Magazine article American Banker

Should GSE Fix Include Farm System?

Magazine article American Banker

Should GSE Fix Include Farm System?

Article excerpt

As Congress mulls legislation that would strengthen the regulation of Fannie Mae, Freddie Mac, and the Federal Home Loan banks, banking trade groups are urging lawmakers to also consider reform of the one government-sponsored enterprise rural banks love to hate: the Farm Credit System.

The Independent Community Bankers of America sent letters Monday to the chairmen of the House and Senate agricultural committees in which it argued that the Farm Credit System's regulator, the Farm Credit Administration, has been too permissive in allowing the system's lenders to compete with banks.

Choosing the week of its annual convention to make its case, the ICBA said any bill that tries to toughen regulation over the housing GSEs should include provisions to reform the Farm Credit Administration.

The Farm Credit System "has engaged in significant retail 'mission creep' over the years," and its regulator "must be reformed" to ensure that the original mission is strictly adhered to, wrote ICBA president and chief executive Camden R. Fine in identical four-page letters to Rep. Bob Goodlatte, R-Va., and Sen. Saxby Chambliss, R-Ga.

"The ICBA firmly believes that Congress should not limit its regulatory structure to the housing GSEs," Mr. Fine wrote.

The American Bankers Association has also weighed in on the issue and has drawn up a list of "talking points" that it began circulating on Capitol Hill last month. It argues that if a new regulator is created for the housing GSEs it should have jurisdiction over the Farm Credit System and Farmer Mac, which is also regulated by the Farm Credit Administration.

At this point Congressional panels looking at GSE reform have shown little interest in lumping the Farm Credit System in with other GSEs. The issue did not come up in a House Financial Services subcommittee hearing Wednesday (see related story, page 1), and Keith Williams of the Senate Agricultural Committee said Wednesday that no hearings are planned.

Still, the stepped-up lobbying has raised the tension between banks and Farm Credit lenders, which bankers have claimed use GSE tax breaks to undercut banks on rates to farmers and ranchers.

Kenneth E. Auer, the president of the Farm Credit Council, a trade group representing the lenders, said this week that the ICBA's letter was an effort to "play to the crowd" at its convention in San Antonio.

Mr. Auer was made aware of the letter by American Banker. He responded with a three-page statement in which he called it "another example of a trade association baiting its members into continuing to pay dues."

Congress created the Farm Credit System in 1916 to ensure that rural residents would have access to credit. Among bankers' complaints is that the system's lenders have strayed from being a last resort and now actively court more creditworthy borrowers.

The ICBA's letters to Congress called for three major changes:

* Expand the Farm Credit Administration's three-member board with two members who have never been borrowers or employees of the system. …

Search by... Author
Show... All Results Primary Sources Peer-reviewed


An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.