FCA dials back non-farm investments

FCA dials back non-farm investments

AT its monthly meeting Nov. 14, the Farm Credit Administration (FCA) board voted 2-1 to withdraw its proposed rule on rural community investments and to conclude, effective Dec. 31, 2014, each pilot program approved after 2004 as part of the Investments in Rural America program.

The move was welcomed by the Independent Community Bankers of America (ICBA), which criticized the Farm Credit System (FCS) for pursuing "all kinds of non-farm lending activities under the guise of investment programs," ICBA president and chief executive officer Camden Fine said.

Fine cited CoBank's recent $725 million loan to Verizon Communications to buy out Vodafone's stake in Verizon Wireless as "just the latest egregious example of inappropriate and unauthorized FCS lending for non-farm purposes."

"FCS lenders have no business pursuing lending for hotels, restaurants, manufacturing, apartment complexes, health facilities and other clearly non-farm loans," Fine said. "These types of activities were never authorized by the Farm Credit Act and displace taxpaying community banks from their vital role in our rural economies."

The FCA board's action permits each FCS institution that is participating in a pilot program to continue to hold its investments through the maturity dates for the investments, provided that the institution continues to meet all approval conditions.

FCA said 32 FCS associations and three banks held pilot program investments amounting to $1.2 billion as of Dec. 31, 2012. Although the agency is concluding these pilot programs, FCA said it can consider investment requests on a case-by-case basis under the existing investment regulations.

Fine said ICBA remains concerned about these case-by-case considerations.

"These pilot projects were nothing more than an attempt to allow FCS lenders to evade the constraints of the law by relabeling their illegal lending schemes as 'investments.' The FCA should take the additional step of sending a clear message to FCS lenders that it will not consider any 'investment' programs that go beyond the eligible loan purposes espoused in the Farm Credit Act that reflect the farm-related mission of this tax-advantaged government-sponsored enterprise," Fine said.

The FCA board voted to withdraw the proposed rule on rural community investments, which was published in the Federal Register on June 16, 2008.

While Fine welcomed the rule's withdrawal, he said it doesn't reimburse the community banking industry for the approximately $4 billion in loans diverted to FCS lenders as investments over the past several years.

"FCA needs to now take the next step and instruct FCS lenders to keep the 'farm' in the Farm Credit System and to refrain from non-farm-based lending activities," Fine said. "If the FCA wants a larger role for FCS lenders in rural America, the agency should engage with the banking industry on how to achieve this in ways that do not disadvantage community banks and their important role supporting the economic growth and viability of rural America."

Volume:85 Issue:48

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