AGRICULTURAL CREDIT BILL, 1927—SECOND STAGE.

Question proposed: "That the Agricultural Credit Bill, 1927, be read a Second Time."

This Bill provides for the establishment of an institution to be known as the Agricultural Credit Corporation. The share capital will be £500,000, with a maximum rate of interest of five per cent., the capital and interest to be guaranteed by the Minister for Finance. The Corporation shall have the right to issue certificates, to be subscribed for by the public, in denominations to be settled afterwards, with a rate of interest to be not more than three per cent. over and above the bank rate, up to a maximum of £7,000,000, or £1,000,000 in any one year. The principal and interest of these certificates will also be guaranteed by the Minister for Finance. The Corporation may take deposits from co-operative societies, and powers are given to it to issue debentures for, I suppose, temporary purposes. That is to say, the Corporation will be financed from two or three sources; (1) share capital up to £500,000, (2) money obtained on certificates up to a maximum of £7,000,000, and (3) deposits from co-operative societies, but not from individuals. That money is to be available for agricultural credit, for farmers and for farming purposes on the one hand, and for farmers' organisations, such as co-operative societies, on the other.

The purposes for which the money is to be available are set out in some detail in Section 12. They speak for themselves and I need not go into them fully. They will be for ordinary productive purposes such as stocking, farm buildings, and drainage, and so far as co-operative societies are concerned, for the establishment of co-operative societies and for the carrying on of their business. The Corporation will also act as a sort of clearing house for credit societies. Credit societies are particularly useful in certain poor districts where the average loan required is anything from £20 to £50, where the ordinary farmer has not very much security to offer as an individual, and consequently it is necessary to get some sort of extra security, the only sort of security he can get, by means of the establishment of a credit society. In my opinion these credit societies will be extremely useful in the really poorer districts, in West Donegal, West Mayo, Connemara and such places. The Corporation will act as a clearing house for these credit societies, that is to say, it will take surplus deposits, if they have any surplus deposits, and on the other hand will make money available to societies that need it.

There is also somewhat of a new departure in this Bill. There is an attempt to establish what is known as a chattel mortgage. A chattel mortgage is really an agricultural bill of sale. It has been the view of every Commission that considered the matter for a long time past that some sort of extra security should be made available for the small farmer in order that he might get the capital he requires. Practically all the Commissions that have dealt with this question have recommended the same thing, something in the nature of a chattel mortgage. There is a chattel mortgage for agriculture in America at the moment, and I think in some of the Dominions also but the conditions there are, of course, entirely different from the conditions here, and we cannot make any general deduction from American, New Zealand or Australian conditions, and apply them here.

At the same time, it is obvious that the Irish farmer, of all farmers, needs some additional form of security. Land is not a good security at the moment, mainly through the farmers' own fault, mainly because it is quite impossible to sell land in the event of the mortgagee being unable to collect his debts. Whatever the reasons may be, land is not an extra good security, and the condition of things at the moment is that the small farmer, or the big farmer, who wants to get anything from £50 to £200 gets it on a three months' bill, signed by three or four of his neighbours, brings them into town for that purpose, spends the day in town, and has to repeat that process at the end of every three months. That is most unsatisfactory and extremely expensive. The ordinary bank rate of interest is high enough, but when you have to add to the bank rate of interest the cost of entertainment, and so on, and the time that is lost, not only in the case of the man himself, but in the case of two or three others, the whole transaction becomes most unsatisfactory and most expensive. Yet, that is the only alternative at the moment as far as farmers are concerned. A mortgage on land is not a form of security that banks are particularly anxious for, for the reasons given. If there was good reason for attempting to establish some system of chattel mortgage in other countries, it seems to me that there is a particularly good reason in this country. The trouble is that there are a number of difficulties of detail to be settled, and it is extremely hard to settle them.

Everyone would agree that a chattel mortgage, on the face of it, is a reasonable sort of security for the farmer who wants to stock land, especially the particular type of farmer who got a holding under the Land Purchase Acts. That sort of security looks reasonable, and the sort of security he ought to have. But when you try to give legislative effect to a chattel mortgage, you find difficulties at once. The trouble is that all the Commissions that examined this question have left the whole matter very much in the air. None of them made a serious attempt to solve these problems. I suppose that is because of their magnitude. It seems to me that we can never carry the question any further until somebody tries to foresee the difficulties and solve them, embody the results in an Act of Parliament, and put it into operation. I do not pretend for a moment that the particular section dealing with a chattel mortgage is water-tight. I believe it is not. But I believe that we will never discover where it needs repair, except by establishing a chattel mortgage and putting it into operation. If afterwards it needs adaptation, correction, enlargement, or variation, our office is there to do it. The alternatives I was faced with when considering the question were either to drop the whole idea where the Commissioners have dropped it, and leave it as a pious wish, or, on the other hand, to insert some provision for a chattel mortgage, and try to put it into operation.

The Bill provides that a chattel mortgage shall be taken by the Corporation itself, or by any of the recognised banks, and by nobody else, and that it shall be registered. Of course, rents, rates, taxes, and some other charges of that sort have priority, but ordinary debts have not. The chattel mortgage shall be registered in a secret register to be kept in the office of the County Registrar, to be available for the banks and for the Corporation. It was the opinion of the Banking Commission, and it was the opinion, I think, of the 1914 Commission on Credits— which was generally agreed to be a very competent body—that secrecy was essential for the successful working of a chattel mortgage. I agree, but I do not think it is right. I think we have to get to the time in this country when an overdraft is looked upon as an ordinary commercial necessity, as it is in every go-ahead commercial country—to the time when people will have all their money invested in productive enterprises, and will try to borrow money cheaply to get into more. At the moment we are a long way from that, and I am satisfied that unless there is a secret register—a register at least fairly secret—you will not have this chattel mortgage availed of.

The difficulties, of course, are with the secret register. If you had an open register, then shopkeepers and everybody else would know where they are, but no one would avail of it. If you have a secret register, I think it will be availed of. I do not think, when it comes to an examination of the matter, that you are going to injure the ordinary trader very much at all. That is a matter I discussed with traders. They agreed in the main that so far as eighty per cent. of their customers are concerned trade is done on the security of the character of the customer, and that this secret chattel register will only affect their dealings with about twenty per cent. of the customers. It will simply mean that the shopkeeper will be very careful about giving credit to twenty per cent. of his customers, and you provide men, including that twenty per cent., with readier means of getting money and, consequently, doing a cash business, which is so much the better for the shopkeeper, and certainly so much the better for the farmer. There is too much illegitimate credit in this country—if I may put it in that way. It is no harm that there should be a tendency to get back to definite institutions for credit, and outside that doing, so far as possible, a cash business.

This Bill provides for the chattel mortgage. I do not think I need go into it in detail. As I say, everyone knows what a chattel mortgage is. It may be taken on any chattels—it may be a floating chattel mortgage for all the chattels of the farm, or a specific chattel mortgage or both. A floating chattel mortgage may be made specific and brought down to definite chattels.

The Corporation itself will do purely and entirely a long-term and intermediate-term business. The proper function of joint stock banks is, of course, a short-term business, but they are able to do intermediate-term and even long-term business with a limited number of customers. They have, however, never been designed to do an entirely long-term business. On the other hand, only long-term loans in the main, including some intermediate-term loans, are suitable for agriculture. At the best of times, there are only small profits from farming, and a loan cannot be repaid except over a pretty long period. The banks cannot give loans for a long period. This Corporation is a recognition of the fact that agriculture needs not only additional credits but, in particular and principally, different kinds of credits for certain purposes. For productive purposes especially it needs long-term credits, and there is no institution at present specially suitable for giving those long-term credits. As the Corporation will be confined to long-term credits, it will not cut across the operations of the joint stock banks in any way. On the other hand, it will undoubtedly strengthen them. I need not elaborate that at any length. Any banker will see that it will undoubtedly strengthen them. It is contemplated— of course these are all matters for arrangement afterwards—that this Corporation will be merely a central institution with no branches through the country. There is no reason that there should be. It would be an expensive process. Apart from that there are the ordinary joint stock banks, and it is more than likely that it will be possible to make an arrangement with them that their branches shall act as agents for this Corporation.

I realise that when we are making arrangements to give additional credits to agriculture we are doing something that is badly needed. It would have been a mistake, however, to my mind, to provide additional credits for agriculture for the last three or four years. It is a mistake, especially in an agricultural country, to provide anything like extensive credits on a falling market. But when prices have fallen and have become stabilised, then credits are wanted and can safely be given. I think, therefore, that the establishment of this Corporation just at this time is particularly opportune and useful. We realise, also, that when we are attempting to provide additional credits for agriculture there is a duty on the other side—that it is absolutely essential to provide more complete arrangements for collecting bad debts, and this Bill provides for that. It provides that any person obtaining a loan by a misstatement, or misusing a loan when obtained for a purpose other than the purpose for which it was given, shall be punished by criminal penalties. So that what I really anticipate under the Bill is that it will make it more easy for the honest man to get credit and more easy to collect debts from the defaulter.

I welcome this Bill as an attempt to deal with a serious aspect of agricultural life. I am very glad to have had the explanation from the Minister with regard to chattel mortgage. I had the fear that Section 25 was very loose and that the strictures, so to speak, on the chattel mortgager were very severe. The Minister assures us it is not water-tight, and one would hope that certain arrangements will be made whereby the conditions which seem so very harsh on the mortgager will possibly be eliminated or made less severe. I allude particularly to paragraph (c) of sub-section (1) whereby the mortgager is prohibited from selling any farming stock comprised in the chattel mortgage without giving at least three days' previous notice in writing to the mortgagee of his intention to sell the same, and from selling any of such farm stock for less than a fair and reasonable price. The Minister must be aware, and we must all be aware, that when people mortgage stock it must be for some cause or other pending a sale of stock. It may be that they are dealing with the mortgagee who lives in Dublin and it may be difficult to get in touch with the mortgagee within three days, to acquaint him that the mortgager is about to sell some stock. That is a provision that will have to be rectified. I may be reading the section carelessly, but it does seem to me that the defect that I have indicated is inherent in the paragraph. Then again, with regard to paragraph (f), that imposes on the mortgager the obligation to preserve and keep safe the farming stock comprised therein. I wonder if that means that the mortgager has to insure his farm stock. It would be a very desirable provision, no doubt, but we have to remember that insurance rates are very expensive and that if the ordinary farmer is asked under these provisions, in addition to other charges, to insure his farm stock for chattel mortgage I am afraid that the conditions imposed will tend to the elimination of any advantage that a Bill like this would otherwise produce.

There is one other section in the Bill to which I would like to allude. That is Section 13. Paragraph (a) says: "The Corporation shall not be entitled to receive deposits of money or deposits of securities for safe keeping and management from any persons except co-operative societies." That means that a farmer will be prohibited if he so desires from lodging money on deposit with the Corporation which has been framed to assist him. I think that is hardly a fair section. After all, this Bill is a very necessary Bill, and it takes off the shoulders of the joint stock banks a business which, I think, we all hold is not a satisfactory business, and not purely a banking business at all. But if you want to put that Corporation on a strong basis, I think it is only reasonable that the people for whom the Bill is arranged should be allowed, if they so desire, to lend money on deposit to the Corporation, which would be available for use amongst themselves. There may be a strong reason why that should not be, as the Government are responsible for the capital of the Corporation. But if they are assured, as they will be assured, that the management of the Corporation will be all that can be desired—if in the event of more than £200,000 being invested by the Government they will have the appointment of the Chairman of the Corporation—there would be no fear of any deposits made by the farmers with the Corporation being ill-used or ill-spent. They would get in that way a larger sum of money than would be available under the Bill as it stands. I think a larger sum of money could be carefully and economically used, and I do not think that this section is a reasonable one. I would ask the Minister to give us some explanation as to why it was thought necessary to insert that particular section in the Bill. I think, on the whole, the Bill has been carefully thought out, with these exceptions, which, I think, are important.

I welcome the Bill, believing that it is a step towards what is essentially necessary in a country like Ireland, namely, to secure that men can borrow money when they are determined to pay that money back. I think the Bill will go far towards doing that. I think we should try to ensure that the mortgager, who very often cannot be presumed to be a very careful or knowledgeable businessman, will not be put in an unfair position between the mortgagee and the Corporation. I welcome the Bill as an honest attempt to deal with the present situation.

CATHAOIRLEACH

I do not think I agree with the construction the Senator put upon paragraph (f) of clause 25, namely, that imposing upon the mortgager the obligation to preserve and keep safe the farming stock. I do not think any court would construe that as involving an obligation to insure, because if so it would have been very simple to say "shall insure." I think all the section means is that a man must not allow his stock to stray about, and that he must look after their feeding and their health, and that he must take reasonable care, as every farmer should do.

Without indulging in any financial high-falutin, which I am not capable of indulging in, I should like, in supporting this Bill, to make this reflection. The very existence of the Bill is, in itself, a reflection upon the inadequacy of the Irish joint stock banks. The Irish joint stock banks have always charged a one per cent. higher rate of interest than the English banks. The English bank rate at present is 4½ per cent. and the Irish bank rate is 5½ per cent. It is no excuse to say that the joint stock banks are operating in a country which is essentially agricultural. If they are Irish joint stock banks they are agricultural banks, and the need for this Bill is a reflection upon their adequacy to meet the needs of the country, which is largely agricultural. In one way the Bill may be looked upon as very excellent, from the farmer's point of view, but in another way it may be enabling the poor farmer to pawn his furniture to meet the deflation caused by the banks in this country by the additional one per cent. higher rate of interest than is charged by the banks in England. There is no mention in this Bill of the rate at which the money is to be lent, but I do hope that the Minister will see that money is lent at a rate equal at least to the current rate of interest charged by the banks in England.

The Minister mentioned the many branches that the Irish banks have and he said this Corporation will not have branches. I am glad to hear that, because that will mean a tremendous saving of expense. Some of the best insurance companies have not got branches, with the result that they give their clients the benefit of the savings effected thereby. If the farmer is to get money to re-stock his land which was depleted sometimes through his own anxiety to sell when prices were high or from other causes, accidental or otherwise, the money ought to be lent to him at a rate equal to the rate current in the English banks.

It is really a Land Bank which we are setting up. It is a corporation to lend some millions of money, and I suppose it has a sort of guarantee about the people to whom the money will be lent. Its chief advantage will be that it will make long-term loans. I do not see why if debts are outstanding the joint stock banks could not make long-term loans. I welcome the Bill, and I hope there will be a proviso that the rate of interest will not be higher than the Bank rate in England. The English farmers are in a far worse position than our Irish farmers to-day. Farms can be sold in England cheaper than in Ireland, even though they are assets. On account of the agitation here no one would lend twopence on an acre of land, because if anyone bought it he would be shot. That may make for security of tenure, but it certainly does not make for currency of credit.

In England, on account of the fact that the population of the world is spreading quicker than the agricultural yield, agriculture is in a very bad way. There is the suggestion in the papers to-day to endow plough land. We are far ahead of them in England because we are taking this step, a step which it will be incumbent on England to take later owing to the parlous condition of agriculture in what may be called the home counties. As an indication of that there will be a limit sooner or later as a result of an improvement in English agriculture in the matter of a sale for our produce on the English market. That is another reason why one should support this Bill. It will enable us to meet competition following the improvements that are certain to be made in England. There is no doubt but that the agricultural conditions in England are being put on a footing that will militate against the sale of our cattle in England. I welcome the Bill because I think it will provide us with a valuable sort of security against the improved conditions that are certain to obtain, sooner or later, in England.

I welcome the Bill and think it is a very advantageous one. This is a matter with which I had some concern in the past in parts of the West of Ireland. I must say, speaking from experience, that the people who obtained loans of money from agricultural societies or loan societies were extraordinarily honest in the matter of meeting their obligations. I was acquainted for a long time with an agricultural society in the West of Ireland. The people who were trusted with loans of money from that society to enable them to buy various things, never failed to repay the loans they obtained. In fact, they paid without any difficulty whatever. I must say that some of the banks at that time did help a great deal in the matter of giving loans whenever they got any security at all. There is just one point to which I desire to call attention. It is to paragraph (e) of sub-section (1) of Section 12. It states that the Corporation will be entitled to lend or advance money "only to the persons and for the purpose hereinafter stated, that is to say (e) to any person (other than a co-operative society) for the purpose of paying off a loan which was originally made to him (whether before or after the passing of this Act) wholly or mainly for a purpose for which a loan could under this section be made to him under this section by the Corporation."

The effect of that paragraph seems to me to be this: that the Corporation is to take over from the banks loans which they granted to farmers in former times, at a time when money was at a much cheaper rate than it is now and when prices were higher. I see great danger to the farmers themselves in that, and I know that a great many farmers object to it. Indeed, I have been asked by some farmers to press to have it altered in some way. Some few years ago, when high prices ruled for agricultural produce and other things, numbers of farmers rushed to the banks and got loans of money to enable them to buy land.

They were invited by the banks to do so.

That is quite true. They did, as a matter of fact, rush to the banks. The banks welcomed them, and sometimes when a farmer went to a bank to do his ordinary business he was persuaded reluctantly to take a loan of money. Sometimes the farmers were not anxious to take the loans, but they were encouraged by the banks to do so in order that they might buy land on loans. It is true, of course, that many people at that time, farmers and others, did not look to the future as they ought to have done. It may be that they had not sufficient experience, but at any rate they ought to have known that the high prices that ruled at that time could not continue, and that prices were bound to drop after a certain period. The fact anyway is that they borrowed large sums of money from the banks. Then the period followed when deflation occurred and when agricultural prices fell. The land and the stock that constituted a good security for the loans at the time they were obtained from the banks are no longer a security. Suppose, for instance, that the banks were to sell up these people, they would not be able to get their money back. The danger that I see in this paragraph is this: that the public are going to be asked to take over these bad debts incurred by the banks. We all know that in other cases, such, for instance, as railway stock, consols and other forms of securities, if prices fall the people who hold the stock are obliged to bear the loss, but here, as far as I can see—I am not giving this opinion in any definite way and the Minister will correct me if what I am stating is not the effect of the paragraph—the banks will get clear of all these bad debts that they have contracted with people who are not now able to meet their obligations. The position apparently is to be that the Government is to take over these debts from the banks and is to pay them off. The farmers concerned are then to become liable to the Government, and if the Government is not able to recover from the farmers, then the general public will lose. That is the position as far as I see it. I think it is very undesirable that such a state of affairs should be created. I hope the Minister will give the House an explanation as to how the Government proposes to meet this particular point with which I have been dealing.

Representing, as I do, the General Council of County Councils of the Free State, a body which is mainly concerned with agriculture, I welcome this Bill. It has the hearty approval of the General Council. With regard to the remarks of the last speaker, I do not see anything in the Bill that compels, as the speaker suggested, the Agricultural Board to take over any of those floating debts from any bank. The Board will deal with applications, with the security of the Government, entirely apart from the fact whether the money is needed to pay off a banking debt or any other form of debt. There is a provision in the Bill, of course, which states that money can be advanced even for paying off a debt which was incurred for a purpose for which money might be advanced under this Bill. The objects for which advances are to be made are set out, and if the loan, in respect of which the debt was incurred by the farmer, was advanced for the purposes or for the objects for which money could be advanced under this Bill, the debtor can come forward to the Society and ask for money to pay off that debt. The General Council of County Councils in considering that particular clause said that it would be only right that such portion of the debt should be taken over by the Board as would be covered by security. That is to say, if the loan originally was fully covered for £100, and that owing to the depression in the value of land the cover had shrunk to an amount of about £50, then the banks should not expect the Board to pay off £100, the amount of the original debt.

The banks are like any other trading concerns. They must take a certain risk. The money which the banks handle belongs to the public. It is not their own money. The directors, no doubt, have some money invested in the banks, but the big bulk of the money which they handle belongs to the public, and they are merely the trustees of it. If they failed, as it seems they did, in a time of inflation, to exercise sufficient foresight and shovelled out money in loans, and if they had not sufficient prescience to see that there would be an inevitable depression as the aftermath of the war, with a consequent shrinkage in securities, then they must bear the consequences and, like every other trader in the community who has a bad debt, cut their losses. I am quite sure they will be prepared to do so, and that if any banker says he has a debt of £100 on a farmer and that his security has shrunk to cover only £50, rather than take the onus and the odium of selling out the farmer to get that £50 he will be glad to compromise for the amount which the security will cover.

The old system of agricultural credit conducted under the auspices of the Irish Agricultural Organisation Society never was, at any time, very popular with the farmers. One of the essentials was that the farmers should subscribe a certain amount of money. There was a grant from the Government administered through the I.A.O.S. to the amount of £2 for every £1 subscribed, which was, I think, a very great inducement to the public. Yet the I.A.O.S. did not, during its time, make very much progress and was not, for one reason or another, ever a popular institution with the farming community.

The General Council of County Councils was of opinion that, in order to offset that want of popularity, seeing that the I.A.O.S. is still one of the factors in the administration proposed in the Bill, and also to offset the probabilities of there being an undue banking influence on the Board, owing to the large holding of shares which the bankers will have, an effort should be made to secure the good-will of the farming community. It is feared that the Board will be purely a banking board, and that the bankers will have a dominating influence on the Board. If that were the position they could transfer bad accounts to the Board. The predominance of their directors on the Board would facilitate a transaction of that sort. The General Council thought that at least one nomination should be given to a body like the General Council, which is purely and mainly an agricultural body, and which is quite conversant with the conditions that obtain in the different parts of the country.

There is in the Bill an omission, I think, as to the objects for which money may be advanced. The Minister, I think, referred to it when addressing his constituents. He said that one of the objects would be to enable farmers to overhold their stock when the markets are depressed. We all know that it is customary for farmers at harvest time, when they have sold their grain, to settle up their accounts with shopkeepers. Last autumn they were not able to do so. Owing, I suppose, to the ring amongst grain merchants, prices were so depressed that farmers could scarcely get an offer for the grain they had to sell. They were at the same time pressed by the shopkeepers, who look for payment of accounts about that time. They had, perforce, to take such prices as were offered to them for their produce. I think that if the farmers were given facilities to enable them to overhold their produce or their stock, for even two weeks or a month, during which the markets might be in a depressed condition, it would be a source of the greatest convenience and profit to them. It is the experience of members of the General Council of County Councils that a provision of that kind is an absolute necessity to assist struggling farmers. I think the Minister did say, when addressing his constituents, that one of the objects for which money could be advanced was to enable farmers to overhold their stock during periods of depression.

With regard to the appointment of directors, the Minister has the appointment of three, and in certain circumstances the appointment of chairman. There is nothing in the Bill to say how the other directors are to be appointed or selected, but I presume that will be dealt with in the Articles of Association. Seeing the attitude of the farmers generally to the scheme under the I.A.O.S., where they were asked to contribute £1 where £2 was given by the Government, I think, in order to offer every possible inducement to the public to take up shares in this Corporation, the Minister for Agriculture and the Minister for Finance should consider whether money invested should not be free from income tax, either as regards capital invested or dividends accruing from investments. That is a principle that might be applied generally in regard to the investment of money for the development of our industries here.

I now turn to the Schedules, and I desire to call the Minister's attention to paragraphs 2 and 4 of the Schedule. There are two conflicting clauses. Clause 2 of the Schedule states:—

The Minister and the Minister for Lands and Agriculture may if and whenever they so think fit by order made by them jointly authorise certificates of charge to be issued against any class or classes of securities specified in such order and may by such order impose such restrictions as they think fit as to the proportion or amount of any particular class of security (including first mortgages on land) to be included in the securities against which a series of certificates of charge may be issued, and may also by such order authorise certificates of charge to be issued although the Corporation does not hold as security for money advanced by its first mortgages on land to the nominal amount of one hundred thousand pounds.

Certificates of charge may be issued against securities even though these securities do not include first mortgages on land. This sub-section (4) says:—

Before issuing a series of certificates of charge the directors shall place under the control of trustees, in such manner by transfer, sub-mortgage, deposit, or otherwise as shall be approved by the Minister, good and sound first mortgages on land held by the Corporation as security for advances made by it to a nominal amount not less than the nominal amount of such series of certificates.

I may be wrong but it strikes me that they make a condition under sub-section (4) that those certificates lodged shall include sound first mortgages on land, whereas in sub-section (2) they may issue certificates on securities which need not necessarily include sound first mortgages on land.

Mr. O'CONNOR

I wish to speak especially for the farmers in the South of Ireland, where the people feel very much that the banks are taking very strong and harsh proceedings in relation to the farmers to whom they were very anxious to lend money when prices were high. When the reaction came and the value of land fell, they did not show any appreciation of the change. A great many people believe that the banks acted in a very unfair manner by forming a combine. When ordinary people form a combine it is looked upon with suspicion, as it is thought they have no good reason to combine in a great many cases. It is a well-known fact that the banks have a combine. No one can get better terms in one bank than in another. I was asked to assist in bringing some pressure to bear on the Government and the banks with regard to their attitude towards the farmers who borrowed money from them in the dear times. From the reports in the papers you will notice that in North Tipperary men went to jail and that when cattle were seized for debts there was a rescue. There is in these things a possibility of very serious happenings. Those people do not intend to repudiate their debts, but they think the banks should show some consideration for the changed times instead of charging 6½ per cent. In some cases they charged 7½ and 8 per cent. for £10, £20 and £40 bills. That was entirely unreasonable owing to the change in the times, and it was above the rate of interest in England.

A friend of mine was offered in England a loan at 1 per cent. less than the Irish banks were charging; he was offered 1 per cent. more for deposits. A great many people thought that the Government were not as sympathetic to the people as they should be in dealing with the banks. At the time when the Government asked for the National Loan the banks came forward and subscribed large amounts in the Government interest. They were more or less under an obligation to the banks then, and the people think they are not anxious to go back on those who were their friends. That does not go down well. The people are most anxious to pay their debts, but the depression in agriculture has driven a great many of them to despair, and they are not able. In the farming industry people have not held their own for the last three or four years, and, with foreign competition daily increasing, it is impossible to do so. My own opinion is that it would take at least five years to bring the country into the state of prosperity we would wish—at least in the cattle trade. It is pleasing to note that the war between the American beef trusts is almost settled, and that should have a good effect here. The security the banks have was ample at the time when the debts were contracted, but at present the sale of land is an impossibility. No one will buy it. I welcome this Bill, because it is a step in the right direction, and it shows that there was a kind and considerate thought in the Minister's mind. There is the possibility that it will bring a great good to the people for whom it is intended. I was most anxious to give the views of the people in the farming industry, that it is time the Government should act with generosity and sympathy towards the people in respect of the banks. The banks should not have the whip hand. Up to a year ago their dividends amounted to 10, 12, and even 18 per cent. That is a false sign of prosperity. The dividends were more or less taken from the people owing to the high rate of interest. Personally, I think the repayment should be extended for a longer period, to give people an opportunity to meet their debts. With the new beet industry and other things, I think the country will prosper and the people will recover their former position. Although we may be at a low ebb, there is a hope for the future. I support the Bill.

I think it is unfortunate we should have three important measures thrust on us during the last three weeks of the session. It makes deliberate consideration rather difficult, especially when you have all the stages of a Bill taken in one day. This Bill seems orthodox, but there are certain features which require careful consideration. One is Section 12 (d), where the Association can lend money

"to any person engaged in or proposing to engage in an enterprise designed for the service of farmers or of farming communities for the purpose of establishing, carrying on or extending such enterprise."

That is very wide indeed. You might have a boot factory for the service of farmers. I think it should be narrowed down to make the industry ancillary to the farming industry. A wool factory might be essential for farmers, but that is not intended, I think. I do not think the section should be as wide as that, even though articles of association are sometimes very wide.

As regards the administrative machinery, I think the Minister will find it very costly, if he is going to pay the high rates he proposes and charge low rates. I do not know how he will work it. Does he propose to utilise the agricultural instructors and get reports from them? I hope he will not depend on paper reports of the character and position of the borrower. It will not do to rely on paper reports and general vague information, because the character of the borrower is really the most valuable security of the lot. With regard to chattel mortgages, that is a question which should be examined closely. I know the Commission on Agricultural Credit in England recommended chattel mortgages, but the recommendation was allowed to remain dormant. Great difficulties were experienced there when they tried to implement these recommendations. In America there are chattel mortgages, but one does not know to what extent they are really effective in the different States. One can understand that where you have big farmers, as in Australia, where they handle a big wool trade which is mortgaged, they would adopt this system because they have recognised markets at fixed times. Even where you have a wheat-growing country, in which the market is organised, you can follow up your chattels. But you cannot do so here, with all farmers selling in different fairs. I think insurance ought to be compulsory. I will put in an amendment to that effect. One has to look to the protection of the State and the taxpayer. It would be very unfortunate if the State were to be faced with a loss of 70 per cent of its cattle, as happened in Clare. There is one important matter, and the Minister has dealt with it, but his information is different from mine. It has caused apprehension to traders with book debts. Traders can find out if there is a mortgage on a farm, but there is a possibility of a secret chattel mortgage being slipped in in priority to their book debts. That would create rather an unfortunate position and might lead to premature realisation of book debts. I think that ought to be considered carefully, and also whether it is wise to have those mortgages secret. In the Dáil, the Minister suggested that by decentralising the registry secrecy might not be so fully secured. There ought to be equal secrecy whether the registry is in Dublin or in the country.

There seems to be no machinery for making regulations under Section 25, the section which imposes all those conditions on the borrower. I do not see how you could carry out in practice that section, with all the regulations about notifying in writing and getting consent of the lender before disposing of chattels. There are regulations made by the Minister for Justice as to the operations that come under his Department, but there are no regulations made in the other case. That matter ought to be considered by this House, and these regulations ought to be laid on the Table.

Senator Bennett is rather concerned with the non-taking of deposits by the Corporation. To effect that, the whole Bill would have to be recast. The Corporation would have to go in for short-term lending. It would have to keep liquid assets and keep a lot of unproductive cash. It would have to go in for joint stock banking. I do not know if Senator Bennett wants a State joint stock bank. That is what would happen if his proposals were adopted.

Senator Kenny suggests that as borrowers borrowed rather hastily in times of high prices, now the banks should bear the consequences. I do not know what he means. The ordinary laws of bankruptey apply to everybody. The banks are asking no more than to carry out the ordinary laws of bankruptcy, like any other traders. Senator Kenny implies that a new code of bankruptcy should be applicable to bank debts. That would raise a very curious and difficult situation. If his aims are to be carried into effect and if farmers are to be relieved from paying their debts, it is the State's duty to relieve them. There should be further grants. It is impossible to place one class of creditor in a different position from another. If you are to deprive one group of creditors from exacting their full pound of flesh, that should apply to everyone else.

With regard to the proposal that the loans to the Corporation should be free of income tax, that would have no influence in bringing in foreign money, because the borrowed money would be subject to income tax in the country in which the national lives. If an Englishman lent money to the Corporation he could not escape income tax, but would have to pay it in his own country.

Senator Gogarty, in criticising bank rates, must remember that 50 per cent. of the sales of land are abortive. That is an important factor. Creditors are unable to realise 50 per cent. of their debts. Surely it is clear that the security then is not very good.

I understood the rates obtained before the war and inflation.

I will deal with inflation in a moment. Senator Col. Moore raised the question of inflation and asked that the advances should be written down to the present value of money. He does not imply the corollary of that, that deposits should also be written down. What is sauce for the goose is also sauce for the gander. If a man deposited £100 in war years, is it suggested he should now get only £70? Senator O'Connor spoke of the difficulty of enforcing full remedies against debtors, but I remember quite well the Minister for Justice saying in this House that civilisation has broken down when the sheriff ceases to operate. That is a serious matter. In some places the sheriff has practically ceased to operate. If the Minister for Justice states that civilisation has broken down——

Where are those places?

In places where lands cannot be sold. There are arrangements made, which the Minister knows, whereby you do not get a free sale or the true price of the land. I do not say that the Government is in any way responsible. It has done its best and has taken up a totally correct attitude on the question of the payment of debts. As the Minister says, the farmers are to a great extent responsible for the depreciated value of land as a security. I therefore hope that this Bill will be examined carefully, especially with regard to chattel mortgages.

Perhaps I might say a few words as a member of the Commission on whose recommendations the Bill is founded. The Commission, in dealing with the matter, found, on inquiry into this question of bank loans to farmers, that a state of affairs existed nowadays that was rather difficult to deal with, both from a banking point of view and from that of sound finance. In ordinary times, before the year 1914, loans to farmers were very liquid. I have had something like forty years' experience of banking in Ireland, and up to the year 1914 I could have stated definitely that the loans to farmers had a less percentage of bad debts to the banks than any other class of loans which they made. That is not the state of affairs now. I should say that now the exact opposite is the case. For various reasons which, probably, everybody who has spoken here knows, all the loans that are now out on farms are of a very difficult nature to handle, and I should say that every bank in Ireland has had in the last two or three years to write off large sums for depreciation on loans which they knew they never could recover. As regards this question, which two or three Senators have raised, I think it is necessary to speak quite plainly, namely, as to why credit is difficult to get, so far as the farming community is concerned.

If the farmers had dealt with their debts as they used to do, there would not now be this question which we are trying to solve. In the old days when a farmer owed money to a bank he did his very best to pay it. He did not go to the bank and say, as many do now, "I cannot pay you, I will not pay you, I will not let my farm be sold, nobody in my neighbourhood will buy my farm, and, therefore, your security is worth nothing." I invite Senators who have been talking on this subject to think what that means, and what it will mean, to the institution which we are now in favour of having established. There is no doubt that this institution, with State money, will have to make loans, just as other banks do. Nobody is going to say that the cattle, for the purpose of which money is going to be lent, will not be at a less price when they come to be sold, than when they are bought. If as a collateral security for that money the security of the farm is being given, and if that goes on for some time, it is quite easy to see how this institution will also have to call for the sale of the farm, and the State, which is going to supply the capital to this institution, will have lost its money if it cannot sell the farm. We bankers are the custodians of the money of the vast mass of the people of the Free State. They have entrusted us with it, and they expect us to look after it. We lend it out to other people who need money, and we give one rate of interest to our depositors, and we pay all our expenses out of the balance which we get by charging a higher rate to the borrower. We, undoubtedly, must take care of all the money on deposit. I hope when this institution is established that its directors will take the same care of the money of the State that we feel we have to take as regards the money of our depositors. I think we should look calmly at the situation here at present.

The banks have lent a lot of money to buy stock. Farmers have, year after year, sold their stock for less than they gave for it. They cannot pay back the banks. At present there are a vast number of loans to farmers to buy stock on what is called long-term credit. We cannot call on a farmer to pay back a bill for £300, because we know he has not got it. He sells his cattle for less money than he gave for them and, gradually, the same situation will come about, and the banks, to get that money, will have to sell the farm. In an enormous number of cases it is no use to either the farmer or the banks to sell the farm. It would be better to let the farmer work along and do his best. I am now talking of honest clients doing their best to make ends meet, and hoping for better times. when they would be able to make money and pay back the bank. In the majority of cases the banks are not calling for the sale of the farms. It is only in cases where they know that no effort is being made to pay the bank that they have to take proceedings to force a sale. That is the state of affairs to-day, and it will be the state of affairs that will exist after this Bill is passed, and after the State has taken up this new method of banking. I think I have said enough as to the situation regarding farmers and the banks. I do not think that the situation is as it has been painted here, and I do not think that the Commission that recommended this institution for the Government when putting forward this Bill meant that the funds of this institution are to be used for taking over a lot of bad debts which the banks have at present. I hope that that is not so, and I would not vote for this Bill if I thought it was so, for they would have no right to do so. The banks have no idea that this is the way the money is going to be used. The Commission intended that this should be fresh money to be available for farming enterprise. One of the reasons why the banks cannot go further ahead is quite clear.

When you have to pay back deposits at call you must keep a certain amount of money arising from deposits in perfectly liquid securities. You must always be able, at once, to have money available that you can hand over to your depositors. Now, when we have to make advances to farmers, such as I have been talking about, we cannot keep that money available in the way we should, for, if we did, every farmer to whom we lent would be smashed. Therefore, we have to keep liquid securities ready, besides a lot of cash. There is only a certain portion of our assets that we could lend to farmers. That is far more tied up at present than it was ten or fifteen years ago, because farmers themselves are not turning it over, and they cannot pay it back. In the old days when a farmer paid back we lent that money to another man. We had a lot of liquid money and we could pay out, but now we have not got it. The situation now is that the banks have as much money lent out to the farming interest as they can afford to do with safety to the depositors and to the banks themselves. We should take that into account and also the fact that our land legislation has created a totally new class of farmer and persons making a living out of the land. A great many people who are now on the land trying to make a living have not got sufficient capital to pledge to the banks for the purpose of borrowing money.

The State has created this new form of farming, and it seemed to us on the Commission that the State was bound to carry out the other part of the arrangement, which was to see that the men who were put on the land had the money to work it. I believe that is one of the main purposes for which this new institution is intended. It is also an excellent institution in regard to the creamery industry, and for again setting up those small lending banks, or institutions, to which Senator Colonel Moore referred, that is, the banks which lent money at 4 per cent. As far as my information goes, these have practically all died out. This new institution is being given money, and, having that behind it, can dictate to those various small associations to which they will give money. It can help the creameries by advancing the money which they will need on long-term credits. It can unite all the creameries, look after the marketing, and use Irish Agricultural Association methods for uniting all those various industries, which it would not have the power to do if we did not give it the capital under this Bill. These are the kind of matters with which it appears to me this institution will have to deal. I do not think Senators ought to publish the view that bad loans are to be taken over from the banks, that all sorts of people who are at present in an insolvent condition are to be helped, and that there is to be a general millennium because we are starting this not very large State institution.

Banks are not doing what some of the Senators have suggested they are doing at present. I believe every bank in this country is doing its level best to tide over the difficulty. Wherever it is possible to do so with any safety, the banks are giving their clients every opportunity to meet their obligations, and, as I have said, they only take the last step when compelled to do so by absolute necessity. I hope the State will not meddle in these matters, and that it will leave the farming community and the banks to get along as in the past, with great consideration for each other. Also, I hope the farmers will take into account what an enormous amount of harm they are doing to the whole community if they go in for repudiation of debts, and for the idea that the payment of honest debts should not be an obligation on the farmers. I ask any Senators interested in the matter to read pages 21 and 22 of the Banking Commission's report. As to the abortive sales of the Land Commission, it says: "In 1912-13 the percentage of abortive sales was 19.5; in 1915-16, 14; in 1920-21, 43; and in 1925-26, 57." That is only the Land Commission sales. The report states:—"From the table it will be seen that the percentage of abortive sales has recently increased at a somewhat alarming rate. We are forced to the conclusion that in many cases there exists a strong disinclination to meet just and lawful obligations. It apparently forms part of the wave of demoralisation which is so marked a feature of the post-war period." Of course, there were bankers on the Commission, but there were also perfectly independent individuals. That was the conclusion they came to after hearing the evidence submitted.

Senator Gogarty referred to the difference between the Irish and the English bank rates. I am sure if the Senator goes to any Irish bank with the class of security which the English bank requires it would give him the Bank of England rate. We would do it. That security does not exist here. We are never asked for that class of loan in this country. These are loans which banks and others go to the Bank of England for on first-class bankers' bills, and such things, and on which as a minimum rate all the other rates are built up. As far as we have been able to find out, the rate for the class of security we get over here on long-term loans is about the same as in England. I do not think there is any difference in the matter. I dare say if Irish depositors choose to take their money over and employ it on the London market they might get a little more than we would give for it, but I doubt it on the whole. I saw a letter in one of the papers this morning dealing with this question of the difference of 1 per cent. between the English and Irish bank rates, but the remarks contained in the letter only show that the writer is not acquainted with the banking facts of the case.

In practically all points the Bill before us follows the recommendations of the Commission. On reading it through, but not examining it very carefully word by word, it certainly seems to accomplish the purpose which the Commission had in view. There are, however, some matters which I think might be improved in Committee. For instance, I think that in Section 4 the word "limited" should not be removed. It probably would be better that the Corporation should be called "The Agricultural Credit Corporation, Limited." If the word "limited" is left out, the creditors and people dealing with the Corporation might think that because the shareholders are to be secured by the Government that the ordinary creditors would also be. As regards the capital of the Corporation, I am of opinion that it would be a great help if the shares were paid in full and, as there would be a Government guarantee behind them, if they were then made trust securities.

I think that in that case Senator Kenny would find out that it would be an impossible attempt; it would be far better for the farmers who have money to put out on deposit that they should come in when this institution was working and buy the debentures which the Corporation intend to issue, and on which they would have the Government guarantee of their interest, and the shares would be first rate buying if they were fully paid, with a Government guarantee of 5 per cent., which would be far better than anything that the bankers could offer to them in the way of deposit. But, of course, they would have to sell their shares when they would want to get their money back, and not get their money on call in the way that we could give it to them.

I think it would be better in Section 5 if the Minister could have the right of issuing stock at such times as the money is required, and issue the share to the bank and to the public in the proportion of two to three. As regards Section 10, the Articles of Association would, of course, as in any company, be submitted before the money was put in, either by the banks or any of the other shareholders who bought their shares. I think Section 11 might be put in better shape so as to be more easily understood. You will notice that the number of directors, including the chairman, is to be seven, of whom three, not including the chairman, shall be nominated by the Minister. And, later on, the section says that "the Minister must nominate from amongst three directors a chairman of the Corporation." So that the chairman of the Association shall also be nominated. That would look as if the Minister could nominate four of the directors. I think that section should be re-drafted. I think the intention is that the Minister should only nominate three, including the chairman.

Here is a section where, undoubtedly, the Bill differs from the recommendations of the Commission. That is subsection (1) of Section 12, which reads:—

"To advance money only to the persons and for the purposes hereinafter stated."

Section 12 (1) (a) reads:—

"To any person for the purpose of purchasing land for agricultural purposes."

The Commission held that it was, undoubtedly, not advisable that any new corporation should be brought into being that was going to lend money for the purchase of land. The original purchase of land is what I refer to. Some of the Senators who have spoken this afternoon undoubtedly are quite right in saying that not many years ago advances were made to a great extent for buying farms. And, apparently, nowadays, the bankers who made the loans are being abused for it. I wish some of the gentlemen who talk about the bankers forcing money on their customers had been present at the table of the bankers when these requests were put forward, and I wish they had read the letters of the borrowers asking the banks to lend them the money. What was put to us then was the safety of the land, and how much the borrower was going to make if we would only lend the money. Now-a-days the shoe is on the other foot. The opinion in banking circles, as long as I remember, is that there is an unwillingness to lend money. As long as I have been in banking I am aware that we have been very slow in lending money, and we have tried to put all the difficulties we could in the way of free lending of money for the purpose of forcing up the prices of farms. The Banking Commission came to that same conclusion, and they said that this institution, with State money behind it, should not lend money to buy farms. There are conditions in which it might be wise to do so. But I think that might be dealt with by another subsection. For instance, suppose the association has lent money to a farmer to buy stock, and the debt is gradually increased owing to his losing money and suffering losses in various ways. The bank has to take the security of the farm. If, eventually, that customer fails, and if the bank has to realise, well then, I think they should be permitted to take another good solvent individual and advance him money with which to buy the farm—the land which they have already held as security. But that is a totally different thing from lending money in the ordinary sense to buy land to a man who does not own a farm in which they are not interested, and bringing in another competitor for the farm and increasing the price of the land. At the present moment this is not a danger. Later on, when the times improve, as we all hope they will, it may become a danger, and I do not think we ought to put that section in the Bill.

The only matter which I think really one ought to deal with in talking on the Second Reading is this question which the Minister has dealt with so fully: that is, the question of chattel mortgages. We had a great deal of discussion about chattel mortgages at the Commission. The bill of sale, we all know, is an impossible thing, and yet we see that a number of people at present who are now farming land are different from a great many of the old farmers. They are men with practically no security to give except their farms. If you lend them money to buy stock without some sort of lien on the stock, it was suggested that it was a risky proceeding. It may be risky enough even with the chattel mortgage. Still there is more of a hold. I think you would all see if a customer came along who had his farm and nothing else but his farm and had no capital to buy stock, how the position would be. Such a man will go to the bank and ask for a loan to buy stock. The bank must refuse to give that loan. You would want some other security besides the farm. That appeared to the British Commission when they inquired into it, and they made a recommendation which was never followed up.

Now, we came to the conclusion, with the number of new holders in this country, that the experiment should be tried. We have in different circumstances to act in different ways, and we came to the conclusion that it ought to be tried and that the right people to try it were an association of this description. They have powers, ways of working and knowledge which the ordinary bankers had not. It gives the same right to the ordinary banker. It may be that clients will go to the ordinary banks and they may be able to get loans, but they are risky loans, and I think we should all recognise that the State, in advancing money to this institution is taking a certain amount of risk. I believe the State should take a risk, but in this matter they are taking a big risk. No matter how excellent a man they may have managing this institution, they may edge along the line that means chattel mortgages. Then there will be risks, and I think you will all see, with depositors to repay, that you can hardly expect many banks to follow along that line. The project can only succeed if the farmers to whom the money is lent are perfectly honest men. That is the one point I want to emphasise. In my young days the farmers always used to be honest men. If they borrow money from this association or from a bank, and if they do their best to pay it back, then these chattel mortgages may lead to an enlargement of credit and will be of great use to the farming community. The system of chattel mortgages may be followed up and they may help the banks and customers out of many difficulties. This is the right institution to try it in the first case.

There is one point, and I hope the Minister will suggest some remedy for it. There will be lots of customers, probably the safer ones, who will come to this institution and say, "I want to buy some stock. I have some stock on the land, but I want more. I cannot get the money from the banker. He says he has given me all he will give me on the security he holds. I will give you a chattel mortgage, and then you will lend me money to buy stock." As the Bill stands, the new association can take a floating mortgage on all the stock the land holds, including stock purchased with the bank's money. I hold that customers should be compelled to disclose to the association their debts to the banks, and the association should inform the bank, or banks, before they take the chattel mortgage, that they are going to take it. Otherwise, the new association would take the stock bought with the bank's money, and have it as an extra cover. I believe a section that would make that right can easily be drafted.

The question the Minister has dealt with as regards the shopkeeping credit is a very difficult one. So far as I have been able to make inquiries, I think the Minister is right. I do not think it is going to cause any great calling-in of credit that will damage the country, and if it makes the shopkeepers reduce the credit which they have been in the habit of giving, I think, on the whole, it will be a benefit I think all bankers will know that one of the things they are constantly pressing upon their shopkeeping clients is: "Do not give such long credit and imperil your own position." Of course, it will always remain with the shopkeeper to come to his banker and say, "How does so and so stand?" There are various methods by which people in the business can find out whether or not it would be wise to lend money to a man. I dare say people in shopkeeping circles would be able to accommodate themselves to the new circumstances and be able to find out information as accurately as before. Even if this leads to a certain curtailment of shopkeeping credit, I am not at all sure that it will not be of benefit to the country as a whole. Cheap credit of that sort is not good for the community generally.

I have spoken at more length than I intended, but this is an important Bill, and it is a Bill that will do a great deal of good in the country. I think it is a Bill which we owe to our Minister for Lands and Agriculture. It will give him the power he needs, and I hope that he will be the Minister who will have the carrying out of it.

Question—"That the Bill be read a Second Time"—put and agreed to.