The Financial Crisis.

Hawera & Normanby Star, Volume XXVII, Issue 2761, 2 July 1894, Page 2

The Financial Crisis.

FURTHER PARTICULARS OP PRO CEEDINGS IN THE HOUSE.

(Abridged from New Zealand Times.) N Mr Ward (Colonial Treasurer) said that in rising to move the second reading of tbe Bank of New Zealand Share Guarantee Bill he need hardly say that it was a matter of great urgency. Hon. members on both sided of the House would realise tbat a grave responsibility had beep placed upon tbe Government in this matter, a responsibility which he himself felt keenly. It was a responsibility, be would inform the House, that could Dot be taken were it not that the nedessities oi the present financial situation demanded. It could not be questioned, when hon. members were made fally aware of the exact position of affairß that the step tbe Government were now taking | bad been rendered necessary in the general interests of the country, because it was necessary that in New Zealand at the present time we should have firm and unmistakably sound financial stability, and thiß applied more particularly to the Bank which now and for so many years conducted the financial business ot tbe colony. Last year untoward influences of unprecedented character had been at work in this colony which had created a lower standard of value of our exports than had ever before existed, and in addition to this there bad been a bad season for colonial prodncts — two unfortunate elements which had worked greatly against tbe prosperity of the country. These adverse oiroumstanoes, which bad told so severely on the country, had been directly reflected, he was sorry to say, on every important financial institution in this colony. It had, therefore, told severely upon tbe great financial institution .with which tbe Government account of tbe colony was kept, and which, as it was well-known, had for many years done the largest banking business in the colony. It was essential in public interest effective action must be taken without delay. He said " public interest " because the Government recognised, as every hon. member must recognise, that no person or company in this oolony, oo matter how important the business they conducted, was entitled to assistance at the expense of the taxpayers, and he gave assurEnce that it was nut the intention- of the Government in introducing this bill to place the taxpayers of the oolony in such a position. He asked hon., members to dismiss from their minds the past career, management, and connections of the Bank of New Zealand, and to take in the full importance of the present situation. In telling the House that the iature •of this institution was in their hands, he said that the House bad also in its hands to a very large extent tbe BuooeßS or failure for some years to come of the colony's industrial enterprises. The colony's ramifications and financial connections were inseparably bound vp — for good or cvil — with that institution. They mast not forget that this bank was a publio institution, and therefore its position was at all times a matter of publio concern ; the question was, Should the Government allow this unsatisfactory state of things to continne until it became absolutely dangerous ?Jj.They had to go to tbe right or to the left. Government had decided to go to the right and take the House into their confidence, and tbe House must now be responsible for the issue. In order to show them tbe full gravity of the position he read a confidential letter from a gentleman who was tbe confidential representative of the bank here at the present time, and who bad been requested by the directors to step in and assißt them. The letter stated, among other things,. that by what was proposed he was absolutely convinced that the State would not lose one penny, and that by thiß measure the banking affairs of the ' colony would be plaoed on a - graatfy^w^wovfdte&footmg for tbe future. He added that if the Government finallyi determined to go on with the measure, it should be pat through that day. The Colonial Treasurer went on to say that, in view of this important communication, the Government bad the responsibility thrown upon them of acting in the general interests of the oolony, or remaining inert. The course proposed was a bold and effective one, and the one which was open to the Government unless they deoided to remain inactive. He predicted that it would be a thoroughly adequate course, whioh would prevent any recurrence of the present situation. The colony was asked to guarantee preference capital to tbe extent of two millions. This appeared a startlingly large sum, but he would remind them that they were dealing with tbe finances of an institution of great magnitude, the assets of which amounted to a sum of eleven millions. Government wore at first disposod to reduoe tbe amount in th« bill to one. million, but the representative of the bank was perfectly frank' and; open, and said that this would be inadequate. His arguments were so conclusive that the Government felt that no other course was open to them than to guarantee the two million preferenoe shares. One million to be at the Bank's proposal for tbe pui poses of its ordinary business, the other million to be held in reserve invested in such manner as the Colonial Treasurer shall approve. The House bad a right to know bow the measure proposed to guard against a recutrenoe of the present state of things in the future. The condition of the guarantee was that it should be released at the end of 10 years. The Government would during that time have full supervision over the transactions of the Bank through tbe auditor who would be appointed and would devote his whole time exclusively to tbe Bank, his salary being paid by tbe directors of ibe Bank. Captain Russell said this was a question upon which it would be reoognised that there should be no attempt to gain party advantages, but there was one short paragraph in tbe Governor's Speeoh he would refer to. It was a very great pity that Ministers should have put words into His Excellency's mouth congratulating the colony when they must have been at that moment in correspondence regarding this subject. The Premier— The Government were not aware at that time. Captain Russell admitted that if the Government were nob aware they were not of course responsible, hut he held that they ought to have had some idea of. what was, the real position of tbe polony' before . putting such words as these in His Excellency's moutb. It was a very great misfortune that tbe Opposition in Parliament bad come back so weak. Standing up as be did first on thia occasion, be might be supposed to represent the views of the ( 'pposition; but in this instance his utterances mast be taken as bis own individual opinions;, It had heeu to him extremely difficult to make np bis mind upon tbe Bill now before the House. He" would have liked to deliberate well, and to know that his feet were firmly planted on a solid foundation before he took any step either one way or the other. On this occasion it was impossible to say that any hon. member except those who sat on the Government benches bad any idea as to the necessity for the bill before themv Under these circumstances it wa3, of course, difficult to arrive at a conclusion. He could not, however, withhold consent; to this bill. (Hear, hear.) Tbe Treasurer had told them that it was absolutely essential to the prosperity of the colony that tbe bill should be passed. Every; person must • know that the affairs of the Bank of New Zealand ramified into every portion of the colony and every section of .sooiety, and. that a fatal blow to the Bank of New Zealand must bring appalling ! disaster to every section of the community, whether tbe rich mercantile bouse in.' the i city or tbe poor workman laboring for his I wage in the remote country district.

Under these circumstanoes the position was this: Would one render tbe oolony liable to a disaster that would be appal* ling, or would one make it responsible for the sum of two millions ? Whether the Bank was solvent or insolvent, there was very '.great danger that' "heavy taxation would come upon the colony, owing to the bill. While he felt it his duty to support the bill, beVwaß distinctly hostile to the principle of a State Bank. Mr G. Hutchison thought that the Premier was undertaking that night a' fearful responsibility. Tbia,. was a loan bill of two millioDß, and the loan would be expended not by Parliament, but by an institution over which the safeguards must be somewhat neoe&sarily restricted? The Treasurer bad no doubt done bis best to convince himself and his colleagues of the absolute necessity of this measure ; but : thishad come upon the Government qniie recently, and the information they had obtained might net therefore have been very extensive. He' did * not think bon. members were wise, or in iaot [doing their duty, in accepting the responsibility ot the Government if any other. course was open whioh would admit, of that' House being informed somewhat mjore particularly of tbe circumstances' under which this fearful emergenoy had arisen; He suggested that; the bill should ; be referred to a select committee, which would sit immediately and take evi< denoe as to the urgency .and necessity for the bill. If that course were 'taken, it would, to some extent, divide the responsibility with ' the "Government. Mr Hutohison went on , to BUgg'est that from the million to be; invested .by the Government money should be -lent to small areas of land or to holders of leases in perpetuity. He strongly objeoted to the provision of section 6, rendering it incumbent upon the directors as a condition of the guarantee to oall up onethird of tbe sum of .£lO per share for whioh tbe shareholders are liable under Section 21 of the New Zealand Bank Aot. It would immediately throw an unexpected liability upon many hundreds of people in this colony, and. would, .mean immediate ruin to some and indirect ruin to others. He suggested that that clause should be made permissible, 3 . not' : per* emptory. Whatever their ' predilections for or against this Bank they 'Md to accept tbe position imposed up6n them by tbis bill, but he urged that they should not accept it until they had exhausted all reasonable means. They ought to sit all night if necessary and have tbis matter disoussed by a committee. Sir Robert Stout thought tbe House recognised that tbis was a bill of urgency, and that therefore it was entirely inadvisable to discuss it at length. - Thie bill was to be passed — in fact, it bad to be passed that evening or not aS all. Therefore he thought it was almost criminal tc spend much time in discussing it. This was not the occasion to go into the question of a State bank or a State currency. He regretted that steps had not been taken long ago to have some kind of a State bank ; was the House prepared to take the alternative of nol passing tbis measure? For his part he was not. He opposed the suggestion tc seDt the bill to a committee. The Com mittee could get no farther information and if they were to oall 20 tommitUta they could get no further evidence. As tc tbe suggestion tha^ advances should b« made on land, be hoped that that would never be agreed to by the' bank or.bj Parliament. Tbe curse of New Zealand banks had been that they bad lent mooej on land and bad not kept their assetf fluid. (Hear, hear.) He urged the 1 House to pass the bill at once. ' , , Mr Hogg supported the bijl* Tbe Premier complimented the Opposl tion for the manner in which, they wen assisting in the passing of thi|lbij£ He did not agree with the suggestip|i;^Mia6^hi measure should go to a committee;;/^ gentleman of responsible position ' h'ac come down to Wellington and had' plaoec information before the^ove^mSSnTi/^tS that information had been supported "^ information from London. Members bac seen what had been telegraphed a fe? days before irom London to the publii press; If this bill were to be passed, i should be passed at onoe. Last year whei the Bank Notes Issue Bill was before thi House no committee was appointed. Th< measure passe 3, the Government took thi responsibility, and, as was predicted* a tbe time, not one pound note had beei required to be guaranteed since. Thi very fact of what the Pr rliament of New Zealand did (hen, averted crisis. As te the statement in His Excellency's Speech com plained of by tho Leader of the Opposition, when that, statement wai written there was every reason tor con gratulation. Tbe oall of the Loan and Mercantile Company had been fully pafd and the oloud whioh had been banging over the colony had passed away. If the present bill was passed, ano.her done would be dispelled. ; , /; Mr Dutbie fully recognised tbe gravitj of the situation, and that the Governmenl should be assisted to pass cbis bid., , Mr Bell cast upon the Government the entire responsibility in this matte ', and, accepting all tbe ciroumstanoes as stated to the House by the Government, he must vote for the measure. If , the 8 circumstances were such as tbe Govern. 8 ment had described, they were deserving r of commendavon, and not b'arae, foi • bringing members there that nighl B to pass those bills. There was oolj 1 one other' matter. . ! Three years age 3 he stood at the bar of the House, !? defending this Bank against a vile | Blander. He was honored then with the 1 intimate personal confidence of two meo 1 who then sat on the Government benches, | and who were afterwards hounded to * their death. Tbe events of tr's night 7 were their justification, and he hoped 3 that those who compared what was being done this night with tbe words they then j used would have the manliness to admit 1 they were wrong. 1 The Colonial Treasurer regretted ex. 3 ceedingly the concluding remarks of Mr 1 Bell. That was neither the time nor ' tbe place to resurrect bygones. H<? i replied on tbe main features of the bill. ' Clause 5 of tbe bill was amended so ' that tbe power of the directors to levy " £500.000 of reserve capital was made permissive, to be exercised at any time ! that tbe Colonial Treasurer may require.