The Press. TUESDAY, SEPTEMBER 2, 1913. THE STATE AND THE BANKS.

Press, Volume XLIX, Issue 14760, 2 September 1913, Page 6

The Press. TUESDAY, SEPTEMBER 2, 1913. THE STATE AND THE BANKS.

■Mr Alexander Macintosh, lato general* manager of the Bank of New Zealand, contributes to the '"Dominion" an extreiiiely interesting and impressive open Jotter addressed to' Mr Massey, in •which, by referring to his actual experience in' connection with the Bank of New Zealand, he' emphasises tbo dangers likely to arise from undue political influence and abuse of patronage where the State assumes. morq or less control over a banking institution. Mr Macintosh realises that he is likely to become the subject of criticism for revealing -matters supposed to bo of a more or less confidential nature, but ho holds that there is a consideration of paramount .importance—the public interest —that may at times demand the relaxation of conditions that would otherwise bo strictly observed. The letter is really a telling indictment of the "Liberal" Administration which was in power during the period with vhich the writer deals. -Want of space prevents us from repeating ail tho counts in this indict-

ment, but some of them are sufficiently serious. The quarter from which they come is such that those against whom the charges are directed cannot afford to neglect them. Mr Macintosh is a man of unimpeachable reputation and high standing, "who, after occupying the position first of Chief Auditor, and next of General Manager, of the' Bank of New Zealand, wiis president of the State Savings Bank and Advances to Settlers' Department of New South Wales, and now occupies a distinguished and responsible position in connection with a leading financial company in this Dominion. He shows in his letter that in endeavouring to maintain tho interests of tho Bank of New Zealand ho had to contend continually against interference- and pressure from the Government of the day. We can only find space for ono or two illustrations. The management of tho Bank of New Zealand, he states, was not at any time- unmindful of tho support accorded by the Government, and was ever ready to render to the State any service within reason. On ono occasion, when the money markets were practically closed to borrowing colonies, it assisted to the extent of balf a million in underwriting a loan, was saddled with between 80 and 00 per cent, of the amount, and subsequently wrote off from profits about £35,000 for depreciation of the stock. Naturally, Mr $ Macintosh continues, a repetition of such a transaction would not be likely to receive favourable consideration, and later on, when a request to that end was pre- • ferred, it met with a refusal, principally because at that time • a larger portion than was deemed advisable of the Bank's funds was locked up in local government . stocks of various descriptions. The Bank authorities were tauntingly informed that it was their concern if they tied up so much money in fetock. This* elicited tho reply that tho etocks held were not voluntarily acquired for purposes of investment, but from time to time to meet the requirements of the Treasury. Wo.gather that the amount required was no less than £800,000, and a further insistent demand fr6m the Government was met with a re-. fusal, and this decision was conveyed with an expression of deep regret that "prudent management of tho Bank's " affaire was evidently a matter of.no "consideration as against the pressing "exigencies of the Treasury."" This candid reply led to invocation of the aid of tho Chairman to induce a with* drawal on the ground that the JetteV would becomo a public document and possibly embarrass tho authorities., " A peep into your pigeonholes," adds Mr Macintosh, "will show that it is "still on record or should be." Another instanco is'quoted by Mr Macintosh in which a demand by the Bank for. the delivery of < securities in connection with the Assets Board was met "by .a " prompt refusal in writing on grounds "that can only be described as purely " personal and political." An order from tho court was obtained, and the securities wore then • handed over. Mr Macintosh , refers ,to members of. his staff being without reference to him summoned from the post of. duty at the call of a Minister. He cites one instance of his being asked through a nominee member of the Board to peremptorily dismiss nn official because of supposed political leanings. He made it clear that instead of being treated as desired the official .in question would have tho fullest protection, and would only be dealt with on a charge -being laid, supported by tho mosfcample proof of unfitness for retention in'tlio service. No more was then heard of. tho matter. In regard to the Bill of 1903, Mr Mclntosh. complains that the Board were kept in ignorance of its provisions, and ho had information that the intention was.to force lt at the eleventh hour. • Hβ quotes a letter which he then wrote to tho Board urging them to join with him in Seeking without delay a definito and 'final pronouncement from tho Prime Minister on the course he intended to pursue, and intimating that he (Mr Macintosh) would resign if this were not done. Finally he shows that when in 1903 he vacated the office of Chief Auditor to become General Manager, the Government, ifc spite of bis repeatod remonstrances, delayed the appointment of another auditor' for twelve months, so that he. was virtually forced into the irregular and highly illegal position of conducting the work attached to the vacant post in addition to the new responsibilities assumed. We do not understand Mr Macintosh to dispute the opinion now generally held that in view of the present position of the Bank the tSovernment must continue to exercise practically the same control over the institution which it now enjoys. He shows, however, very clearly that " there are certain grave dangers inseparable from such control. Tho moral, in our judgment, is threefold. ■ If these dangers are lo be obviated or minimised, first and foremost the Dominion jinust seek to provide itself with a Government'whom it* can trust; secondly, the shareholders must be especially careful in the selection of Directors to represent their interests; thirdly, it is essential, if political pressure is'to be resisted, that the positions of General Manager and Chief Auditor must always be filled, not only by meet of integrity, but by men possessing strong backbone and unswerving independence.