Evening star., 1939-10-14
Usury Is Dealt Blow
In Philippines by
Bank Laws
Money Available at
Lower Rates; Once as
High at 20 Per Cent
By WALTER ROBB,

, Chicago Daily News Foresn Correspondent.
MANILA.-The Philippines are an
Ell Dorado for the man who lends
money. About the minimum rate
for merchants accommodations is
per cent year. which goes side by
side with low taxation.
In its last sessions the Assembly
has taken three whacks at this sit
uation, in three banking laws, hop
ing to get rates down around per
cent. More than a century ago, the
canny elector of Hesse and his
agents, the Rothschilds, made them
selves the financiers of Europe at
rates of 3 per cent to per cent. but
the Philippines linger financially in
still earlier age. Usury in Manila
and the provinces is a plague.
The highest legal rate of interest
Is II per cent In loans above that
rate, the anti-usury board takes
hand when it can make a case. An
easy coverup is to make notes for
more than the actual amount the
borrower receives, and put in the
legal rate of II per cent. or even
10 per cent, when actually 20 per
cent or more is being collected.
Quezon Hit at Rates.
However, President Quezon made
1t his concern from the beginning
of his administration three and one
half years ago to make money avail
able at lower rates, and his effort
has had some effect.
An American tax law helps in the
new banking legislation. 1t is the
excise tax of 3 cents a pound on
Philippine coconut oil ton foreign
coconut oils, cents. The cents
comes to the Philippines. Passed in
1884. the tax presumably had the
effect desired, that of raising the
level of prices for American fats
butter, lard, cottonseed OIL
The Philippines take it to buy
United States manufactures, for
their army purchases and to build
roads in Mindanao. Now they will
Use $75 900 900 of it for the new In
dustrial and Agricultural Bank.
This creates new tax-free in
vestment field The bank will make
industrial and agricultural loans,
also commercial loans, and will is
sue, buy. and sell bonds. The bonds
will probably earn 4 per cent to 6
per cent a year. on their par value,
and in pesos they will be equivalent
to dollars two pesos, one dollar in
their relation to gold. They will be
tax-exempt. which will not change
even though in future the law is
amended.
Disregard 1916 Event.
Salvador Lagdameo will be in
charge of this large bank He has
had long American training in the
finance department of the Philip
pine government, and has been the
head of the National Loan and In
vestment Board funds about $25,-
100000. now merged into this new
bank. Like everything financial in
the islands. all should be well while
the political association between the
islands and America continues. But
In these new banks, as in so many
things. no apparent account is taken
of July 4, 1946, the date of inde-
pendence.
The other bank a new law founds
is the Reserve Bank of the Philip
pines, which has capital of $780,
900 in oil-tax funds. 1t will pool
the legal reserves of Philippine banks
to the end that each bank whose
acceptable paper the new bank will
discount may loan right up to the
margin Of it's reserves This adds
millions of bank credit to the needs
of Philippine commerce.
A third act permits the Philippine
National Bank, founded in 1915 as the
Filipinos' first bank. to loan larger
share of its capital and surplus to
farmers. However, it appears that
the Philippine National will turn
that branch of business over to the
Industrial and Agricultural Bank
and gradually change over to COM
mercial banking exclusively.
Plan No Central Bank.
The Philippine National is the
government depository in the is
and agencies, through the Prov
inces, as the new I. and A. will
have, a process made easy by desig-
nation of town and provincial
treasurers as the banks local agents
or representatives. and, where de-
posits are accepted. sending mana
gers trained in Manila.
Because of the tie-up with Amer
lea and the dollar, the Common
wealth will not have a central bank
Functions of such bank are taken
care of by other legislation capped
by the Currency Act that skillfully
articulates the peso with the dol
lar. A man in New York wanting
pesos to buy Philippine sugar, turns
in dollars and gets peso credit in
stantly in Manila, by cable, at nomi-
nal exchange charges.
A man in Manila wanting dollars
in Chicago with which to buy Dia-
mond T trucks, for example, turns
pesos in to his Manila bank and
gets dollar credit set up in a Chi
cago bank, again at only nominal
charges.
Dollar Exchange Easy.
If a Manila bank is short of pesos
that means it is long on dollars in
New York-its Philippine customers
have been selling commodities
briskly. So it sells the Philippine
treasury some of these dollars, at
the nominal rate, and takes its pay
In pesos.
So this currency runs along. al
ways quite in step with its obliga-
tions. and all the sales of manu-
facturers that Americans make in
the Philippines during a year are
either for cash on the line or by
time drafts without discount
IF business now gets lower bank
rates on its overdrafts through this
grouping of banking capital by the
Quezon government. the immediate