Academic journal article ABA Banking Journal

FCS Abandons Key Mission, Says Report. (Community Banking)

Academic journal article ABA Banking Journal

FCS Abandons Key Mission, Says Report. (Community Banking)

Article excerpt

What's wrong with these pictures?

* Several Farm Credit System institutions participated in $30 million worth of a $499 million loan to an individual who wanted to buy 460,000 acres of timberland in Alabama, Tennessee, and Mississippi. The borrower? WorldCom CEO Bernie Ebbers.

* A pretty 50-acre wooded hillside estate, including a fieldstone mansion, showing scant evidence of farming activity, was purchased with an $840,000 first mortgage from an FCS lender.

These are just two examples cited by Bert Ely in his latest ABA-sponsored report on the Farm Credit System, entitled The Farm Credit System: Reinvented and Mission-Challenged. In it, Ely contends that the system and its constituent institutions have outlived their original mission, ignore what's left of their original duties, and use government-subsidized lending to aid those who can very well afford private-sector lending.

The system, Ely states, was created in 1916 and expanded in 1933 to meet needs that no longer exist. Like any government bureaucracy threatened with extinction, the FCS has tried to reinvent itself, but has done so in a manner that Congress never intended or envisioned."

Ely, a Washington, D.C.-based consultant and researcher, states that the misguided reinvention of the Farm Credit System has run along three lines:

1 System wide consolidation-FCS has shrunk from more than 800 local lending organizations in 1984 to roughly 104 at present, with the shrinkage leading to perhaps as few as 20 organizations by 2010. …

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