men coming down from the States, joined with the Panamanians. I do not remember certainly, but my recollection is that the valuation on that property was about $50,000-about ten times what it was supposed to be worth. We tried for months-General Davis did-to buy some property at Corozal that belonged to the Shubers, that had been in litigation with the old French canal company, and they wanted a thousand dollars an acre for this land that was what we call manglares or swamps [indicating on map], lands that we did not think were worth over $5 an acre.

Senator ANKENY. We had a specimen of that in your hospital matter there, if you remember it.

Mr. WALLACE. Yes, sir.

Senator DRYDEN. They are becoming Americanized, I see. [Laughter.]

Mr. WALLACE. They are, very, very rapidly. [Laughter.]

The result was that at Corozal I was not able to utilize ground that was very suitable for buildings. There were buildings on it that the French had there, and we went in and arbitrarily fixed them up and put our men in them. It was maintaining a status quo. We did not put any new buildings on that property.

In this territory down here there are banana plantations [indicating on map].

Senator ANKENY. And they will be submerged?

Mr. WALLACE. Yes, sir.

Senator ANKENY. Under the lock system?

Mr. WALLACE. Yes, sir. And these towns existing along the Panama Railroad [indicating on map].

Senator ANKENY. Approximately, what damage will this Government have to pay if we take those people's lands? That is a hypothetical question, but we want to know that.

Mr. WALLACE. From my knowledge of the people down there and the way they work-I mean the way they work us [laughter]Senator ANKENY. That is the difficulty.

The CHAIRMAN. They do work us, too. [Laughter.]

Mr. WALLACE. They do. On the whole situation, I should judge it would cost $25,000,000 to pay for the land which will be submerged by that 85-foot dam project on the lock plan.

Senator ANKENY. I understand that you would recommend that this be done under the contract system?

Mr. WALLACE. Yes, sir.

Senator ANKENY. That is unequivocal?

Mr. WALLACE. The object of that is this: Simply to get it so that one man can be put down there and do it.

Senator ANKENY. I understand.

Mr. WALLACE. That is all. If we could do that work the way a railroad company or a private corporation would do it, why I would not say so; but from my experience with it, from the utter impossibility of the United States Government carrying on a constructive enterprise in a common-sense, business-like manner, it looks to me as if the only way there was out of it was to put it in the hands of a general contractor. Then, that general contractor, having no interest in it except to get it done, and as quickly as possible

Senator ANKENY. And to get his money?

Mr. WALLACE. And to get his money, can put a man in charge of that work there, and can use methods which it is impossible for us as a Government to use.

Senator MORGAN. Would you turn over the railroad to the general contractor?

Mr. WALLACE. The whole business, lock, stock, and barrel.

Senator MORGAN. How would you arrange about the commercial traffic on the railroad between the seas?

Mr. WALLACE. The great business of the world is carried on by private railroad corporations to-day; and it would be the easiest thing in the world to specify the rates that that contractor shall charge, and you can hold him to his duties as a common carrier a great deal easier than you can hold one of the transcontinental American railroads to its duties as a common carrier. And the proposition is so simple; it is simply taking freight from one dock and landing it on another 47 or 50 miles away.

Senator MORGAN. And having the control of the railroad he could conduct his canal work without injury to the commerce?

Mr. WALLACE. Without any injury to the commerce whatever; and he should be required to do that. If we are spending three hundred millions of dollars to afford the world an uninterrupted line of traffic across that Isthmus at the lowest possible rate, and we can do that through that railroad, and do it now, why should we not use that railroad for that purpose? And as the contractor's work is to be to accomplish that result, he should be required to do it as he goes along, and there is no reason why he could not do it. That railroad is capable of handling and can be made capable of handling any amount of tonnage that will ever pass through that Isthmus, and doing it quickly and doing it economically.

Senator MORGAN. I would like to ask you whether there is not still some complaint in regard to the railroad rates across the Isthmus?

Mr. WALLACE. I do not know. I have not been in touch with it lately, Senator.

Senator MORGAN. I gather my information from the common source of information in this country-the newspapers.

Mr. WALLACE. What I understand is this: The rates across that Isthmus were made in this wise: There was through billing from New York to San Francisco by the way of the Panama Railroad Steamship Line and the Panama Railroad to the Pacific Mail. That rate was very low, and the average rate across the Isthmus, as nearly as I could figure it when I was there, was about $1.92 a ton. In other words, the competition of the transcontinental railroad lines forced the Panama rate down to that figure. The Panama Railroad did not regulate the rate of the through transcontinental lines, but the through transcontinental lines regulated the rate that the Panama Railroad could charge. They could only get what they could out of what was

left.

Senator MORGAN. That was very natural, because they control it? Mr. WALLACE. Yes; all of the ports along the western Pacific coast; each of them bore a different rate across the Panama Railroad. For instance, the railroad rate was dependent upon what the stuff was and where it came from. In other words, coffee from one port might bear $6 a ton and from another port $4 a ton for its passage across the railroad. What regulated those rates was what it cost to take that stuff

around Cape Horn. In other words, the Panama Railroad charged on that traffic what that traffic would bear, up to the last mill.

I understand those rates have been cut in two, and there have been some minor adjustments, but there is no reason why that service should not be rendered to everybody, and to everybody alike, and there is nothing that you are going to do to develop our trade relations with those South American countries that will help out any more or any better than to make out the lowest possible rate that you can on the railroad across that Isthmus and let those people have the benefit of it. That will develop their country and their purchasing power and

increase our trade.

Senator MORGAN. The railroad is under the operation and control of a New York corporation?

Mr. WALLACE. Yes, sir.

Senator MORGAN. That corporation fixes all the rates?

Mr. WALLACE. Yes, sir.

Senator MORGAN. The Commission does not fix the rates; can not fix the rates?

Mr. WALLACE. Yes, sir.

Senator MORGAN. It has been the work of the corporation?
Mr. WALLACE. Yes, sir.

Senator MORGAN. So that the officers of that corporation are the most important officers on the Isthmus to-day connected with the movement of commercial business, and also supplies to the Isthmus of every kind that are necessary to conduct the canal work?

Mr. WALLACE. That is true. And the officers that control the railroad in New York, with very few exceptions, have never been down. there. They do not know what they have got.

Senator MORGAN. In the contract plan that you suggest, it would be necessary to put the control of this railroad, rates and all, in the hands of the contractor, seeing that he did not charge too much? Mr. WALLACE. Yes, sir.

Senator MORGAN. That would be the programme?

Mr. WALLACE. Yes, sir. There is one thing I want to say, if you will pardon me for mentioning it, and that is that the United States Government and myself are the only stockholders in the Panama Railroad. I bought a share of stock in order to qualify myself as a director in the Panama Railroad. I gave the United States my check for it. They bought back an option on that stock, and took my check and cashed it. And they have got my money and they have got the stock. [Laughter.]

Senator MORGAN. The Government seems to be doing pretty well in the railroad business. [Laughter.]

Mr. WALLACE. But, technically, I happen to be the only stockholder of the Panama Railroad, except the United States Government. Senator MORGAN. You delivered up your share of stock, did you not, to the Government?

Mr. WALLACE. The Government has it.
The CHAIRMAN. And your money, too?

[Laughter.]

Mr. WALLACE. Yes, sir. But that, of course, is neither here nor there.

Senator MORGAN. So that, if you were really a stockholder in the Panama Railroad Company and also a director, you would have a very potential voice in the management of the rate question?

Mr. WALLACE. Yes, sir.

Senator MORGAN. And they would not get away from you, would they?

Mr. WALLACE. Not if I had influence enough to do anything.

Senator ANKENY. There is one other point that I had in my mind that I wanted to ask you about: In advocating the contract system, which I understand you do, how would you dispose of your plant; Í mean your machinery, your shovels, etc., which belong to the Government. What would be your suggestion?

Mr. WALLACE. I would turn them over to the contractor.
Senator ANKENY. Everything?

Mr. WALLACE. I would turn everything down there over to him— your shops, your old machinery, and your new machinery, and everything else.

Senator ANKENY. If either type of canal were completed (we will call them, for convenience, the lock and sea level), what, in your opinion, would be the cost of maintenance? Which would be the greater expense to this Government, or which could we maintain easier?

Mr. WALLACE. Of course, it is a very difficult matter to figure on those expenses.

Senator ANKENY. I know it.

Mr. WALLACE. But I should judge you would save at least a million dollars by the sea-level canal; that it would be at least a million dollars cheaper per annum to maintain.

Senator MORGAN. Per annum?

Mr. WALLACE. Yes, sir; per annum.

Senator DRYDEN. That makes no allowance for the capital invested? Mr. WALLACE. None whatever.

The CHAIRMAN. I think we had better take a recess until 2.15. Senator TALIAFERRO. There is one question that I wish to ask, Mr. Chairman.

The CHAIRMAN. Very well, Senator.

Senator TALIAFERRO. You spoke of the estimated cost to the Government of these lands that would be submerged by the lake in the lock-canal plan. What have you to say about the lands that would be submerged by the Gamboa dam?

Mr. WALLACE. The difference is simply this: There is a very small population in the Chagres Valley above Gamboa, and the larger part of the population in the Zone is in the valley below Gamboa. You will find that, as a rule, the more numerous and the smaller the holdings are, the more trouble you will have with them.

Senator TALIAFERRO. As a matter of fact, does not the Government own more of the land than would be submerged by the lakes in the lock plan than they do in the upper Chagres Valley that would be submerged by the Gamboa dam?

Mr. WALLACE. I doubt it. Those titles are very much involved. We supposed that we got from the treaty a sufficient amount of land between La Boca and Corozal. We supposed that we had that. At least I understand that that was General Davis's view and Judge Magoon's view. But we found, when we commenced to dig into it, all sorts of complications in regard to the title. So I think you will find, when you get at it, that whenever there is any particular piece of land that you want that the Government does not own it in such a way as to relieve you from having to pay somebody else for it, just the same.

Senator TALIAFERRO. Have you made any estimate at all of the acreage that would be submerged by this Gamboa dam?

Mr. WALLACE. No, sir; I told you that was just simply a round, off-had guess-that 25,000,000.

Senator TALIAFERRO. I am speaking of the Gamboa dam.

Mr. WALLACE. That depends on the height of water that there will be. I have not the tables with me, but that is worked out in a set of tables showing the area at different heights of water. It is very easily determinable though.

Senator MORGAN. The amount above the Gamboa dam at the time of the Hay-Varilla treaty was made had very little value.

Mr. WALLACE. That is true, both above and below; but there is a very small population above Gamboa. I have been up there, and after you get away from the river it is simply a jungle for miles.

Senator MORGAN. And steep hills?

Mr. WALLACE. And ravines that ramify in all directions. This shows it, approximately [indicating on map], all these depressions you see. There are no inhabitants up in here [indicating on map]. Occasionally, at these little towns, there will be one or two or three families in thatched huts.

Senator MORGAN. There is a little village between Gamboa and Alhajuela, is there not?

Mr. WALLACE. Yes, sir; but it is practically a wilderness after you get above Cruces there.

(The committee thereupon took a recess until 2.15 o'clock p. m.)

AFTER RECESS.

STATEMENT OF JOHN F. WALLACE, ESQ. Continued.

Senator KITTREDGE. Mr. Wallace, what is the character of the material under the dams at La Boca, Sosa Hill, and from Ancon Hill to Corozal, as proposed by the minority?

Mr. WALLACE. I can explain that to you better from reference to one of these maps. At the mouth of the Rio Grande these are mud flats; and the mud, I understand, depending on the depth of the water, is all the way from 25 to 55 or 60 feet in depth-a soft mud or ooze.

In between Sosa and Ancon, of course, there is rock at a moderate depth, but there is soft material in the line of the other dam between Corozal and Ancon. The cross sections of those dams, as shown by the minority report, of course show those depths, but the situation is a little different from what it is at Gatun, on account of the fact that underneath all of this soft material there is practically a bed rock, and the dam is of a more moderate height. It is to contain about 55 feet of water. The difficulties in the way of its stability are, of course, much less than they are at Gatun, but they consist of this: If you put any weight on that soft mud the soft mud is pressed out from under the weight that you put on it, and before you get a stable structure the entire area of soft mud will have to be pushed out from under the dam. If any of that soft mud should be contained in it in a pocket any undue pressure on one side of the dam or the other might cause the pressure of that soft mud to operate along the lines of hydraulic pressure and might impair its integrity at some time.