Rural Community Investments - Proposed Rule - Comments received after 8/15/08 JERRY L. O'CONNOR President The National Bank of Waupun N11346 Ott Drive Waupun, WI 53963-9644
August 18, 2008
Gary Van Meter Deputy Director, Office of Regulatory Policy 1501 Farm Credit Drive McLean, VA 22102
Dear Gary Van Meter:
I am a former employee of the Farm Credit System. I use to work on projects to create strategies that would expand Farm Credit's activities beyond those that are authorized by Congress.
Since leaving Farm Credit, I am highly concerned that this mostly untaxed (taxpayer supported) GSE NOT be allowed to expand services beyond their current structure.
In fact during this time when COngress should be addressing huge deficits, it seems more appropriate that Farm Credit be converted to a tax paying entity.
Like Fannie Mae and Freddy Mac, Farm Credit has gotten into trouble that requried a tax payer bail out to keep them afloat.
The quas- guaranty that the tax payer would bail them out again still exists. WHY?
With the capital base Farm Credit has accumulated, this would be the right time to remove the GSE status, the quasi-guaranty of taxpayer bailouts and let them pay taxes in the same manner as their competition.
I am writing to express my opposition to the Farm Credit Administration's proposed rule that would allow Farm Credit System lenders to invest up to 150 percent of their capital surplus on projects unrelated to agriculture.
The Farm Credit System (FCS) is a farmer-owned and farmer-capitalized cooperative lender that is also a government-sponsored enterprise (GSE).
Congress created GSEs to serve specific missions, with certain advantages and limitations.
The proposed rule would shift the FCS away from its statutory mission to lend to farmers, ranchers, certain farm-related service businesses, farmer-owned cooperatives, and certain rural homeowners.
It would authorize FCS institutions to finance hospitals, healthcare facilities, transportation infrastructure, hotels, office parks, manufacturing facilities, and any other types of investments FCA identifies as appropriate.
The proposed FCA rule would permit FCS institutions to invest up to 150 percent of their owners' capital surplus in speculative investments that the FCA has little or no experience in evaluating for safety and soundness.
The proposal would harm farmers and ranchers, as well as the System's cooperative framework since every FCS lender is jointly and severally liable for the actions of their fellow cooperative members.
Poor investment decisions could hurt the FCS's credit rating, resulting in higher interest rates and fees charged to farmers and ranchers.
Congress rejected similar expansion proposals for the Farm Credit System in the 2008 Farm Bill.
This proposal also violates principles limiting the mixing of banking and commerce.
When banking and commerce are integrated there exists a genuine risk of insider activity, preferential treatment, undue influence, and anti-competitive activities.
The System should not be allowed to make investments in areas where it has no experience, no loan making authority, no branch networks, and no authority granted by Congress.
The Farm Credit Administration should withdraw the proposal on "mission-related activities."
Jerry L. O'Connor 920-324-5551 President The National Bank of Waupun
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