Pub. 6 2011-2012 Issue 6

www.nebankers.org 24 Extraordinary Service for Extraordinary Members. Bert Ely’s FARM CREDIT WATCH ® Shedding Light on the Farm Credit System, America’s Least Known GSE © 2012 Bert Ely FCS Lobbying Arm Taps Into U.S. Treasury T HE FARM CREDIT COUNCIL, THE FarmCredit System’s Washing- ton, D.C.-based lobbying arm, has received a $675,109 grant from the USDA “to improve the ef- fectiveness of educational material for those who provide training to begin- ning farmers” with a “primary focus” on the “components of a successful financial skills education.” It is not enough of an outrage that the Farm Credit System (FCS) pays hardly any federal or state income tax but now the FCS, through the Farm Credit Council (FCC), is tapping taxpayers to reclaim a portion of the pittance the FCS pays in taxes. This grant to the FCC was included in $18million of USDA grants to organizations providing “training and assistance to beginning farmers and ranchers.” The key question: What is the FCS up to? We know that despite its lip service to serving young, beginning, and small farmers, the FCS is primar- ily focused on financing large farming and ranching operations. Given this focus, the FCS needs political friends outside traditional agri-business. Where to find these friends: among interest groups who promote small- scale farming and shrinking the distance between food production and consumption. Even though the FCS does not lend much money to small-scale farmers, by aligning with such groups the FCS is building alli- ances with potential political allies in advance of congressional reauthoriza- tion of the farm bill. Such alliances could help protect the FCS from being hurt by the farm bill and possibly even help the FCS. With this $675,000 in taxpayer funds, the FCS has the op- portunity to make many new friends. Shouldn’t the FCS Pay a Guarantee Fee, Too? Just before the end of the year, Congress levied a 10-basis-point guarantee fee on all new mortgages guaranteed by Fannie Mae and Fred- die Mac, with the fee going directly into the U.S. Treasury. The new fee partially pays for the two-month extension of the payroll tax cut first enacted last year. Although not ad- vertised as such, the new fee, for the first time, compensates taxpayers for the risk those government-sponsored enterprises (GSEs) pose to taxpayers, the same type of taxpayer risk the FCS poses. Congress should consider levying a comparable guarantee fee on debt issued by the FCS. Based on the amount of FCS debt outstanding as of Sept. 30, 2011 ($183.4 billion), this fee would pump almost $200 million annually into the U.S. Treasury, par- tially compensating taxpayers for the risks the FCS poses to them, while also partially compensating the Treasury for the taxes FCS does not pay. CoBank Completes Acquisition of U.S. AgBank On Jan. 1, CoBank completed its acquisition of U.S. AgBank, another of what were five FCS banks that fund FCS associations. Although officially called a merger, Denver-based Co- Bank clearly acquired Wichita, Kan.- based U.S. AgBank. Based on Sept. 30, 2011 data, the new CoBank had total assets of $86.7 billion, 43 percent of all FCS bank assets. The second largest bank, St. Paul, Minn.-based AgriBank, had total assets of $71.8 billion on Sept. 30. The other two FCS banks are much smaller: Columbia, S.C.-based AgFirst ($30.3 billion in assets) and Austin, Texas-based Farm Credit Bank of Texas ($13.9 billion in assets). One can reasonably wonder when the two smaller banks will merge or be gobbled up by the two bigger banks. American AgCredit Even More Disjointed The other FCS merger effective Jan. 1 was Amer ican AgCredit’s acquisition of FCS of the Mountain Plains. Several 2009 issues of Farm Credit Watch (FCW) expressed con- cern about a very disjointed merger of two FCS associations: Santa Rosa, Calif.-based American AgCredit and Wichita, Kan.-based Farm Credit of the Heartland. The distance from Amer ican AgCredit’s headquar- ters to the Heartland territory was about 1,300 miles. Mountain Plains, which served northern and western Colorado and the northwest corner of New Mexico, sits about halfway between the other two American Ag- Credit territories, but with big gaps in between—Utah to the west of the Mountain Plains territory and eastern Colorado and western Kansas to the east of Mountain Plains.