Page images

Secretary TAFT. This is in section 2 of the act of April 28, 1904. (See Appendix C.) The first section directs the President to take possession of the territory.

Senator SPOONER. That act is not in force now?

Secretary TAFT. It expired by its terms at the close of the Fiftyeighth Congress. That is, not the first section, but the second did. Senator SPOONER. Yes; the first section was accomplished. The things authorized by that section had been done, had they not? Secretary TAFT. No, sir; not entirely.

Senator SPOONER. Well, no matter.

Secretary TAFT. I might say right here, because I intended to refer to it later, that the first section directs the President from time to time to occupy any lands and waters outside of said Zone which may be necessary and convenient for the construction, maintenance, operation, sanitation, and protection of the said enterprise.

Senator SPOONER. That is a right granted by the treaty?

Secretary TAFT. Yes, sir; and the power is vested in the President and the duty is imposed on him of doing that thing.

Senator TELLER. You think that is a continuing duty, notwithstanding the clause that this act should be in force only for a certain time, and that time has expired?

Secretary TAFT. Yes, sir; undoubtedly it is, because you will see that the application of that clause with reference to the close of the Fifty-eighth Congress has no application whatever to the provisions of the first section. There is no doubt that the limitation is confined to the second section.

The Executive order in its recital was made subject to the action of Congress, and at its close contained a provision like this, which I will read you:

That the operation of the order and its enforcement on the one hand, or a compliance with its conditions on the other, shall not be taken as a delimitation, definition, restriction, or restrictive construction of the rights of either party under the treaty between the United States and the Republic of Panama.

I was anxious to avoid that anything which was a mere temporary revocable order should as a construction of its terms affect that which had been provided in the treaty. I did not think that we under that. order exercised all the power that the authorities of the United States might have under the treaty: and on the other hand the authorities of the Republic were anxious to avoid construction of their act as an admission of what we claimed to have, the equivalent of sovereignty on the Isthmus. So section 12, which I have read, met the views of both parties, and was put in there in order to show that this was a mere living agreement, a modus vivendi.

But that is what I construed to be the effect of the order issued on the one hand and the order issued on the other after negotiation and after a verbal statement that each would be satisfactory to the other. We had been sent down there to construct the canal; to expend $150,000,000 in so doing. We had been put, so to speak, in another man's house. We were put in a zone between which and a country of 250,000 inhabitants there was no visible border at all. As I have said, there were no known boundaries to the cities of Panama and Colon excluded by the treaty from the Zone, so that the treaty and the two laws together required us to move in and assume control of a territory altogether unbounded, when the facts were looked into, by

any definite description of any sort. Colon and Christobal--Christobal being now the town which is at the termination of the canal and Colon being that which was reserved out of the Canal Zone-are part of the same settlement. A street, on which the Panama Railroad runs, divides the two. We were obliged to establish municipal government for Christobal, as divided and cut off from Colon.

On the other hand, we were required under the treaty to look after the sanitation of Colon. There was a provision in the treaty that the Isthmian Government-the Government of the Republic-should see to it that the sanitation ordinances of the United States were enforced in Colon and Panama, and if they were not enforced, then the United States was given authority to go in and enforce them. The provision also was that if there was any disturbance in Colon or Panama it was the duty of the United States to go in and enforce public order. We were to introduce from 20,000 to 30.000 laborers, with their families, into a stretch of country that had practically no one in it. We were to enact harbor regulations. We were told to go in and take out of the Zone whatever lands seemed to us convenient or necessary, either for the sanitation of the Zone or the construction of the canal. Senator BURROWS. Outside of the Zone?

Secretary TAFT. Outside of the Zone. Now, it seemed to me as plain as it could possibly be, with those powers and with those duties imposed upon us, that Congress could not have intrusted us with this work, that the Senate could not have confirmed the treaty without expecting that we were to establish with the authorities of that Republic, in whose house and in whose country we were to discharge these duties and perform this work, temporary agreements agreements which should enable us to get along as neighbors, or as people occupying the same boarding house must get along; with agreements not which bound the Government, but with agreements which bound the agents of the Government in the discharge of the duties which they had to perform there. That was the theory upon which I made this executive order. That was the theory upon which we insisted, in this executive order, that the terms of this currency agreement should be carried out by the President of the Republic as a condition of this order. If he did not see fit to do that, then the order, so far as that went, failed of effect. It was inoperative by its terms. But I entered into that form of it for the purpose of not making it an agreement, but of making it a revocable arrangement completely subject, as any executive order is, to renouncement the next day.

Senator MONEY. Excuse me; you mean revocable without the consent of the other party?

Secretary TAFT. Yes, sir. Its nature as an executive order indicates that. It might not be fair to revoke it; it might not be revocable, but I think the power to revoke the order was unquestionable. I have here a statement by the acting general auditor, Mr. Lewis, of the rates of exchange between United States currency and Colombian silver, on the one hand, and between United States currency and Panamanian silver, on the other hand. In this he states that the new Panamanian currency was put into circulation February 12, 1905. (See Appendix I.)

This agreement of June, 1904, made and enforced, as I have stated, conditionally through section 8 of the order of December 3, 1904, had the advantage of limiting the currency--the coinage of the cur

rency-to 3,000,000 pesos, and provided that the Colombian silver of the Isthmus should be recoined to the extent of 3,000,000 pesos; and that that should not be exceeded except by the consent of the Presi dent of the United States-or I think, possibly, it says the Secretary of War:

It also provided that if the number of laborers on the Isthmus required the issuing of more currency, then by the same authority there might be issued by the Panamanian Government what was necessary up to a certain limit, but that it should not issue anything in excess of 3,000,000 pesos more-that is, a million and a half gold. That power has been exercised since the laborers have gone in there to the extent of issuing a million more.

It also provided that these coins must be coined in the Mint of the United States, which gave us the assurance of a uniformity of coinage, and that there would be no change from the ratio mentioned in the agreement of 900 to 1,000-I think that is the ratio, as I recollect it-of the purity of the silver. The new coins, as I have said, were issued in February of 1905. This brings us to April, 1905, after the adjournment of Congress, when the second agreement was made with the bankers. (See Appendix K.) I regard that only as a bankers' agreement. The Republic of Panama was made a party to the agreement for the reason that it was a large customer of the banks. The union of the Canal Commission with the Panama Railroad Company and the Republic of Panama on the one side in agreeing to furnish their exchange business to the bankers enabled them together to make a better arrangement with the bankers than if the bankers were assured only of the custom of one or the other of the parties.

Senator BURROWS. What bankers do you allude to?

Secretary TAFT. I was about to come to that. The International Bank of New York City, which is a bank for foreign banking, came to me and asked that it be made the agent of the Government on the Isthmus. Well, I had no prejudice against the bank. It had been doing business in Manila, and was, so far as I knew, a strong financial institution; and they had already established a branch there with a view to being made the Government agent.

Senator DANIEL. In Panama?

Secretary TAFT. In Panama. I am not sure whether the Secretary of the Treasury did make it an agent or not. But I declined to consent that it should be made sole agent for the transactions of the Government for several reasons-for two reasons, at least. First, it was essential for us, so far as we could, to cultivate good relations with the people on the Isthmus. If we brought a banking institution of our own down there and did all our banking through them, which was bound to be the greater part of all the banking there, it would be a source of constant friction.

Second, we could very well understand that it would become necessary, as it has become necessary, for us to have $500,000 worth of silver every two weeks.

Senator ALLISON. That is necessary in order to pay our laborers? Secretary TAFT. Yes, sir. The strain of supplying that currency, concentrating on the Isthmus, was more than a new American bank could carry. In a Latin-American country, in a country where they are accustomed to the use of silver, a good deal of silver is hoarded;

more than with us. It disappears from the circulation. At least we found that in the Philippines, and I thought it would be the same here. Therefore I was exceedingly anxious that we should have the assistance of all the old local banks to gather together enough silver to enable us to make these very large payments-I say very large; very large for a country like that, which does very little business of its own-in order that the price of the coin which we wished to use should not increase.

As it is, under this bankers' agreement which we have made and in which we have the assistance of all the bankers on the Isthmus, they agree to furnish us silver for exchange on New York at two to one. in accordance with the legal ratio. That was the reason why that bankers' agreement was made; made exactly-in my judgment at the time, and still-as the agreement was made with reference to the delimitation of the boundaries of Colon and Panama; exactly as the agreements have been made with reference to the sewage and with reference to the construction of the water supply; with reference to the shutting up of the streets of the city of Panama while the water and sewers are being put in there; exactly as the agreement was made by the order in which, without waiting to see whether the ordinances of the United States could be enforced, the Panama authorities turned over the sanitation of Colon and of Panama, and the quarantine of those harbors, to the officers of the United States. I can not mention, because they are so numerous, the other various tentative arrangements that have been made because of the necessity of the situation. And that situation grew out of the laws and the treaty-the two laws and the treaty-which made it mandatory upon the President of the United States to go there and attempt to construct the canal. The CHAIRMAN. What is the date of that contract? Secretary TAFT. I think it was the 29th of April, 1905.

The CHAIRMAN. Was that after the expiration of the.act you have named?

Secretary TAFT. Yes, sir; that was after the legislative power of the Commission was exhausted; so that it was made by the Canal Commission (as it really was and would have been under any circumstances, whether it exercised legislative powers or not) as a business agreement; as a means to secure the money to pay the wages of laborers there without unnecessary cost of exchange.

Senator ALLISON. Have you put that agreement into the testimony?

Secretary TAFT. Yes, sir; it will be found in Appendix K. That is the agreement that I think was referred to in the resolution. I am not sure.

Senator BAILEY. That is one of them?
The CHAIRMAN. That is one of them.

Secretary TAFT. I ought to say, in respect to that agreement, that in accordance with my expectation the International Bank was unable, in a number of instances, to comply with its own agreement. They defaulted. They could not get the silver and had to turn the matter over to their colleagues in the agreement, and the latter supplied it. That indicates that the gathering of silver is by no means an easy matter on the Isthmus.

Senator MONEY. Was the difficulty of getting the silver on account of the difficulty of coining it?

Secretary TAFT. No, sir; it is on account of the distribution of it among the people and tradesmen on the Isthmus and the difficulty of getting it back into banking circulation.

Senator MONEY. I suppose a good deal of that silver left immediately for Jamaica and the Barbados and other places?

Secretary TAFT. It is possible. At any rate we were pressed to request and permit the coinage of a million more pesos, to which we consented. But when I was last down on the Isthmus the bankers came again to have the limit raised and I declined to do it. It did not seem to me that the situation was such as to justify it.

Senator TELLER. You are speaking now of the Panama money? Secretary TAFT. Yes, sir.

Senator TELLER. How much have they issued, all told?

Secretary TAFT. They have issued now 4.000,000 pesos.
The CHAIRMAN. That is $2,000,000?

Secretary TAFT. Yes, sir.

Senator TELLER. Do they issue them as pesos?

Secretary TAFT. The law provides that the standard of value shall be a coin exactly equivalent to our gold coin, the dollar, called there a "balboa," from the discoverer of the Pacific.

Senator TELLER. Yes.

Secretary TAFT. And whose medallion is on the coins.

Senator MONEY. How does that compare in value with the peso? Secretary TAFT. That is double the peso.

half of the gold balboa or the dollar.

Senator MONEY. The gold dollar, you say?

the silver dollar.

Secretary TAFT. No; the gold dollor.

Senator ALLISON. They do not coin that?

The peso is 50 cents,

I thought you meant

Secretary TAFT. No, sir. They coin what they call a peso, which is about equivalent to the Mexican peso, its declared value being 50 cents, or one half of the Balboa.

Senator TELLER. That is declared by the Panama Government? Secretary TAFT. Yes, sir; by the law of the Republic of Panama. They also have as a legal tender the gold dollar of the United States, as you will see by this law, which is included in this statement. Senator TELLER. Which of course they do not coin.

Secretary TAFT. Which they do not coin. They coin for themselves the Balboa, but they admit into their legal currency the gold dollar of the United States as the legal standard of value. The parity is to be maintained under their system between the peso, which is just one-half, by law, in value, of the gold dollar or the gold Balboa, and 50 cents gold.

Senator TELLER. It contains how much silver?

The CHAIRMAN. Twenty-five grams.

Senator TELLER. Silver?

The CHAIRMAN. Yes. It weighs 25 grams.

Secretary TAFT. When we adopted the peso I think it was valued at about 42 to 50 cents.

Senator MONEY. Has it not been all the time a little better than the silver dollar?

Secretary TAFT. I think probably it has.

« PreviousContinue »