[3] On May 6, 1904, President Theodore Roosevelt appointed Wallace as chief engineer of the ongoing Panama Canal project.

As with the French effort to build the canal before him, malaria, yellow fever, and other tropical diseases plagued the country and further reduced the already depleted workforce.

Not initially a member of the seven-man ICC, and in an attempt to streamline its efforts, Wallace was appointed to it when it was reformed and its membership reduced to three following his own recommendation.

However, the real solution to the problem would not be found until the appointment of his successor, John Frank Stevens,[4] who often bypassed the commission and sent requests and demands directly to the Roosevelt Administration in Washington; although he too would suddenly resign after two years on the project.

To reduce the costs of construction and enable faster completion, this approach was later changed to a reservoir lake and lock system.

[8] Wallace's resignation ultimately led to a better understanding of the difficult nature of the project by the Roosevelt administration, resulting in reforms that included larger, more realistic construction budgets.

He later served as president of the Electric Properties Company from 1906 to 1914; as president of Westinghouse, Church, Kerr & Company from 1911 to 1916, and chairman of the board of that firm after 1906; and as an engineering expert for the City Council Committee on Railway Terminals of the City of Chicago and chairman of the Chicago Railway Terminal Commission.