B.—ll

36

You will have learnt from the Agent-General's letter of the 19th instant, No. 577, what passed between the Governors of the Bank of England and himself in reference to their inquiries respecting the financial proposals of your Government, when it was arranged to have a conference with us a little later on. Accordingly, the conference took place at the bank on the 24th instant. We found that the Governors had, in the interval, made up their minds not to bring out more than the last million of the Three-Million Loan until after the expiration of your financial year 1884-85 (that is to say, not till after the 31st March next), on the ground that "The Loan Act, 1882," had declared that " no greater sum than £1,000,000 of the £3,000,000 should be raised in any one year, commencing with the year 1883 ;" and, coupling this enactment with the first prospectus of the loan issued by the bank, they considered themselves in honour bound not to bring out more now; they therefore declined being parties to a larger issue at once, but expressed their willingness, provided we would give a guarantee that no more than a million and a half of new loans should be placed upon the market within your next financial year (1885-86), to bring out that amount later on in the year 1885. . We combated this interpretation of the Loan Act, pointing out that, if the objection existed at all, it was one which must be held to apply not to your financial year 1884-85, but to the whole of the year 1885 ; and we also strongly urged that, as a financial operation, there were greater advantages in bringing out the two and a half millions at once. We found, however, that (acting on the advice of their brokers) the Governors would not yield the point, being of opinion that to raise more than the million now would be a breach of faith on the part of the bank towards the public, and compromise the bank accordingly. With regard to the guarantee asked for, we felt sure you would have been prepared for it long ago by our telegram of the 30th September, in which we informed you that we thought we should be able to raise the two and a half millions you required in January, provided you did not come upon the market again for another year. The bank, as you are aware, had themselves a large interest in the question of how much stock would come upon the market early in 1885, on account of the £764,240 of new stock they had agreed to take in order to pay off the 5-per-cent. five-thirties ; it being obvious that the issue of so much as two and a half millions in January would, to a certain extent, be adverse to a disposal of the bank stock. We, therefore, thought it necessary to prevent this question influencing the Governors in their present decision by intimating our readiness either to indemnify the bank from any possible loss on the transaction, or to release them entirely from the agreement to take the stock. The Governors, however, behaved handsomely in the matter, saying they did not think it necessary to make any change in the existing arrangement. Their objection, therefore, had nothing to do with the stock they had to receive to pay off the five-thirties. We explained to the Governors in general terms the method you proposed to adopt for converting the various loans which bear sinking funds; but, unfortunately, we had no copy of the Consolidated Stock Act of last session with us, having only a copy of the Bill as originally brought in by you, which had reached the Agent-General from a private source. We do not doubt that the prospect of further issues of new stock or debentures under that Act being placed upon the market in connection with the sinking funds weighed with the bank in requiring the guarantee. It was, however, quite understood at the conference that the guarantee asked would not in any way prevent the issue of stock for actual conversion of debentures of the loans in question. At the termination of the conference we sent you a telegram acquainting you with the substance of what had passed. Copies of that message, and of the subsequent messages that have passed between us, are appended; and, as the subject is still under yQur consideration, and will be settled within the next few days, we defer making any further statement on our own part until your final decision has been made, when we shall be better able to make that statement complete. We have, &c, P. G. Julyan, F. D. Bell, The Hon. the Colonial Treasurer, Wellington. Loan Agents.

Copies of Telegrams referred to in No. 82. The Loan Agents to the Colonial Teeasueee. Treasurer, New Zealand. (Beceived 26th December, 1884.) New loan. Bank of England having required full explanation respecting your financial proposals, prolonged conference took place to-day, when Governors gave their decision. Firstly, Bank of England feel they are in honour bound not to bring out more than remaining million of three millions in January, and therefore decline being parties to larger issue now; secondly, provided guarantee be given that no more than million and a half new loan be borrowed within your next financial year, Bank of England would undertake to bring out that amount later in eighty-five; thirdly, such guarantee would not prevent bond fide conversion, but would prevent any creation for appropriating sinking funds ; fourthly, necessary therefore instruct whether shall give guarantee required. Our opinion is, inevitable. See our telegram September thirty. Our own opinion therein given remains unaltered, that it would have been better raise whole two millions and a half now; but Bank of England will not yield, therefore no alternative. Loan Agents, London, 24.

The Colonial Teeasueee to the Agent-Geneeal. Agent-General, London. Wellington, 27th December, 1884. Loan Agents. Bank of England's dictation novel, amazing. Fancy they desire protect advance