The formulation of this policy may be said to have started on 22 July 1944 with a memorandum from Brig. Gen. Bonner F. Fellers, personnel officer of General Headquarters, to General MacArthur. He stated that although President Manuel Quezon had established a Division of Civil Affairs in the Philippine Army, the actual work would have to be done by the United States Army. General Fellers, therefore, recommended that General Headquarters immediately assume full responsibility for civil administration during the reoccupation. Administration in the occupied areas should be done, however, in the name of the Philippine Commonwealth and in complete co-operation with its official representatives.[52]
On 30 August General MacArthur issued a directive creating a civil affairs unit in his headquarters and outlining the broad policies that were to be followed in the Philippines.[53] This directive was subsequently expanded on 28 September[54] but it was not until 9 October, eleven days before the landing on Leyte, that MacArthur issued detailed instructions on the procedures to be followed.[55]
During the combat stage General Krueger, the senior tactical commander, was to be responsible for such civil administration and relief as would be possible under the existing tactical situation. General MacArthur would delegate the administration of civil affairs and relief in the liberated areas as promptly as possible to the authorized representatives of the Commonwealth Government. The only restrictions placed upon the Filipino people were to be those required by military necessity. By arrangement with General MacArthur the Philippine Commonwealth was, in general, to determine the guilt or innocence of suspected collaborationists, though the U. S. Army commanders were to retain complete authority to deal with the suspects if necessary.
General MacArthur also established the financial policies to be followed. A new series of Philippine Treasury certificates called “Victory Pesos” would be introduced in the liberated areas. The exchange rate would be two for an American dollar. All prewar currency and all emergency currency officially determined to be bona fide would be accepted at face value. All other Philippine or enemy currency would be worthless. Wage rates to be paid Filipino labor were established and ceiling prices consistent with the approved wage scale were set.
General Krueger delegated authority for civil administration and relief to Generals Hodge and Sibert for their respective corps areas. The commanding general of the Army Service Command was responsible for the recruitment and maintenance of civilian labor. General MacArthur attached to the Sixth Army eight Philippine civil affairs units, which were to assist the field commanders in the administration of civil affairs and relief. Two of these were retained by Sixth Army, two were attached to each of the corps, and two to the Army Service Command.[56]
AN OFFICER OF A CIVIL AFFAIRS UNIT pays off civilian workers with the new “Victory Pesos.”
As soon as the conflict had passed by an area, a civil affairs unit of the Sixth Army stepped in and started to restore the normal community life. Temporary appointments of Filipino officials were made, such appointments going to men who had been screened by the Counter Intelligence Corps or who were sponsored by Filipinos whose loyalty was unquestioned. In nearly every case the Philippine Commonwealth ratified these appointments. In every area reached by the Sixth Army, civil officials were appointed as soon as the tide of battle passed, and without exception cordial relations were established. The civil affairs officers of the Sixth Army did not attempt to interfere with civil operations unless requested to do so, or unless the military situation made it necessary.