MORTGAGEES AND BONDHOLDERS.

Press, Volume LXIX, Issue 20905, 12 July 1933, Page 8

MORTGAGEES AND BONDHOLDERS.

MR MCKELLAR'S VIEWS DISCUSSED. TWO OPPOSITE OPINIONS. Two interesting opinions, one opposing Mr C. G. McKellar's criticism of "the financial slavery" imposed by mortgagees and bondholders, and the other approving it in impersonal terms, were given to "The Press" yesterday by the Investors' Protection Association of New Zealand and by Mr William Machin respectively. Mr McKellar's remarks were made at a meeting of the Riccarton Borough Council on Monday night, and were reported in yesterday's issue. "Mr McKellar has spoken strongly," said Mr Machin, "but he expressed in different words only what every economist, and student of the subject has been saying: if primary production, maintained m volume, is only worth one-third of what it realised when monetary obligations were contracted it is twothirds short of the means of making payment, and if the short means of payment is to be augmented this can only be done out of savings, or other sources of capital, or more borrowing. "This is the cold fact. The conference in London is trying to solve it, and behind the conference are big interests trying to get the issue avoided. The same thing is going on everywhere." Promoting High Costs.

It was no use blaming the individual creditor, Mr Machin added, for whether he was mortgagee, bondholder, or banker, he would be entitled to try to get his money and in some cases would not realise that he might be losing some of his own capital and that of others by demanding and getting his full interest.

Mr Machin emphasised that these monetary obligations were the biggest part of high costs. High costs were keeping business unprofitable; and unprofitable business was sapping economic stability. If more and more people became of the mind of Mr McKellar, and emulated his generous practical application of his views, then stagnation would give place to enterprise. But that time, Mr Machin thought, was not yet in sight. The Canterbury Chamber of Commerce scheme had been a small attempt to meet the difficulty, and a number of generous and far-seeing mortgagees had helped it. But this, Mr Machin concluded, had only emphasised the need for much larger and more extensive action. Mortgagees' Reply. The claim that mortgagees were meeting the position more than fairly, and in most cases generously, was advanced by the Canterbury branch of the Investors' Protection Association of New Zealand, in a reply which it issued to Mr McKellar. The association described as very far from the truth Mr McKellar's statement that "the lender, the mortgagee, and the bondholder each has sat on his rights and refused to take less than his contract except when compelled to by act of parliament. There were many hundreds of cases throughout the country, it stated, in which the Chamber of Commerce and similar pooling schemes were in operation. Under these schemes an adjustment was made annually among the farmer, the stock mortgagee, and the land mortgagee, and in the great majority of cases the land mortgagee accepted his share of the division of the surplus in full satisfaction of his interest.

I In some cases the stock mortgagee Iwas charging up his full year's interest even when this was in excess of his share of the surplus, and this aspect of the pooling schemes was probably the most unsatisfactory. Stock mortgagees generally speaking had been prepared to supply budgets, and land mortgagees had been guided by the stock agents as to what was a fair budpst for both living and farm expenses. It was only in very rare instances that mortgagees had not agreed to the budget prepared by the stock agent, and that was as it should be, since the stock agent was the person or firm who had to find the money to enable the mortgagor to carry on for the year. Parties Compromise.

"Sometimes the accounts when prepared at the end of the year are unsatisfactory from the mortgagees' point of view," said the association, "and in these cases, mortgagees if they are satisfied that the farmer is getting further into financial difficulties, may take steps to exercise their rights; If the mortgagee is satisfied, however, that the farmer is a worker and a competent farmer, it is not an unusual thing for the parties to get together and agree to write off a portion of the principal. Any compulsion by statute would cause much more trouble and injustice than good, and would be fought strenuously by mortgagees. In fact the difficulty of obtaining redress in cases where farmers deserve no sympathy entails such a lot of delay owing to congestion of case? that it is almost unheard of to-day for lenders to seek fresh investments in rural securities, and now that they are liable for unpaid land tax and rates the position is even worse."

Mortgagees were the last people to advocate any further legislative interference, concluded the association, but if the government and local bodies were to have the right of charging the land then they should also have the right of lien over stock and produce, as these were the sources from which land tax and rates should be met.

"The City Council has been very good to this district," remarked Cr. J. S. Barnett, at the reopening last evening of the Spreydon library, the accommodation of which has been increased considerably as a result of a grant made by the council. "I think, however, that the district deserves it," resumed Cr. Barnett, "for when the residents surrendered their status as a borough they handed over to the city some hundreds of pounds in cash, part of this building, and the oldest road roller in Christchurch." (Laughter.)