The Daily News. THURSDAY, MAY 26, 1921. LAND BANKS.

Taranaki Daily News, 26 May 1921, Page 4

The Daily News. THURSDAY, MAY 26, 1921. LAND BANKS.

In submitting to the delegates present at the Wellington-Wairarapa Provincial Conference of the Farmers’ Union an outline of the operations of the Danish land bank system, the president (Mr. W. J. Polson) may be credited with a worthy desire to be of service to those engaged in the farming industry. That he has faith in these land bank system to New Zealand sertion that he believes “the application of the credit union and land bank system to New Zealand is not only possible, but would add enormously to our prosperity and to the stabilisation of our finance under such conditions as oppress us at present.” It is quite conceivable that farmers—and every other section of the community—would eagerly welcome any practical scheme whereby money could be obtained without difficulty and at a reasonable rate of interest. It is in times of financial stringency, unfavorable markets for selling produce, as well as for buying necessaries, that the need for monetary assistance in the shape of advances on security of the land becomes pressing, particularly to the small struggling farmers. At the same time it is as well to keep in view the fact that it by no means follows that a system which works well in Denmark will be equally efficacious in New Zealand, and that land prices, assessments, and many other factors must be taken into consideration when estimating the chances of success of land banks in the Dominion. This much can be conceded for the Danish land banks, namely, the system is a model of simplicity, but it stands of falls according to the value of its bonds on the money market. The notion of a lending bank or credit union doing business without capital is one that is difficult to take seriously, yet such is the principle on which these Danish land banks are operated. As a matter of fact they do not advance actual cash, but bonds are issued to the extent of half the assessed value of the borrower’s land, and these bonds have to be sold on the money market by the borrower, who takes all the risk as to how much they will realise, pays interest and sinking fund on the bonds, also a certain amount towards the reserve fund of the credit union and its management expenses, with a joint liability to make up any losses which the reserve fund cannot meet, though only so far as his real property is concerned. Practically these credit unions are made possible by the faith reposed in them by the people, though it seems marvellous that the bonds should be considered as affording a security of the highest class. The weak point in the system is obviously that when, at a time of financial stress, money is generally more needed, it would not be easy, if at all possible, to realise on the bonds, even when, in the ease of very small holders, a Government guarantee is given. In normally prosperous times it is quite conceivable these land banks meet the requirements of the farmers who are in need of floating capital, but there appears to be a real element of danger in the event of bad times arising, for the joint liability of the members of the credit Unions may, as the result of a panic, create widespread disaster. If the farmers of New Zealand desire to solve this financial problem on safe lines, they should direct their efforts to the establishment of a State commercial and development bank with an adequate capital which the farmers and the community generally eouid assist in providing. Such an institution, free from political control and un- ’

der expert management, would soon become a splendid asset, not only as a lending institution, but as a means for developing the Dominion’s resources. It is claimed that the Bank of New Zealand approaches closely to the status of a State bank. It is nothing of the kind. It was saved by the State and fostered by the State, but it is primarily a dividend earning machine in which the deposits of 1920 amounted to over thirtyseven and a half millions. This indicates what a State development bank could accomplish. Moreover, it is the only practical means whereby the financial problem can be satisfactorily solved. Bonds may satisfy the people of Denmark, but not the people of New Zealand.