When the United States assumed control of the Islands, the affairs of the country were in great disorder. Bands of revolutionists were roaming the country, the uncivilized tribes were addicted to cannibalism and head hunting, sanitation was neglected, epidemics of disease were prevalent, there was no general scheme of education, there were practically no roads and only a few miles of railroad, there was no currency system, the banking system was bad, injustice was prevalent.

All these things had to be corrected and to a great extent have been corrected.

A stable government has been established and order restored, even among the uncivilized tribes.

Roads and railroads have been built. The standard of health has been raised and epidemic and malarial diseases greatly reduced. A good scheme of education is in operation and most popular with the people. In 1914 over 23% of the entire expenditure of the Philippine Government was for educational work. The currency has been reformed, as shown in considerable detail elsewhere. Schemes of taxation, fair and just, have been introduced.

In the Philippines the United States is trying out not only the several kinds of governmental activity with which the people in the United States are familiar, but it is also in the banking, telephone and telegraph, railroad, foreign exchange, fidelity insurance, bond and mortgage, and hotel business.

Apparently these various forms of business which up to date have in the United States proper been left to the initiative and action of private corporations are being quite satisfactorily conducted in the Philippines as departments of the government, as more fully explained in the following paragraphs.

BANKING

Banking practices have been reformed. The state to a large extent took over the regulation of the exchanges, taking the purchase and sale of exchange from the banks. This was undertaken in the first instance in order to stabilize the currency, in connection with the operation of the Gold Standard Fund.

In 1908 the Agricultural Bank was established under government auspices in order to afford means to the planters to finance the growing and distribution of their crops. The original capital of the bank was $500,000. On December 31, 1915, the bank reported that loans outstanding were $2,541,280.

In addition to loans made to agriculturists through the medium of the Agricultural Bank, the Government has heretofore at times made large loans to sugar planters through the Bank of the Philippine Islands, a private institution, but under government supervision.

Until the establishment of the National Bank this was the only independent bank and the largest commercial bank in the Islands. It has a head office in Manila and branches at Iloilo, Jolo and Zamboanga. A recent report shows capital, surplus and undivided profits aggregating $5,957,000, deposits $2,627,000, other liabilities $4,776,000, circulation $5,339,000.

There are also branches of the International Banking Corporation; of the Chartered Bank of India, Australia and China and of the Hong Kong and Shanghai Banking Corporation.

Following is a comparative consolidated statement expressed in pesos, taken from the Governor General's report for 1915, of the resources and liabilities of all the

commercial banks in the Islands at the close of business on December 31, for the years 1915 and 1914.

Current

Accounts

Fixed

984,400.67

Deposits

...

16,600,369.46 15,615,968.79

11,468,664.29 15,042,159.63 3,573,495.34

The Postal Savings Service on December 31, 1915, had 54,434 accounts, to the credit of which was the sum of $1,615,629.

It having been deemed advisable to consolidate the various banking activities of the Insular Government, the Philippine National Bank has recently been organized under the terms of an act of the Philippine Legislature passed in February, 1916.

The authorized capital of the bank is $10,000,000. The Insular Government has purchased and is intended always to hold a majority ($5,050,000) of the stock. Sixty per cent. has been paid in and the remainder is to be paid in annual instalments of 10%. Subscriptions to the minority stock are being received on the same terms from the general public.

The institution is a fully equipped commercial bank, but under governmental control and management. Besides acting as banker for the Government it is doing a regular discount, deposit and foreign exchange business. It is also vested with the function of making loans to agriculturists, and is permitted to issue bonds secured by real estate mortgages properly safeguarded.

The bank is authorized to issue circulating notes but never to exceed 60% of capital and surplus. It is also permitted to issue notes against gold. The bank is authorized to establish branches in the provinces and in the United States. The main office is in Manila. Regu

larly authorized branches are to be opened soon at Iloilo and at Cebu. Twenty-seven agencies have already been established in as many provincial capitals where deposits are received and exchange sold, and at which application for loans may be filed for transmission to Manila.

The bank has taken over the assets and liabilities of the Agricultural Bank, which will cease operations. The bank is the depositary of the Insular Government, of all municipal governments, including Manila, of the Postal Savings Service and of various other institutions. It will probably manage the finances of the Manila Railroad, recently purchased by the Insular Government.

Foreign exchange business has been undertaken by the bank on a substantial scale.

The organization of the bank is intended not only to take care of the needs of the Insular Government and of the Philippine people at home, but also to assist in the development of foreign trade and especially in the development of trade with the United States and to encourage the investment of capital from the United States in the Islands, with the assurance of stable and reasonable accommodation to all forms of legitimate business. Although only established during the spring and summer of 1916, the bank reported on October 25th resources of 37,000,000 pesos, say $18,500,000.

POSTS AND TELEGRAPHS

The Philippine Government has established post offices and telegraph offices throughout the islands.

RAILROADS

The railroad situation is one of mixed governmental and corporate ownership. The lines of the Manila Railroad which serves the island of Luzon are about to be acquired by the Government of the Philippine Islands.

The particulars of the sale, and the reasons therefor, as semi-officially explained, are briefly as follows: "By Act of Congress approved February 6, 1905, the Philippine Government was authorized, among other things, to guarantee the interest on bonds of railroad companies that might be authorized by that government to construct and operate railway lines in the Islands, and on July 7, 1906, the Manila Railroad Company was granted concessions in perpetuity for certain lines on the Island of Luzon including the then existing lines of the Manila Railway Company, Limited. In 1909 this company was granted concessions for further lines the Government desired constructed, and under this supplemental concession the lines of the company were divided into the two systems known as the Northern and Southern Lines, the Government guaranteeing interest of 4% per annum on the bonds of the latter, which includes the line to Baguio. To carry on this construction the Manila Railroad Company entered into a construction contract with the Manila Railway Company, Limited, under which the latter accepted the 4% guaranteed bonds of the Railroad Company at par and was required to find the money for the new construction. In 1911 and thereafter the Government, to hasten construction, found it necessary to make large loans to the Railroad Company. With the advent of the European war the construction company found itself unable to raise funds to carry on construction work and faced the necessity of disposing of its property to best meet its indebtedness, or of going into the hands of a receiver, which would inevitably have been followed by a receivership for the Railroad Company. The Government was thus confronted with the alternative of taking over the stock of the Manila Railroad Company at a fair valuation, or, by permitting the latter to go into the hands of a receiver, of sustaining the loss of a considerable part of the sum loaned to