208 WHEAT PRODUCTION IN NEW ZEALAND 



general policy to grant such loans on an extensive scale. 

 They prefer to give a farmer only temporary assist- 

 ance on the understanding that in a season or two 

 he will be in a position to cancel the overdraft. A 

 departure from this conservative attitude is an infringe- 

 ment of the laws of good banking, as was well demon- 

 strated during the optimism of the "seventies." The 

 advent of several land and mortgage companies was 

 threatening to deprive the banks of some of their com- 

 mercial functions, and during the "seventies" a keen 

 rivalry sprang up between the banks and the firms. The 

 ultimate issue was that in the "eighties" many of our 

 banks could almost be classed as land banks, with the 

 disastrous results well known to those who remember 

 the crisis of 1894, when the Government had to come 

 to the assistance of the Bank of New Zealand. It is well 

 that the banks have now realised the risk involved in 

 granting credits too extensively on such non-liquid 

 assets as land. 



The pioneer work in providing capital for farmers 

 is left to the enterprise of "finance and auctioneering" 

 firms. While, from the point of view of waste of energy 

 and labour, the competitive system is seen here, probably, 

 at its worst, the total net result of the operation of these 

 firms is distinctly beneficial to the community. An 

 enterprising and efficient man, with comparatively little 

 capital, has at his disposal the full confidence of the 

 firm which supplies him with adequate working capital, 

 provided he maintains his efficiency and enterprise. But 

 at the same time the firm makes the stipulation that his 

 produce shall be bought and sold through its agency, 

 and thus the firm reaps a double gain. But in providing 

 the young farmer with the necessary capital at the risk 

 of losing a great part of it, the firm is performing an 

 extremely useful function viewed from whatever stand- 

 point. 



