1.—13.

No. 1.) I have shown that the Government have not lent the money—that it remains in the bank of the Government, and is liable to the provisions of the Public Eevenues Act. And in this connection I may say, here arose the difficulty of making deposits in other banks, because, had the Insurance Commissioner and the Auditor-General signed a cheque to withdraw moneys from the bank authorized by the Governor and placed it in another bank, they would, I think, have been personally liable, because public moneys would have been lodged in a bank in which there was no authority to lodge it. The question of the bank agreement has nothing whatever to do with it the question. That dees agreement can not affect the law in any ietm way or shape. Skat It merely authorizes the Treasurer, if the law is-ee-aad-se permits, to make deposits, as far as the bank is concerned, without question. That is to say, if the law will permit us we can take it the money and invest it without the bank being able to objectisg. The object was to leave the Treasuryer perfectly free to to act upon the public account when the deposits reach a certain amount, so as to obtain interest if Parliament authorized «s Government to make particular investments. T-feat The bank agreement does not and cannot affect the law. That part with regard to deposits is merely binding on the bank, so the Treasurer is free to act as Parliament may direct with regard to these investments. Then I come to this question : The Committee will have observed that I asked each witness when this system of fixed deposits began, and what was its object, and in every case, the Committee will observe, the answer was that they began when Sir George Grey was Premier. Now I have made this point clear with this object: that it is a matter of public notoriety that Sir George Grey would not for a moment think of doing anything in the interest of the Bank of New Zealand prejudicial to the various trust funds. Wfeea We find, as a matter of fact, that during his government very large sums were isvested placed on fixed deposits: at one time the total iaveetmeato fixed deposits in the Bank of New Zealand —on the 25th March, 1879 —amounted to no less a sum than £262,000; and a few days before he went out of office they still remained at £150,000. And, if further evidence was wanted on the subject, it would be seen that these funds were drawn out gradually as the Treasury could supply Treasury or deficiency bills or other securities for their investment. I should wish the Committee to draw this conclusion from that evidence, that this system of making fixed deposits was started with the sole object of promoting the interest of the various funds, and subsequent Troaourete Governments, believing that the arrangement was perfectly right, and was in the interest of the different funds, and the only way in which the funds could be fwp&df profitably dealt with, have followed out that arrangement. So, although it is impossible for me to prove a negative, namely, that it this deposit of £225,000 was deae made in the interest of the bank, as is asserted feese in this charge, there is evidence to show that successive Governments have continued this operation ; that it was begun by a Government who are above suspicion with regard to doing anything in the interests of the Bank of New Zealand; and therefore we may safely conclude that these deposits are made—as is undoubtedly the case—simply and solely in the interest of the departments concerned. Then I have shown also by the evidence of the Commissioner (and the Committee may see it by looking at the law) that the Commissioner is only directed to make up his accounts for publication once a year, and that, as a matter of fact, when he does make up the accounts these transactions are shown. If honourable gentlemen will turn to tae some of the yearly accounts they will see the entry " cash on deposit." I have shown that during all these years these deposits have been going on the Commissioner has never considered, nor has any other department, that they were bound to make a return of these fixed deposits wbieli—l hold is them to be simply another form of account in the authorized bank, and not an investment of funds, which they- are directed by the Public Revenues Act to report to Parliament. Therefore I say that the implied censure, from the fact that it this transaction has not been reported to Parliament, will not stand for a moment: that everything has been done in this matter which ought to have been done. I might also say, though this of course is only a matter of opinion to a certain extent, to explain why the authority of the then Treasurer (Mr. Larnach) was, upon the recommendation of Mr. Knight, given to the investment, so-called, of these funds, that is to say the first fixed deposits made by this department, and the reason no doubt was that these deposits were then looked upon as investments ; they were treated as Sxei-depesite securities by the Controller and Auditor-General, and all these fixed deposit receipts were then kept in the safe and treated like any other security. The same question appears to have arisen in November, 1878, as to what they were, and upon that the opinion of Mr. Stout, then AttorneyGeneral, and of Mr. Eeid was taken as to the question whether they were securities or no!}. They gave it as their opinion that they were not securities within the Act. I will read their opinion, which is dated 18th November, 1878 (see Appendix 8., No. 1). The Committee will observe that that was the opinion of the Attorney-General and Solicitor-General during the Premiership of Sir George Grey. Speaking from memory, I think the whole of these so-called investments in fixed deposits, except the first Post-office investment, took place after that opinion was given. I think the Committee will draw the conclusion from that these facts that tkey fixed deposits were not considered investments by the Government—that they were really considered, as they are, a change of account in the bank; that they were made in the interest of the various trust funds, and for the purposes of obtaining aa-invoßtmont interest which could not otherwise have been obtained; and that, if they had not been so iawsted; deposited, they would have had to remain in the pablie current account, to the great advantage of the bank, at a very low rate of interest. I submit the honourable gentleman has entirely failed to prove one particular of his allegations, and I submit, further, that I have succeeded in proving a negative in every case. I have no further remarks to mak^ Mr. Dargaville : I wist to draw the attention of the Committee to this, in the last opinion read : " Even whei-e a general power of investment is given, we do not think placing money on fixed deposit at a bank could be termed ' investment.' Such a course could only be taken temporarily under a proper investment offer." Major Atkinson : I would merely like to say now that I should like to offer myself for examination by Mr. Dargaville or any member of the Committee. The Chairman : Do you wish to ask the Treasurer any questions, Mr. Dargaville ? Mr. Dargaville : No, Sir ; Timeo Danaos et dona ferentes !

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