Object 99: Bank Check from Manila Loyalty Room

After the liberation of the Philippines during World War II, the U.S. Army took on the monumental task of compiling rosters of all recognized guerilla units and vetting the claims of the more than 1.2 million Filipinos who said they were resistance fighters. This was necessary to ensure that legitimate guerillas received the pay and other allowances they were due as soldiers in the Philippine Army. U.S. Army counter-intelligence officers also worked with Filipino authorities to identify suspected collaborators and communist activists.

Army officials performing these duties amassed a vast corpus of records, including intelligence reports, captured Japanese documents, newspaper clippings, and cancelled checks from the Yokohama Specie Bank in Manila. In 1948, once the Guerilla Recognition Program was over, the Army shipped 222 boxes of documents to the United States for retention. But the Army also left copies of the guerilla rosters, the newspaper clippings and bank checks, and a mass of other material collected by its investigators with the VA Regional Office in Manila.

For the next 70-plus years, the Manila office stored the collection in the “Loyalty Room,” so named because the records were used to evaluate the wartime allegiance of Filipinos who applied for Veterans benefits from VA. In 2022, after the collection had reached the end of its usefulness to the Manila staff, VA transferred the Loyalty Room records to the National VA History Center in Dayton, Ohio.

The U.S. government first opened a benefits office in Manila in 1921 at a time when the Philippine Islands were an American protectorate. In the 1920s and 1930s, the office served not only American Veterans residing in the Philippines but also members of the Philippine Scouts, an Army unit recruited from the local populace. In 1934, Congress made good on an earlier promise and approved a plan granting the Philippines independence after 10 years under an interim commonwealth government. The law also allowed the U.S. president to call into service any military force organized by the Philippine government during this transition period.

Expecting Japan to invade the Philippines in the event of war, President Franklin D. Roosevelt exercised that authority in July 1941. Roosevelt incorporated the Philippine Commonwealth Army, which by December 1941 numbered around 130,000, into the U.S. Army Forces in the Far East. In 1944, recognized guerilla forces that took up arms against the Japanese were officially designated part of the Philippine Army and also came under control of this Army command.  

Filipino soldiers and guerillas were instrumental in ending the Japanese occupation of the Philippines.  But a crucial question remained to be answered after Japan’s surrender in September 1945. Did their military service as part of the U.S. Army entitle them to the same benefits as American Veterans? This issue first came up in 1942 when 24 Filipino soldiers applied to VA for insurance under the 1940 National Service Life Insurance Act. VA issued an opinion stating these soldiers were eligible according to the language of the law, which made the insurance available to any person in the “active service” of the U.S. armed forces.

After the war, however, Congress took a more restrictive position on benefits due to concerns about the costs. In response to a Congressional inquiry, VA estimated it would cost $3.2 billion to extend the GI Bill and other benefits to Filipino Veterans over their lifetimes. To the outrage of the Filipino people, U.S. lawmakers refused to foot the bill.  In early 1946, Congress passed the two Rescission Acts limiting benefits to the insurance policies previously allowed and compensation for service-connected disabilities or death, payable at the reduced rate of one peso (worth $.50) to the dollar. These laws applied to all Filipino Veterans except for the 12,000 who had enlisted in the old Philippine Scouts. They were entitled to full benefits.

The VA office in Manila resumed operations in early 1945 and continued to administer benefits even after the Philippines became an independent nation on July 4, 1946. The Army’s Guerilla Recognition Program made the adjudication of compensation claims a much simpler task for VA staff because it identified guerillas by name and whenever possible recorded their period of service, too. All-told, the Army issued formal letters of recognition to 289 guerilla units and validated the individual requests for recognition as guerilla fighters of 260,715 Filipino men and women.

Confirming the service records of Filipino Veterans seeking compensation was the first and most important step in the evaluation process. But VA and Philippine government officials also wanted to avoid rewarding individuals who had collaborated with the Japanese during the occupation of the islands. This is where the Loyalty Room came in. VA would check the names of anyone applying for compensation against the records stored in the room. If the search turned up evidence of disloyal behavior, the claim would potentially be denied.  

The records of the Yokohama Specie Bank in Manila, seized by U.S. troops when they recaptured the city in 1945, were particularly valuable to VA’s efforts. “Follow the money” is standard investigative procedure and the cancelled checks from the bank allowed VA to do precisely that. The checks filled 36 drawers in the Loyalty Room. They were written by the Japanese occupation forces to pay for goods and services from the Filipino populace.

Some were made out to cash, which complicated the process of determining the recipient or its purpose. But the person cashing the check did have to endorse the back and often included a street address.  Just receiving payment from the Japanese was not enough to negate a claim, but it did raise questions about the person’s allegiances and provide reason for further investigation. Collaboration, whether willing or not, often carried a price.

The check pictured above provides a sense of how the process worked. The check was written to Manuel Aguilar. However, as the index card stapled to it indicates, something about the check was important enough for it to be pulled from the drawer by the VA official investigating the claim of Juan Sarmiento. Several Juan Sarmientos appear in the Loyalty Room index and the resolution of his case is not mentioned, leaving the significance of the check a mystery. But as this brief example shows, the check was very clearly used as part of the benefits determination process and maintaining a record of that fact was likewise intentional.

The Aguilar check is legible, but others recovered from the bank do not yield up their information as easily. The month-long battle to recapture Manila involved extensive artillery shelling and fierce building-by-building combat that left much of the city in ruins. The building housing the Yokohama Bank was not destroyed, but the interior suffered fire and smoke damage.

Fortunately, the National VA History Center in Dayton can employ a range of technical capabilities, including multi-spectral imaging, to uncover information that might otherwise be permanently lost.  In the case of damaged checks, such as the one pictured above, paper and ink burn at different temperatures, so light frequencies can reveal what time, smoke damage, and high temperature concealed.

When the check was shot at high-resolution and then run through the orange color filter (see image below), the dollar amount, paid date, and even the fact it was an overdraft on the account became clearly visible. Some information remains obscured and additional work is needed. Due to the fragility of the paper, the check will return to its acid-free box in climate-controlled storage, and staff will continue the analysis on the images rather than the physical check.

The National Archives holds a companionate Philippine collection. which can be found at https://www.archives.gov/research/military/ww2/philippine. The National VA History Center is working to digitize parts of the Loyalty Room collection and prepare a comprehensive finding aid. Once fully accessible to researchers, the collection will expand our understanding of the Filipino experience in World War II in ways large and small.