LABOR ATTACK

Poverty Bay Herald, Volume LXII, Issue 18632, 16 February 1935, Page 15

LABOR ATTACK

MORTGAGE CORPORATE

VARIETY OF OBJECTIONS SUGGESTED ALTERATIONS 'PRINTING PRESS MONEY (Per Press Association.) •WELLINGTON, tfcis day. When the second reading clct>ato on the Mortgage CorpqratiQp of Nw Zealand Bill was 'resumed, Air. M. Savage said that if the provisions of tho bill were added t,o the legislation already on the Statute Book dealing with primary production, .the average farmer would be little bettor oil - than serfs in bygone days. With the Agriculture (Emergency Powers) Act anil the provisions of ,the present bill, tho last remnants of freedom would have vanished. The Minister lmd said that it was becoming more and more evident that it was idle to look for return to the level of prices ruling prior to. 10.'tO, but that statement was questionable. After all, he continued, price was a TClative thing, and it depended mainly on the people’s power to buy at economic prices the things they created. The power to buy the whole or any part of their products was undoubtedly tho prerogative of the people, through their representatives in Parliament. The Mjwistcr had said that owing to world conditions it was essential that the:necessary' mortgage finance should be made available as cheaply as possible, but where was that to stop. All wagereducing legislation in recent years was based on that cry, and still the farmers and all others wore worse off .than ever. Must they keep _.on rc--4ucing the standards of (Hying order to qualify as successful competitors in the overseas markets? He contended that the best method of providing fanners with cheap money was through the State Advances Department, but the trouble With that department bad ; been that it: was always short of money, as it’ had not the power .to issue money. If .the bill became law in its present form, tho position would be worse than before. While the Mortgage Corporation Would have no power to issue money, and must, therefore, depend on other sources of supply, it xnuSt guarantee a substantial rate of interest to shareholders whose contributions t,o the financial requirements of tRe corporations Would be infinitesimal, as Was the case with the State Advances Department. Money would always be in short supply. Mr. Savage added that the bill was a definite attempt to destroy State lending, institutions. The Mpuster had sard that there was .no intention, of abolishing the State Advances Department, but what else could that bill mean? The Minister had said that) the guiding principle of this national institution would he service, and not .profit, and immediately stated that dividends would ..be limited to 41 per cent., -per annum. _ ‘The State Advances Department, on the other band, was built upon a foundation of service, all the benefits going to the people. Shareholders were to provide £5C0,000 in the way of capital, while the State was to find £500,000, ‘and over £50.000,000 .was 'M mortgages. The mere bagatelle in the Way of capital provided by shareholders was to be made an excuse for electing flhree members fo the board of management. The appointment of a director from the commercial world, as stated by the Minister, looked like the creation "of another highly-paid position. Surely an officer from .the public .Service could foe found (tb fill the position. 1 The loans, said Mr. Savage, were ; r,ot to exceed -two-thirrls of tne value of securities offered, unless guaranteed, and in all cases the securities were to be revalued for that ; pnrpose. In view of. that, it. wopld probably pot be an. exaggeration to say that the new values would be at least 25 par cent, lower than the original values 1 , and that, therefore, the amount of cash that .would be available would not exceed ,$5 per cent, ol the original value of the securities. The merging of the State lending institutions in the corporation seemed to mean that the cream of fhe securities held by the Government. ilQnfimg institutions was to he iianjjfd over to the Mortgage Corporation, while the State was to accept responsibility for the remainder. Mr. Savage continuing, said, that ■the proposals for setting up a special court of revieiv bore a striking resemblance to an amendment moved by the Labor Party in 1924, when the ■Mortgages Filial Extension ‘Bill .was in , committee. Labor members at that. £ .time argued that finality should be reached at the earliest possible moment, and provided an amendment for the taking over by the State, at the productive value, of the securities of all mortgages where mortgagors were .unable to meet, their commitmeiits. The position had grown worse since then, and demanded immediate solution.

Summarising his remarks, Mr. Savage said that: — (1) The proposals involved will; turn farmer mortgagors into serfs, and will take full-time attention of an army of inspectors, valuers and other State officers in their administration. (2) The State lending .institutions are to he superseded by a semi-private lending institution, which without) authority to issue money, must continue to rely op borrowing. 2 (3) For ' ; tho purpose of tho hill, money must be-raised upon securities of second-class importance, and, as ’» consequence, will carry higher rates' of interest, which will be passed on to borrowers. (4) Money for tho purpose of State advances has always been raised on the first-class security of State revenues. and the benefit has been passed on to the borrowers. - (5) The weakness of the present system is duo to the inability of State lending institutions to utilise, by -cli. r - ect means, the credit of the State. This is also tho main fundamental weakness of the proposed National Mortgage Corporation, i (6) Reduced interest charges, though desirable, will .pot bridge the oap between the purchasing powor of the people and the production, and, is therefore, not a solution of the problems dips to fajling prices. 77) A solution of tjlp problems arising oat of the present mortgage system can be solved by a readjustment of mortgages under State control, and guaranteed prices for products ' aiul services, which will finable producers to meet their obligations on a new basis. (8) The Government's proposals mean, in effect, that after a period of deflation! f which was deliberately undertaken, a substantial portion of

the equities of all parties to mortgage contracts is to be destroyed; that Is, unless' something turns up to raise prices. The Minister says that this is not likely to happen. The aim should be to re-establish the equities of all concerned, including home builders. . The Hon. E. A. Ibihsom, replying to Mr. Savage, said that some of the points raised were weak in the extreme. He said the creation of credit by using the printing press would not solve the country’s problems. The Government would not give the corporation power to issue money. Tjie matter would get entirely out. of hand in times of stress if that power wore given. The Labor Party wanted political control of currency, Tuft that was not the opinion of the Government, and it was not provided in the bill. The two bills formulated by the Minister of Finance would go a long way towards rehabilitating the primary producers of the Dominion. The Minister quoted' figures dealing with his own department to show bow .the position of the country had improved in the present year. He denied that the State Advances Department was short of money for lending. Mr. Ravage fs speech wp one of theory opposed ito practice, and while the Government had something practical ro put before the House, Labor did got scorn inclined to give support to it He denied that money would have to be raised on second-class securities. He .'thought that Mr. Savage -must have prepared his speech before lie saw the bill. If the Government took over all the mortgages in the country, the Dominion’s credit overseas would be damaged. He had been asked why the lands of the Dominion .bad pot, been revalued, but vvliat was the use of revaluing land if it was pot possible pfjqo to deal with) mortgages on land. I,ie thought that’ tne way many mortgagors had treated mortgagees -was a .matter for congratulation, anil should bo placed on record. It bad been shid that if the bi|l became law there would be a (light of capital from the Dominion, but that lie thought, was an extraordinary statement when it was remembered that a largo amount of money had been lying in the banks in recent years. Now, when a sound investment was offered, why should that money fly overseas? If better investments wore available overseas, why had that money not gone years ago? Mr. W. Nash (Gab., Hutt) asked what the Minister of Finance meant when he an id that if the corporation, was short of lending money the State would supply H with securities, and asked wjiat was the difference between thai and creating credit by means of tho printing press.