McLEAN, Va. - The people at the Farm Credit Administration call it regulatory relief. Bankers call it unfair competition.

Whatever the term applied to it, the new regulation on "related services" approved last week by the FCA will almost certainly lead more farm credit associations to sell insurance, estate planning, and tax return preparation.

"It will make it easier for them to offer services, and I assume more of them will offer the services," said Stephen Phelps, senior vice president and general counsel for the Farm Credit Council.

To the leaders of the council, trade association for the eight farm credit banks and 232 farmer-owned credit associations, it's only natural that member institutions should be able to do what it takes to keep their customers happy.

But many bankers - who see the $63 billion-asset Farm Credit System as a competitor with lower costs, fewer regulations, tax advantages, and the ability to offer government-backed bonds - would prefer that it be kept in tight check, or even shut down.

"We don't think it's fair for a government-created entity ... to be able to compete in traditional banking markets," said Mark Scanlan, an agriculture lobbyist for the Independent Bankers Association of America.

One issue at Thursday's board meeting in FCA headquarters here was whether the new rule allowed Farm Credit institutions to do anything they couldn't before.

Before the vote, FCA Chairman Marsha Martin said several congressional offices had expressed "serious concerns" that her agency would be giving new powers to the institutions it regulates.

Ms. Martin wanted an assurance that this wasn't so.

"I would just state categorically that we're not," replied FCA policy analyst Linda Sherman, who headed the group of staff members that wrote the regulation.

Senior attorney Joy Strickland said the new rules make it easier for Farm Credit institutions to start offering new services. "But it does not allow them to offer any kind of service they wouldn't have been able to offer before," she said.

That was enough for Ms. Martin and fellow board member Doyle Cook, who then voted to adopt the regulation.

Their decision will let Farm Credit banks and associations offer any of 16 services without getting prior approval from the FCA. All the services but one, title insurance, are already being offered by at least one Farm Credit institution. Title insurance and the seven other kinds of insurance on the approved list were explicitly allowed by Congress in 1980.

The new rule also expands the universe of potential customers for these services. Before, only Farm Credit borrowers could buy them. Now, farmers and others eligible to borrow from a Farm Credit institution can in most cases buy related services from it.

"That opens the door for them to cherry-pick as many good customers as they can," said Terry Jorde, chairman, president, and CEO of Towner County State Bank in Cando, N.D. "Why do they need to continue to try to get expanded services in all these areas when their primary purpose is to provide credit?"

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