STATE BANKING
POSITION OF THE BANK OF NEW ZEALAND THE SUGGESTED PURCHASE COMMENT BY THE ACTING-CHAIRMAN ■V)' , . ■ . ■ ■ . The suggestion mado by Sir- Joseph Ward that tho Government of New Zealand should establish a State bank, by the purchase of tho. Bank of. Now Zealand or otherwise, was mentioned at. yesterday's half-yearly meeting of the shareholders of the Bank of New Zealand. The acting-chairman (Mr. J. H. Upton) quoted'what Sir Joseph Ward had said on the subject: "Although this is not a suitable moorient to discuss so .far-reaching a proposal, it may not bo out of placo to call to mind the circumstances that led to the connection of tho Government with the bank, and to sonio results "arising therefrom/' added' Srr. Upton. "The connection was made bv Act of Parliament in 1894; but tno circumstances ■which, led to it .'belong to a much earlier date. Tho bank was established in 18G1, when the population of the colony was about 210,000 persons. • A small company •of gentlemon in Auckland thought the , time had come when New Zealand should no longer depend on branches *>f Australian banks for tho condnot of its nunnichl arrangements nudfor its-commercial ■ro'iuirements; nnd. accordingly, the bank ■was founded. . ■. ■ -.
i "From tho very .first, the business of the Bank of New.'• Zealand developed along the line of the agricultural and pastoral interests of the colony, those 'interests being at that time of, most rapid growth and always of dominant ; importance. But ns time, went on, the productions of this fertile country entirely outstripped the increase in population. The growth of our.flocks.niid herds in this mild and. genial climnte was enormous, and enterpr'sing ineiuin , both the North and South Islands spent miich pioney in improving the breeds by the importation "of good stud'stock, and pastoral ■ interests consequently assumed a jnost favourableaspect. But alas! they forgot to ask thoniselvps where tho market was to'be foniid:. 1(1,00(1 jniles of sea 'to be 1 traversed; by'sailing, ships niado it pi'tremelyidimcult to induce 'mmigration, \end'quite impossible to export beef, mut-ton,'and-butter; and, of course, to grow sheep merely for their wool whs not a paying proposition. l Gradually the hank was drawn'in deeper and desper, the' Focmitire on which'-'advanci , ,? had been made fell in value, the British depositors of the bank failed to'renew their deposits; a deadlock supervened, and the late Mr. John Sfurray, a 'former general manager of the bank, pl.icivl 'ho d ; fflcult position before the Hon. R. J. Seddon.
"It-.was a fortunaio thing for (his colony that'so able a. man us Mr. Mu'r--ray was connected with the bank, nnd that* so courageous a man as Mr. Seildon was at-the.ihead of,the Government. To have* refused .. assistance would have brought about a 'crash from .which ■ it ■would have taken a long time to recover. The position was, in fact, finite 'comparable with, the position -m'England on August. 4, 1914, when, to •■saw an almost universal bankruptcy, Mr. Lloyd George guaranteed bills oh. the Tendon .market'. Perhaps.-nlso, Mr. Swldon could. see that, given timo, the Government, guarantee-was. in.no great danger of,being called .upon; arid, indeed, as we iiow know, .had it been nosß'ble to .retain until a favourable market those securities, on which advances had bean ma'de, they would have realised tho' whole amount of such advances' over and over again. The. shareholders, howwer, had meanwhile lost the whole of their capital and reserves. *' ■.'■'*
"Something eke, however, had happened- the freezing .machine hnd been invented: The experiment ln.nde by Lord Bacon of stuflin? a. fowl with snow to prevent putrefaction had been followed, nt a- : long interval of time,*'hy the invention- of mechanical means for the ■production at will of a,low temperature. In cmij'sc of yoars the refriwr.itmf; en-gine-was .developed to a- lli.srh state- of efficiency. Befrigerating shins became available for. the transport of our produce, and our meat and other perishab'o products could be safely sent across the ocean to Britain or to wherever a market could be found. Thus the refrigerating engine has made New Zealand,'in the the last twenty-five .veal's, one of tho most prosperous countries in the world, and our produce, instead of being a drug.on the local market, has heconio a. source of almost boundless wealth'. In this general prosperity tho Bank of New Zealand has, of course, shared. It has grown to great proportion';.' and it is now—as it .has been from the' first—the bank of our greatest industry, one-half of the total agricultural and ' pastoral produce of-tho country bninij, jti one form or another, financed: by ; it. "And what of our chief ■'rhrtner; the Government? , We may with propriety ask-whether it nl.=o has benefited. The Government assisted the bank in' two waifs. It guaranteed stock, to provide capital, to the. extent of two milliona Kh-rling. Of that stock, there lemains Btill outstanding, <£>29,988.. Aβ it : s i per. cent, stock, it would be iimr'se to ; pay: it off, and tho guarantee alone need no considered. That gunrnntee was given to save the colony from disaster, and was analogous, to what has happened more than once to the Bank of England itself. The English Bank' Act, of 18M, 'was passed to. regulate .banking in England, and particularly to place the issiio of 'notes, on the. impregnable basis of 'gold. But on various occasions since, its Tirovisions have'had to be qualified., by Parliament indemnifying the Bank of fineland against the consequences of a) .reach of its principal enactment. A'nd still the English system of ■ Dnnk-'mg has lest none* of its credit on that account. "The other .service .rendered by the Government to, this bank was to subscribe ,£750,000 to its capital, which it ptill Jiolds as preference shares. On these.""shares, the Government receives dividends amounting to'.CST.oOO in addition to which it Lift, year received -tax on notes issued by the bank, amounting to ,£92.700. and an- incomo tax and land taxi a further .£267.200, a total of ,-£447.4(10 —a not inconsiderable sum. suh-diriding, as it does, to nearly ,£ISOO a (lay for 1 every day that tho bank opens its doors for business. . , "Can it, with any deree of confidence, 1)0 affirmed that the State Bank, which it is proposed to set up, will prove of equal valiio fls a Foujy'» of revpnn» to the State, or that th" financial achievements ' which are evidently expected lo ba attained by its agency will actually materialise? Such achievements can hardly bo said to have materialised in the isirujlo instance—tho only Me in , actual existence, as far as I am awaro —where the* State, has assumed directly, . and without any intermediary, the functions of banker to the community; nor is there any ground fm- {hat they would follow, if the experiment were tried in this country. "The questions-raised are of vital importance, ealVng for the must careful and serious'consideration. T, however,' merely propound them. T shiill not attempt, to nnswnr tW»m; There is a well-known adage that a man may not lw a jiidgfi in his own cause, and Iherefore I may not at this 'stage do more than call attention tn Hk>' .yrovity of tho proposal, but later, if placed in the Tiosition nf respondent -n*vbn c:ifp, T may .have greater freedom 'n the amimont " Mr. R. W. Xoiio also referred to'tho subject. "Suggestions h.w been made Jn various qnarters to establish ii Stato ijonk.-" he said. ."Slinnld sueh a project •m'ateriftlise, the question of thn nurchase of your interests in our instit.nt'on mny arise. _ I can here only say that if the bank i.= so nppro.ichod, nnv .irrangemenls would linvo to be on a basis of nctnal value for assets, and in any preliminary ■negotiations, you can ,ri>lv'on raur pro-1 perty lwinsr ful'v, S'lfcuardnl,' Tn the ■meantime I would li'-o in spv that sjinrelinlders have valuable ,i.=;nk : n the'r sharee, and I trust nctw of them will lw induced to hun'iedly part with their holdings."
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Dominion, Volume 13, Issue 68, 13 December 1919, Page 9
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1,305STATE BANKING Dominion, Volume 13, Issue 68, 13 December 1919, Page 9
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