Magazine article American Banker

Farm Credit Agency's Charter Plan Hits Snag

Magazine article American Banker

Farm Credit Agency's Charter Plan Hits Snag

Article excerpt

The Farm Credit Administration's controversial plan to grant national charters to Farm Credit System lenders beginning Jan. 1 is likely to be delayed until it can be reviewed by Congress.

In a report released Tuesday, the General Accounting Office concluded that the plan -- which would allow lenders to make loans outside their designated territories -- is subject to a formal review under two federal procedural oversight laws. House Banking Committee Chairman Jim Leach, a vocal critic of the national charter initiative, immediately called on Farm Credit Chairman Michael M. Reyna to suspend all action on pending applications.

For the Farm Credit Administration "to go ahead at this point with national charters absent Congressional authorization (and) Treasury Department approval ... would amount to an assault on the constitutional process of American governance," Rep. Leach, R-Iowa, said.

Farm Credit lenders are permitted to make loans in only their own geographic districts, but under the national chartering proposal, lenders could operate anywhere in the country.

Mr. Reyna has argued that Farm Credit lenders must be able to tap new markets to remain viable. And though some smaller Farm Credit lenders have voiced concern about out-of-market lenders picking off their best customers, most of the nation's 159 Farm Credit lenders have applied for national charters.

Hal Decell, a spokesman for the Farm Credit Administration, said the agency would not comment on the GAO report until it had time to review it. …

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