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FOR IMMEDIATE RELEASE

ICBA Urges More Equity Capital to Assist Rural Co-ops and Opposes CoBank Legislative Proposal

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Washington, D.C. (Oct. 16, 2003) - Stating that "several new authorities in the farm bill to attract equity capital to rural areas are sitting idle," James E. Caspary, president of the First National Bank of Clifton, Ill., today asked Congress on behalf of the Independent Community Bankers of America to urge the USDA to quickly implement the new authorities contained in the 2002 farm bill.

Caspary also told the House Agriculture Committee that community banks oppose allowing CoBank, the national discount government-sponsored enterprise lender to farmer cooperatives, to finance corporations with little or no farmer involvement.

Caspary is chairman of ICBA's Agriculture-Rural America Committee. The ICBA is the country's largest banking trade association, and the only national trade association that exclusively serves community banks.

The House Agriculture Committee hearing discussed financing and structural issues for farmer-owned cooperatives. Caspary called on the USDA to publish regulations on the Rural Business Investment Program (RBIC) and reduce the amounts of capitalization required for small RBICs to obtain benefits under the program. He also encouraged Congress to require the Farm Service Agency, which has experience making farm loans, to make loan guarantees to individual farmers to purchase stock in co-ops for expansion or start-up purposes, noting the program is rarely used.

Caspary also urged the USDA to immediately issue the simple change of raising the Business & Industry (B&I) low-documentation loan level up to $400,000, (from $50,000), as required in the farm bill. "Reducing paperwork for lenders and their customers in securing rural small business loan guarantees is a complementary step to attracting and maintaining adequate equity capital for rural small businesses," he explained.

The committee hearing on "New Cooperative Business Structures" focused in part on laws adopted in two states designed to attract greater equity capital to rural areas by offering varying degrees of ownership and voting control to outside investors. Caspary noted these laws could allow outside investors to have majority control of farmer-owned cooperatives, adding, "while it is appropriate to explore enhancing equity capital, this should be done in ways that don't potentially lead to the loss of legitimate farmer control of their cooperatives or ways that drastically depart from the bedrock principles of what makes a cooperative a cooperative." He also noted the CoBank proposal appears to fundamentally rewrite its lending charter to finance large corporations with little or no farmer ownership or voting interests and possibly little involvement with agriculture.

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