I move:—
That, in view of the present excessive rate of interest charged by the Irish banking companies on loans and overdrafts, the Seanad requests the Executive Council to take such steps as may be necessary to control such rate of interest.
This motion was put down for discussion about three weeks ago. After I had sent in notice that it was my intention to move it, it was suggested to me that the motion might have an injurious effect on the National Loan which was just then being launched. I do not think that the discussion of the motion would in any way be injurious to the National Loan. On the contrary, I think that some of the arguments which I hope to develop would have been an exposition of the value of making an investment in the National Loan. But lest it should be interpreted in any way as being aimed at producing an injurious effect on the flotation of the National Loan, I decided it was wiser in all the circumstances to postpone going on with the motion. We, in our Party, have no desire in any way to injure the National Loan or the National credit. We are very vitally interested in the national credit, and claim that the potential credit of this country, both as a field for national development and for investment is second to none: that the potential resources of the country should be developed on a sound national basis, and that we should ignore the interests of extern elements which, it is to be feared, often count more in this country than the interests of the natives. My reason for bringing up the motion is that there is a very considerable discrepancy between the rates of interest charged by the banks at the moment and the present value of money, not only in this country but all over the world, as well as to show that what is the accepted bankers' theory as regards the value of money in this country compared with the ordinary standard, or what was accepted as the standard, is being completely ignored in the present situation.
The present deposit rate in Ireland is one and a half per cent. The overdraft rate for commercial, agricultural, and other purposes charged at the moment throughout the country by the banks is five and a half per cent. There may occasionally be a difference between the loan rate and the overdraft rate, and a difference between the terms which one client at a bank gets compared to the terms given to another client. There may be certain types of securities on which a bank will advance money at a lower rate than five and a half per cent., but as against that there may be loans granted by the banks on which they charge more than five and a half per cent. What I want to point out is that at the moment there is a difference of four per cent. on the average between the deposit rate and the overdraft rate. The published English bank rate at the moment is three per cent. We had been led to believe in this country that we had a grievance because the prevailing Irish bank rate was always one per cent. above the English bank rate. We find that to-day it is two and a half per cent. above the English bank rate.
I know it will, and can, be argued that the English bank rate, though advertised at three per cent., does not prevail in quite a number of commercial and business transactions on the other side. What I want to point out is that we here have to consider the rates charged by the Irish banks from the Irish point of view. It is not our fault that we are linked up so closely with the system of banking carried on in England and elsewhere. That is something to be regretted and something that will have to be contested. Even those who only take a layman's interest in questions of finance and trade know that at the moment bankers' systems are very much under suspicion, not only in Ireland, but all over the world. I venture to say that in this country we are not going to have anything like economic, industrial or agricultural development, or anything tending towards the progress and prosperity of the ordinary people, of the ordinary business and producing community, until we get right down to what is the fundamental economic evil at the present time, namely, the stranglehold that bankers have got on industry and production.
I think it is fitting that I should call the attention of the House to the minority report of the Banking Commission, which is signed by Mr. J.J. McElligott, who is now the Secretary to the Department of Finance. I desire to quote what he states for the reason that, perhaps, it will not be looked upon as a biassed opinion, as mine might be thought to be. Mr. McElligott was a member of the Bankers' Commission, about which I will have something to say later. In his minority report he states:
"The margin between the rate of interest allowed on deposits and that charged for accommodation seems to be always greater in this country than in England. At the present time the margin here is 3½ per cent., 2½ per cent. being the published rate of interest on deposits and 6 per cent. the Irish bank rate, while in Great Britain the margin is 2 per cent. and 3 per cent., 3 per cent. being the rate allowed on deposits and 5 per cent. being the Bank of England rate. Movements of the Irish bank rate follow those of the English, and if the Bank of England rate were reduced to 4½ per cent. the Irish bank rate would fall to 5½ per cent., while the English and Irish deposit rates would fall to 2½ per cent. and 2 per cent. respectively. As regards both the actual rates and the margin between the deposit rates and those charged for accommodation, the position here seems to require explanation."
I do not know whether Mr. McElligott, since the issue of this report, secured that information. I do not know whether the Minister for Finance has got further information on the matter or whether the Minister for Industry and Commerce, who really is more concerned with this matter has any information. But I quoted Mr. McElligott's statement to show that here, at all events, was a question raised on the existing system of charges for overdrafts and loans in this country as distinct from the English system, and I contend that the position to-day is worse than it was then, in the sense that there is a bigger gap to-day and less justification for that gap than at the time that that report was published. In dealing with this matter it is reasonable to suppose that the banks could put up various arguments and, I think, the bankers did put forward various arguments at the Banking Commission. The comparative volume of trade which would be transacted by the bank's branches, say in country towns throughout Ireland, and similar branches operating in the larger towns in England, could be used by the bankers, and I think was used, as a reason for their extra charges. It was probably not the only reason they put forward. At all events, it must be admitted that in many cases the towns in Ireland do not afford the same volume of business or turnover as, perhaps, in England, and accordingly it could be argued for them that there were overhead charges and that branch control cost them more money. I do not need, at this stage or at any stage, to explode that argument. I did explode it when we were discussing the Bank of Ireland Bill by giving a mere statement of the financial position of the banks operating in this country. At that time I showed clearly that the paid-up capital of the Bank amounted to 8¾ millions, that the profits amounted, in that particular year, to £1,861,000; the dividends to £1,109,000, and also that the built-up reserves of the banks were equal to 125 per cent. of the paid-up capital—that is, that they had 25 per cent. more reserve, I am speaking in broad figures, than they had in paid-up capital.
Anyone who attempts to argue that the banks need this rate in Ireland is, I think, not speaking by the book, and I do not think they can bring forward any figures to justify their attitude. There are many things in connection with this position that require the light of day. I would like for an instant to deal with the problem of hidden reserves of the banks, and unclaimed balances. I understand that there is a very considerable sum of money in the shape of unclaimed balances in the banks of this country, which the banks have as assets. We discussed within the last hour a demand for an analysis of various accounts, and I agree with that. I agree we ought to know; it does not do anyone any harm to know whatever may happen afterwards. I would like to know who is entitled to these unclaimed balances. In my judgment they are something that after a period of years should come to the State with a definite guarantee from the State that if on any occasion it should become necessary to make good any of these unclaimed balances to heirs at law the State should take the responsibility. But whatever the position there is no question that the banks, as such, are not entitled to hold them. I do not know what they are holding; they do not disclose the amount.
Mr. McElligott, in another section of his Minority Report, referred to the insufficiency of the data that the bankers gave us. I agree heartily with that. There is no man could make an analysis of the economic position of this country from the bank reports. I do not know whether that is deliberate or not, whether it is merely following the old tradition of the balance sheets. I know it is a position which should not be tolerated. I think we ought to know what money is to the credit of the depositors and what is done with it—how much is operating here, and that we ought to have the fullest possible details. We do not want the bankers to disclose anything secret as regards individual transactions. We want a segregation of the accounts in such form that they will be an intelligent guide for the Minister for Finance and people generally as to where that money is and how it is being used. Mr. McElligott, in his Report, at page 64 of the Minority Report says:
"A further reform consequent on the establishment of a new political entity is the segregation in the accounts and balance-sheets of banks doing business here, of the figures of assets and liabilities relating to Saorstát Eireann, and the more frequent publication of such figures. I would recommend that something on the lines of the monthly statement suggested by the British Committee on Currency and Foreign Exchanges, presided over by Lord Cunliffe—which suggestions were adopted by the London Clearing Banks, without imposing any necessity for action by the Government—might be adopted here."
Then he goes on to say:—
"At the present time the value of such accounts as the Irish banks publish is diminished by the want of uniformity. The Banking Commission itself had occasion to complain, in its first interim report, of the lack of statistics, and the proposed Currency Commission will be unable to carry out its functions properly unless the trend of banking movements is made clear by presentation of the data mentioned. From the outside point of view the paucity of statistical material of this kind renders impossible the intelligent appreciation of our major economic problems, that is, the visible adverse balance of trade, the growth or decline of prosperity, etc. Without full information on these crucial matters the framing of a sound national economic policy, or indeed, sound private business policies, is rendered extremely difficult."
These are the views of Mr. J.J. McElligott and, so far as I know, nothing has been done on the matter with regard to them since. There is one other point that I think it worth calling attention to when dealing with this question of interest. In approaching this particular aspect, I think, first of all if I am right in my interpretation, and I believe I am, and secondly if my charge is well founded, something ought to be done. Banks in this country prepare half-yearly balance sheets. All customers' accounts are made up for six monthly periods. Under the Banking Act of 1844, it is stipulated that a rate per cent. is to be charged, which naturally pre-supposes that that is a rate per cent. per annum. If the banks' accounts are made up every six months the interest charged for the six months' period is not deemed to be subject to six months' interest for the balance of the half year, and I do not think it is keeping strictly within the terms of the Act to do this. If we take overdrafts of £25,000 or £30,000 and the rate happens to be six per cent., there is a very considerable amount of money in the form of compound interest charged at the end of twelve months by being charged up in two periods of six months. I see Senator Douglas smiling. I hope he will be able to satisfy me on this point. It is a point upon which I think we ought to be satisfied. I think it is the duty of the Minister for Finance or some Board appointed by the Ministry of Finance to deal with this question of the people's interest. I think as I said before, bankers are under suspicion everywhere. I do not accuse and would be very sorry to accuse the Irish bankers of doing anything unfair. I think they do what is fair according to their lights. I do not question their lights, but the system under which they are labouring, and possibly most of them, or at any rate a great many of them, are carrying on a traditional business in a traditional way. They have not wakened up to the fact that they are the keystone of the whole economic structure, and that according as they act for the good of the country or against the welfare of the country the country will prosper or suffer. The banking machine, all over the world, is really getting the world in its grip, and in no part of the world, perhaps, more than in this country are we working for the bankers, and I see no prospect of it being otherwise until our basis of banking and our basis of credit and our whole system of currency is radically changed. What that change will be I do not know, and how far the Minister for Finance will interfere I do not know, but I do know, that whether it is made sooner or later the change is coming, and it will have to come if this country is going to survive and make good.
I said earlier that my argument would have been an argument that would help the National Loan. I would like to make one or two remarks upon that. The National Loan, issued at 93½, bearing interest at 4½ per cent. was, in my opinion, the best investment any people ever had presented to them, taking into consideration the present difficulties of the money market and the difficulty of placing any money with safety. I think the Minister for Finance, who might have been here to-day, and I am sorry he is not, said a few days after the Loan was issued that in a very short time the loan would be at a premium. I agree heartily, and I go further and say that the Loan was issued, in my opinion, at too cheap a rate, and remember this, it is the Irish people that are going to pay the interest on the Loan and to bear the responsibility for it. The bankers may have said, "We will do our best; we will take up so much of it and we will underwrite it all," but I would like any banker to put his hand to his heart and say truthfully that he could put up a better proposition than the last National Loan at the present time, taking into account the security and safety and the profit-bearing nature of the stock.
In most matters that we bring up in this House we feel that we are beaten before we start. That is to say, it is sufficient for a member of the Fianna Fáil Party to raise an issue here to have it defeated. We have raised certain matters here not of a party nature, and I should like the House to understand that we as much as any party, and perhaps more than some parties, have very much at heart the whole national well-being, the credit and prosperity of the country. We try to think in terms of the well-being of the ordinary citizen in Ireland, that is, the people who constitute the main body of our population, the plain people, the working people, the farmers in the fields and the workmen in the factories, and we realise that they alone are the strength of this nation and not any superficial emblems or display of prosperity as may be shown by the big picture theatres, or big business or anything else. We think, in other words, in human terms, in terms of humanity, and I state here to-day, and will argue it anywhere else, that the real evil behind all our evils is an economic one, and the cause of the economic one is a banking one, the system of banking that we are living under. I already said the banks here have accepted a traditional system—the British system and, indeed, the system prevailing all over the financial world. I ask Senators to look at the financial position to-day in London, in New York, and everywhere else, and to ask themselves are they satisfied?
We hear a great deal about little factories in Ireland. We cannot, we are told, put £100 or £1,000 into Irish factories, because all Irish factories go burst. We have had a good deal of investments of Irish money outside Ireland in the last twelve months. I venture to say that more money was lost in one day in the recent slump than was lost during a half century in Irish industries. We never hear people telling us about the money that goes out of the country and is lost. We never heard what happened with regard to the hundreds of thousands of pounds of Irish money and of Dublin money that was lost in the Hatry collapse. We never heard about the money that is lost in all sorts of investments abroad, but we hear all about some unfortunate man who, struggling against most adverse conditions, happens to lose £1,000 of the shareholders' money in an attempt to establish productive industry in Ireland. It is time we woke up to realities and, above all, it is time that the bankers woke up to realities. I want to say that in so far as this Party is concerned we aim at controlling the system of banking. It cannot be charged now that we are injuring the National Loan by making such a statement. This régime has got to end, and this is but one step in the programme I visualise as being necessary if the economic salvation of this country is to be achieved. I have not heard any reasonable argument to show me that the bankers in this country or for that matter anywhere else have not to justify their whole case. Credit has gone west; industry has collapsed; there has been a collapse in activity. We see it in England. It all analyses down to the point, that the whole economic position is due to one cause, the system under which our banks are administered. It is time it was ended. For that reason I hope what at the present moment remains of the Seanad will support me in this proposition. It is not a Party matter. It is an honest attempt to get something done and to curb the activity of the machine that is diametrically opposed to the interests of this country. For that reason I hope Senators who are willing to judge an argument on an issue of this kind on its merits will lend their support to have the motion carried as one step in the right direction.
