48

Clause 35 empowers the Governor to make rules
for the management &c. of the Bank—all such rules to
be published in the Government Gazette.

Clause 36 prohibits the issue of private paper
money, making every bill or note, with the excep-
tion stated, absolutely void and of no effect.

Clause 38 excepts cheques upon Bankers.

Clause 39 enables the Union Bank of Australia
to issue Notes (equal in amount to those in circulation for two years preceding the 1st July, 1847),
till a day to be fixed by the Governor in Council—
of which 12 months notice to be given

Copy of Despatch from Earl Grey

to Gov. Grey.

Downing-street,
August 1, 1848.

SIR,—I have received your Despatch No.
120 of the 25th November last, transmitting a copy of an Ordinance passed by the
Governor and Legislative Council of
New Zealand on the 16th day of October, 1847, intituled “An Ordinance to
authorize the establishment of a Colo-
nial Bank of Issue by the Government of
New Zealand, to make and issue a paper
currency, and to prohibit the making
and issuing of paper money by private
individuals.”

Having referred that Ordinance, to-
gether with your explanatory despatch, to
the Lords Commissioners of the Treasury,
I transmit to you for your information and
guidance a copy of a letter from the Assistant Secretary to that Board, pointing
out those modifications to which their
Lordships consider that the Act should
still be subjected. You will propose to
the Legislative Council the alterations
there suggested; but as they apply
rather to matters of detail than to the
general principle of the Act, which is
entirely in accordance with the recommendation of my Despatch of 2nd Feb-
uary, 1847, No. 35, I have not thought
it necessary to defer submitting it to the
Queen for Her Majesty’s confirmation;
and I have now to inform you that Her
Majesty has accordingly been pleased to
confirm the Ordinance. You will observe that the Lords Commissioners of
the Treasury have recommended that
the investments of the bank shall be
made in the public securities of this
country instead of by means of loans in
the colony. To the adoption of this
amendment I attach the greatest importance, not merely on account of the
greater security which it will give to the
paper currency thus issued, but still
more on account of its being calculated
to carry into more complete effect the
principle laid down in my Despatch al-
ready referred to, of avoiding all interfer-
ence with private enterprise in the
business of Banking properly so called.
By this alteration the transactions of the
Government Bank will be greatly simpli-
fied, and will be reduced as was originally
intended, to the mere supply of the pa-
per money required by the colony, an
advantage which will more than compen-
sate for the lower rate of interest which
will be received for money invested in
the British Funds as compared with that
which would have been obtained from
sums advanced as loans in the colony.

The following are the principal heads
of the arrangement by which I conceive
that these views may most advantageously
be carried into effect.

1st. That portion of the cash received
by the Bank which it may not be necessary to retain for re-exchange of the
Bank paper, is to be paid over to the
Commissary, who will grant a certificate
to the Colonial officer, making the pay-
ment of the amount thus received into
the chest under his charge.

2nd. This certificate is to be transmitted by, or on behalf of, the Colonial Go-
vernment to this country, and on pro-
duction of it here, the Treasury Board
will direct the issue of a corresponding
amount for investment in public securities.

3rd. The investment will be made in
such manner, and in the names of such
trustees, as the Secretary of State and
the Treasury Board may appoint, or as
may be approved of by the Secretary of
State and the Treasury Board, on the
recommendation of the Local Govern-
ment, on which point I shall be prepared
to receive any suggestion from you.

4th. The payments to the Commissary
(under Article 1) should be made to the
principal officer at head quarters, and not
into the subordinate chests at out sta-
tions, unless with the consent and by the
authority of the principal officer by whom
all certificates to be forwarded to this
country must be signed.

5th. The sums invested will be held
on behalf of the colony; the Colonial
Government will be permitted to draw
against them if it should become necessary to raise specie for the use of the
Bank; and should any advances of cash
be obtained by the Bank from the Com-
missariat chest, the Treasury Board will
retain power to direct the re-payment of
such advances out of these investments.

6th. The Commissary will be author-
ised to pay over at any time to the Bank,
on application from the Colonial Gover-