STATE CONTROL OF BANK

Taranaki Daily News, 13 September 1934, Page 7

STATE CONTROL OF BANK

DIFFERENT FROM POLITICAL

MR. POLSON ANSWERS CRITICISM.

WISE GUARDIANSHIP NECESSARY.

RESPONSIBILITY OF GOVERNMENT.

(By Wirer-Parliamentary Reporter.)

Wellington, Last Night.

Declaring that State control of institutions such as the Reserve Bank and the proposed national mortgage corporation did not mean political control, Mr. W. J. Polson, Coalition member for Stratford, speaking in the House of Representatives to-day replied to criticism of himself by Mr. W. Downie Stewart (Co., Dun( West) -by saying that wise control of banking was necessary for sound economic life and that the Government must be responsible for the policy of the Reserve Bank and not a group of private shareholders.

Mr. Polson said both Mr. Stewart and the Hon. A. D. McLeod professed to see grave danger in State control of the Reserve Bank and the suggested national mortgage corporation, but he thought both of them were confusing the issue with political control. - There was an example in the Australian Commonwealth Bank when the strongest Federal Treasurer there ever was, Mr. E. G. Theodore, failed to impress his will on State-appointed directors when he wanted to make his fiduciary issue of £12,000,090. Mr. McLeod ’had supported high exchange with one .breath and with the other had opposed State control of banking, but Mr. Polson said he did not know how Mr. McLeod made these ideas tally, for both amounted to the same thing. “There has been no major banking crisis in any country in which the State has failed to interfere,” Mr. Polson continued. “We had that in the days of the Seddon Government in New Zealand, and we had it with bur own Government in connection with exchange.; I believe that the’ proper policy is to have the Reserve Bank administered entirely by an independent board but that the board shall be responsible to the Government for its policy. That is not political interference, but it is State control.” . NOTHING TO FEAR. There were only two central or reserve banks in the world not under State control—the Bank of England and the German Reichsbank,. continued Mr. Polson. With proper safeguards there was nothing to fear from State control in New Zealand. He suggested that the attitude of Mr. Stewart was one of extraordinary conservatism and that he was the champion of orthodoxy andjwas opposed to the change. Dealing with proposed national mortgage corporation Mr. Polson said that, sooner or later the mortgagors’ relieflegislation must come to an end. Provision must be made for a transition period. It must either be sheltered or unsheltered. If that period was unsheltered something would- have - to be done to rescue the primary .producers., Interest had to be brought down and the Government would have ; to do that. A rate of 3 per cent, on long-term mortgages would not be too much if the primary producer was going to face the difficult competition of the future. The new corporation was going to capitalise mortgages, pay out cash or bonds to the mortgagee, make bonds saleable securities and re-arrange the finance on a long-term basis, said Mr. Polson. There were certain dangers and one was that the best securities would not be left with the corporation. Further revaluation of securities would create anomalies between the first and subsequent mortgagees. MR. SAVAGES ARGUMENT.

Mr. Savage had taken from the brief outline in the Budget the argument that the setting up of this corporation meant the handing over of the whole of. the State lending institutions to a private concern, said Mr. Polson, who added that he did not think that that would take place more. Various State lending institutions had about £75,000,000 out on mortgages and he did not know what portion of these still held good. There would be at least 10 per cent, loss, or probably greater. It would be impossible to hand over that enormous body of money to any corporation dissociated with the Government. The State had borrowed money to finance these mortgages and the responsibility was on the 1 State to repay the money.

Mr. Stewart had suggested that the new corporation would re-arrange finance, but Mr. Polson asked how it could do that Would the State be prepared to wipe off £25,000,000 and hand over the securities then, or if it did not would any private corporation take over securities loaded with £25,000,000? Mr. Polson said he believed it would be possible to arrange a State aided co-operative organisation in which the interest of the State would gradually diminish and he believed that this would be an ideal combination. It would be necessary for the State to take steps to see that there was no gambling with securities. Bonds must be compelled to “stay put,” for the greatest weakness of past systems had been the facility for gambling with securities.