MORTGAGE CORPORATION

Taranaki Daily News, 3 September 1934, Page 7

MORTGAGE CORPORATION

STATE CONTROL ADVOCATED

REVIEW GIVEN BY MR. W. J. POLSON

SHOULD NOT BE BY INDIVIDUALS.

FARMERS’ UNION PLAN RECALLED.

At his meeting at Feilding on Friday Mr. W. J. Polson, president of the NeW Zealand Farmers’ Union, referred to the proposal of the Government to constitute a National Mortgage Corporation. He considered it should be controlled by the State and not by private shareholders. Mr. Polson said that the Government hatj announced a plan for forming a National Mortgage Corporation much on the lines of the Reserve Bank, which would mean that, like the Reserve Bank, share capital would control it. It was subject to the same objection that the Reserve Bank legislation was subject to, namely, that it would allow the control of the whole of the finances of the country—including the State Advances, Rural Advances, Rural Intermediate.’ Credit and Lands Department finance —to possibly pass into the hands of private individuals. ■He believed that' such a plan must depend for its success on a continuation of the control by the State. The old plan was to give the borrower bonds or cash. This new plan was to give the lender bonds in lieu of cash in order that frozen capital might be freed. There was not anything wrong with the principle—in his opinion it was perfectly sound. It would have the effect if properly managed of standardising land values and taking the humps and hollows out which had occurred during the past history of New Zealand. It would enable the transition from the contraction of the Mortgagors’ Relief legislation to be peaceable and unalarming. It would lower interest rates also. One of the difficulties, however, was that if it were intended to apply to urban as well as rural mortgages, two different systems would probably have to be made use of. Urban mortgages were not based bn productive values like rural mortgages, and were subject to the whims of fashion, and if amortised mortgages were given the shortness of the term would make the principal repayments too heavy to be of any use. ' It was extraordinary the changes which the . whirligig of time had. brought. He had personally fought for years for a system of mortgages under the control of some central management dominated by the State, which would do what his proposal planned to do in all mortgages. He was entirely delighted to see that the Minister of Finance had come to his way of ■thinking.. ■ • The Farmers’ Union suggestion was that the bonds issued under the proposal to mortgagees should be of at least two classes—“A” and “B.” The former should be based on the actual appraisable value of the security, and tire latter to be given for the balance of the mortgagees’ interest to have a limited redemption period and to preserve the mortgagee’s expectation of repayment should values recover; but to disappear in a certain period of time if values failed to do that.

The. plan was an adaptation of the American plan, where mortgage lenders •were being paid with Government bonds convertible into cash, and where a new money was being issued to borrowers at low interest rates for long terms. The nation was shouldering the national responsibility of maintaining its food producers. It was a fortunate thing that New Zealand realised the importance of doing that, he concluded.