Subcommittee Passes Agricultural Credit Legislation

Jun 24, 1998

WASHINGTON, D.C. -- The House Agriculture Subcommittee on Forestry, Resource Conservation, and Research today passed legislation to provide eligibility for United States Department of Agriculture (USDA) guaranteed loans to certain farmers who received debt forgiveness prior to passage of the 1996 Farm Bill.

In 1987, Congress enacted the Agricultural Credit Act, which provided farmers with debt relief through loan servicing following the farm crisis of the 1980's. Farmers across the country took write downs with the understanding that if they achieved financial order, they would be eligible for future loans. The 1996 Farm Bill, or Federal Agricultural Improvement and Reform Act (FAIR Act) changed this policy to prohibit farmers who received debt relief from receiving further USDA direct loans and loan guarantees, regardless of current financial status.

"Our language today is very targeted. Those borrowers with past debt relief will continue to be prohibited from receiving direct loans. Those who have taken debt forgiveness after April 4, 1996 -- the date of enactment for the FAIR Act and the date when a strong precedent was set; will no longer be eligible for loans of any kind. The only change under this bill is that borrowers who have debt forgiveness prior to enactment of the FAIR Act, will now be eligible to qualify for USDA guaranteed loans," said Congressman Larry Combest (R-TX), Chairman of the Subcommittee of Forestry, Resource Conservation, and Research.

The policy would further require that borrowers be current with payments on all existing obligations for past USDA loans before qualifying for additional loans or loan guarantees.

"This limited change will not open the flood gates to abuse. Provisions of the 1996 Farm Bill will remain intact to require borrowers to have a positive pay history and remain current on existing loans in order to qualify for additional loans. Furthermore, the fact that private lenders will have to initiate the loans and commit to ten percent exposure in the loan should provide assurance that only creditworthy borrowers will be allowed to come back into the program," Combest said.

"As stewards of taxpayer dollars, we must all demand accountability in this program. We have unquestionably seen blatant misuse and abuse of farm lending programs in the past and aspects of the farm bill's credit restrictions have certainly proven meritorious. I do not support a three-strikes-and-you're-out proposal as the Administration has put forward -- repeat offenders should simply not be allowed to continue to get loans when we have worthy producers vying for limited funds," Combest said.

Among other amendments, the Subcommittee accepted an amendment by Congressman Saxby Chambliss (R-GA) that would provide emergency loans to borrowers with one previous debt forgiveness.

The Subcommittee also adopted an amendment by Congressman Chip Pickering (R-MS) which would combine the cap levels of guaranteed farm ownership ($300,000) loans and farm operating ($400,000) loans for a total cap limit of $700,000, giving family farmers increased financing flexibility.

Combest represents Texas' 19th Congressional District which includes the Panhandle, South Plains, and Permian Basin in the U.S. House of Representatives.