NEGOTIATION OF THE 4,000,000 LOAN. (FURTHER CORRESPONDENCE RELATIVE TO).

Appendix to the Journals of the House of Representatives, 1876 Session I, B-03

8.—3.

1876. NEW ZEALAND.

NEGOTIATION OF THE 4,000,000 LOAN. (FURTHER CORRESPONDENCE RELATIVE TO).

Presented to both Houses of the General Assembly by command of His Excellency.

No. 1. The Hon. Sir J. Vogel to Mr. J. Mackeell. 7, Westminster Chambers, Victoria Street, Westminster, S.W., Deae Sic,— 11th October, 1875. In a letter written by Sir P. Gr. Julyan, Dr. Peatherston, and Mr. Sargeaunt to the Colonial b _ Secretary of New Zealand, and dated 13th May, 1875, the following passage occurs : — No. " We should here explain that, in order to carry out an arrangement which, as we have since been informed by the solicitor employed on the occasion, Mr. Voxel had entered into with Mr. Eussell, provision had been made in the contract with Messrs. Eothschild that the money should all be paid into the Bank of New Zealand." I should be glad to be informed if this passage correctly states that you gave such information. I may add that, if you did so, such information was not correct. At the request of my co-Agents, I asked Mr. Eussell if the Bank would consent to receive and sign for the deposits. The consent was necessary before it could be stated in the contract with Messrs. Eothschild and Sons that the Bank would perform those duties. The arrangement about increasing the rate of interest was quite distinct, and was not even mooted until some time subsequently. I have, &c., John Mackrell, Esq., &c. Julius Vogel.

-5,1875. 10.

No. 2. Mr. J. Mackeell to the Hon. Sir J. Vogel. Deae Sic Julius, — 21, Cannon Street, London, E.C., 13th October, 1875. I have the honor to acknowledge your letter under date of the 11th instant, inquiring if the following statement, contained in a letter written by Sir P. Gr. Julyan, Dr. Peatherston, and Mr. Sargeaunt to the Colonial Secretary of Now Zealand, dated 13th May, 1875, is correct: — " We should hero explain that, in order to carry out an arrangement which, as we have since been informed by the solicitor employed on the occasion, Mr. Vogel had entered into with Mr. Eussell, provision had been made in the contract with Messrs. Eothschild that the money should all be paid into the Bank of New Zealand." In reply, I beg to state that I am at a loss to understand how the information I gave Sir P. Gr. Julyan (who was not a party to the contract with Messrs. Eothschild) respecting the terms thereof could have been so misunderstood, as I was not aware of any arrangement having been entered into between you and Mr. Eussell except simply that the New Zealand Bank should undertake the receipt of the various instalments and sign the scrip certificates. When the contract was being prepared, I explained to you, Dr. Peatherston, and Mr. Sargeaunt that it was necessary to stipulate therein to whom the money should be paid ; and it was arranged between you that you should see Mr. Eussell and ascertain whether the New Zealand Bank would receive it, and undertake the trouble of signing the scrip certificates on payment of the various instalments. This you did, and the name of the Bank was inserted in the blank which had been left in the draft contract for the purpose, and the contract was then submitted by Dr. Peatherston and Mr. Sargeaunt to Messrs. Eothschild for approval. I have, &c., The Hon. Sir J. Vogel, K.C.M.G. John Mackeell.

No. 3. The Hon. Sir Julius Vooel to Sir P. Gr. Julyan, &c. 7, Westminster Chambers, Victoria Street, "Westminster, S."W., Gentlemen, — 15th October, 1875. I observe in the " Correspondence relative to the Negotiation of £4,000,000 Loan," published in New Zealand, a letter of yours dated. 13th May, addressed to the Hon. the Colonial Secretary.

8.—3

2

2. Until the printed paper reached me, I had not seen a copy of that letter, nor of the enclosed case for Counsel, and Counsel's opinion. 3. I now write in order that you may make any explanation you think proper ; for I am unable to disguise my opinion that it was an unjustifiable proceeding to send to the Government such a letter and enclosures without supplying me with a copy. It is true that I had previously written to the Colonial Secretary, enclosing copy of correspondence with you, without showing you my covering letter ; but there is a wide difference between my sending to my colleagues a letter which they might have decided to treat as confidential, and your sending such a letter without showing it to me—the member of the Government to whom belonged the charge of the matters to which your letter specially referred. Tour withholding from me the important legal opinion you had obtained relative to the Bank of New Zealand seems to me entirely without justification. 4. I take the opportunity of adding that paragraph 6of your letter is incorrect. The arrangement with the Bank as to increasing the rate of interest was not contemplated at the time of the arrangement with Messrs. Eothschild and Sons. It was an entirely distinct matter, and was proposed some time subsequently. The Agents for the negotiation of the loan were parties to the deposit of the money with the Bank. It was at the wish of the other Agents (yourselves, with tho exception of Sir P. G. Julyan, who was absent) that I asked Mr. Eussell whether he would consent to the Bank's name being inserted in the contract with Messrs. Eothschild and Sons, the consent of the Bank being necessary before it could be stated that it would perform the duties of signing for the deposits and handing over the scrip. 5. When Mr. Peatherston and Mr. Sargeaunt discussed with me the question relative to the Bank of New Zealand, there was not, so far as I am aware, any doubt as to the propriety of the deposits being left with that Bank. There was a question whether payments should first be made to the London and Westminster Bank, and the money afterwards be handed over to the Bank of New Zealand; but, as I pointed out, that would have involved loss of interest during the intervals between payment and transfer; and it was then agreed that all moneys should be paid to the Bank of New Zealand, if that Bank was willing to receive the deposits, and to sign and deliver the scrip. 6. I was not aware that Baron Eothschild drew your attention to " the serious responsibility that leaving such a large sum with one Bank would necessarily entail." 7. I will only add that I am strongly of opinion that my colleagues supposed you had supplied me with a copy of your letter of the 13th May, and of the enclosures to which I have referred, or that they would not have printed the letter and presented it to the Assembly, without first giving me an opportunity of commenting upon it. 8. I enclose you a copy of correspondence with Mr. Mackrell. 9. As I am leaving England so shortly, I shall feel indebted to you for as early a reply to this letter as you can conveniently make. Sir P. G. Julyan, K.C.M.G. I have, &c, I. E. Peatherston, Esq. Julius Vogel. W. C. Sargeaunt, Esq., C.M.G.

See Nos. 1 and 2

No. 4. Sir P. G. Julyan, &c, to the Hon. Sir J. Vogel. Sic, — London, 16th October, 1875. We have the honor to acknowledge the receipt of your letter of the 15th instant respecting a communication addressed to the Government of New Zealand, in May last, by the Agents for managing the Public Account of the Colony in this country. As one of those Agents (Mr. Sargeaunt), who took an active part in the matters referred to, is out of town, and is not expected to return for some days, we regret that it will not be in our power to comply with your request for an early answer; but, should you have taken your departure before we are enabled to confer with our colleague, a reply shall be addressed to you by the first following mail. We have, &c, I. E. Peatheeston. Sir Julius Vogel, K.C.M.G., 7, Westminster Chambers. P. G. Julyan.

No. 5. The Hon. Sir J. Vogel to the Hon. D. Pollen. Westminster Chambers, Victoria Street, Westminster, S.W., Sic,— 21st October, 1875. I have the honor to forward to you copy of correspondence with Mr. Mackrell, solicitor, and with Sir P. Gr. Julyan, Mr. Peatherston, and Mr. Sargeaunt. 2. Tou will gather from these documents that the letter No. 10, dated London, 13th May, 1875 (B. —No. 5), in the printed paper, "Correspondence relative to the Negotiation of the Four Million Loan," and headed " Tho Loan Agents to the Hon. the Colonial Secretary," had not been seen by me until I saw it in that paper; and that I had also not previously seen the enclosed case for Counsel and Counsel's opinion. You will further observe that I impugn the correctness of paragraph G of that letter. 3. I feel certain you would not have published the letter, and the enclosures named, without first giving me an opportunity to remark upon them, had you not supposed they had previously been submitted to me. 4. I am of opinion that the conduct of the three Agents, and especially of Mr. Peatherston, the Agent-General, in sending to the Government such a letter and enclosures, without allowing me to see

Nob. 1,2,3, and 4.

8.-~ 3

3

them, is most unbecoming, and detrimental to the interests of the public service; and I have the honor formally to make complaint upon the subject. 5. Information I have received from the colony leads me to suppose that, owing to the letter in question, and particularly its sixth paragraph, a wide-spread misunderstanding exists as to my action in London. That information causes _ne to conclude that the impression prevails in New Zealand that it was my personal action that led to the proceeds of the Pour Million Loan being deposited with the Bauk of New Zealand, and that the arrangement with the Bank for increasing the rate of interest determined the deposit of the money with the Bank. 6. I believe that sufficient importance has not been given to paragraph 2 of my letter to you, dated 4th May, as follows: —" I may observe that it was not until I had informed the Agent-General of the terms I had made with the Bank, that any intimation was given to me of its being deemed desirable to remove part of the account." 7. The determination to deposit the money with the Bank of New Zealand was arrived at by the Agents at the time of the negotiation with Messrs. Eothschild and Sons. Sir, P. G. Julyan was absent; but the other three Agents agreed upon the point. There was some discussion between us as to whether or not the money should be first paid into the London and Westminster Bank, and afterwards be transferred to the Bank of New Zealand, as had been done on previous occasions. I objected to this course, because it would involve loss of interest between the dates of receiving and paying over the money, and that no possible object could be gained by first paying the money into one Bank, and then handing it over to another. It was then determined that, if the Bank of New Zealand were willing to sign for the deposits and to hand over the scrip, the payments should be made to that Bank. Of course without the consent of the Bank to perform the duties mentioned, its name could not be inserted in the contract as that of the Bank to receive payments; and I was asked to merely see Mr. Eussell, and obtain the consent of the Bank. 8. No intimation of a desire to change the account having been made to me, and the money having been, by agreement, deposited with the Bank of New Zealand, I felt it to be my duty to obtain the largest interest possible for the balances. Tou will have observed that the opinion of Counsel obtained by the other Agents fully bears out my action. lam not at all now dealing with the question what course I might have adopted if, at the time of the negotiation of the loan, the other Agents had objected to payment into the Bank of New Zealand. There cannot, I think, be any doubt that that Bank is, by our agreement (which cannot be broken, without six months' notice), the Bank of the Government. At the same time, the management has always shown readiness to consider modifications of the agreement rendered necessary by peculiar cireumstauces; and, had it been desired by the other Agents to limit the amount to be deposited with the Bank, I feel sure there would not have been the slightest difficulty in arranging it, so far as the Bank was concerned. I considered at the time — and I cannot now see any reason for coming to another conclusion—that the idea of interfering with the account only occurred to the other Agents after I had arranged with the Bank for a better rate of interest, and had informed the Agent-General of the fact. 9. I am of opinion that, should it be desired, in future, to limit the amount deposited with the Government Bank, it would be advisable tho balance should be invested in Consols, which are always saleable, and the fluctuations in the price of which are not large, and would, except very rarely, be covered by accretions of interest. In the absence of disturbing causes, Consols could be sold at tho price at which they had been purchased, and there would be the interest that had accrued between purchase and sale. 10. As so much publicity has been given to previous correspondence on this subject, I have the honor to suggest that this letter and the enclosures should also be published. I have, &c, Hon. D. Pollen, Wellington Julius Vogel.

8.—5, 1875. No. 7.

8.—5, 1875. Enclosure 5, in No. 7.

No. 6. Sir P. Gr. Julya_. &c, to the Hon. Sir J. Vogel. See, — London, 16th December, 1875. Eeferring to the letter addressed to you by two of us on the 16th October last, we have now to reply to your letter of the 15th of that month. 2. Tou state that in your opinion it was an unjustifiable proceeding on our part to address to the Government of New Zealand our letter of the 13th May last, without supplying you —the member of the New Zealand Government to whom bel6nged the charge of the matter under consideration —with a copy of it; and that the withholding from you the important legal opinion we had obtained relative to the Bank of New Zealand, appears to you to be entirely without justification. ' 3. The circumstances of the case were these: —By the 16th section of "The Public Eevenues Act, 1872," the Governor of New Zealand, or any person or persons duly authorized by him by Warrant, was empowered to direct into what bank or banks all moneys, the property of the Government of New Zealaud in any place beyond the colony, shall be paid; and by Warrant under the hand of the Governor, dated Wellington, the 18th day of January, 1573, in pursuance of the above powers, we—viz., Isaac Earl Peatherston, Esq., Penrose Goodchild Julyan, Esq., C.8., and William Charles Sargeaunt, Esq.- —were empowered to direct and appoint into what bank or banks, in the City of London, moneys the property of the Government of New Zealand should be paid. 4. On the 20th April last, we informed you that the amount standing to the credit of the New Zealand Public Account at the Bank of New Zealand was £2,228,4^2; that we had considered the propriety of keeping so large an amount at any one bank ; and that, acting on tho powers vested in us by the Warrant referred to above, we proposed to divide the amount by placing portions of it on deposit with some of the large joint-stock banks, such as the London and Westminster and the London Joint-Stock Bank.

8.—3

4

5. Before doing so, we took advantage of your presence in this country to consult you on the subject, by requesting you to be so good as to inform us whether you saw any ohjection to the course we proposed. 6. It appeared to us that a most serious responsibility rested on us in this matter, and that the Government of New Zealand, having caused us to be vested by JVarrant with certain precautionary powers, would naturally look to us to exercise those powers to the best of our judgment. 7. Alive to this heavy responsibility as Agents for the management of the Public Account, in which capacity we were then acting, and actuated by a desire, as far as possible, to act in accordance with your views, we communicated to you the steps we proposed to take. 8. In your letter of the 29th Aprjl, you favoured us with your views on the subject, and concluded by stating that you were willing to take upon yourself the responsibility of instructing us not to act as we had proposed, except on further instructions from the colony ; in other words, you were willing to instruct us to keep nearly two millions aud a quarter pounds (£2,250,000) at a Bank whose whole capital was but £600,000. 9. We admit that it appeared to us that, as an absent member of the Government of New Zealand, you had not power to do by letter that which you could not have done by letter had you addressed us from the Treasury at Wellington, viz., set aside the jpowers vested in us by a Governor's Warrant. 10. Under these circumstances, wo sought legal advice, and were advised that we ought not to disturb an arrangement made by the Colonial Treasurer with the Bank of New Zealand before you left the colony (Minute of August 2, 1873) ; in other words, that wo should be justified in leaving this large sum with the Bank of New Zealand, as you desired. 11. This opinion appeared to us to enable us to follow your wishes, more particularly as you had taken upon yourself the responsibility of the matter. 12. Such, then, were the circumstances under which we took legal advice. It does not appear to us that we, as Agents for the management of the Public Account, were in anywise called on to furnish you —with whom we had been associated, it is true, in the raising of 4110 Pour Million Loan (and in no other respect, so far as we are aware) with a copy of that opinion; and the more so as that opinion enabled us to act in accordance with your views. 13. We addressed the Government of New Zealand, from whom we had received our powers ; and we fail to see that our conduct in this matter is without justification. Self-respect would have withheld us from offering any slight or want of consideration to any Colonial Minister. 14. We had not received any communication from the Government of New Zealand, or Warrant, cancelling the powers vested in us by the Warrant of 18th January, 1573 ; and it appears to us that we were amply justified in considering that the power of appointing a bank or banks for the safe custody of the funds in this country belonging to the Government of Now Zealand, vested in us. We do not agree with you that to you belonged the charge of tho matter to which our letter specially referred. 15. To have held a contrary opinion would have amounted to our acquiescence in what you appear now to claim, viz., the power, as a member of the Government of New Zealand, when absent from tho colony, to set aside a Governor's Warrant giving effect to provisions of an Act of the Parliament of New Zealand. 16. As regards the accuracy of paragraph 6 of our letter of the 13th May last, we have to state that it appears to us that no good can result from any discussion on the subject; but we cannot acquiesce in the correctness of your recollection of past events, as narrated in paragraphs 4 and 5 of your letter under acknowledgment. 17. Tou state that you were not aware that Baron Eothschild drew our attention to the " serious responsibility that having such a large sum with one bank would necessarily entail;" but you doubtless remember that Mr. N. de Eothschild, at the request and in the presence of one of us, as well as in the presence of his brother, Mr. A. do Eothschild, repeated to you his father's opinion as to the advisability of dividing so large an amount amongst some of the chief joint-stock banks in this city. 18. The absence of one of us from London prevented a reply being returned to you before you left this country. We forward this by the first opportunity after your departure. We have, &c, P. G. JuLYAJM". I. E. Peatheesto-T. The Hon. Sir Julius Vogel, K.C.M.G. W. C. Saegeaunt.

No. 7. The Hon. Sir J. Vogel to Sir P. G-. Jultan, &c. Gentlemen, — Treasury, Wellington, Bth March, 1876. I have the honor to acknowledge the receipt of your letter of December 16th, in reply to mine of October 15th. 2. Tou do not offer any explanation upon the point I raised respecting the following passage in your letter to the Colonial Secretary:—"We should here explain that, in order to carry out an arrangement which, as we have since been informed by the solicitor employed on the occasion, Mr. Vogel had made with Mr. Eussell, provision had been made in the contract with Messrs. Eothschild that the money should all be paid into the Bank of New Zealand." In my letter to you, I stated that this passage was wholly incorrect ; and I fortified my statement by sending you copy of correspondence with Mr. Mackrell, the solicitor to whom you refer. Tou content yourselves by saying, as a reply, "it appears to us no good can result from any discussion on the subject." 3. In considering the question of your sending to the colony a letter of which you had not shown me a copy, it is essential to remember that the document contained a passage (that which is

5

8.—3.

quoted above) calculated to prejudice the whole matter under consideration ; inasmuch as it went directly to create the impression that the money was originally deposited with the Bank of New Zealand by my directions or arrangement, and against the wish of you, this other Agents. The fact was, on the contrary, that the only other two Agents who had anything to do, directly, with the arrangement with Messrs. Eothschild and Sons agreed (without, as far as I am aware, any dissent) to the money being lodged with the Bank of New Zealand. 4. I do not think, even assuming the correctness of all you state, that, upon your own showing, you satisfactorily explain your withholding from me a copy of the letter you sent to the colony, and of the legal opinion it covered. The proof that the course you adopted was open to the exception I took to it, is to be found in the two facts, that your letter was published under the belief that I had seen it, and that its publication created the false impression that it was I who constrained the deposit of the loan proceeds with the Bank of New Zealand. Neither can I admit that you correctly set forth the circumstances. The Warrant upon which you lay so much stress was sent to you (as has been before explained) to be acted on if you at any time considered the position of the Bank of New Zealand made it necessary to withdraw the Government moneys thence. 5. It is true that on April 20th, you informed me that you wished to withdraw part of the deposits from the Bank of New Zealand; but, as already stated, you agreed, when the arrangement was made with Messrs. Eothschild and Sons, to the proceeds of the loan being deposited with that Bank. After that had been agreed to, I, as Colonial Treasurer, did that which seemed to me an obvious duty—arranged with the Bank to give the Governmeut better terms as to interest upon the deposit than they were bound under their general agreement to give. Not until Dr. Peatherston had been informed of this favourable arrangement did you even hint to me that you desired to transfer part of the funds. Tou then wrote to me to that effect. When I received your letter, it seemed to me to have been written because I had made that arrangement with the Bank; and I took the responsibility of directing you not to interfere, pending a reference to the Government. As I have before stated, if, when the negotiation with Messrs. Eothschild and Sons was proceeding —as to the circumstances of which Mr. Mackrell's letter is very explicit—it had been considered hy the Agents desirable to divide the deposits, I am sure the Bank of New Zealand would not have objected, or raised the point of its right to object. But at that time the only question was, whether the money should be paid into the London and Westminster Bank to the credit of the Crown Agents, and be thence transferred to the Bank of New Zealand. 6. It appears to me that you go beyond the matter under consideration, for the purpose of reflecting on my conduct as a Minister. I might answer your imputations and reflections by merely pointing you to the opinion of Counsel obtained by you, which opinion upheld the course I had adopted. Indeed, you admit this, and a reference to the document could leave no doubt as to the point. But you must permit me to say, I do not consider I owe you an account of my conduct as a Minister, or that you have any right to raise such a question. I say this without desire to wound you, and solely because I conceive that respect for the position I hold demands of me to say it. 7. I do not recollect that Mr. de Eothschild made such a representation as you state in paragraph 17 of your letter. I recollect his saying something on the subject; but my memory is, that it had reference to whether Messrs. Eothschild and Sons should receive the scrip deposits, a duty which I understood Messrs. Eothschild to say they desired should be undertaken by a bank. Whatever Mr. de Eothschild may have said, it evidently did not aft'ect the views of the Agents as to depositing the proceeds of the loan with the Bank of New Zealaud ; for, as I have said, this was agreed to without dissent. I have, &c, Sir P. G. Julyan, K.C.M.G. Julius Vogel. I. E. Peatherston, Esq. W. C. Sargeaunt, Esq., C.M.G.

No. 8. The Hon. Sir J. Vogel to the Hon. D. Pollen. Sic, — General Government Offices, Wellington, 12th April, 1876. I have the honor to enclose copy of further correspondence with Sir P. G. Julyan, Dr. Peatherston, and Mr. Sargeaunt respecting the Pour Million Loan. 2. I need not comment upon these letters. But there has been very much misrepresentation on the subject of the negotiations ; and the correspondence, although I believe sufficiently explanatory, is very long. I desire, therefore, to make distinct statements upon certain points ; for statements of an opposite nature were made upon most of those points during the past Session. 3. The necessity for negotiating at least three millions is now, I believe, fully recognized ; but I wish to say that, from the outset, Dr. Peatherston was fully aware of this necessity. I have in my possession a calculation of his, by which he showed his co-Agents that two millions would not be sufficient. To the statement that I was ever willing to take 88 for the loan, I give the most unqualified denial. In fact, I was persuaded we could obtain 90 nett, and I was anxious to try to get 91 nett. 4. I state that it is incorrect to say that I compelled my fellow Agents to deal with Messrs. Eothschild and Sons. Whilst I had asserted that I felt myself at liberty, as Colonial Treasurer, to issue, if necessary, instructions to the three Agents, it was clearly understood that I had not done so. Those gentlemen, individually, were willing I should try to get 94 from Messrs. Eothschild and Sons, less 2 per cent, commission, and 1 per cent, accrued interest to purchasers, equal to 91 nett. Dr. Peatherston and Mr. Sargeaunt agreed to this, and that I should see Baron Eothschild. I invited Dr. Peatherston to accompany me, and Mr. Sargeaunt went to obtain Sir P. G. Julyan's formal assent, he having been unable to attend the meeting of Agents. 5. I append copy of the memorandum of what it was agreed I should ask Messrs. Eothschild, and which Dr. Featherston and I took with us on our visit to that firm. 2—B. 3.

Nos. 6 and 7.

B.—B.

6

6. Whilst we were having an interview with Baron Eothschild, I received a note from Mr. Sargeaunt, saying, " I have seen Sir Penrose Julyan : he agrees that the offer as arranged this morning should be made to Messrs. Eothschild at 94, &c, provided they guarantee not less than three millions, and would agree, if we all wished it, to take 1 per cent, less, provided they guaranteed the four millions." 7. You will see, therefore, that it is absolutely untrue that I forced the other Agents to accept the terms of Messrs. Eothschild and Sons. My co-Agents were just as much assenting parties to the arrangement as I was, and Dr. Featherston, at least, expressed great satisfaction with it. 8. The conjectures as to what Messrs. Scrimgeour might have done were surely set at rest by the result of what they attempted. Messrs. Scrimgeour had two whole days for forming a syndicate to take up the loan ; and at the end of that time, Mr. Scrimgeour came to me and said he could not do anything unless I definitely closed all negotiations with Messrs. Eothschild and Sons. He added that he did not advise or ask me to do this; and, replying to a question, he said he was not prepared to offer any price for any amount. I take this opportunity of saying that the Messrs. Scrimgeour did what they could to assist us; and it was to me a matter of regret that they did not participate in the results. 9. As to the deposit with the Bank of New Zealand, I assert positively that it was done with the concurrence of Dr. Peatherston and Mr. Sargeaunt. The only question raised was, whether the money should first be paid to the credit of the Loan Agents at the London and Westminster Bank, and afterwards be paid by them into the Bank of New Zealand. I objected, on the ground of the unnecessary loss of interest between the lodgment and the payment over of the money. It was then agreed that payment should be made direct to the Bank of New Zealand; and the name of that Bank was inserted in the agreement. It was not until I had arranged for better terms of interest, and the Bank had prepared for using the money, that Sir P. G. Julyan, Dr. Peatherston, and Mr. Sargeaunt intimated to me their desire to divide the account. I looked upon their action as purely vexatious, and I did not consider the risk objectionably large. It was larger in appearance than in reality; for the Bank in the colony was buying the bills of the Government drawn upon the Bank in London, so that it was, in fact, paying over part of the deposits. If, when the question of deposit was before us, it had been decided to be advisable to divide the account, there would have been no difficulty in so arranging with the Bank. The opinions expressed last Session, that the arrangement with the Bank was in the nature of lodging a fixed deposit, seem to have been formed under a misapprehension of the term "average amount of deposit." It was not meant that there would be usually the amount stated, but that, taking the daily balances all round, the average would be about that amount. If, for example, there was one day twice the specified amount, that would be compatible with there being no credit balance on another day. The average of one million five hundred thousand pounds during the first six months did not mean that there would be that sum at deposit every day during that period. The assurance given was, in fact, one which would have made it very risky for the Bank to have considered the deposits fixed ; and I state my belief that better terms than those I arranged for could not have been obtained from any other safe institution. 10. The idea of obtaining better terms from the Bank was suggested to me by the Hon. Mr. Hall. Speaking to him one day of the large amount deposited, he expressed the opinion that I might be able to get better terms of interest from the Bank, and lat once set myself to do so. We neither of us considered that there was any question as to leaving all the money with the Bank. The first notion of such a thing was conveyed to me by the three Agents, after I had advised Dr. Peatherston, as AgentGeneral, that the Bank would increase the allowance of interest on the deposits. Then, a copy of the Warrant forwarded home by the Hon. Mr. Hall was enclosed to me in the letter .dated 20th April, 1875, already published. Immediately I received this, I sent to Mr. Hall, to ask him the circumstances under which the Warrant was forwarded to England; and his recollection corroborated mine, that it was designed only to be used in case the Bank got into difficulties. I have, &c, The Hon. D. Pollen. Julius Vogel. \

Enclosure. 5-30 years ; 4| per cent. ; interest payable on Ist February and Ist August. Amount, £4,000,000. Price, 94: 4on application; 10 on allotment; 80, three months from interest commencing, say from Ist March. Pirst coupon to be for five months. Power to pay up at 93. Commission 2 per cent., and actual cost of advertising. Messrs. E. to guarantee that the whole amount is sold.

No. 9. The Loan Agents to the Hon. the Colonial Secretary. Sic, — London, 20th September, 1875. The final payments having now been made to the Bank of New Zealand, on account of debentures issued under " The Immigration and Public Works Loan Act, 1874," we enclose a statement showing the nett proceeds realized by the issue of the Pour Million Loan. As you were informed by our letter of the 27th July last, the whole of the debenture bonds had been delivered over to the Bank of New Zealand to be exchanged for the scrip certificates ; and up to the present date we have received back scrip, representing £3,352,000, which we have requested Mr. Hartwright, of your Audit Department, to verify and see cancelled. The remainder will be treated in a similar manner when received. We have, &c, P. G. Julvan, I. E. Peatherston, The Hon. the Colonial Secretary, New Zealand. Agents for New Zealand Loans.

7

8.—3

Enclosure. NEW ZEALAND. The Loan Agents in account with the Government of New Zealand, in respect of the Loan of £4,000,000, 4_ per cent. 5-30 Debentures, issued under " The Immigration and Public Works Loan Act, 1874." De. £ s. A. To proceeds of Loan of £4,000,000, at 94 per cent. ... ... ... 3,760,000 0 0 • „ 5 per cent, per annum on Instalments of Loan paid in arrear of the respective due dates ... ... ... ... ... ... 325 18 6 £3,760,325 18 6 Cb. £ s. d. By Commission, at 2 per cent., on £4,000,000, paid to Messrs. Rothschild ... 80,000 0 0 „ Discount allowed on Instalments of Loan paid before the respective due dates ... 24,914 11 4 „ Cost of Paper and Printing Debentures ... ... ... ... 837 3 0 „ Cost of Scrip Certificates and Stamping ... ... ... ... 131 5 6 „ Supervising the Printing of Debentures and Scrip Certificates ... ... 47 19 3 „ Stamp Duty, at 2s. 6d. per cent., on £4,000,000 Debenture Bonds ... ... 5,000 0 0 „ Paid Messrs. Mackrell and Co. for Legal Expenses in connection with the Loan generally ... ... ... ... ... ... 236 5 0 „ Messrs. Rothschild—Expenses of Advertising Loan ... ... ... 499 12 6 „ Bank of New Zealand —Cost of Telegrams sent to Sir J. Vogel ... ... 2183 £111,069 14 10 ~ Balance placed to the credit of the Receiver's Account during the operation ... 3,648,656 3 8 £3,760,325 18 6 In addition to the above, the Government have, on the one hand, become liable to interest at the rate of 4J per cent, from the date of the debentures to the date of last payment, 16th September; and on the other hand, they will receive interest on money deposited at the Bank of New Zealand up to the same date, at rates varying from li to 2f per cent. P. G. Jultan, "} London, 21st September, 1875. > Loan Agents.

No. 10. The Crown Agents to the Hon. the Colonial Secretary. Offices of the Crown Agents for the Colonies, Sic, — Spring Gardens, London, S.W., 21st September, 1875. Our labours as Loan Agents under " The Immigration and Public Works Loan Act, 1874," have, as you will learn by another letter forwarded to you by the present mail, been brought to a natural close; and we now beg to address you in our capacity as Crown Agents for the Colonies, with regard to any future operations of similar character which your Government may possibly require carried out in London. For many years before New Zealand became self-governing, wo transacted all its general business in this country, and subsequently, under responsible government, we have been the negotiators and consolidators of its various loans; and it has been with very great interest and anxiety that we have watched the steady advance of its credit in the money market of London, from the issue of its first Loan in 1863 up to the year 1874. So far as these valuable results have been due to financial operations devised and carried out in this country, we think we may fairly claim to have contributed in no small degree to their realization. Our efforts have, throughout the whole period, been most conscientiously and exclusively directed to the advancement of the interests of the colony, and we have had the good fortune, until very recently, to act in the most perfect harmony with the several gentlemen from the colony who have from time to time been associated with us in the negotiation of your loans; while, on the other hand, we have been encouraged, under all difficulties, by the enlightened support of successive Governments, and by the evidence we have repeatedly received of the approval and appreciation of our services by those most interested. Under these circumstances, it is most painful to us to prefer the request we are about to make; but we owe it to ourselves, and to the Government of New Zealand, to do so. The correspondence which has already taken place on the subject renders it unnecessary that we should recapitulate here the points of difference which unhappily occurred between Sir J. Vogel and his co-Agents, during the negotiation of the last loan. It will suffice now to state that it would be hopeless for us to expect —unless we were to consent to perform the (to us) impossible part of " dummies," which the Government never could have contemplated when asking us to accept the position of joint Agents for raising the loan—to again act harmoniously in similar capacities in conjunction with Sir Julius Vogel; nor can it be for the interests of the colony to incur the risk of its becoming known, during the negotiation of a public loan, that serious differences of opinion existed between ourselves and a member of the Colonial Government as to the mode of dealing with it. It was nothing but considerations of this kind, and the fear of seriously embarrassing the Government, that prevented us from withdrawing from all participation in the late negotiations. It is due to your Government, therefore, that w re should make known these circumstances ; and it pains us exceedingly to add a request that our names may not again be associated with that of Sir Julius Vogel in the negotiation of any future loan, since we cannot consent to be coerced by one of four Agents into the adoption of any course which, in our opinion, is not tho one best calculated to serve the true interests of the colony.

8.—3

8

It is due to Dr. Peatherston to state, that we have always found him most zealous and most conscientious in the discharge of his functions as Loan Agent; and that, while fearlessly expressing his own opinions as to what is best in the interests of the colony, his courtesy and practical good sense bave invariably enabled us to reconcile our views with his on all important points, and to act in perfect concord, and with great pleasure, in everything where tbe financial affairs of New Zealand have called for our united action. With tbe exception we have named, we shall in the future, as in tbe past, have great pleasure in furthering the views and objects of the New Zealand Government in this country to the best of our ability. We have, &c, P. G. J-LY__. The Hon. the Colonial Secretary, New Zealand. W. C. Saegeatjnt. [Receipt of the above was acknowledged by the Secretary to the Treasury, on tbe 17th November, 1875.]

No. 11. Executive Minute. Read, the letter from the Crown Agents to the Hon. the Colonial Secretary, dated 21st September 1875, and agreed to the following memo.: — 1. The letter of the Crown Agents appears to the Executive to be inconsistent with tbeir continued employment, as tbe writers assume to control the discretion of tbe Colonial Government in the appointment of Agents. 2. Tho Crown Agents bave, during tbe past few years, acted as Loan Agents rather as individuals than in tbeir official capacity.- Sir Penrose Gr. Julyan only was at first appointed: subsequently, Mr. Sargeaunt was added, to meet tbe contingency of Sir P. Gr. Julyan's absence. Separate payments were made to them as Loan Agents, which it was understood did not pass into tbeir official receipts. It therefore seems irregular to treat questions arising out of this employment as questions affecting the Crown Agents' Office. 3. That, as tbe Crown Agents' services as Crown Agents were placed at the command of the colony by the Colonial Office, a copy of the Agents' letter now under consideration be sent to the Secretary of State, together with a copy of the correspondence out of which it arose. It should, however, be explained, that the correspondence is forwarded for the information of Lord Carnarvon, and not with a view to elicit the Secretary of State's opinion upon it, since the Government consider they were at liberty to deal with tbe Loan Agents, and with questions relating to loans, witbout reference to the Colonial Office. Seeing, however, that the Crown Agents, as Crown Agents, have adopted tbe dispute, it becomes necessary to refer to the Colonial Office, for the purpose of making it understood that those Agents have placed their services on a footing different from that on which they were placed by the Colonial Office, and on a footing obnoxious to the Government. 4. In the opinion of tbe Government, the letter in question —apart from other causes —makes it desirable to dispense for the future with the services of tbe Crown Agents, and affords valid grounds for so doing. 5. Tbe Government think it expedient to ascertain whether the Colonial Office desires that the Crown Agents should continue to manage the guaranteed loans. The Government would also ask the Colonial Office, in case it is desired that the Crown Agents should continue such management, if those gentlemen will be required to withdraw the letter, which the Government consider inconsistent witb their employment. Further, the Government,in case tbe Secretary of State desires that the Crown Agents should continue to be employed, respectfully ask on what footing the colony stands with regard to any loss that might arise through such Agents. It has lately been stated to the Government, that neither the Colonial Office nor the Treasury holds itself responsible for tbe Crown Agents. If this be the case, the Government of New Zealand have to consider that the Crown Agents, without sureties of any kind, are constantly in a position of large liability to this colony, in respect of the custody of money and securities ; and that the guarantee afforded by tbe periodical audit of tbe Agents' accounts is of an insufficient nature. "Without implying anything against tbe honor of the present occupants of the office, the Government are of opinion that they are not justified in continuing to place such responsibilities in the hands of any two gentlemen who might hold the position, witbout having either the guarantee of the Imperial Government or very substantial securities. It may be urged that, by relieving the Crown Agents of the charge of the unguaranteed loans, their responsibilities will be much lessened. Whilst, doubtless, this is the case, the Government are of opinion that tbe question is one of degree only ; that the position naturally involves much trust; and that, without devolving such trust, it would be inconvenient to transact business witb the Crown Agents. If the Imperial Government are not liable, the Crown Agents stand to this colony in the position of gentlemen transacting an Agency witbout recognized capital at tbe command of the business, such as would presumably be available if a moneyed institution or house were employed. 6. In explanation of the employment of the Crown Agents since tbe receipt of their letter, it must be stated that the Government having occasion to dispose of the balances of a number of loans that remained unnegotiated, it was thought desirable not to make alterations in the Agency. Indeed, it would not have been convenient to have postponed operations respecting those balances until a reply to this Memo, could be received, or until definite action was decided on. 'Wellington, 13th June, 1876. Approved in Council, 14th June, 1876. _ OBSTEB GOEDTG, Clerk of the Executive Council.

By Authority : G-eobge Didsbuet, Government Printer, Wellington. Price 9d.]