W

HEN the De Lesseps Panama Canal Company broke down and went into the hands of receivers, as related in Chapter II. of this book, they had expended about $260,000,000 and had incurred an interest-bearing debt of some $40,000,000. A considerable portion of this money, and perhaps the larger part of these outstanding obligations, had been contributed or was held by French citizens, most of whom were comparatively poor men who had been induced by extravagant promises to invest their earnings in the ill-fated enterprise.

The only available assets of the company consisted of about 90 per cent of the Panama Railway stock and two canal ditches, one 17 and the other 4 miles long, between Colon and Bohio, and between Panama and Miraflores. There was also an excavation at Culebra heights, pronounced by eminent engineers to be useless, and a large quantity of machinery, most of which was worthless and none of which could have been sold for more than 20 per cent of its original cost. The franchise of the company, obtained under the Salgar-Wyse concession of 1878, was, of course, forfeitable. But the Colombian government, in the hope of securing the canal even against hope, had agreed, conditionally, to extend the concession for a few years.

The receivers caused surveys and estimates to be made for a canal with locks, to take the place of the originally projected sea-level one; and the French government, anxious to relieve its citizens, but somewhat unmindful of prior assurances to the United States, authorized a lottery bond scheme to aid the receivers to raise money and proceed with the work.

With these assets in hand, a new company was created to take over the franchise and property of the old one, free of debt, and to complete the canal on the new plan. An extension of the franchise to the year 1893 was obtained on payment to Colombia of ten million francs, about $2,000,000. The new company (organized under decree of the French law courts) had a capital stock of only sixty-five million francs, or say about $13,000,000. With this, and such other funds as they might be able to raise, it was proposed to complete a canal that had already cost nearly $300,000,000, and was not one-fourth finished. In consideration of this agreement, the assets of the old company, including their stock in the Panama Railroad, were turned over to them.

Under this arrangement, 5,000,000 francs in stock of the new company and 5,000,000 francs in gold were paid to Colombia for a still further extension of the franchise until October 30, 1904. The new company had stipulated with the French tribunal that they would complete the canal by that time; and they further agreed, after paying all expenses, to divide the net earnings of the canal on the basis of 60 per cent to the receivers of the old company and 40 per cent to themselves. But the Panama Railway stock, which had cost the old company $18,000,000, was to be inalienable in the hands of the new company. In case the canal should not be completed, this stock was to remain the property of the latter on payment of $5,000,000 to the

receivers of the former. This would leave $13,000,000 of the stock with the new company, no matter what might happen; so that, in any event, they would be securely fortified against possible loss.

It does not appear that any additional stock was ever subscribed to the new company, or that any more money was ever raised by them for the completion of the canal. The fact is, little or no work was ever done by them. But to keep up appearances, and prevent Colombia from declaring the franchise forfeited, they made a pretence of continuing the excavation at Culebra heights, while permitting the two ditches at the opposite ends of the line to become filled with sediment and overgrown with tropical jungle. In other words, they evinced no serious purpose to complete the canal, but seemed to be waiting for some favorable opportunity to sell out at a profit.

This opportunity soon presented itself. The events of the Spanish-American War had demonstrated the great importance, if not absolute necessity, of an isthmian canal under American control. Public sentiment demanded that such a canal should be opened with as little delay as possible, and at whatever cost. And under pressure of this public sentiment the socalled "Hepburn Bill," providing for such a canal by the Nicaragua route, passed the lower House of Congress with but two dissenting votes. But covert opposition to the measure was soon developed in the Senate, and the bill failed to became a law. It was openly charged at the time that this opposition was inspired from two opposite sources, the great trans-continental Railways and the new Panama Canal Company: one for the purpose of delaying or defeating any isthmian canal project; the other for the purpose of dumping the company's holdings upon the United States at an

extravagant price. However, we are not now dealing with motives, but with accomplished facts.

The Salgar-Wyse concession, already twice legally forfeitable, but twice extended by Colombia for valuable considerations, had now only a few years to live; so that the chance of the new company to save themselves and be in a position to drive a bargain with the United States depended upon their ability to obtain a still further extension of the franchise. To this end, they appointed two special agents, one to operate on the government at Bogotá, the other to operate on the government at Washington. On payment of a snug sum of money, the Bogotá agent procured the desired extension of the franchise; the Washington agent, meanwhile, was importuning the government of the United States to purchase the company's holdings at a fabulous price.

President McKinley, who probably saw through the transparent scheme, now directed the Secretary of State to negotiate and conclude an agreement with the governments of Nicaragua and Costa Rica for a canal under American control across that part of the isthmus, which was promptly done. The old Clayton-Bulwer treaty of 1850 was no longer in the way of such an agreement, because Great Britain had already assented to its formal abrogation.

The new Panama Canal Company now became alarmed, and dropped in their price from $160,000,000 to $40,000,000; and that they would have dropped still further in their price rather than miss the sale, hardly admits of reasonable doubt. But the canal Commission appointed by President McKinley under authority of a law of Congress, after having informally decided in favor of the Nicaragua route, now reversed their decision and reported in favor of the Panama route. They did this, however, with the proviso that

good title to the new company's holdings could be had for $40,000,000, that Colombia would assent to the transfer, and that she would make liberal and just concessions to the United States.

This changed the whole aspect of the case. It now remained only to procure Colombia's consent to the proposed transfer, for the company to show good title, and for Congress to authorize the purchase. The Colombian government, through its duly accredited agents in Washington, readily agreed to the transfer; and on the 28th of June, 1902, Congress passed the Act known as "the Spooner law," authorizing the President to conclude the necessary treaty with Colombia, and to purchase the new Panama Canal Company's holdings at the price named, -$40,000,000. In case the company should be unable to make good title, and favorable terms could not be made with Colombia "within a reasonable time," the Act authorized the President to proceed on the Nicaragua route.

On the 22d of January, 1903, Secretary Hay, by direction of President Roosevelt, concluded with the Colombian Envoy a satisfactory convention, usually cited as "the Hay-Heran treaty," the first article of which is in terms as follows:

"The government of Colombia authorizes the new Panama Canal Company to sell and transfer to the United States its rights, privileges, properties, and concessions, as well as the Panama Railroad and all shares or parts of shares of said company.'

Language could hardly be made plainer or more specific. The grant thus made covered expressly all "the rights, privileges, and concessions" of the new Panama Canal Company, as well as all their other property. Moreover, the protocols and other official documents now of record show that the consent of Colombia to