THE TRADING BANKS

Evening Post, Volume CXXXVI, Issue 3, 3 July 1943, Page 4

THE TRADING BANKS

Sir,—The Minister of Transport (Mr. O'Brien) recently expressed the view that the Government would have to take over the private banks at some time and use the people's credit for the people. . It would probably be interesting and illuminating to see the position as it actually exists. The total deposits, or the public with the private trading banks at May 31. 1943, were £110,000,----000, but an even greater sum was employed in New Zealand by the-banks under the following headings:— Advances to customers 42,000,000 Investments in N.Z. Government Inscribed Stock .. 36,000,000 Fundsjodged with Reserve Notes of Reserve Bank held 4,500,000 Coin on hand • • • ■ 500,000 £116,000.000 There are therefore no idle funds, The item "Investments in New Zealand Government Inscribed Stock, £36.000,000," may be considered a loan to the Government but, as shown below, the Government has also borrowed heavily from the Reserve Bank, which institution obtained the wherewithal from the people directly (per medium of the note issue) or indirectly (per medium of the trading banks). In addition to the funds lodged by the trading banks (£33,000,000 plus £4 500,000 for notes), the Reserve Bank was provided With £27,000,000 through bank-notes in actual circulation, making a total of approximately £64,500,000 provided by the people directly or indirectly which enabled the Reserve Bank in its turn to lend £43,000,000 to the Government (offset by departmental balances of £16,000,----000). It should be apparent to all that the Government has already used "the people's credit" to a very substantial extent but it is evident that the position is not known to, or appreciated by, all members of Parliament. A careful study of these figures, and the trend in them, should enable Mr. O'Brien to realise that there is no necessity for the Government to take over the private banks for the reasons he gave.—l am, etc., BANKER.