J. J. ESSON ; W. J. POLSON.]

L—l 6.

Mr. A. Hamilton: There would be a demand for it. Mr. 11. E. Holland: There would be a demand, all right. Is there any idea of the amount of money that is likely to be applied for in a given year ? Mr. Poison : I think that is hard to say. At first it will not be a great deal. The first twelve months will be taken up in getting it on its feet. Mr. H. E. Holland: Here is a matter that is puzzling me : This is supposed to be a co-operative effort with combined security for the lender. I cannot quite understand where the additional strength from the combined security comes in. For instance, the borrower is to have the right to borrow up to £1,000. He has to give his individual security for that. That is already in existence. Added to that security is the security of the share capital in the group. The share capital in the group, if you assume there are twenty members in the group and each of these members will be a borrower, is £2,000, and the share liability is up to 10 per cent, of the amount to be borrowed. That >s the limit of the liability ? Colonel Esson : Twenty per cent, of the share capital is called up. Mr. H. E. Holland: Is that the liability for the whole amount for the purpose of security ? Colonel Esson: The whole share capital is the liability. Mr. H. E. Holland. —That means that the whole of the share capital is the security, and that follows that the £2,000 is the security provided by the group of twenty, and this twenty between them have the right to make application for £20,000. There is no collective security beyond that ? Colonel Esson : No ; each borrower's liability is limited to the amount of his own loan, plus the 10 per cent, share subscription. Mr. 11. E. Holland : What I want to get at is the amount of collective security that strengthens the position for the farmers. In the case of twenty men they may borrow £20,000 and there is an additional security of £2,000 over the security which each individual can offer. Mr. Poison : You are thinking of the Continental system where farmers guarantee everybody else. Mr. 11. E. Holland : That is absent here, I know. Mr. Poison : The reason that it is absent is that we carefully investigated the matter and concluded that something on the lines of the report on the subject was sufficient. America has nothad many years' experience of it, but they have had three reasonably hard years and their experience was that that was ample. That was their advice to us. When we went to Denmark I discussed the matter with the head of one of the biggest co-operative institutions there, and he admitted to me frankly that the joint-and-several was unnecessary, and that such security as was suggested here would bo sufficient. Mr. H. E. Holland : I was not suggesting joint-and-several. What I want to ascertain is where the additional security comes in. Mr. Poison : The natural effect of this scheme is to make the farmer careful in lending to his neighbour, because some of his own money is at stake. Mr. 11. E. Holland : I know that; but, you see, you are going to market these debentures based on an alleged collective security. What I want to get at is whether there is any joint security, other than the £2,000. There is a possibility of a liability of £20,000, with the backing of a portion of the £250,000 from the Government. Of course, that £250,000 may be backing a liability running into millions. What effect is that going to have when you place the debentures on the market. Mr. Poison : Well, this is the system America had adopted, and there the debentures are selling all right; they are selling at particularly low rates. I saw by a recent publication—a banking publication —from New York that there they had some 4| per cent, recalled at \\ at a premium of 103, so that they are getting their money under this system. The investors are evidently satisfied that it is safe. Colonel Esson : The price of money is largely governed by the sense of security. Mr. H. E. Holland : There is really no collective security. There is only a combination of individuals, and I suppose there is a general understanding that, if the scheme collapses, the State will have to foot the Bill. Colonel Esson : For £250,000 ? Mr. H. E. Holland : No, for whatever the liability is, even if it is £5,000,000. Since the State provides the scheme, it will have to foot the Bill. Mr. Forbes : It would be a moral obligation. Mr. H. E. Holland : With the exception of the £2,000 worth of shares in the group, there is no more security than there would be if this scheme were not in operation, except that in the latter case the individual would have to go on the market for the money, instead of the group looking to the Board for it ? Colonel Esson : There is the absence of proper organization there. Mr. Poison : There is also the advantage with a Board of control that the personnel, being wisely selected and including men of affairs, gives a great sense of security. Mr. Forbes : There is a feeling in New Zealand that ventures undertaken by Government Departments are not too successful. Stock agents frequently say that the Government could not handle chattel security. They say so now. This scheme here is likely to become a little too rigid. Colonel Esson : These matters will be largely managed by the associations—that is, by the farmers themselves. Hp Mr. Poison : That is one of the reasons, largely, for cutting the Government out. Eliolt: I would like to ask Colonel Esson whether he suggests that there should be a debenture issue as'soon as the £250,000 is ready. There is no reason why there should not be. Colonel Esson : They can go on the market at once under this Bill, They do not need to wait,

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