WASHINGTON, Dec. 2, 2015 – House Agriculture Committee members used a Wednesday hearing to see if the Farm Credit System (FCS) is abiding by its mission, because members of the banking community aren’t sure if that’s the case.
At the hearing, lawmakers – for the most part Republican – peppered Farm Credit Administration chair and CEO Kenneth Spearman with questions about the size and scope of Farm Credit lending, primarily in relation to a massive loan to telecommunications giant Verizon.
Many of the questions dealt with whether Farm Credit was sticking within its governmental mission: “to support rural communities and agriculture with reliable and consistent credit.”
“We would’ve never imagined this mission statement to encompass some of the lending that has taken place,” Iowa Republican Steve King said, addressing Spearman. “The language in the mission statement seems to me to confine Farm Credit to a narrow set of boundaries to adhere to . . . but it behooves us all to stay within those boundaries. I think the mission statement is fine, but I think you’ve over stretched it.”
News of the loan to Verizon broke in 2013, when Farm Credit lender CoBank took up $725 million of a $12 billion loan to Verizon, presumably to buy out a European telecommunications provider’s stake in the company. The banking industry – already upset that Farm Credit isn’t subject to many of the same rules and regulations as banks – protested, saying the loan fell outside of the FCS’ agricultural purview. In a statement on Wednesday, Rob Nichols, American Bankers Association president and CEO, said the FCS “needs to be reformed so that it can serve farmers rather than entities that have little, if anything, to do with farming.”
In his opening statement, Spearman said the system’s banks and associations are “fundamentally safe and sound” and ready to help farmers and ranchers “during the current cyclical downturn.” Later, he and members of his staff defended the Verizon loan as a form of portfolio diversification.
But many lawmakers disagreed. Rep. Austin Scott, R-Ga., expressed a common theme of committee members from both parties -- they were happy with Farm Credit’s work within the agricultural sector, but not thrilled with the broader lending activity.
“Certain people getting outside the parameters of what the Farm Credit System was set up for, I believe, are putting the whole system at risk,” Scott said. He encouraged the FCA’s three-member board to take a more active role in regulating activity within the system, specifically implying lending action by CoBank.
“I’ll just be honest with you; I don’t think CoBank’s going to stop until someone stops them,” he said.
Spearman also dismissed questions that tied crop insurance to better loan rates.
To close the hearing, Georgia Democrat David Scott said oversight of the FCS is important to ensure adequate funds for agricultural lending in the U.S.
“We got two trains running here. One train is the Farm Credit System, the other is our banks,” he said. “Our task here is that we’ve got these two trains on these two tracks, and we can’t let one train jump over the other track or we’ve got a big wreck coming. Our farming system cannot handle that.”
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