WELLINGTON NEWS

Hokitika Guardian, 29 October 1930, Page 7

WELLINGTON NEWS

INVESTMENTS

(Special Correspondent)

WELLINGTON, October 25

During the past three years the Stock Exchanges of the Dominion have .shown a revival, that is to say there lias been more trading in shares, and the prices have advanced and have more or less held that advance up to the present. There was no apparent reason for the rise in values, but as the upward movement was engineered from Sydney there must have been other reasons for the rise. News received last week by mail from Australia was to the effect that the “bears” having sold started in to buy shares to cover their commitment ail'd thus the rise took place. It is obvious therefore that it cannot last long, ifor as soon as the “hears” have bought in what they need the market must drop. Last week the market showed a weakening tendency and some bank shares showed price reduction. us now politics and business are somewhat closely intermingled, especially in Australia, so that one cannot pass over political development. The .general election ill New South Wales has been watched throughout Australia and N .Z. and if the final returns show that the Labour Party has secured the reins of Government then investment in Australian securties will be fraught with considerable danger. Mr J. T. Lang, Leader of the Labour Party, threatened the banks, 'declaring that the chartters of the banks to trade could be taken away, and concluded by telling his sympathetic audience that “if y° u not break the power of the banks they will break you.’ This of course, is merely stage thunder, yet it is marvellous how any people, even intelligent people hold stupid and exaggerated ideas of the powers of the banks. Such power as the banks possess is the power to borrow from the public and lend to he public. As borrowers from the public they must comply with stringent conditions imposed by legislation. They cannot lend to the public more than they borrow from the public indeed not quite as much. If they possess any jiower at all it is over the public from when they borrowed their credits. The man with an overdraft naturally does not like being called upon to reduce his overdraft, nor does he like to see the interest raised, but the banks do not act unreasonably or harshly in such matters on the contrary it is a well-known fact* that the banks help their debtors and if they have full confidenc in a debtor they act rather generously towaids him. Some people expect to borrow fro® a batik on any kind of security or on iio security at all, which is ridiculous. The banks lend the money of other people that is they lend trust money and it W not to he wortdered at that they take very great care in making loans, although they are not tied down by legislation as trustees are. The latter are restricts to the kind of securities on which they may make advances. Strong, sound banks are a big asset to any country that may possess them. Constant attacks on banks by men of limited knowledge of the principles of hanking does an infinite amount of harm on'd tends to weaken the credit of a country. The retiring President of the Associated Chambers of Commerce, Mr Agar in his address, made generous recognition of the services rendered to New Zealand by the six trading banks. They have provided adequate credit facilities on all occasions, and in 1926 and again in 1927 the advances exceeded the deposits bv £2,341,093 in 1926 and by £3,601,431 in 1927, which means that they raised millions elsewhere to lend in New Zealand. Had they not done so there would have been a first class disaster in the Dominion. The attacks on banks in times of depression is no new phenomenon, for unfortunately there is always, about that time a number of disgruntled men who, finding that they cannot increase their liabilities at the expense of the banks forthwith turn around and abuse those institutions. The apparently big dividends that the banks declare is another matter that is misunderstood even by alleged business men who fail to take notice of the large reserve funds employed by the banks. Those reserve funds have been built out of annual profits and premiums received on the issue of new shares. In many instances the reserve fund is quite as large as the amount of the paid-up capital, and the reserve fund is as much the property of the shareholders as is the capital. The banks as a whole are well managed, and in the present trying time are handling the situation in a masterly manner.