Even to this day the Filipino is rare indeed who can descry any connection between, on the one hand, the bank's operations, and, on the other, the Government's depleted treasury and the lack of means for public work. Few, indeed, are the Filipinos who recognize wisdom or justice in the GovernorGeneral's continued pressure thus expressed in his Message to the Legislature of 1923:

I recommend, as the Government owns 92 per cent of the stock, that the Legislature take the necessary steps to put the bank in the position which the law requires and that it finally assume responsibility for the bank, its assets and liabilities.

The Philippine National Bank to-day operates insolvent, steadily increasing its deficit, without legal reserves and with no way of acquiring them, still under political control, still running as a solvent bank upon the proceeds of liquidation.

And under these very conditions, as late as March 8, 1924, a bill was passed by both houses of the Legislature again appropriating to the ordinary uses of the Philippine National Bank the sum of $12,428,000, practically the whole reserve fund of the Government.

Governor-General Wood vetoed the bill.

The Filipino press thereupon raised an outcry against the American Executive's malice toward the great national institution.

Mr. Quezon, in a public address delivered at Silay, Occidental Negros, June, 1923, put volumes in one phrase when he said:

The Governor-General, in the use of his executive powers, may order the closing of the bank, but I can assure you that while there is money in the treasury the Philippine Legislature will open another bank.

There you have it.

Chapter XI

THE ROTTENEST THING

WHEN Major-General Leonard Wood was commissioned by the United States of America to assume the government of the Philippine Islands, explicit instructions went with the job.

Among these instructions stood orders to get the Philippine Government out of business just as quickly as was possible without unnecessary sacrifice.

That is, the new Executive was directed to make all haste to clean up the Insular Government's wild-cat investments, working them as nearly as might be into presentable shape; and then to arrange sales of the properties-or else to arrange leases until sales could be effected.

Meantime, and all the time he was "to prevent their being interfered with by the political element."

"In other words," said Mr. Weeks, Secretary of War, writing on September 19, 1921, "the management of the several investments should be made as independent of political control as it is possible to make them."

These instructions are clear and definite. They sound sufficient and seem to warrant a demand for results.

As a matter of fact, what happened?

By way of beginning somewhere, take the case of the Manila Railroad Company.

The Manila Railroad, 645 miles of trackage, had been purchased from private owners by the Philippine Government in the days of Harrison.

During the last two years of Mr. Quezon's presidency of this Railroad Company-an office that Governor-General Wood induced him to resign—one hundred and fifty thousand free passes were issued, each pass valid for travel anywhere on

the road throughout the year whose date it bore and good not only for the recipient himself, but also for all his family and all his dependents.

Another useful feature was the presidential perquisite of issuing railway contracts, as for coaling, to rich and good personal friends-of pushing them across the table, like bread cast upon the waters, without the formality of preliminary bids.

With these things in mind as indications of the general policy pursued, it will be found not unnatural that the Manila Railroad Company has yearly lost money-money which the insular treasury must yearly supply.

Its annual reports, in their balance sheets, show net profits, to be sure.

But the road has never yet paid a dividend on the stock, has put away scarcely any reserve, has written off practically nothing for depreciation, and has never been able to pay so much as the interest on its own government-guaranteed bonds.

Meantime, the Insular Government, by yearly renewed special legislation, has been waiving the company's taxes in order to help it make a political display.

This, in brief, is still the status of the Manila Railroad Company. And the ablest of the Filipino economists have written statements for the American press to prove it a status of financial success.

Now, as to the sugar centrals:

The sugar centrals had cost the people of the Philippines, through their National Bank, from twenty-three to twentyfour million dollars. By the time of General Wood's inauguration the plants had greatly deteriorated in value, through mishandling and neglect, and the business itself was kept alive only by advance crop loans of the people's money, each year renewed and each year more hopeless of recovery.

This in spite of high sugar prices and of the fact that Philippine sugar enjoys a practical subsidy from the United States of America, where almost the entire crop is sold.

The sugar exported to the United States in the year 1922, if duties had been levied upon it in accordance with the rates of the United States Tariff Act of 1922, would have paid about eleven million, eight hundred and sixteen thousand dollars into the United States Treasury.

The other Government enterprises showed practically identical conditions. Senators and representatives composed their directorates. And these directorates, interlocking till none could find head or tail among them, formed busy bucket-lines to the money-tap in the National Bank. One single copra mill drew a "loan" of $11,500,000 in a single year.

While the war lasted everybody splashed. When the war stopped, tableau!

Such, roughly, was the state of affairs that Governor-General Wood stepped in upon with explicit orders from Washington to "get the Government out of business."

And the new Executive, confronting his problem, saw that all these grisly skeletons-railway, sugar centrals and the rest, represented honest opportunities to fill honest needs; and that, by honest and capable operators, they could still be made rich assets to the people of the Islands.

So he fell to work and presently was able to secure from first-class American operating companies a most gratifying response in the form of proposals to handle the railroad and the sugar centrals and to turn them from continuous losers into good money makers for the Philippine Government. To give the details of the proposals would be too burdensome here, particularly as an intelligent statement would necessitate a mass of statistics showing local conditions as affecting the practical significance of the figures. Suffice it, then, to say that in each case the terms, as far as the businesses themselves were concerned, gave occasion for sincere congratulation to the Philippine Government.

Now perhaps you suppose that at this juncture the Big Caciques felt like men starving on an iceberg in the Polar Sea who should suddenly sight the Mauretania heaving around the

corner. But the truth appears to be that even the wisest among them had no real understanding of the condition to which they had reduced their country. All they could see was their slipping grip on their own toy.

For the conditions of the proposed contracts included one point that ruined all the rest. It absolutely precluded any and all outside interference with the running of the concerns, whether in "hiring and firing" or in other operating procedures. A mass of patronage, with all its political possibilities, to lie lost in the hands of professional operators! Never!

These evil days would pass. This too active GovernorGeneral would go home. Meantime, let not the curse of scientific management companies gain foothold in the land and acquire rights and backing from the United States Government.

What, then, should be done?

But lack of expedients is never the caciques' difficulty. They rushed to the house-tops.

"Our country's resources to be given away to foreigners!" they cried abroad. "Patriots, awake! Shall the wealth of our fair Philippines be abandoned to the exploitation of the American Trusts? This man-this Wood-this Autocrat-he is a creature of the Trusts. Do not believe him. He is trying to pay his own old political debts with the heritage of our children!"

Meantime, while the right popular atmosphere and background was thus being manufactured, they held in their hands a simple little tool prepared under Mr. Harrison's supervision for just such emergencies.

They held the Board of Control, whose power sufficed neatly and completely to cancel the Governor-General's entire labours toward reconstructing their country's fortune.

They refused the American proposals. And they left the railroad, the centrals and all the rest of the sorry lot to run as they run, until, perhaps, future events shall make their handling more interesting.