Sir Joseph Declares Against State Bank

Sun (Auckland), Volume III, Issue 741, 14 August 1929, Page 6

Sir Joseph Declares Against State Bank

A DEFINITE STAND A FERVID CRITICISM (TUE SL'N'S Pariiamruuu'y 13:1:ol‘rrr‘) PARLIAMENT BLDG 5,, Tuesday. With tears in his voice and grief for a great opportunity lost, Mr. F. Langston: (Waimar‘ino) introduced his Bank of New Zealand Amendment Bill in the House this afternoon. He claimed that he wanted to restore to the Government and people the power lost by successive Bank Acts since 1920. He said that his Bill only meant alterations here and there in the present Act. The Prime Minister, speaking in the debate, took up a definite stand and held that the Government should not interfere in the private business of a financial institution, and that New Zealand should be proud of its bank. Mr. Langstone said that the reasons for bringing in the Bill were twofold. The question of the bank was important, and it. would be good to set up a committee to investigate the whole question of banking, currency and finance, and bring down something tangible which would solve the problems of unemployment. industrial dislocation, and commercial stagna-' tion which existed in the country at present. His second reason was to throw the light of public opinion on the Bank of New Zealand operations and to see if it was conducting affairs in the best interests of the country. He referred to the help given by the State to the bank in its times of stress, and'said that Sir Joseph Ward would remember the bank’s appeal for financial assistance at three different periods. The Government had given the sum of £5,231,000 to its funds. “I am quoting that,” he said, “to show the base ingratitude of the bank toward the hand that fed it in the past.” In about 1894, he continued. Sir Joseph Ward, as Colonial Treasurer, had had to take control out of the hands of bank shareholders and appoint four Government directors. He had drawu up six safeguards. They were, changing the head office from London to New Zealand, appointing four Government directors, one to be chairman, never paying more than 5 per cent. dividend, never to increase capital, not touching the reserve fund, and. not. going into liquidation. Nowadays the State’s power was practically nil, and the object of hisßill wasto bring back that poWer to the State. Mr. Langstone characterised the Bank Act, 1920, as, a Bill drawn up in the bank itself with theconnivance of the directors. Power =had been taken right out of the hands of the Government nominees, who were not allowed to take part in ballots or meetings of the proprietors of the bank. At present directors’ positions as Government representatives were sinecures. Next there was the Bank Act. of 1926, under which the Governinept was a one-third shareholder but did not participate in a. one-third dividend.

Mr. Langstonc thought a great mistake had been made in the past by the Government not establishing a State bank, but at all events it should have taken over control of the bank. Sir Joseph Ward here rose and said he could thoroughly understand Mr. Langstone’s views, but he would ex-’ plain the attitude of the Government. Had the Government adopted the course suggested by Mr. Langstone in 1894, the bank would have had to be put into liquidation and the interests of those concerned and the assets of the bank would have been locked up. ,The question of a State bank had been considered at that time. Mr. Langstone: You could have bought it for a song. Sir Joseph Ward said that it was impossible to form a. State bank at the time. The Government’s action had put the country ahead many years. Mr. Langstone: Put the share~ holders ahead. Sir Joseph claimed that had the Government formed a State Bank the shareholders would have lost everything they had. The Government had a majority on the bank directorate and Government auditors scrutinised the bank's operations. He said that ‘the bank had offered to come to the assistance of the Government in‘ re—gard to State Advances when he had come into oflice, and was ready to help the Government in any emergency.

' MII. Langstone explained in answer to Sir Joseph Ward that his Bill did iot mean that the State was to take over the bank. . ONCE IN FAVOUR

Sir Joseph W'ard said that it would cost much more than would be” warranted even if the State were'to take‘ over the bank. Already the institu-i tion was semi-State. Once he had? been in favour of a State bank, but now he thought that New Zealand could not have a State bank side by' side with the Bank of New Zealand. The only course open to the: Government was not to interfere' with the bank in its private business. He had heard that people approached Government members to use their influence with the bank. to ' help clients or friends. He himself would resent very much any such request. Mr. M. J. Savage (Auckland West) was surprised to hear Sir Joseph XVard say that it was impossible to make a State bank, for he had a distinct remembrance of Sir Joseph advocating turning the Bank of New Zealand into a State bank. Of course, that was in an election campaign when things were different. (Laughter.) He would like the Prime Min—ister to deny that the House was advised to leave the bank well alone, yet money was being sent overseas and industry was languishing. Mr. P. Fraser (W'ellington Central) said that the Government was worshipping eternally at the shrine of the Bank of New Zealand. It seemed a sort of golden calf at which the Government worshipped. He remembered Sir Joseph Ward in the Tauranga lay-election campaign urging the setting up of a State Bank. “The more this session proceeds,” he said. “the more the lack of policy of the Government is shown.” Here Mr. Speaker called him to order for irrelevancyx Mr. Fraser said that he was speaking in connection with financial matters. He Went on to stress the importance of the State having a voice in the control of the bank. VEHEMENT REPLY Mr. Langstpne was vehement and addressed his remarks mainly to Sir Joseph Ward. In 1920, he said, the bank paid 151 per cent. dividend and

took £1.125.000 from reserve and paid a 675 per cent. dividend. “It bamboozled the country,“ he claimed. banging his desk. “It. was avicious act.” he said, his voice growing shriller with every word; “one of the worst Acts ever passed in this country. It was shocking.” Mr. Speaker called for order and later Mr. Langstone was pulled up again. He explained that he was trying to prove that the bank ivas not paying taxation. He went on to refer to the financial difficulties of the bank, saying that no one knew better than Sir Joseph “‘ard the chaotic conditions of the bank’s finances. If the Bill had not been passed then in one sitting, and it took till 4.30 a.m.. he thought the bank would not have been able to open its doors in the morning.

All that people wanted. he continued, was for the four directors to be there, and a. scientific policy of banking,_finance, credit and exchange decided on. Here was an opportunity for the Government to rise to the occasion and take over the whole control and never be troubled by finance again. (Laughter.) The Bill was read a. first time and the second reading was set down for August 28. ,