I desire to move amendment 4:—
In page 5, line 55, Section 12 (3), before paragraph (a) to insert a new paragraph as follows:—
"(a) any person applying under clause (e) of sub-section (1) for an advance to pay off a loan made by a bank and expended in the purchase of land, where dispute has arisen and agreement has subsequently been reached between the parties as to the amount properly to be repaid in view of the circumstances of the original transaction, unless and until the Corporation is satisfied that the amount so agreed upon is a reasonable and equitable determination of the applicant's indebtedness to the said Bank."
Taken without the amendment the section would empower, by the Memorandum and Articles of Association, the new Credit Corporation to advance money to a farmer to pay off a loan or advance made to him by a bank for the purchase of a farm, and grievous difficulties might arise for the farmer in connection with a transaction of that sort. The aim of the amendment is to provide in some degree some small measure of defence for the farmer. Those who have studied the Second Interim Report of the Banking Commission on agricultural credit will have noticed the admissions that are made in it with regard to advances made at a certain period for the purchase of farms. Most of us will remember that in the first seven years after the great European war wholesale inflation took place; there was the most extraordinary debasement of the currency in history. There had been, as we are all aware, a gold basis for the currency, and an obvious limitation existed upon the issue of bank notes as representative money. But once the stage in the war was reached at which these restrictions were removed, there was wholesale debasement of currency, there was an unlimited issue of bank notes, and, furthermore, one of the evils of the banking system which will yet have to be challenged if society is to be saved from being a slave altogether to the monied interests, was in operation, that is, the issue of overdrafts by banks to persons, merely honouring the cheques that these persons are empowered to write and sign against some security, or with nothing at all except what the mere ipse dixit of the bank directors allows them to draw.
In that period of inflation everyone who thought he saw a good thing, as it is called, everyone who thought he saw a means of making money if he had capital, got advances of this representative and flat money—mere paper. Amongst the other victims of this inflation were Irish farmers, who, seeing prices high, cattle selling at double the price they used to fetch normally, were induced to buy other farmer in the hope of making wealth. In those transactions the banks participated. That is not a mere allegation; the Banking Commission itself admits it. I should by right quote largely from pages 9 and 10 of the report, but for brevity sake I will confine myself to this one passage:—
Irish banks, like banks in other countries, undoubtedly made unduly heavy loans to farmers and farm interest. At that time land values were high and rising, and there was a prevailing belief all over the world that they would be maintained. Since then they have in many cases shrunk by 50 per cent., and bank loans which in 1920 appeared to be protected by ample margins are now of questionable value.
That is, bad debts.
Certainly many such loans can be paid off only slowly, or, in other words, they have assumed a "frozen" character. That banks in such cases should be reluctant to increase their commitments on land or the security thereof is natural.
About 1920 or 1921 the order came from the financial heads, great banking interests, the chiefs of the moneyed interests in Wall Street and in London, to deflate, and these loans were called in, credits curtailed, and notes cancelled. No one here in this island, remote from all these centres of operations, seemed to be aware of what was happening until they suddenly discovered that they were getting only half the prices that in that period of apparent wealth they were receiving for their produce and their cattle. What that means is that a farm bought with low value money has to be paid for in terms of a high value money, money twice the value, so that while the farmer and the workman are being exhorted to more and fuller production, really to meet these liabilities in the ordinary way would require more than double ordinary production.
Many small farmers, and some large farmers, are in a bad way on account of these transactions into which they were induced to enter. I will read out, with a few permissible disguises, details of two or three typical transactions of the kind to which I am referring. This is one case, where a farmer—A—living in a western county borrowed from the Bank of Ireland in his town in the autumn of 1920 a sum of £15,000 to pay for a farm. The rent was pretty high. I cannot give the details, because it might be possible for some Sherlock Holmes to identify the borrower, but it was over £300. The area was about 600 acres and the rent works out at something like £25 an acre. Interest paid to the bank is £4,236, and amount now owing to the bank is £15,000—that is, the original advance and one year's interest. The position of the purchaser at the date of purchase was an overdraft in the bank of close on £2,000. Security, nature and amount of, held by the bank—all the security of any use that the bank holds are the deeds of a near relative's place, on which there was an incumbrance. Now, the bank advanced to this man, who is in this peculiar financial position, and with that type of security, £15,000, and that is still owing. I submit that the bank was a participant in a speculation at a particular moment; furthermore, the money advanced was representative money, paper, not a gold basis, and no gold equivalent or security therefor.
I take as a second example farmer B, this time in the Midlands and with another bank. In the summer of 1921 he bought a farm, the price of which was £1,900. He borrowed from the bank a sum slightly below that amount. The farm is free of rent, the area a little over twenty acres. That was a pretty stiff price. He has paid nearly £1,000 in interest to the bank, but still owes the bank the original advance, plus twelve months' interest. At the date of purchase his position was that he owned a very small farm of what he describes as fair land. He is a married man with four children. He had four guarantors, I should add, one of them solvent. I will take another case. I have several, but this one will suffice. It is the case of Mr. C, again in the Midlands, the same bank but not the same branch. The farm was bought early in 1920, the price paid £6,000, amount borrowed from the bank £4,500, interest paid to the bank about £2,000, amount now owing £4,500, the original amount borrowed. At the date of purchase the purchaser was employed on the farm of a relative. The security held by the bank was another relative's comparatively small farm.
The position is, naturally, that those who are struggling in these days of adversity to meet these liabilities find that they cannot meet them, and they are told that it is owing to economic law that they are hit so hard. Just as we used to hear a good deal about the iron law of wages we are asked to believe that this pressure and this hopeless condition of the farmers, of which these examples are typical, are like the cases of the men where the Mississippi has overflowed its banks, what the lawyers call the act of God. But what I want to draw attention to is that this is not the act of God; it is the act of the banking firms, it is the work of the moneyed interests, the inflation brought about by them and the sudden deflation brought about by them. The order went forth from the headquarters of the banking interests, deflation began, and this unhappy position has been created. If it were proposed that a bank should be able to shift its losses by forcing upon a farmer an agreement as to the amount at which the indebtedness should be fixed and so enable the farmer to come to the Credit Corporation and ask for an advance, it is quite easy to see how pressure, undue and unfair, could be put upon the farmer to call it an agreement, whereas in reality it was a one-sided case.
I daresay the Minister will reply that the Credit Corporation may be trusted to do what is right and to exercise wisdom and discretion as in the other case. The important thing is that the public have a right to know whether or not a State body is being set up, with State guarantees, in order to enable banks to get free of difficulties into which they have themselves entered and into which they induced others to enter, when everyone believed that great profits were to be made out of agricultural produce. The important thing to note is that the Banking Commission, which was made up largely of bankers, were fair enough and frank enough to point out the real character of a joint stock bank, and to point out that it has no bowels of compassion—in Biblical language— and no heart of mercy. I am quoting from page 10, on which, after making a number of comments, they say:—
"All this is no necessary criticism upon the banks themselves, but is merely a statement that since they are organised as deposit banks they are charged with a certain kind of responsibility; and it is their primary duty to discharge that responsibility. They are, moreover, concerned with the shareholders' demand for a profit, and, like private enterprises, they naturally feel it a duty to promote the interests of their owners to the utmost degree that is honourably possible."
In that apologia for the joint stock banks there is an admission which is followed up later:—
"That banks in such cases should be reluctant to increase their commitments on land or the security thereof is natural. That in such cases the farmer who desires to borrow upon what he considers good security should feel that the banks are unduly conservative or restrictive, is equally natural."
The difficulty, therefore, for a farmer to carry on with his bank, to which he owes money already, is that the bank takes the same view as the Minister for Agriculture expressed here the other day, that land is a very poor security. Deputy Sir James Craig followed him almost immediately with the remark that farming was in a very bad way.
That being the view the banks have, they will be very naturally anxious to get their accounts settled up and they could put pressure upon a farmer to agree by saying to him: "The amount of the indebtedness is so-and-so, now go along and get from the Credit Corporation the amount to clear that off and all will be well between us, and you may get a further advance from us if you need it, or, at any rate, you will have your credit restored." It is to prevent transactions of that kind in the interest of the farmer who is hit that the amendment is proposed.