AGRICULTURAL BANKS

Otago Daily Times, Issue 18591, 27 June 1922, Page 7

AGRICULTURAL BANKS

TO THE EDITOR. Sib, —As the organisation of which I happen to be the head has made the establishment of agricultural banks a cardinal plank in its platform, and as I have personally given a great deal of time and study to the question, I crave your permission to reply to the remarkable contribution to agricultural banking opinion recently made by the new chairman of the dominion’s serni-State bank—the Bank of 'New Zealand. In all my exploration of agricultural bankign literature I . have failed to discover anything quite so astonishing as the published opinions of Mr Elliot on tis subject. To put the matter briefly, Mr Elliot is either ignbrant of this subject or disingenuous. It is more charitable to suppose the former. If so, Mr Elliot utterly misunderstands the purposes for which agricultural banks ore chiefly formed; is ignorant of the history of agricultural banking in the world; fails to appreciate or • understand the needs of the farming community in the country his bank trades in (apart possibly from Auckland, where he resides); is perilously near libel in his references to the promoters of the proposal in New Zealand; • and is apparently inspired in his desire to prejudice the public against a movement which must seriously re-act on_ his own institution if it continues to gain ground as it has gained recently.' I am aware that these are strong words, and only the most intense indignation makes me give expression to them. I propose here to justify them and to impeach the chairman of the Bank of New Zealand of an attempt to prejudice the discussion which comes badly indeed from the head of an institution saved from bankruptcy by the people and largely the producers of this country and placed by them in a position of prosperity. The future general prosperity of the producer will be materially benefited by the adoption of' a system which has ceased to bo experiment 1 and has stood the test of time. Whether the Bank of New Zealand will similarly benefit no doubt Mr Elliot thinks more problematical. But let me take Mr Elliot’s statements seriatim. “These (agricultural banking) institutions,’’ he says, “were first started in Europe about the middle of last century.” Mr J. R. Cahill, regarded as the greatest banking authority in the British Empire, in his famous report to both British Houses of Parliament, informs us that Mr Elliot is only about a century out. Again—agricultural banks ‘‘obtained credit from the ordinary banks by means of joint and several guarantees. . . . There ore many unfortunates who now rue the day they put their names to a gaurantee,” says Mr Elliot. “The losses of agricultural banks in Germany,” says Mr Cahill (where they numberoverfifteen thousand), duo to the .default of their members, “is only one fifty-fifth of the losses similarly made by .ordinary banking institutions"— such as Mr Elliot’s. More than this, Mr Cahill points out that when, in a time of great crisis, German Imperial Bonds fell to 25, Agricultural Banking Bonds fell no lower than 55, demonstrating the comparative ability of these banks to tide over a period of slump. I recommend this phase of their operations to Mr Eilliot’a investigation. It will inform him of remarkable results, possibly new to his banking experience, which it would require too much space to deal with here. Mr Elliot goes on: “Under normal conditions the needs of the farming community are adequately provided for by the existing organisations.” And he explains that he means the existing banks and other institutions. It is quite evident that Mr Elliot has mixed up Landscbaften with Raiffeisen Banks if he is not wilfully misleading his audience. • He deals exclusively with short-term credit operations and ignores the long-term land mortgage credit associations which are so valuable to producers. Is Mr Elliot so ignorant of this great question or is he merely disingenuous ? I leave it to him to say. In regard to the disgraceful, undignified, and —I am glad to say —baseless insinuation made by Mr Elliot that those of us who are endeavouring to carry this great reform “are for the most part individuals who are clamouring for an institution which they hope will assist them bv taking big risks.” I would point out that it is often easier to slander those who seek reform than to controvert their arguments. Mr Elliot has apparently chosen the former course. In conclusion, let me compare the attitude of Mr Elliot, whom the favour of the Government has made head of a bank, with that -of the President of the United States of America—Mr Taft. As the result of the investigations of Mr Taft’s admirers, including the ablest bankers in America, the United States to-day mossesses an agricultural banking system modelled on the German. Let me quote Mr Taft’s letter to the governors of the United States. “Why,” says Mr Taft, “will not the investor furnish the farmer with money at as advantageous rates as he is willing to supply it to the industrial corporations? Obviously the advantage enjoyed by the industrial corporation lies in the financial machinery at its command which permits it to place its offer before the investor in a more attractive and more readily negotiable form. The farmer lacks this machinery, and. lacking it he suffers unreasonably. This is not theory. Through all the changing conditions of a century the soundness and practicability of such financial machinery, baaed upon the peculiar needs of the agriculturist, has been tried out, and so successful has been its operation in Germany in times of financial stress money has been taken out of the financial field and placed in the keeping of that empire’s agricultural co-operative banks for safety. The value of this assistance to the farmer receives unquestionable testimonial in the growth of the system in the countries of Europe. More specifically this advantage may be seen in the fact that through this machinery the German farmer has received money at times at rates lower than those current in commercial loans. . . . Both the Federal and State Government in this country have done much to afford the farmer instruction in improved agricultural methods. But it still remains for us to reduce the cost _cf the farmer’s production by affording him the necessary capital for the exploitation of his soil upon the most advantageous terms. . . . The chief advantages brought to farmers through such institutions” (continues Mr Taft), “are lower interest rates and easy amortization whereby the borrowing farmer may repay his loan bit by bit, extending these payments over a long number of years. Thus his obligations are made proportionate to his annual receipts from the exploitation of his soil, and the danger of foreclosure is vastly teduoed.” Personalia I prefer the opinion of men like Mr Cahill and Mr Taft to Mr Elliot’s. There are other aspects of this question—the matter of Government assistance and supervision, for example—which would unduly prolong this reply. Perhaps I may have an opportunity of discussing them later. —I am, etc., W. J. Poison, Dominion President New Zealand ■banners’ Union. Fordell. .June 22.