Pub. 5 2010-2011 Issue 4

November/December 2010 13 Extraordinary Service for Extraordinary Members. O N MONDAY, NOV. 8, BERT ELY will join the ABA’s Floyd Stoner and Seaver Sowers at the 2010 North American Agricultural Lenders Conference in Omaha to discuss the implications of the November elections. Not only is there likely to be a significant shift in the relative power of the two parties in the U.S. Senate and House, but gu- bernatorial and state-legislature elec- tion outcomes will have a significant impact on the reapportionment of U.S. House districts following this year’s census. More information about the conference can be found at www.aba. com/events/agr.htm. FCS Mega-Mergers in the Works U.S. AgBank, one of the five Farm Credit System(FCS) banks, announced in its second-quarter financial report that its board had “approved a plan related to AgBank’s long-term strate- gic direction.” That type of language usually signals that serious merger talks are underway. CoBank, the second-largest FCS bank, separately stated that “U.S. AgBank chose to role was due to “material weaknesses in [Louisiana Ag Credit’s] risk profile as well as an overall continuing con- cern with the association’s safety and soundness.” It will be interesting to see what problems arise in the merged association after the merger is closed. Although not officially announced, a possible merger of American Ag- Credit, ACA, headquartered in Santa Rosa, Calif., with Mountain Plains, ACA, which serves western Colorado, is in the works. The merged institution would have about $6 billion in assets. American AgCredit, which last year merged with an FCS association serv- ing portions of Kansas and Oklahoma, would then serve portions of five states with a highly disjointed and unman- ageable lending franchise. Does this merger make any sense, especially so soon after American AgCredit’s merger last year? FCA Announces Regulatory Performance Plan On Sept. 8, the FCA announced its latest semi-annual Regulatory Perfor- mancePlan,whichsets out a schedule for changes inFCAregulations over thenext year. While some changes the FCA will consider are fairly technical in nature, others are designed to broaden the FCS’ lending and investing activities. Since early 2005, the FCA has been authoriz- ing “pilot programs” for “Investments in Rural America” underwhichFCS institu- tions make investments and enter into partnerships which “could help increase the availability of funds to agriculture and rural America.” These investments and partnerships represent a backdoor way to broaden the FCS’ lending and investing activities. Supposedly, the FCA will end the review of these pilot programs in September of next year, almost seven years after they started. However, theFCAhaspreviouslydelayed ending this review period, so don’t be surprised if the FCA kicks this can down the road again. Bert Ely’s FARM CREDIT WATCH ® Shedding Light on the Farm Credit System, America’s Least Known GSE © 2010 Bert Ely evaluate CoBank as a potential merger partner.” As Farm Credit Watch has reported, the Farm Credit Adminis- tration (FCA) has been preparing the ground for mergers among the FCS banks. According to the FCA’s Fall 2010 Regulatory Performance Plan (see below), the FCA intends to issue a final notice this fall of a Joint and Several Liability Allocation Agreement among the five banks. Although the FCA sought public comment on this proposed agreement, no comments were filed by the close of the com- ment period on Sept. 17—presumably because the five banks are comfort- able with the agreement and no one else cares. Expect a CoBank/AgBank merger announcement around the end of the year. According to a Sept. 8 news release, the FCA granted preliminary approval to the merger of Louisiana Ag Credit, ACA, into Southern Ag Credit, ACA, which serves southern Mississippi. Since August of last year, Louisiana Ag Credit has been managed by Southern Ag Credit in preparation for this merger. Southern’s management Ely to Discuss Election Results at Ag Lenders Conference Q Farm Credit Watch — continued on page 14