CoBank’s Credibility Problem

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After forking over an astounding $1.5 billion in credit to four of the world’s largest telecom corporations, CoBank – Farm Credit’s largest subsidiary and supposed ag lender– is at it again, this time committing hundreds of millions of dollars in new loans to major utility companies across the country.

Here’s how it unfolded:

  • On March 10, the GSE giant participated in a $450 million unsecured revolving credit facility for a California-based water utility provider. As reported in Farm Credit Watch, CoBank acted as a co-syndication agent for the NYSE-listed corporation.
  • Just days later, Fitch Ratings Service affirmed the rating for Georgia Transmission Corp., an electrical infrastructure provider, thanks in part to a CoBank-led, $250 million revolver that was established in March 2013 and later renewed until March 2018.
  • On April 13, CoBank helped Black Hills Corp., a South Dakota-based natural gas and electric utility provider, close on a two-year, $300 million unsecured term loan.

While it’s anyone’s guess as to why CoBank’s regulator does not speak out against such egregious lending activities, the fact remains that these large customers have more than enough capacity to engage the private sector rather than tap into the taxpayer-subsidized credit provided by CoBank and other Farm Credit associations.

CoBank’s seemingly endless portfolio of non-agricultural loans is unsettling because it represents a wildly stretched interpretation of the Farm Credit Act of 1971. While lawmakers passed the decades-old legislation with the intent of enabling lending to important activities and enterprises to support rural America, they likely did not foresee Farm Credit viewing it as a green light for its current “anything goes” approach.

CoBank will continue to run amok until its activities are reined in and refocused on the farm. This begs the question, when will Congress finally step in to take a look at these non-agricultural loans from CoBank and other large GSE’s masquerading as farm lenders?