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Washington, D. C.

The committee met, pursuant to adjournment, at 10.30 o'clock a. m., in the committee room, Capitol, Senator Frank B. Willis, presiding.

Present Senators Willis (chairman), Bayard, Harris, and Nye; later also Senator Butler.

The CHAIRMAN. The committee will be in order. We will continue our hearing this morning by calling first upon Governor Towner. He did not quite finish his statement and I understand that he has some other observations that he desires to make.


Governor TowNER. Continuing the statement that I made the other day, I again call attention to the fact that if there are any amendments to be made to the provisions of the organic act with regard to the auditor, we would prefer to have those which have been suggested by the representatives of Porto Rico.

I am quite sure that you will find that they increase the power of the auditor to at least the same degree that you have increased the power of the auditor of the Philippines, having due regard to our different conditions; and I think it would be unwise for the committee to adopt the suggestion for amending the organic law of the Philippines and make that applicable to Porto Rico rather than the amendments which have been suggested to our own organic act, which is inharmonious with the organic act of the Philippines.

The CHAIRMAN. I think I didn't get what you said the last thing. What was the argument about the Philippines?

Governor ToWNER. It is like this: The provisions with regard to the organic act of the Philippines are intended to amend the organic act of the Philippines. Now, to take those provisions and apply them to the organic act of Porto Rico is not harmonious to the Porto Rican organic act; and therefore it would be wiser and in harmony with our situation if the amendments were adopted that we suggest, which would increase the powers of the auditor but do it in accordance with our own needs and necessities, rather than to take that which was intended primarily to affect and enlarge and increase the powers of the auditor of the Philippine Islands. Senator BAYARD. May I ask a question?

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Senator BAYARD. Have you suggested amendments with this proposed change in the Porto Rican act?

Governor TOWNER. Yes.

Senator BAYARD. I just wanted to know whether you had.

Governor TOWNER. Yes. You will see it if you look at this bill which was introduced.

Senator BAYARD. Don't bother to refer to them. You say you have suggested them?

Governor ToWNER. Yes.

Senator BAYARD. I will get them all right.

Governor TowNER. You will find them, Mr. Senator, in this bill which has been already introduced in the House of Representatives and which will be introduced here, which amends section 20 of the organic act, which applies particularly to the auditor of Porto Rico. Now, gentlemen, in this bill-which is the House bill at the present time, but which will be introduced in the Senate the matters referred to in this bill will be discussed by Mr. Guerra and of course I will be here to be heard if the committee desires to ask any questions about it. These provisions, I think, you will find entirely reasonable and entirely in consonance with the progressive development of Porto Rico.

I think I can say to you gentlemen that Porto Rico is making progress and making what might almost be called rapid progress. I do not know whether you desire any discussion; in fact, I would not try to take up your time in telling you about our financial difficulties, which arose not because of any fault on the part of the legislature because they fell short more than a million of meeting the required budget. but which arose because of the fact that the taxpayers really united to resist the payment of taxes and took the matter to the courts. Now the courts have decided those propositions favorably to Porto Rico, as they all were legally enacted and reasonable in their application.

The CHAIRMAN. Would you suffer an interruption at this point? Governor TOWNER. Yes.

The CHAIRMAN. I don't care to have you go into a detailed statement of this matter, but I wondered if you would not care to make a very brief statement with reference to certain newspaper articles that have appeared in this country and have been quite generally circulated. Those articles appeared in the first instance in the "Baltimore Sun." I read all those articles and I read the reply to them from one of your Porto Rican newspapers. I should be glad to have a very brief statement from you as to the situation described in those articles.

Governor TowNER. I think perhaps I might answer that in a very general way by saying that it is rather singular that a single reporter from a single newspaper in the United States should find conditions which he says he was told exist, because he was only there for a couple of weeks and all of his information, he says, was told to him. It is unfortunate that nearly every statement that he made was unfounded and was just the result of rumor and gossip of those who were attacking the administration.

The fact is that the government of Porto Rico is doing well. We would be fully justified in claiming that it is as clean and pro

gressive a government as there is anywhere in the United States. That may seem almost a strong statement, but I do not care what sort of test you choose to make with regard to it. I think we would be justified in asking for a comparison with almost any State in the Union that you might choose. We have a government there that is a credit to Porto Rico and a credit to the United States. I do not believe that anywhere you will find any dependency or any colonial possession anywhere on the earth of any nation that can compare with Porto Rico in the progressive development that it has made under the American occupation.

Now, with regard to the financial status: Just as soon as these matters of controversy with regard to the legality of these tax rates was settled this opposition fell to the ground. Now we are not only metting all the budgetary expenses, but we are accumulating a large surplus.

I want to call your attention to a statement that I just received in a letter dated April 18, and also submit one dated April 25. It states that at the close of March the available cash balance in the insular revenue for budgetary expenses amounted to $111,197.64. We have paid all expenses up to date and our balances to-day show an available cash balance of insular revenues amounting to-as shown in this statement dated April 21-$700,374.39. We have a balance of trust funds, and other deposits in the treasury and in the various banks in cash, according to the statement made here, amounting in the aggregate to $10,400,868.20. This statement made charging the island with being a bankrupt concern, of course, is laughable when you come to consider the real facts.

The CHAIRMAN. Do you want this statement to go into the record? Governor ToWNER. Yes, certainly, if you desire. It is the report of the treasurer.

The CHAIRMAN. Let me make a brief inquiry about it.

Governor TOWNER. Yes.

The CHAIRMAN. What are these funds? Some of them are rather large. It says American Colonial Bank three millions and something, and the National City Bank two million and something.

Governor TowNER. We never make, Mr. Chairman, any loan without providing for an amortization feature, and accumulating from time to time the money necessary to pay the loan. The most of that balance that is in the treasury there is what might be called trust funds.

The CHAIRMAN. Sinking funds?

Governor TowNER. Sinking funds for the payment and amortization of the debts. Those deposits are kept intact and they are accumulating more rapidly than was anticipated. We have never defaulted in the payment of the interest or the principal when due on any obligation that the Government has made. We have a surplus in almost every fund so that whenever we can buy a bond before it is due we have word left with our New York representative bankers that whenever a bond of Porto Rico is offered before it is due at a price that would be at all advantageous to us financially, we would be very glad indeed to take it up. And we are taking them up in advance of their maturity whenever the opportunity occurs.

The CHAIRMAN. Did I understand you to say that there was a cash balance of some seven hundred thousand?

Governor TowNER. Yes. You see, that statement is made there. (The statement referred to is as follows:)

Balances in depositaries at the close of business April 21, 1926

American Colonial Bank, San Juan, P. R..

Banco Commercial de Puerto Rico, San Juan, P. R..
Banco Territorial y Agricola, San Juan, P. R---
Credito y Ahorro Ponceno, Ponce, P. R..

Mechanic and Metals National Bank, New York, N. Y....
Royal Bank of Canada, San Juan, P. R.
Municipal bonds_-_.

School-board bonds---.

The National City Bank, San Juan, P. R..........
Banco de Ponce, Ponce, P. R...

Banco Popular de Economias y Prestamos, San Juan, P. R.
Banco Masonico de Puerto Rico, San Juan, P. R..
Banco de San German, San German, P. R..

Irving Bank Columbia Trust Co., New York, N. Y.
First National Bank of Boston, Boston, Mass.-.
The Baltimore Trust Co---

Banco Agricola de Aguadilla, Aguadilla, P. R.-

Total cash on hand____

Available cash balance, $700,374.39.

$3,695. 370. 83

600, 000. 00

750, 000. 00

520, 000.00

443, 323. 61 150,000.00 655, 000. 00 36,000. 00 2, 427, 173. 76 500, 000.00 30, 000. 00 75,000.00 10,000.00 0.00


300,000.00 9, 000. 00

10, 400, 868. 20

Governor TOWNER. Now, gentlemen, if you would like me, I would like to make a short statement

(At this point Senator Butler entered the room.)

Governor TowNER. Now, Senator Butler is present. You spoke to me and said that you had some question in your mind that you were going to ask me. I would be glad to have you ask me now.

Senator BUTLER. I think perhaps you might go on with what you had in mind and later I will be prepared to ask you a few questions about this report that I have here which was placed in my hands a little while ago.

Governor TOWNER. The matter that I was going to talk about just at present was the matter of the elective governor. I think there is a feeling of apprehension existing in the minds of some of the people that it would be unwise to extend this privilege to Porto Rico, and that it is and would be a very great extension of power to Porto Rico. I think perhaps that idea is based upon not a full knowledge of the real terms and provisions of the act, but rather on the fact that they think it would be turning over without restraint all the present limitations that exist between the United States and Porto Rico.

The bill provides that in the year 1932 the governor shall be elected by the people. At the present time the governor is appointed by the President. The appointment by the President is for an indefinite time, but the election of the governor by the people will be for four years, and provision is made that the President may, as he may now, discharge or call for the resignation of the Governor of Porto Rico at any time. So, although he may be elected by the people, the President may recall him and appoint one to act as his successor for the remainder of the term. So there does not exist such

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