Banking Legislation

Horowhenua Chronicle, 7 April 1936, Page 7

Banking Legislation

(By Telegrapn —press Association.)

WELLINGTON, Last Night. The House this afternoon resumed rthe second reading debate on the .Reserve Bank of New Zealand Amendment Bill, and urgency was accorded its passing. Mr Forbes criticised the Government for attempting to rush through a, measure of such far-reaching importance when the House had had so little time to consider it. The Bill ended the Reserve Bank as far as the public and those connected with the bank were concerned. The bank was ■brought into being following a report of Sir Otto Nieraeyer, The country would have to pay for its experience and he hoped it would not be too expensive an experiment. The Bill gave the Government power to do anything it thought might be advantageous. The Prime Minister had admitted that he was hot a banker, yet the Bill put the Government in the position of being super-bankers. Instead of having men at the head of the bank who would be able to look at things in an impartial way, they would have apolitical bank. Politics and banking did .not mix, for banking needed confidence, which melted away very quickly before political expediency. The public to-day had confidence in the bank, but that confidence was being shaken because the public realised the bank would bo run by men who would look to political expediency first. Any mistake that was made might be a very ■costly one and the Government could not point to any country where the Government had undertaken the theory that underlay the alteration to the New Zealand' bank. The House was asked to leave the beaten track and undertake something that was absolutely untried. The Government said the bank would' be administered on ■sound principles, but when pressure wa’s brought to bear on the Governhient it would show whether the experiment the Government was adopting would get out of hand or not. if the alteration produced the results the Minister of Finance and the Prime Minister expected there could be no objection, but his feeling was that New .Zealand was trying a great experiment, and he wondered where the •country was going to land. They might find themselves in a much worse position than at present. He thought the opinions and suggestions of the Opposition should carry some weigh; ■with the . Government. The Prime Minister said he 'had made a lifelong study of banking, but Mr Forbes said he would like to know the class of literature that mrtde up his study. It .appeared to him that the Prime Minister for years had studied literature from one angle. Ho thought the Prime Minister had studied it from the monetary viewpoint. He (Mr Forbes) would have preferred him to have .studied it from an economic aspect. The House had not much information as to what the Government intended to do ■except that the Government intended to borrow from the Reserve Bank, Would that not increase the National Debt? He asked the Minister to give the House some idea of its intentions ••and the amount it was prepared to borrow. Otherwise the sky appeared to be the limit, and there was no wonder that there was uneasiness in the inihds of many people. The Government should say what limit they intended to place upon themselves. The country would be much reassured if it had some knowledge on that point. Then there was uneasiness, too, about the changes in the people who were to control the machine. The Government said it came there with a mandate. Government members: Quite true.

Mr Forbes said they should look fit the figures the Government received—- . P. 92,000 votes out of a total of 832,000, or 45 per eent. of the electors. He thought the Government should look the figures, not only at its representation in the House. The numbers in the House assured the Government that any legislation it put before the .House would be put through. Businessmen who had to make forward ar xangements were hesitant to move until they knew what the Government intended to do in the way of taxation to meet the costs of the things they said they were going to do, Regarding the calibre of the men -who were to control affairs, Mi. ioibes said he, personally, after his knowledge of them in Opposition, said they were lacking in a sense of responsibility. 'Government members in their speeches had shown no tendency towards economy and showed a lack of prudence. He would have liked to feel that Government members had a greater sense of responsibility. He said there was no party in which outside organisations played a greater part than the Labour Party. Next week was the Labour Conference and it remained to bo seen what effect it would have on legislation. If the Minister of Finance were to have the sole say he (Mr. Forbes) kjvvould have greater confidence in the future, but he looked forward ifrith

OPPOSITION BROADSIDES GREETED WITH SILENCE. A One-Sided Debate.

some apprehension and wanted to see the position of the people made better instead of worse. They knew the experience of Germany and other countries that tried inflation. His training had always been that when he saw a thing painted in rosy colours to want to know more about it, and he wanted further details of the Government’s policy. He would not like to be in the shoes of the Prime Minister and the Finance Minister in taking the uncontrolled powers they were taking. He thought some safeguards should have been left until the country had more confidence in those who were to control affairs.

Mr. W. J. Broadfoot twitted Government members with remaining silent in face of Opposition criticism. He said he feared the way the Government was builoeking the Bill through showed it was drunk with power. He said when the original Bill was brought down it was 1.1 months before the country before it was passed. Why then the haste with the present measure? This haste looked as though the Government had no other legislation to place before the House while the country was scrutinising the- Bill. Hon. H. T. Armstrong: You wait and seel Mr. Broadfoot said the Bill was the first move towards the Socialism they had been preaching for many years past, but about which they had been silent in recent years, and the Bill was the first move to undertake all development of the country under State control. He said the Government’s methods resembled a dictatorship, and he feared that in the present Minister of Finance they had the Stalin of New Zealand. Powers had boon taken in the Bill that almost savoured of national emergency, and he felt the people' should have been given more time to consider the measure. It was the most important measure that had come before the House in the last 30 years and despite the accusations made against the last Government nothing had been rushed through the House by it as the present measure was being rushed through. Mr. J. Hargest said he intended to oppose the inquitous Bill. He said ho did not think the present Ministers were able to withstand political pressure better than past Ministers.' Ho opposed the Bill because it would deprive the people of what they had gained in a hundred years of toil. He was certain before Parliament ended in three or four years’ time the people, would want a return to freedom and liberty. The people would not stand increasing the number of restrictions, but wanted liberty which thev' would not get under the present Government.

Mr, A. C. A. Sexton said the Opposition could not claim that the way they ran the banking system had been to the credit of the country or the world because the country had had an experience for five years of the economic blizzard. The people had not had enough money in <heir hands to purchase the goods that were required. That should he remedied and the proper course for the Government now was to set up a body of competent statisticians to find out what goods New Zealand had available for consumption and what goods she was capable of producing with the present plant. , Mr. R. A. Wright said the banking system of the British Empire had stood up against the greatest economic crisis the world had ever known, although in his opinion it had made mistakes. New Zealand was embarking on one of the .greatest experiments in the British Empire without any experience of their own or of any other country. The Prime Minister therefore could readily seo there were a number of members who were somewhat timid about where the country was going to land and who were afraid moVe trouble might come later on. He thought the Government would be justified in calling in all the banking experts in New Zealand to ascertain their views and to see if they thought the scheme would work out as the Government imagined. However, that was a matter, for the Prime Minister and the Government. He hoped no extreme element would be allowed to persuade the Government to go in for a highly inflationary policy -which would mean a worse experience than they had just come through. Mr. S. G. Smith suggested to the Government they were in that Bill I forcing upon the House something which they themselves could not defend. The Bill was a gamble and might mean, the end of happy days. Disaster might follow the passing of the Bill. What was going to happen to the people who sent their products overseas —people who would have had no opportunity of placing their views before the Government. The. Bill was the beginning of what would be dangerous to the country, because of the machine that controlled it. The clause - that

gave the Minister power to raise aa overdraft to the extent of the estimated revenue might be disastrous. Ho criticised the rank and file of the Government party for not speaking in support of the Bill. Control of the bank was to be taken from those versed in banking and placed in the hands of the Minister of Finance. He said the Minister would not be able to resist the pressure that would be brought to bear on him when the Bill was passed

When the House resumed at 7.30 Air Smith, continuing, said there were 85,000 farmers in the Dominion, 60,000 of them dairy farmers, and surely they had a right to be heard. He appealed to Labour members not to be dumb dogs. With a Bill of such vital importance to farmers they should have time to study it clause by clause and line by line.

Mr H. Atmore, referring to the fact that Air Smith said that 60,000 farmers were dairy farmers, said that last session the Finance Alinister said 50 per cent, of the dairy farmers were insolvent, and that was after four years of Air Smith’s Government. The light that night was on behalf of 95 per jmod unnu oqj, ‘ojdood sq; jo - ;u33 fought at the election was monetary reform. Experts, he said, should not govern the country. Experts should advise the people’s representatives. If he had his way he would clear our all the expert advisers of the last Government. There never had been a monetary crisis, but that the bankers asked for the national credit to help them out. The Bill would not do what the Government claimed it would do, but the Government would be failing in its duty if it did not do something to assist those in need and treat them as human beings. Air W. P. Endcan said in his opinion the Prime Alinister was going to lead Hew Zealand into bankruptcy.

Government members: Where is it now?

“New ’Zealand now is in a healthy economic position, 55 said Mr Endean. Other countries, such as Sweden, when in trouble had refused to depart from the regular banking principles and had come out of their difficulties. New Zealand could not separate herself economically from the rest of the world, and New Zealand would have to consider what the effect would be on he: produce in England if she followed the principles laid down in the Bill. Mr Endean criticised the Government for making New Zealand a laboratory for social trials and said it was a pity they had lost their heads. Mr D. Me Don gall said the Reserve Bank should never have been brought ipto operation at all. The interest the Government had in the Bank of New Zealand should have been sufficient to convert it into a State Bank. He had every confidence that the Alinister of Finance would get the money require;! and that the Government would put all its promises into practice. Mr John Cobbe congratulated the Prime Minister on the obedience and docility of his followers, in not speaking on a matter of such importance. Fie thought the Government had made a great blunder in introducing such a Bill to the country and House, He protested against the way the measure was being forced through the House. He said it should have been referred to a committee composed of all the interests affected, and he had no doubt that such a committee would have reported against quite a number of the provisions of the Bill. The measure must increase the cost of living. If the banking policy becomes nationalised there was no doubt it would become a plank in every political party’s platform and would become a polical plaything. He likened New Zealand to-day to Russia when Lenin took control of the finance and when there was a great inflation of the currency. Production in Russia prae tically ceased and Russia was in a parlous state despite the amount of money available. Russia had eventually to reopen the banks, establish a savings bank, and obtain a loan from America. Air Cobbe went on to refer to the unwillingness of Government members to speak, when the Speaker intimated that he would rule further references to the silence of member'; out of order on the ground of tedious repetition.

Mr 11. S. S. Kyle said the people were becoming concerned and were losing confidence. This was large!-, due to the statements made by Government members themselves. Reserve Bank shares went up as high, bethought, as £G las, which showed tinprosperity of the country, but recent ly the price fell to £5 I.ls, and that was evidence of loss of confidence. He quoted from a Queensland newspape which said the Douglas Credit move, ment did not contest the election because it had come to a working arrangement with the Labour party. Government cries of “No! ” Mr Kyle said he thought the truth was only now coming out. He said it did not matter much' that the legislation was put on the Statute Book. II was a question of administration, and he asked if the Government had the co-operation of the heads of the Re serve Bank in the principles of the Bill. The Bill was the first step in putting into operation the whole Labour plan of national socialisation. Mr J. W. Poison said he regarded State control of a central bank as a sound principle, and he had always favoured the elimination of shareholder capital in the Reserve Bank am! he would support that; but the speechf of the Minister of Finance made hunt very uneasy because it shorved they! were to have political control of the! bank. He regretted that the Government had not made it clear whethe

they wore to have a central bank or a Government bank. -Mr. Poison said it was possible under the Bill for a corrupt Government to hand out to its own party emoluments and funds from the bank for its own pa rty. Hon. H. T. Armstrong: A corrupt Government could do that without this Bill. -Mr. Poison: Ho Government could do it under the old Bill.

Air. Poison urged fhe country to be- , ware of the Bill which placed the whole of their exertions whether in primary or secondary industries entirely under the control of the Government. The Bill undoubtedly meant inflation which must be dangerous and probably disastrous to the country. Finance Minister’s Reply. Hon, Walter Hash, in reply, said the Savings Bank would continue to pay scale rates on deposits despite the malicious propaganda that was spread about at election time. Anyone exporting products would get the full price for his goods in Hew Zealand. 1 Air. Dickie: But he can’t get the goods. Air Nash: No, ho will receive the price in New Zealand. Regarding the statements about corrupt Government's, Air Nash said they were, not legislating for corruption but for Governments of integrity. Whether that legislation was on the Statute Book or not, a Government could be corrupt if it wanted to. Mr Hash contended there was no difference between State control and political control, as the party in power at the time was in control and it was a political party. Replying to a question oy Air Coates, Air Hash said if the Government having decided on certain action approached the Governor of the Reserve Bank and he gave legitimate reasons why it could not be done or why it would be harmful to carry it out, then it would not be done. The Government’s proposals would bo laid before the House before anything was done. Air Hash said the bank would not lie subject to political control but would be subject to Cabinet control and Cabinet was responsible to Parliament, which could 'turn it out at any time. The Government did not propose to do anything with the London exchange held by the trading banks. There was nothing underhand in the Bill. Everything was open and he was prepared to answer every question any member liked to ask. There was nothing to hide. The Governor of the Bank was not wholly in favour of the principles of the Bill and had made a general protest. New Zealand stocks in London had steadily risen and there was not the same feeling in London that members were trying to create in Hew Zealand. It was misleading and vicious and the Opposition tried to instil fear and lack ol confidence in the Government in the people of New Zealand.

The first division of the session was taken on the second reading of this Bill and the motion was carried by 51 to 10. The division list was: — Ayes (51). —Anderton, Armstrong, Atmore, Barclay, Barnes, Barrel!, C. H. Burnett, Campbell, Carr, Chapman, Christie, Coulter, Cullen, Denham, Eraser, Herring, Hodgens, Howard, Hultquist, Hunter, Jones, Jordan, Langstone, Lee, Lowry. Lyon, McCombs, McKcen, Martin, Mason, Moncur, Mieachen, Nash, Neilson, Nordmeyer,.O’Brien, Parry, Petrie, Ratana, Richards, Roberts, Robertson, Rushworth, Savage, Semple, Sexton, Sullivan, Thorn, Tirikatene, Webb, Wilson. Noes (Id). —Broadfoot, T. D. Burnett, Coates, Cobbe, Dickie, Endean, Forbes, Hamilton, Hargest, Holland, Kyle, Poison, Ransom, Roy, Smith, Wright. The House wont into committee to consider the Bill and the short title was still under discussion at one o’clock. .