CLAUSE OPPOSED

Press, Volume LXXI, Issue 21416, 7 March 1935, Page 14

CLAUSE OPPOSED

INCREASE IN CAPITAL

MINISTER'S UNDERTAKING [From Our Parliamentary Reporter.] WELLINGTON, March 6. A provision that any increase in the capital of the Mortgage Corporation will be equally distributed between the State and private shareholders will be added to the Mortgage Corporation Bill, now before the House of Representatives. The Minister for Finance, the Rt. Hon. J. G. Coates, gave that undertaking in the House to-night, after objections had been raised to a clause in the bill enabling a general meeting of shareholders to increase the capital of the corporation, subject to the approval of the Minister. This clause was subsequently withdrawn, in view of the Minister's promise. The leader of the Opposition, Mr M. J. Savage, said that anyone who had studied the history of banking in New Zealand would see that when the corporation increased its capital it would bo used merely to mop up extra profits. All benefits would go to the shareholders, and not to the borrowers. "I can sec no reason for increasing the capital at all, if it is only for the purpose of dividing the profits, said the Prime Minister, the Rt. Hon. G. W. Forbes. "The leader of the Opposition seems to forget that any increase in capital must be subj'ect to the approval of the Minister for Finance." Mr Savage: "Which makes it worse. The Minister for Finance was not going to do anything that would benefit shareholders to the detriment of borrowers, Mr Forbes continued. Mr P. Fraser (Lab., Wellington Central) contended that the position was really worse than it had been described by the leader of the Opposition. When the Bank of New Zealand, for instance, wished to increase ils capital, a bill had to be brought down in the House to enable it to do so, and the limit of the amount of increase had to be specified. In the case of the Mortgage Corporation, however. there was no limit. The clause removed the corporation from the control of Parliament altogether and the only safeguard would be the opinion of the Minister for Finance. Clause Withdrawn Mr Coates said that if the committee would agree to the clause tentatively, he would have an amendment made after the bill came back from the Legislative Council. Mr Walter Nash (Lab., Hutt): There was the Reserve Bank Bill. Mr Coates said he had asked the law draftsman to draft another clause, which would provide for any increase in capital being on a "fifty-fifty basis."

Mr Savage: If you give us a guarantee that will bo all right, but we will still have a right to fire out the new clause if it does not suit. Mr R. A. Wright (Ind., Wellington Suburbs) expressed the hope that the proposed new clause would safeguard against increase in capital for watering shares. An increase of capital for legitimate business expansion was all right. The clause was later withdrawn by consent of the House. A GOVERNMENT AMENDMENT ASSOCIATE DIRECTORS OK CORPORATION MINISTER EXPLAINS PLAN [From Our Parliamentary Reporter.] WELLINGTON, March 6. The Government's amendment to the Mortgage Corporation Bill, providing for the appointment of associate directors, was explained to the House of Representatives to-night by the Minister for Finance (the Rt. Hon. J. G. Coates.i. He said that the additional clause would enable the board of management of the corporation to keep in touch with the provinces, and to expedite its work from the very beginning. The leader of the Opposition (Mr Ivl. J, Savage) remarked that he supposed these directors would also be drawing fees from the corporation. It seemed that the whole business was going to be a gold mine for everyone but the fellow it was intended to assist. Mr Savage thought that some form of decentralisation was advisable, but he believed that the board itself should not be given full power to appoint associate directors. The point that Parliament was delegating its authority to others was being lost sight of all along. Mr H. M. Rushworth (Ind., Bay of Islands) asked the Minister if local organisations for dealing with intermediate credit were to be abandoned, and when he received the Minister's assurance that this would not be the case, he expressed a fear that the board would use its directors as local agents, to ensure that pressure was brought to bear in the right place. Mr Coates denied that anything like that would be done, and explained that the idea of decentralisation had been taken from a number of big companies which had found it successful. The associate directors were intended to act as advisers to the board, and to keep the corporation in touch with its business throughout the country. They would not be merely officials. All matters on which there was a difference of opinion would be referred to and settled at headquarters, but Mr Coates was sure that the corporation's ordinary business would be greatly assisted by local agents. He could not say yet how many associate directors would be required.

MINISTER'S LETTER REPLY TO THE MUNICIPAL ASSOCIATION (PRESS ASSOCIATION TELEGRAM.) WELLINGTON. March 6. Replying to representations made recently by the Municipal Association as to the effect on local bodies of the Mortgage Corporation Bill, the Minister for Finance, the Rt. Hon. J. G. Coates, in a letter to the president (Mr D. G. Sullivan, M.P.), says:— "It would appear that your association is under some misapprehension as to this matter. The effect of the clause is that the existing protection of the Crown from liability for rates is maintained for mortgages handed over, the reason being that the State will still be financially responsible for these mortgages, as, in effect, they are to be guaranteed 100 per cent. This position, however, continues only so long as the existing securities remain, and in respect of any new securities taken by the corporation, either for cash advances or in the course of adjustment or refinancing operations, the corporation will be in the same position as a private mortgagee. Repayment ' of mortgages will also decrease the volume of securities-in respect of which the corporation, virtually as agent for the Crown, will be protected from liability for rates. It will thus be clear that, far from becoming worse, the position of local bodies will be progressively improved."