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ICBA: FCA final rule appears deeply flawedIneligible processing, marketing firms would be served by FCS Camden Fine, president and CEO of the Independent Community Bankers of America, issued the following statement upon the Farm Credit Administration's action to expand the Farm Credit System powers: "The Farm Credit Administration issued a final regulation on processing and marketing loans that is lengthy and complex. While ICBA is still examining it, the regulation appears to allow FCA institutions to lend to businesses owned by non-farmers. A previous FCA Board believed that such a change would be inconsistent with the Farm Credit Act and congressional intent. "This is obviously a controversial issue as evidenced by the 5,000 comment letters sent to FCA, 60 percent of which opposed the proposal. The proposal permits Farm Credit System lenders to circumvent requirements that entities borrowing from the FCS have at least 50 percent farmer ownership. The final rule allows FCS institutions to lend to entities that are merely farmer influenced and dilutes FCS's focus on serving farmers and farmer-owned businesses and cooperatives. It allows large, publicly traded firms not owned by farmers to be eligible to receive FCS loans. The FCA failed to include important definitions and restrictions in the rule, leaving it potentially open ended in making non-farm businesses eligible to receive tax-subsidized FCS loans." "ICBA adamantly opposes allowing the Farm Credit System's lenders to become the equivalent of commercial banks while retaining tax and funding advantages as government-sponsored enterprises. As a government-sponsored enterprise, the FCS has numerous tax and funding advantages over the private sector. Unlike other GSEs, which work with community banks, the FCS competes directly against community banks for loans at the retail level, a fact which FCA glosses over by repeating the misleading rhetoric of the FCS. "FCA's new regulation allows FCS to utilize its government-derived advantages to finance many investor-owned or privately held non-farm businesses now well served by tax-paying, private sector community banks. FCS, which has been growing its assets by 16 percent per year, should not be permitted to continue its encroachment and crowding out of private sector community banks. Further, the FCA has failed to show any lack of credit availability for processing and marketing firms that supports such an open-ended regulation."
Date: 5/8/08 Advertisement
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