Pub. 11 2016-2017 Issue 1

www.nebankers.org 24 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. The Rating Outlook is Stable.” The other two major rating agencies—Moody’s and S&P—also maintain comparable ratings on FCS debt. Fitch noted that “as a government- sponsored entity (GSE), the FCS benefits from implicit gov- ernment support. Therefore, the ratings and Rating Outlook of the FCS are directly linked to the U.S. Sovereign rating.” This linkage, of course, is why FCS debt trades so tightly to the Treasury yield curve, which in turn gives the FCS one of its key funding advantages over banks and other private-sector lenders—a very low cost of funds. Fitch also “affirmed the long-term and short-term IDRs of [the four FCS banks] as AA-/F1+. The Rating Outlook is Stable.” Fitch went on to note that “the affirmation of the [FCS banks’] IDRs reflect their prudent, conservative credit culture, their unique funding advantage, and their structural second-loss position on the majority of their loan portfolio.” [emphasis supplied] The FCS banks jointly own the Federal FarmCredit Banks Funding Corporation, which issues and markets the FCS’ Systemwide Debt Securities, which Fitch rated AAA. The FCS banks use those borrowings to fund both loans they hold on their own books as well to fund their loans to the 74 FCS associations who in turn relend those funds to farmers, ranchers, and others, in direct competition with banks and other private-sector lenders. Consequently, FCS associations can charge lower lending rates because of the FCS’ AAA rating. Because the FCS banks are jointly-and-severally liable for debt the Funding Corporation sells to investors, the FCS can therefore be properly viewed as one giant, highly interconnected financial institution. As theWashington Post reported, “If [the FCS] were a single bank, it would be the ninth largest financial institution—measured by assets—in the United States.” 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.   Bert Ely — continued from page 23