I—lla.

34

r.T. W. POTNTOK.

19. Have you looked into the point in Professor Salmond's opinion that when loans are borrowed at a lower rate the money shall be lent out at a higher rate?— The Act says it shall be lent at the same rate as it is borrowed. 20. You admit that is a wrong thing?—l pointed out to the Minister that it is a wrong thing. 21. You will admit it is in defiance of the Act?—lt is in strict accordance with the Act; but I say it is a bad principle, because you may have to borrow at a higher rate. 22. Some loans were lent out at a lower rate than what you were getting the money at? — No. We got the money from the Post Office at per cent., and afterwards the Post Office agreed to give us the money at 3j per cent, for the loans we had granted. When money was tight and the Post Office stated that they could not let us have more, we immediately raised the rate. The Post Office agreed to give us all the money at 3 1 - per cent, for loans granted at 3| per cent. I say in my letter to the Minister of Finance, " By law the money has to be lent by the Advances Office at the same rate at which it is borrowed —an unwise provision, in my opinion." 23. You followed the trend of the money-market pretty closely?— Yes. 24. When you were lending money at 3"J per cent, and some of the money was not to be paid over for two or three years, did you not realise that the money would have to be borrowed at perhaps a higher rate and yet lent out at the lower rate?— Yes; the agreement was made. 25. Whatever rate the money was obtained at, the country was pledged to lend this money at 3| per cent. ? — Yes. At the time the Post Office said they would not let us have any more we were committed to 3J per cent., but at the same time they were pledged to 3| per cent. 26. The Board was aware that money was rising. Did you think it right that the Board should lend money at 3| per cent, for a number of years when paying a higher rate?— The moneymarket had nothing to do with these loans. The understanding all through was that the Post Office had to supply all the money wanted. If we had had to go to the London market it would have been a different thing. The arrangement was that the Post Office would let us have all the money required for local authorities. 27. Do you say the Post Office agreed to let you have the money for an indefinite period at 3J per cent. ?—No. 28. Do you wish it to be inferred that the Post Office was bound down to 3J- per cent, if money got dearer? —The Post Office might get emptied out to-morrow; you might have a war to-morrow and money at 6 per cent. 29. Then, the money-market does affect the rates charged by the Post Office? —Not much. Money has been fluctuating for years past, and money has always been got for years past at 3J per cent. from the Post Office. 30. If money gets very much dearer, would not the Post Office at once have to put up its rates?— Yes. 31. If we lend a lot of money at 3J per cent, years ahead, would not the colony have to pay more for it to the Post Office? —Yes. 32. Money borrowed at a time when money was likely to be dearer to the Post Office?—As soon as we got notice from the Post Office that they wanted to increase the rate we altered our rates. I pointed out in my letter the advisability of amending the Act to provide for that. 33. How much a year had you to lend,—£l*ooo,ooo. 34. What does that average a month?—£Bo,ooo odd. 35. How much money was finally approved in the month before the election? —I could not say. I have given it to you in the return. 36. The return puts'it at £164,000?— I could not say. 37. Was not that an abnormal rate of speed?— No. Some months I think it was more and some months less. 38. An average would be £85,000, and in about twenty-eight days it was £165,000 : does not that indicate that in some months you would be only able to lend £40,000? —The monthly rate was not considered. 39. Do you admit that £165,000 had been lent for the month before?—l have given the return, but 1 say again that the election had nothing whatever to do with the proceedings of the Board. 40. In the list you have prepared the loans to local bodies finally approved came to how many, do you know?—l do not know. 41. Mr. E. Newman.] When money was being lent by the State-guaranteed Advances Department to local bodies and payment extended over some years, as was frequently the case, did it not occur to the Board to make an arrangement by which, if there was a rise in the money-market, the local bodies should pay the increased rate?— Well, if we had finally approved or granted loans to local bodies we could not do that, but in the case of provisional approvals we could have done. 42. Would it not have been a prudent thing to have made arrangements with the local bodies that the local bodies should pay an increased rate if money went up?—We could not do that if it was a final contract. 43. Mr. Hanan.] You are a barrister and solicitor by examination?— Yes. 44. Will you look at the opinion which has been given by the Solicitor-General, Professor S almond ?—Yes. 45. The question put to the Solicitor-General by Mr. Allen, Minister of Finance, is as follows: " Please advise me whether the Board has power under the Act to commit the country to expenditure beyond the current year in which the loan is being dealt, with." Will you look at that opinion and tell me if that is a specific question to reply to, and if so, what is the conclusion the Solicitor-General arrives at?— The conclusion that these contracts fix the rate of interest. T do not think it is a direct reply to the question.