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ICBA Opposes Cuts in USDA Guaranteed Farm Loan Programs

Higher Fees Would Hurt Farmers & Community Banks

Washington, D.C. (February 15, 2006)— The Independent Community Bankers of America (ICBA) in a joint industry letter today urged Congress to reject budget cuts offset by proposed new user fees in connection with the Farm Service Agency (FSA) guaranteed farm loan programs.

“FSA guaranteed loan programs have been a highly successful and cost-efficient method of facilitating a steady supply of credit to farm borrowers,” ICBA, American Bankers Association and Farmer Mac said in the joint letter to congressional agriculture and appropriations committees. “These programs leverage a modest federal investment to produce a much larger loan volume. Because the loans are delivered by the private sector, administrative costs to the federal government are negligible. Loan losses in the program have been very low, keeping costs in check.”

Higher fees for the guaranteed farm loan programs and new fees on annual lines of credit will impede farmers’ ability to repay their loans. 

“USDA’s guaranteed loan programs are a last resort option and many borrowers are facing higher production costs this year, weather-related disasters, and low farm prices. The suggested user fees ultimately make credit harder to obtain for these borrowers and seem to undermine the intent of Congress,” said John Evans Jr., chairman of ICBA’s Agriculture-Rural America Committee and CEO of D.L. Evans Bank, Burley, Idaho.   Evans added that the cuts disproportionately affect rural community banks and noted that the guaranteed loan programs provided $3.7 billion in financing to farmers last year. 

The letter noted that the proposed budget and rulemaking changes constitute a fundamental change in FSA loan programs with damaging consequences for farmers and ranchers.   “The budget request proposes to dramatically reduce or eliminate funding for guaranteed farm operating and farm ownership loans and implement new fees on users of the program.  These new fees, which in some cases would be more than double what they are today, would force higher borrowing costs on farmers and ranchers at a time that they can least afford it.”