Committee Holds Hearing to Examine Farmer MAC Programs: Assesses Whether Farmer Mac Has Established a True Secondary Market

Jun 2, 2004

Washington D.C.- The House Committee on Agriculture today held a hearing to examine the programs and financial products of the Federal Agricultural Mortgage Corporation, better known as Farmer Mac.

The hearing focused on an October, 2003, report of the General Accounting Office entitled, Farmer Mac: Some Progress Made, but Greater Attention to Risk Management, Mission , and Corporate Governance Is Needed . In this report, GAO made observations about Farmer Mac's operations, and, as the title suggests, points to several issues of relevance to the Committee in terms of Farmer Mac's mission and management.

Farmer Mac exists to provide a secondary market for agricultural real estate mortgages that will translate into long-term, fixed-rate loans for farmers and ranchers. As envisioned when Congress adopted the Agricultural Credit Act of 1987, that market would be created by Farmer Mac's development of a marketable financial instrument known as an agricultural mortgage-backed security, or AMBS.

"This oversight hearing was helpful in assessing whether Farmer Mac has established a true secondary mark et by selling AMBS," Goodlatte said. "It is critical to establish that this is the case, in the event that the agriculture community faces a crisis of the 1980's magnitude," Goodlatte concluded.

Farmer Mac was established as part of Congress' efforts to resolve the agricultural crisis of the 1980's.

"Farmer Mac plays an important role in providing a secondary market for agriculture real estate loans and I support this mission, however we need to ensure that FCA has the tools it needs to effectively oversee its operations," said Ranking Member Charlie Stenholm.

In addition to GAO, the Committee heard from the Farm Credit Administration, which over the last several months has increased its examination and supervision of Farmer Mac's management and board activities as well as its portfolio of agricultural real estate loans and acquired property, and from Farmer Mac's Board Chairman and President. A complete witness list is below.

Panel I
•Ms. Davi M. D'Agostino, Director, Financial Markets and Community Investment, U.S. General Accounting Office, Washington , D.C.
•Ms. Jeanette Franzel, Director, Financial Management and Assurance, U.S. General Accounting Office, Washington , D.C.
•The Honorable Nancy C. Pellett, Chairman and Chief Executive Officer, Farm Credit Administration, McLean , Virginia
•Mr. Gregory Zerzan, Deputy Assistant Secretary for Financial Institutions Policy, Department of the Treasury, Washington , D.C.

Panel II
•The Honorable Frederick L. Dailey, Chairman, Federal Agricultural Mortgage Corporation, Washington , D.C.
•Mr. Henry D. Edelman, President and Chief Executive Officer, Federal Agricultural Mortgage Corporation, Washington, D.C.