LETTERS TO THE EDITOR.

Dominion, Volume 1, Issue 76, 23 December 1907, Page 5

LETTERS TO THE EDITOR.

■■' : FINANCIAL FOLLY.- : , Sir,—With;reference^to the learlinc; article which appeared in The. Dohixjon this. morning, under the heading " Finaricih! Folly," I desire to point nut that you misapply— quite ''unintentionally, . no. doubt—some remarks made by me at the last half-yearly meeting of the Bank.of New Zealand.' You say:—. ■ ■'"'- '-'■'.' ' : .''.Mr/.Beau'champ.uttered. a grave'.warn- ! ing that some .lending institutions were r over-trading, and -did. not keep large : enough-reserves', and .the directors of these ; companies; seeing, what,.has happened in , New. York, are restricting.advances;.again making money scarcer.." ' ' "' ; Now, •; !• did- .not state that some lending institutions were ■over-trading,' but I alluded to the practice that'how" obtains of "several large "trading concerns, in New Zealand in competing for deposits and allowing their customers.'intero'st- on current : account balances. :My own impression is that the great majority of the lending institutions in this' Dominion —Building Companies,' of course, being included m that categoryconduct 'their ' business" on extremely r snund conservative,lines, and no danger in respect, to them need be apprehended, even though monetary conditions in New Zealand hi. the near future are'not quite so-favourable as they have been during the past'few years. ■ You will, I assume, do me the justice of publishing this-correction, with -the least possible delay, and oblige yours, etc., i• " . '"'.-, HAROLD BEAUCHAMP. ( December '21 (We hare pleasure in complying with Mr. Beauchamp's wish) as expressed above. We cannot see'that'wo misapplied his remarks— certainly - not intentionally. In the conrso of bis speech.at the annual meeting of the Bank of Now. Zealand ho said, referring to the financial crisis in America and its effect in England:—" This emphatically indicates the severity .of the present strain, and it is .only reasonable to .assume' that, should a 7 per cent, .rate' be maintained for a reasonably long period, money, in sympathy with London, will' appreciably harden in this Dominion.-',. The crisis in America-has been attributed—rightly, I believe—to tho narrow_ margin of gold reserve on which the New York l3anks, have been trading, and the encouragement by them of vast credit." Following on this, ho gavo utterance to the following rtote- of warning:—"ln the light of"that experience, niay I, be permitted to sound a" note:of,warning in connection with the action of several largo trading concerns in; New"Zealand' in competing for deposits and allowing' their, customers" interest on current account balances. ' Recently, I examined the published balance-sheets of seven public companies trading.in New Zealand, and found "that their total „ indebtedness in this form amounted to no less than £535,016, made'up as follows:—Current' account "balances, ' £197,381;' fixed deposits, £338,135. Now; in : prosperous times, those heavy liabilities may be treated.lightly, but-I would ask .you .to picture what would happen if, during'a,' period .of depression, these' companies were called upon to discharge their 6bligations. ■. By Statute, the Banks are Compelled, to ; kecp coin or Government securities to the extent of 6s. Bd. in'.tho £ of their liabilities, payable on'domand, and it would • seem only right! and proper in the interests ,:of. tho - public . that a: somewhat similar obligation 'should be cast' upon public companies which undertake banking risks of the same'description."' ( : (Tbe whole point of our article was to warn the. public, against. taking: a too sanguine view of the rmhifidiate.-future—to advise them that the" financial crisis in America was certain to have some effect' indeed was already heing • felt •in < this Dominion; • that money would be dearer, and that the prices of,, a- number, of our staple : products . were being affected, .and might: suffer, still more. Wo did not desire in' any way to be alarmist, but merely urged that reasonable precautions should be taken to .suit changing conditions.'. . It is plain ; that Mr.' liauchamp holds the same view.) . .......