BANK OF NEW ZEALAND BILL

Wanganui Chronicle, Volume 89, Issue 271, 16 November 1945, Page 5

BANK OF NEW ZEALAND BILL

SECOND READING DEBATE (P.A.I Parliament Bldgs., Nov. 15. Urgency was again accorded the second reading of the Bank of New Zealand Bill in the House of Representatives this afternoon after formal business had been disposed of.

Mr. W. M. Denham (Govt., Invercargill), continuing the debate, said the Opposition was obviously dissatislied with result of their propaganda, which was trying to raise hostility against the measure. He could not see what all the luss was about. The Government was taking the power lor the manufacture and issue of money from the hands of private individuals and restoring it to the constitutional authority of the King and Parliament. Mr. H. T. Morton (Opp., Waitemata), said one matter which was disturbing the country was what changes was the Government going to make in the conduct of the Bank of New Zealand. The New State Bank would probably issue its first overdraft to the Standard Newspaper Company, Ltd., for about a quarter of a million pounds for the purpose of floating a new daily newspaper. The bank would be used to finance things which the Government and its supporters had been unable to finance by ordinary methods. There had been many subscribers to the lund for a new Labour daily, but little money had been raised because the people of New Zealand did not want such a newspaper. Mr. Morton said the next big overdraft might well be granted the Federation of Labour,” for election expenses, guaranteed in tins case by James Roberts and Walsh and Co." Many on his side of the House, said Mr. Morton, would be less fierce in their opposition to the Bill if the Government withdrew Clause 14 and thus did away with political control, which was vicious and bad.

Mr. F. Hackett (Govt., Grey Lynn) said the public in recent years had been thirsty for knowledge about the mystery which surrounded banking practice, and as that knowledge was quenched more and more people had become determined that the country should master its own financial destinies.

Mr. H. J. Holyoake (Opp.. Pahiatua) asked if the Bill would create greater confidence among those who dealt with banks. The business and commercial community had lost confidence in the Government so far as following anv particular line of policy was concerned. The Government had no mandate from the people to take over the bank. GREATEST LION TAMER. Mr. Holyoake congratulated the Member for Waimarino on becoming Ihe greatest lion tamer in the country and for putting the Minister of Finance through the hoop. However, he deplored Mr. Langstone's criticism of the Bank of New Zealand's balance-sheet, which was described as fraudulent, and declared that if Mr. Langstone could not substantiate that charge against the directors, staff and auditors, he should withdraw it. The Government, should disown such a statement, which had besmirched the characters of the bank officials concerned, or should disown the Member for Waimarino. Mr. J. O’Brien, Minister of •Transport, discussing the history of the Bank of New Zealand, said the bank had paid back the shareholders’ money nine times over. It had been alleged that the Government's action in taking over the shares would be inimical to the farmers’ interests, but in the depression years, when 50 per cent, of the farmers were on the verge of bankruptcy, the bank continued to demand its 7* per cent, on overdrafts. It did not care if butter-fat was worth 18d, Is, or only 6d, but the bank continued to pay 10 per cent, dividends and built, its reserves up to more than £4,000,000. In 1934 the farmers were crying out for a friend but to-day | when the farmers had won prosperity ; under ten years of Labour Govern-j ment, the Chambers of Commerce,' the Bureau of Importers, and others 1 were seeking to befriend the farmers in an attempt to regain the right to juggle with the farmers’ produce on the overseas markets. It was possible, though unlikely, that in future we might again experience times similar to those of the depression years, i said Mr. O’Brien. In that event the Bank of New Zealand would be used to finance the farmers and other producers and help them over their difficulties. Those who were producing the things the country needed woulo not be left to money manipulators concerned only with their own advantage. If ever anybody had lost the confidence of the people of this country then the directors of the bank’ lost it vears ago. The bank would not 1 have survived but for the Government saving it when no one else would do so.

Mr. J. T. Watts (Opp., Riccarton) said that, according to the member fo.* Waimarino when the latter spoke at., Christchurch, the directors of the Bank of New Zealand were “charlatans and sharks.” Yet these were the directors the Government desired to remain in office and help over the next few years. He described the preamble to the Bill as showmanship and said it was the Government’s job to persuade the people that when the bank was taken over chere would be an improvement, in the monetary system. As soon as the bank was taken over there would be a rush by every man, woman and child to the bank] doors for some of the “free money” of which Mr. Langstone had spoken. He challenged the Minister of Finance to demonstrate how industry could be any better served financially by a Government-owned bank than It [had been in the past by privatelyowned trading banks. The Bank of New Zealand would be- 1 come not a State bank but. a political j bank, said Mr. Watts, resuming his* speech after the tea adjournment. The. [galleries were again crowded. The Government, he said, would use I lhe Bill to obtain votes to make the! State supreme, to bring about the 1 socialisation of industry and establisha tyrannical State dictatorship over 1 the*lives of the people. Mr. J. Thorn (Govt., Thames) said if the Bank of England could bp nation-; alised without any dire or blood-curd- : ling results, why should calamity be-; fall this country if we nationaised the: Bank of New Zealand. The Seddon' Government, with the aid of public.' resources, had extricated the bank from the disaster t||at threatened it. • Wide and infiuentim public opinion l felt that, what was done then was totally inadequate and that the bank! should have been brought completely] within State ownership and adminis-j tration. When the Government; brought out. the private shareholders, in the Reserve Bank the nationalisation of the Bank of New Zealand be-• came less urgent than it would other-; wise have been, but the desirability of the sten remained.

Mr. W. F. Doidge (Opp., Tauranga) , said the Bank of England was a central bank while the Bank of New Zealand was a trading bank. The legislation now before the House of Com- 1 mons did not interfere with the trading banks. No reason had been given by any Government speaker for the compulsory acquisition of the Bank of New Zealand. The question had i been asked why the Government, if il wished to operate a trading bank, did

not start its own, but the fact was that while it was easy enough to start a new bank the creation of confidence and the finding of customers was another story. Rather than establish a new bank the Government decided on what was really a < igantic steal. The Bank of New Zealand to-day was a great institution built up over a period of years. It was highly regarded by the people of this country, as evidenced by the fact that it had 100,000 customers. The Government therefore decided, rather than start its own bank, to take over the Bank of New Zealand. The Government knew that with its majority it could reach out and take the bank as easily as it could take candy from a baby. The Minister of Finance, with Machiavellian astuteness, had prevailed on the directors to retain office, thereby retaining public confidence in the bank. It was plain the Government wanted the bank for political purposes, as the speeches of Government members had made plain. The passing of the- Bill would be a triumph for j’ A Lee.

Mr. A. G. Osborne (Govt., Onehunga): You thought he was going to give you a triumph last time. The Bill followed closely the lines advocated by Lee in a book published years ago, even to the issue of nonnegotiable stock, said Mr. Doidge. "INDUSTRIAL BOUNCERS”

Lee fell foul of the political bosses of the country—th& “industrial bouncers” Lee himself had called them—said Mr. Doidge. Those people believed Lee was politically dead today, but if so the conscience of the Labour Party was buried with him. Currency was now to become the most highly-powered weapon in the State arsenal and would be used lethaliy at the elections. The depths to which Government members would sink had been indicated bv Mr. Clyde Carr’s statement that Those dissatisfied with the treatment they received from the bank could appeal to their member of Parliament. Over every member's ga’e would hang the new sign of the three balls. The only pledge the visitor would be required to leave would be that of voting in the right way.

Mr. Doidge said people were more puzzled over the changed attitude of the Minister of Finance than the antics of the Member for Waimarino. The Minister’s volte face had made him not only a laughing stock, but the butt for every lampoon. Perhaps when the division was taken the Minister's conscience would prick so hard that he would go into the same lobby as members of the Opposition The position of the directors of the bank would now be rather like that of Jonah inside the whale, and as comfortable as sleeping with a boa constrictor. Of what worth wa the Minister’s guarantee that the rights of depositors would remain as at pres, ent? The Minister did not resist pressure last year, and it was doubtful if he would in future year.-. Thera were many questions of principle involved and that was the reason for the Opposition's fight against the Bill. Mr. D. Sullivan, Minister of Supply, said allegations had been made that political pressure would be brought to bear and there would be corruption if the Government took over the bank. He reminded the Opposition that there were several State lending institution; and never in their history could he recall anything approaching corruption or improper political pressure being applied to their operations. He repeated what the Minister of Finance had already stated, tha. there would be no interference with the operation* - of the bank except in regard to directions concerning policy. He considered lhe Bill as a good one which would in its operation ultimately prove to be of immense benefit to every section of the community, io all who carried on the economic life of the country, particularly in times of adversity when the danger f ignal went up and prices began to fumble. H ther.e were State-owned banks they would have the first consideration for national security, whereas privatelyowned banks were concerned only in guarding their assets.

Mr. M. H. Oram (Opp., Manawatu) said the Reserve Bank already had complete control over credit and currency and over trading banks. Convincing arguments were therefore necessary to justify the establishment of a State trading bank in these circumstances, but no such arguments were forthcoming from the Government. Even had such arguments been given it remained for the Government to show why shares in a privatelycwned bank should be acquired in preference to setting up a State bank as a new venture. Government speakers had likened the State Bank to State trading departments, such as the State Fire Insurance and the Government Life Insurance offices, but those departments were started

de novo and built up in opposition to existing private enterprise concerns. Moreover, in neither case did the articles of these departments place them under the immediate control of the Minister, as was being done with the Bank of New Zealand. They wore established and left, free to operate within the sphere of insurance practice, just as a State trading bank, if established, should be left, to operate in competion with existing banks. Mr. Oram said the Minister of Finance, the Minister of Health and the Member for Waimarino had based Iher attacks on the Bank of New Zealand because the shareholder.' made profits. Properly understock one of the greatest influences in tm production of goods and trade was the profit motive. It was clearly established that the Government's motive in taking over the bank was purely political, and it could bo said the measure was the waving of the rod flag that led to the socialisation o. lhe means of production, distribution and exchange of goods in the Dominion.

The Prime Minister. Mr Fraser, declared that he would vote wholeheartedly for the Bill. The most conspicuous feature of the debate was lhe complete collapse of the Opposition. which had shown lack of critical analysis of the measure, he said. Apparently the intention of the Opposition was that the Leader, havim made four points, hoped the countrx would agree with them. So far as the first w point, political control, was concerned, would be Opposition suggest dong away with Government control of the Reserve Bank? On the second point, the prices offered for lhe private shares, the Prime Minister considered the Government had dealt very fairly with the shareholders. He saw nothing iniquitous in the Government’s atritude. nor was he going to say that banking had nol played its part in tne history of mankind. But banking had brought some terrible evils with it. There was a terrific danger in the profit motive in the domination of banking. What the Goverment was doing to-day was taking the profit, motive out of banking by buying out the private shC’eholders. Referring to Mr. Goosman’s com-

monts on the action of the bank directors, Mr. Fraser said he had never heard a comparable attack on free citizens from within the House, and he hoped it was an example which xvould not be repeated. An attempt also had been made by the Opposition to confuse the provision for cash payment to shareholders xvith the ques-

tion of servicemen’s gratuities. But that was a device which did not even have the saving grace of being smart. It was a scarecrow which had been put. up by th? Leader of the Opposition and which had already tumbled into ragged pieces. Ex’erybody knew’ that the cash redemption of shares at £2 5s xvould appeal to only a limited number of shareholders and that inflation was not likely to result. Mr. Fraser declared that but for the Minister of Finance Opposition members xvould hax’e had nothing to talk about. The only thing thev had rhapsodised about was th* l Minister and xvhat he had said in the past. There had never been any doubt or difficulties over the principle involved in the Bill as far as the Labour Party was concerned. There had been argument in the ranks of the party as to when it was opportune to take over the bank. That was reasonable enough. There had never been a more able Minister of Finance in New Zealand or elsewheer than Mr. Nash. The only thing that could be said about him was that when he was defeated within his party, not on n matter of principle, but on the question of what was the right time to acquire the bank shares, then he had agreed to lend his ability to the prosecution of the measure for which the partv had votedMr. Ffaser said in like circumstances he would have done the same. Dealing with the suggestion that the bank should be used politically and that inflation would result. Mr. Fraser said the Government had during the war possessed wide powers over credit and currency, hut the fact that those powers had been used wisely and that inflation had been avoided was shown bv the fact that there had been a smaller increase proportionately in bank deposits in this country than in any other. Th*re would be no question nf reckless finance on th? Government’s part when the hank was taken over.

Mr. Fraser said there had been talk of inflation and deflation. As far as he wa? concerned th? difference between them was the difference between hanging and strangling. One led irevifablv to the other, and we d s d not want either. No country’ could nrevent inflation or deflation unless it had full control, tn the first place, of *h? Bank, but even then th? Reserve Bank did not meet all of thn country’s monetary reouirement*;. No one would suggest the introduction o r the nrofit motive into th A business of fhn poet Offle? or suggest th* return of institutions such as th? railways to private enterprise. Yet banking was even more important for good nr ill than anv such institution as those. TTier? was a realm for nrivate enterhn.nks should be run for the profit nrisa hut the question whether motive or for the benefit of th? Mr. Fraser s?id that som? of the control over credit, and over th-» hanking system which was essential in the national Interest was, in fret, taken bv th? Government under var-tim? regulations, but those regulations would be repealed in accordance with the Government’s promise that the war-time regulations would be revoked and that any powers thev conferred would be retained only if embodied in legislation. This Bill was an important sten in the implementation of that, policy. Mr. Holyoak?: Is this lhe only step? Mr. Fraser: It is a very important on , p - There may be need for something in the way of direction of Investment. but. this Bill is r very Important step indee-J. Mr. Eraser said the Government’s whole programme of social security and other progressive legislation* would break down unless two saitguards wore observed: firstly, the country’s credit issue must be used in the country’s interest; seconmy, the people must work had to produce the necessary cor. .met i;t '.es. “That is our ease and it is an invincible one,” concluded Mr. Fraser. Mr. W. A. Bodkin (Opp., Central Otago) said the Primo Minister had undergone a change of heart since the last election. All the preamble to the Bill was window-dressing, and he challenged the Government to produce the writings of any leading Socialist that it was necessary to have State control of the banking system. Mr. Bodkin then moved the following amendment:—“That this House declines to accord a second reading to this Bill until provision is made therein that the value at which th? shares of individual shareholders are to be acquired by His Majesty, shall be determined by a tribunal to consist of a judge of the Supreme Court of New Zealand and two assessors, to be appointed in the same maner as for a Compcsation Court under the Public Works Act. 1925.’’ Mr. H. G. Harker seconded the amendment. Mr. McCombs rose to a point of order and asked whether the amendment was in order, as the Trib’Wial which it suggested had to be paid and that would require an appropriation. Mr. Harker said no appropriation was called for in the amendment as the appropriation was in the Bill. Mr. Speaker ruled th? amenament in order, after which Mr. Nash rose to a further point of order, pointing out that Mr. Harker, who had already spoken in the debate, could not second the amendment. Mr. Speaker upheld this point of order and Mr. A. S. Sutherland then seconded the amendment.

Mr. W. Nash. Minister of Finance, speaking to the- amendment said he thought now, as he always did, that it was a good thing for the State to own a trading bank. It was not, however. a good thing to have taken action in war time. He knew something about the crucial periods which thcountry had faced, and had the banks not acted as they did in 1931 they would have jeopardised the money of the shareholders. He said the Government had taken a clean, straightforward, honest way in its dealings with the shareholders. The shareholders were being offered an unfailing dividend for twelve years. That was something no banking organisation could dream of giving under present conditions, taking into account th? fact that interest rates were inevitably going to come down if a policy of wise Government was followed. The House was left sitting at 12.15 a.m.