BANKS AND BANKRUPTCY.

New Zealand Herald, Volume XII, Issue XII, 3 July 1875, Page 3

BANKS AND BANKRUPTCY.

The Waikato Times in referring to the case of George Thome, junr., has also much to say upon Banks and Banking :—"The bankrupt, George Thome, junr., commenced business three yeare ago, with a capital of only A'soo, and a credit bank balance of £100'J upon the security of his father. With this he contrived within two or three years to incur nomiual liabilities amounting to between .ESO.OOO and £90,000, principally to the Bank of New South Wales, which had advanced him money from time to time for the purposes of carrying on his business. During the period the bankrupt traded the original capital was supplemented by a sum of t'i,ooo. His books shewed that his expenses were moderate even to penuriousness. Nothing was spent on himself, nothing was spent on improper objects, aua the lawyers therefore wanted to know what became of the £2,000 realized profits. It is clear that their ignorance on this point is mi re affectation. Banks are not in the habit of advancing such enormous sums to customers for nothing. They usually charge somethiug for interest, and we shall therefore not be far out in presuming that the greater portion of the £2,000 went into the coffers of the Bank of South Wales. A business started on such small capital and inflated to such enormous dimensions as that of George Thome, junr., could hardly bo sound. Heavy advances from a bank mean heavy interest, with serious deductions from profits. Air. Thome's business was a mere bladder, and it burst at the first small puncture. The fatal hole was the dishonour of certain drafts on a firm named McLellan at San Francisco, to whom wool had been consigned, the bank holding the bills of lading, and subsequently repacking and reshipping the consignment to New York at a considerable loss. It appears that from first to last Mr. Thorne was entirely and helplessly in the hands of the bank, but when his affairs became serious and he was pressed by the local manager, and afterwards by the inspector, who came over from Sydney, to make an assignment, or file his schedule, he delayed doing fso until he had preferentially paid certain creditors. It was for this that he was opposed by the bank. Mr. MacCormick, who opposed the bankrupt' ) application for his certificate, charged him with fraudulently making away with his property, and a variety of other things punishable under the Act; but only the accusation of paying certain creditors preferentially with the apparent object of diminishing the amount recoverable by the bank was substantiated, and it was for this that Mr. J ustico Gillies suspended the bankrupt's discharge for a period of twelve months. The history of this case reveals some remarkable facts. It is abundantly clear to our mind that George Thome, i junr., was practically nothing more than the agent of the Bank of New South Wales, though nominally carrying on business in the name and style of John RobcrMn and Co. His Honor, in summing up, said :—' It may be true, that he thought liimself, and others may think him, morally entitled to protect those who dealt with him on the faith of his large business and inflated credit supplied by the bank, and morally right in allowing his losses to fall on the shoulders of those who had enabled him to hold himself forth to the world as a man of means, and who appear to have been all but partners with him—they finding the capital, he finding the work, they retaining a hold over the goods and receiving the banking profit, he receiving the commercial profits, but liable for the commercial losses. All this.may be tiue, but it is not my duty to decide the question of the bona fides of the bankrupt, or of the abstract morality of the transactions. I feel bound, however, to express my reprehension of the enormous facilities given to a man known to have almost no capital, and of the practice o 1 honoring bills known to be drawn l>y himself upon himself, tranactions which cannot fail to do injury to legitimate trade.' To our mind it appears that the bank has no ground of reasonable complaint against the bankrupt for the preferential payment of certain creditors. On the sth of November the manager urged him to give a bill of sale to the Bank over his entire stock. Had he done so, the Bank would have monopolised the whole of the assets, and left the other creditors out in the colli. The Bank of New South Wales oppose Mr. George Thorne, junr., for doing the very thing on a small scale which they endeavoured to induce him to do wholesale. The history of this remarkable ease, however, clearly demonstrates the danger of dealing with foreign banks. It is clear that had Mr. Thome's business succeeded, the bulk of the profits would have gone into the maws of the Hank of New South Wales, and so much of the legitimate wealth of the colony would have been withdrawn. As it is the greater part of the L' 2,000, and the original capital of £1,500 have swollen the coffers of that institution. The wholo practice of supporting these foreign banks is unsound, unpatriotic, and pernicious to the best interests of the colony. For, be it remembered, they simply trade on the capital which is deposited in their hands by customers in New Zealand, while the profits-go to swell the dividends of shareholders in Sydney and and elsewhere out of this colony ; and there is not a shadow of an excuse for this short sighted and suicidal practice of throwing the control of our finances and the profits of our trade into foreign hands. Our own banks offer terms equally advantageous, if not more so than the foreign monetary institutions ; their means are ample for tiie requirements of the country ; and their claims to support unquestionable. Let the people be true to their duty as colonists, and lay broad and deep the foundations of permanent prosperity in New Zealand by giving their hearty support to our own banks, our own industries, manafacturcs, and institutions. So shall that great and glorious destiny for which New Zealand is designed be hastened, and based on securer and more enduring principles."