American Banker: Expanding the Farm Credit System Won’t Help Rural America

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As a veteran banker with a large agricultural portfolio in Kansas, I worked diligently with my colleagues from across rural America to convince Congress to stay the course and prevent granting the Farm Credit System additional lending authority in the recently enacted five-year farm bill. The ideas presented in the recent BankThink column by Lee Reiners to pursue the opposite path fundamentally ignore the reality on the ground in agricultural lending today. While rural America needs investment and support to thrive, any plan for long-term success should have commonsense proposals informed by full consideration of the facts. Simply put, the U.S. needs to let ag banks be ag banks, subject to the stringent regulations that protect consumers and taxpayers and ensure that the FCS adheres to its statutory mission.

Expanding and empowering a massive, centralized government-sponsored enterprise — and in the process undercutting rural community banks — is simply a bad idea, one which minimizes the important work rural community banks do to maintain and strengthen their communities. It does not take into account the FCS’s questionable track record of service to rural America’s most vulnerable agricultural producers that it was chartered to serve. And it ignores FCS’s blatant flaunting of its tax-preferred status to compete directly with taxpaying institutions and enable large, unrelated lending that puts not only its cooperative members, but all American taxpayers, at risk.

Reiners’ column mentions “you won’t have to go very far before you run across a Farm Credit association” in any rural area, but in my five-county core area in northern Kansas there are 24 community banks with 56 branches, compared to exactly one FCS location. The suggestion that 56 full-service banking locations can be replaced and our customers be served adequately by one FCS branch is ridiculous.

Farm banks like mine provide valuable services to their communities and are the bedrock that America’s agricultural producers rely upon. In 2017, banks provided nearly 50% of all farm loans in the U.S. — $180 billion as of December 2017. Farm banks increased lending nearly 6% across the country that year, from the northeast to the south, from the Corn Belt and the plains to the west. Small loans made up nearly half of bank farm and ranch lending, with $76 billion in small and micro farm and ranch loans recorded at the end of 2017. Reiners’ proposal that banks be given the option to join the FCS shows how little he understands rural community banks. No bank would want to sacrifice its independent ability to support its community for the chance to be subject to the whims of the FCS. Farm banks will continue to serve their communities because they are a part of their communities — they are not beholden to the interests of a centralized GSE.

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