BANKS DEFENDED

Evening Post, Volume CXVII, Issue 23, 27 January 1934, Page 17

BANKS DEFENDED

MANAGEK'S SPEECH

DEPRESSION DIFFICULTIES

CENTRAL BANK SYSTEM

i Some interesting observations: relating to banking ■. business iv times, of economic, depression were made at the Christchurch Drainage Board's annual dinner".■•by, Mr. P, L. Porter,■„ manager of the Bank of New Zealand in Christ-, church, in responding to the toast of tho board's bankers.

The toast was proposed by Mr. E. H. S. Hamilton, a member of the board, and himself a former bank officer, reports "Tho Press." Ho 'remarked that in these days it was fashionable to criticise the banks harshly and to attribute."'to. them most of the troubles of the present day, and make them' the butt of most biting jokes. Bankers seldom retaliated in words, but suffered in silence. It was often overlooked that bankers were' traders ,who bought and sold money and credit. People said that they were clients of the banks, whereas they were"' really customers. There were times' when there was a strong demand for their goods and supplies had to be rationed; when times were not good and bankers had to ask'for their goods back; there were times like the present, when bankers were overstocked and had insufficient means of using their stock to advantage; and there were times when, at the behest of politicians, tho banks were compelled to buy^ goods/ known as London bills, at a price very much in excess !of their value in the general market, knd to,sell such goods at a sonlewhat higher price and exchange the balance. .; "ALABMS AND EXCURSIONS."

Mr. Porter, in responding, said that last year, from the bankers' viewpoint; had been one of alarms and excursions. It had started off with a high exchange rate, followed by proposals for a central bank, the taking over of tho banks' gold by the State, and then, tho devaluation of the dollar. The Government of New Zealand, in its wisdom, had decided to establish a central bank, and there was a difference of opinion as to the wisdom of the step. Now that it had become the policy of the country there .was one thing of which they could bo quito sure, and that was that as far as the trading banks were concerned, if there was anything that the central bank could do for the community as a whole, the co-operation of tho trading banks would bo forthcoming. In New Zealand, when once a course of policy was decided ;on, they were not in tho habit of bickering. Now that it had been decided that a central bank, should be established,. it would have the opportunity to show what it could do. Noue of them knew what a central bank could do in such a small country as New Zealand, which was a primary producing country—a large farm practically, with-a few industries. In such a country ■it was unusual to have such an elaborate banking system. However, there was no harm in trying it; he himself thought it could not do any harm, but it would be an expense. However, it would have every' opportunity to «hqw what it can do. ■ '-

Very soon they would have a complete new set of coins and, of banknotes—a complete new sot of tools. He ventured to,.say that ;the result would ;be^very*much • the samo as before. Bankers^!by strict -adherence to the principles':;of their business, would be TOlo^tdibi&rifjfr.oa;^: •Fopls 4iA not matter j!|i^iajt^;:;th/i'^^ change'jof f goodsf and. services, and the ; business' -;pi, thß^banksC was tp facilitate such'exchanges. '■{');'. >v. v-.^v ■■;••.",

POWEB OV THE BANKS.

i^'iSa that banks were credited with' having a great'deal more power than they really possessed. It had become the practice, in times .of depression, to blame the banks and the Government,; but all were ,the victims of circumstances.. To blame the banks was a very old practice; the man who lent money was still considered a scoundrel, and that was air there was to it. From his own personal experience the banks, as la whole, had been, very steadfast in their attitude '.towards business 'generally. , They had endeavoured' to pursue a' course which was neither over-confident nor pessimistic. They had, endeavoured to be fair to everybody, and' he felt that they had succeeded. Of course, they had made mistakes; but on the whole'; they had pursued a steady policy throughout. He'had experience; of different parts of the world, and he felt, satisfied himself that New Zealand was one of the most fortunate countries. The depressioh had not affected it "to", anything like the same extent as it had affected other . countries. They all .had. thoir unemployed, and it seemed inevitable that some people should be on. short commons;' but; taking things on the averagej. ho thought that New Zealand had escaped the .worst, results, of tho depression. The national life had gone on 'almost uninterrupted; social services had not been curtailed; the Health Department -was still functioning; education i and other services were, going on much the same as before. Though some were on short commons, he did not think that it could be said that they had anyone who was actually starving. Certainly no one should be starving in a country like. Now Zealand, .which, was singularly well placed. In respect o£. the fertility of the. land, and its fine climate, it was a country in which there was plenty for all. The problem was that of distribution. EXCHANGE STABILITY.;

The One thing that prominent economists were thoroughly agreed upon was the necessity for stability of exchange. They had been forced off the gold standard by the war, and; it seemed'now that'nothing would serve their purpose but a return, to that standard, and the sooner they returned to it the sooner they would be laying the foundation for the return to prosperity. He had read recently Professor J. B. Condliffe's review of world con;, ditions, in which ho arrived at the conclusion that the first thing necessary1 was a return to stable exchange. .'