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F.D. 12A.3 ' 5 0 VO No. Federal Reserve Bank STRoit) District No. 2 Correspondence Files Division PAP&-ES SUBJECT G<Iode), COW: L-Ww9/e0 CEA)E209z. CE-AVo, rwe,,to / PAi/ge../.0P/A-le5 (c, Ph oi!!!!!!!!!!!!!!!!!!9111111111/ Najor Gen. Leonard_ri 494quartere t'tntral Department U. S. Arm:;, 4 Chicago, Illinois. dear Gen. Wood: Basil and I left Phoenix for our camping trip equippg0 with writing materials to enable me to prothat aftiole which I had expected to have in your before this, but 70 found that our travels kept us 1y busy almost every day from sunrise to sunset and -a was no ppportunity for serious thought about matters more important than the daily routine of travel and caEp. Our trip took us all the way to the Pinacate atain in old Mexico within about -15 miles of the Gulf f Calif ciia. We connected with McCoy at Casa GTande, ad a short viisit ith biL 7A Douglas and anot4er visit ith him $44jo. coil has left.me to visit the Bliss's' nta tta r rut I join,him in San Francisco next 4 and on the 1 h we sail for the Orient. Both of Uo lammed with wuch regret that the fallen up-on-MoCoy and that he had been transferred Central Devrtment as a Major of Cavalry, the only bmpeneation betk his return to a close aseool-tion with Won't you Ove him my best regards and tell.hi'h that our photograhhS are ever developed I shall send him ther instalLent. The eneloeed memorandum is intended to be no e than an expression of my personal views about some of practical questions in finance and e00nomic:3 that are pressing upon us as a result of the war. ObvioUelY, very* close associhtion wah the treasury and its finan perations during the war period may an the one hand be-con idered as prejndipiht3 LT views, and on the other hand Amh,oeing some ri6ttaint in expressing them. At Iehst ou may take what I say on these matters as the best eonlotions I have And ac being based upon a rather intiuhte owledge of what transpired. lath most cordial - :thee, believe me _incere_ h Phoenix, Arizona, April 7, 1920. TORANDUM FOR GENERAL WOOD The whole world is addressing' itself to a study be economic problems growing out of the war, and they et so intimately involved witL the s Oial and political situation, both at home and. abroad, that aur public men cannot expect to s.-tisfy those who- are looking to them for leaderabip, unlese they are able to present clear and easily understord opinions on these matters and more particularly coLe constructive program. Tho cop:vents given below are divided into the ollrwin,:7 subjects:2. 4. 2. 7. 0 Dankinf7 and curmoney expansion. Hipp cost of living. Tartff. Foreidn Trade. Loanalo allies i=igration. * Taxation and loans. Business. 1.Banlior-.panc4n7andcuz3ion. For the past two years otudents 7f this subject and artioularly Gotha of -our economists ,connectod with the univeritie3 havo soverely,criA.eised the financial policy of the treaoury department, claiming that a great expansion of currency and bank oreditlhad resulted from the governments borrowing at too low ratTo oi from the reserve banks talittetnin to low discutt :c..too in order that this,polciy A.ght succeed, from the treasur:i 'sort:owing too much on short loan and that the consequences of this expansion were the present high prices of commodities and disorgaaisation of labbr.Thera is, of course, sole babes for a part of these chp,rges, but the basis is theoretical and oompletely overlooks ciroul&Aanoca which fmiuently in time ofmarmakes it necessary to, elect a choice of evils. ' When the war started in 1914 all belli;vent nations =ell had aeoess to our makkete-camo here tr buy foodstuffs and military suprlies in ulimited quantities, beyond our capacity to produce and their capacity to pay by the usual exchange of goods ana services for goods and servJ.ces and without regard to prices. This resulted in various econemicl phenomena, which may be summarized briefly as follows:- ) We planted more land end increaeed our farm production. We bred more food and Oat animale and increased our herds. -We nnlarged our industrial plante, built new ones and greatly increased out production of all kinds of material requited,abroad for both civil and military 'use. We enlarged our exports beyond anythin heretofore witnessed in the worlds history. We loaned largo sums of money abroad. (r) We repaid debts which we owed abroad. We imported over a billion dollars of gold and incroadedour bunk recervee by that amount. In conoaluence of the above t;.ere wao a slight enthe note curronc- i ciroulation and largement conuiderable enlargement of banh loans and-der_osite. These nosienasinvaribly accompany sn increase in tione wealth Olether in timo of peace or war. In other , we were rapidly etting rich out of the war, onls4rginL; Ot roduetion, our national aseets and our banking resourcee. The only question which can be raised ac to the aeundneee and perm-nence of thio- prosporify relates to the question of the price level, which in my opinion, was unavoidably bound to advance under conditions which, no system of banking of of economics which has yet been devised could be made to control. The above reltes to the period between the outbreak of war in 1914 and cur ontr-sace in 1917. Thoee,who have criticized the treasury's policy laim that the federal reserve eyatem has been doiAnted bs the resoury-and its rates, s.ss a result, have been, kept too low order to facilitate an unsound treasury proram. They claim t these bow rates are reeponnible for inIlation and high . ces. Broadly speaking, there are throe ways by which ination crk be moderated or kept under control and prices kept . own. 1. General economy in the consumption of all kinds of goods by all the people of the country 3e that what is resulted for military pursooes my be out of what io saved by economy. (2) Restriction upon borrowing from banks for the pureose of expanding production by pharging heavy rates for _loans, thereby imposing a t4A upon production which is based upon bank credit. () The payment of higher and more attractive ratee by the government for .long time war loane; so that a wider distribution to investors might be obtained without calling upon the banks either to subscribe, for bonds or to lend money to aubncribere who were unable to pa 71 for their bonds. As to the first, the people of thio country must be to impreoe aware of the determined efforts which were made that t'nere upon them that there was urgent need for economy and would be disorganizing consequenceo growing out of higher prieee If they did not heed the onoAing. It may be that moro. could have been done in thio direction, bnt the reeponsibility for the failure, if it was a fialure, rests neither with the treasury nor wit the federal reeerve eyetem,, but kather with the peculiarities of the 4Lerican temperament and the habits of a people who bad long been accuetomed to enjoy the luxuries and extravagances that 'are characteristic of a new. ,an rich country, and who were unwilling to surrender them. As to two and three, opinione differ widely, but my best judgment wile at the time and 'now that had much higher rats e bean'paid by the government and charged by ..te were reeerve banks, wo would have brought on troubleu t oueeesofully eacoped, p000ibly more serious in their affects the expansion * won the country than noae which reoult fromnot the secretary and and high Tricoo now prevuling.- Congress of the trenoury wa chorgod witl; the duty of authoring war lenne; Congress fixed the raloo or those %rens and delitgated a moot limited authority to t7oe eocretnry of the treaeurylp fix rntee-ano, termu. The Congreeo sirO1y heard his recommondo tions which were arrived at after consulting the reperve banks of and other b nkere. Assuming, however, that the.aecretrxyre.;.. Congress to be the treasury had auffisient influence with be paid, there were garded as himself determiniboo the rates to to be than two bodies between 'whom this queotion of tntee nrid on the settled. On the one hand theotronsury deportment are that in other hand the Federal Room:ye system. The facts every instance they made every effort to have their minds- meet to orrree unen the=wieeot °aurae.. There were certniniy er-enoeo of opinion. La 301:10 inotancesoI personally felt the rntee_were too low, wherene othyro of my own ciates, as well as manyobankere outside of the Reeervetoo eel,felt that they were about right, or in some caaes As always be true discueoionr these comg- ratesmust the reaultonifof auch4catteis,.and apolicies e to ere Inieh it was at the meon altion of oollflictino vi . .believed fiat the greatest possibilities of euccepe 4xisted. The fact is that the ratee at which the United States Government borrowed money had to be determined, either by Con, erese or be- the secretary of the treasury, or by the Federal Reserve systeeo Congrese gave very limited authority to the eecretary to fix rotea and terns for the long tine 'cane, except in the cene of the fifth loan, after Seoretgity Glass took office. /le between Congress and the sooretory of the Treasury, on the one hand, ond the Federal Reserve System en the other hand, the former could fix to so low and no much below the Federal Reserve rates that ,the loans would be hopoloso failuroe, or on the other hand; the Foderal Reserve Syeter ceuld have fixe-Aa rotes so much above those at which the eecretory believdd that he could borrow money, that it would heve caused the loans to fail. Ac to the long loans, - ' orincipal reeponeibility resMod with Congress end I firmly _eve that the tares fined by Congress, Whioh wore partly ho recomoendotion of the eeeretzry Of the Treaeviy, rated the best coneensus of banking experience and judgehat could be had at the time. I ale- bolive that little it, and pteoihly a vod deal of advnnto eeuld result ony attack of a poletioal nature upon the wa-r fine:nee 'ram, which on the whole, wrea a magnificent achievement. The great cry for higher interest rates by critics Toipally college orofessore, really vereliee to the short borrowing of the troaoury. n--1;41e, principally from the banks ox the country rather than investors, became() in those operations the greatest peseibilitieu of expansion wOh the resulting effect won prices existed. So far rep the Volume of that borrowing is concerned, it eould hardly have been less, except we had been willing to pay More taxes, because the country's oapaeity.to abecrbe long tioe bonds had been strained to the breaking point. The only question which I reg:rd as open to debate as to the wisdon of the treasury program, oel-tee to the rates paid for short loans.. As this letter is Loot confidential, 1 feel at liberty to say that 1 have differed with the officers of the treasury and with some of my own aeoociatea in the reserve system ea te this policy sine() the oummer of 1919, but nevertheidaa 1 realize that queetions here involved ere ones of judgment and time may dieolote that my own .opinion to rates, which wao a minority, was Wrong and the treasey eiew wao right. In general, however, theibllowing should be eald on the sobjeot of intereet rates. Any nation which encounters an unlimited demand for goods, at almoot any price,bad beyond it..: capacity to oroauce, and whose people are consuming and wasting goods beyond their ability to Tay out of current savings muet resort to credit and mortgage the savings of the future i,.. order to pay for the =ate and extravegance of the present. ii Till: II I X.-1 :3,30 nrY would have been effective in imposing a rigid economy uporsa people who were mad to spend money, might indeed have emashed the value° of all securities and poeeibly embarraesed or bankrupt many indivduals and corporetions an.: caused hard- shipe, loeSee and erbarrassments, equal,if not greater* than thoee reoulting from the preoent high prices and inflation- of bank depoeits and currency. Critics overlook the foot that the greateet corrective of waotaful expenditure b y the civil population in time of war is direct taxation, graduated to the point ere it will not diecourage production. :While our tax laws re olumey in some casco produced oululative taxes and may s degree be'diecouraging to production now that peace has come, the tax program was neverthalese on the whole couraeeoup and oonetruotive and saved us frou: esany a disaeter, such ac were encountered during the civil wax', which waa financed .almoet entirely upon credit. Loot you feel that thee° atatemento are dogmatio somewhat egotiscal, I hope you will bear in mind that durg the period eince our entrance into the war, the author had a peculiarly favorable optortnnity of viewing all eidec of these sublecte because of his intistte aeoociation with the rtreasury, his connection with the Reeerve yetem and acting as the head of the vartous wasnloan organizatione in New York. During this time, that le in 1916 smd 191t, I applat po1 ntho in Europe studying their experinnoes and getting their we, which helped to confirm my opinion that while semis kee were made, in general, the financing of the we wae done and these-are few importent mistakes, if any,- that juotify criticism. . . iI Cost of Livins. Most people discuse this6Ator vlicv though some formula or aoetrom Could be administered at night snd doliver hin the next morning oomplotely renown:. of hiG diceaoo without any period of conualeeance. They aleo.overlook the fact that At Is a diclease which is supported and etimulated by the atmoephore in whioh the patient lisee, and that juot now the atmonphere extends over the entire oivilleod world. The real ours for the high 000t of living is a supply cs. ' goodo w'ioh arc generally claeced as noemecitiee in exceee of a nomal demand for those geode. Thie es, be brought about L) br:nging to bear infitlencee which will stinulge productien and diecouraee coneuMption. What are *6" the fundemental influences which do not develop of their own accord and which can be brought to bear in accomplishing this cure? Possibly the _following are the most ipportant. (1 shall not arrange these in any order of importence, es opinions very so widely and my own views are not positive) e. A revision of the tax laws to remove those features which discourage production of neeessitice. 2. Thoprompt funding and payment of the short borrowings of the United States government so that these loans will re oh the hends of inveotors and be taken out of the bank. A deter,eined and vigoirue campaign of economy h must be practiced by the people of the 'United States.A similiar policy of economy by the government of the United States and by the states and municipalities. The maintainence of sufficiently hieeh rates of diecount by the reeerve banks to 'make borroeringe by the banks of the country en-rofitable unless they cherge their customers such high r es (n turn as to s ourage all unncooseary borrowing. A vigorous campaign with the laboring classes particularly thooe belonging to lebor unions, to speed up production. They should be &own that they on increase their bun waecs more rabidly by reducing the cost of goods through. an incre-ee in the production of goods than theypoan poo.ibly noreased by striking for higher evges at the wee time they reduce production and increase the cost of goods. Verieue measures of lees importance, looking to a more prompt distribution of the necessities of life from producer to consumer, the disciplining of those who obtain control by one means or another of the supply of any article f neceeeity, etc., etc., can all be undertaken, but what can be accomplished by such measures is trifling, comperedObb those mentioned above. Of all influences upon the cost of livi,ng,.the most importent is economy .lwthe avoidance of waste. ae140e/ Many diseased in the body politic are cured by remedies provided by nature, just as diseee.cs of the human body are arrested by anti-bodies, developed by nature. Much of the economic disorder of the world and more than any other disorder this very serious one of high living-coats, will find their principal reraddy-through the operations of the natural law http://fraser.stlouisfed.org/ of supply and demand, rather than IT the enactment of statute Federal Reserve Bank of St. Louis aind that the damage caueed by this war did not occur in a day or in one year, or five years. It is the damage eaueed by the misdirection of human effort0 over a period of 4o years, over eince Germany undertook to be a military deppbtism and this damage will take a long time to repair nxid results cannot be expected without further loeeee and euffering. Tariff' Undoubtedly the industrial development of this'' Country received a gre t etimulue from the protection aforded by a protective tariff. We grew rich rapidly by developing the countrytu reeources and employed much fole*gn accomplished, capital for the purpose. It w scosts and wages', however,Iby which, establishing a higher level of higher standard of believe, is usually confused with ahave enjoyed a greater living. Our wor'ing classes might prosperity had we been able in the earlier years of our development to engage more largely in world trade. Whatever may be the traditbonaliview of tate of matter, I think the time has now arrived when the people the country would be better setiefied to leave the develop- ment of tariff legislation 'and conoeauently the adoption of a tartff policy to a body of experts and eliminate it as a palitical issue. How otherwise oan the uncertainties which affairs now surround all of the economicwhat ourof Europe be taken determing tariff policy shall into consideration in be? The war has unquestionably developed special induetttes,,such situations in respect to special protection may bean the justified. dye indus Ty, a' ore--some sort of the less of It might also appear that In the case of some of utili very living are eveloped counties, where standards as in China, some sort of ours, low and wages abomaat a fraction produced goods coming inof protection against very cheaply our awn, may be necessary. with to our markets in compptition purpose, A tariff which would accomplish thiswould, of such, for instancg course, operate as would exclude C ins so pig iron, irons, but the list of such to exclude all other foreig4 pig articles iu comparatively command great advantagce of in which small and applies to goods production. we ourselves, as a rule, roaeifp____IL3eTz. One of the effects of the long period of education protective tariff of the people of the country to the idea of a that a nation mistaken belief has-been to lead them to tl,e trade. Hati_ga grows rich principally outs. of its exportthe exchange of grow rich out of "trade" and trade consists in goods and services between the nations. In the long run the natural ros-urces an other advontagesof climate,of a new industrious and virile populationj)f liberal government enjoyed by thie country should enable us to compete with the other producing nations of the world, find markets for our surplus production, and import freely those things which we cannot produce ourselves. It has always'seomed to me that the greatest breeder of international dispute and warfare' in modern times is the interference by governments through preferential tariffe, bounties, subsidies and other similar devices, in order to grasp for their citizens some of the international trade of the world which natural advantaoco did not entitle thooe nations to enjoy. With all of Europe prostrated by the war and most of the nations of Europe now owing us large oums of money, the temptation to all of their governments to opploy.devioes of that character will be stiong indeed. Since Making two visits to Europe during the war period, I have become convinced that herein lies the groat danger to the future peace of the world and the greateot argument for. the early establishment of some such body as the League of Nations, under the direction of which intornotional law may be °edified, troaties ado public, and ultimately, I hope, a court of; 0.OootienelAajudication established. Leaving out - all other 'eetioneLeurrounding the troaty and the leeague ae to this particular question, no surrounder of the of the United States need be involved in participating- in such an4 international organization. severe/4y with all of The future trade of the United States the rest of the world is intimately involved in the question of what we shall do about the loans now °win- to our governIf we eapeot them to be paid ment by the allied governments. even though payment ofoorincip01 and interest is spread over a very long period of years, it can only be done through large importations of goods in excites of the amount of our ex-ortations.. How these loandoshali be dealt with is-a serious and impvrtont question referred to in the next para- It ig probable' however, that the country must be gradually Iodate) indurstand that we cannot expect to maintain any such surplus of exports as we have recentty Witnessed graoh.. certainly not without a continuenoe of 440ordered exchanges - a long delay in the ecionomic recovery of 'Europe and ultimate inability of our creditors to cy their debts. 5. Loans to Allies. One of the unfortunoto necessities of the war emergency required our government to make direct loans to fcrekgn governments. Had it been possible, it woulO halite been infinitely better for thee° loans to have been sold direct to .mrn,roAlrAWIN,IAVA, W WM. ts continue to be o41 uhdorourrent of suggestion or preesure to induce a rioH creditor to forgive onOeimpoverished debtor. This would be a misfortune and a great blow to the credit of citizene of nations. In the event of another war, the with belligerents neutral natione would be chary of dealing and ef lending them money, fearing that they would never get or more every -it back. On the other hand, for a generation those foreign of budget subloitted by the finance ministers countries must make rovieion for the payment of a tribute irand to this country. This will be a source of une-sinee ritation. Under pronont conditions it would seem to b oat impolitic and unwise to agitate this subject at all. I should hope, however, that our present administration eill ahortly conclude an arrangement for dealing with current interest payments on our foreign loans so thot no policy need by adopted for a year or two. After that period, anC,. ofter conditions cattle down in Germany and Austria, it ehouid be Possible to effeot an adjustment of the e_ebt by cancelling duolicat4one and to some extent accepting payment in the form of the bends given by Germany and Austria in reparotion of _ war damage, so as to almost, if not quite, cumin to this .cause of international bad feeling. In Interleave when European credit recovers, these loans now held by our government may be converted under arrangment with the borrowers into a form which can be distributed to American investors andothe proceeds applied to reducing our wn government debt. e. Immigption. It is altogether too soon to determine ifiat the of *miggation and imraigrotion will be throughout the on there Will be a world. It may be a fair guess that lotor If that proves to be eoneiderabte migrttion to this country. the case, I cannot phrade in thtemmemorhndum any policy which uld meet the situation so admirably as that which you stated me. in Chicago. We shall need added. population in the make sure future just as we have in the past, but we mustAmerican that these who come*Ifrom abroad come here to boon= .citizens, and that they are capable of doing so. Unfortunately, the ideal of self determination has taken such a strong hold upon the raises and tribes of Europe that their relatives in this country have become thoroughly imbued with the idea and in .any cases nue beginoe to do t'oink more of their oid country and its welfare than they should This idea must be combeetted and it of the United States. 111111.1111111111111"."i0" not be- allowed to grow worse bfy allowing hordes of foreigners to coe to this country nithout any regard to their education their underetonding of our inetitutiono,eed their willingness to lea= the ,.language and °beery° our laws. 7. . Taxation and Loane. There is agimoot natural outcry againet the preeent to.e laws and some danger loot in heeding it our Congress may gb to; far to the other aeltreme and reduce revenue from tnxation, too much and too seen. United States Government now has a debt of abut twenty-five billion dollors offeet by about ten billion 4o1,lare, owing us by the alliee. Great care must be exerciffed leet thic situation develop amonnce similar to that which occurred during President Cleveland's adminiotration, when an adverse balance of trade, following the reduction of te teeiff caused heavy gold exports and almoot forcedous to -a auopension of specie payment. Thio lc a subject of great complexity end difficulty, lorzely one of edminietration for which the statesmanship of the Secretory of the Treasury will be a better pretcotion to the oountry, if he is an able -ad experienced man, than anythinn eloo that I gen think of. the present time, I belive that the most that cierebe claimed for a conetruotiveoprogram for the future wilo be to so reviee our tax laws that rovenueo will not be greatly reduoed, .but will oprean over a larger number of tax payero and relieve some of the burdens which I believe it hao been found root too heavily uon some of our industries and upon their proprietors. There will be a natural endeney in a hen Ogre's to look to indirect taxation, the effects of which are obscure but which, novertheleao, boor too heavily uoon the laboring aleseee for relief from the preeentosituntion. Suchaa policy will in the end be calamitous. It will play into the hands of that olase of agitators who in their heorts are enemiee of our inetitutions. Thie io one of the penalties of the woro which muct be principally borne by those of moderate an) larger means, and to ac groat an extent ao poseibleo by direct taxes. Little can be expected in the way of revenuee from our allies for many years to come. The burden, therefore, of .ainortizing our own loans must be borne by our own people. It will be a miotake to defer connencing repayment to later years. Our Government should quit borrowing at the earliest pooeible moment and start a regular and scientific retirement of Ito debt. Failure to do so will renderiit exceedingly difficult to get this painful process well under way and will lens de http://fraser.stlouisfed.org/ fer a return to normal conditions. Federal Reserve Bank of St. Louis - nli" Buoineco. Every wax of modern times which inflicted heavy dcstruotion of lift and property has boon followed immediately upon its ooncluoion by a period of business activity, opsoulationip. and higher prices. This post war period of somewhat artificial prospority hao voried in ion* and intensityand han then been followed by a reaction and liquidation with groat prostration tr businoss and 3eolry looses ano suffering. It somos ao th ugh the speculative period- follSwing this war might last for some time, and how serious the osriod of liquidation will be, no one eau safely prophesy. Probobly at no time in our history has it boon so 'necessary that our govornment shoulJ adopt a constructive policy, looking to the conservation and security of the industry and oomoorce of the country, as at the present time. So many of the business activities of our citizens in manufacture, transportation and bankingiare now-eubjoot to statutory regulations of the Federal anti State govornments that it is impossible in this brief memorandum to attempt to refer to any particular branch of this subject. The most that I shall say is that our government should pet about aositting the business interests of the country and adopt a more sympathetic and helpful attitude than has charootorizod the past tt:enty years. Mich has been actoomrlished in ocorching out and -destrotimg dishonest practices and s4useo. It has been followed by an antagonism felt throughtttt the whole country directed ao:ainat our successful men of -affiirs and their enterprises and frequently oxpressed,in all sorts of congressional investigations whioh have aceomplisheld little more than to oreate aralto perpetuate sootional and class fooling. The above memorandum has not contdined any reference to the nesd for budget legislation. It is a sulpct now faitly well understood and as I understand. it, rbto prpposol has received the endorsement of both political partioa. For obvious reasons this memorandum is confidential for General Woodlo personal use and information and not for publication or distribution. Opt Gouvator-Ognierni Qibtfi tkEi 1017itippirm Utanbrz Manila, September 15, 1925. Dear Mr. Strong: EVer since the Insular Auditor, lar. Wright, told me of his interesting conversation with you and spoke of your interest in Philippine affairs I have intended to write you concerning the situation here. I frequently receive letters asking me what my viers are concerning the 2hilippine situation and what I think should be done. Last year I sent the inclosed telegram of ;Larch 14 to the home government. This telegram expressed my views at that time and expresses them now. It was published in the Official Gazette here and went to practically every important official in the Islands. It was also published in the insular press and at home and had a wide circulation. It is a concrete expression of my views on the situation and as to what our policy should be. The views expressed were not pleasing to the political agitators, but nevertheless caused little comment among the people. Indeed, I did not receive a letter, telegram or verbal protest against any of the statements made therein. That the Filipino people are contented and happy and making steady progress is everywhere evident. Business is steadily increasing, as are our revenues, which were nine million pesos more last year than the year before and the expenaes of the government a million less. Exchange, which at one time was 15 per cent against us, is stable and during the past year has at times been in our favor. The balance of trade is heavily in our favor. There has been general improvement all along the line: in the administration of justice, public health, public education, etc. Largely as a matter of race pride, the mass of the people desire independence without understanding its responsibilities or what it means. To turn over the twelve milliOn people of these islands to their political leaders would not establish a condition of independence but one of stagnation and tOt /9E5 R vE-s- sOVERNOira 0 OFF1- exploitation. The people are not strong enough to defend themselves successfully nor are they prepared either from the standpoint of economic development or resources to maintain an independent government. Such stability as exists here is fundamentally due to the presence of the American flag, and anything which unstabilizes the flag will affect adversely the wellbeing and progress of these people through the destruction of confidence ,confidence in investments, confidence in the administration of justice, confidence in the efficiency, integrity and stability of the government. We are trying to build up here a well-organized, The well-trained Christian people. Great progress has b people are mostly Christians and under our protection and leadership will be a tremendous force in Christianizing the Orient and in esTo do anything which tablishing a Western type of civilization. would bring this work to an end or put it in the hands of those who cannot carry it forward would be a blow to progress in both lines. To withdraw from the Philippines with the Bast talking self-determination and full of unrest would be a great blow to civilization throughout the East and Lmpose a heavy additional burden or responsibility upon England, the Dutch and eventually the French in Indo-China, as it mould result in a great increase in the existing unrest in all the Eastern holdings of the principal Western Moreover, if we withdraw one of the great powers will nations. promptly take our place and this change will not be to the benefit of the Filipinos nor of the upbuilding of our own ideals of government in this part of the world. If we are to be strong in the Pacific west of Oahu, it is absolutely essential that we have a strong first-class There is no other place well-equipped naval base in these islands. The Islands are our part of where we can establish such a base. the Far Eastern problem and are our only holdings in this part of Without a first-class well-equipped naval base our the world. Navy will be tremendously handicapped in all its operations west of Indeed it will be pretty effectually off the Pacificwest of Oahu. that island. Such action would be We cannot fortify Guam. We are taken as an offensive rather than a defensive measure. free, however, even under the terms of the Washington Conference, to develop to any extent our aif forces, our submarine forces, and surface craft up to 10,000 tons, with guns not to exceed 8 inches in caliber. Full development on these lines will make the .1.1Q:58,31.6 wcp /./2 V.1`71.-.% 1==4 vc-ki 1P-10 v.1.0 uric! ' -3- Philippines safe from attack, provided we have an adequate fleet on the Pacific, which now seems to have been adopted as our policy after years of struggle to this end. We should also maintain a military and commercial base at the place where we maintain our naval base or its immediate vicinity, namely, Manila Bay, which is the best available base. This is the century of the Pacific and our position and influence in the Pacific will be greatly improved if we stand here in strength, as will our influence in the maintenance of the Open Door in China, and our ability to protect our educational, Missionary and commercial interests there and secure fair treatment for our growing trade with Asia. To withdraw from the Islands now would be in effect a betrayal of the Filipino people and a failure on our part to discharge our clear responsibility to carry our part of the eastern burden. We are confronted by a situation of responsibility toward these people, the world and our own interests, and we should discharge it fearlessly and to. thebest of our ability. It is no time f istic dreams based on self-determination, which has doae so much to destroy good government and upset the world in recent years. If these people were as near us as Cuba, we might attempt the experiment, because if anyone molested them or intolerable internal conditions arose, their vary position would justify our intervention; but if we leave here of our awn volition, We can never return except through a great war. We have done more for these people in 25 years than any other nation ever did for a dependent people in a much longer period. They have made excellent progress under Our leadership and with our assistance. ,-They enjoy true liberty to an extent which they can never hope for under a government of their awn. They have confidence in us, as shown by the fact that practically every request for a special inspector has stipulated that the inspector be an American if possible. The problem here is not political but biological. We cannot expect a black, yellow or brown race to ask to be governed They will accept such government if it is efficient, by a white race. honest, kindly and tolerant, but we cannot expect them to ask for it. stated in the dispatch, it is our clear As I duty to continue our government here until we are confident that conditions are such that the Filipino people can maintain an independent stable government and protect themselves. , t f) laisa -USD .6 1 titt ..aptIne.; 91 to ffOS. - , .cI, :tat fi" 5") " ,F;'q The independence propaganda has been limited to a very small but very active group who hope to control matters One hears little themselves in case we withdraw from the Islands. of this oropaganda outside of Aanila. the mass of the people want independence as a matter of race pride, I am convinced that in their Oval hearts what the intelligent and informed ones rant is the protection which Comes from our sovereignty, coupled with the largest practicable measure of autonomy. The present agitation and attacks upon the policy of the United States keep the eyes of the masses upon the agitators and are in a way their sources of influence and income. Although, as I have As to local autonomy, they have a very large measure of autonomy at present and no more should be given until they have accepted and lived up to , in letter and spirit, the clear Latent of Congress as expressed in the Organic Act. There is not an American who holds elective office in the Islands and the Even total percentage of Americans in office is between 1 and 2. including schoolteachers, men and women, the Americans who hold office or government positions is only a little over 3 per cent of the total number. We must not be swept off our feet but hold steadily on our course until we are sure the situation warrants a change. The Vice-Governor should always be an American and should be availablefor assignment in case of an emergency as the head of a department or to discharge such other duties as the Governor-General may assign to him from time to time. The ViceGovernor, who may be Acting Governor-General at times,would then have the power to call upon the Army and Navy of the United States and to do other things the power to do which Should only be extended to an American. Commencing almost immediately after the passage of the Organic Act, known as the Jones Law, there have been almost constant enroachments upon the executive authority through legislaThese enroachments have been such that we need tive enactment. certain changes in the Organic Act to strengthen the hands of the His main strength now rests on the right of superGovernor-General. This has envision and control over all departments and bureaus. abled me to keep the situation well in hand, but certain changes should be made in the Act in order to minimize certain conflicts with the Legislature, especially in the matter of the confirmation of The Senate, for example, claims that it should be appointments. consulted prior to an appointment, and that an appointment should This would mean that, in not be made except with its aLproval. p, .-.); ,,,',;,-;.E '.1 riT.,7x.:-.,.:4 :J, (---,:y,::.:7: aT,m:Iy1 triiie-el 1:,,,,,... -sc.i 1 .; L, '1--,-- o '.'''.'1 '.. c." -..,,L *77,7, ,-;..:, ; --.;-' -.:'a i.:,,c, r!../77:-;Z:f 1 ,, -;',, '...-47) 4`je Ais ;_.7e -2G .:' 1-7,.' .:..; -.:-, , :, , ;-_ 1,1, tr.,7 .,, 7., ,-,-, . liJVT1372 7 :' !t;..' il -,,.-' f.,:! t. - . IT 1 ..-....J:,,..,JTc.,te 4.0..gy c't- pi pung.. pr r; cowtrin Gw-friftee Uri. ilf. (A*.,4:-.%. CU; ',.a ,.r.,,i .prfLettfill* LPT3 Aveeu. .!:..f at atibtt- ,2i4;:,1111,11,1 IC .Y. ;,,e 2rp 3 ass f ve .74,grat *4.,;.pc, 2.pLeVe.Ppwi pie pr4Tql Ot ors ,'1-'0 4191-r ertivf.c.1.7.UGur.e.NwLe pGIZI ailop ,gprs.p we zesq : 'y..1 r!b03; 44.7e.,-..erpfft-X.e.t.; ...3..f .f: i..70 i',..,- a tylotlep falar.---c; .i,-, :1,-LroiarTi? ;;Af-.1, 4cr,g0 nue 4pe-Lc 1,:;:f',Er pear aT.rea.r ,:', :: ...,..7,;::-, :: .', . EITst`4'. OLii I. r.f.-:e :. ,r, I77.:',t.;,o;..,,y: 1-73 .;-!--A*,. ilfi.;;-_,.. ot .ppe ...-,-:' ;,,,,e Trr ::.c1 4-_:o1-. 1riuTvTlIc GET.,;7:.,;;I I- F....el .); (.::-!,,r, ...,,-. .i. ._ - ; i; 1, --'. , -1 !I ,',.'._7, :7J &Oryi.4.;,..1,4 '::-'-,1-,.,,'-'.''' LT:4^ ... .t.i.e --... .5 'I-Ig pvm, 4:0 qc c-c,,.L ;m4ls- 9 N14 beAet Pot-,Tc.J 2!-:or1 : 7.--(7. ...o cvyi II.:+ou .cpc V.W.,*4 7:2.1... .:;;,, ;_, r,ci ,,,,t,;,,xn 5,4:."t1( ;;G Ir:r7.0.3 -44iy 14 .ppre a' 14411'.7 lj:,:u 4- InAc,LA-,- :t", -::GLIT)11Ar 4 valT`ou .co wrik..p,illikq: , ,74.474: OL 40 IT34447. 4.0L - '11-n(4 e C0 CKS QP9 ATG9g of;g0T., rPICTeR V2 -113.c 01, ff3.1112!er42 ;7- A7Ge-10AGLI0T. up G791-70.. 21t9ug mna kw no sme gfUITOU .!,r0Lranrosw Vti,c jet ,111.- 74c4P6aaelp o Jb : ,12 L.,181.171QUa Ta ovrt .,,,,5or.79,t4;2cpetv mr; 4.0wen mo,; 251 GaitctVenel uptAit pe rm. yeres,Tctur , OAG1 2 'FAL Ga."1; at ItteLIG=V ',.:1,z1c.47,PG 01. NYSQL1-Qara p' o;3 la pef,:fiesm U1P7 ..upo poila floc*Ine 01,ATOG ote itytruq2 7, .7, i:631".0 utt irg.77,x1TQl ID' ljE orArmTc tr.74 ,;17G.7.;E r 'I TAr.21 ' .; grAcal sxcize E Wa ptihG I AEI.% yuLV0 a -.5- addition to having the power to cdnfirm, it would also virtually control the power of appointment. I have always freely admitted the Senate's power to confirm or reject, but I have always held that I was in no way obligated to consult with it or be guided by it in the makft of appointments, the only exception being possibly in case of judges of first instance, where the phraseology of the Organic Act states that the appointments shall be made with the advice and consent of the Senate. Under the Organic Act Department Secretaries. all executive authority is vested in the Governor-General and must be exercised by him in person or through the executive departments under his control and supervision. These executive departments are: Public Instruction, including public health; Interior; Justice; Finance; Agriculture and Natural Resources; and Commerce and CommuniThe Departcations. Under these departments are the various bureaus. ment Of the Interior is the department which has the most to do with It is the departthe conduct Of municipal and provincial affairs. ment which is most closely in contact with the administration Of All the Secretarthese units and the political influences therein. ies, with the exception of Public Instruction (the Vice-Governor), are Filipinos, appointed by the Governor-General and confirmed by the This, as you will see, largely ties the Governor-General's Senate. hands in the free selection of his own Secretaries, heads of executive departments, in other words, the selection of those who are to carry out his policy and exercise a large measure of executive authorThe necessity for their confirmation by the Senate results in ity. the Senate claiming that the Secretaries owe allegiance to it and are The Governor-Gendependent on it rather than the Governor-General. supervision and coneral, who under the Organic Act has the power of trol, maintains, and properly, that they are dependent on him and are his representatives and not in any way subordinate to or dependent on the Senate. The result is that it is at times difficult and indeed In impossible to obtain, confirmation of Secretaries of departments. issue to the point of demanding some cases the Senate has carried the of the Secretaries a promise of allegiance to it prior to confirmation. The confirmation Of the appointments of the Governor of a State or the President of the United States is supported by the party which elected him, but the Governor-General has no party and no representatives in the Legislature other than the two appointive Senators and seven appointive Representatives representing the nonThese men naturally have very little weight in the LegisChristians. lature and can only be expected to look after affairs immediately affecting their own people. I think, in view of the situation, that the Secretaries of departments should be appointed by the Governor-General without confirmation and should hold office during his pleasure. If t . I ca I t to 6;1 V -6- this cannot be done, they should be appointed by the President upon the recommendation of the Governor-General. The Governors of the non-Christian provinces, that is, Of the lohammedan and non-Christian mountain people, should be appointed by the Governor-General without confirmation. These people have been disarmed and are absolutely dependent on us for protection and are a unit in desiring the confirmation of American Governors by the Senate. I have one or two cases which have been pending for months. The Senate desires to place Filipinos over these people regardless of their demands for American Governors. Other changes are also very desirable. First, with reference to the Constabulary, a force of nearly 6,000 officers This and men, of which the Governor-General is commander-in-chief. is the only organized force for the maintenance of law and order within the limits of the Islands. It is under the immediate command of an officer known as the Chief of Constabulary, who holds the relative rank of Brigadier-General. He is appointed by the Governor-General and must be confirmed by the Senate. This is undesirable, as he is the immediate head of a force of which the Governor-General is com, mander-in-chief, and the only force outside the Army and Navy (which can only be used in case of martial law) which he has for the maintenance of law and order from oae end of the Archipelago to the other. I feel that the Chief of Constabulary should be detailed by the Governor-General (from among the assistant chiefs) had hold office This would do away with the present condition' during his pleasure. of double allegiance, so to speak, which results from the Chief being It also introduces the dependent upon the Senate for confirmation. element of politics into a force which should be absolutely free from it. The sane policy should be in force with reference to the assistant chiefs. They should be appointed by the GovernorGeneral from the field officers of the Constabulary without confirmation by the Senate. The change suggested would not be a very radical change. As it now stands, all officers of the Constabulary from lieutenants up to and including majors are appointed by the Chief of Constabulary and commissioned by the Governor-General without confirmation by the Senate. It is highly Important that the senior officers should be in no ray dependent upon political support; in other words, they should be appointed by the Governor-General and serve during his This would not in any ray affect their permanent commission pleasure. in the Constabulary. Unless I can be furnished a thoroughly competent legal adviser, there is another official who should be appointed by the Governor-General and hold office without confirmation, namely, the Anyone familiar with Filipino character realizes Attorney-General. how difficult it is for a native Attorney-General to declare uncon p. ti -7- stitutional the Acts Of his awn Legislature or to interpret the provisions of the Organic Act in a manner contrary to the prejudices and political aspirations of his people. There are also certain necessary changes with reference to the exercise of the veto power in connection with appropriation Under the law as it now stands, the Governor-General can veto bills. an item or items or a section or the entire bill, but he cannot veto a The provisos are sometimes the most objectionable proviso of a bill. The power of veto with reference to appropriation bills features. should give the Governor-General the power to veto the bill in toto or any item or items, proviso or provisos, section or sections of the bill or parts of the same. The Jones Law on the whole is a good law, and with the power of control and supervision in the hands of the Governor-General it has been practicable to maintain a progressive and efficient but there has been a great deal of difficulty in securgovernment; ing satisfactory Secretaries as heads of departments, for the reasons I have therefore suggested the above changes. above outlined. Az I have With reference to further autonomy. stated, we can give further autonomy by appointing Filipinos to Secretaryships of Public Health and later on Public Education if it is deemed important and advisable to further extend local autonomy. I have already appointed a Filipino Director of Civil Service, a very imThe few Americans left in portant position with far-reaching powers. the service are highly technical men such as the Director of Forestry, the Director of theBursau of Science, the Director of Education, and the Director of Public Works. I have no particular objection to all Secretaries being Filipinos, provided my hands are strengthened as to their appointment and I continue to have the power of supervision and control. Ihile the present law giving the GovernOr-General power of supervision and control makes it perfectly clear that the Secretaries are dependent upon him and not upon the Legislature, nevertheless it would be well to emphasize this in any change which may be made in the law. We do not need a radical rewriting of the Jones Law, becasse we are likely to get something much worse; but if we have the changes herein suggested, it will be tremendously strengthen the and tend to a hands of the Governor-General, clear up the situation, more efficient conduct of the government. All reports that the people are uneasy and disI know of no more happy people in contented should be disregarded. they are free from all responsibility any land than the Filipinos: and worry, aad their tax rate is the lowest in the world for any people receiving the advantages they enjoy. If I were to recommend the policy to be followed, I should recommend the permanent continuation of our sovereignty, with the largest possible measure of local autonomy, combined with adequate power of control and supervision in the hands of the Governor-General. With this power clearly defined, local autonomy can be as extensive as the progress and loyalty Of the people warrant. In my With reference to the Fairfield Bill. opinion, it was a most objectionable and dangerous measare and it is very fortunate that it was never favorably considered. It would have left us with full responsibility local and international but without any adequate power of control. It would have opened up the natural resources of the Islands to practically unrestrained exploitation during the period of probation. Noreover, whatever period of probation was agreed upon no sooner would it have been fixed than there would have been an insistent demand that the period be shortened. I am practically conducting the government without Americans. A British or French colonial possession with twelve million people would probably have from six to ten times as mazy nationals I can get on, however, representing the home government as I have here. provided I am given the same support which I have had Up to date; but it would be much easier if some of the changes in the Organic Law which I suggested were made. I-do need, as I set forth in a letter of November 12 of last year, the assignment of a group of three carefully selected men to serve as assistants and advisers very much as does the staff of an embassy or legation, men who could pass on from one Governor-General I have asked for a to another the policy and traditions of the office. first-class man from the United States Treasury Department and one from the State Department as well as a carefully selected man from the AttorIn addition, a man ney-General's or the Judge Advocate General's office. from the Department of Agriculture would be very valuable as the future develOpment Of the Islands depends very largely upon the development of their agriculture. This is a rather, modest request considering the magnitude of the problem. Its approval would be of the greatest assistance, and the appointment of a thoroughly competent man from the Attorney-Geaeral's or the Judge Advocate General's office -would maim it possible to get on satisfactorily with a native Attorney-General and obviate the the hands of necessity of placing the Appointment of this official in the Governor-General without confirmation. -9- I do not, however, wish to ask for the impracticable. I should place first in LAportance the appointments of the Secretaries; second, the appointments of officers of the. Constabulary; and third, the appointments of the Governors of the so-called Special Provinces chiefly inhabited by the liohammedans and other non-Christian peoples. The tTsident!s letter to Speaker Roxas embodies a sound policy and was and -is most helpful and there should be no change It was thoroughly sound and for the in the policy therein announced best interests of these people. There should be no further extension of local autonomy until the Legislature and the people have accepted in good faith the provisions of the present Organic Act and have shown capacity and fitness by constructive legislation and full coopEratioa. There has been a lack of cooperation, and too much effort has been expended by the Legislature to defeat the clear Latent of Congress as expressed in the Organic Act, and too little to comply with its provisions in a spirit of loyal cooperation and an effort to promote the progress and welfare of the people and the proper development of the natural resources of the Islands. Senator Quezon and Speaker Roxas have declared it to be their purpose to reduce the Governor-General to a mere Senator Osmeila and other leaders, in effect, concurred figurehead. These stateby actively supporting the policy of non-cooperation. ments indicate a lack of that spirit of true loyalty and cooperation which is so much needed in solving a problem such as we have here, in which all concerned must work together. Whatever changes are made, the Governor-General, the Vice-Governor, the -Auditor and a majority of the Justices of the Supreme Court should be Americans, and in case of disabblity of the Governor-General and the lace-Governor, the president should be free At preto name anyone he sees fit to serve during such disability. the Vicesent in case of disability of both the Governor-General and Governor, he would be required to name one of the Secretaries. This would be a Filipino, whose detail might result in very serious complications. The Organic Act should also make it perfectly clear that Americans, otherwise qualified, may hold any office or position under the government - insular, provincial or municipal. is preAt present their appointment as Secretaries of Departments local kegislattg - that they be vented by the requirements of Islands three years Filipino citizens and have been residents of the immediately preceding their appointment. The policy of the Legislature has been to get Americans out of the government as rapidly as possible and to Filipinize throughout. This is in a way to be expected, but we cannot go beyond a certain point without seriously crippling the government. The Filipinization which has already taken place has been too rapid and has resulted in a loss of efficiency. We must have a certain number of efficient Americans here, and especially must we have a great increase in the number of American schoolteachers. I have gone somewhat into detail so as to give There is nothing whatever you a lit/le view Of the situation here. to worry about so far as any reported trouble with the Legislature is I have gotten through my budgets for the last three years. concerned. It is simply the inevitOur personal relations are very good indeed. able differences between the executive and legislative branches, which have been added to by racial differences, and lack of training - on the part of the Filipino - in our form of government and lack of appreciation of the sharp distinctions we insist upon between the exenative, After all is said, legislative and judicial functions of government. it must be remembered that at the bottom the problem here is not so much political as biological. With kind regards. Sin ely yours, fre,e(7,LEONARD WOOD. Governor-General. Benjamin Strong, Esq., Federal Reserve Bank, 15 Nassau St., New York City. enclosure - 1. - CICPR d---CGVERNOR'S OE RECEIVED 3 r325 r"1:0-01 *ii,41,-7 /1-45. Office of die (531irrnor (65eneral fflanila September 30, 1925. Dear Ur. Strong: I have sent you a rough memorandum which gives you a general idea of the situation. Bob Bacon has been here for five weeks and has gotten pretty thoroughly in touch with the general broad problem. I hope you will see him and have a good His visit has been most talk with him. helpful and I am sure he can be of great assistance to us at the Washington end of the line. You can render a great public service if you would take a vacation and come out here for a month or two and look over the general situation. I will guarantee you some very go3d fishing and an interesting trip and a most cordial reception. With kindest regards, as ever, Sin ely yours, AfAt'gAtladOPX0r(P. 15 Nassau Street, New York City. EFAirei crtc-7:-.3 UONFILESTIAL: November 30, 1.925 My Uear Genend: Ci an exceedinly busy time for the last few :::.bsencein Europa e ek s &ince my return, has made it impossible until today to reply o jour But you may be sure tnat 1 have letters of September 15 and Zeptember 30. read them both with the greateet possible interest and attention. Nothing Ikoula please me more than to be able to make you a visit, such a b you euggest, which ia really the beet *ay to prepa.re oneself for some Constructive .or t here, but 6e are, e I thing. you realize, in the RiOst Of a period of monetary reorganization abroad which pl.cee a good deal or responsibility u4on U 5 in the Federal Reserve system, and it seems alost unlikely that I can lve or 60 extended an .abse.noe for ,ome time to come. May 1 express soult: impressions which I gain from your letter rather categorically: It would seas that too strong a d.evelooment in the direction of 8,u t000lki, or certainly complete indepen..:ence, presents the possibility of great danger unless we are willing to turn the Filippino loo.ie to become the prey to their on immediate incapacity of self-government, or to immediate subjection to the sovereignty of 60ine other power, have in mind that autonomy, as expressed by some of the agitators, would etai that the talted otatee Government would still retain all responsibility for Filippinb independence, but ,,ould leave the country in condevelopdition politiIly where :kis-government, ox2loitetion and othor ments ,lould etortly cell fur the hcetl Of iabervdrition Of g,,ogie :,x)rt, and tA, .1: time , :hen e had so end our 1oci:4 org 'thzation that the intervention would be costly in Lae extreme. The Jones Law, which it, the organic law of the laluids, re-,uires Emenoment, princip,ily in the matter of ?ointments and their confirm,tion the Senate, in order that your organization may betreagthened at the top by including a Isr6tr pertent:..ge or skilled Americane 8,3 Department Secretaries, etc. A more effective, direct responsibility of tile coustEbulary to the GovErnor General v,ould seem desirable. 1...xecutive control of appropriations is now not as complete ae it -,hould be. There should be assigned to the Governor General's staff a sm,:11 group or four or five technic ai experts who would be the backbone of a nprm,,nPot nroAni,uk*Inn tn (tarry on nn/inipn 2 Major Genera Leonerb 11. M.25 utl oreeni zati o o It rent;tk3ered, an 1 n t el 6. 4ith. the D ligent eevalopment, of greeter ;:utonomy .old be poeeitde. eni.sefe, FM-oh eennot now be undertaken. epply not only to Fron this end I think chteages .ere re.juired tee Philippiue Ielande, but to our other insular ?oseeeeions, evereepoesibly eieekeud the Genta Lone. Leevine out the territorial goeerremere. Alaske, sie aoe have the Virgin Islends, Porto Rico, the Philippine Ieleende, ana the Cenal. Zone, all more or leee .)bjct to s,iiitiy overeeent Eech of the possesetione hfle probleme welch centers in the seer Lepertment. Of a.apecial. aeture which reeeire th.e review of epecielly tieiaed men leech s we heve for our own oontiaeutal governeent of the Urited See-tee in the IP rioue departeemte of the Government, theet is to say, politicel netters under the Etete Depertmene, finenoiel meeeeare Jade:Jr the Treasury rifspertment, 1.K.wi natters in the office of the Ateoraey Geuerel, Commerce, Agriculture, etc:. etc. L'y thouglat hes tete*. tieet if the LiL.n.-...6-exent of iJce. tht1 pobeeseiona could be put. Und.er lehe exnoutive aupervieloo ofa :.5ecretery who eould 'oe ft C,ebinet Member, ano bo would have es MS staff b. group of mea, stly the oerm,..ment Under Secreteriee in the veri.oee Deeertmeeite, it might be pole:Able to develop en or6arai- 4b.t1on in ;ehingtou which. eould correeooad to and 000rdiaate with the orgnizations in the verieue poeseeeions, so thet dl locel croeleme esealee oe eubject, eo tee considereeion 'eee reviee of men of experience in eece divieion of the eork. You 0.d.11 not uadertend thie to be s.ay criticiem of :_tey indiviceasa fir. It is diffieelt for me to eicuelize present ceneerned 4th irul an orgenize.tion to cover all of this groenathich ooula effectively center in one man itheet the 4.ciek,uate 13u;..ort of xen o2 experieece uneer him 'eh° ere 4,e1.1 euelified toe:,ive edvize on spaciii tocanicel metters, and, of couree, there iireet raeoeeeibllity to 'Lb Pre:A:lent. ahould "eere euch n ozgenization developed here, the v rioue diftieultiee expreteien In your letter would, it eeecs to me, heve the kind of atudy which they all re.eare, nc the tuOiee would rezezit n recemeeeeetioee- inr dl of the chengee thich yoe eegeeee You have, of couree, beeneedvieed that some little -:ork.in thie airection tees alreedy teen ieeugureteci.s The eLeeject tee aporeaclea originelly becaeae of various otonetery problem eich', ere oreeeiag tor attention both in Porto Bieo IL the ceee of the letter, juet to larelceete the eeed for specielieetion, the cureency of thoet. ielende ia etill the Deniel currency, iesued the Vi rg in I sleuth . e. Denieh Beek, which, in tern, is owned in Denmerk end which tee. never been brou,?ht under the sLonetery sietere of thie: coent.ry. by msy be thet the eteeiee these ;entlemen ere now :Inking (men princip .1Lill result in ;ileac, recomI am oropoeine to take the first meade.tione elon:-.; the line of your letter. opportunity to have e. talk eith them, end will Arita you the reaulte. ky on ly drettei frem the verioue .Depertmeute of the Gov ermn n difficulty is to find exactly the means of keoroechine the eubject in oreer to get emethinse done. ehin6ton, x.. en. eine I &hell first have a tlk with Freak McCoy, who is now in Wiaoll I expect to bee this week. I have one or two men in mind t.ho might Le useful to you in poeitione d more eepecie.11y to monetary eel financial metters, but of course the nife eey .1weyes ariees ,bout fmilice, the long dietence from the United f..1- tee, .ele pr-oblete of youk, children, their schooling, climete, ate. 5 Mijor General Leonr.. 11.50.45 After P.t1k 4th IteGoy I el 6.11 prot.--b1y to:.ve o;;porti;nity for a word lth Mi. Mi1on, ithsr this week, or on my nE.,xt viz,1t. to whi_biraton. I very mint e...p.prediste your writing as GO fully, end you ev:y certsinly count upon Ity usint; every opportuaity for t6ei1ia; tti ubjcot aliveA:1o%; sone of my -friends in Oie.stincton. vi alt to ' Lo...torI mv be Ab1e to ot,ary out te plan I b:ve loug had to sake 4th wftrme.st rsgarcs sma i;oot %gory sincerely yours, M Genersl Leonard :40oo, Lovernor cienerll of tt,e Philippines, Pbili:jir; I& 447-7t-- refii My dear Generale otter e se *wryest flreetiege January 4, 1926, .e ihe fx.e 1,13 you will aea by the date on the aecompanying letter, it wee written over a month ego, and heb been held only until I could have b. talk with McCoy and poeeibly with Bob Bacon, ea well 8.6 to meke some furteer inquiry as to a man who might be eent to Manila, in case that developed to be desirable. Unfortunately I heve been continually invaded by vieitore from Europe on important mattere heving to do with the benk, ever Arica my return from Europe. It has delayed me* things, including the opportunity for ese talks. I have had one or two trika with McCoy, and only let week erranged with Bob Bacon to have him meet ma the next time he is in New York or I dm in WeehinLton. A1°, bb you doubtless know, my friends le the Treasury are continuing activities looking to further study and a better underetending of all insular matters. Mr. Winaton, the Under :secretary of the Treasury, has asked me if ee could apre h earl to go to %enilb, who would be competent to give you some aesistance both in connection with the budget and with the Philippine I had in mind one of our Mbll who le now eoing a somewhat eimiler piece of work in Chile, hevinie been a member of Proreeaor Xemsereeb Commie/elan and beint, kept there in order to round out the work. but his stay he been extended in response to urgent representetionb from the Chilian Government, end i fear we cannot gat ham back in time for your purpose. Alec) I am not quite sure that he is just the men you need. Nationel Brink. We were considering the possibility of sanding our 101-. Rounds, who would Le in every way just the men for your purpose. Unfortunetely, due to the very active banking situation in New York, we have had e heavy drtft on our staff, no lobe than four of our beet men having accepted positions with oommercial tanks within the last few months, and another one is now This, therefore, Is eimply a report that tne matter is being given attention and that we are doing what we can to find just the right person. considering an offer which may take him elle), from us. You doubtlese by now have received McCoy's cable about my son Philip. He is a fine fellow, hee had quite e little benking experience, and he is interested in some form of public service. The eugeeetion wee in response to his own desire to do something of this sort, brought out, I believe, as e result of bome talks be had about the Philippines, end in no small part inspired by his admiration for you and the work you ere doing there. I. 4.26 This letter carries warrneet greetings and best wishes for the Nt,vi Tear. I beg to ref:win, 6incere1y yours, Major Generel Leone ra *000, 3overnor General of the Philippines, tails., Philippine IsIsnde.