The CHAIRMAN. I think at the present moment it is at a little less than par as compared with gold. At the time of its adoption the seigniorage on the coinage would have amounted to 15 or 16 per cent.

Senator BAILEY. Two pesos are a little less than our American dollar. The fact of it is that when the arrangement was made the silver coinage of that country was overvalued. The appreciation of the price of silver since that agreement was made probably makes it now a little undervalued, and that appears to be the case, because, as the Secretary says, it is difficult to get it. If it was undervalued there would be less difficulty to keep it in circulation.

Secretary TAFT. That is quite true, and that is the difficulty we are having in the Philippines now.

Senator BAILEY. And I think the appreciation since the agreement was made has probably made it a little different.

Secretary TAFT. The fractions are a little different. When the agreement was made, as I recollect it, the difference in the intrinsic value of the coin and the legal value which it was hoped to maintain was as 42 cents to 50.

Senator TELLER. Eighty-four cents to the hundred?

Secretary TAFT. Yes, sir.

Senator BAILEY. It was undervalued about 15 or 16 per cent.

The CHAIRMAN. The Mexican basis is 32 to 1, the same as the Philippine, you know. They have had trouble on account of the cxportation and melting down of silver.

Senator BAILEY. The truth of it is that under the present coinage value there is no necessity for the United States or any other Government to make any agreement about maintaining its parity. Instead of being under obligations to maintain the value of it it would be necessary to readjust it to prevent the use of it in other ways.

Senator TELLER. Would it not have been better to have had Congress provide a currency for that particular region?

Secretary TAFT. I think it would.

Senator TELLER. Would you not have had a currency better adapted to the conditions down there to-day?

Secretary TAFT. I think it would be better always to have provisions made by Congress which shall enable the Executive to carry out his duty. But the question that is always presented to the Executive is how his duty shall be carried out, and whether there is in the law, or whether he can find in the law, as the implication from the duty imposed upon him, authority sufficient to enable him to discharge his duty, or whether he has to say, "Congress has not given me that power with which I could do this thing they have enjoined upon me, so that my hands are tied."

Senator TELLER. He could come back to Congress, then?

Secretary TAFT. Yes; he could come back to Congress. This very agreement was submitted to Congress last year. It was contained in the report. Unfortunately-I say unfortunately because I am very sorry that it was not-the whole agreement was not set out. But, with the exception of the legal-tender clause that was, as I have said, inoperative, those features of it which are made the subject of discussion as to the power appear on page 9 of my letter to the President, which was transmitted to Congress some fourteen months ago and was referred in the Senate to the Interoceanic Canals Committee and

in the House was referred to the Committee on Interstate and Foreign Commerce, and printed as House Document No. 226.

It is not necessary, because you gentlemen are much more familiar with legislation than I am, for me to say that at times Congress leaves the Executive to do the best he can to work out something which Congress expects him to do. For instance, let me call attention to this very act of April 28, 1904. You gave us power to govern the zone until the end of the Fifty-eighth Congress and after that time you left us without any direction at all.

Senator SPOONER. Or any statutory power outside of the canal act? Secretary TAFT. Yes, sir: or any statutory power outside of the canal act.

Senator ALLISON. That was on the supposition that we would legislate in the short session, and everybody supposed we would.

Secretary TAFT. I am not finding fault with Congress, but I am simply telling you the situation as it was for the Executive.

Senator TELLER. We passed an act, but the House declined to take it up.

Senator ALLISON. I thought we did.

Senator TELLER. And we are now being blamed as a Senate because that has not been done.

Secretary TAFT. I understand the position to be that there was general authority for the President, as charged with the execution of the laws and looking after the property of the United States, to retain control there, and that is what he has attempted to do.

I ought to add on the question of motive that what led me to take this action in respect to the currency and advise the President to confirm it was our experience in the Philippines in the same matterwhile I was there silver fluctuated from less than 2 to 1 to 165 to 1— and the difficulties that we had in paying our employees and the complaints, and the just complaints, that we met when we had at one time to keep accounts in three different currencies. All of that stood before me as a possibility if we did not take some means of securing a suitable currency in which to expend these immense sums. As to the legal-tender provision, with respect to that, all I have to say is that it is there, and I seem to have agreed to it, but as it looks to me now it was an inadvertence; and as it was never in force, and as it never was treated as a part of the currency agreement it seems to me that it can hardly appear here as a subject of other than academic discussion. I certainly should not now approve its presence there.

The attempt on the part of the Commission to have determined a legal tender there would perhaps have been doubtful, even under the broad language of the second section of the act of April 28, 1904. And, secondly, still more doubtful would have been the agreement to bind itself to such legislation. One question is whether the Commission had the power to declare what should be legal tender for future contracts in the Zone, and the second question is, even if it had, had it the power in the agreement to agree what it should do in advance? If I was wrong in that I am glad to admit it, and can only say that under pressure, and in the very strenuous times that I have had to go through in determining these matters, I made a mistake. I do not deny it. I am willing to admit my mistakes when I am shown that they are mistakes.

There is a discussion of this agreement in my report to the President of December, 1904 (House Doc. 226), which I would like to put in the record at this point. It is as follows:

Section 8 provides for the execution of the currency agreement made in Washington June 20, 1904, by the President of the Republic, and for the abolition of the tax of 1 per cent on gold coin exported from the Republic of Panama. This was necessary to make it operate properly. The currency agreement puts in force a system similar to the one in the Philippine Islands, by which a Panama peso of the intrinsic value of 40 cents is declared equal in value to 50 cents gold, and is maintained at that value by the Government of Panama with the assistance of the United States authorities. An export tax on gold, however, would interfere with the free exchange of gold between Panama and the countries of the world, and so would make the maintenance of the parity with gold more difficult, for it would always increase the cost of exporting gold from Panama at least 1 cent on the dollar.

The provision for securing the parity in the agreement is that the Republic of Panama shall deposit 15 per cent of its issue of silver pesos in a New York bank for the purpose of maintaining the parity, and that the seigniorage on all subsequent pesos, which can, by the agreement, only be coined at the instance of the United States authorities, shall be used for the same purpose. As the coinage does not exceed one million and a half gold, and the United States has agreed to assist in the maintenance of the parity by drafts on New York, I do ́ not see that the United States would run any particular risk if it united with the Government of Panama in an agreement to redeem all Panama currency of the new issue by the payment of New York sight drafts in gold at par and a maximum of exchange equal to the cost of exporting gold from Panama to New York-that is, the cost of transportation and insurance. In that way it seems to me that the exchange on New York could always be kept down to the cost of the exportation of gold, and this would in effect maintain the parity. With your permission, after a conference with some experts on coinage, I shall issue an order to the Commission giving some details as to the course which they should take in this matter of preserving the parity and preventing the enormous fluctuations of exchange that so greatly impede the legitimate business in the Isthmus, and which would seriously interfere with the monetary arrangements of the Canal Commission in the construction of the canal. At 12 o'clock m. the committee adjourned until Saturday, January 27, 1906, at 10.30 o'clock a. m.

APPENDIX A.

ACT AUTHORIZING THE CONSTRUCTION OF AN ISTHMIAN CANAL.

The Isthmian Canal Commission is organized and is acting under the provisions of the act of Congress approved June 28, 1902, as follows:

AN ACT To provide for the construction of a canal connecting the waters of the Atlantic and Pacific oceans.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled. That the President of the United States is hereby authorized to acquire, for and on behalf of the United States, at a cost not exceeding forty millions of dollars, the rights, privileges, franchises, concessions, grants of land, right of way, unfinished work, plants, and other property, real, personal, and mixed, of every name and nature, owned by the New Panama Canal Company, of France, on the Isthmus of Panama,, and all its maps, plans, drawings, records on the Isthmus of Panama and in Paris, including all the capital stock, not less, however, than sixty-eight thousand eight hundred and sixty-three shares of the Panama Railroad Company, owned by or held for the use of said canal company, provided a satisfactory title to all of said property can be obtained.

SEC. 2. That the President is hereby authorized to acquire from the Republic of Colombia, for and on behalf of the United States, upon such terms as he may deeem reasonable, perpetual control of a strip of land. the territory of

the Republic of Colombia, not less than six miles in width, extending from the Caribbean Sea to the Pacific Ocean, and the right to use and dispose of the waters thereon, and to excavate, construct, and to perpetually maintain, operate, and protect thereon a canal of such depth and capacity as will afford convenient passage of ships of the greatest tonnage and draft now in use, from the Caribbean Sea to the Pacific Ocean, which control shall include the right to perpetually maintain and operate the Panama Railroad, if the ownership thereof, or a controlling interest therein, shall have been acquired by the United States, and also jurisdiction over said strip, and the ports at the ends thereof, to make such police and sanitary rules and regulations as shall be necessary to preserve order and preserve the public health thereon, and to establish such judicial tribunals as may be agreed upon thereon as may be necessary to enforce such rules and regulations.

The President may acquire such additional territory and rights from Colombia as in his judgment will facilitate the general purpose hereof.

SFC. 3. That when the President shall have arranged to secure a satisfactory title to the property of the New Panama Canal Company, as provided in section one hereof, and shall have obtained by treaty control of the necessary territory from the Republic of Colombia, as provided in section two hereof, he is authorized to pay for the property of the New Panama Canal Company forty millions of dollars, and to the Republic of Colombia such sum as shall have been agreed upon, and a sum sufficient for both said purposes is hereby appropriated, out of any money in the Treasury not otherwise appropriated, to be paid on warrant or warrants drawn by the President.

The President shall then, through the Isthmian Canal Commission hereinafter authorized, cause to be excavated, constructed, and completed, utilizing to that end, as far as practicable, the work heretofore done by the New Panama Canal Company, of France, and its predecessor company, a ship canal from the Caribbean Sea to the Pacific Ocean. Such canal shall be of sufficient capacity and depth as shall afford convenient passage for vessels of the largest tonnage and greatest draft now in use, and such as may be reasonably anticipated, and shall be supplied with all necessary locks and other appliances to meet the necessities of vessels passing through the same from ocean to ocean; and he shall also cause to be constructed such safe and commodious harbors at the termini of said canal, and make such provisions for defense as may be necessary for the safety and protection of said canal and harbors. That the President is authorized for the purposes aforesaid to employ such persons as he may deem necessary, and to fix their compensation.

SEC. 4. That should the President be unable to obtain for the United States a satisfactory title to the property of the New Panama Canal Company and the control of the necessary territory of the Republic of Colombia and the rights mentioned in sections one and two of this act, within a reasonable time and upon reasonable terms, then the President, having first obtained for the United States perpetual control by treaty of the necessary territory from Costa Rica and Nicaragua, upon terms which he may consider reasonable, for the construction, perpetual maintenance, operation, and protection of a canal connecting the Caribbean Sea with the Pacific Ocean by what is commonly known as the Nicaragua route, shall, through the said Isthmian Canal Commission, cause to be excavated and constructed a ship canal and waterway from a point on the shore of the Caribbean Sea near Greytown, by way of Lake Nicaragua, to a point near Brito on the Pacific Ocean. Said canal shall be of sufficient capacity and depth to afford convenient passage for vessels of the largest tonnage and greatest draft now in use, and such as may be reasonably anticipated, and shall be supplied with all necessary locks and other appliances to meet the necessities of vessels passing through the same from ocean to ocean; and he shall also construct such safe and commodious harbors at the termini of said canal as shall be necessary for the safe and convenient use thereof, and shall make such provisions for defense as may be necessary for the safety and protection of said harbors and canal; and such sum or sums of money as may be agreed upon by such treaty as compensation to be paid to Nicaragua and Costa Rica for the concessions and rights hereunder provided to be acquired by the United States are hereby appropriated, out of any money in the Treasury not otherwise appropriated, to be paid on warrant or warrants drawn by the President.

The President shall cause the said Isthmian Canal Commission to make such surveys as may be necessary for said canal and harbors to be made, and in making such surveys and in the construction of said canal may employ such persons as he may deem necessary, and may fix their compensation.

In the excavation and construction of said canal the San Juan River and Lake Nicaragua, or such parts of each as may be made available, shall be used.

SEC. 5. That the sum of ten million dollars is hereby appropriated, out of any money in the Treasury not otherwise appropriated, toward the project herein contemplated by either route so selected.

And the President is hereby authorized to cause to be entered into such contract or contracts as may be deemed necessary for the proper excavation, construction, completion, and defense of said canal, harbors, and defenses, by the route finally determined upon under the provisions of this act. Appropriations therefor shall from time to time be hereafter made, not to exceed in the aggregate the additional sum of one hundred and thirty-five millions of dollars, should the Panama route be adopted, or one hundred and eighty millions of dollars should the Nicaragua route be adopted.

SEC. 6. That in any agreement with the Republic of Colombia, or with the States of Nicaragua and Costa Rica, the President is authorized to guarantee to said Republic or to said States the use of said canal and harbors, upon such terms as may be agreed upon. for all vessels owned by said States or by citizens thereof.

SEC. 7. That to enable the President to construct the canal and works appurte nant thereto, as provided in this act, there is hereby created the Isthmian Canal Commission, the same to be composed of seven members, who shall be nominated and appointed by the President, by and with the advice and consent of the Senate, and who shall serve until the completion of said canal unless sooner removed by the President, and one of whom shall be named as the chairman of said Commission. Of the seven members of said Commission at least four of them shall be persons learned and skilled in the science of engineering, and of the four at least one shall be an officer of the United States Army, and at least one other shall be an officer of the United States Navy, the said officers respectively being either upon the active or retired list of the Army or of the Navy. Said Commissioners shall each receive such compensation as the President shall prescribe until the same shall have been otherwise fixed by the Congress. In addition to the members of said Isthmian Canal Commission the President is hereby author ized, through said Commission, to employ in said service any of the engineers of the United States Army at his discretion, and likewise to employ any engineers in civil life, at his discretion, and any other persons necessary for the proper and expeditions prosecution of said work. The compensation of all such engineers and other persons employed under this act shall be fixed by said Conimission, subject to the approval of the President. The official salary of any officer ap pointed or employed under this act shall be deducted from the amount of salary or compensation provided by or which shall be fixed under the terms of this act. Said Commission shall in all matters be subject to the direction and control of the President, and shall make to the President annually and at such other periods as may be required, either by law or by the order of the President, full and complete reports of all their actings and doings and of all moneys received and expended in the construction of said work and in the performance of their duties in connection therewith, which said reports shall be by the President transmitted to Congress. And the said Commission shall furthermore give to Congress, or eithor House of Congress, such information as may at any time be required either by act of Congress or by the order of either House of Congress. The President shall cause to be provided and assigned for the use of the Commission such offices as may, with the suitable equipment of same, be necesary and proper, in his discretion, for the proper discharge of the duties thereof.

SEC. 8. That the Secretary of the Treasury is hereby authorized to borrow on the credit of the United States from time to time, as the proceeds may be required to defray expenditures authorized by this act (such proceeds when received to be used only for the purpose of meeting such expenditures), the sum of one hundred and thirty million dollars, or so much thereof as may be necessary, and to prepare and issue therefor coupon or registered bonds of the United States in such form as he may prescribe, and in denominations of twenty dollars or some multiple of that sum, redeemable in gold coin at the pleasure of the United States aften ten years from the date of their issue, and payable thirty years from such date, and bearing interest, payable quarterly in gold coin, at the rate of two per centum per annum; and the bonds herein authorized shall be exempt from all taxes or duties of the United States, as well as from taxation in any form by or under State, municipal, or local authority: Provided, That said bonds may be disposed of by the Secretary of the Treasury at not less 25534-10-2