LOWER INTEREST RATES

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

LOWER INTEREST RATES

MR POLSON DISCUSSES FARMERS' POSITION QUALIFIED SUPPORT FOR THE BILL (From Our Parliamentary Reporter. l . WELLINGTON, February 15. Enlarging on the farmers' claim for reduced interest rates, and emphasising the desperate position in vrfhich many farmers had found themselves, Mr W. J. Poison (C., Stratford), in his speech on the Mortgage Coi'poration Bill in the House of Representatives to-day, said he would vote for the bill, though he disagreed with the principle of shareholder control. As Mr Poison is president of the New Zealand Farmers' Union, he was given a particularly attentive hearing. He said j that farmers were up against such conditions to-day that they could not possibly carry on. Without immediate assistance, they could not pay the rate of interest with which they had been faced for the last few years, and their most urgent requirement was to have interest rates reduced. The farmer wanted to know how he was going to square his accounts at the end of the year, and also what interest and principal reductions were t'> be made within the next few months, said Mr Poison. If this problem had been fairly met in the past, the country might have escaped some of the proposals in the present bill. For instance, the powers of the Mortgagors' Relief Commissions might have been extended, but many farmers were now glad of the Government's plan, provided it gave them immediate and urgent interest relief and principal readjustment. Rates of Interest "But the farmer," added Mr Poison, "is also concerned with the attitude of the State and his prospects for the future. The proposed corporation will dictate interest rates, and if it succeeds it will occupy the position of the enormous bond loan associations on the Continent —in Germany and Denmark —which actually determine the price of land, so it is only natural that the farmer, and particularly the young farmer, should feel anxious about the corporation." Mr Poison said that the farmer was not a socialist. His calling made him believe in individual effort, and convinced him that the competitive system gave him the best opportunities, but he considered that the system needed improvement and that it should apportion its rewards more justly. The farmer wanted to see the Government's plan managed by the Mortgage Corporation. to keep interest down and not to raise it. In the past, he added, the farmer had pinned his faith to co-operative principles. . . A„ Labour voice: Is thst individualism? Mr Poison: Oh, yes. Co-operation and individualism go well together, but of late the farmer has begun to realise that co-operation has received n body-blow—almost a death-knock—in this' bill: and he is now prepared to support the principle of State aid. Aim of the Corporation Mr Poison said he was satisfied that the co-operative plan would have aroused no antagonism. It was said that the aim of the corporation would be, service, and not prolit; but that was not generally the object with which financial people entered into such concerns. Surely the fact that the dividend was to be 1 per cent, above the bond rate was an incentive to keep the rate up. Mr Coates: Would you prefer a fixed interest rate? Mr Poison: If the State has a majority of directors on his organisation, how can it escape, responsibility and say it is not behind the bonds? Some years ago, he said, the Government had repudiated responsibility for rural credit bonds, which were State bonds issued by .the Treasury, and they had gone on the market at a 1 per cent, higher rate of interest. Because of that action, the farmer had to pay an extra 1 per cent. Mr Polson did not want to see that occur again; but it was bound to happen if the State were not behind the present plan. The mutual guarantee fund of £2,500,000 ultimately subscribed by the borrowers would undoubtedly be the property of shareholders. They would use it to protect their own share capital, and £2,500,000 would stand between them and loss. Although the borrowers were to subscribe five times the £500,000 share capital found by the shareholders, they were to be given 1,1 representation. The £2,500,000 found by the borrowers would take the first risk of loss. issue of Share Capital Mr Poison said that if, instead of share capital being issued, the State were to provide a further 3 per cent, on top of the mutual guarantee of 2 per cent., bringing it to 5 per cent, it would result in cheaper money being available, and would prevent powerful interests from gaining control of the affairs of the corporation. As the bill stood, it appeared to represent a skilful twisting of machinery to fit a capitalistic plan. Speaking of the plan to combine in the mortgage corporation the operations of several Government departments, Mr Poison said that other departments were being left out—departments in which there was more than £23,000,000 of Government securities. Why, he asked, should not the persons who were mortgaged to those departments—the Public Trust, the Government Life Insurance, and others—receive the same treatment as those who were to benefit from the operations of the corporation?