RURAL CREDITS.

New Zealand Herald, Volume LXIII, Issue 19418, 28 August 1926, Page 12

RURAL CREDITS.

report of the committee. LONG - TERM MORTGAGES. SPECIAL BRANCH ADVOCATED. PRACTICAL TEST OF SCHEME. [BY TELEGRAPH. —PRESS ASSOCIATION.] WELLINGTON, Friday. The report of the special select committee set up bv the House of Representatives to consider the report of the Royal Commission on rural credits and the Bank of New Zealand scheme for long dated loans to settlers was read in the House this afternoon by Mr. D. Jones (Ellesmere), the chairman of the committee. The committee reported that it had considered the recommendations of the Royal Commission, also the rural credits proposal of the Bank of New Zealand. In regard to the Royal Commission the committee expressed its appreciation of the manner in which the thorough and detailed information obtained had been set out by the commission. In ' its report every branch of finance affecting rural producers had been dealt with, and whilo in certain countries there were more systematised methods of operating the committee particularly noted the commission s finding that in the important essentials of long-term mortgages and short-term credits no country was better served than was the Dominion by the State Advances Office and by the banks. Proposals of Commission,

The proposals of the Royal Commission could be briefly stated in the following three propositions:— (1) That long-term mortgage credits should continue to bo administered by the State Advance Office, 'in which a special farm loan branch should be constituted under the control of a farm loan beard consisting of the psesent State Advances Board supplemented by representatives of the primary industries, capital to be provided by the issue of securities charged directly against mortgages instead of public revenues as at present; the limit of advances to be £7OOO based on'the ascertained; productivity up to two-thirds'of the value of the, land. (2) That intermediate credit should be provided which will enable",the producer to make extended use of existing institutions - with the assistance of the Farm Loan Board. (3) That facilities for credit should be improved by adopting a method whereby warehouse receipts can be accepted with confidence ah security for moneys advanced against stored produce. Matters for Further Inquiry. Tho committee found it inexpedient to give detailed consideration to the intermediate rural credits oroposals outlined in the report, nor dicl it examine the Hcheme providjng for the licensing and bonding of public warehouses storing agricultural produce under conditions intended to establish the integrity of their receipts and make these receipts generally acceptable as security for loans. Consequently the committee ,is of opinion that these several and very important matters should he 'fully inquired into by a select" committee xiox't' jsVssiprr with ' a, view to ascertaining"durability of legislation 1 in the li, lis; - consider eti 'By " |W. tt.ee th at the- propofiaL regarding lohg'-'dated loans ie the most material and important proposition. ' The investigations of the committee were directed to a careful ejtaißmation of the suggestion as .to whether a system of the issue, of jand. bonds and'the increaS-. i.ricr of the amount now obtainable from the St'atft,'Advances' Office.' rianiely, £3500, to a greater amount, viz., £7OOO, is to be approved;., as to the advisability oi having' the margin of security _ at- twothirds or whether.it should reVriain at the ratio now obtaining nnder the - advances to settlers' branch (76 per cent.) and as to whether it' is considered'the- State Advances ' Office has already sufficient machinery to administer the proposed farm loan branch, or whether a new board —the Farm Loan Board—-should'he established.' Particular attention was given to this last matter as it is realised that additional administrative machinery must of necessity add to thj cost of loan moneys. Findings of the Committee.

After due deliberation on matters! incidental to giving effect to this particular recommendation of the commission, the committee, is of opinion; (1) That, the State Advances without additional machinery, can effectively carry out : the proposal of the commission in respect of rortg-term mortgages en the amortisation principle arid recommends that a new branch be created in the State Advances Office with a distinctive designation but urlder tfte.control of the State Advances Board, the establishment. Of a farm loan board being considered- unnecessary. •, -.~ - (2) That this fyranch be given power to authorise the issue of mortgage bonds or stock and thus test out the central idea in .the commission's . report, such bonds not to exceed the value of the mortgages held as security therefor and issued for varying periods, the bonds to be issued and sold by the Treasury but without State guarantee. (3) That advances made by this branch shall not exceed £5500. The system and method of valuation adopted by the State Advances Office should be followed, but tho amount so advanced by this branch should not exceed two-thirds of the valuation of the land and improvements. The rate of interest on bonds or stock should not. exceed 5| per cent', and the rate to -borrowers should be governed by "the cost of the money plus the cost of administration. (4) That all. loans should b<s on the amortisation principle. , (5) Tn cases where a'rj owner's interest in the preferred security does not exceed uO per cent, of its. value, the . term of the loan should bo for a substantially shorter period. ■ •