BANKING ARRANGEMENTS OF THE GOVERNMENT.

New Zealand Times, Volume XXXIV, Issue 5733, 14 August 1879, Page 3

BANKING ARRANGEMENTS OF THE GOVERNMENT.

TO THE EDITOR OP THE NEW ZEALAND TIMES. Sir, —Referring to a letter signed “ Vigilance” in your paper of the 4th instant 1 have carefully thought over what he stated with reference to the advisability of the Bank of New Zealand having the monopoly of the Government account. I consider the present depression in trade and tightness of money is attributable in a great measure to that monopoly. The commercial interest of New Zealand will be always subject to it unless the Government banking account is divided among the six banks, called “ Associated Banks.” The Government of Victoria hare adopted this plan, and it works admirably; indeed it stands to reason that when the Bank of New Zealand is holding large deposits of the Government, they, in order to make the deposit return them a profit, invite and advise their constituents to accept further advances, which really means overtrading on their part, and encouragement to do so to their customers. Suddenly a large amount of money is required from the bank by the Government, when what is the result ? nothing but a scramble to gather in their lately pushed advances, and this not only means ruin to many, but succeeds in bringing about a commercial panic, such as the one we are now experiencing. A similar state of things occurred here in the.years 1873 and 1874. The Government of New South Wales within the last six months borrowed in London market some thred millions at 44 per cent, at a better : value than any other Australasian colony had previously done. They actually borrowed this money in the face of having 'some two or three millions at deposit with the Bank of New South Wales, —that bank told the Government that if they withdrew the whole, or any large proportion of the deposit, .a commercial disaster would.be bound to ensue, and depression would be widespread in that colony, as tbe deposits had been re-lent to the general public, and could not by any possibility be gathered in without seriously crippling the commercial community at largo and precipitating a crisis. The New South Wales Government, in its endeavors to avoid such a dilemma in tbe future, have decided to divide the Government account among the banks, and it would be well if the Government of New Zealand were to adopt a similar course to prevent the calamity which has now fallen upon the people of this colony being repeated. It is to be hoped the general public will take the matter up, and that the members who may be elected for the next session may be induced to bring this important subject before the House, and have the banking arrangements of the Government divided among the banks to obtain

public safety and on account of public economy, as a large saving would be effected. The evidence of four inspectors of banks who were examined before a committee of the House in session of 1875 proved that better arrangements could be made for the Government if the account was sub-divided. In conclusion, I beg to remind you, Mr. Editor, of the old proverb, “Never put too many eggs into one basket.” You must know that such a proceeding is attended with danger to the eggs.— l am, &c , Merchant.