THE BANK.

New Zealand Gazette and Wellington Spectator, Volume V, Issue 341, 24 April 1844, Page 2

THE BANK.

Among the Ordinances to be submitted to the Legislative Council at its next meeting, will probably be one to enable the Branch of the Union Bank established here, to sue and to be sued in the name of its manager. The result of such an Ordinance, should it be passed, will affect so deeply the welfare of this community, that we feel it to be our duty to offer some observations upon the subject. It might be enough to state that the Bank in seeking for a legislative interposition in its behalf, is bound to rest its claim on some ground of public utility. It is asking for a privilege possessed by no other trading partnership in the place, and it must in order to entitle itself to this privilege, prove the performance on its part of some function highlj beneficial to the public", and incapable of complete or satisfactory execution without the privilege in question. And besides this it is bound to submit to whatever limitations and restrictions may be imposed, and to obey whatever regulations with regard to conducting its business, may be prescribed by the Legislature, as the condition of the grant of any such power as it seeks. We believe that this power is needless and may be mischievous ; but whether this opinion be well or ill founded, there can be no doubt of the necessity of some most stringent regulation* in order to qualify and guard its exercise. The Union Bank was established in this place with a full knowledge of the circumstances in which it would be placed. — Every risk, and the risks were numerous, was foreseen and provided for. Its operations were arranged and have been carried out upon principles and in a mode only to be justified by the peculiar circumstances in which it was to be placed. — Because the colony was in an uncertain position, uncertain as regarded the amount of busines to be conducted, the power of maintaining a paper currency — the value of securities for advances — and the amount and permanence of any export trade — the Directors of the Bank issued notes which were not redeemable in specie, and demanded a rate of interest and an amount of security proportioned to the imagined risk. And in every transaction into -which the Manager oi« the Bank has entered since its establishment the system originally laid down by the Directors' has been inflexibly pursued. IJe has persisted in requiring tip to the present moment a rate of interest forty per cent.

higher than has been for a considerable period demanded by the other branches of the same Bank established in the neighbouring colon i eSj — aia d he has uniformly demanded and received an amount of security for his advances which would have been in the highest degree unreasonable under any other circumstances. By means of these excessive securities and of this high rate of interest the affairs of the Bank have been so conducted as that its realized profits up to the preseßt moment exceed the amount of outstanding claims, and that if the whole of what now. remains due to the establishment were lost it would he a gainer by its transactions in this place. And when an institution of this nature enters into a speculation with this full knowledge of the possible risks, shaping its whole proceedings so as to provide for all contingencies, and does in fact realize a considerable profit by the transaction, not merely has it no title to additional security, but. we are entitled to

infer that any application a£ the present moment for powers which it has never hitherto required must he made for some other purpose than that of enabling its Manager to continue his transactions. It is far more probably the first step towards a settlement of its affairs in this place as a preliminary to its withdrawal from the colony.

Not merely however has the privilege now sought by the Bank been proved to be needless in order to the profitable conduct of its business, and unjust, as its absence has always formed an element in those calculations of the Directors upon which this branch was established, but it would confer a power that might be exeouted at once to the utter ruin of nearly every individual in the community. In every country the selling price of property bears a certain definite relation to the amount of the circulating medium. To such of our* readers as are familiar with the subject any proof of this proposition is needless, and to others it may be made intelligible by the depretiation of almost every species of property that has been produced within the last year, through the contraction of the issues of the Bank. If then the Bank should use the power for which it is now applying, and we may be assured that there is no intention to allow it to rust for Want of exercise, it may by a perseverance in its present course, so diminish the amount of its notes, which form our only circulating medium, as to make the price of all property little more than nominal. By restricting its issues it diminishes the purchasing power, and this might easily be carried to such an extent as that whatever property was offered for sale, should realize only an inconsiderable portion not meiely of its original price, but of that which all parties would feel was its actual value. Supposing that as property was sold under executions at the suit of the Bank the present Manager should retain in his own hands, as we may be assured he would, the whole of the price realized, it is obvious that after a short time there would be absolutely no money left wherewith to make any further purchases, and property might be bought in by the Bank for less than a hundreth part of its original price. But though property were thus recklessly sacrificed — the unfortunate proprietor would not the less be liable to the Bank for the balance, and a state of things mighc be produced by so much more fearful than any which other colonies have experienced, that here the amount of the currency depends upon this one institution alone. There is no person in the place who owes any amount however small, who might not be driven through an Insolvent Court; although bis solvency under any sound system would be beyond a question. Assuredly our Legislature will pause before they commit a power so irresistible to the hands of any body of men, even though their claims to confidence were far greater than any which can be urged for the Union Bank. ¥ - And it must be further borne in mind, if there be any probability of loss to the Bank, which we do not believe, though it will no doubt be strenuously urged upon the Legislative Council, that thjs has resulted entirely from its own proceedings. Up to a certain period the Manager encouraged speculation of almost any kind by his ready advances. By the facilities which he afforded and the large issues which he made, parties were induced, and in many cases directly encouraged to enter upon operations which would have been imprudent, except upon the nnderstanding that the accommodation granted to them would not be withdrawn, and would if needful be extended. Suddenly, without any apparent cause, certainly without any cause arising out of the circumstances of the colony, a totally different system was adopted. Every engine at the disposal of the Bank was put in motion to contract its issues, and diminish the amount of its advances. We need not trouble ourselves to detail the results of this line of conduct ; our readers hav f e had abundant opportunities of witnessing, and there are few who have not experienced its effects. But there is one result which we must distinctly indicate, because it has a direct bearing upon the question which we are now discussing. Every individual who was indebted to the Bank for advances intended to be employed in permanent improvements found his mean of payment dried up, and thus without any fault of his own, without extravagance, and even without imprudence, excepting so far as as it was imprudent to trust the good faith of the Bank, he was left subject to a burthen from which under the most favourable circumstances he could only relieve himself by years of painful frugality. These persons, moreover, we believe, without a single exception, have given to the Bank securities very far exceeding in value the amount of any sum which may have been advanced to them, and it wonld be cruel in the extreme, and practically most unjust to expose them without protection to whatever measures a mistaken policy, or a feeling of irritation, or the instructions of parties indifferent or

hostile to the welfare of this colony might lead the Manager of the Bank to adopt. If in any case there may have been imprudence or wastefulness, the Bank is at least equally responsible for this result with those to whom it has made advances, and we have a right, which we are assured the Legislature will not disregard, to insist that the whole consequences of any error should not be thrown exclusively upon one party ; and that party not only the weakest and least wealthy, but also the one by whom any loss would be most severely felt.

From these considerations it results that the power which the Bank now seeks to obtain is unnecessary, and further that if for the asumed convenience of the Bank it should be eventually granted, it ought to be accompanied with conditions and restrictions limiting its exercise, and guarding against its abuse. These should be, Ist. That all notes should be payable in specie on demand. 2nd. That the rate of interest should be limited to the same rate that they may obtain for the time being in the neighbouring colonies. 3rd. That in no case in which the Bank has takea collateral securities should it be enabled to sue upon its bills, and 4th. That at least no fixed property should be sold until after the expiration of such a period as would afford to the debtor a reasonable prospect of redeeming it. For the two last provisions the legislation of most of our older colonies furnishes abundant precedents, and 'we will venture to say that there never was a case in which they were more imperatively required than in our own.

We are anxious to guard against a misapprehension which it is probable may exist in the mind of Captain Fitzroy upon this subject; that in conferring privileges upon the Bank, he is serving this community. We have attempted, and we believe successfully, to show that any additional privilege will be giving a power that may be used to our destruction, and we feel assured that so soon as his Excellency is made aware of this fact, he will insist that before any Ordinance for the purpose is passed beyond its first stage, it shall be sent to this settlement in order that we may have an opportunity of expressing our opinions upon the subject. Under due regulations the Bank may be of service to us, but without such restrictions as we have pointed out, this institution, which has already drained the colony of capital to an extent far beyond what our readers would imagine, and which, lia^ done us no other service than that of supplying a paper currency, may be turned to the utter destruction of the settlement.