The Independent Community Bankers of America® (ICBA) yesterday told a House Agriculture Committee subcommittee examining rural credit availability that credit is plentiful for America’s farmers and ranchers and is being provided at rates near historically low levels. However, Sean Williams, president and CEO of First National Bank of Wynne, Ark., urged Congress to conduct a series of hearings relating to troubling activities of the Farm Credit System (FCS).
As part of the hearing on credit availability in rural America, Williams noted that “the ag economy has experienced record prices allowing farmers to pay down debt. Livestock producers are also now benefitting from lower feed costs and higher prices providing much-needed profits. The rapid rise in farmland values has slowed or stalled, meaning that land prices are expected to be stable or slightly decline if crop prices continue declining or remain below the cost of production.”
Williams also provided the subcommittee with conclusions of a recent ICBA banker survey, which found that:
- The farm bill and crop insurance are vital to extending credit,
- Reference prices are “adequate” but won’t cover production costs,
- Drought and weather problems exist in many states and are a concern, and
- More farm bill details and decision-making tools are needed.
Additionally, Williams voiced community bankers’ alarm over the FCS’s cherry-picking activities. He said that FCS, a government-sponsored enterprise, leverages tax and funding advantages to target the financially strongest customers of community banks, destabilizing ag loan portfolios of many banks. This increases risks to the community bank industry, leading to fewer lenders and less credit availability for rural America.
In the written testimony, ICBA noted the Farm Credit Administration’s unauthorized “investment” gambit to allow FCS lenders to engage in non-farm lending; questioned why the FCA obtained a $10 billion line of credit without congressional approval; and noted the FCA’s “anything goes” regulatory approach led to CoBank, the FCS’s largest cooperative lender, making an unauthorized $725 million loan to Verizon to buy out Vodafone’s interest in Verizon Wireless. “This deal finances large, corporate, multi-national firms located in New York City and London; this is a non-rural and non-cooperative, international corporate financial deal inappropriate for an ag-based cooperative operating as a taxpayer-backed GSE,” Williams said.