MORTGAGE BILL

Press, Volume LXXI, Issue 21404, 21 February 1935, Page 14

MORTGAGE BILL

Mr Downie Stewart's Alternatives GOVERNMENT PLAN CRITICISED REPORT OF RURAL CREDITS COMMISSION QUOTED i [From Our Parliamentary Reporter.J WELLINGTON, February 20. Alternatives to the Government's plan to establish a National Mortgage Corporation were put forward by the Hon. W. Downie Stewart, during his speech on the second reading of the Mortgage Corporation Bill, in the House of Representatives to-night. Mr Downie Stewart outlined what he thought should be done to meet the situation, stating that he was doing this lest it be said that he had confined himself to criticism. He agreed with the proposal of the monetary committee and the Budget to bring all the Government lending departments under joint control, to avoid duplication and competition; but instead of creating one huge corporation to absob the State departments and provide an unknown amount of mortgage money over and above that, he should prefer to see several independent mortgage corporations created on a decentralised basis, with as little Government assistance to start them as need be. It was true that there might be higher overhead charges, but the country would be better to avoid the danger of political control, and also the danger which would arise if one large corporation got into financial difficulties. "If the Minister's expert advisers believe that the creation of independent mortgage corporations is not practicable," said Mr Downie Stewart, "then I suggest that he should try out fresh possibilities of bond issues by the rural advances branch of the State Advances Department, which was so strongly recommended by the Rural Credits Commission of 1926. This commission, after touring Europe and America, reported that the formation of long-term mortgage co-operative loan associations was not necessary in New Zealand. All that was necessary was the creation of a special rural credit branch attached to the State Advances- Department. This special farm loan branch, it was stated, could issue mortgage bonds, and thus avoid the chief difficulty the Minister wished to escape—inflating the gross public debt." Committee's Support This report, added Mr Downie Stewart, had been supported by a committee of the House under the chairmanship of Mr David Jones. The committee considered that such bonds would have a ready market, and that they should meet all requirements. The commission had returned to New Zealand toward the close of the session, but at its urgent request the Government agreed to try ou* its central idea at once. The Government created a rural advances branch of the State Advances Department, with power to raise money by the sale of bonds, and it was expressly declared that these bonds should not be a charge on the public revenue. It was necessary, however, to provide some agency for the payment of interest and principal of the bonds, and this task was imposed on the Treasury. In order to demonstrate that the bonds, which were a new form of security, were a sound investment, Mr Downie Stewart said he had arranged with the Bank of New Zealand to underwrite a parcel of £IOO,OOO, to show its confidence. Unfortunately, however, a controversy arose as to whether in fact the State was not by implication liable, owing to the machinery for payment being vested in the Treasury. The net result of this was to confuse the minds of investors and raise doubts as to the security of the bonds. Thus the scheme never expanded in any degree that would replace the State Advances Department in -popular favour. Mr Downie Stewart had observed from the last balance-sheet, however, that there had actually been issued about £4,250,000 worth of bonds, and these were now eagerly sought. Of course, this ivas partly explained by the fact that they paid interest at the rate of 4 per cent. Rural Advances Scheme "If the Minister considers that it is not feasible to free his proposed corporation more fully from political control, and heavy and unknown financial obligations," said Mr Downie Stewart, "then I suggest that he might more nearly attain his object by revising the rural advances scheme, which was the result of world-wide investigation by his own Government, and which was approved by Parliament. It would have the following advantages:— (1) That no new corporation would be necessary, and the State would not be nearly so deeply embroiled as it is in the proposed corporation. (2) That the existing staff of the State Advances Department would not need to be transferred or distributed among other departments. (3) That the money would be raised in the same way as he now proposes, without all the complications of his new organisation. (4) That the plf.n could be put into operation with much greater expedition. "I have stated my views to put them on record," he added, "although I am aware that the Government is set on its course, and will pay little regard to the suggestions for improvement. But as far as the Minister has in view the avoidance of increases in the public debt, and getting away from political control, I am in sympathy with these objectives."