LAND, FINANCE

Evening Post, Volume CXVII, Issue 50, 28 February 1934, Page 10

LAND, FINANCE

CORPORATE SECURITY

ROTARY PROPOSAL

SIZE OE FARMS

A scheme for financing land dcvelopmont by the co-ordination of the existing systems is put forward by a committee which reported to tho New Zealand Eotary Clubs' Conference at New Plymouth yesterday. Tho report also put forward a proposal for corporato security. • | 'Tho adjustment commissions have fairly wide powers in regard to reducing interest rates and reducing or wiping off altogether arrears of interest (stares the report). It is apparent from what happens at the sittings of the commissions that many farmers, with all tho indu'genee and help extended to them, cannot pull through with tlio low prices ruling for their products owing to the weight of their liabilities. It is also apparent that they arc burdehed with altogether too much land in proportion to their actual capital resources, and that they, tho mortgagees, ' and the community generally would bo substantially better off if theso farmers could be relieved of. some of their acreage, with proportionate reduction of their liabilities. Indeed, it cau bo stated as an axiom that no farmer seeking relief from his financial obligations should occupy moro land than ho can economically work whilst there are so many landless people anxipus to secure land on which to sustain themselves and their families.

"Up to now, however, no machinery has existed to enable the surrender and disposal of such surplus acreage. It could be provided easily enough by extending the powers of tho mortgage commissions to adjust capital liabilities as well as interest and other charges. Obviously it would be to the advantage of the mortgagor, if unable to maintain his interest payments and meet his general obligations, to rcduco his liabilities by surrendering and disposing of a part of his land. It would be the only asset ho would have left in order to relieve his position. The surplus could be utilised for closer settlement, for enabling others to go on this already, improved land and so case.the pressuro and tho economic loss; of unemployment. '..-. ' GROUP CREDITS. "The next stop would, bo to provide the1 means for. transferring and paying for the surrendered land. Hero the services of tho Rural Credits Board could bo utilised. During the short period of its existence tho board has done- good work in assisting farmers through its system of group credits. Power could be given the board.to issue long-term credit bonds upon corporate security, i.e., upon the joint and several guarantees of groups of mortgagors. Either that, or sanction the giving of a charter to a. straight-out land bank, enabling it to, issue amortisablo bonds of a currency of sixty years, carrying interest" at 4 per cent, plus redemption of i per cent. , _..'..;

"A mortgagee would receive these bonds—bearer' negotiable bonds—to replace the adjusted amount of the original mortgage, and his security would not only be the piece, of. land concerned, but all the other land in a group. In other words, his (would be not. individual, but corporate security, and as such would be gilt-edged and acceptable to the investment market. DENMARK'S EXAMPLE. "It might bo argued that farmers would be opposed to joining a group and being therefore jointly and ■ severally liable for the payment of .interest and sinking fund of the other group members; but it may bo pointed out that the principle is already in'force in connection, with the rural credits system, and that tho advantage, of obtaining the lowest interest by collective security far outweighs any objection to the principle. In any case, it is not an untried system. It is in force in Denmark and other, countries, arid has proved an unqualified success. In Denmark, today two-thirds of the private capital is/invested in land bank . mortgage bonds: private,' individual land mortgages have become almost things of the past. And, more to the point, under this system no fewer than 16,000 now farmers wero placed on the land in 1906 and subsequent years.; The bonds are regarded as gilt-edged, as safe and sound as Government stock itself. The banks .maintain; regular p'aymentsi on the ,bonds, .and in turn receive»payments from the farmers, whose security, of course, improves as time goes on. The bonds are amortised in sixty years. - "As _ to the possibilities of attracting private money in New Zealand towards investment of this kind, one need but refer to the paucity of firstclass securities, reflected by tho accumulation; of deposits iv the trading banks. There is other money that woulfl be available were the security available." •. "ANOMALOUS POSITION." "Surely it is anomalous that in a country requiririg development of its great natural resources more than anything else we should have such a vast accumulation of comparatively idle money, and at the same time have thousands of people anxious to go on the land, yet not having tho wherewithal to do so. Surely it should not be beyond tho wit of the leaders of tho country to place by the means suggested 20,000 men on small farms at a cost of £.1000 each. Such an expenditure should be quite- sufficient to provide sustenance. The acreage would be comparatively small, and the housing accommodation of the simplest kind. The amenities and facilities could be left to the farmer to provide out of his own energy and enterprise. • * :

'' Today 3i per cent. Government stock is selling at par, and there are yery few gilt-edged investments yielding as much as 4 per cent. Laud mortgage bonds based on tho collective security of a group of farmers and their rural assets should prove attractive to investors. .

"Such r.scheme, would be far-reach-ing. It would confer benefits on (a) the owners, who would be relieved of. a part of their existing mortgage burdens; (b) those who arc now in the unemployed ranks or young men anxious to pursue farming pursuits; (c) the original mortgagee who would receivo negotiable-bonds in satisfaction of- his tied-up capital; and (d) the State, which would receive the benefit of greater' and more intense production of the settled land of the Dominion without having to bear any appreciable capital outlay in providing communications, schools, and other .facilities and amenities. . MACHINERY IN EXISTENCE. '' Tho scheme could be initiated without delay. With the exception of the land bank, a charter for which would bo necessary, or, alternately, of extending tho powers .of the rural credits system, the whole of the machinery is already in existence. There would be no compulsion at any stage of the scheme. It would all be doneby voluntary agreement, from the transfer of surplus land to the joining of a rural credits group and the issuing and taking up of the bearer land bonds.!

"Were the scheme in operation there is little doubt but that it would confer an immediate and -lasting benefit upon all those concerned and the country itself, and that tho vicious system of short-term high interest rates, with its attendant losses and risks to the farming' community, would soon become a thing of the past."