TOO MANY LOANS

Evening Post, Volume CXII, Issue 151, 23 December 1926, Page 12

TOO MANY LOANS

WHAT REMEDY <.

A LENDER-BORROWER COUNCIL

PLAN TO MEET AUSTRALIAN

PROBLEM.

A- somewhat ambitious plan to establish a Loan Council, or some such body, to regulate Australian borrowing, has been suggested in the Old Country.

Australia already has an Australian Loan Council, but it is necessarily a committee of borrowers, and, even at that, is not participated in by New South Wales.

Tho body suggested in the Old Country would Represent lenders as well as borrowers, and the complexity of interests thus brought together would increase the difficulties of harmonious working.' Would all the seven Governments of Australia fall in with its decisions, and modify their loan-demands accordingly?

The idea seems to have originated with the city editor of the "Manchester Guardian."- Hhat journal circulates largely in the manufacturing centres of the.United Kingdom. Therefore, it fully, realises that one of the effects of the/substantial borrowing of recent years by Australia has been to promote a larger import trade than that of pre-war days. Prosperity within the Commonwealth has largely assisted in the same direction. The wish, therefore, is that nothing shall occur to interfere, with the full course of trade between the United Kingdom, and the Dominion. The opinion expressed is that almost a laissez'faire system has come into existence in connection with Dominion borrowing generally. That is because of > the privileges conferred upon the dependencies of allowing their bonds and stock to become trustee securities. The effect has been that loans have beeni obtained by the Dominions at fully 1 per cent, less interest than if they had to face free market conditions. Issues have been surrounded, it is said, with an atmosphere "of reputed soundness which has no necessary relation to their intrinsic quality." Although that state of. affairs exists Dominion stocks are popular with trustees. For that reason the position is accepted—that their offering as 'trustee investments will go on. Politically it is accepted that it is hardly practicable, if not impossible, to amend the Colonial Stocks Act.

The way-out of the dilemma, it is suggested, is not so much to bother about the inclusion of particulars respecting the state of the finances of the borrowing country, but to establish some body or council, representative of financial interests, both in London and the Dominions. Such an organisation, it is urged, could periodically survey the field in. the light of Dominion requirements and of the power of .the British investor to supply them. It could then advise and recommend (comments an Australian paper). "The Australian Loan Council, in part acts in this way, and it is hoped that Mr. J. R. Collins, late Secretary to the Commonwealth , Treasury, will be able to furnish the Commonwealth Treasurer with information regarding financial matters in a manner not hitherto attempted. Time is required to demonstrate whether such an arrangement iB sufficient. For, after all, he represents tfie borrowers. The idea is that something shall be heard from the leaders, who, unquestionably, would suffer opprobrium if they were so to button up their pockets as largely to check borrowing for the time being. If a general loan council endorsed their action in that respect, resentment could hardly be expressed." • isut would this general body be united enough to arrive at decisions unanimously or by a substantial majority?