MORTGAGE BONDS.

Star (Christchurch), Volume LXVI, Issue 20540, 15 February 1935, Page 9

MORTGAGE BONDS.

Minister Defends Capital Scheme. “ A SENSE OF CONFIDENCE.” “ Star ” Parliamentary Reporter. WELLINGTON, February 14. Stoutly defending the introduction of private shareholder capital in the Mortgage Corporation, Mr Coates, in the House to-night, declared that the main essential was to give a sense of confidence to the investor, as that feeling would be the ke3'stone of success of the new organisation. Mr Armstrong (Christchurch East) : Call them both “B” Bills. Dealing with criticisms of the private shareholding provision the Minis ter said, “The idea in having private shareholder capital is to give a sense of confidence to the lender. Some say there is no nesd for that, but I am bound to say that to give that feeling of confidence to the investor is the keystone of success of this organisation.” Replying to interjections, Mr Coates said the maximum dividend would be 1 per cent over the bond rate. Mr Samuel (Thames); Will not investors be “bulling” bonds to keep up the rate of interest? -The Minister said it was essentia 1 that there should be created an organisation that would get as near as possible to gilt-edged rates. If monev could be obtained at 3 per cent of 3i per cent it should be possible to lend that money to the farmer at £J 15s. after allowing for management and repayment of principal over a long period. Better Than State Advances. That, of course, would be the lowest rate, and it was better than the States Advances Department was lending at to-day or had ever lent at. The rate, of course, might run up to 5 per cent. He felt certain it would be possible to get administrative costs below 1 per cent. Mr Armstrong: Can’t you get money without borrowing it? - Mr Coates: Would you call that borrowing money, Mr Armstrong: I would use the State’s credit and create it. “ I believe that the proposals I am submitting to Parliament, which are breaking fresh financial ground, have all the best elements of private enterprise and the best elements of State enterprise,” declared the Minister. He expressed the belief that it would create a firm structure which would have the effect of creating confidence in the investor. who would purchase bonds, and at the same time give the benefit of the lowest market rate of interest and the cheapest possible management costs, which would be passed on. Would Apply to Any Industry! “Is it only for the farmer?” was one query he immediately answered, declaring tha* it would apply to any industry, not farming alone, so long as it had the necessary security. He declared that, whether members became tired of it or not, he would continue to assert that the Dominion could not afford otherwise than help in every legitimate way the basic industry of New Zealand, primary production. Mr Langstone (Waimarino): Do we live on our exports? The Minister: Yes, to a great extent. If he says otherwise, he must show clearly how it would be better to foster internal manufactures to the exclusion of exports. Mr Howard (Christchurch South) : Not necessarily. Mr Coates: For many years to come, this country will depend for its standard of living upon the prices it gets for its exports. Eliminate that, and it will lower the standard to a point detrimental to every citizen of this country. Mr Coates .said that he and his colleagues agreed that the proper course was to arrange a system of finance which suited the industry of farming, and that was the long-term mortgage. They proposed fifty years. In other countries, such as Britain, the term for land was sixty years, and for permanent improvements forty years. He believed the Mortgage Corporation would achieve the objective of reducing interest rates to the lowest possible level. Mr Parry (Auckland Central): And put all other lending institutions out of business? The Minister: They will be in competition. of course. First Consideration. What ought to be considered first of all? asked Mr Coates. Was it not the interest of those on whom the country depended to a tremendous extent? Business people and others in the cities would also benefit by all the advantages offered the farmer if the system suited them. It was not the intention to set up a monopoly, but to establish an institution big enough to ensure, cheap, efficient administration.