154 L I F E A N D RECOLLECTIONS OF

C H A P T E R X I I .

L O A N CONSOLIDATION—BANK «OF N E W Z E A L A N D A N D T H E A U C K L A N D L O A N — DITTO A N D A N OTAGO LOAN — A COLONIAL G U A R A N T E E A N D ITS E F F E C T S — A N ALTERCATION — M R . W. FITZHERBERT L E A V E S FOR E N G L A N D AS LOAN A G E N T — E X T R A C T S FROM HIS LETTERS TO M E .

SUBSEQUENT to most of the events narrated i n Chapter X I . a scheme was broached for consolidating a l l the loans of the general and Provincial Governments into one great five per cent. loan. This question came under practical discussion i n the House of Representatives during the session of 1867. On one side (of which Dr . Featherston was the leader, and I one of the outside supporters) i t was argued that the Colony should derive a monetary advantage, i n consideration of its giving its guarantee to the various Provincial Loans, which at this period were not permitted to be quoted i n the daily official lists of the London Stock Exchange, and were consequently at a great discount and much below par value. This was the case wi th the Auckland six per cent, loan of half a mi l l ion which had been taken up by the Bank of New Zealand at about par (I th ink i n the year 1864) ; and the Directors, w i th M r . Kennedy as the head Manager of that Institution, had by a fluke succeeded i n placing £100,000 of i t on the London market at a small profit to themselves. The investors in this fifth portion of the loan, thought i t to be part of a Colonial loan for which a quotation i n the daily lists would be obtained. To their chagrin they soon found out their mistake,

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and that they had purchased a Provincial and therefore a security of inferior value. The result to the Bank of N e w Zealand was equally disastrous, for nearly £400,000 worth of their bonds remained unsold, and i n the hands of the B a n k ; their value being nominal, or about £90 for each £100 bond. The shareholders of the Bank of New Zealand were therefore naturally i n favor of a scheme of consolidation which would prevent them from losing, by the debentures i n question, about £40,000 i n hard cash.

The same financial establishment having made large advances to the Provincial Government of Otago received orders to dispose of £500,000 worth of debentures authorized to be raised under the "Otago Loan A c t 1862." This they d id at various times. One parcel of these securities, representing a sum of £112,000, was sold, I know, at the ruinous rate of £75 for each £100 debenture.

Dur ing the year 1865 they offered the balance, £300,000 worth of this loan, for competition, at a minimum price of £90, w i th but poor success : i t was not taken up, but was afterwards, i n 1866, finally disposed of,—the average rate obtained for the whole half mi l l ion being the low figure of £ 8 0 : 1 5 : 2 for each £100 debenture.*

A t the time I am speaking of (1867) it.was foreseen that a Colonial guarantee would send the depressed Provincial bonds up to par, or nearly so, and leave the holders of them the choice of exchanging them for consolidated five per cents, or not, as they might see fit—the guarantee of the Colony being as good i n one case as i n the other.

The terms afterwards offered to induce conversion, were £13 : 10 for each £100 six per cent. General Government bond redeemable i n 1891, and £ 9 for six per cent. Provincial debentures.

* I obtained these figures from the branch establishment of the Bank of N e w Zealand, i n L o n d o n , in the year 1872.

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Thus an investor in one £100 Provincial bond, for which he might have only paid a Provinc ia l Government £75 (perhaps £ 8 0 : 15 : 2, the average price of the Otago bonds), was offered £109 i f he would convert i t into a more valuable security— but bearing only five per cent, interest; the principal having to be repaid at the end of thirty-six years, by means of a one-per cent, cumulative sinking fund invested in annual drawings.

I am and always have been a holder of a considerable number of shares i n the Bank of New Zealand ; st i l l this has not prevented, nor w i l l i t prevent me from criticising adversely any of its proceedings which I know to be unfair, of a jobbing nature and unworthy of a great financial institution.

The Chairman of the Bank of New Zealand, M r . T. Russell, a bold and speculative man, told me in Well ington he could on behalf of the Bank agree to give the Government five per cent, to secure its guarantee. W h y this was not carried out I can­not understand.

It was well known that an unconditional Colonial guarantee of payment of principal and interest, would add great value to the neglected and depreciated Provincial bonds, send them up to par, and replenish the coffers of the Bank of New Zealand, as well as fill the pockets and bosoms of astonished London bondholders and speculators, wi th cash for the first, and delight for the second ; while the Colony of New Zealand which con­ferred this estimable, but unappreciated and unpaid-for profit­able boon, would receive no correlative financial advantage from this one-sided arrangement; the ultimate result of which was, as I saw in ths London Times of A p r i l 10th, 187 3, that these very guaranteed five per cent, bonds were quoted as sold at £104J.

O n the other side, i t was plainly said, that, whether the Colony guaranteed the Provincial bonds or not, i f the Prov in ­cial Government failed to pay either principal or interest on their public debts—the General Government would have to step i n and do i t for t h e m ; therefore a Colonial guarantee

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should be extended to the Provincial indebtedness represented by these loans, and be given unconditionally.

The simple answer to this was, the public creditors who held Provincial securities knew that they had no legal claim on the Government of the Colony, i f the Provinces made default in the payment of interest or principal of these bonds : moreover their being an inferior security was proved by their lower price, and from their not being quoted in the daily lists of the Stock Exchange.

It must, I think, be admitted that at this period (1867) the lax i ty and unscrupulosity in financial considerations in the N . Z. Parliament, together with the subsequent considerable, i f not complete success of the consolidated loan scheme was but the beginning of a disreputable state of affairs (that I have more particularly alluded to at Chapter X L ) , which led up to the adoption of a system of reckless borrowing, represented by, and culminating i n , M r . Jul ius Vogel's gigantic loan schemes, and followed by wasteful expenditure which is l ikely to be continuous, and which cannot now be stopped t i l l its ruinous financial results are fully developed during the next three or four years that loom i n the distance.

It is due to D r . Featherston to say—though he was imprudent in public borrowing himself—that he vigorously denounced the consolidation scheme, with an unconditional guarantee, as most dishonest to the Colony. Dur ing the discussion of this subject i n the session of 1867, he said: " I say f o r the last time I protest against this B i l l , as committing a robbery, f o r it is nothing more or l e s s — a s robbing the Colony o f t w o three or f o u r hundred thousand p o u n d s — a s committing upon i t a gross f r a u d and a gigantic swindle."

Notwithstanding this, and the attribution of corrupt motives to certain members, it passed into law, even though at first opposed by the Minis try of the day (particularly the Colonial Treasurer, M r . Fitzherbert), but who at

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the last moment gave this discreditable scheme their support. A t the time the A c t was before the House, i t excited great public interest and attention. Strong language was uttered i n debate, and i n the midst of conviviality in the refreshment-room—bitter expressions found utterance even between two gentlemen who had long been friends, privately and publicly. The one was in office as Treasurer: the other was on the opposition benches, and an opponent to the Act .

The former was M r . Fi tzherbert ; the latter D r . Featherston. The altercation i n question occurred in the refreshment-room of the House. H i g h words, angry and offensive, passed between these two gentlemen—these two old friends. Next morning Dr . Featherston, at his office, handed me a letter he just received from M r . Fitzherbert, asking for an apology for the opprobrious words used by the former. Dr . Featherston, believing himself to be i n the wrong, at once assented to the request of the writer, and thus a reconciliation was effected— at the last moment, and just on the eve of the departure of the Hon. the Colonial Treasurer, W . Fitzherbert, on a mission to England, to consolidate old loans and raise £1,114,000 as a new one; but not i n time to prevent some friends of the latter from attending a dinner given to h im on the 6th of December, prior to his leaving, but at which only thirty-six persons were present. Before the dinner M r . Fitzherbert came to me and—as he had heard that I was not going to be present—asked me to attend it . On account of our old friendship I told h im, i f i t had been simply a dinner given h i m by his old personal friends, I should have l iked to have done so ; but as my presence at the public dinner might be construed into an approval of the mode of consolidation of our loan, which he was going home to carry out, I felt that I must reluctantly decline going.

However, on the 8th—on a Sunday—I went on board the steamer " R a k a i , " bade h im a hearty good-bye, and as he asked

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me to write to h im once a month, I promised to correspond with him. Just before leaving the ship he informed me that he was—while away from Well ington—to be paid four guineas a day for travelling expenses, and to be allowed his salary, as a Minister , of £1000 a year. The following are extracts from some of his letters.

H i s first letter began as follows :—

" 2 1 , Cockspur Street, " Trafalgar Square,

" London. ' ' J u n e 1st, 1868.

" M Y D E A R C A R T E R , " I have not received any letter from you

by either of the last mai l s ; but I dare say you have been busy, and although I have been busy and i l l too, during the last three weeks, yet, as I am recovered now,* * * and as I promised I would write to you whenever I could, I am unwi l l ing to let the mai l go without a word * * * Hitherto, everything I have undertaken in this country has turned out a success * * * I have succeeded in establishing a favorable influence at the Colonial Office, where I am invariably received w i th marked attention * * * i n the C i ty , I am regarded wi th confidence, and my scheme [consolidation of loan] regarded as a marked success. The credit of New Zealand in this market, is now higher than it ever stood before * * * H o w far the Colony w i l l endorse this favorable opinion, is altogether another question. I admit, I ought to know something by this time of the ' envy, hatred, malice and al l uncharitableness' which pursues Colonial men, for party purposes, and ends generally by disgusting the best men, and compelling them to withdraw their services from the public, and I do not suppose that I can expect to be an exception to the general rule.

" Believe me, " Yours sincerely,

" W I L L I A M F I T Z H E R B E R T . "

1.60 L I F E A N D R E C O L L E C T I O N 8 OF

H i s next letter was dated from :—

" O x f o r d and Cambridge Club, " P a l l M a l l , London,

" 1st A p r i l , 1868. " M Y D E A R C A R T E R ,

" M a n y thanks for your letter : I hope you w i l l write to me frequently and give me al l the gossip, and also the benefit of your remarks, for I can assure you that I value them particularly. Y o u w i l l be glad to hear that I have succeeded i n inducing the Home Government to withdraw al l their claims against us. A s these amounted to several hundred thousand pounds—nearly, i n fact, to three-quarters of a mil l ion sterling, I think you w i l l agree w i th me, this is no small cause of congratulation * * * the concession has been graciously made. I d id not forget what was due to the Colony, and I declined to sue for that which I plainly said the Colony regarded as a right. I d id not cringe or was obsequious, as, I am afraid, poor Wood was sometimes ; neither d id I bounce, l ike poor Wood did, and so get snubbed, but I stood my ground firmly; but w i th imperturbable patience * * * Y o u wi l l thus see what I have done, and what difficulties I have overcome. N o w the task of dealing with the Crown Agents, Exchange, and launching the seven-million loan is before me.

" Possibly (for i t is the fate of the absent) I shall be abused, and my work made l ight of, and the Independent, (whose people owe me no end of good-will,) probably w i l l lead the attack against me. However, depend upon it , Carter, that I have achieved great things already, and i n a style that has been appreciated and has commanded respect for the Colony. I have been expecting to hear from you about the Eai lway [to the Wairarapa] as you wrote [about]. I believe I could do you good : I have made a great number of friends.

" Yours very sincerely, " W I L L I A M F I T Z H E R B E R T . "

The th ird letter I received from him consisted of twenty-four pages of note paper : i t was dated from London, August 31st, 1868, and commenced as follows : —

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" I have received your letter of the 8th of J u l y , and hasten to reply. I thank you for remembering me and backing me up, and writ ing the article you refer to in the [Wellington Advertiser] D a i l y Times * * * . Nothing is a truer act of kindness than protecting an absent friend, and saying a word to back him up when he is not present to defend himself. When a man is on the spot he can defend himself; but cowards always attack a man behind his back— like curs : lukewarm friends stand st i l l and quietly enjoy the attack, while they look on and make no sign . . . I want support, and, though I say it myself, I know I deserve i t , and have accomplished great things for the Colony."

I may here observe that my friend appeared to me to take an extreme view of the services he rendered the Colony on this occasion, and of the Colonial criticisms lie was consequently subjected to—yet his remarks on the abuse a public man receives when he is absent, are as true as they are appropriate. When my friend returned to the Colony a l l went well with him, and, as I have before stated, the House of Representatives voted h im £3000 for his services. H i s opponents may say that it was not given in a very generous manner (inasmuch as many of the members declined to vote for or against it) , nevertheless, i t passed in the usual way. The letter I have been referring to goes on to say, that after having been on the Continent w i th his wife and daughter for about three weeks : — " I rushed back to London on the 27th [August] . * . the 27th was the last day allowed for receiving offers to exchange 7, 8, and 10 per cent. Provincial debentures » • •. There have been only £145,000 [worth offered for] exchange—on the terms proposed —out of £500,000 [advertised]; the fact was I was in too great a hurry, which is a great mistake in these k i n d of operations ; but I was so anxious to have everything finished so that I might get away by the mail of the 2nd of November, that I chanced i t . " After this he had to remain longer, as he said, to " see it out to the end."

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H i s last sixteen-page letter to me, of 1st October, 1868, was less statistical and more descriptive and interesting. Speaking of his having been i l l he said :—

" I have suffered from more severe and more repeated attacks of gout than I have ever experienced, and i t is not that I l ive a sedentary or luxurious life. I take a great deal of exercise [on horseback] • • » and as to medicine, I have taken a small chestful. I cannot say so much about smoking. I smoke from morning to night, I can't do without it . Y o u must know now that i t has become a respectable fashion ; the smokers have carried the day and this very day (1st of October) al l railway trains [companies] are compelled to provide carriages for smokers. Y o u used to be obliged to do your smoking by stealth : now, it is declared respectable • * » They are squabbling al l over the country. I believe there is an awful amount of hypocrisy on both sides. One side hates democracy as much as the other; but a l l b id for, and are drift­ing towards i t ; but both i n their hearts equally detesting the thing. It is a poor spectacle."

Speaking of D r . Featherston—who about this time was offering serious opposition to M r . Fitzherbert's colleagues, in the House of Assembly i n Well ington—he remarks :—

" I am sorry to hear [from you] that the Doctor is i l l . H e is a wonderful man, for i t does not seem to affect his attempts to upset the coach [the Minis try ] , as old Gibbon Wakefield used to say [said when he heard D r . Featherston make a speech at his first election for superintendent], holding up his hands wi th astonishment—" There is nothing the matter w i t h that man's lungs ! "

This closes my extracts from letters from M r . Fitzherbert to myself. H e is now (1874) Superintendent of the Province of Well ington and pushing i t ahead wi th borrowed money. I n the year 1858 he was a staunch and ultra Provincialist. I n 1868 he was a m i l d Centralist. In 1874 he is now a revived Provincialist. I cannot follow him, and yet i n chang­ing w i th the t imes—if he changed from conviction and not interest—he is right.