Magazine article American Banker

Proposal Could Qualify Backyard Gardeners for Farm Credit Loans

Magazine article American Banker

Proposal Could Qualify Backyard Gardeners for Farm Credit Loans

Article excerpt

The banking industry is up in arms over what seems like a simple question: how to define the term "farmer."

According to the Farm Credit Administration, the answer is pretty straightforward. A farmer is someone who is generates income from actively producing agricultural products.

Yet that seemingly simple definition is at the heart of a Farm Credit Administration plan that has bankers riled.

In the Aug. 13 Federal Register, the agency proposed expanding the universe of people who are eligible for Farm Credit loans.

But the definition of a "bona fide farmer" is so vague that anybody making money off the tomatoes grown in the backyard could borrow from the system, industry representatives complain.

"You could grow vegetables for a hobby on a small plot of land and occasionally sell them at a farmers market to pass the test in this proposal," said Mark Scanlan, the Independent Bankers Association of America's agricultural lobbyist. "This will become a very serious competitive problem for rural bankers."

What's worse, lobbyists said, someone who qualifies as a bona fide farmer also would be eligible to receive Farm Credit System loans for "housing and domestic needs."

This throws the door wide open for the system to extend credit for nonagricultural reasons. Indeed, these "needs" could be interpreted to include summer homes, yachts, and family vacations, said John M. Blanchfield, associate director of the American Bankers Association's agricultural banking division.

"This is a government-sponsored entity that is getting into the commercial bank business," he said. …

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