to use my best endeavors to that end. I communicated his views to the Panama Government, and the fiscal commissioners afterwards called upon him with me and expressed their grateful appreciation of his interest and their accord with his views. Several months were devoted by the commissioners and their counsel to the investment of these funds, and the result is a just source of pride to the Panama Government and all concerned. With regard to the disposition of the $10,000,000 paid by the United States Government in May, 1904, to the Republic of Panama, I am permitted by the Government of the Republic to furnish a statement of the disposition of said moneys, certified by Mr. J. D. de Obaldia, its minister to this country, which is as follows: Memorandum of the general disposition by the Republic_of_Panama of the $10,000,000 paid by the United States to its fiscal agents, Messrs. J. P. Morgan & Co., May 2-20, 1904. Investment in 32 first mortgages upon improved real estate in the city Cash on deposit with Bankers' Trust Company, of New York, as trustee Cash on deposit at London with Comptoir National di Escompte to Cash invested by Panama Republic under law 74 of 1904 in establish- By law 52 of 1904, there was appropriated "from the payment on account of the canal" the sum of 3,250,000 pesos ($1,625,000 gold) for the construction of public works in the seven provinces as follows: Province of Panama.. Province of Colon. $5,165,500.00 834,343.75 1,150,000.00 $300,000.00 71, 280.62 632,690.00 150,000.00 500,000.00 Province of Chiriqui... Province of Cocle Province of Los Santos.. Province of Veraguas. Province of Bocas del Toro.. $500,000 150,000 225,000 175,000 175,000 175,000 225,000 Of this sum there has been expended in public buildings, roads, and other improvements to date... By drafts of Panama Government on Messrs. J. P. Morgan & Co., fiscal agents, from time to time. Expenses of fiscal commissioners for accountants, cables, postage, etc.. 573,000.00 622, 615. 52 570.11 10, 000, 000.00 From this statement it will be seen that the Panama Government to-day holds intact $8,800,000 of this amount, of which $5,165,500 is invested in 4 per cent first mortgages upon improved real estate in the c New York, $834,343.75 in the 4 per cent gold bonds of the Panana Railroad Company, and over $2,800,000 in cash deposited in the trust companies and banks named, bearing interest at rates varying from 2 to 3 per cent, and that considerable of the balance of said sum has been put into public improvements on the Isthmus. Neither I nor my firm have been the attorneys for the Isthmian Canal Commission or for the Government; but on several occasions the President and the Secretary of War have sought information and advice from me with relation to particular topics when it seemed so them, by reason of my familiarity with the Isthmus and the canal, that I could be of assistance. One of these subjects related to the differences that had, unhappily, grown up between this Government and that of Panama concerning the application of the Dingley tariff in the Canal Zone, the establishment by the Zone authorities of new ports of entry near Panama and Colon, postal regulations, etc. At the request of the President and the Secretary of War I accompanied the Secretary when he went to the Isthmus in November and December, 1904, with Admiral Walker, then chairman of the Commission, and Judge Magoon, its general counsel, and I rendered to both Governments every assistance within my power, resulting in the harmonious and successful adjustment of all pending questions. Another subject upon which this Government asked my aid was the purchase of the outstanding minority interest of the Panama Railroad stock. This outstanding interest naturally gave the Government great concern. The Government recognized that if the interests of the minority were disregarded litigation might result. For many practical reasons, too, it became of vital concern that the United States should have complete ownership. Both Houses of Congress initiated legislation to accomplish the retirement of this minority interest, but no law was passed. You remember that the two Houses failed to come to a concurrence at the last session. At this stage the President and the Secretary of War charged me with the task of acquiring, if possible, all of the outstanding minority stock. The efforts of the old De Lesseps régime, as well as of the New Panama Canal Company, to acquire this outstanding minority had never been successful. Senator KNOX. What did it amount to in dollars? Mr. CROMWELL. The total shares were about 1,100. Mr. CROMWELL. About one hundred and ten or one hundred and twenty thousand dollars, probably. I devoted myself to the subject with every resource within my power and reached every individual stockholder in England, France, Italy, the United States, and elsewhere, and succeeded in purchasing and delivering to the Secretary of War every single share of the outstanding minority stock, some of the certificates for which had been held by their owners for over forty years. This was accomplished without the payment by the Government of any compensation, commission, or profit of any kind. Senator TALIAFERRO. What did this stock cost, Mr. Cromwell? Mr. CROMWELL. Roughly speaking, about one hundred and forty or one hundred and fifty thousand dollars. The accounts are on file. Senator TALIAFERRO. I notice that your language there is that no compensation was aid by the Government. Mr. CROMWELL. None was paid by the Government. Senator TALIAFERRO. That implies that there was compensation paid. Mr. CROMWELL. No, sir; it implies that there was cost in the purchase of the stock, sir." My final account, with the vouchers of payment audited by the Government department, are in the Government files, and every share of stock is now in the Treasury of the United States, acquired at cost. The establishment of a sound monetary system by the Republic of Panama Senator MORGAN. Let me inquire there whether it does not require an ownership of stock to qualify a man to act as a director? Mr. CROMWELL. It does, sir; and I will be happy to explain that, if you will permit me, later. I have taken great pains about that, Senator, and I am sure, as a lawyer, you will feel a deep interest in what I will state to you as to the method we have adopted in that regard. Senator MORGAN. Yes. Mr. CROMWELL. The establishment of a sound monetary system by the Republic of Panama was of the highest importance to that Republic, and obviously of interest to the United States in connection with the construction of the Panama Canal. The Republic of Panama has met the highest ideal of national honor in this regard. It established by law the gold standard. It created a gold reserve fund to maintain the parity of its silver with gold, and deposited this reserve with the Bankers Trust Company of New York as a trust fund for this purpose. It established a coinage of its own of the aggregate amount of 4,000,000 pesos, equivalent to $2,000,000 gold, and redeemed and retired the Colombian currency theretofore current on the Isthmus. While the standard of currency was thus wisely established by Panama, something else was necessary to maintain commercial stability and prevent the violent fluctuations of exchange with the consequent injuries. Prior to 1904 both the New Panama Canal Company and the Panama Railroad Company found it necessary to make agreements with the bankers of the Isthmus looking to the regulation of this exchange. The Walker Commission, realizing the necessities of the case, gave anxious consideration to devising means by which the rates of exchange would be controlled, and it was proposed by the Commission to encourage such result by the deposit of $1,500,000 in some American bank having a branch at Panama. Some doubt existed as to the legal power of the Commission to make such deposit of the canal funds; and to obviate this difficulity a bill was introduced in the Senate during the third session of the Fifty-eighth Congress, known as Senate bill 7207. The Senate fully realized the necessity for action and passed the bill in the following form: "That to enable the United States to secure at all times a sufficient supply of money to meet the necessities of the Government on said Canal Zone, the President is hereby authorized to deposit such sum of money as he may deem sufficient for said purposes, not to exceed one million five hundred thousand dollars, of any sums appropriated for canal purposes, in some bank or banks in the United States having a fiscal agent on the Isthmus of Panama, to be selected by the President: PC-VOL 2-06-5 Provided, That such deposit shall be on terms which shall preserve the title to said money in the United States, enable the United States to withdraw said funds from said deposit at any time, and proper and sufficient security be given by the bank of deposit for the return of said money or the lawful accounting therefor." As this measure, however, failed to pass the House and become a law, and some other solution was imperative, I was then requested by the President of the Republic of Panama and by the Secretary of War of the United States to assist in the solution of the difficulty. During several months I was engaged with the Secretary upon this subject in studying the problem, reconciling interests, and bringing the principal bankers of the Isthmus and the American bank having an agency on the Isthmus into accord. Senator MORGAN. You mean you were engaged with the Panama Secretary? Mr. CROMWELL. I was engaged, as I have said, with the Secretary of War of the United States. Senator MORGAN. Of the United States? Mr. CROMWELL. Yes, sir. Senator MORGAN. I misunderstood you. Mr. CROMWELL. It was the subject of frequent conferences upon the part of Secretary Taft, Mr. Shonts, as chairman of the Commission and president of the railroad, and myself. You have before you the agreement which was thus reached, dated April 29, 1905, by which the United States is furnished upon its drafts all the silver it may demand for its use at par, without commissions, premiums, or charges of any kind. Senator MORGAN. What is meant by par there, Mr. Cromwell? Senator MORGAN. Well, what is meant by it, the par of gold or the par of silver? Mr. CROMWELL. The par of silver to gold-upon exact parity. Mr. CROMWELL. Two dollars of Panama silver produces $1 of American gold. Senator MORGAN. Well, that is not par. Mr. CROMWELL. I think it is, sir. It is furnished all the United States currency which it may call for at a fixed rate of exchange of three-fourths of 1 per cent gold. The agreement also insures general commercial stability and protects the public by providing that the public shall be furnished exchange at a rate which shall not exceed 2 silver pesos (the equivalent of $1 in gold) and 3 cents Panama currency (the equivalent of 14 cents in gold) for each $1 United States currency, or. 14 cents gold for each $1 gold. By this arrangement the object of the Commission, the railroad, and the Panama Government was accomplished without the deposit of $1,500,000, as proposed by the Senate bill, or the risk of involvement of any Government deposit, and without subjecting the United States to the possibility of the loss of a single dollar, for the United States in every instance receives the actual coin upon presentation of its draft. Neither the Commission, the railroad company, nor the United States Government has one dollar on deposit with any of these bankers. On the contrary, the bankers give credit to the United States for the time which is consumed in transmitting the draft of the United States to New York for collection. This arrangement is very advantageous to the United States, and was meant by all concerned to be so. It expires on April 29 next. With reference to the retirement of Mr. Wallace, I notice that he has given you an explanation as to his retirement radically different from that which he gave at the time. Senator MORGAN. What do you mean -to whom? Mr. CROMWELL. At that time, June and July, 1905-———— Senator MORGAN. Wait a moment, please. To whom was that explanation given at the time that you speak of? Mr. CROMWELL. It was given to Secretary Taft. Senator MORGAN. In your presence? Mr. CROMWELL. It was. At that time he made four formal statements, giving his reason for his action. First: Upon the Isthmus, before leaving, he stated that he had decided to accept a position offering a larger salary, and was leaving the Isthmus to retire. Senator MORGAN. To whom did he make that statement? Mr. CROMWELL. I will presently explain, sir. Second: At the Hotel Manhattan on June 25, 1905, at his interview with Secretary Taft, of which the Secretary himself has given a complete account, and which has been published Senator MORGAN. Published where? Mr. CROMWELL. I do not know. Senator MORGAN. How do you know anything about it if you do not know the paper it was published in? Mr. CROMWELL. I read it at the time, sir. Senator MORGAN. You are stating, then, your recollection of what was stated in a public paper without naming the paper? Mr. CROMWELL. I can easily produce one. Senator MORGAN. Will you do it? Mr. CROMWELL. With pleasure. Senator MORGAN. That is right. Put it in the record. Mr. CROMWELL. Second: As I have said, at the Hotel Manhattan, on June 25, 1905, at his interview with Secretary Taft, of which the Secretary himself has given a complete account and which has been published. At this interview Mr. Wallace stated his reasons, none of which made any reference to me. Third: On the day following the Manhattan Hotel interview, namely, on June 26, Mr. Wallace wrote to Mr. Shonts, the chairman of the Commission, a letter stating the reasons for his action, and again not making the least allusion to me as a cause therefor. Senator MORGAN. Have you a copy of that letter? Mr. CROMWELL. With the permission of Mr. Shonts-I did not mean to disregard your question, Senator, because my succeeding sentence refers to that matter. Senator MORGAN. Yes; very good. Mr. CROMWELL. With the permission of Mr. Shonts I quote from this letter, written the day after the Manhattan Hotel interview of June 26, as follows Senator MORGAN. Have you the whole letter? Mr. CROMWELL. I have a copy of the whole letter; yes, sir. |