By Brian NixonToday’s House Agriculture Committee hearing on the role of the Farm Credit System — from the perspective of the System’s regulator, the Farm Credit Administration — featured pointed questions from lawmakers about mission creep, retained mineral rights following foreclosures and the risk to taxpayers posed by “the only GSE that makes loans at the retail level.”
The latter phrase is the description of the Farm Credit System offered by Farm Credit Administration Chairman and CEO Kenneth Spearman, who was one of three FCA witnesses testifying.
“While Congress has generally outlined the authority by which the Farm Credit System may fulfill its ultimate mission of ensuring a dependable source of credit for agriculture and rural America, I realize that authority is not necessarily delineated with bright line rules,” said committee Chairman Michael Conaway (R-Texas). “Therefore, we largely rely on FCA as the regulator to ensure that System banks are doing their part to stay within the bounds of the Farm Credit Act. In that vein, there has been much scrutiny of System banks financing deals with major telecommunications networks.”
As ABA explained in its recent white paper, the System’s mission makes no mention of lending to major corporations, to non-farm businesses, and for golf courses, hunting preserves and weekend retreats.
“We never imagined this mission statement to include the kind of lending that has taken place, particularly related to telecommunications,” said Rep. Steve King (R-Iowa). Such loans include CoBank’s $725 million loan to Verizon to buy out Vodafone’s stake in Verizon Wireless. “If we don’t have this hearing annually, we simply won’t be doing the oversight we need to,” he said.
“The spirit of the mission, and what’s actually happening, is of concern,” said Rep. Bob Gibbs (R-Ohio).
“Certain people getting outside the parameters of what the FCS was set up for, I believe, is putting the whole system at risk,” added Rep. Austin Scott (R-Ga.).
Michelle Lujan Grisham (D-N.M.) reflected the committee’s bipartisan concerns in emphasizing the need for the Farm Credit System to “strike the right balance” and “not compete inappropriately with community banks.”
In a statement, ABA’s new president and CEO, Rob Nichols, called the committee’s first oversight hearing in more than a decade –- scheduled at the urging of ABA and the state bankers associations –- “an important step in putting a spotlight on the Farm Credit Administration’s failure to effectively regulate the FCS.”
“The Farm Credit System has not only used its taxpayer subsidies to undercut competition from local banks, but has, at the same time, moved far beyond its mission,” Nichols said. “While the Farm Credit System provides vital services to American farmers, it has used its significant taxpayer benefits to enhance its portfolio and to leave a large part of the farming community behind, especially when it comes to serving young, beginning and small farmers. The FCA’s own annual reports clearly show that the largest portion of FCS’s lending activity is focused on large farm conglomerates, agribusinesses, utilities and companies having little to do with farming.”