“D” Mortgage Bank Shares

Dominion, Volume 28, Issue 114, 7 February 1935, Page 11

“D” Mortgage Bank Shares

Sir, —Referring to my letter in “The Dominion” on January 29, and the bank s reply, it is noted that there is no foundation for the report that the long-term mortgage Capital might be repaid shortly. How does any bank official know .this? In the final issue the matter rests with the shareholders, not with anyone The Act contained a clause that this capital could be repaid at short- notice, presumably at par. But, notwithstand.ing this, the nomenclature of the shares and the classification of them in the Stock Exchange lists and elsewhere gave every investor the impression that these .-Imres were a permanent investment. Transactions took place on the supposition that they were a permanent investment. If investors did not look upon these shares as permanent, then will any stockbroker tell me why _ people were so foolish as to pay any price up to 35/a share? I venture to suggest that 99 per cent, of .the investors in these shares during the last two years never suspected for one moment that they were redeemable at par; I will venture the opinion that not 5 per cent, of the stockbrokers in New Zealand were aware of this fact. If the stockbrokers were aware of it and failed to advise their clients accordingly, well, least said soonest mended. . , . Referring to Mr. Bucholz’s article, in “The Dominion” of January 31, his first paragraph has been answered by the above. In his second paragraph he refers to “further protection” to mortgage shareholders. The preceding part of his letter contains no protection whatever so that the word "further” is inappropriate. But let us see what the "further” protection amounts to. Merely this, that any action taken must be confirmed by a postal ballot and that, of the 408,000 chares issued, 400,000, are held by ordinary shareholders. What protection does that provide? If twothirds of the ordinary shares are held by persons who do not hold any mortgage shares, as might be and very likely is the case, then those people could at any time carry a resolution to pay off the mortgage capital when it waits them. The fact that such a resolution had to, be confirmed by a postal vote is no benefit whatever. Nor can I see that the limit of voting power to 2000 votes is of any efficient protection to mortgage holders; but perhaps Mr. Bucholz will enlighten us on this point? The protection of mortgage shareholders lies in quite a different direction. The Government was largely responsible for this issue. It holds one-third of the capital of the bank and appoints twothirds of the directors, and I venture to think for its own reputation and for the reputa*ion of this country for fair dealing the Government would not allow this injul'y to be inflicted on investors. I cannot close this letter without referring to a circular which was issued last year, presumably by the banks and the stockbrokers jointly, in which the activities of a certain institution were referred to. People were advised not to sell their good securities and invest in securities hawked round by Pertain persons. In this circular to which I refer all investors who contemplated selling their good securities were advised first to seek the advice of their bankers or stockbrokers.—l am. etc.. "D” MORTGAGE. Wellington.