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No. 9. The Hon. Sir J. Vogel to the Hon. Dr. Pollen. 7, Westminster Chambers, Victoria Street, Westminster, S.W., Sic,— 12th May, 1875. I have now the honor to forward to you copy of the further correspondence respecting the negotiation of the Four Million Loan, to which I referred in my letter of the 4th May. I have, &c., The Hon. Dr. Pollen. Julius Vo&el.
Loan Agents, 12th April, and reply of sth May.
No. 10. The Loan Agents to the Hon. the Colonial Seceetaey. Sic,— London, 13th May, 1875. We have the honor to enclose a statement showing the sums received, since our last advice of the 4th instant, in respect of the Four Million Loan lately contracted. 2. The total amount paid into the Bank of New Zealand on this account, up to yesterday inclusive, is £3,157,344 17s. 10d., and the balance standing to the credit of the Public Account with that Bank is now £2,486,788 18s. 6d. 3. On the 19th April, 1872, when addressing you with reference to the disposal of the proceeds of a loan of one million, we expressed ourselves as follows: — " 8. Although we shall of course, in compliance with your instructions, place the whole of this money on deposit with the same Bank, we feel that we should be assuming a very grave responsibility if we failed to draw the attention of the Government to the magnitude of the sum thus to be dealt with ; and without for a moment calling in question the solvency and honour of the Bank of New Zealand, we think we may fairly question the expediency of venturing so large a sum with this, or any other Bank similarly constituted, whose whole capital —supposing it to be intact—is, we believe, but £600,000 sterling." 4. In reply to that representation, the Colonial Treasurer, in a letter dated Bth June following, informed the Agent-General that, — "In view of the large sums that will have been received for the second instalment of the New Zealand Loan, I have the honor to request that you will, if you think it desirable, invest a portion, say about one-half the amount, in Exchequer bills." 5. With the recollection of these circumstances before us, and bearing in mind that the magnitude of the amount now to be disposed of would render the precautions we then advanced trebly necessary, we came to the conclusion that it would be our duty, in the execution of the trust committed to us by the warrant forwarded in Treasury letter of the 18th January, 1873, to distribute the risk, by dividing the public balance into at least three equal parts, of which one should be left with the Bank of New Zealand, and the others be placed with two of the leading joint-stock Banks of London. 6. 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 entered into with Mr. Russell, provision had been made in the contract with Messrs. Rothschild that tho money should all be paid into the Bank of New Zealand ; but in becoming parties to that arrangement we never for a moment contemplated leaving more than a certain amount there : indeed, Baron Rothschild himself drew our attention to the serious responsibility that leaving such a large sum with one Bank would necessarily entail. 7. Before removing any part of it, however, we thought it right to ascertain the Treasurer's views on the subject, and we enclose, for the information of the Government, copy of a letter addressed by us to Mr. Vogel, and of his reply. 8. Upon receiving such a strong expression of the Treasurer's opinions, and with an earnest desire to respect the agreement to which he informs us the Government is committed for at least six months to come, we thought it best to seek counsel's opinion, in order to ascertain what legal responsibilities we should incur if we allowed the balance all to remain at one Bank, even though we might be convinced of the imprudence of doing so ; and we find that the advice we have received—copy of which is enclosed —will enable us to leave Mr. Vogel's arrangements undisturbed until we receive further instructions from the Government. 9. It is as well, however, that we should point out that Mr. Vogel's view of the power conferred upon us by the warrant is one which could hardly, under any circumstances, avail the Government in respect of the particular Bank in which the money is deposited. The whole of the banking business of the Bank of New Zealand is transacted in the colony, and it is from thence alone we could expect (only when too late) to hear of such difficulties as we are told would justify our removing any part of the Government balances. 10. The fact that " the interests of the Bank are so intimately bound up with the interests of the colony " would appear to us to render reasonable precautions no less called for. All precautions of the kind are taken in view of certain possible eventualities. No country is exempt from periods of commercial distress, which tell more or less severely upon Banks, and it would only aggravate the distress of the community, if upon such a crisis overtaking New Zealand any large portion of the public balances were sacrificed. 11. It is true Mr. Vogel gives us to understand that the money will soon be largely drawn against by bills sold to the Bank in the colony, but we would remind you that your risk in respect of the amount represented by such bills continues for ninety-three days after their acceptance here on your behalf by the Crown Agents for the Colonies.
See ante.