THE GOVERNMENT AND THE BANK.

Star (Christchurch), Issue 7675, 7 April 1903, Page 3

THE GOVERNMENT AND THE BANK.

STATE BANKING. [Fhom Ocn ConnEsroNDKXT.] WELLINGTON, Apr:!, 7. The Premier's reference to tne banking position and the possibilities of its future lias met with considerable attention here. The "Nov.- Zealand Times" 'dealt bricily with the Mibjict yesterday morning, and the •' Pof>t|" nt somewhat more length in the evening. Speaking of ihe. alternative of the Government acquiring the ordinary shaa-es o: tho bunk, the " Times " remarks : — "ls the Government prepared to p.iy for the : '-!.'.:u-(-sV A largo amount of shareholders' capital has been applied to writing oil" past l(i:-si.*;, buy, owing to prudent management a:i.l prosperous business, the value of the concern has vastly increased during the past i'c-w years, and any new arrangement ought in equity to recognise these facts. The sanction" of Parliament i*- 1 , of course, required io the suggested partnership, and tlie whole question will no doubt- be exhaustively considered when the proposals come before Parliament in the course of the approaching session. In view of the vast interests involved, it is highly desirable thait tht; shareholders of tho bank should, at an early date, bo made acquainted with the intentions of Ministers in the matter of the proposal.'' That the Government should isiue all bank notes circulating in New Zealand has not, the morning journal -thinks, much, save se-nfimoflitul considerations, to conimemd it, adding that "the 'ream of paper and a printing press,' enthusiast will doubtless approve of it, but to practical people it is not quite apparent that the Government would bo justified in sacrificing revenue for the . fake of taking ihe. printing oi bank notes into its own hajids. ' Tlie ''Post gives an exhaustive summary of the report of the Select Committee of the New South Wa.lus Legislature, appointed iv 1893. I append the introduction andi the summary, which are as follow: — "An inquiry was made in 1893 by a Select Committee of the New South Wales Legislative. Assembly, and although the committers conclusions were unquestionably affected to. a certain extent by the fmaaicial crisis through, which Australia was pacing atthe time, there is mudh in its report o£ poimanent value- to any Australasian politician who wifhes to gra.pplo with vhe problems of State banking. The special purpose for which the committee was set up! was to ' inquire into and report- upon itho expediency of 'establishing a national bank, and its conclusions wore based on a m«ss «,f expert evidence, a great part of whia.i may be. a,*>pl,ied with the necessary qualiii-' cations u/thb New Zealand of to-day In view of the discussions which Mr Seddon has foreshadowed, it wiil 1* well to glaim-. at the opinions expressed by this Aew Soufh Wales committee. In the first pla£, it was lad. by its survey of the- Austrian - financial situation to a.ser • the. m-em necessity for an altcTation m the issue- of paper money and other functions of private banks. It further declared that in the. event of «ui v alteration being miie in- tlie currency, the power to issue note* ,hould be inferred to the S • J t alfo- recommended that the Nute, through Ihe medium of a national bamc, should hnd money at a fair rate of interest Tbe evils which this latter proposal was intended to remedy have been met m part h. this colony by our advances to settlers' legislation. The- committee cm- j pliasised the well-known truth tnat conii'enet is ibe foundation of sound banking, and contended that the people must have llU »re confidence in the Government than in any private institution. Tt appealed to histor'v and economic, authorities to coniirin its statement that the establishment of a paper currency based on national secumy had been aa expedient of the greatest nations in the world, and had m sevtral m-rt-anccs f -av.'d them from national banlcruntev and ruin. Tt pointed out that there was not hin- in the nature of the bank.ng fousiness to preclude its practical administration by ihe Government, and that as many Governments al-vady transact.-d such business in part, enlarging the. sphere o.' such operations w.uild be a question of decree, not of principle, «n extension and >4ot an innovation. Pacing to a more detailed consideration of the steps to be taker, the committee recommended the immediate establishment cf a national bank of issue, Avith tlie following functions: — (1) The' sole right of the issue of a note currency upon a gold and fiduciary basis in addition to Government stock ; (2) the issue of a ton-shilling note in addition to the denominations of the usual note currency, and (3) the banking business y_ all l>. 'eminent Departments in connection with the receipt and expenditure of revenue The feasibility of such a bank of issue was admitted in the testimony ot several practical bankers and others who gave evidence befora the committee. A most significant recommendation to ensure the freedom of the bank from Ministerial and political influences, which are particularly to be dreaded in connection with all such State institutions, was that the management should be entrusted to a Hoard of Commissi oners appointed by Act of Parliament and removable only by a vote of tne Legislature, this Board having authority to appoint officers and servants and to supervise and control all the operations of the bank .and' its employees. A provision ot this nature would be absolutely essential to the success of a State bank, since one of the chief arguments urged against the project is the danger of extending the sphere of political interference with business. As a corollary to the National Bank of Issue, the New South Wales committee recommended the evolution of the savings bank, of a national bank of deposit and discount, and of a bank of issue. This general bank might be condemned, but the two groups of functions should be clearly defined hnd kept separate. The national bank of deposits and discount should ba authorised to receive deposits without limitations^ and its 'general business should include: — (1) The holding of the gold reserves of all other banks by making it compulsory for all private banks to invest in Government securities ; (2) the flotation and management of all Government loans ; (3) all Government 'busineiss now transacted through the agency of private banks ; (4) the advancing of loans to municipal and otheH local bodies on approved security ; (5) the management of the public debt of tha colony ; and (6) the provision of a sinking fund for the redemption of outstanding loans. The working capital might be! furnished by a. Government issue of stock, the proceeds of which should be earmarked for. the purpose." Commenting /on the above* th© "Post" says that though the repoft was drawn up in a time of ;financial panic, and was not acted upon by the New South Wales Government,, it establishes, together with the evidence taken before the committee, a strong case for both a State bank of issue and a State bank of deposit and discount^ but it insists on no political control.