BANK OF NEW ZEALAND

Dominion, Volume 14, Issue 33, 3 November 1920, Page 8

BANK OF NEW ZEALAND

BILL BEFORE THE HOUSE

INCREASE OF THE STATE'S . INTEREST MR MASSEY EXPLAINS THE PROPOSALS Tho. Prime Minister (Alt. Massey) moved the second leading of tho Bank of Now Zealand Bill in the House of Kepresentatives yesterday afternoon. He explained the Bill in detail, and answered some criticism that has been directed at it. He assured the Hous» that tho Government was making a goud bargain. The Bill was debated at somo length by other members of the Houst>.

Mr. Massey said ho had been glad to notice that the Bill had met with a very favourable reception, very little ndverso criticism had been heard, and the people who were bejt qualified to judge seemed to be practically unanimous in saying that tho Bill, if passed into law, would be of substantial benefit to tho country. Mr. Massey proceeded ta place on record a sketch o? tho history of the bank from its inception. i£o mentioned that of tho members of the House who had occupied seats when the Government came, to' the assistance of tho Bank of New Zealand in .1894, only two, the Speaker (Sir Frederick Lang) and himself, were still there. Two other members (Sir Francis Bell and Sir William Praser) were members of the Legislative Council.

The bank, continued Mr. Massey, was now in a splendid position. It had experienced "ups and downs'" in the past, but for some years it had been on a wave of prosperity, and ho hoped that the prosperity would continue for a long time to come. There was mo doubt that periods of depression would come again, but ho trusted that the lessons of the past would be remembered, and that the bank and the country would be better able to meet adversity in the futuro than they had been in the past. The connection between the Government and the Bank of New Zealand undoubtedly had been profitable for both parties. That fact was shown clearly by the balance-sheet. Tho income tax paid by the bank for the year ended March 31 last would amount to £274,097. Tho tax paid by the bank on its note circulation for the same period amounted to ■£140,068, and the land tax paid! by tho bank totalled .£17,123, making a total of .£435,288. Then the dividends paid by the bank to tho Government on the State's holding of A and B preference shares amounted to £03,750. The A shares, amounting to £500,000, received interest at the rate of 10 per cent., and they might be regarded rather as a mortgage than as ordinary bank shares. Tho Bill proposed that this rato of 10 per cent., which was at present a maximum, should bo fixed for the future. The .dividend on the B shares amounted to £43,750. The Government had borrowed money to pay for its shares, and it was paying interest to the amount of £32,300 on these loans, so that the not profit on tho transaction, ■on the basis of the figures ho had quoted, was £61,250. Ho thought that might be regarded as a pretty satisfactory transaction for tho Government. The Government's net income from the bank) was in tho neighbourhood of £500,000. Tho payment by tho bank to municipalities in the'form of rated amounted to £7G30. Mr. Massey reminded members that banks wera not assessed for income tax in the same way as ordinary joint stock companies. The banks paid tax not upon their profits but upon their business. The Hat rate, ho believed, was 30s. per £100. That was really a tax on/turnover, and ho understood that: the Bank of Now Zealand was paying in incomo tax about '£140,000 more than-it would pay if it were taxed on its profits in the same way as other companies. The bank had about 3100 'shareholders, of whom 1700 wore resident in Now Zealand, About 000 of these shareholders had 'been on the register as far back as 1895, when Hie remainder of tho old capital nnd reserve of tho bank was written off. For seven years, from 1895 to 1901, the shareholders did uot receives any dividend, although in. that period substantial profits wero being earned and applied to the building up of the reserve fund Tho dividond had risen since 1901 from 5 per cent, to 174 per cent., the rato for lust year. Last year's dividend represented about G per cent, on tho acl'ual capital paid up by the ordinary shareholders, allowing for the capital and reserve that had been written off. Seme people had an idea that the Bank of New Zealand did business only in very large sums, continued Mr. Massey. That this was not the case was proved by tho fact that on March 31 Inst the number of overdrafts of under £300 had been 7530, and of overdrafts over £300 and under £500, 1379. These two totals made up 68 per cent, of the number of overdraft account's. Ha had heard a good deal said about the Commonwealth Bank in Australia. This bank in tho eight roars of its existence had yielded nothing to the State in the wny of dividend, or, as far as his information went, had it paid any taxation. •; Mr. Voitch: But the State has no capital in it. , ,„■„,, , Mr Massey: No. But the State has a very big responsibility I understand the position. Mr. Massey mentioned that precedents had been provided in Britain for the proposals embodied in the Bill. Three of tho five big British joint stock banks had recently made issues of shares of small denomination. These transactions were in line with the proposal in tho Bill to convert the £10 shares into £1 shares. THE BANK'S PROPOSAL. AN OFFICIAL LETTER BEAD. The Prime Minister then rend to the House the following letter received by him on June 22 last! from the General Manager of the Bank oi New Zealand:— "Sir—Since 1835 the bank has got into a strong financial position and is now abHc, (subject to the necessary statutory authority being given, to reinstate part of the capital which was written off. Tho present' strong position has been largely attained by limiting tho dividends paid to shareholders, and transferring the undistributed profits to the reserve fund. The reserve, fund of tho bank now stands at £2,500,000. My Board of Directors consider it fair that a portion of this sum should be applied to the reinstatement of the bank's capital upon a basis just to ordinary shareholders and to tho Government alike. Tho present position of tho sharo capital is as follows:— A preference shares held by the Government ... 500,000 B preference shares held by the Government ... 250,000 Ordinary shares 1,500,000 £2,250,000 ft is proposed to reinstate a portion of the capital written off. and to proportionately increase B preference shares by transferring £1,125,000 from the rescrvo fund. "My directors have givon deep consideration to tho question of tho proportions in which the two classes of should participate in the proposed distribution. At presont tho Government has only n 60vonth share in tlie bank plus an interest in tho uaVuro of a first preferential charge created by tho A preference shares and, therefore, if the bank's constitution remains unaltered, tho Government will only participate to the oxtent of one-seventh in any increased distribution of profits which may take ploeo in the future. "In view of tho value to the bank of the Government's association with fho institution, my directors feel justified in suggesting a modification of the constitution which will enable Ihe Government to participate to tho extent of onethird instead of only one-seventh in ony increased distribution of profits which may take ploco in the future. effect to the foregoing ideas it is proposed :— "1. To transfer £1,125,000 from reserve fund to capital so as to make tho capital as follows:— £ A preforenco shares 500,000

I! preforenco shares from £250,000 to 025,000 Ordinary shares from £1,500,000 to 2,250,000 £3,375,000 "2. To provide for tho allocation of profits available for distribution in each year as follows:— (a) First £50,000 to Government as a fixed preferential dividend on the A preference shares: (b) Pesiduo up to £306,250 to be divided as follows: One-seventh .to holders of B preference shares, and six-sevenths to holders of ordinary shares as at present. (c) Any balance of profits available for distribution over £350,250 to bo divided as fol-lows—one-third to holders of B preferonco shares and twothirds to holders of ordinary shares. "The distribution of profits which hns just been made for the vear ended March 31, 1920, has been at the rate of 10 per cent, on A shares £500,000, 17-1 per cent, on B shares £250.000, and on ordinary shares £1,000,000. This distribution amounted to:— A shares 50,000 B. , B . h « r c9 •• 43,750 Ordinary shares 175,000 Total £208,750 My directors feel no doubt that, if tho alterations in the capital and reserve which are now proposed are not made, dividends at similar rates can be paid upon capital as it now stands, viz., 4. shares £500,000, B shares £250,000, ordinary shares £1,500,000. These dividends will amount to:— £ 10 per cent, on A shares ... 50,000 17i per cent, on B shares ... 43,750' - 171 ner cent, on ordinary shares |. 262,500 « ■ A total of £356,250 "After the proposed reconstitution of the capital, a distribution of similar amount, if made in the manner suggested by my board, would represent tho following return upon the re-arranged capital:— A shares, £500.000 at 10 p.c £50,000 B shares, £625.00(1 at 7 p.c 43,750 Ord shares, 2,250,000 at 11 2-3 p.c. 262,500 ■ £356,250 "Ton will notice.that the rato of dividend upon the B shares which has hiTtlerto been tho same as thaO upon the ordinary shares, would thus he at a lower rate than tho latter shares receive. The amount, howovor, would bo tho same. Tim greater reduction in the rail? upon the B shares' is accounted for by tho fact that tho amount of these shaues will have been increased by 150 per cent., by the redistribmlion of capital nnd reserves, while that of the ordinary shares will only have been increased by 50 per cent. It is, however, confidently anticipated by the board that, partly owing to the increased earnings from' £500,000 of additional capital which has recently been paid uo by the ordinary shareholders— they will bo able to distribute in future a larger amount of profits than the sura

mentioned, and that the B preference shares will recoive 10 per cent, nnd .(die ordinary shares 13 l-3rd per cent.

"As you are aware, the Government's shareholding interest in the bank was acquired bv tho issue of £375,000 in i per cent, debentures, the nayment of interest on which' involves the Government' in an annual payment of £3 r ,;000. If the proposed reconstitufion of the capital is carried into effect, and the estimate of profit which I have jn*t given is realised, the Government will rcceivo'in dividends tho annual sum of £112.500—a net profit of £77,500—equal on a 5 ner cent, basis to a capital sum of. £1,550,000. ■ I feel sure you will recn'inise that this is a handsome Tohtrn, even for the great asnisfnneo which his been rendered by the Government, to the bank

"My director? also consider it desirable tha'f tho ordinary, capital should be converted into-shares of n denomination of £1 to encourage small investors to become shareholders, and thereby mnkciflie institution as domne.rat.ir-. as possible. There is nothing unusual in these nronosnls. for qui't> a number of important banks have recently increased Hie amount of their canital on the principle indicated herein, and the nronnaal to convert existing shares into £1 shares hns «eeu carried in f o effect by some of the leading TW.lsh banks, with a view t*> petti"" their shares more widely distributed.

"The foreiwlmr propowils imprnrn the. Government's present nosiHnu nl- the pxnens" nf tho ordinary shareholders in the following respects:—

' (]) The (lividfuwl on t.h» A nrpfer<>nff sharp' i« mode fixed inercnd of liable <n diminution at 5 per cent. nS nt nresont. (2) On .i windinsr-HT) tlif Coverr

monf would *<"•" " preferential r'Tht to receive -CG2s.nnn in Tesneei of a return of B preference capital instead nf .£250.000 as nt present. (3) The Government will participate 1 in anv increased distribution of profits to the extent of one-third instead of ene-pßventh under the bank's present constitution. "My directors desire me to respectfully nsk you to consider these proposals, and later nffW -them the opportunity nf discussing them with you, dionlil you consider such n disnuseion holnful or necessary. (Sgd.) H. Bucklcton, General Manager." The Bank's Business. That lotter, continued the Primo Minister, was the beginning of the negotiation's that had resulted, in the introduction of tho Bill now before the House. Ho mentioned that the bank had been criticised adversely for accumulating funds in London. These accumulations .had been due to the large excess of exV»'ts over imports in the late-years of the war. and to the difficulty in getting the import trade back to normal conditions after the war. But the funds hold by tho bank in London had since been reduced by not less than ten millions. There had been a. contraction of nearly a. million and n half in the noto circulation, and this had been effected easily by the transfer of funds from London. It had to be remembered, in this connection, that under the war contracts payments had been made by the Imperial 'Government for produce upon delivery in tho 6torcs here. This arrangement did not exist now, and comparatively little nioney had been coming into the country lately. But he anticipated a return to a more satisfactory state of affairs. He had told the House earlier in tho afternoon that spaco was to be provided for 100,000 crates of cheese monthly, a quantity that would represent about .£900,000. The funds held in London had enabled the bank to meet tho requirements of all ite own customers, and to sell exchange freely to other banks, thus assisting them to meet tho requirements of their customTurning to the details of tho Bill, tho Primo Minister stated that of the sum of £1,125,000 to be transferred from the reserve to capital, the State was to get one-third instead of the one-seventh to which it would have been entitled under the old arrangement. This meant that the State wn,> £211,000 to the good on tho deal The State was getting that mucli more than it was legally entitled to on the B preference shares. Ho regarded that as the most important proposal in the Bill

Mr. Wilford: What are the shareholders getting out of it? ' Mr. Massey: "Theshareholders are getting their share, but they are getting less than they would have got if tho Bill had not been brought before tho House. I do not think thero is any doubt about that. The bank says it is making a. gift to tho 1 will not eo to that length, but I do sny thnt from our point of view it, is a very satisfactory nrrnngement. Our share in tho bnnk will be increased by (his Bill to exnctlv. one-third. Wo will have. 1,125,000 A and B shares, which is exnctlv ono-third of the proposed share capital of .£3,375,000. . . . If we leave out the ,£500.000 of A shares, our share will be nbout one-fifth. The last dividend on the B preference shares and ordinary shares was 17\ per cent. Under tho new proposal the Government will receivu precisely the same return on capital as the ordinary shareholders." Mr. Mnssey ndded thnt the additional sum to be received nnnunlly by the Government from the bank would be in the neighbourhood of £20,000. Ho mentioned that, he had taken care to consult authorities regarding tho proposals contain.

Ed in the Bill. Tho auditor of tho bank, who was practically a Government officer, and the acting-head of the Treasury, had both assured him that tho Bill was in the best interosts of all concerned. In conclusion Mr. Massey explained the clauses of the Bill. About the Shareholders. Mr T. M. Wifford, Leader of tho Opposition, "said tho first thing which 6truck him was that while the advantages to tfho Government had been fully explained, ho had not heard a word from tho Prlino Minister about what benefit the shareholder* were receiving. It was fair to assumo that the shareholders were receiving a benofit at least equal to that which the Dominion was receiving. Ono could nit call the operation 8f tQie Bill exactly a watering of stock, but it was at least a juggling with reserves. First of all he wished to say that no such Bill could be produced without: recalling the banking crisis of 1894, when the lale Bight Hon. If. J. Seddon came to the rescue and-in-troduced a measure which enabled the Primo Minister to make tho speech he had made that atternoun. Mr. Massey: I quite admit! that. It was stated by banking men associated with tho t!hen Prime Minister In that business, continued -Mr. Wilford, that tho grasp he showed of the situation was extraordinary. He thought it! right to mako that referenco so that the great work which the late Mr. Seddon did. on that! occasion might be recalled to the present generation. It seemed inevitable that any banking legislation should lie rush legislation. He hoped that any reference to tho affairs of the bank miglTt be made with a due senso of responsibility- Tho Bill had two purposes, one to capitalise a portion" of the reserve, tho other to define the position of the shareholders. 11l had been slated that the proposals would domocratiso the bank, but this was the "morost political eyewash. What chanco was there Jor anyone save tin shareholders to obtain the £1 shares into which the £10 shares were bcinj divided? It'" was no un> talking of tuo income tax, land tax, and note tax paid by tho bank. The bank did not pay it, but its clients who worked on overdraU or transferred money. Answering an interjection, Mr. Wilford, said there was no closer corporation in this country than the banking trust, protected by regulation from the cradle to the grave. Competition among the .different bankswas a negligible quantity. Discussing Hie "derails of the measure, Mr. Wilford approved v of the provision securing a flat rate dividend of 10 per cent, on the A preference shares. But, he addcil, what kind of a bargain was the shareholder getting when he received ten £1 shares for ft share on which he had paid up £6 I3s. id.?" Commenting on tho increase of the Government's interest from one-=eventh to one-third, ho asked why there was not! a corresponding increase in control? M.r. Massey: We have four directors to two now. , Mr. Wilford said that did not affect the question. The State's share of control should be increased proportionally. A member: T)o you want the lot? Mr. Wilford: "I think it willcomo t« that eventually." He was- glad to see tßatin the futuro issues of share capital the Government was to maintain .tho status it was gaining now. The stipulation regarding the minimum qualification for a seat on the directorate required for that purpose, it had been estimated, £4000. This was hardly dcmocmtisation. The largest: shareholder did not necessarily make the best director. He saw a danger in making 60,000 the maximum number of shares to be held by one holder. If the shares attained a high market . vnlue thero might be a danger of their being concentrated in a few hands. The old qualification of 6AOD shares was fixed at a fimo when the actual value of the £10 sliaro was far below £10.

Where, asked' Mr. Wilford, did the public come in in this Bill? Was any shareholder coins to refuse to take the tax shares in return for his ,£lO share? What was coing to be done for the man who <l r opped out in the bad old >I-»v<ip Did the. country owe no moral obliffntion to those who went bankrupt in the old dara through holding Hnnlr of New Zealand shares? Ho sue/Rested the insertion of a clause increasing the allowance to those- pensioners who were retired from tlio servico of the bank in the past when times were bad. State Bank Suggested, Mr. J. Craigie (Timaru) said that the prosperity of the bank had grown with the development of the country, and it might be said that the war had added to its prosperity. Analysing tho lost bat-nnce.-sheet, he snid that the profits wers even greater than appeared on the face of it. The .£50,000 written off for buildings was too much, in th»; face of the increase in property values. He made a plea for increased salaries for, tho staffs. Ho thought they were underpaid before the war, and ho did not think the rise they had recently had was commensurate with the increase In thtf cost of living. The transfer authorised by the Bill was merely n book entry. No fresh capital was coming in. The Government, was apparently doing well out of the transaction. H)> noticed that the Bank of New Zealand had .£17,000,000 of free capital, while the public banks among them had £M..000.000 of free deposit. This he did not think was right. The bank was well run, and tho association of the Government with it was profitably, 'but he did not think the Government should be associated with an institution run for the benefit of shareholders. It 6hould bo run for tho benefit of the pfeople of New Zealand. If the Government was to bo associated with a bank let it be a State bank. In order to have the position reviewed he desired to move an amendment in the following terms:—

That this House is of opinion that the Government should set up a special committee representative of the commercial, agricultural, and industrial classes of this House to inquire - into— (1) The relationship between tho State and the Bank of New Zealand ns now existing, and to submit recommendations as to thy? manner in which the present capital interests could bo best adjusted, with a view to promoting in the most effective manner the permanent interests and future prosperity of the Dominion. (2) Tbie desirability of the Government taking steps to have tho bank State-owned and managed, and, if desirable, what terms and conditions would bo fair and'reasonable in the interests of the State and the private shareholders. (3) Whether it is desirable in thk> interests of the State to establish an independent State bank, and, if so, what proposals or steps should be adopted. Mr. W. A. Vf:itohi (Wangnnui) seconded the amendment. He said that while he agreed with tho Prime Minister that considerable advantage was accruing to tho Govt-rumerit by the rearrangement, ho did not agree that it was as groat as was claimed. After tracing tho history of recent legislation, he snid that tlie Government was merely receiving about onethird of the accumulated profits being capitalised. Tho shareholders, ho thought, were doing better than appeared on the surface. In addition to receiving an allotment of two to one of the accumulated profits, by paying in £) fe, Bd. they were to reccivvj from the reserve another .63 fis. Bd., on which they would immediately draw interest at tho rate of 15 per o?nt. He did not begrudge thorn it, in view of the hardships and difficulties of the past, but ho thought the Prime Minister should have put all tho cards on the table. He thought thj! Bill might remove the Government guarantee, for it seemed to him the institution was in so strong a position that nothing likely to occur in tl«j future would trouble it. . The advantages given to the holders of old ordinary shares were bo some extent nt any rate justified by what these people had undergone when tho bank was in difficulties. Tho proposal to hold an investigation was not the result of any >* n that there was something wrong. The investigation should serve to zive tho ordinary member of tho public confidence in the. bank". Much might be done to popularise tho bank as a public institution. The bank might well consider tho advisability of reducing tho annual charge for the keeping of accounts to a nominal amountsay hnlf-arorown—so that the poorer people might ho encouraged to usp tho banks, and so savo their money. Sir. Veitch proceeded to discuss the conditions of omplovmcnt of the bank staffs. He wns not in favour of the present rule prohibiting oji officer from marrying until a certain salary was rencnea, The bank could rely more upon *

young married raw than upon a single one and it should do all it could to encourage young men to eottlo down in riinrried life. The Bank of New Zealand should do something in the way of reducing its profits In order to givo concessions to its clients.

Amendment Out of Order. The Speaker at ffiis stage ruled l that the amendment moved by Mr. Croigie was not in order at the moment, but would bo in order if moved immediately after the second rending. 11 r. W. D. Stewart (Dunedin West) coiumented on some of tho points raised by the previous speakers. lie pointed out that where tho Government gained was in flho fact that it got a third or the new issue from the undivided profits, instead of only the one-seventh to which it was strictly entitled The division of the £16 snares into £\ shares did scum to him 10 give tho general public a belter chance of buying. Tims tho division would lead to a wider distribution of the shares. The effect of'one of tho suggestions that had been put forward had boon thai', the Bank of New Zealand should cater for what was really tho work done at present by the Post Office Savings Bank. As the Government was interested in both instihufions-, it would really bo "competing with itself." Mr. Craigie's amendment was not-before tho House, but he would suggest that while the questions raised by it were suitablo for investigation by a committee, they should not be raised in connection with the present Bill, because the effect would 1» to hold the Bill up.

Mr. Craigie observed Shot lie had no wish to bring about that result. Mr. Stewart proceeded to state that in his opinion the arrangements connected wtilh the Bank of New Zealand combined the advantages of State ownership with private ownership. All the previous speakers had recognisod that the Bill embodied a good bargain for the State. It materially improved the position, of the Government in relation to tho bank.

"An Academic Quostion." Mr. B. M'Callum (Wairau) spoke of the possibility that bad times might come upon the country soon. Ho considered that the main thing -was to strengthen tho Bank of New Zealand, which was tho most important financial institution in tho country. Another time, but not the present, might be suitable, for discussing the Vacademic question of a, State Bank." The Bill embodied suggestions on the part of tho bank that were genorous, in his opinion. Ihe shareholders had for years denied themselves dividends in order to build up tho huge reserve of .£2,500,000. It was proposed to tako one-half of this and distribute jt between the shareholders and the Government. The Government a fair proportion was one-seventh. Iho bank said to the: Government: If you will agree- to the' reduction of the reserve by one-haCf wo will not ask you to accept only one-seventh. We will give you one-third of that half." lhe net result was, said Mr. JTCaUun.. that the country was offered a gift of X2U,,89. The issue of .£1 shares- certainly democratised" the bank. Ho strongly believed in making the bank the peoples hank, and ho thought the change a wise one. The House would bo well advised to pass the Bill. The onT.y weak ed to be in tho calling up of the whole Ca Mr' l M. J. Savage (Auckland. West) saw in tho Bill an indication that what the country needed was a State BanK. « seemed to him that the government ot the Bank of Nqw Zealand, was to remain what it had been before, and he understood that the crux of democracy was the form of government. Tho proposal in the Bill was to use the reserve to provide more capital that, sponge-like, would serve to absorb tho future profits of the bank The depositor had to bo considered by any private bank, hut dividends were the object sought after by tho director. Tho Australian Commonwealth Bank had no capital, and really did operate in the interests of the depositors. Supposing another crash liko that of 1891 came, who was going to "pay the piper"? . The State would have to, ' and yet tho State was "playing second fiddle in the control of the bank. He endorsed tho proposals made by the member for limaru.. Whatever became of tho Bill, it would have little effect on the producers of the country, who would still have to carry the load of interest they were bearing to-day. Hie wished to see relief given to- thoso who required financial nceoinmodntion. What proposals was the Government putting forward to meet that desire? "Sound Business." If capital playsd no part in tho affairs of a bank, suggested Mr. W. D. Lysnar (Gisbome), the last speaker might easily have a bank of his own. There must either bo capital or credit —with something behind the credit to enable tho institution to pay up when required. The Bill was- sound business. So long ns the Bank of New Zealand met the requirements of tho trade and conimerco of the Dominion, it was quite: satisfactory. Tho amendments set out in the schedule gave the tank the right to issue notes against its London securities without depositing its securities. Tho other banks had enjoyed this privilege only when it was granted as a war measure, and he hoped that if the Government was now going to confer upon the Bank of New Zealand the privilege referred to, the other banks would be placed on a similar footing. Mr. Lysnar charged the head of tho bank (Mr. Beauchamp) with having gone out of his way to "decry tho values of the produce of the Dominion." ■ A member: He's giving you good advice. ■ ' The head of the bank, Mr. Lysnar continued, had talked about a slump. That very (Lay ho (the speaker) had been offered for lnewfc prices that he had never had offered him before. Mr. R. A. Wright {Wellington Suburbs): Armour and Co.? Mr. Lysnar: "No, London. If you are curious to know the price, it was tenpenco a pound .for lamb f.o.b. New Zealand, sevenpence for wethers, and fivepence for owes. Now thoso are prices wo never had before." Mr. Lysnar indicated that ho was not at all pessimistic in his view of immediate prospects in the market for meat or the market for wool. When the complete change did come from "commandeer" conditions to normal conditions ho hoped that the other banks would bo on the same footing as- the Bank of New Zenland, particularly in the matter ho had mentioned. A State Bank Already. "I don't know-what a State bank is if the Bank of New Zealand isn't a State Bank," said Dr. A. K. Newman (Wellington East), who proceeded to enumerate tho officers nominated by tho Government. The Bill, he thought, was a very good one. The shareholders had an almost negligible part in the direction of the bank in comparison with the part held by the Government, which represented the people as a whole. He heartily supported the Bill. Ho thought that Mr. Beauchomp's advico to the country to be prepared for a. slump wag good advice, in spite of what the member for Gisborne had said. He wished to see only one alteration made in tho Bill; ho wished for some assurance that tho bank would not hnvo practically unlimited power to issue notes. He knew that the power was limited in certain ways, but it appeared to him to be "practically unlimited."

Mr. Tl. Ahuore (Nelson) -thought the Bill the best Bank of Now Kenlaml Bill that had yet been, before the House. Ho thou(rht it was a pity that tho Government had not gone tho whole way and taken over tho bank; for tho credit of tho whole people must, bo greater than tho credit.of a part. If the Government forced the Bank of New Zealand to pay interest upon money at call—and ho suggested that it should do so—the othor banks would have to follow suit or loso their free deposits. ' Mr. J. M'Combs (Lyttelton) said the ordinary shareholders were going to be placed in a much better position than tho Government, and the State, moreover, wns surrendering an equity in allowing a portion of the reserve to be. capitalised. If bad times came, tho reserve would havif been availnhle to vroy tho dividend of I<S per cent, on tho Government's A shares. The dividends Hint the bank was making proved, he urged, that the bank was not serving in the best way the interests of the community in New Zealand. These dividends represented an unnecessary toll. Tho time had come for considering tho establishment of a hank,

The Bill Committed, Tho second reading was carried on tlie voices, and tho House went into Commit* tee on the Bill at 10 15 p.m. Mr. Craigio was not present to move his amendment, though lie appeared in the Houso a few moments later.

Mr. Massoy said in reply to Mr. Croigio's inquiries, ti'nat he would next session look into the of setting up such a committee as Mr. Crnigie had proposed. Mr. H. E. Holland (Buller) announced his intention of dividing the Houso on tho first (or "short titlo") clause lie considered limit there was n danger of a banking smash ahead of the country. Would it. not 'bo better, ho asked, for . the Stato to place its' credit behind a bank run bv the Stnte tihnn to placo its ciedit behind a bank run by others? J he Bank of New Zealand was a huge sweating institution so far us its employees were concerned. ~,,,, ' Mr. MTombs supported Mr. Holland Tho clause wont to n division and was. retained by 57 votes to 8. The division list was as follows:— For the clause (57).—Anderson, Al> niore, Bitchcner, Bollard, Burnett, Campbell, Coalos, Craigio, Dickson, J.MC, Dickson, .1. S., Me, field, Forbes, Guthrie, Hamilton A.. Hamilton, J. K., Harris, Hawken.Henar?, Hemes, llncklv, Horn, Hunter, Isitt, Jones, Kellett, Lee. Luke, Ly.-Jiar, M'C'allum, M'Leod, M'Nicol. Mander, Massey, Masters, Mitchell, Nash, Newman, A. IC, Newman, ]'{~ Nosworthv, Tan', I'omare, I'ottor, Powdrcll. Reed, Khodes, It. H„ Rhodes, T. W.. Smith, 1!. W., Smith, S. ti., Stewart, Sykes, Veitch, Wilford, Williams, Witty, Wright, Young Against ■. tho clause- (S).—Bartram, Fraser. Holland, Howard, M'Combs, Parry, Savage, Sullivan. Mr. Wilford warmly , approved of a Government amendment providing that tho Public Trustee should not be confined to tho holding of 60,000 shares, > which was tho maximum number that ( might 1)0 held under* the Bill by any one proprietor. Ho hoped that the Public Trustee would make,full use of the opl>ortunity provided by the amendment, and buy shares whenever they were available. The amendment was adopted. Mr. Lvsnar (Gisborne), speaking on the motion for the third reading, asked that other banks should have the same privileges as the Bank of New Zealand with respect to tho issue of notes and other matters. Mr. Massey said the matter was being considered by the Attorney-General, who would be dealing with the Bill in another place. ... Mr. M'Combs (Lyttelton) repeated ins objections to the Bill, on the ground that in his opinion it did not protect public interests and that time had not. been given for its consideration by financial experts. ' ■ The Prime .Mj-iister, m reply, said again that the Government was making a 1 good bargain. It had gained bv the transaction .£215,000. He recognised that tho country had done a great deal for the bank, and was entitled to something. But the bargain was a good one. The Bill had been before the country for six days, and had been' explained and discussed in all the leading newspapers, eo that there need be no suggestion of lack of opportunity, for consideration. The third reading of the Bill was agreed to on the voices and the Bill was passed.

NARROW-GAUGE RAILWAYS BILL PASSED BY THE HOUSE. Tho District Railways Amendment Bill, authorising the construction of narrow gauge railways was before the Houso of Representatives last night. The Minister of Public Works (Hon. J. Q. Coates), in moving the.second reading of the Bill, said that some objections would be raised to the construction of narrow lilies. It was true that the wider gauge made a better line. But on tho other hand' the narrow gauge made possible the construction of lines that would not bo built, at all if the standard gauge, was demanded. The question really, was one of expediency.' He proposed to leave the actual gauge to be fixed by. regulation after further inquiry. His own opinion was that in many parts of 'New Zealand, particularly the swamp lands, a two-foot gauge would be quite satisfactory. Such a line could be laid rapidly and cheaply, and it would assist onormously in tho development of districts where the provision of good roads was difficulti Mr. J. A. Young (Waikato) said that his district would welcome the Bill. Ho suggested that tlitf gauge should bo specified in the Bill as "not less than two feet." Competent inquirers were satisfied that such a gaugo would be adequate. TheT!wo-feet gaugo hadi been 'sEon by , New Zealandors in successful operation in Prance arid in Fiji. The settlers on tho route of tho proposed Hamilton-Raglan-Kawhia line had gone into this question thoroughly. If they wore to wait nntil a railway of the full gauge was constructed, they would have to wait for fifty years. Mr. G. Mitchell (Wellington South) also assured tho House that the two-feet gauge line was a practical railway,- capable of handling a great deal of traffic. He suggested that the Government should have power to resume the narrow lines when the time came to put down standard lines.

Mr. Mnssoy: The general Act covers that. ' Several members oppressed a doubt whether the narrow-gauge railway was a good business proposition. Mr. W. A. Veitch (Wnngamii) suggested tlint the best course in railway construction was to make the first cost the only cost, and not to expend money first on a light Tailway und then on a standard railway. , , . , ' , ■The Minister, in replying, observed that the saving effected bv constructing a two-foot line from Hamilton to Raglan would be <£100,000, as compared with the cost of constructing a Ime with a gau»e of 8 feet Gin. This estimated saving°woiild bring within the bounds of possibility the construction of a Hamil-ton-Raglan lino which otherwise would be out of the .question at present. Ho would admit that the maintenance charges on narrow-gaugo lines were lairhThe'second reading was carried[oritho voices. The Bill was put through Committee, read a. third time ««£««£; The Local Railways Bill, which also gives authority for ways, was also' .put through its stages and passed. ' "VERY CONTENTIOUS" WELLINGTON'S PAHUTUA ENDOWMENT. When the "Washing Up".Bill was introduced by Vioe-Jteal J»«W » tt A B House of Representatives ast light, Mr. G. Witty (liiccarton asked it contused any contentious clauses. Ihe Bill was bein read a second time pro forma and ?efer°rcd to the Lands' Committee for of Lands (Mr. Guthrie) replied that, there were some content Km., olauses in the B 11. K they were found to he clauses that were very ™*gm? and that ought to be den It wit in another way ho would cut them outMr. Fraser (AVellmgton Central) Is there a clause dealing _w.Hi the ton City Council's endowment lands -t Not at present, but a clause dealing with those leweswil bo brought down on a supplementary oidei paper. I understand. that is a very contentious clause. Wellington members: Hear, hear. Mr. Guthrie: If there is any opposition when the Bill is betoro the House I will out it out. , , Mr. Luke (Wellington North) suggested that the clause should bo placed in a °Mr M'Nicol (Pahiatua) said ho would like to point out that this was a very important matter to the parties concerned. The promotion of a local Bill was i .„..-jiii .• a U"> piv.wn-.l stage of the session/owing to the forms of the House. He appealed to the members who bad indicated opposition to the clause to let it go through in the interests of tic Wellington City Council, and of the tenants. Tho City Council had approved of the proposal made in the clause and its refection would be a\erious matter ior the people concerned. Dr Newman (Wellingrtn East) remarked that he would offer most earnest opposition to the clause. The city of Wellington had a very valuable endowment , at Pahiatua. The proposal to sell the endowment had been carried by a narrow majority on the council. He was prepared to use all the forms of the House in blocking the proposal. :