Rural Community Investments - Proposed Rule - Comments received after 8/15/08 Ryan Fiala Bilingual Assistant Lender & Auditor First State Bank and Trust 1005 E 23rd St. Fremont, NE 68025-0800
August 16, 2008
Gary Van Meter Deputy Director, Office of Regulatory Policy 1501 Farm Credit Drive McLean, VA 22102
Dear Gary Van Meter:
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.
This proposal could expose taxpayers to unwarranted risk. Since the System is a GSE, American taxpayers could be forced to pick up the tab when failed institutions quickly burn through the capital of the farmers and ranchers who own the System. It has happened before.
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."
Sincerely,
Ryan Fiala 402-721-2500 Bilingual Assistant Lender & Auditor First State Bank and Trust
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