The Guardian And Evening Star, with which is in corporated the West Coast Times. SATURDAY, NOVEMBER Ist, 1921.

Hokitika Guardian, 1 November 1924, Page 2

The Guardian And Evening Star, with which is in corporated the West Coast Times. SATURDAY, NOVEMBER Ist, 1921.

THE AGRICULTURAL BANK. Tin: Lind Mortgage Associations Bill, which was introduced in the Bouse ol Representatives this week, makes provision for the formation of associations of farmers to raise money by bonds and deposits to enable loans to be made on iirst mortgage of freehold farming land up to 70 per cent, of the capital value. Advantage is taken of the existing Companies Act as Jar as possible to provide for the incorporation and management. Practically the whole management is lelt to directoos to Is: elected by the association, but a Government ollicer, called the oflicia! auditor, is appointed for each assn, iation, Ids principal function being to prevent the issue of bonds or the acceptance ol deposits beyond the Jimit of security rci|iiired by tile Act. and to ace that a due register of sbaroboldcis is kept. With the exception of the signatories to the memorandum of association, who cannot originally be mortgagors, though they may intend to become such, no person may be a shareholder who is not both a farmer and a mortgagor to the association. Every mortgagor takes one share for every £IOO lent to him. The shares are £3 each. No money is payable on the shares unless and until the association is wound tip, no calls can be made, and no dividends are payable. When a mortgage is paid oil the mottgagor’s name is removed from the list of shareholders. '1 he liability on the shares is to provide a further security to the bond-holders and depositors in the event of winding up. The provision for linauce is a.s follows:

—The Government may advance to an association for its first veai’i; expenses a sum not exceeding £2OOO, \vitlion t interest, and lor a term not exceeding 10 years. The Government may also advance and lend to an association sums not exceedin'' CAO.OOO without • interest. for a term not less than ten or more than twenty years. The Act contemplates several such associations, and it is provided that the total of the Joans to all associations under this headin'' shall not exceed £1.10,000. An association is required to keep one half of tho Government loan in liquid securities to provide for the redemption of bonds and deposits. The further finance to enable the association to extend its lending operations is provided hy the power given to the association to issue hoods, of not le.s. than live years’ currency, at a rate o! interest not exceeding per cent

and to accept deposits for periods of not less than five years at a rate of interest not exceeding .1 per cent. The limitation of the issue of hoods and the acceptance of deposits as provided hy the conditions that the aggregate of such liabilities shall never at any time exceed the amounts loaned and secured on mortgage, together with the the amount of the Government loans, and restraint within this limit is provided by the powers of the official conditions. fly this means the extension of the funds available for loans on mortgage is limited only hy the possibilities of procuring purchasers of bonds and depositors, and tho loans may therefore he increased continuously. The bondholders and depositors have always as security, not only the mortgages to the association, hut also the full amount of the Government loan. As further security to bondholders and depositors it is provided that out of all repayments of principal the association must invest 5 pc cent, upon liquid securities in a special

reserve, and tho interest on that reserve is added to its capital. The redemption of bonds and deposits at maturity is secured by (1) one-half of the Government loan; (2) the second special reserve fund gradually augmented hy the 3 per cent, repayment of principal, and (3) by a special power to tho association to raise money upon its securities for the sole purpose of meeting bonds and deposits at maturity. 'When the latter power is exercised the consent of the official auditor is necessary to its exercise. It is provided that an association must, out of the first principal moneys coming to its hands, or hy the issue of further bonds, and tho acceptance of further deposits, redeem the charge created for tho emergency. It is probable that this power will seldom, if ever, ho exercised. because in the ordinary course the liquid securities and the issue of further bonds should enable every deposit and bond to he met at maturity. For its current expenses each association will have, in addition to the Govemmpnt advance for tlic first year,

the whole income of the Government loan, and, in addition, the difference between the interest paid on its bonds and deposits, and the interest charged to its mortgagors.