DOMINION LOANS.

Press, Volume LXII, Issue 18682, 4 May 1926, Page 10

DOMINION LOANS.

EXCESSIVE BORROWING. PROSPECTUS LAXITY. (FBOil OtS 0W» CCaBZSPOHDEKT.) LONDON', March 2P>. A new publication which should be of great value amongst financial circles is "The Banker," which is now in its first volume and third monthly number. Mr Arnold Here, Government Auditor at the Department of the High Commissioner for New Zealand, has contributed to this March number an article in which he utters a warning against any alteration or repeal of the Colonial Stock Act, 1877, which he maintains is a wise and beneficent measure. "Overseas debts," writes Mr Hore. "are undoubtedly large in relation to population, but critics are apt to forget that the Dominions incurred exceedingly heavy liabilities in defending our common rights and liberties, and that the bulk of the remainder of the public debt is sunk in directly interestbearing assets. Generally speaking, the Dominions themselves are alive to the futility and danger of excessive borrowing, but new and undeveloped countries must have fresh capital if progress is to continue, and capital in sufficient quantities can only be obtained at moderate rates of interest abroad. So long as the proceeds of new issues are skilfully invested in reproductive enterprises, and output expands as it has done in tho past, there should be no real cause for apprehension.

Colonial Stock Act. "The impartial investigator can come to no other conclusion than that the Colonial Stock Act, 1877, which confers 'valuable privileges on overseas States, is, on the whole, a wiso and beneficent measure, and that its repeal at this stage, and the substitution therefor of a system under which the Imperial Treasury ov any body of financial experts could veto applications from overseas would be fraught with grave political and economic consequences to the Empire. Disappointed and exasperated borrowers would not necessarily abandon their loan proposals, but would turn to monetary centres where a free market existed, and trade as it is carried on to-day would be inevitably divorted into other channels. No one, either here or in the Dominions, could contemplate successive applications to New York without dismay, and we must, therefore, dismiss the appeal of the Colonial Stock Act and the creation of an arbitrary body as outside the region of practical politics. "But there is one direction in which the London Money Market could exercise a much greater influence than it does to-day over Colonial issues. The ease with which overseas States have been able to raise money in the past has produced a laxity in the presentation of prospectuses which should not be tolerated any longer. Kelying apparently on the fact that their issuos rank as trustee securities, and will be underwritten in the usual way, they proudly disdain to supply any vital information as to the condition of their finances, and the investor is denied all opportunity of exercising an intelligent and independent judgment. A large number of the States who maintain a policy of silence would lose nothing by taking investors into their confidence, but I do not know of any other walk of life in which a borrower, no matter what his good faith might be, is released from the obligation to produce a full and candid statement of his affairs.

Conspiracy of Secrecy. "The amazing thing is that the credit of theso Olympian debtors never seems to have suffered to any appreciable extent. Underwriters, brokers, and financial houses entrusted with the care of other people's money must be largely to blame for this conspiracy of secrecy. They ought to insist on the publication of figures showing the borrower's budgetary position, tho public debt, divided into productive and non-productive loans, imports and exports, and the measures employed for debt extinction, and if it wore possible the Stock Exchange Committee should be empowered to refuse quotations to any stocks not complying with the above requirements. It is doubtful whether applications from overseas would be seriously diminished by the enforcement of regulations on the lines indicated, but imprudent and extravagant borrowers would be penalised by tho market, and the discrimination exercised in the city would have tho salutary effect of compelling the reckless to put their financial houses in order. The market, if it feels so disposed, can bring any borrower to heel, nnd while the setting up of an independent bodv with arbitrary powers of .veto would be resented by the self-governing Dominons as an intolerable interference with their freedom of judgment, not one of them could afford to disregard the views of the city based on reliable information and the sound common sense nnd business acumen for which it is famous."

woou (BT CABLE—MESS ASSOCIATION— COPTKIGHT.) (AUSTHALIAS AND K.Z. CABM ASSOCIATION.) (Received Mn*y 4th, 13.15 a.m.) SYDNEY, May 3. The wool sales were resumed with strong French and Japanese demand for fine qualities, but the Yorkshire demand for merinos for comebackß and fine crossbreda at Into full rates. Medium grades are irregular, late full rates. Medium grades were irregular.