THE ADDRESS-IN-REPLY

Dominion, Volume 18, Issue 256, 24 July 1924, Page 10

THE ADDRESS-IN-REPLY

AND AN AGRICULTURAL BANK. Sir,—l think it may bo safely said of the above debate that “it was humorous without being unduly vulgar.” Probably the most humorous items were given by Hon. A. D. McLeod in his remarks on agricultural banks. He opened his remarks by . saying, “The Liberals’ demand for agricultural banks was impossible to concede.” He then rives various reasons why. 1. The short-dated mortgage system in New Zealand was a big obstacle in the way. 2. The Government had steadfastly refused to nut the credit of the State' behind banks over which it had no control. 3. And it would not agree that the profits of the bank should be free of income tax. 4. A State guaranteed borrowing scheme would simply add to the difficulties which the farmers had encountered owing fy ’ the fondness of investors for local body debentures. 5. In any event agricultural banks could not meet all the farmers’ needs for many years to come... * I propose tn deal with Mr. McLeod’s objections seriatim. 1. It is a curious fact, but nevertheless true, that most of the other am thoritics on agricultural banking are insistent' that the existence of the short dated mortgage system is one of the chief reasons for establishing agricultural banks. Thev argue that short-term loans are quite useless to the farmer, especially in a new country, inasmuch as it is years before he gets a full return on his capital outlay. Evon when tho farm is fully improved, his returns for tho most part, only come in once a year. This applies to wool, grain, and seeds. Tn tho case of cattle, if bo is a breeder it three years before he gets a return. 2. T|v» State lias unit its guarantee behind tlm Rank of New Zealand, and 1 believe behind tlm note issue of tho other banks. Otherwise, how are non-conve’'i-;hlo notes a '‘leva] tender”? 3. The savings hanks pay no income tax. nor do municipal trading concerns. If tho worker is to get higher interest, and tho city dweller cheaper service, whv should not. the farmer, th" hook-bone of the country, get some help? ■l. Is a cryptic utterance that I confess for t'l’o most part I do not understand. The only part I can understand is that about “the fondness of investors for local bodies’ debentures.” Nntnrallv they prefer a local body debenture carrying an income

tax charge <f 2s. Gd. to a mortgage carrying an income tax charge of 7s. 6d. 5. Nobody ever said they could, but 1 don’t suppose Mr. McLeod would deny that they would give immediate help, and in tho end would solve tho difficulty. There is just ono other little bit of humour in his speech I should like to touch on. Ho is reported 'to have said, “Tho Farmers’ Union was simply playing with the country and itself when pretending to represent the farmers as a body. When the farmers were really organised they would be entitled to every respect.” If he had added but at present they are entitled to nono at all, he would probably have fully expressed his views. It the Farmers’ Union does not represent the farmers, then they have no representation at all. The union represents the farmers just as much a« Mr. McLeod represents his electorate; far more than chambers of commerce represent the cities, as much as the labour unions represent the workers. There is a general insinuation throughout Mr. McLeod’s speech that the Farmers’ Union is trying to foist on to the Dominion a “wild cat” scheme, that the farmers have everything to gain without risk, and that the rest of the communitv has everything to lose, and takes all the risk. Ihe facts are as follow:— The Government are to take 20.000 £0 shares at par. Those-shares bear no interest. (Section 23 of the Act). The due payment of nil land bonds issued under the authority of this Act is guaranteed by the Government. (Section 84 of the Act). The . protection offered the Governwont is as follows: —The Government appoint two out of an executive cf seven. The two members appointed bv tho Government shall devote tho whole of their time and attention to the business of tho bank. (Section 7 °f th© Act). It shall be the duty of the two Government appointees to present to the Government at tho nnd of each half-year a renort and balance shoot. Section 9). The bank may carry all or any portion of the profits to a reserve fund. When the resen-e fund reaches £100.001), then all future sums intended to bo carried to reserve shall be divided into two nona] parts, one of which shall ho added to reserve, and the other used to nay off Government shares at par value. Each borrower must take un •’ h’ s oan 1,1 shares, and is liable for another 5 per cent, in case of anv loss made by his branch of the bank. Dividends are limited to 5 per cent., but are not paid out to shareholders (who must bo borrow-

1 Lut arc credited to thoir account I and become when the sharehoWer > navs oft his debt. Tlis share capital is also returned to him when h n ceases - to be a . debtor of the bank. All loans 1 are on an amortisation plan bvirmans . of a fixed numlie.r of annual or half- • vearlv instalments sufficient to cover • all interest, charges, and repayment • of capital sums. Amortisation and • other payments on tho nrincinal of > mortgages which have been hereby 1 constituted security for the renavment of bonds shall constitute a trust fund ’ in the hands of tho bank and '’’mil at the option of the bank, be offered or emnloved as follows:—(a) To pay off bonds as thev mature; (b) to ’ purchase at or below par bank bonds: (c) to loans of first mortgage of lands; (d) to mi-chare Government securities. All the above to bo deemed t ,rus i ; fund. The accounts of the bank shall ly> audited bv the Gov-"i-n.'mcnt Audit office. Advances must been first mortgage, and arc limited to G 6 per cent, of canital value. To sum up, the Government is asked to < provide a preliminary capital of £lOO.000. Share.s-a.re to he issued ao-ainst ' this advance, and the profits of the nn.nij a,re to be used to repurchase these shares. We ask that no income tax bo charged on land bank bonds and that they bo free of stamp duty. Ju addition to the security of our lands wo offer a further IQ per cent, iiointlv and severally) on the amount of oiir loans. Wo undertake to pay off all loans by an annual charge of from 1 to 1 per cent, over and above nv'-'nm.rv interest charge. Tf the Domnion is to succeed the farmer must, have cheap nnd adequate finance, ynd nidging bv what Ims been done in other countries, we believe that the best and most speedy wav to attain that end is by means of agricultural banks.—l am, ete., . FRANK Cm,RECK. Mornnsville, July 17, 1924.