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New Zealand Times, Volume XXXIV, Issue 5734, 15 August 1879, Page 4

A letter appeared in onr columns yesterday, signed “ Merchant,” bearing on the Government banking arrangements. It apears to us there are several inaccuracies which we venture to point out. “ Merchant” says the Government of Victoria have divided their banking account, and it works admirably. The facts are. the Government of Victoria have recently given notice to the Associated Banks to discontinue this arrangement, as it has not worked satisfactorily for the Government. “Merchant” again says in effect, “ That owing to the Bank “of New New Zealand having the Go- “ vernment account a panic occurred here “in the year 1873-1874.” Our remembrance does not bear out this assertion. He goes on to say, ‘ 1 The Government of “New South Wales have, within the last “ six months, borrowed some £3,000,000, “ in the face of having some £2,000,000 “ or £3,000,000 deposited with the Bank 0 f New South Wales, and that the Bank told the Government that if they withdrew the whole or any large portion of this deposit a commercial disaster would ensue, as the deposits had been re-lent to the public, and could not by any possibility be gathered in without resulting in a crisis ; and that the New South Wales Government, in its endeavor to avoid such a dilemma in the future, have decided to divide the Government account among the banks. It is perfectly true that the Government of New South Wales did borrow £3,000,000, but it is not true that they had £3,000,000 deposited with the Bank ofNew South Wales, which had, and still has, the account of the Government of that colony ; £2,000,000 were distributed among the banks, who were willing to take the deposits, and we believe that it was in consequence of this distribution of the money that when the Government required it they had to borrow rather than bring about a crisis. The New South Wales Government have not decided to divide their account, and we believe they would be wise in adopting the plan the New Zealand Government have followed heretofore, viz., to only keep small balances in the colony, and in that avoid dilemma. Finally, “ Merchant ” says that the evidence of four inspectors of banks, who were examined before a committee in the House, in 1875, proved that better arrangements could be made for the Government if the account was sub-divided. This statement is not in accordance with facts, the committee having reported that tenders should be invited from the banks separately, not associated, which was clone. We hardly think the Bank of New South Wales will thank “Merchant” for his statement that a commercial panic would ensue if they were called on to find the money deposited with them, when in fact it was not held by them, but distributed between four banks.