THE PROPOSALS IN DETAIL

Evening Star, Issue 19326, 12 August 1926, Page 9

THE PROPOSALS IN DETAIL

The following aro the conclusions of tho Commission in detail: —

(1) The administration of rural credit should bo vested in a separate branch of the State Advances Oliico to bo designated tbo “ Farm Loan Branch,” with such further additions in regard to representation or agencies as may bo found necessary to extend tho functions of the said office in conformity with this proposal. (2) it is desirable to incorporate a system of intermediate credit for the use of agriculture. . . ■ (3) A Farm Loan Board, consisting of the State Advances Board, supplemented by three representatives of the agricultural and pastoral interests, two of whom shall represent long-term borrowers, and one the users of the proposed intermediate credit, should be an executive body to inaugurate and control, tho extended system of rural credit, . . (4) Registered co-operative societies, the sum of whose capital and reserves is not less than £2,500, and whose membership shall not bo less _ than thirty, may, on the hypothecation ot their securities, if the Farm Loan Board so decides, bo eligible to receive advances for the purpose of an intermediate credit of not more -ban 80 per cent, of tho value of such sccuritl°(s) Bodies of bona fide farmers of not fewer than twenty in number who form registered co-operative rural intermediate credit associations, with a capital of not loss than £SOO, may, upon pooling their securities, obtain such advances, not exceeding 80 per cent, of tho value of tho securities as tho board may decide. (6) Tho amount of advance granted and the margin of security should be decided by tbo board in each individual case. , (7) Tho system and method or valuation adopted by the State Advances Office should bo followed _»or long-term loans, but that valuation should be based on the productive value of land, ascertained over a period of at least five years, and the amount advanced should not exceed two-thirds of tho valuation. (8) It should bo tbo function of the Farm Loan Board to classify thesccuii,ties offered, and establish the maximum amounts per aero in the respective classes beyond which advances may not he made. (9) For tho purpose of establishing intermediate crqedit and extending long-term rural credit tho Hon. tho Minister of Finance be given pmrer to expend a sum not exceeding £2U,OOU for preliminary expenses; also to make advances of public moneys to the Farm Loans Branch for terms of not less than ten nor more than twenty years upon which no interest shall bo payable for the first ten years, but thereafter interest to bo paid at tho rate of 5 per cent, per annum, provided that tho aggregate amount so advanced for both purposes shall not exceed £500,000. . , (10) Local advisory committees bo established in connection with longterm loans when and where the L arm Loan Board may deem it advisable. (11) In cases of any divergence of views regarding the value of securities between such advisory committee and tho Valuer-General the decision of tho Farm Loan Board should be final.(12) Provision should bo made for loans to be increased on basis of the improved condition of property or in recognition of instalments already paid. (13) In order to facilitate land settlement, the Farm Loan Board should have power to grant applicants lor selection, in tho case of land which is offered for closer settlement, an additional 10 per cent, based on tho board’s valuation of the land.

(14) A borrower from the Farm Loan Board on long-term mortgage should submit evidence that bo is twenty-one years of age, a British subject, and lias been resident in Now Zealand for three years; that he has had three years’ experience in farming, and that ho possesses average ability and capacity; is of good character, and ho is actually in bon# fide occupation of, or intends to occupy, the land upon which the loan is to be made; also that his application must bo favorably reported upon. Where an applicant submits sufficient evidence that he has had three years’ experience of farming in the British Empire the board may reduce the term of residence to one year. (15) The amount advanced to each borrower should not exceed £7,000.

(Ifi) Preference be given to applicants for loans of £I.OOO and under.

(l7) The rate of interest on bonds or stock should not exceed 5|- per cent. (18) The Farm Loan Board be given power to authorise the issue of mortgage bonds on stock for varying periods in consideration of tbe typo of farming employed, and when considered desirable in the case of virgin lands to suspend amortisation payments by borrowers for a period not exceeding five years, provided that the area of the security docs not exceed 2CX) acres and that the mortgagor continues to duly work his land and to effect improvements. (10) The issue of land mortgage bonds should not at any time exceed the value of the mortgages hold as security therefor. (20) ■ Interest charges to borrowers should not exceed the rate paid on mortgaged stock or bonds by more than 1 per cent. (21) Stock and bond holders should have first charge in priority to all other charges upon (a) mortgages to boards or to co-operative associations or societies; .(b) the amount held by the board upon loan from the Government; (o) capital liability of all shares in associations or societies, such charge to be a floating charge until the winding up of the association or society, but not to prevent an association or society from dealing in due course of its business with properties and moneys sub-

ject in such charge in accordance with provisions of the proposed law. (22) The Farm Loan Board may borrow with the consent of the Treasury upon the security of all or any or its assets for the purpose only of providing fluids to redeem bonds _or deposits at maturity if the moneys in the ordinary account and reserve are insufficient, such securities to have priority to the floating charge previously created. . (23) All moneys so borrowed should bo repaid out of the first capital money received by the issue and sale of land mortgage securities to replace those redeemed. (24) Money borrowed under those provisions to be upon such terms and at such rates as the Farm Loan Board, with concurrence of the Treasury, deems .necessary and expedient. (25) Legislative provision be made giving land mortgage, stock bonds, or securities the same favorable position as that accorded State securities and those of local bodies. (26) Borrowers bo given cash instead of bonds, and that the Dominion Treasury should he appointed to issue bonds and to act as fiscal agent for the schemc-

(27) A borrower should ho entitled to pay off the amount of his mortgage, or" any portion thereof, by presenting to the Farm Loan Board at any interest period after the expiry of the first five years debentures, bonds, or -took of the same series as those issued against his mortgage, and his mortgage indebtedness bo relieved accordingly and such bonds or stock duly cancelled. (28) .The Farm Loan Board should have the right at any time to buy in the open market its stock or debentures and to cancel the same, and thereupon to release the proportionate amount of mortgages securing such stock or bonds.

(29) Securities issued at the instance of the Farm Loan Board under authority of , suggested legislation should bo deemed to be securities in which public moneys may be invested. (30) In the interest of the bondholders three custodians of mortgage securities and collateral deposited against the issue of laud mortgage, bonds, stock, or securities should bo appointed. The Superintendent of State Advances, the Audit Office, and one to 1)0 nominated by the Minister of Finance are suggested. (31) Provision be made for inscribing stock of £IOO and over at the option of the investor, and that tho custody of small holdings of bonds for payment of interest to savings bank .accounts bo free of charge. (32) In order to promote and encourage thrift, bonds should be issued in denominations of £lO and upwards. (33) Savings bank systems he promoted lor the purchase of bonds, (34) The annual report and balancesheet of the farm loan branch bo presented to both Houses of Parliament if sitting within sis wecks_ of the end of tho financial year, or if not sitting, then within ten days after the commencement of tho next ensuing session. (35) Shares in co-operative associations established for the purpose of intermediate credit be £l. and that shares in all new co-operative societies taking advantage of proposed intermediate credit shall he limited to £l. _ (36) The, Farm Loan Board be given power to at any time demand and enforce the sale of intermediate credit securities. . . (37) In tho case of societies or associations using the intermediate credit the provisions of the Companies Act, 1908, should he applied where consistent. (38) An. adequate systein of warebousing produce is necessary in order to simplify the process of making advances against produce. Legislation should be enacted to provide for the licensing and bonding of public warehouses storing n/.'icnltural products under conditions tending to establish the integrity ot their receipts, and make them generally acceptable as security for loans. (39) The principles embodied in the draft of suggested legislation submitted iu the appendix bo adopted and applied. Drafts of two suggested Bills to give effect to recommendations ary attached to report.