The Guardian And Evening Star, with which is incorporated the West Coast Times. SATURDAY, MAY 8, 1926. NATIONLIZATION OF BANKS

Hokitika Guardian, 8 May 1926, Page 2

The Guardian And Evening Star, with which is incorporated the West Coast Times. SATURDAY, MAY 8, 1926. NATIONLIZATION OF BANKS

It is evident from the attempt of a Socialist Member of the House of Commons to obtain a second reading for C a Bill to authorize the Government to purchase and control the Bunk of England, says a Home financial journal, _ that the Labour Party still cherishes the hope of bringing about tbe nationalisation erf (the .banks. Among other arguments in support of this policy, it is contended that greater economy in the administration of the business would be possible, and that the State would benefit, by receiving the profits now made by the banks. Probably tho dliief objective i.s to abolish the “money trust,’! which it is alleged has been produced by the great amalgamations effected some years ago. It is asserted that by that movement something like a monopoly was obtained, and competition was nlmocst eliminated. It is also urged that the power of creating and controlling tbe currency,'which should belong to the Government, lias been usurped by tile banks as a result of tbe enormous extent to which cheques are used for making payments, and that tbe profits from this part of tbe business at least- should go to tbe Government. It may be pointed out that tbe issue of cheque forifis is not in itself a source of profit. Indeed, to a slight extent a bank is out of pocket when it bands a cheque book to a customer for while tbe latter is charged with tbe stamps embossed on tbe cheques, the bank must pay for paper and printing. Admittedly, tbe provision of facilities by which cheques are accepted for payment enables the banks to obtain very large amounts of tbe public money, much of which they use profitably in loans to customers. In regard to the question of competition, bankers themselves maintain that this still exists? and, indeed, i.s stronger now than before the war. It can he admitted that the amalgamation of numerous hanks into five big institutions makes it easier to reach agreements regarding money rates and other matters, and probably agreements o' tin's kind exist. But in the endeavour to obtain fresh business there is a grent deal of competition throughout the country. There are probably : few towns of any importance that are not represented by the “Big Five” and i sometimes a branch of two or three of 1 those institutions will l>e found in one 1 main street, frequently almost next i door to each other. That there is com- 1 petition in this way strengthens one y of the arguments of the advocates of t nationalisation. It is that the hank- 1 ing business of tbe country as at pre- I sent conducted involves some waste s and overlapping. It can lie admitted t that in many centres some of the li

branches of the great banks are not really needed, and under nationalisation, presumably, there would only be one office where at present- there may be five. Still, it does not follow that the business of banking, ft' carried out by the Governmnt would be run on more economical lines thaii it is at present. The experience of official administration during and after the war suggests that something like the reverse would be the case, and if a saving were effected by shutting up superfluous branches, it is almost certniil that this would be offset by extravagance in other matters. Profits obtained from banking are at present large, but they are not excessive in comparison with those earned bv some trading operations. To take a somewhat extreme example', the net profit of the Imperial Tobacco' Company (of Great Britain and Ireland) for the year ended Oct. 30tb. last, amounted to £8,881,990, or £1,500,000 in excess of the combined - profits for 1925 of Barclays. Lloyds pud the Midland Bank, while the amount distributed in dividends by the imperial Tobacco Company Was only about £300,000 less than the total dividend by the “Big Five” among their proprietors. Dividends paid on bank shares are hand some, hut the yields on the shares, except to those who acquired their holdings many years ago, are quite small, amounting in .some cases to less than 5 per cent. Further, it is a mistake to suppose that the hanks are owned by immensely wealthy capitalists. It was said by Dr Walter Leaf at tho last meeting of Ihe Westminster Bank (although the remark was not reported) that the average, value of the shares held by the public in that institution was only £IOO. Probably the experience of the other banks is similar. While it is probable that wasteful administration would characterise State hanking, there would ho a risk in handing over to the Govern oh .r. eomplcto control of Ihe currency. Tit certain circumstances there would he a great temptation to use this enormous power for the prosecution of social schemes, the value of which would be doubtful, and which would he quiAc unremunerative. There would also ho a temptation to indulge in inflation, with all its attendant evils, of which Europe had such a hitter experience .some years ago. Somewhat similarly it might be a great disadvantage if under a system of State banking tho taxable resources of the country were available to the hanks as a potential reserve. Apart from the question that the capacity of the nation in this respect is not limitless, it is obvious that there would he a temptation, when such a reserve was available, to embark upon unsound business such as would be refused in ordinary circumstances, with the inevitable result of bad debts and ultimate insolvency. Altogether, therefore, it i.s not liken that the country would benefit either in the shape of extra, service and security or economy and efficiency, if State banking replaced private enterprise. It is not ■, business lb.il is learned in a day, and the great prosperity of our institutions how i.s a a large extent the result of centuries of experience.