Page:Life·of·Seddon•James·Drummond•1907.pdf/239

 the bank should be called up, and that the Government should subscribe £500,000 for preferential shares, giving the bank a clear capital of £1,000,000. In addition to that, the bank was to have the whole of the State guaranteed stock to the amount of £2,000,000 for ordinary use.

First class credit was necessary to insure the confidence of depositors and enable the bank to conduct the vast business connected with the trade and industry of the colony. The incubus of the Estates Company, which, under the existing conditions, had to appear on the bank’s balance-sheet, and was a fit subject for attack and for injurious comments of opposing banking institutions inside and outside of the colony, had to be removed. It was important that the bank with which the Government dealt should have the confidence of the discount houses in London.

With the increased burdens thrown upon the bank by the two millions of additional stock and the readjustment of capital, it was necessary that the bank should have a very large addition to its earning power. The only way to do that so as to enable it to make enough profits to pay its way and sustain its credit was by purchasing the business of the Colonial Bank. Arrangements for the amalgamation of the two banks had already been entered into, but they had been dropped. Shortly after the banking legislation was passed in 1894, negotiations for the amalgamation of these banks began in earnest. Late in 1894, an agreement was arrived at. It was proposed to make an amalgamation, but not to purchase the Colonial Bank by the Bank of New Zealand.

One night in September this agreement was forwarded to Sir Joseph Ward. The next day he wrote a long letter to Mr. Seddon, in which he showed the difficulties he had to deal with and the trying time he had gone through. This letter states:—

“Since the colony guaranteed two millions to the Bank of New Zealand, the whole matter has given me the greatest concern and anxiety, not so much on account of the guarantee of the bank proper, as on account of the position of the Estates Company. Attached to the bank as it now is, it will, in my opinion, render it impossible for the bank to extricate itself, even with the colony’s guarantee, and must, if not dealt with now, call in the future for further substantial aid from the colony. If the company is left under the same control as