MORTGAGE CORPORATION BILL.

Taranaki Daily News, 7 March 1935, Page 16

MORTGAGE CORPORATION BILL.

(To the Editor.)

Sir,—There is considerable confusion of terms ,in the Mortgage Corporation Bill which provides, in paragraph 38, for transfer of “stock” to the Government in consideration of cession of about £50,000,000 in mortgages, interest on the “stock” to be similar to that on “stock or bonds” issued to the public. “Shares” of £500,000 value are to be issued to the public and the amount of capital may be increased by shareholders’ resolution. This capital is a species of debenture stock, carrying one-third more interest than the first issue of bonds, since it is to be at 4 per cent and intended to rate 1 per cent above bonds. Unless the Government “stock” issued against mortgages is not to count in the permissible “bonds” issues of fifteen times the capital and reserves, there will be practically nothing to be issued against private mortgages. Government “stock” will, presumably be saleable, and the rate of interest to ; be paid thereon will dictate mortgagors will have to pay. If the original share capital is ' considered as “stock,” the-State may'receive 4 per cent, over all its “stock,” and bare interest Charged to mortgagors by the Corporafion equid not be less than 5 per ?ceht., or with amortisation and rebate, 6i per cent. ■ State mortgagors will .nominally have freedom to remain under their old contracts; but removal' of legislation protecting those contracts and reducing interest thereon may be expected to compel them to execute fresh contracts, in which case they must add -2 per cent, to their mortgages for the benefit of the Corporation’s Reserve Fund, a total of £1,000,000. This will be .the real reserve, as the beneficiary ownership of the £2,500,000 securities of the Local Authorities: Branch practically remains, with the Government, the Corporation merely feting as collector of money for the State'and receiving as a collection fee the difference, if any, between the annual interest receivable on the securities from the Corporation securities. (It is conceivable that the Corporation may Jose and the average annual rate received if interest rates rise). _ Why then is the almost negligible amount of £500,000 private share capital being raised, with voting privileges, with one third more interest—endangering the bonds issues—-and with hosts of complications? The State appoints all the first directors, and much is left to be mutually arranged between those directors and the State. Even the transfer of Government mortgages may be back-dated. Limitation of bonds to fifteen times £3,500,000 precludes any immediate possibility of dealing extensively in private mortgages, so that the scheme resolves itself into an offer of preferential treatment to subscribers of half a million of private capital to enable the transfer of nominal control Ito the Corporation.—l am, etc., A. E. ROBINSON. Auckland, February 1.