BANK OF NEW ZEALAND BILL

Wanganui Chronicle, Volume 89, Issue 265, 9 November 1945, Page 5

BANK OF NEW ZEALAND BILL

URGENCY ACCORDED DEBATE VIGOROUS OPPOSITION PROTEST (r.A.) Parliament Bldgs., Nov. 8. There were crowded galleries in the House of Representatives to-night when the second reading debate on the Bank of New Zealand Bill opened. Urgency was taken after tne Opposition had called for a division. When Sir. Fraser moved that urgency be taken Ihcre was a chorus of Opposition cries of protest. Mr. Holland said: “Be fair. You can’t put this off the air-you dare not.” Mr. Fraser attempted 1o make a reply amid further protests from the Opposition, and Mr. Holland was heard to say: “There ran’t be any extensions. I warn you of that.” Mr. Fraser said the Bill would go until after 10.30 p.m., and reasonable progress must be made. So far as the air was concerned Opposition members: “No extension!” Mr. Fraser: '‘All right, that should facilitate Ihe passage of the Bill.” A division was then taken and urgency accorded by 40 votes to 34.

Mr. Nash, moving the second reading, said it was the first occasion for many years that when an iriiportant Bill was before the House the Minister in charge had been denied the opportunity to give an adequate explanation, but he had no complaint to make.

The Bill’s general purpose, said Mr. Nash, was to bring into operation a trading bank under Government control and to promole the general welfare of the Dominion to the extent that banking could help in that direction. Inex.ricably associated with this objective were those of assisting post-war reconstruction and helping servicemen. It was obvious that full employment and successful rehabiiitation were closely linked with the long-term development of the Dominion. The interests of the Bank's customers as well as the interests of the whole country would be preserved. Those who carried on the country’s productive and Industrial activities in various directions should be assisted to the maximum with the Bank's facilities, and this would me done, together with the safeguarding of the country’s interests.

Setting out his own attitude to the taking over of the Bank's shares, Mr Nash recalled that in 1925 he was the author of a small pamphlet. "Financial Power in New Zealand,’’ in which he said the six directors of the Bank of New Zealand, including the four Government appointees, determined the financial policy of the Dominion and they always determined it in the itere.-ts of their shareholders and the financial corporations of the Dominion. However, with the estab, lishment of the Reserve Bank and later the amendment of the Reserve Bank Act after the Labour Government took office, the situation was altcl ed and a satisfactory position achieved. Mr. Nash said that in 1943 at the Labour Party conference he did say that the taking over of the Bank of New Zealand was inopportune and unnecessary. He believed it then. In 1944 his colleagues in the House unanimously decided, at a time when he was away that the privately-owned shares should be acquired. "I am not the dictator of any Government or of any narty. I am simply a member ot the Cabinet and of the party which happens to be in power,” said Mr. Nash. He had never been against the State owning a trading hank, but in 1943, and again in 1944, he felt it unnecessary and inopportune to take over the Bank of New Zealand. His colleagues felt It should bp done. It had been part of the party's policy for half a century. WENT AHEAD WITH JOB

Following the reaching of that decision he had no two minds about it. He went right ahead with the job the Government: wanted done. It was true he had said on one occasion that the bank was doing a better job than the Government could do, but he still felt the State ought to own and control a trading bank. “Following the decision taken by my colleagues we decided in March this year, unanimously to acquire the privately-owned shares,” continued Mr. Nash. “This followed the recommendation of the Labour Party conference, the text of which showed that the Government was asked to investigate the matter.” Following the Government’s decision in March he had made a statement telling the country of the intention to introduce a Bill providing for the taking over of the shares and setting out the manner in which customers’ rights would he safeguarded. That statement covered the Government s policy until thp Bank Bill was introduced last week.

There was no magic’about the acquiring by the State of a trading tank, said Mr. Nash. Mr. Langstone: Or any other bank. Mr. Nash said what was necessary was to determine what money could do and then go ahead and do it. Money in the main extended facilities fo\ producing goods and services in the country, and also facilities for the distribution of those goods. He emphasised that since the war broke out and since his contact with the trading banks of lhe Dominion thev had co-operated fullv—the Bank of New Zealand and the other five banks—but it would be wrong if he did not mention that since the outbreak of the war the trading banks had taken iw £17.000,900 of Government stock. Tn his opinion a private bank did not have the right to take ur> Government stock. It was quite a dicerent thing for an insurance company to do so. When a private bank did so it had an effect on the currency of the country. The tact was that last veer the Bank of New Zealand earned about half a million oounds from its investments in Government stock, and had it not taken un that stock it would have had so much less income with which to pay if ■ dividends. EARLY HISTORY RECALLED Recalling the Bank of New Zealand's early hls'orv, Mr. Nash said that between 1861 a-.d 1895 it took in shareholders’ capital amounting to £2.263.990 but paid out in dividends £2,777,909. Then suddenly it liad nothing. There was not an asset that could be realised nnd the Government had come in. Dividends should not have been paid in those years when the hank was losing money. In effect, the bank lost four millions in the latter years of that period. From 1902 the hank began showing small profits again, and from 1913 it had pnid reasonably good profits. Yet the bank would not ho.’-e survived bad not the Government saved it in 1895. From 1914 to 1919 the bank's assets rose fro..- £2:1250.000 to £43.250,000 ami its surplus increased by nearly £1.500,000. while tlirougl-oul the war years the bank paid a dividend of 15 per cent. Its assets were built up during the

I Great War by the troubles of the country. In 1920 the bank paid a 17’ per cent, dividend and also distributed | £1,125,000 of capital, which meant that jit actually distributed in that year 674 :per cent, on its capital. Of that £750,000 went to the private shareholders and the remainder to the Crown. After that the dividend fell to 134 per cent, but the amount at. the lower rate was actually greater than before. The effect of this transaction was to give the shareholders £2 15s per £1 share.

The bank continued to make large profits, and in 1930 its assets were greater than in 1919. Then the slump came and the bank continued to pav 10 per cent. Tlnoughout the slump the bank, in common with, o.h-'rs, withdrew from the community credits which were vital at that time. The bank was less co-operative with the Government then than it had been latterly. It charged £5 8s 9d per cent, on Treasury bills. Mr. Nash said nobody could have been more co-operative with himself during the war years than the banks and the bank’s dividend had fallen in recent years until it was 7 per cent Discussing the effects of the Bill, Mr. Nash said it ruled out speculation by becoming operative as from November 1. He discussed the options given to shareholders. He said he thought it would pay shareholders to take the 12-year tax-free stock if they paid 6s in the pound Income tax, but they could work it out for themselves. EXTENSION OF TIME REFUSED

Mr. Nash was discussing the options given holders of the long-term D mortgage shares when Mr. H. E. Combs (Govt., Wellington South) moved an extension of time for him It was refused on the Opposition voices.

Mr. Nash said there were three bases of fixing share values—the share value yield, the value which the Government considered scrupulously fair, and what was known as the asse s value. Anybody who purchased shares in the bank prior to 1943 had not done so in anticipation that the Government would take over the bank, but anybody who purchased shares after that did (o to buy and sell profitably or to gain a sound continuing income. Al this point the assets value did not come into it. Mr. Nash said the small shareholder could balance his liability to income tax against the pos;ibilities cf tlie types of stock offered.

He thanked the directors for the co-operative way they had discussed the matter with the Government ana for their co-operation during the war. Some of them had differed strongly wiih the Government, but they had discussed the problems in a helpful way. At no time had Mr. Donnelly sugges:ec that he wa in favour of the Government taking over the shares, but in the interests of tne country and of the shareholders he and the other direc'ors had agreed to carry on and administer the banks’ affairs in accordance with the principles laid down by the Government. PRIME MINISTER BLAMED

M’\ S. G. Holland said Mr. Nash had only the Piime Minuter to biame for not getting an extension of time. Before the House met, said Mr. Holland, he had telephoned Mr. Nash offering him an opportunity to speak for an hour, but Mr. Nash did not mention the Government’s’ intention to take urgency. The Government seemed to expect all the fair play from one side.

“If that is to be the atti.ude we will give no quarter,” he said. A Government member: “And get none.”

Mr. Holland said the Government should at least have done lhe Opposition the courtesy of telling them that it intended to to take urgency to-night. The Opposition could fight, but it would fight clean and above board. Mr. Holland said that Mr. Nash had failed to give any reason for taking over the bank. It was a bad Bill and had a wrong origin. The Minister nad not said he was in favour. He had quoted himself as saying he was against what was now be’iig done. The Bill was the culimination of a long tug-of-war between the Right and Left wings of lhe Labour Party, led respectively by Mr. Nash and Mr. Langstone. Mr. Holland quoted seve?al statements by Mi*. Nash to tbe effect that it was unnecessary to lake over the bank. Mr. Holland declared that the vote of the Labour Party conference determined the policy of the party, and referred to several utterances by Mr. James Roberts to the effect that once tne conference had made a decision it should be abided by. and that "the will of the conference must be done. “A later statement was that meuibers ot Parliament were not allowed to behave as they pleased, but should be controlled. It was a bad day when any outside organisation could exert such influence that the Minister of Finance had to humble and humiliate himself by introducing a Bill after confessing that he was opposed to it. It was certainly a triumph for the Labour Party’s Easte? conference. SOCIALISATION MEASURE. The measure was one more step toward socialisation and a further step toward the strangulation of the country. The present system of Government should not permit an outside organisation to write laws in the Statute Book. The Bank of New Zealand Bill went further than nationalisation of the bank and the Government had achieved remarkable success when it obtained the assistance in implementing its policy of those who formerly were opposed' to such action. This discussion coi.ld be divided into two subjects—expropriation of private property and State control of hanking. The Oppositicn acknowledged that the natona! interest was superior to tlfr interest of the individual, but expropriation of private property ai d State control of banking. The Opposition acknowledged

that the national interest was superior to the nterest of the individual, but expropriation of private property was justified only when such action was unavoidable, and in that event there should be fud compensation paid for any loss incurred. It could be asked: Why could the State not establish a tradirg bank of its own? Mr. Holland said the answer was because such a bank would not get enough customers to carry on business. The Government had no moral right, whatever its legal right might be, to expropriate private property, and so far as compensation was concerned the shares had been taken away from the shareholders, who had never been consulted as to their worth. He quoted lhe member for Waimarino, whom he described as the architect of the Bank of New* Zealand Bill, as saying that lhe houses of lhe people should be publicly owned and privately occupied and that various utililies s*hould be publicly operated. The member for Waimarin > was apparently powerful enough to influence the Minister of Finance, and it appeared that the next step was to expropriate other private propetty. Mr. Holland traced the h.story of the bank and the relations Governments had with it, and then declared that it was no misrepresentation to say that the Bill was designed to bring about changes in banking procedure.

Mr. Holland said he believed that to tamper with the monetary system of the courtry was to tamper with human welfare. There was more money in the country at present than the people knew what lo do with, and in a period oi a lew years there was an increase in the amount in circulation of more than £100,000,000. A policy ol inflation was threatening the country, and the tact that the Minister ot Finance had offered to pay shareholders in cash would add lo inflation—what a story to tell v. hen our gallant serv.cemen wanted their gratuities.

Mr. P. G. Connolly (Govt., Dunedin West): Sixteen millions. Mr. Holland: Ten millions for shareholders. If you can do that for the shareholders you can do the same for the soldiers. Mr. Holland said the Bill was a very bad o: e and contained provisions which were not in the be4t interests of the country. The first people to suffer would be the working man and woman. The Bill wouid increase the supply of money, yet the soldiers, sailors a: d airmen were to be denied the very thing that was being made availab’e to the shareholders. He opposed the Bill, bell, book and candle. The debate was continued by the Hon. A. H. Nordmeyer, Minister of Health. Mr. W. Sullivan (Opp. Bav of Islands). Mr. F. Langstone (Govt. Waimarino), Mr. W. S. Goosman (Opp.. Waikato) and flfrr. H. E. Coombs (Govt., Wellington Suburbs), and the House rose at 11.10 p.m.