The Dominion. FRIDAY, JUNE 11, 1912. OUR LATEST LOAN.

Dominion, Volume 5, Issue 1466, 14 June 1912, Page 4

The Dominion. FRIDAY, JUNE 11, 1912. OUR LATEST LOAN.

o The cable news to-day concerning the four-million loan placed on the London market by the Mackenzie Ministry does not make pleasant reading to New Zealandors. Despite the extraordinarily attractive terms hf?lcl out to investors we are now told that the public only took up 13 per cent 'of the loan, the balance of 87 per cent being left for the underwriters to carry. Probably the latter may be able to quit a portion of their holding if they so desire, but the results of this loan transaction so far disclosed are not only costly to New Zealand, but are very disquieting as well. The facts of the position call for careful attention. Our readers will recall that Sir Joseph Waed, at the gathering in his honour at the Town Hall a week or two ago, in one of his bursts of egoism, disclosed the fact that in December last he had taken the initial steps to float a four-mil-lion loan, and he declared that if that transaction had been completed the tightness which at present existed in local financial circles, and the slackness in business, would have been avoided. We fully exposed at the time the shallowness of his excuse for not completing the transaction, and showed also the injury he had done the country by the course he had pursued. It is not necessary to repeat the whole story now. The outstanding fact is that the ex-Prime Minister left his successors in office a legacy which has embarrassed them and which is going to coat the New Zealand taxpayer a great deal of money. The financial position -of the country apparently was such that the Mackenzie Ministry was forced to go on the London market with this very large loan at an inopportune time, and to borrow the money on very dear terms. We do not suggest that they could have done better at, the moment—it is impossible to believe that they would have floated the loan on such terms had not the money been urgently needed. In other words, they simply had to do the best they could in the unfortunate position in which they, found themselves placed as the result of Wardist methods of finance; and the country must bear the brunt, of it.

It must be quite plain to everyone that financial wizardry which creates such a situation as to make the fortunes of the country so dependent on large and costly loans as to necessitate such a transaction as that now coming under public notice is a very undesirable and dangerous tiling. But the phase of the matter, which is of most interest at the moment is I he effect which this loan appears to have had on financial circles in London. We were told when flu: prospectus of the loan was first issued that it had been ''favourably received.'' The Fiiuviriol Timet slated that the yield lo investors [£-t (Is. Bd. per cent] was good for security of this clnib?, and no doubt the public would aupre«

eiiite this opportunity. This comment appeared so.uhd and reriso.'nabic. The terms, indeed, seeini d atIrticlivi! enough—fill- 100 .ifl;traet'i;v.e: from the. borrower'!! point, (if view - to ensure a good demo nd far Ihe bonds. Yet strange Ip Sity the .public.; appears to have held alnni', onlv ii! per cent of the. total loan .haviiia; been taken up, the. balance M'!i;.ng '.to the underwriters. The conniieuls of the. London T/'mi-g, now cabled -i-il a. measure explain the ;r.easoii Tor this non-success, but if the explanation given is the correct it places, the Dominion in it very nnTfir-tuiiut'e light. The says: "The 'market did not like 'llie : i'ss,iic-j not onlv because the ainoii.il,t w'4s inconveniently large, but because' Ihe yield wtis so high as to make .existiriir colonial securities look dear." That is t.o say, that the. price whi.c'lj we were offering for this loan ivas so high in proportion to that, paid for previous loans, that- ij made the holders of existing, securities appear to have made a comparatively badbargain. The tendency of tliis.,. o'l course, would be to depreciate, the value of the existing securities, and by so doing the credit of the Dominion. The Time/: added this very significant- remark: No doubt the term's of -this lcia'n ihorg nearly represent the'i'aets. as' to.'-tlio credit ol'_ New Zealand oacl, sajni; other countries than the ideas- liitherio prevailins: in official circles. We sincerely hope that, this view will not be generally accepted; but it was impossible to expect that New Zealand could continue borrowing on the extravagant .'.lines rendered necessary by Wardist. methods of finance without receiving some such, check. The Dominioff .-possesses: siicli enormous natural .resources that-Ilie injury which the .financial methods of Wardism, culminating in this latest loan transaction, would ap ; pear to have done, its credit abroad is, we trust, not likely to prove of any long duration. Careful administration of the country's affairs' will do_ much to eradicate the bad impression is it desirable that be d change from the methods, which have grown up under ■' . the Wardist ret/ime. Judging by an interview published in a southern contemporary Sir Joseph Ward, would seem to realise that he. has. good reason to fear the verdict wliicliVthc^'public: ,i.i certain to pass ;outcpiiie, 'o|; his financial administration. ,In the course of his remarks he gives relief to his feelings in such cb.oice language as "a gutter-snipe press." and "most monstrous ''anil .it'ntr.uihful suggestion that could have emanated from-any sane brain," and so on, which may -pass witii him for very : excellent- argument, but wheri;-.'.;.sthe;'member for Awarua talks in.t-his.strain, those who know him best realise that he not only has a very bad case, but is. feeling very annoyed indeed that, other , people are. able (o see how bad it really. is.-- His decision to stay in the thick of the fight in. New Zealand politics is-- really .most opportune. It may ,prpj^r:Vtaßarr.ass. ; ? ing to his party to. have to. continue, to carry him and. the burden' qf his past administration on .their, slioiilders, but since he to their rescue they' ;wU] have to' put up with that little.,inconvenierice, and share the responsibility of his actions. Meanwhile the public willawait- with the kMiie|t';iirteiSt;;the full details of in the hope that theV'clisifuieting- feaT tures of the situation 'disclosed, by the comments of thit .-.Times may then take on a less serious .aspect-. " ■