Finally, Farm Credit System (FCS) institutions are required to have updated standards of conduct and a code of ethics for their officers and employees.
The FCS’s regulator, the Farm Credit Administration (FCA), recently finalized a rule mandating that each FCS institution set standards for ethical conduct, enhance the program governing the standards, adopt a formal code of ethics, and encourage ethical practices within the System as a whole.
This, and the standards that the FCA proposed, shouldn’t be controversial, right?
During the comment period for this regulation, Farm Credit institutions submitted more than 150 letters critiquing the proposed regulation. That itself isn’t surprising – Farm Credit institutions want to exercise their right to critique proposed government standards.
But the Farm Credit Council, the FCS’s lobbying arm and voice in Washington, showed its hand in its comments, two of which should raise eyebrows.
First, the Farm Credit Council takes issue with the new definition of conflict of interest: “The proposed regulations redefine ‘conflict of interest.’ The definition is not customary.”
This comment encapsulates the problems with the Farm Credit Council and its approach to even the most basic reform of the FCS. The Farm Credit Council is too focused on what may be customary and safe than what might be needed. Beyond that, the Farm Credit Council should know all too well that little about Farm Credit is customary. It is the only government-sponsored enterprise (GSE) that lends directly to borrowers, among other idiosyncrasies.
Second, it expresses skepticism that it should have more rigorous ethics standards because of its status as a GSE. The proposed rule points out that the System’s GSE status “confers on System institutions additional responsibility to strive for high ethical standards and business practices.”
In response, the Farm Credit Council offers that, “The System, and each of its banks and associations is very mindful of the ‘GSE status’ cited in the Proposed Rule. However, we have been unable to identify any other Federal financial regulatory agency that promulgated similar disclosure based standards of conduct regulations for their regulated entities. Is it reasonable to conclude from this that FCA believes that the ethical standards of farmers and ranchers and cooperative directors are somehow in need of greater scrutiny than those of commercial bank directors?” [emphasis added]
This is an attempt at a rhetorical ploy to misdirect and sidestep the real question, namely: should a GSE, implicitly-backed by American taxpayers and operating under the auspices of the federal government, go without a strict code of ethics?
In the 1980s, a “borrower bill of rights” was established to protect borrowers. This surely wasn’t created in a vacuum, and was likely due to complaints of ethical breaches, perceived or otherwise, by Farm Credit lenders.
Why shouldn’t Farm Credit entities, operating under the public’s trust, have a code of ethics that goes above and beyond what is expected for others who are not backed by the government? Shouldn’t they be above reproach and suspicion?
Most of the public would agree that Farm Credit, its directors, and its employees should adhere to the highest ethical standards. Fortunately, the FCA’s new rule is a step in the right direction. But it’s just one step. Congress needs to conduct annual oversight hearings of Farm Credit and the FCA to make sure that standards of conduct and codes of ethics are adhered to, and that Farm Credit properly serves America’s farmers, ranchers and producers. America’s taxpayers should demand nothing less.