STATE BANK PROPOSALS.

Taranaki Daily News, 13 December 1919, Page 8

STATE BANK PROPOSALS.

POSITION OP BANK OF ZEALAND. ACTING CHAIRMAN'S OBSERVATIONS. Wellington, Yesterday. In the course of his address at the half-yearly meeting of the Bank of New Zealand to-day, Mr. J. H. Upton, acting chairman, referred to the question of the proposed State Bank. He said:— In a manifesto to the country Sir Joseph, roughly outlined a proposal foe the cstablishmennt of a State Bank by purchase of the assets of the Bank of New Zealand, or otherwise. The proposal of Sir Joseph necessarily so deeply concerns this bank that your directors deem it proper, on this first occasion of! a meeting of shareholders since the pronouncement was made, to refer to it. I may say that the directors, if such a proposal had to be made at all, acknowledge that it could not have well been made in a more reasonable spirit, nor with more consideration for your rights, though there are in it several hypothetical as- ! sumptions which are open to question. j It would not be appropriate, however, I on this occasion, or at the present stag'- 1 , 1 to enter upon a discussion of the merits i of, or objections to, the proposal; and I shall content myself merely with placing on record the words of Sir Joseph Ward himself. After quoting the latters statement, he proceeded*—Although this is not a suitable.moment to discuss so far-reach-ing a proposal, it may not be out of place to call to mind the circumstances that led to the connection of the Government with the bank, and to some results arising therefrom. The connection was made by Act oi Parliament in 1894; but the circurn

stances which led to it belong to a mucli earlier date. The Bank was established in 1861 when the population of the Colony was about 210,000 persons. A small company of gentlemen in Auckland thought the time had come when New Zealand should no longer depend on branches of Australian Banks for the conduct of its financial arrangements and '•■ for its commercial requirements; and, accordingly, the Bank was founded. From the very first, the business of the Bank of New Zealand developed along the line of the agricultural and pastoral interests of the Colony, those interests being at that time of most rapid growth and always of dominant importance. But as time went on, the. productions of this fertile country entirely outstripped the increase, in population. The growth of our flocks and herds in this mild and genial climate was enor-

mous, and enterprising men in both the North and South Island spent much money in improving the breeds by Ihe importation of good stud aiock, and pastoral interests consequently assumed a most favorable aspect. But alas! they forgot to ask themselves where the market was to be found: 10,000 miles of sea to bo traversed by sailing-ships made it extremely difficult to induce immigration, and quite impossible lo export beef, mutton, and buiier: and. of course, to grow sheep merely for their wool was not a paying proposition. Gradually the Bank was drawn in deeper and deeper, the securities on which advances had been made fell in value, the British depositors of the Bank failed to renew their deposits; a deadlock supervened, and the late Mr. John Murray, a former General Manager of the Bank, placed the difficult position before the Hon. R. J. Seddon. It was a fortunate thing for this Colony that so able a man as Mr. Murray was connected with the Bank, and that so courageous a man as Mr. Seddon was at the head of the Government. To have refused assistance would have brought about a crash from which it would have taken a long time to recover. The position was, in fact, quite comparahle with the position in England on 4th August, 11)14, when, to save an almost universal bankruptcy, Mr. Lloyd George guaranteed the floating bills on the London market. Perhaps also, Mr. Seddon could see that, given time, the Government guarantee was in no great danger of being called upon; and, indeed, as we now know, had it been possible to retain until a favorable market those securities on which advances had been made, they would have realised the whole amount of such advances over and over again. The shareholders, however, had meanwhile 1 lost the whole of their capital and reserves. Something else, however, had happened —the freezing machine had been invent-

The experiment made by lord Bacon of stuffing a fowl with snow to prevent putrefaction had been followed, at a long interval of time, by the invention of mechanical means for the production at will of a low temperature. In course of years the refrigerating engine was developed to a high state of efficiency. Refrigerating ships became available for the transport of our produce, and our meat and other perishable products could be safely sent across the ocean to Britain or to wherever a market could he found. Thus the refrigerating engine has made New Zealand, in the course of the last twenty-five years, one of the most prosperous countries in the world, and our produce, instead of being a drug on the local market, has become a source of almost boundless wealth. In this general prosperity the Bank of New Zealand has, of course, shared. It has grown to great proportions and it is now,—as it lias been from the first,—the Bank of our greatest industry, one-half of the total agricultural and pastoral produce of the country being, in one form or another, financed by it. And what of our chief partner, the Government? We may with propriety ask whether it also has benefited? The Government assisted the Bunk in two ways. It guaranteed stock, to provide capital, to the extent of two million sterling. Of that stock, there remains still outstanding £j2a,9Sß. As it is 4 per cent, stock, it would be unwise to pay it off, and the guarantee alone need be considered. That guarantee was given to save the Colony from disaster, and was analogous to' what has happened' more than once to the Bank of England itself. The "English Bank Act," of "1844, was passed to regulate banking in England, and particularly to place the issue of notes on the impregnable basis of gold. But on various occasions since, its provisions have had to be qualified, by Parliament indemnifying the Bank of England against the consequences of a breach of its principal enactment. And still the English system of banking has lost none of its credit o>: that account. The other service rendered by the Government to this Bank was to subscribe £750,000 to its cf-pital, which it still holds ns preference shares. Of these ihares, the Government receives dividends