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and which can ever be the cause of regret on the part of the Government at Washington.

Through it all I have been in the closest conference with Admiral Goodrich and General Davis, and they have supported me heartily in everything I have done. I wish, moreover, to commend the way Mr. Lee conducted matters before my arrival and his assistance during the last few days. While all these events may seem very small at Washington, they have completely absorbed the attention of this community, and have been the most stirring that have occurred in its small limits since the revolution of one year ago.

I have, etc.,

JOHN BARRETT.

Mr. Hay to Mr. Barrett.

No. 32.]

DEPARTMENT OF STATE, Washington, December 8, 1904.

SIR: I have to acknowledge the receipt of your No. 70 of the 22d ultimo, reporting the facts regarding the disbandment of the Panaman army, and the advice given by you to the President in the matter. Your course is commended by the Department. I am, etc.,

JOHN HAY.

PAYMENT OF THE CANAL INDEMNITY.

Mr. Bunau-Varilla to Mr. Hay.

LEGATION OF THE REPUBLIC OF PANAMA,
Washington, December 10, 1903.

SIR: I think it is necessary, in view of the ratification of the canal treaty by the Government of the Republic of Panama, and in view of the steps taken by his excellency the President of the United States for the ratification by the Government of the United States, to inform you of the name of the banking house that has been designated to be the financial agents of the Republic of Panama in the United States.

I have, therefore, the honor, sir, to notify you and through you his excellency the Secretary of the Treasury, that by letter dated November 17, 1903, and in virtue of the full power given me by my Government in fiscal questions, I have named the firm J. P. Morgan & Co. the financial agents of the Republic of Panama for one year, with the full and exclusive power to collect for the account of the Republic of Panama any sum the Government of the United States may have to pay the Republic of Panama for any cause whatsoever. It goes without saying that the Government of the Republic of Panama will notify the Government of the United States in due time, and previously to the collection by Messrs. J. P. Morgan & Co., the amount that the Government of the Republic intends to withdraw from the United States Treasury on the sums placed to its disposition according to the conventions in force.

I am, etc.,

P. BUNAU-VARILLA.

Mr. Bunan-Varilla to Mr. Hay.

LEGATION OF THE REPUBLIC OF PANAMA,
Washington, March 3, 1904.

SIR: In our conference this morning you notified me that the moment had come to deliver to the Government of Panama, according to Article XIV of the treaty of the 18th of November last, the $10,000,000 fixed by said article as a part of the price of compensation, and that it was the desire of the Government of the United States to settle this question without delay.

You further asked me if anything had taken place that would modify the notification I made to the Department of State by letter of December 10, 1903, to the effect that Messrs. J. P. Morgan & Co. had been apointed financial agents of the Republic of Panama for one year, with full and exclusive power to collect for the account of the Republic any sum the Government of the United States may have to pay to Panama for any cause whatsoever. You added that if nothing had modified this power the Secretary of the Treasury was going immediately to transmit to you a check of $10,000,000, payable to Messrs. J. P. Morgan & Co. for the account of the Republic of Panama.

I beg to confirm what I had the honor to answer to you:

First. That the Government of the Republic was undoubtedly ready to comply with Article XIV of the treaty, as well as with any other.

Second. That the appointment of the firm of J. P. Morgan & Co. as financial agents, with the power above mentioned, had been explicitly ratified by the junta, whose acts have been in their turn ratified by the constitutional convention; that such appointment with such power was definitive, and that therefore the check of $10,000,000 could be prepared, payable to J. P. Morgan & Co., for the account of the Republic of Panama. I added, though, that according to my letter of December 10, 1903, to the Department of State, any withdrawal of funds by the financial agents from the United States Treasury had to be preceded by a specific order of the Government of Panama, and that I was going to cable to Panama to this effect. In the meanwhile, I respectfully request your excellency to keep the check of $10,000,000 pending the transmission of said order.

I am, etc.,

P. BUNAU-VARILLA.

Mr. Russell to Mr. Hay.

[Telegram.—Paraphrase.]

AMERICAN LEGATION,

Panama, April 23, 1904.

(Mr. Russell reports that he has been requested by the Panaman Government to ascertain when the United States will make payment

to Panama on account of the canal indemnity.)

Mr. Hay to Mr. Russell.

[Telegram.-Paraphrase.]

DEPARTMENT OF STATE,

Washington, April 25, 1904.

(Mr. Hay informs Mr. Russell that the amount due Panama on account of the canal indemnity will be paid in a few days, and asks to be informed to whom payment is to be made.)

Mr. Russell to Mr. Hay.

[Telegram.-Paraphrase.]

AMERICAN LEGATION,
Panama, April 25, 1904.

(Mr. Russell states that the Government of Panama asks that one million of the indemnity be paid to J. P. Morgan & Co., and that the balance be held until the arrival of the newly appointed minister, who will sail for Washington by the first steamer in June.)

Mr. Hay to Mr. Russell.

[Telegram.-Paraphrase.]

DEPARTMENT OF STATE,
Washington, April 30, 1904.

(Mr. Hay informs Mr. Russell that $1,000,000 will be paid to J. P. Morgan & Co. on the 2d proximo, and that the balance will be held in the Treasury until the arrival of the Panaman minister.)

Mr. Loomis to Mr. Russell.

[Telegram.-Paraphrase.]

DEPARTMENT OF STATE,
Washington, May 16, 1904.

(Mr. Loomis instructs Mr. Russell to state to the Panaman Government that the Government of the United States desires to pay the balance of the amount due the Government of Panama, and will pay the same at once to J. P. Morgan & Co., the accredited fiscal agents of Panama, to whom one million has already been paid.)

Mr. Russell to Mr. Hay.

[Telegram.-Paraphrase.]

AMERICAN LEGATION,
Panama, May 17, 1904.

(Mr. Russell reports that the special commission appointed by the National Assembly to receive the amount due Panama will sail for New York to-morrow, and that the Panaman Government urgently requests that the amount due be held until the arrival of the commission.)

Mr. Loomis to Mr. Russell.

[Telegram.]

DEPARTMENT OF STATE,

Washington, May 18, 1904.

You will immediately communicate the following to the Panaman Government and energetically urge prompt withdrawal of the request set forth in your cablegram of yesterday.

Quote this to the Government:

Upon the faith of your agreement constituting J. P. Morgan & Co. fiscal agents of the Panaman Government to receive the entire consideration payable to the Panaman Government under the treaty, this Government has recognized such fiscal agents for such purpose, and has paid to them $1,000,000 on account. This Government can not see how, as between it and such fiscal agents, having recognized their authority, it can now repudiate that authority and refuse to pay the balance of the consideration. This Government does not intend to become involved in any question as between such fiscal agents and a commission appointed by the Panaman Government subsequent to the appointment and authorization of such fiscal agents, and for that reason and the foregoing ones desires at once to close the matter by payment to such fiscal agents here of the balance due, leaving the commission to deal directly with such fiscal agents upon its arrival.

LOOMIS, Acting.

Mr. Russell to Mr. Hay.

[Telegram.]

AMERICAN LEGATION,

Panama, May 18, 1904.

Your cable has been communicated to the Panama Government and withdrawal of their request energetically urged. Panama unwilling to authorize payment to Morgan and maintain that it has a right to have payment made to the commission which was appointed as a result of your cable of April 30, complying with its request to pay one million to Morgan and hold balance for their account.

RUSSELL.

Mr. Loomis to Mr. Russell.

[Telegram.-Paraphrase.]

DEPARTMENT OF STATE,
Washington, May 19, 1904.

(Mr. Loomis instructs Mr. Russell to inform the minister of foreign affairs of Panama that the United States Government declines to modify the arrangement made with Panama concerning the payment of the $10,000,000 due under the canal treaty.

The direction to pay it to Panama's fiscal agent here was accepted by this Government and acted upon after the exhibition by Morgan & Co. of its written authority from the Government of Panama to receive the entire amount due from the United States.

The suggestion of such an unusual course as to hand over so vast a sum to individual commissioners, who may present themselves for that purpose, can not be accepted by the Government as a substitute for the conventional method agreed upon.

The suggestion by the Panama Government that it has appointed a commission to receive the money because of this Government's statement that it would, as a favor, defer paying over the nine millions to Panama's fiscal agent here until the arrival of its minister can not be acquiesced in by this Government as deducible from the facts.

The suggestion to wait until the arrival of Panama's minister was accompanied by representations that a plan of safe investment was being considered that might obviate the necessity of handling the money twice, hence this Government's expressed willingness to retain possession of the balance until the minister's arrival.

Upon the whole, it is deemed best by this Government to adhere to the original arrangement, and it has accordingly paid over the nine millions to J. P. Morgan & Co. for account of the Republic of Panama, being balance in full of amount due under the treaty.

The representation to this Government by Panama, made prior to the ratification of the treaty, that at least eight millions of this fund should be safely invested to secure the stability of Panama's finances, this Government will expect to be carried out in good faith.)

Mr. Russell to Mr. Hay.

[Telegram.-l'araphrase.]

AMERICAN LEGATION,

Panama, May 21, 1904.

(Mr. Russell reports that he has received written reply from the Government of Panama accopting terms of the United States relating to the payment of the canal indemnity to J. P. Morgan.)

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