RAISING OF LOANS.

Pukekohe & Waiuku Times, Volume 3, Issue 166, 30 January 1914, Page 3

RAISING OF LOANS.

Short or Long Dated ?

Difference of Opinion.

DUN&DIN, Monday.

Replying to recent criticism by | Sir Joseph Ward on the GoveruI ment's loan policy, the Minister for Finance (Hon. James Allen), in an I interview to-day, Haid:"It is psrfectly true there is a I very considerable improvement in I the London money market, but nothing like to the extent that some people think. It muat be recollected that the latest Victorian 4 per cent loan, thouzh it was soon subscribed by tha public, was floated at a very low price indeed, £97, and it was quite sufficiently tempting to the public to make them subscrib° heavily for it, with the certainty that they would make a profit out cf it. However, I am pleased to see that there is an improvement in the money market. I sincerely trust it will continue, but I sea no prospect, for eome time to come at any rate, of being able to float a loan in London at a lowe? rate of interest than 4 per cent, and I believe there are very large d mands yet to come on tne London market.

"it is not much use, however, to speculate en the London prices. The market varies from time to time, and we must do our best as we find it. Sir Joseph War J hadealt with the principal dated loans as opposed to long-dated loans. Of course, there a r e degrees of short dated loans, and it may be expedient soma time to take a comparatively short-dated Joan, though 1 doubt very mucli indeed whether it will ever pav us. But there can be no two opinions as to the folly of our entering into short-dated loans, which run for two or lour or five years. Indeed, with a ten-yesr loan one will have to calculate the whole cost of renewal every ten years, including the underwriter/ fees, brokerage, bank charges, and various other charges, before one can make any comparison between it and the longer dated loai, which has only to meet thesa charges once in 30 or 40 years. "With the short-dated loans, however, euch as the late Governments committed us to for four and two years, the absolute folly of them must be apparent to anybody. Such loans d) not get into the hands ot the legitimate investor. Tbey go into the hands of the speculator, who is looking for what he can make out of the underwriting fees as often as he can get them. These people are not prepared to renew loans; they insist on New Zealand going through all the cost of refloating. That is what is happening with" respect to the last two loans. Two years ago the Government paid underwriting fees, brokers' fees, bank fees, stamp duty, and other bank charge*, and those same charges have all to be paid over again now, and it is the same story with regard tu the fouryear loan. Add to this the difficult position in which it places the Government, which has to borrow to npay these loans in one year, and in the same year borrow for its uiual annual requirements. The cost of the two years' and four years' loans, including sufficient to redeem the discounts, is very much heavier than in the case of the loan floated last February."

V SIR JOSEPH WARD'S REJOINDER. In the course of conversation with Sir Joseph Ward in Auckland on Tuesday morning a pressman drew the attention of the Leader of the Opposition to the comments of the Hon. James Allen on the loans raised in London by his predecessors, with especial reference to the fouryear loan raised hy Sir Joseph himself, and the two-year loan raised by Mr Myers as Finance Minister of the Mackenzie Government. "Yes, I read the statement made by the Minister of Finance," said Sir Joseph Ward. "He recapitulated the old story of the intrigues of party politics in connection with the financial operations of the country. Ido not propose at the present time to discuss the matter," he added, "other than to say that to one knows better than the Minister of Finance that he was not acting fairly or justly by confusing two loans raised by two different Governments. The last loan for which I was responsible was for four years at 3J per cent, with the right of conversion into, I think from memory, a 32J years' loan. And as a matter of fact a considerable amount of that loan had been converted into that period. In contradistinction to the affirmation of the Minister of Finance in condemnation of short-dated loans, there is scarcely a country of any consequence for years past that has not followed the course of short-dated loans, with the ultimate object of putting them upon the market for longer periods when the conditions suited. The need of paying double brokerage and double charges as is now suggested, is to a very large extent a new one, as a very large portion of all the loans renewed during my time as Minister of Fioanco were done at a comparatively small cost as compared to what is paid for the brokerage and charges of raising new loans. The fact therefore remains that the least costly way for a period of years to the Duminiun was undeniably the best in the general interests of the country."