Jerold L. Harris, president and chief executive of the Farm Credit Bank in Wichita, gets hot under the collar when he hears bankers' complaints about his organization. What annoys him the most? Charges of unfair competition. Farm credit banks don't compete unfairly, he says - just aggressively enough to be a competitive force. In fact, says Mr. Harris - who also heads a national Farm Credit System's planning committee of presidents - community banks have many powers that give them some competitive advantages. The Farm Credit System, with assets of about $63 billion, is a government-sponsored network of six regional farm credit banks, two specialized cooperative banks, and about 240 local farm lending entities nationwide. The institutions raise lendable funds by selling bonds and notes in the capital markets. Mr. Harris, 53, who has spent his entire career with Farm Credit, recently discussed the head-to-head competition with commercial banks.

Q.: What complaint about Farm Credit by bankers irks you the most?

HARRIS: That we have a lot of unfair advantages.

Q.: Why does that bother you?

HARRIS: I think a lot of it's just rhetoric. We each have some advantages and disadvantages in certain aspects of our business.

Q.: Bankers gripe that farm credit banks have the advantage of cheaper funding sources, which lets them undercut banks on loan rates. Is that true?

HARRIS: We are a government-sponsored enterprise, and that's our mechanism for raising loan funds. We may be able to raise larger amounts on a more consistent basis, but I don't believe, when you look at what they're paying on CDs for deposits, that we can raise the money cheaper.

Q.: What about differences in regulation?

HARRIS: Again, I think we have a lot of differences in our regulatory requirements. We are not subject to the Community Reinvestment Act. But neither are banks subject to borrower rights, as the Farm Credit System is.

Q.: What are borrower rights?

HARRIS: We have some very rigid requirements when it comes to dealing with troubled accounts. Some of that is very costly, as is CRA costly to commercial banks.

Q.: What about the allegation that Farm Credit cherry-picks banks' best customers?

HARRIS: There's probably evidence all across the country where we have been able to attract some good accounts from commercial banks. They have also attracted some good accounts away from us.

It's just a fierce competitive environment out there.

Q.: What advantages do you think commercial banks hold over farm credit banks?

HARRIS: Commercial banks have broader authorities than do farm credit banks. Farm Credit cannot buy whole loans today from agricultural lenders. We would like to. When commercial banks out in the heartland make ag loans, some of them are getting loaned up, and they're looking for liquidity and they're coming to our associations and want to sell us whole loans. The commercial bank would continue to maintain the relationship with that customer.

Q.: Bankers say that's untrue.

HARRIS: That's absolutely wrong. They keep the origination fees, keep the servicing fees, and maintain the relationship with that customer.

Q.: How would you characterize the relationship between Farm Credit lenders and commercial bank agricultural lenders.

HARRIS: Overall, the relationship is reasonably good. Throughout the midsection of the country, we find a larger number of small community banks that have evolved in financing agriculture. When you find tough competition, you're going to hear a lot of rhetoric about we don't get along. But there's also a lot of evidence of the Farm Credit System and commercial bankers working together to serve the needs of rural America and agriculture.

Q.: What do you see as the future for Farm Credit and agricultural banks?

HARRIS: Agriculture will continue to consolidate. I think there'll be more cooperation in the future. If you're out in rural America, there's a need for Farm Credit, there's need for commercial bankers. I don't see one just clearly dominating.

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