Consideration of Federal Aid Unlikely until Budget Is Released

By Naylor, Bartlett | American Banker, February 1, 1985 | Go to article overview

Consideration of Federal Aid Unlikely until Budget Is Released


Naylor, Bartlett, American Banker


WASHINGTON -- Farm creditors called for immediate help from the government at a public hearing Thursday, but industry observers said Congress is unlikely to consider any specific proposal until the President's budget is released this weekend.

A.J. "Jack" King, president of the Independent Bankers Association of America, said "the time for effective action is slipping away." He called for Farmers Home Administration loan guarantees to be expanded by "several billions of dollars."

Mr. King, Bank of America vice president Fred Martin, Melvin Todd of the Farm Credit Council, and a dozen other agriculture industry executives addressed a public hearing chaired by Sen. John Melcher, D-Mont. The unusual hearing was organized by Sen. Melcher because Sen. Jesse Helms, R-N.C., declined to hold a formal session at this early stage before his Agriculture Committee, according to a Melcher aide.

Responding to pleas for help, Sen. Melcher promised he would "run with the ball" but said that farm and farm credit lobbies must first come up with specific proposals.

More than 4,000 banks have at least 25% of their total loan portfolio committed to farm and ranch loans, according to Mr. King, who is also president of the Valley Bank of Kalispell, Mont. About 1,700 of these have more than 50% of their loans to farmers.

Bank of America reportedly has a $2 billion farm-loan portfolio, and 15% are 90 days or more past due.

Forty-four of the 79 bank failures in 1984 were agriculture banks, Mr. King pointed out. 10% to 40% Could Face Failure

At least 10% of these lenders will fail or face "serious financial pressure," Prof. Luther Tweeten of Oklahoma State University predicted at a public policy forum here earlier in the week. Other scholars at the two-day symposium, sponsored by the American Enterprise Institute, suggested that the farm lender failure rate could be as high as 40%.

Despite the gravity of the problem, there has been little response from Washington. The IBAA itself proposed a $1 billion increase in the Farmers Home Administration loan guarantee program last summer. …

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