FARM FINANCE

Wanganui Chronicle, Volume 79, Issue 59, 12 March 1935, Page 6

FARM FINANCE

GOVERNMENT’S TWO BILLS ADDRESS BY MR. H. G. DICKIE. MEETING AT WESTMERE. A well-attended meeting iu the Westmere Hall last night was addressed by Mr. H. G. Dickie, M.P. for Patea, who outlined the provisions of the Mortgage Corporation Bill, which, is now nearing the end of the committee stage in the House, and the Rural Mortgagors’ Final Adjustment Bill, which will be placed before the House in the near future. The speaker dealt briefly with each measure, pointing out several minor adjustments which he considered should be made, and, iu general, expressing approval of the Government’s attempt to deal with the important problem of farm finance. The speaker was introduced by Mr. J. J. Taylor, president of the Westmere branch of the New Zealand Farmers’ Union, under the auspices of which the meeting had been called. Mr. Dickie said that the two matters which gave rise to concern in the union seemed to be the rate of interest at which money would be lent and the introduction of shareholder capital to the proposed. Corporation. His personal opinion was that if the Government could obtain money at 3 per cent., the rate of interest charged to farmer mortgagors would not be more than 4 per cent., plus 4 per cent, sinking fund. He had felt that if the Corporation could be carried on without shareholder capital it would be best to do without it, but he was satisfied that Mr. Coates had Thoroughly investigated that aspect of it, and if it had been at all possible to dispense with that capital he would have done so. The £500,000 shareholder capital and the £500,000 State contribution would be the bulwark between the mortgagor and the bondholder. Continuing, he pointed out that the Bill gave power to the Government;, by Order-in-Council, to transfer the State lending departments to the Corporation. It was realised that in recent years the State Advances (Department had become a “political football,” and one election was fought on a promise to borrow seventy millions and pump it into that department to lend out to borrowers. In effect, the Corporation would free that department from political control. Another point which had been raised was that the bondholders should be afforded representation on the board of directors of the Corporation. He pointed out that that would be impossible because the Corporation would be dealing with “bearer” bonds. If it was inscribed stock, warn a complete register of that issued, it would have been possible to have the holders fully represented. The dividend on capital, the speaker had suggested, should be 1. per cent, above the bond issue rate, but not more than 4| per cent. Issue of Capital. The issue of fresh capital was another point which had been objected to, and the speaker was in accord with such objection, tie thought that oefo.re there was any increase such should be subject to ratification by Parliament. There was too much heard these days of watered stock. It had been stated in some quarters that the Bill did not permit payments off capital 'being made at any naixyearly period. That was not the case. It any person was tortunate enougin to have the cash it would be accepted at any half-yearly period to reduce lhe capital indebtedness. I’ayment couia be made in either cash or bonds, but there was a provision that the bonds used Had to be tnose issued at tne time the mortgage was negotiated. A borrower who was not able to find the £2 per cent, which was required to be set aside for the reserve fund of the Corporation, could borrow it and would be charged interest on it and sinking fund, which would wipe it out over the term of the loan. That had been done in connection with the Rural Intermediate Credits reserve. This amount was termed a “procurative fee.” Voices: That’s the word. Reverting to the probability of tb.e State Advances Department being taken over by the Corporation, the speaker said that it would not be possible to bring ail the State loans over. There was a great deal of “dead wood” in the department and as the Corporation was to oe run on strictly business lines it would not take over “dud” assets. Local Body R a tes. Dealing with the contentious clause 47 of the Mortgage Corporation. Bill, which provides that it shall enjoy the same immunity from rates which is at present enjoyed, by the Crown, Mr. Dickie said he had taken the matter up with Mr Coates, who had assured him that th© Government would assume some responsibility for unpaid rates. If the Budget position was satisfactory he would give relief to local bodies to tlhe fullest possible extent, and at the end of five years liabilities in this direction should be completely wiped out.

At this stage the speaker replied to numbers of questions relative to the Mortgage Corporation Bill. Mr Corliss wanted to know how it was that the London County Council was able to raise money at a little over two and a-half per cent., and Mr Dickie talked of the Corporation raising it at three. Mr Dickie replied that the loan referred to was a failure from a flotation point of view, in that roughly 50 per cent, was left with the underwriters. Mr Claud Smith: But they got the money? M. Dickie: Of course they got the money. The loan had the whole of London behind it, and London is not New Zealand. Mr J. J. O’Reilly: What is the title of the Bill you are discussing? Mr Dickie: The Mortgage Corpora-, tion of New Zealand Bill. Another questioner wanted to know whether bonds would be sold to the public. Mr Dickie replied in the affirmative. A Voice: And the big firms could “corner” them. Mr O’Reilly wanted to know where the expense of maintaining a big field staff was to come from. Mr Dickie replied that then the expense would not be great. Taking the State Advances Department as a guide, it should be remembered that the cost was down as low as 2s lid per cent. As there would be a greater degree of supervision required under the Corporation that figure would be higher, but whatever it was it would have to be found by the concern. Mr O’Reilly: I think it will be found by the mortgagor#.

There was further discussion between the speaker and Mr O’Reilly relative to the rate of interest. Mr O’Reilly could not see the farmers getting money at less than live per cent, from the Corporation. Mr Dickie: People who talk like that are talking through their hats. It we can raise capital at three per cent, we will be able to lend it at four, plus a-half per cent, for sinking fund. Mr Corliss: Will you, as a representative of the Government, say definitely that the rate of interest and sinking'fund will not exceed four and ahalf per cent-? Mr Dickie: 1 am expressing a personal opinion. How can 1 tell how many bonds you are going to take up? I cannot tell yet how it will appeal to the investing public. A Voice: The Bill might go through. Mr Dickie: It is through the Commitee Mages, except for one or two things’ There is nothing to stop it going through, unless we have a revolution. I am prepared to make a wager that 1 am nearer the rate of intetesr than those who talk of six and seven per cent. (Applause and cheers). Mr B. Dawes: How could the Corporation operate if the lending rate was seven per cent? Mr Dickie: It could not operate at all. , There were several questions regarding the probability of Discharged Soldier Settlement Mortgagors being absorbed by the Corporation, but Mr. Dickie said that that would not be done unless it could be shown that they would be better off than they were under their own Act. It was a matter for Parliament to f/o into carefully and decide upon. In answer to Mr R. Farley, the speaker said that the matter of second mortgages would have to be one for voluntary adjustment. He could not see anything else for it. That was a matter dealt with under the second Bill, which was to come before the House shortly. Mr Dickie was answering further questions regarding the borrowing of money to fund the Corporation, when a voice twitted him: “You paid off banks Treasury Bills and beat them for five per cent, of their interest. Why did you want to borrow money for this?’’ (Laughter). Mr Dickie explained that that was quite a simple form of banking practice, the issuing of credit against the sterling holdings in London. “If there is anybody here to-night who was opposed to the Central Reserve Bank he is on the wrong side of the fence tonight.” he added. A Voice: 1 was opposed to it, and still am. Mr A. G. Goldsbury: In my opinion it was the biggest dead-head bit of legislation you ever put on the Statute Book. If it was good enough for Good Old England to issue Bradburys in war time it was good enough for New Zealand to do the same jn this slump. (Cheers ). Mr Dickie: And are still paying for those Bradburys now. The speaker then outlined the provisions of the Rural Mortgagors’ Final Adjustment Bill, which is to be a subject discussed at a Government caucus this morning. Mr Dickie was accorded a vole of thanks on the motion of Mr R. Dawes and those present were entertained to supper by the ladies. MR. MELLSOP’S VIEWS ADDRESS AT WANGANUI Speaking along the same lines as I hose of his address at Hawera, and at Marton recently, Mr H. O. Mellsop (president of the Auckland Provincial Executive of the Farmers’ Union) was accorded an attentive hearing in Wanganui last night. Mr Mellsop dealt at length with, the Mortgage Corporation Bill. Mr W. Morrison occupied the chair and apologised for the absence of Mr T, Currie, who had been unable to attend. Mr Mellsop considered that it was a good summing up to say that the Corporation would make a safe investment for money. All money lent by the State had been made as definite State loans and all the State was doing was to hand over the mortgages to a semi-pri-vate concern. He considered that the Government was repudiating the bond of the farmer and the returned soldier. A deputation of farmers had been io Wellington for an interview with Mr Coates and Professor Belshaw, but were dissatisfied with the answers received. The farmers did not approve of certain provisions in the Bill. The Bill did not express the wishes of the fanner or meet the case. With sinking funds the interest would come to practically six per cent., which would bo of no benefit to the farmer. Farmers could see no help whatever from the Mortgage .Corporation Act. One effect of the Act would be that it would relieve the indebtedness of the country, which he considered a good thing. Another effect was that it would also provide a safe outlet for loan money. Mr Mellsop thought that this was the main object of the Bill, more so than the interests of the farmer. The interests of the. bondholders would be looked after by three directors. It was perfectly obvious that it would be to their benefit that the rate of interest should be kept as high as possible. The rate of interest on that class of security would determine the general rate, of interest on most investable capital. This, Mr Mellsop considered, was definitely wrong. He found that banks usually objected to co-operation in business, though they were really the strongest co-operative bodies in New Zealand. In fact, they were six separate trading companies working in perfect unison. Air Mellsop said that Auckland had not always agreed with Taranaki in its opposition to the Bill. It had been stated that the Rehabilitation Bill could not give immediate relief, but that would come later with the Mortgage Corporation. Now, however, that they had seen the provisions of the Mortgage Corporation Bill he asked what help they were going to get out. of it. He considered the Hon. S. G. Smith at New Plymouth had covered lhe whole position in his last paragraph, when he stated that the Bill was going to make a safe investment for money.

One important aspect had not been touched during the discussion. Returned soldiers’ monev had been lent bv the State under definite contract to the soldiers, and this legislation now proposed to hand over to a semi-pri-vately controlled concern all State mortgages. That was the whole basis of the proposal, rnd he held that it was repudiation by the Government of a contract. Many men were averse to any financial institutions getting anv sharp of the control, as they were well satisfied with their treatment, by the

State Advances Department. He would like to say something about the DairyCommission. He had no objection to the commission’s findings, but he, strongly opposed the commission being held in camera. He held that the farmers did need the Mortgage Corporation. The primary producers must leave aside the party question and vole solidly for the measure, and then any political party would listen to them. That was the only hope the primary producer had. He believed if the same measure of control as was now proposed had not been given to the Reserve Bank it would have been possible to get the farmer out of his difficulty without any repudiation of contrast. If the farmer got out of his difficulty the whole community also got out of its difficulty, and that was the reason whv the matter should be State controlled. Afr Alellsop objected to the phrase that the farmer was “the backbone of the country,” rather the produce of the farmer was the life-blood of the •country. He asserted emphatically that the farmers of the Auckland province would never agree to their mortgages being handed over to a semi-privately controlled corporation. Al r Alellsop said at the conclusion of his address that the views he had put forward were not the views of the New Zealand Farmers’ Union, but the views of the Auckland Provincial District. He hoped, however, that they would soon be the views of the Dominion Executive. This was in answer td a question put by the chairman.