Pub. 5 2016 Issue 2

March 2016 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 FCA’s rationale for not publishing its enforcement orders As bankers know, banking regulators routinely publish enforcement orders issued against banks and thrifts, but that is not the case at the FCA. To the best of my knowledge, the FCA has never published an enforcement order against an FCS institution. The only way to find out about the existence of an enforcement order, specifically those dealing with safety-and- soundness issues, is when it is disclosed by the FCS institution subject to the order. The FCA’s non-disclosure philosophy is spelled out in a Policy Statement it has issued on several occasions, most recently last September in a document titled “Disclosure of the Issuance and Termination of Enforcement Documents.” That document first states that the FCA Board “finds that it is in the best interest of the [FCS], the FCA, and the public that certain information concerning the issuance and any subsequent termination of final enforcement orders, formal agreements and conditions imposed in writing . . . be disclosed to the FCS and the public. Specifically, the basis for disclosing this information is to communicate to the FCS and the public that the FCA is effectively using its enforcement powers. . . .” So far, so good, but then the document states that “if the [FCA’s Office of General Counsel] determines that [such] a disclosure adversely affects a civil or criminal investigation, the disclosure will not be made.” It seems that FCA’s general counsel always makes that determination. The banking regulators never seem to worry about the impact of disclosing an enforcement order, so why does the FCA have that concern, unless it is trying to protect the FCS from adverse publicity, such as in the FCS Southwest situation? Where does FCA’s Inspector General fit into the picture? Like many other federal agencies, the FCA has an Office of Inspector General (OIG). Although appointed by the FCA Board, the OIG “provides independent, objective oversight authority for the [FCA] . . . promoting economy and efficiency, and preventing and detecting fraud, waste, abuse, and mismanagement . . . by conducting audits, inspections, and investigations of [FCA] programs and operations.” [emphasis supplied] One of the FCA’s key responsibilities is to enforce the lending constraints Congress has imposed on the FCS. The FCA’s OIG, however, disclaims any responsibility for monitoring FCA enforcement of FCS lending activities by conflating FCS mistreatment of borrowers with loans the FCS should not have made, regardless of how well the borrower was treated. Specifically, the OIG claims that its “statutory authorities extend only to the operations of FCA and its employees, not to the operation of [FCS] institutions.” The OIG then instructs borrowers that if an FCS institution “has violated your rights as a borrower [or] has not complied with a statute or regulation . . . please notify the FCA Office of Congressional and Public Affairs.” However, complaints the FCA has chosen to ignore about FCS institutions, notably CoBank, making impermissible loans clearly represents FCA mismanagement. The FCA OIG needs to begin investigating the numerous, well-document instances where the FCA has not taken enforcement action against FCS institutions, and not just CoBank, who have lent outside the FCS’s congressional charter. The FCA OIG should then blow the whistle on FCA’s regulatory mismanagement. CoBank’s solar tax gimmick As if it does not already benefit enough from the tax breaks and cheap financing it enjoys as a GSE, CoBank has pushed the edge of the envelope further with a financing model for solar power installations. According to “SunShot,” a publication of the U.S. Department of Energy, Farm Credit Leasing (FCL), a for-profit and therefore tax-paying subsidiary of CoBank, entered into a leasing deal with the electric cooperative serving Rockford, Minnesota, to install solar panels on property owned by the City of Rockford. In this transaction, FCL leased the solar panels to a for-profit, and therefore taxable, subsidiary of the cooperative. That subsidiary was entitled to a “30% federal investment tax credit for solar . . . equipment.” Likewise, FCL will capture whatever tax benefits are available to a lessor of solar equipment. A sweet deal all the way around, except for taxpayers. Report FCS lending abuses to: green-acres@ely-co.com Bankers are continuing 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