Railways in Mindanao: Then and Now

Department of Transportation and Communications, 2010

 

News is that the National Economic Development Authority (NEDA) has approved a Feasibility Study to proceed for the proposed Mindanao Railway Project. The map above gives an indication of the scope of the proposed railway system.It’s been a long time coming. An overview of railways in the past can be found in The Colonial Iron Horse: Railroads and Regional Development in the Philippines, 1875-1935 by Arturo G. Corpuz. The British, of course, were railway pioneers in the Philippines, and as this report on a US Congressional Hearing in 1904 shows, the Americans were wary of British commercial interests in this regard. See also a 1907 journal article by Frank McIntyre, Railroads in the Philippine Islands.

The Philippine Diary Project gives a glimpse into the first glimmerings of a railway scheme for Mindanao. These glimpses are through the diary of Francis Burton Harrison, former Governor-General, and who served as an adviser to the Commonwealth of the Philippines from 1935-36 and again from 1942-44 (and after independence, on foreign affairs). Aside from having been a chief executive, Harrison was a longtime resident of the United Kingdom and was thus attuned both to British psychology and their reliance on railways, in contrast to the American preference for highways. See Planes, trains, and automobiles from July 16, 2008 for some background:

Courtesy of Augusto de Viana is The railways in Philippine history which, however, so compresses the most interesting years, the 20s to the 50s, as to render that section meaningless. Oh well. Viviana overlooks the ambivalence and even hostility American officials felt towards railways, since it would affect the Philippine market for automobiles… When autonomy was achieved, railroad development accelerated. And the policy debate on highways versus railways also began, along with still-unrealized plans such as a railroad for Mindanao (the development of Maria Cristina Fall’s hydroelectric power was originally envisioned as primarily powering the Mindanao railways: there are interesting snippets on these debates in F.B. Harrison’s diary: as an Anglophile, he was pro-railways, pointing with envy to Britain’s not altogether altruistic promotion of its own steam engine industry in its colonies…

Harrison’s interest in railways can be seen in his entry for October 25-29, 1935, Harrison records an extended conversation with Alejandro Roces, the leading newspaper publisher at the time:

Roces, Sr. advocates a National Transportation Corporation to take over all the motor bus lines –capital required now is about three million pesos but they would take shares or installment payments; they can be run as feeders for the Railroad. Paez agrees with him. Roces advocates moving Bilibid prison out of town and making the site a central market and the hub of motor buses –thus cutting out the middleman. This has been tried in Spain –and is a success.

His interest is also shown by railways-related details he notices. Two days before the inauguration of the Commonwealth (November 13, 1935), Harrison visits Pasay and noticed,

Called at Pasay. Quezon was closeted with General MacIntyre, General Creed Cox (Chief of the Bureau of Insular Affairs), Osmeña, Roxas, Paez and Carmona –I believe they were discussing the subject of the bonds of the Manila Railroad.

Harrison quite early on (the idea was first broached in broad strokes on November 2, 1935, thirteen days before the inauguration of the Commonwealth) was engaged as an adviser on communications, and his first task was advising the Philippine government on how to handle the British owners of the Manila Railway Company. See his diary entry for November 26, 1935:

We then discussed my appointment as Adviser on Communications and he asked me also to help him in the reorganization of the government. He is to put me in touch with Quirino and Paez on the purchase of the Manila RR. bonds from the English.

Harrison seems to have immediately set about getting himself up to speed on the railway situation. See his diary entry for November 27, 1935:

Talk with [James J.] Rafferty and McCreery, who is auditor and acting manager of the Philippine Railway. He said that the Iloilo line, is practically self-sustaining. Cebu is not suited to a railway.

Two days later, he was actively taking up the task assigned him with the railways manager. See his diary entry for November 29, 1935:

Conference 9-10 a.m. with [Jose] Paez over the proposed purchase of the Manila RR. Southern 4’s from the Southern Syndicate. He is much in favor of accepting the British offer, and says that if the plan is carried thru’ the RR. can meet its indebtedness for interest even in bad times.

About a week later, he was being consulted by representatives of investors on what to do, see his entry for December 6, 1935:

[John H.] Pardee wants to know whether the Philippine Railway Co., should pay its Dutch bond holders on a gold basis, or whether the Manila RR. had decided that under American law they could pay only 4%. If so, the Philippine Railway Co., would pay only 4%, because the gold clause was not in their bonds and upon “instructions” from the Secretary of War in the time of Taft this had not been followed by a vote of their board. No written word of this exists in the War Department today.

Three days later, the government position was formally communicated to the new National Assembly. See Message of President Quezon to the First National Assembly on Railroad Bonds Redemption, December 9, 1935.

Politics being what it is, by December 15, 1935 Harrison was noticing political intrigue concerning his assignment on railways:

[A.D. Williams] reported that it is now rumoured that I came out here this time to advance the interests of the English in the Manila RR. bond redemption. (Exactly contrary to facts –as usual). Says Paez insisted on resigning if the bonds are not redeemed. I feel certain we could have made a better bargain with the English; that I could have done it; and that it is legally possible to avoid paying them receipts from the “gold clause” in the bonds, and that the English know it. (N.B. Quezon asked me to prepare “advise” on this subject and then never asked for my opinion.)

Five days after that, Harrison records his discussions with the president, and then with the British consul on December 20, 1935 (along the way it’s an interesting glimpse into the contending interests that come into play whenever any commercial interest is affected by government policies –press, politicians, governments local and foreign, get into the act):

Then I asked him [Quezon] what was the matter with the Manila RR. bond purchase? He said it has been held up to enquire of the United States Government as to whether they considered that the Philippine Government was resposible for the principal of these bonds; they had replied thru the High Commissioner in the affirmative –so Quezon said the bill would go through because this meant that the United States would act on the maturity of the bonds and seize the Customs House. He said that if the American Government had decided this Government was not responsible for the principal, he was going to say to the English that he had been in favour of purchase but the Legislature demands better terms. I told him that this Government was not responsible for principal of these bonds –that just as we had bought the railroad we could sell it. Then he said Confesor (Assemblyman) had told him of F. Theo Roger’s (of Free Press) story that I had come out here to get what I could for the English! He said that he had authorized Confesor to state the true facts in the Legislature –that this impugned his honor as well as my own– that he would put Rogers in prison if he printed such a gross libel. He asked me to bring him the memorandum on these bonds which I had prepared for him on December 6, which I did…

…I then went to home of A.P. Blunt, British Consul General –he did not get there until 8 o’clock, having been at work in his office, getting off in the mail all his reports on governmental development here… As I left, Blunt asked me in a casual voice what had happened about the purchase of the Manila RR. bonds –I said there had been “a hitch.” He eagerly enquired “what hitch?” I said it had been caused by Vicente Villamin’s speech –“ah!” he said “they fear the wily English bankers, whereas our fellows would rather get this agreement now than perhaps lose everything later.” I replied that there was much to be said on each side, but I really thought the deal would go through –(it passed the Legislature just about that time).

The story resumes some weeks later, on January 16, 1936:

I asked him [Quezon] whether he wanted me to talk public business at luncheon, and he replied that he enjoyed it with people he liked. Told him I had just been with Paez and had written for him (Quezon) an opinion on the Manila RR. I advised him to instruct the public utilities commission to stop for the present issuing any more “certificates” or licenses for the bus lines. Said he would do so. Told him it was fortunate he could put the railroad and the busses under one control –other countries could not now do so but he was catching the situation nearly as it began.

I also expressed the hope that he would be able to get the Legislature to agree to permit the Manila Railroad to abandon those branches which were (dead) unprofitable.

(a few days later, on January 20, 1936, Harrison would note that he submitted a memorandum on Manila Railroad plans “for the next few years”). A few months later, the situation seems to have been resolved, as recorded in his diary entry for March 19, 1936:

Quirino said to me that my silver purchase suggestion was “gaining ground.” He also remarked that I had helped in the purchase of the Manila Railroad bonds, because I knew the “psychological background” of the English bondholders.

But this entry is about the proposed Mindanao Railway. And here, Harrison gives insights into the thinking behind the Mindanao Railway –and the opposition to it.

The entries related to a Mindanao Railways plan start on February 18, 1936, when A.D. Williams, the American adviser of the government on public works, makes an inquiry with Harrison:

A. D. Williams came in to enquire whether there was any basis for Quezon’s newspaper statement that it was being considered whether to build main roads in Mindanao, or railroads, which would cost ten times as much and probably be a heavy loss. We agreed that roads were the modern solution, and that a railroad was only justified if leading to a mine or other heavy industry.

A month later, Harrison, on March 17, 1936 notes that Teofisto Guingona, Sr. (who would be Commissioner of Mindanao and Sulu) had a different point of view:

Guingona is in favour of constructing roads rather than railroads in Mindanao.

The clash between these points of views is discussed in his entry for March 25, 1936:

Busy morning at office. Miguel Unson has seen Quezon…

We talked over the issue of railway vs. roads in Mindanao: he says the plan is to take down there that useless railroad outfit in Cebu, and perhaps in Iloilo as well, and to build roads as feeders. I also saw Osmeña for a moment before the Cabinet meeting and he talked on the same subject: says the time has come to decide either for railroad or roads, and not to make the same mistake as in Luzon, where they run parallel.

It seems that the issue continued to remain unresolved –or that those opposed to railways were still lobbying to change the policy. See Harrison’s entry for April 28, 1936:

At Malacañan. A. D. Williams had just come from a conference with Quezon, Paez and Ramon Fernandez; says the President is set on building railways in Mindanao, and “A.D.” and Fernandez tried to convince him they would not pay. “A.D.” said he thought he had offended Quezon still more by replying to his (Quezon’s) complaints that the roads offered too unfair competition to the Manila Railroad, that the competition from trucks was unfair and when they had finally managed by January 1, 1936 to get the tax on trucks raised from one peso to two pesos per 100 kilos, the rate had at once been reduced again. This was Quezon’s own doing on the advice of Geo. Vargas, and they both looked pretty glum.

But the policy remained. See May 8, 1936:

This morning, Quezon gave a press interview to both “foreign” and “local” reporters. Evidently, he had important things to give out. The newspapers published:

(a)  A statement that Davao land “leases” would go to the courts.

(b)  The President contemplates the construction of a 150 kilometer (300!) electric railway between Davao and Cagayan de Misamis, and also would complete the Aloneros-Pasacao gap in the southern lines of the Manila Railroad. The Maria Cristina Falls in Lanao are to be used for part of the power for the first project.

(c)  That the Philippines would sooner ask for immediate independence than wait for the end of the ten years period if there are no prospects of improving the provisions of the economic clauses of the Tydings-McDuffie law.

Still, the opponents of the railways scheme hadn’t given up, as recorded in this entry for May 9, 1936:

[A.D. Williams] told me again of a talk with Quezon concerning transportation. It arose out of a project to build a wharf for the Cebu Portland Cement Co. Williams pointed out that this would reduce the revenues of the Cebu Railway. Quezon replied: “our guarantee of interest on the bonds expires next year. We will have to buy the road and move it.” Williams agreed and suggested moving it to Negros. Quezon remained silent. What he wants is to move it to Mindanao which Williams opposes since he believes that a railroad would be so much more expensive to maintain and operate than roads.

The policy, however, still remained. As the entry for May 18, 1936, the railways head was dispatched to Mindanao to conduct an inspection:

Quezon returned from Hong Kong and after a day at Malacañan left for Baguio. His office work is greatly in arrears and is in confusion. Vargas handed me a memorandum prepared by Quezon dated April 14 in Iloilo, addressed to me, (and unsigned) asking me to prepare papers to carry out the recommendations of the annual report of the Manila Railroad Co. This I received May 18!! Vargas says he found it “on the boat” (Arayat?). I hardly think it was meant for me, anyway, but probably for Paez who is away inspecting the line for the proposed railroad in Mindanao.

A month later, the lobbying of the National Assembly included a pitch for the Mindanao railways scheme, see June 6, 1936:

Before making wharf at Iligan, Quezon addressed the Assemblymen, asking for funds for the development of Mindanao. He used maps, and said that an electric railway was to be built from Misamis, via Bukidnon to Davao, the water power for this project coming from the falls in Lanao. Only four or five of the Assemblymen had ever been in Mindanao before. The gathering seemed to be willing to vote the money, but wanted to know how they were to get the colonists? Quezon replied “Open roads, and they will come of themselves.”

These behind-the-scenes stories in Harrison’s diaries, help provide context to the official declaration of policy in the Second State of the Nation Address, June 16, 1936 in which the railroad bonds, and future plans, including the expansion of the railways system, were discussed:

Manila Railroad Company –A very important measure approved by the National Assembly is Commonwealth Act No. 4 providing funds to be loaned to the Manila Railroad Company for the purchase, before maturity, of certain outstanding bonds of the said Company. In accordance with the provisions of this Act, I directed the Insular Treasurer to loan to the Manila Railroad Company P9,900,000, and authorized the Philippine National Bank to use P3,360,000 of its funds in the purchase of said bonds.

On January 29, 1936, upon payment to the Manila Railway Company (1906) Ltd., through the Chase National Bank, New York City, of the sum of $6,698,631.41 covering the principal, interest and exchange premium, all of the Souther Lines 4 per cent gold bonds maturing May 1, 1939, held by the English Company, with par value of P16,340,000, were delivered to the order of the Bureau of Insular Affairs, Washington, D.C., acting as representative of the Commonwealth Government and the Manila Railroad Company.

The successful culmination of this exceedingly important transaction resulted in great financial advantages to the direct benefit of the Manila Railroad Company and indirectly of the Commonwealth Government, which is the sole owner of the property. The following estimates indicate in round figures the savings that will be effected between now and the maturity of the bonds:

Total face value of the bonds held by the Manila Railway Company (1906), Ltd. …………….. P16,340,000.00
Cost at 80 per cent of face value …………….. 13,072,000.00
Savings in principal …………….. 3,268,000.00
Less –premium …………….. 165,500.00
Net saving in principal …………….. 3,102,500.00
Normal 4 per cent annual interest on English Company holdings P653,600.00
Normal interest for 1936, 1937, 1938 and half of 1939 2,287,600.00
Premium for 3-1/2 years at P441,180 each year 1,544,130.00—————— 3,831,730.00—————————–
Total …………….. P6,934,230.00
Less-
2% on P13,350,000 for 3-1/2 years 934,500.00—————————–
Total savings in principal and interest …………….. P5,999,730.00================

The above savings on the English Company holdings are based on the principal of the bonds being redeemed at maturity at their face value. However, both the principal and interest are subject, at the holders’ option, to payment in certain European currencies at the former gold equivalent, and if this option should be exercised covering the principal at the time of maturity, the amount necessary to redeem the bonds being held by the English Company would, on the present basis of exchange, represent a total sum of approximately P27,287,800. The purchase of these new bonds at this time for the sum of P13,072,000, therefore, means a saving in interest and principal of about P14,200,000 besides a savings in interest and premium amounting to about P2,900,000 after allowing for the two per cent interest on the loan from the Government, or a total saving of about P17,100,000.

The investment of the Government in the Manila Railroad Company including bonded indebtedness of the Company all told amounts to approximately P28,000,000. This is a respectable sum for any Government and doubly so for a Government whose yearly revenue at present is around P78,000,000 and at its highest peak only reached the total of P92,783,173.70.

Bus and truck transportation due to improved roads in the northern and central provinces of Luzon have caused a large decline in the income of the Manila Railroad Company. We cannot afford to allow this situation to continue and permit the Government to suffer tremendous losses in railroad operation, for the time might come when the Government would either be compelled to suspend the operation of the Railway or carry a yearly financial burden that sooner or later would bankrupt the National Treasury.

The Manila Railroad was acquired by the Insular Government in 1917 in order partly to withdraw from foreign hands the control of our most important means of transportation at that time. Soon after the Government assumed the administration of this property, the railroad began paying interest on the bonds from its revenue, and even extended some of its lines with its own resources. Only during the last two or three years has the income of the railroad begun to decline due, as already stated, to bus and truck competition. If it should be found advisable, I am prepared to authorize the Manila Railroad Company to purchase some of these competing bus transportation companies or else to have the Government establish and operate its own bus and truck services. The Constitution expressly authorizes the Government to establish and operate means of transportation and communication, and, upon payment of just compensation, transfer to public ownership utilities held by private individuals to be operated by the Government.

Another step that must be taken at once is the completion of the railroad line to the Bicol provinces. This, I am informed, will make the southern lines a paying enterprise. In pursuance of the authority vested in me by law, I have directed the Secretary of Finance to purchase P3,000,000 worth of stocks of the Manila Railroad to finance the completion of the Aloneros-Ragay line. It is my understanding that to complete the road the Government will have to invest only P700,000 more in addition to the P3,000,000 referred to above.

But this amount will have to be greatly increased if the Manila Railroad Company is not given permission to abandon the Legaspi-Tabaco, Las Pinas-Naic, Rosario-Montalban and Batangas-Bauan lines which are absolutely unnecessary from the point of view of public convenience and which, consequently, are causing an annual loss of about P100,000 to the Railroad Company. Once these lines are abandoned their materials and equipment will be used in the construction of the Aloneros-Ragay line.

I, therefore, earnestly recommend that a law be enacted authorizing the Manila Railroad Company to abandon the lines above mentioned.

After this, there isn’t any discussion on the Mindanao railways scheme, as Harrison resigned as adviser in 1936. As a postscript, the last mention of railroad planning in Harrison’s Diary is on December 23, 1938 when, during a visit, he mentions the recently-completed Bicol Express:

Staying with the President alone at the Guest House across the Pasig River from Malacañan Palace.

At luncheon we had Don Alejandro Roces, proprietor of the T.V.T. newspapers and Paez, manager of the Manila Railroad Company. Paez told of the success of the new branch of the railroad in the Bicol Provinces –at last, they have through connection with Manila and it is no longer necessary to cross Ragay Gulf by steamer. Quezon mentioned that he had refused the request of residents of those provinces for a highway parallel with the railroad.

For the official record on this, see the Fifth State of the Nation Address, January 24, 1939:

The Manila Railroad Company has at long last completed its southern line. The gap which existed for many years between Tayabas and Camarines Sur was connected at a cost of about P2,000,000. This was one of my dreams that have come true. The significance of this achievement will be readily seen when we consider the fact that a daily, comfortable, fast and inexpensive communication service has been established between Manila and the Bicol provinces. At the same time the completion of this southern line means increased earnings for the railroad.

Some photos (click to enlarge):

 

The Hondagua reception committee consisted of the crew of a Manila railroad boat.
Railroad officials inspecting the construction of the Sinuknipan Bridge along the new railway line
Government officials and assemblyman welcomed Commissioner McNutt and President Quezon
Coming down
A big crowd cheered the gayly-decorated special trains bearing guests of the Manila Railroad Company as it reached Del Gallego
High Commissioner Paul V. McNutt, President Manuel L. Quezon and Speaker Gil Montilla at the historical stone marker
The historical stone marker unveiled by Commissioner McNutt
Another partial view of the unveiling of the stone marker at Del Gallego, Commissioner McNutt (left) and President Quezon are shown standing before the marker in the background
Manila-Legaspi Line Inauguration
Line to the South

We can catch glimpses of the continuing story, also in the official record for the next two years:

Sixth State of the Nation Address, January 22, 1940:

In addition to this public debt, however, the Manila Railroad Company has an outstanding obligation in the amount of P26,472,000 for which no sinking funds are being provided. In order to protect the credit of one of our most im­portant enterprises, the Government will have to as­sume the payment of this debt maturing in 1956. I recommend that the National Assembly consider a plan establishing a sinking fund for these obliga­tions from the proceeds of the excise tax in the event the Manila Railroad Company is unable to provide therefore.

Seventh State of the Nation Address, January 31, 1941:

With the completion of the Tayabas-Legaspi section of its main Southern Line, the Manila Railroad Company has been enabled to maintain through train operation between Manila and Albay…

The Manila Railroad Company has also outstanding bonds amounting to P28,718,000.00. We have taken steps to enable this company to redeem its outstanding bonds upon maturity. For this purpose the National Assembly last year appropriated P7,000,000 from the Coconut Oil Excise Tax Fund. The present program of the Government contemplates further yearly appropriations from this same Fund until the total bonded debt of the Manila Railroad Company is fully covered.

World War II would put an end to railway schemes. In the years that followed, the story would be destruction and trying to rehabilitate the railways system.

See the two-part series by in the Cebu Daily News: “What happened to the Philippine Railway Company?” on June 12, 2014 and June 19, 2014.

See Statement of the Presidential Spokesperson on the restoration of rail service between Manila and Bicol on June 29, 2011:

The Bicol Express commenced in 1938 when, half a kilometer from del Gallego town proper in Camarines Sur, a golden nail was driven into a railroad tie, marking the meeting point of the south and north railroad lines and so officially linking Manila and Legaspi City by rail. The devastating weather of the early 1970s devastated the South Railway, and only token efforts were made to restore rail services. The railway was only rehabilitated in 1985, but deteriorated again soon after that. Then rail service between Manila and Bicol ceased in 2006 due to typhoon damage.

See also The Railways and Industrial Heritage Society of the Philippines website.

 


August 31, 1945, Friday

I have been asked many times how the Japanese financed themselves during their regime.

They came here bringing with them Japanese military notes. It can be assumed for certain that those notes are not backed by reserves. There is nothing behind it except the backing of the Japanese government. As a matter of fact, they are not currency or money. They are in reality requisition slips. Instead of forcing the Filipinos to give them food, equipment and materials, they found this indirect and less painful way of attaining their wishes. At the beginning the circulation of the currency of the Commonwealth was allowed. Following the economic law that bad money drives away good money, the latter soon disappeared in the market. Later, the Japanese made the circulation of the currency of the Commonwealth illegal. Those caught exchanging military notes for Commonwealth notes were taken to Ft. Santiago and punished for committing a hostile act.

The Japanese government then established the Southern Development Bank. They did not use the two Japanese banks, the Yokohama Specie Bank and the Taiwan Bank, except that the Taiwan Bank was used to liquidate the American and other foreign banks. As a matter of fact, the Southern Development Bank was not a bank but acted as a branch here of the Japanese Government Treasury. It was given the sole power of note issue. All the military notes were distributed through it. I had numerous discussions with the Japanese as to the nature of these notes. They have always insisted that they were Southern Development Bank notes, whereas I always maintained that they were Japanese Government notes. I did not feel it proper for the Philippine Government to deal with a private bank.

The Japanese, unlike the Americans, practically made the countries occupied by them defray all the expenses of their Army. They did this by means of the issuance of military notes. I also have no doubt about this as I happened to see the Japanese Government budget. In the statement of income, there was included what was called Contribution of the Southern Islands. (I was not sure what they called it, but I am sure that there were billions — 17 billion as I remember — provided as income from the Southern Islands.) As there was no direct request for funds, necessarily they must come from the proceeds of the military notes. They cannot ask for direct contribution because nobody or very few would give. This was shown when subscriptions were opened for the Philippines to buy and donate an airplane to Japan. Very little was collected and the project was stopped. It would not have been possible to collect a sufficient amount to buy even a small airplane unless force was used, as was done in many cases. As a matter of fact, those military notes were no more, no less than requisition slips. The whole financing of the Japanese, including the expenses of the Army and Navy and what they called war development companies, was exclusively handled by the Southern Development Bank.

This bank made every effort to exercise all the powers of a Central Bank and of a clearinghouse. It insisted that all the other banks deposit their funds with it, especially the reserves of the banks. I opposed this very strongly. I was willing to stake even my life to uphold my view. All the bank managers naturally were afraid to have any sort of issue with the Japanese. I told them that they need not assume any responsibility. I gave them orders not to deposit with the Southern Development Bank without my express authority and order. At that time, there were already on deposit in the Southern Development Bank funds of the different banks amounting to about 1000,000,000 pesos. About three-fourth or four-fifth of the funds belonged to the Philippine National Bank.

It must be stated in this connection that at the beginning I had no supervision over the Philippine National Bank. Supervision was being exercised by Malacañan. The reason was that the P.N.B. was a government corporation and Malacañan was in charge of all national companies. Later, I found out that it was Executive Secretary Pedro Sabido who was handling P.N.B matters. Even after his appointment as Minister of the new Department of Economic Affairs, he attempted to continue exercising the powers; as a matter of fact, after his appointment, he became even more insistent. He contented that the supervision of the Philippine National Bank properly belonged to his department since the bank was a government corporation and his department was in charge of all government corporations. He further contended that the Department of Economic Affairs should control the Philippine National Bank to enable it to realize the purpose for which it was established and also to facilitate the financing of the national companies.

Finally, he contended that, under the law, the Secretary of Finance is already the head of the bank, and it is not proper nor advisable for the Secretary of Finance to be also the Supervisor; otherwise; the Secretary of Finance would be supervising himself. I refused to devote much time and words to the discussion which was academic. So far as I was concerned, the argument I emphasized was that I found it impossible to supervise the banking and financing business unless all the banks were under me. Supervision over the P.N.B. was especially necessary since at least 70% of banking transactions in Manila was handled by the Philippine National Bank. I concluded in a memorandum to Pres. Laurel that if he decided to deny my request, I would strongly recommend that the supervision over all banks be transferred to the Ministry of Economic Affairs. After due consideration, the President told me that he fully agreed with me and he would immediately issue an order accordingly.

Days and weeks passed, the order did not come. I found out that the Minister of Economic Affairs was very insistent. So the President decided to submit it to the Council of State composed of Chief Justice Ramon Avanceña as President, and Don Miguel Unson, Don Pedro Aunario, Don Rafael Corpus, Don Ramon Fernandez and Don Jose Paez. The Council considered the matter very thoroughly and even heard the arguments of Minister Sabido. The President, and this was confirmed later by Don Miguel Unson and Don Rafael Corpus, advised that the Council upon preposition of Don Miguel Unson, decided unanimously in my favor. He assured me that he would issue the order forthwith.

Days passed; weeks passed, no order came. I decided to prepare the order myself and give it personally to the President. It was not signed and issued. I prepared another and left it with the President. After a few days, I asked him about it. He was surprised that I had not received it yet. I prepared another and this time I did not leave Malacañan without the President’s signature.

After the President signed the order, I immediately called Mr. Carmona, President of the P.N.B.. I must first state that under the order, I had all the powers of the Board of Directors of the Bank. I asked him about the deposits. He told me that he had submitted the matter to Malacañan and that no objection had been expressed on the part of Malacañan to the existing arrangement. When I asked for a written authority, he advised that he had not received any and that his experience was that he got no action from Malacañan on matters taken up by him, or at least action was delayed for weeks and even months.

I asked him to explain how he happened to have such a large deposit in the Southern Development Bank. He answered that from the very beginning the military people as well as the Manager of the Southern Development Bank requested him and even ordered him to deposit all excess funds of P.N.B., or funds not needed for ordinary daily transactions, with the Southern Development Bank. Pressure was used so that he had to make some deposit, but he assured me that it was far from what he could have deposited.

The Japanese reorganized the clearing house. Under the new system, all clearing balances were kept by the Southern Development Bank. There was no liquidation and the funds could be withdrawn only when the corresponding bank needed funds. So the deposit of P.N.B. in the Southern Development Bank increased everyday. This was also true as regards the other banks, Bank of the Philippine Islands and Bank of Commerce. They were also being required to make deposits. They said that they had to conform unless they wished their banks closed and their officers accused of a hostile act. I ordered them not to deposit. When they expressed fear, I told them that they should tell the Japanese that, per my order, they had to secure my approval. I also told them to withdraw their balances in the clearing house from the Southern Development Bank.

Mr. Hariguti Takahashi and the Manager of the Southern Development Bank came to me to request me to authorize the deposits. I flatly refused. This is one of many similar incidents I had with the Japanese. One instance was when a large Japanese sugar concern wanted to acquire the Philippine Refining Co., which was owned by the government and practically had the monopoly of sugar refining in the Philippines. An official of the company was told that an unfavorable recommendation from him would be interpreted as a hostile act. I told him to tell the Japanese to talk to me. The Japanese never came to see me. Another instance was when the Japanese Army proposed that the Textile Department of the National Development Company be constituted into a separate company and recapitalized with equal participation of the Philippine and Japanese governments. The participation was later changed to 40% for the Japanese and 60% for the Filipinos. I was made to understand that the plan had already been agreed upon by somebody in Malacañan. I prepared a memorandum strongly opposing the plan. The reason I gave was that the National Development Company, as any other national companies, was formed not for profit but rather to carry out national economic policies. Another time was when Colonel Utsonomiya, later promoted to General, approached me to ask me to allow the importation of opium. I told him that the laws prohibited the importation of opium and penalized its sale. Twice the Colonel approached me. I maintained my position. When it came to protecting our people and their rights, I ignored consequences absolutely.

In connection with the banks, a Japanese officer came to see me. He said that it had been reported to them that in the Ministry of Finance, there was somebody who was anti-Japanese and always worked against them. I knew it was merely a ruse. I answered that I assume responsibility for anything done in the Ministry of Finance.

Mr. Carmona wisely did his best to attain our purpose without unnecessary exposition. Carmona was so capable and prudent that he was able to withdraw a very good portion of the deposit and to maintain the deposit at a very low level.

My views and actions were fully reported to the President and he approved.

I had many other incidents. During a bombing raid, a boat loaded with military notes was blown up and all along Malate and Ermita, it rained notes. They were picked up by the people and spent. The Japanese who had the serial numbers of the notes prohibited the circulation. I protested on the grounds that the notes were already in the hands of innocent persons. For instance, there was Mrs. Mariquita de Ocampo who sold her furniture for 7,000 pesos as she needed the money. Afterwards, nobody would accept her money. What fault had she committed? Finally, the notes were accepted.

The Japanese wanted the administration to be self-supporting. They themselves prepared and imposed the approval of tax laws. From the beginning, my plan was not to change our tax laws; not to burden the people with more taxes than what they had to pay before the war. But how do we finance the government? Of course I had to make it look like I was trying to increase the income by means of assistance of our people. So I did not object to the increase in the income tax law, although I insisted that low incomes not be taxed and larger incomes not be taxed as heavily as in other counties. This is also the reason why I sold an amount of bonds instead from where I proposed to get the money.

Even during the time of the Commission, we borrowed money from the Army, It reached the amount of ₱23,000,000. During the Republic, I secured a credit of over ₱100,000,000 from the Bank of Japan, about ₱50,000,000 of which I got through the Southern Development Bank. When I submitted it to the Cabinet, there was some opposition. I did not argue, but after the meeting I explained to Minister Osias who was the one strongly opposed that my purpose was to charge to the Japanese as much of our expenses as possible. The Japanese Army after the establishment of the Philippine Republic tried to collect our previous indebtedness of ₱23,000,000. I declined on the ground that the Executive Commission was a mere instrumentality of the Japanese Administration. The amount was never paid.

Returning to inflation, I could do nothing as the Japanese did not want to give any power which would enable me to do something. I thought and thought about what to do until I came up with the idea of establishing a Central Bank if I could get the Japanese to approve my conditions. Some of them were: (1) That the Central Bank shall have the sole power of issue of notes. With this I meant to curb the unbridled issue of notes by the Japanese and the unlimited grant of credits to Japanese companies. (2) That the Ministry of Finance shall have jurisdiction and power of supervision over the Japanese banks. I demanded this most important power to control large credits given by the Japanese banks to Japanese companies and nationals. (3) That the Central Bank shall be the depository of the reserves of the other banks. And (4) That the Central Bank shall handle the clearing house balances.

The Japanese were opposed to my plan at the beginning, but in view of the fact that we were a Republic and they therefore could not openly deprive us of the right to exercise powers belonging to all independent states, they changed their tactics. They instead did their best to delay the establishment of the bank. They put up all kinds of objections and suggested many modifications. They wished preferential treatment or at least equal treatment for Japanese banks. I could not of course accept this. Mr. Haraguti, while I was speaking before the National Assembly about the establishment of a Central Bank, sent me a memorandum. I got the impression that he was opposed to it or wanted to delay it. I immediately suspended the proceedings and charged that Mr. Haraguti was out of line. He immediately saw me and tried to explain that such was not his intention. I know English well, I believe, and I had no doubt that my interpretation was correct.

The bill was approved by the Assembly but upon the request of Speaker Aquino a provision was inserted to it so that the establishment of a Central Bank would depend upon the promulgation order by the President. Aquino at the beginning was strongly opposed to the bank; later, he withdrew his objection but was evidently not interested in its establishment. However, the Japanese had not given up. We had no facilities here for the printing of notes and this had to be done in Japan. We prepared the necessary designs. We were told that all the printing presses were busy printing notes for other countries and that they could not begin making delivery until May, I believe of 1945. I went to Japan where I made every effort to expedite it but in vain. I was told that the delivery had to be periodic and the amounts for each period could not be very much. The matter remained in that state until hostilities in the Philippines began.

Another reason why I wanted the Central Bank was that I did not want to have a shortage of notes. We had a terrible crisis about the first months of 1944 because the ships used for transporting the notes were probably sunk or blown. The Japanese banks had no more available notes and the Southern Development Bank had only about ₱10,000,000 in notes of 10, 20 and 50 centavos. The Japanese banks suspended payment, and there was a run in all the banks as the public feared that the banks had no more funds. The Japanese banks, including the Southern Development Bank, wanted to get the notes of the Filipino banks. I refused to authorize the Filipino banks to loan their funds to the Japanese banks. I also instructed the Manager of the Philippine National Bank to withdraw a part of its deposit from the Southern Development Bank. We were all very much worried. Stoppage of payment of banks would paralyze business. All demands for withdrawal in Filipino banks were met. The Philippine National Bank, however, had to offer notes in small denominations. Generally, those wishing to withdraw big amounts desisted as the package of the money would be quite bulky. After a few days, shipment of notes came and the crisis passed. Because of this, I inquired about machines and materials in the Philippines that could be used in case of shortage of notes. We could print here but in limited quantities.

* * * * *

We heard on the radio that Truman had said that the Philippines might have her independence in 4 or 5 months. This means that we may have our independence by next January. I welcome it; I want to have it right now. We would have been spared the loss of billions of pesos and thousands of lives if only people ceased to be mentors of other people.

This means the election will have to be held soon. We may not even be able to take part in the elections. Until we are cleared, we cannot be of much service.

According to the radio, Ambassador Vargas was found in Tokyo and he is a very worried man. He was generally criticized for having been very weak with the Japanese. We were aware of it and we thought him a useless man and an incapable executive. But after we reflected, it may well be that under the circumstances, he did what would be of the greatest benefit to the people. Supposing that instead of getting the confidence of the known murderers, the Japanese, he had fought and defied them. He becomes a hero. But he sacrificed his country for w would have meant direct or almost direct rule by the Japanese. Instead of 200,000 dead, we probably would have had to mourn the loss of millions of our countrymen. Vargas has done much for our country.


July 31, 1945 Tuesday

Yesterday, I received a long letter from my wife containing plenty of news.

Immediately after the occupation of Manila, Gen. Maeda, Chief of Staff of the Army of Occupation, sent a message to Vargas, then Mayor and a ranking Member of the Cabinet, giving instructions that a governmental organization be created to carry out the policy of the Japanese contained in a proclamation issued by Gen. Homma, Commander in Chief, par. 3 of which provides:

The authorities and the people of the Commonwealth should sever the relations with the United States of America and trust the just and fair administration of the Army, obeying faithfully all its commands, cooperating voluntarily with it in its stationing and activities here and supplying military supplies when asked.

In his inaugural address at the opening session of the First Congress of Philippines on June 9, 1945, Speaker Jose Zulueta quoted the declaration of prominent people (34) assembled at the house of Speaker Yulo in response to Gen. Maeda’s orders.

In response to the Message of Your Excellency as Commander-in-Chief of the Imperial Japanese Forces, on the 8th of January 1942, through Hon. Jorge B. Vargas, we have duly taken note of the contents thereof and respectfully express our gratitude for your Excellency’s words of solicitude over the welfare of our people.

We beg to inform Your Excellency that, in compliance with your advice, and having in mind the great ideals, the freedom and the happiness of our country, we are ready to obey to the best of our ability and within the means at our disposal the orders issued by the Imperial Japanese Forces for the maintenance of peace and order and the promotion of the well-being of our people under the Japanese military administration. Consequently, we have constituted ourselves into a provisional Philippine Council of State and we are immediately proceeding to draft our Articles of Organization in line with your Excellency’s advice.

I am not sure that the above is the exact text of the letter we signed. I took notes of all that happened and what were said in the meetings held in the house of Speaker Yulo, but unfortunately I lost them all when my house was burned.

I recollect very distinctly that we drafted and redrafted our answer many times. In the original draft instead of “advice” in the second paragraph it was “order”, we wanted to make the people know that we did not voluntarily offer our services, but that we were ordered to organize some form of administration. Our proposition was not accepted by the Japanese and we had to accept “advice” as a substitute. Instead of the “great ideals” and “freedom”, we used “independence” in the original. It will be remembered that from the very beginning we did not want to accept anything unless the independence of our country was assured. Without such assurance we were prepared to suffer whatever consequences our refusal may bring. The Japanese, on the other hand, did not want anything inserted referring to our independence. But in view of our insistence, they communicated with Tokyo for instructions. Tokyo apparently agreed to our demands; in fact, on the 21st of January, Premier Tojo delivered a speech before the Diet which, among other things, announced their policy of granting our independence upon compliance of certain conditions. The authorities, insisted in the use of “grand ideals” and “freedom”. Upon an inquiry, however, this was clarified to mean independence.

The inaugural speech of Speaker Zulueta was pronounced unanimously as an excellent speech. It showed that Mr. Zulueta has matured to statesman. His defense of the collaborators was superb. His statement of facts, however, was not exactly correct. We did not immediately constitute ourselves as Council of State. The meetings in the house of Speaker Yulo were informal. Those who attended were called by the Speaker to consider the order of the Japanese Military authorities. The statement in our answer about constituting ourselves into a provisional Council of State was the first mention of any Council of State, and as may be seen, it was only provisional and had yet to be approved by the Japanese military administration.

A newspaper has published that persons close to official circles have given the news that “small collaborationists” may be released when the Japanese pockets still in existence in the Philippines are wiped out, inasmuch as military security could no longer be endangered. “Big collaborationists” like members of the Cabinet of the last Republic, will be detained during the duration of the war, but they may be released upon the guarantee of the Philippine government.

To me, this is not good news. Why should there be any distinction between big and small? Insofar as military security is concerned, the small collaborationists are just as dangerous, if not more dangerous, than the big collaborationists.

The guarantee required of the Philippine government will place us in the vortex of politics. We will be placed into the hands of politicians. This is precisely what I have been fearing. I fear that our release or continuation under detention would depend upon whether it will favor or prejudice the political aspirations of the official concerned.

In connection with our letter mentioned previously, it should be added that we purposely used the word “obey” in order to indicate that we were being ordered, thereby attaining the purpose we had in wishing to use the word “order” in the first part of the second paragraph.

On July 25, 1945, there was a Reuter’s dispatch from Washington, substantially saying as follows: Senator Albert Chandler (Democrat, Kentucky) and a member of the Senate Military Affairs Committee told Reuter today, “I shall make use of the Senate Debate on the ratification of the San Francisco Charter to bring to the attention of my colleagues the question of the political future of India.

“I have studied with great care the reference in the Charter to dependent territories, and I would like to clarify the position that India would occupy in this new world organization.

“The Charter promises ultimate independence to all countries and I would like to know what steps can be taken by the new organization to bring about India’s complete freedom and independence.”

The Senate voted against the United States’ participation in Pres. Wilson’s League of Nations. This time the participation in the new league was approved and thus commits America to full-scale cooperation in the New World order. There are many causes of the failure of the former League of Nations. To me, one of them which I consider one of the main causes, is the failure to draw in the United States. Any world organization without the United States cannot endure. This is not only because of the greatness and importance of the United States among nations but also because she has assumed a virtual protectorate of the North and South American continents. This protectorate will extend to the Philippines.

I have already commented on the San Francisco World Charter insofar as its provisions referring to dependent peoples are concerned. I criticized this provision for not being clear and specific enough. There should not be the least doubt that the Charter will insure independence to small states and dependent peoples. Colonization must be eliminated for all time. This is necessary, not only to prevent wars between two or more nations, but also to avoid revolutions, rebellions, massacres, or just individual cases of killing, imprisonment or political persecution. If this policy had been implanted about the middle of the 17th century, there would not have occurred the American revolution; there would not have been recorded the many bloody revolutions of South American countries; we would not have suffered on account of our revolution against Spain. Rebellions of dependent peoples have caused death and untold suffering of a great number of people. Massacres, like that of Amritzar, India, have taken place because of the libertarian movements on the part of the people. How many lives have been lost for the cause of liberty! How many have languished in Britain for heading or championing separatist or liberal movements! How many have been deported, banished from the country that has given them life, and separated from their dear ones! All these horrors must be prevented at all costs.

* * * * *

            Autograph hunting continues. To Dr. Lanuza, I said: “Together we shall be up to the end of the journey.” What I mean is that having suffered together we shall be united in all efforts to win our vindication and to serve our country.

To Mr. Carmona: “I shall never forget the days when we together shared equally the joys and sorrows of life. This has cemented the friendship which binds me with you.”


July 6, 1945 Friday

Yulo continued to be very bitter against everybody. He has lost confidence in Osmeña and in Roxas in so far as our situation is concerned. As to MacArthur, he says MacArthur will do only what would be for his own convenience. He thinks Osmeña is useless. As to Roxas, he resented the fact that both of them journeyed from Baguio to La Union together, and then to Manila together, and afterwards, Roxas left him. Since then, they have not seen each other.

It is reported that Osmeña at one time planned to prevent the election of Roxas as President of the Senate. He wanted Yulo to return to make him his candidate for the position. This was never carried out.

It was also reported that Roxas had said that Congress had nothing to do and could do nothing in our case, and that it is only the military that could decide our case. This report depressed us. But the news was clarified by the letter of my wife. She said that she, accompanied by Mrs. Recto and Sen. Rodriguez, went to see Pres. Osmeña in his office. The President received them amiably. My wife went there to intervene in my behalf. The President told them that he cannot do anything now as we are still under the military, that he had already requested that we be transferred to the Commonwealth, and that once transferred he would be able to do something. According to her, Roxas paid her a call at our house. He said practically the same thing — that nothing can be done now, but that he has already asked Gen. MacArthur to turn us over to the Commonwealth. He would do his best for us, and if necessary he will go to America.

Today, news came that the military campaign in the Philippines had been declared closed. This may accelerate our transfer to the Commonwealth.

* * * * *

It seems almost definite that the elections will be held next November and that the opposing candidates will be Pres. Osmeña and Roxas. There is quite a difference of opinion as to whether it will benefit us or prejudice us. The general opinion seems to be that it will favor us. Recto upholds this view. They say that both will try to do everything for us with the expectation that we would help whoever could get us released. They are aware that we here hold the balance of power and that whoever we support will come out.

My opinion is different. I believe the effect will be just the reverse. Each would not be a candidate unless he is reasonably sure that he can win. They would be thinking: Why allow a new element to come in which may deprive him of his chance to win? Better eliminate any disturbing element. On the other hand, there are many candidates for senator who will try to use their influence not to allow us to be released for fear that we may present our candidacies and therefore lessen their chances to get elected. Furthermore, each candidate will want to be sure of our support. Those will not get our support will surely work against us.

Both Osmeña and Roxas can do very much for us either way. Osmeña will be the one to decide what to do with us once we are turned over to the Commonwealth. On the other hand, Roxas is an intimate friend of MacArthur and just now our fate is in the hands of MacArthur. If, on the other hand, because of our prudence and because we do not want our attitude known just yet, both may lose interest or may want us to remain where we are until they find out how we stand.

We have been informed that the most serious charge against former Ministers of the Philippine Republic is that we left Manila and this resulted in the killing of so many residents of the city. In other words, they say that if we had not left Manila, the massacre of residents would not have occurred. I am sure that our presence in Manila would not have made any difference. This is what the Japanese did throughout China before the establishment of the Pro-Japanese government. The Japanese were aware that the majority of Filipinos were against them. To protect our people and ourselves, we of course denied this. But as a matter of fact, we knew positively that 95% of the Filipino people were anti-Japanese. We knew that even the government employees serving in the Japanese regime were “guerrilleros”. We knew the feeling of the Filipinos because we were in continuous close contact with them. They hated the Japanese. This feeling was prompted by the abuses committed by the Japanese. They also resented the intervention of the military police and Japanese civilians in strictly private affairs.

What the Filipinos resented most was the air of superiority assumed by the Japanese. Even those holding the lowliest jobs acted no more, no less than kings. All branches of government had Japanese advisers, some of them very ignorant. They would give orders to Filipino officials who by education and experience were far ahead of them.

I remember the case of Dr. Sison, Director of the Philippine General Hospital and Dean of the College of Medicine, reputed as one of the best doctors in the Philippines. A young doctor in the Japanese Army with the rank of Lieutenant, a Dr. Ono, tried to boss him around. We had a Japanese friend, Mr. Yamamoto, then Manager of the Yokohama Specie Bank. We were with him almost everyday as he was a member of the Philippine Club and we used to play tennis with him. After the Japanese occupation of Manila, he would not even talk to us.

We interpreted the attitude of the Japanese as a superiority complex. This we can never accept. Just as we have been preaching that we must have no inferiority complex towards the Americans and other whites, we cannot under any circumstances admit inferiority to the Japanese. Such is the general feeling of Filipinos toward the Japanese and they knew this perfectly well. This is the reason why they tried to change the government, why they wanted Gen. Ricarte and Benigno Ramos to hold responsible positions in the government; why they organized the Makapili, which constitutes not only an army to fight with the Japanese, but a party openly and aggressively for the Japanese. They were against the Laurel government because they were convinced that all of us were not sincere. On the other hand, they knew perfectly well that in Manila and everywhere else, there were many “guerrilleros” and that the moment the Americans approached Manila the Filipinos would all rise up in arms. Under the circumstances, it was not surprising that they had decided to kill everybody they saw before retreating. We could not have done anything. All that would have happened is that they would have killed us also; they did not discriminate. Even those who were reputed to be pro-Japanese and who had done much for the Japanese were killed.

Supposing that we could have done something, why did we leave Manila. We did not want to leave Manila. Plans to evacuate Manila had been previously considered. Various places were considered for the purpose, like San Mateo and Montalban. After due consideration, however, we decided to drop the matter of the proposed evacuation. But on the 19th of December, the President called us to a special meeting and told us that we were being ordered by the Japanese Military authorities to go to Baguio. We were all surprised. Baguio was one of the evacuation places considered and there was almost a unanimous vote against it for two reasons: (1) There were only two roads leading to the City. If these were cut off, not only would it be impossible to escape but there would also be a food shortage since Baguio is far from being self-sufficient. (2) The water supply of Baguio comes from a pumping water system and if the water lines or the pumping mechanism were destroyed or ran out of fuel, we would have a big problem with our water supply.

At any rate, we had decided not to leave Manila. We asked the President whether we could stay. He answered that he had done all he could to prevent the evacuation since he felt duty was to stay in Manila. He feared that there would be a panic when the people found out that the national government had left. He desired to be in a position to protect the people, to die if necessary. Of course that was also the sentiment of each and every Minister. The President said we must go.

We were given 48 hours to leave Manila. For this reason, I was not able to clear out my desk. My family had no time to prepare for departure. I left many things that I should have taken. At home, we packed hurriedly, also leaving many valuable things behind. We were not able to make arrangements for the occupancy of our house during our absence. We had to ask my daughter Lily and her husband to stay there in the meanwhile. The newly married couple, my daughter Neny and Ramon Cojuangco, could not go to Baguio with us because the younger sister of Ramon was doing to be married in a few days. They promised to follow us as soon as possible. (They failed to do so and I suspect it was because of lack of transportation or because American planes were hovering all over Luzon and it was not safe to travel.)

Our car was not ready for the long trip; it needed to be brought to the repair shop. We were told that we would leave for Baguio at ten o’clock of the night of the 20th. Our car was finished at about 9 o’clock of the night set for our departure, but it did not run smoothly. A Malacañan mechanic, after inspecting it, told us that the car could definitely not reach Baguio. I decided to take the armored car of the Philippine National Bank where I was the one-man Board of Directors. But the armored car was hardly sufficient to accommodate our cook, laundry woman and servants, not to mention our luggage. Not including our household help, we were thirteen: my wife and I, my eight children, mother-in-law, my Japanese military police guard and my chauffeur. We tried to get other cars in Malacañan, but they were all in bad shape and the mechanic certified that they could not reach Baguio. In a way, we were glad as we thought that it would be a good excuse for us not to go.

The Japanese offered to give us a military car, but of course I did not want to use such a car because it was painted in the special khaki color of all military cars. It would have been very dangerous since American planes seem to have already mastery of the air and I was sure that we would encounter American planes. The military car would be a target. I decided to borrow the Buick 7-passenger car of my son-in-law, Ramon Cojuangco (1941 model), although it had not been used for months and we were not sure that it would run. When we tried to leave the Malacañan Palace grounds to go to the house of Speaker Benigno Aquino where the car was kept, the Japanese guards stopped us and questioned us repeatedly. When they found out who I was and where I was going, and that my sole purpose for leaving the premises was to get my son-in-law’s car to use in going to Baguio, we were allowed to leave but under guard. Speaker Aquino’s house was within hailing distance from Malacañan.

The Buick would not start. We pushed it to start the engine, and finally after two hours of pushing, the car began to function. All the while we were pushing the automobile, the soldiers followed behind us. Back in Malacañan, the mechanic certified that it could reach Baguio, so we decided to use it.

We arrived in Malacañan before ten o’clock, the time for departure set by the military, but we were not to leave for Baguio until the next morning. No one was allowed to leave Malacañan. That night we slept on divans and chairs, and some slept in the cars. We were not allowed to get food from the outside; we had to be contented with the little food furnished us by Malacañan. The palace was very heavily guarded by Japanese soldiers and officers.

The motorcade consisted of at least 30 cars belonging to the President, the Chief Justice, and all the Ministers with the exception of Minister Sison of Home Affairs. The Japanese Ambassador and his staff were also with us. Alongside the car of each Minister was a military vehicle with Japanese guards in full uniform. We noticed that they kept their eyes on us.

We boarded our automobiles at about seven o’clock in the morning. We were given instructions. The cars were camouflaged and divided into groups. Each group would leave at half-hour intervals and each car was to keep a certain distance from the next. When American planes appeared, we were told to alight and endeavor to find an air raid shelter, or go to a more protected place like under trees, and not to move. We knew that the trip was going to be a dangerous one. I was worried as I was carrying about ₱15,000,000 of military notes and about ₱1,000,000 of Commonwealth notes in the armored car owned by the Philippine National Bank which was part of our caravan.

We did not actually start until about 9 o’clock and so we were inside the car sweating for a full two hours. The Kempetai or military police assigned to me sat with the chauffeur and was fully armed. We took the regular route to Baguio. There was very little civilian traffic or Filipinos on the road. All along the way, the roads with the exception of places inside the “poblacion” were deserted. Almost all the houses were vacant. The atmosphere was very pitiful and sombre. We also saw no animals. There were stretches of miles and miles with no Filipinos in sight. They probably had fled to the mountains or to the barrios to avoid the Japanese soldiers who had been taking all their food. There were many Japanese soldiers, automobiles, trucks and other military vehicles all along the way. It convinced us that there were still many Japanese soldiers in the Philippines. What we could not understand was that the soldiers were travelling in both directions. We saw cannons, especially anti-aircraft. We saw various airplanes parked alongside the roads, very well camouflaged.

Before leaving Manila, we were told that signals would be given whenever there was an air raid or American planes above. I forgot to say that our convoy included many trucks of Japanese officers and soldiers. Generally, there was one truck in front of a group and another behind. Because of these trucks, we travelled at a very slow pace. A kilometer before reaching San Fernando, Pampanga, we were stopped. We were advised that Camp Clark, the most important Japanese air base, was being attacked. We got off to run for shelter. I selected a ditch. We saw two American planes overhead. We certainly were scared. Evidently the planes did not see our cars as they continued on their way.

We proceeded on our way. San Fernando was intact, but when we reached Angeles we saw that the town was almost completely wiped out. It is said that it was burned by Communist elements. We reached a place from where we could see Camp Clark; a few places were still burning. We learned that many Japanese planes were either shot down or destroyed on the ground. There were also some American planes hit. We learned that Pres. Laurel and his family, who were in the first group, were very near the scene of the air battle and bombing. They also had to alight and hide.

When passing Tarlac we saw many planes coming. At first we thought they were American planes, but they were flying low. Evidently, a big transport carrying some high Japanese officers, was being escorted. The rest of the way we did not stop. We tried to go as fast as possible when approaching or passing airports and other military objectives. We did not encounter any more planes.

Alcohol fuel is really far from being as good as gasoline. All along the road cars belonging to different groups stalled. Many had to be pushed or’ repaired. Some cars had to be abandoned on the roadside, the occupants transferred to the military trucks with the Japanese and Philippine Constabulary soldiers. After a few hours, the motorcade broke up as most of the cars had stopped. The cars still running went ahead. All along the way the trucks loaded with Japanese soldiers never left us. When our car stalled, they also stopped and helped push our car. No car was able to arrive in Baguio before dusk. Some arrived before midnight of the 21st and some in the early morning of the 22nd. Some even arrived on the 23rd. Many cars were left behind. The occupants of cars that broken down in Kennon Road walked all the way to Baguio.

My family and I had the most sensational experience. My car ran smoothly until we entered Pangasinan when it stopped. It had to be pushed by Army trucks quite a long way before it would start again. This had to be repeated many times. At one point, the machine would not function anymore. A Japanese mechanic alighted from a truck and repaired the machine. He must have been a good mechanic as the machine started and we continued on our trip. After about 20 kilometers we stopped again. A truck tried to pull us with the intention of doing so up to Baguio. But my car was very big and heavy and it could not be pulled up the mountain road. The mechanic was able to make it function again. After stopping in Pozorrubio for fuel, at about six o’clock in the evening, we started the sleep climb to Baguio. Before reaching Camp one, the car stopped again. It had to be pushed for kilometers by Min. Recto’s car. In places, the roads were so narrow after a landslide; the fender skirts caught a high ground and the car got stuck. We removed the fender skirts but were convinced, however, that we could not continue the trip that way. Meanwhile, many cars had accumulated behind us and the occupants were becoming impatient. I heard them hooting. I was annoyed; I thought they ought to be more helpful. I told the chauffeur to stop the car, park it on the side of the road, and allow all the cars, including the one pushing us to pass. I was determined that we would sleep right there on the road. It was certainly difficult for my mother-in-law, my wife and my children. I could see that they were suffering, especially as it was already very cold. I was not sorry to stay; I was afraid to continue. My chauffeur had been rejected by the government insurance company for poor eyesight. He was also color blind. I should not have allowed him to drive, especially on narrow and dangerous roads like the Kennon Road. But the chauffeur continued to work on the car. Finally, to our amazement, it started to function.

By this time we were the only car on Kennon Road. We went quite fast. We could not slow down because everytime the car slowed down it would stop. We continued our way in quite a fast clip. We passed all the cars that hours before had left us. We reached Baguio several hours ahead of them. My chauffeur had never been to Baguio. So I had to direct him. We intended to go straight to the house reserved for us in Cabinet Hill. The road to Cabinet Hill was closed. We went ahead to the Pines Hotel. There we learned that the houses on Cabinet Hill were not ready since the present occupants had been given only a few days to vacate the houses — accommodations in Baguio were then very difficult. But the Pines Hotel was ready for us.

My chauffeur, who had never been to Pines Hotel, did not know the correct entrance. He entered through the exit. Since the driveway was very narrow which made it difficult for a car to back out, I walked to the hotel lobby where I got permission for us to approach the front entrance passing through the wrong way. From the entrance, I hailed my chauffeur to start the automobile and proceed. The road was steep and the car began to roll down, I was right in front of it. I hardly had time to jump out of the way. It was a narrow escape.

We went into the hotel. There was no food prepared for us so we passed the night hungry. We were given two small rooms where we had to sleep four to a bed. We suffered terribly.

I relate all these facts to show that we did not want to leave Manila voluntarily and that we were carried by threat and by force to Baguio.

I would also like to relate here the circumstances connected with the ₱15,000,000 of military notes and ₱1,000,000 of Commonwealth notes that we brought to Baguio.

Sometime on December 19, 1944, the Japanese adviser of the Ministry of Finance, Mr. Haraguti, accompanied by three Japanese officers, came to see me at my office. I was surprised at the sudden arrival of my visitors for I had not been informed of their coming. Haraguti, in the name and on behalf of the Japanese Army, demanded that all Philippine and American currency deposited and in the possession of the different Filipino banks be turned over to the Southern Development Bank, a bank owned and controlled by the Japanese government. As Minister of Finance, I had the sole discretion of affecting such a transfer with the final approval of the President. The Japanese did not go to Laurel directly because, in many previous occasions, Laurel told them that where money matters were involved he executes whatever his Minister of Finance recommends.

I protested vehemently. Haraguti cited a precedent — what the American High Commissioner did with reference to bank funds upon the commencement of the Pacific war. He said that the High Commissioner took possession of all the Philippine currency belonging to the different banks. I answered that the present case is different inasmuch as the Philippine Commonwealth was really under the American government, whereas at present the Philippines is an independent Republic formally recognized by the Japanese government. Haraguti insisted and I could see that the Japanese were determined to use force if necessary. I then asked him why they wanted to get the money. He answered that the purpose was to prevent their circulation. I then proposed that the Republic get the money for safekeeping. I added, however, that I would consult Pres. Laurel before making a definite decision. I thought they had accepted my proposition as they left without saying anything further.

I immediately went to see Pres. Laurel. I told Laurel that I was convinced that the Japanese were hell bent on confiscating the money and that we had no other recourse but to do all the means necessary to save the money. Pres. Laurel and I decided to meet with the managers of the banks concerned. Whatever is agreed upon by the managers and myself, would be considered as approved and ordered by the President.

The following day, I called the bank managers concerned and met with them in the office of the President of the Philippine National Bank on the Escolta. As I recall, the only banks then having Philippine or American currency were the Philippine National Bank, the Philippine Bank of Commerce, and the Bank of the Philippine Islands. The PNB was represented by Mr. Vicente Carmona, as bank President, while PBC and BPI were represented by their respective Vice President and General Manager, Miguel Cuaderno and Rafael Moreno. Felix de la Costa, director of the Bureau of Credits and Investment, was also present.

During the meeting I gave them an account of what happened. I told them that the only possible satisfactory solution would be for them to turn over the money to the Philippine government for safekeeping. I added that the money would be returned to them as soon as conditions become normal. They all readily agreed. With respect to the Philippine National Bank, no action was necessary as we were leaving all the money with the bank. I issued corresponding receipts to the banks for the amounts received as follows: Philippine National Bank, ₱490,529.00; Philippine Bank of Commerce, ₱425.200.00; and Bank of the Philippine Islands, ₱969.00. The total amount taken by my office was left and deposited with the Philippine National Bank. After leaving the bank, I went directly to Pres. Laurel to give my report. He approved all that had been done.

About a week prior to the above-mentioned events, Malacañan had advised all the Ministers that the Japanese were ordering all of us to go with them to Baguio. On December 20, 1944, an arrangement was made with the Philippine National Bank to load all the currency in the bank’s armored car which would go with us to Baguio. The person in charge of the armored car was Mr. Amado Lagdameo, the manager of the Baguio branch of PNB. Upon arrival in Baguio, the money was taken directly to and deposited in the Philippine National Bank branch.

In the evening of January 8, 1945, I received a letter from Manager Lagdameo reporting that Maj. I. Moritani accompanied by the Managers of the Bank of Taiwan and the Nampo Kaihatsu Kinko, forced him to hand over to them all the notes deposited in trust with the branch. Also taken were all the cash in the vault. He also wrote that he was not allowed to communicate with me by phone nor see me personally.

I immediately reported the matter to Pres. Laurel. I told him that what the Japanese had done was clearly illegal and improper. I recommended that Laurel make representations to the proper Japanese authorities immediately for the return of the currency seized as it was being held in trust by the Philippine Republic for the banks. Laurel protested strongly to the Japanese Ambassador and the Japanese military authorities demanding the return of the money. Up to the time when I escaped from Baguio on April 12, 1945, the money had not yet been returned. All that we were able to get was a receipt for the money from Col. Utsonomiya. All the original documents are in my possession.


February 23, 1942

Proud of our boys in Bataan. They are still holding the line. KGEI reports “heavy exchange of artillery in the Bataan peninsula.” We’re doing better than Singapore. Filipinos are good soldiers.

Messrs. Noya, Kobatake and Evangelista returned from Bulacan. They report confusion and misunderstanding in purchase arrangements between Major Kurumatani and Supervisor Noya.

Posadas reported inability to handle tremendous amount of detail work in connection with the handling of confiscated rice.

Bank meeting this morning. Didn’t agree with the Board. Binalbagan has a credit line of ₱1,000,000 which was being increased to ₱1,500,000 favorably. On the other hand, Nasugbu and Roxas firms were requesting a credit line of ₱100,000 each for 160,000 piculs of sugar and this was denied. It was my opinion that under the circumstances, Binalbagan’s request should have also been denied. Carmona argued that Binalbagan belonged to the bank. I said that that should give greater weight to my contention. Then Chairman Vargas revealed that ₱350,000 of the requested increase had already been given. This was given without the Board’s knowledge nor consent and I called the Board’s attention to this. Chairman Vargas demanded a categorical answer: “Do you approve—Yes or no?” I remained silent. The credit line was passed.

After the meeting. Vargas called me. In the presence of President Carmona, Vargas apologized, giving as excuse his state of high nervous tension.

Later in the morning, as I had no time to go to the bank, I told Carmona over the telephone that under the circumstances, I did not want any longer to be a board member and I leave it to him to present my resignation as bank director at the opportune time. Carmona asked me not to resign. “Just forget the matter, Vic,” he said.

Those present in the board meeting were Carmona, Sison, Rodriguez, Gomez, Avanceña and Vargas.

I submitted my resignation, verbally anyway. A man must stick to his principles.


January 28, 1942

No bombs today.

All Manila is talking about last night’s bombing. Some think the reinforcements have arrived in Corregidor. Others claim it was just a nuisance raid. A friend of mine said he hears somebody say that the USAFFE is now in Pampanga. Some of the boys in the office celebrated.

I prefer to keep quiet and to reserve my own opinions. One cannot be too careful these days. Those who show that they are overjoyed may get into trouble. Discretion is the better part of valor.

Meeting of the directors of the Philippine National Bank held at Malacañan. Chairman Vargas presided. Present were: Alunan, Sison, Carmona, Vargas and myself.

The Yokohama Specie Bank will lend ₱5,000,000 to the Philippine National Bank at 2% interest. ₱4,000,000 will go to the P.N.B. and the remaining ₱1,000,000 will go to the Bank of the P.I. The Bank of Commerce has ₱500,000 of its own. These three banks will open.

It was decided that withdrawals would be limited to ₱500 per month. Withdrawals for industrial investments would have to be done by permits.

Discouraging reports in the provinces given by Gallego, de los Reyes, Santos and Cojuangco. Reign of terror in the provinces. Organized banditry. Acting Governor Ysip of Nueva Ecija killed. Relucio beheaded. Maeyama, Japanese pacification campaign leader, wounded in Caranglan. Same condition exists in Bulacan. Death stalks in every corner.

Lt. Takeda, through Mr. Noya, approved the payment of salaries of the personnel of the National Trading Company. Payday is a great day.

I wonder what’s afoot. Mr. Ishiwata has requested the office address of Tommy Confessor. He also wants to know Tommy’s home address. That’s right, where is Tommy? He has not shown up lately. He must be up to something.

I wonder if they’ll bomb Manila tomorrow. Hell. I’m always wondering about many things.


July 24, 1936

Breakfast at Malacañan Palace with the President, Secretary Yulo, Carmona and architect Arellano.

Before the others arrived, I told Quezon how much I approved his appointment of Hermenegildo Cruz as Director of the Bureau of Labour, and the President replied that under the preceding administration Cruz had been “framed,” but that he (Quezon) had then advised him to resign because he had lost the confidence of Governor Murphy.

At the table, the President remarked that he was reading Professor Kirk’s new book on the Philippines, and enjoyed the first chapter so much because of the cynicism with which the author exposes the “cant” of McKinley’s government in pious profession of the “White Man’s Burden.” He added that Governor Forbes had really believed in that cliche. Quezon and I both admitted to one another that we had tried to read Governor Forbes’ book on the Philippines, and had been quite unable to do so.

After lunch, we all went down to Binondo to look at three sites for the proposed new building of the Philippine National Bank. In the business district, the crowds stared at Quezon as if he were royalty!

I enquired as to Quezon’s opinion of the present disorders in Spain. He replied that the Spanish people are not fit for self-government, and have lost the ability to carry on under a constitutional monarchy. “What they need,” he remarked “is five years of a dictatorship.”

To dinner with Colonel Hodsoll at the Manila Club; the first entertainment given by the English since the death of King George V.


April 22, 1936

Quezon returned on Visayas having left the Arayat on account of a small typhoon in the Bicols. Unson met him at the steamer and said he was in excellent health and spirits. He gave the President the result of the work of the Survey Board and Quezon at once appointed Assemblyman Marabut of Leyte as Under Secretary of Finance vice Carmona now President of the Philippine National Bank. The President accepted the Survey Board’s resolution creating a Budget Office directly under the President, consisting of Under Secretary Marabut, Auditor General Hernandez and Director of Civil Service Gil–transferring to this Board all accounting divisions of the Bureaus. Unson and Hernandez wanted property divisions also transferred to the Budget Office, but Trinidad, Paez and Dizon thought this would make too much friction–however, it is “now or never”!

Quezon spent 7 p.m. to 9 p.m. at Malacañan signing papers etc–then went off to Baguio for some days where he is busy with such Government officials as are now up there on “summer” vacation.

Babbitt and Rockwell have left the Philippines for a long vacation–“everybody” is supposed to be gone from Manila, but gaieties still keep up. Doria is preparing to depart on the 27th on Empress of Japan en route to Peking.

A San Francisco (Cal.) judge writes to Paredes concerning the “repatriation” scheme for Filipinos in the United States that: “the Filipino community in his city, in proportion to its numbers, affords the courts more criminal business than any other, and most of this is due to the fact that nearly all of them have white mistresses of a type not likely to do them much good–but still they are happy.” (This is all the more notable because such relations have always been very rare in the Philippines itself–and incidents arising therefrom are most unusual out here.)


November 13, 1935

Called at Pasay. Quezon was closeted with General MacIntyre, General Creed Cox (Chief of the Bureau of Insular Affairs), Osmeña, Roxas, Paez and Carmona –I believe they were discussing the subject of the bonds of the Manila Railroad. Later, had fifteen minutes talk with Quezon, who told of his learning that the Governor General and Secretary of War were going ahead after all with defining the High Commissioner’s prerogatives. Quezon says he got out of bed and drove to Malacañan; the Secretary of War offered to leave the room , but Quezon asked him to stay so that he could hear what he said to the Governor General. Then Quezon went for the Governor General who, in reply, spoke of the army and navy. Quezon replied that while some of his best friends were in the army, that body as an institution seemed unable to think rationally on some subjects. The Governor General offered to resign as High Commissioner, if he had forfeited Quezon’s confidence, but the latter replied that this was not necessary. Then Quezon told the Secretary of War that the army had even “betrayed” an American Governor General (me). That if they tried on anything now he would ask the President to withdraw the United States Army, and he would take over the defense of the Philippines himself. He then told the Secretary of War that if he would treat him frankly and “without mental reservation” he would find that he was always ready to come half way to meet American views, but that if he conducted plans behind his back, he would get no co-operation from him, and then all that would be left for the Secretary of War to do would be to order his soldiers to shoot him. Quezon thinks this has definitely settled the relations between the Philippine Government and the army; says he reminded the Secretary of War how he had gome to Washington to get the Hare-Hawes-Cutting Act amended just so as to cut out a provision retaining the army here after independence. Quezon thinks he had now nothing adverse to expect from the office of the High Commissioner.

Another subject discussed at this animated meeting just before the inauguration of Quezon as President of the Philippine Commonwealth, where Secretary of War Dern and Governor General Frank Murphy “went to the carpet” with President-elect Quezon was the question of the number of guns to be fired by the American Army to salute the new government. This salute had already been fixed by the Secretary of War, before his arrival at Manila, at 21 guns. Later, after his first few days in the Philippines, Secretary Dern changed his mind, yielding under American “Old Timer” influence in Manila (Quezon thought through Murphy, on the instigation of the Bulletin), so it was decided to make the salute only 19 guns. Quezon heard of this by chance, so he hurried to the meeting at Malacañan Palace, where Dern and Murphy were in conference. Quezon told them both that he did not like this being done behind his back; that he would take his oath of office in his house in Pasay, and would not attend the inauguration; that he was only a farmer’s son (and a poor farmer) and all his life had found ceremonies irksome, but this matter of the salute was one affecting the new Commonwealth. Quezon stated that Murphy turned blue and Dern pink. He told them they had selected the wrong man to trample on –that no Secretary of War had any authority over him– not even the President could remove him unless he used his Army to do it and he intended the United States Government to understand this right at the beginning. That if, by the Tydings-McDuffie Act the United States intended to give sham self-government to the Filipinos, as the English had to the Egyptians and to the Indian Princes, he would not be a party to it. Dern very decently said he appreciated the way Quezon was talking. Thereupon, President Roosevelt was brought in by cable, and he sent a personal appeal to Quezon to go through with it, which the latter accepted, rather than embarrass Roosevelt and make the Congressional delegation appear ridiculous. Quezon adds that after this “brush,” his stomach ulcer cleared up, and he got well again.