In testimony before the Senate Agriculture Committee on behalf of ABA today, Leonard Wolfe, president and CEO of United Bank and Trust in Marysville, Kan., raised concerns about the size, complexity and tax advantage of the Farm Credit System and called for closer congressional oversight of the government sponsored enterprise — a key component of ABA’s Agenda for America’s Hometown Banks. Wolfe, chairman of ABA’s Ag Credit Task Force, said that the FCS has expanded its operations outside of its intended mission, making loans to large entities over young, small and beginning farmers and ultimately passing on few of its tax advantages to its customers.
Wolfe highlighted the significant risk that FCS poses to taxpayers, who would be left to foot the bill if the GSE — which holds $304 billion in total assets — were to run into financial trouble. This obligation was formalized in 2013 when the Farm Credit System’s Insurance Corporation secured a $10 billion line of credit from an arm of the U.S. Treasury.
“[FCS’s] increased reliance on taxpayers is a disturbing development, to say the least, and the Farm Credit Administration should be forthright about what that means for taxpayers,” Wolfe said. “We urge Congress to perform an autopsy on the system to ensure that their charter of helping young, beginning and small farmers is being followed. If it’s not, we urge Congress to remove the significant tax break provided to the system.”
Wolfe added that lending by the FCS to YBS farmers has steadily declined over the years, dropping from 30 percent of total new loans in 2003 to just 14.1 percent in 2015. At the same time, FCS has increased its lending to large borrowers — at the end of 2015, 45.5 percent of all outstanding loans made by the GSE were in excess of $5 million, including multimillion dollar loans to telecom giants like Verizon and Frontier Communications. “Clearly, those who would benefit the most from the highly subsidized credit made available by the FCS are not receiving the benefits that Congress intended them to receive,” Wolfe said.