THE RESERVE BANK

Otago Daily Times, Issue 22101, 3 November 1933, Page 10

THE RESERVE BANK

SECOND READING OF BILL APPOINTMENT OF GOVERNOR IMPORTANT CHANGE AGREED TO POWERS OF STATE INCREASED (From Oor Parliamentary Reporter.) WELLINGTON, November 2. State control of the Central Reserve Bank was strongly advocated in the House of Representatives to-night during the last committee stages of the Reserve Bank Bill. Although the Bill was ultimately passed in its entirety in an amended form, it was passed only on the understanding that the Minister of Finance (Mr J. G. Coates) will amend it further before it reaches the Legislative Council in the direction of making the governor and deputy-governor of the bank as nearly as possible State appointees. Just how far the Minister will go in this direction is not certain, hut the group of Government members who sought, the change indicated that they were not satisfied with the compromise which the Minister did offer, and which was for the time being accepted by the House —a compromise to the effect that the governor and deputy-governor should be appointed by the Governor-General-in-Council on the recommendation of the board of directors of the bank and not, as the Bill provided, elected by the shareholders with the approval of the Gover-nor-General-in-Council.

The appointment of these two officers is really the key to the control of the bank, for of the remaining seven directors who have voting power four are elected by the shareholders, and three are appointed by the State, If the governor and deputygovernor are made State appointees, or so, the State will virtually ■'have control of the conduct of the bank. What alteration in the method of appointment is finally decided on will, of course, apply only after the first appointment of the two officers which is to be made directly by the State. There was a feeling that the demands of some Government members for State control were becoming pressing when a sudden caucus of the Coalition Party wag held in the tea hour to-night. When the House resumed at 7.30 there was a long delay over clause 25, which provides for the appointment or election of the governor and deputy-governor. Consideration of this clause was ultimately postponed when the Minister indicated that he was prepared to make an amendment providing for the appointment of the two officers for the second and subsequent terms by the Governor-General-in-Council on the recommendation of the board of directors. , The remaining 27 clauses of the Hill were passed entirely without discussion, and the House quickly returned to consideration of clausa 25. Five members of the Government Party—Messrs F. Lye, A. E. Jull, W. J. Poison, W. J. Broadfoot, and J. A. Hargest—then rose in succession and asked the Minister to go still further towards ensuring State control of the bank. Their proposals as put forward bv Mr Lye, were either that —(1) the governor and deputygovernor should be appointed by the Governor-GeneraMn-Council on the recommendation of the Minister of Finance after consultation ;#ith the board ot directors; or that (2); the governor ot the bank should be appointed by the State and the deputy-governor by the board. In the first case it was suggested that the governor should have deliberative and casting votes and the deputy-governor no vote at all, in which case the State appointees to the board would have a majority of the voting strength. If the governor was appointed by the State and the deputy-governor by the hoard, each officer was to have the right to. vote, but the governor was to have deliberative and casting votes. - The speakers who followed Mr Lye all urged upon Mr Coates the necessity for one of these two proposals to ensure State control of the bank. The Minister, in reply, said it was obvious that several members thought the amendment he had proposed did not go far enough, but he would remind them that it went at least halfway from the original proposal. The normal procedure would be for the Minister to consult the board of directors as to who should be governor and deputy governor, and in 99 cases out of 100 exactly the same appointments would be made as the Government would have made itself. Mr Coates emphasised that his suggested amendment would protect the bank from any suspicion of political control, and he regarded it as essential _ that there should be no such suspicion. He thought the House would have to pay attention to the feeling in the country as expressed in the newspapers, which was against State domination of the bank. The success of the bank, he emphasised, depended upon the extent to which the people supported it, and he felt that the House was inclined to ignore the strength of public opinion. He suggested that the clause should be allowed to go through with the amendment he offered, and he undertook that before the Bill went on to the Legislative Council he would see what could be done to give effect as nearly as possible to the wishes of members. Subsequently other Government members spoke in support of his amendment providing for the appointment of a governor and deputy-governor by the Governor-General-in-Cou'ncil on the recommendation of the directors. It was carried on the voices at 0.45 a.m. and the third reading debate was then initiated by the Leader of the Opposition, Mr Savage. The other important change in the Bill under which th c profits from the sale of the gold coin and bullion transferred from the trading banks to the reserve bank are to be credited to the public account was endorsed by the House by the huge majority of 56 votes to 5. Mr Wright, who proposed the amendment restoring the provision of the original Bill for arbitration as between the Government and the banks found only four other supporters in the whole House —Mr Downie Stewart. Mr Hargest, Mr Atmbre, and Mr Wilkinson. A small amendment was made to clause six of the Bill to ensure that shares in the bank shall be held only in New Zealand.