BANKING REFORM.

Evening Post, Volume LXXVII, Issue 73, 27 March 1909, Page 15

BANKING REFORM.

TO THE EDITOB. Sir, — I have an innate contempt for "nommes dcs plumes," and if it were not for the sake ot the importance of promoting bank reform, would entirely ignore • 'Gratis' s" letter in your issue to-day. His whole letter is disingenuous to a degree. It begins by misquoting a statement in one of my early letters, and deducing from his misquotations a conclusion which is absolutely false. I stated that in my experience I had charge of a country branch where the advances were only £2710, the deposits £45,000. After much troubio with head office, I was able to increase advances to £35,000. The results wero highly proiitablo to the bank, for deposits grew to £85,000. The district also went ahead ; two small factions were estublibhed in it, and the population increased by 800 adults. "Gratis" wants your readers to imagine that the increase of deposits--some £40,000— camo trom the uso of £35,000 by 800 people The population •■{ the district I refer to was oyer 10,000. A large proportion of the increased doposita camo irom the profitable use of the money which I advanced to various people. 1 could recount many incidents of what can be done by wisely helping on settlement and industry ; but this would only cause* '"Gratis" to doubt my veracity. Besides the profitable results from wise moneylending 1 , both to the bank and tfioEe who were truly holped, other depositors were attracted. For nothing goes, farther .'n building up confidence in a bank than the class ot advance business the bank does. In small country districts the people hear from each ether how they aro dealt with, and when they see neighbours prospering by the judioious help 'extended by the bank, the "mana" of that institution a to enhanced that the deposits flow in. Deposits grow in the country as the result of true wealth production and saving— they are to a great extent what keep tho commercial and city speculations on foot, it is a pity they are to often badly applied by our branch system of banking, and its legalised monopoly. The district I cited was more An agricultural and pastoral ono than anything else. Minerals had nothing to do with either increase of deposits or advances. What does "Gratis"' mean by a Stalo Bank? Does he moan some sort of an institution which will do all and every kind of banking business which is known or required by a fairly civilised country such a* our own .' If he dooa meati iuch a wonderful concern, and I have met such people who have such ideas of State banking, then I say again, may it never be I Look at the monopoly such a concern would hold. It would by force take from our live banks all their business, mergin" every line into the power of the State. Wo suiter from tho monopoly of five banks Gratis would like that intensified perhaps Wo have under our very ejes in this country— never mind America just now— no less than three types of State banking, lursl, the Post Office Savings Bank ; secondly, the Advances to Settlers Department; and lastly, the Bank of I\ew Zealand Which model would "Gratis" work by? Let us consider tho matter: Ihe Post Office Savings Bank controls about £11,000,000, m which a very low rate of interest is paid. These funds are sunk id Government hondb, and so kept out of fruitful U=e to the community Thp Advances to Settlers i b kept going— until it stops for a while— on foreign-borrowed money over £5,000,000. The Bank of New Zealand so far forgot its native, land, even though its board is crowded witrl Government. appointed diiectors, that they sont £5,000,000 out of tho Dominion to help London speculators— this piece of folly being largely responsible for our present money stringency Another feature about the last-named bank : It Be ems to have a desire to emulate the Post Office In its balance-sheet of March, 1908 it show. £1 123,295 locked up in Government and municipal securities! As if there were not enough wealth-producing-advances offering in the country, which would return a higher rate of interest bpcause well able to baar it, than such ridiculous investments. T ask "GraW how it would turn out if all this wondcriul btate banking wefu merged into one btqfo institution, having added thereto every kind ot commercial, manufacturing pastoral, and speculative banking requirem r e ?i s e t£ ct )v) ve <-' n the Post Office and Bank of Now Zealand £16,000,000 wero kept out of use for the development of this country, the Government having £11,000,000 for State requirements, and the Bank of New Zealand £5,000,000 propping „„ arrairs of London speculators. Of tho three institutions, the one least a bank m tho true sense, viz., the Advances to Settlers has done most good to tho Dominion lor it is a big factor in aiding truo wealthproduction. Wo never cari have n Stole Bank, for our tin-pot law* are not able to over-ride the Imperial charters under which four of our banks trade. We may tinker with our local banking laws amuch as we please, even though the rehull, is vpry hurtful to our true interests ±ne only way to cure monopoly is by iree banking under proper Stale s-uper-vision In this small country we have already a large wool production, also considerable dairying, timber milling, woollen manufactures, meat export. Those aro five impoifaiifc staples would could .spoeia.li'.p into a bank for each. They require far more support than is al presnnt accoided to them by our branch banks. Undor our prcbcnt system the people interested aro but tho playthings of produce and (.hipping ''rings." Tho operations of these "rings" are only possible when produccis are not properly catered for by tho bank*. I have quoted five lines, instead of one only as asked by "Gratis." I have not advocated "ask and ye t-kall

receive" banks, nor tho Kilkenny cat variety either, though I havo seen some "wild cat" banking in this Dominion and in Australia. Banks properly conducted do their business on sound lines — they obtain both personal and collateral security for advances. At iho present time tho complaint is that people with "character and security" aro unablo to obtain accommodation mi any terms from our banks ; moreover, in many instances tho banks are calling up advances, thug shaking established values and killing every form o^ enterprise. Tho only oxcuso in reason is that wo ha\e too much work for only five bank?. We want more, and we want them conducted with prudence. So away witli monopoly ! Let us have more banks. A word to "Gratis" : Japan is about the eize of New Zealand, and has 2500 banks; we have only five. I would rcrnind "Gratis*' it was not the advances against wool which brought about the smash in Australia, but the huge advances to land boomers, aud certain reckless merchants and useless parasites. We had the-samo experience in New Zealand, and are having another dose at present. Let us hopo it is only a little one. I. am doing- what I can for bank reform, and. am pleased that many others aro working in that direction. Next Parliament will hum with banking questions. As to my experience : At the end of December I finished thirty-six years of business. I plead guilty to having read deeply works on political economy, finance, banking, and such matters. I blush when I own up to writing for financial and other journals hundreds of articles during tho last thirty years. I havo had the most varied and practical experience this country provided for twenty-five years in a bank. Can "Gratis" say as much, anyway? Come out of your hiding and let us see what stuff you are I made of. Who aro you? Perhaps you would hko to let me know. My address is P.O. Box 831.— 1 am, etc., J. B. HOBART. Wellington, 19th March, 1909.