CORRESPONDENCE.

Hokitika Guardian, 2 September 1922, Page 4

CORRESPONDENCE.

AGRICULTURAL BANKS. (To the Editor). Sir—Mr AY. J. Poison is not generous in implying, as he does in the letter he has addressed to the Press, that tho critics of his agricultural hanks scheme are impelled by some sinister motive. There are many , people, besides the Dominion Presi- | dent of the Farmers’ Union, who are ■ concerned for the welfare ol the men i on the land and anxious to see them j assisted in overcoming the 1 difficulties by which they at present arc beset. These people may not go to the length of subscribing to Mr Poison’s assertion that the “producing class,” using the term in its narrower sense, “has tho fortunes of the whole community in its keeping;” but they fully realise that the farmers, being engaged in the most essential of all the industries, are entitled to every possible assistance and encouragement towards increasing their output and so adding to the wealth of the country and promoting the welfare of the whole community. This, however, is not pertinent to the subject we are discussing, and out of consideration for your space, T will content myself by asking Mr Poison to believe that the critics of his scheme, as far ns 1 know them, are just as solicitous as he is for the well-being of the primary pro-

ducers. But we may differ as to the best means of reaching the end we all have in view without imputing improper motives to either side. Air Poison s arguments in favour of agricultural banks put briefly, are (1) that in 1914 the Government of the day went to the rescue of the Bank of Nov Zealand with two millions of money and saved it from collapse; (2) that Rider Haggard, in his investigatory book, has declared that in Denmark there have been practically no losses at all from the operations of agricultural banks; (3) that in Germany with close on 20,(XX) such institutions their losses have been only one fiftyfifth of those of the ordinary hanks through the insolvency or default of clients! (!) that the American GoVcirnmen if established agricultural banks because of tlTc greater safety to the farmer and the lower rate of interest the system secured, (5) that the Taxation Committee here has admitted hat owing to the. huge income tax of B.s 9 3-od in the pound, the existing companies cannot give the farmers the assistance they required, and (6) that Mr Taft, an ex-Prcsident of tho United States had warmly eulogised the safety and usefulness of the German “agricultural co-operative banks.” To make quite clear the value of Mr Poison’s contention that the farmers should bo treated at least as well as were the shareholders in the Bank of New Zealand, it is necessary to present it in hi s own words. “It is within my 'recollection.” he says, “that when the investing class, represented in the shareholders of the Bank of Now Zealand found their incomes jeopardised, they appealed to the community through the State tor support, and the Government, backed by the newspaper which now denies the rip lit of State assistance in this regard t > farmers—granted that support to the extent of two millions of money. If it is right to help the investing class who .without injustice may lie likened to the drones of the hive, surely it is nut unfair to appcnl for some modified form of State assistance to the producing class, a class which all sections admit has the fortunes of the whole community in its keeping.” Mr Poison’s recollection has served tile Dominion President of the Farmers’ Union very hadlv. As it happened I was acquainted with the main facts of this great crisis in tin financial affairs of the country some hours before they became public property and they were impressed upon me in a manner that insured their remaining there. But for convenience sake I may quote a. correction of Mr Poison’s mis-statements, which already has appeared in print, and which I can confirm from personal knowledge in every particular. “Tho Government,” it runs, “did not come to the rescue of the shareholders of the Hank of New Zealand. Quite the contrary. The unfortunate shareholder not only last every farthing of the capital represented by the shares he held, but was forced by legislation to find tho sum for which he was liable in the event of liquidation, namely. £lO per share. After part of this had been applied in writing off had debts he was allowed to retain a portion as new capital. That was the peculiar kind of support accorded to shareholders many of whom had paid as high as £25 or £2B for the,privilogo of becoming proprietors of the institution. A goodly number were ruined and forfeited their holdings.” Sb much for Mr Poison’s precedent. If iiiv friend will rend the speech in which Sir Joseph Ward moved the second reading of the Bank of New Zealand Share Guarantee Bill on June 29tli, 1804 (Hansard Yol. 83, pages 160-164) his memory will lie refreshened and he will recognise that the unhappy shareholders received very scant consideration in tho Government’s anxiety to save the country from an appalling catastrophe. M.r Rider Haggard’s statement, to proceed with Mr Poison’s other contentions, that the agricultural hanks in Denmark have made practically no losses, and Mr Poison’s own assertion that those in Germany have made much smaller ones than those suffered by the ordinary hanks, “through tho insolvency or default of clients,” is not very illuminative. To begin with the conditions existing in Denmark and Germany, even before the war, were very different from those existing in New Zealand at the present time. Then, a hank might he conducted on such conservative lines, taking no risks at all, that its losses would he reduced to a minimum. But a hank ol this description, even if it were prepared to lend money below the current rate, with a 50 par cent margin of security, would he of little assistance to more than a very small minority of the farmers of the Dominion. The Advances to Settlers Department, in uoilnal times, serves all tlm purposes of such nn institution .on a mile!: more generous scale than is known in either Dcnnrtirk or Germany. Mr Poison’s suggestions under this leading might very properly form a subject for inquiry, but they certainly should not. lie put into practice without a most careful investigation by competent authorities.

The American Agricultural Banks, as I understand them, partake very much of tlio character of our own Advances Department, providing money at something below current rales on ample security, and leaving the borrower to obtaip what more he requires on second mortgage or from the “ordinary” banks. Mr Taft’s eulogy of the German system was pronounced before the present worl 1-wide crisis and loses much of its point in view of recent developments . When normal times return the farmers here, in America, and, we may hope, in Germany, with a 50 per cent margin, will have no difficulty in obtaining such accommodation as they may require at reasonable rates,

Tlie Taxation Committee no doubt put the position created ' by the huge income tax upon the Companies in this country correctly, and there is no reason to suppose that the agricultural banks in this respect would find themselves in" anv better case than arc the other proprietary concerns. J hey would have to pay at least 5 or 6 per cent for their capital and probably 10s or 12s ill the pound in the way of income tax on their earnings and land tax on their properties. In these circumstances they could not afford to lend money at less than the 11 or 1per cent mentioned by the Taxation Committee and then only on the very best securitv, so that the .unhappy farmers would not he n penny better off than they are at the present time. Surely Mr Poison, with Ins knowledge of the financial difficulties already confronting the Government ■cannot iie wholly serious when he suggests that the State should give the mone-Ini-V assistance to enable the farmers to embark upon this hazardous undertaking He lias not explained, so far as I have noticed, how he would have his agricultural banks managed, hut presumnblv he would have them controlled largely by farmers in the interests of farmers, the business and financial expert supplanted by the man from nwav back with everything to lenrn, mid'the long-suffering public standing h v in patient submission to foot the bill ;is each financial year came round. It is not a pleasant prospect. If it is a possible outcome of Mr Poison s scheme it calls for the serious attention rif Parliament. T am etc., TIRED TAXPAYER.