TO RAISE MONEY. MEETING PRIVATE NEEDS.

Evening Post, Volume LXXVII, Issue 117, 19 May 1909, Page 3

TO RAISE MONEY. MEETING PRIVATE NEEDS.

BEACHING THE SMALL INVESTOR. INTERESTING PROPOSALS. Mr. B. Dawson, of Wright-street, Ellington, has formulated a new scheme for relieving- the tension of the money market. Shortly, it is this : The Public Trustee is to act as agent for British and Australian capitalists who may be desirous of lending money on real :estate 'in New Zealand ; interest to be paid at the rate of 4 per cent, wherever lenders may direct it to be paid, a minimum of £500 to be accepted for minimum periods of five years, and security for all money to be absolutely assured by legislative enactment. Mr. Dawson brought this scheme under the notice of ' the Prime Minister (Sir Joseph Ward), after having received the endorsement of its practicability by "numerous principal residents of Wellington city, all of whom commended it as sound, and calculated to achieve the object aimed at." The Prime Minister, in writing to Mr. Dawson, said : "I recognise the, lucidity with which you have put forward the matter, and I can only say at the present moment that I am having the scheme a? outlined by yon reported upon by a responsible officer to whom I have now referred your paper." STOCK EXCHANGE HOSTILITY. On 21st April, Sir Joseph Ward was interviewed by Mr. Dawson, when he is reported to have stated, amongst other things, that the scheme was a good one, and that he would adopt it were it not that "he feared such a proceeding might meet with hostility by the Stock Exchange, the effect of which would, perhaps, be ruinous to us." To this Mr. Dawson replied: — "As regards the impediment you verbally mentioned yesterday to adoption of the cheap money scheme that I had the honour of submitting to you, it has just Dean suggested to me by one of several prominent citizens with whom I have discussed your observations, to point out to you that,* at the time certain loan companies, not now operating here, were lending to us freely, our credit was at high-water mark, as evidenced by the fact that Government could then obtain money on the London market at the cheapest rates it has ever been procurable, and to ask if that circumstance does not 'negative your lupposifcion that the scheme might be regarded with hostility by the Stock E*»;hange." THE COUNTRY'S CREDIT. Continuing, Mr. Dawson said : "Not any limitations were imposed by the Exchange on the operations of the aforesaid companies, neither as regards the rates of interest they charged, nor the sums they advanced. Why, then, should it be presumed that the Exchange might oppose a system that .would supply our needs in a much more cdvantageous manner than that provided by the departed companies? "Must it , not be true that as the scheme aims at securing cheap money, vastly cheaper than that now available, the benefits conferred by its adoption would bo universally regarded as improving the country's credit? That it would do so is undoubted, because of the economic fact that money expended Ini improving property increases the vMue of same to a greater extent than is? represented by the actual cost of tUe improvements. If that were not so people would not build, nor other v^se improve. ' ''If, as you apparently assume, the Stock Exchange would say, we regard our institution as first mortgagees, and do not approve of your proposal to go past us tor any money proposed to be dealt with under Government control, but if you do we shall decline to entertain any further applications you may hereafter address to us. Now would the Exchange declare itself in any such fashion? How could it refuse to acknowledge that as the Dominion increased in prosperity so would the position of its creditors improve? And how, also, could it decline to admit that our settlers would certainly be more prosperous if they could obtain money for development purposes at 5 per cent., than they would be if they had to pay very much higher rates for it? Further, how could the Exchange get past the fact that higher rates would be paid on the foreign capital (as some of it would be) not contributed by the agency of the Stock Exchange, nor, necessarily, by previous creditors of the country. Would it not be an irresistible conclusion that it would be preferable, in every conceivable interest, not only to not 'place any obstacles in the way of our settlers getting, at the cheapest possible rates, money for developing the resources of the Dominion, but to help them to get it?" CHEAPEST SOURCE OF SUPPLY. Assuming that the Stock Exchange insisted that loans on real estate advanced by Government must be obtained through the Exchange, Mr. Dawson asked : "Would it not be an excellent happening for the Dominion, provided all the money required would be produced by that source on terms that would permit of it being loaned at rates not exceeding 5 per cent.?" It must be recognised, he holds, as being a paramount duty of the Government to make, 'with due regard for economic law, the best financial arrangements possible for its people ; and if the Stock Exchange did not desire to provide what might be required, why should the supposition arise that it might place an embargo on our efforts in any other direction to obtain what was wanted? "In the present circumstances of those people of the Dominion whose energies have been stayed by lack of capital for important development operations, it would be regrettable to hang up the scheme simply on the ground that adoption of it might provoke reprisals by' the Stock Exchange, in the form of coldshouldering our next loan requirement for public purposes. "Could not the attitude of the Exchange be ascertained by submitting the scheme for consideration by its committee?" NEED OF MORE CAPITAL. Mr. Dawson asks, categorically — Does the Stock Exchange refuse to recognise : (1) That the development of New Zealand must continue ; (2), that prudential development cannot be too vigorous; (3), that capital must be provided from outside for that purpose ; and (4), that it would be prejudicial to the interests of existing creditors of New Zealand if the capital were not provided at lowest rates. A further reason had been mentioned to the Premier why the Stock Exchange should not oppose the proposal. It was tiiat the money sought to be raised was to meet private needs only. Arguments could be advanced to dispel Stock Exchange opposition if such were raised. With money available at rates not exceeding 5 per cent., large areas of now nnprotective land could be converted into a condition of productiveness. Capital now in tne Dominion is, Mr. Dawson maintains, reaping a good harvest from those whose necessities are so pressing as to compel them to borrow, even at extreme rates. The proposal is much likelier to meet with more troublegoine objection within our own borders,

but that need not alarm the Government, because local capitalists would have their compensations in the improved prosperity generally that would result from the scheme being brought into operation. NEW SOURCES OF SUPPLY. Under the scheme proposed, "we would largely draw on new sources .of supply," Mr. Dawson continues; "'there would not be any brokerage to pay ; the money introduced would not represent any addition to the public debt, and wo would not have to assume greater responsibility for it than if it were raised on loan ; and, finally, it would confer the supreme advantage of relieving our Settlers of the immense drain on their resources that is iepres?nted by excessive rates of interest, and so materially contribute to the general prosperity of the Dominion. BANK OVERDRAFT? "A suggestion has been published that it would be advisable to provide for additions to the number of banking institutions now permitted to carry on business in the country. Such would, no doubt, be a desirable proceeding, but it must be emphasised here that, as regards advances on real estate, it is not a recognised function of banks to lend money on flat mortgages — the system under whioh our settlers must have accommodation. A farmer's main crop is realisable once a year, and if he operates on the unstable basis of a bank overdraft, assuming he could now get it, he might find himself (as many have already found themselves) called on at short notice in a most inconvenient season to pay it off. Thus, to lean on a bank overdraft is a perilously weak financial practice, and not to be adopted when money is required for periods of considerable duration." Mr. Dawson has put his ideas into circular form, and is distributing an outline of his scheme to members of Parliament, Chambers of Commerce, Farmers' Unions, municipal councils, and all other similar bodies throughout the country.