Magazine article American Banker

Spare Change: Ely Can't See `Farm' in These Loans

Magazine article American Banker

Spare Change: Ely Can't See `Farm' in These Loans

Article excerpt

The banking consultant Bert Ely is so convinced Farm Credit lenders steal business from tax-paying banks that, unlike most Washington types, he is willing to get his wingtips muddy to prove it.

With camera in hand, Mr. Ely recently ventured into the rolling hills of Fauquier County, Va., to examine properties purchased with Farm Credit loans. There he found at least six properties that, according to his monthly newsletter, Farm Credit Watch, "obviously violated the intent of the Farm Credit Act."

The properties, which he found through court records, included a "337-acre estate located in a tony area of the county" that, as far as he could see, had no farm component. Another is a cornfield that Mr. Ely said had been purchased by a developer who has filed requests to have its zoning changed.

"These aren't real farmers and ranchers," he said.

As Mr. Ely sees it, Congress created the Farm Credit System to be a lender of last resort to farmers and ranchers who could not get credit elsewhere. However, he has maintained for years -- most notably in his newsletter, published by the American Bankers Association -- that Farm Credit lenders overstep that authority and use their tax-exempt status to offer lower-interest loans to banks' customers.

But Donald Shiflet, the chief executive officer of the $850 million-asset Farm Credit of the Virginias, which made the loans Mr. Ely condemned, said they comply with the intent of the Farm Credit Act, because these customers "intend to conduct some kind of agricultural activity. …

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