FARM FINANCE

Otago Daily Times, Issue 22504, 23 February 1935, Page 14

FARM FINANCE

MORTGAGE CORPORATION BILL JLABOUR’S ALLEGATION REPLY BY MINISTER (From Our Parliamentary Reporter) WELLINGTON, February 22. A commencement was made by the House of Representatives to-day with the committee stages of the Mortgage Corporation of New Zealand Bill. No clauses were passed, the whole of the sitting being occupied with the discussion on the short title on which members are allowed four speeches of 10 minutes each as against four five-minute speeches on the remaining clauses. The debate followed much the same lines as that on the second reading of the Bill, which will be further considered in committee when the House resumes on Tuesday after the week-end adjournment. Replying to the Labour criticism that in establishing the Mortgage Corporation the Government was taking steps to stultify the progress that had been made by the State Advances Office, the Minister of Finance (Mr J. G. Coates) said if that department were extended to meet all the applications the public debt would be greatly increased, and it was necessary to be very careful about doing that. The alternative was to set up an organisation to do the work and leave the State free to act in other directions. He considered they should not have a number of corporations but one strong organisation that would command public confidence. DUAL MANAGEMENT SYSTEM DEFENDED BY MR COATES. (From Odu Parliamentary Reporter) , WELLINGTON, February 22. The appointment of joint managing directors of the proposed mortgage corporation was defended by the Minister of Finance (Mr J. G Coates) when the Mortgage Corporation of New Zealand Bill was-under consideration in the House of Representatives to-day. Doubts had been expressed by Mr R. A. Wright (Wellington Suburbs) as to the advisability of a system of dual management. ... Mr Coates said that the system of joint managers was by no means unique. He had looked up the method adopted in the control of similar organisations in other countries, and had found that two general managers was by no means uncommon. He could not find a case in which the system of dual management had not worked admirably. On e manager would look after one particular section of the business and the other would take charge of another. Such a system of management was not new, and had been tried out satisfactorily. At the same, time he realised the question was a legitimate one to raise. ISSUE OF BONDS QUESTION OF STATE GUARANTEE OPPOSITION LEADER’S CRITICISM. (From Our Parliamentary Reporter) WELLINGTON, February 22. The suggestion that there must be a difference of opinion in Cabinet in regard to the desirability of the State guarantee for bonds to be issued by the National Mortgage Corporation was made by the Leader of the Opposition (Mr M. J. Savage) in the House of Representatives this afternoon. Mr Savage quoted as grounds for his assertion statements that had been made by the Prime Minister (Mr G. W. Forbes) in 1926 when he was simply the member for Huruunui. “ When we were discussing the rural advances bonds in 1926,” said Mr Savage, “Mr Forbes said that if anything could be done to make the bonds bring the best possible results to the farmer it would be to give them a State guarantee which tfould enable the money to be raised at the best possible rate. Later he had said, ‘ I do not fear the bogey that has been raised as to the burden on the public debt. The security that is ottered is not equal to the security of the State. The farmers’ bonds should be made as attractive as local body debentures, and unless they have a Government guarantee I do not'think they will be as good as local body debentures at the same rate of interest.’ ” They were discussing the same principle to-day, Mr Savage continued. -the national mortgage corporation would have authority to issue bonds based on the security of the corporation and not of the State. “I want to know whether there is a difference in the Cabinet,” he said, “and whether the ; Prime Minister has changed his course.” A Labour voice: Changed his spots. Rising to reply, the Prime Minister said that since those carefree days when he was simply the member for Hurumn he had been Minister of Finance, and he realised that a Government guarantee of the kind advocated by the Labour Party was looked on as an addition to the public debt and woujd not be regarded with any degree of satisfaction by those who were to provide the money necessary for the conduct of the corporation. Mr Coates had gone to a good deal of trouble, to find the best way to get the money at a low rate of interest, and the introduction of the shareholder principle into the corporation was looked upon as a means of providing stability and security for the organisation. 1 Mr Savage: Does the Prime Minister think the member for Hurunui was wrong in 1926? Mr Forbes; He hag learnt a good heal since then. SHARE CAPITAL PROVISION ITS ELIMINATION SOUGHT MR W. 5. POLSON’S VIEWS (From Odb Parliamentary Reporter.) WELLINGTON, February 22. Renewed efforts to secure an amendment to the Mortgage Corporation Bill eliminating its share capital provision was made by Mr W. J. Poison (Stratford) when the measure was being discussed in committee in the House to-day. Mr Poison said he got his abhorrence of the share capital and joint stock system of farmers’ finance from his investigations abroad as a member of the Rural Credits Commission in 1926. He admitted that under the Bill the system was limited to joint stock control, but it was the same principle. Half a million of share capital, a trifling portion of the amount to be lent, would control the organisation. The most serious aspect was the incentive given to the shareholders to sell their bonds at the highest rate to keep up their dividends. A further point made by Mr Poison was that the farmers, who were the borrowers from the corporation, should have renresentattion on the hoard, a point which Mr Coates had agreed in 1927. The £2,500,000 in the mutual guarantee fund, to which the borrowers contributed 2 per cent., could be swept away before a penny of the share capital was touched. Yet those who contributed to that fund were denied representation. It would soften the blow if the Minister would consent to that. Mr Coates: Soften what blow? ■

Mr Poison: The farming community is opposed to the share capital, and I am sure the Minister wants the farming community at his back. Mr Coates; Yes, but I am not going down on my.knees to any community. The Government; thinks the farmer will be able to get cheap money under this scheme and that is what the farmer wants. Mr Poison: But the effect of this Bill

will not be to give the farmer cheap money. It will keep the price of money up. If the people who find the money for the mutual guarantee fund are given representation that at all events would be a compromise. The farmers would welcome that. The fund meets the first shock of the loss and until it is swept away the share capital remains intact. Mr Coates: There are reserves as well. Mr Poison: Yes, but they will go too before the share capital. The Prime Minister (Mr G. W. Forbes) said the desire of the Government was to establish an organisation that would have confidence behind it. He recalled that when the State Advances Office was started the department had to send officials around the country and buttonhole the farmers to persuade them to transact business with the department. It had been put to meetings of farmers that it was wrong to have shareholder capital in the proposed corporation, but nothing was said about the other side of the question, and the advantages that would accrue as a result of the legislation. It was also said that the farmers would have no say in the control of the corporation, but the nominees of the Government on the directorate would be men who would represent the Government’s veiws. He was sure no farmer felt that his interests would suffer in the slightest. LABOUR’S SOLUTION CORPORATION UNNECESSARY STATE ADVANCES ADEQUATE (From Ook Parliamentary Reporter) WELLINGTON, February 22. Confident belief in the ability of the State Advances Department to perform the work for which the Government proposed to form the National Mortgage Corporation was expressed in the House of Representatives to-day by Mr Walter Nash (Hutt). Mr Nash deplored the fall of a department' which, with all its failures, had done more good for the country than any other department. He considered that the Government should expand the State Advances operations and organise the finance of the farmer through that channel. He referred to the Labour Party’s policy of issuing credit to the value of the produce that could be brought into being. He asked the Minister of Finance whether the new corporation would meet all the demands made on it. Mr Coates: Easily. Mr Nash: Then would not the State Advances Department do the same? Way let private enterprise into the business? The Minister explained that the Government had been faced with two alternatives in attempting to rehabilitate primary industry. It could have met all the requirements of the farmer through the machinery of the State Advances Department, but everybody knew that the department could not meet those requirements without piling up the national debt. Some saw no harm in this course, but any Government undertaking a policy which would ultimately destroy the national security would not be tolerated for long. The other alternative, a reduction of costs and the establishment of a, powerful institution, strong enough to riieet the needs of the farmer without adding to the nation’s debt, had been considered wiser and more practicable. Replying to points raised during the debate, Mr Coatee said that if the corporation bonds were guaranteed by the State the Government’s prudent policy would be defeated. The corporation woudl combine the best elements of State and private enterprise.