23 24
Financial Measure-(b) Partial Moratorium.
449
69. The Chinese registered banks were in a weaker position than the European banks for various reasons. A certain amount of over-trading had taken place among the former as a whole; and although their resources were quite large and adequate to the ultimate satisfaction of all depositors, the trouble at the start of the crisis was to find immediate liquid assets. There is reason to suppose that some at least of the registered banks would have been compelled to suspend payment in June, and the same applies to the native banks. It was necessary to gain time. To compare for a moment small things with great, the Chinese banks at that time were in the position of the London Joint Stock banks on the 1st August, 1914. But whereas in London the lucky accident of a Bank Holiday (extended for two days) enabled the Treasury to provide new currency, and to guard against any possible run, we in Hongkong were obliged openly to suspend payment by means of a partial moratorium until help came. This, therefore, is not strictly comparable with the general moratorium
declared in England on the 6th August, 1924 Our moratorium 1914.
lasted from the 22nd to the 29th June, and on the latter date the Chinese registered banks re-opened for business, having mobilised their own resources, and were able to meet all obliga- tions.
70. The moratorium was suggested to the Government by the Hon. Mr. Chow Shou-son on the evening of the 21st June. On the previous day (Sunday) a general moratorium had been men- tioned at Government House when the Hon. Mr. D. W. Tratman, Mr. A. G. M. Fletcher, Mr. Chow Shou-son and I were present; but no decision was reached. The request made by Mr. Chow was for a partial moratorium applying only to Chinese banks. He tried to see me in my office at 5.30 p.m. on the 21st, but I had left for home. However, when I heard of the decision. next morning, I informed him and the Assistant Colonial Secre- tary that I supported the measure.
71. Although I gave my support to a moratorium on this occa- sion, I may perhaps be allowed to point out some of the dangers which always attend the taking of such an extreme measure. These dangers must be borne in mind if a similar occasion arises. in the future; and the effects of the financial situation, as it then is, must be carefully considered. A mere mechanical imitation of precedents may lead to grave results.
72. The moratorium at all times is a dangerous device. If it became the regular practice to declare a moratorium in every financial crisis, the natural check to over-trading, namely, the fear of the resulting crisis, would become too weak. It is only justified by political disturbance so unexpected and of such inten- sity that no ordinary exercise of business caution or foresight would be sufficent to meet it; and this was our, case in June. Granted that in this case. the moratorium saver some of the Chinese registered banks and many of the native banks from the necessity of suspension in June and July, it nevertheless com- pletely disorganised the financial fabric of the Colony. occurred immediately before the June Settlement fixed for the 23rd (a time probably chosen purposely by our cunning enemy), and made it impossible for that settlement to be carried through,
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