SERIOUS OUTLOOK

Nelson Evening Mail, Volume LIV, 22 March 1921, Page 5

SERIOUS OUTLOOK

FINANCIAL STRINGENCY DRAIN ON THE BANKS .MEASURES TO ARREST POSSIBLE CRISES (By Telegraph. —Own Correspondent.) WELLINGTON, This Day. Something of a sensation was caused in the House by the introduction of the new clauses into the Mortgages Extension Amendment Bill. Xte House was in the midst of the second reading of the Finance Bill when the now clauses loathe other Bill came down by Governor-General s message. In the first place, th 0 Prime Minister said he did not propose to go on with clause 13 of the Finance Bill, which required am - firm receiving money on deposit at call to bo subject, to the same regulations by Order-in-Oouiicil as banks, and requiring them to have a. license to carry on hanking. There wars no hurry for that, and it. could stand over until next session. T his matter, which had come down by Governor's Message, was quite a different matter, and was only justified by the financial .stringency. The first amendment provided for the extension of duo dates of monies deposited with local bodies, companies, or firms other than banks. Such deposits were immediately extended aa to due dido until 31st May. A member: Does it affect the hanks.'

Mr. Massey: It in no way interferes with monies Hold by banks. Ho went on to say that it was well known that there wore huge sums of money deposited with firms and local bodies throughout the Dominion. It was difficult to say what the amount was. but it totalled many millions. Lately there: bad been a tendency on the part of depositors to withdraw those monies. Being asked for monies, the firms went to the banks and got the necessary amount, and the consequence of it all was that there was not enough money left for the banks to carry on the ordinary business of Hie country. That was one of the reasons for th 0 scarcity of cash at present. The Government wished to remedy that without doing any injustice to anyone. The effect of it was this: Suppose the money was at call, or was duo in a few days’ time, or next month, 31st May was now made tlie due date.

Continuing, Mr. Massey said the other part of the amendment was to provide that any public body, company, etc., holding money on deposit might, before 31st May, notify depositors that it .required a further extension of the date until 3Lst December, but in that ease there would be a. condition that the borrower would have to pay one- per cent, more than the rate originally agreed upon A member: That is not fair. The current rate ought to he paid. Mr. Massey pointed out that there remained beyond this the right of depositors to go to a. .fudge ol (hr .Supremo Court to plead a. ease of hard ship. If a company or other body holding money did nut. choose to give the necessary notice, there would he no extension beyond 51st May. It had lieen found, he repeated, that, unless the amendments were passed, the banks would have to find for (heir customers, companies, and public bodies so much money as to leave insufficient for ordinary trading purposes. He did not think there would ho veiy much hardship connected with the new provisions.

The Prime Minister was given j>ortni’ssion to make a further statement later. This was one of (he times, lie said, when wild statements should not be made nnleS'S opportunity was given to contradict them. The member for Invercargill bad said that this proposal would give fho banks more •money. It would not give the banks a shilling more. It would give them stability. Supposing, be asked, the capital of the banks were to become exhausted? Mr. Han a n : Is it as serious as that? Air. Massey: It is. They knew perfectly well, ho continued, that there wova lame firms who had taken large deposits in this way. This was what would happen. The money of these firms was exhausted. He did not say their capital; and they wore unable to meet the demands of depositors coming for their money. Firms so situatedwould close their doors, and who was going to lose? Th e small depositors in all probability, and storekeepers who dealt with them. Ho felt they were up against a very serious condition. Ho did not mean that these people wore not sound financially. They were, but their money was locked up. Their cash was not there, ana what' was wanted was time to find it. The Government know the grave responsibility resting on it by agreeing to the proposals. The House might be averting a very' serious crisis. They bad to deal with the mailer one way or the other that night. Several members spoke, but the amendments were ultimately adopted by both Houses.