AN AGRICULTURAL BANK.

Hawera & Normanby Star, Volume XLII, Issue XLII, 7 October 1922, Page 3

AN AGRICULTURAL BANK.

MORTGAGE CREDIT.

FARMERS' UNION PROPOSAL

AWAITING LEGISLATION

Probably no subject has created so much interest in the fannin £ world in recent years as that of the establishment of a system of agricultural banking. The council of the New Zealand .tanners' Union has taken the matter up seriously, and when Mr. W J. Polson, Dominion president of that body, was in Hamilton recently, he gave a representative of the Waikato Times! some interesting information relative to the working of the system in other' parts of the world. I

"If," said Mr. Poison, in answer to a question, you We read the report of the Taxation Commission, you will realise that the farming community is suffering severely from financial condij tions. That report explains why it is , that stock and station firms, and Investing concerns such as insurance com-j panics, are withdrawing their money

, ; from farm securities and reinvesting in >; war bonas and municipal and harbour I board bonds. A concern with a capital of £200,000, which earns 5 per oent. on its money, must pay the Government 8s 9 3-od in taxation, which means that they. cannot lend to the farmer at anything less than 11 or 12 per cent., a rate which the commission says definitely he cannot pay. The moratorium is still here, and the Union is fearful of what will happen when it ceases. la other producing countries an agricultural banking system has been established, which provides the farmer with, both long and short term credit, by the issue of bonds based on reasonable land values. That system has been so enormously successful that in some countries the whole of the farming community are members of these land banks. The system has been Tecently adopted by America, where already it has achieved remarkable results."

The system, added Mr. Poison, possessed some special features which, might be worthy of notice. These banks were generally governed by their own mem- * Ws and supervised by a Government officer, who also audited their accounts. They had power to issue bonds amortised, in periods of from 10 to- 30 years as a rule, by payment of interest and sinking fund. Such bonds could be either sold by the bank or handed to the individual owner for disposal as circumstances required. The funds of the banks consisted of (1) • the issue of bonds, (2) the deposits of individuals, (6) the payments of borrowers into sinking fund accounts, (4) the accumulation ot reserves and funds, and (5) State grants and loans. The mortgagor was at any time entitled to reduce the a^ ntx,° f debt- and ** ™w also i withm the powers of the bank to ad- | vance loans to members by lien for the Pitt-chase of seeds, implements, stock cr tarm improvements which might be approved by the board. As a matter of fact added Mr. Poison, the key to the whole system was institutional mortgage credit, enabling the land owner to mobilise, as it were, a high proportion ot the value of his landed property by the creation of bonds which flowed into the general system of securities, so that he possessed facilities for converting a

mortgage charge into a security realisable -it any time in. the general market. In all of these banks in other parts or tne world tue loans granted were not subject to recall; the rate ot interest was us moderate as possible, oeing, or course, related to the ex.suug murAeo sraws tor money, 'me boiicts oouig uinsdeeiadUie uy me owner, tne race oi interest coaid not be raised. ±$y conceding tixe right to reduce the debt by payments' maae at the mortgagor's uonyenienje, tne necessary extinction 01 'the capital debt was established graduallV. ' Tnese, said Mr, Poison, were some of the cnief points of the system, which could be elaborated considerably but for shortage of space. Fairiy comprehensive legislation would, he said, be required to bring down such a system, but Mr. Massey liad promised to deal with the matter this session, and they were very anxiously watching for the appearance of the^Bill. - Mr.' Poison remarked that he was surprised at the unanimity of the demand by branches of the Union throughout New Zealand for this system. It was quite evident to him that the farmers understood it and that they would be satisfied with nothing lessT In this respect he would .add that he had, at the Teauest of the Public Accounts Committee, which had the Bill before it, given evidence on the question in Wellington, and impressea ux>on the committee this aspect of the case. He did so the more effectively because their friends, the Dairy Farmers' Union (which had been newly formed in the Manawatu" district, and ■which he hoped to see back along with its parent body in the Waikato, into the fold of the Farmers' Union as a branch directly), asked him officially to .represent them also before the com,mittee, and to give evidence on their behalf as well as" on behalf of the Farmers' Union. He would add that the [Returned Soldiers' Association also Tealised the advantage of co-operative banking to its soldier settlers. There was such a- body of public opinion in favour of the movement to-day that he doubted if any Government would seek to resist it. . -