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NAIIONALISATION OF BANKING
Socialisation of Credit
ADDRESS BY MR. W. K. McCONNELL, M.A.
"We recently issued a loan at 3-4 per cent in Aus
l' :tralia and it was successful. The Moscow News, of which.:.
I have the most recent copy in my hand, wants a loan for :
.'public works and 7 per cent is offered. If they c-ould
Screate credit surely'they w'3uld do so in Moscow.
S . W. Ic.W i. Ooiell,. M i.A.. 'iutorial .Class .iLeotiireri 'IEco
noiics.' atthe Uniiveirlty, of Sydiney. quoted .tlh abov. ii.LhUi tciirse
oC. his aiddres 'to a miiee'ting at tle Towin Hall lastnlightuii anltie siub- -.
.ject of Banltking anld Credit. He poinited to it tr;s'a imens; of coni
p. rlisn in regard: to efficiency between thieSoviet .illd tlie AiitiT:' i;
lian banlking system. i Mr. hJ. W. McDonaldl prelsd(il at tnhieteotiin."
:"The 'Naitioinl'isatien of 'llanking'
anl .the 'Socinlisation of Cred.it' are
thlle policies thati will be snbmittdd at.
the flortheoming Flederal Eloctions lIy
the Sceullin Lalolr p?r'ty and 'the Latlig
L:tbour party rcspelictlvely," said Mr.
MOcConnell. "This evening I wishi to
examnine theseo-olicies, and to indicate
tlhe effei;ts 'hat w ould follow f.:roni
thellir adopttion." Thteoetica'l'ly these
piolicies miay ditffr, but- for .all pic
tical political purposes they are idten
tical. To Lrabour leaders the nation.
ilisantiton of b'ankhig is the essential
nmeans ?t ttile socinlisntion of credtit.
The Labour bbjective cannnt be achiev
i'd until the State' owns and controls
ilthe entire hbankting structuire. :Aboeit
thiis' there is not,- anitl coild not be,
any dispute betweeni Mr. Scullii and
Mi 'Lang. '
IN WEST AUSTRALIA'"
" Considerl tion mitst be given to the
iliffereend between i Stite ownqrsiip
and State control. It. is' the coales
centce of ownership and control that'
mnaktes nationalttistion of baknting such
a tlda!gerons iroposal. Unidertakings
which are. ownedt by tile State, butre
main t free front any inteiference In
their operation. imust be dlstiiiguished
from ithose whichl are owned' andt coil
trolled by the State. Faillur.e to run
tl:e undertatlig efftcieintly hlas alimoot
invariab!y resulted, whenever o\vwner
ship and comttiol have been combinedtl
anul the taxpayer lhas 'hadi to miake
cjodt the losses.'incurred. A strikting
examiple, with regardl to banking, of
the danger of State owaership and
State contiol 'is:tlhe Agricultuai l Bank
in Western Australia. The policy of
this banke is subject to. the direction
of the party in power, ani'd has been
changedl so frequently by the differe.nt
Cabinets :that the affairs of the hank
hiave ibecome mutddlctd and uniscttled.
Two Royal Coimmissions 'have been ap
iointed at dtifferent times to enquire
into its olpetltions. So interwoven is
the liolicy of thle' hank with party
pctitcs that reconstructton on lines
suiggcst',l tby expert opinion Ihas ilot
bEen attemplted. The GrOlup Settle
iuenit losses incurred' by' this bank to
dlate reach niearly £5i.000,000. Prinecipal
repaymnents to the. binik are overdue
to the extentt of £9.800S00,0, and fiuter
st lis heavily ill arrears. The state
mient of the Auditor-General in his an
nt~ul rleport on the state of the bank's
finances at June 30, 1933, shnotld' prove
a warning to those who advocate 'hte
nationalt'sation of tihe enitire Anstra
lian Bankling System. 'Thle .flinanicial
iositittn, of :tile Bank,' hlie said; 'is aliy
thing but satisfactory, a.nd thile Treas
tu'ysllhouldhInot ;eXlect.tozcontinueg-tq.
rierive interest' on Iloan mIloney?s ro
vided iin excess of tile actual collec
tions by ,the Bank.' It certainly looks
as if th!s loss of interest w!ll litve
to lbe horneo by taxpayers andi that
somie ntillions of pounds of loan ionlley
will have to lie written off.
"lin compiarison vithl, this example of
State ownership andti control may. tie
olted the successful operation of the
Commoiwvealtl Bflnk a nd tile State
Savings Banlk of Victoria, bothl of
uhich are State owned institutions.
whos, oplerations are free front poli
ilical control. It is this freeidomwhich
has enabletd these hankls to pursue
sound banking practice, and their suc
ceas may Ibe attriblutedi to tile indc
Dendotance of action their imanagements
have ibeen permitted to enjoy by leg
"islative enactnient. They cannot ac
curately be rieferred to as na.tionaliseld,
banks. To claim that they are, is :o
overlook the distinction between State
ownershlip andl State control. Though
State owned, thee Commonwealth
Bank andt the State Sarvings Bank of
Victoria cani be rliled up ,to continue
eui:de.ring efficient servipes to the com
muniiiy. It 'is true 'that these banlks
are subject to tre Legisla.ttre, lint
their constitutions, which provide for
frredoin froei Cabinet dlonlinatlon, can
only be alteretld:by vote of lboth Hoiuses
of Parliament. ' '
STATE MANAGEMENT
"Wh!te some few State owlned and
controlletl undtlertaklinigs have been
carriedt. on at a profit, the vast minjor
lty have shown ihelavy losses, which
hiave increased sutlstantially. the lbu'
'den of taxation. Thie following fligures
give at few exalniples from New South
Wailes alone of the' estent of sonie 'of
the losses incu?redi: ' '
"Cumnulnated loss to June 30,. 1932,
since date of Inception:-Roiways,
'£12,454,365; Tinramways, £1,223,200;
Murrimbidtgee . Irrigation Area,
' £4,406,808; State T'rawlers £314,020;
Staste Timber.. Yartlds, . Ulr's Point;
£320,071: Government i Dockyarlds.
Newcastl e,£227;413; State Briclkworks;
Botany. £31.101; Stte?a Sawmllls; Crityv
esi anti Glotiucetes,. £64,814:" Port
IKenmbla EIlectricity Supply, £5,341.;
iAlthoughl i such enterprises ' are
managed ,iy coinmis onsi, hoaids or'
State serva nits, the llanaagemena t is: fit
free ,to- litiuo .an, ind?pendi~,nlt.d lolltyt ' I
.tiletitdl Iy th?c ndlitions of the enter;
.lriwse tun'der" ilta siliervisitn,- The
.authorlty in charge of eac eltriterptiie
l?s .:l!te.ctly responsible 6. t. Oabinrt
Minlster, whlo' froin tiitti to 'tinl. iaies'
instructlons 'In:-'. a'ccortldce w\vith
Cab!?net tlecisions. This m'ietlod' ,of
control ind mnaitageiesnt in in itiarked
con trast to .itlio. idl'niinlst'at.bin o' of :ite'
C.:omoii sn eal,?i Bank : andi thle Sitate
SSavilngs Binlk. of. Victoii, whcllCh tre
ilot sulijeot to' the 'wtill of Oahlineit.'
':,i'.'loThe menace of 'nlstioinillsattlln of
'hanking' lies, in the fact that it em
.i'races botthl ownership of the banlting
e'trnlcturo and control of 'its functions.
Altlhoigh some of .Labour's brand·?i of
n'ationaslasntoan more definitely than
others lwrovri for polibical control of
thle hankli'g ,structure, such control is
the objective of all sections of the
Labour party, however disguised may
be their plans.
"They aim lot at more efficient
banking, but at releases of credit
at their behest, to enable them to
try out experiments in Socialism.
"That thle policies of Mr. Scillin
and Mr. Lang involve polftical conitrol
is borne out by the lavish promises
of both leadIters'as ..to the mannei' in
.which tllhey areo going to use the nition
csietset banking system'l..: Even ani' at
temlpt. to fulfil" these. pronfes w0oull
be ,impossible i. with out govc?rn',·lmitc
control of policy. Ahi exapll le iof vhat
is Intnded is Itndicalted in aii l:ddlress
by Mr. Theodore to -tlhe New South
WVal'es bralncl of.thel Edoniollni'Society
of Australia. and' New Zeaicjld, whenl
Ile said '"The.. Oolinm'issioi (i.e.;, the
body, to control the State blnk) onuld
be appointedP fpr a ternl ,which lwonld
b' conc'rrEnt.: withl the life of P'rlia
men0t in order ,to leave untranniielled
nnl incoming Governmieal wllos, liIan-c
latoe maly necessitate. a .chailge: in
monetarf policy.'
'HAVE BANKS .CAUSED THE
S DEPRESSION?
"Tile chab'ge that banks; h'lae caused
tire depression 'is' based on two as
sinlptions9o: .(a) TlhIt Monietary factors
alone can-e depressions and that the
causes of this depression e are. entirely
monetary; (b) that the drastico fail
in prices which initita;ed thie depres
Fion was cngineerled by .the banks
through restriction of rcredit.
"The present depression is tile lIeri
tanue of the jireatest wall in history,
and panic mnesures, a(dopted ,to meet
the problems it las raised. To develop
colossal industries for .the provision
of the destructive materials of war, to
destroy billions of pounds worth of
propearty :and .ithen,- -upon a word; to
turn .to the pursuits; of peace nnlst
necessarily cause dislocation. The imn
position of lnge reparation payments
by the victors upon the vanquished
and the contraction of hugl debts have
given rise to 'a frantic *struggle for
balances abroad. Tills lias rcsultedi in
the raising of tariff walls by all r the
countries of the world and a naive
refulal to trade with eaclh other. It
is not to be wondered at tilhat as a coln
sequence prices 1have fallen, and we
filld ollrsc4ves in ia depression of 11n1
paralleled, miagnitude.
"These are ,the coilditions within
which. thle banks 'have "lhadto work;
they were not of tlior making. It Is
greatly to the credit 6f llth banking
systeml thilt in snllc a nmallstlroll solund
finance IIEs bieen at all possible.
"(b) It is freqiuently aserted! that
thle lianks by restricting advances
initiated tlhe depression. ., Statisitics
prove 't.hese statements to lbe incor
rect. They show that tile total ad
vances' by tile nine Australian trading
6anks were . as ..:follows: 1929.
£257.398.111; 1930, . £280,425 531; 1931,
£261,239.096; 1932,- £261,56,2412- 1933,
£279,408,313. These figures show how
baseless is the chl.rge that banks have
rvi:olen tly `-liitra,'Ldd(11aitcl?ce.s ',13 But
what is more imlportant than this, over
the years in iquestion the anlount of
spenlingll power 'available to the public
Irar: INCREASED becalnise with i each
fall in prices tie 1amouill of goods and
services whicl each poundl buysj has
increased. In .flct in 1932 at the depth
of tile depression 30' 'per cent more
pllrchasing power was inl the Ihands of
tile public thlan in '1929' before its conl.
IIElICelllelit. '
UNLIMITED CREDIT ti
"To grasp the full significance of
the proposed-.sclhlene to nationalise, the
banks, a1 'clear lcolnception of the flunc
Lions atnd structure of tlie Australian
Banking System is essentiEfl. There
are some who conslder: banking anlun-.
controlled monopoloy, and supporters"
of ;nationalisation, of banking repeat
edlly pult tills forth 'as one of the-rea
solns fcr .their'proposals. . a:Thi s' hows
a complete :lack of undlerstandillg of
the systen'.: . . - .. ' .
"The.niost mlnporltant phiase of bank
ilng policy in' Australia aI e' under 1the
control of. the 'Coninonwsealthi Banic
as tihe Contral Bank. Withn li mits
dletermined by this Bank's pollcy,_the
otller lnemlbers of the; systein rigoro6us
lyconmpete with each other. However,
it considerable degree of co-ordination
exists within'the system, and between
it and th communllity. Tile Central
Bank is th1e hle10art of ile system;, link
ing all tle banklts together. Thle trad
ing banks, eilthoulgh competing
amongst thlenselves, for business, co
operate, with each other1 in 11upport
of ,the Central Bank.' It is doubtful
whether one could find in all ecolnomy'
a happier blend of co operation and
competition. ,We have a State-owned
Central Bank which has 1ultlinate con
trol anl'd nine Iprivqately' owwned trdl(ing
banks, strong onough not to be pilp
ots, individualistit lenouglh to coam
pcte', an(ll assuring a variety of outlook
an'd, an elasilttcity tlhat' couldnot be ex
pectcfd of a State inonopoly. ' ,
"The system andlthe comunlllnity a.re
Intimately relaitdd. There are, over
71,010 .Bank, shli?e:liollders,' most of
moder ato mneans . 'NeIarly 800,000 AlOs
trallan citlzens -have,'monobey on deposit
in one or other of the ibanking institU-I
lions, thousands of workers aIrenln
ployedr in the banking business, while
tile wvllo p lpaildlace;( delpend for Ultbilr
livelihood 0on. tlie 'c'~lllnunilty's' eco
nlonlc activities, wlicl: 'li turn delpenlt
on the: efficiontt ,wor'lng' of :the ba'nk:
inlg systemn.I
' ."A': great ileal of '11115.00ncepti 00it s
aipamri:nt in iregairdl' to tle cn Iacity:io
the 'tradln'g' banks ' t'o .rete ' creidit
Brlefly, tlie view leld'01 is tiliat they, cian
11rant lUnllimlit ed ),oveiildrats;- ir?sapect
Ive 'of t.l1hef1''' hodlisal .'of papl1er i.'an
metallic cuirrelif"' .~'Tlil',:viiew is based(
oni the beilliet'.tltlt.thl toal' suml that:
Iay: bo 'I.draww i" fl'oj' anli' .ili Ianlks
lgalinist ,licretiased' ovei:rllaft Th lts ill:w
inevi?tably Ibo paid l'ackl ag;iiintdo-tioie
banks iasi dIposits 'iby tlhe retclaielts'. '
"In othler ?oids l.t . is saill' tllat if:
totall ovelrdaifts' obi 'a 'dvances': i-.
crese;.'-total' delposits will 'also bie In-'
creaesod byh the sa1nle smai. Thereoore;
it ,lsai been argued, the banks care Ill
Sprosition to release unlimited, supplies
of credit.
"It is not dollied it?hat 'some depoosits
Ilave theior ,origin In advlancea, bn.t it
Is not corecot to maintain that all
sidvan'c'es give rise to dtelosits. Sunp
pose, for 'example, tradlor A. receives
and ad.tvnce fronl Ills baink of £1000
Bnid pays it 'to trader B. In settlemlent
of some debt. At the moment the
advan'ce is made ,the total of the bank
advances, all other things ren linil.ng
uilchallngcd, will havoe incre11sed by
(Continued on Page 3.)

NATIONALISATION OF BANKING

(Continued from Page Two.)
£1000. If trader B. is' a credit cus
tolier of one of tie trading banks the
money he receives from trader A. will
increase his credit balance by £1000
and the total of 'the deposits of the
bantiiig system, all other things again
remainiing. constant, will increase by
this amount. If, however, trader B.
is ai borroweirfrom his bank, the £1000
hie receives from' trader A. %vill not
appeaiCas; a, deposit,: but :s n. rediuc
tionr.of' his ovedra.ft. 'In this casa.
therefore, Iflih or.:oiginal increase of
£1000 in. the total, of. advancesa.will be
reduicYeill by a sililair saniount when
B.11 'liitdates hisli. overd.raft&': Con sider,
too, .thi :pdostion if tiade?i .' useid:,tlhe
£1000i/ceived 'fromn tradilr A'i':to. 'pur
chlasediilon 'tunds ri this'caase, 'to,
the'. £1000 additioriia.i' dvanc ee ; would
ihot 'crca.te'"a £1000 delosit iall. that
woulil' hiappen, for the'. baiiinl~ s ' a
whole, -would !be 'af increasesiin- ad
.yancesi of:' £1000 'a`nd:I" iediuetion in
,.reserv'e& lield lbroad( of a. l ii , i oiint.
i NO LIMITS. : :.,r
;"Suppotg~ however;there'wereno'
limits,' sulch"' ors.ehie; In mposed"l. .. :'thie:
neceissltyoi f tlie ;,trad iiganks 1?.lol
cash.- resrves ed p l:by,:'tlhio poicy 1',
the :Ceitiral Ink, and .that also 'a!l
adtvance . ,ave i'se. to I deposits; th ere
wiuld : nevertlield? es ' be :!o ? e viery
definite. limitsi iyondt which theio trai
lirg banks coulld not "granit overdrhafts
Swithout inflicting -dire distress on lithe
whole comnimunlty. If the. baniksl?were
to g.rant ovirdirafts ad.l litli the iaiili
Wiould be precisely the saini oT'asn if the
GovernmnentI wereito' iroceede wtl'i. the
.unrestrictedl' rin.tiig ot ;note'i .sand. all
the: evils of liiflatiohn -?il.t'qiiickly
follow. Theie imust be sbfiiie formn o
contn'ol of credit.' Pie'ie Cbmin'on:ivieatl.
Bank iis a Central Banikis isin' a pdsi
tioh to. regulate the ,volliune iof 'crediit'
while the trading banks 4fro m know
:ledge aind' explerience acciilrled oveirta.
veny long period of iiiliiiate contact
with itreide an'd indiistry airebea, t btabld
.to select the safest: avenues f'or ,is
employment. .:
'"In the last 'anialysis the-: priilcipal
reiguilatory factor is the. capiicty i'o:
industry. to engage ii: piofitable pro
duction. The trading- bannks ;.'sential
ly are leiiders; It is, "it theiir int-erest
to grant 'overdrafts as'freelyi as'pos
sible. The flow *and ebb of their, land
inig is goveeined lby.,the flictuationst ,of
blisiness Iactiviet .

* 'The real' security- on wli'ch: any
bank overdraft is giveni.is, tliei fiitunr?
;prodiction . i',Tich, it kill llifacllitate.'i
fromi whic itwiill be re'paild. Deedsi'or
scrip,'i or: tli'r fin r of '.secity, hlhld:
by :-tbe baink 'against en ,'advance a?re
collateral only. No bank graiitinsg '
ovord.raft: does sob?with'' theie expedta;
tion thilt -the collaterali?security :will
bhave .to ble realilsed iffin'drderi'to'Irepy
theai.,advnnce. It the banks1 swere ;to
imake a practicee o advancinig money.
to anyone iivlit; tie' soloh robviso tlia.t
aidequate colliteral secniit.y':;vere'
giveni; bllsiness' inight in. fnovery coiln
siderable tiiie,. bL redilcedi'ito a 'stahte
of claos..:- ( .'' .' . ,":
-'Thle question of . hethler o'r inot
"cliedlt": ,should: l&'e "releiseed" , fiei'l,
ably; leads lback to itlie ;ftiindai.ental
probleiif fa'ciig AistraHia tlie .necess.
ity to 'iaes ka'Dl akilds of * pi-odiltidoc
,profitab e. : :; ;:'
!'No modler tridingiailk01 o btli
;trailing lianksi: tilken fi, stbieri ;ica
1i i'3lle 'clredit . in e. ?ces; :of tllediiit,'i
con'ditibiio d by'. tlie ol'c'y.- f ti
Ceiittal Blr;.ll Tie giaiting ofovI:'r
drafts? at 'ani??iiioint. is always?(?: c
;pelndeliti ilipon': (inT' i: eloanPi l
ccredit; (iij:.tbli.volume oftliel cnsii,
roes ?rieo, (ill) .ithe. lrpo>spectso bet6" boi:..
rowcirs/'%. , . .: :' *; K ; *
THE DEMGND FOR'CREDITb
,"A: bank cannot lend' f tliere 'Tar'
borrowers. There: are 'felw polsile
iho, o'iild ; bprrOv t md o onie whe eve? r
ild, :wieree;i- tli ?.Y 't cold : get: Biut
thIey, *i"tlielr :riijntersit, irid .:pir-;
ticlnirlr lii''thie-i nteresa6. of tUib gell -
eral coliinm uility,.'a. to.be : lscoiira ged.
Generally slospeak 'ng'" ll:' dimanid for
bank credit' cobiini fromi i, lsiness .nlme
-famners, -'nniuftacturersi merc'l int;:
bllilders, edtc;i?io' delsre to hive, tlhe
a;sn-it'ance ofl bilnk 'redit, to prodice
anid ?ill, and, on? oldo'ing'ias they cain
produce nid' Isetl: rofitably;.' Asa .iiatt
ter of fact, 'tliue:d iiiial for credlt at
.any time, anld'. at' ny, given rate; of ii
terfit; , Is always' liiitd.I" I;A; prlielit
business ian.iwoiiuld niiot'-iorrow money
viiven l"t fwerefirre;of .itreste:Liileds:
lie '0oiid .use ift :rofitably. The uileI
uiinai'tl for credit'";ari~es:l-'in niuch: tie
samil - s.r t :'or .way; as ' 'the ;dein a 1l ;for
anil?y merchii idliablef';:'oi'?b?oi lity..

' :THE 'CASH ,RESERVE; ,
"Bank, acealwa1ys cinidertihe chglig
tion to piy oa sl ioh ' .ii?i'dFi d.l Evoy
c urrent accoibunt cus t?iim: 'i " lititled
to ppresent. a?a olih'iie lncn i.ni g?i the
whsole of'h 'ca' fdlepoit lngcashc't.(lgcll
tenuelai cccney) i, t alny Inome it :dciing
bancking ho?i. s Evec',Vrixei d' blf)aSitdr
is entitled; tdo:d llaWsn'? athie.tii' . icatuir
ityof,' h sl dipbo ft: I Every'p'eie 0 nl wlho
has been ·rantfedanc 'boverd r'ifftis' es' t .
titled to' demand' anx.yl : ndi~iwli~h'r;i)Sitioni
of h?. loan 'ini cah', ondt'.m o t,.
netlcee :aE?'i:ifl'n"' bankma'iiit?:.:" hkes' ,.
frsea lc bno grantis an 4ovrrnf't, bcir,
if yo -u like'T 'is es i nda i 6o'dr '·.ilf,' it. in,
creases: its own :obldigatlo?bii't' fini
cash. Of course modileinl baniiiks know
thlat thee i ar easoh-nible:: busahess
certininty tlhnt the amlfount of caip they
w91"1 be cahlled. itpon0it a- 'b'uot., ay from
daiy?' to day,,providel thit t the flinancial
mlecianilsmlSi: oi'wking: s?i oothlly and
thlat:coifidenoce islieing sustalined, will
iiot bo-.as larige as thetir totallobliga
titons.T!:: c T.imoit of.dslih thlcey ncust
hold will v'ary from 'time to time, anmdl
t'romn.,lplae tdo plade. 'It will depend
upon a 'nilme of vfactors, such as the
finanlc?ial Jcabits and customs of thle
conlmlunity, tIhe business confidence of
the community, and so on; The fdct
,'emains thant a certalin volume of cash
will be demanded. No bank can live
thalt does nobt hIoli itself always In
reactiness to meet 'this cash demand.
This constitutes a very real andl in
escapablle limit to 'lthe trading bank's
capacity .to lend.
THE PROSPECTS.OF BORROWERS
"In lissuing credit, banks have sonme
thing clore to 'think of thani findling
potential borrowers, and being ,aslur
el of the requisite cash reserve. They
ulust illnl borrowers who Ilhve reasoll
ably certain prIospects if being ahllo
0to 'calrry out their conl.racts; that is to
say, to pay thie interest periodically.
ancd to 'lquldiate thie loan eventually.
The whole financial systemc would
verly soon coile O a hallt were tlie
banks to fail ill any way to ie cauti
ous ill thlis lmatter. No ldouht lthe blnkc s
imay lha.ve, on ocecsloc. clclder-es.ticn
ated thie clapalcity of appli:cants. But
thlere is nIo dislputing that it is better,
icc tile ihterests of thie whole cocnmucn
ity, tlhat they should be cautious
rathier than reckless.
"A c acrgunlellc. solietilmes aclVanccld
by crities is that Iancks really need
clot. worry aboct tile bolrvowers' pros.

peets, provided that they get, as they
usunally 'do, adequate collateral secur
ity upon which they can foreolose in
case of deifault. Such a su?gestion
betrays lack of due appreciation' of the
conditions necessary for the F1nmooth
working of the credit system. Fore
closures are the last things that banks
want. They tend to increase their
"frozen assets." They also tie lup
funds, and thus decrease tile hanks'
capacity to continue lending. They
destroy confidence, which ils the es
sential basis of credit. Thus fore
closures are bad for business; not only
banking business, hut business in gen
eral. This, in turn, hbas serious re
actions upon the whole comnlnunity.
Moreover, widespread foreclosurens
would :destroy the market and make
realisation of securities impossible.
'Banks prosper on successful lending,
not upon foreclosures. They are
money-lenders, not bailiffs.
".'Clearly tllen there is not an unlimit
ed supply of overdrafts.' Banks can-.
i'not create. credit at will to any extent,
as so many,,?judging by their talk. ap- -
piear to imagine. In ,both the issue
:rad' thelrecall-of credit they are hedg
ed .rouand :by . set of conditions over
which. they h.ve little or no control,
ail' w;lhich;'ln the intereVts'of the gan
uri:'l ?.omiul'l'nty,'io Ilss' than their
uwthi-,,t'liy fare houirid. to obserse. Such
lilnitaitiolns are ,pat and paircsi of the
:.edrlit':'systnem "itself.' Th ,'* are thie
sil ' iarantee :of :its :continuiii, e xist-:

5du'6t·l,:b.hilt-?(\~ifiE?'.h'???:I~abr,:v,:;ovY ]80
eI 'rwe toa li) itllesiO '15 Steo
eitiat'he"'vaqt "iajorlyi overith 80
STIqi teationer: Vo, know -thi?? lthe
anitk ofAattailasia'i nbranch of thu
Billank of EnglanidM
',.Mt McCoifeli?lsild.,id' was ne¥s to
hliito anill it 'i lild als?hbe news, to the,
ianilk of -iistraliasla to :linDW such wisi
'tihe'ctse
"'1he qluetio:ner .You knew Mr
Solomon: Bi;igs?
Mr. McConnell: 'I do not, bnt'
'klinow that he':, ansa mnde stalttments .
wisth tegaiti- to, tile wvatering of bank
stock 'allind linnks- making enori?ous
profitsai lich are entirely untrue..
"Why does" the Commonweith
Biikaiko: eniter .trtvate trading?".w?s
antother ; ieSitlon ' asked.
iMl?;Mottoni ll said thant the Com
innoniiveilthi Bank hield thie position of
h Cen'trl" Baliilc,: and s such, one of
its, iriiiipal 'dutiues was to acnet an a
steadyin? infitence. If a Central
Baink' t6okl the same, risks as other
b'inks theni liitinie of monetary crsisis
It'?ibolddoliot be in a position for obvi
otli reasons to'act as'a steadying influ
·ence.· '
.Mr. IR::.T ' BIlint?B.Ecs., asked inwtat
caplitnal 'tli'e Ciinimonwealth Bank had
wbhen -it started' titid what its profits
:ere.2..
S?W "iten"?,l 'aie toai Goullurn,;' said
Mri .':McCoilniell"i "' scarcely' thought I
voullihltave thesie old :warhorses trot.ted
oit'tt 1This "is ?in. question I get a.t every
titettiig ttbilt .there is generadly a
otifi;de'i uitnblditii . 1:InIl tis case the
:qifilteiolti tipiliea" of .coirse that a
banlk c?in :'start ?ithoutloilt capital Th
:Coniuoonwe-lth:tBaank started with a
,osapdi o,? £1,000- from tile Govern
thenandthie' :'iorajise of more if they
wantet, i hi l t ,t"b on tle dtiy it opetned
.it? ?O:'· d ,lsit.r';ecovedit' dieposaits of?"
f£2500,0000 practi~ly rl fof P'whvich was
Govseti'nment iitioney. Tecitnically it is
trdie ?t ittlarted :.wilthoutfti tis; a cttally.
it' is stntt'te.
l y?ii:? il ta'iou tft eproflts.?..
'Ž"'r"5p Ioii:fitis '?:iifficult to ,
say'exatlyw tby 're 'Don't for
ioet'Oiti!':,TJiekGomiinibniwealtlt Bank
has'f' lieiJ'n aconslitiictt :sidtces,s and-:
'nobtilo;tiywalinsits"it Iltdrit t'frotm per
forttin:tg tit;present unid:jiiodper ftnc
ftloi; olit tli?e Ceaifioionw'ealth Bank has
cctloitt'adviint'v-es over private banks.
It. raiys no staxation. La't year th'
private'' ba?ks' 'pai.d in taxation an
amri?ttnti neaitrlyequal to thIle whole of
'tile proflit''-''
.,I ;anwer Ato .:a qeittlon front an
oilitife'conicefi'g Brtti?tt .jiStice being
thei:riglits o:ff tll. :inor!ty.. Mr. Me
Cotnnell !?retotrtd tliartit was notlhing...
of the kinil:.' Briili :'jtiustce he saidl,
ntildl appliits ?tood' for -individual
.fikeilomn;.:y:::i ::·_:: :
:.'IfI I?e.ntto .put my money in a
lI aitde:!biinki i I shoutld be allowed' to
tdo -ro ," . le s hidt l :.'.
.M I' 1. T.' Wratson movdl a vote of
thtanls".. The .bankiing system of Ais
:tra'lla "'ha's scan Au"tra.lha througi h a
grieat .crlisN Ther? :had been no fanci-.
fel fl.iatice, and it wis', a ioredit to the
Iaiksli:.they had done so well. The
Itubtlic tli thltlidnael that thie bIanks hadl'
got aiilthloe'. imoney all the banks did
1'iS\ ;to aihndl ldii: th peorle s' mtoney. -
They wiere the olearing Ihous of th-il
DeotPle ?"ol? ney" In that capacity tilhe
itfititlinl'· ir t 'dte.v ondlerful work dur
ili?: tll dtleprssion.
,MI r'C. V.'iRunssell seconded!' ·thoe
ttttioln;, w011 wi carrieds in ithb usual1
ay.,. .?' ' :.:? '... . . ..,. . .

$