AGRICULTURAL BANKS

Timaru Herald, Volume XCVIII, Issue 18084, 2 June 1923, Page 12

AGRICULTURAL BANKS

i At the provincial conference of the . Farmers’ Union in Tiraaru on Thursday the Dojninion President (Mr W. JT’olson) outlined the Farmers’ Union I programme, dealing specially with the . subject of agricultural banks. Mr J. Bitchener, M.P., introduced Mr Poison as a “really live wire,” and one who had done a very great deal of good for the farmers of New Zealand. (Hear, hear.) j Mr Poison said he wished to address liis remarks to those who were outside the ranks of the Union, rather than to the stalwarts of it. The membership of. the Union had materially increased during the past year, and funds were coming in more freely now than at any previous time in the history of the Union, indicating that farmers were realising the value of the Union to them. There were one or two questions which he desired to ask. Why was Ar- | gentine beating New Zealand both in regard to the quantity and the price | of its frozen beef, when New Zealand could grow beef which was in no wav inferior to Argentine beef? Why did • Banish butter fetch more than New Zealand butter, when the latter had the best dairying country and produced the best butter ? Why did Canadian i cheese sell at a higher figure than I New Zealand cheese, the former being ; no better than the latter. Why did , Scotch lamb bring higher prices than ! New Zealand lamb, notwithstanding j that New Zealand lamb was the better j of the two ? , The answer in each case ! was lack of organisation. And farmers j must remedy this state of affairs. They had only to think of what had been ' done by the Meat Control Board to : realise what organisation meant to the producers. The programme of the Farmers’ Union might be briefly summed up as follows: (1) cheaper money; (2) more economical methods of handling the produce of the land; (3) better! means of distribution. These, and I other matters were being dealt with by the Dominion Executive, and he wished South Canterbury would send a representative to the meetings of the executive.

Mr Poison then went on to deal with the question of agricultural banks, n , y . °Ur ,na! suggestion for a Land I ank in New Zealand was based on a cursory study of Danisli condititns. I discovered that these banks were very largely used, that their interest charges were low and tlmt they presented a ™ e ® n ® of + , raisn, g a long-dated mortgage on. the amortisation plan. Investigation showed that in spite of the a d hfen? P I ° f i arCt!C . climatic conditions, f h,eak landscape, inferior soil, and a tbe g s 7o n i r ’ Tl IIC, r necessitated housing the stock eight of nine months in the year, th 6j Danes had become in half a centurv s extraordinary progress one woiid 6 r ihlt st ih eople - ? pe V apita in the , oi' rJ , that the price of agricultural than land k ' giiei 'D n Denmark than land of similar Quality in Great Biitam or even New Zealand, and that rtS ’ a tea is not -mb laiger than the province of Welof S’iELSir ter than the « SYSTEM OF FINANCE.

I found that lier system of finance vus tue inundation of lier success, and lurt-nor examination revealed tiiat it was based on tne great Lauasebaften system or liermany. “Tne question i wished to consider was wne mer ■ these remarkable banks giving landowners tiie benent of amortisable loans at 2 per cent, to 3 per cent. Jess interest man we were paving m New Zealand could be of use to this.country. I found that more or less oruae mutations or them existed in Canada and South Africa, and that tne umtea States of America had adopted a system of Agricultural Banking baseu on similar ideas, and that more latterly- New South .Wales had aaoptoa a system under the control of a Suite Board. I examined the New South Y\ ales system because the conditions ap p e ,ared to me to be more like the New' Zealand conditions than any otbers; but tne entire control which the State exercised seemed to me a grave objection. Evidently the- Government or New South Wales have come to that conclusion also, because tney have now brought down a Bill to establish a rural credit system not under Government control. “rtaviug satisfied myself that the scheme would work as well in New Zealand as anywhere else, I set out to prepare a rough outline of a Bill, the mam principles or which are as follows:

(I) That the farmer requires his money cheaper, that he must have long-dated loans, and that fie must have tne opportunity to pay them off ' vi '**n ue has funds available. ‘(2) Tnat no one understands the producers' requirements as well as the producer himself, and that he is consequently jus tinea in establishing ins own bank.

I*o -that as New Zealand’s wealth is created wnoiiy by the producer from rije soil (as witness our exports) there are soima grounds ior asking ior the , U'ovei ninent s assistance which is granted to Cue producers 01 other countries by tiie. state wr.en founding these banks. CHEAPER MONEY. “Do we. require money cheaper? We have to compete m the world’s markets, and we have the handicap of liipjou miles of sea. The land bonds of Germany m 1919-20 stood at £lOl to ±.ibd, while State securities were at £O4- to £66. In no case has the interest on German land bonds exceoded 4 per What were larmers paying in iu.ill-20 lor money m i\ew Zealand? 'But,’ says our hanking critics, ‘cheap money would mean another boom,’ or •cheap mone, wont! mean inflated land values,’ or some otner disaster would happen.. I ■■.-tie long-dated loans better than ! short-dateu mans ? Certainly they are. xou cannot oorruw money lor longer than turee years nowadays. An Agricultural Banks bonds ior £l6uo would cost less than .tie. even it me present olnciai chaises are adhered to. Put a mortgage oi £Louu to-day for three years with tire usual procuration fee would cost over £4O, a difference of practically f per cent, per annum in ! tne cost oi tile loan saved by the bank ! in charges alone. And when in addition ■' ne can pay oil his loan piecemeal as his iunus become available, surely the far- i mer is better off. .ms land becomes iiis I bank, tie can borrow lreely ior improvements, jiis improvements enable him to pay oil' his loans, and so he goes on, until we see in Denmark torn.., the extraordinary result. THE PRESENT SYSTEM. “"What happens under the present system The farmer lias funds available. His mortgage is not due for a year or two. He purchases shares in a quasi-eo-oporative society, or a motor car, or some more land, and thus adds to his indebtedness, instead of reducing j it. “The second question is: Can the producer manage his own bank? Of course the bank will be managed by experts just as any other bank is managed, with the additional security that ihe law definies the road the bank must travel, and that Government nominees are on the Board to watch that all is j well. “Xn any case., I decline to believe j

FARMERS' UNION PROGRAMME.

OUTLINED BY MR W. J. POLSON.

that the New Zealand farmer is less able than the Danish or the German or the American or Canadian or *' ustralian farmer, or that he is less enlightened. The German banks* looses up to 1911 were only l-55tk of the losses of joint stock banks doing a similar class of business, and the Danish banks, which are equally successful, allow interest on current account at only i per cent, less than on fixed deposits. Nor have there been any failures. The only failure was a joint stock bank, whose name mu.ed the Prime Minister into the belief that there was one land bank which had failed.

JOINT STOCK PATRIOTISM. “Tho success of these banks in America was at once apparent, and the discovery so alarmed the joint stock banks that they utilised every device of tho American law to defeat them, on tho ground that they were unconstitutional. This action of the joint stock banks paralysed the American land banks for two years out of the five they have been in existence, but ni spite of that handicap their success lias been enormous, and the Amencan Government lias recently been ®°“‘ pel led to raise another billion and a quarter dollars to keep its part of the bargain with the American faimei. Dut° Denmark is still the most remai liable illustration of the °P era “ ° f these banks. No 'country half acentmy ago was more poverty-stiicken. dav her agricultural land is voivn irom £IOO to £l5O an ■f?,’ Savings deposits of her people in the departments of the banks aie hi|| - than any other country in the vox Let. • SHOULD THE STATE ASSIST. “Is it advisable for tlie Statc to a - sist in the launching of these banks . It is of course, no argument to that because other Govenimente support these banks m a variety °f > New Zealand should do so also. Noi.is ft of much weight to declare Government which guaranteed a banknipt joint stock bank, whose shaielioklers were largely the investing class and not the wealth-producing class at all ought certainly to have no qualms about guaranteeing some form of support to a' producers’ Land Lank. But we are on safe ground when we point out that 95 per cent, of the exports of New Zealand come from the land, and if we can devise a system which will increase the wealth of New Zealand as Denmark’s has been increased, the community at large must benefit. Surely anything that will increase the walth of th community without loss to th State is desirable. Now, where is tlie risk? Behind the Bank are (1) the uncalled share capital; (2) the several guarantee of the bondholders to the extent of 5 per cent, of their bond issue; (3) the assets of the bank; (4) the lands of the borrowers. It would be only in the extraordinary and almost impossible event of all these being swept away that the Government would have to find any money at all. THE CRITICS. “The critics chiefly confine themselves, .however, to the assertion that the Bank will create a boom in land, and assist the speculator, it will do neither the one .nor tlie other. The only object of the several guarantee is to prevent this occurring. The units of the bank are the district groups, whose committees value the land in their own districts upon which values the loans are based. If - those committees are liable to the extent already referred to for any loss made by their group, in common with the other members of the group, they will see that the values are stable, and that the borrower is a reliable farmer. Values are stabilised and tlie bank’s value becomes the actual value of the land, because these bank values become the basis upon which finance can be obtained. Thus the land speculator entirely disappears where these banks operate, and prosperity - grows, because the resources of the producer are mobilised and directed to increased production. ADVANCES TO SETTLERS.

“It lias been stated that the Advances to Settlers’ Department is doing ail that these banks can do. No student or tne question could make such a claim, because no State Department can be run so economically or so keenly as landsmen’s banks. Government advances are always based on values ridiculously below actual productive values the system is cumbersome aud does not appeal to the producer, and, as they have discovered in New South Wales, apparently is not more satisfactory tnun many other forms of State enterprise have proved themselves to be. Hi any case, tne Advances to Settlers’ Department is nothing more than a very primitive form ot State Agricultural Lank, and, while it has undoubtedly been of very great assistance to many producers m New Zealand, it cannot he as satisfactory as a Bank run on sound business lines by the producers themselves, in tins connection it is interesting to note that the State is advancing on cnatteis security —a, risk not contemplated by Agricultural Banks.

THE RURAL CREDIT ASSOCIA- , TIONS ACT. “The State has already recognised the principle ot an Agricultural Lank in iYew Zealand by passing the illstarreu itural (Jreuit Associations Act ol last session, j.t is not in line with our requirements, and m some respects worse than no Act at all. “xnit tue producers are waking up to tne importance or Agricultural .banking, auu ocgiiiuiug to take, a ueeper interest m it tnrougiiouL New Zealand. In fact, to study it is to become a convert to it. i. ueiy any disinterested student lo oppose tins reform. More pupumuon auu closer settlement are wanted in nils country, ana agricultural Hanking wnl assist ui tins, and m making r>ew Zealand ‘God’s Own Country.' ” (.Applause.) in repiy to a question iur i'oison said it was proposed to ask the Government to advance £iUU,uuO to .start the Bank. Mr Bitchencr said that in view ot all the evidence lie considered that the Government would bo quite justihed in advancing this money. (Hear, hear.) MOTION OF APPROVAL. On the motion of Mr J. Trotter, seconded by Mr Sinclair, a resolution was unanimously passed all inning the desirableness ol establishing agiicultural banks for the producers of New' Zealand, and Mr Poison was accorded a hearty vote of thanks for his able address. A SECOND ADD BESS. Mr Poison addressed a second meeting in Timaru yesterday, when he spoke to”a gathering of farmers in the Board Boonfof Lite C.F.C.A. Mr J. Bitclicner, M.P., presided, and in introducing Mr Poison’spoke in complimentary terms ot the work which he was doing on be-

half of the farmers of New Zealand, i f Applause.) I Air i'oison, who was closely listened to, spoke on similar lines to his address of tne clay belore, wlien he spoke to members of the Farmers’- Union m Tiraaru. ~ In reply to questions Mr Poison said it was hoped that the Agricultural Bank would be able to lend money at what it cost the bank. Socrates himself could not say what the money would cost tne bank, but a year ago tho annuls Union had received an oner oi £S,UUU,CKJU at 5 per cent, from London. This showed how the English investor regarded Agricultural Lank bond'h winch were regarded as gilt-edged ‘ - rity. They proposed to ask that the bank’s bonds in New Zefand should be exempt from tax, as they other countries, it was pi°P ‘’N ask the Government for a stiaight-ouc guarantee of £IOU,OOO foi tie an and to raise the money in the same way as it was raised an othei • if a farmer wished .to bo• iov,,,s«*, £IOOO, he would given bo ds to the value of that amount to se 11 ° u ““ °!ft market; if lie could not sell them Hie bank would undeitake Britain either in America or Gieat. Bntai where the bonds were ie 6 ald ®J db w first class form ol mvestnieub. it. vouUl be a good thing for the county RUie 'suggested Agncultuial pio-lrtecn “li s mauMilw b, iH-ody wb. ' m mAnZy 'pIo!“K “« v»t; ttate tc.Hr rotate W.mtwSr#»is‘“‘“S eSi to gjagaj* the community foi e f tbo making to ccnre *“r»at,” J oT vital producers. Ibis was ence. Under xi 1 imarY producers of the Dominion the Pinn<. fSrfoTeYutlrtcd by producers in general. seconded the JSm which was carried unanimously, and with applause. __