THE New Zealand Mail. PUBLISHED WEEKLY. FRIDAY, MAY 19, 1893. THE AUSTRALIAN BANKING CRISIS.

New Zealand Mail, Issue 1107, 19 May 1893, Page 22

THE New Zealand Mail. PUBLISHED WEEKLY. FRIDAY, MAY 19, 1893. THE AUSTRALIAN BANKING CRISIS.

The suspension of the Queensland National Bank is the tenth suspension of the panic .record. It was not unexpected. Even the libel action entered the other day against three London newspapers for talking about a run on the bank in Brisbane failed to stop the current rumours. The shares (L 5 paid up) were selling in London early in the month ac ten shillings and in Sydney were reported to be unsaleable. In January last the bank declared a dividend of ten per cent, and the directors' report was cheerful and reassuring. But it dealt extensively with a class of subjects which gave emphasis to the notorious fact that the unliquidated proportion of the bank's assets is unduly large. Too much of the bank's deposits is locked up in stock and stations and sugar properties for safety in a crisis like the present. The Government policy (of making railways on the land grant system), on which they are winning the elections, was said to be intended to help the bank. The statement has also been made that the Government was doing all it could in other ways to save the bank, going even so far, it was alleged, as to pay over the moneys of the Government Savings Bank,'

swelled by the withdrawals from the other banks during the panb which were placed in the Savings Bank. The latter is hardly credible even when allowance is made for the fact that the Queensland National Bank is the Government bank, holding large quantities of Government money, which it has been of late found inconvenient to treat as cash immediately available. The large proportion of locked up assets has forced the bank to take refuge, like so many of its predecessors in misfortune, in a scheme of reconstruction. The theory of these reconstruefcionsis excellent, inasmuch as ib balances locked up assets by converting deposits partly into per. nnnent loans and partly into share capital. Reconstruction also proposes to meet shrinkage of values by calling up unpaid share capital—Lßoo,ooo in the case of the Queensland National—while preventing further shrinkage' by compulsory winding-up of properties. Reconstruction is also regarded throughout Australia as not only a reconstruction of banks, but as also a revolution in banking by a return to legitimate principles. The Review of Reviews, goes so far as to declare that the reconstructed ; banks will be far s'rbnger than their rivals, ihis theory remains to' be tested, but as a hopeful expression in the height of an unprecedented crisis it is valuable.. This, however, is a large subject to which we muse return on a future occasion. As we write we get news that another bank has suspended in Brisbane. The Bank of North Queensland, which divided 5 per cent last January, was also the subject of a reassuring report. The Chair man of Directors not only assured the shareholders that the bank, whose shares wpre being forced on the market at ruinous rates, was perfectly safe, but he made the unique and very creditable statement that he and his friends had bought shares largely to show their confidence. The expeced blow has fallen in Queensland. It remains to be seen if the task of banking.reconstruction will be as smooth there as in other parts of Australia.

J It has not yet been said that the panic in Australia has been vastly exaggerated for the purpose of enabling bankers to reconstruct banking. We are quite prepared to see it said from day to day. Already the ingenious writers have gone very near it, in their laudable desire to restore confidence. They have already made so little of the panic that there is almost nothing of it left to be whittled away. They must very soon say that there never was any panic, they are on the eve of the discovery that the bankers have stirred up their depositors to get up runs on their several institutions in order that they m >y have an excuse to get back quietly to legitimate banking. When the critics say this they will of course be wrong. But though what we may call in passing the ' confidence trick' has been overdone and may be pushed still further towards burlesque than it hns already gone, there is much truth in what has been said about the advantages of reconstruction. First and foremost, recon; struction is better than the only , possible alternative, viz, liquidation If the twelve banks—the Commercial of Sydney makes the twelfth—which have suspended had gone into liquidation, something like 80 millions' worth of assets would have had to be realised at once, the shareholders would have defaulted in the payment of callable capital to the extent, it has been computed, ©f six millions out of eight ; between the two the depositors would probably not have had three halfcrowns in the pound, and there would have been widespread ruin, of a sound country, from Cape York to Cape Otway. Reconstruction has prevented that terrible catastrophe. In the beginning there were people who imagined that liquidation would have enabled every creditor to get his money quietly. The stretching of the number of suspensions to twelve has very clearly demonstrated the incalculable superiority of reconstruction ; for liquidation, which might have brought speedy relief to the depositors of two or three institutions, would undoubtedly, if applied to the majority of the banks doing business, have prevented any kind of relief worthy of the name, The reconstruction is possible because the commercial position throughout Australia is sound. The saving of a really sound country endangered by a panic not altogether unreasonable is the great service performed by the principle of reconstruction at the present time. Terms of its application are discussed everywhere, and here and there rejected. Bub all understand that reconstruction is imperative, and reconstruction will be an accomplished fact in a short time. All the banks, probably, may not come back into line ; if they do not, reconstruction will have shown itself to have been armed with the subtle power which lived in the spear of Ithuriel, the power of forcing .the spurious to throw off its mask. But whether the weak will go to the wall now or later, one thing is certain ; reconstruction will not save them. For the present we need say no more than that the principle of reconstruction has fairly met the danger of the panic,and saved thedisasterofacompulsory realisation of three-fourths of the assets of the Australian banks. We do not know which to admire the most : the judgment of the bankers, or the good sense of the depositors, or the loyalty and honour of the shareholders. Together these three things make a great record. Between them they spell, we believe, the crucial word ( safety.'

Mr E. D. Hoben, a clever young j lurnaHst on the staff of the Evening Post, has sent us a copy of a booklet, written and published by him, entitled''ln Memoriam, John Ballance.' Mr Hoben wields a facile and graceful pen, and has given an interesting and pathetic account of the late Premier's illness and death. A report of the funeral ceremony," and a britf record of the late Mr Ballance's career make up a publication which is well worth preserving. ■""■}'

A prominent Wellington commercial firm have received a letter from their agents in Sydney giving an expression of opinion on the financial position in New South Wales. We have been privileged to make the follow ing extract ;-The long continued depression has at ltngth culminated in the suspension, 'prior to reconstruction,' of four banks of issue and deposit during the month. Of these the one which most serioudy orients tbii colony is the Australian Joint Stock Bank, as it transacted a very large share of the Country business. That the suspension of these banks-: will cause,great inconvenience and Bonis lost! goea without saying* but it should hot be forgotten that there has been nd destruction" of wealth, and that the factors of Wealth pro s dtiction are just as good as ever they Were. What has really taken place is that some of the machinery by which credit and exchange have been woiked has been dislocated; With the reconstruction of the suspended banks It is probable that financial rnatters will be put on a more substantial basis than heretofore. Summarising the position, Mr B. R. Wise, in an able letter to the Sydney Morning Herald, says :—' The thing to bear in mind is that the present is a credit crisis, and not a mercantile crisis; that is to say, it is due to a failure of mutual confidence, and n"t to any mercantile collapse. Our real wealth is not appreciably less, nor have our productive powers declined. There is no evidence of any decay of our national resources, but, on the contrary, our production* u steadily increasing, so that our experts for the last three years have exceeded our imports. However, owing to causes, which a letter gives no space to consider, there has been a general arid continuous weakening of credit and confidence until, as was the case in London in 1866, no one ' knows whom he cm tiust, and capital'has, as'it were, 'gone on stiike.' The brunt of a crisis of this nature has naturally been borne by the banks, since these institutions are. after" ail really credit shops, dealing jn debts by collecting them from one set of customers and transferring them to another.' While engaged with Mr Benham, T 'oneof the clowns at Fillis'. circus, in assisting at a very humorous item on the programme on Wednesday boy named Driscoll slipped on the carpet, and broke his collarbone. Dr Cahill was at once called to his assistance, and ordered his removal to the hospital. He was at onceconveyed thither by Mr Benham, where Dr Ewart at once set the bone, and by latest accounts the boy was very comfortable aqd in a fair way to a fpeedy recovery. The mishap was the result of pure accident, and no blame whatever can be attached to the management or to Mr Benham himse f, who is much concerned at the unfortunate conclusion of what was a most laughable item. In connection with the recent fire'at'the , Hutt, we learn from an eyewitness that the fire broke out in the kitchen about half-past 12 o'clock, when the two lessees, Messrs Jaines and Hilder, were away at the township. The only occupant of the stables at the time of the outbreak was a lad named True, who had gone to bed, and was awakened by-the room being full of smoke. On getting up ha was obliged to get through tho kitchen into the. . main passage of the stables. Hftjeund the kitchen walls in flames, and on^penixig-.die"' door to get out had his hands severely burnt.by the handle, which was.neVrly red hot. His hair ' was singed, and altogether he had a very narrow, escape. On getting out he ran, as he was, in his night ehht, to MrT. H. Hill's cottage close I by and gave the alarm, and in a few minutes Mr Hill and Mr W. Davies, the trainer, and several of their Loys rushed to the spot. The building, by this time, was well in Mimes, and although they did their "best to rescue the horses, they were unable to do so, (iwing to the dense smoke with which the building was filled. Only buckets were available. 10 put out the fire, but these were, of course, insurncient for the purpose, and tne flames took possession of the whole building, which was completely burnt to the ground. It is supposed that the horses were suffocated 'before the fire reached them. The unfortunate lessees lost everything they possessed?* including their clothes, a quantity of harness, and|. a considerable quantity of foddtr, and r; were totally uninsured. The building was insured' for L2OO in the North German Offioe. The mate Traitress has won several races, and ran at the last meeting of the Wellington Racing Club in the name of Mr It. Campbell. Donald Dinnie ran at the same meeting in the name of Mr I. James, and was considered a very promising hurdle horse. Heath was a chestnut fl!ly, by Ascot, out of Vanity Fair, belonging to Mr R.H.Brown. Shortly before midnight on Monday Dr Mackin was called up to attend ,a man who had received a severe cut, . and whom the police had brought to his surgery. The man gave his name as David Thornton, and lives opposite the lioyal 'Tiger Hotel, in Tara;iaki street.. The wound, which was a gash.about six inches in length on the fuienead, was dre.-seii by.Dr Mackin, and 'Thornton was removed to,the hospital, where, when questioned, he said had fallen and struck his head on a camp oven, which had cut hia face.

H;The Government have decided to appoint Mr John Thomson, 8.E., Resident Engineer at Greymouth. He .will also take charge of, 1 and act as lecturer to, the Schoolß of Mines at Brunnerton, Greymouth, Kumara, Stafford and Hokitika. Mr Thomson possesses, firstclass credentials. He was engineer under the Belfast Harbour Commissioners in Ireland, and since his arrival in the Colony he has been consulting engineer in respect of the New Plymouth harbour works, engineer in charge of tha Patea harbour works, and lecturer on the Otago University staff. A very pleasant evening was spent 'by a large audience in the Wesley Church, Taranaki street, on Wednesday, when the Rev W.,Morley gave a lecture on ' What I saw and heard in America.' The liev J. J. Lewis presided. In a most interesting manner the rev lecturer gave a graphic description of the chief towns in America, together with an account of the habits and manners of the people, interspersing his remarks with racy anecdotes and sketches of individuals, the whole being narrated in a manner that held the attention of the aulience from beginning to end. The proceedings concluded with votes of thanks to the lecturer and the chairman.

Dr Wm. Mill, now in charge of the Totara Hospital, Ross, has received the appointment of assistant medical officer of the Wellington Lunatic Asylums,