B.—No. 1A.

No. 18. Copy of a Letter from Mr. J. Morrison to the Hon. E. W. Stafford. Office of the New Zealand Government Agency, 8, Adelaide Place, Sib,— Kins William Street, London, E.G., 25th May, 1866. Since my last communication the financial and banking communities have passed through a panic of such severity as has never before been experienced. The suspension of the firm of Messrs. Overcnd, Gurney, and Company, on Thursday, the 10th instant, created wide-spread consternation ; and the difficulties of the Imperial Mercantile Credit Company, and the English Joint Stock Bank closely following, led to a run upon many of our Banks here. The mistrust was allayed to a great extent by the suspension of the Bank Charter Act, on Saturday, the 12th instant, and although this feeling of easiness continued, we are now experiencing further embarrassments and a state of extreme anxiety. It is easy to trace the causes which have gradually led to so alarming a crisis, and although the ordinary trade of the country is not unsound, much time must necessarily elapse before affairs return to their normal state. For the information of the Government, I enclose the Times Money Article of Friday, the 11th May ; the explanation of the Chancellor of the Exchequer in the House of Commons the same evening ; the correspondence between the Government and the Bank of England Directors; and the Circular from the Foreign Office to the British Embassies ; all referring to the financial crisis. Among the suspensions was the New Zealand Banking Corporation, whose bills were returned on Friday last. At a meeting afterwards held, an adjournment was agreed to, that steps might be taken for winding up the concern. I beg to direct the attention of the Government to a paragraph from a paper called the Investor's Gtiardian, referring to steps taken towards re-organizing the Company, under the title of the " Commercial Bank of New Zealand." The only instances I can trace of the Colony of New Zealand having been affected by the crisis are —Ist, the suspension above referred to ; and 2nd, a sale of £300,000 five per cent, debentures of the £1,000,000 loan (issued by the Crown Agents in 1864), at the extraordinarily low price of £60. This sacrifice was impelled by the severe strain for money experienced by the holders ; and the sale having been unfortunately made public, has been prejudicial to securities generally. At the Bank of England the minimum rate of discount is 10 per cent.; all transactions however are almost restricted .to advances on Consols; in the open market accommodation cannot be had except upon almost prohibitory terms. It would be perfectly impracticable at present, and for some time forward, to float Colonial Securities, the market being altogether nominal. I have, <fee, The Hon. the Colonial Secretary, "Wellington, New Zealand. John Morrison. No. 19. Copy of a Letter from Mr. P. G. Jtjltan to the Hon. E. W. Stafford. Offices of the Crown Agents for the Colonies, Spring Gardens, Sir,— London, S.W., 26th May, 1866. On the 26th ultimo, I informed you that a panic then existed in the Money Market here, which rendered it very difficult to deal with the unsold balance of your 6 per cents., amounting to £36,200. Since then matters have grown so much worse that it would be difficult for me to convey to you anything like a correct idea of the height to which the panic has reached. You may form some conception of tho state of things existing here a fortnight ago, when excitement was at its height, as well as the opinions prevailing at the present moment, by reading the enclosed articles, cut from the Times newspaper of the 11th and 25th instant. I also enclose two paragraphs, cut from the same journal, referring to a transaction which had taken place in your 5 per cents., being a portion of those disposed of by the Crown Agents to the " Credit Mobilicr" in 1864, and held by them over since. It would be unfair, however, to assume that the price therein referred to (60) is the actual measure of the market value of your securities at the present moment; nor must it be taken as any indication of a depreciation of your credit in the London Market. The transaction arose out of the necessities of the Company, and the scarcity of money during an unprecedented panic, when sales, to any extent, could not be effected unless at some such sacrifice. At the same time, the fact that this Company with all their efforts have never been able to recoup themselves of the purchase money, affords indisputable evidence if such were needed that these securities were originally placed on the market by the Crown Agents on terms very advantageous to New Zealand. It is satisfactory also to be able to report that, in the midst of this crisis, we have been able to reduce the unsold balance of your 6 per cents, to £18,000, having since the departure of the last mail disposed of £15,600 at 92, and £2,600 at 91-y ; and we hope, as the panic subsides, gradually to work off the remainder at no less satisfactory prices. To accomplish this we have been obliged to hold out the inducement of an extra \ per cent, to the Stock Brokers on all they have succeeded in placing since the public allotment took place. The final instalment was paid up on the 21st instant, in accordance with the advertised conditions which were sent to you, with the exception of £620, which will I believe be paid in a day or two hence, with interest. Out of the sum so received, £40,000 was retained to meet your bill of the 14th March last; £50,000 in accordance with the request contained in the postscript of your confidential letter of the 15th March; £7,000 was paid on the 25th instant to your credit with the Bank of New Zealand; and the remainder disposed of as per accounts, which will be rendered to you in due course.

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LOAN OF £3,000,000 STERLING.