SECOND EDITION. THE BANK CRISIS.

Evening Post, Volume L, Issue 53, 2 September 1895, Page 3

SECOND EDITION. THE BANK CRISIS.

THE BILL BEFOER THE LEGISLATIVE COUNCIL. The Legislative Couneir met at 11 a.m. to-day, the galleries being full. The Bank of New Zealand and Banking Bill was received by message from the Lower House. _ The Colonial Seoretary moved tbo suspension of the standing Orders in ordei to allow the Bill to pass through, all Btagea at one sitting. The Hon. S. Shrimski opposed tho motion as an aot of ooeroion The Government was to blame for not bringing up the measure earlier. The Colonial Seoretary said that immediately the state of things was known to the Government it took measures to briug down the Bill at the earliest opportunity. The Hon. B. Fharazyn said the note issuo guarantee expired to-day, and Govornment brought down the Bill at the lust moment in order to compel tho Council to force it through. It was a renewal of the " confidence trick" of last nession. Tho motion was carried by 19 votes to 13, the division being aa follows : — For the suspension, 19 — Biohardson, Baillie, Whitmore, Bonar, Barnicoat, Swanion, Williams, Kelly, Jenkinson, W. C. Walker, Feldwick, Bowen, Oraoe, Pollen, M'Cullough, Montgomery, Buckley, Holmeß, M'Lean. Againßt the suspension, 13-Boynolds, Shrimski, Sootland, Bolt, Stewart, Pharaxyn, Bigg, Taiaroa. MacGregor, Aoland, Stevens, Ocmond, Johnston. The Colonial Seoretary said it was fortunate that the domioile of tho Bonk had been removed to Wellington, and that there were now able and reliable men at its head. Government waa only in possession of the result of Che investigations of these men a few days before it came to the House. No better oolleotion of m6n oould have been got together than the Committee whioh had investigated the affairs of the Bank. Past directorates had permitted the Bank to drift to its present position. The present directorate deserved credit for showing the oourage of its conviotions in revealing the trno state of affairs. The business was a good and sound one if properly managed, and under its present management would yet return to prosperity. The Hon. Mr. Ph&razya considered the Government had honestly endeavoured to do its duty to the oountry in the proposals now before them. Had the information now available been available last year the Guarantee Aot would not have been passed. (Hear, hear.) Government last year assured them that they were familiar with the position of the Bank. (Sir Patrick Buckley and Mr. Montgomery — " No.") So far baok as the timo of Mr. Ballance the Government was warned by leading bankers in Wellington of the position of the Bank of New Zealand. He bad seen the correspondence. This year they had not to trust the Government but the able Committee and the pr& '<mt directors. The weak points of the present proposals were the value of the assets and the amount whioh might be eipeoted from the shareholders. One knew numbers of individual instances in whioh it would be impossible to pay the call. The Government, however, oould not be blamed for making the call. The panic amongst London shareholders was understandable. The whole tendency of the Government's legislation had been to destroy landed property, and consequently the Bank bad some claim. The system of Graduated Land Tax was the most iniquitous iv the world, made as it was on valuations kept up by men who would be discharged if they aid not do so. In his case he was paying 4s in the £ on his income from land, and others were paying ss, and that income was 3 per pent, on the value of the land. These notitions values wore the cause of the Bank's downfall. Ministers were not statesmen, but olevar politicians. The Bank had Buffered from reckless and dishonest directors, but it suffered also l!rom the actions of Government. They oould not say the oountry was opposed to tbia measure, or they might refuse to pasß it. It was a ohoioe of evils and they must endorse it. He had every confidence in the present directors, and regarded the amalgamation proposal as an excellent one They had little intimation from the country on the matter. Sorre members of the Knights of Labour and other uninformed bodies had spoken, but they knew nothing of the matter. The Hon. Mr. Bowen, us a member of the Committee, said the position had entirely changed from last year, They bad now » President and directors of their own, who had laid bare the position. The responsibility of the recommendations was great, but in the interests of the country the thing must be settled an soon as possible. The Committee found it had to oreate new capital for the Bank, find it credit, enlarge its earning- powers, and separate the Assets Company from it, to enable it to do anything at all. They bad first to deoide whether the oountry should oome to t'ae rescue at all. If the Bank olosed, a oatastrophe must ooour Whioh would reaoh ovary interest in the polony, and especially ilia farming interests, already severely pinched for money. It was all very well to say other Banks would oome to the resoue, but they did not know how gnoh a catastrophe as this would affect other Banks, direotly oir indireotly. Comparatively small suspensions whioh had taken place recently had affected every position of life and every industry. Had the Committee felt there was no hope it would have faced the position at onoe, but it felt that there was au alternative which would give a reasonable prospect of ultimate Buooesa. It was impossible for anyone but a director or an expert to oalonlate the earning power of the Bank, These estimated the earning power at- £103,000— £138,000 waa put down as »ac figure of increase, but .£38,000 of this was equivalent to the loss shown by last year's aooount under unfavourable oonditionß. Even if they only got half this, the £!>O,OOO a year would be paid in to the Bealisation Board, and begin to clear off the Bank's liabilities. The Committee was not sanguine as to the inoreased liability, which amounted to about - It millions more than the country had already undertaken, but the Committee felt that there was a reasonable chance, under favourable circumstances, to attain suooess, while immediate liquidation must be felt within the colony, and echoed beyond the colony. The Hon. Mr. Bigg said he must oppose the Bill. He regretted his approval of the proposals of last year, and had not dreamt that the setting up of the Committee this year meant an additional liability to the colony. The Bank was insolvent. Yet if the gazetted returns were correct, the Bank was ■olvent. He oaloulated that the total value of the assets was .£2,980,885, and the liabilities were 427,460,765. Were the Committee's estimates not realised the colony would be responsible for £4,497.880 and nine years' interest thereon. They were therefore asked to guarantee a sum whioh nnder the most favourable oironmstanoeß might be .£4,500,000, but might be £7,500,000, and the aeourity for the .£2,000,000 already guaranteed would vanish. For seourity they were now offered a reserve fund which had vanished, and .£500,000 worth of shares in a bankrupt institution. Should the Bank be able to pay 5 per cent, on its shares, these were only to receive Z\, and if they rose to a premium the shareholders were to have them at par. let the colony for this ohanoe had to pay £17,500 per annum for interest on the .£500,000 After the lnnoheon adjournment, The Hon. Mr. Urmond said he agreed in the main with Mr. Bowen. He protested againßt the baste whioh had characterised the whole of the proceedings. Last year's Bill was passed without consideration, under Government ooeroion. This session pressure of time was again felt, and it did not seem possible that the Government, with its own offioers in the Bank, oould have been ignorant of the position up to a week ago. Government should have stated the position on the first day Parliament met, instead of leaving it till the day of the expiry of the Bank Note Issue Aot, when the Bank must olose to-morrow if the Bill were not passed. The Committee was improperly hurried in its deliberations. Had it had more time it might have evolved a better soheme. Never again should the colony be placed in such a position. The Committee had matters before it whioh Mr. Bigg could not know, and whioh oould not be reported to Parliament. The Committee started with the consideration that the colony was already hampered with the two millions guarantee, that the whole of the Banks capital was gone, and that liquidation would produce great distress. Ihey should have nad outside evidence as to the effeot of liquidation on outside institution*, but that was forbidden by lack of time and the order of reference. They could then have learnt whether the dangers alleged were real. A considerable amount of assets value wonld have to be written off. Liquidation meant loss to the oolony of one million of itß guarantee, and that was an underestimate. The best part of the soheme was the proposal to separate the Assets Company. The Bank, when these proposals were passed, would do business under circumstances more favourable than probably any other institution in the oolonies. It wonld have all its debts paid, and capital to work with furnished by -the taxpayers. Under careful management the Bank had a future before it when it had regained public confidence and the business it had lost. It wbuld be a perfeotly safe plaoe to do business, and that view would become general. He did not agree with the estimate of earnings, but the taxpayers had made the Bank safe. The Bank would have large sums in its coffers, and the most profitable means of applying these' would Joe to purohase other bank business.' This clause should not be hampered by conditions whioh might prevent its being usefully applied. They should put the Bank 1 in the position of acquiring business on business lines, and with business despatch, but the Government should be made so far responsible that its approval Bhonld be required. There was, too, the very much -to■ be - regretted* action of the Lower House in diminishing the already insufficient sum to be paid to the officers to be entrusted with the liquidation of the assets. It was simply ridiouloua to think that any business man would entrnst the liquidation of £2,000,000 of assets to the type of men he could secure for £300 or £400 a year. The loss on any one transaction in consequence would far more than exoeed the expected saving. It was monstrous to ask the Council to consider undor suspension of Standing Orders the new provision applying to all banks with regard to trading concerns. (General assent). The present position was ontirely due to the coercion of Parliament by Government last session. Either Ministers failed to properly ascertain the position of the Bank or they were b'inoly led. Had they made any enquiry they must have ascertained that Mr. Ipurra^'s leading statement waa entirely fcontrary to fact. " z ■ | Left sitting. J THI NEW PROVISIONS. Tho amendments proposed in the Council by Government provide that the clause preventing any "direotor of the Bank or o£ the Estates Company or member of the Assets Board" being allowed an overdraft from the Bank, " shall not come into operation until tha Ist January, 1896," and " Bhall not apply

to any firm whereof such direotor or member iB a partner, nor to such direotor or member as such partner." The Government olauso to givo effect to Mr. G. J. Smith's motion withdrawn in the Lower House is as follows :—": — " 1. After the p expiration of seven years from the commencement of this Act it shall not be lawful for any bank within the meaning of ' The i. Banks and Bankers Act, 1880,' to, directly or indirectly, by itself or its agents, carry on % any mercantile ooncern or mercantile busir ness other than the legitimate business of banking. 2. For every default in compliance with any of the provisions of this section, r each direotor of tbe bank making such dea fault, and also the bank's general manager or other its principal offioer in the colony, i shall be liable to a penalty not exceeding i five pounds for every day during whioh j such default continues." The names of Messrs. Guinness (for) and ■ Dnthie (against) were omitted from the pair- > list of Saturday night's division, printed on 1 the fourth page. [ fpBEBB ASSOCIATION. | ' Melboubnb, 31st August. . The Age says tho New Zealand Government has a very serious task before it in arranging the affairs of tbe Bank. It cannot be overlooked, says that journal, that banking experiences in England afford precedents for State assistance being afforded to avert disasters whioh would press heavily on the whole community, and the success of the New Zealand scheme will be anxiously looked for. That it will excite criticism is certain, especially from those whose interestswill be influenced by the creation of a quasi-State bank. The majority, however, will doubtless regard it with satisfaction, as it proves that the Government has sufficient force of character to deal with a grave emergency. (Beoeived September 2, 10 40 a.m.) London, Ist September. The affairs of the Bank of New Zealand have not affooted Colonial Government stoaks. for contmwUmo] reaaxng matter mm fourth page.