BANKING ARRANGEMENTS OF THE GOVERNMENT.

New Zealand Times, Volume XXX, Issue 4542, 11 October 1875, Page 3

BANKING ARRANGEMENTS OF THE GOVERNMENT.

The select committee on the banking arrangements of the Government have brought up an interim report. As will have been seen by our report of Parliamentary proceedings at Friday's sittings, Mr. Bridges, of the National Bank, having ma(Je, in the opinion of the committee, grave imputations against members of the Legislature, and having refused to answer any further questions, the committee were of opinion that the inquiry ought to be prosecuted by the House. In pursuance of this, the House passed a resolution on Friday, summoning Mr. Bridges to the bar, where he will appear at 3 o’clock to-day, and will be attended, it is understood, by Mr. T. L. Travers as his legal adviser. The evidence and appendices thereto, taken so far before the committee, have been printed, and occupy thirty-nine pages of foolscap, and contain many points of remarkable interest. Mr. D. L. Murdoch, Inspector of the Bank of New Zealand, was examined at some length. He said, amongst other things, that there was a safe limit of relation between the deposits and circulation of the bank, varying from 20 to. 25 per cent, of the demand liabilities. In the case of the Bank of New Zealand the proportion was always larger than was considered the safe limit. As to the effect of the deposit of the unrequired portion of the loan with the bank, the following was the examination :

Was it not the fact that the Bank of New Zealand, prior to the floating of the loan, did bring pressure upon their ordinary customers—that is to say. did not afford the same facilities as they were prepared to do after the floating of the loan ’—Certainly not. The same facilities were afforded before as after ? Certainly. Of course there are individual cases in which pressure was brought to bear, but the reasons in these cases had no reference to the position of the Government and the bank. Cases are constantly occurring such as I have mentioned, but beyond these no pressure that I am aware of was put upon the customers of the Bank of New Zealand. It it is the general impression that it was so, it is an erroneous impression ?—Certainly. You are not aware that any of the managers stated that as a reason for withholding accommodation that would have been given under ordinary circumstances? —I am not aware of it.

As to the lodgement of the balance of the loan with the Bank of New Zealand, in terms of the agreement as stated by Sir Julius Vogel, Mr. Murdoch’s examination ran:— The committee wish to know whether it would have been in contravention of that agreement if the Government, Instead of investing the money In Treasury bills, had deposited a portion of it with some bank other than your own ?—At the time the agreement was made it was not contemplated that the Government would be so largely in credit as they are by proceeds of the B'our Million Loan, and therefore I do not suppose that such a thing occurred cither to the Treasurer or the bank, Under the strict reading of the agreement I should say it would be in contravention of the agreement if such a deposit were made. But if it was the desire of the Government to fix a limit to the credit balance which the bank should hold, X think the bank would be willing to agree to it. Supposing the bank had chosen to stand. on its strict rights, could It have demanded that all those sums should be placed with it, and not with any other bank ?—I think I have already answered that under the strict interpretation of the agreement I do think the bank could have done so. You have already said that you thought the Government would be justified In purchasing Exchequer bills as a temporary investment with part of the money, instead of depositing it with the Bank of Now Zealand?—Yes.

"Well, if instead of doing that, they took a part of the money not to open a new hanking account, hut to lend to another banker on bis receipt, would that be a violation of the agreement?—l cannot see any dis-

Unction between lending money to a bank on receipt, and opening a bank account. It would certainly be a lodgment of money with the bank, and therefore a contravention of the agreement. Then supposing that the loan agents had lent the money to some private individual, so healthy as to make it perfectly secure, would there have been any objection to that ?—I do not think so. Why should there be any objection to lending money to a banker then?—lt is a very nice distinction, but I think that in lending to a banker the transaction partakes of the nature of a division to, the Government account, which by the agreement is not permissible. I do not mean putting the money into another bank as a current account, which could be operated upon from day to day, but as a loan for a term, say a six months’ deposit, which is actually a loan for six months? —The agreement might be interpreted in that way.

The Hon. the Colonial Treasurer was examined, and one portion of his evidence ran thus:—

Supposing that it appears on the Estimates that the amount of appropriations made by Provincial Councils exceeds by a million . and a half the estimated revenue, it will be competent for the House of Representatives now to exchange the whole of the authorisations which it has already made, and fulfil these appropriations with the remainder of the loans instead ? —Yes, so 1 understand it. Might not that be regarded as breaking faith with the country? Supposing you were to rescind these votes and divert them to another purpose, would the result not be that some parts of the colony would have public works and others not? —Yes. Then it is competent to do a thing and break faith in doing it ?—Yes.

In regard to the raising of the Four Million Loan the examination ran:— Has not the result shown that Sir J. Vogel’s course was the only one that a prudent financier could possibly take?—Yes. „ Because you see now, that out of the Four Million Loan, in four months three millions are already spent, and you have only one million left to come and go upon j and therefore if you had adopted the course proposed by the Crown Agents, of taking up the loan id two operations, you would already have been in dithculties ? —Yes. , Did the circumstances of the colony, in your opinion, imperatively require that the whole of the four million should be raised firm by Sir Julius Vogel?—Yes. Mr. Bridges, a director of the National Bank, entered fully into what in hia opinion were the losses entailed upon the country by the arrangement with the Bank of New Zealand. In the course of hia examination the following occurred :

Supposing that your directors had been placed in the same position by Sir Julius Vogel as the Bank of Now Zealand was placed in—that is to say, receiving an assurance that £1,500,000 would remain for six months—do you consider that, notwithstanding that limitation, the rate would have been much more favorable than they could have obtained?—Much more favorable. . „ , _ ~, . And through their standing in England and their own position, notwithstanding the youth of the bank, they would have been able to see that financial operations based on that assurance were made good? —Undoubtedly. , _ , , Supposing then that a similar offer had been made to place £1,500,000 with the National Bank, not for six months certain, but with the assurance that so far as then known it would be left for six months, what rate in your opinion could have been obtained on that understanding ?—I think a fixed rate could have been obtained. At present you are not getting a fixed rate; you may get only 1 per cent, next month, as the rate varies with the Bank of England rate. I think that a fixed rate of at least 3£ per cent, could have been obtained.

Mr. Bridges stated that he was aware of occasions on which the Bank of New Zealand authorities had put pressure on Governments, but subsequently declined to particularise, as the circumstances had come to his knowledge whilst he was a confidential servant of the hank. At a subsequent examination the following letter was read :

“ Bank of New Zealand, September 28, 1875.—Sib, —I have the honor to acknowledge receipt of your letter dated 23rd instant, calling my attention to certain questions put to Mr. Bridges by a member of the Public Accounts Committee, together with the answers thereto, and requesting that the bank will permit Mr. Bridges to give the fullest and most detailed information upon the particular point referred to that the committee can desire.’ My directors quite concur in the opinion you express, that general statements, such as appear to have been made by Mr. Bridges, are prejudicial to the interests of the public service and not only relieve Mr. Bridges from any secrecy on the subject, but desire me to express a hope that you will compel him to make the fullest disclosure—l have, &c., D. L. Mukdocii, Inspector.Header Wood; Esq., Chairman Public Accounts Committee, Wellington. 0 . . , . . That, therefore, gives you full permission to state distinctly what you really referred to in this matter. Perhaps you would have no objection to do so. No ; but previously I should like to ask you a question. There is an axiom in law that the greatest truth may be the greatest libel. Am I open to & n 7 action at law on the part of the bank ?—No. [The witness then entered fully into the transaction between the Weld Ministry and the bank. He then reterred to the purchase of the Port Chalmers railway, and said that purchase would not have been made at the price it was made, but through pressure put by the bank on the Government, the bank being largely interested in it. The railway would, perhaps, not have been made but for the bank.] .... The railway was a private undertaking, was it ? —Yes • the money, or a large portion of it, .being advanced by the bank. I heard Mr. Bathgate, who was a member of the Ministry at the time, say ho would not consent to such an exorbitant price being given for the railway; and it was generally considered in the bank that that was one of the most profitable operations the bank had had. What consideration did the Government get for giving this high price?—That is a question of opinion. You cannot teU the committee where the pressure was brought to bear. You have stated the fact that in your opinion the Government yielded to political pressure; can you form any idea of how that political pressure was exercised?—Yes. What is your idea?—l shall decline to state that. It appears to me that by your answers you would lead the committee to believe that your opinion is that by some corrupt attempt the Government were induced by the bank to give a higher price for the line than they otherwise would have given. In what way would the Government have been damaged if they had refused to yield to that corrupt attempt. I should have no hesitation in answering that question, but, as I stated at the beginning, I must be quite clear whether lam open to any consequences on the part of the bank or any individuals. My answer to that would extend beyond the bank. When you left yesterday, you objected, I think, to give some specific information, because your answer “ would extend beyond the bank," and you wanted to be "quite clear as to the course the committee would adopt with reference to your evidence in that respect. The committee have deliberated, and their opinion is that all the protection they have the power to give you will be given. - -1 understand. Xdo not think that is sufficient to protect me, and, therefore, I have no further evidence to offer. Perhaps you will allow me to withdraw the last answer I gave yesterday /—I cannot consent to that. . , _ In answer to the question put to me yesterday, 1 meant that pressure was used on the part of the bank, but not political pressure. Pressure was used to obtain a higher price than the property was worth, the bank being interested. i „ . ~ The committee desire me to tell you that they consider your answers to the questions that have been put to you of a very important nature, as they involve practically the character of some of our public men The committee do not think the answers ought to rest where they are, and they consider it their duty to press the matter further, and to endeavor to obtain from you more precise answers than you have yet given to those questions. Whilst the committee are desirous of giving you every protection that lies in their power, they must leave it to you to determine as to what the nature and character of that protection is, that is to say. whether it is sufficient to cover you as completely as you wish to bo covered under the circumstances of the case? —As far as I am aware, no. I have looked at the Act, and it appears to me quite unreasonable to expect that I should make any statement that should render mo liable to a lawsuit. , . . . At the same time, the committee are of opinion that these answers cannot remain where they are, ana that you must be more explicit. Would you state to the committee, under the circumstances, what the nature of the pressure is to which you alluded with regard to the purchase of the Port Chalmers railway ? With all respect to the committee, I must decline to answer any questions that I think would render me liable to a lawsuit.

A great deal of cross-examination following upon this, terminated in nothing material being elicited, and in Mr. Bridges refusing to answer any further. The result of this has been already stated.