POLITICS AND BANKING

Evening Post, Volume CXV, Issue 39, 16 February 1933, Page 10

POLITICS AND BANKING

(To the_ Editor.)

Sir, —I was astounded on reading your sub-leader on "Politics and Banking" referring to the Reserve Bank Bill. You state: "The delay is regrettable." I venture to predict that action in the matter as now presented to Parliament would be more regrettable. Is it possible that you have not carefully read the Bill, and that your leader was written on the strength of the Minister of Finance's introductory remarks? : The Bill has every appearance to me; and many others who have read it, that the principles embodied'in it were dictated by the'international financiers who are at present strangling the world. For instance," clause 10 states:: "The Minister' o£ Finance shall ■'••..;.. . pay into the General Reserve Fund;of the bank the sum of one million pounds; which shall not be recoverable except in the event of the winding up of the bank." Clause 6 states that "the original capital of the Reserve Bank shall be £500,000." Yet the Minister "shall pay 'into; the reserve fund of the bank" twice the amount of the original capital. It appears to be a strange arrangement, especially"; when clause 11 is considered, which vstates: "Any payments required to be made to the Reserve Bank by. the Minister of Finance^ under any/ofvthe foregoing pro-visibns'-'r.'of this Act . -;-'.-;. shall be regarded as investments without interest/ It would be interesting to learn whether, any other countryr-being a victim of these international financiers—has offered such generous terms. It may be stated that the shares would be taken up in New Zealand by "New Zealanders. The first, issue might; but what is to prevent 51 per cent, or more of these shares being, collected by. the international financiers, even at 1000 per cent, premium? Imagine the condition of God's Own Country in the grip—financially—of these financiers, and clause 6 (5) states that "the Minister of Finance shall not be entitled to vote at any meeting of the shareholders of the bank by virtue of his being the holder of any shares pursuant to this section." There is something to regret if this Bill becomes law. Clause 11 provides also how the Minister is to raise the funds to bolster up this privately-owned bank. It states: "The Minister is hereby empowered to create and issue.Government,securities for the purposes contemplated by this section." Inflation!? Yes, but what of the recently added_ls per cent, on the, exchange? There is nothing new is the word. Governments have practised it for long enough under different cloaks whenever they found themselves hard-up. But lately it has assumed a "bogy" significance. We have seen that clause. 11 empowers the Minister to create " and issue Government securities, without limit, for the purpose of bolstering up a privately-owned bank. Is there any just cause or impediment why he should not create arid, issue; securities for the; coin-; pletion. of the, Tawa Flat deviation and other public! works and revivify;;millions of "dead capital" into interest-paying concerns? A'reply to the lastquiestion would give infinite satisfaction to many'of-your readers.—l am, etc.,- .....'

QUO FATA VOCANT.

["Quo Fata Vocant" is much astray in suggesting that we have not carefully read the Bill and that our leader was written on the strength of the Minister's introductory remarks. He is evidently unaware of the fact that the Minister of Finance made no "introductory remarks" when the Bill was read- a first time, and the second reading has not yet been taken. Further, if he had followed the subject closely he would know that we dealt editorially with the Bill on December 10, arid again on December 14, on the latter occasion comparing the detailed contents of the Bill with the outline submitted by Sir Otto Niemeyer_ Obviously this called for careful reading. The correspondent asks what is to prevent the shares being collected by international financiers. There appear to be .ample safeguards against this. The . governor, deputy-governor, and directors after the first appointments are to be elected by shareholders, and it is provided by clause 47, sub-clause (2), that no person other than British subjects "ordinarily resident in New Zealand" shall be entitled to * vote at shareholders'/ meetings.^ .Further, by clause 11, sub-clause (2),;: of "the Rules of the Bank; (First Schedule)_ the bank is entitled, "without assigning; any reason, to decline to accept any corporation or person as the transferee of any share." Other safeguards are in the limitation of. voting; and proxy- rights and furnishing to the; Treasury' an annual, list of shareholders- _withnames and addresses' and [shares held." If NewTZealahd shareholders land directors";with .such safeguards cannot keep; the control; in' New, Zealand 'they would prove themselves unfitted to manage a reserve.bank.' The-Minister of Finance is denied.voting rights obviously in order that the ibank may not be underV political control; ? The payment to the General {Reserve Fund would be a practical; guarantee,' and it' would ultimately return to the Consolidated Fund, which "would-be entitled to : profits''after-; payineht of : a limited dividend 'arid stipulated allocations to reserves. We'i have 7 ourselves questioned the provision that the Government's contribution should be in securities instead of cash (as provided in Sir Otto Niemeyer's proposals).. The Government takes 'power from time to time to create and issue securities for the purpose of carrying on public works, and such issues are governed.by the New Zealand Loans Act, 1908, under which the securities to be delivered to the Reserve Bank, (which are not "without limit", but are restricted to the purposes of the Bill)-would be issued. Such works loan_ issues are, of course, governed by consideration of the value of the works proposed to be undertaken, the capacity of the market, to absorb the loan, and the wisdom of adding to the Public 'Debt.—Ed.] . . '