Evening star., 1923-08-19
SHOWS BIG LOSSES
Of PHILIPPINE BANK
Gen. Wood Reveals Tottering
Condition Caused by
Mismanagement.
Rr tho Assncintel Press.

By the Associated Press.
MANILA. August 16 delayed
Governor General Leonard Wood today
made public his message to the last
Philippine Legislature, dated February
Is, which. he said, was suppressed by
house and senate leaders who did not
even communicate it to the members
of those bodies, supposedly because of
It's uncomplimentary exposition of the
condition of the Philippine National
Bank.
During the last few days leaders of
the democratic party have called on
Governor General Wood and requested
TO see that message, saying they ola
not Vet know its contents. The COVER
nor general, therefore, decided to pub
liSh it.
The message shows that during Its
six years of operation the National
Bank lost S37.345.5 500, representing the
governments entire investment or 9S
per cent of the banks capital stock in
addition to SIS. .346.5 800 in deposits, or
81 per cent of the S23.771 800 which the
government had deposited in the bank
Limit of Debts.
The heavy losses of the Philippine
National Bank are largely responsible
for the increase i'll our bonded in
debtedneSS which is uD to the limit
prescribed by congress-" the message
said.
During the past year bonds totaling
S23.00O,OOO have been sold TO provide
funds for the re-eStahliShment OF our
currency system so that now behlnd
every treasury certificate there is its full
face value in gold and silver. The gold
standard fund for the maintenance of
the parity of the peso Is recognized to
be smaller than desirable, but 1t Is
the limit our Indebtedness permits.
Provision has been made for increasing
the fund TO the desirable maximum
Bonds have been issued for that pur-
pose.
"Other bond issues are TO be made
for developing irrigation and other
public works, imposing additional bur
denS on the treasury department in
the way of interest and sinking fund
requirements and necessitating rigid
economy and increasing our revenues.
This is all a part of the price the
government has had to pay for It's
policy Of entering the field or ousl-
ness"
Has Frozen Credits.
The note says that in addition to
its losses the banks remaining assets.
of which many are of doubtful char
acter, are solidly tied up in frozen
loans and investments and must re-
main so indefinitely. Further. IT says.
the bank is carrying virtually no re-
serves behind its $40. .S37. 500 in de-
notes which it is impossible for the
bank to redeem III lawful money as
required by law.
They (the notes). therefore. are a
constant menace TO the financial sta
bility of the government and private
business" the note continues. For
tunately these notes circulate freely
because the people know the govern
ment is responsible for their redemp-
ton. The underlying fallacy of the
bank was that it encouraged specu-
lation in handling and marketing
products rather than assisting in their
production.
Under the above conditions there
can be no question of the banks in
solvency. In accordance with the or
dinary rule of law it would have been
my duty to close the bank as soon as
this condition was clearly revealed.
1t is unjust for the government to
fail to enforce it's own laws against
an institution of its own creating
while enforcing the same law against
private institutions. In following
such a course private capital is un-
justly Disseminated against and the
foundation of our business prosperity,
which must he based on private ini-
tiatiye, is undermined.
StIn Kept Open.
However, conditions here have been
exceptional, and l felt for this and
other reasons that II would be un-
wise TO close the bank, at least until
after the Legislature had been given
full knowledge of the situation. The
force of necessity has required that
the bank be kept In business despite
the fact it was operated in open vio-
lation of the law, and in competition
with private institutions, contrary to
the governments policy of getting the
government out of business"
The message says the government is
now operating the bank at consider
able loss, operation being limited
chiefly TO nursing along" heavy in
Nolved business estates taken over by
the bank. In addition to the bank
losses, the message points out, the
government has been operating sugar
oil, tobacco. cement and other COM
mercial companies. ''all of which are
involved in huge additional losses"
the amount of which is not stated.
PEACE I'M ISLANDS.