ORIGINAL CORRESPONDENCE.

Oamaru Mail, Volume IV, Issue 981, 11 June 1879, Page 2

ORIGINAL CORRESPONDENCE.

THE FINANCIAL SITUATION. TO THE EDITOR OP THE CAM AKU MAIL. Sir, —It is surprising how, in these troublous times, so little expression of public opinion lias appeared in the Press, relative to the unfortunate attitude of the Banks towards their clients. These institutions are supposed to be established for the benefit of the community, but it would appear that the supposition is grounded on no foundation, for at the very critical time their assistance is required to tide over the difficulties arising from short crops, small prices, and various other causes, they withdraw their support, call up advances, and generally lay down hard, cast-iron regulations that not only impodc, but actually stop commerce. The Banks plead—and plead honestly, it may be—that they cannot otherwise act, inasmuch as they are short of cash, and must perforce call in the needful. The fact is doubtless true —but why should it be so ? is the question Ishould like answered by some financial authority. No satisfactory explanation has yet been given of the causes of the present very sad position of affairs, and no one seems to know how long it is to continue, or how it is to be remedied. The banks, and notably the Bank of New Zealand, are to be censured for their imprudence, want of forethought, and injudicious advances made to speculators in land ; and the Government is not blameless. A banking institution has no right to lock up its capital in landed security, unless it retains sufficient money to meet the requirements and exigencies of its legitimate customers —the agriculturist and the trader—apart from that which it devotes to speculation. The Government is acting wrongly in not sharing its custom with other Colonial banks, for it cannot reasonably be doubted that the needs of the Government at the present juncture have necessitated the Bank of New Zealand to realize upon its securities, and to curtail accommodation to a ruinous extent. Had portions of the Government deposits been given to the other banks it may be inferred that the calls of the Government would have been met without inducing such a lamentable change in the financial atmosphere. The community usually expects that institutions having for their sole business the management of finance should have sufficient prescience and skill to provide for the contingencies of bad times, such as are sure to occur periodically. We also look to the Government for some thoughtful consideration of the interests of the tax payer, from whose pockets its resources are drawn. The action and conduct of both the bank and the Government at the present moment are ruinous and suicidal—ruinous to the customers of the bank and the body politic, and suicidal to the banks and the Government of the Colony. All of us know the folly of the man who killed the goose that laid the golden egg, and most of us have probably heard the saying of the sailor thai "the ship is the mother of freight-.' The lesson and principle of the fable and the sailor's proverb are being outraged and ignored by the sudden and undue pressure of the Colonial banks—a pressure having the effect of very seriously interfering with the prosperity of the very classes upon whom the profits and success of those institutions chiefly depend, and to whom the Government looks for its main source of revenue. All of us who know the principles of taxation are aware that the moderately prosperous citizen is the fountain out of which adequate revenue can be drawn. Any observant person who has given the smallest degree of attention to the operation of the banks in this district, and has noted its effects., will agree with me that agriculturists, merchants, manufacturers, and traders generally, have suffered great losses, and that large gains would have been made by these classes if _ a more liberal and discriminating policy had been pursued for the past few months. The community of the district, instead of being benefited by the distribution of these profits on grain and other commodities, has witnessed with regret their transference to the foreign shareholders of mercantile companies and banks ; for has it not been a patent fact that such companies and firms trading with foreign banks have been alone able to purchase from farmers and others 1 ■ This monopoly of trade has compelled settlers to sacrifice their crops at ruinous prices, which might generally have been obviated by a judicious temporary accommodation by the banks on staple commodities that could not possibly depreciate in value, and on which in a few months there was almost certain to be a decided increase of value, and consequently livelier demand. I could write more to prove the probably disastrous effects of the short-sighted policy of the colonial banks, and to show that the Government should bestir iv°elf from its apathy and make such arrangements as will prevent the Colony from forfeiting its character as an attractive field for small capitalists from the Home Country. These remarks will, it is hoped, induce correspondence from an abler pen than that of A Strangeb.