Every five years the federal government reviews its national agricultural policy and updates it through a piece of legislation called the Farm Bill. This is an opportunity for the American agricultural community come together with Congress to put into place strong agricultural policies that will ensure the safety and prosperity of American agriculture.
Leave it to Farm Credit to muck things up.
The newly-released draft of the Farm Bill addresses hundreds, if not thousands, of important agricultural policies. But snuck into the middle of the bill is a provision that should leave jaws hanging: Farm Credit wants to repeal a statute that governs the compensation of the members of boards of directors of Farm Credit System (FCS) banks. The statute that Farm Credit wants to repeal is not complicated. It reads:
“(a) IN GENERAL. The Farm Credit Administration shall monitor the compensation of members of the board of directors of a System bank received as compensation for serving as a director of the bank to ensure that the amount of the compensation does not exceed a level of $20,000 per year, as adjusted to reflect changes in the Consumer Price Index for all urban consumers published by the Bureau of Labor Statistics, unless the Farm Credit Administration determines that such level adversely affects the safety and soundness of the bank.
(b) WAIVER. The Farm Credit Administration may waive the limitation prescribed in subsection (a) under exceptional circumstances, as determined in accordance with regulations promulgated by the Farm Credit Administration.”
In plain English: Farm Credit’s regulator will keep an eye on how much FCS bank board members are paid so that they aren’t paid more than $20,000 a year. This amount will be indexed to inflation. The statute Farm Credit wants to get rid of is exceedingly reasonable.
There are two major effects of repealing this provision. One, it will enable FCS banks to pay members of their boards of directors whatever they want – it could be $20,001, or it could be $500,000. There’s no limit on compensation once this provision is repealed.
Two, it will remove the Farm Credit Administration’s (FCA) discretionary authority to determine whether that level of compensation may “adversely affect[s] the safety and soundness of the bank.” In essence, Farm Credit wants to strip away the power of its regulator – a power that the FCA should be exercising to guarantee that there’s not another Farm Credit Crisis, and that taxpayers aren’t footing the bill for Farm Credit’s screw-ups.
Without a doubt, Farm Credit will claim that it needs to raise limits to compensation for its board members so that it can attract the right kind of talent to manage its vast enterprises. But here’s the rub: the Farm Credit System banks’ and associations’ boards of directors should comprise their own member-customers. If they do comprise their own member-customers, then each person on each board should be operating a farm or an operation that is producing an income. It’s not as though the only income stream for a board member is their compensation as a board member. If Farm Credit is really about serving its member-customers, then each board member should be maintaining a farm or operation that is producing an income.
The worst thing about Farm Credit’s attempt to repeal this provision is that it ignores the safeguards already in law. Section B of the statute that Farm Credit is trying to repeal is there to make sure that the FCA can override the limits on compensation if there are exceptional circumstances (notice it doesn’t say “in the case of an emergency”). If it’s really necessary to raise compensation for board members, then shouldn’t Farm Credit be going through the already established legal process?
It’s not shocking that Farm Credit would lobby Congress to weaken the FCA. But it’s shocking that it would do so this brazenly, without any reasonable justification for why it would want to (1) remove any limit for its board members’ compensation and (2) remove the ability of the FCA to do anything about it.
Members of the House Committee on Agriculture have the good sense to recognize that this is an obvious cash grab by a few people at the top of Farm Credit. They should act swiftly during the markup process to remove this provision from the Farm Bill.