Pub. 13 2018-2019 Issue 1

NEBRASKA BANKERS ASSOCIATION 23 Although the FCS still has substantial competitive advan- tages over taxpaying banks, some victories have at least slowed down the FCS’ continued growth. Hopefully, there will be more victories. An early, clear-cut victory was the defeat, late in the last decade, of the so-called Horizons project. Based on materi- als that fell off a turnip truck passing by my office in the fall of 2005, in the December 2005 edition of FCW, I gave readers a heads up that the FCS, through its trade association, the Farm Credit Council (FCC), was launching amajor initiative, called the Horizons project, that would expand the FCS’ off-farm lending powers so that the FCS could serve all of rural America. Commer- cial banks, of course, more than adequately meet that off-farm credit demand. Within a few years, after numerous FCWarticles criticizing the Horizons project, this proposal faded away. Before Horizons, the FCA proposed a “customer’s choice” rule that would have allowed an eligible party to borrow from any FCS institution, regardless of that institution’s assigned territory. In reality, this was a “lender’s choice” rule that would have permitted any FCS institution to lend anywhere in the United States. With lender’s choice, FCS institutions, with their taxpayer-backed borrowing power, would have been able to compete against each other in lending to agricultural bor- rowers. Credit quality surely would have deteriorated as FCS institutions expanded their out-of-market lending. Strong op- position to the customer choice proposal, fueled by numerous FCW articles, led to a successor proposal by the FCA—National Charters—which would have enabled an FCS association to ob- tain a charter from the FCA authorizing it to lend anywhere in the United States. Strong congressional opposition to National Charters, led by Rep. Jim Leach (R-IA), then the chairman of the House Banking Committee, coupled with hearings held by both Agriculture Committees, followed by opposition from the George W. Bush administration, led the FCA to kill the National Charters proposal on October 11, 2001. No serious attempt has occurred since then to revive it. More recently, CoBank, which has the exclusive authority within the FCS to lend to agricultural and rural utility coop- eratives, had begun lending to large, investor-owned utilities such as AT&T and Verizon, by buying participations in loans originated by large banks. CoBank would then resell portions of those participations to other FCS institutions. Numerous FCW articles challenged this CoBank activity, which led to sharp questioning of this practice by members of both the House and Senate Agriculture Committees. As best I can tell from publicly available information, CoBank has stopped buying such loan participations and may have even sold some of them. But vigi- lance must never cease, which is why I continue to value greatly all the tips I get from bankers and others about FCS activities that exceed its lending and investing authorities. Dear readers, please keep it up! Bert Ely — continued on page 24