Pub. 11 2016-2017 Issue 2

www.nebankers.org 24 Extraordinary Service for Extraordinary Members.  Bert Ely — continued from page 23 news release, Halverson joined CoBank in 2013 after spending more than 16 years at Goldman Sachs in a variety of executive positions. He holds a doctorate in “war studies.” As the April 2016 Farm Credit Watch reported, CoBank angered institutional investors when it announced in March that it would redeem $405 million of 7.875 percent subor- dinated notes, asserting that new capital rules promulgated by the FCA opened the door to this redemption. On April 15, CoBank carried out that redemption, wiping out the ap- proximately $50 million premium at which those notes were selling above their par value. Not surprisingly, on June 13, 28 investors in those notes, who in total owned approximately 44 percent of the notes, sued in federal court (Southern District of New York) for damages. It will be interesting to see how this litigation turns out as three other FCS institutions have issued high-yielding subordinated debt; they probably are tempted to redeem that debt, too. FCA Issues Annual Report on FCS’ YBS Lending The FCS loves to brag about how much it lends to young, beginning, and small (YBS) farmers yet as Farm Credit Watch has reported on numerous occasions, the facts belie that asser- tion. Young (Y) farmers are borrowers 35 or younger, beginning (B) farmers are those who have been farming or ranching for 10 years or less, and small (S) farmers are those whose gross receipts fromagriculture are normally less than $250,000. On June 9, the FCA released its annual report on the FCS’ YBS lending. As the FCA has always readily acknowledged, the FCS double- and triple-counts its YBS lending. For example, if a loan is made to a 33-year-old who began farming eight years ago and normally has gross farm receipts of $200,000 annually, that loan gets counted three times—as a Y, a B, and an S loan. Furthermore, if that farmer has four loans, say a real estate loan, an operating loan, and two equipment loans, those loans will get counted 12 times in the FCS’ YBS data even though there is just one borrowing relationship. Given that the FCS, in the interest of sound credit management, monitors its total credit exposure to each of its borrowers, it could report its YBS data by borrower, but it does not. As the March 2016 Farm Credit Watch reported, FCS demonstrated its long-standing ability to aggregate loan data by borrower when, for the first time, in its 2015 Annual Information Statement, it reported outstanding loans to bor- rowers, in ranges of the amount borrowed at year-end 2015;