The Ongoing Battle Between Banks and the FCS

In last week’s blog, I described the forthcoming Senate Committee on Agriculture, Nutrition, & Forestry hearing to satisfy the committee’s responsibility to provide oversight to the Farm Credit System (FCS). That meeting took place last Thursday, May 19. I predicted that the Farm Credit System would come to this meeting better prepared to defend its competitive advantages over the banking industry than it had at the House Agricultural Committee version of an oversight hearing nearly two years ago. That prediction proved to be accurate.

Testimony from a farmer who borrows from a Farm Credit System bank, a manager of a Farm Credit System bank, and an executive with the Farm Credit System did a much better job of explaining the need for the Farm Credit System, while glossing over the obvious competitive advantages the FCS has over the vast network of community banks. Bankers representing both the American Bankers Association and the Independent Community Bankers of America provided excellent testimony, as they had at the House Agricultural meeting previously. Less time was spent on some of the egregious examples of loans from the Farm Credit banks to companies like Verizon and Cracker Barrel.

If the House committee hearing was a win for bankers, and the Senate committee hearing a tie, where do we stand now? Should we expect any relief for banks competing against the Farm Credit System? A single hearing does not make or break the battle that continues between bankers and Farm Credit System supporters. The reality is that, while the hearing did not change any legislator’s opinion, significant structural advantages provided to the Farm Credit System remains to be dealt with. My opinion is that this battle will rage on for quite some time.

No one expected this committee hearing to be the sole impetus for changing the Farm Credit System. The hope was that this would be another step in that process. Both sides can argue that they won, hence my statement above that this one was a tie. An important election will be the focus of legislative attention for the remainder of 2016. Therefore nothing will occur except for some appropriation bills until after the election. Then there will likely be a lame duck session of Congress, during which many issues deemed to be of importance by legislators will be bundled into a bill or bills and passed. Do not count on anything relative to the Farm Credit System to be part of that packaging, but I do think there will be some community bank regulatory relief included.

Bankers knew from the beginning that taking on the Farm Credit System would be a long process, with no guarantee of success. Last week’s hearing was merely another step in the right direction to level the playing field between banks and the Farm Credit System.

– S. Joe DeHaven

2 Responses to The Ongoing Battle Between Banks and the FCS

  1. Thanks for the update, Joe – much appreciated. And truly appreciate IBA’s efforts in this battle on our behalf.

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