"NOTHING NEW"

Ashburton Guardian, Volume 55, Issue 107, 15 February 1935, Page 6

"NOTHING NEW"

THE FINANCE CORPORATION. SUPPORT BY FARMERS URGED. ADDRESS BY MR MULHOLLAND. There was a good attendance ol : farmers at the Ashburton Agricultural and Pastoral Association’s rooms this afternoon to hear an address on the Government’s mortgage corporation proposals. The speaker was Mr W. W. Mulholland (vice-president of the Dominion Executive of the Farmers’, Union), who attended at #e Invitation of the Mid-Canterbury Provincial Executive of the Union. The president (Mr Raymond Oakley) presided. Mr Mulholland said the whole question of farmer’s finance was one of the most important, tne most intricate and the most difficult to solve of any problems in New Zealand to-day. Farmers’ indebtedness was only one phase, though one of the most pressing, of public finance problems. He reviewed something of the rise and fall •of the personal wealth of New Zealanders from the pre-war days till late years.. The increase seemed to have been due to the lending of money between the people and the only way to reach a sound position was to bring about a drastic reduction of indebtedness. The Government had reduced the public burden to some extent by the conversion method, and in other ways a good deal of indebtedness had been wiped out, notably through the Bankruptcy Act, which, it was held, could wipe it all out, .but what would happen ? The value of land would diminish almost to the vanishing point, and the mortgagee would be the most heavy loser. Sound Principle Necessary. The “back-lash” from such a move would throw the whole economic system of the country out of gear to a much greater extent than had occurred. Therefore, it was essential to find some #)ther means of straightening out the tangle into which rural finance had got. The Farmers’ Union had been trying for years to find some means whereby this could he attempted, and a sound principle of< adjustment was necessary. Two years ago a small committee was set up to find some such principle and means of putting it into operation. It arrived at a principle, which, briefly, was this: That a mortgagee was entitled to interest to the full rental value of the land, based on its productive capacity at the time of adjustment, and that the mortgagor, if he paid that full rental value as interest, was discharging to the fullest it was possible to do his obligations to the mortgagee, and he should be given a secure tenure. This was an eminently fair system to all concerned. It had been said that the mortgagee was carrying the full burden of the times. The Government would make the proper statement of the relations of the mortgagee and the mortgagor of the facts of their case. The actual value of the mortgage would remain. That sum over the value of the mortgage would be kept in suspense for five years, when the benefit would be available. If the mortgagee were to use his powers through the Bankruptcy Act to-day, he would not reap that benefit. In the interests of both, as well as oil the whole country, some means must be found to give the farmer a secure tenure of his land and the mortgagee a definite fixing of his charge upon the land. The Mortgage Corporation itself did not deal with these problems. It was an improved system of obtaining mortgages. There was no compulsion about it. Farmers could go outside it, if they thought they could do better. Therefore, one wondered why there was such a very hot criticism of the proposals. He was not prepared to say the proposal was perfect, but the principle was so very sound that one wondered why the attacks on it were made. The Chambers of Commerce attacked the proposal to make borrowing easier, as it was one ot the biggest troubles to-day as it was. The proposal, at the same time, aimed at helping the to get out of debt. There was nothing new or novel about the proposals, for the Advances Department had been in existence for a long time, and everyone knew the benefit farmers had reaped from that system* Mr Mulholland went oq to say that with an ordinary mortgage the reduction of small amounts a year was not practicable and it was! necessary that there should be some organisation to take -up this aspect. That was the proposal of the Government. Taking Over cf Farm Loans.

There was another side to the scheme and that was the taking over oi : farm loans, house-building loans and a good many others that were not in a very sound position. It was a question whether it was wis) t(^ incorporate both systems in one scneme. He did not think it was wise to deal with them separately, but the Government might have a suitable scheme in mind. The rehabilitation of farmers was more open to criticism than the corporation proposals. The Chambers of Commerce thought the Mortgagors’ Relief Commissions, if left for two years, would see the position cleared, but if they were not to be followed by some more permanent legislation, it would be better to have left them alone. The Commissions had served a very great service in that they allowed farmers to look about them and adjust themselves to the new viewpoint. It took time to do this, and time was necessary to give the proposals a chance to achieve their object. The Corporation would be used to bring down interest and give loans -up to 80 per cent., 13 1-3 per cent, being guaranteed by the Government, which would set up special tribunals to issue a stay order similar to those of the Relief Commissions. The farms concerned would be run on a budgetary system, which would be reviewed at the end of five when the positions of the parties to the transaction would be considered, the value of the farm being set down, and the amount the mortgagee should get, this being made the permanent mortgage. How the remaining 20 per cent, was to bo financed he did not know, but presumably the mortgagee would have to take it, the mortgagor paying the interest on the whole sum. The value of the land would be calculated on the capacity of the land. There had been objections to this on the score that the farmer who did no farm his land well would come out best, but there would be practical men on the tribunals and the farmer who tried to get out of things that wav, would fall in. Mr Mulholland went into other details relating to this phase of the proposals.

Another problem he saw in the scheme was as to how the budgeting system was to be carried out. An “agent” had been mentioned, and if the stock and station agents had the work it would be a hardship on the mortgagee in some instances as far as charges were concerned; but this was one of the minor problems with which the proposals bristled. At the same time, it was an honest attempt to stabilise the position at its true values. There was nothing in the scheme aiming to take anything away from anyone. There was no sanctity about a contract which demanded money from a man when lie did not have the money and could not get it. The Bankruptcy Act protected the man in this respect. The speaker said that the Chambers of Commerce criticism could only be taken as an admission that there was some good in the Finance Corporation. They had stated that if nobody did 'anything the position would be all right in the end, but there were two ways of looking at that. Supposing it was found that all the mortgages were found to be useless, and the mortgagors said it would be all right and that the monev would be paid, how many mortgagees would let their money remain on the land? Very few. The farmers were prepared to put their shoulders to the wheel if they were given a little hope, but it was hopeless to expect them to go on indefinitely under the conditions ruling at the present time. At the close of his address Mr Mulholland answered a number of questions, and said that one of the best aspects of the scheme was in the taking over of arrears of rents on late mortgages and excess mortgages. There would, no doubt, be a large amount of writing-off, but the scheme would bring everything down to a level. Regarding the rate of interest under the amortisation scheme, Air Mulholland said that Air Coates had stated that he did not know what they would be, and no one else knew, but it would be round about that on Government bonds, and certainly not more than 1 per cent, above. „