Manawatu Evening Standard. WEDNESDAY, JUNE 11, 1924. THE AGRICULTURAL BANKING QUESTION.

Manawatu Standard, Volume XLIV, Issue 1039, 11 June 1924, Page 4

Manawatu Evening Standard. WEDNESDAY, JUNE 11, 1924. THE AGRICULTURAL BANKING QUESTION.

The question of agricultural banks having heen under discussion a great deal of late, it may not be generally known that their establishment in this country is by no means an easy master, since this peculiar form of hanking, which apparently provides that the shareholders of a. bank must be those who borrow from it and that the management of the bank itself must be in the hands of those who are its debtors, would require a very large amount of capital before it oould be put into operation. The Government has been charged with refusing to sanction the establishment of such hanks, but it has placed on the Statute Book a Rural Credits Act, which might well be accepted as a beginning, for it is based on the primary principles oi such banking enterprises in countries where agricultural banks are in existence. The Act does not go far enough to meet vyith the approval of those who are agitating for the establishment of an agricultural bank or banks, but it is fairly clear that one bank alone would not suffice, and that, for their establishment, a large amount of capital would be necessary. Mr Poison, the. Dominion president of the New Zealand Farmers' Unionis reported to have stated that London capitalists were prepared to find £5,000,000 towards financing an agricultural bank in this country. if that is the case the farmers themselves should have no difficulty in forming a banking corporation, tq carry on the business of such a bank always providing the money is obtainable and they can comply with the terms the London financiers would exr. act. But we shrewdly suspect the money would not be forthcoming unless the State guaranteed the pay* ment of interest on the capital \v|iich might be subscribed for the purpose. The question the Government has to consider, therefore, is how far it js justified in extending the already heavy responsibilities it has undertaken in making advances to farmers and others to the extent of over £20,000,000 through the State Advances Department, irrespective of the £23,000,000 or £24,000,000 which have been advanced to soldier settlers and soldier workers. It is. noteworthy that, in the countries where agricultural banks have been established, the State does not make advances in the way that such are made ill New Zealand.; consequently no crjtir cism of the New Zealand Government's action, based upon its attitude ip regard to agricultural banking, is justifiable which fails to take into account the large sums it has already advanced, to, the farming community. At the pA-espnt time the Government is faced with the impracticability of obtaining money from London. While it is a comparatively easy matter to float such loans as the Government requires in England, it is next to .impossible, in view of the embargo on the export of gold from Great Britain, to obtain the actual cash. Even wero the embargo removed it would cost at least £3 per cent, for the money to be made available here. The difficulty might be got over were it possible to

establish a system of mutual credits, which would obviate the exchange cwfieultv, but, as matters stand, mone>s raised in England are retained tf» e * e to meet State and business WMJ] tions and purchases, etc. The amount of coin and bullion held by thebanKS doing business in the Dominion nas only advanced from £5,712, /51 "J 1914 to £7,877,259 as at March Jis* last, and is rather less than it was ap tha,t time last year, which may "« S? cepted as an indication that very i" tie monev has actually come into tne country during the last ten point which amateurs in banning finance are apt to overlook.

SOME MISTAKEN NOTIONS-

The extraordinary ideas held by the advocates of agricultural banks can be best illustrated by » reference to the statements made by Captain Frank Colbeck at Masterton recently, and repeated by that gentleman in a letter addressed to a Wellington daily on Saturday covering an attack upon Mr A. Di: MoLeod, M.P., in which Captain Colbeck alleged there was sufficient "floating capital" in New Zealand to find all the money that is re. quived for agricultural banking purposes. Captain Colbeck includes in the list he gives of this alleged "floating capital, moneys in the handsi or the Government in the Post Office Savings Banks, the Public Trust Office and the sinking funds, totalling £76,119,849; moneys held "in private hands" —that is in bank deposits (including private savings banks) and companv deposits, estimated in the latter case at £10,000,000— amounting to another £60,339,917, making, together with the moneys in Government hands, the total qf what he terms "floating funds" £136,459,366. To this he adds.a sum of £240,000,000 "lent on registered mortgage," and concludes by representing as the "amount available for investment in agricultural bank bonds," £376,459,266. It does not seem to have oecuri red to Captain Colbeck that practicI ally every penny of this total is already invested in one way or another. The Postmaster-General has to pay 4 per cent, on all Savings Bank deposits from £1 up to £SOO and 3J per cent, on deposits in excess of the latter sum. If he failed to invest the moneys he thus receives on deposit, how could he possibly have paid the eleven millions or so that have been credited to the depositors' accounts by way of interest during the last ten years? The Public Trustee has similarly to invest the amounts at his disposal, and the banks of issue would be unable to carry on business if they failed to suitably invest their funds. Private savings banks and companies are in the same position, and when it comes t.P moneys lent on registered mortgage, mostly represented, by the way, by the unpaid purchase moneys of properties, held by the mortgagors, it should be fairly clear that such amounts more closely represent floating debts than moneys "available for investment in agricultural bank bonds." If it were possible for tain Colbeck and his friends to place their hands upon the moneys said to be thus "available," and they had the disposal of them, the country' would be. likely to experience an era* of "frenzied finance" certainly unequalled in the experience of any other British State. The amateur financiers who are responsible for the dissemination of such wild ideas as those advanced by the vice-president of the Auckland provincial executive of the New Zealand Farmers' Union are hindering rather than helping the Government in its efforts to assist the man on the laud, and the sooner that fact is recognised the better for all concerned. I