MORTGAGE BILL

Press, Volume LXXI, Issue 21400, 16 February 1935, Page 14

MORTGAGE BILL

■ r — • . Views of Opposition Leader CONTROL OF MONEY SYSTEM URGED SCHEME OF GUARANTEED PRICES [From Our Parliamentary Reporter, j WELLINGTON. February 15. "The way out of the trouble is to control the money system and to establish a system of guaranteed prices, based on a readjustment of overhead charges,'; stated Ihc leader of the Opposition (Mr M. J. Savage) in a general criticism of the Mortgage Corporation Bill in the second reading debate in the House of Representatives to-day. Mr Savage said that after a l.oriod of deflation the Minister for I'inar.co was proposing to destroy a portion of the equities, not only of mortgagors, but also of mortgagees. Unless something turned up in the meantime, the Labour party believed that, instead of destroying equities, attention should be directed to making ii possible for people to pay debts. Mr Savage, at the uid of an hour's speech, summarised his points of criticiim under the following eight headings:— (1) If the proposals in the Bill are «'.d:ptea they will turn farmer mortinto serfs, and they will take int luil-time attention of an army of inspectors, valuers, and other State crhcers in their administration. 1 2> The State lending institutions are to oe superseded by a semi-private lending institution, which, without authority to issue money, must continue to rely upon borrowing.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, the money must be raised upon securities of second-ctass importance, and, as a consequence, will carry higher rates oi interest, whicn win be passed on to the borrowers. (4) Money for State advances has always been raised on the nrst-ciass ' security of State revenues, and the benefit has been passed on to borrowers. (5) The weakness of the present system is clue to the inability of the j Siate lending institutions to utilise by \ curect means the credit of the State. Tms is aiso the mam fundamental weakness of the proposed Mortgage Corporation. (6; Reduced interest charges although desirable, will not bridge the gap between the purchasing power of the people and production, and do not tnerefore sclve the problem arising out of ialling prices. (7) The solution of the problems arising cut of the present mortgage system can be solved, (a) by a readjustment of mortgages under State control; and (b) by the guaranteed prices tor products and services which will enable producers to meet their obligations on a new basis. (8) The Government's proposals Ir ; ea s' a in effect - that after th « period deflation which was deliberately undertaken, a substantial portion of the equities of all parties to mortgage contracts is to be destroyed; that is unless something turns up to raise pnees. The Minister says that is not Jikely to happen. The aim should bo to re-establish the equities of all concerned, including home-builders. Farmers' Finance Mr Savage said it was a pity the House had not before it the second bill for the rehabilitation of farmers' finance, because both measures were fundamentally related, and if the contents of the second bill were known members would be in a better position to discuss the whole problem. Mr Coates was a "lightning-change" Minister, and those who had studied the scheme outlined in his pamphlet found that changes had been made by the bill. The Minister had said it was becoming more and more evident that it was idle to look for a return to the level of prices ruling before 1930. Mr Savage disagreed with that. After all, price was only a relative thing, and depended mainly on the people's power to buy at economic prices the things they created. .The power to buy the whole or any part of their products was undoubtedly the prerogative of the people. All the wage-reducing legislation'of recent years was based on the cry that costs must be reduced, continued ,Mr Savage, and the farmers and all others were still worse off than ever. Must reductions of the standard of living be continued in order that New Zealand should qualify as a successful .competitor in overseas markets? Let there be lower rates of interest by all means, until New Zealand was intelligent enough to do its own banking. But let there be no delusion that by destroying the people's monetary incomes the relative cost of production was being reduced. * Cheaper Money Mr Savage asked what other industries obtained money cheaper by selling shares, bonds, and debentures on the Stock Exchange than did those farmers who obtained money from the Advances to Settlers' Department. The trouble with that department was that it was always short of money, as like the present proposal, It nad no power to issue money. If the bill became law, the position would be worse than before. While the Mortgage Corporation would have no power to issue money, and must depend on other sources, it must guarantee a substantial rate of interest to shareholders. When a farmer required £3OOO from the corporation, he would probably be offered £ISOO or £2OOO, because the corporation would always be short of money. The shareholders were to provide £500,000 in the way of capital, while the State was to find £500,000. and more than £50,000,000 was represented in mortgages. The mere bagatelle in the way of capital supplied by shareholders was to be made an excuse for them to elect three members of the board of management. Loans were not to exceed two-thirds of the value of securities offered, unless guaranteed, and in all cases securities were to be revalued for that purpose. It was probable that the new values would be at least 25 per cent, below the original values, and therefore, the cash available would not exceed 45 per cent, of the original value. Incomes of Farmers . "How is it that we can fix the incomes of tens of thousands of our citizens, and yet cannot fix a reasonable income for our farmers?" asked Mr Savage. "The incomes of the citizens of the nation should, and could, be based upon the whole of the production of that nation. It is true that this would involve the nation in complete control of its money system; but why should that not be our immediate Objective? It seems as if both parties to a mortgage contract are to be left Winging between heaven and earth for »ame years, in the hope that something »ay turn up."