To hear farm banker Ernest Paulick tell it, Bad Axe, Mich., deep in the state's flat, sugar beet-rich Thumb Peninsula area, is ground zero for banker pique at the Farm Credit System.

"It's our biggest competition, and it's getting bigger," said the executive vice president at Bad Axe-based Signature Bank. "They quote rates, terms, and conditions we just can't quote."

To be sure, commercial bankers everywhere these days have problems competing with farm credit banks, government-sponsored enterprises that have recently sought new powers that could make them competitors in more than just agriculture.

But the farm credit animus is running particularly strong in Michigan. According to a recent Federal Reserve Bank of Chicago survey of farm lenders in the region, 65% of Michigan's bankers reported a rise in farm operating and mortgage lending by the state's four farm credit banks - located in Grand Rapids, Lansing, Lapeer, and Adrian.

In the rest of the Chicago Fed district, about half of the 400 farm lenders surveyed saw growth in Farm Credit System lending.

"That's not surprising," said Mike Singer, an economist and agriculture finance expert at the Chicago Fed. "Farm Credit is a little stronger in Michigan than the rest of the district. It's pretty strong in both land and operating loans."

With the Farm Credit System's fight for new powers almost over - the Farm Credit Administration should decide on whether to expand its lending purview soon, if not this week - farm bankers have their dander up.

"The farm credit banks are being so aggressive because they want to gain back the market share they lost in the 1980s," said Randy Rice, first vice president of agriculture lending at Bank of Lenawee in Morenci, Mich.

Mr. Rice, who worked at Farm Credit for eight years before moving to a commercial bank, said, "I won't say a lot of their programs aren't good, but they are making it a heck of a lot harder for farmers to say no."

He cited reduced requirements on farmers owning stock in farm credit banks when they borrow as well as relaxed underwriting standards and offering subprime rates on many operating loans.

Terry Harris, manager of the Lenawee County branch of Farm Credit Services of Southeastern Michigan in Adrian, said there has been a substantial increase in lending at his bank, especially in operating loans. Listening to him list the specials, it's not hard to understand why.

Michigan farm credit banks are offering operating loans at 5% for the first 80 days, to celebrate the system's 80th birthday. The bank's Gear Up program offers reduced down payments and other attractive terms for equipment loans. It also offers a complementary initial tax evaluation for new customers to introduce them to Farm Credit's increasingly popular ancillary services, such as multiperil crop insurance and its proprietary farm record keeping computer program.

"We're always coming up with new programs to spur interest from our members," he said.

He added that the four Michigan banks and their various branch offices throughout the state pool resources for marketing, product development, and statewide advertising.

As tantalizing as they are for borrowers, such initiatives get at the craw of rural bankers.

"I guess when you're not lending your own shareholders' money, it's easy to lowball," said Paul Clabuesch, president of Thumb National Bank and Trust in Pigeon, Mich., referring to Farm Credit's ability to borrow money cheaply based on its quasigovernmental status. "You put capital at risk when you push the underwriting standards down like they have been. I guess they don't have that worry like we do."

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