Series of Congressional Hearings Needed to Examine Farm Credit System Abuses
Washington, D.C. (Dec. 2, 2015)—The Independent Community Bankers of America® (ICBA) today urged the House Agriculture Committee, which is reviewing the Farm Credit System (FCS), to conduct a series of hearings aimed at uncovering details of how the FCS is avoiding legal constraints. In a statement for today’s committee hearing, ICBA noted that the system’s regulator—the Farm Credit Administration (FCA)—has gone out of its way to allow FCS lenders to make otherwise illegal loans if such financing is labeled as “investments.”
ICBA explained that the FCA, after withdrawing a proposed investments regulation and pilot program, briefly published a guidance memo instructing FCS lenders how to gain approval to finance investments, including credit for non-farm businesses, communities, rural areas and infrastructure projects. “In other words, even though the FCS unsuccessfully lobbied Congress for years to receive expanded powers, FCA has suddenly and quietly decided to just allow FCS lenders to do whatever they want if FCA provides a rubber stamp of approval,” ICBA said.
ICBA also questioned huge loans by CoBank to Verizon, AT&T, U.S. Cellular and other large multi-national corporations. “CoBank’s newly found lending activities appear to be an effort to leverage their government-sponsored enterprise (GSE) advantages deeply into the realm of multi-national, non-agricultural, non-rural and non-cooperative corporate financial deals,” ICBA said.
Additionally, ICBA expressed community bankers’ alarm that the FCS leverages its GSE tax and funding advantages to cherry pick the financially strongest customers of community banks, which destabilizes ag loan portfolios of taxpaying rural banks. This increases risks to the community banking industry, leading to fewer lenders and less credit availability for rural America.
Finally, ICBA raised several questions regarding a secretive $10 billion line of credit the FCA gained on behalf of the FCS from the U.S. Treasury. “There should have clearly been hearings on a GSE seeking a $10 billion line of credit,” ICBA said. “If FCA believes the Farm Credit Act is as loose as to allow it to grant any type of financing desired by FCS lenders, then the act needs to be tightened. Congress never intended for FCS to be a general purpose rural lender.”
About ICBA
The Independent Community Bankers of America®, the nation’s voice for more than 6,000 community banks of all sizes and charter types, is dedicated exclusively to representing the interests of the community banking industry and its membership through effective advocacy, best-in-class education and high-quality products and services.
