GOVERNMENT AND BANK

Evening Post, Volume CXIV, Issue 123, 21 November 1932, Page 8

GOVERNMENT AND BANK

• At the time of writing no reply has been, made to the serious statements of the Mayor on Saturday concerning the Government and the Bank of New Zealand. Neither the Government'nor the promoters of the high exchange movement can ignore the serious implications of Mr. Hislop's. statement. Mr. Hislop declares that representatives of the Government have made: direct representation_tb the Bank of New Zealand.

; It appears (he- says)..thatf an at-; tempt is being made: to exert politi-' cal pressure on one member- of the' Associated Banks while trying !to; create the impression in the public mind that the Associated Banks are. being-left, free to decide the matter. The Bank of New Zealand is, of .course, tho Government's banker, a position which v it r will cease to occupy in the event, of a central bank,.being established. It is, however, understood that suggestions have been made that proposals for the establishment of a central bank might be held over indefinitely,; or that tho Bank of New Zealand might itself bo constituted such central banlc. :

The Government is fully entitled to make representations 'to its .bankers on any issue of, banking policy, and t6 consult with. them.. It is both right and-proper that it should do so. On i a former occasion Mr. Downie Stewart, as Minister of Finance, discussed in this way the question of interest rates and his subsequent statement to the House of Representatives showed that he did not wholly approve the banking policy of the time. But he made it clear that he considered he was entitled to go no further than setting forth the Government's views. ,

The central bank proposal is also a proper subject for discussion between the Government and the Associated ißanks, and the Government bankers. But it would not be proper that any envoy of the Government, whether official or unofficial, should go to the Bank of New.Zealand or the Associated Banks with' a high exchange, demand in one hand arid a central bank proposal in the other, leaving it to be understood that fhe banks,^ or any one of them, can make a choice. Equally improper would be the suggestion that a central bank, should be ■ established because the Government was; dissatisfied with the policy of the Associated Banks onthe exchange issue. Such a suggestion" would be highly objectionable in two ways:, first, as a covert threat, and second, as implying that the Government believed that a central bank would be subject to the political influence which had failed'with the trading banks. '

We cannot too strongly emphasise the harm that may be done if the suspicion is aroused in the public mind that a bargain has been struck or is about to be concluded. The Government is a Government elected to serve the whole .community, and not to place the interests, of the part before the welfare of the whole. Similarly, the bank's serve the whole country. They are neither farmers' banks nor importers* banks. They retain the confidence of the public because they have hitherto discharged a public duty according to.sound and wellestablished banking principles. It would be destructive of public confidence if now it were to become apparent, or even open to grave suspicion,, that any section of the community had been sacrificed for the benefit of another section:—that a bargain had been concluded in which the welfare of a considerable section (in this case a major section) had been bartered away.