Pub. 2 2013 Issue 1

January 2013 27 l e a d i n g a d v o c a t e f o r t h e b a n k i n g i n d u s t r y i n k a n s a s BERT ELY’S FARM CREDIT WATCH ® SHEDDING LIGHT ON THE FARM CREDIT SYSTEM, AMERICA’S LEAST KNOWN GSE ©2012 Bert Ely FCS billboard pitches loans to “fake farmers” O NE OF THE MANY WAYS IN WHICH THE FCS stretches its lending mandate is by making loans to “fake farmers” – buyers of recreational properties, such as hunting preserves and fishing camps, that generate absolutely no agricultural income. Further, the borrow- ers using taxpayer-subsidized FCS financing to acquire these recreational properties hardly need that financing – they can readily qualify for loans from taxpaying lenders. The FCS is getting even more aggressive in ped- dling its cheap funding for recreational properties. A billboard on I-94 betweenMilwaukee andMadison, Wisconsin, hypes “No-nonsense financ - ing for recreational land” – contact Badgerland Financial. Badgerland is the $2.9 billion FCS association serving the southern half of Wisconsin. Over half of its loans (55%) are real estate mortgages. One can reason- ably ask how many of these loans finance fake farmers. Badgerland is quite blatant on its website, www.badgerlandfinancial.com, about financing recreational properties; i.e., fake farms. Badgerland pitches that it “helps customers looking for: Hunting Land, Vacation Homes, Second Homes, [and] Recreational Land for other uses.” To gain a better appreciation of Badgerland’s recreational property lending, go to “Rural Dreams: Realized” to bring up video clips of Badgerland bor - rowers, including a video of customer James Layne, who financed the purchase of 60 acres of hunting land. The video’s announcer begins: “Rural Wisconsin Dreams: Having them is your job – helping you realize them is ours.” Not a word is mentioned about farming or ranching or generating agricultural income – it is all about “cultivating rural life.” Then Layne waxes lyrically about what it meant to him to buy this acreage and not have to build a house on it. He says not a word about raising livestock or growing even a bale of hay. The Farm Credit Administration (FCA), the FCS regulator, should bar FCS institutions from lending to fake farmers. FCS loan growth accelerating as FCS loan rates plunge F CS PROFITS REMAINED STRONG DURING THE THIRD quarter of 2012 even as the FCS aggressively cut its interest rates. Consequently the FCS has experienced strong loan growth, as bankers who have lost customers to the FCS know all too well. First, the interest-rate story and then the loan-growth story. The FCS largely funds itself with short- and medium-term debt – at the end of 2011, 35% of its $185 billion in debt was scheduled to mature in 2012, with another 36% maturing in 2013 and 2014. Much of the FCS’s continued on page 28