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MONEY TRUST INVESTIGATION
INVESTIGATION
OF

FINANCIAL AND MONETARY CONDITIONS
IN THE UNITED STATES
UNDER

HOUSE RESOLUTIONS NOS. 429 AND 504
BEFORE A

SUBCOMMITTEE OF THE COMMITTEE ON
BANKING AND CURRENCY




PART 1

WASHINGTON
GOVERNMENT PRINTING OFFICE
1913

SUBCOMMITTEE OF THE COMMITTEE ON BANKING AND CURRENCY,
HOUSE or

REPRESENTATIVES.

ABSENE P. PUJO. Louisiana, Chairman.
WILLIAM G. BROWN, West Virginia.
GEORGE A. NEELEY, Kansas.
ROBERT L. DOUGHTON, North Carolina. HENRY McMORRAN, Michigan.
HOBERT D. STEPHENS, Mississippi.
EVERIS A. HAYES, California.
JAMES A. DAOGHERTY, Missouri.
FRANK E. GUERNSEY, Maine.
JAMES F. BYRNES, South Carolina.
WILLIAM H. HEALD, Delaware.




R. W. FONTENOT, Clerk.

A. M. MCDEBMOTT, Assistant Clerk.

MONEY TRUST INVESTIGATION.
SUBCOMMITTEE OF THE
COMMITTEE ON BANKING AND CURRENCY,
HOUSE OF KEPRESENTATIVES,

Washington, D. C, Thursday, May 16,1912.
The subcommittee met at 2.30 o'clock p. m.
Present, Messrs. Pujo (chairman), Doughton, Stephens, Daugherty, Byrnes, Neeley, McMorran, Guernsey, and Heald.
The subcommittee had under consideration the following resolutions :
[H. Res. 429, Sixty-second Congress, second session.]

Resolved, That in order to obtain full and complete information of the banking and currency conditions of the United States for the purpose of determining
what legislation is needed, the Committee on Banking and Currency is authorized and directed to make a full investigation thereof, including all matters
touched upon in House Resolution Numbered Four hundred and five within the
jurisdiction of said committee: and the said committee Is authorized, as a
whole or by subcommittee, to sit during sessions of the House and the recess of.
Congress, to compel the attendance of witnesses, to send for persons and papers,
to administer oaths to witnesses, and to employ experts, counsel, accountants,
and clerical and other assistants.
The Speaker shall have authority to sign and the Clerk to attest subpoenas
during the sessions or recess of Congress.

[H. Res. 504, Sixty-second Congress, second session.]

Whereas H. Res. 429 was heretofore passed for the purpose of directing the conduct of an investigation into certain of the matters covered by this resolution,
and it has since been ascertained that said H. Res. 429 is insufficient in the
delegation of its powers to permit of the scope of inquiry which is believed
to be necessary as a basis for remedial legislation on the subjects covered by
this resolution:
Resolved, That H. Res. 429 is hereby amended so that the same shall read as
follows:
" Whereas legislation is now pending involving important changes in our national currency and monetary system and vitally affecting our national banks
and other financial institutions, and various bills have also been introduced,
and are now under consideration by Congress having for their purpose the
amendment and supplementing of the act approved July second, eighteen
hundred and ninety, entitled 'An act to protect trade and commerce against
unlawful restraints and monopolies,' generally known as the Federal antitrust law; and
" Whereas bills are also pending or under consideration to regulate industrial
corporations engaged in interstate commerce through Federal incorporation,
supervision, and otherwise, and legislation is believed to be necessary to
further control the incorporation, management, and financial operations of
railroad corporations that are now subject to the jurisdiction of the Interstate Commerce Commission, including, among other things, the regulation
of the issue and sale of their securities and the protection of minority stockholders; and




4

MONEY TBUST.

"Whereas it has been charged, aud there is reason to believe, tb.it the management of the finances of many of the great industrial and lailroad corporations of the country engaged in interstate commerce is rapidly concentrating
in the hands of a few groups of financiers in the city of New York and their
associates in New York and other cities, and that these groups, by reason
of their control over the funds of such corporations and the power to dictate
the depositories of such funds, and by reason of their relations with the great
life insurance companies with headquarters in New York City, and by other
means, have secured domination over many of the leading national banks and
other moneyed institutions and life insurance companies in the city of New
York and in other cities to which they direct such patronage and over the vast
deposits of money and of the other assets of such institutions, thus enabling
them and their associates to direct the operations of the latter in the use of
the money belonging to their depositors and the stockholders and in the purchase and sale of securities and loans of money by such banks and other
moneyed institutions and life insurance companies, and that these institutions and their funds are being used to further the enterprises and increase
the profits of these groups of individuals from such transactions and to augment their power over the finances of the country and to control the money,
exchange, security, and commodity markets, and prevent competition with
the enterprises in which they are interested, to the detriment of interstate
commerce and of the general public; and
" Whereas it has been further charged and is generally believed that these same
groups of financiers have so entrenched themselves in their control of the
aforesaid financial and other institutions and otherwise in the direction of
the finances of the country that they are thereby enabled to use the funds
and property of the great national banks and other moneyed corporations in
the leading money centers to control the security and commodity markets;
to regulate the interest rates for money; to create, avert, and compose panics;
to dominate the New York Stock Exchange and the various clearing-house
associations throughout the country, and through such associations and by
reason of their aforesaid control over the aforesaid railroads, industrial
corporations, and moneyed institutions, aud others, and in other ways resulting therefrom, have wielded a power over the business, commerce, credits,
and finances of the country that is despotic and perilous and is daily becoming more perilous to the public welfare; and
" Whereas the national binksand other moneyed institutions controlled as aforesaid are charged to have been, and to be, engaged in the promotion, underwriting, and exploitation of speculative enterprises and in the purchase and
sale of securities of such enterprises, and in acquiring, directly or indirectly,
stocks of other banking institutions and absorbing competitors and in using
their corporate funds and credit for such purposes, either alone or in conjunction with those by whom they are controlled; and
* Whereas It is deemed advisable to gather the facts bearing on the aforesaid
conditions and charges or in any way relating thereto or to any of the subjects above mentioned as a basis for remedial and other legislative purposes:
Therefore be it
"Resolved, That the Members now or hereafter constituting the Committee
on- Banking and Currency, by a subcommittee consisting of the eleven members
thereof already appointed under H. -R. 429 and by such substituted members
as may be from time to time selected from the members of the said committee
to fill vacancies in the subcommittee, is authorized and directed—
"First. To fully investigate and inquire into each and all of the aboverecited matters and into all matters and subjects connected with or appurtenant to or bearing upon the same.
" Second. To fully inquire into and investigate among other things whether
and to what extent—
"(a) Individuals, firms, national banks, and other moneyed corporations are
engaged In or connected with the management of financial affairs of interstate
railroad or industrial corporations, or life insurance companies, and what
potential or other power they have or exercise over such corporations, and
how and to what uses the bankable funds of such interstate railroad or industrial or other corporations are applied.
"(b) The marketing of the securities that have been from time to time
issued by interstate railroad and industrial corporations has been by com
petitive bidding or otherwise.
"(c) Changes have been procured in the general laws of any of the States
under
 which such Interstate corporations are organized in the interest or upon


MONEY TRUST.

5

the procurement of such corporations, and for what reason and by what
methods and influences such changes were accomplished.
"(<1) Individuals, firms, national banks, and other moneyed corporations
interested in or in anywise connected with such interstate corporations are
enabled by reason of their relations or connection with other interstate corporations or with other individuals, firms, national banks, moneyed corporations,
or life insurance companies, or otherwise to prevent or suppress competition
in the interest of such interstate corporations, or to protect or assist the latter
in preventing or suppressing competition.
"(e) Such interstate corporations and the individuals, firms, national banks,
and moneyed corporations are mutually benefited and protected against competition and otherwise by the relations existing between them.
"(f) National bunks and other moneyed and other institutions are directly
or indirectly owned, dominated, or controlled through their directors or
through stock ownership, official management, patronage, or otherwise by the
same persons, interests, groups of individuals, or corporations that are also
directly or indirectly interested in other national banks or moneyed or other
corporations located in the same city and in interstate corporations that are
customers of said national banks and other moneyed corporations.
"(g) The same individuals are officers or directors of, or were or are
directly or indirectly interested in or dominate or control, or heretofore
dominated or controlled, in any way, more than one national bank or other
moneyed corporation.
"(h) The funds or credit of national banks and other moneyed corporations
or life insurance companies are or have been used or employed other than in
making current loans to merchants or on commercial paper, by whose influence
or direction such funds or credits were so used or employed, and particularly
whether and to what extent such funds are or have been employed: First, in
the purchase of securities from bankers or others in any way interested in or
connected with such corporations; second, in the guaranty or underwriting of
securities or syndicate transactions, either alone or in conjunction with others;
third, in loans on notes secured by bonds, stocks, or other collateral; fourth, in
loans on or purchases of stock of other bunks or of any trust or investment company or financial or moneyed corporation; and, fifth, in any form of investment alone or in joint account with others.
"(i) Any national bank or other moneyed corporation, whether directly or
Indirectly, or whether through or by means of another corporation having substantially the same officers, management, control, or stockholders, or with stoctt
paid for by the dividends of a parent or affiliated company, and. whether alone
or with others, has acted as an issuing house or in offering securities to the
public or to investors by prospectus, advertisement, solicitation, or otherlwse, or
has speculated or is speculating in stocks and if so, the nature of all such transactions and the profits and all other details thereof.
"(j) The management and operations of the New York Stock Exchange and
the New York Clearing House Association are. or may be, directly or indirectly,
dominated, controlled, or otherwise affected by any individuals or groups of
individuals who control or are influential in directing the use or deposit of the
funds of nationtil banks in the city of New York, or of interstate railway or
industrial corporations, or life insurance companies, and the relations that the
New York Stock Exchange and the New York Clearing House bear to such individuals and groups of individuals and to their financial transactions and to our
commercial and financial systems and to interstate and foreign commerce.
"(k) Any individul, firm, or corporation, or any one or more groups of such
Individuals, firms, or corporations, may or can affect the security markets of
the country through the NPW York Stock Exchange, or can create, avert, or
compose panics by the control of the use and disposition of moneys in the banks
and other moneyed or other corporations that are controlled by such individual,
firm, or corporation, or by other means.
"(1) There is any connection between the relation of bankers, banking firms,
and the relations of any of these interests to any of the others that (.perute to
interstate commerce, and the relations of such bankers, banking firms, and
their associates to the national banks and other moneyed or other corporations,
and the relations of any of these interests to any of the thers that operate to
protect such interstate corporations against competition or are or may be used
for that purpose.
" Third. To investigate, find, and report the facts bearing upon the payment
of political contributions to national campaign funds by or in the interest of
national
 banks and interstate railroad and industrial corporations, and by all


6

MONEY TBUST.

persons who are officers or directors thereof, and by other persons who are
directly or indirectly in control of or connected with such corporations, together with the amounts of such contributions and the circumstances attending
the same.
" Fourth. To investigate the methods of financing the cash requirement of
interstate corporations and of marketing their securities, and the relations
of national banks and others to such transactions.
" Fifth. Said committee as a whole or by subcommittee is authorized to sit
during the sessions of the House and during the recess of Congress. Its hearings shall be open to the publif. The committee as a whole or by subcommittee
is authorized to hold its meetings both during the sessions of Congress and
throughout the recesses and adjournment thereof and in such cities and places
in the^ United States as it may from time to time designate; to employ counsel,
experts, accountants, bookkeepers, clerical and other assistants; may summon
and compel the attendance of witnesses; may send for persons and papers;
and administer oaths to witnesses. The Comptroller of the Currency, the
Secretary of the Treasury, and the Commissioner of the Bureau of Corporations, and their respecthe assistants and subordinates, are hereby respectively
directed to comply with all directions of the committee for assistance in its
labors, to place at the service of the committee all the data and records of their
respective departments, to procure for the committee from time to time such
information as is subject to their control or inspection, and to allow the use of
their assistants for the making of such investigations with respect to corporations under their respective jurisdictions as the committee or any subcommittee may from time to time request.
" No person shall be excused from giving testimony or from answering any
question or from otherwise disclosing any fact within his knowledge as an
individual or as an officer or director of a corporation, or otherwise, or from
producing any book, paper, or document on the ground that the gh ing of such
testimony or the production of such book, paper, or document would tend to
incriminate him, or for any other reason; but every person so testifying shall
be granted immunity from prosecution with respect to any matter or thing concerning which he may be interrogated and as to which he shall truthfully make
answer under oath upon such investigation. The Speaker shall have authority
to sign and the Clerk to attest subpoenas during the recess of Congress."
Mr. PUJO. The committee will be in order. The purpose of this

special hearing to-day is to take the testimony of a gentleman. Mr.
Herman Sielcken, who is about to go abroad, and who has kindly
consented to appear before the committee without subpoena for the
purpose of giving such information as he has or may have in his
possession relating to the subject matter of this inquiry. Mr. Farrar
is not here to-day, largely owing to the short time that we had to
give him notice, and no doubt also to conditions existing down in
New Orleans at this time, because of the flood.
The inquiry will be primarily conducted for the purpose of having
it in concise^ and sequential by the counsel for the committee.
Of course, every member of the committee has the right to ask a question, but it is suggested that this should not be done until the inquiry
in the main is concluded.
"With this preliminary statement, and such statement as counsel
may desire to make, I will swear the witness and commence with
the inquiry.
TESTIMONY OF MR. HESMAN SIELCKEN.
The witness was sworn by Mr. Pujo.
Mr. UNTERMYER. Mr. Chairman, before proceeding to inquire of
Mr. Sielcken perhaps I ought to say to the committee that Mr.
Sielcken is being called out of order and that therefore the sequence
of the inquiry may not quite so readily appear from his examination
as will be made apparent later, when it is taken in connection with



MONET TBUST.

7

testimony that will be adduced in the regular order of procedure.
Owing to the fact that Mr. Sielcken is going to Europe we felt that
perhaps he ought to be called out of order.
Mr. Sielcken, you live in the city of New York?
Mr. SIELCKEN. I do.
Mr. UNTEKMYEH. HOW long have you
Mr. SIELCKEN. Forty years.
Mr. UNTEHMYER. YOU are a member

Sielcken?

lived in New York?
of the firm of Crossman &

Mr. SIELCKEN. I am.
Mr. UNTERMYER. That firm is engaged in what business?
Mr. SIELCKEN. In importing and exporting from and to

foreign
countries.
Mr. UNTERMTEK. What is its primary or principal business as
importer?
Mr. SIELCKEN'. AS importers we are now largely in coffee.
Mr. UNTEBMYEH. That firm has existed many years, has it not?
Mr. SIELCKEN. Yes; the firm was established in 1862.
Mr. UNTERMYER. Your firm has been a very large factor in the
coffee market for many years, has it not, Mr. Sielcken ?
Mr. SIELCKEN. Yes.
Mr. UNTEKMYER. Has

it or not been the principal factor, in America, in the coffee business?
Mr. SIELCKEN. I suppose that since about 25 years ago we have
been the largest dealers in green coffee in America.
Mr. UNTERMYER. YOU are members of the New York Coffee Exchange ?
Mr. SIELCKEN. We are.
Mr. UNTERMYEE. IS your

firm a member or are you individually
the firm member in the exchange?
Mr. SIELCKEN. NO; both partners are members. We are both
members.
Mr. UNTERMYER. And you are important factors in that exchange,
are you not?
Mr. SIELCKEN. We are large dealers in it, yes. We neither of us
visit it.
Mr. UNTERMYER. YOU transact your business through your
brokers ?
Mr. SIELCKEN. Through brokers.
Mr. UNTERMYER. Brokers who are your representatives in the exchange ?
Mr. SIELCKEN. Yes.
Mr. UNTERMYER. The

Coffee Exchange in New York is an important element in the international dealings in coffee, is it not?
Mr. SIELCKEN. Yes.
Mr. UNTERMYER. And

years past?

Mr. SIELCKEN. Yes.
Mr. UNTERMYER. The

has been an important element for many

United States of America consume about
what proportion of the entire coffee production of the world?
Mr. SIELCKEN. The entire coffee production in the world changes
according to the crops. The United States alone consume about
70 per cent as much as all Europe.



8

MONEY TRUST.

Mr. UNTERMYER. But, taking a series of years, is it not a fact that
the consumption in the United States is, in rough figures, about 40
per cent of the coffee output of the world 1
Mr. SIELCKEN. Yes.

Mr. UNTERMYER. The dealings on the coffee exchange are not only
national but international; are they not?
Mr. SIELCKEN. They are international so far as other people do
business on the coffee exchange in New York—so far as foreign
people do.
Mr. UNTERMYEH. Yes; and they are national in so far as from the
coffee exchange radiate the dealings in the United States.
Mr. SIELCKEN. Yes.

Mr. UNTERMYER. The quotations and dealings on the coffee
exchange in New York are the standard regulators of prices, are
they not ?
Mr. SIELCKEN. The basis of prices; not the standard regulator.
Mr. UNTERMYER. Those quotations are the authentic quotations of
value, are they not?
Mr. SIELCKEN. I would rather say the authentic quotations in certain branches. There is sometimes a considerable difference between
the values of green coffee in the different qualities as compared with
the values of the coffees on the coffee exchange.
Mr. UNTERMYER. Yes; but in the dealings in coffee—not the speculative dealings but the actual dealings in coffee—the prices as quoted
from time to time on the exchange are the basis of value, are they not,
or approximately so?
Mr. SIELCKEN. Approximately; yes.
Mr. UNTERMYER. That is, there is not any very wide difference between the quotation prices and actual transactions?
Mr. SIELCKEN. Oh. yes; there is sometimes.
Mr. UNTERMYER. There is at times ?
Mr. SIELCKEN. Yes.
Mr. UNTERMYER. But

ordinarily actual transactions follow the
quotations of the exchange, do they not, pretty closely ?
Mr. SIELOKEN. The quotations of the coffee exchange are based
upon the cleanliness of the coffee, while the transactions of the country are based upon the quality of the coffee. For illustration, Java
coffee might sell 6, 7, or 8 cents higher than the coffee exchange quotation of that day.
Mr. UNTERMYER. Most of the quotations on the exchange are in
Brazilian coffee, are they not ?
Mr. SIELCKEN. Yes. The coffee exchange deals in all grades. Delivery can be made in every grade of coffee sold in the world, but,
Brazil furnishing about 80 per cent of the world's production, naturally the quotation is in Brazil coffee.
Mr. UNTERMYER. And the usual quotations for Brazil coffee in
New York are for No. 7 ?
Mr. SIELCKEN. Basis No. 7.
Mr. UNTERMYER. NO. 7 is the basis of value?
Mr. SIELCKEN. The base; yes.
Mr. UNTERMYER. What does "No. 7" mean?
Mr. SIELCKEN. The coffee exchange has nine grades, from No. 1 to
No. 9. Formerly there were 11 grades. According to the laws recently changed in the United States, it is not allowed to deliver any


MONEY TBUST.

9

thing below No. 8. No. 8 is the lowest grade in quality, and Xo. 7 is
next. It is a lower grade.
Mr. UNTERMYER. The coffee exchange issues, does it not, from time
to time a list of values, and a history of the course of prices and
values?
Mr. SIELCKEN. Yes.

Mr. UNTERMYER. And the visible supply?
Mr. SIELCKEN. Yes.
Mr. UNTERMYER. This

is the list that is issued, is it not, and that
is considered as official and authentic and accurate, usually [handing
paper to witness] ?
Mr. SIELCKEN. Yes; this is issued by the coffee exchange, by the
superintendent, officially.
Mr. UNTERMYER. I will offer this in evidence, it being a pamphlet
or sheet entitled, " The Coffee Exchange of the City of New York,
supplement," containing a statement or the crops of each year; first
of all kinds, then of Rio and Santos, then the amounts of the arrivals of crops of coffee in the United States and in Europe, and
then deliveries of the coffee in the United States and in Europe;
with a separate column showing the world's visible supply on the
1st day of July and the 1st day of January of each year, begin*nine in 1886 and ending in 1912; also with a column showing the
highest and lowest prices at which future contracts for coffee were
sold during these years. Then it gives the quotations of Rio No. 7
spot coffee in New York, on the 1st of July and the 1st of January,
together with the highest and lowest prices during each crop year.
Then it has other columns, which do not concern us much here, relating to the exchange at Rio and at London, and the different levels
of coffee.
(The supplement referred to was marked " Exhibit No. 1, May 16,
1912," and will be found appended to this hearing.)
Mr. UNTERMYER. Rio coffee is coffee from what States of Brazil?
Mr. SIELCKEN. From the State of Rio and from the State of Menas.
Mr. UNTERMYER. Yes; Riode Janeiro?
Mr. SIELCKEN. Rio de Janeiro is the capital^ and the Rio coffee is
shipped by Rio de Janeiro, the capital.
Mr. UNTERMYER. IS Rio de Janeiro the name of the State ?
Mr. SEILCKEN. It is the name of the State and also of the capital.
Mr. UNTERMYER. That is a coffee-growing State ?
Mr. SIELCKEN. Yes.
Mr. UNTERMYER. The

Paulo, is it not ?

Mr. SIELCKEN. Yes.
Mr. UNTERMYER. The

largest coffee-growing State of Brazil is Sao

State of Sao Paulo produces what proportion of the entire Brazilian crop ?
Mr. SIELCKEN. When I first visited Brazil the State of Sao Paulo
produced 300,000 bags, and the States of Rio and Menas together
produced from four and one-half to five millions. Since then the production of Rio and Menas has decreased, and the production in
Santos itself has increased toward a record crop. The largest crop
was five years ago, or six years ago, when it was in excess of 15.000,000 bags in Santos alone. An average crop in Santos to-day would be



10

MONET TBTJST.

10,000,000 bags. In Rio the average crops are about two and onehalf million bags now.
Mr. UNTERMYER. Santos is equivalent to Sao Paulo?
Mr. SIELCKEN. Santos is the shipping port of the State of Sao
Paulo.
Mr. UNTERMYER. The world's visible supply of coffee is very much
larger than it was 10 or 12 years ago, is it not?
Mr. SIELCKEN. The world's visible supply; yes.
Mr. UNTERMYER. For instance, in July, 1899, the world's visible
supply was a little over 6,000,000 bags.
Mr. SIELCKEN. Yes.
Mr. UNTERMYER. In

January, 1900, it was a little over 7,000,000
bags. It is now between 13,000,000 and 14,000,000 bags, is it not?
Mr. SIELCKEN. It was that on the 1st of January.
Mr. UNTERMYEH. Yes. If you take the 1st of January, 1912, as
a basis, on the 1st of January, 1912, the world's visible supply of
coffee was about twice what it was in 1900, was it not?
Mr. SIELCKEN. Yes.
Mr. UNTERMYER. The

price of coffee covering the same period is
double what it was then; that is, it was 6£ cents a pound then, when
the visible supply was only 6,000,000 bags, and it is about 13 or 14
cents a pound now, is it not 1
Mr. SIELCKEN. It is about that; yes.
Mr. UNTERMYER. YOU are very familiar with this attempt—successful attempt—of the Brazilian States to carry through a plan of
what they call valorization, are you not ?
Mr. SIELCKEN. I am familiar with it; yes.
Mr. UNTERMYER. YOU are very familiar with it, are you not, Mr.
Sielcken ? You were quite interested in it, personally ?
Mr. SIELCKEN. Yes.
Mr. UNTERMYER. And took
Mr. SIELCKEN. Yes.
Mr. UNTERMYER. When, in

part in it to some extent, did you not?

point of time, did the coffee-growing
States of Brazil begin to undertake a plan for controlling the price
and supply of^coffee ?
Mr. SIELCKEN. I do not think they ever tried to control, if you
ask me that question.
Mr. UNTERMYER. Then, as I understand you, they never did inaugurate a plan the purpose of which was to maintain or increase
the price, and to control and regulate the supply ?
Mr. SIELCKEN. Not quite so.
Mr. UNTERMYER. Well, substantially so; was it not ?
Mr. SIELCKEN. NO; not even substantially.
Mr. UNTEKMYEK. We will get to that in a minute and see. Let us
see what it was then. This plan, whatever it was. began in October,
1905, did it not?
Mr. SIELCKEN. Some negotiations were carried on at that time in
which I was riot interested.
Mr. UNTERMYER. NOW, let us see. On the 3d of October, 1905,
you recall a law being enacted by the State of Sao Paulo, authorizing
it to enter into an agreement with the Brazilian Federal Government,
and with the governments of the coffee-growing States, for the adoption of measures to assure the valorization of coffee ?
Mr. SIELCKEN. Yes; I remember it.



MONEY TKUST.

11

Mr. UNTERMYER. That law. if you will remember, authorized the
Government of Sao Paulo, did it not, to make contracts and guarantee interest or premiums in a certain manner ?
Mr. SIELCKEN. To make contracts?
Mr. UNTERMTEH. Yes; to contract with the neighboring States
also producing coffee.
Mr. SIELCKEN. Yes.

Mr. UNTERMYER. TO enter into what was called the Taubate agreement?
Mr. SIELCKEN. Yes.
Mr. UNTERMYER. The

Taubate negotiation, resulting in the
Taubate agreement, was a negotiation between the three coffee-growing States, was it not?
Mr. SIELCKEN. Yes.
Mr. UNTERMYER. The

reason that it is called the Taubate agreement, as I understand, is because Taubate is the city or town at
which the agreement was made; is that right?
Mr. SIELCKEN. Yes.
Mr. UNTERMYER. That

is the name of the Brazilian city where the
agreement was entered into?
Mr. SIELCKEN. Yes.
Mr. UNTERMYER. DO

you recall that following this first law of
which I have spoken, in October, 1905, there was a law enacted by
the State of Sao Paulo, on December 29, 1905, imposing a tax of 3
francs gold (about 57 cents) on each bag of coffee exported?
Mr. SIELCKEN. Yes.
Mr. UNTERMYER. That

tax was to be collected at the ports of
Santos and Rio de Janeiro, was it not?
Mr. SIELCKEN. Yes.

Mr. UNTERMYER. The proceeds of that tax were to be used in the
valorization of coffee, were they not ?
Mr. SIELCKEN. It was not commenced yet.
Mr. UNTERMYER. The proceeds of the tax, when it was in force,
were to be used for the valorization plan, were they not?
Mr. SIELCKEN. They were trying to collect the money to proceed.
There was no actual business commenced at that time.
Mr. UNTERMYER. NO; but the law was passed, and the surtax of
3 francs per bag was imposed for the purpose of inaugurating the
valorization scheme, was it not?
Mr. SIELCKEN. It did not go into effect. It was passed, but did
not go into effect.
Mr. UNTERMYER. Did it not later go into effect ?
Mr. SIELCKEN. Yes; a year later.
Mr. UNTERMYER. Yes; I understand that; you are familiar with
that law, are you not?
Mr. SIELCKEN. Yes.
Mr. UNTERMYER. Under

article 1 of that law do you remember
that the contracting parties agreed to maintain in the domestic markets of Brazil a minimum price on coffee of from 55 to 65 francs
gold, being a price of from 7.3 cents a pound to 9.34 cents a pound?
Mr. SIELCKEN. That was the intention, which was not carried out.
Mr. UNTERMYER. That was the first article of the law, was it not ?
Mr. SIELCKEN. The law which they enacted, which they never
were able to carry out.



12

MONEY TBXJST.

Mr. UNTERMYER. NO ; but I am tracing the history of this, now.
They did pass such a law, did they not, and that law did fix a minimum price within Brazil?
Mr. SIELCKEN. No; they could not live up to it.
Mr. UNTERMYER. But there was such a law passed, was there not ?
Mr. SIELCKEN. They tried to.
Mr. UNTERMYER. And that law provided for a minimum price of
7.9 cents a pound up to 9.34 cents a pound for the American type
No. 7 coffee, did it not, and it was to be raised later to 10 cents a
pound ?
Mr. SIELCKEN. It was their wish to do so.
Mr. UNTERMYER. And that was the law that was enacted, was it
not?
Mr. SIELCKEN. The law was passed, and so states, but it was never
carried out.
Mr. UNTERMYER. There was never any law carried out for a surtax of 3 francs?
Mr. SIELCKEN. Oh, yes; but this law of which this price, as you
state, was supposed to be the basis, was never carried out.
Mr. UNTERMYER. When the surtax was collected was it not collected under the same law to which I have referred ?
Mr. SIELCKEN. But not on the same basis of price.
Mr. UNTERMYER. On what basis of price was the surtax collected?
Do you know ?
Mr. SIELCKEN. The basis of price which the Brazilians tried to
maintain as their cost of production was 4 milreis in their money,
which was equal to about 7 cents in our money.
Mr. UNTERMYER. YOU say you are familiar with the Taubate
agreement ?
Mr. SIELCKEN. Yes, sir.
Mr. UNTERMYER. That provided

for raising a loan of £15,000,000
Sterling, did it not, to control the output of coffee?
Mr. SIELCKEN. Yes.
Mr. UNTERMYER. DO

you remember when the first attempt was
made by the Brazilian Government to control the output in the
way of a financial operation in a foreign country ?
Mr. SIELCKEN. In Augus^September, 1906.
Mr. UNTERMYER. Was that the loan from the Brazilianische Bank
fur Deutschland?
Mr. SIELCKEN. I had nothing to do with that.
Mr. UNTERMYER. YOU remember that was the first financial transaction, do you not ?
Mr. SIELCKEN. Yes; in Europe—not here at all.
Mr. UNTERMYER. And it was a loan of £1,000,000, was it not?
Mr. SIELCKEN. Yes.
Mr. UNTERMYER. For one year?
Mr. SIELCKEN. Yes. sir.
Mr. UNTERMYER. The next step in

the attempt to control the price
and output of coffee was in December, 1906, was it not?
Mr. SIELCKEN. NO, sir.
Mr. UNTERMYER. DO you

remember in December, 1906. a loan
being arranged with J. Henry Schroeder & Co., of London, and the
National City Bank of New York?
Mr. SIELCKEN.



Yes.

MONEY TEUST.

13

Mr. UNTERMYER. That was a loan of £3,000,000 sterling, was it
not?
Mr. SIELCKEN. Yes; but that was not the step that you refer to.
Mr. UNTERMYER. Let us see; we will come to that in a minute,
Mr. Sielcken. It is a fact, is it not, that the Government of Sao
Paulo in December, 1906, did arrange a loan of £3,000,000 sterling
with Schroeder, of London, and the National City Bank, of New
York?
Mr. SIELCKEN. Yes; £2,000,000 sterling in London, and £1,000,000
here.
Mr. UNTERMYER. It was all under one contract, was it not?
Mr. SIELCKEN. Under one contract.
Mr. UNTERMYER. And you represented the National City Bank in
that transaction, did you not ?
Mr. SIELCKEN. I did.
Mr. HEALD. Mr. Chairman,

will you have the attorney ask the
witness to explain what this valorization scheme is that he is talking
about?
The CHAIRMAN. Yes; I think he is coming to that logically. We
will have him do it at the proper time.
Mr. UNTERMYER. Yes; I am going into it very fully. This is the
contract, is it not, Mr. Sielcken ? [Handing paper to witness.]
Mr. SIELCKEN. Yes, sir.
Mr. UNTERMYER. Will you

look at the back and see whether that
is your signature for the National City Bank ?
Mr. SIELCKEN. Yes,
Mr. UNTEKMYER. I

sir.

will ask the stenographer to mark that " Exhibit 2, May 16, 1912," being a contract between the government of
the State of Sao Paulo and Messrs. J. Henry Schroeder & Co. and
the National City Bank of New York.
The paper referred to was marked " Exhibit No. 2, May 16,1912,"
and will be found printed at the end of this hearing.
Mr. UNTERMYER. YOU were active in negotiating that contract,
were you not ?
Mr.» SIELCKEN. I was.
Mr. UNTERMYER. Prior

to the negotiation of this contract, had the
government of Sao Paulo been buying large quantities of coffee in
the market in Brazil?
Mr. SIELCKEN. Prior to that I made a contract
Mr. UNTERMYER. Yes, I know; but before we come to that
Mr. SIELCKEN. In September, 1906.
Mr. UNTERMYER. But prior to your making a contract, the government of Sao Paulo had begun, had it not, making purchases in
the market?
Mr. SIELCKEN. NO, no; not in Brazil.
Mr. UNTERMYER. YOU are sure of that ?
Mr. SIELCKEN. Quite sure.
Mr. UNTERMYER. A time did come, though, before December, 1906,
the date of this contract, when the government of Sao Paulo bought
largely in the Brazilian market, did it not ?
Mr. SIELCKEN. Yes.



14

MONEY TBTTST.

Mr. UNTEHMYEH. When this contract of December, 1906, was made,
how much coffee had been accumulated by the government of Sao
Paulo in purchases in the Brazilian market ?
Mr. SIELCKEN. The government of Sao Paulo contracted with a
number of coffee merchants, including myself, for an advance of 80
per cent on consignments of coffee, and that contract provided that
the government should not exceed purchases of 500,000 bags a month.
So it commenced in September, October, November, December. The
maximum quantity which they could have acquired by that time was
2,000,000 bags.
Mr. UNTERMYER. This coffee, thus purchased by the government
was purchased for the purpose of taking it off the market, was it not ?
Mr. SIELCKEN. The surplus of that crop.
Mr. UNTERMYER. It was to take the surplus of that crop off the
market, was it not ?
Mr. SIELCKEN. Yes, sir.
Mr. UNTERMYER. And the

purpose of taking the surplus of that
crop off the market was to secure higher prices for the balance of the
crop, was it not ?
Mr. SIELCKEN. It was just the reverse. It was not that way; it
was the reverse,.
Mr. UNTERMYER. It was the reverse? In other words, the Government went into the market to buy coffee and have it kept off the
market so that the planters should get less money for their coffee,
did they ?
Mr. SIELCKEN. NO ; the market went down under the Government's
purchases.
Mr. UNTERMYER. The question is not what happened, Mr. Sielcken;
we will come to that in a little while. The question is, What was the
purpose of the Government in taking this coffee off the market ?
Mr. SIELCKEN. The purpose of the Government was to prevent a
price below the cost of production.
Mr. UNTEHMYER. Yes; in other words, to increase the price of the
remaining coffee above what it would be if the Government had not
bought.
Mr. SIELCKEN. YOU could not say that; at least, I could not confirm that, because the Government primarily did not wish to have
the price below the cost of production.
Mr. UNTERMYER. This coffee that the Government bought, and
that you and your associates took on consignment and advanced 80
per cent of the cost, you agreed to carry, did you not ?
Mr. SIELCKEN. Ob, we agreed to carry it for one year after the
crop was finished.
Mr. UNTERMYER. And then to extend it for another year if necessary, did you not?
Mr. SIELCKEN. Each one had his own option.
Mr. UNTERMYER. Did not all of vou agree to carry it for a certain
time?
Mr. SIELCKEN. One year.
Mr. UNTERMYER. Did you not all agree, Mr. Sielcken, that if
required by the Government you would renew that for a second year ?
Mr. SIELCKEN. NO ; nobody was obligated for more than one year.
Mr. UNTERMYER. Were the contracts that were made with the different coffee houses, like yours, all substantially in the same form ?




MONEY TRUST.

15

Mr. SIELCKEN. All alike.
Mr. UNTERMYER. And they were all made with the Government of
Sao Paulo?
Mr. SIELCKEN. With the Government of Sao Paulo.
Mr. UNTERMTER. IS this one of the forms—the form of the contract
with Arbuckle? [Exhibiting paper to witness.]
Mr. SIELCKEN. That was the form which Arbuckle Bros., of New
York, insisted upon.
Mr. UNTERMYER. And you all had the same form ?
Mr. SIELCKEN. The same conditions; not exactly the same form.
Mr. UNTERMYER. But substantially the same contract?
Mr. SIELCKEN. Substantially the same.
Mr. UNTERMYER. I offer that in evidence, being a contract between
the Government of the State of Sao Paulo and Arbuckle Bros.
The paper referred to was marked " Exhibit No. 3. May 16, 1912."
and is here printed in the record, as follows :
EXHIBIT NO. 3, MAY 16, 1912.
The government of the State of Sao Paulo of the United States of Brazil,
having applied to Arbuckle Bros., of the city of New York, United States of
America, for the loan of a sum of money upon the security of 200,000 bags of
coffee, and having requested said Arbuckle Bros, to arrange for the classification (grading), shipment, and storing of che coffee:
It is therefore agreed by and between said State of Sao Paulo and said
Arbnckle Bros, as follows, to wit:
ARTICLE I. Subject to the terms and conditions hereinafter set forth, said
Arbnckle Bros, agree to lend to said State of Sao Paulo a sum of money equal
to 80 per cent of the value of not more thnn 200.000 bags of coffee, which
coffee shall be pledged to said Arbuckle Bros, as security for the repayment of
the loan and the interest and other charges hereinafter mentioned.
ART. II. Said State of Sno Paulo agrees and binds itself to repay to said
Arbuckle Bros, at any bank or other place in London. England, which Arbuckle
Bros, may designate, all sums of money loaned to it by said Arbuckle Bros, in
pursuance of this agreement, which repayment shall be made one year from
the date of the respective loans, together with interest thereon at the rate of
6 per cent per annum, from the date of the loans until paid; and also agrees
and binds itself to pay to said Arbuckle Bros, at the same place and at the
same times, all and singular the costs, charges, and expenses hereinafter mentioned.
ART. III. Said State of Sao Paulo also promises and agrees to purchase
100,000 bags of coffee at Santos and 100.000 bags of coffee at Rio de Janeiro, and
to ship same to the city of New York, United States of America, and not to
sell the same or any part thereof within one year from the date of this agreement.
ART. IV. Said State of Sao Paulo also promises and agrees that so long as
any part of the aforesaid loans remains unpaid, the collection of the surtax of
3 francs per bag of coffee on all coffee exported from the ports of Santos and
Rio de Janeiro will be enforced.
ART. V. The coffee to be pledged as security must average as nearly as practicable the grade known as No. 5 of the New York Coffee Exchange standard,
and must be shipped to New York consigned to Arbuckle Bros.
AET. VI. Whenever said State of Sao Paulo desires said Arbuckle Bros, to
advance any part of the proposed loan, it shall place the coffee which it intends to pledge as security therefor at the disposal of Arbuckle & Co. at Santos
or Rio de Janeiro (as the case may be), for shipment to New York, and when
the bills of lading for such coffee have been issued and delivered to Arbuckle &
Co., said Arbuckle Bros, (through Arbuckle & Co.) shall deliver to said State
of Sao Paulo bills of exchange on London, payable 90 days after sight for a
sum equal to SO per cent of the value of the coffee represented by said bills of
lading; the value of the coffee within the meaning of this Article VI being the
then market value of the like grade of coffee at New York.



16

MONEY TRUST.

ABT. VII. The classification (grading) and shipping of the coffee shall be
made and done by Arbuckle & Co., and besides the expenses for shipment at
Santos and Rio de Janeiro, that is, cartage to the vessel, dock dues, export tax,
freight to New York at the rate of 35 cents per bag and 5 per cent primage,
fire and marine insurance, and other small usual expenses, said Arbuckle &
Co. shall be paid 100 reis per bag shipped, as a remuneration for classifying
(grading) the coffee.
ABT. VIII. Upon arrival of the coffee at New York It shall be stored in warehouses by Arbnckle Bros. The storage charges at New York shall be 4 cents
per bag per month, plus the cost of insurance, and Arbuckle Bros, shall pay
the insurance premiums as the same become payable. The charges for taking
the coffee into the warehouses and out again (both included) shall be 4 cents
per bag. All the charges end expenses referred to in this agreement shall be
chargeable to the State of Sao Paulo, and shall bear interest at the like rate
with the principal loan, and shall be due at the same time and place that the
principal is due.
ART. IX. As compensation for the services and obligations undertaken and
assumed by said Arbuckle Bros., and for which no other compensation is specified herein, they shall receive a commission of 3 per cent per annum of the
value of the said 200,000 bags of coffee, and this whether the whole amount of
200,000 bags is pledged and shipped or not. The value of the coffee as a basis
for calculating this commission shall be as follows: For the coffee actually
shipped and pledged, the value shall be the same as Is fixed by Article VI of
this agreement; and for any part of the 200.000 bags of coffee which are not
shipped and pledged, the value shall be calculated at the price of 55 francs
per 50 kilos at Havre. Arbuckle Bros, shall also be paid a banker's commission
of one-fourth of 1 per cent upon all the bills of exchange mentioned in Article
VI of this agreement.
ABT. X. If at the maturity of any of the said loans the State of Sao Paulo
shall have paid the Interest, costs, and charges provided for in this agreement,
and, as well, kept and performed all and singular the other terms and conditions herein contained on its part to be kept and performed (except the repayment of the principal), then and in that event said State of Sao Paulo shall
have the option of requiring a renewal of the loan for one year upon the same
terms and conditions as are herein contained, except that such renewal shall
not carry with it the right or option for any further renewal.
ART. XI. Should the value of the coffee (that is, the market value In New
York) fall below the value upon the basis of which the loans were made, then
the State of Sao Paulo shall at once pay to said Arbuckle Bros., at any bank
or other place in London designated by Arbuckle Bros., such sum of money as
will reduce the amount of the loan to the point where the loan will not be
In excess of 80 per cent of the then value of the coffee; and this shall be done
from time to time as often as the fluctuations in the market value make it necessary, it being the intention and agreement that a margin of 20 per cent shall
always be kept intact. And if the State of Sao Paulo should make any default
In fulfilling the provisions of this Article XI said Arbuckle Bros, are hereby
given the right, power, and authority in such case to sell so much of said coffee
as may be necessary to realize a sum of money sufficient to reduce the loan to
the point where said margin of 20 per cent shall be again attained. The sale
or sales which may be made under and by virtue of the provisions of this
Article XI shall be made in accordance with and be governed by the provisions
of Article XIII of this agreement.
ART. XII. Should default be made by the State of Sao Paulo in any of the
promises oi conditions contained in this agreement the principal sums of the
said loans, and all other charges and expenses herein provided for, shall, at the
option of said Arbuckle Bros., or their assigns, become immediately due and
payable without demand and without notice.
ART. XIII. The State of Sao Paulo hereby gives to said Arbuckle Bros., and
their assigns, full power and authority to sell and deliver the whole or any
part of the said coffee at any broker's board or elsewhere, at public or private
s>ile, at the option of said Arbuckle Bros, or their assigns, on the nonperformance of any of promises or conditions herein contained, and without notice of
the amount due or claimed to be due, without demand of payment, without advertisement, and without notice of the time or place of sale, each and every
of which is hereby expressly waived; and such power of sale may be exercised
by said Arbuckle Bros., or their assigns, from time to time as they in their
discretion may deem proper; and at any such sale or sales said Arbuckle Bros.,



MONET TETJST.

17

or their assigns, may purchase all or any part of the coffee then offered for
sale, free from any right of redemption.
ART. XIV. Whenever the coffee pledged as security as aforesaid shall be
sold, whether In accordance with any of the foregoing provisions of this agreement or after liquidation of the loans, said Arbuckle Bros, shall be entitled to
a commission of one-half of 1 per cent of the sale price.
In testimony whereof this memorandum of the said agreement and another of
like form and tenor have been executed by the said parties thereto as of the
13th day of February, in the year 1907.
UNITED STATES OF AMERICA,

State of New York, City and County of New York, ss:
On this
day of May, in the year 1907, personally came before me, William
A. Jamison, to me known and known to me to be one of the members of the
firm of Arbuckle Bros., and who executed the foregoing agreement, and he
acknowledged that he executed the same for and in behalf of, and as the act
and deed of the said firm of Arbuckle Bros.
Witness my hand and official seal at the city of New York aforesaid, this
day of May, 1907.
Mr. UNTERMYER. I call your attention to article 10 of the agree-

ment. After providing that the consignees were to carry the coffee
for one year for the State of San Paulo, it provides as follows:

If, at the maturity of any of the said loans, the State of San Paulo shall
have paid the interest, costs, and charges provided for in this agreement, and
has well kept and performed all and singular the other terms and conditions
herein contained, then and in that event the said State of San Paulo shall
have the option of requiring a renewal of the loan for one year upon the same
terms and conditions as are herein contained.

That is correct, is it not?
Mr. SIELCKEN. That may be the exact language of that contract.
Mr. UNTERMYER. I understood you to say they were all in substantially the same language.
Mr. SIELCKEN. Substantially. Arbuckle's is a very rich firm, and a
great many of the parties in Europe who contracted could not engage
themselves for more than one year.
Mr. UNTEKMYER. But, Mr. Sielcken, what I want to know is this:
I understood you to say that all these contracts were substantially
the same.
Mr. SIELCKEN. The same, except that I say now nobody was obligated to carry it longer than one year.
Mr. UNTERMYER. Was your contract the same as Arbuckle's contract?
Mr. SIELCKEN. NO ; we were only obligated to carry it one year.
Mr. UNTERMYER. Where is your contract?
Mr. SIELCKEN. The contract under which this business was done
was made by a firm named Theodor Wille.
Mr. UNTERMYER. The question is, Where is your contract ?
Mr. SIELCKEN. I personally had none.
Mr. UNTERMYER. Then, as I understand, your firm had no contract for the carrying of coffee directly with the State of San Paulo ?
Mr. SIELCKEN. NO.
Mr. UNTERMYER. Your contract was through Wille ?
Mr. SIELCKEN. Through Wille.
Mr. UNTERMYER. That is a Brazilian house, is it not?
Mr. SIELCKEN. A German and a Brazilian house.
Mr. UNTERMYER. It is the largest coffee house in the

not?

 46627—PT 1—12


2

world, is it

18

MONEY TKUST.

Mr, SIELCKEN. I think it is, sir.
Mr. UNTERMYER. Larger than yours?
Mr. SIELCKEN. Yes.

Mr. UNTERMYER. Your contract, then, was with*Wille, was it?
Mr. SIELCKEN. Wille contracted for all of us.
Mr. UNTERMYER. I see. So that the State of San Paulo carried
this coffee through a contract with Wille, and Wille made subcontracts with these other coffee houses ? Is that right ?
Mr. SIELCKEN. Yes.
Mr. UNTERMYER. These

not?

contracts were made in 1907, were they

Mr. SIELCKEN. 1906.
Mr. UNTERMYER. This one was dated in February, 1907.
Mr. SIELCKEN. Yes; but our contracts under which this

business
was done were all dated in September, 1906. That was not the first
contract that Arbuckle made. He made a previous shipment.
Mr. UNTERMYER. Yes; but these contracts for the consignment and
placing of the coffee by the State of Sao Paulo were made, then,
before the £3,000,000 loan was negotiated, were they?
Mr. SIELCKEN. Yes, sir; nearly four months before.
Mr. UNTERMYER. SO that at that time, when the loan was negotiated with the National City Bank and with Schroeder, there were
on consignment how many bags of coffee under these various contracts?
Mr. SIELCKEN. TWO million bags.
Mr. UNTERMYER. About 2.000,000 bags ?
Mr. SIELCKEN. The parties, the merchants that contracted with
the State of San Paulo, confined the State of San Paulo to 500,000
bags a month.
Mr. UNTERMYER. Then this loan of £3,000,000 was negotiated for
the purpose of assisting in further purchases of coffee, was it not?
Mr. SIELCKEN. XO. All further purchases, all of them during the
whole year, were made by the merchants on consignment. This contract that you speak of was an entirely different matter. It was
an exchequer contract.
Mr. UNTERMYER. I understand that it was an exchequer loan, but
the exchequer loan was for the purpose of aiding Sao Paulo in buying coffee, was it not?
Mr. SIELCKEN. Sao Paulo needed money.
Mr. UNTERMYER. And was it not for the purpose of aiding her in
buving coffee?
Mr. SIELCKEN. During the year 1906-7 the State of Sao Paulo, in
order to do its business, needed money.
Mr. UNTERMYER. It was to buy coffee, was it not ?
Mr. SIELCKEN. Yes; but their credit was good enough to make the
loan without any coffee.
Mr. UXTERMYER. But do you not see that that does not concern us ?
The question is whether the money was borrowed for the purpose of
enabling the State of Sao Paulo to go forward with these coffee
purchases.
Mr. SIELCKEN. That was not a condition of the contract.
Mr. UNTERMYEH. But that was the purpose of the loan, was it not?
Mr. SIELCKEN. I can not discuss the purpose.
Mr. UNTERMYER. Did you not negotiate the loan ?




MONEY TBXJST.

1&

Mr. SIELCKEN. I negotiated the loan and negotiated the security
of the loan, but what the.State of Sao Paulo would do with her
money I could not negotiate for her.
Mr. UNTERMYEE. There was no understanding as to what they were
to do with the money, was there?
Mr. SIELCKEN. What they would do with the money was not stated
in the loan, nor was any coffee given as security.
Mr. UNTERMYER. Mr. Sielcken, we want to get these facts.
Mr. SIELCKEN. I understand.
Mr. UNTEKMYEE. And we do not want to fence at all.
Mr. SIELCKEN. NO; I understand
Mr. UNTERMYEK. Wait a moment, Mr. Sielcken. You know that
in 1906 and 1907, at this time, there was a very heavy crop, was there
not?
Mr. SIELCKEN. Yes.
Mr. UNTEBMYER. An unusually heavy crop?
Mr. SIELCKEN. Yes.
Mr. UNTERMYER. That threatened to reduce the

much, did it not?

price of coffee very

Mr. SIELCKEN. Yes, sir.
Mr. UNTERMYER. And you

know, do you not, that this loan of
£3,000,000 was negotiated for the purpose of enabling the State of
Sao Paulo to buy up coffee and take it out of the market?
Mr. SIELCKEN. Not exactly.
Mr. UNTERMYER. Was that one of the purposes ?
Mr. SIELCKEN. In a time like that the State of Sao Paulo probably
needed money, but none of the coffee shipped during the year 1906-7—
in fact, no coffee shipped by the State of Sao Paulo—has been shipped
under anything but the consignment contracts; not a single bag.
Mr. UNTERMYER. That I understand, but under the consignment
contracts the State of Sao Paulo had to pay 20 per cent of the price
of this coffee itself, did it not?
Mr. SIELCKEN. Yes.
Mr. UNTERMYER. YOU

and your associates only loaned 80 per cent,
did you not ?
Mr. SIELCKEN. Eighty per cent.
Mr. UNTERMYER. The State of Sao Paulo had to pay 20 per cent
on the coffee, did it not?
Mr. SIELCKEN. They had to pay 20 per cent on the coffee; yes, sir.
Mr. UNTERMYER. And part of this money went for that purpose,
did it not?
Mr. SIELCKEN. I suppose so, but that is not what I can state.
Mr. UNTERMYER. YOU negotiated the business yourself, did you
not?
Mr. SIELCKEN. I did.
Mr. UNTERMYER. With

the State of Sao Paulo and its representatives?
Mr. SIELCKEN. With the Brazilianische Bank and the Schroeders;
yes.
Mr. UNTERMYER. And with the Government?
Mr. SIELCKEN. Yes.
Mr. UNTERMYER. SO

that you knew, did you not, what the Government was borrowing the money for?



20

MONEY TB.TJST.

Mr. SIELCKEN. The Government needed money. I did not go
into
Mr. UNTERMYER. DO you mean to tell us that you do not know that
they were borrowing the money to carry through this valorization ?
Mr. SIELCKEN. I mean to state that none of the coffee shipped was
shipped under that contract.
Mr. UNTERMYEH. What you mean is that the coffee was not given
as security for the loan, was it ?
Mr. SIELCKEN. It was not given as security for the loan.
Air. UNTKRMYER. That we know; but the money was given as security for the coffee, was it not? That is, the State or Sao Paulo
had to put up part of the purchase price of the coffee ?
Mr. SIELCKEN. Yes.
Mr. UNTERMYER. And had to get the money to do it ?
Mr. SIELCKEN. Yes.
Mr. UNTERMYER. And you helped them get it, did you
Mr. SIELCKEN. I helped them negotiate that deal.
Mr. UNTERMYER. Yes; I see. Under this arrangement

not?

how much
coffee did the State of Sao Paulo buy after this £3,000,000 loan had
been negotiated and the money had been paid over on it ?
Mr. SIELCKEN. The State of Sao Paulo had negotiated with me
and my associates 2^000,000 bags, as I stated before, and we negotiated with them 3,000,000 bags more under the same conditions as
the first, only the condition was that the advences should be only
given on a declining market; not on an advancing market.
Mr. UNTERMYER. That is not material. What I want to know is
how much coffee they bought after this £3,000,000 was turned over
to them?
Mr. SIELCKEN. I do not know whether they bought it after the
£3,000,000 was turned over to them or before; I can not state. The
total purchases they made up to the end of that crop year were between seven and eight million bags.
Mr. UNTERMYER. Up to what date had the State of Sao Paulo
accumulated from seven to eight million bags of coffee ?
Mr. SIELCKEN. Up to the end of that crop year—July. 1907.
Mr. UNTERMYER. IS it not a fact that they had accumulated a little
over 6,000,000 bags?
Mr. SIELCKEN. Not for shipment. I was onlv interested in taking
my share of the consignment and the coffee which the Government
bought and shipped to foreign countries.
Mr. UNTERMYER. Let me see, Mr. Sielcken. whether there had not
been accumulated 8,146,123 bags for shipment ?
Mr. SIELCKEN. There might have been that amount. I was not in
the negotiations.
Mr. UNTERMYER. Let us see about it.
Mr. SIELCKEN. I was only interested in settling
Mr. UNTERMYER. YOU carried 452,700 bags, did you not—Crossman & Sielcken ?
Mr. SIELCKEN. No; more.
Mr. UNTERMYER. I mean up to 1907.
Mr. SIELCKEN. Yes; up to that time.
Mr. UNTERMYER. Theodor Wille & Co. carried 5,159,644 bags, did
they not?
Mr. SrELCKEN. Xo. no.




MUNEY TRUST.

Mr. UNTERMYER. For themselves
Mr. SIELCKEN. Yes.
Mr. UNTERMYER. The Comptoir

21

and their friends, did they not?

Commercial Anv. & Bunge & Co.
carried 1,000,000 bags, did they not?
Mr. SIELCKEN. Yes.
Mr. UNTERMYER. Peimann, Ziegler & Co.—who are they?
Mr. SIELCKEX. A coffee firm in Hamburg.
Mr. UNTERMYER. They carried 500.000 bags, did they not ?
Mr. SIELCKEN. Probably; yes, sir. I do not know the

exact
quantity.
Mr. UNTERMYER. Who are Prado, Chaves & Co. ?
Mr. SIELCKEN. Prado, Chaves & Co. are Brazilian exporters of
coffee.
Mr. UNTERMYER. They carried about 840,000 bags, did they not?
Mr. SIELCKEN. I do not know that, because
Mr. UNTERMYER. Very well. Is it not the fact that the total purchases of coffee by the State of Sao Paulo up to the time of the
£15,000,000 loan, of which we will speak hereafter, were over 10,800,000 bags that were taken off the market under this valorization
scheme ?
Mr. SIELCKEN. It is a fact that according to the statement of the
Sao Paulo Government- they bought that much and resold part of it
in the meantime, but they never owned that much. I do not know
the exact amount they bought; I could not tell you, because I had no
connection then and no detailed knowledge of what they did at home
in Brazil. I did not know.
Mr. UNTERMYER. Let us see. On September 30, 1909, you know
that there were over 7,000,000 bags still being carried, do you not?
Mr. SIELCKEN. Yes.
Mr. UNTERMYER. Taken

off the market and carried, and that of
that amount 1,744,161 bags were carried in New York?
Mr. SIELCKEN. About that; yes, sir.
Mr. UNTERMYER. What is terme coffee ?
Mr. SIELCKEN. Terme coffee is coffee received under terme contracts, what we call options in this country. In Europe they call
them termes.
Mr. UNTERMYER. That is different from consigned coffee, is it not?
Mr. SIELCKEN. That is different.
Mr. UNTERMYER. Of the coffee that was carried in New York in
September, 1909—of the 1,744,161 bags—there was about 500,000 bags
of terme coffee ?
Mr. STELCKEN. Yes; option coffee.
Mr. UNTERMYER. Option coffee, and about 1,241,000 bags of consigned coffee?
Mr. SIELCKEN. Yes; that is all right.
Mr. UNTERMXER. And in Hamburg there was carried at that time
566,000 bags of terme coffee and 1,200,203 bags of consigned coffee,
making a total of 1,766,203 bags carried at Hamburg?
Mr. SIELCKEN. That is probably correct.
Mr. UNTERMYER. That is about right, is it not ?
Mr. SIELCKEN. Yes, sir.
Mr. UNTERMYER. YOU have

heavy one, was it not?

Mr. SIELCKEN. Yes.



said that the crop of 1906-7 was a very

22

MONEY TBTTST.

Mr. UNTERMYER. This table shows that it was; and the idea of the
Government in buying up this coffee to the extent of 10.000,000 bags
and having it carried and borrowing money with which to pay the
20 per cent was to keep that coffee off the market, was it not ?
Mr. SIELCKEN. It was never kept off the market.
Mr. UNTERMYER. Will you not answer my question as to whether
tnat was the idea ?
Mr. SIELCKEN. No; it was not.
Mr. UNTERMYEH. It was never the idea ?
Mr. SIELCKEN. Of that one crop year.
Mr. UNTERMYER. Of that one crop ?
Mr. SIELCKEN. That one crop year.
Mr. UNTERMYER. But the idea was to keep

that surplus off the
market, was it not ?
Mr. SIELCKEN. NO ; I was always trying to sell it. It was not kept
off the market.
Mr. UNTERMYER. YOU all have three or four million bags of it now,
have you not?
Mr. SIELCKEN. HOW much?
Mr. UNTERMYER. Between three and four million bags.
Mr. SIELCKEN. We?
Mr. UNTERMYER. NO; I mean the parties in. the valorization scheme.
Mr. SIELCKEN. There is left about four millions and something.
Mr. UNTERMYER. Four million bags are still left, after all these

years ?

Mr. SIELCKEN. Yes, sir.
Mr. UNTERMYER. And coffee

is it not?

Mr. SIELCKEN. Yes.
Mr. UNTERMYER. More

scheme went into effect?

is selling at nearly 14 cents a pound,

than twice what it was selling at when the

Mr. SIELCKEN. Yes.
Mr. UNTERMYER. And

you gentlemen were so anxious to sell that
coffee that you have still got it, have you not ?
Mr. SIELCKEN. We are anxious to sell it.
Mr. UNTERMYER. But I say, you have still got it, have you not ?
Mr. SIELCKEN. We have a part of it.
Mr. UNTERMYER. YOU have 4,000,000 bags?
TMr. SIELCKEN. Yes.
Mr. UNTERMYER. And

this is part of what you have been carrying
for the last four years, is it not ?
Mr. SIELCKEN. Shall I speak for the United States, or what they
do in Europe?
Mr. UNTERMYER. No; I am talking about the whole scheme.
Mr. SIELCKEN. The whole scheme? We have sold here, in New
York City
Mr. UNTEHMYER. NO, Mr. Sielcken; do not let us get into that.
Mr. SIELCKEN. I thought that this concerned principally the United
States.
Mr. UNTERMYER. DO you not think this valorization scheme concerns the United States as much as the rest of the world?
Mr. SIELCKEN. It did not concern our market here.
Mr. UNTERMYER. DO you not think it concerns our market here
whether we pay 14 cents a pound or 6 cents a pound for coffee ?



MONEY TBUST.

23

Mr. SIELCKEN. It did; but that was not the reason it went to 14
cents a pound.
Mr. UNTEKMYEB. Never mind; we will see about that in a minute.
Mr. SIELCKEN. All right.
Mr. UNTEEMETEE. Referring to this £3,000,000 loan, of which the
National City Bank took £1,000,000, did they have any partners in
that enterprise?
Mr. SIELCKEN. I took a part of it.
Mr. UNTERIMTER. And who took the rest?
Mr. SIELCKEN. They put it on the market.
Mr. UNTEHMYEK. NO ; did they not have partners in that ?
Mr. SIELCKEN. NO; not as a bank.
Mr. UNTEBMYER. They underwrote it and put it on the market,
did they?
Mr. SIELCKEN. Yes; at once.
Mr. UNTEEMYER. AS this coffee had to be carried and was being
carried along, the State of Sao Paulo required more money, did
it not ?
Mr. SIELCKEN. NO.
Mr. UNTERMYER. They

made a loan of £15,000,000—$75,000,000—
did they not?
Mr. SIELCKEN. But for the sake of repaying the other loans.
Mr. UNTERMYER. But they did not need $75,000,000, did they?
Mr. SIELCKEX. Exactly.
Mr. UNTERMYER. Then it was because they could not carry the
other loans any longer, was it?
Mr. SIELCKEN. NO ; it was too expensive to carry the other loans.
Mr. UNTERMYER. Oh, I see. Who negotiated this loan of £15,000,000?
Mr. SIELCKEN. Who negotiated it ?
Mr. UNTERMYER. Yes.
Mr. SIELCKEN. John Henry

Schroder & Co. in London and the
Societe Generate in Paris.
Mr. UNTERMYEH. And also the Banque de Paris des Pays Bas?
Mr. SIELCKEN. Yes; they were partners with the Societe Generale.
Mr. UNTEEMYER. There were other partners in that loan, too, were
there not?
Mr. SIELCKEN. NO. Others bought a part of it, but they were not
partners in negotiating the loan.
Mr. UNTERMYER. Whether they were partners in negotiating the
loan or not, they were partners in taking the loan, were they not ?
Mr. SIELCKEN. There were several people who took part of that
loan; yes, sir.
Mr. UNTERMYER. The loan was for £15,000,000 altogether ?
Mr. SIELCKEN. Yes.
Mr. UNTERMYER. Of

it not?

which the City Bank took £2,000,000, did

Mr. SIELCKEN. Yes.
Mr. UNTEBMYEB. That

it not?

Mr. SIELCKEN. Yes.
Mr. UNTERMYER. The

is the National City Bank of New York, is

City Bank had partners in that transaction,
did it not ?
Mr. SIELCKEN. They had two partners in that transaction.



24

MONEY TRUST.

Mr. UNTERMYER. And who were those partners?
Mr. SIELCKEN. J. Pierpont Morgan & Co. and the First National
Bank.
Mr. UNTERMYER. The First National Bank of New York. In
what proportions did those three partners participate in that loan ?
Mr. SIELCKEN. Absolutely I can not answer. I suppose equally.
I have never seen that. I do not know the details. I suppose
equally.
Mr. UNTERMYER. Were you not intimately connected with the
negotiation of that loan, Mr. Sielcken?
Mr. SIELCKEN. I never asked a question about what they did
amongst each other.
Mr. UNTERMYER. NO ; but I say, you were very much concerned in
the negotiation of that loan, were you not?
Mr. SIELCKEN. I was very much interested that the loan should be
made.
Mr. UNTERMYER. Did you not help negotiate it?
Mr. SIELCKEN. The negotiation was for £2,000,000, which I
Mr. UNTERMYER. YOU made it, did you not ?
Mr. SIELCKEN. I sold it from the Schroders to the City Bank.
Mr. UNTERMYER. Yes; you made the negotiations for the £2,000,000
participation of the City Bank ?
Mr. SIELCKEN. I had no negotiation with their partners.
Mr. UNTERMYER. DO VOU mean to tell us that you, as the negotiator
of that £2,000.000 loan" between the Schroders and the City Bank,
did not know who the City Bank's partners were?
Mr. SIELCKEN. I told you who they were.
Mr. UNTERMYER. But you did not "know the proportions of their
arrangement ?
Mr. SIELCKEN. NO.

Mr. UNTERMYER. And do not know them yet?
Mr. SIELCKEN. I do not know them up to to-day.
Mr. UNTERMYER. YOU assume it was an equal division ?
Mr. SIELCKEN. I assume that.
Mr. UNTERMYER. This is the contract under which that loan was
made, it is not—a copy of it in French and English [exhibiting paper
to witness] ?
Mr. SIELCKEN. Yes.

Mr. UNTERMYER. I offer that as Exhibit i.
The paper above referred to was marked " Exhibit 4, May 16,
1912," and will be found printed at the end of this hearing.
Mr. UNTERMYER. Were you present when the contract was signed ?
Mr. SIELCKEN. NO ; I was not.
Mr. UNTERMYER. It was executed in London, was it not?
Mr. SIELCKEN. In London.
Mr. UNTERMYER. The French bankers took one-third of

the loan,
did they not ?
Mr. SIELCKEN. They took £5,000,000 out of the £15,000,000, and
Schroder took the £10.000,000.
Mr. UNTERMYER. Schroder took the £10,000,000 in partnership with
these associates of his, did he not?
Mr. SIELCKEN. He resold £2,000,000 to the City Bank, £2,000,000
in Germany, and £1,000,000 in Belgium.



MONEY TB.UST.

25

Mr. UNTERMYER. It was all part of the same transaction by which
the Schroders took the loan, was it not?
Mr. SIELCKEN. He resold it and charged them a commission.
That I know.
Mr. UNTERMYER. SO that the City Bank did not get the loan on
the same terms that the Schroders got it?
Mr. SIELCKEN. No,

sir.

Mr. UNTERMYER. What was the difference in the terms ?
Mr. SIELCKEN. I think it was about 1 per cent.
Mr. UNTERMYER. That is your recollection, is it?
Mr. SIELCKEN. Yes.
Mr. UNTERMYER. What was <he security for that loan?
Mr. SIELCKEN. The security for that loan was threefold:

About
7,000,000 bags of coffee which were held by the consignees and the
guaranty of the Federal Government of Brazil and the government
of the State of Sao Paulo.
Mr. UNTERMYER. Let us see, Mr. Sielcken. Is not this the fact,
that as security for that loan the State of Sao Paulo agreed, first, to
prohibit the planting of any more coffee ?
Mr. SIELCKEN. NO, sir; that was done long previous.
Mr. UNTERMYER. I know; but they had passed a law, had they
not, at the time
Mr. SIELCKEN. In 1901.
Mr. UNTERMYER. Wait a

moment. You are sure they did not pass
a law in 1905 prohibiting the planting of coffee ?
Mr. SIELCKEN. Thev renewed that law.
Mr. UNTERMYER. They renewed it?
Mr. SIELCKEN. They renewed it.
Mr. UNTBKMYKK. That was about the time they were going into
this valorization scheme, was it not?
Mr. SIELCKEN. That was the time when they stood before an overproduction.
Mr. UNTERMYER. From that time to this—from 1905 to this day—
that contract is still outstanding, is it not, whereby the State of Sao
Paulo agrees to prohibit the planting of coffee ?
Mr. SIELCKEN. Oh, no; oh, no! They never prohibited it; they
put a tax on the planting.
Mr. UNTERMYER. They put how much of a tax on the planting?
Mr. SIELCKEN. About 2 milreis on a quantity of land, called in
Brazil an alquier.
Mr. UNTERMYER. The effect of that law has been to prohibit the
planting of more coffee?
Mr. SIELCKEN. NO ; that was not the effect.
Mr. UNTEHMYER. Has there been more coffee planted in that area ?
Mr. SIELCKEN. Yes; there has been some.
Mr. UNTERMYER. HOW much?
Mr. SIELCKEN. I do not know that; but if you wish to know the
truth, the effect was a different one. They wanted to induce the
planters, instead of planting coffee alone, to plant beans and corn and
other things—to diversify their crops.
Mr. UNTERMYER. But they wanted to avoid the planting of any
more coffee, did they not?
Mr. SIELCKEN. They wanted to avoid the State of Sao Paulo planting coffee only.




26

MONEY TRUST.

Mr. UNTEBMYEB. Did they not want to avoid the planting of any
more coffee?
Mr. SIELCKEN. It was stated in that contract that the planters
could replant all the trees that had gone out or trees that were old
and replenish all of them. This contract only meant for new lands
in the State of Sao Paulo to be used for coffee plantations.
Mr. UNTERMYER. They wanted to prevent and prohibit the planting
of any more coffee land?
Mr' SIELCKEN. Not prohibit it, sir. They wanted to diversify their
crops.
Mr. UNTEEMTEB. And to diversify them by omitting the planting
of any more coffee except to take the place of trees that went out ?
Mr. SIELCKEN. That is not quite correct. If I am to answer, I can
not answer that question quite in that way. The State of Sao Paulo
passed that law as a paternal measure to diversify their crops and to
direct their planters, to make it more difficult for them to plant coffee
only.
Mr. UNTERMEYER. Another step that the State of Sao Paulo took
was, was it not, to limit the exportation of coffee—the amount of
coffee that might be exported ?
Mr. SIELCKEN. That law was made at the same time that the
£15,000,000 sterling loan was effected.
Mr. UNTERMYEE. Yes; and that law provided, did it not, that
there should not be exported from Brazil
Mr. SIELCKEN. From Sao Paulo.
Mr. UNTERMYEE. From Sao Paulo the first year more than 9,000,000
bags of coffee, the second year not more than 9,500,000 bags of coffee,
and the third year and subsequent years not more than 10,000,000
bags of coffee?
Mr. SIELCKEN. That is correct, except the subsequent years were
only as long as the loan was not repaid—during the life of the loan.
Mr. UNTEBMYER. Yes; so that during the life of this loan the exports of coffee from Sao Paulo were restricted in the manner I have
described ?
Mr. SIELCKEN. It was not necessary to restrict the crops. The
crops were less than the amount provided for in the restriction.
Mr. UNTERMYER. Mr. Sielcken, was it or not part of the agreement on which this loan was made that those crops were to be restricted in the way I have stated?
Mr. SIELCKEN. Yes.
Mr. UNTERMYER. If

it was not necessary to make any such restriction it was made anyway, was it not ?
Mr. SIELCKEN. It was made to avoid further planting in case of
another enormous crop like the crop of 1906-7.
Mr. UNTERMYER. Will you be good enough to tell me why you say
it was not necessary to make any such restriction because the subsequent crops were not as large as that one?
Mr. SIELCKEN. Most of them were not so large.
Mr. UNTERMYER. Let us see; this arrangement was made in what
year—this £15,000,000 sterling loan ?
Mr. SIELCKEN. 1908.
Mr. UNTEBMYEB. The

000 bags, was it not?



crop of 1908-9 from Sao Paulo was 12,419,-

MONEY TRUST.

27

Mr. SIELCKEN. That is possible, yes; but that was during that crop
year when the contract was made. It did not affect that one. It
affected the next crop.
Mr. UNTEKMYEB. Let us see about that; the contract was made
when?
Mr. SIELCKEN. In December, 1908.
Mr. UNTERMYER. YOU say it was not necessary to restrict the
crops because they did not amount to so much, anyway ?
Mr. SIELCKEN. Not from 1909 onward when that law went into
effect.
Mr. UNTERMYER. It was not ? The 1909-10 crop of Sao Paulo was
14,944,000 bags, was it not ?
Mr. SIELCKEN. I have always understood that that was Rio and
Santos together.
Mr. UNTERMYER. Of course it is Rio and Santos together.
Mr. SIELCKEN. Then this restriction does not refer to Rio.
Mr. UNTERMYER. Does it not?
Mr. SIELCKEN. NO, sir; not at all.
Mr. UNTERMYER. I think you will find it, does.
Mr. SIELCKEN. NO, no, no, no; only Santos.
Mr. UNTERMYER. HOW much was the Rio crop ?
Mr. SIELCKEN. The Rio crop this last year has been

about 2.500,000
to 3,000,000.
Mr. UNTERMYER. And the rest of it is Santos?
Mr. SIELCKEN. Santos.
Mr. UNTERMYER. Deducting 2,500,000 from the 1909 crop
Mr. SIELCKEN. 1909-10.
Mr. UNTERMYER. 1909-10 you would still have 12,500,000 bags,
would you not?
Mr. SIELCKEN. NO; there was not that much.
Mr. UNTERMYER. IS this statement right or is it not?
Mr. SIELCKEN. Let me see that. I do not remember.
The statement heretofore marked " Exhibit No. 1 " was handed
to the witness.
Mr. SIELCKEN. It is Rio and Santos. Does it show how much
each one was?
Mr. UNTERMYER. NO; they are not separately marked. They are
marked together.
Mr. SIELCKEN. Rio and Santos, 14,944,000—well, if such a large
crop was in Santos then in the same year the crop in Rio was larger
than two and a half. When there are small crops in one place there
are small crops in the other place.
Mr. UNTERMYER. HOW big was the Rio crop in 1909-10? Was it as
much as 3,000,000 bags?
Mr. SIELCKEN. Oh, yes; easily.
Mr. UNTREMYER. Your memory is refreshed, then, on that point,
is it?
Mr. SIELCKEN. Well, I concluded—I am giving the figures from
memory, you know—that we never have very large crops in Santos
and very small crops the same year in Rio.
Mr. UNTEBMYER. Was it more than 3,000,000 bags?
Mr. SIELCKEN. About, say, 3,000,000. I think it was three million—three or four; I do not know exactly.




28

MONEY TBUST.

Mr. UNTERMYEK. If it was three and a half million bags, the Sao
Paulo crop was still in excess of the 10,000,000 bags, was it not ?
Mr. SIELCKEN. But that was the only crop since then, when that
law went into effect. The crops since then have been much smaller.
Mr. UNTEBMYEB. YOU say there were not any since then ?
Mr. SIELCKEN. I said it was not necessary to restrict them, because
a little more export for that year would not have made any difference. That was made in order to provide against a succession of
enormous crops; not against one single crop.
Mr. UNTEBMYEB. At any rate, it was thought important to restrict
the exports as a condition of getting this money, was it not ?
Mr. SIELCKEN. That condition was made in France.
Mr. UNTEBMYER. I did not ask you where it was made.
Mr. SIEL.CK.EN. The French bankers made that condition.
Mr. UNTEBMYEB. Yes—well, the others agreed to it, did they not?
Mr. SIELCKEN. They could not get the loan without it.
Mr. UNTERMYER. NOW. I call your attention to the ninth paragraph
of this contract, Exhibit 4. It reads as follows (this is the contract
providing for the £15,000,000 loan, with 7,000,000 bags of coffee as
collateral):
A committee, consisting of seven members resident in the United States of
Europe, or partly in one and partly in the other, shall be appointed, whereof
four and their successors shall be nominated by Messrs. Schroeder, two and
their successors by the Societe Generale, and one and his successor by the
Government; that committee shall be invested with full powers of controlling
the sale and liquidation of the said coffee now belonging to the Government
as aforesaid, and other matters and things connected with the said coffee.

This committee of seven, having charge of this 7,000,000 bags of
coffee, was appointed, was it not?
Mr. SIELCKEN. It was.
Mr. UNTEBMYEB. And you were one of them, were you not?
Mr. SIELCKEN. I was representing the United States interests.
Mr. UNTERMYER. YOU represented the United States interests,

and you are still a member of that committee, are you not ?
Mr. SIELCKEN. I am.
Mr. UNTERMYEB. And

that committee has meetings from time to
time in London, has it not ?
Mr. SIELCKEN. Yes.
Mr. UNTERMYER. Paragraph

11 of this contract, after providing
that Sao Paulo is to limit its production of coffee, contains this
provision:
The Government—
Eeferring to the Government of Sao Paulo—
Will use its best endeavors to arrange that the governments of the States
of Rio Minas Geraes and Bspirito Santo will also pass laws limiting the amount
of coffee to be exported from those States.
Mr. SIELCKEN. Yes.
Mr. UNTERMYEB. DO you remember that provision of the contract?
Mr. SIELCKEN. Yes.
Mr. UNTEBMYEB. Did the Government of Sao Paulo use its best

endeavors to have the Governments of these other States pass laws
limiting the amount of coffee?




MONEY TBUST.

29

Mr. SIELCKEN. They never succeeded. It was not done.
Mr. UNTERMYER. It was not done?
Mr. SIELCKEN. I do not know how well they tried.
Mr. UNTERMYER. I suppose the purpose of making these elaborate
provisions, not only that Sao Paulo was to limit its exports, but that
it was to get the other coffee-growing States to limit their exports,
had nothing to do with an attempt to limit the supply of coffee, had
it?
Mr. SIELCKEN. It had only to do with the equalization of the supply ; not with the control.
Mr. UNTERMYER. I say, it had nothing to do with limiting "the supply of coffee?
Mr. SIELCKEN. NO ; it had only to do with the equalization of it.
Mr. UNTERMYER. What do you understand to be the meaning of
these words—
That the Government " of Sao Paulo " will use its best endeavor to arrange
that the Governments " of these other States" will pass laws limiting the
amount of coffee to be exported from those States.
Mr. SIELCKEN. Just exactly what I say—to equalize the crops.
Mr. UNTERMYER. YOU mean to reduce the exports ?
Mr. SIELCKEN. TO equalize it; to put the large surplus of one crop

into the next.
Mr. UNTERMYER. But was the purpose of preventing exports from
those different States to reduce the supply or to increase the supply ?
Mr. SIELCKEN. It did not reduce the supply. It confined the supply to Brazil instead of to Europe or the United States.
Mr. UNTERMYER. Let us see about that, Mr. Sielcken. These
bankers were lending £15,000,000 upon the security, partly, of
7,000,000 bags of coffee, were they not?
Mr. SIELCKEN. Yes.
Mr. UNTERMYER. And

that 7.000,000 bags of coffee was being put
into the hands of this committee of seven, of which you were one ?
Mr. SIELCKEN. Yes.
Mr. UNTEKMYER. And you are still acting, are you
Mr. SIELCKEN. Yes.
Mr. UNTERMYER. It was also provided, was it not,

not ?

in this contract,
that only a given number of bags could be sold each year ?
Mr. SIELCKEN. Not exactly so.
Mr. UNTERMYER. Five hundred thousand bags could be sold the
first year, could they not ?
Mr. SIELCKEN. Yes.
Mr. UNTERMYER. And 600,000 the
Mr. SIELCKEN. NO. We could at

second year ?
any time double the amount if

the market required itMr. UNTERMYER. YOU mean vou could feed it out to the market
if they would take it without affecting the price ?
Mr. SIELCKEN. If the market required it.
Mr. UNTERMYER. Suppose you were to feed out the 4,000,000 bags
that you have got on hand. Do you think coffee would remain at 14
cents a pound?
Mr. SIELCKEN. I can only answer that question from the standpoint
of the American market. I do not wish to answer for the European
market.



30

MONEY TBTJST.

Mr. UNTERMYER. Suppose you should dump 4,000,000 pounds on
the world's market?
Mr. SIELCKEN. I will say that you have supposed, and I will
answer your supposition. If the amount of coffee held by this
valorization in the United States to-day was sold to-morrow it would
not make that much difference in the market [the witness snapped his
fingers].
Mr. UNTERMYER. It is 14 cents a pound now, is it not?
Mr. SIELCKEN. Yes.
Mr. UNTERMYER. And

it only cost the Government 7, did it not?
Mr. SaxcKEN. Oh, I beg your pardon! It cost them a great deal
more.
Mr. UNTERMYER. Did it?
Mr. SIELCKEN. Oh, yes.
Mr. UNTERMYER. "i ou mean

with commissions and bankers' charges
and the rest of it?
Mr. SIELCKEN. Insurance, et cetera.
Mr. UNTERMYER. But I am talking about the price in the coffee
market.
Mr. SIELCKEN. The original price.
Mr. UNTERMYER. It did not average 7, did it?
Mr. SIELCKEN. NO.
Mr. UNTERMYER. HOW much did it average ?
Mr. SIELCKEN. Oh. that would be a rough estimate.
Mr. UNTERMYER. If you can get 14 cents for it now,

why do you
not sell it?
Mr. SIELCKEN. I will answer that question in this way: The conditions of the contract were that at the time it was difficult to obtain
money, and this being a very unpopular measure in the markets
Mr. UNTERMYER. Which markets ?
Mr. SIELCKEN. All markets.
Mr. UNTERMYER. Why was it unpopular; because it raised the
price ?
Mr. SIELCKEN. It did not raise the price.
Mr. UNTERMYER. I see. Then the fact that the price of coffee has
gone from 5 cents a pound to 14 cents a pound has not anything to
do with the fact that you gentlemen kept these millions or bags off
the market ?
Mr. SIELCKEN. Xot that much [the witness snapped his fingers].
Mr. UNTERMYER. I suppose if you had 20.000,000 bags more
Mr. SIELCKEN. Xot that much [the witness again snapped his
fingers].
Mr. UNTERMYER. We will see about that. Mr. Sielcken, there was
a report made by the secretary of finance of the State of Sao Paulo
to his Government on the subject of this valorization, was there not?
Mr. SIELCKEN. There was.
Mr. UNTERMYER. It was a very intelligent report, was it not ?
Mr. SIELCKEN. Yes, sir.
Mr. UNTERMYER. It was made in September, 1910, was it not ?
Mr. SIELCKEN. Yes, sir.
Mr. UNTEHMYER. And you concur in the statements in that report,

do you not ?
Mr. SIELCKEN. In most of them. I have not read it entirely, but
it is an intelligent report.




MONET TBUST.

31

Mr. UNTERMYER. A very intelligent report. Now. let me ask you
whether you concur in these statements which I will read from the
report:
There is no foundation whatsoever to the suggestion, which has sometimes
been made, that the benefits which followed the Government's action were
simply due to natural causes and were not in any way influenced by such action.
What happened was just the contrary, as may be easily verified by examining
the following table, showing the figures for the crops of four years preceding
and of the four years succeeding the Government's action:
Four years preceding official intervention.
Years.

1902-1903
1903-1904
1904-1905 .
1905-1906

'

Crops.

I

Bags.
16,655,000 1
15,992,000 [Average, 18,474,000 bags.
14,445,000
14,792,000

..

J

FOUB YEARS or INTERVENTION PEBIOD.
i

Years.

1905-1907
1907-1908
190S-1909
1909-1910

Crops.
.
1

Saga.

1
1
)

23 786 000
14 862 000
15 968,000 1 [Average, 18,418,000 bags.
19.059.000
oo

1

So far, therefore, from there having been a falling off in production, as haft
been suggested, there was a notable increase, a much larger increase, in fact,
than was expected.
The Government's action was handicapped by an increase of nearly 3,000,000
bags to be dealt with.
In 1906 Sao Paulo was expected to produce 12.000,000 or 13,000,000 bags, but
the crop turned out to be 15,000,000, thereby increasing the world's supply In
that year to 24,000,000 bags.
But It did not cease there. In the following year the port of Santos received
a further supply of nearly 9.000.000 bngs, in itself nearly as large as the whole
crop of 1901-2. which up to then constituted a record.
Greater difficulties still were c.iused by the crop of 1909-10, which contributed no less than 19,000,000 bags to the world's supply.
That is how natural causes influenced the situation. Instead of alleviating,
they greatly accentuated the difficulties.
The most critical moment of valorization were the years 1906-7, when the
markets of the world, as may be seen from the foregoing table, were flooded
with the enormous quantity of 24,750,000 bags of coffee.

You agree to all this, do you not ?
Mr. SIELCKEN. No, no.

Mr. UNTERMYER. YOU do not? Well, will you not
Mr. SIELCKEN. I beg your pardon; if you ask me for an opinion,
you know, I will have to explain. I could not say " yes " or " no
to that.
The CHAIRMAN. YOU have a right to explain your answer.
Mr. SIELCKEN. If you ask me for an opinion, in the first place
Mr. UNTERMYER. NO; I ask you whether you agree to this statement.
Mr, SIELCKEN. Only the figures I agree to.
Mr. UNTERMYER. 1 ou do not agree to his conclusions, do you ?




32

MONEY TRUST.

Mr. SIELCKEN. Because the time when that was written was September, 1910, and the values in the coffee market from the valorization we speak of here now, from 1906, when we commenced, to 1910,
did not move. The Government action did not* impose the price.
The values remained the same. Only when we got small crops in
1910-11-12 did the prices improve. It was the small crops and not
the valorization.
Mr. UNTEEMYER. NOW, let us see if you are not wrong about that.
Mr. SIELCKEN. Go ahead.
Mr. UNTERMYER. In January, 1910, coffee was selling at 8f cents a
pound, was it not?
Mr. SIELCKEN. Yes—January, 1910.
Mr. UNTERMYER. Higher than that, in fact; it was selling at 8{$
cents a pound, was it not?
Mr. SIELCKEN. Well, about the same; yes.
Mr. UNTERMYER. That is, the beginning of 1910?
Mr. SIELCKEN. Yes.
Mr. UNTERMYER. This
Mr. SIELCKEN. Yes.
Mr. UNTERMYER. AS a

report is dated in September, 1910?

matter of fact, when the valorization began
coffee was selling at about 5 cents a pound, was it not ?
Mr. SIELCKEN. NO, sir.
Mr. UNTERMYER. Well, let us see.
Mr. SIELCKEN. Yes; 1906, July, August, September
Mr. UNTERMYER. But the valorization began in 1905, did it
Mr. SIELCKEN. NO.
Mr. UNTERMYER. The Government began buying coffee and

signing it to you when ?
Mr. SIELCKEN. In September-October, 1906.
Mr. UNTERMYER. That is when the Government began ?
Mr. SIELCKEN. Yes, sir.
Mr. UNTERMYER. Well, now. let us see.
Mr. SIELCKEN. August-September.
Mr. UNTEKMYER. Are you not mistaken?
Mr. SIELCKEN. I am not mistaken.
Mr. UNTERMYER. Let us see about that.

not?
con-

The £3,000,000 loan was
made when ?
Mr. SIELCKEN. In December, 1906.
Mr. UNTERMYER. And the loan by the Brazilianische Bank was
made when ?
Mr. SIELCKEN. In July, 1906.
Air. UNTERMYER. Yes; in July, 1906. When did the Government
begin buying coffee ?
Mr. SIELCKEN. All I know of it—I can only state the facts—was
that it was in September^ 1906.
Mr. UNTERMYER. AS I understand you, you claim that the present
high price of coffee is not due to the fact that you gentlemen have
been withholding this coffee from the market, but that it is due to
natural causes, do you not ?
Mr. SIELCKEN. Absolutely.
Mr. UNTERMYER. And in that respect you differ from the minister
of finance, do you not ?
Mr. SIELCKEN. I do not differ from the minister of finance.



MONEY TETJST.

33

Mr. UNTERMYER. Then, in September, 1910, when he made his report, is it the fact, as he states, that the price was due to the valorization and not to natural causes?
Mr. SIELCKEN. It is not, because
Mr. UNTERMYER. Then you do differ from him, do you not?
Mr. SIELCKEN. I differ with him in the statement from 1906 to
1910, during the four years of valorization; a further decline was
prevented, but no advance had taken place. The average price in
those four years after the valorization started remained the same.
Mr. UNTERMYER. Let us see about that. You have heard me read
from his report, have you not?
Mr. SIELCKEN. Yes.
Mr. UNTERMYER. DO
Mr. SIELCKEN. YOU

you agree with it^ or do you differ from it?
have not read his report. You have read,
finally, there a report that was written, which he publishes as being
an expert report by a foreigner.
Mr. UNTERMYER. But do you differ from it, or agree to it ?
Mr. SIELCKEN. YOU did not read the minister of finance's report.
Mr. UNTERMYER. Yes; this is an extract from his report, is it not?
Mr. SIELCKEN. NO, no.

Mr. UNTERMYER. It is not?
Mr. SIELCKEN. NO ; I believe not.
Mr. UNTERMYER. Yes; it is.
Mr. SIELCKEN. If you will

give it to me I will show it to you
[examining report].
Mr. UNTERMYER. It is a report made to the president of the State
of Sao Paulo.
Mr. SIELCKEN. Yes; but he includes in that report all of this other
matter written by Mr. Denis.
Mr. UNTERMYER. But the question is whether that is an extract
from the report of the minister of finance to the President of the
Republic.
Mr. SIELCKEN. NO, no; he says what it is. He says he publishes,
from a foreigner, what he considers a good opinion.
Mr. UNTERMYER. But, I say, is this an extract from his report ?
Mr. SIELCKEN. He makes this report to the president of Sao
Paulo—the minister of finance does.
Mr. UNTERMYER. That is what I asked you.
Mr. SIELCKEN. But that is not his opinion. It is something written
by some one else.
Mr. UNTERMYER. Not what I have read.
Mr. SIELCKEN. I think it was.
Mr. UNTERMYER. Oh. I beg your pardon—oh, no; nothing of the
kind.
Mr. SIELCKEN. YOU will see there that Mr. Denis wrote that.
Mr. UNTERMYER. Oh, no. Please look, if you will, at pages 9 and
10 of this report and tell me whether or not that is the report of the
minister of finance and not something that he gets from somebody
else.
Mr. SIELCKEN. He states in his own report where he gets it. He
states it right in this report.
Mr. UNTERMYER. Oh, no; he does not.
Mr. SIELCKEN. Yes; he does.
 46627—PT 1—12


3

34

MONEY TRUST.

Mr. UNTERMYER. IS not that his argument to show that it was the
valorization scheme that piit up the prices and not natural causes?
Mr. SIELCKEN. Mr. Olavo Egydio, the minister of finance, who was
very active in the matter, wanted to show, naturally, that the work
of the State of Sao Paulo had been very beneficial to the planters of
Sao Paulo.
Mr. UNTERMYER. Yes.
Mr. SIELCKEN. But the

value of coffee from 1906 until the time he
wrote had hardly changed.
Mr. UNTERMYER. That is not the point, Mr. Sielcken. We will
clear up one thing at a time.
Mr. SIELCKEN. That is the point.
Mr. UNTERMYER. DO you differ from me?
Mr. SIELCKEN. I differ with the statement that the valorization has
put up the price of coffee to-day.
Mr. UNTERMYER. DO you differ from me that the minister of
finance says it has?
Mr. SIELCKEN. I have read that report, of course; and as far as I
remember he incloses a report from a foreign authority. He says
he does not wish to speak himself; he prefers that a foreigner's opinion about the operation should be given. I think I have got that in
my pocket.
"Mr. UNTERMYER. Let us take one thing at a time. I ask you again,
Is it or not the fact that the minister of finance, in his official report
to his Government, says that it is the valorization that has increased
the price and not any natural causes ?
Mr. SIELCKEN. It did not increase the price.
Mr. UNTERMYER. I say, Is not that what he says ?
Mr. SIELCKEN. Perhaps so. If you read it, it must be so.
Mr. UNTERMYER. NOW, let us see. Is the price of coffee affected at
all by the visible supply ?
Mr. SIELCKEN. The price of coffee is principally affected by the
prospects of crops.
Mr. UNTEBMYER. I S it affected at all by the amount on hand ?
Mr. SIELCKEN. TO some extent.
Mr. UNTERMYER. IS not that the most important factor?
Mr. SIELCKEN. NO; the prospect of the coming crop is the most
important.
Mr. UNTEKMYER. DO you know what next year's crop is going to be ?
Mr. SIELCKEN. Yes, sir.
Mr. UNTERMYER. YOU do?
Mr. SIELCKEN. Yes, sir.
Mr. UNTERMYER. Before the tree flowers?
Mr. SIELCKEN. Yes, sir.
Mr. UNTERMYER. Before it blossoms ?
Mr. SIELCKEN. NO, no; it blossomed last July, August, September.
Mr. UNTERMYER But before July of this year you know what next

year's crop is going to be, do you ?
Mr. SIELCKEN. I know now—at least I suppose I know, and have
known since last September—that the crop of 1912-13 will be about
7,000,000 bags.
Mr. UNTEKMYER. That you think you know now ?
Mr. SIELCKEN. I do.



MONEY TRUST.

35

Mr. UNTERMYEB. YOU have made a great many mistakes in figuring that out, have you not ?
Mr. SIELCKEN. Oh, yes; we all do; but I have been closer to it
than most of them.
Mr. UNTEBMYER. But even you have made many mistakes, have
you not?
Mr. SIELCKEN. In estimating the crop?
Mr. UNTEBMYEB. Yes.
Mr. SIELCKEN. You are

bound to. Everybody makes mistakes.
The world accepts those figures, though. They are not my figures.
The world accepts them.
Mr. UNTERMYEE. I call your attention to this table, and to the fact
that the visible supply of coffee on Januarv 1 was about 14,000,000
bags—13,578,000 bags.
Mr. SIELCKEN. Yes; about that.
Mr. UNTEBMYEB. AS against 6,000,000 bags in 1900.
Mr. SIELCKEN. Yes.
Mr. UNTEBMYEB. And

yet the price to-day is more than double
what it was then, is it not ?
Mr. SIELCKEN. Yes. Do you want an explanation of that?
Mr. UNTEBMYEB. I am going to ask you for one in a moment.
Has the fact that your valorization syndicate is holding this coffee
and not putting it on the market any effect whatever upon the price
of coffee?
Mr. SIELCKEN. At the present time?
Mr. UNTEBMYER. At the present time.
Mr. SIELCKEN. Very little.
Mr. UNTERMYEB. Has it ever had any effect on the price of coffee ?
Mr. SIELCKEN. During the time of overproduction, yes.
Mr. UNTERMYEB. When did it have any effect on the price of
coffee?
Mr. SIELCKEN. During the years of overproduction.
Mr. UNTERMYEB. What years were theyf
Mr. SIELCKEN. 1906-7, for instance—those three years, 1906-7,
1907-8, and 1908-9.
Mr. UNTERMYER. When the natural laws of supply and demand
have been allowed to have their sway without interference coffee has
gone down below 4 cents a pound at times, has it not?
Mr. SIELCKEN. I have known it to go to 4 cents; yes.
Mr. UNTEBMYER. It has gone down as low as 3.60 cents, has it not ?
Mr. SIELCKEN. By speculation, at times, if you like.
Mr. UNTEEMYEB. I do not know by what; but it has gone down as
low as that?
Mr. SIELCKEN. Yes; but you asked me about the natural Jaws.
I said it was not the result of a natural law.
Mr. UNTERMYEB. Did you do the speculating?
Mr. SIELCKEN. Did I?
Mr. UNTERMYEB. Yes.
Mr. SIELCKEN. A large

speculator had to sell out, and I helped
him.
Mr. UNTEBMYEB. I see. You helped him to sell out?
Mr. SIELCKEN. Yes, sir.
Mr. UNTEBMYEE. And helped



him to buy in?

36

MONEY TBUST.

Mr. SIELCKEN. No; I bought it.
Mr. UNTERMYER. YOU bought it—you helped him to sell, and then
you bought it; and that was the time coffee went to 3.60 cents a
pound, was it?
Mr. SIELCKEN. As I remember; yes.
Mr. UNTERMYER. If it had not been for this valorization scheme,
do you think coffee would have gone as low as that again ?
Mr. SIELCKEN. In 1906-7; yes.
Mr. UNTERMTER. I here offer in evidence the quotations of coffee
beginning in 1900, month by month, up to the present time. The
others are already in. from 1886 up; so the whole thing is there.
Those are correct, are they not, Mr. Sielcken ?
Mr. SIELCKEN. Yes; I suppose so.
Mr. UNTERMYEK. YOU furnished those, did you not, yourself?
Mr. SIELCKEN. My office did.
The quotations above referred to, contained on three single sheets,
were marked, respectively, '" Exhibit No. 5. May 16. 1912," " Exhibit
No. 6, May 16,1912," and "Exhibit No. 7, May 16, 1912," and are as
follows:
EXHIBIT 5—MAY 16, 1912.
Quotation of the spot option on the 1st of each month.
i

1900

March
April
Mav

1901

1902

1903

6.10
6.95
6.65
6.35
6.60
7.15

5.65
5.35
6.20
5.45
5.25
5.15

6 65
6.25
5.35
S.20
5.00
5.00

4.3S
4.15
4.30
4.05
3.65
3.70

7 00
8.05
5.30
5.50
5.70
5.45

1901

1902

1903

1
7 55 i 5.00
7.90 i 4.80
7.25 4.65
6.95 ! 5.00
7.20 i 5.95
6.20 | 6.55

1904

4.85
5.75
5.40
4.95
5.05
4.40

3 65
3.60
3.80
4.70
5.45
5.95

1900
July
September

1904
5 75
6.00
6.6S
6 75
6.60
6.8S

EXHIBIT 6—MAY 16, 1912.
Quotation of the spot option on the 1st of each month.
1908

1909

1905

April
May

1906

1907

7.65
7.05
6.10
6 50
6.50
6.30

6.45
6.90
6.95
6 60
6.45
5.95

1905 i 1906 1907

5.40 5.55 5.50
5.45 6.00 5. So
6 20 6.85 6.95
5 70 : 5.65 6 95
5.45 i 5.80 7.05
5.45 , 6.05 7.00

July

1908 i 1909

6.25
7.00
6 15
6 45
6.00
5.90

6.05 , 6.20
5.70
6 10
5 70
5 40
5 60 i 5 35
6.30
S.45
5.10 | 6.3S

. . . | 6.40
. . . 6.80
1
7 20
[ 6 95
6.40
. . . 6 65

1
1

5.20
5.90
5.75
5.90
5.55
5.70

EXHIBIT T—MAY 16, 1912.
Quotation of the spot option on the 1st of each month.
1910 '

March..!
April
May




1911

11.25
6.85
6.75
10.28
10.10
6.90
10.54
6.70
6.35
10.65
6.15 | 10.70

1912
13.74
13.08
13.10
13.72
13.57

1910

i
July
September
October
December

1911

6.65
6.95
7.95
8.90
8.75
10.65

11.20 '- 11.42
12.25
12.90
14.55
14.39

1912

MONEY TBtTST.

37

Mr. UNTERMYER. Mr. Sielcken would like to get away to-day. If
there is no objection, shall we go on until we get through? You
would rather go on until we get through, Mr. Sielcken, I understand ?
Mr. SIELCKEN. Yes, sir.
The CHAIR-MAN. Mr. Sielcken

has come here, as I stated before,
without a subprena, and deferred his trip abroad in order to come
and testify. I hope the committee will indulge him every courtesy
that it can in the way of continuing his testimony. If there is no
objection, we will continue until we finish.
Mr. UNTERMYER. This valorization scheme, Mr. Sielcken, could not
have been carried through without this loan of money, could it ?
Mr. SIELCKEN. It was carried through without it.
Mr. UNTERMYER. Without the £15,000,000?
Mr. SIELCKEN. Yes; it was.
Mr. UNTERMYER. But the coffee

could not have been carried without the loan?
Mr. SIELCKEN. Why, surely.
Mr. UNTERMYER. They could have continued to carry it, could
they?
Mr. SIELCKEN. Yes, sir.
Mr. UNTERMYER. The loan cost a
Mr. SIELCKEN. But it was more

great deal of money, did it not?
expensive to carry it under the
old contracts. The old contracts were at 6 per cent interest and 3
per cent commission every year, whether sold or unsold; so it cost
the Government 9 per cent a year.
Mr. UNTERMYER. But you gentlemen who were carrying this coffee
were not bound to carry it more than one year, were youl
Mr. SIELCKEN. NO ; but we were perfectly willing to carry it.
Mr. UNTERMYER. Did you not tell us you were only bound to
carry it one year?
Mr. SIELCKEN. Yes; we were only bound to carry it one year, but
we were willing to renew from year to year.
Mr. UNTERMYER. Oh! Then, it was part of your arrangement
that you were to renew, was it?
Mr. SIELCKEX. All parties to that arrangement would be willing
to renew if they were financially able to.
Mr. UNTERMYER. For how many years would they be willing to
renew ?
Mr. SIELCKEN. I should suppose that under the conditions of getting 9 per cent for their money, they would have carried it a great
many years; certainly up until now.
Mr. UNTERMYER. That you are sure about, are you?
Mr. SIELCKEN. I suppose so.
Mr. UNTERMYER. And they were all able to do it, were they ?
Mr. SIELCKEN. The parties who were in that contract were nearly
all rich people.
Mr. UNTERMYER. Was not the Government in danger at any time
of any of these parties saying: " We will not renew, and then having to have the coffee sold ?
Mr. SIELCKEN. NO.
Mr. UNTERMYER. There was no danger of that?
Mr. SIELCKEN. There were parties who desired

to withdraw, who
did not wish to renew; but there were others to take their place immediately.




38

MONEY TETJST.

Mr. UNTERMYER. It is now almost six years since this operation
started, is it not?
Mr. SIELCKEN. It started in September-October; yes, sir. It is
not quite five years on an average.
Mr. UNTERMYER. It averages about five years ?
Mr. SIELCKEN. Yes.
Mr. UNTERMYER. And

you are able to assure us here that $75,
000,000 of loans on coffee could easily have been carried for five years
without any difficulty?
Mr. SIELCKEN. Very easily; with great ease.
Mr. UNTERMYER. And the Government in making this loan did it,
as you think, simply from motives of economy of carriage, did they ?
Mr. SIELCKEN. From motives of economy, for one thing, and finding it more agreeable to trade with a few than to trade with so many.
Mr. UNTERMYER. Let us see about that. The Government sold
these bonds at 93, did they not ?
Mr. SIELCKEN. NO; they did not.
Mr. UNTERMYER. NO ; they sold them at 85, did they not ?
Mr. SIELCKEN. 85.

Mr. UNTERMYER. And they were redeemable at par, were they not ?
Mr. SIELCKEN. Yes.
Mr. UNTERMYER. And they had to pay them back at par?
Mr. SIELCKEN. In 10 years.
Mr. UNTERMYER. Or sooner if the coffee was sold ?
Mr. SIELCKEN. Yes.
Mr. UNTERMYEK. And. as a matter of fact, the loan is going

to be
closed up within five years, is it not?
Mr. SIELCKEN. Yes; I think within one year from now.
Mr. UNTERMYER. Within one year from now. So that the loan
will amount to about a five-year loan, will it not ?
Mr. SIELCKEN. Yes; the Government could not foresee how
soon
Mr. UNTERMYER. That is not the question.
Mr. SIELCKEN. When they made that contract, they considered the
loan cheaper than 9 per cent.
Mr. UNTERMYER. I do not think you understand me, Mr. Sielcken.
This loan was made in December, 1908, was it not?
Mr. SIELCKEN. Yes.
Mr. UNTERMYER. YOU think it will be closed up within one year?
Mr. SIELCKEN. Yes.
Mr. UNTERMYER. That will be June, 1913, will it not ?
Mr. SIELCKEN. Yes.
Mr. UNTERMYER. SO that is about four and a half years, is it not?
Mr. SIELCKEN. Yes.
Mr. UNTERMYER. IS that right?
Mr. SIELCKEN. About that; yes, sir.
Mr. UNTERMYER. And the Government received 85 for the bonds,

and has to pay them back at par ?
Mr. SIELCKEN. Yes.
Mr. UNTERMYER. SO
Mr. SIELCKEN. Yes.
Mr. UNTERMYER. In

that is 15 per cent, is it not?

addition to that there are commissions, are
there not?
Mr. SIELCKEN. NO ; the loan included all commissions.




MONET TEUST.

39

Mr. UNTERMYER. Commissions for selling the coffee, or to the
committee ?
Mr. SIELCKEN. The commissions, and interest for carrying, were 9
per cent per annum.
Mr. UNTEEMYER. The loan is at 5 per cent, is it not ?
Mr. SIELCKEN. Yes.
Mr. UNTERMYEB. SO

it will cost the Government about 9 per cent
a year, will it not, to get this loan?
Mr. SIELCKEN. It will cost them 8 per cent, just exactly.
Mr. UNTEEMYEE. Between 8 and 9 per cent ?
Mr. SIELCKEN. Eight; but the other one would cost surely 9 per
cent.
Mr. UNTEEMYEE. Then the other one was uncertain, too, as to how
long the people would carry the coffee, was it not, because they only
agreed to carry it for one year?
Mr. SIELCKEN. It was renewed from year to year.
Mr. UNTEEMYEE. But I say it was uncertain, was it not ?
Mr. SIELCKEN. Yes.
Mr. UNTEBMYEB. NOW, I

will call your attention to this report, and
I want to ask you as to certain things in it, because it sets forth, it
seems to me, very admirably the situation as it existed. The report
states:
In order to give effect to laws No. 959 of October 3, 1905, and No. 984 of
December 29, 1905, the Sao Paulo government celebrated with the State governments of Minas Geraes and Rio de Janeiro, the agreement commonly known as
the " Convention of Taubate," which was signed at the city of that name on
February 26, 1906, by Dr. Nilo Pecanha—

That is right, is it not? That was to give effect to that convention
of Taubate?
Mr. SIELCKEN. Yes.
Mr. UNTEEMYEE (reading):
With a view of defending the coffee interests of the State, seriously threatened by the depreciation of prices, which would be rendered more acute by the
exportation and sale of the extraordinary crop of 1906-7, the Sao Paulo government anticipated the acceptance of the Taubate Convention.

Do you agree with that?
Mr. SIELCKEN. Yes; that is what is stated there.
Mr. UNTERMYER. YOU agree that this scheme was entered into with
a view of defending the coifee interests that were threatened with
depreciation of prices?
Mr. SIELCKEN. Absolutely.
Mr. UNTERJIYER (reading) :
In spite of the immense difficulties daily encountered to sustain prices, by
holding on to such an enormous stock, the Government never hesitated, and
supported by the loyalty of public opinion within the State, and ably seconded
by all who were interested in the solution of such a momentous problem, it
persevered in its plan which had been adopted in favor of the vital interests
of the agricultural and commercial interests of the State of Sao Paulo.
Having once attained the principal object of this campaign; that is, keeping
beyond the insistent market offers the excess production of the immense crop
of 1906-7 and once reestablished normal market conditions, it became necessary to consolidate the position just reached, adopting means which would enable the Government to hold its stock, keeping same out of the markets until
such time as the necessities of the markets and consumption demanded.

You agree to that, do you not ?



40

MONEY TRUST.

Mr. SIELCKEN. Mr. Untermyer, how can I agree to what a foreign
government say in their report or disagree with it ? I can not.
Mr. UNTERMYER. DO you agree that the purpose of this scheme was
to keep the stock out of the market ?
Mr. SIELCKEN. The purpose of the scheme was what is ably said
there—to defend the price of their principal product.
Mr. UNTERMYER. By keeping this stock out of the market ?
Mr. SIELCKEN. The surplus of that crop.
Mr. UNTERMYER. Yes; but that would lead to the maintenance or
to the increase of prices, would it not ?
Mr. SIELCKEN. There is not any question that a big surplus, crop
after crop, gives a lower price.
Mr. UNTERMYER (reading):
By law No. 1127 of August 25, 1908, the following measures were authorized
toward affecting this purpose:
1. To limit the exportation of coffee to 9,000,000 bags in 1908-9; 9,500,000
bags in 1909-10; and 10,000.000 bags from 1910-11 onward.
2. To raise the surtax from 3 to 5 francs on every bag of coffee exported.
3. To authorize the raising of a foreign loan of £15,000,000 to consolidate the
existing position which had been attained.

Mr. SIELCKEN. Exactly.
Mr. UNTERMYER. That is quite right, is it not?
Mr. SIELCKEN. That is what I always maintained.
Mr. UNTERMYEE. What is what you always maintained ?
Mr. SIELCKEN. That the loan was not made for any new business;
it was made to pay off the old ones.
Mr. UNTERMYEB. YOU mean " to consolidate the existing position"?
Mr. SIELCKEN. TO consolidate the loans that the merchants had
made for 1906-7 a year and a half previous.
Mr. UNTERMYER (reading):
This loan was realized at the rate of 85 per cent, having for its special
guaranty the surtax of 5 francs per bag collected on all coffee exported and
also the proceeds of sales of all State-owned coffee.
*
*
*
*
*
*
*
After the realization of the loan of £15,000,000 a committee was constituted
In Europe for the purpose of taking charge and selling the State-owned coffee,
as per special contract drawn up in London on December 11, 1908.
This committee is composed of seven members. * * * The functions of
this committee are: * * *
(c) Liquidate the stocks of coffee in the name and for account of the Sao
Paulo Government, by means of public auctions or otherwise, being 500,000
bags in 1009-10, 600,000 bags in 1910-11. 700,000 bags in 1912-13, and afterwards at the rate of 700,000 bags annually. Beyond these minimum quantities, at any time before the commencement of the obligatory sales, the committee is authorized to supply the markets with whatever quantities that are
required, taking for their basis the price of 47 francs (later changed) per 50
kilos for good average and 50 francs (ditto) for the quality known as "Havre
Superior."

How much is that per pound; do you know? It is about $10 a
bag. That is about how much a pound ?
Mr. SIELCKEN. Seven or eight cents.
Mr. UNTEIOIYER. Eight cents a pound. They could not increase it
unless they got that minimum price, could they?
Mr. SIELCKEN. NO.



MONEY TRUST.

41

Mr. UNTERMYER. He says, furthermore: " When the price of coffee
drops the whole community suffers." I suppose he meant by that the
San Paulo community, did he not?
Mr. SIELCKEN. Yes. It was written for the State of Sao Paulo.
Mr. UNTERMYER. It does not mean that the United States consumer
suffers, does it?
Mr. SIELCKEN. No; it was written for Sao Paulo. It was not
written for your committee.
Mr. UNTERMYER (reading):
The 1897 crop was a remarkably large one, and the world's stocks were Immediately raised from five to six million bags. There was then a notable reduction in price which lasted till 1900, when they got firm once more. However,
agriculture suffered but little during the first period of low prices.
Mr. NEELEY. I should like to know what the witness considers a

surplus to be.
Mr. UNTERMYER. Mr. Sielcken, Mr. Neeley would like to know
what you understand a surplus of a crop to be.
Mr. SIELCKEN. Any crop which is larger than the annual consumption. The annual consumption of Brazil coffee, Eio and Santos,
to-day is about 14,000,000 bags. So if the two crops produce a great
deal more than 14,000,000, that, in all probability, is a surplus of that
crop.
Mr. UNTERMYER. Mr. Sielcken, do you agree to this statement:
In October, 1905, news from all parts commenced to pour in indicating prospects of a bumper crop in 1906, news which was later confirmed by the absence
of frost and other unfavorable conditions, insuring perfect growth.

That is right, is it not ?
Mr. SIELCKEN. But those are facts that only confirm what I said a
little while ago, that we know a year and a half in advance.
Mr. UNTERMYER. DO you ?
Mr. SIELCKEN. Yes, sir.
Mr. UNTERMYER. I did not

know that, because this says that in
October, 1905
Mr. SIELCKEN. Yes; they knew that the 1906-7 crop
Mr. UNTERMYER. Just a moment. This says that in October, 1905,
news came in indicating a bumper crop in 1906.
Mr. SIELCKEN. 1906-07.
Mr. UNTERMYER. NO; it says 1906.
Mr. SIELCKEN. But it means from the 1st of July, 1906, until the
1st of July, 1907.
Mr. UNTERMYER (reading):
It soon became evident that the rise of prices of 1905 could not be maintained
and calculations were wistfully made as to the probable world's consumption
during the next few years and how long it would take to reduce the accumulation of stocks from the crop of 1906. Among these calculations there entered
one favorable eiement which was absent when similar calculations were made
in 1901. It was this: Since 1903 the Sao Paulo Government had prohibited
further planting.

Do you agree to that statement?
Mr. SIELCKEN. Mr. Untermyer, I can not possibly agree or disagree
with statements made in Brazil by an official there.
Mr. UNTERMYER. DO you agree to the statement, from your knowledge of the facts, that "since 1903 the Sao Paulo Government have
prohibited further planting?



42

MONEY TRUST.

Mr. SIELCKEN. They have never prohibited it.
Mr. UNTERMYEE. Then you do not agree to that statement?
Mr. SIELCKEN. They put a tax on it; I explained that before.
Mr. UNTERMYER. That was a tax of 20 per cent ad valorem, was it
not?
Mr. SIELCKEN. Ad valorem what ?
Mr. UNTERMYER. What was the tax on planting?
Mr. SIELCKEN. The tax was 2 milreis—I have given you a little
note that you can look over.
Mr. UNTERMYER. HOW much was the tax?
Mr. SIELCKEN. Look at the note I gave you.
Mr. UNTERMYER. DO you remember it?
Mr. SIELCKEN. NO; a little while ago I explained that it was 2
milreis for so much land to be planted.
Mr. UNTERMYER. Then the minister of finance is wrong in this
statement, is he?
Mr. SIELCKEN. In what?
Mr. UNTERMYER. That since 1903 the Sao Paulo Government has
prohibited further planting?
Mr. SIELCKEN. He did not prohibit it; he prevented it.
Mr. UNTERMYER. He is wrong about it then, is he ?
Mr. SIELCKEN. He is wrong in the expression. If a law is made to
forbid planting, that prohibits it. If a tax is imposed, it makes it
difficult.
Mr. UNTERMYER. Then he goes on and says this:
This was a very wise precaution, but it could not be expected to yield beneficial results immediately, as same could only be felt after sufficient time had
elapsed, because the coffee plant does not commence to bear fruit for five or
six years after planting of the young trees.
The Government of Sao Paulo took upon itself to buy the excess of production or surplus, keeping it out of the market for a requisite time until the
reduction of stocks must, perforce, raise the price.

Did you understand that to be the purpose?
Mr. SIELCKEN. Mr. Untermyer, I will not criticise or give an
opinion upon what the Brazilian Government did nor do I think it
proper that this committee should, if I should be here and hear this
committee express themselves upon the action of another government, upon which we have no right to express an opinion.
Mr. UXTERMYER. I think this committee will take care of itself,
and so will the Government.
Mr. SIELCKEN. YOU asked me for an opinion.
Mr. UNTERMYER. NO; the point is, now, whether you understood,
as the minister of finance understood in reporting to his Government,
that the State took upon itself to buy the excess of production, keeping it out of the market for a requisite time until the reduction of
stocks raised the price; that that was the purpose. If you did not so
understand it you will say so; if you did you can state it.
Mr. SIELCKEN. That is a matter for discussion, and you asked for
an opinion. I have already explained that the Government bought
the surplus of that crop. There is nothing further to say that I can
possibly say.
Mr. UNTERMYER. The minister of finance says further, the following, as to the way in which they carried out that scheme. He says:
During a few weeks every year arrivals of coffee flood the Santos market like

an irresistible wave, upsetting the market and creating artificial prices, without



MONEY TBTJST.

43

consideration of the law of supply and demand. Was It not necessary that
some public authority should remedy this evil by intervening in the market as
a regulator? There was one great danger. The idea of such regulation was
to raise prices. It was seen that the benefits accruing from a rise in the prices
of Brazilian produce would also accrue to the competitors of Brazil in other
coffee-growing districts of the world. Other places would therefore benefit
gratuitously at the expense of the State of Sao Paulo without taking any risk
or incurring any of the expense entailed by valorization. It would not do for
Sao Paulo to undertake the work at their own cost merely to enrich their competitors in Guatemala or Costa Rica. To prove that this fear existed in Sao
Paulo it is only necessary to refer to the trip made by Dr. Augosto Ramos for
the purpose of study, he being sent by the Government to visit and report upon
the situation in the other coffee-producing countries of South America. His
work was published in book form by the Secretary of Agriculture in 1906. He
found on all sides the the same difficult situation caused by low prices as was
the case in Sao Paulo, and that the advantage, from a physical point of view,
rested with Sao Paulo, where the maturity mas more regular and the crop less
embarrassed by excessive rains. He also found that labor was scarcer and of
a poorer quality than in Sao Paulo, and that the orgnization and arrangement
of the plantations were not so perfect. He concluded, therefore, that Sao Paulo
could conserve the price of coffee, that it had a constant advantage over its
most favored competitors, who would be eliminated one after another, the
process of elimination having already commenced, and that no benefit would
accrue by maintaining the price of coffee below 80 francs.

How much is 80 francs?
Mr. SIELCKEN. That is 12 cents a pound.
Mr. UNTERMYER. 12 cents a pound?
Mr. SIELCKEN. Our money.
Mr. UNTEBMYER. About 12 cents?
Mr. SIELCKEN. About, yes.
Mr. UNTERMYER. The report of the minister continues:
He persuated the Government of Sao Paulo that the business was possible.

It was the foundation of valorization.

It is a fact that the purpose of this valorization scheme was to put
coffee at 12 cents a pound?
Mr. SIELCKEN. I can not answer ex parte questions of that kind.
You read me an argument, and if you will allow me to argue I will
answer you.
Mr. UNTERMYER. Yes; but I want to know if in your negotiations
with the State of Sao Paulo and in the making of these contracts
you understood that the purpose of this scheme was to get coffee
to 12 cents a pound and keep it there ?
Mr. SIELCKEN. It was not. I made the contract. I can state to
the committee what the object was.
Mr. UNTERMYER. It was not. You do not agree with the minister
of finance?
Mr. SIELCKEN. He does not say so. He says it is necessary to keep
it below a given price: nor can anybody keep or put it up. That is
impossible.
Mr. UNTERMYER. I will go on with this report [continuing reading] :
It was necessary, therefore, to intervene in another direction, and more radically. It was decided, therefore, to withdraw from the market all of the surplus
coffee. It was necessary, however, to proceed with great caution in case the
Government's action in curtailing the home market might give impulse and
result in greater production on the part of other countries, thereby neutralizing
the advantage which Sao Paulo hoped to reap.

Were you parties to any such discussion as that ?
I never was a party to any such discussion there.

 SIELCKEN.
Mr.


44

MONEY TRUST.

Mr. UNTEEMYEK. With what officials of Sao Paulo did you negotiate these contracts?
Mr. SIELCKEN. With what officials?
Mr. UNTERMYER. Yes.
Mr. SIELCKEN. I proceeded

with what we call down there the president, and he has got the last authority—the only authority.
Mr. UNTERMYER. Has the minister of finance no authority?
Mr. SIELCKEN. He is just exactly what he is here. He deals with
financial matters.
Mr. UNTERMYER. In this report by the minister of finance to his
Government he states further:
It is impossible to describe the situation which would thus Inn e been created
In the State, struggling with difficulties judged invincible, if the Government
had merely taken steps of simple expediency, leaving the process of natural
selection to do its work of destruction.

That you do not agree to at all ?
Mr. SIELCKEN. Read a little further.
Mr. UNTERMYER. I say you do not agree with that at all ?
Mr. SIELCKEN. Eead the next sentence, and then I will answer.
Mr. UNTERMYER. DO you agree to that ? We will stop right there.
Mr. SIELCKEN. I never agree to anything ex parte. If you wish
me to give an opinion, he says there finally that the law of the survival of the fittest does not act well.
Mr. CTNTERMYER. Does not act well. But the point about it is
this: Do you agree that the situation would have been impossible if
the Government had merely taken steps of •simple expediency, leaving
the process of natural selection to do its work of destruction?
Mr. SIELCKEN. I think there would have been a revolution in Sao
Paulo. There was threatening a revolution in Sao Paulo.
Mr. UNTERMYER. DO you think that would have been a worse condition than that we should pay 14 cents a pound for coffee ?
Mr. SIELCKEN. We would have paid that anyhow.
Mr. UNTERMYER. We would have paid that anyhow? Going on,
he says this, in October, 1910:
The coffee situation is now solid and not easily upset and will continue so
Indefinitely, provided the public authority is vigilant to see that the conditions
which led up to the crises that we have left behind are not repeated.

Do you agree to that ?
Mr. SIELCKEN. I can not agree or disagree with what the minister
of finance might say of San Paulo.
Mr. UNTERMYER. Why not?
Mr. SIELCKEN. If you will read it there, he makes his argument
as the minister of finance; and if you will give me the chance to
argue, then I will answer.
Mr. UNTERMYER. Yes: you will get a chance. You will get a
chance to make any statement you care to -make.
Mr. SIELCKEN. I can not possibly ansvv er. I know the gentleman
who has written it, and I have a very high regard for him. I do not
wish to criticize—to agree or disagree.
Mr. UNTERMYER. YOU can tell us whether or not you agree to this?
Mr. SIELCKEN. NO : it is not proper for me to do so.
Mr. UNTERMYER. Wait a moment; let me finish my question. You
can tell us whether or not you, as a leading coifee merchant of this



MONEY TRUST.

45

country and as an expert of 40 years' standing, are of the opinion
that the coffee situation is now solid and not easily upset.
Mr. SIELCKEN. I do not wish to say anything in criticizing what
he says.
Mr. UNTERMEYEB. He says, further:
It Is not necessary to attempt an estimate of the results attained. Sufficient
it is to say that the price of coffee in Santos is above Rs. 7,000 for 10 kilos.

Mr. SIELCKEN. 10 milreis, that means at the present time 2.10 for
10 kilos. Ten kilos is 22 pounds.
Mr. UNTERMYER. He continues:
As to the liquidation of the compromises assumed by the state, it may be
affirmed that within two or three years they will be all paid off, leaving a considerable balance. As a proof of this statement, it is sufficient to say that the
loan of £15,000,000 will on January 1, 1911, be reduced to 10,000,000, not only
by means of amortizations already made, but also by the large balances which
on that date we shall have in the hands of our bankers. The loan of £3,000,000,
contracted through the Federal Government, has already been reduced by
amortizations to £2,800,000.
The Government stock of coffee in the hands of bankers was 6,842,374 bags,
of which 500,000 bags were sold during the current year, leaving 6,300,000
bags on hand.
If we take as a basis the price of 66 francs per 50 kilos, now ruling at
Havre, without taking into consideration the greater value of our coffee, which
is nearly all composed of the higher grades, we have at present figures 6,300,000
bags, of the approximate value of £20,000,000.

I will ask to have this report of the minister of finance marked as
an exhibit, and I offer it in evidence.
The report referred to was filed, marked by the stenographer " Exhibit No. 8, May 16, 1912," and will be found printed m full at the
end of this hearing.
Mr. UNTERMYER. HOW many meetings of this committee of seven
have you attended, Mr. Sielcken?
Mr. SIELCKEN. I think it has met in four years. I have attended
in three years, each year one of the meetings.
Mr. UNTERMYER. Have you attended all that have been held ?
Mr. SIELCKEN. NO.
Mr. UNTERMYER. Was

there a meeting held on the 5th of January, 1909?
Mr. SIELCKEN. Yes; I suppose there was.
Mr. UNTERMYER. At that meeting was it decided that no coffee
should be sold during the year 1909 at less than 47 francs, which is
7.2 cents a pound, for an average, and then only up to an amount of
500,000 bags during that year?
Mr. SIELCKEN. Our records are published every year.
Mr. UNTERMYER. YOU have some recollection of that ?
Mr. SIELCKEN. We publish our meetings; we publish exact records
every year, here as well as over there.
Mr. UNTERMYEE. IS that your recollection? Was that done at
that meeting?
Mr. SIELCKEN. I suppose it was.
Mr. UNTERMYER. Was it also agreed then that 500,000 bags should
be sold at market prices during the period of January to July, 1910 ?
Mr. SIELCKEN. Yes.
Mr. UNTERMYER. And was

it agreed that in case the 500,000 bags
were sold in the year 1909 the committee might, at its discretion,
cancel the sale of the 500,000 bags to be sold in 1910?



46

MONEY TRUST.

Mr. SIELCKEN. Yes; I think we took that action.
Mr. UNTERMYER. Was there another meeting on the 27th of April.
1909?
Mr. SIELCKEKT. Yes; there was.
Mr. UNTERMYER. And is this practically what was done at that
meeting: Was it first reported that no sale had been made of the
coffee that was to be sold in 1909, and that the sales of the 500,000
bags would not be undertaken until the trade was ready to pay the
price stipulated therein, or its equivalent, in any of the markets, and
that in no case should the sales during the current year exceed 500,000
bags?
Mr. SIELCKEN. Yes; that is right.
Mr. UNTERMYER. Was it then stated and reported that the government of San Paulo had lately under consideration the advisability
of replacing the then existing law limiting export of coffee by a new
law creating an extra duty of 10 per cent on all exports of coffee
payable in turn, such coffee to be destroyed under the control of the
committee ?
Mr. SIELCKEN. That was never carried out.
Mr. UNTERMYER. But it was considered?
Mr. SIELCKEN. Yes; it was considered.
Mr. UNTERMYER. The Government was considering, with your committee, the destroying of that coffee?
Mr. SIELCKEN. The Government was considering the destroying of
coffee that is forbidden in this country; the common, low grade,
which the United States forbids to come in here.
Mr. UNTERMYER. That was the reason; because the United States
would not take it?
Mr. GIX^KEN. I do not know the reason. It was immaterial.
Mr. UNTERMYER. DO you not know the reason ?
Mr. SIELCKEN. I explained the reason.
Mr. UNTERMYER. The reason was that they wanted to get rid of
the surplus, was it not?
Mr. SIELCKEN. The farmers in this country burn corn. Do you
suppose they want to destroy it ?
Mr. UNTERMYEB. Yes. That is all that you have to say about
that, is it not?
Mr. SIELCKEN. An opinion is not necessary. It was not carried
out.
Mr. PUJO. No; we want the facts. We will draw our deductions
when it comes to that.
Mr. UNTERMYER. Did you attend the meeting on January 6, 1910,
of this committee?
Mr. SIELCKEN. NO ; I do not think I attended that meeting.
Mr. UNTERMYER. What?
Mr. SIELCKEN. One meeting I did not attend.
Mr. UNTERMYER. That was the meeting at which it was reported
that the plan of destroying the coffee was to be withdrawn ?
Mr. SIELCKEN. Yes.
Mr. UNTERMYER. At

that time did the committee decide that 500,000
bags should be sold gradually at market prices between the period of
February and June. 1910. the first sale of 125,000 bags to take place
in the first half of February?
Mr. SIELCKEN. Yes; there was 500,000 bags to be sold.




MONEY TBTJST.

47

Mr. UNTERMYER. One hundred and twenty-five thousand bags of
which was to be sold in the first half of February; and was it also
decided then that no further coffee should be sold during the year
1910?
Mr. SIELCKEN. Yes.
Mr. UNTERMYER. Unless

the tendency of the market and the requirement of the trade should, in the opinion of the committee,
render such further sales advisable?
Mr. SIELCKEN. Yes; there was some such resolution.
Mr. UNTERMYER. And that such further sales were not to exceed,
in any case, 600,000 bags, and that 600,000 bags should be sold at
market prices during the period of from January to July, 1911 ?
Mr. SIELCKEN. Yes.

Mr. UNTERMYER. IS not that right?
Mr. SIELCKEN. Yes.
Mr. UNTERMYER. Was

it not further arranged at that meeting that
in case 600,000 bags were sold in 1910 the committee might at its
discretion cancel the sale of 600,000 bags in 1911 ?
Mr. SIELCKEN. Yes.
Mr. UNTERMYER. AS

to the prices realized at these sales, there was
a meeting on May 4, 1910, was there not, at which it was announced
by the committee that 75,000 bags were sold in New York, if you
will remember
Mr. SIELCKEN. Yes; yes.
Mr. UNTERMYER (continuing). At 9£ cents; do you remember
Mr. SIELCKEN. Yes; I suppose so. I do not know.
Mr. UNTERMYER. Were you there?
Mr. SIELCKEN. I have made so many purchases and sales in

that I could not remember each date.
Mr. UNTERMYER. Did you buy that?
Mr. SIELCKEN. NO ; I did not buy it; I sold it.
Mr. UNTERMYER. The committee sold it?
Mr. SIELCKEN. I sold it for the committee.
Mr. UNTERMYER. For the committee; but you did not buy it?

that?
coffee

Mr. SIELCKEN. NO.
Mr. UNTERMYER. On

June 15, 1910, it was announced that 10,000
bags had been sold in New York at 9^-cent basis and 40,000 bags at
9-cent basis?
Mr. SIELCKEN. Yes.
Mr. UNTERMYEB. And

that there would be no further sales of
Government coffee in 1910?
Mr. SIELCKEN. Yes.
Mr. UNTERMYER. That is right, is it ?
Mr. SIELCKEN. Yes.
Mr. UNTERMYER. Were you present at

1911?

Mr. SIELCKEN. Yes.
Mr. UNTERMYER. YOU were? That
Mr. SIELCKEN. Yes.
Mr. UNTERMYER. At that meeting

the meeting on January 5,

was in London, too?

was it decided that 1,200,000
bags should be sold between the 1st and the 30th of April, 1911, and
that no more should be sold during that year?
Mr. SIELCKEN. Yes; that is right.



48

MONEY TRUST.

Mr. UNTERMYER. During all this time were you buying, too, on
your own account, and selling it?
Mr. SIELCKEN. I am always buying and selling coffee.
Mr. UNTERMYER. Yes.
Mr. SIELCKEN. Always.
Mr. UNTEKMYER. And on your own account?
Mr. SIELCKEN. Always; since many, many years.
Mr. UNTERMYER. On February 24, 1911, the committee

meeting, did they not, in London?
Mr. SIELCKEN. When?
Mr. UNTERMYER. February 24, 1911.
Mr. SIELCKEN. That was in Paris.
Mr. UNTERMYER. It was in Paris, was it?

held a

Mr. SIELCKEN. Yes.
Mr. UNTERMYER. That

is the meeting at which they ordered that
600.000 bags of coffee should be sold on April 1, of which 300,000
were to be sold in New York?
Mr. SIELCKEN. Yes.
Mr. UNTERMYER. And the remainder at other points ?
Mr. SIELCKEN. Yes.
Mr. UNTERMYER. Did you attend to that for them ?
Mr. SIELCKEN. Yes.
Mr. UNTERMYER. And they ordered that 600,000 bags

should be
sold on April 22 at a price not less than 10.8 cents per pound?
Mr. SIELCKEN. At how much?
Mr. UNTERMYER. Seventy-five francs?
Mr. SIELCKEN. 12f cents.
Mr. UNTERMYER. NO; 10.8 cents.
Mr. SIELCKEN. Seventy-five francs; that was the highest point. It
was sold at 12J cents in New York City.
Mr. UNTEKMYER. That was in April, 1911, was it not?
Mr. SIELCKEN. Yes.
Mr. UNTERMYER. Did you buy that ?
Mr. SIELCKEN. I bought it and sold it.
Mr. UNTERMYER. DO you mean that you

sold it for the committee
or bought it yourself?
Mr. SIELCKEN. I made a profit on that deal.
Mr. UNTERMYER. And on April 1 the committee announced that
300.000 bags had been sold at 12f cents?
Mr. SIELCKEN. Yes.
Mr. UNTERMYER. And afterwards
Mr. SIELCKEN. Yes.
Mr. UNTERMYER. HOW much of

another 300,000bags at 12| cents?

this Government coffee is there
now in the New York dock warehouses ?
Mr. SIELCKEN. HOW much?
Mr. UNTERMYER. Yes.
Mr. SIELCKEN. About 600,000 bags.
Mr. UNTERMYER. That is where; in

the New York Dock Warehouse Co.?
Mr. SIELCKEN. In the New York dock warehouses; yes.
Mr. UNTERMYER. And is that part of a larger stock that was there ?
Mr. SIELCKEN. We had originally, in December, 1908, 1,750,000



MONEY TETJST.

49

Mr. UNTERMYER. Who is regulating the time and the price at
which that coffee is to be sold?
Mr. SIELCKEN. The committee.
Mr. UNTERMYER. YOU do that by cable correspondence?
Mr. SIELCKEN. No; we do it in our meetings, once or twice a year.
Mr. UNTERMYER. And between those meetings you do not transact
any business ?
Mr. SIELCKEN. None at all.
Mr. UNTERMYER. I think that is all. Mr. Sielcken, would you
like to make a statement ?
Mr. SIELCKEN. If the committee is willing to hear me, I would
be very much pleased.
Mr. PTTJO. The committee would like you to make a concise, succinct statement with reference to valorization and the salient points
covered by the general interrogatory, and the general questions,
particularly as to the relations of the National City Bank, Mr.
Morgan, and others, to the present condition.
Mr. SIELCKEN. In regard to the transaction, I suppose the committee has received the impression from its counsel, and the questions that he has asked, that this valorization has put up the price
of coffee to unheard-of high figures; that it was an extraordinary,
artificial deal; and otherwise, that the valorization and the financing of it, and everything of that kind, was at the expense of the
United States, or of the consumers. I sometimes read in the newspapers about a Coffee Trust. Perhaps you gentlemen have. There
is nothing further from the coffee business than a Coffee Trust. If
it refers to my business, I have a partner, and neither he nor myself has, nor have we in our business, any understanding, any contract, any market arrangement, with any firm in the United States;
so that, as a trust necessarily implies a combination of capital and
of people in the same business—at least, I so understand it—and as
neither of those things has ever existed in our firm, we are not in
a trust. My firm is not, that is sure; and there is no Coffee Trust,
nor even the semblance of one, anywhere in the United States, to
my knowledge; not the semblance of one.
As regards the question of the extent to which valorization increased the value of coffee, which I suppose is the question you would
like me to give an opinion upon, the value of coffee since I have been
dealing in it, since I have been in Brazil, which is exactly since 1876,
has varied as follows: In those years Kio coffee was selling between
21 and 27 cents. The high prices brought about a larger production
of coffee, and from 1877 the market slowly declined from 27 cents
down to 15 cents and 16 cents, and in consequence of large failures iu
the trade it ran down to 6 or 7 cents a pound in 1884. In 1884 the
Brazilians tried a speculation to prevent a further decline. The
Government was not interested, but the speculation was largely aided
by the Bank of Brazil, which you might call a Government bank, and
it made a most disastrous failure. It improved the price for six
months, only to have it break down lower than before. In consequence of the low prices and their effect on production, the crops
commenced to decrease, and from 1886 the market commenced to advance, and in one year it advanced from 6 or 7 cents to 22 cents.
That 22-cent market did not hold, but for the years from 1886 until
 46627—PT 1—12


4

50

MONEY TRUST.

1896 the average price was perhaps 15 cents. The highest was 22
cents and the lowest was perhaps 11 or 12 cents.
In 1889 Brazil changed from an Empire to a Republic, and the Republic immediately commenced to issue paper money in unlimited
amounts. When Dom Pedro was driven away from Brazil in 1889,
the value of the Brazilian paper money was 27 pence. In four or
five years afterwards it was 6 pence; that is, 12 cents in our money.
These very low values in paper money enabled the planters at that
time to reap a very heavy harvest out of the price of coffee. They
paid their labor in that paper money, and did not increase their
wages for a long tiftie. The same wages were paid when the exchange was 12 and when the exchange was 27, so that the planting
of coffee increased enormously in the State of Sao Paulo, which, had
been by far the smaller State in coffee raising compared to Rio, and
Sao Paulo commenced to raise crops two orlhree times as much as
all Brazil put together, and the planters entirely forgot to pay attention to other branches of agriculture or the necessities of life. The
consequence of those enormous big crops was the bringing down of
the price of coffee. In 1895 and 1896 the decline commenced, and in
1897 and 1898 it steadily declined, until in 1903 the lowest price was
reached.
As to the low rate of exchange, the question there was similar to
our silver question. They supposed that the farmer could pay his
laborers with the same amount of money in poor money, in paper
money, as in gold. That brought about a high rate for everything
that they used. They had to pay enormous prices for flour and for
beans and for every necessity, and the price of coffee going down
created a crisis in Sao Paulo, for the reason that the exchange had
changed and the value of their money had gone down from 16 pence
to 6 pence, and coffee, which had been selling at 16 cents, went down
to 6 cents, and at the same time the price of their paper money went
back from 6 to 16, so that the fanner received a low price for his
coffee and had to pay a high price for his labor.
It was at that time that the State of Sao Paulo became very despondent, and the question was with them, "How can we prevent a
further decline in coffee?" A further decline meant destruction
and perhaps ruin and bankruptcy all around. In order to prevent
that they first put a tax on the planting of coffee. A tax of 2 milreis
at that time was a heavy tax.
Mr. UNTEKMYER. HOW much is a milreis ?
Mr. SIELCKEN. A milreis to-day is worth 33 cents—32 or 33 cents.
At that time the exchange was 6 cents, and the milreis was worth 12
cents. So it differed.
The State found that the question of not forbidding coffee cultivation, but putting a heavy tax upon planting would not act for
many years to come. It takes six to seven years for a full-grown
tree to mature. When trees are 4 or 5 years old they give very little.
Then, in those days the planters commenced to refuse to pay
interest on their mortgages. They were willing to give up their
entire crops, but they said: "We can not pay interest on our mortgages." The consequence was that a single firm was obliged to foreclose on 27 plantations on mortgages, and the Government of Sao
Paulo could see a great danger, that either the land in the State
would go into the hands of foreigners—because nearly all the mort-




MONEY TRUST.

51

gages were made with foreign capital—or a planter who had been
working hard and had raised big crops was fined and punished;
raising a big crop he was dispossessed from his homestead. The price
of coffee was so low that he could not pay.
Another great danger lay in the fact that they were unable to pay
the laborers. The laborers in the State of Sao Paulo are mostly
Italians. They have white labor. Two or three years before slavery
was abolished in all Brazil Sao Paulo abolished slavery with the
condition that the slave was free if he left the State. They wanted
him to leave the State, and to substitute white labor. This substitution of white labor has produced a marvelous effect in making the
State of Sao Paulo produce, with 3,000j000 people, more coffee than
all the other people of all the coffee-raising States, with a population
of fifty or one hundred million people. Here was the danger: Should
a planter be punished for working hard and raising a Targe crop?
Should men be dispossessed from their homesteads? I was told by
people who have lived there for many years, "We will not foreclose
any more mortgages. Our life is worth more than that. We will
not expose ourselves. These men will defend their homesteads. They
say,' Here take my coffee; I have no money.'"
The State of Sao Paulo has paid millions and millions to import
those Italian laborers—for their emigration from Italy. That labor
was brought there at the expense of the State. If those laborers
should leave the State because of nonpayment, if they should leave
the State of Sao Paulo and go to the Argentine, or return, there was
a danger that the plantations would be neglected. When a coffee
plantation is neglected, the weeds grow high and the trees possibly
grow wild, and they can not be replaced. Therefore, in making my
statement to you here to-day, gentlemen, I say that the State of Sao
Paulo undoubtedly did everything in its power—created all the laws
and did all in its power—to prevent a further decline of coffee from
the price already existing. A further decline from the existing price,
which was below the cost, would have been disastrous. They did
everything they could, but by doing what they did they did not make
the present price. The price of coffee from the time of the valorization, when the first purchases were made in September, 1906, until
July, 1910—that is, during nearly four years—did not change more
than a cent or two. The price did not change more than a cent or two
in that whole time, but remained stable in spite of the proposed destruction, which Mr. Untermyer several times referred to and which
he asked me about. The value of coffee did not go down or up.
Regarding the question of whether, in the beginning of this transaction, the attempt was made by the merchants and bankers participating in the deal to put up tie price of coffee, I will give a positive answer. The State of Sao Paulo, through their agent, approached all the bankers in Europe in 1906 for a loan to do their
business, and they were refused by the English bankers, by the
French bankers, and the German bankers. Nobody would entertain
the proposition. They approached me in September, 1906, and asked
me whether I could do something in the matter, I being well known
in the trade. I told them I would finance 2,000,000 bags provided the
reports of the next crop were absolutely assured to be small. To
the party who asked me I said. "We can not take your statement.
You are biased. If the general opinion of disinterested parties is



52

MONEY TRUST.

that the next crop will be very small, we—my partner and others—
will try to make an arrangement by which we will finance 2,000,000
bags of coffee on the basis of 80 per cent of the value." We started
at 7 cents, and the limit at which the Government could buy coffee
with that money and consign it to us at 8 cents was not 7 cents for
No. 5. We would go downward further. We declined, and all the
merchants who were with me declined to advance on the price in
excess of cost of production. We were willing to advance the cost
of production, and no more; 80 per cent of the cost of production.
Therefore any statement that can possibly be translated to the effect
that the coffee merchants, of whom I am One, in the United States-^
and in this case there were only 3 in the United States and in Europe
perhaps 25 or 30—aided the Government to try to put up the market
is not correct. We absolutely and positively limited the price upward, and we only went further downward, and under the influence
of the Government's buying the market declined, and declined
largely. The market decline from the first consignment we received
was from 7 cents down to 5 cents. On 5-cent coffee we advanced 4
cents.
Now, all of these transactions were absolutely made only by merchants. No bank or banker had anything to do with them.
I wish to refer to another matter. I was active in procuring the
loan of £3,000.000. for the Sao Paulo Government. Sao Paulo did
not only not get any more than the market value, but they were
obliged to pay us a margin as the market went down. We treated
the Sao Paulo Government exactly the same as we would treat
any other speculator or any other merchant. They had to keep
good their margin of 80 per cent; and that was done not only
once, but was continually referred to. The merchants called upon
the Government for margins. The market price for coffee going
down from 7 cents to 6 cents and from 6 cents to 5 cents, the Government had to put up further margins.
At that time, knowing that the Government needed money, and
that the credit of the Government was good and always had been
good, that they could borrow money, could raise a loan without security. I was instrumental in negotiating the loan of £3,000,000,
of which £1.000.000 was done with the City Bank in New York
and £2,000,000 in London. The National City Bank in New York
was not at all willing. They were afraid and it was a business
to which they were not accustomed. They only accepted it. first, because of my saying, '' My firm will take 25 per cent of that loan, and
if you do this business you will do a great act for commerce in the
United States. In case Brazil needs money, and can only find it in
Europe, the commerce of Brazil will go to Europe." We said to the
City Bank of New York. " This will be the entering wedge for the
future, larger business between the United States and Brazil. If you
go into this, it is safe, you will get a surtax, it will pay you, and
you can pay the loan."
These were the conditions of that loan, and the inducements I held
out to the City Bank were particularly the larger and better business in future with Brazil, not only for the City Bank but for the
country at large. I may state here that in 36 years I have been
probably the largest exporter between this country and Brazil. Coffee is not my only business. I went to Brazil to sell axes and shovels




MONEY TBUST.

53

and spades and silverware and everything else, and I have continued,
up to to-day. We export as well as import.
During the four years that valorization had taken place the market
did not advance. The Government had financed the surplus of that
crop for the purpose of preventing it. as much as possible, from going lower, and for the purpose of making it possible for the planters
of Brazil to continue taking care of their plantations. Supposing,
now, that they had not done so. Supposing that the planters in
that time, during 1906 and 1907. when there were very severe conditions in the financial market the world over, when it was just as difficult to obtain money in Brazil as it was in New York, or in Europe, as you gentlemen all probably remember, had been unable to
get money. If it had been impossible for them to obtain money—
and I wish that the committee would receive the opinions of others,
of other merchants in the trade, merchants who have been successful
and have shown that they understand their business—the price of
coffee to-day, without the valorization, would be higher than it is.
In 1906 and 1907 the price would have gone very much lower. I
have not the slightest doubt that that crop would have sold at a
ridiculously low price, so low a price as to prevent the planters from
paying interest on their mortgages or continuing their business, and
if that had happened, the subsequent crops would have been smaller
and smaller all the time. There we had a record crop of nearly
20,000,000 bags in Rio and Santos; 15,000,000 bags in Santos alone.
Since then the crops that we have had there have been, this year, say,
nine and three-fourths millions, last year 8,000,000, and next year,
from my information, I should say the crop would be 7,000,000 bags.
In case the plantations had been neglected, we might have had crops
of two, three, and four million bags, and a price for coffee of 25
cents.
So far as the sale of that coffee is concerned, the valorization
coffee, of which there is still on hand 4,400,000 bags, the bankers who
took the loan of £15,000,000 sterling, as well as the planters in Brazil
who were paying the surtax, required conditions, and the conditions
were that the bankers were afraid that some large amount of coffee
would be thrown on the market, and not realize as much as the loan.
So the guaranty of the Government of Brazil was required to absolutely secure ttiat loan. But the planters, on their part, who were
paying the high tax, and to absolutely enable the loan, have done
more than we merchants, or all the bankers, because without the
payment of that surtax the loan would have bfeen impossible. The
planters were sure that in case the crops should be very small, the
coffee on hand would not be positively thrown on the market, because
on the small crop they would have had to pay the 5 francs surtax,
and on the small crop they must receive higher prices than for the
big one; and that is not only the case with coffee, but with everything else we have in this country as well. At no time would there
have been a possibility to look upon the situation differently than a
decrease in the production of coffee. Since I have been in the business, for 35 years, the only country in the world which has increased
its production of coffee is the State of Sao Paulo. The Rio Menas
production decreased. Java decreased from £2,000,000 down to
£300,000; and the Central American States have stood steady, while
the consumption of coffee has doubled. So that, without somebody in



54

MONET TBTJST.

the world producing large crops, the price of coffee would have been
very much higher than it is to-day, and it is greatly to the interest
h
o
of all the coffee consuming countries that Sao Paulo is enabled to
continue her plantations, giving them the greatest care and the greatest attention, and that the planters of Sao Paulo are not compelled
at any time, by the low price of coffee or by their inability to raise
money, to let their plantations go down. Therefore, I make the statement that in my opinion the price of coffee without the valorization
would have been higher to-day than with it.
As far as this country is concerned—and we do not speak about
Europe—we have on hand to-day from the stock which we took
over, which was in this country, 1,774,000 bags. We have sold in
three years 1,300,000 bags, which leaves only about 400,000 bags on
hand, and the committee has sent 500,000 bags from Europe over
here to reenforce our stocks. Without that the stock of valorization coffee in this country would be very small, so small that it has
no effect on the market. Now, as a merchant, as a coffee dealer,
with a crop of 7,000,000 bags in yiew, coming, I would be willing
to pay the Government to-day, if they wanted to sell, the same
price that we received for the last sale in January—15 cents. I
would be willing to take every bag of coffee that is in this country;
I would buy it on account of my firm at that price and resell it,
every bag of it, at 15 cents, with the idea of having the same conditions we had then—with the idea that it would be a profitable
transaction to me—because that would end all the valorization coffees in this country.
If you will permit me. gentlemen, I will now refer to another
matter, which I can not help speaking of, in the interest of the mercantile war here, and of our endeavors in South America to increase
business between here and there. I have been in that business for
36 years. I have been there nine times more in the way of selling
goods than of buying goods. We require the good will of South
America, because the South American Republics, Brazil, Argentina,
and Chile, are financially sound people, and they are large producers; and large producers are always large consumers. We are
occupied in this country with the question, "Is the valorization deal
of another country, or was that deal, a correct deal? Should they
have done it?" In the first place, I question the propriety of the
United States criticizing or going into the details of the action of
another country. Supposing that in this country we had a deal
on cotton in the South, and Brazil should say, "Well, we want to
look into that"; or suppose England or Germany should say, " We
wish to know why cotton is 15 cents a pound. It has been only 5
cents, and later 10 cents—within a year or two—and we want to
know why it is 15 cents." Any foreign Government or any foreign
party that would act in that way would be thrown out of this country. We would not stand it or allow it for a minute.
From 1900 until 1910, gentlemen, this country has seen the highest prices for its produce on record in those 10 years. I speak of
cotton, and I speak of wheat, and I speak of corn, and I speak of
everything we raise here. In the same 10 years the Brazilians have
had the lowest prices on record for their productions. During the
years from 1900 to 1910 the Brazilian coffee market had the lowest
prices they ever had. In the last two years we have had better prices,




MONEY TEUST.

55

owing to smaller crops and to prospective small crops. I suppose all
of you gentlemen will agree that the markets of the world are more
influenced by the prospects of supplies than by the stocks now in
existence. That is the case with coffee, and I do believe it is the
case with other crops as well. If for two years, when they have
small crops after the big ones, they get better prices in Brazil, should
•we be so mean here as to say to them, " Now, we must try and see
why you are getting higher prices for your coffee. You shall sell
your products always at the lowest, and we ours at the highest. You
must not make any combination of any nature or form. That is a
conspiracy if you try to protect yourselves—if you try in the most
legitimate way to do the business." So far as the legality of the
business is concerned, I challenge the Attorney General in this country and every lawyer in this country to tell me that as a coffee merchant it is illegal for me to accept consignments. That is what was
done in this case. The business was done on consignments.
Mr. UNTEBMYEB. Mr. Sielcken
Mr. SIELCKEN. If the committee will be kind enough to allow me,
I want to say this much: My business has been inquired into by the
Attorney General, through grand juries, and here we are sitting, and
there have been inquiries, direct and indirect, by the counsel of this
committee about what steps the Brazilians took to protect their
property. Was that a proper thing to do? Was there something
wrong it it? That is the question I am addressing myself to.
Mr. PUJO. Mr. Sielcken, what the committee is primarily interested in and what we conceive to be largely the scope of our investigation is to see whether or not there has been a concentration
of capital
Mr. SIELCKEN. Capital?
Mr. PUJO (continuing). In the United States, by our financial institutions, particularly as connected with this valorization scheme.
I understand your testimony, analyzed or epitomized, is that the
$75,000,000 were borrowed and that $10,000,000 were furnished in
this country and that you represented
Mr. SIELCKEN. I beg pardon, Mr. Chairman. I did not quite say
that. The $75,000,000 with which the coffee was bought was furnished by the coffee merchants of the world.
Mr. PUJO. Yes.
Mr. SIELCKEN. None

of it by the banks. As far as the banks are
concerned, the City Bank took
Mr. UNTERMYER. Have we not got all this here in the documents?
Does it not all appear here?
Mr. PUJO. I want it epitomized here. Please state your proposition, Mr. Sielcken ? The City Bank took how many millions of the
loan?
Mr. SIELCKEN. The only interference of any bank here is that out
of the £3,000,000 sterling of the exchequer loan for five years the
City Bank took one-third of it. They sold here
Mr. UNTEEMYEE. That has all been gone into. We have got all
that.
Mr. SIELCKEN. NOW, you asked me to go over this.
Mr. UNTEEMYEB. Yes.



56

MONEY TEUST.

Mr. SIELCKEN. In addition to that, the City Bank bought from
John H. Schroder £2,000.000 sterling of one, which was placed in this
market.
Mr. PUJO. Yes.
Mr. SIELCKEN. Outside

of that, gentlemen, I want to state right
here, because I have been informed that in Washington it has been
current that we, for instance, received large loans from national
banks. We never received any.
Mr. UNTEBMTER. Mr. Sielcken, there is nothing of that kind before
the committee here. We are not discussing anything of that sort.
What is the use of going into all that here ?
Mr. SIELCKEN. The chairman asked me to what extent the national banks were interested in this deal.
Mr. UNTERMYER. NO ; we have not inquired into that.
Mr. PUJO. XO ; this is not a personal question. We do not desire
your personal transactions.
Mr. UNTERMYEB. If you have finished, I would like to ask you a
few questions.
Mr. SIELCKEN. Yes, sir.
Mr. UXTERMYER. In connection

with your statement that it is the
small crops since 1906 and 1907 that account for the present price
of coffee, will you tell me whether or not the world's crop of coffee
of 1909 and 1910 was not the biggest crop in 26 years, except the one
crop of 1906 and 1907, and was not the crop in 1.901 and 1902 about
the same as that of 1909 and 1910? That is so, is it not?
Mr. SIELCKEN. In the years 190JT and 1910 the coffee market did
not go down.
Mr. UNTERMYEB. Let us see about it.
Mr. SIELCKEN. NO ; it did

not.

Mr. UNTEBMYEB. That is not the question. The fact is, is it not,
that after this valorization scheme went into effect you had the biggest
crop that you have had in 26 years, except the crop of 1906 and 1907 ?
Will you not answer that ?
Mr. SIELCKEN. I can not answer that. If that is so, that does not
do away with the argument that I made. I said that the market
went up when crops became small, and the crops have only been small
for two years.
Mr. UNTEBMYER. NO ; the crops have not been small for two years.
The crop of 1910 was the biggest crop in 26 years.
Mr. SIELCKEN. The 1910 and 1911 crop was 8,000,000 bags in Santos. Then it went up.
Mr. UNTERMYER. IS not the fact somewhat different from what
you say?
Mr. SIELCKEN. What is that?
Mr. UNTERMYEB. That owing to the crop of 1909 and 1910 being
large the price of coffee did not go up ?
Mr. SIELCKEN. NO.
Mr. UNTERJIYER. IS

it not a fact that coffee on January 1, 1910,
was 8^J cents?
Mr. SIELCKEN. I do not call that going up.
Mr. UNTERJIYER. Let us see about that. You do not think that is
going up?
Mr. SIELCKEN. NO, sir.



MONEY TRUST.

57

Mr. UNTEBMYEB. Let us see. In 1902 and 1903, before the valorization scheme, coffee was 5J cents, was it not ?
Mr. SIELCKEX. Yes.
Mr UNTERMYEB. "When

had it been as high as 8}£ cents within 10
years before that? Had it?
Mr. SIELCKEN. Oh. yes; yes. It was
•
Mr. UKTERMYER. NOW, wait a moment.

I find from this chart
that from 1897 it had never been as high as 8}J cents, which it was
on January 1, 1910.
Mr. SIELCKEN. On the second crop, you say ?
Mr. UNTEUMYER. Yes.
Mr. SIELCKEN. I will tell you. It was 9 cents.
Mr. UNTEBMYER. Then is this chart wrong?
Mr. SIELCKEN. NO ; it is not. It does not give every month.
Mr. UNTEEMYEB. YOU have got every month here, have you
Mr. SIELCKEN. Yes; but
Mr. UNTERMYEB. Wait a moment. We can not get on if we

talk at once. On the 1st of January, 1910, coffee was 8{i cents?

not?
both

Mr. SELCKEN. Yes.
Mr. UNTERMYEB. NOW,

look at Exhibit No. 5, which I show you.
and point out to me, if you will, any time from the 1st of January,
1900—any month or any day—when coffee was as high as 8{% cents.
Mr. SIELCKEN. Well, here [indicating on chart].
Mr. UNTERMYEB. Will you not read it?
Mr. SIELCKEN. I beg your pardon; these are coffee options. You
quote me No. 7 prices. It is an entirely different thing you quote
there.
Mr. UNTEBMYEB. What is spot option ? Is not spot option the same
as spot coffee?
Mr. SIELCKEN. NO, sir; there is a difference of a cent and a half or
2 cents.
Mr. UNTEBMYER. Wait a moment. We will not get excited about
it—or we will try not to. Look at the quotations on No. 7 spot coffee.
That is spot coffee, is it not?
Mr. SIELCKEN. We have both spot and option on there.
Mr. UNTERMYEB. There is a column there that is headed " Spot
coffee," is there not?
Mr. SIELCKEN. Yes; here it is [indicating].
Mr. UNTEBMYEB. And on January 1, 1910, spot coffee was 8{$
cents a pound, was it not?
Mr. SIELCKEN. Yes; and on February
Mr. UNTEBMYEB. NOW, will you not wait a moment?
Mr. SIELCKEN. Yes.
Mr. UNTEEMYEB. Beginning

with 1900, and down to that time, is
there any.point at which spot coffee was as high as 8H cents?
Mr. SIELCKEN. Yes; higher.
Mr. UNTEEMYEB. Where is it?
Mr. SIELCKEN. Here it is [indicating].
Mr. UNTEBMYER. Eead it.
Mr. SIELCKEN. February, 1904; 9^ cents.
Mr. UNTERMYEB. IS there any other time?
Mr. SIELCKEN. Yes. Here is 8£, and here is 8}f.
Mr. UNTEBMYEB. Wait just a moment; let us understand each
other.




58

MONEY TBTTST.
Mr.

SIELCKEN.

Yes.

Mr. UNTEBMYER. YOU have spoken of'high prices of coffee away
hack in the eighties.
Mr. SIELCKEN. Not away back—in 1886 to 1896.
Mr. UNTERMYER. That is a long time.
Mr. SIELCKEN. That is not long.
Mr. UNTERMYER. There were not any high prices in 1896, were
there?
Mr. SIELCKEN. U p to the year 1896; oh, yes.
Mr. UNTERMYER. Yes?
Mr. SEECKLEN. What you would call high, certainly.
Mr. UNTERMYER. I S 7 | cents high? That is April, 1907.
Mr. SIELCKEN. YOU are not looking at it right. I will show you.
Mr. TJNTEEMTER. I do not think so.
Mr. SIELCKEN. Absolutely.
Mr. UNTERMYER. Quotation spot coffee ? I think not.
Mr. SIELCKEN. Absolutely. Can I help you with that chart?
Mr. UNTEBMYER. N O ; I can find it. Now, at these times, for instance in 1886 and down to 1895 and 1896, the visible supply of coffee in the world was less than 20 per cent or 25 per cent of a year's
production, was it not?
Mr. SIELCKEN. But the consumption was one-half what it is now.
Mr. UNTERMYER. Will you not answer?
Mr. SIELCKEN. I do not know that. The world's markets go by
both consumption and production.
Mr. UNTERMYER. NOW, if you will just listen to the question and
answer it, we will get through here.
Mr. SIELCKEN. Yes.
Mr. UNTERMYER. In

1894 and 1895 the crop was 11,700,000 bags,
and thte world's visible supply was 2,146,000 bags. That is about 20
per cent of the crop, is it not?
Mr. SIELCKEN. I do not know. I suppose so. I will go by the
records.
Mr. UNTERMYER. That was the world's visible supply then—20 per
cent of the year's crop. The world's visible supply in 1910 and 1911
was 14,165,000 bags, and the crop was 14,524,000 bags; so that for
that year is it not the fact that the world's visible supply was a
whole year's crop ?
Mr. SIELCKEN. Yes.
Mr. UNTERMYER. Well
Mr. SIELCKEN. D O you wish an
Mr. UNTERMYER. D O you think

intelligent answer from me ?
that the amount of visible supply
as compared with the crop has no bearing on the question of prices s
Mr. SIELCKEN. I t depends, for the future.
Mr. UNTERMYER. Yes.
Mr. SIELCKEN. With regard

to that, I beg to state here that the
consumption of coffee, since those supplies you speak about, has
doubled.
Mr. UNTERMYEB. I am speaking of the proportion of the world's
supply to the crop.
Mr. SIELCKEN. The proportion is regulated by how much is consumed. If the world consumes 10,000,000 bags, a visible supply of
4,000,000 bags is very good. If the world consumes 18,000,000 bags,
as it does now, the difference in the supply is quite different.




MONEY TEUST.

59

Mr. UNTERMYER. YOU do not think they have any relation to
prices—the visible supplies on hand?
Mr. SIELCKEN. The markets of the world, Mr. Untermyer, I can
not regulate, nor can anybody else. The markets of the world,
whether in coffee or cotton or anything else, go more by the prospects
and by the probable future production and consumption than by the
immediate supply.
Mr. UNTERMYER. Suppose the world's visible supply to-day was
30,000,000 bags instead of 14,000,000 bags. Do you understand ?
Mr. SIELCKEN. Yes.
Mr. UNTERMYER. SO

that you would have two years' supply ahead.
Would that affect the price?
Mr. SIELCKEN. Why, of course; but you are stating
Mr. UNTERMYER. NOW, will you not answer my questions, because
that is all I ask you to do?
Mr. SIELCKEN. Yes.
Mr. UNTERMYER. YOU

do not admit, do you, that the fact that you
have to-day a whole year's visible supply ahead has any effect on the
price of coffee ?
Mr. SIELCKEN. We have not.
Mr. UNTERMYER. On the 1st of January you had 13,500,000 bags,
did you not?
Mr. SIELCKEN. May I instruct you a little ?
Mr. UNTERMYER. NO; I do not ask for any instruction at all.
Mr. SIELCKEN. But correct figures you want?
Mr. UNTERMYER. These figures say 13,578,000 bags.
Mr. SIELCKEN. But the committee wants to be correctly informed.
The crop in Brazil comes in during the first six months of the year,
and from the 1st of January to the 1st of July the crop decreases
three or four million bags each year, because
Mr. UNTERMYER. We are not speaking of that, but of the figures
of the 1st of January, the only figures we have before us.
Mr. SIELCKEN. But the amount decreases.
Mr. UNTERMYER. What I want to know is this: On the 1st of
January of this year you had practically a year's visible supply, did
you not ?
Mr. SIELCKEN. NO; we did not.
Mr. UNTERMYER. YOU did not?
Mr. SIELCKEN. NO, sir.
Mr. UNTERMYER. HOW many months' visible supply had
Mr. SIELCKEN. Eight months'.
Mr. UNTERMYER. YOU had eight months' supply. That

large supply, is it not ?
Mr. SIELCKEN. NO.
Mr. UNTERMYEK. It
Mr. SIELCKEN. NO.
Mr. UNTERMYER. It

you?
is a very

is not unusual?

is not? Do you find in this entire list, in the
26 years, more than two periods in which it was as large as that?
Mr. SIELCKEN. The visible supply has increased, and so has the
consumption.
Mr. UNTERMYER. Yes. If the natural causes created this rise in
coffee, why did the Government go into this business at all?
Mr. SIELCKEN. The natural cause of small crops has existed only
for two years, while in 1906 and 1907 the condition was different.




60

MONEY TRUST.

Mr. UNTERMYER. Then the purpose of the Government in going
into this business was to maintain the price and to increase the price
of coffee, was it not?
Mr. SIELCKEN. To prevent the country from being ruined through
the low price of coffee.
Mr. UNTERMYER. TO prevent the country being ruined? You
know that, do you?
Mr. SIELCKEN. Yes.
Mr. UNTERMYER. YOU know what it costs to raise coffee, do you?
Mr. SIELCKEN. Yes.
Mr. UNTERMYER. DO you own any coffee farms ?
Mr. SIELCKEN. I am on very close
Mr. UNTERMYER. DO you own any coffee farms?
Mr. SIELCKEN. NO.
Mr. UNTERMYER. Did you ever own any?
Mr. SIELCKEN. NO.
Mr. UNTERMYER. Or did you ever raise any coffee ?
Mr. SIELCKEN. NO; but I do know what coffee costs, because I

have been dealing in coffee for 30 years.
Mr. UNTERMYER. YOU know what it brings?
Mr. SIELCKEN. I know what it costs to raise it, since many years.
Mr. UNTERMYER. In 1896 the Brazilian coffee raisers existed on
5 and 6 cent coffee, did they not ?
Mr. SIELCKEN. Will you please tell me when it was ?
Mr. UNTERMYER. Yes; you know, do you not?
Mr. SIELCKEN. YOU mean in the last 10 years?
Mr. UNTERMYER. 1901, 1902, 1903, and i904; 1907 and 1908.
Mr. SIELCKEN. That is exactly the statement I made to the committee— the lowest prices on record.
Mr. UNTERMYER. Yes. You say it costs how much to raise coffee?
Mr. SIELCKEN. It costs probably—the cost on different plantations
is different.
Mr. UNTERMYER. That is the best answer you can give?
Mr. SIELCKEN. The cost of raising coffee changes, just as the cost
of raising cotton changes.
Mr. BYRNES. Did you ask him how much it cost for the last crop ?
What is the cost of production?
Mr. UNTERMYER. There are no figures extant.
Mr. BYRNES. In his figures a while ago he said he knew.
Mr. UNTERMYER. HOW could he possibly know?
Mr. BYRNES. I understood him to say he knew.
Mr. SIELCKEN. Would you like to know ?
Mr. PUJO. Yes; answer the member of the committee.
Mr. SIELCKEN. The cost of a crop of coffee changes, depending
on the size of the crop. A large crop can be raised for less money
than a small one.
Mr. BYRNES. I understood that; but what was the cost of production of the last crop ?
Mr. SIELCKEN. The last crop was a small crop, only 8,000,000
bags, and it was an expensive crop.
Mr. BYRNES. HOW much did it cost?
Mr. SIELCKEN. TO raise?
Mr. PIJJO. By the pound?
Mr. BYRNES. By the pound?




MONEY TEUST.

61

Mr. SIELCKEN. I suppose 8 or 9 cents, by the pound.
Mr. UNTERMYER. The planters of Brazil in 10 years, from 1897
until 1907, did not average over 6 cents, did they ?
Mr. SIELCKEN. I think not.
Mr. UNTERMYER. And in all that time it cost them how much?
Mr. SIELCKEN. It cost them
Mr. UNTERMYEB. Eight cents, did it?
Mr. SIELCKEN. NO ; I did not say so. I beg your pardon. I said
a small crop cost that much. Last year was a small crop year. The
crop wajs only 8,000,000 bags. In those years you mention they had
large crops, and, as I explained to the committee, the rate of exchange had a great deal to do with the cost of the coffee.
Mr. UNTEEMYEB. What was the average cost of coffee during
those 10 years when it brought about 6 cents ?
Mr. SIELCKEN. In 1906, when I made the first advance to them
on the consignments, they told me the average cost would be 7
cents a pound.
Mr. UNTEBMYEE. I understood you to say that the National City
Bank had been induced by you to go into this business not for
profit, but as a great act to promote the commerce of the United
States; is that right ?
Mr. SIELCKEN. I do say so. I repeat it.
Mr. UNTERMYER. Yes; what inducements did the Schroeders, who
were their partners also, have for going into it—to assist the commerce of the United States ?
Mr. SIELCKEN. Schroeders had been bankers of Sao Paulo for
many years.
Mr. UNTERMYER. Then their purpose in being partners with the
City Bank was what ?
Mr. SIELCKEN. Partners with the City Bank? They were never
partners. In all the loans that Schroeders have brought out in the
State of Sao Paulo they had no partners. In this particular loan
they desired the City Bank, because generally the American influence is recognized in politics in South America, and they said,
" We would like to see the American flag covering this loan."'
Mr. UNTEBMYEE. YOU mean the Schroeders would like to see the
American flag?
Mr. SIELCKEN. Yes.
Mr. UNTEBMYER. That

is the reason they joined with the City
Bank, is it?
Mr. SIELCKEN. They were induced more than if anybody else had
joined it but the Americans.
Mr. UNTERMYER. Was that also true as to the $75,000,000 loan,
that it was all to help the commerce of the United States ?
Mr. SIELCKEN. The $75,000,000 loan was made under very different conditions.
Mr. UNTERMYEB. Yes; but I want to know this: Was that also an
act to aid the commerce of the United States %
Mr. SIELCKEN. DO you mean by the City Bank?
Mr. UNTERMYER. Anybody.
Mr. SIELCKEN. I only talked to the City Bank to aid the trade of
the United States. I do not suppose an English banker thinks about
the United States.



62

MONEY TEUST.

Mr. UNTERMYER. Yes; but there were not only English bankers in
that loan, but French and Holland bankers and other bankers, were
there not?
Mr. SIELCKEN. Mr. Untermyer, there is no possible comparison
between the two loans.
Mr. UNTERMYER. Will you not answer my question ?
Mr. SIELCKEN. Nobody else does anything for the United States
except an American.
Mr. UNTERMYER. What countries were interested—what bankers
of different countries were interested—in the $75,000,000 loan?
Mr. SIELCKEN. England, France, Germany, and Belgium.
Mr. UNTERMYER. And America?
Mr. SIELCKEN. Yes; and America.
Mr. UNTERMYER. Were those the only five?
Mr. SIELCKEN. Yes; officially, who took it.
Mr. UNTERMYER. And they got a 5 per cent bond from a government that you said had always paid its debts ?
Mr. SIELCKEN. Yes.
Mr. UNTERMYER. And they
Mr. SIELCKEN. Yes.
Mr. UNTERMYER. They got
Mr. SIELCKEN. Yes.
Mr. UNTERMYER. They got

got it at 85, did they not ?
most adequate security, did they not?

these 7,000,000 bags of coffee besides
the obligation of the Government, and the surtax?
Mr. SIELCKEN. Yes.
Mr. UNTERMYER. And

the surtax amounted to what proportion of
the loan?
Mr. SIELCKEN. The surtax?
Mr. UNTERMYER. Yes.
Mr. SIELCKEN. Five cents a bag. It amounted
Mr. UNTERMYER. TO $10,000,000 a year?
Mr. SIELCKEN. $10,000,000 a year; yes.
Mr. UNTERMYER. SO that that was pretty good

was it not?
Mr. SIELCKEN. For the loan?

to $10,000,000.
security in itself^

Mr. UNTERMYER. Yes.
Mr. SIELCKEN. For the service of the loan.
Mr. UNTERMYER. But the interest on the

loan was about three
and three-fourths millions, was it not?
Mr. SIELCKEN. Yes; everything together.
Mr. UNTERMYER. That would bring it up to about how much?
Mr. SIELCKEN. $3,000,000.
Mr. UNTERMYER. $3,000,000. So that there was a surplus of the
surtax applicable to the principal, was there not ?
Mr. SIELCKEN. Yes.
Mr. UNTERMYER. And

then there was the obligation of the Government and the 7,000,000 bags of coffee ?
Mr. SIELCKEN. Yes.
Mr. UNTERMYER. SO
Mr. SIELCKEN. The

that it was a good loan, was it not?
second loan was the best loan I have ever

known.
Mr. UNTERMYER. The best loan you have ever known?
Mr. SIELCKEN. Yes; the second, not the first.
Mr. UNTERMYER. That would depend on how high coffee was.



MONET TBXJBT.

63>

Mr. SIELCKEN. The first loan was an act of patriotism on the part
of the City Bank.
*
Mr. UNTERMYER. YOU mean the loan of £3,000,000?
Mr. SIELCKEN. Yes.
Mr. UNTERMYER. On the obligation
Mr. SIELCKEN. Yes.
Mr. UNTERMYER. And you say the

of the Sao Paulo government?

Sao Paulo government's obligations—its bonds—have never been defaulted?
Mr. SIELCKEN. Yes.
Mr. UNTERMYER. Never;

so that that was considered a prime bond
in the market ?
_Mr. SIELCKEN. I sa\
Mr. UNTERMYER. Will you not answer ? Please answer my question.
Mr. SIELCKEN. In my opinion it was. but not with the City Bank.
It had no such knowledge.
Mr. UNTERMYER. What I was trying to get at was this: They paid
93 for that bond, did they not, on the £3,000,000 loan?
Mr. SIELCKEN. Ninety.
Mr. UNTERMYER. They paid 90 for the bonds?
Mr. SIEI-CKEN. Ninety.
Mr. UNTERMYER. And how long did those bonds run ?
Mr. SIELCKEN. Five years.
Mr. UNTERMYER. And then they got a commission besides, did they
not?
Mr. SIELCKEN: NO ; that was included.
Mr. UNTERMEYER. It was 90 flat?
Mr. SIELCKEN. Yes.
Mr. UNTERMEYER. A five-year loan?
Mr. SIELCKEN. Yes.
Mr. UNTERMEYER. Was it payable in installments?
Mr. SIELCKEN. Yes; every year.
Mr. UNTERMEYER. SO that there was an average time

was there not, under the loan?

of 2£ years,

Mr. SIELCKEN. Yes.
Mr. UNTERMYER. And

that would give an interest rate of 9 per
cent on the loan, would it not *
Mr. SIELCKEN. It does not make that.
Mr. UNTERMYER. Wait a minute.
Mr. SIELCKEN. I can not figure it at that.
Mr. UNTERMYER. The average of the loan was 2£ years ?
Mr. SIELCKEN. Yes.
Mr. UNTERMYER. And the
Mr. SIELCKEN. Yes.
Mr. UNTERMYER. SO that

years, was it not?

Mr. SIELCKEN. Yes.
Mr. UNTERMYER. That

bonds were sold at 90 ?
that was a discount of 10 points in 2$

is an average of 4 points a year, is it not?
And, added to the interest at 5 per cent, does not that make it 9 per
cent a year?
Mr. SIELCKEN. Perhaps it does.
Mr. UNTERMYER. YOU ought to know. You are a good calculator.
Mr. PUJO. Those are obvious propositions. Those r.re matters of
deduction.



64

MONEY TKTJST.

Mr. UNTERMYER. Getting 9 per cent per annum on their money on
a prime loan—that you call an act of patriotism?
Mr. SIELCKEN. Yes; in 1906 and 1907, sir, when you could not get
money at 9 or 10 or 12 per cent in New York City, against security,
and much less in foreign countries.
Mr. UNTERMYER. All right. Did Schroeders have partners in the
loan on their end ?
Mr. SIELCKEN. All bankers put out a loan on the market.
Mr. UNTERMYER. And they got the same terms as the City Bank,
did they not?
Mr. SIELCKEN. Yes.
Mr. UNTERMYER. And

they considered it a good piece of business,
did they not?
Mr. SIELCKEN. They understood Sao Paulo, and the City Bank
did not.
Mr. UNTERMYER. Will you tell me, Mr. Sielcken, whether this section of the charter of the coffee exchange is still in existence ? It is
section 84, and it reads as follows:
Any member who shall himself, or whose partner or partners shall apply for
an injunction or legal instrument restraining any officer or committee of the
exchange from performing his or its duty under the by-laws and rules shall
by that act cecise to be a member of the exchange.
Mr. SIELCKEN. I never read that book.
Mr. UNTERMYER. DO you understand that if a member of the

Coffee Exchange, of which you are a member, goes into court to protect himself that expels him from the exchange ?
Mr. SIELCKEN. I do not know. I never read that. I suppose
that if it is printed there, it is so.
Mr. UNTERMYER. That is all.
Mr. PUJO. Is there any member of the committee who would like
to ask Mr. Sielcken a question?
Mr. BYRNES. I •would like to ask you one or two questions, if you
please.
Mr. SIELCKEN. Yes,
Mr. BYRNES. Did I

sir.

understand you to say that if your committee
sold that 4.000,000 bags of coffee that you have on hand it would
make no material reduction in the price to the consumer at that
time?
Mr. SIELCKEN. I did not say that. I said the New York end of
it, to-day; what I have here, if the New York stock would be sold
to-morrow.
Mr. BYRNES. HOW much is that ?
Mr. SIELCKEN. Nine hundred thousand bags, including what is
coming; 600,000 bags.
Mr. BYRNES. Six hundred thousand bags ?
Mr. SIELCKEN. Yes.
Mr. BYRNES. What is the price to-day?
Mr. SIELCKEN. The price of that coffee ?
Mr. BYRNES. Yes: what does it cost, to sell it to-day, in the market?
Mr. SIELCKEN. 15 cents.
Mr. BYRNES. YOU told me a while ago that the cost of production

was about 8 or 9 cents?
Mr. SIELCKEN. Yes.



MONEY TBUST.

65

Mr. BYRNES. IS that a fair profit, now, on 15 cents?
Mr. SIELCKEN. This was not produced now; this was produced
six or seven or eight years ago.
Mr. BYRNES. What was the cost of production then ?
Mr. SIELCKEN. Yes; but you asked what is the difference; what
it cost to produce.
Mr. BYRNES. It would be sold at a fair profit now ?
Mr. SIELCKEN. That has been carried for eight years.
Mr. BYRNES. It cost something to carry it?
Mr. SIELCKEN. I should judge so.
Mr. BYRNES. Every year you would carry it, then, you would have
to get a higher price in order to get a fair profit ?
Mr. SIELCKEN. If I want to get my money back ?
Mr. BYRNES. If you kept it 25 years the price would go up still
higher ?
Mr. SIELCKEN. It would be 200 per cent higher.
Mr. BYRNES. Then, if selling now would make no material reduo
tion, why do you not sell it?
Mr. SIELCKEN. It is not my coffee.
Mr. BYRNES. But your committee has that?
Mr. SIELCKEN. The committee has, by contract with the bankers,
to sell a given quantity a year—600.000, 700,000, or 800,000 bags, according to the amounts of the crops. So much a year is sold by the
committee, and no more.
Mr. BYRNES. And your committee can not sell this coffee ?
Mr. SIELCKEN. We can sell a definite amount in one year.
Mr. PTTJO. Does any other gentleman desire to ask Mr. Sielcken
a question?
Mr. UNTERMYER. Does Mr. Sielcken want to say anything else?
Mr. PTJJO. Have you anything else you want to say, Mr. Sielcken?
Mr. SIELCKEN. NO; I am very grateful to you because you have
permitted me to make some explanation, and all I can say is that I
hope that the examinations into the affairs of a foreign country will
be conducted in a friendly light, in a friendly way, and not in a
criticizing way, because it does not become us, when a country is in
great distress, to criticize.
Mr. UNTERMYER. Before you go, let me ask you this: Do you not
understand that the purpose of this investigation has no relation
at all to any foreign country, but that we are simply trying to establish the connection of our institutions with a product that our people
are consuming ? Do you not understand that that is our only purpose,
and that if in that investigation it becomes necessary for us to examine into the origin of that transaction, that is a mere incident?
Mr. SIELCKEN. I do not consider it so, for the reason that what
this country consumes and buys from a foreign country, the value
of that is not made by any transaction of government; it is made,
in the long run. by the law of supply and demand.
Mr. UNTERMYER. But suppose yon and your firm were to have
5.000,000 pounds of coffee from Sao Paulo in your warehouses here ;
suppose you were to have it here, and you were to hold it and feed
it out to the market, you understand, and regulate prices, do you not
recognize that that would be a proper subject of inquiry?
Mr. SIELCKEN. What?
46627—PT 1—12




5

66

MONEY TRUST.

Mr. UNTEKMYER. DO you not recognize that that would be a proper
subject of inquiry?
Mr. SIELCKEN. No.
Mr. UNTEEMYEH. YOU do
Mr. SIELCKEN. NO.
Mr. UNTEBMYEH. That is

not?

all.
(At 5.45 o'clock p. m., the subcommittee adjourned.)
Exhibits Nos. 1, 2, 4, and 8, referred to in the foregoing hearing,
are as follows:
EXHIBIT NO. 2, MAY 16, 1912.
CONTRACT FOR THE ISSUE AND SALE OF £3,000,000 SAN PAULO STATE 5 PEE
CENT EXCHEQUER BONDS WITH SCHEDULED FORM OF GENERAL BOND AND
DEFINITIVE BOND.

An agreement made this
day of December, 1906. between the government of the State of San Paulo (hereinafter called "the government 1 '), by
of
of the one part and J. Henry Schroder & Co., of 145 Leadenhall Street, in the city of London, and the National City Bank, of the city of
New York, in the United States of America (which bank is for the purposes of
this agreement represented by Mr. Hermann Sielcken, of New York, in the city
of London its duly authorized agent), the said J. Henry Schroder & Co. and the
National City Bank being collectively hereinafter referred to as " the bankers "
(which expression shall in this agreement mean the persons or person or corporation for the time being carrying on the business of the said J. Henry
Schroder & Co. and the National City Bank, respectively) of the other part.
Whereas the government is about to issue a public loan for the nominal
amount of £3,000,000 sterling, bearing interest at the rate of 5 per cent per
annum and to be called " The San Paulo State 5 per cent exchequer bonds"
(hereinafter referred to as "the said bonds"), duly authorized by law 984 of
the said State dated the 29th of December, 1905.
Now, it is hereby agreed by and between the parties hereto as follows:
1. The government will forthwith create and issue the said bonds, which
shall bear interest at the rate of 5 per cent per annum, payable half yearly, the
first payment of interest for the full half year ending on the 1st of June, 1907,
to be made on that date. The payment of the principal and interest of the said
bonds shall be guaranteed by the government, and such principal and interest
shall be secured by a first hypothecation mortgage or charge on a gold surtax
of 3 francs per bag on all coffee exported from the State of San Paulo, which
tax shall be levied and collected by the government during the continuance of
the loan, and so that the government shall not during the continuance of the
loan create or issue any hypothecation mortgage or charge on the before-mentioned surtax ranking in priority to or pari passu with the said bonds.
2. The said bonds shall be secured by a general bond, to be executed by or on
behalf of the Government, and such general bond and the said bonds shall
respectively be in the forms annexed hereto or in such other form, respectively,
as shall be as near thereto as practicable and be previously approved of by the
bankers. The general bond shall be retained by the said J. Henry Schro'der
& Co.
3. The said bonds shall be issued as to bonds for the nominal amount of
£2,000,000 sterling in English currency (hereinafter referred to as "the Englishbonds"), in denominations of £1.000. £500, and £100. and be payable as to principal and interest at the countinghouse of the said J. Henry Schroder & Co.
in London. The remaining bonds for the nominal amount of £1,000,000 i hereinafter referred to as "the American bonds") shall be issued in sterling in the
like denominations and be payable in gold coin of United States gold currency
equal to the present standard of weight and fineness at the rate of .$4.84 per*
pound sterling exchange and be payable as to principal and interest in such
currency at the countinghouse of the National City Bank in New York.
4. Ou the Monday oi each week during the continuance of the loan the Government shall pay the revenue derived from such surtax, free from all deductions whatsoever, to Messrs. Theodor Wille & Co.. of Santos, as the .'^ents of
the bankers, and the amount so paid shall be remitted by them as to two-thirds




MONEY TRUST.

67

thereof to the said J. Henry Schroder & Co. for the sen ice of the English bonds
and as to the remaining one-third to the National City Bank for the service of
the American bonds. The first payment of such revenue shall commence and
be made on Monday, the 17th of December, 1906, and shall continue each week
until a sufficient amount has been paid to provide for a full year's interest on
the said bonds. The next payment shall commence and be paid on the first
Monday in August, 1907, and shall continue each week until a sufficient amount
has been paid to provide the interest on the said bonds for the year ending the
30th of November. 1908, and the necessary payment for the first redemption of
bonds, which will take place on the 1st of December, 1908. On the first Monday
in December, 1908. and on the 1st of December in each succeeding year during
the continuance of the loan the said payment shall again commence and shall
continue iu each week in eacli year until a sufficient amount has been paid to
provide for one year's interest on such of the said bonds as shall remain outstanding and the necessary payment for redemption of bonds in such year. In
the event of the revenue derived from such tax being insufficient to meet any
of the payments aforesaid the Government shall forthwith make up the
deficiency out of its general revenues
5. The said bonds are to be redeemed by not less than four equal annual installments, the first to be payable on the 1st of December, 1908. Redemption
of the said bonds shall be effected as and when there shall be funds of the
government available for the purpose by purchase by the bankers in the
market below par with accrued interest for account of the government or by
yearly drawings at par, the first drawing to take place in the first week in
November, 1908. The bonds drawn will be paid on the 1st day of December,
1908, and each succeeding year. Such drawings shall take place on a convenient day ro be fixed by the bankers at the counting houses of J. Henry
Schroder & Co., in London, and the National City Bank, in New York, respectively, in the presence of a duly authorized representative and of a notary
public. The denoting numbers of the bonds drawn from time to time shall
be published as to those drawn in London in the Times and one other London
daily paper, and as to those drawn in New York in two New York daily
papers. The said coupons and redeemed bonds shall be canceled and forwarded to the treasury of the government.
6. The bankers hereby jointly and severally nominate and appoint the said
Messrs. Theodor Wllle & Co. and any member for the time being of that firm
their and each of their attorneys and agents' attorney and agent in the State
of San Paulo for the purposes of clause 4 of this agreement and to receive and
give receipts for all moneys payable thereunder and generally to act in relation
to the said loan and hereby grant to the said Messrs. Theodor Wille & Co. and
any such member as aforesaid full power and authority to do all acts and
things and to sign and execute all instruments, deeds, and documents for that
purpose, and for the more effectually carrying into effect and giving full force
and virtue to all or any of the provisions of this agreement, and appear before
any court or authority in the said State, and to register any document or documents in such State in such manner in all respects as the said attorneys shall
think fit.
7. The said bonds shall be signed free of charge by a special representative
of the government in London, whose name the government will communicate
to the bankers in due time and before the 1st of May. 1907. Such bonds shall
be payable to bearer and shall have attached thereto such a number of coupons
as will suffice for the payment of the interest until such time as the loan will
be redeemed.
8. The government shall sell and the said J. Henry Schroder & Co. shall
purchase in English currency at £93 for each £100 of the nominal amount
thereof the English bonds, and the Government shall sell and the said National
City Bank shall purchase in English currency at £93 for each £100 of the
nominal amount thereof the American bonds.
9. The government shall pay or allow to the bankers l i per cent on the
total nominal amount of the said £3,000,000 loan, the same to be payable a»
to two-thirds thereof to the said J. Henry Schroder & Co., and as to the balance
to the National City Bank, to cover all stamp duties payable in respect to the
said bonds and the expenses to be incurred by the bankers in relation to the
issue and placing of such bonds.
10. The government shall be authorized by the bankers to draw upon them
or such other firm or company as they may designate at 90 days' sight for
the sum of £1,752.500 part of the purchase price of the said bonds by bills on
London
 as to £438,125 part thereof during December, 1906, and as to further


68

MONEY TBUST.

part thereof by like drafts for £438,125 each, on such date in each of the following months of January, February, and March, as the government shall select.
And as to the balance of the said purchase price, namely, £1,000.000, the same
shall be paid by the bankers in the proportion of two-thirds by the said J.
Henry Schroder & Co., and as to the remaining one-third by the National City
Bank in cash in London on the 31s" of July, 1907, for the withdrawal of and
against delivery and cancellation of bills for that amount issued by the Government and due on the day following such last-mentioned date,
11. The said J. Henry Schroder & Co. are hereby appointed agents in London
of the government for the service of that portion of the loan represented by
the English bonds for the whole period thereof and the National City Bank
are hereby appointed agents in New York of the government for the service of
that portion of the loan represented by the American bonds for the whole
period thereof.
12. The said J. Henry Schroder & Co. and the National City Bank shall, as
such agents, be respectively paid by the government 1 per cent on the nominal
amount of the interest upon the English bonds and the American bonds, respectively, as and when the same shall be paid, and 1 per cent on the amount applied each year for the redemption of that portion of the loan represented by
the English bonds and the American bonds, respectively.
13. The government will reimburse the bankers any expenses incurred by
them, respectively, for advertisements, telegrams, correspondence, or otherwise,
in connection with the service of the loan, including the payment of interest
and redemption thereof.
14. The said J. Henry Schroder & Co. and the National City Bank may respectively deduct any moneys payable to them by the government under this
agreement from the moneys from time to time remitted to them, respectively,
for the service of the loan.
15. The government will at all times indemnify and keep indemnified the
said J. Henry Schroder & Co. and the National City Bank, and each of them,
from and against all claims, demands, actions, suits, and proceedings whatever,
as may arise (other than from the direct negligence of the said J. Henry
Schroder & Co. and the National City Bank or the said Messrs. Theodor Wille
& Co., their agents, respecthely). which may be made, instituted, or prosecuted
by or on behalf of any holder of any of the said bonds for or in respect of any
moneys at any time in the hands of the said J. Henry Schroder & Co. and
the National City Bank or the said Messrs. Theodor Wille & Co., on their
behalf, under this agreement or otherwise remitted to them, respectively, for or
in connection with the service of the loan or otherwise for or in connection
with this agreement or anything relating thereto.
16. And the government hereby undertake and agree with the bankers that
during the continuance of the loan no future loan secured by any charge on any
surtax or general tax whatsoever on coffee exported from the said State shall
be made by the government unless the same shall provide to the satisfaction
of the bankers for the repayment of the principal and the full interest of the
present loan. And also that all future loans of any description at any time
hereafter issued by the government shall be first offered for acceptance as to
two-thirds thereof to the said J. Henry Schroder & Co. and as to the remaining
one-third thereof to the National City Bank upon at least equal terms to those
offered by any other authority, corporation, firm, or person.
17. The said J. Henry Schroder & Co. will use their best endeavors to obtain
a quotation on the stock exchange in London for the said loan.
In witness whereof the said
, on behalf of the government,
. on behalf of the said J. Henry Schroder & Co., and the said
Herman Sielcken, on behalf of the National City Bank, have hereunto subscribed their respective names.

[Form of general bond.]
REPUBLIC OP THE UNITED STATES OF BRAZIL, STATE OF SAN PATJLO.
GENERAL BOND.

General bond of the government of the State of San Paulo, authorized by
law No. 984. of the 29th of December. 1905, duly sanctioned by the Congress
of the State of San Paulo, for the issue of this loan of £3,000,000 sterling, with



MONEY TKUST.

69

interest at the rate of 5 per cent per annum, and to be called " The San Paulo
State 5 per ceni exchequer bonds."'
In the city of San Paulo, before me. the undersigned,
, notary
public, of the said city, duly admitted and sworn, appeared
,
and whom I certify that I know. The said
— declared, on behalf
of the State and government of San Paulo, that by the present instrument
he declares and recognizes the said State bound in conformity with the following clauses, which are those of the loan contracted with Messrs. J. Henry
Schroder & Co. and the National City Bank as the bankers under date the
day of
, 1906.
In the city of London, before me, the undersigned,
, notary
public of the said city by royal authority, duly admitted and sworn, appeared
Messrs. J. Henry Schroder & Co., of London, England, represented in this act
by
. partner in the said firm, whom I certify that I know, nnd
also the National City Bank of New York, represented in this act by
, whom I also certify that I know, pursuant to an authority
granted to him by the National City Bank.
First. The loan is for the sum of £3,000,000 sterling, nominal capital represented by bonds to bearer in denominations of £1.000, £500. and £100, of which
bonds for the nominal amount of £2.000.000 sterling shall be issued in English
currency and be payable as to principal and interest at the countinghouse of
Messrs. J. Henry Schroder & Co. in London, and the remaining bonds for the
nominal amount of £1,000,000 shall be payable in gold coin of United States gold
currency equal to the present standard of weight and fineness at the rate of
$4.84 per pound sterling exchange and be payable as to principal and Interest in
the like currency at the countinghouse of the National City Bank in New York.
Such bonds shall bear interest at the rate of 5 per cent per annum, payable
half yearly, the first payment of interest to be made on the 1st of June.
Second. Such bonds shall be in the form scheduled hereto, or as near thereto
as practicable.
Third. The government will pay the principal and interest of the said bonds
according to the tenor of this general bond and of the said bonds, and for the
purpose of the service of the loan a gold surtax of 3 francs per bag on all coffee
exported from the State of San Paulo (which tax shall be levied and collected
by the government during the continuance of the loan) is hereby charged by
the government by way of a first hypothecation, mortgage, or charge and so
that the government shall not under the continuance of the loan create or
issue any hypothecation, mortgage, or charge on the before-mentioned surtax
ranking par! passu with or in priority to the present loan.
Fourth. On the Monday of each week during the continuance of the loan the
government shall pay the revenue derived from such surtax levied and collected
during the preceding week free from all deductions whatsoever to Messrs. Theodor Wille & Co.. of Santos, as the agents of the bankers, and the amount so
paid shall be remitted by them as to two-thirds thereof to the said J. Henry
SchrBder & Co. for the service of the English bonds, and as to the remaining
one-third to the National City Bank for the service of the American bonds.
The first payment of such revenue shall commence and be made on Monday, the
17th of December, 1906, and shall continue each week until a sufficient amount
has been paid to provide for a full year's interest on the said bonds. The next
payment shall commence and be paid on the first Monday in August. 1907, and
shall continue each week until a sufficient amount has been paid to provide the
interest on the said bonds for the year ending the 30th of November. 1908, and
the necessary payment for the first redemption of bonds which will take place
on the 1st of December, 1908. On the first Monday in December. 1908. and on
the 1st of December in each succeeding year during the continuance of the loan
the said payment shall again commerce and shall continue in each week in each
year until a sufficient amount has been paid to provide for one year's interest
on such of the said bonds as shall remain outstanding and the necessary payment for redemption of bonds in such year. In the event of the revenue derived
from such tax being insufficient to meet any of the payments aforesaid, the
government shall forthwith make up the deficiency out of its general revenues.
Fifth. The said bonds are to be redeemed by not less than four equal annual
installments, the first to be payable on the 1st of December. 1908. Redemption
of the said bonds shall be effected as and when there shall be funds of the
government available for the purpose, by purchase by the bankers in the market
below par. with accrued interest, for account of the government, or by yearly
drawings at par, the first drawing lo take place in the first week in November,



70

MONEY TRUST.

1908. The bonds drawn will be paid on the 1st d«iy of December, 1908. and in
e*icu succeeding year. Such drawings shall take place, on a convenient day to
be fixed by the bankers, at tlie countinghouses of J. Henry Schroder & Co., in
London, aud the National City Bank, in New York, respectively, in the presence
of a duly authorized representative and of a notary public. The denoting numbers of the bonds drawn from time to time shall be published as to those drawn
in London in the Times and one other London daily paper, and as to those
drawn in New York in two New York daily papers. The said coupons and
redeemed bonds shall be canceled and forwarded to the treasury of the government.
Sixth. The Siiid bonds shall be signed free of charge by a special representat h e of the government in London, whose name the government will communicate to the bankers in due time and before the 1st of May, 1907. Such bonds
shall be payable to bearer and shall have attached thereto such a number of
coupons as will suffice for the payment of the interest until such time as the
loan will be redeemed.
Seventh. The payment of the bonds drawn is to be effected on the 1st day of
December in each year, and interest upon the bonds drawn is to cease from that
date unless from default of the go\ernment the principal should not be paid at
that date.
Eighth. The bonds presented for payment are to ha% e all the coupons not due
on the date appointed for such payment, and in the event of one or more
coupons being absent the amount of the same is to be deducted from the sum
paid to the bearer of such bond.
Ninth. The bonds issued in English currency are to be paid in London in
sterling money at the countinghouse of Messrs. J. Henry Schroder & Co. and
those payable in American currency at the countinghouse of the National City
Bank, in New York, in gold coin of United States currency equal to the present
standard of weight and fineness at $4.84 per pound sterling exchange.
Tenth. The coupons paid and the bonds redeemed are to be canceled and
forwarded to the treasury of the State of San Paulo.
Eleventh. The payment of the coupons and the redemption of the bonds are
to be exempt from every tax whatsoever, the go\ eminent of the State of San
Paulo binding itself to pay any dues, whether federal, state, or municipal, to
which the said coupons or bonds may at any period become subject, as also
to the payment of the coupons and bonds, both in time of war and in time of
peace, whether the bearer be a subject of a friendly or a hostile state.
Twelfth. In the event of the decease of any holder of bonds of the present
loan, the bonds are to pass to his heirs or representatives in accordance with
the law of succession in force in the country of which the deceased holder was
subject.
Thirteenth. Should any bonds or coupons of the loan be destroyed by any
cause, the government of the State of San Paulo by these presents agrees to
deliver to the holders new bonds or coupons upon payment of the expenses
occasioned by their substitution, after having had all such evidence as they
may deem expedient of the loss of the bonds or coupons and the rights of the
claimant and after all necessary legal formalities shall ha\ e been complied with.
In faith and testimony, etc.
THE SCHEDULE.
PART i.—FORM Ot LXMISH BO5O.

The San Paujo State 5 per cent exchequer bonds f.ir £3,000.000 sterling, in
denominations of £1,000. £500, and £100. as to bonds for £2.000,000 sterling, in
English currency, and as to bonds for £1.000,000. in the same denominations,
but payable in gold coin of United State" currency equal to the present standard
of weight and fineness at the rate of $4.S4 per pound sterling exchange.
The loan is authorized by law No. 9S4. of the 29th of December. 1905, duly
sanctioned by the Congress of the State of San Paulo, and secured by a general
bond, dated the
. 1906, a copy of which is indorsed hereon.
The bonds are to be redeemed by not less than four equal installments, the
first to be payable on the 1st of December. 1908. and redemption will be effected
as and when there shall be funds of the government available for the purpose
by purchase in the market below par, with accrued interest, or by yearly drawings at par, the first drawing to take pla^e in the first week in November. 1908.



MONEY TBUST.

71

The interest on the bonds issued in English currency will be payable In
London at the countinghouse of Messrs. J. Henry Schroder & Co. half yearly
on the 1st of June and 1st of December in each year.
f

.

Bond to bearer for f

sterling.

No. —

.

The government of the State of San Paulo will on the
, 19—, or on
such earlier day as the principal moneys hereby secured shall become payable
according to the terms of the general bond, unconditionally pay to the bearer
of this bond at the countinghouse of Messrs. J. Henry Schroder & Co., in London, the sum of
— pounds sterling and will in the meantime pay interest
thereon at the rate of 5 per cent per annum by equal half-yearly payments, to
be made on the
day of
find the
day of
in each year
on presentation of the annexed coupon corresponding to such payment.
This bond is one of a series of bonds of like tenor and effect for sums amounting in the aggregate to £3,000,000, and all the bonds of this series shall rank
pari pussu without preference or priority one over another; and the holder of
this bond and the holders of the other bonds of the same series are entitled
pari passu to the benefit of the general bond (a copy of which is indorsed on
the back hereof) and to the first hypothecation, mortgage, or charge thereby
created for the purpose of the service of the loan on a gold surtax of 3 francs
per bag, to be levied and collected by the government and paid over weekly,
on all coffee exported from the State of San Paulo during the continuance of
the loan.
In witness whereof the authorized representative of the government of the
State of San Pnulo has hereunto set his hand this
day of
. 10—.
NOTE.—The bonds of this series consist of—
(Payable in English currency.)
Bonds of f
each, Nos. 1 to —
f
—
Bonds of £
each. Nos. — to —
Bonds of £
each, Nos. — to —
Bonds of £
each, Nos. — to —
(Payable in American currency.)
Bonds of f
each, Nos. — to —
Bonds of £
each, Nos. — to —
•
Bonds of £
each, Nos. — to —
3,000,000

A tithorized Representative of the Government of the State of San Paulo.
Agents for the Loan.
The San Paulo State 5 per cent exchequer bonds for £3.000.000.
£

.

Coupon for £

, bond No.

.

No. 1.

Six months' interest payable on the 1st of June, 1907, in London, at the
countinghouse of Messrs. J. Henry Schroder & Co.
£
.
Authorized Representative of the Government of the State of San Paulo.
(XOTE.—A copy of the general bond will be indorsed.)
PART II.—FORM OF AMERICAN BOND.

The San Paulo State 5 per cent exchequer bonds for £3,000,000 sterling, In
denominations of £1,000, £500, and £100, and as to bonds for £2,000,000 sterling
in English currency, and as to bonds for £1,000,000 in the same denominations
payable in gold coin of United States currency equal to the present standard
of'weight and fineness at the rate of $4.84 per pound sterling exchange.
The loan is authorized by law No. 984, of the 29th of December, 1905, duly
sanctioned by the Congress of the State of San Paulo, and secured by a general
bond dated the
, 190-, a copy of which is indorsed hereon.
The bonds are to be redeemed by not less than four equal installments, the
first to be payable on the 1st of December, 1908, and redemption will be effected




72

MONEY TBUST.

as and when there shall be funds of the government available for the purpose
by purchase in the market below par, with accrued interest, or by yearly drawings at par, the first drawing to take place in the first week in November, 1908.
The interest on the bonds payable in American currency will be payable in
New York, at the countiugliouse of the National City Bank, half yearly, on
the 1st of June and ]st of December in each year.
Bond to bearer for £

sterling.

No. •

The go\erument of the State of San Paulo will, on the
, 19—, or
on such earlier day a s the principal moneys hereby secured shall become payable according to the terms of the general bond, unconditionally pay to t h e
bearer of this bond, a t the countinghouse of t h e National City Bank in New
York, the sum of
pounds sterling in gold coin of United States currency
equal to t h e present standard of weight and fineness a t t h e rate of $4.84 per
pound sterling exchange, and will in t h e meantime pay interest thereon a t
the r a t e of 5 per cent per annum by equal half-yearly payments, to be made
on the 1st day of June and t h e 1st day of December in each year, on presentation of the annexed coupon corresponding to such payment.
This bond is one of a series of bonds of like tenor and effect for sums amounting in t h e aggregate to £3,000,000. and all the bonds of this series shall rank
pari passu, without preference or priority one over another, and t h e holder
of this bond and the holders of t h e other bonds of t h e same series a r e entiiled pari passu to the benefit of the general bond (a copy of which is indorsed
on the back hereof) and to t h e first hypothecation, mortgage, or charge thereby
created, for t h e purpose of t h e service of t h e loan on a gold surtax of 3 francs
per bag to be levied and collected by t h e government and paid over weekly on
all coffee exported from the State of S a n Paulo during t h e continuance of
the loan.
In witness whereof the authorized representative of t h e government of t h e
State of San Paulo h a s hereunto set his hand this
day of
, 190-.
NOTE.—The bonds of this series consist of—
(Payable in English currency.)
Bonds of £
Bonds of £
Bonds of £

each, Nos. 1 to —
each, Nos. — to —•
each, Nos. — to —

£

(Payable in American currency.)
Bonds of £
Bonds of £
Bonds of £

each, Nos. — to —
each, Nos. — to —
each, Nos. — to —

3,000,000
Authorized Representative of the Government of the State of San Paulo.
Agents for the Loan.
The San Paulo State 5 per cent exchequer bonds for £3,000,000.
£

.

Coupon for £

($

), bond No.

,

No. 1.

Six months' interest payable on the 1st of June, 1907, in New York, at the
conntinghouse of the National City Bank.
£
($
).
Authorized Representative of the Government of the State of San Paulo.
(NOTE.—A copy of the general bond will be indorsed.)
In faith and testimony whereof the said
, on behalf of the
covernment of the State of San Paulo, affixed his signature at the city of
San Paulo before me. the notary, and the witnesses whose signatures are below
written.



73

MONEY TBUST.

In faith and testimony hereof I ha\e signed these presents and affixed my
notarial seal the
day of
. 190—.
In faith and testimony whereof the said Baron Bruno Schroder, partner
in the firm of Messrs. J. Henry Schroder & Co., and the said Mr. Hermann
Sielcken, on behalf of the National City Bank, affixed their signatures in the
city of London, before me, the notary, and the witnesses whose signatures are
below written.
In faith and testimony hereof I have signed these presents and affixed my
notarial seal the 14th day of December. 1906.
J. HENRY SCHBCDEK,
By BBTJITO SCHRODER.
NATIONAL CITY BANK (of New York),
By HFRM4NN SIELCKEN.

Witnesses:
WALPOLE GREENWKLL,
FKANK DAWES.
[SEAL.]

JOHN D. VENN,

'Notary Public.
No. 535.
Reconheco verdadeira a asslgnatura retro de John D. Venn, Taballiao Publico
d'esta Capital, e para constar onde convier, a pedido do mesmo passei a- presente,
que assignei, e flz sellar com o Sello das Armas d'este Consulado da Republica
dos Estados Unidos do Brazil em Londres, aos quatorze de Dezembro de 1906,
[SEAL.]

F . ALVES VlEIBA,

Consul Gerael.

ReceUlo., 11, 8.
Vieira.

A legalisacSo da flrma consular g facultada ou na Secretaria de Estado dag
RelagSes Exteriores no Rio de Janeiro, ou em quaesquer das Repartigoe's
Fiscaes da Republica.
EXHIBIT NO. 4, MAY 16, 1912.
CONTRACT FOB THE ISSUE AND SALE OF £15,000,000 SAO PATJLO STATE 5 PBB CENT
TBEASTJBY BONDS 1908 WITH SCHEDULED FORM OF GENEBAL BOND AND DEFINITE
BOND.

An agreement made this
day Convention passge ce
mil neuf
of
— , 1908, between the Govcent huit, Entre le Gouvernement
ernment of the State of San Paulo,
de L'etat de San Paulo, dans la
in the Republic of the United States
Rgpublique des Etats-Unis du Brg.
of Brazil (hereinafter called "the
sil (ci-apr&s dgnommg " le Gouvgovernment"), represented by His ernement") represents par Son ExExcellency Councillor Dr. Antonio
cellence le Conseiller Docteur AnDa Silva Prado, duly authorized
tonio Da Silva Prado, dument
for this purpose by procuration of
auterisfi & cet effet par procuration
the government dated
, 1908,
du Government date
, 1908,
or by M. Ferreira Ramos, duly subou par procuration de Monsieur
stituted by power of attorney anFerreira Ramos dument substitug
nexed hereto of the first part, J.
par pouvoir ci-joint d'une premiere
Henry SchrSder & Co., of 145 Leadpart J. Henry Schroder & Co., 145
enhall Street, in the city of London
Leadenhall Street, dans la Cite de
(hereinafter
called
" Messrs.
Londres, aggisant (ci-apr&s dgSchrSder," on behalf of themselves,
signgs "MM. Schroder") tant en
the National City Bank of New leur nom personnel qu'au nom de
York, and Messrs. S. Bleichroder,
la National City- Bank de Newof Berlin, of the second part, and
York et de MM. S. Bleichroder de
the SocigtS Ggngrale pour favoBerlin d'une seconde part et la
risher le Dgveloppement du Com- Socigte G6nerale pour favoriser le
merce et de L'Industrie en France,
Dgveloppement du Commerce et de
of Paris. France (hereinafter called
L'industrie en France, a Paris,
"the Soeigtg Ggngrale), and the
France (ci-apr8s dgnommge " L a
Banque de Paris, et des Pays-Bas,
Socigte Ggngrale") et la Banque de



74

MONEY TEUSI.

of the third part, the said Messrs.
Schroder and the said Societe Generate and the Banque de Paris et des
Pays - Bays being hereinafter collectively referred to as " the
bankers," which expression and also
the expressions " Messrs. Schroder "
and "the Societe Generate" and
the Banque de Paris et des PaysBays shall in this agreement mean
(both collectively and individually
as the case may require) the persons or person or corporation or
corporations for the time being and
from time to time carrying on the
business of the said J. Henrj
Schroder & Co., the said Sociute
GtaPrale pour favoriser Ie DSveloppement du Commerce et de l'lndustrie en Prance and the Banque
de Paris et des Pays-Bas, respectively, the Societe Generate and the
Banque de Paris et des Pays-Bas
being also hereinafter collectively
referred to as " the French group."
Whereas the government is, for the
purpose of redeeming or paying off
the balance now outstanding of the
issue of £3,000,000 of the State of San
Paulo 5 per cent Exchequer bonds
issued in 1906 and secured by general bond of the government, sanctioned by law No. 984. of the said
State of San Paulo, dated 29th December. 1905, and for the purpose of
repaying moneys advanced to and now
owing by the government on security
of coffee bought by the government
and the expenses directly connected
therewith, about to issue a public loan
to be guaranteed as to principal and
interest by the San Paulo Government and the Federal Government of
the United States of Brazil (hereinafter referred to as " the Federal
Government"). for the nominal
amount of £15,000,000 sterling bearing interest at the rate of 5 per
cent per annum and to be called
" The State of San Paulo 5 per cent
treasury bonds, 1908" (hereinafter
sometimes referred to as " the said
bonds" and sometimes as " the said
loan"), which loan has been duly
authorized by law No. 1,127 of the
said State, dated the 25th day of August. 1908. and whereas the Government have offered the said £15,000,000
of bonds for sale to Messrs. Schroder
and the latter have invited the French
group to participate with them in the
purchase of the said bonds to the extent of one-third, or £5.000.000 thereof, which they have decided to do.



Paris et des Pays-Bas d'une troisi&me part les dits MM. SchrSder,
la dite Soeiete Generate et la
Banque de Paris et des Pays-Bas
etant ei-aprgs collectivement d£signes conime "' les Banquiers." expression qui. ainsi que les expressions •' MM. Schroder" La Societe
Generate et la Banque de Paris et
des Pays-Bas et " le groupe f rangais" signifleront it la prGsente
Convention (a la fois collectivement
et individuellement comnae le cas
pourra 1'exiger) les personnes ou
la personne, corporation ou corporations alors et de temps & autre conduisant les affaires des dits J.
Henry Schroder & Co.. de la dite
Societe Generate pour favoriser le
dSveloppement du Commerce et de
l'lndustrie en France et de la
Banque de Paris et des Pays-Bas la
Societe Generate et la Banque de
Paris et des Pays-Bas etant ci-aprfis
designees collectivement comme le
groupe fraugais.
Attendu que le Gouvernement dans
le but d'amortir ou de rembourser le
solde, restant du actuellement, de
remission de Lg. 3,000,000 de Bona
du Tresor, cinq pour cent, de l'Etat de
San Paulo, faite en 1906, les dits Bons
garantis par l'Obligation Generate du
Gouvernement sanctionnee par la loi
984 du dit Etat de San Paulo en date
du 29 Decembre. 1905. et dans le but
de rembourser les fonds avances au
Gouvernement et actuellement dus par
lui, contre la garantie du cafe achete
par le dit Gouvernement ainsi que les
frais s'y rattachant directenient, est
sur le point d'§mettre un emprunt
public que sera emis. en principal et
intGret et garanti par le Gouvernement Federal des Etats Unis du Br6sil (ci-aprSs design^ le Gouvernement
Federal) d'un montant nominal de
quinze millions de livres sterling,
rapportant interSt au taux du cinq
pour cent por an. et qui sera appeie
" The State of San Paulo Five per
cent Treasury Bonds. 1908" (d6signes parfois ci-apr6s comme " les
dits Bons " et parfois comme " le dit
Emprunt") emprunt qui a ete dument autorise par la loi No. 1,127 du
dit Etat, en date du 25 Aout mil neuf
cent, huit; et Attendu qu Ie Gouvernement a offert les aits Lg. 15.000,000 de
Bons en vente a MM. Schroder et que
ces derniers out invite le groupe franca is a participer avex eux k l'chat
des dits Bons, a concurrence d'un tier?,
soit Lg. 5,000.000. ce qu'il a accepte.

MONEY TRUST.

75

Xow, it is hereby agreed by and between the parties hereto as follows:
1. The Government will forthwith
create and issue the said bonds, which
shall bear interest at the rate of 5
per cent per annum payable halfyearly, the first payment of interest
for the full half year ending on the
1st day of July, 1909, to be made on
that date. The payment of the principal and interest of the said bonds
shall be unconditionally guaranteed
by the Government, and the payment
of the said principal and interest shall
also be unconditionally guaranteed by
the Federal Government by guarantees indorsed on or appended to the
general bond and to each of the said
bonds as set out in the forms annexed
hereto, and such principal and interest
shall be secured (subject, only so long
as any of the £3,000,000 5 per cent
exchequer bonds remain outstanding,
to the security therefor) by a first
hypothecation mortgage or charge on
the gold surtax of 5 francs per bag
on all coffee grown or produced in
and exported from the State of San
Paulo, created by the said law No.
1127. of the 25th day of August, 1908
(which tax shall be levied and collected
by the San Paulo Government and paid
over by it to the Federal Government
during the existence of the said bonds
and paid over to the agents of the
bankers by the Federal Government as
hereinafter mentioned). This mortgage shall also be a charge on coffee
amounting to 7,000,000 bags or thereabouts now belonging to the Government and which are now at ports in
Europe and the United States of
America subject to advances as aforesaid (which advances are to be paid
off out of the proceeds of the said
bonds (and on the proceeds of the sale
of such coffee. The warrants or other
documents of title representing the
said coffee shall be handed to the
bankers as trustees for the bondholders, who shall deliver the same to
the committee mentioned in clause 9
hereof or its nominees for the purpose
of being dealt with by the said committee for the purpose of carrying out
the sale of such coffee as therein mentioned against payment of proceeds of
such sales.

II est dit, convenue er arretfi ce qui
suit, entre les parties aux presentes:
Art. 1. Le Gouvernement creera et
gniettra iinniecliatenient les dits bons,
qui rapporteront int&ret au taux de
5 pour cent par annee, payable semestriellement. le premier paiement
d'interet, pour le semestre prenant fln
le premier Juillet mil neuf cent neuf,
devant etre effectutj a cette dernigre
date. Le paiement du principal et de
l'interet des dits bons sera assure Inconditionellement par le Gouvernement et le paiement de ce principal
et interet sua egalement garanti inconditionnellement par le Gouvernement federate a l'endos ou a la suite
du bon general et de chacun des bons
ainsi que cela se trouve indisque sur
les formes ci-jointes et ce principal
et cet interet seront garantis (sous
reserve seulement de la garantie affectee aux Lg. 3,000,000 de bons du
tresor 5 pour cent, tant que des bons
de cet emprunt resteront en circulation) par une premiere hypotheque ou
charge sur la surtaxe or de cinq francs
par sac sur tout le cafe cultivG ou
produit dans l'Etat de San Paulo et
export e de cet etat, crfiee aux termes
de la dite loi Xo. 1127 du 25 Aottt mil
neuf cent huit (taxe qui sera Iev4e
et encaisse par le Gouvernement de
San Paulo par et versa par lui au le
Uouveruenient Federal pendant la
diirPe de la circulation des dits bons
et T ersee par le Gouvernement Fgderal aux agents des banquiers comme
il sera ci-;ipr5s mentionn£). Cette
hypothfque portera egalement sur le
cafg. Relevant a 7,000,000 environ de
sacs, appartenant actuellement au
Gouvernpment et qui se trouve en ce
moment dans des ports d'Europe et des
Etats-Unis d'Amerique, sous reserve
des avances comme dit ci-dessus
(avances qui seront reniboursSes sur
le produit des dits bons) et sur le
produit de la veute du dit caf€. Les
warrants ou autres titres de propriety,
relatifs au dit caf§, seront remis aux
banquiers, agissant comme fidel-commissaires des porteurs de bons, qui
les delivreront au comite uientionng &
la clause 9 des pr£sentes ou aux personnes par lui assignees dans le but
d'etre utilises par lui pour effectuer
la rente du dit c/ifS comme il y est
indiqu£, contre paiement du produit de
ces ventes.

2. The said bonds shall be secured
by a general bond to be executed by or
on behalf of the Government and such
general bond shall be in the form annexed hereto. The bonds shall be
drawn up in accordance with the form

Art. 2. Les dits bons seront garantis
par une obligation generate, qui sera
signSe du Gouvernement ou en son
nom, et cette obligation genfirale sera
gtablie d'aprfis la formule ci-annexee.
Les bons seront etablis d'apr8s la for-




r6

MONEY TBUST.

annexed hereto or in such other form
respectively as near thereto as practicable which shall be previously approved of by the bankers and shall be
free from all present and future taxes
whatsoever whether federal or of the
State of San Paulo. The general bond
shall be delivered by the Government
to and shall be retained by the said
J. Henry Schroder & Co.

mule ci-annexee ou formule se rapprochant autant que possible, approuvees
prealablement des banquiers et les
dits bons seront exempts de touted
taxes presentes et futures quelles
qu'elles soient, fSd&rales ou d l'Etat de
San Paulo. L'obligation generate sera
remise par le Gouvernement aux dits
J. Henry SchrSder & Co., qui la garderont par devers eux.

3. The said bonds shall be printed
in both the English and French languages, and (or) such other language
as the bankers may require and shall
be issued in English, French, German,
Dutch, and American currency, namely,
in pounds, francs, marks, guilders, and
dollars in denominations of £1,000,
£500, £200, £100. £50, and £20 sterling
or their equivalents in francs, marks,
guilders, or dollars reckoned at the
rate of exchange of francs 25-12, marks
20-40, guilders 1205, and dollars 4-86,
respectively, to the pound sterling, that
is to say:

Art. 3. Les dits bons seront imprimis a la fois en Anglais et en
Franeais et, ou dans toute autre
langue, comme les banquiers pourront
le demander et seront emis d'aprSs les
systeme monetaires Anglais, Frangais,
Allemand. Hollandais et Americain,
c'est-a-dire en livres sterling, francs,
marcs, guilders, et dollars, en titres
de Lg. 1,000, Lg. 500, Lg. 200, Lg. 100,
Lg. 50, et Lg. 20 sterling ou de leurs
equivalents en francs, marcs, guilders,
ou dollars, calculus au taux du change
de 2512 francs, 20-40 marcs, 1205
guilders, et 4-86 dollars, respectivement
par livre sterling.
En consequence, le montant nominal
des titres est fixe comme suit:

Bond« of Francs.
£1.000
500
100
50
20

=25,120
=.12,560
= 2.512
= 1,256
=
502-40

Marks. Guilders.
-20,400
-10,200
- 2.040
- 1.020
408

=12,050
- 6,025
= ],205
602-50
=
241

t
-4,860
=2,430
= 486
= 243
=
97-20

Two-thiids or 10,000,000 pounds nominal value of the said bonds representing those purchased by Messrs. Schroder shall be created In bonds of such
of the above categories in the proportion which shall be fixed by the said
Messrs. Schroder and shall be hereinafter called the " Schroder bonds."
One-third or f5.000.000 sterling nominal of the said bonds being the bonds
purchased by the French group under
clause 12 hereof shall be issued in
separate bonds of £20 and numbered
consecutively from >fo. 1 to 250,000
nnd shall be hereinafter referred to as
the bonds of the French group.
Each coupon will be payable for the
bonds of:
Francs.

Marks.

Guilders.

4

£1.000 at i25 0 0-628 =510 =301-25 =121 50
500 at 12 10 0=314 =255 =150-625 = 60-75
100 at
2 10 0=62-80=51 =30-126 = 12-15
50 at
1 5 0=31-40= 25-50= 15'0625= 6-075
10 at
10 0=12 5 6 - 10-20= 6-025 = 2.43




Titres
deLg.
1,000
500
100
50
20

Francs.
-25,120
-12,560
= 2,512
— 1,256
=
502-40

Marks.
=20,400
=10,200
= 2,040
= 1,020
=
408

Guilders.
-12,050
- 6,025
= 1,205
602-50
=
241

$
=4,860
=2,430
= 486
= 243
=
97-20

Deux tiers ou Lg. 10,000,000 valeur
nominate des dits bons representant
ceux achetes par MM. Schroder & Co.
seront cre£s en titres de l'une des
categories ci-dessus dans la proportion
qui sera flxee par les dits MM. Schroder & Co. et seront dGsignes ci-aprfis
comme les bons Schrb'der.
L'n tiers ou Lg. 5,000.000 valeur
nominale des dits bons, representant
ceux achetes par le groupe Frangais
aux termes de la clause 12 des presentes seront emis en titres unitaries
de Lg. 20 et numerotes consecutivelnent de 1 a 250,000 et seront designes
ci-aprSs comme les bons du groupe
Frangais.
Chaque coupon est payable:
Pour les titres de:
Lg.
Lg.
1,000 par 25
500 par 12
100 par 2
50 par 1
20 par 0

0
10
10
5
10

Frs.
Mks.
Guild.
$
0=628 =510 00=301-25 —12150
0=314 =25.5-00=150 625 = 60-75
0 - 62-80= 51-00= 30-125 = 12-15
0 = 31-40= 25-50=. 15 0625= 6-075
0= 12-56= 10 20= ti 025 = 2-43

MONEY TBUST.
in London, in pounds sterling, at
the offices of Messrs. Schroder,
in Paris, in francs, at the offices of
the Society Generate, and the
Banque de Paris et des Pays
Bas.
in Germany in marks,
in New York, in gold dollars,
in Holland, in guilders,
at the offices which will be hereinafter appointed by the
bankers.
The payment of the principal shall
be made at the same countinghouses
and on the same conditions.

a Londres, en livres. aux caisses
de, Messieurs Schroder,
a Paris, en francs, aux caisses de
la Societe Genera le,
et de la Bauque de Paris et des
Pays-Bas,
en Allemagne, en marcs,
a. New York, en dollars, or
en Hollande, en guilders
aux caisses qui seront ult€rieuremeut
designees par les banquiers. Le
paiement du principal avoir lieu aux
tngmes caisses et dans les m§mes conditions.

Art. 4. Le lundi de chaque setnaine,
4. On the Monday of each week,
during the continuance of the loan, the pendant la duree de l'emprunt. le
Government shall pay in gold francs Gouvernement paiera en francs or le
the revenue derived from the said sur- revenu obtenu de la dite surtaxe sur
tax on coffee, free from all deductions le cafg, exempte de toutes reductions
whatsoever to the Federal Government de toute nature, au Gouvernement
for the purpose of being paid by the F§d£ral, a charge par ce dernier de le
Federal Government to Messrs. Theo- verser a MM. Theodor Wille & Co..
dor Wille & Co., of Santos, or to such a Santos ou 3, toute autre malson de
other firm of bankers or merchants in banque ou tous negociants, dans l'Etat
the State of San Paulo as the bankers de San Paulo, que les banquiers pourmay from time to time appoint in ront designer de temps a autre par
writing for that purpose as the agents 6crit dans ce but comme leurs agents
of the bankers (who are hereinafter (et qui seront ci-aprSs design6s comme
referred to as the agents of the " les agents des banquiers") et les
bankers) and the amounts so paid sommes ainsi versees seront remises
shall be remitted by the agents of the par les agents des banquiers a savoir:
bankers as to two-thirds thereof to deux tiers de ces sommes a MM.
Messrs. Schroder for the service of the Schroder & Co. pour le service des
Schroder bonds and as to the remain- bons Schroder et l'autre tiers au
Ing one-third to the French group for gronpe Frangais pour le service des
the service of the bonds of the said bons dudit groupe. Le premier versegroup. The first payment of such rev- ment de ce revenu commencera et sera
enue shall commence and be made on effectue le lundi sept DScembre mil neuf
Monday, December 7, 1908, and shall cent huit et continuera ensuite chaque
continue each week until all the said semaine jusqu'a ce que tous les dits
bons aient ete rembourses.
bonds shall have been redeemed.
5. The Government hereby guarantees that the amount of the said surtax collected and/or the amount produced by sales of the said coffee now
belonging to the Government as aforesaid shall not be less than 45,000,000
francs, gold, in any year so long as
any of the said bonds shall be in
existence and unredeemed. If. from
any cause whatsoever, the payment of
45,000,000 francs, gold, applicable to
any year mentioned above, should not
be paid, the government of the State
of San Paulo shall within eight days
from the demand which will be made
to it by the bankers by cable or registered letter to the treasurer of the
State of San Paulo, immediately make
up the deficit and pay the amount
thereof to the agents of the bankers,
who will remit the same to the latter;
and if. from any cause whatsoever, the



Art. 5. Le Gouvernement garantit
par les presentes, que le montant de
la dite surtaxe pergu et ou le montant
realise par les ventes du dit cafe appartenant actuellement au Gouvernement comme dit ci-dessus, ne s'ei§veront pas a moins de 45,000.000 de
francs or, dans une annee quelconque,
taut qu'il restera des dits bons en
circulation et non amortis.
Dans le cas oil pour une cause quelconque le versement de Frs. 45,000.000
or applicable a une annee mentionne
ci-dessus n'anrait pas ete effectue, le
Gouvernement de l'Etat de San Paulo
devra, dans les 8 jours de la demande
qui lui sera addressee par les banquiers par avis teiegraphique ou
postal recommand6 au tresorier de
l'Etat a San Paulo, combler imniediatement le deficit et en verser le montant aux agents des banquiers qui le

78

MONEY TRUST.

government of the State of San Paulo
shall fail to make such payment within
the time aforesaid, then the Federal
Government shall, In pursuance of Its
guaranty, within eight days after receipt of a request from the bankers
addressed to the minister of finance at
Rio de Janerio, and sent by registered
post or by telegraph, pay to the
bankers, through the financial agents
in London of the Federal Government,
Messrs. N. M. Rothschild & Sons, the
amount which may be required to
make up the said payment of 45,000.000
francs gold.

remettront & ces derniers et si pour
une cause quelconque le gouvernement
de l'etat de Sao Paulo manquerait de
faire ce paiement dans le temps mentionne le Gouvernement Federal sera
alors tenu par suite de sa garantie au
payer au banquiers par les agents
financiers du Gouvernement Federal a
Londres Messieurs N. M. Rothschild &
Sons dans les huit jours de la reception d'une demande des banquiers
addressee au ministere des finances a
Rio de Janerio et expediee par lettre
recommandee ou par le cable electrique le montant necessaire pour completer le paiement de Fes. 45,000,000
en. or.

6. The said bonds are to be redeemed by means of the application,
half yearly, of the surplus of the revenue derived from the said surtax and
the proceeds of the sale of the said
coffee now belonging to the Government remaining after the payment of
Interest on the said bonds, the expenses of the bankers in reference to
the service of the said loan and the
working expenses of the committee referred to in clause 9 hereof in the
purchase of the said bonds by the
bankers at any time they may think
fit (as to the Schroder bonds by
Messrs. Schroder, and as to the bonds
of the French group by the French
group) in the market at any price below par (exclusive of accrued interest) for account of the Government
or by half-yearly drawings at par to
take place in the first week of every
June and the first week of every December, the first drawing to take place,
if necessary, in the first week of the
month of June, 1909, and the second
in first week of the month of December of the same year. The bonds
drawn will be paid on the 1st day of
July and 1st day of January following the drawings. Such drawings
shall take place on a convenient day,
to be fixed by the bankers at the
counting house of Messrs. Schroder in
London, in respect of the Schroder
bonds, and at the banking house of
the Societe Generate of Paris in Paris,
in respect of the bonds of the French
group, in the presence of a duly authorized representative of the Government. For that purpose a drawing
wheel shall be provided for the
Schroder bonds and shall be deposited
in London at the banking house of
Messrs. Schroder & Co. Another
drawing wheel shall be provided for
the bonds of the French group and
shall be deposited in Paris at the
banking house of the Societe Generale.

Art. 6. Les dits bons seront amortis
en appliquant semestriellement le surplus du revenu obtenu de la dite surtaxe et du produit de la vente du dlt
cafe, appartenant actuellement au
Gouvernement,
restant
disponible
apres le paiement de l'interet des dits
bons, des dgpenses des banquiers encourues pour le service du dit emprunt
et des frais de fonctionnement du
comite mentionne ft la clause 9 des
presentes, a 1'aehat des dits bons par
les banquiers a toute epoque, comme
ils le jugeront bon (par les dits J.
Henry Schrb'der and Co., en ce qui
concerne les bons Schroder et par le
dit groupe Frangais en ce qui concerne
les bons dudit groupe) sur le marche,
a tout cours au-dessous du pair (sans
y comprendre les interets courus) pour
le compte du Gouvernement, ou au
moyen de tirages semestriels au pair
devant avoir lieu chaque premiSre
semaine de juin et chaque premi&re
semaine de decembre, le premier
tirage devant se faire, s'il y a lieu,
dans la premiere semaine du mois de
juin 1909 et le second dans la premiere
semaine du mois de decenibre de la
meme annee. Les bons sortis au
tirage seront rembourses les 1 " juillet
et I " Janvier qui suivront les tirages.
Ces tirages auront lieu ft un jour convenable, fixe par les banquiers, a la
caisse de MM. Schroder ft Londres en
ce qui concerne les bons Schroder et
a la banque de la dite SocietS Generale
de Paris a Paris, en ce qui concerne les
bons du groupe Frangais, en presence
d'un representnnt du Gouvernement
dflment autorise.




A cet effet, une roue de tirage sera
etablie pour les bons Schroder et
restera deposee a Londres dans les
causes de MM. Schroder & Co. Une
autre roue de tirage sera etablie pour
IPS bons du groupe Frangais et restera
deposee a Paris dans les caisses de la
Societe Generale.

MONEY TRUST.
The denoting numbers of the bonds
purchased or drawn, from time to time,
shall be published as to those purchased or drawn in London in the
Times and one other London daily
paper, and as to those purchased or
drawn in Paris, in two Paris daily
papers, and such papers in other foreign centers as the bankers may decide. The amount to be applied in
each half year in redemption of the
said bonds shall be such amount as
the bankers shall declare is available
after the payment or reservation from
the said surplus of the half-yearly interest on the said bonds and the expenses above referred to and the bonds
purchased by the bankers or drawn
by virtue of the stipulations of this
clause shall only be canceled when
the current half-yearly interest on the
said bonds shall have been paid, with
the object that if the amount of the
surplus available for the redemption
of the bonds has been overestimated
so as not to leave a sum sufficient for
the payment of the interest and expenses, the difference can be obtained
by means of the resale or hypothecation by the bankers of the bonds purchased or issued up to a sufficient
amount. After payment of each half
year's interest and expenses, all the
bonds purchased or drawn remaining
in the hands of the bankers shall be
canceled and the Government will not
be entitled to reissue those bonds or
to make any fresh issue whatsoever
of bonds in relation to this matter.
The redeemed bonds with the unpaid
coupons belonging thereto shall be
canceled and forwarded by the
bankers to the treasury of the Government and at its expense. Any of the
said bonds which shall not have been
previously redeemed as aforesaid shall
be repayable and shall be paid off at
par by the Government on the 1st day
of January, 1919, and for this purpose
the Government shall pay the necessary funds on or before the 1st day of
October, 1918, to the agents of the
bankers for remittance to the bankers
as aforesaid. The Government may
at any time, upon giving six calendar
months' notice by advertisement in
the daily papers aforesaid expiring on
one of the dates fixed for payment of
the interest, pay off the principal of
the said bonds at par together with
accrued interest.




79

Les numferos des bons rachetfis ou
sortis de temps a autre au tirage
seront publics, en ce qui concerne les
bons rachetgs ou sortis au tirage 8.
Londres, dans le Times et un autre
Journal quotidien de Londres et, en ce
qui concerne les bons rachetSs ou
sortis au tirage a Paris dans deux
Journaux quotidiens de Paris et clans
tels Journaux d'autres villes etrang&res que les banquiers pourrout fixer.
La somme devant fitre applique'e
chaque semestre au remboursement
des dits bons sera le montant que les
banquiers
dficlareront
convenable
aprSs paiement ou reserve en dehors
du dit surplus de 1'lnte're't semestriel
sur les dites obligations et les frais
prScites. et les obligations achetfes
par les banquiers ou tiroes en vertu
des stipulations de cette clause ne
seront annulfies que lorsque les intents semestriels courants sur les
dites obligations auront 6t6 paygs,
dans le but que si le montant du surplus utilisable pour l'amortissement
des obligations a 6te estime1 audessus
de sa valeur de fagon a ne pas laisser
une somme suffisante pour le paiement
des interet et frais, la difference
puisse e"tre obtenue au moyen de la
revente ou de l'hypothecation par les
banquiers des bons achet&s ou §mis
pour une somme sufflsante. AprSs
paiement de chaque inteTet semestriel
et des frais, tons les bons achetgs ou
tire's restant entre les mains des banquiers seront annulgs, et le Gouvernement n'aura pas la faculty d"6mettre
a nouveau ces bons ou de faire une
nouvelle Emission quelconque de bons
relativement a cette affaire.
Les bons amortis, accompagnes des
coupons impaye's qui s'y rattachent,
seront annulgs et envoyfis par les banquiers au trgsor du Gouvernement et a
ses frais.
Tous ceux des dits bons qui
n'auraient pas 6t% prGalablement
amortis comme dit ci-dessus, seront
remboursables et rembourse's au pair,
par le Gouvernement, le 1 " Janvier
mil neuf cent dixneuf et. dans ce but,
le Gouvernement versera les fonds
n6c6ssaires, au plus tard le 1 " octobre
mil neuf cent dix-huit, aux agents des
banquiers qui les remettront a ces
derniers comme dit ci-dessus. Le
Gouvernement pourra, a toute gpoque,
en en dormant avis six mois a l'avance
par voie d'annonce dans les journaux
quotidiens ci-dessus indique's, ce delai
expirant a l'une des dates fixges pour
le paiement de l'inte'ret, rembourser en
totality le principal des dits bons au
pair y compris l'int&ret couru.

80

MONEY IBUST.

7. The bankers hereby jointly and
severally nominate and appoint the
said Messrs. Theodor Wille & Co., and
any members or member for the time
being of that firm or such other firm
as for the time being may be appointed
by the bankers under the provisions of
clause 4 hereof, and any members or
member for the time being of such
firm, their and each of their attorneys
and agents, attorney and agent in the
Republic of the United States of Brazil
for the purposes of clauses 4 and 6 of
this agreement, and to receive and give
receipts for all moneys payable thereunder, and hereby grant to the said
Messrs. Theodor Wille & Co. or such
other firm as aforesaid, and any such
members or member as aforesaid full
power and authority to do all acts and
things, and to sign and execute all instruments, deeds, and documents for
that purpose, and for the more effectually carrying into effect and giving full
force and virtue to all or any of the
provisions of this agreement and appear before any court or authority in
the said Republic and to register any
document or documents in such republic in such manner in all respects
as the said attorneys shall think fit.

Art. 1. L,es banquiers dfeignent et
nomment par les pr€sentes, en m6me
temps et individuellement, les dits MM.
TModor Wille & Co., et tous membres
ou membre faisant alors partie de cette
maison ou toute autre maison qui pourrait alors §tre dSsignee par les banquiers aux termes de la clause 4 des
pr£sentes et tous membres ou membre
faisant alors partie d'une telle maison,
eornme leurs fondes de pouvoirs et
agents, fondfi de pouvoirs et agent
dans la R&publique des Etats-Unis du
Brazil pour les besoins des clauses 4
et 6 de la prgsente convention et pour
recevoir, en donnant rec.us tous les
fonds payables aux termes des prGsentes et ils donnent par les prfisentes,
aux dits MM. Thgodor Wille & Co., ou
a. toute autre maison et & tous autres
membres ou membre, comme dit cidessus, plein pouvoir et pleine autoritg
d'accomplir tous actes et choses, signer
et mettre & execution tous instruments,
actes et de donner toute leur et leur
vertu, de faeon plus efficace, & toutes
ou a l'une quelconque des dispositions
de cette convention, de comparaltre devant tout tribunal on toute autoritfe
dans la dite Republique et d'y enregister tout document ou documents de la
manigre, a tous ggards. que les dits
fondSs de pouvoirs jugeront convenable.

8. The general bond shall be signed
Art. 8. L'obligation g&iSrale est
at the same time as this agreement. signfie en m?me temps que le present
With regard to the said bonds they contrat, quant aux dits bons, ils seront
shall be signed free of charge by a signers, sans frais, par un reprSsentant
special representative of the Federal special du Gouvernement Federal et
Government, and by a special repre- par un representant special du Gousentative of the Government in London vernement a Londres et ou & Paris, dont
and (or) in Paris whose names the Gov- les noms seront communique aux banernment will communicate to the quiers par le Gouvernement en temps
bankers in due time and before the utile et avant le ler Janvier, 1909. Ces
1st of January, 1909. such signatures signatures pourrent etre autographies.
may be griffed. Such bonds shall be Ces bons seront payables au porteur
payable to bearer and shall have at- et seront munis d'un nombre de coutached thereto such a number of cou- pons suffisant pour assurer le paiepons as will suffice for the payment ment de 1'inte'ret jusqu'st l'&poque oil
of the interest until such time as the l'Emprunt sera completement amorti.
said loan will be fully redeemed. In En attendant, les banquiers sont autothe meantime the bankers are author- rise's a ^mettre. au nom du Gouverneized to issue on behalf of the Govern- ment, pour leurs bons respectifs. des
ment for their respective bonds scrip certiflcats provisoires au porteur.
certificates to bearer.
9. A committee consisting of seven
Art. 9. TTn comite compost de sept
members, resident in the United States membres r£sidant dans les Etats-Unis
of America or Europe, or partly in one d'AmSrique ou en Europe ou en partie
and partly in the other, shall be ap- dans l'un et partie dans l'autre de ces
pointed, whereof four and their suc- pays, sera constitue1 comme suit:
cessors shall be-nominated by Messrs. quatre membres de ce comite1 et leurs
Schroder, two and their successors by snccesseurs seront dfsignes par MM.
the Soeietg Generate, and one and his Schroder, deux et leurs successeurs
successor by the Government. That par la Society G?ne>nle et un et son



MONEY TRUST.

81

committee shall be invested with full
powers of controlling the sale and
liquidation of the said coffee now belonging to the Government as aforesaid, and other matters and things
connected with the said coffee.

successeur par le Gouvernement. Ce
eomit§ sera investi de pleins poavoirs
pour opSrer les ventes et la liquidation
du dlt caf£ appartenant actuellement
au Gouvernement conune dit ci-dessus
et accomplir toutes affaires et choses
s'y rattachant.

10. The Government shall not, while
any of the said bonds shall be outstanding and unredeemed, purchase
directly or indirectly any coffee for its
account or create or constitute or pass
any law or decree authorizing any new
valorisation scheme in reference to
coffee. It further undertakes not to
make any modification in the present
law relating to the surtax.

Art. 10. Le Gouvernement, taut
qu'aucun des dits bons resterout en
circulation et non amortis, s'interdit
d'acheter, dlrectement ou indirectement, tout cafS pour son compte ou de
creer, rendre ou faire passer toute loi
ou tout dficret autorisant tout nouveau
projet de valorisation relatif au caf6.
II s'engage egalement k n'apporter
aucune modification a la legislation existant actuellement en ce qui concerne
la snrtaxe.

11. The Government shall not at
any time if any of the said bonds shall
be outstanding and unredeemed raise,
procure, issue, or effect or guarantee
any further loan or loans secured on
surtax or general tax on coffee without
first obtaining the consent thereto of
the bankers, and the Government also
undertakes for a period of two years
from the date hereof not to issue or
guarantee any external loan without
having first obtained the consent of
the bankers. The Government will
use its best endeavors to arrange that
the Governments of the States of Rio
Minas Geraes and Espirito Santo will
also pass laws limiting the amount of
coffee to be exported from those
States.

Art. 11. Le Gouvernemeut. a aucune
epoque tant qu'il restera des dits bons
en circulation et non amortis, ne fera
n'emettra, n'effectuera, ou ne garantira ancun nouvel emprunt ou emprunts, garantis soit sur la surtaxe on
sur la taxe generate sur le cafe1 sans
en avoir tout d'abord obtenu le consentement des banquiers. II s'engage
egalement pendant une dur6e de 2 ann£es a. eompter des prfisentes a n'Smettre ou garantir aucun emprunt extgrieur sans avoir tout d'abord obtenu
le consentement des banquiers.
Le Gouvernement fera tons ses efforts pour s'arranger de fagon que les
Gouvernements des Etats de Rio,
Minas Geraes et Espirito Santo passent ^galement des lois limitant la
quantitS de cafe a exporter de ces
Etats.

12. The Government shall sell and
Messrs. SchrSder shall purchase the
Schr5der bonds in English currency at
the rate of £88 less £2 per cent for expenses for each £100 of the nominal
amount thereof; that is to say, twothirds, or £10,000,000, nominal value
of the said bonds carrying interest
from the 1st January, 1909, and the
Government shall sell the bonds of
the French group and the Society
Generate and the Banque de Paris et
des Pays-Bas shall each purchase
half without joint responsibility in
English currency at £88 less £2 per
cent for expenses for each £100 of the
nominal amount thereof, being the remaining one-third, or £5,000,000,
nominal value of the said bonds carrying interest from the 1st January.
1909.

Art. 12. Le Gouvernement vend et
MM. Schroder achgtent dans le systSme nionetaire Anglais, les Bons
Schroder a raison de Lg. 88 moins Lg.
2 pour cent pour les frais, pour
chaque fraction nominale de Lg. 100
de ces bons, c'est-a-dire les deux tiers
ou Lg. 10,000,000; en valeur noniimile,
des dits bons avec Jouissance du 1 "
Janvier, 1909, et le Gouvernement
vend et la Socigte Generate et la
Banque de Paris et des Pays-Bas
achetent chacune par moitie, sans solidarite, dans le syst&me monetaire
Anglais, les bons du groupe francais
fl. raison de Lg. 88 moins Lg. 2 pour
cent pour les frais, pour chaque fraction nominale de Lg. 100 de ces bons,
c'est-3.-dire le tiers restant ou Lg.
5,000,000, en valeur nomiuale, de oes
bons avec jouissance due 1 " Janvier,
1909.

46627—PT 1—12



6

82

MONEY TRUST.

13. The Go\ eminent shall also pay
or allow to the bankers one pound per
cent on the total nominal amount of
the said loan of £15,000,000 for the
stamps to which the said bonds
(which are to be free from any Brazilian Federal or state stamp duty)
may be subject abroad.

Art. 13. Le Gouvernement paiera ou
allouera aux banquiers une livre
pour cent sur le montant total nominal du dit emprunt de quinze millions
de livres sterling, pour les timbres
auxquels les dits bons. (lesquels
n'ont a acquitter aucun timbre bresilien, ni federal, ni estadoal) pourront etre assujettis & l'Etranger.

14. The purchase money for the
said bonds (after deducting from the
first installment thereof the amounts
payable by the Government to the
bankers under the last preceding
clause hereof) shall be payable subject as hereinafter provided by the
bankers in their respective proportions by the installments following,
namely on the 18th day of December,
1908, 15 per cent per bond, on the
10th day of January, 1909, 15 per cent
per bond, on the 4th day of February.
1909. 25 per cent per bond, and on
the 4th March, 1909, 31 per cent per
bond. The said purchase moneys
shall be applied in the redemption of
the balance now outstanding of the
said £3,000.000 State of San Paulo 5
per cent exchequer bonds issued in
1906 nnd in the payment off and liquidation of the advances, loans, and other
moneys secured on or owing in respect
of all coffee belonging to the Government, and accordingly tbe bankers
shall as and when the installments of
their respective purchase moneys become payable as aforesaid apply the
same in redeeming the said outstanding bonds either by purchase in the
market at any price below par (exclusive of accrued interest) or by
drawings at par or by exchange of
the said outstanding bonds for the
said bonds and in paying off the said
advances, loans, and other moneys
secured on or owing in respect of all
coffee belonging to the Government
at such times and in such manner as
shall be directed by the committee,
and the balance of the said purchase
moneys shall be handed over to the
San Paulo Government. The bankers
shall determine the time and manner
of effecting the redemption of the existing bonds subject to such redemption, being effected as speedily as in the
opinion of the bankers shall be expedient, having regard to the interest
both of the bankers and of the Government.

Art. 14. Le prix d"achat des dits
bons (aprgs avoir d6duit du premier
acompte de ce prix les sommes payables par le Gouvern,ement aux banquiers, aux termes de la clause precedente des pr&sentes) sera payable
par les banquiers, sous reserve de se
qui sera pr§vu ci-apr8s, dans leur proportion respective, par acomptes et
comme suit, & savoir:
le 18 decembre, 1908, Lg. 15% par
bon.
le Janvier, 1909, Lg. 15% par bon.
le 4 fevrier, 1909, Lg. 25% par bon.
le 4 mars, 1909, Lg. 31% par bon.
Le dit prix d'achat sera applique a
ramortissement du solde, actuellenient impaye, des dits Lg. 3,000,000 de
bons du tr&sor, cinq pour cent, de
I'Etat de San Paulo, emis en 1906 et
an remboursement et a la liquidation des avances, emprunts et autres
sommes garantis par ou dfls sur tout
le caffi appartenant au Gouvernement
et par suite les banquiers quand et
comme 16s accomptes de leur prix
d'achat respectif deviendront exigibles. comme dit ci-dessus, les eniploieront au rachat des dits bons restant
en circulation soit par voie d'achat
sur le marche a, tout cours au-dessous
du pair (sans y comprendre rinteret
couru) ou par voie de tirages au sort
au pair on d'echange des dits bons en
circulation contre les bons actuels et
an remboursement des dites avances,
emprunts et autres sommes garantis
par ou dfls sur tout le cafe appartenant au Gouvernement, & telles gpoques et de telles manigres qu'indiquera le comite et le solde du dit
prix d'achat sera remis au Gouvernement de San Paulo. Les banquiers
determineront l'epoque et le mode
d'amortissement des bons en circulation, cet amortissement devant toutefois s'effectuer aussi rapidement que
les banquiers, & leur propre avis, le
jugeront expedient en tenant coinpte
a la fois de leurs int6rfits et de ceux
dn Gouvernement.

15. The bankers shall in respect of
all moneys from time to time in their
bands allow to the Government interest thereon at a rate per annum varying from time to time with and being

Art. 15. Les banquiers, en se qui
concerne tous les fonds qu'ils pourraient de temps a autre avoir en
mains, alloueront au Gouvernement,
<*ur ees fonds, un interet annuel qui.




MONEY TBUST.

83

in the case of moneys in the hands of
Messrs. Schroder l i per cent below
the rate of discount for the time being allowed by the governor and
company of the Bank of England, but
not exceeding £4 per cent per annum,
and in the case of moneys in the
hands of the French group at H per
cent below the rate of discount allowed by the Bank of France, but not
exceeding 4 per cent per annum, and
the bankers shall be entitled in respect of all moneys from time to time
advanced by them to the Government
to interest at a rate per annum varying from time to time with and being
1J per cent above the rates of discount aforesaid, but not to fall below
5 per cent per annum.

de temps 4 autre, suivra les fluctuations et sera pour les fonds entre les
mains de MM. Schroder de l i pour
cent iiti-dessous du taux de l'escompte
alors alloue1 par le Gouverneur et le
Consiel de la Banque d'Angleterre,
sans exc&der Lg. 4 pour cent par an
et. dans le cas de fonds aux mains
du groupe frangais. de 1* pour cent
au-dessous du taux de l'escompte
allouS par la Banque de France sans
exc&der 4 pour cent et les bnnquiers
auront droit sur tons les fonds qu'ils
pourraient avoir avance1, de temps &
autre, au Gouvernement, a. un intent
annuel qui suivra, de temps a autre,
les fluctuations et sera de l i pour cent
;iu-dessus du taux de l'escompte
comnie dit cl-dessus mais sans pouvoir
descendre au-dessous de 5 pour cent
par au.

16. Messrs. Sehrfider are hereby appointed agents in London of the Government for the service of that portion of the said loan represented by
the Schroder bonds for the whole
period thereof and the Soci6t6 Generale and the Banque de Paris et des
Pays Bas are hereby appointed agents
in Paris of the Government for the
service of that portion of the said loan
represented by the bonds of the
French group for the whole period
thereof.

Art. 16. MM. Schroder sont nomme's,
par les prGsentes. agents & Londres du
Gouvernement pour le service de la
partie du dit Bmprunt represented par
les Bons Schroder et pour toute leur
durge et la Society Gf»n6rale et la
Banque de Paris et des Pays-Bas sont
nominees par les pr£sentes, agents a
Paris du Gouvernement pour le service de la partie du dit Bmprunt represented par les Bons du Gronpe francais et pour toute la duree de ces
demiers.

17. Messrs. SchrSder and the SoArt. 17. MM. Schroder et la Societe
cifitS G6n6rale and the Banque de GSn&rale et la Banque de Paris et des
Paris et des Bays Bas shall as such Pays-Bas recevront respectivement du
agents be, respectively, paid by the Gouvernement,
en cette quality
Government 1 per cent on the nomi- d'agents, un pour cent du montaut
nal amount of the interest upon the nominal de I'lnte'rCt sur les Bons
SchrSder bonds and the bonds of the Schroder et les Bons du Groupe franFrench group, respectively, as and cats respectivement quand et comnie
when such interests shall be paid and ces intGrets seront pay&s et un pour
1 per cent on the nominal amount cent du montant nominal employs
applied each year for the redemption chaque annfie a l'amortissement des
of the SchrSder bonds and the bonds Bons Schroder et des Bons dn Groupe
of the French group respectively.
Frangais respectivement.
18. The Government shall reimburse to the bankers any expenses incurred by them, respectively, for advertisements, telegrams, correspondence, or otherwise in connection with
the service of the said loan, including
the payment of interest and redemption of the said bonds.

Art. 18. Gouvernement reniboursera
aux banquiers tous les frais encourus
par eux respectivement pour publicity, teiSgrammes. envoi de titres,
correspondance ou autrement a 1'occasion du service du dit Emprunt, y
compris le paiement de l'intergt et
l'amortissement des dits Bons.

19. The bankers may. respectively,
deduct any moneys payable, respectively, by the Government under this
agreement from the moneys from
time to time remitted or paid- to them,
respectively, for the service of the
said loan.

Art 19. Les banquiers pourront d£duire respectivement toutes sonuue
qne le Gouvernement aurait a leur
verser respectivement aux termes de
cette convention, des fonds qui leur
seraient remis ou verse's respectivement. de temps a autre. pour le service dn dit Emprunt.




84

MONEY TRUST.

20. The Government will at all
times indemnify and keep indemnified
Messrs. Schroder and the French
group and each of them from and
against all claims, demands, actions,
suits, and proceedings whatever as
may arise (other than from the direct
negligence of Messrs. Schroder or the
Societe Generate and the Banque de
Paris et des Pays Bas or the agents
of the bankers, respectively), which
may be made, instituted, or prosecuted
by or on behalf of any holder of any of
the said bonds for or in respect of any
moneys at any time in the hands of
Messrs. Schroder or the Soci6te Generate and the Banque de Paris et des
Pays Bas or the agents of the bankers
on their behalf under this agreement
or otherwise remitted to them, respectively, for or in connection with the
service of the said loan or otherwise
for or in connection with this agreement or anything relating thereto.

Art. 20. Le Gouvernement indeinuisera et tiendra indemnes, a toute
epoque, MM. Schroder et el Groupe
Frangais et chacun d'eux, de toutes
revindications, demandes, actions,
actions Kjgales et procedures, quelles
qu'elles soient, qui pourraient se produire (a l'exception de celles resultant de la negligence direete de MM.
Schroder ou de la SociSte Generate et
de la Banque de Paris et des PaysBas ou des agents des banquiers respectivement) qui pourraient etre
faites, intentees ou poursuivies par, ou
au nom de tout detenteur de l'uu
quelconque des dits Bons pour ou au
sujet de tous fonds qui se trouveraient, a une epoque quelconque, anx
mains de MM. Schroder ou de la Societe Generate et de la Banque de
Paris et des Pays-Bas ou des agents
des banquiers agissant en leur nom
en vertu de cette convention, ou qui
leur seraient autrement remis respeethement pour ou & l'occasion du service de l'Emprunt ou. autrement, pour
ou a l'occasion de cette Convention ou
pour tout objet s"y rattachaut.

21. Messrs. Schroder and the French
group will respectively use their best
endeavors to obtain quotations on the
stock exchange in London, and on the
bourse in Paris, and at least two other
bourses or stock exchanges respectively
in addition to Paris and London for
the Schroder bonds and the bonds of
the French group respectively.

Art. 21. MM. Schroder et le groupe
Fransais feront respectivement tous
leurs efforts pour obtenlr l'admission
des bons Schroder et des bons du dit
groupe. respectlvement, a. la cote du
stock exchange de Londres et de la
bourse de Paris et d'au moins deux
autres bourses ou stock exchanges respectivement en dehors de Paris et de
Londres.

22. Messrs. SchrSder and the Soeiete
Generate and the Banque de Paris et
des Pays Bas. respectively, shall each
be concerned with the said bonds purchased by them respectively; that is to
say: Messrs. Schroder with the Schroder bonds, and the Society Generate
and the Banque de Paris et des Pays
Bas with the bonds of the French
group; and neither of them shall incur
any responsibility in regard to the said
bonds purchased by the other.

Art. 22. MM. Schroder et la Societe
Generale et la Banque de Paris et des
Pays-Bas s'occuperont chacun respectivement des dits bons achetes par eux
respectivement c'est-9. dire MM. SchrSder des bons Schroder at la SociStg
Generate et la Banque de Paris et des
Pays-Bas des bons du groupe Frangais
et aucnn d'eux n'encourra de responsabilite an sujet de ceux des dits bons
achetfs par l'autre partie.

23. In the event of any difference
nrising as to the meaning or construction of the general bond, the said
bonds, or these presents, by reason of
any discrepancy of language, the English text shall be the binding one.

Art. 23. Dans le cas ou une question
quelconque serait soulevee quant 9. la
signification ou l'interpretation du bon
g6n6rale et des bons ou des pr6sentes,
par suite de quelque imperfection de
lansage. le texte anglais fera foi.

24. All moneys paid by the bankers
for the purpose of repaying advances
on the coffee and/or expenses and/or
service of the loan shall be remitted
by them respectively to the different
foreien centers where the same mav

Art. 24. Toutes les sommes versfies
par les banquiers dans le but de rembonr«er les avances sur le cafe, et ou
les frais et ou le service de l'emprunt,
serout remises respectivement par eux
dans les diverses villes etrang&res ou




MONEY TKUST.

85

have to be paid at the current rate of
exchange ruling in London or Paris,
as the case may be, on the day of remittance on such center.

ces sommes ont a 6tre payees, au taux
courant du change alors en vigueur,
a Londres ou Paris, selon le cas le
jour de la remise dans les dites villes.

25. Subject to the agreement of 1906,
all future loans of any description, at
any time hereafter during the duration
of this loan, issued by the Government
shall be first offered for acceptance, as
to two-thirds thereof to Messrs. Schroder and as to the remaining one-third
thereof to the French group, upon at
least equal terms to those offered by
any other authority, corporation, firm,
or person: and no terms shall be accepted or firm offer made unless and
until the same has first been offered to
the bankers and refused by them.

Art 25. Sous reserve des dispositions
de la convention de 1906. tous empnmtb
quelconques, qui seront emis par le
Gouvernement a toute epoque ulterieure, pendant la duree de cet emprunt seront tout d'abord offerts a
Facceptation de MM. Schroder, a concurrence des deux tiers de ces emprnnts
et du groupe Frangais a concurrence
du tiers restant, a. des conditions au
moins egales a celles offertes par toute
autorite. corporation, maison, on personne et il ne sera pas accepte de conditions ou fait d'offre ferme a moins
qu'elles n'aient et tant qu'elles n'auront
pas fite tout d'abord offertes aux banquiers et refusees par ces derniers.

26. In case and so often as any question shall arise concerning the meaning or fulfillment of this contract or
any provision hereof or otherwise In
connection with this contract or the
said bonds, or any of them, or the mode
and manner in which the obligations
of the Government under this contract
or in respect of the said bonds, or any
of them, are to be carried out and enforced, then, upon the request of either
party, such question shall be referred
to and finally settled by arbitration In
manner following—that is to say: One
arbitrator shall be appointed by the
Government, another arbitrator shall
be appointed by Messrs. Schroder and
the French group, and an umpire shall
be appointed by such two arbitrators.
Should one of the parties not have appointed his arbitrator, or if the two arbitrators fail to appoint such umpire
within 40 days after their appointment, then the matters in dispute shall
be referred to and finally settled by
the Hague tribunal or (if that tribunal shall have ceased to exist) by arbitrators or an umpire to be appointed
by the King for the time being of the
United Kingdom of Great Britain and
Ireland or, in default of such appointment, by the President for the time
being of the Republic of France, and
the decision so arrived at shall be final
and binding on all parties.

Art. 26. Dans de cas et chaque fois
qu'une question quelconque serait
soulevee concernant la signification ou
l'execution de ce contrat ou de l'une
quelconque de ses dispositions ou
autrement au sujet de ce contrat ou
des dits bons ou de Tun de ces derniers
ou le mode et la mani&re dont les
obligations du Gouvernement, aux
termes de ce contrat ou a l'egard des
dlts bons ou de l'un de ces derniers
doivent §tre remplies et observers, sur
requete alors presents par l'une des
parties, cette question sera soumise a
l'arbitrage et dSfinitivement tranchee
de la maniSre suivante, a. savoir: TJn
arbitre sera dfisigne par le Gouvernement, un autre le sera par MM.
SchrSder et le groupe Frangols, et un
surarbitre dfisigne par ces deux arbitres. Dans le cas ou l'une des parties
n'aurait pas designe son arbitres.
n'auraient pas designs le surarbitre
dans les quarante jours de leur nomination, les questions en discussion
saront alors renvoyees au tribunal de
La Haye et definitlvement tranchees
par lui ou (dans le cas oil le dit tribunal aurait cesse d'exlster) par des
arbitres ou par un surarbitre qui
serait design^ par le Roi regnant
alors du Royaume-Uni de Grande
Bretagne et d'Irlande ou, a defaut
d'une telle nomination, par le President alors en fonctions de la Republlque Franchise, et la decision ainsi
obtenue sera definitive et Hera toutes
les parties.

27. If during the period of 21 days
from the date hereof the stock and
share markets of England and/or
Europe and/or America shall, in the
opinion of the bankers, be materially

Art 27. Dans le cas ou, pendant une
periode de vingt et un jours, (a compter de la date des presentes, les
marches financiers d'Angleterre et on
d'Europe et ou d'Amerique se trou-




86

MONEY TRUST.

affected by any financial or political
crises, so as to render the issue of
the said bonds to the public impracticable or inadvisable, the bankers shall
have the right to terminate this agreement by giving written notice to the
representative of the Government in
London, or to the Government by
cable, and in such case neither party
shall have any claim against the other
in respect of anything herein contained.

verait niateriellement affects, de l'avis
des banquiers par des crises financieres ou politiques quelconques, de
nature a rendre remission publique
des dits bons impraticable ou peu
desirable, les banquiers auront le droit
de rfisilier cette convention en donnant avis par ecrit au reprfisentant du
Gouvernement si Londres ou au Gouvernement par cablegramme et, dans
ce cas, aucune des parties ne pourra
exercer de revendication eontre l'autre
du chef de l'une quelconque des provisions des prGsentes.

In witness whereof the said
, on behalf of the Government;
, on behalf of Messrs.
Schroder;
, on behalf of
the SociSte Generate, and
, on behalf of the Banque de
Paris et des Pays Bas, have hereunto
subscribed their respective names.

En foie de quoi, les dits
, au nom du Gouvernement;
, au nom de MM.
SchrSder; et
, au nom de
la Societe Generate; et
,
au nom de la Banque de Paris et des
Pays-Bas ont appose, ci-dessous, leurs
signatures respectives.

EXHIBIT NO. 8, MAY 16, 1912.
I-Extract from the report of Dr. Olavo Egydio, secretary of finances of tbe State of Sao
Paulo, to the president of the State, Dr. Manoel J. de Albuquerque Lins.]
VALORIZATION OF COFFEE.

By law Xo. 959 of October 3, 1905, the Sao Paulo State government was
authorized to en*er into an agreement with the Federal Government, and with
the governments of other States interested In the growing of coffee, with the
view of taking steps to bring about the valorization and propagation of the
sale of this national product.
To provide the necessary funds for such a project, law No. 984 of December
29, 1905, paragraph 29, created a tax of 3 francs gold for every bag of 60
kilos exported. This surtax was afterwards raised to 5 francs by paragraph
2, of law No. 1127, of August 25, 1908.
In order to give effect to laws Xo. 959. of October 3, 1905, and No. 984 of
December 29, 1905, the Sao Paulo government celebrated with the State governments of Minas Geraes and Bio de Janeiro, the agreement commonly known
as the " Convention of Taubate " : which was signed at the city of that name
on February 26, 1906, by Dr. Xilo Pecanha, representing the State of Rio de
Janeiro; Dr. Francisco Salles, representing the State of Minas Geraes; and
Dr. Jorge Tibirica, representing the State of Sao Paulo.
This convention was modified by a codicil dated Bello-Horlzonte, July 4,
1906, and signed by the same gentlemen who had signed the agreement of
February 26.
These acts were in due course approved by the legislative bodies of the
three States concerned, as well as by the Federal Government.
With a view of defending the coffee interests of the State, seriously
threatened by the depreciation of prices, which would be rendered more acute
by the exportation and sale of the extraordinary crop of 1906-7. the Sao Paulo
government anticipated the acceptance of the Taubate convention.
Thus, in August, 1906, purchases were initiated with a view of regulating tho
various coffee markets.
For.that purpose, the State firstly contracted a loan of £1,000,000 with the
Brazilianische Bank fur Deutschland. by means of discounting treasury bills
in favor of the Direction Desconto Gesellschaft of Berlin, at 12 months date,
falling due on August 1.
Afterwards, on December S, 1906, a further loan of £3,000,000 was contracted,
viz. £2.000,000 with Messrs. J. Henry Schroder & Co., London, and £1.000,(00
with the National City Bank, New York, payable in five years paying interest
nt the rate of 5 per cent per annum and guaranteed by the special tax of 3
francs on every bag of 60 kilos of coffee that was exported.



MONEY TRUST.

87

Of this lopn there remains deposited with the bankers, Messrs. J. Henry
Schroder & Co., London, £1,000,000. for redeeming the respective bills at their
due dates, representing an equal sum in favor of the Direction Desconto Gesellschaft, of Berlin.
On January 27, 1908, the State of Sao Paulo contracted a further loan of
£3,000,000 with the Federal Government, payable in 15 years, paying 5 per cent
per annum interest, and commencing from August 1, 1909.
Employing these resources, as also the proceeds of bills drawn on banking
correspondents, to the value of 80 per cent more or less of the total value of
coffee exported by the State, the Government intervened regularly in the
markets of Santos, Bio de Janeiro, and Sao Paulo, as well as in Havre, Hamburg, and New York, thus becoming the holders, at the beginning of 1908, of a
stock of 8,474,623 bags of coffee.
In spite of the immense difficulties daily encountered to sustain prices, by
holding on to such an enormous stock, the Government never hesitated, and,
supported by the loyalty of public opinion within the State, and ably seconded by all who were interested in the solution of such a momentous problem,
it persevered in its plan, which had been adopted in favor of the vital interests
of the agricultural and commercal interests of the State of Sao Paulo.
Having once attained the principal object of this campaign—that is, keeping
beyond the insistent market offers the excess production of the immense crop
of 1906-7—and once reestablished normal market conditions, it became necessary to consolidate the position just reached, adopting means which would
enable the Government to hold its stock, keeping same out of the markets until
such time as the necessities of the markets and consumption demanded.
By law No. 1127 of August 25, 1908, the following measures were authorized
toward effecting this purpose:
1. To limit the exportation of coffee to 9,000,000 bags in 1908-9, nine and a
half million bags in 1909-10, and 10,000,000 bags from 1910-11 onward.
2. To raise the surtax from 3 to 5 francs on every bag of coffee exported.
3. To authorize the raising of a foreign loan of £15,000,000 to consolidate the
existing position which had been attained.
In execution of State law No. 1127. of August 25, 1908, the Government contracted, on December 11 of that year, a loan of £15,000,000 with the bankers',
Messrs. J. Henry Schroder & Co., London; the Societe Generale of Paris; and
the Bank of Paris et des Pays Bas, also of Paris.
This loan was realized at the rate of 85 per cent, having for its special guaranty the surtax of 5 francs per bag, collected on all coffee exported, and also
the proceeds of sales of all State-owned coffee.
It was also guaranteed by the Federal Government, a guaranty conceded by
virtue of Federal Law No. 2014, of December 9, 1908.
This loan was to be paid off within a period of 10 years.
After the realization of the loan of £15.000,000 a committee was constituted in
Europe for the purpose of taking charge and selling the State-owned coffee, as
per special contract drawn up in London on December 11, 1908.
This committee is composed of seven members, four of whom are nominated
by Messrs. J. Henry Schroder & Co., London; two by the Societe Generale, of
Paris; and one by the Sao Paulo government, the latter having a suspensive
veto pending a final decision to be given by the Bank of England as arbitrator.
The functions of this committee are:
(o) Pay off through the bankers all funds or parts of funds due for advances
made under the guarantee of the State-owned coffee, thereby freeing the said
coffee from the onus of such hypothecation.
(6) Pay through the bankers all insurance, warehousing, and other expeuses
incurred in connection with the said stocks.
(c) Liquidate the stocks of coffee in the name and for account of the Sao
Paulo government by means of public auctions or otherwise, being 500,000 bags
in 1909-10, 600,000 bags in 1910-11, 700.000 bags in 1912-13, and afterwards at
the rate of 700,000 bags annually. Beyond these minimum quantities, at any
time before the commencement of the obligatory sales, the committee is authorized to supply the markets with whatever quantities that are required, taking
for their basis the price of 47 francs (later changed) per 50 kilos for good average and 50 francs (later changed) for the quality known as " Havre Superior."
The committee was constituted in accordance with this contract and was made
up as follows: J. Henry Schroder & Co.. Theodor Wille, Hermann Sielcken.
Eduard Bunge, Societe Generale. Visconte des Touches, and Dr. Francisco



88

MONEY XBUST.

Ferreira Ramos (later changed) as temporary representative of the Sao Paulo
government.
Dr. Francisco Perreira Ramos was later succeeded by Dr. Paulo da Silva
Prado, who now represents the government on the committee.
Messrs. Theodor Wille & Co. represent the committee and also the bankers
who issued the loan in the State of Sao Paulo.
Bags.
During the campaign in defense of coffee the State of Sao Paulo
bought, received, and warehoused for its account
10, 868, 266
It sold
3, 781, 894
Therefore there existed on Dec. 11. 1908
Delivored to the committee

7,086,372
6,843.152

Leaving
243,220
This remainder of 243,220 bags was included in the contract to be liquidated
as the government thought fit.
This coffee already is entirely sold, so that on the date this is written the Sao
Paulo government possesses only the coffee deposited in the hands of the
committee.
Bags.
The committee organized to sell State-owned coffee received
6,843,152
Sold in 1910, as per contract
532, 829
Leaving on hand
Whioh are stored at the following ports:

6,310,132
Bags.
1,741,576
1,461,890
1,433, 203
1,055,178
197,790
130,191
109,807
86,781
83,907

Havre
New York
Hamburg
Antwerp
London
Rotterdam
Trieste
Marseille
Bremen

6,310,323
The statement of accounts relating to this colossal operation may be resumed
as follows:
RECEIPTS.

Loans:
1906. Loan of £1,000,000 contracted with the Brazilianische Bank fur Deutschland at exchange of 15i
15, 843: 000$000
1906. Loan of £3,000,000 contracted with J. Henry Schroder & Co., London and the National City Bank, New
York
46,089:000$000
1907. Loan contracted with the Federal Government,
£3,000,000
48,000:000$000
1908. Loan contracted with J. Henry Schroder & Co.,
Societe Generale, and the Banque de Paris & Pays
Bas, 05,000,000
240,000:000$000
349,932:000$00O
Bills and advances:
Effected against coffee shipments
Net proceeds of surtax from 1906 to 1909
Sales of coffee in 1908-9
Supplies out of common fund
Rs




196, 057: 315$527
65, 804:122?296
45, 935:133$340
40,288: 080?780
698,016: 651$94S

MONEY TBUST.

89

DISBTJBSEMENTS.

Loans:
Restitution of loan of £1,000,000 of the Brazilianische
Bank for Deutschland
Restitution of loan of £3,000,000 of the loan of J. Henry
Schroder & Co., London, and the National City Bank
of New York
Restitution of £67,500 of the £3,000,000 of Federal Government
Restitution of £155,000 of loan of £15,000,000

15,483: O00$000
46,449:000$000
1,080: 000$000
2,480: 000$000

65,492:000$000
Bills and advances:
Amount liquidated with valorization consignees and correspondents
191,442:578$640
Coffee purchases:
Value of coffee bought from 1906-1909
284,808: 906$218
Defense of coffee:
Difference of types of (valorization project) various loans
(discounts), freights, insurance, buying and selling commissions, interest on advances, storage charges, and
other expenses in connection with State-owned coffee__ 156,273:158$084
Rs
698,016:651$943
Now that the coffee crisis from which we suffered for 12 long years has at
last been overcome, and to the solution of which the efforts of the Federal
Government, and especially of the Sao Paulo government, have so largely con*
tributed, it is worth our while to pass in review a rapid history of this out*
standing incident in our national life.
We possess in abundance documents containing all the details of this great
struggle, but we prefer to employ the language of an illustrious foreigner who
passed several months in Brazil studying this and other economic problems and
who published a book on the result of his investigations.
We refer to M. Peiire Denis and his much appreciated volume, Brazil in the
Twentieth Century, where we read the following:
" In order to explain the intervention of the Sao Paulo Government in the
coffee market, it is necessary to understand the supreme importance of coffee
growing to the welfare of the State.
" Formerly Sao Paulo produced other commodities—sugar, cotton, etc.—but
during the last 30 years all these have receded in favor of coffee.
" Everybody there depends upon coffee.
" Even the industries established within the State, as well as other branches
of agriculture, can only subsist and prosper in proportion to the prosperity of
coffee growing and the sale of the product.
" When the price of coffee drops the whole community suffers and not merely
the individual, and the State resources are threatened, making it impossible to
make ends meet
"The export tax furnishes, in fact, two-thirds of the total revenue. That
tax is in proportion to the price of coffee, following the market fluctuations.
"A crisis in the coffee trade, therefore, causes an immediate falling off in
revenue. It is a public danger as well as a danger to individuals.
"Furthermore, it affects the fiscal equilibrium of the whole of Brazil. A
country like Brazil, with but few accumulated economies, can not live without
receiving annually from abroad a greater amount of gold than that which goes
out. It is an indispensable condition toward being able to meet foreign en»
gagements, thus maintaining the country's credit abroad and preventing its
currency from deteriorating in value. Imported gold represents the value of
national products sold abroad, and as coffee alone comprises the greater part
of Brazilian exports, it is the gold received for such coffee that enables the
country to pay to the foreigner in exchange for that which the national industry is incapable of producing.
" To suppress coffee exports is to profoundly injure the whole of Brazil,
threatening its very existence. The coffee question is not a question affecting
the States that produce that product alone, but the whole future of Brazil
depends upon it, and therefore the part played by the Federal Government,
in the valorization plan is easily understood.



90

MONEY TBUST.

" From 1885 to 1896 coffee was sold at a good price. That was the trulyprosperous period of agriculture, prices ruling about 70 francs per 50 kilos
and sometimes rising as high as 120. or even 130 francs.
" The 1897 crop was a remarkably large one, and the world's stocks were
immediately raised from five to six million bags. There was then a notable
reduction in prices, which lasted till 1900, when they got firm once more.
However, agriculture suffered but little during the first period of low prices.
" In the years 1897 to 1899 there was a great depression in exchange, and it
so happened that although the price of coffee had dropped largely as regards
its gold or selling price, it did not make such a notable difference in Brazilian
currency prices.
" Due to this circumstance, the growers did not then feel the effects of the
decline. It came some years afterwards, in 1901, when the world's total production reached 20,000,000 bags and with a world's visible supply of eleven
and one-half million bags.
" Then prices fell to 30 francs per 50 kilos, and the decline continued during
1902 and 1903. There was, as a matter of fact, a small rise in values in 1904,
which was further maintained in the following year.
"The price was now 40 to 50 francs per 50 kilos, but the stocks had been
but little reduced, as in 1905 there was an accumulation of supplies of, say,
11,000,000 bags, or equivalent to seven-tenths of the world's annual consumption of coffee.
" It was under these conditions that in October, 1905, news from all parts
commenced to pour in indicating prospects of a bumper crop in 1906, news
which was later confirmed by the absence of frost and other unfavorable conditions, insuring perfect growth. It soon became evident that the rise of
prices of 1905 could not be maintained, and calculations were wistfully made
as to the probable world's consumption during the next few years and how
long it would take to reduce the accumulation of stocks from the crop of
1906. Among these calculations there entered one favorable element which
was absent when similar calculations were made in 1901. It was this: Since
1903 the Sao Paulo government had prohibited further planting.
"This was a very wise precaution, but it could not be expected to yield
beneficial results immediately, as same could only be felt after sufficient time
had elapsed, because the coffee plant does not commence to bear fruit for five
or six years after planting of the young trees.
" The trees planted in 1902 did not yield a single berry until 1906, and this
explains why the 1906 crop so far exceeded that of 1902, in spite of the prohibition to plant new trees.
" It was only after 1906 that the effects of the prohibition could become
manifest.
" This law of restriction was only a palliative to prevent the crisis from becoming more acute. It did not supply the remedy, and more radical measures
had to be resorted to.
" It is interesting to note some of the measures which were proposed, but
not applied, in order to understand the atmosphere in which the ideas of
valorizing coffee first breathed and flourished.
*
*
*
*
*
*
*
"All were agreed on one point, viz, that the actual Santos prices, so far
from giving or guaranteeing a just return on the enormous capital employed
on the plantations, did not enable the planter to live and pay his way, as the
wages of his men, machinery, and transportation charges could not be materially reduced.
"Another point too, upon which all were agreed, was this: That the Government should take some steps—that it would not do to wait amidst the suffering and misery resultant from these circumstances for the process of natural selection to run its course—to eliminate the weakest on the principle of
the case being a survival of the fittest.
" The Government of Sao Paulo did not hesitate, and the idea took root in
the minds of some of the eminent men of the State that the best way out
would be by valorization; that is, that the State should take upon itself to
buy the excess of production, or surplus, keeping it out of the market for a
requisite time until the reduction of stocks must perforce raise the price
" It was reasoned that in the first place it is not true that the world's production is very large, taking an average year: but it is irregular, and one
large crop gluts the market, leaving it to the deficits of following crops to
normalize matters once more.



MONEY TRUST.

91

" It is also a law of experience that a large crop is always followed by a
small one, sometimes by two or three small ones.
"To get over the crisis, therefore, it is only necessary to keep the surplus
left by the " fat" years to be put on the market during the " lean " ones.
" It was argued that this operation would save the planters, and that there
was every reason to expect it would be also profitable to those undertaking it.
" In the second place, It was felt that this sequestration of surplus of large
crops should be undertaken by the Government, because private enterprise
could not be relied upon to carry It out.
" It could not be expee ed that every planter would warehouse a certain
portion of his coffee. The planters were, as a matter of fact, in a difficult
situation, because up to the time of gathering their crop they live on credit,
and must sell their coffee in order to pay their debts.
" Every planter has his commercial agent, who acts as an in ermediate between the grower and the exporter, and known as a ' commissario,' who, were
it not for lack of capital on the part of the planter, would have no cause for
existence.
"This commissario is, before anyihing else, a banker, it hardly ever happening that the planter has sufficient funds of his own for running his farm without outside assistance.
"The months of the crops are to him, therefore, months of bills falling due
and engagements to be met, thereby making the sale of his coffee an imperious
necessity.
"During a few weeks every year arrivals of coffee flood the Santos market
like an irresistible wave, upsetting the market and creating artificial prices,
without consideration of the law of supply and demand. Was it not necessary that some public authority should remedy this evil by intervening in
the market as a regulator?
"There was one great danger. The idea of such regulation was to raise
prices.
" It was seen that the benefits accruing from a rise in the prices of Brazilian
produce would also accrue to the competitors of Brazil in other coffee-growing districts of the world. Other places would, therefore, benefit gratuitously
at the expense of the State of Sao Paulo, without taking any risk or Incurring
any of the expense entailed by valorization.
" It would not do for Sao Paulo lo undertake the work at their own cost
merely to enrich their competitors in Guatemala or Costa Rica.
" To prove that this fear existed in Sao Paulo, it is only necessary to refer
to the trip made by Dr. Augosto Ramos, for the purpose of study, he being
sent by the government to visit and report upon the situation in the other
coffee-producing countries of South America.
" His work was published in book form by the secretary of agriculture
in 1906.
" H e found on all sides the same difficult situation, caused by low prices,
as was the case in Sao Paulo, and that the advantage, from a physical point
of view, rested with Sao Paulo, where the maturity was more regular and the
crop less embarrassed by excessive rains. He also found that labor was
scarcer and of a poorer quality than in Sao Paulo and that the organization
and arrangement of the plantations were not so perfect. He concluded, therefore, that Sao Paulo could conserve the price of coffee, that it had a constant
advantage over its mos. favored competitors, who would be eliminated one
after another, the process of elimination having already commenced, and
that no benefit would accrue by main aining the price of coffee below 80
francs. The importance of that trip can noi be overestimated.
" He persuaded the government of Sao Paulo that the business was possible. It was the foundation of valorization."
It would thus be seen from the above extract that the final intervention of the
Sao Paulo government in the operation known as the " Valorization of coffee,"
produced such a notable repercussion all over the world, was nothing more or
less than the sanction given to the almost unanimous opinion of the people of
Sao Paulo, and that from its first application it produced benefits, veiled at
first, but later on becoming so irresistably manifest as to convince even those
who had most stubbornly contested its advantages and practicability.
Not finding among the innumerable projects put forward and discussed a
single safe and immediate solution of the coffee crisis, the Government decided



92

MONEY TEUST.

to commence by safegmudiug its economic future, taking decisive steps to prevent the indefinite prolongation of low prices.
The cause of the low prices was the formidable disequilibrium between production and consumption, and as the latter could not be forced to show an increase in proportion to the expansion and development of the former it was
decided to temporarily curtail, by legislation, the planting of new trees, and as
consumption increased it was felt certain that commercial equilibrium would
be restored and that those interested could again sell their coffee at remunerative prices.
This great measure would also inevitably give an impulse to the production
of other commodities within the State, which until then had been neglected in
favor of coffee.
It could also not help but improve the processes employed in the coffee industries themselves, which would now have to make use of more scientific
methods for prolonging the life of the plant and increasing its production.
Legislating for the future, however, would not remedy the existing situation,
which, owing to intolerably low prices, was passing through a crisis. Things
would be worse still if, as "might easily happen, there had been another crop of
from twelve to thirteen million bags.
It was necessary therefore to intervene in another direction, and more
radically. It was decided therefore to withdraw from the market all of the
surplus coffee, which was the sole cause of the ruinous prices.
It was necessary, however, to proceed with great caution, in case the Government's action in curtailing the home market might give impulse and result in
greater production on the part of other countries, thereby neutralizing the
advantage which Sao Paulo hoped to reap.
It was known that if such occurred, it could only happen in other LatinAmerican countries, and in order to make investigations a special emissary was
sent by the Government. In February, 1905, this emissary telegraphed his impressions from New York, which were of a tranquilizing nature, and confirmed
the same later in his official report to the Government.
It was clear, therefore, that the valorization could be proceeded with without
misgivings, and the Sao Paulo government then intiated operations on the lines
indicated, taking every precaution possible to guarantee the success of the
project.
The foregoing facts clearly demonstrate that Sao Paulo had taken every step
possible to insure success and that it did not embark upon the plan as a
thoughtless adventure, as some tried to make out.
There is no foundation whatsoever to the suggestion, which has sometimes
been made, that the benefits which followed the Government's action were
simply due to natural causes, and were not in any way influenced by such action.
What happened was just the contrary, as may be easily verified by examining
the following table, showing the figures for the crops of four years preceding
and of the four years succeeding the Government's action.
Four years preceding official intervention.
Yeais.

Crops.
Bags.
16,655,000 1
14 445'000 f - ^ r a s 6 ' 15,474,000 bags.
14,792,000 J

1902-1903
1903-1904
1904-1905..
1905-1906

Four years of intervention period.
Years.

1905-1907
1907 190S
190&-1909
1909-1910




Crops.
3(109.
23,786.000 >
14,882.000 [Average, 18,418,000 bags.
15,968,000
19,059,000 )

MONEY TBUST.

93

So far, therefore, from there having been a falling off in production, as has
been suggested, there was a notable increase, a much larger increase, in fact,
than was expected.
The Government's action was handicapped by an increase of nearly 3.000,000
bags to be dealt with.
In 1906 Sao Paulo was expected to produce twelve or thirteen million bags,
but the crop turned out to be fifteen millions, thereby increasing the world's
supply in that year to 24,000,000 bags.
But It did not cease there. In the following year the port of Santos received
a further supply of nearly 9,000,000 bags, in itself nearly as large as the
whole crop of 1901-2, which up to then constituted a record.
Greater difficulties still were caused by the crop of 1909-10, which contributed
no less than 19,000,000 bags to the world's supply.
That is how natural causes influenced the situation. Ins ead of alleviating,
they greatly accentuated the difficulties.
The most critical moment of valorization were the years 1906-7. when the
markets of the world, as may be seen from the foregoing table, were flooded
with the enormous quantity of 24,750,000 bags of coffee.
During that year, but only for a short time, prices fell at Havre to 35 francs.
Some years before, in 1902-3 and 1903-4, prices had fallen as low as 30 francs,
owing to the great excess of production in those years over consumption.
Then the world's consumption was about 15,000,000 bags and the visible
stock ranged between eleven and twelve million bags, the percentage of stock
over consumption being 79 per cent.
In 1906-7 the world's consumption was about 17.000.000 bags, and the stock
was 16,333,333, or a percentage of stock over consumption of 96 per cent.
Therefore, if in 1902-1904, with a percentage of stock over consumption of 79
per cent, prices fell to 30 francs, it may be easily imagined to what depths
prices would have fallen in 1906-7, with the colossal percentage of 96 per cent.
It is evident that we would have seen for the first time prices fall below
25 francs, which would have been the ruin not of the planters alone, but of the
whole State, because all of the great commercial and industrial interests of
Sao Paulo are dependent upon coffee.
It is impossible to describe the situation which would thus have been created
In the State, struggling with difficulties judged invincible, if the Government
had merely taken steps of simple expediency, leaving the process of natural
selection to do its work of destruction.
It would have been the ruin of the great coffee industry; it would bring
about a complete disorganization of the commerce of Sao Paulo and the port
of Santos, inseparably bound to the fate of coffee industry; it would have been
the annihilation of those great transportation enterprises which are our pride;
It would have meant the disnationalization of our territory, and, worse than all,
it would have meant the death, commercially, of the present generation of
Paulistas, upon whose shoulders of strength rests the richness and the prosperity of the State.
All honor, therefore, to Dr. Jorge Tibirica and his able secretaries, your excellency among them, for conceiving the idea of valorization of coffee by
direct intervention and for standing by the entire population of Sao Paulo, then
threatened with so much danger and ruin.
Results have proven that the steps taken were well considered. The coffee
situation is now solid and not easily upset and will so continue indefinitely,
provided the public authority is vigilant to see that the conditions which led up
to the crises that we have left behind are not repeated.
It is not necessary to attempt an estimate of the results attained. Sufficient it
is to say that the price of coffee in Santos is above Rs. 7$000 per 10 kilos.
As to the liquidation of the compromises assumed by the State it may be
affirmed that within two or three years they will be all paid off, leaving a
considerable balance.
As a proof of this statement it is sufficient to say that the loan of £15,000,000
sterling will on January 1, 1911, be reduced to £10,000,000, not only by means
of amortizations already made but also by the large balances which on that
date we shall have in the hands of our bankers. The loan of £3.000,000 contracted through the Federal Government has already been reduced by amortizations to £2,800,000.
It will be thus seen that the obligations which weigh heavily directly upon
the State treasury In this connection will on January 1. 1911. amount to about
£13,000,000.



94

MONEY TRUST.

The Government stock of coffee in the hands of bankers was 6,842,374 bags,
of which 500,000 bags were sold during the current year, leaving 6,300,000 bags
on hand.
If we take as a basis the price of 66 francs per 50 kilos, now ruling at Havre,
without taking into consideration the greater value of our coffee, which is nearly
all composed of the higher grades, we have, at present figures, 6,300,000 bags of
the approximate value of £20,000,000.
Deducting the £13,000,000 that remains to our debit from this £20,000,000
worth of coffee, we are left with a balance of £7,000,000 for the reduction of
our floating debt and other compromises.
Economically, therefore, besides keeping millions from ruin, the operation was
highly advantageous to the State from a financial standpoint.
The foregoing observations I have felt it my duty to make to your excellency
on the occasion of presenting to you the accounts of this colossal operation,
which the State decided 10 take up in obedience to the most exalted motives of
patriotism.
These accounts are made up with great care and clearly demonstrate the
perfect organization of the treasury.
We invite the examination of all, feeling sure that if errors be found in
them the very nature of the operation and its magnitude will be considered
only a small circumstance.
In conclusion, I may be allowed to put on record the thanks which are due to
so many for the part they took in this memorable struggle, and to whom Sao
Paulo shall ever be grateful. In the first place, a tribute is due to that eminent
Brazilian, Dr. Alfonso Penna, back upon whom Sao Paulo shall ever look with
everlasting gratitude for his relevant and efficient support. Thanks are also
due to the State congress and also to the representatives of Sao Paulo in the
Federal Congress, whose unflinching solidarity constituted an invincible and
triumphant force.
I would also mention the name of my friend, Dr. Augosto Ramos, for the
invaluable services rendered in studying the subject hereinbefore cited and for
his persevering and intelligent campaign on behalf of valorization in the public
press.
If I may be permitted to mention one house out of so many who took part in
the operations and whose services to the State were most valuable, I would
name that of Messrs. Theodor Wille & Co.
I can not bring this report to its conclusion without calling your attention
to the dedication and zeal of the treasury staff and its illustrious chief, Col.
Luiz Gonzaga Azevedo, whose competence and active intelligence so largely
contributed to the results obtained, as well as that of Dr. Luiz Arthur Verella,
the State financial attorney, whose assistance and study of the various contracts were most efficient, and to all those in the department of accounts whose
duty it was to examine and write up all the accounts referring to the operation,
often necessitating working at night, the chief of which, Mr. Carlos de Carvalho, deserves the highest possible compliments.
SAO PATJLO. September 30, 1910.

OLAVO EGYDIO, Financial Secretary.

(The foregoing is a copy of English translation as rendered by the Brazilian
Review in its i<*-nie of December 27, 1910.)