Pub. 10 2015-2016 Issue 6

March/April 2016 25 Extraordinary Service for Extraordinary Members. To contact Bert Ely, email bert@ely-co.com , phone (703) 836-4101, fax (703) 836-1403, or send mail to P.O. Box 320700, Alexandria, Va. 22320. If your bank belongs to the American Bankers Association (ABA), you can enjoy a free email subscription to FCW or you can read it monthly online at www.aba.com. To receive FCW by email or to manage your subscription, visit ABA Member Email Bulletins at www.aba.com/Tools/ Ebulletins/Pages/default.aspx. For other inquiries, please contact Barbara McCoy at the ABA at (800) BANKERS or bmccoy@aba.com . to acknowledge is that by retaining those rights, the FCS sold a property for less than what it would have received if the sale of the property had included those rights. In effect, FCS institutions gambled on the future income those rights would generate; such gambling was hardly envisioned by Congress when it created the FCS 100 years ago, which is why it told the FCS to stop retaining mineral rights. The pre-1985 rights became quite profitable for the FCS, with mineral rights income rising from $30 million in 2009 to $132million in 2014. That gamble was less profitable for the FCS last year as mineral income dropped 37 percent for the first nine months of 2015 compared to the same period for 2014. Most striking, though, is the lack of any data as to the current market value of the FCS’ mineral rights. In defending the FCS’ shadow-banking activities, the Council cited its statutory authorization to furnish its cus- tomers “closely related services” as justifying the offering of a wide range of services unrelated to the actual furnish- ing of “sound, adequate, and constructive credit.” Over the years the FCA, as the FCS’ very friendly regulator, has authorized FCS institutions to peddle services not closely related to furnishing credit, such as “farm record keeping, tax preparation assistance, and financial planning.” Most egregious, of course, are the cash management services an increasing number of FCS institutions now offer, including the acceptance of uninsured deposits. Although the ABA letter said nothing about the FCS’ sale of crop insurance, the Council felt compelled to defend that activity, claiming that FCS “employees that sell crop insur- ance must meet all of the same licensing and regulatory requirements as any other crop insurance agent.” As “Farm Credit Watch” has previously reported, state insurance regulators, notably in Illinois and North Dakota, have cited FCS institutions for utilizing unlicensed personnel to sell crop insurance, often tied to an FCS loan. Perhaps the most astounding aspect of the Council letter was its failure to offer any defense of the ABA’s observation that the FCS’ lending to young, beginning, and small (YBS) farmers declined from 30 percent of the FCS’ total loan portfolio in 2003 to 15 percent in 2014. The Council’s failure to defend the FCS’ YBS lending effectively is an admission that the FCS has turned its back on YBS farmers. That lack of defense also evidences the poor quality of the Council’s response. FCS: Forecasting the Future In celebrating the 100th anniversary of its founding, the FCS recently opened a time capsule buried nearly 50 years ago to mark the 50th anniversary of the Federal Land Bank system, the precursor of today’s FCS. The time capsule was buried in Larned, Kansas, near the site of the first FCS loan made in 1917. Included in that time capsule were predictions that 12 FCS leaders fromacross the country wrote “about the future of agriculture and the financing required to feed and clothe an ever-growing population.” According to the Farm Credit Council, “the 1967 predictions accurately identified some of the most prominent drivers of agricultural finance today.” Interestingly, none of the five predictions related to agricultural finance, other than that larger farms “will neces- sitate the use of more credit.” The Council declined, though, to release the text of the predictions of the 12 leaders. One can reasonably wonder if any of the 12 leaders predicted the bursting in the 1980s of the farmland bubble that was largely inflated by the FCS’ reckless real estate lending dur- ing the 1970s. Report FCS Lending Abuses Bankers are continuing to send Farm Credit Watch reports of FCS lending abuses such as FCS loans for ru- ral estates, weekend getaways, and hunting preserves. Email reports of similar lending abuses in your market to: green-acres@ely-co.com.  Commercial Lending Real Estate Lending Agricultural Lending Loan Workouts Bankruptcy & Creditors’ Rights Tax Increment Financing Bond Financing Community Development SID Operation & Financing Real Estate Development Commercial Litigation 2120 South 72nd Street, Suite 1200 Omaha, NE 68124 402.391.6777 Croker, Huck, Kasher, DeWitt, Anderson & Gonderinger, L.L.C. crokerlaw.com