Pub. 5 2016 Issue 2

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 26 BERT ELY’S FARM CREDIT WATCH ® SHEDDING LIGHT ON THE FARM CREDIT SYSTEM, AMERICA’S LEAST KNOWN GSE ©2014 Bert Ely FCS HAS YET TO RESPOND TO CONGRESS’S QUESTIONS A S LAST MONTH’S FCW reported, on December 2 the House Agriculture Committee held an oversight hearing “to review the Farm Credit System.” The sole witness was Farm Credit Administration (FCA) Chairman and CEO Kenneth Spearman; he was accompanied by the other two FCA board members as well as by two FCA executives who answered many of the questions posed to Spearman. As often occurs, Spearman and his colleagues were unable to answer all the questions fired at them during the three-hour hearing. As is also the case at such hearings, Spearman and his colleagues promised to provide written answers to those questions. Those answers, which are included in the published record of the hearing, provide important documentation of the issues raised at the hearing. Oftentimes, those questions are the only way to extract information from an agency. Usually witnesses, especially those from a federal agency overseen by the committee whose members posed the questions, respond quickly and fully to those questions. It is not smart for an agency to do otherwise. However, the FCA seems to be the exception as 57 days later it still has not answered the questions put to it at the hearing. FCS Southwest finally acquired by Farm Credit West The FCA finally announced on January 11 the completion of Farm Credit West’s acquisition of FCS Southwest, the financially troubled association serving most of Arizona; Farm Credit West serves portions of central and southern California and part of Nevada. The “share exchange phase” of the two associations’ merger was completed on November 1, 2015, but FCS Southwest will continue to operate as an independent subsidiary of Farm Credit West for up to three years. Interestingly, the FCS Southwest website (https://www. fcssw.com/) does not indicate that FCS Southwest has been acquired by Farm Credit West. Likewise, there is barely any mention of the FCS Southwest acquisition on the Farm Credit West website. The only hint Farm Credit West is managing FCS Southwest is on the webpages pertaining to Farm Credit West’s online banking program. While operationally FCS Southwest has been integrated into Farm Credit West, its financial results are not being consolidated with Farm Credit West’s results as long as FCS Southwest operates as an independent subsidiary. That is, FCS Southwest will be kept at arms’ length from Farm Credit West until such time as all litigation related to FCS Southwest’s financial problems has been fully resolved. That separateness will protect Farm Credit West members from the cost of cleaning up the FCS Southwest mess. Presumably FCS Southwest will continue to file call reports so that the eventual cost of its financial problems will be fully disclosed to the public and to its members. Time will tell.