Committee Reviews Farm Credit Administration National Charters

Mar 7, 2001

Committee Reviews Farm Credit Administration National Charters
Proposal is first of Ag Committee's examination of FCA's rules and credit needs

(March 7, 2001)

Reviewing the proposed rule for issuing Farm Credit System national charters, House Agriculture Committee Members on Wednesday brought the Farm Credit Administration's chairman and banking industry representatives before a hearing prior to the close of public comment on the charter rule. The proposed rule was published in the Federal Register on February 16, 2001 and the 30-day comment period will close on March 19, 2001.

"The Farm Credit System needs to respond adequately and appropriately to the credit needs of farmers and ranchers, but its regulator, the Farm Credit Administration, should make sure that competition among lenders is fair and that farmers in local service areas are able to secure affordable credit," said House Agriculture Committee Chairman Larry Combest (R-TX). "The Ag Committee expects the Farm Credit Administration to exercise its authority to make certain that system institutions always operate in a safe and sound manner."

Credit Subcommittee Chairman Frank Lucas (R-OK) said the hearing should be the first of those the Committee should hold to examine fully FCA's regulatory program and the credit needs and provision of credit to farmers and ranchers by the Farm Credit System.

"This is the Committee's first hearing this Congress to provide our Members the opportunity to gather facts and viewpoints from persons, both public and private, who are charged with providing credit to this nation's farmers and ranchers. I would also like to make it clear that this hearing will not be the last on credit matters," said Lucas, (R-OK), Conservation, Credit, Rural Development and Research Subcommittee Chairman. "Chairman Combest is working diligently to find a consensus to write prudent commodity programs to restructure and replace those that will expire in 2002. Additionally, we must begin the process of working to find a consensus in other areas of the Farm Bill that will also be of great importance to producers."

The proposed rule would establish standards so local associations may apply for, receive, and operate under a national charter. Once the FCA grants a charter to an association, that institution may lend anywhere in the country. Currently, most associations must lend within prescribed territories or where they have permission to lend in another territory. By statute, land bank associations in Louisiana, Mississippi and Alabama; production credit associations in part of New Mexico; and First South agricultural credit association in Louisiana, Mississippi and Alabama are protected.

The Farm Credit Administration is an independent Federal agency responsible for regulating and examining the bank, associations and related entities that comprise the Farm Credit System, including the Federal Agricultural Mortgage Corporation ("Farmer Mac"). The Farm Credit Administration was initially created by an Executive order in 1933 but receives most of its authority from the Farm Credit Act of 1971. Congress established the Farm Credit System in 1916. The Federal Government provided the original capital for institutions. Today, borrowers own the System banks and associations.