J3.—3.

Mr. Langstone.] Or lack of security ? —That would of course come into it. Mr. Shaw could probably say why the long-term mortgage department results have been disappointing. I read in the balance-sheet a few years ago that they had not lent a great deal out against broad acres during the past year on account of the lack of demand. Mr. Shaw : I think most farmers prefer an overdraft, if they are working on a fluctuating account. Mr. Langstone : That is not the point. lam trying to find out about the amount of money the banks have lent out on long-term mortgage. Mr. Fussell: The only way to find out how much of the mortgages that exist now should be classed as long-term would be to carefully study each account and each security, and to assume how much of that mortgage the farmer could pay back if called upon within, say, a year. It could only be an estimate. None of the mortgages are lent out on long-term mortgage. Mr. Langstone.] Except by the Bank of New Zealand ? —lf you go to the bank and say, " Lend me £500 for four years at 5 per cent." the bank will say, " You will have to go to a long-term mortgage department." Mr. Clinkard : Did not the Bank of New Zealand set aside a particular sum of money to lend in that particular way ? Mr. Shaw : Funds were provided by a special issue of capital. Mr. Clinkard.] It was not very generally taken up ?—lt has been rather disappointing, on the whole. Mr. Fussell: Financing by overdraft is an advantage to the borrower, because he can get the benefit of the day-to-day fluctuations. If he pays in £10 in one day, the interest goes down immediately, but on a fixed mortgage the interest goes on all the time. Mr. J. N. Massey.] You only lend on demand, and the demand can be made at any moment ? — That is the basis. The bank's first duty is to the note-holders and the depositors, and if you have tied up your advances, the note-holders and depositors may ask how you are going to pay them. The depositors do not come on us for the full amount, because they have confidence in us, and we do not come on to the holders of overdrafts because we have confidence in the securities, and we realize that would only precipitate a crisis at the time when it is the last thing that is wanted. Could Mr. Shaw tell us the amount of money the Bank of New Zealand has lent on long-term mortgage ? The Chairman : I think that question was replied to by Mr. Shaw this morning, Mr. Massey. Mr. Shaw : Yes, £1,100,000. Mr. J. N. Massey.] What proportion of losses do your accounts show ? —I am afraid I could not answer that; it has not come under my notice. You mean on the long-term accounts 1 Yes. Would it be reasonable to ask you to supply a statement to the Committee on that point ? — I shall be quite prepared to arrange it, provided my general manager is agreeable. Thank you. In connection with commercial concerns, do the banks do any investment business apart from the overdraft ? Mr. Fussell: In what way ? In the system they have in Germany where the banks engage in trade ? What you mean, I think, is do the banks act as a sort of holding company ? Mr. J. N. Massey.] Yes ?—No, they do not do that. Dr. Sutch.] Do they ever underwrite share flotation ?—Not to my knowledge. I. have not heard of any case where it has been underwritten. Mr. Schramm.] Gold was referred to this morning. You say it was not a fair price to pay for the gold, the price set out in the Reserve Bank Act of New Zealand ? —I did not say that; nothing like that was mentioned. While the matter is sub judice I would not like to say anything that would embarrass either side. The notes that are issued to-day by the banks are really inconvertible note-issue ? — In a sense. They are not convertible into gold, but into sterling. Legally they are inconvertible, but you can buy sterling. Captain Rushworth.] You can buy gold too ? —Yes. Mr. Schramm.] They are pronounced to be legal tender and you have got to accept them. If a man came along with one hundred bank-notes, you would have to take them ? —Yes. You would have to accept them in payment ? —Yes. I put it to you that it does not matter whether they are inconvertible bank-notes or convertible ?— If it were convertible into gold the fact that it was legal tender would not matter at all, because you can change it into gold. If they were convertible but legal tender, there would be no hardship on any one. Ido not consider there is any hardship at the present time, because it is for the benefit of the country that they are legal tender. But the State has to put through an amendment to the law to that effect to assist the banks ?— To assist themselves. They use the banks to assist themselves. And to help the banks ?—Yes. It is quite clear that it was necessary for the efficient carrying-on of the banking business, but the object was to help the country. That was the point I was coming to. To efficiently function, all banks must have at some time or other behind them the assistance of the Government ? —I think that has been the experience. I do not say no bank could satisfactorily function without the Government behind it, but every bank is circumscribed with banking legislation, and the general experience of the world has been that it is necessary that the banks should have the Government behind them in some way or other. If all the banks were owned and controlled by the Government, you officials, who have competence and ability, would not lose any of your competence, or ability ? —No, but that, of course, is not the objection. Ido not think any one would argue against nationalization of the bank on the ground that it was not built for the education of bank clerks.

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