THE RESERVE BANK

Otago Daily Times, Issue 22057, 13 September 1933, Page 8

THE RESERVE BANK

TO THE EDITOR. Sir, —The statements of the Minister of Finance with regard to the Central Reserve Bank continue to exhibit' some remarkable inconsistencies, the most important of which relate to the control of the policy of the institution. In exasperation almost one is tempted to demand: “Is this institution, if set up, to be controlled by the Government or is it not? ” The following statement says the Government is to control it: “The Central Bank is nothing more than a machine or device for co-ordinating and controlling the banking system in accordance with the monetary policy laid down by Act of Parliament.” But in the article previous to this we have the remark: “The theory underlying the conception of a State Bank centres on the proposition that since a wise banking policy is the basis of a sound national economic life, the bank should be under the control of the National Government. But the dangers of this course are great. That the Minister considers these dangers are overwhelming is pretty evident, in spite of his assertions to the contrary, for we read: “ The Central Bank _ is hedged round with legislative _ restrictions and safeguards, all designed to ensure that the board of directors remains free and unbiased in carrying out the important duty of safeguarding the currency and controlling the credit in the best interests of the people as a whole.” . _ Why it should be dangerous for Parliament, which is elected by the people, to have control of the peoples currency is not clear. The sponsors of the proposed bank/ however, regard private individuals, who will not be responsible to the State for their actions, be they good or ill, as being eminently fitted to perform this task. . . Naturally we look for some special means by which these worthy people will be selected, and we find that their Q?? *" fications are to be two: (a) That they shall have at least £5; (b) that they shall meet with the approval of the Minister of Finance, for “the shares are to be allotted in the first instance by the Minister of Finance.” Yet this statement also appears: “ If this management was wholly appointed by the Government of the day it is obvious that this would not be the case, for at least there would always be the possibiiitv that the appointment ot directors would be influenced by any political questions or policies which nap■pened to be the subject of sharp dilreiences of opinion at the time. These people to whom the Minister allots shares will, of course, elect the directors. . I here are two exceptions, however; the governor and deputy-governor “ are to be approved by the Governor-General in Council. Out of this maze of contradictions two main facts emerge: pointment of the bank’s personnel will not bo entirely free from political influence; (2) that the credit of the country is to ho handed into the keeping of men, not numbering more than 1000. These men are to use the life-blood or tins country, as the Minister himself terms it, as they think fit; they are to be absolutely unhampered in their actions and will not be held culpable for any possible errors. But their reward is to be 5 per cent, on the value of their shares, although the amount of business transacted will be so small, we are told, that one office with a staff of 20 will be sufficient to carry it out. . , , The credit, which is lo lie controlled by the bank, is backed by the organisetion, invention, skill nno Inborn* of 1 500,000 citizens. Yet their elected representatives are to have no voice in the matter. The dangers of their mterference, sny the exyevts, would be too great. I Too dangerous to wlw»*».? Perhaps some

remarks of Mr Gladstone may give us the clue. “ From the time I took office as Chancellor I began to learn that the State held, in the face of the bank and the city, an essentially false position as to finance. The hinge of the whole situation was this: The Government itself was not To be a substantive power in matters of finance, but was to leave the money power supreme and unquestioned. In the conditions of that situation I was reluctant to fight against it by financial self-assertion from the first.” Are we in New Zealand about to surrender to finance?—l am, etc., National Credit. TO THE EDITOR Sir, —To the uninitiated the statement that the Reserve Bank is going to take over Government accounts would be the better of more elucidation when it is accompanied by the further statement that the Reserve Bank will require only one small office in Wellington. To keep the Government accounts the Bank of New Zealand has to make use of its many branches. How is the Reserve Bank going to manage with a small office in Wellington only?—I am, etc., September 12. Layman.