Wellington Independent. "NOTHING EXTENGATE; NOR SET DOWN AUGUT IN MALICE." THUESDAY, 24th OCTOBER, 1867.

Wellington Independent, Volume XXII, Issue 2588, 24 October 1867, Page 3

Wellington Independent. "NOTHING EXTENGATE; NOR SET DOWN AUGUT IN MALICE." THUESDAY, 24th OCTOBER, 1867.

If the historian of this colony should not feel himself justified in commencing the chapter of its history, relating to the borrowing and expenditure of the threemillion loan, with the remark that "About this time tho people of New Zealand went mad," Mr Stafford will not be altogether a false prophet. It is very likely that the historian will fail to regard the universal desire to spare no expense to get rid of a war, ruinous if only by reason of its continuing to be long drawn out, as an evidence of mental aberration ; but the more he ponders over the consolidation proceedings of the late session, the more reason will he find to write of it that "About this time the Government acted as if it was demented." Something akin to this is tho judgment which journalists, removed from the excitement of actual strife, are calmly forming from the pages of " Hansard." •' Tho perusal of the speeches of the Premier and Colonial Treasurer will, we are convinced, (says the Nelson Examiner for instance) only confirm the impression that never was a thoroughly bad and rotten case supported by such lame and wretched props. The arguments are in every way worthy the cause." To others, as to us, the reason for the extraordinary line of action which the Government took was unaccountable at the time ; but it becomes still more so, the more and more it is pondered over. A perusal of the evidence given by Mr Russell and of his memorandum accompanying it — printed copies of which have only just reached vs — shows that the Government have stepped much farther beyond the limits of liberality to the bondholders, than even their representative ventured to propose. "We may dismiss any further notice of the fact that the Government introduced a measure (framed after much thought) avowodly ignoring the liability of the colony ; and then withdrawing it, submitted another admitting its liability. That

is admitted, and the consequent loss to the colony has been sufficiently shown already. What we now propose to do is to show, from the documents before us, that the Government has needlessly, and with its eyes wide open, given the bondholders tons upon tens of thousands of pounds more than they themselves considered just or even asked for. Mr Russell says in his evidence that he represents persons who hold Provincial bonds to the amount of " upwards of £400,000." How many of these are held by the New Zealand Bank it is not necessary to enquire. We would prefer eliminating the Bank as much as possible from the issue. We only wish incidentally to mention, that whereas it has got abroad that the Bank has suffered a loss by its dabbling in bonds on its own account, such an impression is unfounded. Mr Eussell says that the first £100,000 of the Auckland bonds sold by the bank , fetched, "at and above par," and that it has neither sold nor offered any of the remaining £400,000 below par. At present, therefore, the Bank has made a profit by its speculation, and of course will make a still larger one now that the bonds are guaranteed. It is only right that we should say thus much, because we have been told that the natural effect of our exposing the heavy loss which the | Bank would have made, had the present Act not passed, would have been to depreciate its shares considerably. It was to avoid this effect on the London market that the Panama steamer was detained to take the news of the passing of the Act through both Houses. The marketable price of the debentures held by the Bank have, fortunately for its shareholders, been raised to their nominal; value, and probably. 5 per cent, beyond it ; but it must not be lost sight of that this is effected at an equivalent loss to the colony. The object of consolidating the Provincial loans is briefly to do away with the confusion of having so many kinds of debentures ; which, it is said, is apt to bewilder capitalists and, by the variable security, depreciate the value of New Zealand credit and paper generally. Mr Russell is asked what, in his opinion, is the best plan for effecting this purpose ; for effecting a complete and final consolidation of the Provincial loans. He answers, " If by ' consolidation ' I am to understand the conversion of all Provincial loans into one General Government loan, of, say six per cent., the Government still desiring to make a profit on the conversion, then I think the plan I propose in ;my Memorandum and the clauses attached, is the best. The plan briefly is —

" 1. The exchange of tall tho bix Provincial six per cent, bonds for General Government six per cent, bonds. "2. The exchange of all other Provincial bonds bearing different rates of interest, according to their value, as proposed in my eleventh clause. ' "3. Upon these exchanges a small premium may fairly he charged, the premium to be such as not to prevent the bondholders' acceptance of the exchange. " 4. Power to be retained as proposed in the Act to buy any bonds for cash. " I believe this* plan would be quite successful, and in six months would ensure the conversion of all the Provincial bonds."

On referring to Mr Russell's memorandum, we find him thus explaining what he means by the " small premium" alluded to in Section 3, and which we have italicised : — The question to be resolved is " upon what terms may the holder of a provincial 6 per cent, bond thus recognised by the General Government as worth £100, or par, fairly be asked to exchange his Provincial bond for a General Government bond of equal amount and rate of interest — both being good, but in one case an ultimate liability only, in the other a direct one — the one not saleable on the Stock Exchange, the other saleable there and now worth £5 premium. It is proposed that the provincial bondholder should give up his Provincial bond and pay £5 premium. This would give the colony a profit on the conversion, and be no hardship to the. Provincial bondholder ; if he did not choose to pay the £5 premium he need not, nor could he complain that the General Government had ignored his position by their overriding legislation. On the contrary, his position is improved by the guarantee of ultimate payment, while asking him to pay the £5 for another and a saleable article is just, as the bond so purchased is actually worth the £5 which he is called upon to pay, but it may be justified also, on the ground that the security he is called on to pay the £5 for, is a different and better one than that which beholds." We need scarcely say more than that the italics are Mr Russell's own. Mr Russell tells the Government that he considers it just that he should pay to tho Government £5 on tho conversion of each of his 4000 debentures, and that the conversion is actually worth the £5 which he proposes to pay. Mr Russell offers gladly to pay the Government £20,000, and says that the holders of the remaining £1,070,000 six per cent bonds will as gladly do the same; which is £53,500, or, together, £73,500. Mr Russell distinctly assures the Government that the holders of all Provincial bonds, will regard it as only just if they are required to pay for the guarantee; and that in doing so they actually lose nothing, because the General Government bond is saleable for £5 premium. And yet the General Govern- ! ment introduce an Act declaring its instant liability (or guarantee), thereby magnanimously refusing to take the £73,500 offered by the six per cent bondholders, with some smaller proportionate addition from the holders of bonds at higher rates of interest !

Further on, in his evidence, Mr -'Russell sa y S . — « Xf } however, by " consolidation." I am to understand simply the getting rid of Provincial bonds, and the substitu-

tion of General Government bonds in lieu' of them — the removal of the discredit at; » present attaching to New Zealand seen- .. ritios by the presence of Provincial paper of undefined value in the • market— then, unquestionably, the best and simplest course, and ono quite certain of success, is to pass an Act accepting the liability for all Provincial loans as they stand, upon all the bondholders exchanging . tlieir bonds for General Government bonds of. a similar amount, and rates of interest within a given time." Here , is an alternative plan. By the 'one''.' first mentioned Mr Eussell says/ybii' can make a just profit of over £73,1500, but possibly the consolidation may hot' l be quite complete. By the second' '• method consolidation is certain, ■• but you will make no profit. The Govern- ■ tnent actually do neither. They refuse the profit offered, and then, instead of gratuitously guaranteeing the provincial, loans " upon all the bondholders exchanging," the guarantee is given at once — before exchanging— which renders consolidation a matter of indifference to the bondolder — every provincial bond of £100 being worth £105, or. whatever the General Government bond may at the, time be selling at. Had the Government bought up the provincial debentures at marketable rates, aa proposed in the first Act introduced, from three to four hundred thousand pounds would have been saved to the colony, without (as is contended) the ' slightest injustice; now, however, on Mr Russell's own admission, the course ' adopted will not only not consolidate, but the £73,500, which a portion of the bondholders were thankfully prepared to pay for the conversion, is lost into the bargain. We know certain parties have pooh-poohed our remarks. "We think they can scarcely do so now ; although we admit that there is great apparent force in the argument with which sceptics are button-holed — " is ifc j likely that the Government would act so absurdly." "We thought it impossible that Government could have so acted, • and it is only fair to say that we believe the Government never would have acted • so detrimentally to the best interests of the colony if it could have helped it. There was a power behind the Colonial Treasury greater than the Treasury itself, and, as the Nelson Examiner remarks, "the case in which it is least easily resisted is, where pecuniary liabilities and personal ■ indebtedness place members and their, votes under the immediate control of particular individuals and corporations." Thus, in addition to those of Auckland, the votes of Hawke's Bay and to some extent of Canterbury were all in the same breeches pocket — Hawke's Bay' being promised an advance of £30,000 and Canterbury of £130,000 contingent on the " Act for paying £300,000 to certain speculators and stock jobbers, and for raising the said sum by way of loan to be charged upon the colonial securities" passing both branches of the Legislature.