THE Wairarapa Age SATURDAY, MAY 30, 1936. LENDING BY THE STATE.

Wairarapa Age, 30 May 1936, Page 4

THE Wairarapa Age SATURDAY, MAY 30, 1936. LENDING BY THE STATE.

As might have been expected, the State Advances Corporation Bill is being criticised only in moderate terms by the Opposition in the House of Representatives. The measure contains a great deal in which the Opposition is able lo concur heartily. While the Mortgage Corporation ostensibly is abolished, its organisation in great part is retained. The actual or possible weaknesses in the Bill are in the powers and methods of control it establishes. In particular, the managing directorate is brought directly under the control of the Minister of Finance and the latter is given very wide powers in determining the margins on which advances may be made. A great deal, of course, must depend on the manner in which, these powers are exercised in detail. The essential change that is being made is from one form of State control to another. The Mortgage Corporation now being abolished worked under principles and in conditions determined by Parliament, but was in a position to exercise, within • defined limits, a large measure of delegated authority. The adjustment of essential working details will now become the responsibility rather of the Minister of Finance than of the directorate of the corporation. The most valuable feature of the Mortgage Corporation established by the late Government was, of course, the organisation of mortgage finance on a new and greatly improved plan. The flotation of mortgage bonds gives the lender a security at once assured and for practical purposes liquid and abolishes the principal disabilities suffered by both borrowers and lenders 'under the flat mortgage system. Much was done by the late Government under this plan to ensure and justify a reduction in interest rates and to give better security and greater financial stability to both mortgagees and mortgagors. These valuable features of the organisation of the Mortgage Corporation are, as might be expected, retained in the Bill now before Parliament. The provision that mortgages may be part tablA and part flat may be a detail improvement in some cases-— the essential thing is to encourage the mortgagee to increase his equity as rapidly as is reasonably possible. The provision that the bonds issued by the corporation shall be iState-guaranteed is a step in policy on which two opinions are possible. Against this step it has been urged that the effect is unduly to add to the public debt and to mortgage the public credit. On the other hand it may be argued that the bonds issued by the Mortgage Corporation in the conditions established by the Coalition Goy eminent were State guaranteed in but name. Adding to wha’t has been said that the broad conditions of borrowing and lending laid doyrn are financially orthodox, it becomes clear that a great part of what is embodied in the State Advances Corporation Bill is perfectly acceptable. The weakness of the measure is in its far-reaching extension of direct political control and in the possibility tjius created that safe standards in the management of State lending may be upset by mass political pressure. With the Mortgage Corporation es it stood, ( the possibility appeared of establishing standardised and safeguarded conditions of borrowing; and lending by which the community as a whole undqubtedly would have benefited. Whether, the change-over to direct political control of a farreaching kind will work out to as good an end remains-to.be seen and on some obvious grounds, may be doubted.