AFTER THE UMBRELLA: WHAT?

Evening Post, Volume CXVIII, Issue 14, 17 July 1934, Page 6

AFTER THE UMBRELLA: WHAT?

Farm lands in Australia, as in New Zealand, are overloaded with debts, some of which will never be paid; but the hopeless and the hopeful alike come under the umbrella of moratorium laws. Lately the Commonwealth Government has been searching the world to find a system of adjusting rural debts—a system that will find a way to do without the umbrella—but does not seem to have discovered any promising adjustment s)'stem, except perhaps in Canada. Nevertheless, feelers of public opinion ai'e_ being published in Australia, and one. of these makes a suggestion which boils down to the ageold meeting of creditors—plus a Governmental subsidy on the amount written down. "Bankers, mortgage companies, merchants, storekeepers, fertiliser companies, oil companies," etc., are to meet, decide what proportion of their claims is irrecoverable from the farmer, and then the Government "will provide portion of the amount" required by the writingdown. The . idea does not seem to have much originality, but is at least an admission that the umbrella cannot last'for ever. "One of the difficulties" is to discover how, "in the event of any unexpected appreciation, the creditors who have suffered depreciation and wiping-off of debts shall be reasonably recouped." The annual conference of the New Zealand Farmers' Union last week considered this subject and had before it the report of a special .committee recommending: (1) Extension of relief legislation to December 31, 1937; (2) conversion of short-term land mortgages into long-term, amortisation mortgages; (3) refinancing mortgaged farms by-writing down mortgages to present-day values, subject to reinstatement on revaluation at intervals over a term of years of any increase, in value; (4) transfer of personal covenant liability on specified terms. The conference, approved only the .first recommendation. The balance of the report was referred 'to the.committee for further consideration and to report to the executive of th,e union. It is quite possible that a stumblingblock was the proposal for reinstatement of any increased value. There has been a demand in several quarters that mortgages shall be written down to present values. Tin's would be grossly unfair ,to mortgagees, for only ihe pessimist would declare that present-day produce values fairly represent prospects. .' In any writingdown there must be a safeguard against this injustice. . .. ' A change from short-term to longterm mortgages also presents practical difficulties. It was suggested that the change might be arranged by forming mortgage companies with which persons, might deposit even small sums for limited periods. But this would be dangerous.' A company holding deposits for periods up to five years could not safely tie up its money for twenty years. One has not to go far back in history to discover the difficulties such methods create. Moreover, if the companies are established by changing mortgages for bonds there would heed to be valuation of each mortgage. The mortgagee who has advanced on a conservative basis cannot be expected to share-the risks and losses of the vendor-mortgagee who has made a paper sal& at a boom price. All these points need attention before an | acceptable plan can be drawn up. Particularly there must be a clear recognition of the fact that appears to be forgotten—that the mortgagee has j his rights, though those rights are j suspended for the time. Any attempt j to. abrogate the rights permanently must mean that mortgage-finance will come to an abrupt conclusion. ]