STATE ADVANCES

Evening Post, Volume CVIII, Issue 77, 27 September 1924, Page 13

STATE ADVANCES

RECENT LOAN TRANSACTION

HOW IT IS BEING MET

The recent loan transaction between the Bank of New Zealand and the Government and its relation to advances to settlers were. discussed in the House of Representatives last night in the course of the debate on the State Advances Department Estimates.

.The Leader of the Opposition (Mr. T. M. Wilford) expressed regret that the advances were still far behindhand. It was wrong for the Government to stick to the valuation fees paid by applicants without paying interest on them. The unsatisfactory replies received from the Department by applicants were due, as had been said before, to the fact that the Department was a "Bolls Eoyce without any petrol." Now the Government had mortgaged the State Advances Department to the Bank of New Zealand.

Mr. Massey: "No." Mr. Wilford: "According to the General Manager, debentures have to be issued."

Mr. Massey: '-We must hand over our debentures."

Mr. Wilford: "I would like to-ask the Prime Minister, if the Bank of New Zealand issues £1,125,000 worth of £1 shares to its shareholders, the shareholders find the money, and the bank gives the money to the Government at 5i per cent., how is the bank able to pay the shareholders 13 per cent, on the money. the shareholders have given them?" The bank could lend £1,125,----000 to the Government at 5£ per cent., but a farmer could not get a £500 overdraft at 7 per cent. The" £375,000 which the Government was getting in shares would be better paid into the State Advances Department, in cash, rather than taken in Bank of New Zealand shares, except that the Government would i earn 13 per cent, on them. Mr. F. Langstone (Waimarino) said that one of the most scandalous things that had happened in the country, was the inflation of the bank's shares in one night after the recent loan transaction was announced. ■ .

Mr. T. K. Sidey (Dunedin South) said that it appeared that the bank was lending the Government £375.000 at 5^ per cent., and that only £750,000 was ooing provided for the State Advances Office.

AS GOOD AS SOVEREIGNS. Mr. Massey said it was tsue that the Government was paying 5£ per cent, interest, and he thought they wero very fortunate in getting the money at that price, for it enabled tho Government to lend money at 5| per cont. without making a loss. With regard to references made to the rate of interest on tho Bank of New Zealand shares, Mr. Mnssey said there was no guarantee that it would continue at 13 1-3 per cent. He would guarantee that the whole of tho £1,125,000 would bo lent to the settlers. Mr. Langßtone: "How do you pay for the shares?" The Prime Minister: "I would pay for them in one of several ways. Our debentures aro as good as sovereigns. I could pay for them in debentures, or with money that is passing through our hands from day to day. I could find tho £375,000 without taking a copper from the £1,125,000 that is going to be lent to settlers." Mr. Sidey: "What interest are you paying for these shares, supposing you give debentures?" Mr. Massey: "I will take care that wo do not pay more than a fair rate of interest. I am not going to pay more than 6Jt per cent, or 7 per cout." Mr. Langstone: "If you make it 5^ per cent, it won't bo bad business." Mr. Massey smilingly replied that Mr. Langstone imagined he was an authority on finance. "Tho transaction is simple enough," he said. "The whole of the £1,125,000 will be available to settlers. I will sco to the other thing, because I know exactly what I can do. I can chooso my method of doing it. As to the £1 shnres, tho public, according to tho bank- manager, get ono share in four; wo get share for share. Tor every share that we take' up we are entitled to a note. ... I propose to take U5/r,7. S\ are'" The Primo Minister added that the profits to tho State mado on the previous transaction with tho bank amounted to over £500 000 net Mr. Massey addod that the profits of tho bank were not all mado in New Zealand. What it earned in the Dominion was very small. Ho stated that ho had received a return showing that 71' per cent, of the clients of the bank in New Zealand had their money at 6i per i cent. l i