Lawmakers echoed bankers’ concerns about “mission creep” by the government-sponsored Farm Credit System in a House Agriculture Committee hearing today on the system’s performance and overall safety and soundness.
“My rural community bankers, they’re not happy” about the Farm Credit System’s participation in loans to “similar entities” that appear to fall beyond the scope of FCS’ statutory lending authority, acknowledged Rep. Bob Gibbs (R-Ohio). According to the FCS representatives testifying before the committee, as well as Farm Credit Administration Chairman Dallas Tonsager, similar entity loans are allowed to make up 15 percent of an individual FCS bank’s total assets, and they account for roughly 3 percent of the system’s total assets. As Gibbs noted, however, “when you’re looking at the whole Farm Credit System, that’s still a lot of money.”
Farm Credit employees countered that they plan to continue pursuing opportunities to finance communications infrastructure projects in rural areas, like those that provide wireless and broadband capabilities. “We’re doing a lot of that business. We’d like to do more,” said CoBank president and CEO Tom Halverson.
The American Bankers Association has long criticized FCS for lending beyond the scope of its mission, highlighting a number of instances in recent years where FCS banks — such as CoBank — made multimillion dollar loans to telecom giants like Verizon and AT&T, while curbing lending to young, beginning and small farmers. Loans to small farmers have fallen from 30.3 percent in 2003 to just 14.1 percent in 2015, ABA noted in a statement submitted for the record of today’s hearing. Furthermore, the majority of FCS’ outstanding loans are in excess of $1 million, ABA pointed out, adding that “any farmer able to take on over $1 million in debt does not need subsidized credit.”