Bank of New Zealand Crisis.

Feilding Star, Volume XVII, Issue 53, 30 August 1895, Page 2

Bank of New Zealand Crisis.

THE BANK BILL BEFORE PARLIAMENT. AN ALL-NIGHT SITTING. BILL CARRIED BY A LARGE MAJORITY. [Per Press Association.] Wellington, August 29. The House met at 2.30. Hou, Scddon moved the suspension of tbe Standing Orders to allow the Banking Bill to be taken through all its remaining stages at to-day's sitting. Mr Bell objected to this course on tbe ground that he had not yet sufficient time to grasp tho scope of the Bill. There could be no excuse for such indecent baste over this Bill. The proposals of Government to deal with the Bank question were uot to his mind satisfactory, and would not be sufficient to settle the matter finally. Mr Thos. McKenzie also objected to the suspension of the Standing Orders. Dr Newman characterised the report of the Committee as the most contemntible and unbusinesslike document ever brought down to the House. Mr Duthie considered there was no occasion whatever for any undue baste, as there was not the slightest possibility of any panic occurring. Speaking with a full knowledge of the financial position of most of the business firms from Hokitika to Gisborne, he did not fear any grave crisis from the suspension of the Bank of New Zealand. A few weak storekeepers might go, but it was utter nonsense to say there would be any general disaster. Messrs Joyce, G. W. Russell, Larnacb and Steward asked the Premier not to force the Bill through at one sitting. Mr Pirani complained of the absolutely unreliable nature of the tables attached to the report. Some of the additions were all wrong. Mr Allen suggested that the Committee should take back its report and consider whether it had not come to a conclusion on false tables. Iv reply to Mr Mitchelson, Mr Seddon said all he asked for by the suspension of the Standing Orders was to prevent two or three members setting up a stonewall and obstructing the reasonable passage of the Bill. Government had no desire to force the Bill through, and there was no intention to take the third reading to-day. If the second reading debate was finished before 10 30 to-night the Bill would be taken into Committee. Mr Geo. Hutchison suggested that the House should be furnished with a schedule showing the value of the estates. After considerable discussion, Mr Ward said the mistakes in additions in the tables were due to the rapidity with which the report had been printed. The totals were correct, and the Committee bad not been misled. The mistakes did not in any way affect the balance-sheets. Government wished to make progress with the Bill and did not waut to see hV blocked. He might say it would be a very improper and unfair thing to disclose the value of the estates to the House as had beeu suggested. It was not intended to throw the assets away and it* would interfere with negociations between buyer and sellers if .the values were disclosed. """*---_.__,_ After further discussion Mr Seddon, in reply, repeated that all Governinenrwished to do was to prevent a stonewall such as had resulted last night. If tbe House refused to suspend the Standing Orders the responsibility would not be with the Government. The value of the estates given to the committee was the lowest writtendown value taken at the time when prices were low, and no business man would do what members wanted Government to do, viz., place the values opposite the estates. Referring to Mr Duthie's remarks he said 90 per cent of the local bodies dealt with the Bank of New Zealand, and they could imagine the result to those bodies if anything happened to that institution. He aeked the House to agree to the suspension of the Standing Orders, and the House would not sit after 1.30 am., provided there was no factious opposition to the Bill. The Premier's motion for the suspension of the Standing Orders was put and lost on the voices. When the House resumed at 7.30. Mr Ward moved the second reading of the Bank of New Zealand and Banking Bill to make certain provision in connection with the affairs of the Bank of New Zealand, to further amend the New Zealand Bank Act 1861, and Banks Deed of Settlement, and to amend the Banking Act of 1894. He said the House would recognise the^ circumstances that led to the necessity of introdtxsing the Bill, and that the causes were beyond the control off most people and certainly were not owing to the Government _ow in power. He thought it was a matter for regret that when the Globo Assets Company was formed some years ago, there had not been such reconstruction as would have proved more beneficial to all concerned. If Government had not come to the assistance of the Bank last year it could not have carried on very long, and in face of the commercial crisis that had at that time overtaken Australia, it would haye meant a very disastrous crisis to this colony if Government had not taken the action they had done. Whether the action of last year was advisable or not had nothing to do with the present proceedings. The Bill practically covered the recommendations made by the Joint Banking Committee, which meant that the colony should accept further direct responsibility with the Bank by subscribing L 500,000 in preferential shares, and it was proposed to issue L 500,000 of stock at 3-V per cent. These preferential shares would rank second only to the two millions of last year, and the colony's total guarantee of two and a half millions would take precedence of all obligations of the Bank except the amounts due to depositors. It was proposed that au extra director should be fcominated by Government,- but Government would not have the right to vote at shareholders' meetings. If Government exercised the right of ordinary shareholders they would practically have control of the Bank, but this was not desirable, as the time had not arrived for the establishment of a State bank in the colony. The Realisation Board would enable the institution to finally remove from its balande-sheet the great trouble that had existed for many years in the possession of estates belonging to the Estates Company. It was proposed to hand over to this Board tbe whole of the properties mentioned in the schedule of the Bill, and be should circulate amongst members the whole of the Land Tax values of those properties. He detailed the proposals with respect to guarantee against loss of this Company, and said Government proposed to put against the L 855.000 deficit one million of called up and uncalled up capital. In addition to this" they would put tho profits of the Bank to the extent of 1*50,000 a year, which would be paid to the Realisation Board. The Directors estimated the earning power of the Bank at _135,---000 a year. It was proposed that one million of the required securities reserved last year should not be reserved any longer, and it was contemplated to invest that amount in the ordinary way at 4 per cent, which would give to the Bank L 15.000 a year. It was proposed to give the Bank power to purchase other banking business, which would return L 30,000 a year to the institution. -Government were, howevef, opposed to ftmals^matiojj^'be^^sp it %ojtfd meau

further share respqnsibilities to the Bank. He explained in detail the vario_s proposals of the Bill as recommended by the Committee, and said he hoped the proposals would be accepted) as it was only by eliminating the losses caused _y the institution and separating it from the properties that caused those losses, that the earning power of the institution could be arrived at. The losses caused by the Estates Company and the Agricultural Company were to • be wiped off. Some members urged that Government should take over the Bank, but that meant an expediture of twelve millions of money. He would not hesitate to take the institution over if the colony had twelve millions to spare. He hoped once aud for all that the solution of this difficulty would be effected. Government did not wish to force members, and the responsibility rested with the House. He said the proposals contained in the Bill wero briefly as follows :— lst. We propose to release the second million, and thereby to effect a saving to the institution of L 15,000 per annum. 2nd. To take the L 500.000 preference shares, ranking before guaranteed shares. 3rd. To call tip L 500.000 of additional capital from the i shareholders. 4th. To pay L 50,000 a year to the Realisation Board. 5 th. To pay L 25.000 a year to the shareholders upon the second L 500,000 they are to pay up. 6tb. To pay all balances beyond the L7s,ooo— that is tbfe L 50,000 to be paid to the Realisation Board out of the profits and L 25,000 upon the L 500,000 to shareholders. 7th, To give the Bank power to purchase further banking business. Sth. The colony's business to be done in England. Mr Mitchelson complimented Mr Ward on the very temperate manner in which he dealt with the subject, which was in contrast to the Premier's speech in the afternoon. He congratulated the joint committee on their work, and, although he could not support their proposals, he had no doabt they had conscientiously come to their conclusions. It would undoubtedly be a great calamity to the colony if the Bank of New Zealand was allowed to close its doors. He declared the colony would receive no bene* tit whatever from the L 500.000 preferential shares, and the colony wouldalso.--*- 1 have to be prepare^.jc&4i_>*jss^at least one__sDlio_-m''the realisation of the estates. He thought the position of the shareholders in the Bank was most unfortunate. He could not see tbat tho Government proposals would attain the object desired. He was of opinion that it would take a very long time to liquidate the loss sustained by realisation ai the rate proposed by Government (L 50.000 a year). He had great respect for the Bank, and he did not want to do anything to injure it, but be hoped the House would consider the whole matter carefully and impartially. He for one would take no part in stonewalling tactics, and he hoped nothing of the kind _: would be attempted. Mr Duthie could see no benefit either to the shareholders or the colony by the adoption of the committee's report. He denied that the bank had a good business, and said it had written off altogether L 1,362,000., 362,000. He held that an. average of four years was no guide to the value of the estates, aud said it would be a long time L 50.000 would be realised to wipe out the deficiency. Shareholders would have to contribute everything by this scheme without receiving any benefit from it. " The proposals before the House showed no finality at all, and they would cause enormous loss to the colony. Hon. McKenzie said Mr Dutbie's speech was one of the most insulting political utterances he had listened, jo for some time. Every member in the House was responsible for the guarantee which had prevented the Bank closing its doors last year. The House came to the rescue of the Bank last year, not for the sake of the Bank, but to prevent a crisis occurring in tlie colony. The settlers of New Zealand would be most injured if the Bank closed its doors. Merchants would be able to be whitewashed ond start again, but settlers would not be able to get rid of their obligations sq ersily. He declared th^t very fe,w financial institutions of the colony would be in a sound condition withiu a month of the suspension of the Bank. .The Committee had done their duty faith, fully and well, and he thought it the duty of the house to adopt their pro*. posals. Referring to the value of tho estates, he reminded the House that a rise of one penny or twopence in wool would make a vast difference to their paying capacity. Mr Thos. McKenzie qu&tioned whether the bed rock value of the estates had been reached. He considered the greater portion of the two millions were lost to the colony notwithstanding what was said by Government. He waa strongly m favor of amalgamation. He would vote against the second reading of the Bill. Mr Buchanan, who was Chairman of of the Bank Committee, blamed the Government for the present state of affairs as the result of their, action last year. As the least of two evils he thought the House should accept the Committee's - scheme. Sir Robert Stout said it appeared to the Committee there was a total deficiency of £2.193,183, and sgttjng agajn§t that certain assets there, was a sisall inargin of* solvency in the " Bank. If this were a private institution he should say it was not wise to come to its assistance, but if the Bank were liquidated the colony would lose altogether from a million to a million and a half of money. The difference between the scheme he had submitted to the Committee and the Government scheme was that the colony was liable as a guarantor in the latter case to the extent of three million and a half, whilst under his scheme it would only be liable for ,£850,000. If the Bank «ould be saved it would be better to do so, even if at the end of nine . years the colony had a million to pay for it. He felt the gravity of the situation and agreed with Mr Buchanan that ! the House should choose, the least o| tws evils. Capt. Russell felt in a most awkward position to have to vote on what might be a momentous event in the history of the colony. In agreeing to the report of the Committee, he said the report contained the best expression of opinion they could arrive at. He had endeay. oured to carry in Committee a resolulution to have the evidence of the bankers and business men as to the effect of the suspension of the ; I_auk, but tha| was deemed not to be in order of reference, and was not allowed. It was a question as to whether the committee had provided a final remedy in their report, he believed they at any rate had postponed the evil day for many years. It was possible the business of tho Bank would be built up again but that could only be done by the absorption of some other institution so as to increase the power of the Bank. Mr Bell thought all this talk about the Bank going down was "bogey and scare," as it was last year. He hoped the gillwpilldbe *" ; '* : Messrs Collins, Buddo, W. Hutchison, Allen, Flatman, Miller, Carncross, Mas. lin, Saunders and Guinness also spoke. , Mr J. W. Kolly moved, as an amendment, that the Bill be read a second time that day six months. Mr G. Hutchison seconded the amendment. - He said the Bank was now applying practically for its fourth reconstruction within seven years. If the Bank was allowed to close its dOors beyond a dislocation of trade for a few months he believed the injury would be of a iuost transitory character. ••)•'< •i'**'*'^ _f Sed4gii : ;sßttd cotUin^ ' ha* beeu y '.: . *.

kept back from the Committee. The directors of the Bank had concurred in the Committee's proposals and regarded them as such to place the Bank on a sound footing. The Bank was just solvent, and, with better prices and a more prosperous time, would pull round. Mr Kelly's amendment was lost, by 40 t° l5 ' -r-r _ Mr Ward replied at 5.30 a.m. Ec believed lhe time had come when a State Bank should be established in New Zealand, and also in the other Australian j Colonies. The only direct liability the i colony would be saddled with under the proposal was £17,500 per annum interest for the preferential shares. Tbe Government were trying to save the country, not the Bank. The second reading was earned by 3o to 20. The Division list on Banking BillAyes 35— Bnddo, Cadman, Carncross, Carnell, Cattail, Collins, Crowther, Duncan, Flatman, Fraser, Guinness, Hall, Harris, Hogg, Houston, Kelly, W. Lawry," Maslin, McGovan, McKenzie, J. McLachlan, Meredith, Millar, Mills, Montgomery, Morrison, Pariti, Pere, Pinkerton, G. W. Russell, Seddon, Ward, Stevens, Thompson, Willis. Noes 20— Allen, Bell, Buick, Duthic, Earnshaw, Hall-Jones, Heke, Hutchison, G. Hutchison, W T . Joyce, Massey, McGuire, McNab, Mitchelson, O'Began, Pirani, Saunders, G. W. Smith, Tanner, Wilson. Pairs— Ayes; E- M. Smith, Reeve?, " • W. •E. Basse)., Steward, Buchanan, Stout, Green, Mackintosh. Noes -Graham, Thompson, R. Kelly, 3. W. Larnacb, Newman, Te Ao, Lang, McKenzie, Thomson. Committal was set down for 1.30 p.m. The House rose at 6.10 a vi.