The Auckland Star WITH WHICH ARE INCORPORATED The Evening News, Morning News, The Echo and The Sun. MONDAY, FEBRUARY 4, 1935. THE MORTGAGE PROPOSALS

Auckland Star, Volume LXVI, Issue 29, 4 February 1935, Page 6

The Auckland Star WITH WHICH ARE INCORPORATED The Evening News, Morning News, The Echo and The Sun.

MONDAY, FEBRUARY 4, 1935. THE MORTGAGE PROPOSALS

For the cause that lacks assistance, For the wrong thai needs resistance, For the future in the distance, And the good that tee can do.

1 After a careful and deliberate weighing of the Government's mortgage proposals, the Associated Chambers of Commerce have issued a report which may be taken as representing the condensed views of the business community on this important plan. In New Zealand, because of the predominance of farming, the business man finds his interests bound up very closely with those of the man on the land, and the report reflects the natural desire to restore rural prosperity as a means of giving a lift to business generally. As the Associated Chambers look at the Government's scheme, they see it divided into two parts — firstly, the proposal to establish a Nationa Mortgage Corporation, thus changing the present system of rural and urban finance; and, secondly, the rehabilitation of the straggling farmer. In a critical examination of the plan, as set out by Mr. Coates in a pamphlet two months ago, and in submitting alternative proposals, the committee responsible for this report has made a valuable contribution to the study of a thorny and difficult problem. One of the Government's objects in proposing a corporation is to increase the facilities for attracting capital into mortgage investments, and the committee, in discussing whether such facilities are needed, declares that producers who are on a firm footing have no difficulty to-day in borrowing at low rates. Unfortunately such producers are few, and the Government is concerned about the 50 per cent who are estimated to be definitely on the wrong side, and the further 25 to 30 per cent who are in a shaky position. It is to salvage them that the mortgage plan has been prepared. Whether a corporation as proposed will be able to place capital at their disposal at as low rates as farmers have been led to expect is, however, doubtful, and the committee questions the power of a corporation to lend at much less than 4£ per cent. The level, of course, will depend largely upon the willingness of the public to buy low-interest bonds.

A corporation of the size proposed, with £50,000,000 in mortgages to carry, would loom large on the Dominion's financial horizon, and the committee doubt the wisdom of building such a structure on the financial basis at present proposed. The ratio of twenty to one between the bond issue and the share capital and reserve certainly goes considerably beyond the amount sanctioned by British precedent. On the question of valuations the committee says businessmen have been struggling for years to find a really sound basis, and the most ticklish problem of all for a new institution might well be to fix upon a level in the shifting conditions of current prices for produce. Then there is the difficulty of choosing a staff which will make the level apply uniformly over the whole country. Again there is the troublesome task of discriminating between the competent and incompetent farmer. When, hoAvever, the committee goes on to say that the State's responsibility in regard to existing mortgages should not be qualified, it goes too far. If there is to be a loss, it should be shared by those concerned —the farmer, the mortgagor and . creditors. The community cannot be expected to bear the burden of inflated values. Comment on the alternative proposals of the committee, and on the rehabilitation of the farmer, must be reserved. Final settlements may be difficult to make until conditions are more stabilised, and if temporary settlements offer- a way out, the question is whether they should be made through a corporation or by private compositions.