TRAGEDY OF A BANK.

New Zealand Herald, Volume LXVIII, Issue 20864, 5 May 1931, Page 9

TRAGEDY OF A BANK.

CLOSING OF THE DOORS.

BLAME PLACED ON POLITICS.

SOME OF THE ALLEGED CAUSES. [FJIOM OUR OWN CORRESPONDENT.] SYDNEY, April 30. The towering, imposing State Savings Bank, with its doors closed and with curious passers-by peering through its massive ornate windows, as into a house of death, stands to-day, not so much as one of Australia's architectural glories—which it is—as a tragic witness to the harm that politics can do. For politics surely must be to blame for the collapse of this great institution, which for so many years prospered because the people had unbounded faith in it.

Now we find the Labour Party in power blaming the National Party and the National Party blaming tho Labour Party for what has happened. On the side of Labour there has been little more than abuse, but tho Nationalists have come forward with a well-ordered argument which the Premier, Mr. Lang, has not attempted to explain away.

The deputy-leader of the Nationalist Party, Mr. Stevens, speaking in Parliament, charged the Lang Government with deliberately withholding from the bank funds that rightly belonged to it and sufficient, may be, to avert the crisis. He said that statements furnished to him by the commissioners in August last, when he was in office as Treasurer, indicated that, notwithstanding a heavy anticipated withdrawal, it was expected that by the end of this financial year the cash receipts from all sources—apart from deposits—would have exceeded the cash demand on the bank by, roughly, £2,000,000. The commissioners assumed then that the normal excess of withdrawals over deposits each month would be £500,000 —■ that is, exclusive of withdrawals for investments in the new Commonwealth loaD issues. Unexpected Withdrawals. The recent tragic events, Mr. Stevens said, indicated clearly that the withdrawals had exceeded all estimates to an alarming degree and he suggested that the receipts from all sources had fallen short of expectation. The excess of withdrawals over deposits from July, 1930, to the date the bank closed seemed to have been about £16,000,000. For the six months ended December 31, 1930, it was no greater, proportionately, than those in similar institutions in the Commonwealth.

During January this year the rate of withdrawals was in harmony with the experience elsewhere in the Commonwealth, said Mr. Stevens. That apparently was also tho position for the greater part of February, but since then the decline in the depositors' balances assumed calamitous proportions. From April to the date of closing more than £4,000,000 was withdrawn and during March more than £2,000,000 must have been taken out. But for the unprecedented run on the depositors' balances within the last six or eight weeks, and but for the withholding from the bank by tho Treasury of tho moneys due, the bank would have easily surmounted tho difficulties which beset it. < Factors in the Position. Mr. Stevens said that the outstanding factors in tho position were:—(l) The non-payment by tho Government of £432,000 representing interest due to the bank on February 1; (2) the failure on the part of the Government to redeem a loan by the bank of £250,000 at per cent., which matured on the same date; (3) during February and April fixed deposits amounting to £929,000 matured, but were not repaid. Deposits which matured in September and October, 1930, and January, 1931, amounted to £280,000. Tho renewal of these deposits was quite justified, because at the time there was no evidence of a run on depositors balances; (4) in addition to fixed deposits the bank had, and still has, £995,000 on deposits at call with the Treasury, and, notwithstanding the Premier's knowledge that funds were being withdrawn from tho bank at an alarming rate, not one penny of that call money was repaid. Mr. Stevens said that the aggregate of those four items represented no less than £2,606,000— every penny of which should have been paid to tho bank in such a crisis. Tho Government repudiated its obligations and left the Savings Bank a financial collapse. When the bank closed its doors it had practically no cash in hand, but the Government held then, and still hold more than £7,000,000 of the bank's deposit moneys. The trading banks and the Commonwealth Bank, by way of contrast, paid every penny duo to the bank and must have found at least £8.000,000 during tho last fivo months. Tho failure of tho bank was definitely and solely traceable to the Government.