Congress typically does not include Farm Credit Administration issues in
agriculture policy, but bankers and Farm Credit lenders -- pushing vastly
different agendas -- are asking lawmakers to do so when they begin debating a
farm bill next year.
Whether members of Congress will be listening is another matter.
The Farm Security and Rural Investment Act of 2002 expires Sept. 30, the
end of the current fiscal year, and lawmakers are expected to start on the
farm bill during the session that begins in January.
Farm Credit lenders would like the bill to include provisions widening
the scope of their lending beyond agriculture.
The banking industry, meanwhile, is loath to give the
government-sponsored Farm Credit lenders any more powers and, in fact, will
be asking Congress to consider privatizing the 90-year-old system that was
created to ensure that rural America had reliable access to credit.
It is unclear whether the new Democratic majorities in Congress will be
willing to address Farm Credit-related issues in the farm bill, however.
Calls to several members of the House and Senate agricultural committees were
not returned.
But Alise Kowalski, a spokeswoman for the House Agriculture Committee,
said a separate law deals with Farm Credit System issues and the general
feeling is that any change in the system should be made directly, through
amendments to the Farm Credit Act. (The 2002 law made some technical changes
in the Farm Credit Act, but these were seen as minor.)
Though not ruling out a debate on Farm Credit matters, Ms. Kowalski said,
"We would be very cautious about adding anything" to the next farm bill. "Once
you start doing that, there is no end in sight."
The Farm Credit Council, a trade group representing most of the nation's
roughly 100 Farm Credit System lenders, released a report this year called
the Horizons Project that includes recommendations for improving the system
to better meet the needs of U.S. agriculture.
Kenneth E. Auer, the council's president, said the system's lenders would
like Congress to include a provision in the next farm bill to let them make
housing loans in areas with a populations of up to 50,000. The current
charter only lets Farm Credit lenders make nonfarm housing loans in areas
with up to 2,500 people.
Farm Credit lenders also are asking for more flexibility to finance
businesses that primarily serve agriculture. In general, the system can only
lend to businesses that are owned by farmers or to cooperatives owned by
farmers. Modern farming has changed, Mr. Auer said, and the system's lenders
would like to have more flexibility to lend to businesses and cooperatives
that serve farms, whether or not they are exclusively owned by farmers.
"The proposals we will lay out are pretty modest," he said. "It is to get
the flexibility to serve agriculture and rural America today."
But banking industry advocates say these proposals are an attempt to move
the Farm Credit System further away from its legally defined mission.
The Farm Credit System's lenders do not pay federal taxes on the income
they earn from long-term real estate loans. Though they do pay state and
local taxes in some states, bankers argue that the federal tax exemption
gives them the ability to unfairly undercut private-sector lenders in the
competition for agricultural loans.
Bert Ely, a consultant in Alexandria, Va., and a longtime critic of the
Farm Credit System, said it should be serving small farms and beginning
farmers but that many of its lenders are financing well-to-do farmers and
ranchers who would easily qualify for bank loans.
Any effort to broaden the Farm Credit System's powers would be met with
fierce opposition, he said. "It is highly unlikely [that Farm Credit lenders]
will get what they want through amendments slipped quietly into the farm bill,
because the bankers are raising hell about this," Mr. Ely said.
But bankers will not just be playing defense on Farm Credit-related
matters.
Mr. Ely last month released his own report, prepared on behalf of the
American Bankers Association, that called on Congress to privatize the
system. He and the ABA are also asking Congress to require Farm Credit
lenders to register and file reports with the Securities and Exchange
Commission or disclose enforcement actions imposed by their regulator. Mr.
Ely pointed out that the Farm Credit System is the only government-sponsored
enterprise that does neither.
The House Agriculture Committee's Ms. Kowalski said that if specific
language or bills were offered, they could be considered. But if a debate
does happen, she said, it should answer whether the system's lenders are
adequately meeting the needs of U.S. agriculture. "If they're not, that is
when we go into how do we make this better and how do we change it," she
said.American Banker
