modified. 
 
 NECESSITY OF GOVERNMENT GTJARANTT. 
 
 The Chairman. If there is a guaranty it will be more easy to 
 negotiate than without it? 
 
 Mr. Jenks. From what I know of the conditions there it would 
 seem to me a practical impossibility to get this money without a 
 guaranty. In the first place the capital has to come from the United 
 States or some other country. It is not in the Philippines. 
 
 RATE or INTEREST OF GUARANTY. 
 
 The Chairman. What rate of interest ought the guaranty to be — 
 3 or 4 per cent? 
 
 Mr. Jenks. I think 4 per cent. 
 
 The Chairman. Do you think that 3 per cent would suffice? 
 
 Mr. Jenks. I doubt it. There are too many opportunities for in- 
 vestment of capital where the investment pays more than 3 or 4 
 per cent. I think that the rate ought to be 4 per cent. 
 
 BENEFITS TO BE DERIVED FROM ESTABLISHMENT OF BANK. 
 
 Mr. Gilbert. In what way will the poorer classes, the peasantry of 
 the Philippines, be benefited by being encouraged to borrow money at 
 8 per cent? What particular line of investment would they make use 
 of in the expenditure of that money? 
 
 Mr. Jenks. I think that there are two main things that should be 
 kept in mind. In the first place a very large percentage of the poorer 
 Filipinos are now borrowing from the usurers and are paying very 
 high rates of interest — from 20 to 100 per cent and over. It has 
 been the experience in Egj'pt, in Burma, and in northern India that 
 in many cases they would borrow from the bank at 10 per cent in 
 order to pay off the amounts owed the usurers, and would thus reduce 
 their interest rates from 30 to 40 per cent. 
 
HEABINGS BEFOKB COMMITTEE ON INSULAB AFFAIRS. 57 
 
 EESTEICTION AS TO USE OF MONEY LOANED. 
 
 Mr. Gilbert. Is that money used for practical purposes or for 
 profitable purposes? 
 
 Mr. Jenks. It is unquestionably true that in a good many instances 
 loans have been made by the usurers which have been used for the 
 purpose of giving the borrowers some sort of amusement. For in- 
 stance, in Burma, this expense was sometimes incurred in order to 
 pay for a wedding. The Burmese are very fond of wedding feasts 
 arid things of that kind, and so the money borrowed would be spent 
 in this way, and the borrower would be saddled with the debt. That 
 is one of the advantages of government loans. When a man asks for 
 a loan he is questioned as to what he intends to do with the money. 
 In his application for a loan he is required to make a specific state- 
 ment of the purposes for which he desires to use the money. 
 
 The Chairman. I should think that that was an exceedingly im- 
 portant feature. 
 
 Mr. Jenks. Beyond any question. It is one of the most important 
 features. If a man does not make the use of the money as set forth 
 by him in his application, the debt immediately becomes due; and 
 besides he is subject to punishment by fine or imprisonment, or both. 
 He has not only violated his contract, but he has committed an 
 offense similar to perjury, because he has violated his word as set 
 forth in the contract. That is one reason why we have thought the 
 agricultural bank extremely important, because it would keep track of 
 the way the money borrowed is expended. The bank would not lend 
 money except to help agriculturists to buy draft animals, to purchase 
 seed, to purchase agricultural implements, or for similar purposes. 
 Modern agricultural implements are going in there more and more. 
 The purpose of the bank is also to enable the peasants to pay off the 
 money that they have borrowed from the usurers at much higher rates 
 of interest. 
 
 Mr. Olmsted. Supposing a Filipino borrows money from this bank 
 to buy machinery or draft animals with, and then, if he wants to give 
 a feast, he goes to the usurer and borrows additional money just the 
 same — the result would be that he would be still deeper in debt. 
 
 Mr. Jenks. There is this to consider : If he borrows from the bank 
 in the first place, the bank would have his security; and the chance 
 of his falling into the hands of the usurer would be considerably less. 
 May I venture to add a word also in answer to this question, as sup- 
 plementary to what Professor Kemmerer has said in reference to 
 the larger loans? Of course it is known that owing to the rinderpest 
 the draft animals in the Philippines have very largely died, and on 
 some of the larger estates it has been necessary to expend large sums 
 of money to supply new draft animals ; likewise for the purchase of 
 improved agricultural machinery large sums are needed, so that in a 
 general way some of the largest estates would like this bank, for 
 they want to install more modern methods of agriculture, and they 
 really need large loans. 
 
 Mr. Eucker. It is seen to that the money is thus employed. Is 
 this attended to by the agent of the bank or the government ? 
 
 Mr. Jenks. By an agent of the bank. 
 
 Mr. RucKER. He is a kind of an administrator of the money for the 
 bank. For instance, in other words, if a man says that he wants to 
 
68 HEAEINGS BEFOEE COMMITTEE ON INSXJLAK APFAIBS. 
 
 buy cattle or machinery the government sees to it that the money is 
 so invested, this being done through an agent of the government. 
 
 Mr. Jenks. Not a government agent, but an agent of the bank. I 
 think that the plan ought to be follo\ved that is followed in Egypt 
 as to the bank's assistants. 
 
 Mr. EucKEE. Then j'ou proceeded to say that if the money was 
 not expended as stated in the application the borrower was subject 
 to fine or imprisonment, or both. By what authority would this be ? 
 
 Mr. Jenks. That, of course, would be under the general law. That 
 would be, presumably, part of the law passed by the Philippine Com- 
 mission, and it would simply make the loan fall due and the borrower 
 would be brought into the local court. 
 
 Mr. RucKEE. That is your idea ; if a man says that he wants $100 
 with which to purchase farm animals and he invests $80 of it in that 
 way and the remaining $20 in household furniture, that he would be 
 guilty of violating a penal statute? 
 
 Mr. Jenks. That would be settled by the Philippine Commission 
 when they passed the law; but the suggestion has been made that 
 in the case of a small borrower he would be expected to tell with a 
 good deal of particularity just how he intended to use that money. 
 The money would then be paid out to him in a limited sum. 
 
 Mr. Rtjckee. Is not that one reason why the small man is forced 
 to borrow from the usurers, from the man who will lend without re- 
 quiring such particularization as to what he is going to do with it ? 
 
 Mr. Jenks. That might be. But there are other things to be said 
 in connection with that, also. If a man really wants that money for 
 the improvement of his small land holding he won't object particu- 
 larly to saying so. If he wants to get $10 or $15 or $25 to squander 
 he would hesitate to say so. It is certainly true that the government 
 of the Philippine Islands does not care to guarantee the interest on 
 any bank investments except for the special purpose of improving the 
 agricultural conditions of the country. 
 
 Mr. RucKEE. But it seems to me that we might, if we should pass 
 a bill like this and empower the Philippine Commission to enact 
 laws like those you have suggested, thereby driving the legitimate 
 business of the bank entirely away, and then force it to do business 
 without a profit except the 4 per cent guaranty from the United 
 States or from the Philippine government. The bank might rest on 
 its oars and not do any business at all, knowing that the 1 per cent 
 interest was assured. 
 
 Mr. Jenks. The guaranty would include, the interest alone. 
 
 Mr. RucKEE. Yes. 
 
 Mr. Jenks. The oppoitunities of making money in connection with 
 this business are, it seems to me, good enough there, so that there is 
 no particular likelihood of the owners of the bank being content 
 with 4 per cent interest. The presumption is that they can make at 
 least 6 or 7 per cent. 
 
 PEOBABILITY OF SECUEING INVESTMENTS OF :M()NEY IX BANK. 
 
 Mr. RucKEE. Is it not true that a large amount of capital is in- 
 vested to-day at 4 per cent, and is seeking investment at 4 per cent? 
 Could we not hope to get money invested without a Government 
 guaranty of 4 per cent ? 
 
HEARINGS BEPOKE COMMITTEE ON INSUIAE AFFAIRS. 59 
 
 Mr. Jenks. Oh, yes; beyond a doubt, in this country. But, at the 
 same time, where money is invested at 4 per cent that is done in this 
 country or in England or in some of the other more important coun- 
 tries where the investors can handle the money easily, and not in 
 remote countries like the Philippines. 
 
 Mr. Rtjcker. This 4 per cent is guaranteed over and above the ex- 
 penses of administration. 
 
 Mr. Jenks. The point is this, as provided in the bill, that the 
 ordinary expenses of administration are to be paid first. 
 
 Mr. E.UCKER. The ordinary expenses include the collection, inspec- 
 tion, taxes, and all those things. 
 
 Mr. Jenks. The regular expenses that are ordinarily so taken out. 
 
 Mr. RucKER. So that it only means 4 per cent net. 
 
 Mr. Jenks. Yes; but there is also this provided — at any rate, it 
 should be provided — that in a question of this kind the government 
 should exercise close enough supervision so that the money would not 
 be expended in high salaries, etc., in order to cover up profits. 
 
 Mr. RxjCKER. Would it not make some of its people a little resent- 
 ful if they have good friends in the bank and they should not get 
 appointed to good paying positions in the bank ? 
 
 Mr. Jenks. In the" first place, the bank is to be started by private 
 capital. The money is to be raised entirely from private sources. 
 It is to be raised under as careful restrictions as the government can 
 put on it. There would, of course, always be temptation, as there is 
 not merely in public institutions, but in private institutions. But 
 it is also true that in jarivate enterprises, generally speaking, the 
 directors and chief stockholders are looking after dividends, and they 
 are not likelj' to put in incompetent help. I think, if we may judge 
 by experience, that, speaking broadly, incompetent help is more likely 
 to get into public institutions than into private. With the likelihood 
 of making in this bank dividends much above 4 per cent I do not 
 think that there is any danger. 
 
 The Chairman. "What was the guaranty in Egypt? 
 
 Mr. Jenks. Four per cent, I believe; was it not, Mr. Kemmerer? 
 
 Mr. Ke^imerer. Three per cent ; but in Egypt the guaranty is on 
 the principal, while here the guaranty would be on the dividends 
 only and not on the principal. 
 
 . Mr. Jp:nks. Three per cent in Egypt and a guaranty on the prin- 
 cipal also. 
 
 SCOPE or CtOvernjient (uakanty. 
 
 Mr. Olmsted. Does this not amount to a guaranty of the principal, 
 because there could be no pi'ofit unless the j)rincipal is unimpaired? 
 
 Mr. Jenks. \o. To illustrate : If the bank should make a serious 
 failure after the government had paid these 4 per cent dividends for 
 two or three years the government would lose what it had thus paid 
 in, but if the bank had lost also its capital the government would not 
 be compelled to pay up that capital. 
 
 The point you have in mind, I think, is this: If the bank went into 
 liquidation it would be expected that in the first place the regular 
 legal obligations of the bank would be paid, then the capital would be 
 paid, and then the government claim to anything that it had paid 
 out would l)e liquidated; so that if there were money enough in the 
 
60 HEARINGS BEFORE COMMITTEE ON INSULAR AFFAIRS. 
 
 bank its capital atouM be paid up before a settlement would be made 
 with the government. 
 
 Mr. Olmsted. Then the government would not have to pay more 
 than the 4 per cent guarantj'. 
 
 Mr. Jenks. Xo; merelj' the 4 per cent guaranty. 
 
 The Chairman. The fact that the principal is not guaranteed 
 would constitute a strong inducement for energy, care, and industry 
 on the part of the capitalists, would it not ? 
 
 amount of guaranty. 
 
 Mr. Jenks. It would seem to me so. I think, perhaps, Mr. Chair- 
 man, that I might add a word also as to the amount of this govern- 
 ment guaranty. It seems to me that the guaranty is not, after all, a 
 serious matter. As was explained yesterday by Governor Ide, the 
 financial situation of the Philippine Islands is such that it would 
 seem that it could without any serious difficulty meet any obligation 
 of that kind that might come up even in the event of the bank being 
 a complete failure. But there are two things to be said along that 
 line. In the first place, suppose the bank is organized with a capital 
 of $5,000,000, as has been suggested ; the amount of the guaranty then 
 would be $200,000 a year. If it seems after the first two or three 
 years that the bank is going to be a failure, and it then goes into liqui- 
 dation, the government's obligation would, of course, cease there be- 
 fore large sums have been lost. If, however, on the other hand, the 
 bank is reasonably successful and wishes to increase its capital, that 
 would indicate that the bank was so much of a success that the gov- 
 ernment would not be called upon to pay anything, beyond any doubt. 
 
 It is suggested in the bill that the highest possible limit of the obli- 
 gation of the Philippine government would be half a million dollars 
 a year. That would mean that the bank might be successful enough 
 so that it could and would increase its capital stock until it should 
 amount to $12,500,000. If afterwards it should wish to increase its 
 stock any more, the government's guaranty would not be increased 
 over the limit of a capital of $12,500,000—1. e., $500,000 a year— while 
 the prosperitj' leading to the increase of capitalization would make 
 it certain that the government would never be called on to pay any- 
 thing. 
 
 PROFIT FROM RECOINAGE OF FILIPINO PESOS. 
 
 I think that I may add another point that may have escaped the 
 attention of the committee, which makes it clear that the Philippine 
 government could not be burdened unduly bj^ the guaranty. Owing to 
 the increased price of silver it has become necessary for the Philippine 
 government to recoin its silver pesos. It is necessary, of course, to 
 recoin them at considerably lighter weight. Something like 34 per 
 cent less silver will be in the new coins than in the old ones. Accord- 
 ing to the most careful estimate that can be made, the government is 
 practically forced to make a profit out of this recoinage of the silver 
 coin in the Philippine Islands so large that, if that profit were in- 
 vested at 4 per cent interest, it would be, in itself, considerably more 
 than any possible loss that could come under this bill with the bank 
 capital of $5,000,000. What I have just said can be added to what 
 
HEAEINGS BEFORE COMMITTEE ON INSULAB AFFAIRS. 61 
 
 was stated yesterday by Governor Ide as to the ability of the govern- 
 ment to meet any possible emergencies that might arise. 
 
 The Chairman. "Will you give us the figures in detail -on that 
 proposition ? 
 
 Mr. Jenks. You mean, I suppose, the figures in detail with refer- 
 ence to the profit on the monetary system. That is what you have 
 in mind. 
 
 The Chairman. Yes; the seigniorage. 
 
 Mr. Jenks. The present pesos in the Philippine Islands, as you 
 know, are of silver, 416 grains; that is practically 27 grams, nine- 
 tenths fine. The new pesos are 20 grams, eight-tenths fine. The 
 change in the fine silver content has been reduced about 34 per cent 
 in making this recoinage, so that in the recoinage there is a saving 
 of about 34 per cent. 
 
 Mr. Kemmerer. The last figures are, I think, about 34. Of course 
 there is additional profit in the subsidiary coins. 
 
 Mr. Jenks. There is this profit of about 34 per cent on the pesos, 
 and I think that we might add still further that at the present time, 
 owing to the high price of silver, these Philippine pesos would be 
 worth in Manila as silver bullion, if they could be exported, some- 
 thing like 10 to 12 per cent more. Of course it varies from day to 
 day, depending upon the price of silver. The government takes 
 them in at their face value because it has forbidden their exporta- 
 tion. If it had to pay for the silver for this new coinage, it would 
 have to pay this 10 to 12 per cent more, so that it is fair to add to 
 the 34 per cent gain to which I have referred the added value that 
 there is in the bullion now, which would be something like 10 per 
 cent more, according to the estimates that we have been able to make. 
 We think that there will in all probability be a net profit from the 
 recoinage of from six to seven million dollars, gold. 
 
 The Chaiejian. At 4 per cent, that would be about $250,000. 
 
 Mr. Jenks. As estimated, the largest amount of the guaranty of 
 the bank is not over $200,000 a year, with the $5,000,000 capital. 
 Even if we wanted to pay out considerably more than that the inter- 
 est on this seigniorage profit would be enough to cover it, so that it 
 seems to me that there is no question whatever as to the ability of the 
 Philippine government to meet all possible financial obligation. 
 
 Mr. Ruckee. Wtat is the cause of the rise in silver? 
 
 ilr. Jenks. It is rather difficult to say. I am not interested in 
 silver except in this way. There have been three or four reasons 
 given. In the first place, the output of gold has been very materially 
 increased, and I think that there can be no question whatever that 
 this increased output of gold is bound to have an increasing effect on 
 the price of silver bullion. In addition to that, the demand for silver 
 bullion for use in the arts has been very decidedly increased, and 
 again, the demand for silver bullion for coinage purposes has also 
 been increased. 
 
 Mr. Rtjcker. Has that had anything to do with the price of silver ? 
 
 Mr. Jenks. Why not ? 
 
 Mr. EucKER. I do not know. I used to hear it controverted. I 
 wanted to get your views. [Laughter.] 
 
 Mr. Jenks. The United States is now buying silver for subsidiary 
 coin. Germany will doubtless have to do this also before long, and 
 France is likewise buying it. 
 
62 HEABINGS BEFOEE COMMITTEE ON INSULAR APFAIBS. 
 
 Mr. ErrcKEK. The United States is buying it now ? I thought they 
 quit a little while ago. The price was said to be too high. 
 
 Mr. Jenks. Yes; it stopped buying it a few days ago. It must 
 buy again before long. There is also the added demand for silver 
 for the arts. 
 
 Mr. RucKEE. If we kept on buying it, the price would be as it used 
 to be? 
 
 Mr. Jenks. It depends upon how much is bought. 
 
 The Chairman. Gentlemen, this argument is not quite germane; I 
 think that we had better get back to the subject of the agricultural 
 bank. 
 
 DISrUIMINATION IX BATES OF INTEREST l)N LOANS. 
 
 In view of the fact that the Bank of Egypt fixed by law, or by 
 statute or ordinance, the same rate of interest, do you think that we 
 ought in any legislation that we may enact to provide for any dis- 
 crimination in the interest charges between the small and large bor- 
 rowers in the Philippines, or ought we to do the same as was done in 
 Egypt, and provide the same rate for all borrowers? 
 
 Mr. Jenks. I speak on that question with a good deal of hesitation, 
 but I feel that that is a matter that ought to be left to the discretion 
 of the Philippine Commission, for this reason : We may have trouble 
 in raising the capital. I see no reason why Congress should not put 
 a maximum limit of, say, 10 per cent, but as yet we do not know who 
 is willing to invest the money. I think that two things may be taken 
 into consideration by the people who propose to invest money in this 
 way. One is the government guaranty, which, I think, is absolutely 
 essential. Another is the opportunities there are for making addi- 
 tional profits. If they should be held rigidly to the same rate for all 
 parties they would, in all probability, lose here and there a good many 
 large loans. There are, of course, private banks in the Philippines. 
 And as conditions improve there there are going to be more and more 
 of these banks ready to advance money at lower rates, and I am in- 
 clined to think that the proposed agricultural bank would be likely 
 to lose some rather large loans that would still be profitable at a 
 much lower rate of interest, if they had to ask the same rate for all 
 loans, notwithstanding there is a much larger expense and a pro- 
 portionately greater risk in making the small loans. I was going to 
 say that I quite agree with what has been suggested before, that it is 
 a desirable thing not to have the smaller borrowers pay more than 
 the larger ones do ; but it seems to me that it is still more desirable 
 that the small borrowers be put in a position where they can borrow. 
 We must not make so severe conditions that we fail to get the bank. 
 
 The Chairman. Don't you think that it should be the purpose of 
 the bank to establish such a rate for all borrowers in order that on 
 its whole business it may make some profit? 
 
 Mr. Jenks. Beyond question. 
 
 The Chairman. Not by giving the power to discriminate between 
 small borrowers or between two borrowers of equal amounts. In 
 other words, there should not be any favoritism under Government 
 supervision or where the Government is giving the guaranty. 
 
 Mr. Jenks. I quite agree with you that it is a desirable thing to 
 follow the plan that has been followed in Egypt and see to it that 
 
HEAEINGS BEFORE COMMITTEE ON INSULAR AFFAIRS. 68 
 
 there is no discrimination made. On the other hand, I think it 
 extremely important that we get this bill passed and this bank es- 
 tablished, and when it comes to the negotiation for establishing the 
 bank the Philippine Commissioin should, if it thought necessary, 
 permit discrimination. I do not know what the Philippine Com- 
 mission ought to do before I know the conditions under which thej'^ 
 will be nlaced. It seems to me that power should be given to them to 
 settle that question. I have not now sufficient knowledge of the money 
 market to express an intellii:ent oninion as to what ought to be done. 
 
 The Chairman. Suppose that one man is charged 9 per cent and 
 another one raising the same articles on the same amount of land 
 is charged one-half that rate, is he not given a very great ad- 
 vantage, so that he could undersell his competitor in that immediate 
 market ? 
 
 Mr. Jenks. That suggests another point. I should be quite in- 
 clined to the opinion that borrowers under the same conditions 
 .should not have any discriminations made as to them at all, but 
 in our own country we know very well that if a man wants to borrow 
 $50,000 or $100,000 on excellent security he can get it at a consid- 
 erably less rate of interest than could a poor man on a small amount 
 at a greater risk. 
 
 The Chairman. Some of the greatest abuses in the interstate 
 commerce act have come in under the interpretation of the law's 
 words " under similar conditions," and some of the greatest abuses 
 are now going on under the interpretation of that clause. If you 
 permit them to say that rival or joining owners of estates shall be 
 permitted one to borrow at 4 per cent or 6 per cent and the other at 
 10 per cent you give an opportunity for favoritism and discrimi- 
 nation. 
 
 Mr. Jenks. I see no reason why the restriction can not be made 
 as you yourself implied as to payment of the same rate if con- 
 ditions are the same. It should be kept in mind also that it is 
 proposed to have two government directors in the bank to watch 
 that all the time. 
 
 The Chairman. We had Government directors on the Union Pa- 
 cific Railroad, and I had a man tell me that he heard one of those 
 directors say that one of the attorneys of the road wrote his (the 
 director's) report. The Philippines are remote from here. Some 
 of the islands are rather difficult of access from Manila at present. 
 My own idea is that we should here, in so far as possible, throw 
 restrictions around the loaning of money with a government guar- 
 anty back of it, so as to prevent any sort of favoritism or dis- 
 crimination by a government official or a bank official, or by anybody 
 else. 
 
 Mr. Jenks. I agree fully with the purpose that you have in mind. 
 The question is whether it would not be wiser, after all, to leave 
 the matter of discrimination with the Philippine Commission, which 
 will have to make the final negotiations. The members of the 
 Philippine Commission, if I may be permitted to say this, have more 
 interest in making a success of a thing of this kind than has any- 
 body else. 
 
 Mr. Olmsted. As we do not propose to guarantee the capital, of 
 course those who furnish the capital are interested in preservinw the 
 bank and making a profit on their investment. Will not the result 
 
64 HEAEINGS BEFOEE COMMITTEE ON INSULAR AFFAIRS. 
 
 therefore, be that they will be just as conservative in making loans 
 as any other concerns would be? If we compel them to charge a 
 fixed rate of interest, will not the results be that we will put the 
 screws onto these people so that they will get nothing out of the 
 bank at all? 
 
 Mr. Jenks. With the rate of interest that is suggested here, of 
 10 per cent, it will beyond any question be profitable to the bank to 
 make loans in very small sums to the poorer cultivators whenever 
 their securities are satisfactory. 
 
 Mr. Olmsted. Would you propose to secure these loans on the draft 
 animals, or on the crops, in the nature of chattel mortgages ? 
 
 Mr. Jenks. That might be taken on the smaller loans. On sums of 
 $100 and less security of that nature might be accepted. 
 
 Mr. Olmsted. But if the rinderpest should take away the cattle 
 the security would then go out from under the loan. You would not 
 expect the bank to lend money on that class of security at as low a 
 rate of interest as on a first mortgage on a farm ? 
 
 Mr. Jenks. That is the point that I had in mind a moment ago. 
 
 Mr. Gaekett. Is there a provision in the Philippine agricultural 
 bank bill that the bank shall oversee what is done with this money ? 
 
 manner oe collecting loans. 
 
 Mr. Jenks. Yes. T think I might add a word there, because I 
 gather from what was said yesterday that there was some doubt as 
 to the part that the government officials would play in the matter. 
 The loans are not made by government officials, but by agents of the 
 bank. The part that the government official plays is simply this: 
 That when he is collecting taxes he is also given claims of the bank, 
 and he makes the collections at the same time, so far as it does not 
 interfere with his official duties. On the other hand, if a borrower 
 defaults it is the business of the tax collector merely to report the 
 case to the bank. If the collection has to be made through the courts, 
 the bank, not the government official, presses the claim. That ques- 
 tion brings up another point in this connection that is verj^ im- 
 portant. While it is quite worth while for the people of the Philip- 
 pine Islands to feel that the Philippine government is doing what 
 it can to secure these privileges for them, it would be unfortunate, I 
 think, if the government itself should have to enforce by legal process 
 the collection of these loans. 
 
 Mr. Webber. The Egyptian banking system having been cited here 
 as a great success, and the reason why this bill should prevail, there 
 being no discrimination over there as to interest, the rate being the 
 same to all, why should not the same thing prevail here ? 
 
 Mr. Jenks. I have said that it seems to me that it is a desirable 
 thing to encourage that. But the Philippine government has not yet 
 succeeded in getting the money needed. The only proposition that I 
 have to make is that the Philipi^ine Commission be left a free hand 
 in making its negotiations. 
 
 interest guaranteed bt wiioai ? 
 
 Mr. RucKEE. This guaranty is not a guaranty of the United 
 States Government, but of the Philippine government ? 
 Mr. Jenks. It is a guaranty of the Philipine government. 
 
HEARINGS BEFORE COMMITTEE ON INSULAR AFFAIRS. 65 
 
 Mr. RucKER. But the United States Government is really back of 
 it, is it not ? 
 
 Mr. Jenks. As that raises a constitutional and legal discussion, I 
 prefer not to enter into that. As I understand it, the situation is this : 
 The Philippine people, through the only representative that they 
 have in the United States, the Philippine government itself and the 
 War Department, are asking that they be allowed, through their own 
 system, to pay out of their own pockets, if necessary, the guaranty, in 
 order that they may have the privilege of making these loans. And 
 so long as the Philippine government's credit stands there will be no 
 possibility to get back to the United States Government. 
 
 Mr. RucKEE. The credit of that government is likelj' to stand as 
 long as Ave hold the islands and give them the credit of the United 
 States ? 
 
 Mr. Jenks. Yes. 
 
 Mr. RucKER. Therefore this guaranty of 4 per cent offers such 
 inducements that there will not be any question about men going in 
 there on this sort of a jjroposition ? 
 
 Mr. Jenks. Without a guaranty there have not yet been any 
 institutions of that kind coming into the Philippines. 
 
 Mr. RucKER. In only one place in the whole world there is such a 
 bank, isn't there ? 
 
 Mr. Jenks. That is hardly accurate. I was speaking of the Eng- 
 lish colonies in the East. 
 
 Mr. RucKER. Is there an agricultural bank in existence anywhere 
 else, with a government guaranty, than in Egypt ? 
 
 Mr. Jenks. No; not with a government guaranty. I was speak- 
 ing of agricultural loan banks, many of which are cooperative. 
 
 Mr. RucKEE. I understand. I mean that the one in Egypt is the 
 only one with a government guaranty, and we are going to try to 
 establish another one with a guaranty. It seems to me that the con- 
 ditions in the Philippines, after the United States has been running 
 the islands for a number of years to give them prosperity, education, 
 and intelligence, are not in much better shape than they were before 
 we took possession of them. 
 
 Mr. Jenks. The credit of the Philippine government, as we all 
 know, is excellent to-day. So is the credit of Egypt, and it was made 
 thus by the good administration in Egypt. It is now in excellent con- 
 dition, but, so far as we can judge, in neither one of these countries 
 has capital been ready to make such an investment without a guar- 
 anty. 
 
 Mr. RucKER. There is no case where a country within its own bor- 
 ders — ^not within its provinces or colonies, but within its own coun- 
 try — ^has organized such a bank. 
 
 Mr. Jenks. It has not been necessary in advanced countries. 
 
 Mr. RucKER. So that it is proper and right that if we pursue the 
 English colonial system we ought to pursue the English colonial 
 banking system ? 
 
 Mr. Jenks. We ought to adopt some system that will secure the 
 establishment of an agricultural bank -in the Philippine Islands. It 
 seems to me that a guaranty is an essential feature of a successful 
 system there. 
 
 lA— 07 5 
 
66 HEARINGS BEFORE COMMITTEE ON INSULAR AFFAIRS. 
 
 I^OAN INSTITUTIONS IN EGYPT. 
 
 Mr. Olmsted. What other financial institutions, if any, are now 
 or were at the time of the establishment of the agricultural bank 
 loaning money in Egypt? 
 
 Mr. Jenks. I can not answer that to a certainty. 
 
 Mr. Kemmeeee. There are four or five others now. There were 
 two or three a few years ago, in the nineties; from 1901 to 1906 the 
 number increased from 2 to 6. 
 
 Mr. Jenks. My memory of the matter was that in 1898 and 1899 
 there were only two small ones, whereas now there are six. In Pro- 
 fessor Kemmerer's report I find that between 1901 and 1906 the 
 number increased to 6 ; the share and debenture capital and surpluses 
 of mortgage banks in Egypt increased from £7,263,000 in 1901 to 
 £29,749,000 in 1905; their liabilities increased during the same pe- 
 riod from £6,530,000 to £23,403,000 and their assets from £7,744,000 
 to £32,655,000. 
 
 LOAN INSTITUTIONS IN THE PHILIPPINES. 
 
 Mr. Olmsted. Can you state what institutions now are loaning 
 money in the Philippines? 
 
 The Chaieman. Governor Ide, can you tell that? 
 
 Governor Ide. In the Philippine Islands the only banking insti- 
 tutions that are there are the Monte Piedad and the Spanish- 
 Filipino Bank, whose paid-up capital is a million and a half pesos, 
 which does loan on real estate to a considerable degree. 
 
 Secretary Taet. Governor Ide, that is not an agricultural-loan 
 bank. Are not most of the loans on business property ? 
 
 Governor Ide. They were able to make loans to agriculturists to 
 promote the interests of the sugar planters particularly. 
 
 Mr. Olmsted. What rate of interest do they usually charge on 
 such loans? 
 
 Governor Ide. They state that they charge about 8 per cent. The 
 Hongkong-Shanghai Bank is an English corporation. It has 
 branches all over the Orient, and also in London and Hongkong, of 
 course. The officers of that bank in the Philippine Islands are not 
 allowed to make loans on real estate. There is the Chartered Bank 
 of England, Australia, and China, which is also a large institution, 
 with brandies practically all over the Orient. It does not make 
 loans on real estate, although it sometimes takes real-estate mortgages 
 to secure loans that they have. The only American bank that 
 amounts to anything in the islands is the International Banking Cor- 
 poration, of New York, which is an American institution. Tho 
 charter of that bank is very broad, and it authorizes them to do 
 a great many things. The directors may exercise quite substantially 
 their discretion in making loans. 
 
 Secretary Taft. They can do anything, in any place, except the 
 State in which they have been created. [Laughter.] 
 
 Mr. Olmsted. Do they make loans on agricultural real estate? 
 
 Governor Ide. Very little. The business of exchange, of course, 
 was a very large one for all these banks except the Spanish-Filipino 
 Bank, that is, foreign exchange; and before we had a gold standard 
 the business of local exchange, of trading one kind of money for 
 
HEARINGS EErORB COMMITTEE ON INSULAR AFFAIRS. 67 
 
 another, was a very profitable branch of business. There is no other 
 banking institution, practically, excepting the Monte Piedad, where 
 loans are made upon personal security at low rates to poor people, 
 so that there are no facilities for obtaining money for the agricul- 
 turists further than by dealing with large exporting houses, who 
 may make advances to them upon their crops, upon terms, of course, 
 that are not disadvantageous to the New York house. 
 
 Mr. Olmsted. Would not this New York institution lend money 
 on real estate if they found it desirable to do so ? 
 
 Governor Ide. The New York institution has branches in Yoko- 
 hama, and throughout the Orient, and it would be impossible for it 
 to tie up all of its capital in loans on real estate in the Philippines. 
 They are very cautions in making loans upon real estate. 
 
 Secretary Taft. Some years ago they permanently planted some 
 of their capital, did they not ? 
 
 Governor Ide. It was stored in warehouses. Several other banks 
 made advances upon hemp stored in warehouses, but upon investiga- 
 tion it was found that there was no hemp there. 
 
 We have a new chattel-mortgage law in the Philippine Islands 
 that was passed last summer. I do not know of any other source 
 to which agriculturists may look for money except those that I have 
 named, aside from the small local usurers. Chinamen, and others 
 of that kind, and their dealings would be mainly with the small land 
 owners. 
 
 Secretary Taet. Is it not a fact that money thus loaned on agri- 
 cultural lands, both by the International Banking Company and by 
 the Spanish-Filipino Bank, hardly exceeds, as Professor Kemmerer 
 states, ¥=150,000, or $75,000 gold, and that probably that is loaned on 
 some large estates to men who are known to the banks as financial 
 men in the community? 
 
 Governor Ide. I should say that that is substantially a correct 
 statement. 
 
 THE TOBACALEEIA. 
 
 Secretary Taft. And that practically, in the Philippine Islands, 
 the only bank in the Philippine Islands that lends much money on 
 agricultural property is the tobacco company, the Tobacaleria, as it 
 is called, which does a large business as a factory, and that there is 
 really no company which really does the business that it is proposed 
 to do, or, possibly, that it is proposed here should be done by the agri- 
 cultural bank? 
 
 Governor Ide. I intended to include the Tobacaleria Company in 
 my remarks as being one of the principal exporters. 
 
 SECURITY ON AGRICULTURAL LANDS IN THE PHILIPPINES. 
 
 Secretary Taft. And these companies sell the crops and charge 
 only a nominal rate of interest on the loans. They require a deposit 
 of the crops in their warehouse and pay larger commissions by charg- 
 ing warehouse cost, so that when they get through there is very little 
 left the agriculturists. 
 
 Governor Ide. I intended to cover that much more in my state- 
 ment. 
 
68 HBAEINGS BEFORE COMMITTEE ON INSULAH AEEAIES. 
 
 Mr. Oljisted. Are these loans on which the agriculturists pay 
 such exorbitant rates extraordinarily hazardous risks ? 
 
 Governor Ide. I would say that as conditions have been the field 
 has been open to capitalists, but they have not come in ; and the gen- 
 eral consensus of capital had been that under the conditions that had 
 existed as they had heretofore it was unsafe for capital to invest in 
 large amounts on account of this uncertainty of conditions. 
 
 TITLES TO PHILIPPINE LANDS. 
 
 As I undertook to explain in my statement, there have been marked 
 changes, one of them that we can obtain safe titles and the other 
 that we have a system that acts effectively under somewhat the 
 same conditions in Egj^pt, and that has been working up from small 
 beginnings to large ones and has made a demonstration that we have 
 never had before; and I am free to say that, as the Secretary of 
 War knows, I thought that the government could not have gone into 
 this business before these changes, particularly the change that has 
 come about in Egypt, applying those conditions in the Philippines. 
 I have now changed my opinion, and I think that a well-guarded law 
 of this kind would be one of the greatest benefit to the people of the 
 Philippine Islands. 
 
 Mr. Olmsted. In your judgment, you think that it would be just 
 as conservative as the other banks and would not take hazardous 
 risks ? 
 
 Governor Ide. It depends upon what you call " hazardous risks." 
 Capital will come wherever it Sees a sure and safe return on its 
 investment, and the guaranty would insure a return of at least 3 or 
 4 per cent. Otherwise capital will not come in. "WTien it comes to 
 the question of the actual administration of the bank everything de- 
 pends upon the conservative care in the way in which the bank is 
 conducted. I am of the opinion that no tremendous sums should be 
 loaned, but that the example of Egypt should be followed, and only 
 modest sums should be loaned. Experiments should be had, and 
 there should be an ascertainment of whether the Filipinos should be 
 treated in the same way as the peasants of Egypt were with the same 
 results. I think that the same system can be followed, and I have 
 been in every part of the islands repeatedly, and without any attempt 
 to exploit myself I will say that probably there is no one in the States 
 now who knows more about the Philippines than I do, because I have 
 been there longer than has anyone else, and I am ordinarily fairly 
 conservative. 
 
 Secretary Taft. You have banked in Vermont, have you not ? 
 
 Governor Ide. Well, I have borrowed some there. 
 
 Secretary Taft. Haven't you been a director in the National Bank 
 of Vermont ? 
 
 Governor Ide. Yes ; ever since I have been in the Philippines and 
 some before that time, but I have never directed very much. 
 
 The Chairman. Your idea as to the workings of the proposed 
 bank in the Philippines is that the conditions are the same as they 
 were in Egypt when the Earl of Cromer broached the subject there. 
 There was then no precedent for anything of the kind, and the 
 character of the Egyptian peasants was such that he doubted some- 
 
HEARINGS BEPOEE COMMITTEE ON INSULAR AFFAIRS. 69 
 
 what whether the plan would be a success. You are convinced that 
 it can be made a success in the Philippines, the conditions being prac- 
 tically the same as they were in Egypt ? 
 
 Governor Ide. I would agree entirely with what Profe'ssor Jenks 
 says, that it is undesirable to tie this bill up with a large number of 
 minute restrictions. The Philippine Commission is on the spot and 
 knows the conditions, and also Imows the needs of the people. The 
 legislation here is not to establish the bank, it is to authorize another 
 legislative body to establish it, and the Commission ought to be 
 allowed to establish the bank within certain limitations. 
 
 The Chairman. We will suspend at this point, as I see that the hour 
 of 12 o'clock has arrived. 'As I said yesterday, it is exceedingly im- 
 portant, if any legislation is to be enacted for an agricultural bank 
 in the Philippines, that we lose no time in getting at it. I therefore 
 wish to conclude the hearings at the earliest possible moment, and also 
 to secure such information as is obtainable. We have the witnesses 
 here to furnish the desired information, and so I will again request 
 the committee to meet promptly at 10 o'clock to-morrow morning. 
 
 COBIMITTEE ON InSULAE AFrAIES, 
 
 House of Representatives, 
 Thursday, January 10, 1906. 
 
 STATEMENT OF PBOFESSOR JENKS— Continued. 
 
 The Chairman. How many visits did you make to the Philippines? 
 
 Mr. Jenks. Two. 
 
 The Chairman. In what capacity? 
 
 Mr. Jenks. The first time I went as a special commissioner of the 
 War Department to make investigations in the English and Dutch 
 colonies in the Far East for the purpose of reporting to the Philip- 
 pine government and the Secretary of War on matters connected with 
 the Philippines. 
 
 COMMISSION ON INTERNATIONAL EXCHANGE. 
 
 The second time I went as a member of the Commission on Inter- 
 national Exchange. This Commission, consisting of Mr. H. H. 
 Hanna, Mr. Charles A. Conant, and myself, was created by act of Con- 
 gress on recommendation of the President in response to an invita- 
 tion of the Governments of Mexico and China, who asked the assist- 
 ance of the United States in reforming their monetary systems. 
 After the work of the Commission in Europe was done, at the sug- 
 gestion of the other members of the Commission, I was instructed 
 by our Government to go to China, as a menber of the Commission on 
 International Exchange, in order to report to the Chinese Government 
 with reference to the work of that Commission in Europe and to give 
 any assistance that I might be able to give with reference to a change 
 in the Chinese monetary system. At that time the new monetary 
 system of the Philippines was being established and there was appar- 
 ently some trouble in getting the new money into circulation. In 
 consequence the Secretary of War, Secretary Eoot, with the approval 
 
70 HEAEINGS BEFORE COMMITTEE ON INSULAB AFFAIRS. 
 
 of Secretary Hay, asked me to go to the Philippine Islands, and on 
 that visit I consulted with the Philippine government with reference 
 to the monetary system. 
 
 General Edavards. Upon the invitation of the Commission also? 
 
 Mr. Jenks. Yes, sir ; of course. 
 
 Mr. Chairman. You and Mr. Conant were really sent as experts 
 to consult with the Philippine Commission? 
 
 Mr. Jenks. Yes. Mr. Conant had visited the islands earlier to 
 report to the Government with reference to monetary matters from 
 the standpoint of the monetary expert and as one who had studied 
 conditions in the islands. I reported upon the monetary conditions 
 in the other countries mentioned yesterday — India, Java, etc. — and 
 indicated the bearing which their experience seemed to have on the 
 question in the Philippines. We afterwards worked together in 
 recommending the monetary system for the islands. 
 
 The Chairsian. Subsequently you were a member of the Commis- 
 sion on International Exchange and made a report ? 
 
 Mr. Jenks. Yes. The Mexican Government was trying to estab- 
 lish a monetary system on a gold basis and the Chinese Government 
 wished to do the same. At the request of those two Governments 
 the United States appointed the Commission on International Ex- 
 change, named a few minutes ago, to do what it could to assist Mexico 
 and China in organizing a monetary system. Incidentally we were 
 to go to Europe for the purpose of explaining the situation to the 
 leading governments of Europe and to do what might be necessary 
 to keep the European governments friendly toward any change that 
 China might wish to make in regard to the gold standard. At that 
 time the Chinese were under obligations to the powers of Europe 
 on account of the indemnity for the troubles of 1900, and it was essen- 
 tial that the powers should not object, if China wished to make a 
 change. 
 
 I was appointed afterwards, by order of the President, as the repre- 
 sentative of the Commission to go to China and make a report to 
 the Chinese Government. On that trip I went to the Philippines 
 at the request of the Secretary of War, Secretary Root, as I have just 
 said. 
 
 The Chairman. That was on the first trip ? 
 
 Mr. Jenks. No; the first time I visited the English and Dutch 
 colonies mentioned yesterday, before going to the islands; the second 
 time I was sent to China and Japan, and stopped for about a month 
 in the Philippines to do the special work mentioned in connection 
 with the new monetary system of the islands. 
 
 The Chairjian. Now as to the proposed agricultural bank in the 
 Philippines ; will you resume your statement of yesterday ? 
 
 agricultural bank and small loans. 
 
 Mr. Jenks. Three or four matters were brought up yesterday in 
 the form of questions that I should like to answer somewhat more 
 fully. The question was asked whether this agricultural bank, if 
 established, would be willing to make loans to small farmers, or 
 whether it would feel that the security was not good enough. I 
 think there are several reasons for believing that the bank would be 
 willing to make such loans. In the first place it would be established 
 
HEARINGS BBPOKE COMMITTEE ON INSULAE AFFAIRS. 7l 
 
 for that purpose. That would be in the line of its business. The 
 Commission would insist upon that class of business being done by 
 the bank. The Philippine Commission will have a representative 
 on the board of directors and the business can be watched all the way 
 through. 
 
 In the second place only one-fourth of the money loaned can be 
 put out in sums above $2,500, so that three- fourths of the loans must 
 be in less sums. It will be the purpose on the part of the government 
 to make the loans as small as possible. 
 
 In the third place this bank has obtained its concession along the 
 lines suggested and will have the assistance of the government tax 
 collectors (the provincial and municipal treasurers) in collecting 
 loans and interest, which will give this bank facilities such as no 
 private bank or money lenders will have in making or collecting their 
 loans. 
 
 BRANCHES OF THE BANK. 
 
 In the fourth place, if this bank starts it will have branches 
 throughout the islands, and it will have agents everywhere in the 
 islands so that it will meet those needs continuallj^ The situation 
 is practically the same as in Egypt, where the bank establishes in 
 many places (72 places in 1905) its own representatives; it would 
 start in a small way and gradually extend. Its business agents 
 would go to the small men and call their attention to the facilities for 
 making loans. In this way the bank Avould extend its business 
 where it is safe to extend it. It seems to me that, for those reasons, 
 we have no really good ground for doubting that loans would be 
 made to the more thrifty people. The small farmer would appreciate 
 it and the influence of the bank itself would be good. Of course the 
 bank could be depended upon to take care of its own capital and not 
 to make loans to the unworthy and dishonest. 
 
 COLLECTION OF LOANS. 
 
 Mr. RucKER. You speak of the government tax collector collecting 
 amounts due the bank. Is it contemplated that that is to be a part of 
 his official duties to make these collections ? 
 
 Mr. Jenks. The thought is that the government will have a gen- 
 eral supervision of the bank. Besides that its tax collectors at the 
 same time that they are doing their regulai' work could make these 
 collections. 
 
 Mr. RucKER. The tax collector would be working for the bank as a 
 private person ? 
 
 Mr. Jenks. Yes. That would doubtless be specifically provided 
 for in the law. 
 
 Mr. RucKER. You spoke of the fact that the bank's agents Avould be 
 going around interviewing those thrifty classes of small farmers to 
 extend loans to them. How many bank agents would be necessary ? 
 
 Mr. Jenks. It would depend on the amount of business done. I 
 suppose the bank would deem it wise to stait in a small way in two 
 or three provinces to begin with and gradually extend its business. 
 
 Mr. RucKER. Those bank agents would be salaried men, would 
 they not? 
 
 Mr. Jexks. Yes; the leading ones. The others would be paid by 
 commissioiTs In Egypt the bank has to provide them. They have 
 
72 HEARINGS BBFOEE COMMITTEE ON INSULAR AFFAIRS. 
 
 Englishmen who speak Egyptian that go about and supervise in 
 different parts of the country the native agents of the better type. So 
 1 should think it could be done in the Philippines. That shows the 
 difficulties as well as the desirability of having good intelligence 
 and good capital back of the bank. It will at times be found neces- 
 sary for the bank to use Filipinos, and also to have each one of these 
 Filipinos under the direction of an American or an English-speaking 
 person familiar with the people and the business who can speak the 
 language and get in touch with the people. 
 
 AGGREGATE INDEBTEDXESS IN EGYPT. 
 
 Mr. RucKEE. In Egypt, where the bank has been in operation for 
 several years, I believe that the reports show that the aggregate 
 indebtedness is greater now than when the bank started. 
 
 Mr. Jenks. I think that is true — that a larger number are in debt 
 to the bank — but they are more prosperous, with larger incomes than 
 before. 
 
 APPOINTMENT OP BANK EMPLOYEES. 
 
 Mr. RucKER. And probably the chief industry would be to get 
 people to apply for jobs under that banking institution instead of 
 raising corn. 
 
 Mr. Jenks. There is not the slightest ground for thinking that 
 there is danger of anything of that kind. A man is not necessarily 
 appointed to a position by the Ixink because he asks for a place. 
 After the bank has been established and a place of business arranged 
 for, the first thing they do, of course, will be to get some trustworthy 
 men and get them to do the work. 
 
 Mr. RucKEE. You need not employ everybody that applies, but 
 you would employ a great many good men. 
 
 Mr. Jenks. If you take the country as a whole that would be the 
 case. The local men would probably only get a commission on work 
 actually done. 
 
 Mr. Olmsted. I think that you would find it to be a big expense 
 to have a system of banking where you emploj^ed agents to solicit 
 men to borrow the money and afterwards pay agents to collect the 
 principal and interest. 
 
 Mr. Jenks. Of course I assume it will not take too many high- 
 priced men. There would not have to be so very many of those. The 
 small men are paid commissions. That is why 9 per cent is charged 
 in Egypt (earlier 10 per cent, with the commission) and 10 per cent 
 is proposed in the Philippines. That is thought to be sufficient. 
 
 Mr. Ritcker. Would it not rather give the tax collector and the 
 government itself more unpopularity if it were their duty or businass 
 to do the collecting of principal and interest for loans of the bank? 
 
 Mr. Jenks. That was touched upon yesterday. It is expected that 
 the collector will save the bank some expense, but in case of default 
 in payment it is not to be the business of the tax collector to push 
 those collections. That is referred back to the bank. 
 
 EFFECT ON FILIPINOS OF ESTABLISHMENT OF THE BANK. 
 
 Mr. Gilbert. Would not the establishment of the bank upon the 
 principle substantially of the one so successful in Egypt, temporarily 
 to help that class of poor people in the Philippines, in the long run 
 
HEABINGS BEFORE COMMITTEE ON INSULAE APPAIES. 73 
 
 have a tendency to perpetuate some of the conditions that have been 
 in existence for centuries in China and India, and would it not de- 
 prive the people of that self-reliance we are trying tq bring about ? 
 
 Mr. Jenks. It would seem to us who have considered the matter 
 that it would have the opposite effect. It should be kept in mind that 
 now the people are quite in the habit of being dependent on the 
 usurer in making loans, and the tendency is to rely upon that source 
 to a considerable extent. If the bank should encourage these men to 
 take up loans made by usurers and to substitute for them loans made 
 by this bank, and if the bank should enjoin regular payments, say, 
 semiannually, and have its claims presented with regularitj^ for 
 payment and then follow this up with persistent pressure, I think 
 there is no doubt it would have the opposite effect, and that it would 
 breed in the borrowers habits of regularity in their business and in 
 that waj encourage thrift and better business habits. 
 
 SUPERVISION OF EXPENDITUEE OF LOANS. 
 
 Mr. Gilbert. You said yesterday that there would have to be, in 
 connection with the bank, some agency to exercise some sort of super- 
 vision upon the subject of what way loans should be invested. That 
 otherwise they would spend their money in a spectacular way or in 
 marriage feasts, and that they would not improve their condition. 
 Do you not think that the exercise by the bank of such scrutiny over 
 the loans would have a tendency to suppress that thrift that we are 
 anxious to develop ? 
 
 Mr. Jenks. The agency I had in mind was the bank agent who 
 makes the loan. The supervision would be of this nature: These 
 farmers and persons making application for loans would be required 
 to state the purposes for which they wished the money. No money 
 would be advanced to them except for the purposes given. The agent 
 Avould see to it that the money was properly expended. It does not 
 follow that because a man is compelled to keep his financial olbliga- 
 tions it tends to suppress his individuality. Here is a reliable, trusts 
 worthy institution which says, " We are prepared to advance money 
 to you on thie terms indicated if you agree to use it in the way we 
 suggest." They will see to it that he lives up to his contract. That 
 is all. 
 
 ECONOMY AND ENTERPRISE DEVELOPED BY BANK. 
 
 Mr. Gilbert. You think it would develop economy and enterprise ? 
 
 Mr. Jenks. Yes ; instead of begetting bad habits. That has been 
 found to be the effect of these minor loans. 
 
 Mr. EucKER. These agents, as v.-e designate them, you said a mo- 
 ment ago, would be paid a commission of a cent and a half on the 
 dollar. 
 
 Mr. Jenks. Yes ; one or, at the outside, one and one-half per cent. 
 
 Mr. RucKER. And they are to go about soliciting loans ? 
 
 Mr. Jenks. Yes; the smaller men would doubtless suggest the 
 bank as a good place to get loans. 
 
 Mr. Eucker. Then there would be other men who would see about 
 investments ? 
 
74 HEAEINGS BEFORE COMMITTEE ON INSULAR AFFAIRS. 
 
 RESTRICTION ON LOANS BY THE BANK. 
 
 Mr. Jenks. Presumably it would come to be so in the course of 
 time. The more responsible agents who investigated the credit of 
 the borrower Avould, I should suppose, generally have charge of that 
 part of the work. 
 
 Mr. RucKER. In a financial institution, doing business of making 
 loans recommended by an agent, whose pay depends on the amount of 
 loans made, would not the tendency be to loan more than was pru- 
 dent? 
 
 Mr. Parsons. Is the commission paid for making or collecting 
 loans ? 
 
 Mr. Jenks. For making loans the local agent is paid a commis- 
 sion of 1 per cent. The collector is also paid a commission for col- 
 lecting. That tendency would be dangerous if they were not to be 
 supervised. The business is similar in operation to the business of 
 life insurance, where the company pays a commission on the -pre- 
 mium to the agent who solicits the business, but the insurance com- 
 pany will not put into effect a new risk without the supervision of 
 other officers. Likewise the bank will have trustworthy officers to 
 supervise these loans. 
 
 POSSIBLE BAD EFFECTS OF ESTABLISHMENT OF BANK. 
 
 Mr. Garrett. As I understand it, from the report of Mr. Kem- 
 merer, this proposition as a governmental undertaking is twofold; 
 it would beget in the minds of the people the idea that it was pa- 
 ternalism, and secondly, it would create dissension when it was at- 
 tempted to collect private debts by government agents. It would 
 be violative of those two cardinal principles. If we delegate to 
 private parties the power to lend this money, but empower our own 
 agents to collect it through our tax collectors, it would touch the 
 people at a vital point and might hurt. In other words, have those 
 people intelligence enough to distinguish between the power of the 
 tax collector as a public official and as a private representative of the 
 bank, and will it not beget some opposition to the government if we 
 give this power to tax collectors? 
 
 COLLECTION OF LOANS. 
 
 Mr. Jenks. I think the question is a very pertinent one. It seems 
 to me, however, that there would not be any very serious danger 
 along that line, for this reason ; the tax collector presents the claim 
 and he makes it convenient for the borrower, as well as for the bank, 
 to pay this money regularly at these times; but in case there is a 
 default and the man does not pay, it is not the tax collector who 
 pushes the claim ; it is the bank itself which pushes it. On the other 
 hand, in the case of the taxes, where the collector is a representative of 
 the government, the tax collector pushes the claim. I think that there 
 would be little likelihood of the borrower making a mistake of the 
 kind suggested. 
 
 You speak of the objection to the collector doing the work sug- 
 gested because of the odium that it would bring upon the govern- 
 ment. I think perhaps the chief way in which hostilitj' would be 
 
HBABINGS BEFORE COMMITTEE OK" INSXTLAE AFFAIRS. 75 
 
 aroused would be this: Whenever a man makes an application for a 
 loan, it is of course necessary that his financial condition — the way in 
 which he has been in the habit of spending his money, his personal 
 character, and everything of that kind — be investigated with great 
 care. It is this prying into personal affairs that is annoying. All 
 that kind of work would be done by the bank. If it were a govern- 
 ment agent who was making the investigation it would be felt, 
 doubtless, as in the case of some of our income-tax propositions, that 
 the government was interfering in private affairs; whereas if we 
 ourselves go to a bank to borrow money it is the bank that is taking 
 the risk and we expect ourselves to be investigated as regards our 
 qualifications, personal character, etc. Likewise in the case before us, 
 an investigation on the part of a government official would be re- 
 sented, but the investigation would be made by a bank official, and 
 every one of course would feel that such an investigation was a proper 
 thing for a private individual or for a corporation taking the risk. 
 
 Mr. GrAEEETT. Do you think that with the intimate connection that 
 will be established between the bank and the government the people 
 will distinguish very carefully? 
 
 NO ODIITM ON GOVEENMENT FEOM COLLECTION OF LOANS. 
 
 Mr. Jenks. In my judgment, the intimacy between the two is not 
 great enough for the government to get any of the odium from it. 
 In the first place, we do not ourselves believe, and no one would, that 
 the government is going too far when it grants a franchise to a cor- 
 poration or to such corporation to be formed, and that is what the 
 government is doing here. It is simply granting a concession, to 
 begin with. 
 
 Mr. Gaeeett. We understand that perfectly ; but I am asking you 
 from the standpoint of the intelligence of the Filipinos what they 
 would think of it. 
 
 Mr. Jenks. So far as the native Filipino is concerned, in the 
 granting of a concession he understands nothing whatever about 
 it. He does not care whether it is a private corporation or a private 
 individual from whom he can borrow. He would not go so far as 
 to ask what right they had to loan the money, and the government, 
 therefore, would not appear in the transaction at all. The only 
 connection in which the government would appear would be when 
 the claim of interest or principal would be presented by the govern- 
 ment's collector acting for the bank. That would be the only con- 
 nection in which the government Vould figure in the transaction. 
 At the point of greatest difficulty, when the man's private affairs 
 are being investigated, the government would not figure, nor would 
 it appear in the forcible collection of the loan upon default. 
 
 USURY LAWS NOT NEEDED. 
 
 Mr. Webbee. As I understand it, there are no laws against the 
 exaction of the usurer ? 
 
 Mr. Jenks. There are no usury laws in the Philippines at the 
 present time, I believe. 
 
 Mr. Webber. And this bill is to take the masses out of the hands 
 of the extortioner and the usurer, and to put them into the hands of 
 those who will lend them money at a reasonable rate? 
 
76 HEARINGS BEFORE COMMITTEE ON INSULAR AFFAIRS. 
 
 Mr. Jexks. That would be one very important reason for the 
 establiishment of the bank, and, in my judgment, would be a much 
 more effective way than any possible usury law. 
 
 BONDING OF COLLECTORS. 
 
 Mr. RuGKEE. These tax collectors are elected or appointed, and, 
 I suppose, like all officers intrusted with the collection of public 
 funds, are under bonds. Would their bondsmen be responsible for 
 misappropriation of collections made by them? They would collect 
 large sums of money. 
 
 Mr. Jenks. Provision on that point would be especially made by 
 the Philippine government. 
 
 Mr. EtJCKEE. And without being chosen by the bank, as I under- 
 stand the case, the collector who would go around and get the money 
 would be the agent of the government in the particular district or 
 province. Is there a provision as to this in the bill? 
 
 Governor Tde. This is only a suggestion, but I wish to say that it 
 is very unsafe to undertake to argue from the special draft of the 
 bill. This bill has not been considered by the Philippine Commis- 
 sion or by any other authorities of the Philippine government except 
 Mr. Kemmerer. I do not know what the provision is here with re- 
 spect to the matter in question, but I know perfectly well that the 
 bonds of the collectors — and the municipal treasurers would be the 
 collectors — would require them to be responsible for the moneys 
 collected for the bank. I supposed that it was in this draft of the 
 bill. 
 
 Mr. RucKER. I do not know whether it is in the bill or not. 
 
 Governor Ide. I am very sure that it will be when the law is 
 passed. There will be a provision in it making the treasurers respon- 
 sible for the money collected under the bonds given for them by the 
 bonding companies, which are under contract for two or three yea,rs, 
 so that lihere will be no difficulty about that subject. 
 
 Mr. Rtjckee. As I understand you, Governor, the draft of the bill 
 before the committee has not met with the approval of the Philip- 
 pine Commission. 
 
 Governor Ide. The recommendation of the Philippine government 
 is contained in their report here, and that is that the Philippine gov- 
 ernment be authorized by act of Congress to pass a law with certain 
 limitations that are laid down there. My opinion, if I might be 
 allowed to express it strongly, is that it would be exceedingly unde- 
 sirable to pass a law here as to the details of which the Filipinos have 
 had no opportunity to express an opinion. In the Philippines some 
 member prepares a bill ; it is then perfected as far as possible by the 
 Commission, and then they advertise a public meeting for its dis- 
 cussion, and the Filipinos come in and express their views as to the 
 proposed measute, and the bill is then amended after it has been fully 
 discussed in this way. It is a very common thing there for the Com- 
 mission to get the opinion of prominent business men, native Fili- 
 pinos, and Spaniards who have been in the islands for a long time, 
 and then reshape the bill according to the ideas thus obtained. 
 
 As far as the bill under discussion is concerned, I would not stand 
 for all of the provisions in the present draft. It is undoubtedly a 
 good draft and a good working basis with which to start, but I think 
 
HEAKIUGS BEFOKB COMMITTEE Ctff INSXJLAB AFFAIRS. 77 
 
 that the proposed legislation should be within the general line of 
 authorizing the Philippine Commission to establish the bank, with 
 certain limitations as to its capital, as to the rates of interest to be 
 charged, as to rate of the guaranty, and leave the details to be worked 
 out by those on the spot. I might say in this connection that every 
 member of the Philippine Commission is in favor of this general 
 class of legislation. They are on the spot. The Secretary of War 
 is strongly in favor of it, as is also the Chief of the Bureau of Insular 
 Affairs. All who are familiar with the affairs in the islands are 
 thoroughly and strenuously in favor of legislation of this general 
 character because of the vast good that really could come from it. 
 
 DE3IAND OF FILIPINOS FOR AGRICULTURAL BANK. 
 
 Mr. Parsons. How do the Filipinos themselves regard it ? 
 
 Governor Ide. It has been their crying need from the time that I 
 first went to the Philippine Islands until to-day. I have never been 
 in a province in the islands when the municipal and provincial offi- 
 cials have been gathered together where the first thing that they 
 have presented to my attention was not the need for an agricultural 
 bank. The difficulty is not so much with the usurious charges in 
 rates on loans, it is that the money is not there. The country is 
 poor. We want to devise some system for getting money into the 
 islands from the outside, and this apparently is the most feasible 
 proposition for that purpose that the world's experience has demon- 
 strated. 
 
 We had a convention in last July of the agriculturists of the 
 islands at Manila, and a unanimous resolution was adopted by those 
 representatives there with a provision therein that we should use our 
 utmost strenuous efforts to get this legislation. 
 
 Colonel Edwards. This and the tariff. 
 
 Governor Ide. Yes; the two things. But this is really the thing 
 that comes nearer to the comprehension of the people — the chance to 
 get some seed and modem agricultural implements and buy more 
 land and have homes that they can call their own. 
 
 THE MONTE PIEDAD. 
 
 Yesterda!y I referred to the Monte Piedad. Xow, that is a govern- 
 ment institution, in a sense. The Spanish Government chartered it 
 and aided it, giving it a considerable sum of money at one time. I 
 am not sure whether it was money that belonged to the government ; 
 that is very doubtful; but they gave it money, and the church or- 
 ganization furnished it a great amount of money, also. It is under 
 strict supervision. I have not them here, but I have reports in re- 
 gard to the operations of this institution. The Monte Piedad lends 
 money on personal property, and the reports show that over 85 per 
 cent of the property pledged is redeemed within the time limit. 
 About 96 per cent has been redeemed ultimately, but the sales of the 
 unredeemed property on the average have furnished a considerable 
 sum above the amount of the loans to be paid back to the borrowers. 
 It is evident from this that when the Filipino finds that his own 
 property is bound by the payment of the debt he is anxious to save 
 his property and to fulfill his obligation. That institution is quite 
 
78 HEARINGS BEFORE COMMITTEE ON INSULAR AFFAIRS. 
 
 a charitable one, I think we might term it, because the rates on the 
 loans are very low. The purpose is to allow the poor people on 
 pledges of clothing, jewelry, or household furniture to obtain a little 
 money for their temporary needs at a low rate of interest. The rate 
 of interest is also lower than is proposed here. 
 
 This bank is proposed to accomplish some of the same benefits for 
 the agriculturists that the Monte Piedad accomplishes for another 
 class of poor people. 
 
 COLLECTION OF LOANS. 
 
 Mr. EucKEE. The Philippine government, then, would see to it 
 that by law it would have an opportunity to collect the money due 
 this bank. 
 
 Governor Ide. To collect it so far as it could. Its agents would 
 collect it without force. The collector would be the receiver for the 
 money. 
 
 Mr. EuoKEE. In that way you would by law create from year to 
 year and from term to term agents of the bank, but nobody would 
 know in advance who would be the agents of the bank until their 
 election or appointment. 
 
 Governor Ide. These are agents of the bank in the sense that 
 they are the people who receive the money and hand it over to the 
 bank, and the auditing system in the islands is such that auditing 
 is very frequent by means of traveling auditors. The collectors 
 would be responsible for this money. 
 
 Mr. Garrett. You have nothing in the Philippine Islands analo- 
 gous to our free-seed distribution, I suppose? [Laughter.] 
 
 Governor Ide. No; not exactly analogous. We have agricultural 
 experiment stations. 
 
 Mr. Garrett. As I understood you to say a moment ago, many of 
 the small agriculturists need small loans for the purpose of buying 
 seed, etc. 
 
 SCARCITY OF MONET IN THE PHILIPPINES. 
 
 Governor Ide. The need of money by the small agriculturists is 
 almost indescribable. The country is poor and the people are poor, 
 and I do not know of any method by which they can become prosper- 
 ous until thej' have the means to cultivate their lands and to acquire 
 much more land. There are millions of acres that are unscratched 
 and untouched, perfectly available. They can not buy any additional 
 land because they have not the necessary money. They can not buy 
 improved machinery because they have not got the money. 
 
 Mr. Olmsted. Could not the government sell them those lands on 
 favorable terms? 
 
 Governor Ide. The government would sell the lands on favorable 
 terms, but the people have no money at all for purchasing the land 
 even on easy terms. 
 
 The Chairman. They would have to borrow money of the usurers 
 to get it. 
 
 Governor Ide. The land must be paid for just the same even though 
 it be bought from the government. 
 
 Mr. RucKER. This has been the perplexing thought with me. The 
 people of the Philippines are poor, thriftless, and prodigal in some 
 respects, and they have to pay enormous rates of interest on their 
 
HEAEINGS BEPOKE COMMITTEE ON" INSULAR AFFAIRS. 79 
 
 loans that we have heard described here, 20, 30, 40, 50 per cent, and 
 sometimes as high as 100 per cent. How do they survive from }'ear 
 to year? Plow do they get the money to pay back their debts? 
 
 Governor Ide. I suppose that if you could get the average amount 
 of all their debts it would be a pitifully small sum, but, at the same 
 time, to a man who owes $10 and has but $1, the hardship is just as 
 great, and he is just as much subject to the oppression of the usurer 
 as though the amount of his debt was much greater. The difficulty 
 is that there is not enough money in tlae islands. 
 
 Mr. RucKEE. The situation, then, is this: You have those people 
 there owing small sums of $10, and they think that they can escape 
 the losing of their farms if they can get the money to pay off these 
 $10 debts? 
 
 Governor Ide. Verj' often he does not. But in other cases he 
 would pay some more interest and be under the harrow of the usurer 
 during all of his lifetime. 
 
 Mr. RucKEE. It is onlj^ a matter of time when the man would go to 
 the wall? 
 
 Governor Ide. They do go to the wall, very many of them. They 
 are exceedingly poor. 
 
 EFFECT OF I-OANS ON AGEICULTUEE. 
 
 Mr. Olmsted. Would the advancement of these moneys tend to 
 increase the volume of agricultural products in the islands? 
 
 Governor Ide. Oh, yes; I think very largely. 
 
 Mr. Olmsted. But is there a market? Where would be the mar- 
 ket for their increased agricultural products ? 
 
 MAEKETS FOE PHILIPPINE PEODUCTS. 
 
 Governor Ide. The market for hemp in England and the United 
 States is immense. Copra is sold in Hamburg, Marseille, London, 
 and the United States. There is, of course, a world market for 
 sugar, except as to the United States, and the markets for tobacco are 
 all open to them on some terms, except that of the United States, 
 so that the markets are large enough, and nearlj? all of the products 
 that the Filipino raises, except those necessary for his immediate con- 
 sumption, are such that there is a great market for them throughout 
 the world. They exported last year, trusting to my memory, about 
 $22,000,000 worth of hemp. The local market for rice is very great, 
 much beyond present production. 
 
 Mr. Page. Did I understand you to say that the markets of the 
 world are open without tariff duties to Philippine products, except 
 the United States on sugar and tobacco? 
 
 Governor Ide. Ko ; I would not say it as broadly as that, but the 
 markets of the United States are prohibitory ; but I do not know of 
 any other countries where they are. 
 
 Mr. Page. Other countries are not ? 
 
 Governor Ide. I do not know of any others. 
 
 DEJIAND FOE AGEICULTUEAL BANK. 
 
 In regard to this agricultural-bank proposition, perhaps I might 
 be permitted to state that during the month of October last the gov- 
 ernor-general and some of the other members of the Commission 
 
80 HEAEINGS BBFOEB COMMITTEE ON INSULAK APFAIES. 
 
 made a trip through the southern provinces, and the places for the 
 meetings were arranged beforehand, and the principales, the presi- 
 dentes, and the members of the municipal councils were mainly gath- 
 ered there, so that the meetings for the welcoming of the governor- 
 general and the members of the Commission were representative 
 gatherings. I have copies of the Philippine papers giving accounts 
 of those meetings, containing telegrams from Governor-General 
 Smith to Manila, and they are, of course, authentic, and they say that 
 there was not a single place at which the party held meetings but 
 that the two things presented were the tariff proposition and the 
 agricultural bank. \ The agricultural banli is a proposition that 
 reaches the comprehension of the ordinary man more than the tariff 
 proposition. 
 
 The Chaiemajst. In that connection I wish to say that when the 
 Taft party was in the Philippines that was the one subject, next to 
 the tariff, that was constantly broached — the subject of the agricul- 
 tural bank — wherever we went. 
 
 METHODS OF TJSTJEEES IN THE PHILIPPINES. 
 
 There was a prominent business man in Manila who said that the 
 people in the provinces are taught business in this way. The usurers 
 keep the rate of interest up in their discretion, and then they make 
 such terms of adjustment and appraisement in the payment of the 
 loans — reduction or increase, as suited them — that, in effect, they sim- 
 ply keep the landowner at work for them on the terms of the usurers. 
 The usurer could not get another man to take the man's place and so 
 he did not foreclose, but he just kept on making demands, and he 
 got all that the poor man had and kept him practically a slave at his 
 command. 
 
 Governor Ide. That is worked out also in another method. They 
 have a system of making loans that would be payable in a series of 
 years by annuities, making the rate of interest very moderate and 
 reasonable. For instance, if $100 were loaned to be paid back in five 
 equal annual installments at 6 per cent interest, the borrower would 
 be informed at the end of one year that he would have to pay back 
 $20 and $6 interest. At the end of the next year he pays another 
 $20 and $6 interest, and so he continues paying that sum for the next 
 five years, and in this way he is paying $6 interest the last year for 
 the use of the $20. The usurers are very ingenious in satisfying 
 the borrowers that the terms are generous, making it appear that the 
 borrower can extricate himself by the payment of a comparatively 
 small amount of interest each year. 
 
 Mr .Webber. The usurer works him for all he is worth. 
 
 TJSUET LAW NOT DESIRABLE. 
 
 Mr. Gilbert. Would a usurer be suppressed for charging excessive 
 rates of interest when they are figured mathematically? Is there 
 any such regulation as that in the islands? 
 
 Governor Ide. There is none. There is probably not a twentieth 
 part of the money in the islands that is needed there, and I doubt 
 whether we could get very much ahead by putting a man in prison 
 who undertakes to take some advantage of the law of supply and 
 
HEARINGS BEFORE COMMITTEE ON INSULAR AFFAIRS. 81 
 
 demand. That is the whole question, of course, everywhere. But 
 in the Philippines, I think, with the tremendously small supply of 
 money that we have and the resources that are available, that it is 
 not well to strangle such producers as we have by legislation. I sup- 
 pose that here in the city of Washington — I do not know — you allow 
 vour pawnbrokers to take almost any rate of interest, and it is so 
 in other cities, but that is on the basis that the loans are hazardous 
 and a good deal of a risk, and the same is true in the Philippines. 
 
 Mr. HuBBAED. To drive out the usurer would add to the difficulty. 
 It would not We wise to drive out the people who have the money and 
 who are willing to supply the deficiency. 
 
 Governor Ide. There is a legal rate for loans on produce, by con- 
 tract, and that is a reasonable rate. 
 
 The Chairman. Professor, have you anything additional to say? 
 
 Mr. Jenks. I would like to answer in another way the question 
 that was propounded when Governor Ide spoke. 
 
 I would like to say that the draft of the bill prepared for the 
 Philippine government was merely submitted here in the hope that it 
 might be used as a sort of basis on which to work. The Philippine 
 government would pass the law in the form that seemed to it wise. 
 
 COLLECTORS OF LOANS. 
 
 But as regards these government collectors, I would like to quote 
 from the draft of the bill, as follows : 
 
 The Philippine Agricultural Bank shall be permitted, on the approval in each 
 instance of the treasurer of the Philippine Islands, to utilize the services of any 
 of the provincial treasurers of the Philippine Islands and any of the municipal 
 treasurers in their capacity as deputies of the provincial treasurers of their 
 respective provinces, in so far as such services shall not conflict with the efficient 
 performance of the ofHcial duties of said provincial and municipal treasurers. 
 
 There is no compulsion whatever on the part of the bank to take 
 these services of the tax collectors. They are simply permitted to 
 utilize them if they can make better arrangements with them than 
 with other persons. 
 
 Further on the bill says : 
 
 Provincial treasurers, in making collections as above provided, shall be re- 
 sponsible directly to the bank. 
 
 In that respect they are not acting as government officials, but as 
 agents of the bank. Again the bill reads : 
 
 AH accounts and records of transactions, either directly or indirectly per- 
 taining to the affairs of the Philippine agricultural bank, shall be kept entirely 
 separate and distinct from the oflicial accounts and records of the various 
 provincial and municipal treasurers, and all funds belonging to said bank shall 
 be kept entirely separate from the municipal, provincial, and insular funds held 
 by said treasurers, and shall be labeled as such. 
 
 And so it is simply a permission on the part of the government to 
 the collector to act in this way. 
 
 Mr. RucKER. Does that have any reference to the office of collector ? 
 
 Mr. Jenks. Yes, sir. The provincial and municipal treasurers 
 mentioned in the bill are the tax collectors. 
 
 Mr. EucKEE. I understood that it was the purpose of the law 
 passed here to make the collectors personal representatives of the 
 bank. 
 
 lA— 07 6 
 
82 HEAEINGS BEFOEE COMMITTEE ON INSULAE. AFFAIRS. 
 
 LOANS SHOtTLD BE MADE TO SMALL AGRICULTURISTS. 
 
 Another reason why these loans would go to the small agricultur- 
 ists is that a very large percentage of the lands are very small hold- 
 ings. All of the agxicultural land except 4.8 per cent is held by 
 men who have less than 5 hectares, about 12i acres. And, for that 
 matter, over 35 per cent of the entire holdings are very small, not 
 over thirty-five one -hundredths of a hectare, or about 194 feet square. 
 This of cour^v is a small patch of land. 
 
 Mr. Gilbert. You do not mean that those are agricultural holdings? 
 
 Mr. Jenks. Yes; agricultural holdings. 
 
 Mr. Gilbert. A^^iat do they cultivate on that 194 feet square? 
 
 Mr. Jenks. They cajii cultivate a little hemp, a little rice; and 
 where they are near the villages they can raise vegetables, etc., for sale 
 in the villages. 
 
 desirability of HAVING PRn'ATE COLLECTORS. 
 
 Mr. Garrett. Inasmuch as the collection of a debt is much more 
 vital in its effect upon the sentiment of the man from whom it is 
 collected, would it not be better if government agents are to be con- 
 nected with this matter to turn the thing around and let the govern- 
 ment agents advertise the benefits of the loan and let private indi- 
 viduals do the collecting ? 
 
 Mr. Jenks. They will do that more or less, too. But it should be 
 kept in mind again, as Governor Ide has suggested, that the govern- 
 ment officials will not use any pressure in the collection of the loans. 
 
 THE government GUARANTY. 
 
 I want to call attention again to the guaranty that v\'as spoken of 
 yesterday. It is a much less risk, in the first place, for an investor to 
 put money into the bank than into railways in the Philippines, and 
 a much less risk for the government to guarantee interest on the in- 
 vestment of the bank than in the case of a railway. This is true for 
 two reasons : First, where the money is invested in a railroad very 
 large sums are put into the form of fixed capital at once — into roadbed 
 and rails and stations. If the railroad is not a success the money is 
 practically lost. In the case of a bank the money can be first invested 
 in a small way; if it is found that it is not a success, the bank 
 will suspend before a very great amount of money is sunk; and, 
 secondly, it should be remembered that the government does not 
 guarantee the capital of the bank; it simply guarantees the interest, 
 and the business will be stopped in time to prevent any particular 
 loss. We may properly note, also, the fact that the passage of this 
 bill could not affect unfavorably any interest in the United States, 
 while if the bank proves a success, as seems probable, it will add 
 greatly to the prosperity of the Philippines and will thus indirectly 
 aid the United States. The Philippine people simply ask Congress, 
 without risking in any way any interest of the United States, to 
 permit them to guarantee at their own risk the interest of this bank, 
 which they think will relieve many of their difficulties. They take 
 whatever risk there is. They surely ought to be given this privilege. 
 I think that there are a number of others here who ought to be heard. 
 
HEARINGS BEFOEE COMMITTEE ON INSTJLAE AFFAIRS. 83 
 
 I will therefore pass over the other points that I had intended to touch 
 upon, and will conchule unless there are some questions that the mem- 
 bers of the committee may wish to ask me. 
 
 EXPENSES OF EGTPTIAN BANK. 
 
 The Chairman. Doctor Kemmerer, there is one question I want to 
 ask you in connection with your statement. I then want to put on 
 a business man from the Philippines, Mr. Lowenstein, for a state- 
 ment. 
 
 In the matter of these collections, I find in your report, on page 20, 
 a statement that the salary list of the bank of Egypt is about £2,000 
 a month, which is approximately $10,000; the office expenses £1,000 
 a month, which is another $5,000. Well, now, tAvelve times $15,000 
 would be $180,000. This, with the agents in the field, of which there 
 are 22, would make the expense over there about $200,000 a year. In 
 a bank with $35,000,000 of loans out, have you figured out what per- 
 centage of expense that is to the money loaned? 
 
 Mr. Kemmerer. I should say that that is from five-tenths of 1 per 
 cent to six-tenths of 1 per cent on the loans. 
 
 PROBABLE EXPENSE OP CONDUCTING PHILIPPINE BANK. 
 
 The Chairman. Do you think that the business could be conducted 
 on such economical lines, on the same expenses, in the Philippines ? 
 
 Mr. Kemmerer. I should say that as the business increases the 
 relative expenses would naturally decline — that is, a concern of 
 this kind would have a larger relative percentage of expense when it 
 was small than when it had grown larger — and I should say, also, 
 that it is improbable that the expense in the Philippines would be 
 reduced to the low level that it has been in Egypt, because Egypt is 
 comparatively a compact country, with the agricultural lands covei"- 
 ing a territory of about 13,000 square miles, say, right along the 
 Nile Valley and Delta, while in the Philippines the agricultural 
 land is more scattered and there would be heavier expenses of ad- 
 ministration for that reason. I should say that the Egyptian ex- 
 penses would not be representative in that regard. They would be 
 greater in the Philippines, probably. 
 
 The Chairman. The expense would have to be a great deal more 
 to jeopardize the bank? 
 
 Mr. Kemmerer. I should say so; yet, the bank proposed for the 
 Philippines would receive a rate of 1 per cent more interest than the 
 Egyptian bank receives, and I should say that that 1 per cent addi- 
 tional would more than cover the extra expense. 
 
 STATEMENT OF HON. WILLIAM H. TAFT— Continued. 
 
 Secretary Taft. Mr. Chairman, will you let me say now what I 
 have to say in advance of Mr. Lowenstein, as my time is now very 
 greatly taken up and I am anxious to leave as soon as possible ? 
 
 The Chairman. I wanted you for the peroration. 
 
 Secretary Taft. I would not be able to give a peroration. [Laugh- 
 ter.] 
 
84 HEARINGS BEFORE COMMITTEE ON INSULAR AFFAIRS. 
 
 There are only one or two general observations that I would like to 
 make with reference to this proposed legislation. The first is a mere 
 iteration of what the chairman was saying just as I came into the 
 room, with reference to the feeling of the Filipinos in respect to the 
 agricultural bank. 
 
 FEELING OF FILIPINOS AS TO AGRICULTURAL BA-NK. 
 
 Going back to 1900, when we first went to the islands, down to the 
 present time no public gathering of any sort, with reference to the 
 economic or political improvement of the islands, is ever held in the 
 islands that emphasis is not put on the importance of an agricultural 
 bank in the islands, and the government was urged from the begin- 
 ning to organize sach a banl-r. 
 
 DIFFICULTY IN SECURING INVESTMENT OF PRIVATE CAPITAL. 
 
 It was pointed out by gentlemen who were familiar with the his- 
 tory of the islands and who resorted to ai'gument which is common in 
 such a case, and which under different conditions would have been 
 very forceful, that under the Spanish Government it was entirely 
 possible, and that therefore under the present law it would be pos- 
 sible if the Spanish law of corporations can be said still to contiiiue in 
 the islands, to organize an agricultural bank on a i:)rivate basis and 
 cany on the business which we seek to carry on under this proposed 
 bill. But those who are at all familiar with the conditions in the 
 Philippines, or, indeed, Avith conditions in any country that is going 
 through a transition — that is, remote from the centei's of capital — 
 will realize that there are certain classes of business, and, indeed, 
 most businesses, that ai'e difficult to start on a private basis because of 
 the natural timidity that cajDital has in going into remote places. 
 
 We have had such an experience with respect to the Philippine rail- 
 roads that is most significant. We did succeed in securing a com- 
 pany, and a responsible company, to undertake the construction of 
 iOO-odd miles in Luzon without a guaranty, but there were 300 miles 
 in other parts of the islands that we had to guarantee. In other 
 words, the necessity for Government intervention in a case like this 
 is to prove to capital, that we hope will subsequently come in without 
 such aid, that it is jjossible there under the conditions that exist to 
 invest capital with the reasonable hope of getting good interest and 
 of getting a retui'n of the capital. It is to make the initiative, it is 
 to stir up those who have capital to understand that they can make 
 a good profit and a good return without loss of their capital. Now, 
 of course, it is not necessary to say that this is especially true of the 
 making of these small loans to the small farmers who borrow them 
 and have of course less security to offer than persons who own large 
 plantations. 
 
 DISCRIMINATION IN INTEREST CHARGES. 
 
 Something was said yesterday about maintaining the rate of inter- 
 est unimpaired. I am afraid that an original provision of that sort 
 would interfere with the usefulness of the bank. I think that a 
 limitation might be placed upon the interest to be charged and that it 
 
HEARINGS BEFORE COMMITTEE ON INSULAR AFFAIRS. 85 
 
 ought to be placed, and even as between small farmers. One small 
 farmer has borrowed money and has shown that he is industrious, 
 that he takes care of his cattle, that he husbands his resources, and 
 pays his debts on the dot, and he may very well ask from those to 
 whom he has proven his industry and his providence that he shall 
 have a less rate of interest than another farmer who is negligent and 
 not industrious, and a loan to whom must necessarily involve more 
 risk. This is ordinary banking. It is discrimination, but you have 
 got to have discrimination anywhere with reference to individuals 
 and with reference to security. 
 
 The Chairman. In that connection I call your attention to the 
 fact that Lord Cromer, who made such a wonderful success in 
 Egypt, had the interest fixed at 9 per cent first for all borrowers, 
 large and small, and then had it reduced to 8 per cent for all bor- 
 rowers, large and small, the idea being that it was so much less than 
 the 20, 30, 40, 50, or even higher per cent that the people had pre- 
 viously been paying that they would all borrow from the bank. 
 
 Secretary Taft. In other words, that you make it so beneficial for 
 all that it is as low a rate as the best security ought to get. 
 
 Mr. Olmsted. It might be beneficial to the borrower, but it would 
 compel the bank to loan at a low rate on a great risk. 
 
 EGYPT AS A PRECEDENT. 
 
 Secretary Taft. We ought to be frank in discussing this matter, 
 and look forward with as much clearness as we can connnand with 
 reference to the operation of this law. Possibly Mr. Kemmerer has 
 already commented on the differences in conditions between the Fili- 
 pinos and the Egyptians. And a great difference, in my mind, and 
 a doubt that arises as to the successful operation of this act grow out 
 of the difference in the conditions of agriculture in that valley of the 
 Nile, in which all crops are raised bj^ irrigation and are therefore 
 necessarily constant, while in the Philippines most of the crops are 
 not raised by irrigation, but are more or less affected by the variations 
 in climatic conditions from one year to another. 
 
 But, in spite of that. I think that the experiment in Egypt, if you 
 will examine it, shows, because of the resemblance of the people to 
 the Filipinos, the possibility that this act will work out to great 
 benefit. I think that the importance of the proposition from a sen- 
 timental standpoint — and that is something that is not to be ignored 
 in this matter — that the importance of it and of its success, if we can 
 accomplish it, is worth the $200,000 a yeal- that would be involved if 
 everything was lost to the Government. I would not mtike it more 
 than $200,000 a year until it proves itself to be a success, and then, I 
 fancy that if it does prove to be successful, there will be no difficulty 
 in coming to Congress and securing authority to increase the capital, 
 if that be necessary. What we are very hopeful of is that should it 
 be a success, it will have the same influence upon the investment of 
 private capital there without a guaranty that this bank in Egypt 
 seems to have had on private capital in that country. 
 
 ADVANTAGE OF GOVERNMENT AGENTS. 
 
 The advantage of our government officials acting as part of the 
 agency of the bank is, first, that their services can therefore be com- 
 manded at a much less rate than if independent agents were sent 
 
86 HEAEINGS BEFORE COMMITTEE ON INSULAR AFFAIRS. 
 
 out ; and, second, that in a country like that, which — and we do not 
 realize how great the influence is — in a country like that the official 
 character of the man who collects the money adds greatly to his in- 
 fluence on the debtors to secure promptness in payment, because 
 they respect him and they fear his power, and they are apt to act 
 with a great de^l more promptitude and more respect for his de- 
 mands. 
 
 Mr. Smith. With reference to the agents of the government acting 
 as agents of the bank, the officials of the government acting as coP 
 lectors for the bank, the fact that they are collectors would probably 
 make them far more efficient, would it not, to secure for the bank 
 responsible borrowers than if the bank were compelled to select its 
 collectors from outsiders who might not be so familiar with the 
 people as would be the government collector? 
 
 Secretary Taft. Yes, sir ; that is quite true. Of course the govern- 
 ment collectors collect taxes from everybody in the province, and they 
 are necessarily familiar, therefore, with the character of their pay- 
 ments, as to whether they are prompt or not,- and as to the exercise 
 of authority that they have to exert to insist upon prompt pay- 
 ment. They can not but be advised as to the conditions and habits 
 of their borrowers. 
 
 INITIAL CAPITAL OF BANK. 
 
 Governor Ide. In this bill there is a provision that the bank shall 
 not commence business until the $500,000 gold has been paid in. 
 Do you think that capital of that amount would be sure to come in 
 before any experiment has been tried, or would it not be better to 
 leave the Philippine Commission to decide the amount that must 
 be paid in. They are dealing with their own matter, and the re- 
 quirement that that amount of gold must be paid in before the bank 
 can do any business at all ought to be left to the judgment of the 
 Commission. It is my idea whether it would not be better to leave 
 that with the Commission than tc tie it up here. 
 
 Secretary Taft. As far as the committee is to go in recommending 
 legislation, I think it is best to leave it, as far as possible, to the 
 Commission to do this, as they are more familiar with the conditions 
 in the islands than Congress can be. I am not sufficiently advised — 
 let me see, that would be 10 per cent of the capital of the bank. I 
 confess that I do not think that would be unreasonable, and I think 
 that, according to Vermont methods, they would require all that. 
 
 Governor Ide. Yes; that would be true if they were dealing with 
 other peojDle's money, but in Egypt they commenced with £10,000, 
 and it is possible that in the Philippines it would be better to select 
 a very small area. 
 
 Secretary Taft. Of course the guaranty would increase propor- 
 tionately as the money is paid in. That is a detail with respect to 
 which i should prefer to leave it to Judge Ide, for my experience in 
 the four years that I have been in the islands with Judge Ide was 
 that Avhen he Avas on the less conservative side I always yielded to 
 him. [Laughter.] 
 
 Mr. Jones. We have no bill pending here now. 
 
 Secretary Taft. Oh, I thought there was a bill pending. 
 
 Mr. Jones. I did not know that there had been a bill introduced. 
 
HEARINGS BEFORE COMMITTEE ON INSITLAE APPAIES. 87 
 
 On the subject of the recommendations of Doctor Kenunerer, what 
 I wanted to ask you was whether you thought that we ought to enact 
 a law going into and defining the various provisions and details of 
 legislation upon this subject, or whether we should simply pass a 
 general measure empowering the Philippine government to enact this 
 legislation, and provide what the limit of guaranty should be, what 
 the rate of interest should be, and other general provisions like that, 
 but leave to the Philippine Commission the power and authority to 
 work out the details? 
 
 Secretary Taft. I am bound to say that I think that that would 
 be the better form of legislation. Of course. Congress aiaturally feels 
 there ought to be some limitations with respect to the amovint of 
 the guaranty, and the amount that ought to be involved, but with 
 the Commission on the ground I feel sure, knowing the Commission 
 as I do, that they will be exceedingly conservative in the establish- 
 ment of a bank of this character. A bill has been prepared by Mr. 
 Kemmerer, General Edwards, and Professor Jenks, which modifies 
 the bill which has been introduced so as to point out the character 
 of the legislation that the Commission ought to enact, without saying 
 what that legislation shall be, saying that it should enact legislation 
 on various subjects, but without determining just what the pro- 
 visions shall be with reference to those loans, and it seems to me 
 that that would be a very much better form of bill than to make 
 narrow and rigid the limitations in this bill. 
 
 Mr. Jones. Not to undertake to enact details that we can not pos- 
 sibly know about here. 
 
 I have not read this measure, but I think that it ought to be as 
 clear a bill and as concise as possible, leaving the details to the Philip- 
 pine government. That is my idea as at present advised about it. 
 
 Secretary Taft. If you will remember that is the character of the 
 railroad bill that was passed, and that bill has worked fairly well. 
 
 ALLEGED EIGHTS OF SPANISH-FILIPINO BANK. 
 
 Mr. Gaerett. To-day, after I was assigned to this committee, I 
 received what I presume the other members received earlier, that is, 
 a book from the Spanish-Filipino Bank, indicating that they were 
 very strongly of the opinion that they had some reserved rights. 
 Is there any probability that after the passage of this bill the pro- 
 posed bank would come into conflict with the Spanish-Filipino 
 Bank? 
 
 Secretary Taft. No, sir. The Spanish-Filipino Bank under a 
 grant of the Government of Spain — and Governor Ide can correct 
 me if I do not speak exactly — had the right to issue currency — that 
 is, its bank notes — to three times the amount of its capital, with the 
 security, I believe, that the government had the right to have two or 
 three directors in the bank. Now, that provided for the issuing of 
 certain kinds of currency payable in certain Spanish coin, and the 
 claim made was that when the change of sovereignty came it had 
 no effect on the right to issue currency for the use of the people 
 under that charter. 
 
 Mr. Gaeeett. The charter rights preserved it. 
 
 Secretary Taft. Yes, sir; that the charter rights preserved it, al- 
 though it was not so specifically mentioned in the treaty. I have 
 
88 HEAEINGS BEFORE COMMITTEE ON INSTJLAE. AFFAIRS. 
 
 not the slightest doubt that the right of people to issue currency is a 
 right that does not pass from one sovereign to another, and if it did 
 that the right of the bank in question was to issue notes payable in 
 Spanish coins, in the coin of the country granting the right. They 
 claim that they have the right to issue notes payable in our particu- 
 lar coin to-day because of this contract right for them to issue bills 
 payable in Spanish coins. To me this is an absurdity, and I have 
 never allowed it to interfere with either my dreams or my waking 
 hours. [Laughter.] 
 
 Governor Idb. Do they not complain of the circulation of silver 
 certificates ? 
 
 Secretary Taft. Yes; I believe they do, and I believe we put a 
 tax, did we not, on their currency beyond a certain amount? 
 
 Governor Ide. I think we made a general provision that would 
 apply to any bank, and as that is the only bank that has authority 
 to issue currency it would affect them more than any other. [Laugh- 
 ter.] It would prohibit them from issuing more than in excess of 
 two-thirds of its capital. 
 
 Secretary Taft. It is proposed, I believe, to bring suit in the 
 Court of Claims — well, the Court of Claims is here. That court has 
 entertained jurisdiction for suits against the United States on the 
 ground that the Philippine government was the debtor, and they 
 can try it in the Court of Claims. Let them go to the Supreme 
 Court and see how valuable that asset is that they count on. 
 [Laughter.] 
 
 Mr. Garrett'. I notice that in this case they charge that we have 
 taxed State banks out of existence. 
 
 Secretary Taft. It is a very good subject for legal discussion along 
 the line of profits, vested rights, and reasonable fees, but beyond that 
 I do not think it comes to anything. 
 
 REMOVAL OF LIJIITATIOX UN MINING CLAIMS IN THE PHILIPPINES. 
 
 There is one other measure, Mr. Chairman, to which I would 
 like to refer, if I may, and that is a little bill that ought to be 
 enacted here taking off the limitation that Congress imposed with 
 reference to persons locating more than one claim. I do not think it 
 too strong an expression to use to say that the mining in the Philip- 
 pines is practically nothing. There is hope of a development, and 
 if you get an enthusiastic commissioner who presides over the 
 mining department he will outline the possibilities that a company 
 might develop out there. We have been out there six yeai's and 
 there have been a good many prospectors, but up to this time there 
 has been very little profitable mining of any kind, either of coal or 
 of precious treasures of the earth, and one of the obstacles has 
 been the limitation which prevents a man or a company from own- 
 ing more than one claim. Now, gentlemen, it seems to me that, with 
 due deference. Congress in this business jDroceeded on the theory 
 that the profits on transactions and the growth of wealth ought to 
 be restrained by rigid legislation. We have had a theory on the 
 subject and we thought that we would try it on the Philippines 
 instead of trying it here. If this kind of legislation had been put 
 into force with reference to the mines of this country, it would have 
 
HEARINGS BEFOEE COMMITTEE ON INSULAE AFFAIRS.' 89 
 
 been a great obstacle to the progress which has been made in this 
 matter. 
 
 Now, it is proposed in this country to limit the use and sale of 
 coal lands of the Government, and that is all right. There is no 
 danger that the coal industry Avill not extend in this country, no mat- 
 ter what are your limitations with respect to it. But there is treasure 
 in the Philippines, and more encouragement ought to be givyn to the 
 digging into the bowels of the earth, which is exceedingly difficult 
 out there under the tropical conditions that exist and the absence of 
 mining laborers, and you ought, therefore, to allow some latitude 
 in the hope of prospective gain by letting men have more than one 
 claim for mining. That is all I have to say, Mr. Chairman. I am 
 very much obliged to you. 
 
 NECESSITY OF LIMITATION. 
 
 The Chairman. Speaking for myself, I think that the intent of 
 Congress was this: At that time, you will remember, a great many 
 newspapers were saying that we were in the Philippines for purposes 
 of exploitation. We were called exploiters, and every sort of accu- 
 sation was made, that American capital was going there to seize all of 
 the resources of the islands. I have had, I presume, a hundred let- 
 ters myself in which it was intimated that that was the purpose of 
 this Government in the Philippine Islands, so that I think, possibly, 
 that o'ut of excessive caution Congress proceeded to demonstrate 
 that that was not the purpose of the United States in the Philippines. 
 
 Secretary Taft. So far as the limitation on land is concerned, we 
 do not ask that you raise that, but in the case of mines, where it is 
 so full of risk, it seems to us that you ought to give them a little more 
 chance, a little more healthy exploitation. That is, if that means 
 an investment of capital. Such investment would greatly benefit the 
 islands if there are only one or two successful gold mines that attract 
 capital and build up communities, and even if they be owned by one 
 man or one company. 
 
 Mr. Garrett. Mainly, here progress has been " the substance of 
 things hoped for," in mining business, and " the evidence of things 
 not seen." [Laughter.] 
 
 COPPER IN the PHILIPPINES. 
 
 Secretary Taft. Yes; exactly. There is, I think, a verj^ thick 
 vein of copper in the mountains of Benguet and Lepante, and if 
 a railroad is ever built there it may be profitable to mine it. There 
 is gold all over the islands, but it is generally in such form and such 
 small quantities as generally not to encourage investment. AVe would 
 like very much indeed to say to people who come there, " You need 
 not venture all your money on the question of whether one claim will 
 inure to your benefit; you may go and file many claims (just as they 
 do in this country) and perha])s out of all of them you will get one 
 that will justify your investment." It is a good deal better to have 
 that done than to have the treasure lie in the soil, as it is likely to 
 do unless you take some steps of this kind. 
 
 Mr. Gilbert. Still, there ought to be some limitation, ousht there 
 not? 
 
90 ^HEARINGS BEFORE COMMITTEE ON INSULAR AFFAIRS. 
 
 Secretary Taft. There is no limitation in this country. 
 
 Mr. GiiJiERT. No. 
 
 Secretary Tapt. I think it is such a new industry that sxe ought to 
 remove-the limitation. 
 
 The CiiAiitjiAX. Last summer I met a gentleman in Wisconsin who 
 had just returned from Alaska. I talked to him about two hours 
 one evening, and he was exceedingly forceful in saying that there 
 ought to have been limitations in Alaska. He told me that one man 
 had located acre after acre with no intention of working the land, 
 but simply to hold it for purposes of speculation. 
 
 WORKING or :mining claims in the Philippines obligatort. 
 
 Secretai-3' Taft. Under the law in the Philippines they are obliged 
 to put work on each claim each year in order to secure it, and if the 
 law were enforced in Alaska, those fraudulent actions could be pro- 
 hibited. It is possible here, in the matter of legislation for an infant 
 colony, or an infant dependency, for which Congress has to legislate, 
 to be too ligid in the first restrictions, even though this lack of rigid- 
 ity inures to the benefit of some private interest. As Speaker Reed 
 used to say, " One can not always object to a law because somebody 
 makes a dollar and a half out of it." And our experience in the Phil- 
 ippines with reference to getting capital into those islands is so dis- 
 couraging that the removal of any restrictions is of assistance. 
 
 The Ciiairjian. We thank you very much. Mr. Lowenstein, will 
 you take the stand, please ? 
 
 STATEMENT OE MR. M. E. LOWENSTEIN, OE CASTLE BROTHERS, 
 WOLE & SON, MANILA. 
 
 The Chairman. How long have you lived in Manila ? 
 
 Mr. Lowenstein. Six years, Mr. Chairman. 
 
 The Chairman. With what firm are you connected there? 
 
 Mr. Lowenstein. Castle Brothers, Wolf & Son. 
 
 The Chairman. What is its business? 
 
 Mr. Lowenstein. They are importers and exporters. 
 
 The Chairman. What? 
 
 Mr. Lowenstein. General merchants. We export practically all 
 of the products of the Philippine Islands, with the exception of sugar 
 and leaf tobacco. 
 
 The Chairman. You are the largest exporters in the islands? 
 
 Mr. Lowenstein. I believe so. 
 
 The Chairman. And you are thoroughly familiar with business 
 conditions in Luzon, and all over the islands generally ? 
 
 Mr. Lowenstein. We do business all over the islands. I have had 
 considerable experience there. 
 
 PRICE OF PHILIPPINE SUGAR. 
 
 The Chairman. Will you please tell the committee what the price 
 of sugar has been ? 
 
 Mr. Lowenstein. According to a cablegram sent to the Secretary 
 of War, a copy of which was shown to me yesterday, the average 
 price of Iloilo sugar, Nos. 1, 2, and 3, is at the present time 1.25 cents 
 gold per pound f . o. b. Iloilo. 
 
HEAEIHTGS BEFOEB COMMITTEE ON INSXJLAK AI'FAIRS. 91 
 
 LOCATION OF SUGAR PLANTATIONS. 
 
 The Chairman. That is the principal sugar place in the islands ? 
 
 Mr. LowENSTEiN. Yes ; and has been for years. There is of course 
 some sugar raised north of Manila — in Luzon — but the production 
 there is very much smaller than it was before the war, and it has not 
 given promise of increasing in the immediate future. Batangas was 
 also a sugar-pcoducing place. 
 
 The Chairman. Iloilo is in Negros and about the center of the 
 island ? 
 
 Mr. LowENSTEiN. Yes; it is right opposite Negros, and the sugar 
 of Negros is barged over to Iloilo. 
 
 The Chairman. It is about the center of the island? "Wliat did 
 you say your business was? 
 
 Mr. LowENSTEiN. I am connected with Castle Brothers, Wolf & 
 Son, of Manila. We do a general merchandise business. 
 
 Sugar is usually sold in the following shipments: Five No. 3, two 
 No. 2, one No. 1. Those are the fractions, and that we call "assorted 
 Iloilo sugar." 
 
 COJIPARISON or PRICE OF SUGAR, PRESENT AND PAST. 
 
 The Chairman. How do the present prices compare with the prices 
 last year and the year before ? 
 
 Mr. IjOwenstein. Well, considering the sugar boom which ob- 
 tained two years ago, following Brazil's experience, sugar in the 
 Philippines went as high as 7 cents per picul — 137.5 pounds. 
 
 The Chairman. How much is that a pound, about ? 
 
 Mr. Lowenstein. About 2.6 cents per pound. 
 
 The Chairman. Will you state briefly to the committee 
 
 Mr. Lowenstein. In the islands sugar was worth about $5.75 per 
 picul, or 137.50 pounds, which is about 2.08 cents gold per pound, 
 and as I stated before, the price has lateh' declined to 1.25 cents per 
 pound, at which price it is impossible for the planter in the islands 
 and the peons to make both ends meet. 
 
 conditions of sugar planters to-dat. 
 
 The Chairman. What is the condition, therefore, of sugar in the 
 Philippine Islands to-day, generally speaking? 
 
 Mr. Lowenstein. It is in the worst jDOSsible shape, and the planter 
 is threatened with losing his lands as a result. It is a question 
 whether it is best for the plantei's' houses, who are carrying these 
 planters along, to continue doing so, or whether they had better fore- 
 close their mortgages. Would you not say so. Governor Ide? 
 
 Governor Ide. I am not sufficiently familiar with the way in which 
 the houses are situated, but I know that they are umvilling to make 
 any further additions. 
 
 Mr. Lowenstein. I may explain that more thoroughly. These 
 lands are held by the Spanish-Filipino Bank, and the Chinese Bank 
 has itself loaned some money to the planters. Most of that financing 
 has been done by Spanish houses who have been established there for 
 years. It is simply whether it pays these Spanish houses best to con- 
 tinue carrying these planters in the hope that the conditions may 
 
92 HEADINGS BEFORE COMMITTEE ON INSULAR AFFAIRS. 
 
 eventually improve, or whether it pays them better to foreclose the 
 mortgages at the present time. The condition is most unfortunate. 
 
 LOSS OF CARABA08. 
 
 It was hoped that the inoculation of the carabaos would save the 
 animals there, but from advices I understand that the animals are 
 dying faster than ever before in the islands, and I leajrned the other 
 day that a great many of the horses of J. G. White & Co., who are 
 building a railway on the island of Panay, have lately died. 
 
 THE TWO GREAT NEEDS OF THE PHILIPPINE ISLANDS. 
 
 The CHAipaiAN. "What, in your opinion, as a business man of wide 
 experience, are the two great needs of the Philippine Islands to bring 
 about business prosperity? 
 
 Mr. LowENSTEiN. An agricultural bank first; and secondly, a re- 
 duction in the tariff as proposed in the pending bill. 
 
 The Chairman. The one that is now pending in the Senate? The 
 one that has passed the House? 
 
 Mr. LowENSTEiN. Yes, sir. 
 
 The Chairman. In what way would the agricultural bank be of 
 benefit to the agriculturists of the islands ? 
 
 IMPORTANCE OF USURER. 
 
 Mr. LowENSTEiN. There seems to be a misunderstanding as to the 
 importance of the usurer in the islands. The usurer is the man who 
 provides loans of .5, 10, and 20 pesos. He is not of importance as far 
 as agriculture is concerned, to any extent. On the other hand, we 
 have no commercial banks in the islands, with the possible exception 
 of the Spanish-Filipino Bank. The other banks, even though the 
 charter of the International Banking Corporation may be broader 
 than that of the other banks, are exchange banks, and any advances 
 that they may make are merely for the purpose of making exchanges, 
 so that there are no means in the islands at the present time of provid- 
 ing the small farmer with money. According to the statistics of the 
 provincial agents we have no farms there. To illustrate, we are 
 importers of American agricultural machinery. We brought in 
 quite a little last year. The people have no money with which to 
 buy cattle, farm implements, etc. 
 
 I have in mind a man who has an estate with a good title and 
 assessed for taxes at 100,000 pesos. He had about 100 carabaos, but 
 they all died, and he has no more money with which to buy more, 
 and he does not want to purchase any more because he does not know 
 but they will all die of rinderpest. This man came to me and said: 
 " I want to buy plows, and I want a traction engine. I want an 
 American mill that will mill rice thoroughly, and I will require 
 about 8,000 pesos worth of machinery. I am willing to give my land 
 as security, and I am willing to pay 12 to 15 per cent, but I want to 
 have three years in which to pay that money." 
 
 Now, I would like to have accommodated this man, but at the 
 same time we are a commercial firm, and not bankers, and our capital 
 
HEABINGS BEFORE COMMITTEE ON INSULAR AFFAIRS. 93 
 
 would then be invested in banking. That is the kind of business an 
 agricuhural bank would do. 
 
 INTRODUCTION OF AMERICAN PLOWS. 
 
 We have brought in a number of American disk plows. We have 
 told by the people that they did not believe that the Filipino farmer 
 would take to them, but the result has been very remarkable. We 
 have sold several hundred already. A man who uses the disk plow 
 can go down into the soil 14 inches, whereas now they use the old 
 style hand-made j^low made in the Philippines, which perhaps turns 
 the soil to a depth of :2 or 3 inches. We have made demonstra- 
 tions in different parts of the country to show the plows, and we 
 have had a peculiar experience in that regard. At one time we went 
 to a place where there was quite a meeting of the people to see the 
 plows works, and I remember to have heard them say on one occa- 
 sion, '"A carabao can not pull this plow." An American would take 
 a carabao and hitch him up to a plow, and, very much to their sur- 
 prise, the plow not only worked well, but worked about four times as 
 well as the native plow. 
 
 NEED OF MONEY FOE PURCHASE OF FARM IMPLEMENTS. 
 
 These people are very anxious to be able to jDrovide themselves 
 with facilities, and the first thing a man needs is a plow. While the 
 sum of 25 to 100 pesos is not much to a man here, it is a great deal in 
 the islands. People who have the means to do so want to grow rice. 
 As a result of the improved American machinery introduced into the 
 islands two years ago the rice industry is in better shape than ever 
 before, and I believe that if these people along the line of the Manila 
 and Dagupan Railroad could get assistance through an agricultural 
 bank, I am free to say that in two or three years it would not be 
 necessary for the Philippine Islands to longer purchase rice. 
 
 RICE CILTURE. 
 
 The Chairman. The rice crop is a great thing there? 
 
 Mr. LowEN STEIN. It is. 
 
 The Chair^ian. And yet they have imjjorted considerable quan- 
 tities. 
 
 Mr. LowENSTEix. Yes. Up to 1896 the country produced enough 
 rice for home consumption, but by reason of the insurrection and 
 rinderpest it became necessary to import it to the extent, I think, at 
 one time of about ¥=12,000,000 in amount. Last year it was in the 
 neighborhood of ¥"4,000,000. The crop last year was no larger than 
 before, but the imports fell off. A good many of the older houses 
 in the Philippines have had to decrease importations owing to the 
 fact that the Philippine people did not have money with which to 
 buy rice. They had to live on other native food. 
 
 Mr. Jones. What are the conditions, so far as you know them, of 
 agriculture in the neighborhood of Cavite now as compared with 
 recent years? 
 
 Mr. IjO^^enstein. They are improving. Of course the country 
 was in a state of war and the ladrones (robbers) were so prevalent 
 
94 HEAEINGS BEFOEE COMMITTEE ON INSTJLAB AEFAIES. 
 
 that it was impossible to develop the resources of the country. Farm- 
 ers did not feel that their carabao or their implements were safe, but 
 last year the province of Cavite made a little improvement. From 
 now on I think it will improve. 
 
 HEMP CULTURE. 
 
 The Chairman. The possibilities for the development of hemp 
 culture are very great in the Philippines? 
 
 Mr. LowENSTEiN. Yes; but it is not generally understood that it 
 grows only in certain sections. It would not grow in the northern 
 part of Luzon. 
 
 The Chairman. But the possibilities are not yet realized? 
 
 Mr. LowENSTEiN. Not yet. It takes two or three years to get a 
 crop of hemp. 
 
 The Chair JIAN. You exported two or three million dollars' worth ? 
 
 Mr. LowENSTEiN. About that amount. The year ended December 
 31, 1905, was an unusually small one — about 760,000 bales, against 
 929,000 bales for the preceding year. For the three years preceding 
 it has been about 940,000 bales. The shortage was due to drought in 
 1905 and the very severe typhoon of September 26, 1905. In previous 
 years as high as 2,200,000 bales were exported. 
 
 COPRA CULTIVATION. 
 
 The Chairman. There is also very great possibilities for the pro- 
 duction of copra ? 
 
 Mr. LoAVENSTEiN. Ycs ; but that requires seven years to produce a 
 crop. "V\T.iat they need at the present time is immediate help. It 
 must be borne in mind that the Filipino can not exist on promises, 
 but must have help now or he is going to the wall. 
 
 GREAT NEED EOR AGRICULTURAL BANK. 
 
 It is all very well to get as low a rate of interest as possible in con- 
 nection M'ith the establishment of an agricultural bank and to safe- 
 guard the people as much as possible, but I am in close touch with 
 the Philippine people. I have warm friends among them, as much, 
 possibly, as any American business man there, and if I were asked as 
 to whether the bank should be established immediately on fairly good 
 terms or let us wait three years more for very much more liberal 
 terms, I should say for God's sake give it to us to-day on the best 
 possible conditions. 
 
 PR03IPT ACTION NECESSARY. 
 
 And that is why I would ask you gentlemen, I would beg you 
 gentlemen, to let us have this bill at this session of Congress; and I 
 would also beg you to permit the Philippine Commission to have as 
 much authority, as much latitude, in arranging the details as pos- 
 sible. I hope you will see your way cleai', as nearly as possible, to 
 recommending the bill which is now before the Senate. 
 
HEARINGS BEFORE COMMITTEE ON" INSULAR AFFAIRS. 95 
 
 DETAILS OF ESTABLISHMENT OF BANK SHOULD BE LEFT' TO THE PHILIP- 
 PINE COMMISSION. 
 
 I have had considerable experience with the Philippine Commis- 
 sion, and Governor Ide Avill confirm me when I say that I have taken 
 an interest, as merchants do over there, in important legislation that 
 has taken place in the islands. I usually aj^pear before the public 
 sessions of the Commission in Manila and give my views there, as 
 most merchants do, as to matters of legislation. The Philippine Com- 
 mission has always driven the best bargain possible for the Philip- 
 pine people, and if you leave the detail of this bill to the judgment 
 of the Philippine Commission, the interests of the Filipinos are going 
 to be safeguarded in every way possible. 
 
 If we felt sure that capital was going to fight over the chance of 
 getting this charter as proposed under the pending bill, I A\ould say 
 this, "Make the provisions as severe as possible; but I know as a 
 positive fact that capital is not going to rush in there for the purpose 
 of establishing an agricultural bank. I have talked with a number 
 of bankers in New' York during this week and I do not believe that 
 there is going to be any American capital available for the establish- 
 ment of a Filipino agricultural bank, because American capital can 
 do better in the West right now. I know of one English banking 
 interest that is ready to go into the Philippines and organize an agri- 
 cultural bank, provided the proAdsions of the act are not too severe. 
 If j-ou make the provisions too severe, I do not think that you are 
 going to get the money necessary, e^-en with a 4 per cent guaranty. 
 That is of the very greatest importance, gentlemen, and I hope that 
 3'ou Avill bear it in mind. 
 
 DISCRIMINATION IN INTEREST RATES. 
 
 A good deal has been said about the rates of interest and the ad- 
 visability of permitting different rates to be charged, in the discretion 
 of the bank. I would like to call your attention to the fact that 
 security to be oifered by the borrowers would differ very greatly. 
 Now, for instance, a man who has only carabaos has very much poorer 
 security from a banking standpoint than the man who has agri- 
 cultural implements as security, because the carabaos might die 
 at any time. Now, then, in the question of security, some are very 
 much more secure than others. Hemp crops are much surer than 
 rice crops, as the latter are likely to be destroyed at any time. The 
 rice in the Cagayan Valley, oAving to the storms which prevail 
 there in October and November, is sometimes destroyed to a great 
 extent. The carabaos are such an uncertain quantity now that the 
 farmers prefer to buy traction engines, although, of course, every 
 small farmer can not buy traction engines, but the municipalities 
 would, no doubt, devise some means of buying a traction engine or 
 steam plow for the community. 
 
 Mr. Olmsted. An engine to work on the rice lands? 
 
 Mr. Lo WEN STEIN. No; because the rice is grown there according 
 to the Japanese method, wet, but it is possible in certain sections to 
 adopt the Texas method of dry planting, and no doubt that will 
 be done on the larger tracts of land. 
 
96 HEARINGS BEFORE COMMITTEE ON INSULAR AFFAIRS. 
 
 FINANCIAL CONDITIONS IN THE PHILIPPINES. 
 
 Mr. Gaeeett. How do the financial conditions compare with, the 
 conditions there before American occupation ? 
 
 Mr. LowENSTEiN. I should say that the financial conditions are 
 worse than they ever have been. 
 
 Mr. Garrett. Even before the insurrection ? 
 
 Mr. lyowENSTEiN. Yes. 
 
 Governor Ide. You mean the industrial conditions. 
 
 INIr. LowENSTEiN. I mean both industrial and financial, Governor. 
 
 PROBABILITY OF SUCCESS OF THE BANK. 
 
 A good deal has been said about the security of the bank. I 
 would like to call attention to the fact that a railroad befo're it can 
 operate has got to build 20 miles, which is money actually invested, 
 and which will remain invested. It is different with a bank. A 
 bank can feel its way gradually, so to speak, because if it makes a suc- 
 cess of its business it can then invest more money, if possible, etc. 
 And so it seems to me that a bank conservatively managed is bound 
 to make a success. 
 
 The Chairman. You think, then, that it would be all right to pro- 
 vide that the bank should start in with a capital of no more than 
 $50,000 at first? 
 
 Mr. LowENSTBiN. I think that it should be left to the Philippine 
 Commission to decide this. I think that they will make the very 
 best bargain possible, as they did in the case of the telephone and the 
 telegraph lines. 
 
 TERRITORY TO BE COVERED BY BANK. 
 
 Mr. Gilbert. You say that there is a great demand for an agricul- 
 tural bank from all over the vast territory of the archipelago. How 
 could the beneficial effects of the bank extend all over those islands? 
 Would it not be best to have several banks ? 
 
 Mr. LowENSTEiN. The bank would have branches all over the 
 islands. 
 
 The Chairman. I have heard so many times about the immense 
 territory of the Philippines. It is a fact, however, that if the islands 
 were all put into one aggregate batch, the whole territory would not 
 be as large as that of N^ew Mexico. 
 
 Mr. Gilbert. I understand that the beneficial effect would be more 
 immediate around the territory where the bank it located, and that 
 this benefit would not extend to the more distant portions of the 
 islands, and my jDurpose in asking the question was to ascertain the 
 opinion of this gentleman as to whether there should not be several 
 branches of the bank. 
 
 Mr. LowENSTEiN. I am not sufficiently familiar with the details 
 of the bill, but Professor Kemmerer can reply to that. 
 
 Professoi' Kejimerer. The idea is that the bank shall extend its 
 branches as far as the success or means of the bank permit. The 
 Egyptian bank has 7"2 branches. 
 
HEARINGS BEFOEE COMMITTEE ON" INSULAB, AEFAIES. 97 
 
 TERKITOEX COVERED BY EGYPTIAN liANK. 
 
 Mr. EucKER. ^Vhat is the territory covered bj' those 72 branches ''. 
 
 Professor Kemmerer. All of the delta of the Nile. 
 
 Mr. RuGivEE. Can you give it to me in miles ? 
 
 Professor Kemjceeee. I suppose it is something like 20,000_ square 
 miles. The total agricultural area is 17,000 square miles. 
 
 Mr. RrrcKER. How does that compare with the Philippines ? 
 
 Professor Kemjierer. The total agricultural area of the Philip- 
 pines I believe 
 
 Mr. RucKER. Approximately, if you can. 
 
 Professor Kemisieree. About 7,000,000 square acres, and the part 
 of that that is under cultivation is about one-half, say 3,500,000 
 square acres. I do not recall the exact figures, but I have them in 
 my report. 
 
 Mr. Gilbert. A peasant at quite considerable distance from the 
 location of the bank building, in order to borrow a small amount of 
 money would not be apt to be benefited because of the poor means of 
 transportation ? 
 
 Professor Kesimerer. The islands are all divided up according to 
 provinces. I think that with the anxiety on the part of the natives 
 at the present time they would be willing to go considerable dis- 
 tances to make applications for loans, and as the bank's business ex- 
 tended it would extend to the best provinces, the most successful 
 ones. It would have traveling agents going all over the country 
 as in Egypt. The traveling agent is a very important factor in 
 Egypt. 
 
 Mr. LowENSTEiN. We have a very good system in the islands, 
 which enables us to reach all of the impoi'tant parts of the country at 
 least once or twice a month. 
 
 WHAT PRODUCTS WOULD BANK ASSIST? 
 
 Mr. Olmsted. What are the agricultural products of the Philip- 
 pines that can be increased in volume? You have stated that the 
 price of sugar is so low that it would not pay to raise it at the present 
 time. 
 
 Mr. Lowenstein. Outside of sugar, rice is the only one that offers 
 any immediate help. What we require is immediate help. We can 
 raise hemp and then maguey, which is similar to the American sisal 
 plant, but it takes two years to get a crop after you have once planted 
 the hemp, and the natives have not the money with which to buy the 
 young hemp for planting. 
 
 Mr. Olmsted. My thought was, what products this agricultural 
 bank would most provide assistance for ? 
 
 Mr. Lowenstein. Well, all, approximately, but principally rice, 
 and, secondly, sugar. It would enable the producer to employ more 
 up-to-date methods in producing his crops, and, therefore, would 
 cheapen the cost of their production. 
 
 SUGAR raising IN THE PHILIPPINES. 
 
 Mr. Olmsted. Can they raise sugar in the Philippines and compete 
 with the product of the other countries successfully in the markets of 
 the world ? 
 
 lA— 07 7 
 
98 HEARINGS BEFORE COMMITTEE ON INSULAR AFFAIRS. 
 
 Mr. LowENSTBiN. No; I should say not, owing to many circum- 
 stances that obtain there. I thinlt that we can never compete with 
 sugar raised in other portions of the world until the market of the 
 tJnited States is thrown open to Philippine sugar, not in order that 
 the sugar may be sent here, but to enable us to make China and Japan 
 pay us a better price for our sugar. At the present time we are abso- 
 lutely at the mercy of China and Japan. 
 
 The Chairman. That is a very interesting argument. It was made 
 in the Philippines to the Taft party when we were there. 
 
 Mr. LowENSTEiN. I have found that in the United States a duty of 
 1.3 cents confronts me. I have got to deduct that from the price 
 that is charged here for our sugar, and knowing that I can not cut 
 the price after deducting the duty and insurance, anything that I 
 can get in excess of that is, of course, so much gain. China naturally 
 buys its sugar as cheaply as possible in the Philippines, so that it 
 pays as little in excess of that parity mentioned as possible. But if, 
 for instance, the tariff were reduced so that there would be a duty 
 of only one-half a cent a pound on our sugar, the difference between 
 1.3 cents and half a cent, being 0.8 cent per pound, that would go into 
 the pocket of the Philippine producer, because China and Japan 
 would be compelled to pay that charge. 
 
 Mr. Olmsted. Could they pay that much more and still get it as 
 cheaply as from other countries ? 
 
 Mr. LowENSTEiN. They could. We have absolutely no market 
 for our sugar at the present time except that. Sometimes a little 
 goes to England. 
 
 Mr. Olmsted. If we reduced the tariff, would the agricultural 
 bank assist the producer? 
 
 Mr. LowENSTEiN. It would, because it would enable him to increase 
 his production. It would enable him to buy up-to-date American 
 farming machinery, and later on it would assist him in the establish- 
 ment of central mills, at least it would attract capital to establish 
 central mills, which would still further reduce the cost of the sugar. 
 
 AGRICULTURAL CONDITIONS IN THE PHILIPPINES. 
 
 Mr. RucKER. Are the agricultural conditions in the islands worse 
 now than they were when we went there ? 
 
 Mr. LowBNSTEiN. No; I said the financial conditions. I referred 
 particularly to the financial and industrial conditions. 
 
 Mr. RucKBR. The agricultural conditions are part of the financial 
 and industrial conditions, are they not? 
 
 Mr. LowENSTEiN. I said as compared with when I first went there. 
 
 Mr. RucKEK. Compared with the conditions when we went there, 
 are the agricultural conditions worse now than when we went there? 
 
 Mr. LowENSTEiN. The production of rice is about the same, as far 
 as I can remember. 
 
 Mr. RucKER. How about sugar ? 
 
 Mr. LowENSTEiN. I am not clear as to sugar. I think that it is 
 also true as to sugar. I was going to refer to hemp. The production 
 of hemp was greater than it was last year, and the same is true of 
 copra. 
 
 Mr. Ol:msted. And you are now comparing with 1906? 
 
HEARINGS BEFORE COMMITTEE ON INSULAR AFFAIRS. 99 
 
 Mr. EucKEE. You said that the agricultural bank would enable 
 the farmer to buy more machinery, and thus make his profits larger. 
 He has been using primitive machinery all through the past. 
 
 Mr. LowENSTEiN. Yes, sir. 
 
 Mr. RucKER. And the query in my mind is why he can not do as 
 well to-day with the old-fashioned machinery, crude and old as it 
 is, as he has been doing. 
 
 Mr. LowENSTEiN. Well, first of all, the Filipino has not made 
 any headway in the past. 
 
 Mr. RucKEE. No ; but it seems that he is not going backward. His 
 condition is not worse than it has been. 
 
 COST OF MVIXfi INCREASED IN THE PHILIPPINES. 
 
 Mr. LoA^'ENSTEIN. The cost of living has increased in the Phil- 
 ippines. 
 
 Mr. RucKER. To ^Yl^at is that attributable — to the failure of the 
 crops there? 
 
 Mr. LowENSTEiN. No; to the general advance in the price of 
 staples throughout the world, and also to the advanced cost of labor 
 in the rice-producing country. We have an office at Hongkong, and 
 to-day we are paying 50 per cent more for labor than we did four or 
 five years ago. And the same is true in Japan. 
 
 PHILIPPINE EXPORTS. 
 
 Governor Ide. On the subject of the general conditons of the 
 islands, perhaps a statement or the exports would ifurnish some meas- 
 ure of comparison by which this could be judged. The exports in 
 1899 were #=29,000,000 — and I am now giving only the round num- 
 bers— 1900, f=39,000, 000 ; 1901, ^=46,000,000; 1902, f=49,000,000 ; 1903, 
 ¥=66,000,000; 1904, ¥=60,000,000; 1905, ¥64,000,000, so that it would 
 appear that, so far as the exports are concerned, that there had been 
 a very decided improvement since 1899 and 1900. 
 
 Mr. RucKER. What do those exports consist of principally ? 
 
 Governor Ide. Agricultural products, principally. 
 
 Mr. RucKER. There is not much manufacturing? 
 
 Governor Ide. Very little. 
 
 Mr. RucKER. They seem to have grown very rapidly in the past. 
 
 Governor Ide. Rapidly when it is considered that many of their 
 cattle have died, they have had locust pests, their houses have been 
 burned, and that really thej' have recovered only in a measure from 
 those difficulties. 
 
 Mr. Rtiokee. Yes; they run from ¥29,000,000 of exports in 1899 
 up to ¥64,000,000 in 1905, which is a considereable increase — more 
 than 100 per cent; and a steady increase every year, excepting one, 
 I believe. One j'ear there was a little falling off. In view of this, 
 I do not see how the farmer can be so much worse off with the exports 
 increasing right along. 
 
 Governor Ide. Mr. Lowenstein takes his own view on the subject, 
 and possibly I might take a little different view on that question. 
 However, exports of only ¥65,000,000 for 8,000,000 people is pitiably 
 small. 
 
 Mr. RucKER. It is smaller than it used to be ? 
 
100 HEARINGS BEFORE COMMITTEE ON INSULAR AFFAIRS. 
 
 Governor Ide. Yes. 
 
 Mr. RucKEE. ^Vhat ay;is it before the war? 
 
 Governor Ide. I have not the statistics here. 
 
 Mr. Rtjcker. What is your recollection of it ? 
 
 Governor Ide. I do not know whether I can give you those statis- 
 tics, and I do not think that they would be very useful. I have not 
 the statistics here. I was going to suggest the reason why these 
 statistics would not furnish very satisfactory information. 
 
 Mr. Rucker. I want to get all the information you have. 
 
 Mr. Lowenstein. Before the war hemp was as low as 4f cents in 
 New York, and it is to-day worth 10 cents. It has been high for 
 the last four years. Copra, on the other hand, was sold in the 
 Philippines during my time as low as -i^ pesos per picul, and the last 
 sale was made at $12 per picul. Therefore these exports are some- 
 what misleading. On the other hand, there are only certain sec- 
 tions that are benefited by the increased value of the hemp exports; 
 and, mind you, they amount to about <i5 per cent of the total ex- 
 ports. Hemp is produced only in this part of Luzon [indicating], 
 in Samar, and in Mindanao, so that this other great country up in 
 northern Luzon and the southern islands arc not at all benefited by 
 this apparently great showing in our expoi'ts. 
 
 Furthermore, on copra, of which in 1903 the exjjorts amounted to 
 100,000 tons, the price at that time was, in the marliet of Marseille, 
 between twelve and thirteen pounds sterling per ton ; at the present 
 time it is between twenty and twenty-two jDounds per ton. But 
 copra is not grown all over the islands; it is grown principally in 
 the southern part of Luzon, along the lake, and on the island of 
 Cebu and northern Mindanao. So the great bulk of agriculturists 
 are just as badly off as they ever were, or worse, because their cost 
 of living has increased ; whereas rice at that time was worth from 
 three to four pesos per picul, it is now worth from five to six. Before 
 the war he did not have to eat imported rice, because rice v^as pro- 
 duced right in his country. To-day he must buy imported rice, at 
 a price from five to six pesos per picul. which is prohibitive for the 
 very poor man. 
 
 rOXDITlOX OF THE FILIPINO SHOULD BE IMPROVED. 
 
 But there is one other thing I desire to call attention to. I think 
 you all mean to improve the condition of the Filipino. If we want 
 the Filipinos to continue being a rice and fish eating people, then 
 of course it does not mattei- much what \\e are going to do for them. 
 But Ave want the Filipino to go ahead ; we want him to improve his 
 method of living. And he is doing it very rapidly. 
 
 Mr. Olmsted. What do you want him to eat? 
 
 Mr. Lowenstein. We want him to eat canned milk, for instance, 
 and American flour. The importation of flour is increasing very 
 rapidly. He is beginning to eat bread, which he hanlly knew a few 
 years ago. He uses canned milk, he uses canned meats, he uses 
 canned salmon, he uses ham and l)acon, he uses better cloth than he 
 used to buy before. And as he has more money he spends more and 
 lives better; he educates his children better; in other words, he 
 becomes a better man. 
 
 Mr. Garrett. He eats canned meats? 
 
HEARINGS BEFORE COMMITTEE ON" INSULAE AEEAIES. 101 
 
 Mr. LowENSTEiN. Yes, sir. 
 
 Mr. Parsons. What caused the falling off in the hemp exports a 
 year ago? 
 
 Mr. LowENSTEiN. As I said before, the drought, to begin with, and 
 that severe typhoon we, had; and the same with reference to the 
 copra. 
 
 WAGES OE LABOR INCREASED. 
 
 The labor in the Philippines is going up very rapidly. For in- 
 stance, down here in Sorsogon, where they produce hemp, the laborers 
 get ^2, ^3, aind ^4 a day for hemp stripping and loading steamers. 
 Of course, that sort of wages was never thought of before American 
 occupation. That is why I say labor has increased and the cost of 
 production has increased. 
 
 Mr. Ide. That is not the general compensation for laborers in the 
 islands ? 
 
 Mr. LowENSTEiN. No; but in Manila the wages have increased. 
 The wages of a longshoreman at the present time are 75 cents gold 
 per day. The government pays 50 cents and more, and of course they 
 do not make their laborers work as hard as we do. As the Filipino 
 gets more money he spends more, he lives better, he improves his own 
 condition and the condition of his family. I think the experience of 
 Doctor Barrows, the head of the school system, is as important in 
 that connection as anything else ; and he told me the other day that 
 throughout the islands the natives had begun to live better than 
 they did before. 
 
 THE GREATEST NEED OE THE PI-IILIPPINE ISLANDS. 
 
 The Chairman. To sum up your experience, and in your judgment, 
 what is the one thing most needed in the islands in the way of legis- 
 lation ? 
 
 Mr. LowENSTEiN. I think the agricultural bank will do more imme- 
 diate good than anything else there. 
 
 The Chairjian. Well, I think we will leave it right there. 
 
 Mr. LoAVENSTEiN. I thank you very much. 
 
 Whereupon, at 12.40 p. m., the committee adjourned. 
 
PROPOSED AGRICULTURAL BANK FOR THE PHILIPPINE ISLANDS. 
 
 CoiMjriTTEE OX THE PHILIPPINES, 
 
 United States Senate, 
 Wednei^diii/, -/(uiiiary 30, 1907. 
 
 The committee met at 10. o'clock a. m. 
 
 Present: Senators Lodge (chairman), Plale, Beveridge, Long, Dick, 
 Nixon, Branclegee, Culberson, McCreary, and Stone. 
 
 STATEMENT OF PKOF. EDWIN WALTER KEMMEREE. 
 
 Mr. Kejuierer. Do you wish me to go ahead and give an outline 
 of the proposition under discussion ? 
 
 The Chairman. I would like you to stato^ your relation to this 
 matter, and your experience in Egypt. 
 
 Mr. Keji merer. I spent two 3'ears and a half in the Philippines as 
 adviser to the Philippine Commission in matters relating to the cur- 
 rency reform. JMy official position during the greater part of the 
 time I was in the islands was that of chief of the division of the 
 currency. In connection with that work I had considerable to do 
 with the banking work of the government, particularly the work of 
 bank examination. Along about the fore part of 1903 the Philippine 
 Commission passed a resolution directing the treasurer of the Philip- 
 pine Islands to make a report as to the advisability of establishing a 
 government agricultural bank in the islands. "When I arrived in the 
 Philippines in August, 1903, the governor of the islands (Secretary 
 Taft) instructed me to prepare a report on that subject. I accord- 
 ingly investigated the matter rather carefully and later prepared a 
 report, which was published in the winter of 1905, copies of which, 
 I believe, the members of this committee have. This report is on 
 " The advisability of establishing a government agricultural bank in 
 the Philippines." 
 
 Senator Dick. Is the report numbered as a jDublic document? 
 
 Mr. Kem MERER. It is not numbered as a public document. It was 
 published by the Bureau of Insular Affairs. 
 
 After surveying the subject carefully, and talking with a number 
 of people who were familiar with banking conditions in the 
 islands, and also Avith the general agricultural conditions there, I 
 made up my mind that it would be inadvisable for the government, 
 on its own initiative, to try to establish and run an agricultural bank, 
 and so my report to the Commission, to which I have referred, took 
 a position strongly adverse to the establishment of a government 
 agricultural bank. 
 
Z AGRICULTUEAL BANK FOE THE PHILIPPINES. 
 
 I came to the conclusion, furthermore, that the wisest course to 
 pursue would be along the lines followed in Egypt in the establish- 
 ment of the Agricultural Bank of Egypt, which had proven such a 
 remarkable success, and the general character of which I will en- 
 deavor to explain to you in a few moments. So, in the report I ad- 
 vised that the Philippine government seek authoi-ity from Congress 
 to establish a bank along the Egyptian lines — that is, to give an in- 
 terest guaranty or a dividend guaranty to private capital invested in 
 such an enterprise. 
 
 Last year the Philippine Commission appointed me a special com- 
 missioner to Egypt to investigate the subject of the Agricultural 
 Bank of Egypt and to make a repoi't to them and to the Secretary 
 of "War. I spent a couple of weeks in Egypt, and while there I inter- 
 viewed the Earl of Cromer, the manager of the >\ational Bank of 
 Egypt, the manager of the Agricultural Bank of Egypt, and a num- 
 ber of other prominent bankei-s, business men, and government offi- 
 cials. The result of my inquiries there have since been published in 
 "A Report on the Agricultural Bank of Egypt," copies of which 
 have been placed in the hands of the members of this committee. 
 
 ^\ow, a word in regard to the need of some facilities for the exten- 
 sion of agricultural credit in the Philippine Islands. I suppose that 
 it is generally admitted that the future of the Philippine Islands — 
 the economic future — depends more largely on its agriculture than on 
 any other line of economic activit^r. The Philippines are preemi- 
 nently' an agricultural Country, and I suppose always will be. Agri- 
 cultural conditions in the Philipioines at the present time are bad. 
 There is no question about tliat. One of the best -known and most 
 conser\'ati'\-e business men in the islands — an American Isusiness 
 man — stated before the ETouse Conunittee on Insular Afl'aiis a few 
 weeks ago that probably agricultural conditions in the Philippines 
 are at the present time no better than they were when Americans first 
 entered the islands in 1898. 
 
 There are no facilities in the islands at the present time by which 
 the agriculturists can obtain the necessary funds for the development 
 of their joroperties. As a result of the insurrection, the destruction 
 of the farm cattle by rinderpest, and as a residt of the recent typhoon 
 and other mifortunate happenings, whatever progress PhilijDpine 
 agriculture has made during the past few years has been very slow. 
 In most of the provinces of the islands it is impossible to borroAv 
 money on agricultural security at any rate of interest. There are 
 only a few places where money can be borrowed on agricultural secu- 
 rity at all, and, with a few exceptions, it can be borrowed in those 
 places only at exorbitant rates of interest. 
 
 Senator Brandeoee. When you say '•agricultural securilies" do 
 you refer to the land? 
 
 Mr. Kemmeree. I refer to lands and crops. 
 
 Senator Hale. W^hat rates of interest are exacted? Are the loans 
 made by banks or by private usurers? 
 
 Mr. Kem MERER. Largely by private business houses or by Chinese 
 money lenders. An investigation of this subject was made some time 
 ago. Inquiries were sent out by the insular ti-easurer to the various 
 provincial treasurers throughout the islands as to the rates of interest 
 prevailing in their resijective localities and as to the need of an agri- 
 
AGRICULTURAL BANK FOR THE PHILIPPINES. 6 
 
 cultural bank. The replies to these inquiries are summarized in my 
 first report, in which I have tabulated a schedule of the rate of interest 
 on agricultural loans ijrevailing in the various provinces. (The 
 schedule will be found on pages '2!S to 30 of the re^Dort.) 
 
 Senator Hale. They are pretty high, are they not? 
 
 Mr. Kemjieeee. They show that the rate ^'aries from 1 per cent a 
 month to 10 per cent a month. A rate as low as 2 per cent a month is 
 rather uncommon, except in the case of the larger loans. 
 
 Senator Beandegee. What are the dates of those two reports of 
 yours to which you have referred ? 
 
 jMr. Kejemeeee. One report was published last year, but it was 
 written in February. 1905. 
 
 Senator Beandeoee. That is the first one ? 
 
 ]Mr. Kesimeeee. Yes, sir; the first one. The second report was 
 published a few months ago. 
 
 Senator Hale. They mortgage their crops, do they not ? 
 
 Mr. Kejijieeee. Yes; they mortgage their crops or their lands, 
 either one. The i^etty loans are made by Chinamen generally on the 
 condition that when the crops are sold the Chinaman can buy the 
 crops at their own price. The European commercial houses that 
 make loan to the large agriculturists likewise not onh' charge heavy 
 rates of interest, but frequently insist upon the jirivilege of buying the 
 crops later at their own prices — ^^prices often considerably below those 
 of the open market. There is no institution in the Philippine Islands 
 filling this need for the loaning of money to agriculturists. Ever 
 since Spanish times there has been agitation and discussion as to the 
 need of some institution for the extension of agricultural credit. 
 Jlather liberal powers in that regard were contained in some of the 
 Spanish laws, but they were never taken advantage of to any extent. 
 
 At the ]n'esent time there is no bank that is filling the need. Of 
 the four large exchange banks in the islands, two are prohibited by 
 their statutes from loaning money on real estate security. The other 
 two banks loan on such security only small amounts, and that A-ery 
 reluctantly. An investigation that I made shortly before leaving 
 the islands led me to the conclusicm that probably the entire amount 
 of the loans of the two leading banks in the islands that do loan on 
 agricultural security was less than $400,000, and this in a country of 
 upwards of 8,000,000 people, whose principal business is agriculture. 
 
 Senator Beaivuegee. Where are those banks located? 
 
 Mr. Ke:mmeeee. The two I refer to are located in Manila; one has 
 a subbranch in Iloilo and the other a subbranch in Cebu. 
 
 Senator Beandegee. Of what institutions are they branches ( 
 
 Mr. Kemmeeee. One of them is a branch of the International 
 Bank, which is chartered in Connecticut ; the other is a local bank — 
 the Spanish-Filipino Bank. It has a capital of a million and a half 
 jjesos, and, I believe, a surplus of about an equal amount. 
 
 If something must be done, the question arises, " How shall we go 
 about it ? " I doubt if it is worth while here to consider in any detail 
 the subject of a Government bank — a bank carried on by the Gov- 
 ernment itself. It seems to me that in the Philippines the arguments 
 against such a proposition are very strong. The Filipinos have a 
 tendency to rely on the Government altogether too much anyway. I 
 am very much inclined to think that if the Government should estab- 
 
4 AGEICULTUEAL BANK FOR THE PHILIPPINES. 
 
 lish such an institution the people would look upon it as a sort of 
 paternal institution ^Yhich had an unlimited supply of wealth upon 
 which it placed little value, because it was easily obtainable, and 
 which it was under obligation to loan to the people on easy terms of 
 payment. It would be expected to be liberal to the extent of laxity 
 in collecting its annuities and in otherwise enforcing the terms of tlie 
 loan contract. The natives would feel that it was an injustice if the 
 Government should try to enforce the terms of the loan contract in 
 a business-like way, and I think that the Government would find it 
 extremely diificult to conduct such a bank on strictly business prin- 
 ciples without causing a good deal of hard feeling. 
 
 The sentiment in the Philippines is not, of course, as pro- American 
 as -^^e would like to have it. The insurrection was put down only a 
 short time ago,- and, if the government is to obtain the good will and 
 support of the peojDle, and to encourage good feeling, it must handle 
 the Filipinos Mith gloves for a considerable time. Should the officials 
 of a govermnent bank, for example, receive applications for loans 
 from two persons, and grant a loan to one man and refuse one to the 
 other — perhaps his next door neighbor — that would of course cause a 
 feeling of injustice. The man whose application was rejected would 
 reason that the money loaned was Government money, to which he had 
 just as much right as his neighbor, that the supply was inexhaustible, 
 and that it was the rankest kind of injustice and political discrimina- 
 tion that he should be refused a loan while his neighbor received one. 
 And, again, if, when an annuity became due and was not j)aid, the 
 Government should say : " You must pay that money or we will en- 
 force its collection." I think it would find that the people would feel 
 that such a procedure was unjust. They would feel that the Govern- 
 ment ought to be liberal to the point of laxity, because its funds were 
 unlimited. If it should be compelled to foreclose mortgages to any 
 extent for nonpayment of loans, it Avould be vituperated for its greed 
 in exacting money from a poor and unfortunate people, and for de- 
 priving them of their property to increase its already extensive 
 domains. 
 
 Senator Hale. What you are speaking of now is on the theory of 
 the establishment of an agricultural bank on the Egyptian basis, or 
 on the theory of the government organizing this bank ? 
 
 Mr. Ke3i MERER. On the theorj' of the Go^-ernment's organizing and 
 managing the bank. I am strongly opposed to the Government's un- 
 dertaking the jDroposition directly, for the reasons mentioned. I 
 believe, moreover, that it would be difficult for the Government to 
 23ay salaries sufficient to get a high jjersonnel for the more important 
 official ijositions for such a bank. A fact of great importance with 
 reference to the subject of a Government agricultural bank for a 
 country situated like the Philippines is, that no such institution under 
 conditions like we have in the Philippines has ever succeeded. I 
 make this statement on the authority of Mr. F. A. Nicholson. 
 
 Senator Brandegee. What position do you occupy now ? 
 
 Mr. Kemmeeer. I occupy no Government position at the present 
 time. I am assistant professor of political economy at Cornell 
 University. 
 
 A tew years ago the government of the Madras presidency, India, 
 appointed a man by the name of F. A. Nicholson to make an investi- 
 
AGRICXILTUBAL BANK FOE THE PHILIPPINES. 5 
 
 gation in Madras as to the advisability of the government's taking 
 some measures for the extension of agricultural credit facilities in 
 the Madras presidency. Mr. Nicholson made a large two-volume 
 report on the subject, covering in great detail the experience of other 
 coimtries. His conclusion with reference to the subject of a Gov- 
 ernment agricultural bank for Madras is as follows : 
 
 The establishment of state banks is out of the question. It is impossible, 
 and would, if possible, be inadvisable. It would enormously develop bureau- 
 cratic interference in every-day affairs of life, and would absolutely confirm 
 the already overwhelming tendency of this country to look to the state, not 
 only in all emergencies, but in the ordinary affairs of life to consider it as 
 answerable for or bound to relieve its misfortunes and to accept the burden of 
 all its debts and poverty ; it would develop in a high degree the habit of at- 
 tempting to overreach and defraud that entity vaguely known as "govern- 
 ment," which is usually credited with unlimited means and with the ability to 
 overlook individual debts. 
 
 Again, he says: 
 
 The history of rural banking shows that no state bank has ever yet succeeded 
 except in very petty states, where the administrative staff is out of all propor- 
 tion — relatively to large states — to the work to be done and the area to be covered 
 by it. or where the communes are linked to the central organization by peculiar 
 arrangement, or where the banks are not credit banks at all, but mere offices of 
 issue of loans, either upon the results of the inquiries of special commissions, 
 as in the case of the German rent charge banks, or tipon the security of commer- 
 cial organizations which deal with all details, as in the case of the Russian 
 peasants land bank, founded to enable the ex-serfs to buy out the land settled 
 upon by them. 
 
 The Earl of Cromer, when the matter came up in Egypt, opposed 
 the establishment of a Government bank there, although the Gov- 
 ernment did try the experiment to a very slight extent in making 
 small loans. He stated, in his report of 1899 : 
 
 It «'as never intended that the Government should embark seriously on a field 
 of enterprise which can more suitably be left to private individuals and insti- 
 tutions. 
 
 The objections to purely go^■ernment action in Egypt are twofold. In the 
 first place, the (Jovernment could not, without much iuconvenieuee. have pro- 
 vided the necessary capital. In the second place, the officials of the Govern- 
 ment have not the time to go amongst the villagers and seek out those who are 
 in want of loans. Even if they had the neccessary time at their disposal, it 
 is not altogether desirable that they should be em[jloyed on work of this sort. 
 Further, they have no personal pecuniary interest in the matter. When it 
 has been publicly notified that on application to some Government authority, 
 at a certain time and place, small loans may be obtained on certain condi- 
 tion.?, the Government officials naturally enough think that they have done all 
 that is required of them. 
 
 In his report of 1900 he says: 
 
 " It is not, in my opinion, desirable that Government officials 
 should, in their official capacity, investigate into the private affairs 
 of the people to the extent that such investigation is necessary for 
 the safe making of small loans on agricultural security." 
 
 Senator Hai,e. Won't you, right at this point, when you state 
 your objections to a Government bank of this kind, state what your 
 scheme and Lord Cromer's scheme is, so that we may understand 
 what you want? How does it differ from the Government bank? 
 
 Mr. IvEJiiiEEBR. In order to show what the Egyptian scheme is 
 it is desirable that, with the permission of the committee, I make 
 a very brief sketch of the facts leading up to it. 
 
 In 1894 in Egypt, or before that time, the Eail of Cromer tried 
 to induce private capital to establish agricultural banks in Egypt. 
 
b AGRICULTXTEAL BANK FOE THE PHILIPPINES. 
 
 He Avas informed that on account of the thriftless character of tlie 
 jDeasants, and of the luistable conditions there, that such an enter- 
 prise would not i^rove profitable, and he was accordingly unable to 
 induce any jDrivate concerns to take it up. Capitalists lacked faith 
 in the Egyptian peasants. Finally, the Government itself made 
 some loans of seed. It sold seed to a number of peasant proprie- 
 tors, and provided that the payments therefor should be made at the 
 end of the crop season. The payments were all made in due time. 
 The Government did this for two or three j'ears. In ISiX.i it loaned 
 7,700 pounds sterling. It received every pound back with the ex- 
 ception of £20. This venture having proven srccessful, the Gov- 
 ernment, a year or so after, took measures for the establishment of 
 the National Bank of Eg^'pt. This is a bank established by private 
 capital. One of the main reasons that induced the Governmeut 
 to consent to the establishment of this bank, according to the state- 
 ment of the Earl of Cromer, was its desire to provide facilities for 
 the extension of agricultural credit to petty farmers. This bank 
 began operations on a small capital. It was provided that the Gov- 
 ernment should guarantee interest at 3 per cent per annum on the 
 funds of the bank Avhich were invested in agricultural loans to the 
 peasantry. Xo loan was to exceed £300. 
 
 Senator Stone. 'S^hat was the guaranty ? 
 
 Mr. Kejimeeer. Three per cent per annum. 
 
 Senator Stoxe. ^Vas this guaranty made l)y the English or the 
 Egyptian government ? 
 
 Mr. Ke:\i5ieeee. It was nominally the Egyptian government. 
 Practically, it was the English Government in Egypt. Of course, 
 this first guaranty elimiuated one great objection to the private 
 cajjital coming in — that is. the risk was done away with. The 
 guaranty covered the principal and interest. 
 
 Senator Beveridge. Will you state that guaranty again ^ 
 
 Mr. KEjmERER. The guaranty was for 3 per cent. 
 
 Senator Beveridge. What kind of a guaranty was that ? 
 
 Mr. Ke5i:merer. The Egyptian government guaranteed to the Na- 
 tional Bank of Egypt a 3 per cent net return on all funds invested in 
 loans to the peasantry. The guaranty took such a form that it 
 amounted to a guaranty of the principal invested as well as of the 
 interest. 
 
 Senator Hale. The go\'erument did not furnish the funds for the 
 bank to do lousiness, and the bank did not do anything in the way of 
 competitive hanking business? 
 
 Mr. Ke3i merer. Nothing, except that at one time the government 
 made a temporary loan to the bank, the bank's capital having proven 
 insufficient to meet the great demands made upon it for loans to the 
 IX'asantry. This advance of £'2;">0.000, made in 1901. was paid back 
 as soon as the bank's capital could be increased. 
 
 Senator Beveridge. The guaranty amounted to the government 
 saving: " If the people do not pay the monev back we will make it 
 good?" 
 
 Mr. Kejuierer. Yes, sir. 
 
 Senator Hale. It guaranteed the interest? 
 
 Senator Beveridge. No; the principal, too. 
 
 ^Ir. Ke:mjierer. The provision was this: At the end of each year 
 the gross profits of the year were taken, and to the gross profits were 
 
AGKICULTURAL BANK FOR THE PHILIPPINES. 7 
 
 added any sums received during the year whicli liad been due the 
 ])revious year and not paid wlien due — that is, past due loans which 
 were paid in succeeding years. Then from that sum there was 
 deducted all expenses of operation during the year, in the first place, 
 and, in the second place, all sums that were due during the year and 
 not paid. So that the bank never carried as good a cent of past 
 due loans from one year to the other. P]very dollar due during the 
 year and not paid by the end of the year was counted as an absolute 
 loss in figuring the bank's net profits for the year. The particulars 
 of this arrangement you will find given in detail in my two reports. 
 
 Senator Beveeidge. These loans that were not paid at the end of 
 the year were counted as loss and as though they would not be paid 
 ■it any time in the future, and the Government would then come in 
 and pay the amount of such loans to the bank. I understand you 
 to say that that is what the guaranty amounted to ? 
 
 Mr. Kejijieree. If, after making those deductions, the net returns 
 of the bank, together with the accumulated surplus, were not sufficient 
 to pay a 3 per cent dividend, then the Government agreed to step 
 in and pay to the bank a sum sufficient to enable it to pay such a 
 dividend. 
 
 Senator Hai^e. That is, the Government agreed to that. How 
 did this work — the practical operation? 
 
 Mr. Keimjieeee. There is one other important point in this con- 
 nection which I would like to mention. The Government also placed 
 at the disposal of the bank its own tax collectors for the collection of 
 the annuities on these loans. These loans were for the most part made 
 to be paid back in ;5, 10 and, later, 20 installments, each installment 
 to co\'er the annual interest and a certain percentage of the principal. 
 One great difficulty in the way of inducing private enterprise to take 
 this matter up was the administrative expense of collecting the an- 
 nuities on such a large number of petty loans. We have Govern- 
 ment tax collectors in the Philippines for the collection of land taxes. 
 When our tax collectors go out to collect the land taxes we can 
 au.thorize them to collect the annuities on the loans and transfer 
 them through the provincial treasurers to the bank. These collectors 
 would be paid, as in Egypt, a special commission for this extra work. 
 In that way the bank would avoid the expense of a large staff for the 
 collection of these annuities — an expense which would prol^ably be 
 prohibitive for a private bank without this privilege in a cottntry like 
 the Philippines. 
 
 Senator Braxdegee. Is the anntiity to which you refer the principal 
 and interest ? 
 
 ^Ir. KEJtjiERER._The annuity is an installment of the principal 
 and the annual interest. 
 
 The question aslced me was: " How did the system work? '" 
 
 Senator Hale. The bank began its operations in what year I 
 
 Mr. Ke^ijierer. The National Bank of Egvpt began its operations 
 in 1898. 
 
 Senator Hale. That is eight or nine years ago? 
 
 Mr. Ke:mmeeer. Yes, sir. 
 
 Senator Hale. Now, tell us how it worked. H.as the Government 
 ever had to pay anything? Has the institution been a profitable one? 
 
 Mr. Ke:\imerer. The bank started in with a very small capital — an 
 
8 AGEIOULTUKAI, BANK FOE THE PHILIPPINES. 
 
 authorized capital of £2,500,000 and a paid-up capital of £1,250,000. 
 The loans extended so raj^idly that the capital was increased. 
 
 Senator Hale. This money was furnished by private capital? 
 
 Mr. Kejimeeer. Yes, sir. The capital was increased and the agri- 
 cultural credit operations of the bank soon assumed such large pro- 
 portions that they became unwieldy for the National Bank of Egypt, 
 and it became necessary to establish a separate institution to take 
 over that business; accordingly, in 1902, the Agricultural Bank of 
 Egjrpt was established. The Agricultural Bank of Egypt took over 
 all the agricultural credit business of the National Bank of Egypt, 
 and was granted by the Egyptian Govei'nment the same guaranty 
 and essentially the same privileges as had previously been enjoyed by 
 the National Bank of Egypt in respect to its agricultural loans. The 
 bank's business increased very rapidly, and from a small beginning 
 of an authorized capital of £2,500,000 and a paid-up capital of 
 £1,250,000, the latest reports show that the capital, including deben- 
 tures, has increased to about £7,000,000. The bank has recently ob- 
 tained authority for a further increase. When this new increase is 
 effected the bank will have a capital of over £10,000,000. That looks 
 as if the bank had proven a success from the financial standpoint. 
 
 As regards the capital, the bank at present has debentures of about 
 £4,000,000. These debentures pay .3.5 per cent, and they are quoted 
 at a little below par at the present time. The bond market every- 
 where is bad in these prosperous times. The cumulative preferred 
 stock, of which the bank has about £1,250,000 in shares of £10 each, 
 and on which a 4 per cent dividend is paid, stands at just about par 
 in the London market. The common stock, Avhich has a par value of 
 £5, stands to-daj^ at about 100 per cent premium in the London mar- 
 ket. The bank has paid dividends on its stock from the first. The 
 first year it paid 4 per cent on common stock; the second j'ear 6 per 
 cent, the third year 7^ per cent. Evei-y year it has set aside some- 
 thing for the surplus. The deferred oi' founders' shares, of which 
 there are 2,000, have a par value of £5, and were being sold when I 
 was in Egypt last March at £950. The Earl of Cromer informed me 
 that they had been sold at as high a figure as £1,200. 
 
 Senator Bkandegee. ^^^lat rate of interest did they charge for these 
 loans ? 
 
 Mr. Kemjierer. The National Bank of Egypt originally charged 
 10 i^er cent ; when the Agricultural Bank of Egypt was established in 
 the summer of 1902 the rate was reduced to 9 ]Der cent ; a further re- 
 duction has recently been made to 8 per cent. 
 
 The Chair JL^N. How much did you say these deferred shares paid? 
 
 Mr. Kemmerbr. They were said to be worth £950 last March. They 
 paid 6.3 per cent dividends the second year, and 15.15 per cent the 
 third year. 
 
 Senator Ci'Lberson. Has the Egyptian Government been com- 
 pelled to pay any money on its guaranty ? 
 
 Mr. Kemmerer. Xo, sir; with a success of that kind one would not 
 exi^ect that the Government would be called upon to make good a 3 
 per cent guai-anty. The fact is that the government has never been 
 called upon to pay a cent on its guaranty, and the Earl of Cromer 
 says that there seems to be no probability of such a contingency. The 
 officers of the bank say the same thing, as do also its competitors. 
 
AGRICULTURAL BANK FOR THE PHILIPPINES. 9 
 
 HoAvever, the guaranty enables them to float their debentures on the 
 market more easily, and they can get better prices than they could 
 without it. I have talked with other bankers and persons who are 
 well informed concerning the institution, and they say that the bank 
 has an excellent financial standing, and that it is highly improbable 
 that the government will ever be called upon to pay a cent on its 
 guaranty. 
 
 Senator Hale. I have read a report of your hearings before the 
 House committee. Has the banlt, as its business has increased, low- 
 ered its rate of interest charged to the agriculturists ? 
 
 Mr. Kemmeree. They started in, in the case of the National Bank 
 of Egypt, at 10 per cent. When the Agricultural Bank was formed, 
 the rate was reduced to 9 per cent. A short time ago the bank asked 
 authority of the Government to increase its capital to £10,000,000, and 
 this authority was granted on the understanding that it would de- 
 crease its rate of interest on outstanding loans as well as on loans to 
 be made in the future to 8 per cent. 
 
 Senator Culbeeson. Are these loans made on agricultural lands ? 
 
 Mr. Kejimerer. They are made on agricultural lands. There is no 
 loan above $2,500 of our money. The average size of the loans is only 
 about $155 of our monej^ 
 
 Senator Culberson. To what do you attribute the fact that the 
 Government has not been compelled to pay any of the guaranty on 
 the loans of the Agricultural Bank of Egypt? Do you attribute it 
 to the soh-ency of the borrowers, to the value of the lands, or to the 
 extraordinary productiveness of the land, or to what? 
 
 Senator Beveeidge. It is not very largely due to the perfect ma- 
 chinery for the collection of the loans ? 
 
 Senator Culberson. I am trying to get at that. 
 
 Senator Beveeidge. The truth about it is very clear. It is because 
 the loans are collected in just the same way as the taxes are col- 
 lected — by the tax collectors. The people must have the monej^ or 
 they could not pay the taxes. 
 
 Senator Hale. That being so, it must be a fact that the agricul- 
 tural bank has helped to increase the thrift and the paying power of 
 the borrowers. That is the wisdom of it all. 
 
 Senator Cvlkeeson. Will you kindly answer my question in your 
 own way. Doctor Kemme rer ? It is very valuable, of course, to have 
 suggestions of the other Senators, but you have been on the ground 
 and investigated conditions. 
 
 Mr. IvEJtMEEEE. I shoidd say that among the reasons which account 
 for the success of the institution are the following: First, the re- 
 markable organization of the bank and great care that the bank 
 takes in investigating applicants for loans, and in every step in the 
 negotiation of the loan contract, and particularly in matters relating 
 to the security offered. The bank's officials have been exceedingly 
 conservative and careful ; they have an excellent organization, a 
 splendid machine, and it has been administered admirably. In the 
 second place, the bank has a liigh personnel, who are paid good 
 salaries, and this is an important factor in the scheme, according to 
 the Earl of Cromer, who mentions as one of the most important rea- 
 sons for the success of the bank the fact that " the supervision, which 
 has been conducted by verv carefully selected British agents, has 
 
10 AGRICULTURAL BANK FOR THE PHILIPPINES. 
 
 been capable, vigilant, and honest." They pay high salaries and 
 they have a high class of men to carry on the work. 
 
 Again, agriculture in Egypt during the last few years has been 
 very profitable. The last few years have been years of great pros- 
 perity for EgyjDt. The fact that the government has authoi'ized 
 the bank to utilize the services of the government tax collectors in 
 the collection of the annuities has been another important factor in 
 the bank's success. 
 
 The Egyptian peasants moreover, when once relie^'ed of an unjust 
 and iniquitous system of taxation and secured in the possession of 
 their property by the British Government, proved to be not the 
 thriftless people they had so often been chai'acterized, but rather a 
 reasonablj' industrious and thrifty people. Those are the principal 
 reasons, I think, for the success of the bank. 
 
 Senator Culberson. Will you kindly institute a comparison be- 
 tween the conditions you mention in Egypt resulting fi'om the estalj- 
 lishment of the agricultural bank there and the conditions in the 
 Philippines ? 
 
 Mr. Kkmmerer. Would you ha'^-e any objection to my making a 
 few additional statements in regard to the finances of the bank, 
 before I answer that question? 
 
 Senator Culiiersox. Certainly not. 
 
 Senator Braxdegee. AVas there any provision in the Egyptian 
 bank's charter as to the elimination of the government guaranty on 
 loans after the l^ank gets prosperous, so that the guaranty can be 
 withdrawn ? 
 
 Mr. Kemjierer. There is no provision of this kind. The charter 
 riuis for fifty years. When I left Egypt the bank had over l<s."'),000 
 loans outstanding, amounting to about £7,000,000 ($35,000,000). Xo 
 loan exceeded £500 Egyptian (approximately $2,500). Only about 
 £200,000 of the loans are permitted to exceed £300. The average size 
 of the loans was only £31. Now, you would naturally ask, "Would 
 not a bank of that kind have a great many bad debts?'" 
 
 Senator Hai.e. I do not see how it could help it. 
 
 Mr. Ke^uferer. One of the first objections that is generally raided 
 to the establishment of an agricultural bank to make petty loans to 
 small agriculturists is the danger of having a large number of bad 
 debts. The most astonishing feature in connection with this bank in 
 Egypt is the fact j^ointed out to me last March bv the manager of the 
 Agricultural Bank of Egypt and substantiated by the manager of 
 the National Bank of Egypt — that is, that counting the loans they 
 had taken over from the National Bank of Egypt when the Agricul- 
 .tural Bank of Egypt was established in 1002, and counting the loans 
 that they had put out since that time, he did not believe that they 
 had on tlieir books in the total loans outstanding of 7,000,000 pound-^. 
 a single dollar of bad debts; that is, debts that were not collectible. 
 He said that they had one petty loan outstanding that would not be 
 paid by the person who borrowed the money, but that one of the Gov- 
 ernment officials was responsible for this loan, because he had given 
 a false report concerning the security, and the money Avould be col- 
 lected fi'om him. "Aside from that," said the manager, " we have, to 
 the l)est of my knowledge, not a single pound on our l^ooks which we 
 will not ultimatelv collect." 
 
AGEICULTUBAL BANK FOR THE PHILIPPINES. H 
 
 Senator Hale. That is certainly a most amazing thing. 
 
 Mr. Kejijcerer. I asked the manager of the Agricultural Bank 
 about foreclosures. I said : " Ho\y many times have you had to pro- 
 ceed with foreclosures and sell out property ? " He replied : " We 
 have since the bank was organized begun foreclosure proceedings in 
 350 cases. In every one but four, settlements have been made before 
 the proceedings were completed." That is also a most remarkable 
 record for a bank having 185,000 loans, most of which are small, and 
 which are being collected on the annuity plan. 
 
 Senator Dick. You speak of the prosperity in Egyjiit as to the 
 agricultural crops. "Which is the most profitable crop there now ? 
 
 Mr. Kejimerek. I suppose that the greatest crop is cotton. 
 
 Senator Culberson. I imagine that you do not anticipate that the 
 bank will become a large land owner through foreclosures. 
 
 Mr. Kejimeree. Well, you see that in the case of the Agxicultural 
 Bank of Egypt foreclosure proceedings have only been carried 
 through in four cases. 
 
 Senator Clilbeesgn. I ask you, is it not your ojDinion that the bank 
 Avill not become a large land owner? 
 
 Mr. Keiimeree. I do not see why it should. There are no ]Dros- 
 pects of this in Egypt at the present time. 
 
 Senator Hale. You went over this in the House hearing, and also 
 went into a comparison between the localities. I wish that you 
 would go into that again. It was given in the House committee very 
 thoroughly. 
 
 Senator Culbebson. I have not had the pleasure of reading the 
 report of the House hearing. If you will go into this briefly, I will 
 be glad. 
 
 Senator Dick (addressing Mr. Kennnerer). Possibly you have 
 that in your memorandum. 
 
 jNIr. Kejimeeer. I meant to take \\p the relation of the bank to 
 the peasantry, and also a comparison of the Egyptian peasants with 
 Philippine peasants later. 
 
 Senator Dick. You remember my question, if I do not anticipate 
 you ? 
 
 jNIr. Ke-Mjieeee. I will take that up later. 
 
 Senator Dick. Very well. 
 
 Senator Hale. The Senator will remember that we have not very 
 much time. We would be glad to give more time to the considera- 
 tion of this question, but the session is drawing to an end. 
 
 Senator McCeeaey. What is the usual size of the farms in P^gypt? 
 How many acres are there? 
 
 Mr. Kejimerer. The farms in Egypt are for the most part very 
 small. In 1904 over Sti per cent of Egyptian landowners were owners 
 of farms of less than 5 acres in area. (You will find detailed figures 
 with reference to this subject in my report on the Agricultural Bank 
 of Egypt, pp. 6, 7.) 
 
 Senator Hale. I understand that the farms over there are very 
 small. "What is the value of the land per acre. 
 
 Mr. Kemmerer. That is hard to say. 
 
 Senator Xixgn. Is this Agricultural Bank of Egypt a bank of de- 
 posit as well as of loan ? 
 
 JMr. Keji:merer. No, sir. 
 
12 AGRICXILTUBAL BANK FOR THE PHILIPPINES. 
 
 This increase in the loans shows that the fellaheen are taking ad- 
 vantage of the bank. The result of this increase of business has been 
 that the rate of interest has been materially lowered on agricultural 
 loans throughout Egypt. The establishment of the bank has had the 
 effect of driving the usurer out of business to a very great extent, or, 
 perhaps more correctly, of forcing him to loan at more reasonable 
 fates. The agricultural conditions have been improved, and there is 
 no question but that the bank has gi-eatly benefited the Egyptian 
 peasants. 
 
 I do not ^^•ish to put myself in the position of maintaining that such 
 a bank in tlie Philippines would have the remarkable success that this 
 bank has had in Egypt. The conditions in Eg3'^pt are certainlj^ very 
 favorable. There is no risk in regard to drought, and the uncertainty 
 of the crops is reduced to a minimum. They do not have to depend 
 on the rainfall, as they have artificial irrigation. They can count 
 with almost absolute certainty on regularity of the crops. The agri- 
 cultural area in Egypt is only about 13,000 square miles, and it is all 
 right along the Nile. It is compact and easily administered. The 
 bank has something like 72 branches, and it is very easy to get from 
 one to another. While I do not believe that such an institution 
 would attain the remarkable success that the Egyptian bank has, 
 I do believe that such a bank would succeed and be highly profitable 
 if established in the Philippines by private enterprise, if conducted 
 on strictly business principles, if conservatelj^ managed, and if care- 
 fully supervised by the Government. 
 
 Those are the main points I wish to bring up. 
 
 The Chair JIAX. Are the Filipino people in the habit of borrowing 
 
 monev 
 
 Ml-. Kemmeree. They can not borrow money on agricultural land, 
 because there is no one to lend it to them. There is an institution in 
 Manila called the Monte Piedad, which is a savings bank and a 
 pawn sliop combined. It loans money on jewelry and things of that 
 kind. The figures show that only an insignificantly small propor- 
 tion of the pledges are sold on account of nonredemption. I exam- 
 ined the Ijooks of the institution some time ago and was surprised at 
 its success in collecting its loans. The figures of that institution com- 
 pare very favorably with the figures of our model pawn shops in this 
 countiT. The institution is patronized almost entirely by Filipinos* 
 That is about the only criterion we have of the Filipino people as 
 borrowers. The Monte Piedad is a church institution. 
 
 Senator CtfLBEESON. You have instituted a comparison between 
 the loans of the two countries. Now, would you care to institute 
 a comparison between the ijeasantry of Egypt and the farming, 
 classes of the Philippines? 
 
 Mr. Kejoieker. I did institute sucli a comparison in my statement 
 before the House committee, and I can repeat what I said there. 
 
 I belie^-e that in many respects the Egyptian peasantry and the 
 Filipinos are alike. Both have been repeatedly charged with being 
 a lazy, thriftless, and shiftless class of people, who would not live 
 up to their obligations, and who would not work any more than they 
 had to. 
 
 The Earl of Cromer said that he believed that the Egyptian 
 peasantry would " make good " if they were given the chance. At 
 
AGBICULTUEAL BANK FOE THE PHILIPPINES. 13 
 
 least, he -thought that they ought to be given a triah In the earlier 
 days, on account of the unjust taxes, and still more unjust methods 
 of collecting them, there was no incentive to their being thrifty. 
 As soon as tliey had accumulated anything it was taken ivora theiu 
 by government officials under the guise of taxes, fees, fines, etc. 
 The same thing was true in the Philippines und^r the old regime. 
 If the Filipino peasants did save anything they were bound to 
 be deprived of it under one excuse or another by Government 
 officials or by their own caciques. The Egyptian peasantry Averc 
 given a chance, and they made good. I believe that the Filipino 
 will do the same if given a like opportunity. At least, it is worth 
 while to give him a chance. 
 
 I think that the Filipino, on the whole, is, perhaps, not as indus- 
 trious as the Egyptian peasant. I think, on the other hand, that he 
 is more intelligent. He has a greater amount of ingenuity, and ho 
 is more ambitious for an education. When it comes to meeting con- 
 tracts or repaying loans, I am inclined to think that he would not 
 prove as unreliable a man as the Egyptian peasants are proving 
 now. but that within a reasonable length of time he would prove 
 to be a good borrower and would make reasonably prompt pay- 
 ments — that is, for a private bank conducted on strictly business 
 principles. 
 
 Senator Culbeksox. Would you recommend a policy of making 
 loans on lands by these banks by which a man's home could be taken 
 away from himself and his family because of nonpayment of debt ? 
 
 Mr. Kjsmmerer. I think that the loans should be made on security 
 of the borroM'er's property and with an additional provision that 
 the money should be loaned for certain specific purposes, and that if 
 it were used for other purposes the mortgage should be subject to 
 immediate foreclosure. That is a matter which I think should be 
 left to the Philippine government to work out. 
 
 Senator Culbeeson. Do you think that there should be no home- 
 stead exemption? 
 
 Mr. Kemmeeee. I think that the bank would have to be started on 
 a strictly business basis. The Government is supposed to have repre- 
 sentatives on the board of directors and I think that the Government 
 would see to it that the limitations laid down would be very liberal 
 ip cases of that kind. It seems to me that the only way in which pri- 
 vate enterprise can be induced to go into that business is with the un- 
 derstanding that it be conducted on strict business principles. The 
 peasants should be given to understand that if they did not settle 
 iheir accounts when they became due their property would be taken. 
 
 Senator Culberson. You would not have the Government return 
 the money to the bank, as they do in Egypt ? 
 
 Mr. Kem3ieeee. I should certainly say that we can get no private 
 capital to go in there at the present time except on the granting of a 
 guaranty. 
 
 Senator Culbeeson. That is, on a guaranty by the Government. 
 Would they have to make any extra effort to collect the principal ? 
 
 Mr. Kemmeeee. According to the plan proposed the bank is to 
 charge 10 per cent interest. The Government guarantees only 4 per 
 cent on the amount actually invested. The Philippine government 
 would certainly see to it that capital was not invested in the enter- 
 
14 AGEICXJLTUEAL BANK FOR THE PHILIPPINES. 
 
 prise any more rapidly than it could be utilized, and I do not think 
 that the business men who would take up such an enterprise would 
 expect to invest their money in it and then rest back on their oars and 
 get only the 4 per cent interest guaranteed. The guaranty, it should 
 be noted, covers only the dividends on stock or tlie interest on deben- 
 tures and not the principal. 
 
 Senator Culberson. My recollection is that Lord Cromer recom- 
 mended the granting of a guaranty only on I'ailroad investments. 
 
 Mr. KEMaiEEER. I do not know how that is, but certainly he was 
 the originatoi' of this system. He refeiTed to the agricultural bank 
 of Egypt scheme in his conversation with me as one of his pet 
 hobbies. He is certainly a strong supporter of the scheme, and right- 
 fully proud of its success, whatever his oiDinions may be with ref- 
 erence to a similar guaranty for railroads. 
 
 Senator Beandegee. Senator Culberson asked for a comparison as 
 to the thrift and industry of the Egyptians and the Filijjinos. Did 
 you institute any comparison of the amount of the lands held in the 
 Phililjpines as compared with tho.se in Egypt — the amount held by 
 individuals or hj corporations? 
 
 Mr. Kejuieree. No; I did not; here is a statement, however, based 
 on the Philippine census report that will answer that question in an , 
 indirect way. Over Sfi per cent of the farms in Egypt are farms of 
 less than .1 acres each. In the Philippine Islands at the present time 
 there are 81.i.4.')o farms, covering about 7,000,000 acres, of which 
 45.9 per cent is cultivated. Now, of these farms, 80.8 per cent are cul- 
 tivated by their actual owners. Twenty-one and .seven-tenths per 
 cent of the farms in the Philippine Islands are plots of le.ss than 194 
 feet square. Only 4.6 per cent are larger than '2!S acres, and 89 per 
 cent are under l^i acres. So that you see that the great bulk of the 
 farms are very small indeed. 
 
 The Chaiejiax. They are petty farms. 
 
 Senator Beandegee. Have you instituted any comparison as to 
 labor in the Philippines and in Egypt ? I suppose that in Egypt 
 most of the labor is Egyptian peasants. 
 
 ilr. Keji MERER. Yes, sir; and in the Philippines most of the labor- 
 ers are Filipino 23easants. I do not think that in the Philippines 
 the population avouIcI be found so homogeneous as in Egypt. With 
 the exception of the Negritos the Filipino people are probably all 
 of Malay stock, so that the fundamental racial attributes of the 
 different ti'ibes are the same. I think that there is a much greater 
 difference between the people of the different sections of the Philip- 
 pines than between those of the different sections of Egypt ; the Fili- 
 pino people are much more scattered. 
 
 STATEMENT OP PROF. JEREMIAH W. JENKS. 
 
 The Chairjian. We will be glad to hear j'ou now, Mr. Jenks. Our 
 time is rather limited. Explain first the source of your interest in 
 the question. 
 
 Mr. Jenks. In 1901 the Secretary of War (Secretary Root) and 
 the Philippine Commission asked me to go through the countries in 
 the Far East that were under the rule of England and Holland, in 
 order to report to the Philippine government and to the War De- 
 
AGRICXJLTUEAL BANK FOR THE PHILIPPINES. 15 
 
 partnient on questions of economic interest that might be useful in 
 mailing laws for the Philippine Islands, particularly on the questions 
 of money, of labor, of police, and of taxes. On that trip I stopped 
 in Egypt for a time and this question of agricultural loans seemed to 
 me to be the one Egyptian question that would be likely to be of 
 special interest to the Philippine government. I therefore reported 
 upon it to the Philippine government as a very important subject on 
 which Egyptian experience was very suggestive. In that way I 
 came first to make an investigation of this question. At that time I 
 stayed in the Philippines about two months, in order to complete my 
 report and make some investigations there. 
 
 In 1903, in connection with the establishment of the new monetary 
 system, the Secretary and the Philippine Commission asked me 
 again, as I was going to China as a member of the Commission on 
 Internationa] Exchange, to stop in the Philippines and confer with 
 the Commission regarding the monetary situation, so that I then had 
 an opportunity a second time to study conditions in the Philip])ines. 
 
 Professor Kemmerer has covered the subject so thoroughly that I 
 do not need to enter into the general discussion; but there are, I 
 think, one or two points that have not been quite covered. In the first 
 place, Senator Beveridge has asked some questions as to the con- 
 nection between the Egyptian Government tax collectors and the 
 collection of the agricultural loans, and I do not think that this 
 subject has been quite understood. 
 
 As a matter of fact the collectors of taxes in their regular work 
 make demand also, as Professor Kemmerer has said, for the amounts 
 clue the bank. In case, howe^'er, there is any default in payment 
 of these loans, it is not the government tax collectors who enforce the 
 payment, as was implied in the question of the senator. In case the 
 collector finds that the interest will not be paid, he simply so reports 
 to the bank. The bank then sends its own private agent to investi- 
 gate the case, and if it is found that the default is on account of 
 illness or some other unavoidable misfortune that is probably shortly 
 to be overcome, then a delay is granted and the money is taken up 
 in due time. 
 
 On the other hand, if it is found that the failure to make payment 
 is due to the desire of the borrower to CA^ade his obligations, an Eng- 
 lish agent is then sent to collect the money, and the matter is settled 
 by a resort to the courts. But the government collector, as such, 
 does not prosecute any claims. It is simply a convenience to the 
 bank, and to the borrower also, to have the bill presented at the same 
 time that the tax is collected. I have no doubt that a similar plan 
 would be adopted by the Philippine government in the event of 
 the establishment of the proposed agricultural bank in the islands. 
 
 Senator Beandegee. We could establish, doubtless, the same sj'stem. 
 
 Mr. Jenks. Yes; we could undoubtedly establish such a system. 
 
 Senator Beandegee. And use our own tax collectors. 
 
 Mr. Jenks. And use our own tax collectors. Of course, that is 
 something that the Philippine Commission can determine for itself, 
 but it seems to me a desirable thing. As long as the government 
 does .not have anything to do with enforcing the collection of the 
 loans it would not do the government any injury. 
 
 Another question was as to the opposition of Lord Cromer to guar- 
 
16 AGRICULTURAL BANK FOR THE PHILIPPINES. 
 
 anteeing interest on railway investments in Egypt. There have been 
 established some agricultural railways in Egypt with such a guar- 
 anty. Ordinarily the Egyptian railways are owned and adminis- 
 tered by the State. It was thought desirable, however, in addition to 
 the regular roads, to put through the agricultural districts some 
 narrow-gauge roads chiefly for the transportation of agricultural 
 proflucts. Some of these railroads were built by private capital, and 
 the government did guarantee them. It guaranteed a dividend of 
 3 per cent on the original cost of the lines, estimated at £E. 1,200 
 per kilometer, with the understanding that whenever the gross 
 receipts exceeded a certain amount (225 Egyptian pounds a kilo- 
 meter), then the surjjlus was to be divided between the government 
 and the companies. Lord Cromer was of the opinion, when I was in 
 P]gypt, that those railways would soon pay a dividend of 4 or 5 per 
 cent, so that he did not think that the govei'nment would be called 
 upon to pay any guarant3^ though they did make a guaranty of a 
 3 per cent dividend on those lines. 
 
 Senator Culberson. I understood that. I understood that the 
 government had made a certain guarantj^ on some railroads. My 
 question went to the other fact, however, as to whether Lord Cromer 
 was not personally opposed to that system. 
 
 INIr. Jexks. Lord Cromer, generally speaking, is very much in 
 favor of encouraging private enterprise. 
 
 Senator Culberson. He is very much in favor, too, of encouraging 
 individual independence of the people. 
 
 J\Ir. Jenks. Absolutely so. 
 
 Senator Culberson. He is against a system of paternalism, in so 
 far as it is compatible with the conditions in the East. 
 
 Mr. Jenks. Nevertheless he was glad to guarantee the railroads 
 and the bank as an exceptional matter. AVe might go further on the 
 general question. He does not favor even free education. They had 
 free schools in Egypt for a long time. In 1879 no less than 95 per 
 cent of the pupils attending the government schools paid no fees. 
 Lord Cromer has steadily pushed the policy of charging some fee in 
 the public schools, so that now a vei-y large proportion of the pupils 
 are paying to go to the schools. In his report of 1900 he says : " Last 
 year 98.5 per cent of the boys in the higher primary schools and 86 
 per cent of those in the secondary schools were paying pupils." Lord 
 Cromer's policy is distinctly an individualistic policy and not one of 
 paternalism. In spite of that fact, however, he has found it desirable 
 to recommend these two cases of government guarant)'. 
 
 Senator CiTLBEi;s(iN. May I insert right at this point the statement 
 of Lord Cromer, to which I have referred ? 
 
 The Chairman. Certainly. You mean his statement in regard to 
 the railroads? 
 
 Senator Ciilberson. Yes. 
 
 JNlr. Jenks. There are those two points that I wished to speak of 
 briefly in connection with the statement of Professor Kemmerer. As 
 regards any other points, I should be glad to answer any questions as 
 best I can. 
 
 Senator Hale. Did you visit Egypt also ? 
 
 Mr. Jenks. Yes, I visited Egypt in the fall of 1901. 
 
 Senator Hale. So that you had a view of the relative conditions as 
 
AGEICULTURAL BANK FOE THE PHILIPPINES. 17 
 
 Tegards the safety of establishing an agricultural bank in the Philip- 
 pines as compared with that in Egypt? 
 
 ' Hr. Jenks. Yes. Any statement that I might make on that sub- 
 ject, I may say, would be practically the same as that just made by 
 Professor Kemmerer. On the Avhole, it seems that the conditions in 
 Egypt were somewhat more favorable than they are in the Philip- 
 pines. In the first place, the crops in Egypt are always absolutely 
 hure on account of the system of irrigation. In the second place, on 
 account of the compactness of the territory, there would be a little 
 less expense in the making and the collection of the loans. I am in- 
 clined to think also that probably the Egyptian peasants are more 
 amenable to direction and pressure than are the Filipino peasants. 
 
 Senator Hale. In the report before the House committee you 
 were very interesting in that line as to the difference between the 
 two peoples. I think that the basis of it was that the Filipino is more 
 nomadically inclined and more indolent than the Egyptian? 
 
 Mr. Jenks. I should think, rather more. But, also, on the other 
 side, he is jarobably rather more intelligent. I think that I might add 
 this further experience. On this same trip that I made through the 
 East, I was in India for some months. It had seemed to me that the 
 experiences of India and Burma are also in favor of the establishment 
 of an agxicultural bank. AVliile they have not established any agri- 
 cultural banks there, it was found in northern India and in Burma, 
 where the conditions are much the same as in the Philippines, and 
 where there was'great need for agricultural loans, that it Avas desir- 
 able for the government to make some loans through government 
 officials. 
 
 Some loans were made to the peasants. The results were those 
 anticipated. The peasants were paying very high rates to the usurers, 
 sometimes as high as 40 or 50 per cent, or even as high as 100 per 
 cent, in the coui'se of a year. The Government loaned them money at 
 7 or 8 per cent in small loans, and in that Avay they succeeded, to a 
 considerable extent, in getting the people out of the hands of the 
 usurers. They succeeded also in giving to the peasants better ideas as 
 to habits of business, bj' teaching them to look after their obliga- 
 tions. It seems to me that one of the great advantages of a system of 
 this kind is exactly that. 
 
 When the bank makes a loan the condition of the borrower is very 
 carefully examined. He is asked what he wants to do with the money. 
 The bank Avill not lend him money until he tells just what he wants 
 to do with it. He must state just what kind of an investment he 
 desires to make, and the money will not be loaned to him unless he 
 intends to use it on his farm. AVhen the loan is made the agent of the 
 bank sees to it that the borrower makes use of the money in the direc- 
 tion indicated. If it is found that the boirower is violating his 
 promise, immediate measures are taken to collect the loan, and pres- 
 sure is brought to bear upon the borrower to enforce the payment of 
 the mone}^ This feature in itself has had a great deal to do with the 
 success of the bank in Egypt. 
 
 Senator Hale. Have you gone into the question as to the titles 
 that the peasants in the Philippines have to their lands ? 
 
 Mr. Jenks. Of course, as is known, in the Philippine Islands the 
 titles that the peasants have are in very many cases not good. On 
 A B p— 07— 2 
 
18 AGBICUL.TUEAL BANK FOE THE PHILIPPINES. 
 
 the other hand, the government has established in the islands the 
 Torrens system of land registration, which in time will give the peas- 
 ants absolutely secure titles to their property. If this bill is passed, 
 borro\Yeis will doubtless be compelled to bring their lands under this 
 system of land registration. 
 
 Senator Hale. Do you think that the Torrens system is going to 
 work out all right 1 
 
 Mr. Jenks. I think so. It certainly has worked out well in coun- 
 tries where it has been applied, and that again, I think, is an advan- 
 tage of having their loan system established, because it will bring 
 some pressure to bear to make the landowners get secure titles to their 
 lands. 
 
 Senator Culbersox. I am strongly favorable — and more than usu- 
 ally so, I judge — to the proposition of homestead exemption, and man- 
 ifestly there will be more danger of the lands of the farmers being 
 taken for debt in the Philippines than in Egypt, on account of the 
 less security of the credit in the Philippines, and it would also favor 
 authority on the part of the bank which would be established there to 
 take homesteads for nonpayment of debt. 
 
 Mr. Jenks I think that all questions of that kind can best be 
 handled by the Philippine Commission, who are on the ground and 
 are familiar with the local conditions. As regards my own personal 
 opinion, I will say this : The smaller loans will probably be made on 
 the security' of crops or personal property. There can not well 
 be an exemption in such cases. I am inclined to think that there 
 should be a homestead exemption on lands, although it could not be 
 anything like that found in some States in this country. 
 
 Senator Culberson. It ought, of course, to be suited to the condi- 
 tions there. 
 
 Mr. Jenks. Yes; it ought to be suited to the conditions in the 
 islands. I should, mj'self, be inclined to favor a small homestead 
 exemption. I think, however, that the Philippine Commission should 
 be left to their own judgment on this question. They know more 
 about it. 
 
 Senator Brandegee. Up to what per cent of the valuation of the 
 land security does the Egyptian bank lend ? 
 
 Mr. Jenks. If I recall rightly, it loans up to 50 per cent, and that 
 is what I think should prevail in the case of the proposed Philippine 
 bank in most cases. In some special instances it should not make a 
 loan above one-third the value. 
 
 Senator Beveridge. Who estimates that value? 
 
 Mr. Jenks. The value Avould be estimated, of course, by the agents 
 of the bank. They will have, in the first place, an assessed valuation 
 for purposes of taxation as a basis on which to act. On the other hand, 
 the Government, through its directors and its control, has a check on 
 the bank, and if it finds that the bank has been evading the legal pro- 
 visions, the Government can hold it liable. 
 
 Senator Hale. They ha^'e what they call vouchers. 
 
 Senator Beveridge. Under their system of land valuation was 
 caused the over-valuation of land in the Argentine Republic, and 
 building and loan associations have failed for that reason. 
 
 Mr. Jenks. The failures were chiefly among the national associa- 
 tions; the building and loan associations are usually local in charac- 
 
AGRICULTURAL BANK FOR THE PHILIPPINES. 19 
 
 ter, and are conducted where the people interested know the vahiation 
 of the lands. Those have generally been safe. 
 
 Senator BEX-BRinoE. In some cases where the actual value of the 
 land was only $1,000 it was valued at $5,000, and loans of 50 per cent 
 were made on that basis. 
 
 Mr. Jenks. That was in national associations. Those acted like 
 some mortgage companies in some cases. 
 
 Senator Brandegee. That is largely where the building and loan 
 associations compete with savings banks for business. I think that the 
 proposed bank would produce competition in the Philippines, because 
 it would relieve the people from the usurers. 
 
 Mr. Jenks. I Avould like to add a word further on that subject. It 
 was found in Burma, particularly, that one of the advantages of hav- 
 ing the government ready to make loans came from the interest that 
 the people took in the watchfulness of the government as to their 
 property. In Burma all of the land taxes are levied practically upon 
 the income from the land, and in order that the income may be prop- 
 erly estimated, very careful and accurate surveys are made of every 
 little patch of land, even as small as a quarter of an acre ; so that in 
 every locality it is known that the government has a complete record 
 of the property, and any man can be shown a map of exactlj^ what 
 land he has. That knowledge of the peasant that his affairs are 
 thoroughly known to the government officials and also to others who 
 have a right to know has a tendency to make him very much more 
 careful. I think that the operation of such a system in the Phili]3- 
 pines would be somewhat similar. 
 
 There is one other point about which I should like to speak for a 
 moment in connection with the establishment of this bank as a private 
 institution under a gTiaranty, as compared with the establishment of 
 a Government bank. 
 
 Professor Kemmerer has already called attention to the fact that a 
 Government bank would not be so likely to be successful, because it 
 would be practically impossible to get sufficient skilled help. The 
 (Tovernment would probably be unwilling to pay the salaries neces- 
 sary to get the best type of men. Again, the pressure on the local 
 agents would doubtless be such that the Government officers would 
 find it extremely difficult to enforce the regulations as a private in- 
 stitution would. 
 
 Along these lines I may emphasize very strongly what Professor 
 Kemmerer has said. I think that the general principles could be laid 
 down that any government institution, in order to be successful and 
 not encourage' in the people habits of thriftlessness, must be an insti- 
 tution something like our Post-Office Department. It must be of a 
 monopolistic character and widely extended ; one of such a nature that 
 losses in some parts can be borne by profits in others, as ou.r city post- 
 offices pay in part the losses of remote country districts. A private 
 company would not serve those districts. Again, a government in- 
 stitution should be one that has a multitude of indi^'idual transactions 
 of a routine kind that do not require very much individual initiative 
 on the part of those who are going to manage the business ; here, again, 
 it must be the same kind of an institution as the Post-Office Department. 
 Still further, the work should be such a kind as to be carried on under 
 the puiilic eye, so that it may be checked up continually by public 
 
20 AGRICULTUEAL BANK FOE THE PHILIPPINES. 
 
 opinion. The work of the proposed agricultural bank is not of a 
 routine character at all. It is a matter of individual initiative by 
 its special examining of individual cases. Again, the work is not done 
 under the public eye as is that of the Post-Office and of other institu- 
 tions that are managed successfully by the Government. It is not of 
 that nature at all. Moreover, as has already been set forth, Govern- 
 ment agricultural banks, except in very small States that are ex- 
 tremely paternalistic, have invariably been failures. 
 
 There is one point with reference to the ability of the Philippine 
 government to make this guaranty that I think might be touched 
 upon for a moment. The Philippine government at the present 
 time has so managed its affairs that they have a surplus in the treas- 
 ury. As Governor Ide stated before the House committee, that sur- 
 plus is ample, and more than amiDle, in itself to pay any possible 
 obligations that might come upon the government through this bank, 
 even if the bank were a failure, so that the guaranty would have to 
 be paid to the full amount. But the case is stronger even than that. 
 Owing to the increased price of silver, the government has had to 
 recoin the money of its monetary system, and from that recoinage 
 there will, beyond any question, be a jDrofit from six to seven million 
 dollars gold, so that from this source, too, it would have a surplus 
 fund that has come simply through the increased price of silver, 
 which would enable the government to meet any obligations of that 
 kind without any difficulty at all. 
 
 Another phase of this question was called to my attention yester- 
 day. If the government is going to establish any guaranty, or going 
 to take any risk in this matter, it ought not to make these risks in 
 any way dependent upon the seigniorage profit from the recoinage 
 of its silver. It should take the risk and make it dej)endent upon 
 the revenues. If its wants to raise money for any particular pur- 
 pose — guaranty or other — it should levy a tax for the purpose before- 
 hand, or should secure the necessary money through a loan; it 
 should leave the seigniorage profit to be handled as seems best when 
 it comes in. It is too uncertain in its nature to found a banking 
 institution on. I should not have mentioned this i3oint had it not 
 been spoken of elsewhere; but I feel strongly that the bank should 
 not be made dependent upon the seigniorage — the profit that is to 
 come out of the recoinage of the monej^ that we have there now. 
 
 The Chairman. Do you think that private capital would go into 
 a bank of this sort ? 
 
 Mr. Jekks. I think that the bill should be so drawn that enough 
 power will be put in the hands of the Philippine Commission to 
 enable it to get private capital to invest in the bank. I do not think 
 that private capital is at all anxious to go into a busine&s of this 
 kind. 
 
 The Chairman. Notwithstanding they have done so well in Egypt ? 
 
 Mr. Jenks. They have done well in Egypt in part because of 
 the government guaranty. The bank officials there say that the 
 fact that there is this government guaranty back of the bank has 
 enaJjled them to borrow money, and to sell their debentures at a con- 
 siderably lower rate than they otherwise could have secured. With- 
 out this guaranty of 4 per cent capitalists are not likely to be induced 
 to go so far from home to invest ; they can invest to good advantage 
 
AGHICTJLTURAD BANK FOR THE PHILIPPINES. 21 
 
 right at home. However, I think that an assurance of 4 per cent, 
 with the probability of considerably more, would be sufficient to in- 
 duce capitalists to invest in the bank. 
 
 The Chairman. What is your opinion as to the bank doing as well 
 as in Egypt? 
 
 Mr. Jenks. There are two main reasons why a bank in the Phil- 
 ippines would probabl)^ not do quite so well as the Egyptian bank^ 
 One is because the crops in Egypt are absolutely certain on account of 
 the irrigation there; the other is that the land there is much more 
 compact and the expense of making the loans and coUectrng them 
 Avould be less than in the Philippines where the territory to be covered 
 is so widely scattered. 
 
 Senator Beveeidge. The territory in Egypt is not more compact 
 than it is in the island of Luzon? 
 
 Mr. Jenks. No; but the bank's business would extend over all the 
 islands. 
 
 Senator Culberson. May I ask one question at this point, Mr. 
 Chairman. 
 
 The Chairman. Certainly. 
 
 Senator Culberson. It is a sort of quasi-political question. Do 
 you not believe, Mr. Jenks, that the guaranty of the income on rail- 
 road securities for thirty j^ears, and the establishment of this bank 
 by the guaranty of the government, which is practically the Govern- 
 ment or the United States, extending over a period of years, will 
 have a tendency to keep the United States in the Philippines? 
 
 Mr. Jenks. That question is rather aside from the subject, as you 
 intimate. I will say that it is my private opinion that the United 
 States will be compelled to stay in the Philippines under all possible 
 conditions, at least until after that period of twenty-five years has 
 passed; so that I do not think that there will be any particular 
 danger along that line. 
 
 Senator Culberson. It would certainly not lessen the tendency to 
 get out of the islands. 
 
 Mr. Jenks. Oh, no. 
 
 Senator Brandegee. Did the ijrovisions of the Philippine coinage 
 act compel this recoinage of the silver money that has been re- 
 ferred to? 
 
 The Chairman. A special act covering that point was passed last 
 year. 
 
 STATEMENT OF HON. HENRY C. IDE. 
 
 The Chairjian. Governor Ide, we shall be very glad to hear from 
 you now. 
 
 Senator Hale. I wish that you would now go into the subject of 
 the getting of private capital to go into the Philippine Islancls. 
 
 Governor Ide. The subject of an agricultural bank is a very old 
 one under American occupancy. I went to the islands early in 1900, 
 and remained until this fall. I have had charge of the financial 
 department of the Government from the beginning, and the cry 
 for an agricultural bank has been loud and constant from the Fili- 
 pinos. The people feel that they need and want that kind of relief, 
 but I ]iever could see my way clear to launching the government on 
 such an investment of its money, if it had it to invest — which it did 
 
22 AGEICULTUEAL BANK FOE THE PHILIPPINES. 
 
 not — in a field where private capital would not ventiu'e. I was there- 
 fore very conservative upon the whole proposition, and continued to 
 be so until we had a demonstration worked out in a field where the 
 conditions were in many respects the same as in the Philippines, 
 of a scheme by which capital could probably be induced to invest in 
 the Philippines with a limited aid from the Government, so as to 
 secure such a combination of private capital with limited aid from 
 the Government as would accomi^lish the desired residt, and, on the 
 other hand, not involve the Government in such extensive operations 
 as would imjDeril its financial integrity. An investigation of the sub- 
 ject was made at Secretary Taft's request and my own, Ijv Pi'ofessor 
 Kemmerer. 
 
 The Chairman. "I'ou had charge of the finances of the govern- 
 ment ? 
 
 (Tovernor Ide. Yes. I have had charge of the financial depart- 
 ment of the govei'nment from the beginning. When the report 
 came in from Professor Kemmerer showing that the Eg3q3tian bank 
 was not a theoretical operation, but was an experiment carefully 
 worked out, starting with 10,000 pounds Egyptian advanced by the 
 Government of Egypt, and making loans only in a small field at 
 first, and these being gradually extended. and increased until they 
 became larger than the Government desired to involve itself in, and 
 the business had been passed over to the National Bank of Egypt, 
 and that then a separate bank had been organized for the purpose of 
 making agriculture loans, and that these operations had continued 
 until practically the bank now has between $3.5,000,000 and $40,000,000 
 gold invested, with jDractically no losses, it seemed to me that the 
 Avay was open for the relief that was needed, and preeminently 
 needed, in the Philippine Islands. The situation there is, I think, 
 one that would appeal to any person who became familiar with it, as 
 showing the great need of capital. There are several members of 
 this committee who have been in the Philippines, and all those mem- 
 bers knoAv perfectly well that we ne\'er had a single meeting of the 
 Filipinos anywhere that of two things the agricultural bank was 
 not one that was mentioned and urged. The peoj^le feel the need of 
 and the necessity for it. 
 
 I know that the amount of circulating medium in a country is not 
 the entire measure of its resources. At the same time it is a meas- 
 ure, in a certain sense, and in the Philipj^ines far more than in other 
 countries, and much more so than in the laiited States, whei'c forms 
 of what is practically paper money, drafts, notes, checks, etc.. form 
 so large a jDroportion of our money. In the Philippines practically 
 all we have is the hard cash — the pesos. A firm Avill sencl .")(),000 or 
 100,000 joesos. which it has gotten from a bank, into the interior to 
 pay for cojora, hemp, and other commodities that it is buying for ex- 
 port. The buying agents can not use checks or drafts for this pur- 
 pose. The amount of monev in the Philippine Islands is approxi- 
 mately 34,000,000 pesos. A peso is half a dollar. The S[)anish- 
 Filipino Bank can issue paper money to the amount of its paid-up 
 cajoital, as the law now is. It can practically do so, and its ])aid-up 
 ■ capital is only a million and a half pesos. 
 
 The old currency in the islands has all been eliminated, so that the 
 money there consists of upwards of 34,000,000 ]X'sos of the money of 
 
AGRICULTURAL BANK FOE THE PHILIPPINES. 23 
 
 the islands, and a million and a half pesos of the bank's notes. There 
 is a certain amount of United States currency in the islands, l)iit it is 
 not in common circulation. The banks may use it for the purpose of 
 reserve and for shipment abroad. We have a joopulation of toward 
 8,000,000 people, with only 37,500,000 pesos circulating medium. 
 
 It is useless to say that the usurers ought to be exterminated or 
 eliminated, ^^^lere there is such a small amount of money the people 
 who want it are willing to pay very large interest rates. They pay 
 anywhere from 10 to 20, 30, 40, or even sometimes as high as 100 
 l^ei- cent a year to a usurer. The difficulty is not that here and there 
 enormous interest rates are charged; it is that the money is not in 
 the islands, and the jseojDle can not get it. They can not buy agri- 
 cultural machinery, Avhich they greatly need. They can not buy new 
 animals, and the rinderpest has devastated the islands from one end 
 to the other. They can not procure seed. They go to the local 
 usurers and get petty sums, on which they pay extortionate rates of 
 interest. They borrow only enough to get along on from day to da>', 
 and thus keep themselves always in the hands of the usurers. There 
 is no one thing that we need there so much as caj^ital from the (jutside. 
 We can not form cooperative banks, for the money is not there for that 
 jiurpose, or to deposit in savings banks. The banks that are now in the 
 islands are large institutions, and there are a veiy few of tliem. They 
 are not authorized, in general, to make loans upon real estate. 
 
 Senator Braxdegee. According to the figures that you have given, 
 the circulation in the Philippines Avould be about $2 per capita, and 
 most of it in the banks. 
 
 Governor Ide. I would not say that most of it is in the banks. A 
 good deal of it is in the banks. 
 
 The Chairman. P^roni the figures that GoA'ernor Ide has given. 
 I would estimate the per cajjita at from $2 to $H. gold. 
 
 Governor Ide. Yes. sir ; so that if any scheme could be devised 
 that would bring capital into the islands, the benefits from it would 
 be tremendous. The Government could afford to run some chances 
 of liability for a guaranty if money would come in for the develop- 
 ment of agriculture, and that is of importance to everything in the 
 Philippines. The benefits would be so marked and the prosperity 
 of the whole people would be so increased that the revenues coming 
 into the treasury from increased business would be entirely sufficient 
 to compensate for any liability that might be assumed in connection 
 with the guaranty. The liability that is jjointed out in this bill is 
 up to the amount of $500,000, gold, per annum. The recouunendation 
 of the Philippine Commission one year ago was a liability not to 
 exceed $200,000 a yeai-. I thought that the safe course for the bank 
 to pursue was to be conservative and move most cautiously at the 
 „ntset — to feel its way along, so to speak — and if tlie bank ultimately 
 -needed more than $5,000,000, gold, of capital, it would have made its 
 demonstration l^y that time, and Congress could then authorize an 
 increase of its capital. But this bill does not fix the amount of the 
 capital. The House bill does. This does it in an indirect way. by 
 limiting the liability to $500,000. 
 
 As Doctor Jenks has stated, the Go\-ernment finished the fiscal 
 vear ended June 30, 190(5, with all obligations met, including interest 
 on bonds and every other obligation, with approximately a million 
 
24 AGRK^UDTUEAL BANK FOE THE PHILIPPINES. 
 
 ynd a half dollars, gold, to the good. The operations of this year, 
 as shown by the budget — and it is a very conservative one — ^will 
 result in a surplus of at least a million and a half dollars, gold, more. 
 But public works ought to be constructed, so that I do not mean that 
 it is going to be retained there as a permanent fund at all. But it is 
 api3arent that the Government could stand a loss. If worst came to 
 worst, and the whole amount of this liability had to be paid, the 
 Government would still be perfectly solvent, because the present 
 revenues, I think, are not liable to be diminished. 
 
 The Chairman. Do you think that this guaranty would bring pri- 
 vate capital into the islands; and if so, where from? 
 
 Governor Ide. Yes; I think it would. The manager of the Hong- 
 kong-Shanghai Bank came to see me frequently. In fact he was the 
 first man to bring this Egyptian idea into the scope of my vision. He 
 is an Englishman, of course. He stated that if the government 
 would inaugurate such a system as that the Hongkong and Shanghai 
 Bank would undertake to finance it. That would undoubtedly mean 
 great capital. The government is under no obligations to the mana- 
 ger of that bank, but if the guaranty of the government were made T 
 think that it is a practical jDroposition in normal times. At the imme- 
 diate present, money has been in great demand, and borrowed at high 
 rates of interest here and in other countries. It is not an uninviting 
 proposition to receive a guaranty of 4 per cent on money, with great 
 probability of much larger returns. The guaranty could be 3 or 4 
 per cent, as might be deemed best, with a margin for the investors of 
 the difference between 4 and 10 per cent. 
 
 The loans would probably be made on a 10 per cent basis, and 
 there would be a speculative element that is attractive to capital. I 
 think that the proposition is an inviting one. I think that capital 
 would come in. And it gives a fine and admirable combination of pri- 
 vate enterprise — private security — and of the interest of looking after 
 its own investment on the one hand and government protection to 
 prevent o^jpression to the borrowers on the other, combined with gov- 
 ernment aid in making the collections. The Commission has never rec- 
 ommended any government enterprise of this kind until last yeai'. 
 Last year, aftei' this matter had been thoroughly investigated, the Com- 
 mission were unanimous in making a recommendation in favor of the 
 establishment of an agricultural bank. General Wright was at that 
 time governor-general, and he, as many of you know, is a man of large 
 business experience and capacity. Commissioner Forbes has been a 
 director in many corporations and institutions here in the United 
 States. I myself have had considerable experience as a director in 
 national and savings banks and manufacturing concerns in this coun- 
 ti'v. The other American commissioners are men of sound sen^e and 
 most thorough knowledge of conditions in the islands. The Philip- 
 pine commissioners are all men of large property, know the local 
 conditions, arc owners of large establishments, but are conservative 
 business men. The commissioners have been unanimous for two suc- 
 cessive years in recommending this bank proposition. They know 
 the conditions and the needs of the people. As Professor Jenks has 
 said, it is far safer to leave the details to be determined by them than 
 to undertake to restrict them by legislation here in this bill. 
 
 The CHAimiAN. You are opposed, of course, to a government bank? 
 
AGEICXJLTURAL BANK FOE THE PHILIPPINES. 25 
 
 Governor Ide. I am opposed to a government bank for quite a 
 number of reasons. In the first place, if the scheme develops as I 
 think it will, and as it ought to, the resources of the Philippine Gov- 
 ernment would be entirely inadequate and could not furnish enough 
 money. Again, it is well known that private initiative in a business 
 enterprise is of tremendous value as compared with government 
 development alone. In the next place, I would not like to see the 
 government placed in the attitude of enforcing these collections. 
 The people who had hardships and difficulties in meeting their pay- 
 ments would be pretty certain to feel that they should be favored, 
 that the government was their father and could aiford to be lenient. 
 Disaffection might arise if it became necessary to employ stringent 
 measures in the collection of the loans which, I hope, would not be 
 the case; while with a private institution managing the bank that 
 kind of prejudice Avould not exist. 
 
 Senator Beveridge. Would you go so far in imitation of the Egyp- 
 tian scheme as to have the government collect the loans ? 
 
 Governor Idb. I would. 
 
 The Chairman. Not collect the loans but the interest? 
 
 Senator Beveridge. Yes, the interest. 
 
 Governor Ide. The government collector has to collect the land tax 
 and he could at the same time collect the interest on the loans. 
 
 Senator Beveridge. Would that not be only secondary to the 
 scheme itself in making the proposition attractive ? 
 
 Governor Ide. Certainly; that is one of the great inducements, 
 because the bank would get the moral support of the Government as 
 well as the material. 
 
 Senator Beveridge. They would have the whole machinery of the 
 tax collection for the purpose of collecting the loans? 
 
 Senator Hale. Have you a pretty perfect system for the collection 
 of taxes all over the islands? 
 
 Governor Ide. I think that it is pretty satisfactory. Our system 
 is purely a local one, of course. Each municipality has its own 
 treasurer, but the municipal treasurer is under the supervision of the 
 provincial treasurer, and the local treasurer, who is the collector, col- 
 lects the municipal taxes and they are forwarded to the provincial 
 treasury by the municipal treasurer. The portion belonging to the 
 province is retained, auvl the rest returned to the municipal treas- 
 urer as needed. 
 
 Senator Hale. The municipal treasurer is a Filipino? 
 
 Governor Ide. Usually. The provincial treasurers are, I think, 
 without exception, Americans. 
 
 Senator Stone. If a borrower should refuse to pay his interest, 
 what process Avould the tax collector take to enforce collection? 
 
 Governor Ide. The tax collector would take no steps whatever, 
 if we follow the outline of the draft of the bill that has been pre- 
 pared for consideration by the Philippine Commission. He simply 
 calls for the inonev and receives it, as he does the land tax. If it 
 be paid, it is remitted to the bank. If it be not paid, the facts are 
 reported to the bank, and an agent of the bank takes the matter into 
 his own hands, and the whole process of forcible collection is con- 
 ducted by the bank. How forcible the collection would be, I do not 
 know. 1 think that it would depend largely upon the condition of 
 
26 AGKIGULTUBAL BANK FOR THE PHILIPPINES. 
 
 the crops. I have strong faith, myself, in the success of the proposed 
 bank. Judging, in part, from the payments that have been made to 
 the Monte de Piedad, of which Professor Jenks has spoken, and 
 judging from my personal knowledge of the Filipinos — and I have 
 been in practically every province in the islands — I am confident that 
 the Filipino will want to pay up, that he will want to save his 
 lands, and that he will exert every effort to do so. The moral effect 
 on the Filipinos Avill be verv great, also, in encouraging habits of 
 thrift. 
 
 Senator Hale. You and the Secretary went over this subject very 
 fully before the House committee. I have a copy of the hearings 
 here. Wh&t was the object of that? What has the House commit- 
 tee done? 
 
 Governor Ide. I do not know, excejjt 
 
 Senator Hale. Have they reported ? 
 
 Governor Ide. I think not. The chairman of the committee told 
 me that when he redrafted this bill he would like to have me with 
 him. I have heard nothing from him since that time. 
 
 Senator Hale. There has been no official action taken ? 
 
 Governor Ide. Not to my personal knowledge. 
 
 Senator Hale. These hearings before the House committee are 
 very exhaustive and very interesting. 
 
 Senator Beveeidge. I think that the case made here this morning is 
 one of the most complete of its kind that I have ever heard. 
 
 Senator Aldkich. I would like to ask a question, if I may. 
 
 The Chairman. Certainly. 
 
 Senator ^Vldeich. I may be asking something that is entirely 
 familiar to all of the members of the committee, but is it the intention 
 to make this bank a bank of deposit? 
 
 Governor Ide. No. 
 
 Senator Aldrich. It won't receive any deposits at all? 
 
 Governor Ide. Oh. no. It would be purely an institution for fur- 
 nishing loans. 
 
 The Chairman. Neither deposit nor issue ? 
 
 Governor Ide. No ; they should have no temptation to dabble in 
 any kind of speculation. The bank is to be jDurely for the purjjose, so 
 far as the investors are concerned, of loaning their own money. 
 
 The Chairman. They would loan on merchandise and on crops, as 
 well as on lands? 
 
 Governor Ide. Yes; but under stringent regulations. 
 
 The Chairman. On merchandise that is in the hands of commis- 
 sion merchants? 
 
 Governor Ide. That is a matter that must be legislated upon. This 
 bill j)i'ovides that no loan above $5,000 shall be made without the 
 written approval of the secretary of finance and justice. The 
 whole theory is that it is simply the landowner that the bank is in- 
 tended to help, and that provision was inserted for the purpose of 
 preventing any opportunity for the funds to be largely used by ex- 
 porter's and large dealers or commission houses. The secretary of 
 finance and justice Avould be very conservative in this. 
 
 Senator Brandeoee. Do you know Avhether the rough draft had 
 anything to do Avith warehouse receipts? 
 
 Governor Ide. Professor Kemmerer prei)ared the rough draft as 
 
AGEICULTUEAL BANK POR THE PHILIPPINES. 27 
 
 part of his report to the Commission. The Commission has never 
 taken up that draft and passed upon it section by section, because 
 Congress had not given its sanction. I am not certain as to what 
 authority the Commission would have under the general legislative 
 powers given it. The Commission perhaps could have established 
 an agricultural bank, even with a guaranty, but questions might have 
 arisen as to the power of the Commission to make such guaranty, 
 and it is most undesirable to go into the commercial markets with 
 any question as to the guaranty. The details of the bill have not 
 been worked through by the Commission. There is merely a basis 
 for starting upon. 
 
 The Chairman. It is now 12 o'clock and we will have to adjourn. 
 
 The committee adjourned at 12.05 o'clock p. m. until Saturday, 
 February 2, 1907.