Please, bankers, no repeat of the 1980s
By Larry Dreiling
The headline says it all.
American agriculture can't stand to have a repeat of the 1980s. America's major bankers need to take care of business and assist agriculture.
The effects of the April 10 failure of New Frontier Bank in Greeley, Colo., can be seen up close when you talk to the producers left in the wake of the bank's failure. It's obvious that most of the producers left standing are pretty good farmers.
I mean, these aren't the kind of characters you saw in those farm movies produced back when.
I was in graduate school at the time, and I recall going to the movies to watch Sam Shepard in Country and Mel Gibson in The River. My usual screening buddy was Wayne, a libertarian who now writes conservative editorials for a Colorado newspaper. Wayne and I would walk out of the theatre agreeing that these guys on the screen were lousy farmers who deserved to lose their places.
I wrote a column for the college newspaper, entitled Farmers from Disneyland, that castigated Hollywood for its mostly inaccurate portrayal of the crisis at the time. I saved that clip. Applying for a job a couple of years later, I showed it to a certain publisher of a certain farm magazine. I think he liked it.
The people now in crisis because of New Frontier's failure aren't at all like those losers on the screen. Far from it, they aren't caricatures. They're real life, flesh and blood folks who got caught up in the malestrom of crashing farmgate prices and skyrocketing input costs.
They aren't simpletons, either. Most of the folks who are the most affected by this crash out there are quite sophisticated dairy producers. They used the futures and options markets as best they could. They aren't to blame in this.
My old banker dad taught me years ago no banker in his right mind would keep as high a ratio of loans in one sector as New Frontier. When the price pyramid collapsed, so did New Frontier.
Worse, a few weeks before the closing, the Federal Deposit Insurance Corporation publicly issued a cease and desist order on New Frontier to stop ag lending. I can't believe how reckless the FDIC behaved in this matter. They might as well have put ads out shouting, "Hey, New Frontier customers, let's have a run on the bank!"
Once they closed the bank, the FDIC continued to make a mess of things by being clueless about how ag operations work. Shutting down the bank at the apex of the season when producers obtain operating loans was dumb. It was really dumb because so many of the other leading lenders in the state just aren't lending anymore.
That's a shame.
Most of these producers would make great customers. They don't need a bailout, just a hand up to have someone assume their notes so they can move confidently forward toward paying their bills.
Again, a word from my smart old banker dad:
"I was once offered the job of president of a bank in Greeley. I darned near took it. It's a good place for ag banking. Weld County is still one of the top ag counties in the country, right? Well, they won't be for much longer if this stuff keeps up.
"These big banks on 17th Street (Denver's financial district) are going to have to realize that serving these smaller towns means serving ag, too. Somebody better step in and start taking over these notes."
He then went into something even deeper about where we are in agriculture these days.
"Lending is tied to how we eat in this country. If there are no good lenders, then there's no more farms. Guess what--we'll start seeing all our food being imported year-round. It won't be just stuff like grapes coming in from where--Chile--in the winter. We'll be as dependent on other countries for food as we are for oil."
So it's time, big bankers, to take my old man's advice. Stop sitting on that pile of federal bailout cash you've been hoarding to make your shareholders happy and start doing the job of American banking again--especially for agriculture and in particular for the former customers of New Frontier. You guys know who you are, so get to work.
Without you, this country's toast.
Larry Dreiling can be reached by phone at 785-628-1117 or by e-mail at email@example.com.