PLEASED NOBODY

Nelson Evening Mail, Volume LXVI, 21 February 1935, Page 5

PLEASED NOBODY

MORTGAGE CORPORATION PROPOSAL IJON. W. DOWNIE STEWART’S CRITICISM (From “The Mail’s” Parliamentary Reporter) WELLINGTON, This Day. Speaking in the House of Representa lives last evening on the Mortgage Corporation Bill, the Hon. W. Downie Stewart, Independent, Dunedin West) said the Bill had _ several distinct objectives in view, but insofar as it was based on the report of the Dairy Commission as a means of assisting distressed dairy farmers it seemed correct to say that it was dealing largely with the North Island problem and all the elaborate and interesting statistical tables dealt with North Island districts. It was for that reason that the people of Otago, at least, were puzzled at the proposal to erect so grandiose an edifice to cope with a problem that for the most part they were able to handle with their own local financial resources. Even under the State Advances Department only a small percentage of advances are in Otago, lo achieve his desire to assist the dairy farmer and increase the country s capital liabilities, the Minister of Finance had to choose between the continuous expansion of the State Advances Department and the creation of one or more independent mortgage corporations. The Minister made his choice in favour of tlie latter, lienee the Bill.

A HYMRID SORT OF PLANT”

Mr Downie Stewart agreed with the choice, but did not agree that the Minister had achieved his objective, except in a shadowy way. The Bill was ii hybrid sort of plant that purported to set lip an independent statutory organisation, but the State still remained deeply involved in its control and administration and in the financial liability. The result is that however well meaning the Government’s effort is, it has pleased nobody. Socialists were indifferent because, naturally, they believed in an omnipotent and presumably benevolent State monopoly. The commercial community was alarmed for they saw that the new organisation was liable to implicate and involve financially the Government ami the taxpayers more deeply than ever, and the farmers, judging by their papers, were hardly enthusiastic. The Bill raised the cup of hopes to their parched lips, but could do little to satisfy their thirst. However, what relief could be given to the farmer, could not be fully judged till one saw tlie next Biil dealing with rehabilitation. The House was greatly handicapped by not having botli Bills before it.

THE LENDING RATE

Even if the new organisation were made truly independent- and self-contain-ed, it would, said Mr Stewart, be dangerous by reason of its mere size. It began by taking over large groups of State mortgages, running into fifty millions or more, and may expand indefinitely beyond that. It was true the Minister said it was not intended to be a monopoly, but one object lie lmd in view was tlie creation of a lending rate to which all existing lending agencies would have to conform or go out of business. The institution alight become too large, and the danger then was just as great when it was controlled by a private Board as when it was a State Department. In either case, its downfall would be a national disaster, and the State and the taxpayer would have to come to its aid. lie did not think the Minister realised that there were thousands oi tiurfty, self-reliant people whose small capital was the result of a lifetime's hard work and saving, and who simply could not live on the rate of interest artificially forced down by huge monopoly organisations. Their’ plight was just as desperate as that of the farmer. It was true the producer must be considered before the rentier, but if the thrifty mail could find someone who was content to borrow from the individual rather than from an inelastic central organisation, they should be encouraged to make their bargain without the lender being forced to accept a rate artificially dictated, and which was too small for him to live on. For that reason if 11011-Government organisations were to do the job, lie would prefer to see a number of those organisations geographically distributed so that if one or more of them fell it would not produce a national crisis or unnecessarily involve the general taxpayers. It also would have the advantage that applications for loans would receive quicker consideration and despatch. WHAT SHOULD BE DONE, Lest it might bo said he had confined himself to criticism, what he thought should be done was: (1) He agreed with the proposal of tne Monetary Committee and the Budget to bring all Government lending departments under joint control to avoid duplication and competition. (2) Instead of creating one huge corporation lie would prefer to see several independent mortgage corporations created on a decentralised basis with a little Government assistance to start with as need be. (3) If the Minister’s expert advisers are of the opinion that the creation of independent mortgage corporations is not practical politics, then he suggested the Minister should try out the fresh possibilities of bond issues by the Rural Advances branch of the State Advances Department. Tf the Minister found it was not possible more clearly to free the proposed corporation from political control and heavy and unknown financial obligations, then lie suggested the Minister might more nearly attain his objective by reviving the Rural Advances scheme, which was the result of worldwide investigation bv his own Govern nieiit and approved by Parliament. It would have the following advantage: (1) That no new corporation (would be necessary, and the Stale would not lie nearly so deeply embroiled as it is in the proposed corporation. (2) That the existing staff of the State Advances would not need to be. transferred or distributed among other departments. (3) That the money would be raised in the same wav as the. Minister now proposed, without all the complications of the new organisation. (4) That the plan could be put into operation with much greater expedition and the Dairy Commission was emphatic as to the immediate urgency of the problem. “GETTING AWAY FROM POLITICAL CONTROL” As far as the Minister had in view the avoiding of increases in public debt and getting away from political control, lie was in sympathy with those objectives. The Dairy Commission showed the farmer would be benefited if lie could get money at 3£ per cent., but the Minister calculated that if he raises money at 3j per cent, the farmer must pay 4t. per cent, at least. If that is so. the gain to the farmer seemed negligible. It was true lie was reducing his principal by instalments if he can make payments, but it was generally agreed that during the first five years of an amortisation mortgage, the danger of default in payment is greater thin un-

dor a hat mortgage, because of the added increment of debt, payment of which is included in each, instalment. In other words, payment by amortised loans is no panacea for farmers’ problems while low prices rule. The Minister, he said, would provide for a Hat mortgage in special cases, but lie (Mr Stewart) thought it would be better,' if necessary, ■ to suspend instalments of principal under amortisation mortgages for the first few years.