Pub. 2 2013 Issue 9

December 2013 19 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 The bottom line: CoBank’s corporate-buyout loan to Verizon is an incredibly blatant attempt by CoBank to arbitrage its GSE status, which entitles it to cheap funding and tax exemptions. The Farm Credit Administration (FCA), CoBank’s regulator, should immediately direct CoBank to sell its Verizon loan, which it should be able to do without any loss. If the FCA does not, then it has opened the proverbial barn door to other FCS banks and associations lending to corporate entities of all types. That certainly will be the case if CoBank sells participations in its Verizon loan to other FCS entities. Keating letter to HouseAg Committee asking for FCS hearing On October 7, ABA President and CEO Frank Keating sent a letter to Rep. Frank Lucas and Colin Peterson, the Chairman and Ranking Member of the House Agriculture Committee, requesting that the committee “hold an oversight hearing to examine the financial practices, regulation, and growth of the FCS.” In making this request, Keating observed that “the Committee has not held a hearing on the FCS in many years.” Noting that bankers “are alarmed at the growth and questionable practices of the federally subsidized [FCS],” Keating suggested that the Committee or one of its subcommittees should examine the following specific issues, many of which I have addressed in prior issues of the FCW: indirect lending through entities such as AgDirect; retained mineral rights arising from real estate foreclosures; never- ending pilot programs such as “Investments in Rural America” or Rural America Bonds; questionable practices involving the sale of Federal Crop Insurance; and shadow banking activities, such as taking deposits, providing cash management services, and offering credit cards. CoBank’s $725 million loan to Verizon is another issue that should be addressed at that oversight hearing. In closing, Keating said that “it is not the goal of this letter for the Committee to require ‘farmers to pay more for credit,’ but that Congress has a responsibility to examine anachronisms in federal tax expenditure policy . . . Government ought not to pick winners and losers in the marketplace, whether it is in the agricultural economy or elsewhere. Fair competition in the marketplace will ensure the availability and affordability of agricultural credit.” The Committee should hold that hearing. FCAasking FCS for suggestions for regulatory relief On July 18, the FCA published a notice in the Federal Register seeking comments, presumably from FCS institutions, on regulatory burden. Specifically, the FCA issued “this notice in order to consider whether our existing regulations are inefficient or burdensome. We seek public comment on the appropriateness of the requirements we impose on [FCS] institutions . . . We ask for comments on our regulations that may duplicate other requirements, are ineffective, are not based on law, or impose burdens that are greater than the benefits received.” After the comment period closes on November 15 FCW will report on the more interesting suggestions for reducing the FCS’s regulatory burden. Report FCS lending abuses to: green-acres@ely-co.com Bankers are continu- ing to send FCW reports of FCS lending abuses, such as FCS loans for rural estates, weekend getaways, and hunting preserves. Email reports of similar lending abuses in your market to: green-acres@ely-co.com . Please provide as much detail as possible about any loan which violates the spirit, if not the law, governing FCS lending.