Magazine article American Banker

Farm System Bailout Won't Include Banks, US Official Says

Magazine article American Banker

Farm System Bailout Won't Include Banks, US Official Says

Article excerpt

DALLAS -- Legislation to bail out the Farm Credit System could be introduced into Congress as early as today, U.S. Undersecretary of Agriculture Frank W. Naylor Jr. Said.

But commercial bankers will not be included in any aid package worked out for the financially ailing agricultural lender, he told those attending the American Bankers Association's annual agricultural bankers conference. "I frankly don't think there will be any [legislation introduced] that has any application to commercial banks," he said Monday.

The Farm Credit System is a network of federally organizaed banks and cooperatives, which together compose the largest source of farm financial.

Bankers have pushed to be included in any federal assistance to the Farm Credit System, which recently asked Congress for $6 billion in aid. But Mr. Naylor told reporters that banks will have to rely on the Farmers Home Administration guarantee program, "which, frankly, will meet their needs." The FmHA is an arm of the Agriculture Department that provides credit for, among other things, family farms, soil and water conservation, and rural housing and development.

Later, at a session with bankers, he said major flaws in the guarantee program had been cleared up in recent months, and he expected "very substantial use of the program," which was not heavily used by bankers last year.

Senate Agreement on Buydown

In addition, Mr. Naylor said an agreement has been reached with the Senate for an interest rate buydown on FmHA-guaranteed loans. By this agreement, a bank could write down up to two percentage points on interest rates, which the government would match.

Harold L. Volkmer, D-Mo., a member of the House Agriculture Committee, told bankers at the conference that any help for the Farm Credit System should not give the system a competitive advantage over commercial banks. …

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