The Dominion. FRIDAY, JANUARY 6, 1911. THE BIG LOAN.

Dominion, Volume 4, Issue 1018, 6 January 1911, Page 4

The Dominion. FRIDAY, JANUARY 6, 1911. THE BIG LOAN.

1 The Prime Minister has broken his silence upon the failure of the £5,000,000 loan, and has made a characteristic statement on the subject to the Timaru I'ost. This statement we reproduce in another, column. Our readers will recollect that The Dominion, and subsequently some of its contemporaries, produced the best possible evidence that the loan was a remarkable • failure, so far as the investing public was concerned. AYc gave the opinions • expressed by The Times, the Financial Times, the Morning l'ost, the Daily News, the Westminster Gazette, and the Manchester Guardiani and all these journals not only referred to tho loan as a failure but treated the fact of its failure as a fact well known to everybody interested in finance in London. We have since received tbo opinion of the Financial World that "the loan was a fiasco, and a surprise for New Zealand," and of the Birmingham D'qily l'ost that "the issue was a pronounced franco." The I'ort is unkind enough to add that "the .rebuff" will not be ! an unmixed evil if it serves to check tho borrowing propensities of some of tho colonics. Tho paper we have,seen that has anything to say in defence, the Standard, admits that at .first sight it is somewhat startling that the underwriters .should bo left with 92.per cent-of the loan on their hands, and proceeds to explain this away on the ground that the tendency of investors is to look for high interestyielding stock. It also expects the public to take up tho debentures later, tho Standard, however, shows that treated as a short-dated loan the generous terms' offered by the New Zealand Government mean that the; holder of tho bonds for tho period of four years prescribed will secure a net yield of £4 3s. 6d. per cent on his investment. In other words, our Si per cent loan costs us £435,;6d. per cent, plus underwriting; costs. The Prime Minister says, with.his customary urbanity, that all the advprse opinions aro "absolute rubbish!" The arguments he advances are amusing: "We got our money at tho rate agreed upon, 3| per cent, and we got it placed at a time when the Bank of England rate was !> per wmt." Tho Prime Minister must cither bo a very simple person, or must think the public a very simplei public, if he imagines that anybody will fail to see that practically any country could have raised a big loan at 3i per cent provided it made tho terms * favourable enough. "Tho transaction was a distinctly fine one from this country's point of view," tho Prime Minister added, "and the critics of the loan must, give the London financiers, who underwrote the loan, credit for knowing their own business." That is the trouble. The London financiers knew their business so well that they demanded a remarkably good price for their obliging behaviour. required that if .tho public did not take up tho debentures they should still do well for themselves; but, expecting to sell to the public, they required that they should be able to offer bargains to the investor after pocketing their own good, profits. They require nobody's sympathy. But who is it who has to provide these exceptional bargains? The New Zealand taxpayer. From his point of view the prospect is not so pleasing. _ The actual interest lie has .to pay is £3 10s. per £100 but lor each debenture he only receives £93 10s. less the costs of getting the loan, through. The investor who buys ■without intention of converting gets over £4 2s. 6d. per cent on his money. This is a quite exceptional price to pay for our loans. Unless nothing matters provided tho money is forthcoming, the loan was a very costly one from the New Zealand taxpayers' point of view, and was also a failure, in tho opinion of tho financial critics of the leading London journals. The Prime Minister must really excuso the public if it declines to consider that by exclaiming "Absolute rubbish!" he can sweep away the joint opinion of tho friendly, disinterested, and weighty authorities which, we have quoted. In view of the fact that one of our criticisms of the loan was to the effect that the loan is likely to damage our market and, raise for a long time the price Now Zealand will have to pay for any new borrowing at 3i per cent, Sir Joseph might have explained why, at the last report (on Saturday last) -New Zealand 3; per cent stock was lower than the 3i per cent stock of any of the Australian States. Tho figures were: New South Wales, 9S; Victoria, 98 3-Bth; South Australia, 96J; Queensland, 07 _5-BtK; West Australia, 97; Tasmania, 99; New Zealand, 95 3-Bth. This is lower than the lowest figure ever recorded since tho black year 1893. Since 1894 New Zealand per cents never went below 96J until now, 'This, we presume, is one of tho many splendid results of this brilliant loan.