ICBA - Publications - Farm Credit System Seeking New Powers

Farm Credit System Seeking New Powers

MAY 9, 2003


As ICBA reported in our February Ag Update, the Farm Credit Administration's (FCA) recent annual report for fiscal year 2002 revealed what came as little surprise to bankers-that the Farm Credit System (FCS) continues to generate well over $1 billion a year in annual net profits and is experiencing rapidly rising loan volume and market share. In fact, 70 FCS associations were reported to have had double-digit loan volume growth. FCS' share of the agricultural lending market is now over 30%. Against this backdrop, we are witnessing the advent of several new FCS-related proposals aimed at increasing its lending activities and market share even more. To comment on these proposals, described below, bankers should check ICBA's Web site (www.icba.org); in the "Members Only" area click "Ag Issues" & "FCS."

The FCA published in the May 2 Federal Register a notice seeking comment on whether it should repeal, retain, or amend the scope of financing regulations which currently distinguish between full-time "bona-fide" farmers and part-time farmers. Currently, full-time farmers can receive full credit from FCS lenders, but part-time producers can receive only restricted credit as their income sources reflect less involvement in agriculture. Two FCS petitioners asked FCA for changes, including removing the distinction between full-time and part-time farmers as well as allowing FCS lenders to supply producers' "other credit needs," meaning the total scope of non-agricultural financing that a borrower may desire. FCA asks responders the question: "How should we regulate access to the other credit needs of eligible farmers who derive most of their income from off-farm sources?" FCA is also asking whether and how to modify the requirement limiting FCS mortgage lending to "moderately" priced housing.

FCA has scheduled a public meeting for June 26 at its headquarters in McLean, VA. Individuals wishing to testify must notify FCA by June 21 by submitting an e-mail to reg-comm@fca.gov; or through the Pending Regulations section of the Farm Credit Administration Web site at www.fca.gov. Written requests to testify and comments should be sent to Robert E. Donnelly, Acting Director, Regulation and Policy Division, Office of Policy and Analysis, Farm Credit Administration, 1501 Farm Credit Drive, McLean, VA 22102-5090 or by fax to (703) 734-5784.

In addition, FCA is seeking comment from the public regarding large loan syndications and whether to allow system institutions to engage in these transactions, which involve syndications that non-System lenders originate, without making such loans subject to the stock purchase, borrower rights, and territorial concurrence requirements. This means that FCS institutions would be able to freely engage in larger loans outside of their geographic territories, a similar version of the withdrawn National Charter proposal. Comments are due June 20. Changes may require congressional action.

In a separate proposal, CoBank, the System's $27 billion nationwide cooperative lender, has asked Congress for legislative authority to begin making loans to Limited Liability Corporations and entities designated by state law to be cooperatives if they have any capacity to engage in agricultural-related activities.