If the Farm Credit Administration continues to skirt its responsibility to oversee and regulate the Farm Credit System, Congress will have to step in to investigate and oversee both entities. This is according to Rep. Mick Mulvaney (SC-5th), who indicated last week that the time for Congress to assert its authority over these matters is near.
In a letter addressed to FCA Chairman and CEO Jill Long Thompson, Rep. Mulvaney questioned the Farm Credit System’s decision to approve a recent string of large, risky loans to major entities including Verizon, AT&T, U.S. Cellular and Frontier Communications.
“I now question whether these loans exceed the authority granted under the Farm Credit Act and violate the plain language of the statute,” Rep. Mulvaney wrote. “If these types of transactions continue, it will be incumbent on Congress to review the statutory authority of the FCS. We must determine if this use of taxpayer subsidies continues to serve its intended purpose and whether authorization of this program should continue in its current form.”
Rep. Mulvaney noted that if the FCS were a commercial bank, it would be the ninth largest in the country. He also pointed out that the size and scope of Farm Credit’s lending activities have grown exponentially — in just the last ten years, Farm Credit’s total assets doubled.
“It makes me question the impact the FCS has on traditional, private U.S. financial markets, and whether the appropriate amount of regulation and Congressional oversight is being exercised over such a large enterprise,” he wrote.
The Congressman also took the Farm Credit System’s standard line of defense to task, questioning how similar entity lending applies to such loans.
“While lending to similar entities is permissible, I fail to see how a large, publically traded telecommunications company is similar to a small, rural telephone cooperative. Even if companies like Verizon, AT&T, U.S. Cellular and Frontier Communications serve rural areas, I do not believe they meet the letter or spirit of the statute as a similar entity to which CoBank may lend,” he wrote.
“Even if you argue that they do, CoBank should have exercised its discretion not to commit to loans to such entities. Large, corporate banking transactions for companies with access to global financial markets are best left to the private sector, not the taxpayer.”