really gold reserves and were entitled to be treated as if they were metallic gold belonging to the Philippine Government.

The advocates of the claim of the islands further persuaded the administration and the committees of the Congress that inasmuch as the Federal Government had made a profit of over $2,000,000,000 upon its actual gold by the devaluation of its gold dollar, the Philippine Government was entitled to a proportionate profit upon its bank deposits. There were over $4,700,000,000 in deposits of public moneys in the banks on January 31, 1934, of which a billion and a half were deposits of the United States Government upon which not only was there no profit by the devaluation but which in fact decreased in purchasing power by the devaluation. In the face of these facts the Seventy-third Congress was induced by what appears to be a misunderstanding of the facts to pass H. R. 9459 by which an appropriation of $23,800,000 was authorized to be made and paid to the Philippine Government as a profit upon its deposits in American banks on January 31, 1934. In computing the amount to be paid the Philippine Government the $15,000,000 of interest received by the Philippine Government upon the bank accounts was deducted, though it is quite obvious that if the Philippine Government was entitled to 40-percent profit upon its bank deposits on January 31, 1934, by reason of the devaluation of the gold dollar it should be entitled to the full amount without deduction of interest which had been received over a period of 12 years past.

It is conceded by the representatives of the Philippine Government that not one dollar of the money deposited in the American banks has been lost. It is further conceded that the funds so deposited would have redeemed on January 31, 1934, and will still redeem the same number of Treasury certificates as prior to the devaluation of the American dollar. There is no claim whatever that the Philippine Islands have been actually damaged. The only claim is that had the Philippine Government had this gold in its possession it could have made a profit upon it in the same percentage as that made by the United States upon its gold.

It is very doubtful if the Philippine Islands would have been able to realize a profit on the gold had it had its deposit in gold at the time of the devaluation of the gold dollar but it is needless to discuss that. The fact is that these funds were not in gold at that time and no profit could have been made by the possession of this gold prior to the devaluation of the gold dollar and possession of the gold by the Philippine Islands prior to that time would only have meant the loss of interest which they were receiving.

Claim is sought to be made that the Philippine_government demanded the payment of its deposits in gold prior to January 31, 1934. On June 29, 1933, and perhaps at other times after April 5, 1933, the Philippine government requested the War Department to make arrangements to secure its deposits in gold. When these demands were made the banks had no gold with which to make the payments and under the statutes of the United States could not have lawfully made the payment had they the gold in their possession. These facts were, of course, known to the Philippine government. It is, however, claimed that demands were made prior to April 5, 1933, and reference is made to certain correspondence to support this contention. An examination of the correspondence clearly shows that

no demand was ever made for the payment of these deposits in gold. An inquiry was directed to the Secretary of War on October 19, 1932, as to whether or not it would be possible to secure a modification of the deposit agreement with the banks by which the banks would agree to pay gold to the Philippine Islands upon demand.

The War Department advised the insular authorities that it was not feasible or possible to have such a change made in these agreements with banks of a desirable type and that a material reduction of interest rates would follow if made, and the Philippine government made no effort to withdraw its deposits or to convert them into gold. Other correspondence shows that having heard rumors following the passage of the Thomas amendment that the President was contemplating devaluing the gold dollar, inquiry was made as to what would be the effect of such devaluation upon the obligations of the Philippine government upon its outstanding bonds payable in gold of the then standard of weight and fineness. The Philippine bonds contain the common form of gold clause. These inquiries were fully answered by the statute passed by the Congress declaring such gold clauses void, which statute was subsequently upheld by the Supreme Court of the United States.

Even if demand for payment in gold had been made and refused the Philippine government has suffered no loss for that reason. Its only claim is that it should have been permitted to make an unearned profit from the gold-devaluation legislation of the United States in defiance of the plan and purpose of that legislation.

While having no direct bearing upon the question at issue, it is not without interest to note that the Philippine government has outstanding approximately $75,000,000 worth of bonds payable in American dollars, so that that government is in a position to take advantage of the devaluation in the American dollar in the payment of its bonds.

Under the financial situation set up by Congress there was no authorization for the deposit of Philippine funds in American banks. In fact, so far as the Treasury certificate fund was concerned, there was a specific requirement that it be kept in the Philippine treasury. The deposit of Philippine Government funds in American banks was authorized by an act of the Philippine Legislature after the granting of autonomy to the Philippine Islands. This act provided that Philippine Government funds should not be deposited in the Philippine Islands or in banks owned by Filipinos. The Bureau of Insular Affairs aided and advised the Philippine Government in the handling its deposits in American banks, but neither that Bureau nor the Secretary of War had the authority to compel the depositing of Philippine Government funds in any American bank. Some discussion occurred during the hearings as to the deposit of the Philippine Government funds in the Federal Treasury, but there was no authority on the part of the Federal Government to accept the deposit of Philippine funds until an act was passed in 1934 subsequent to the devaluation of the gold dollar granting this authority.

The entire situation may be somewhat briefly summarized as follows:

1. The Philippine Islands had no gold reserve.

2. The Philippine Islands had no occasion for a gold reserve as it had no currency requiring redemption in gold.

3. The Philippine Islands had no gold coin and no currency which it was required to redeem in gold.

4. There was no legal difference between the bank deposits of the Philippine Government and those of the citizens of the United States. Neither had title to coin nor currency by reason of their deposits. Each had but a debt due from the bank.

5. The Philippine Islands' deposits, moreover, were secured by adequate collateral.

6. The Philippine Islands suffered not one dollar of loss in its bank deposits.

7. The Philippine deposits were maintained for a specific purpose and the adequacy of the deposits for that purpose was not lessened by the devaluation of the American gold dollar, while purchasing power for ordinary purposes of the deposits of the American citizens was lowered.

8. The deposits of the Philippine Islands will redeem actually as many Treasury certificates as before devaluation.

9. The statute sought to be repealed gave an unwarranted profit to the Philippine government upon its bank deposits which was denied to the similar deposits of the American States, other public bodies, and to other American citizens, and unless repealed will impose an unjust burden upon the taxpayers of the United States. If the Philippine Islands are entitled to a profit upon its bank deposits there is even greater reason why States, counties, cities, and individual United States citizens should be given an equal profit upon their deposits.

10. There is, therefore, involved in this statute a principle the application of which is not limited to the Philippine Islands. There is involved the interpretation and application of the various legislative enactments of the United States Congress affecting gold clauses and gold coinage in the United States. The application of the principle underlying the statute sought to be repealed to all deposits to which logically applicable would involve many billions of dollars. The following is the statute sought to be repealed:

[PUBLIC NO. 419-73D CONGRESS]

[S. 3530]

AN ACT Relating to Philippine currency reserves on deposit in the United States

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That the Secretary of the Treasury is authorized and directed, when the funds therefore are made available, to establish on the books of the Treasury a credit in favor of the Treasury of the Philippine Islands for $23,862,750.78, being an amount equal to the increase in value (resulting from the reduction of the weight of the gold dollar) of the gold equivalent at the opening of business on January 31, 1934, of the balances maintained at that time in banks in the continental United States by the Government of the Philippine Islands for its gold standard fund and its Treasury certificate fund, less the interest received by it on such balances.

SEC. 2. There is hereby authorized to be appropriated, out of the receipts covered into the Treasury under section 7 of the Gold Reserve Act of 1934, by virtue of the reduction of the weight of the gold dollar by the proclamation of the President on January 31, 1934, the amount necessary to establish the credit provided for in section 1 of this Act.

Approved, June 19, 1934.

о

S. Repts., 76-3, vol. 3 -18

JUNE 3 (legislative day, MAY 28), 1940.-Ordered to be printed

Mr. HUGHES, from the Committee on Claims, submitted the following

REPORT

[To accompany S. 3329]

The Committee on Claims, to whom was referred the bill (S. 3329) for the relief of Charles E. Molster, former disbursing clerk for the Department of Commerce and the National Recovery Administration; J. L. Summers, deceased, former chief disbursing clerk, Division of Disbursement, Treasury Department; and Guy F. Allen, chief disbursing officer, Division of Disbursement, Treasury Department, having considered the same, report favorably thereon with the recommendation that the bill do pass without amendment.

The purpose of the proposed legislation is to credit the accounts of certain disbursing officers and clerks in the employ of the United States Government, covering certain disallowances in their accounts. The amount of the disallowances is $9,248.29. Your committee has been informed that during the period in question these disbursing officers disbursed over $120,000,000.

The facts are fully set forth in House Report No. 2294, Seventysixth Congress, third session, which is appended hereto and made a part of this report.

[H. Rept. No. 2294, 76th Cong., 3d sess.]

The Committee on Claims, to whom was referred the bill (H. R. 8414), for the relief of Charles E. Molster, former disbursing clerk for the Department of Commerce and the National Recovery Administration; J. L. Summers, deceased, for