The Farm Credit System / Horizons

Issue

Preventing the Farm Credit System (FCS) from expanding its charter and further exploiting its tax-advantage and unique government sponsored enterprise (GSE) retail lending authority to compete unfairly with banks, the FCS proposed HORIZONS Project being one example.

Position

ABA opposes expanding the powers of Farm Credit System institutions to compete unfairly against tax-paying banks. Such powers include a variety of regulatory and industry proposals aimed at transforming FCS lenders into full-service retail lenders by providing a wide array of consumer loans and commercial loans to non-farm borrowers. The mission of the FCS should be contained to its historical purpose – providing agricultural loans to farmers and ranchers with limited resources. The FCS should be required to work with banks, particularly as a funding source and through loan participations.

Explanation

Congress created the FCS in 1916 to serve the needs of family farmers and ranchers for agricultural loans. However, FCS institutions have increasingly focused their lending on large agricultural interests rather than bona fide small ranchers, farmers, and farmer-owned businesses. In addition, the Farm Credit Administration (FCA) has granted FCS institutions powers beyond their traditional agricultural lending role, which represents a dramatic departure from the mission of the FCS and its limited-purpose charter.

Recently, the FCS, through the Farm Credit Council, has launched a campaign, called "HORIZONS," to convince the FCA and Congress to grant the system even greater authority to offer financial products and operate in greatly expanded geographic areas. The HORIZONS changes would transform the FCS into a full-service finance company, focused on business and consumer lending.

ABA believes the FCS should remain focused on the geographic areas and constituencies that it currently serves. The FCS also should collaborate with banks, rather than utilize their tax-advantage to edge out banks from serving agricultural and ranching communities. In addition, Congress should ensure that the FCA is included in GSE reform and made part of a uniform regulator that oversees all GSEs. Since FCS lenders are unique among GSEs as the only lender with retail abilities, they should be subject to the same disclosures and transparency requirements as banks. ABA will urge the FCA and Congress to restrict the FCS to its historical mission of serving farmers and ranchers in rural areas.

Contact for further information: John Blanchfield (202) 663-5100.