ferring funds between the United States a defrayed by the Government of the United penses would be assumed without prejudice by

NEED FOR A MORTGAGE P

One of the needs of the agricultural port was most strongly and repeatedly set forth commission through the provinces was an belief was widespread that such a bank wou revival of agriculture in the Philippines, by insurrections, the death of cattle from deterioration of seed through the lack of pro culture. Again and again the wish was exp dentes and by private citizens that aid should farmers, even if it was done at the expense o commission is not prepared at present to reco of a mortgage bank, owned and conducted by recognizes the danger of locking up the asse in landed securities. There appears to be no mortgage bank, organized according to the thoroughly tested in Europe, should not be pine Islands. The rate of loans upon mo extremely high, especially in the sugar-gr introduction of improved machinery, by m would greatly add to the volume of the prod the country.

The initiative in creating a mortgage bank must necessarily come from the owners of private capital if such bank is not established and endowed by the Government.

The commission believes that authority should be granted to charter such banks, under proper safeguards. The authority might be conferred by a general grant of legislative power to the government of the Philippine Islands, without restrictions of any sort; but in order to give the assurance that proper safeguards will be thrown around investments of capital in this manner, if for no other reason, we believe that Congress should lay down by some law some of the conditions governing the organization of such banks. For this reason we recommend that Congress provide directly for the creation of mortgage banks, but that they shall be required to have a capital of not less than $250,000; that they shall not be permitted to loan over 10 per cent of their aggregate resources to any one person or corporation nor to loan over one-third of the market value of the property pledged, as determined by some impartial board, to be established under the authority of the Government.

If a large commercial bank is established in these islands, with branches extending throughout the world, it would not be beyond the bounds of prudent banking policy to permit such an institution to set aside a limited portion of its capital for mortgage business. It is a sound rule of banking that a commercial bank should keep the bulk of its resources in a quickly convertible form. This is especially the case where the bulk of its obligations consists of deposits payable on demand. In the case of a large bank, however, with a capital of $1,000,000 or more, the limit of safety would not be infringed if 25 per cent of its capital were permitted to be loaned upon mortgages. The remaining three-fourths of the capital would be available to strengthen the current assets in meeting emergencies and the demands of the depositors. The rule that a small percentage of capital may be set aside for mortgage or agricultural loans, when such business is kept separate from commercial loans and is conducted with prudence, is recognized by many economic writers and is supported by the example of several of the large European banks, notably the AustroHungarian Bank and the Imperial Bank of Russia.

It might easily happen, in the absence of sufficient information to attract an independent mortgage bank to the Philippines, that a large bank established here for other classes of business would see the benefit

of setting aside a portion of its capital for such a purpose. We recommend, therefore, that authority to do mortgage business within certain limits be granted to commercial banks with a capital of $1,000,000 or more, under substantially the same restrictions as those which may be imposed upon banks devoted wholly to loans upon mortgages.

finances of the islands, the revenue will be meet all ordinary expenses of good administr erable appropriations for large general impro of public works. In the ordinary current ex include, for the purposes of the statement nov and maintenance of an efficient police syste good order, and of necessary means of com islands for transportation of mails, public o toms inspection. There is no reason why United States should ever be called upon t support of the insular government, and wit years after the complete restoration of goo sonable to anticipate that the revenues of the to pay all expenses incurred for troops, nativ lar police sufficient to maintain good orde archipelago.

In addition to the treasury balance above lowing items, which practically are treasury

1. Loans to provinces under act No. 134

2. Money loaned to provinces under act No. 196.. 3. Portable property purchased from insular funds by ernment and transferred from the property retu government to the army returns, by virtue of Ger Division of the Philippines, issued April 4, 1901, a No. 38, office of the military governor, issued M the basis of low valuations stated by the transfer

with lists to be added from two officers who have not yet reported. It is understood that compensation for this property is to be made to the insular government out of army appropriations by the United States Government. In addition to the property above mentioned, 16 gunboats purchased from the insular revenues, at a cost of $265,000, United States currency, were transferred to the United States Navy under military orders. Armament and accessories to the ascertained value of $19,147.79, United States currency, were also transferred to the Navy, together with a large quantity of such property of unascertained values. It therefore appears, that up to the date of submitting this report, there have been turned over to the United States Government property purchased from insular funds to the ascertained value of $922,721.40, United States currency; but the valuations thus stated are, in the opinion of the commission, greatly below the actual values.

The gunboats above referred to are almost indispensable for the use of the revenue service and the inter-island communication necessary for efficient government. It is highly desirable that an arrangement should be made with the Navy for a retransfer of those gunboats to the insular government. They are now of little use to the Navy, while the insular government is to a degree paralyzed for the want of them. Great loss will ensue if the insular government must wait one or two years for the construction of new boats to perform service greatly needed immediately, which service could be well performed by the gunboats in question.

SEIZED FUNDS AND SPECIAL DEPOSITS IN THE TREASURY.

The insular treasury contains a considerable amount of Spanish funds seized by the military authorities at the time of and after the occupation of the islands by the American Army and seized from insurrectos since that time. These funds have not been considered as a part of the general revenue of the islands and await such disposition by the proper authorities as may hereafter be determined upon. A summary of Spanish seized funds is as follows:

from which credits to the amount of $200 have been allowed by the auditor under rule 28 of act No. 90, leaving as a balance of Spanish seized funds $890,029.86, or, reduced to United States currency at the

ratio of 2 to 1, $445,014.93; but as a small portion of the seized funds was in Spanish gold pieces and bars, the actual value reduced to United States money would be about $4,000 more than the sum last above stated. In addition, there was seized at the mint by the United States forces at the time of the occupation, and with which the treasurer of the archipelago is charged, a quantity of damaged silver coin, of gold and silver metal mixed, copper ingots, bar silver, and unfinished silver coins, some of which are claimed to be the property of private individuals. There are also in the insular treasury about $110,000 Mexican, of $55,000 gold values, seized by the military authorities at the Spanish general treasury, at the ayuntamiento, and in the junta provincial, being mostly deposits previously made as guarantees for government contracts or as security for services in official capacities. There are also special deposits in the treasury of funds seized from alleged insurrectos or from insurrecto governments at various times by military officers since the American occupancy, amounting in the aggregate to approximately $300,000 Mexican, or $150,000 gold value, at the ratio of 2 to 1, besides articles of personal property seized, such as jewelry, rings, earrings, necklaces, watches, field glasses, silverware, melted silver, insurrecto flags, stick pins, medallions, and cuff buttons, and miscellaneous articles. A detailed statement of the seized funds and property is hereto annexed and marked "Appendix V." While all the above-stated seized funds and property are deposited in the treasury and the treasurer is responsible for the same, yet none of them are included in the general treasury balances hereinafter stated. The seized copper coin, which amounted to a very large sum, as will be seen from the exhibit, is of materially higher exchange value in Spain than its currency value here in these islands. Under an order issued by Major-General Otis, a considerable portion of it has been placed in circulation here from time to time for the purpose of furnishing a medium for small change, but it does not remain in circulation long. It is hoarded by speculators and sent to Spain, where a very large profit accrues. This course is considered very undesirable, and it is recommended that the commission be authorized immediately to sell such seized copper coin, after due advertisement in this and foreign countries, and to provide for its exportation from the country to Spain and the deposit of the proceeds of the sale to the account of seized funds in lieu of the copper coin sold. As to the general seized funds, it is recommended that Congressional action should be taken authorizing the commission to turn the seized funds, so far as title to them shall not be established through the courts in favor of private individuals, into the general treasury of the islands, to constitute a general school fund for the support of public schools, with the proviso that where a specified portion of the seized funds was collected as taxes P C 1901-PT 1—8