The Gisborne Times PUBLISHED DAILY. SATURDAY, OCTOBER 15. 1932. A NECESSARY SAFEGUARD.

Gisborne Times, Volume LXXIII, Issue 11768, 15 October 1932, Page 4

The Gisborne Times PUBLISHED DAILY. SATURDAY, OCTOBER 15. 1932. A NECESSARY SAFEGUARD.

Tin; need on the paid of the government to safeguard the interests of the Public Trust Department at the present juncture by the grant of what amounts to a moratorium in the ease of local body sinking funds will not conic as a, general surprise. For years, that important State Department has proved a very acceptable medium for the investment of funds of that character and, in. turn, it lias re-invested huge sums out mortgage on town and rural properties. To-day, however, it finds itself in the plight that is common to other largo lending institutions, and particularly to those which have specialised in advances upon “broad acres.” On every hand, it is experiencing difficulty in. securing prompt payment of interest and of repayments of principal. But, as far as those wjio-' have 'entrusted. it with moneys for investment are concerned, punctual payment of interest' to them continues as hitherto. It may bo recalled that the Department, in line with other financial institutions, soino time hack “cut” the rate of interest payable to investors in its Common Fund. This was, of course, part of t]ie national system aimed at bringing about a general reduction of interest rates throughout the Dominion. As it so happened, however, a number of local bodies- which had invested their sinking funds with the Public Trustee tjien regarded it as-a shrewd move to withdraw their moneys and invite their own sinking fund commissioners (To make other investments at ai higher rate than the Public Trustee was willing to allow. Time will, of course, tell whether all of them acted wisely. Some, at any irate, must be affected by later legislation compulsorily reducing interest ■rpt-es to a lower figure.. In due course legislation protecting borrowers may affect an even greater num-

ber. It would,'lndeed,’seem'that', to-" day, the amount of liquid funds in the hands of tlie Public Trustee, over and above wliat is required for tlie payment of interest ahd? other Ordinary purposes, is not nearly so large as was the case prior’ to tlie dejiressidn.' Under tlie new legislation. dealing with mortgages, the Public Trustee is, ol' • course, in a position'not different from any other mortgagee. Put in other words, lie niffy require to forego payment of considerable amounts of interest arrears in many cases and Lis. chances of- securing prompt repayment of principal arc, generally speaking, no better than those, of other lenders. In all tlie circumstances,, it is in the interests ol' the Department that the government has taken; the step to which reference is now : being made. Seemingly, there has been a widespread opinion that the Department' has lent over-much, more especially on rural securities. It has even been suggested That it may be found that it is likely to make substantial losses -in various districts. But, if such should prove to be tho case, investors in its Common Fund will not' be uliected in tho slightest degree. The new legislation will ■lead- ;to an official statement as to how the Department is weathering the financial blizzard. As matters will stand, when, the Dill is passed, the -Public Trust will be made immune, for tlie next three years, from raids by local bodies to withdraw their sinking funds. What has been decided upon, lias, no doubt, been carefully thought out and is likely to be just’as much in The interests of tlie local bodies concerned as in those of the Department. The only question tliaf can arise is whether the rate of interest • allowed by the 1 Public Trustee to the local bodies is reasonably adequate, all things considered and not omitting tlie State backing afforded such investments. In this regard, it >s not improbable that a strong effort mu-j be made to have it increased slightly above the present figure, of 4 per cent., in return for the concession that the investments in question may ■not bo withdrawn during the next three years. If an increase were agreed to, it. would rob criticism of a groat, deal of its sting.