FOR IMMEDIATE RELEASE
ICBA Comments on Rabobank Purchase of FCSAmerica
Washington, D.C. (Aug. 2, 2004) - Responding to the proposed purchase of the Farm Credit Services of America by Rabobank Group, a $500 billion-asset Dutch cooperative bank, the president and CEO of the Independent Community Bankers of America, Camden R. Fine, said the transaction has significant implications for the U.S. agricultural credit market. While ICBA will closely evaluate the proposed transaction before taking a final position, and expects Congress may do the same, Fine said he believes the purchase would raise several key questions and issues.
The current structure and makeup of the Farm Credit System (FCS) is not the most efficient and beneficial for farmers and ranchers. The FCS should be "opened up" and restructured to allow community banks access to FCS funding for agricultural loans, so that all farmers and ranchers have more choices for obtaining low cost credit, ICBA said.
The FCS has argued for "modernization" in recent years. While the Rabobank purchase is a type of modernization that fuels greater competition, it also raises obvious questions. Community banks must often fund loans through their core deposits, which are becoming more difficult to raise as rural populations steadily erode. If community banks could more easily pledge agricultural assets to fund rural loans, wouldn't farmers benefit by greater access to GSE funds offered from domestic lenders?
The FCS has consolidated to fewer than 100 institutions and has sold itself to the highest bidder in a major geographic district. Community banks have thousands of locations throughout rural America that could provide more funding for farmers if they could access the FCS' low-cost funding structure.
If both managers and members make huge profits from value generated largely from the entity's GSE status and tax breaks, is it appropriate to do so without returning any money to taxpayers? And, if FCS managers and members are willing to sell out to the highest bidder rather than keep their profitable FCS cooperative intact, is there still a need to provide tax breaks and cheap funding for multi-billion-dollar FCS associations that compete with tax-paying community banks?
"While we expect Congress will scrutinize the proposed acquisition, perhaps this is also a time to recast the FCS by allowing community banks access to this GSE funding source to provide their farm and ranch customers the same access to low-cost funding as FCS customers now enjoy," said Fine. "For the sake of all farmers, the time for preferential benefits to a select few large FCS lenders should end. To those who want 'modernization' and even more competition in rural farm markets, not stopping the Rabobank purchase is one approach; allowing community banks real access to the FCS funding window would also accomplish this goal. Certainly taxpayers and commercial banks have a stake in the broader issue of FCS 'modernization.'"