DR. FEATHERSTON ON THE THREE MILLION LOAN.

Otago Witness, Issue 747, 24 March 1866, Page 1

DR. FEATHERSTON ON THE THREE MILLION LOAN.

(From the Daily Times, March 20.) It i 3 with great concern we observe the suggestion m^de by Dr Ftatherston, that under the Three Million Loan Act more than three millions of debentures can be issued. Iv our summary for Europe we took express care to mention that there was no chance of the suggestion being carried out ; and it is with regret that we notice that the Lyltelton Yi'/nes — a paper usually very cautious of committing itself to a doubtful rumor — hazards the prediction that it will be adopted. Nothing could have a more disastrous effect on the credit "of the Colony, than the bare suspicion that such a plan would be attempted To begin with : supposing it were within the four corners of the Act, it is totally opposed to commercial u<?age. Loans cutnu lating to countle33 millions have been negotiated on the strength of Acts or Proclamations similar to that of New Zealand ; and is it likely that a suggestion, however ingenious or even correct from a worddefinition point of view, would be allowed to interefere with a enstom on the strength of which enormous wealth is built. For Dr. Featherston attacks the very foundation upon which the credit of nations

depends. The first thing to ascertain of a borrowing country is the extent of its liabilities. It is in the essence of Dr. Featherston 's strange doctrine that it is impossible to tell the liability which a new loan covers. A loan of three millions may, if hia theory be adopted, mean a power to contract liabilities to the extent of thirty millions. In fact he holds that Acts which confer a limited borrowing power, cover no limit to the extent of the liability which may be contracted. Uoon the grounds of public policy therefore, Dr. Feather^ton's proposal would be inadmissible. He would, in fact, invite repudiation. Who could say, for instance, that his cireat grandson, supposing that mythical individual to attain to political power, would be wrong, when the time came, to deny that the Colony was liable for a larger amount than that for which the Act purported to make it liable.

But it must not be supposed tint the opposition to the suggestion rests only on general grounds. It seem 3to be contrary not only to usage, but to the common sense interpretation of the Act. II the Governor were empowered simply to raise three millions of money, we miaht allow that Dr Featherston was technically correct. But the words are (3rd clause) " borrow and raise " such sums, not exceeding in the whole, " the sum of three million pounds ster- " ling." If on the strength of this, debentures or acknowledgements are issued for four millions, can it be said although those debentures sell for only three millions, that four are not borrowed ? Will Dr Featherston say that the hapless youth who gives an acceptance to the money-lender for a thousand pounds, and receives in exchange LSOO in ca^h, and the balance in wine and jewellery, is a borrower of these various articles or of a thousand pounds ? There are men in the servica to whom he can put the question, and they will tell him they found to their cost that it was the money not the goods they borrowed Debentures are but another form of bill. We believe they invariably purport to be for such and such a " principal sum." It is this " principal sum" the repayment of which the Act authorises, and the " principal sums so to be borrowed" are a convertible term for the money borrowed. At any rate Dr Featherston puts him-elf in this fix: if the Act empowers the issuing a larger amount of deben ures than three millions, it does not authorise their repayment. We are aware the point has been raised, that by selling the debentures at a discount the Act is contravened, since, practically, tha result is brought about that the money is borrowed at a biorher rate of interest than that specified. Mr Sewell and Mr Fitzherbert have given in their adherence to this view of the matter, and substantially, we believe, they consider the loan to have been illegally nesotia^ed. We might plead ajrainst this view usage and custom, but we do not think it necessary. The Act seems to us to amply s*nction the practice of selling the debentures at a discount in the absence of any express stipulation to the contrary. The phra'e " shall have power to borrow and raise in " Great Britain, or elsewhere, by bonds, " debentures, or otherwise, such sums not " exceeding in the whole the sum of three " million pounds sterling," means that authority is given to contract by bonds, debentures, or otherwise, liabilities to the extent of three millions. Then the fourth clause supplies the machinery for selling at a discount, because it says that " any " bond, debenture, or other security " granted under this Act," ..." shall " be transferable and negotiable in such " manner " as the agent appointei by the Governor "shall prescribe." Here is clearly the means afforded. The Three Million is to be represented by bonds, debentures, or other securities, and they can be sold at discretion. The one limitation is, that the total amount is not to exceed three millions. Without this limitation, who would lend a Government money ? How would it be possible to ascertain even the proximate amount for which it was making itself liable ?

In the present case, there is a distinct element of bad faith introduced. If the Three Million Loan was uutouched, and its ncgociatiou were stated to be intended after the manner of Dr. Feathers ton's suggestion, people would go into it with eyes wide open, or they could leave it alone. But pax;t of this loan has been pegociated upon the clear understanding that the Colony was

contracting a liability of only £3,000,000. Throughout the whole of the lengthy papers connected with this unfortunate subject, the intention is made apparent that the liability was to be limited to the amount named. Upon the strength of this, Mr Reader Wood invited tenders for the first million. The liability the Colony wai contracting was stated to be three millions. The Times described the nrßfc million of debentures as one third of the amount to be issued. In the Imperial Act afterwards rejected by the Colony, the amount borrowed and the liability were held to be convertible terms. It must be remembered that this is inconsistent with Dr. Featberston's theory, because he asserts that there i-i no limit to the liability which may be contracted under the Act ; but he cannot deny that the borrowing is limited to the sum named, so that in other words, he holds the amount borrowed and the liability incurred are not cognate. Again, when sending home the half- million • ' debentures to the Imperial Government, the liability of the Colony for the Loan was assumed to be three millions. Dr. Featherston would ride through all these implied pledges, and for what object ? This is the fanny part of his proposal — just to show that an ingenious man can traverse an Act. If a larger borrowing power be what he wants, the simpler, and surely the wiser plan would be to seek it is the other was sought, by an Act, which it would not be necessary to subject to ingenious interpretation.