Getting the Farm Credit System Back to its Mission

Today is an important day for rural/agricultural bankers. For the first time in over a decade, the Farm Credit Administration (FCA) will appear before the U.S. House Agriculture Committee for an oversight hearing. We bankers have been asking for this scrutiny for several years and are pleased that committee Chairman Mike Conaway has acted upon our request. It seems to bankers that the FCA, which is the regulator for the Farm Credit System, has much to answer for.

Indiana Rep. Jackie Walorski sits on the House Agriculture Committee, and she has expressed concern to me regarding actions taken by Farm Credit System entities which appear to have strayed from their mission to serve young, beginning and small farmers and ranchers. In particular the entity of CoBank has made huge loans to Verizon, AT&T and Frontier, all of which are large, investor-owned telecommunications companies. If that were not enough, CoBank also has consolidated the debt of the Cracker Barrel restaurant chain.

Joe Kessie, senior vice president and head of agricultural services at Lake City Bank, Warsaw, is vice chairman of the American Bankers Association Agricultural and Rural Banking Committee. Kessie met yesterday with Rep. Walorski and is scheduled to attend today’s committee meeting. The Indiana Bankers Association appreciates Mr. Kessie’s leadership, and we thank him for sharing his expertise on behalf of all agricultural bankers.

We expect that numerous questions will be asked of the witness from the FCA regarding the aforementioned loans being allowed by the FCA. The adequacy of the FCA as a safety and soundness regulator will also likely be called into question. I anticipate that pricing by the FCS will be a question, too, as the regulation clearly states that FCS may not offer predatory pricing not available to other lenders. I hear frequently from agricultural bankers suggesting that this occurs more often than not.

While it is impossible to know what the longer-term outcome of today’s meeting will be, it certainly is gratifying to at last put the FCA on the hot seat. We hope that this is just the beginning of getting the Farm Credit System back to its mission and away from the predatory and expansionary lending practices of late. It will be up to bankers to keep this issue on the forefront of legislators’ minds.

For many years, we have asked that the Farm Credit System and credit unions be put on an equal playing field with banks. I frequently hear from bankers regarding the unfair competitive advantages that these tax-advantaged organizations enjoy. All providers of equal services should be held to the same rules, regulations and tax levels to create a fair and healthy economic marketplace. Today could mark a turning point for arriving at that fair economic marketplace. It will, however, require vigilant, routine advocacy from the banking community nationwide.

– S. Joe DeHaven

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