LABOUR'S VIEW.

Auckland Star, Volume LXVI, Issue 39, 15 February 1935, Page 9

LABOUR'S VIEW.

MONEY MAY BE DEAR. "SECOND-CLASS SECURITIES" MR. SAVAGE'S CRITICISM. (By Telegraph.—Parliamentary Reporter.) WELLINGTON, this day. Eight main points were made by the Leader of the Opposition, Mr. Savage, in the House to-day, in elaborating the Labour party's view of the- Mortgage Corporation of New Zealand Bill. These points were:— (1) The proposals are involved. They will turn farmer mortgagors into serfs, and they will take the full-time attention of an army of inspectors, valuers and other State officers in their administration. (2) The State lending institutions are superseded by a semi-private lending institution, which, without authority to issue money, must continue to rely upon borrowing. (3) For the purposes of the bill money must be raised upon securities of second-class importance, and as a conse-. quence it will carry higher rates of interest, which will be pasecd on to the borrowers. (4) Money for the purposes of State advances has always been raised on the first-class security of the State revenues, and the benefit has been passed on to the borrowers. (5) The weakness of the present system is due to the inability of the State lending institutions to utilise by direct means the credit of the State. This is also the main fundamental weakness of the proposed National Mortgage Corporation, (6) Reduced interest charges, although desirable, will not bridge the gap between the purchasing power of people and their production, and is therefore not a solution of the problems due to falling prices.

(7) The solution of the problems arising out of the present mortgage system can be eolved by (a) a readjustment of mortgages under State control, and (b) guaranteed prices for products and services, which will enable producers to meet their obligations on a new basis. (8) The Government's proposals mean, in effect, that after the period of deflation, which was deliberately undertaken, a substantial portion of the equities of all parties to mortgage contracts is to bo destroyed—that is, unless something turns up to raise prices. The aim should be to re-establish the equities of all concerned, including- home-builders. Effect of Revaluations. Mr. Savage said that loans'from the corporation were not to exceed two-thirds of the value of the securities oflerea, unless guaranteed, and in all cases securities were to bo revalued for that purpose. In view of that, it appeared that the new values would be -at least 25 per cent, lower than the original values, and therefore tli* ffinount of cash that would be available would not exceed 45 per cent, of the securities' original value. The requirement that the borrower should contribute to the reserve fund two per cent, of the amount of the mortgage was equivalent to asking tnost, in difficulties to lift themselves by their own bootlaces. In a State lending institution the public revenues would constitute the reserve, and whatever losses were made in the business would be a charge on the Consolidated Fund, and all profits would go to the people. It seemed, from members' explanations, that the cream of the securities held by tho Government lending institutions would be transferred to the corporation, while tho State accepted responsibility tor the remainder. As tho investment? of the local authorities' branch of the State Advances Otliee wore to be used to safeguard bondholders against loss, the bondholder's would receive a guaranteed profit without incurring any liability. Position of Mortgagor. It was difficult to imagine the real position of the mortgagor under the special proposed court of review. It appeared that the farmer's equity in a property managed as was proposed would be 20 per cent, whatever might be the circumstances of the case. If a farmer with a real equity of, say, 25 per cent, were to be put on the same basis ae his neighbour, whose equity was only 15 per cent, the Minister's troubles would begin in earnest. From start to finish, said Mr. Savage, the proposals were involved and impossible oPoperation. An army of valuers and other officers would be needed to administer the law—that was, if there was any intention of administering it, which he greatly doubted.