In a letter to the House Agriculture Committee today, ABA President and CEO Rob Nichols called on members of Congress to more closely examine the activities of the Farm Credit System, citing a number of ways in which the GSE has been allowed to operate outside the scope of its mission. The letter comes almost two months after the committee held its first oversight hearing of the FCS in more than a decade, called after persistent advocacy efforts by ABA and the state associations.
Among the key concerns raised at the hearing was the FCS’ ability to make loans to similar entities, an authority that Nichols said has extended far beyond its original purpose and has since been used to fund telecommunications giants like Verizon and AT&T, as well as nonagricultural initiatives such as casinos and raceways. “We do not believe allowing the FCS to use its tax-advantaged subsidy to participate in corporate lending was Congress’ intention with similar entity lending, and [we]urge the committee to eliminate these practices,” Nichols wrote.
The letter also called for closer scrutiny of indirect lending and shadow banking activities by FCS institutions and better standards for evaluating the FCS’ lending efforts to young, beginning and small farmers — which have declined significantly over the last decade. It also raised concerns about FCS institutions retaining mineral rights on foreclosed properties.
These concerns highlight the need for more frequent monitoring of the Farm Credit System, Nichols said, expressing his hope that the December hearing would be the first step toward more routine oversight of the GSE in the future.