THE Wellington Independent Friday, August 23, 1861. A LOAN AND TRUST COMPANY.

Wellington Independent, Volume XVI, Issue 1611, 23 August 1861, Page 2

THE Wellington Independent Friday, August 23, 1861. A LOAN AND TRUST COMPANY.

The Government by the expenditure of its means may import population to

the Colony, but it can devise no mode by which with such population capital equally necessary and in some due proportion, shall be supplied for the application in the most favorably manner of such labour to the various enterprises to be undertaken. Members of the Chamber of Commerce objected chiefly to a New Zealand Bank from the belief that it would absorb capital in a less profitable manner than it would be used without such an institution having a colonial origin. In our last we pointed out that capital need not necessarily be absorbed by a Bank, and that the condition on which it would be absorbed was that the capital should be raised in our community to be applied to the Banking business in another country; and we showed at the same time that in conducting our banking business, the Union and Oriental, availing themselves mainly of colonial funds, supplied a very small addition to" the capital of the colony out of their own funds — a sum which very probably would not equal the profits they took out of the Colony during any three years in which they have acted as distributors of a portion of the colonial capital. We gather, however, from the statement of these members of the Chamber of Commerce that they were impressed with the belief that we had not now capital to meet the very palpable cases in which it could be profitably and usefully applied for the benefit of the Colony. That the Colony is undersupplied with capital, we believe, is a common conviction , and the important question arises how can that which is wanted, or a portion of it, be obtained for a suflicient period of time. We would suggest that it can, in all probability, be supplied through the agency of a Loan and Trust Company, such as those which are now acting in connection with Australia and with Canada. Institutions of the kind really do supply capital, though banks may or may not not do so, according to a fact to be gathered from a reference to the proportion between their deposits and the loans they make to the colonists. It is very probable that many of our readers are not acquainted with the operations of a Loan and Trust Company. We will therefore briefly describe the character and business of such an Institution, when the means by which it mainly lends capital and secures a good dividend from a very cheaply worked business will become apparent. Such a Company first subscribes a capital of its own, let us say £100,000, and secures a notable direction, one that has connections at home, and is thoroughly trusted by the public. The existing companies are, we believe, English and Scotch and that their capitals were subscribed at home. Such a Company advertises in the English papers that it is always prepared to receive loans, stating the smallest sum it will accept from any body, at, let us say, 6 per cent, and assures the public that all which it loans or lends is secured by mortgage on numerous good properties which are rising steadily in value in the Colonies. It is prepared to receive loans for various terms, almost indeed for any period arranged with the lender. In this way a large amount is procured, and the London Board is consequently receiving and paying back considerable sums of money from time to time, and the intended issue of these transactions is to secure a considerable amount upon which to make loans in a Colony, in addition to such as it can make with its own paid-up capital. Thus with £100,000 paid up and a good Directory, probably a London Company would, by granting interest at home at 6 per cent, secure for use in the Colony with which it was connected £900,000. In such a case the Company would have at its command to loan in the Colony a million of money. Supposing it to loan this sum at ten per cent, it would have a gross income made up in the following manner, £10,000 from its own capital of £100,000 and £36,000 being the difference between six per cent paid by it to parties in England, and ten per cent received by it from parties in the Colony. The two items would make a gross income of £46,000, and if the expenses of management amounted to £26,000, the remaining £20,000 would yield the shareholders twenty per cent upon their paid-up capital of £100,0^0. Such a Company would really provide ,the Colony with capital, and, as it ought only to lend on real estate, a moderate proportion of the value calculated, not in speculation times, but during a somewhat, stagnant period, such, for instance, as we now may be said unhappily to enjoy, the security ought to be nearly as perfect as any security can be, Loans at a low valuation of property would afford security alike to the lender and borrower. The one would be the more certain to receive, and the other better able to pay tlian upon a high valuation, and this therefore ought to be a stringent condition of the management of such a business, A Company suoh as we have described is one of the several means by which the capital of the Colony could be augmented and for a long period. Such a capital applied to real estate would enable some to pay local loans andmort-

gages which would release local capital to be otherwise employed, some to increase the joumber of their acres ; others by improvement to increase the existing value of Iheir properties, and others to withhold or withdraw funds from their estates with which to become shareholders in Insu- i ranee Companies, Banking Companies, Steam Boat Companies, and many other Companies which might be prudently established, alike to the benefit of the individual and advantage of the Colony. We would strongly urge upon members ofthe Chamber of Commerce, and other influential persons in the Colony, and also upon those residing at home intrusted in these islands, the propriety of getting one of these valuable institutions established in connection with New Zealand. Originated by the right person, and conducted in the right way, such a Company would be sure to be adopted as a legitimate undertaking by the monied classes of England.