BANKS AND CREDIT.

Bay of Plenty Times, Volume LXIII, Issue 11784, 31 July 1935, Page 3

BANKS AND CREDIT.

Sir,—ln your leader of the 29th mst„ you suggest that, with all this talk of socialisation of banking, etc. it is about time that our prominent bankers spoke up and let us have a bit more insight into their working policies. Certainly, if a bank is operating on sound lines, < there should he no need for any "secrecy concerning its operations.

You g 6 on to say “A banking company has small resources of Us own relatively and these consist of its capital and reserves,, which befong to its shareholders.” Do we not here see the excuse for this secrecy’ Operating as they do on depositors money the shareholders capital forms a very Insignificant part of their total working capital—the fine leading English tradings hanks were able to pay dividends to their shareholders ranging from 12 per cent, to 18 per cent, in spite of difficult times At the same time large surplus profits were transferred to their reserve funds? the extent of which are never disclosed to the public. From this it appears obvious to any thinking person that these institutions depend almost entirely upon .the credit-worthiness of the community as a basis for their operations.

To quote Professor Murphy;— "Credit Is the agreed postponement of payment in money. It Is a protracted exchange, or the exchange of present wealth for the promise of wealth in the future.’* To use simpler language this simply means that real credit is the belief in a person’s ability to produce a given article within a given time, and it therefore follows that credit .is created by the person to whom it is granted. Why, then, should this valuable instrument, upon which our whole social structure has been built and depends at all times, be controlled by private individuals, who have in actual fact taken no part In its creation? Under a system of public control this credit instrument would be diffused, always, in such a way as to suit the interests of 'those to whom it justly belongs;, just as, under a private monopoly, the interests of the shareholders must Inevitably receive first consideration. “POLONIUS.”