The Taft administration made it amply clear that the periodic revolutionary turmoil in many Latin nations would no longer be tolerated by the United States. Instability was regarded as a threat to the security of the nearly completed Panama Canal. Secretary of State Philander Knox acted to broaden the Roosevelt corollary to the Monroe Doctrine; not only would the United States police the Caribbean, but it would also attempt to force European financial interests out. The area was to be made safe for American ships and for American investment dollars. Two actions in Central America typified dollar diplomacy:
This heavy-handed intervention, occurring as it did in the long shadow of the Panama Canal adventure , made the United States widely despised throughout Latin America.
Honduras. The nation of Honduras had run up huge debts, much of it owed to British investors. The political volatility of the region made the creditors nervous and talk of possible British intervention was heard. The Taft administration sought to avoid tampering from the Old World and sent in American bankers to restore fiscal order. Private funds were employed to stave off the immediate crisis, but the bankers remained on site to administer Honduran financial affairs.
Nicaragua. Nicaragua, southern neighbor of Honduras, experienced a revolution in 1909. The United States government hoped to advance the interests of American businessmen and supported the rebels against the reactionary government. U.S. Marines helped to implement a new regime friendly to American commercial interests. Two years later, another uprising occurred and the U.S. took the side of the sitting government. Armed forces were again deployed and remained on site until 1925. American bankers were given charge of Nicaraguan finances, collecting customs duties, paying the nation’s debts and returning the remainder to the friendly government.