THE BANKING INQUIRY.

Otago Witness, Issue 2211, 16 July 1896, Page 20

THE BANKING INQUIRY.

HOX. G. M'LEAN'S STAND.

(Fbom Our Own Correspondent.)

Wellington, July 9. In view of 1 the great interest still being taken n the banking question, I send you the full text of the speech delivered in tbe Legislative Council yesterday by the Hon. G. M'Lean.

The Hon. Mr M'Lean : B .-fore thai question is put, Sir, I would like to csk this Couuoil to consider well before they repent the appoinbmeu,t of a committee. It must bo admitted .that inquiry into these matters is necessary in order to' pub. the thing straight with the public. This matter, which . should not have L-can brought) into politics at all, has become a : political nutter from beginning to end. Dp and down" -the whole country miatepreoenUtions of an extraordinary character have bten made, and ib is necessary to give refutation to them. We know there is a general election coming' od, and we kaow that a great deal that is said coocerning the banks is got up for the purposes of this general election, and probably we would not he&v so much about the matter if it were not before the election. My hou. frieud. Me Otmond is a most painstaking man, and one of the ablest meu in this Council, in my opinion, and he' took a great deal ot trouble over this rattier last session. He has set forth to-day very clearly vthat is opinions are, and hm obj^obs to ser?e ou this committee. Well, I would ask my hon. frien i, for whom I have a grout respeot, why he should nob go on that committee ? He could go there. He could examine every one and he could see fairplay there as far as he was able to have it carried out'; and even if it was only his own voice that was raised in this Council as to whether wrong had been done or not great at'ention would ba paid to t|ia utterance* of a gentleman, of his position. I say it is wrong for him to oVJHct to serve on this committee when he bai shown by his abilities last aetsitn that he is so fully capable of serving on it. Extraordinary statements hava been made in order to .try and wreck the Government, and in order to effect their obj r 06 persons have not respected the reputation of innocent men. That is what I say has. been carried on, in this country. Let there be fair play. Let ' anyone who h'aS. done wrong suffer, but let every man. in this .country f<vel he is a British subject.! and that he will have British fairplay. .It. has been said that the Colonial Bank has ' been foisted on tbe colony; that it has been sold ' by tb.3 balance sheet; What are the circumstances connected with - that matter ? , The Colonial Bui>k got the colony out of its troubles — enabled the colony to pay iti intsre&t and keep its' credit good ab Home ; and what did the colony give in return p Ib passed legislation that the bank pay 40 per cent, of the whole I of the taxation pud by the banks in New Zea- ! laud, and wound up byptssing' legislation to kill it. And still it has- besn stated this [ bank has been foisted on the colony. • What \ are the facts P You ' passed ' legislation to bolater up the Bank of New Zealand, the deficiencies of which have been written off to the extent of £3 600,000 ; and, sir, what position would the Colonial Bank hare found itself in in fighting an institution wbich had been bolstered up by Government money in that way ? I Btated in the Council when the two millions ware gr&u'ed thab I shosld have dealt with that bank differently, bub after it w&s granted I fans ready to take my chare of the responsibility in common with other hon. members for whit was d( ne. Whether ib made a mistake or not ill ever bs a debatable question. Last eesMort'' you built up the Bank ot New Zealand, leavit g ib to £e?k a certain amount of additional earuing power required to hold its own. H i<l ib nob been able to purchase the Colonial Back through being placed in' that position by j legislation— it was enabled to fight the Colonial j Bank, and no doubt would have gone on and taken a lob of the Colonial Bank's business from the very facb if its being placed in the 'position it was by- the "colony— you virtually forced the Colonial Back into -the position of' having tj sd', a thiog'.tuis colony should never toatre dote. You laid- the Colonial Bank on its back for its b^ncs to be picked. ■ That is I what this colony ;did to the Colouial.Bank — instead, of bring sold bya balance sheet, ib was sold by taking.indlvidual accounts. Ode 'individual' account was taken after, another* What wastbe { result P Nearly 'a million of undoubted accounts j was taken clean over, and then about £700,000 was put with very large reserves against it— a much larger amount than, in my opinion, was necessary. We know what a bank liquidation is. Everyone wants to get out of paying their debts, and many succeed, and others get compromises. With respect' to tbe Bank of New Zealand, they have reserves th&t will make them absolutely safe, and they oannot possibly lose with the margins they. hold against the accounts. The large reserves were agreed to,so that the Colonial Bank' shareholders are nob held liable for anything further." -The reserves were made on something like the following principle :— A man has a property worth, s»y, £20,000, on which he owes, say, £11,000, and the selling bank considers the account worth 20s in the pound. The buyer says it is only worth 10s in the pound, and he asks for reserves against it to that amount. How is it to be proved that the debt is worth 20* iv the pound. You go into the market for sale. There is no sale for it, and a. value cannot be determined, and the seller is obliged to consent to the reserve, so that the reserves of the Bank of New Zealand cannob result in the loss of one shilling in connection with the purchase of the Colonial Bank. That is the position which the BaDk of New Zealand people took up, and tb.at is what you call foisting the Colonial Bank on to the Bank of New Zealand by a balance sheet. That purchase of the Colouial Bank has enabled the Bauk of J^§w Zealand to make tufficienfc.proflfc out of the Business taken over from it' to pay .the Assets Company £50,000, which went to pay that company. If it had nob been for that 'you would * have had the bank back here again this year. The purchase of the Colonial Bank has put them on their legs, and-i instead of £75,000 paid for the good frill ib •hould have been at least £150,000 or £200,000,

and'it would h&ve been oheap to them at that amount, because they oould not have gone into the market and got the advances they required. They would have been bound to go into the market and fight for advances and then could nob have gob thorn. My old firm gob £60,000 cash for the goodwill of their business which I had retired from— unfortunately I go"; none of it. If I had to sell tbe Colonial "banking busioess over again, if they were to offer £200,Q00 they would not get ib. That js my opinion of the mattar now, under the oircumstances. Jast think of anyone holding the idea tbab the Colonial Bank has been foisted on to the colony. The Bank of New Zealand took good cure tbat they got good valuo for their money, and if they paid anything for the goodwill they took ib off the other end. None of those in the Colonial Bauk ever drearab that there could be a loss by the Ward Farmers' Association, and it came as a great surprise when we were in the midst of the negotiations to bo told so. Au officer was sent down to invettigfits, and when his ' report came we immediately informed the bank.' We had then to decide what had best ba done under the circumssances in which we wer6pl>ced. The question -was then what would pnt that acoount into such a position that if the Bank of New Zealand would not take it over some obher baak would. . It was aob for us to go ia and burst up the company if we c 6u T d avoid it. It would not have suited us to do so then, .and £55,000 was supposed to have put it in a proper position for some other bank to take it over if the Bank of New Zealand would nob take it. Meantime tte Bank of New Zealand insisted on having a guarantee for the whole account, and after three months' experience the Bank of New Zealand wbb to ssy either that it would take ib over 0: leave it alone. Now if it had been on the "B" list it would have had two years, but the accouut was put in a position in wbich it wa^» to bs taken or rejected within three mouths. The £55.000 lefo the capital intact all but £2009, and ?eeing that: ib was in that position, with all its uncalled capital, ib looked to b8 in. a position that any bank would take if--, and I presume that bad it nob been tbab Mr Ward was in po'itics it is very possible the ace -tint would havo gone away without any great trouble to some other institution. Then, Sir. was the Colonial Bank going to let Mr Ward off ? Was this to be a presont to Mr Ward, as has been suggested ? How could it be made a pre ont to Mr Ward ? Mr Ward had taken the dibb upon himeelf. The jud^e, unfortunately, was, I think, misled a good deal. Ho' ouly heard ono part of the story or, probably, he would have correoted hi* judgment in that respect. The judge said the promissory note was a worthless bit of ,paper. Let us see whether ib was a worthless bib of paver or net at the time ib was taken from" Me Ward; Mr Ward at that time had £23,000 worth of property. AU the stores at that time belonged to Mr Ward himself. They were all let to the ! RPBOcintion ; but after-tenants will now have to be sought. He had in addition £23,000 worth . of shares in the Ward Farmers' As&ociatipn, and if that company was sound, as the placing of the £55 000 was supposed to have made ib, bo had £4000 worth. of odds' and ends and £16,000 worth of shares in Nelson Bros—in a'l, he had £66,000.. Againtt that he owed somewhere between £5000 and £6000. He had a draft agaiaht Nelson Bros, shares for .£l6 000 sent Home .for ,sile. Th»t made £22,000, leiying a balance'of £42,000 to the good against this £55,000. Sir, what has happened since? Tho £23,000 has melted away to nothjng. The £16,000 for Nelson Br, b. shares has melted away to very little. Bub was ib a worthless bit of paper at the time when it was takeo-P No, Sir, it was supposed good for a very considerable amount, and," to do Mr Ward justice, whatever may be the feeling against him ib. is only right to fay j th^t hd never tried to get' out of tee-liability, j .but- said he would give up everything he : ppesersed. Then another thing thah was) brought up against him was ' the £30,000 guarxn^ea given to bank. ' " Thi3 was practically obsolete. He gave that guarantee when tha bank knew he was ponseised of property. He was interested in the Ward j Farmere' Association,' and hid guwante-sd ' the accDunt. He had then only 1000 con- ; ttibuling shares in the Ward Farmers' Asso- j ciation, cr soroebbiDg like that, bub he took ! another 7090 shires, and, of cjurse, the bank (hen had Irs liabilities on those shares for calls at any time, so tbat the £20,000 was 0? no consequence. Then this ndd baeo twisted aud turned in every way. The Ward Farmers' account is the acoount which has suffered worst through the whole of the traußact : ons. Ib has been written about poli'ioally. It his been given no chance, and it has virtually bten in liquidation since that time, and has been drifting and drifting. Then I have no doubt ! that the people who were buying it were trying to get the best bargain they could out of it, and that they made it out to be as bad as. they could. I do not think it is nearly so bad as. that. Still, as everyone knows, rather than face liquidation; it is better to ' take a great deal less than the value. If you coma to liquidate a number of . farmers, how much cm you get out of them ? when, if they were given' a short time, or a reasonable time, they would pay in full. That Is against' liquidator). "And, Sir, the Bunk of New Zealand was belped to help the country ; but hero, in this case — through writing in the newspaper*,— a lot of shareholders and other innocent men interested in the Ward Association are ruined in order to geliat Mr Ward, and a who'e countryside of farmers are also ruined a« well in order to get at him. I may siy that ever since the Colonial Bank has been handed over to the liquidators the liquidators have never consulted the old directors iv any way whatever, never asked any information, and have kept everything they were doing iuconihecfcion with, the Ward -I?»*mer»' Association a comp'.ete secret. You all know as muoh about their transactions as I do, or have done ever since. Then another thing, Sir, that I never knew of, a section of shareholders going systematically to work to knock their owd property to pieces. They go into court to prevenfr the appointment of the liquidators recommended by the directors— and mind, in saying this, I say that Mr Simpson, the man the judge appointed, is as good a man as there is in Dunedin. But, Sir, to appoint him they turned out a man who was put there for his special knowledge, his technical knowledge and his training which fitted him for the position. A man who, iv my opinion, would havd brought out a result better than that of any other man you could pick up. Aud with him there were two others — good, steady, feliabls men. And then, after tbat, a boasb was made that a compromise was prevented. Well, Sir, as I told tho shareholders, they may just as well hand over the wholo of the surplus in the "B" list to the Bank of New Zealand if they ate not going to give the liquidators power to compromise. If they are going into court for every case — well, it will pile !up tha law costß and be a fins' thing for the lawyers. But you will find t that before they will go through thab I process, they will go through the insolvency J court, to that the Coloniri Sank ahatehoidsia

are bsing sacrificed by what I look upon as simply politics being brought in. Of course there are plenty of people very brave when they are out of the wood. But what was the opfldition of things during the period f com 1893 to 1895 in banking matters P Owing to the panic in Australia— a panic the like of which has never been known in Ihe world, a panic in which a large number of banks had to stop, and in which, had it not b:ea for the aotion of the Government in New South Wales, every bank in tho colony would have shopped. Sir, they they talk about the Colonial Bank. Pat any other institution through the same process as thab bank had been put through— the procQSS of picking whioh it has been put through,— and do you tell 'me it will show any. capital or reserve fund. No, "you would find eaoh bank would have gone to its shareholders for a lot of money, a thing the Colonial Bank would not have to do. I have a very interesting list of what has happened to the shareholders of the other basks that had to shut up their doors in Australia, and when the ccmtmtbee is set up I will give them some statistics to show what has happened to shareholders of other institutions. Sir, I am sorry to tiko up the t'v&i of the Council, but this ia the first opportunity I have had to put the matter fairly before the Council. I am sorry to trouble the Council, but I have felt that I ought to t&ke the opportunity I have had to do some justice all round. Ib will be found when the milters are inquired into tint all this cry about being found out melts into thin air, and you will find that the people concerned are just as honest people as there are in this Council, and much more honest than those who are trying to traduce their characters.