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 As far as the bank was concerned, two things had to be done to avert the crash. One was that the bank should be placed in possession of increased capital resources, partly to fortify its cash reserves, and partly to enable it to extend to its customers the accommodation they required in the second half of the year in anticipation of their wool-clips and crops of the ensuing season; and the second was that the total of the increased capital resources should be sufficient to maintain confidence in the bank’s stability, even if no dividend was paid for a time on its existing capital.

The proposal made by the bank was that the Government should give a guarantee to an issue of £2,000,000 in preference shares for ten years, the issue to be replaced by a fresh issue of ordinary shares or otherwise at the end of that time, and the State to be then relieved of its guarantee. As a cover to safeguard the State from loss, there was the bank’s paid-up capital, amounting to £900,000, and a reserve liability of £1,500,000, making a total of £2,400,000. It was proposed that one of the two millions guaranteed should be placed at the disposal of the bank in its ordinary business, and that the other million should be held in reserve and invested only with the approval of the Colonial Treasurer. The bank’s officers believed that, apart from preventing a terrible misfortune to the colony, the arrangements suggested would have the effect of placing and maintaining the whole banking business of the colony on a sound basis.

Four days after this proposal was submitted to the Government, Mr. Seddon was informed that since the bank’s balance-sheet had been issued, the position had become impaired and seriously compromised.

There could be no doubt of the gravity of the position as seen by Mr. Murray. As a banker of forty-five years’ standing, thirty of which he had spent in New Zealand, he gave Mr. Seddon his assurance that the occasion was one of public urgency. He was absolutely convinced that if his proposal was adopted the State would not lose a penny, and it would avert a great loss to itself as well as to the community, while the banking affairs of the colony would be placed on an improved footing. “If the Government finally determines to go on with the