After much public dissent, the Farm Credit System's regulator this year shelved a controversial proposal that would have allowed Farm Credit lenders to expand geographically and to add new products.

Now a similar measure is back, only with a different name: National Chartering. This time, banks say, the Farm Credit Administration, which regulates the nation's roughly 200 Farm Credit lenders, is not interested in hearing what they have to say. "They're trying to slip this past with no debate," said Robert J. Nall, president and chief executive officer of $39 million-asset First American Bank in Woodward, Okla. "They act like they're able to do whatever they want to without answering to anyone."

The National Chartering plan would allow Farm Credit lenders to make loans anywhere in the country as soon as Jan. 1, 2001 - assuming they receive approval from the Farm Credit Administration.

The government-sponsored lenders currently divide the country into exclusive territories in which they compete with commercial banks for farm loans. But regulators seldom have allowed Farm Credit lenders to move into one another's territories to compete.

With most rule changes, the Farm Credit Administration makes a formal proposal, takes public comment, and then votes. But in this case, the regulator contends that it already has the right to allow Farm Credit lenders to operate wherever they want and, therefore, that it needs only to clarify existing rules.

That has angered banks and House Banking Committee Chairman Jim Leach. The Iowa Republican two weeks ago fired off a letter urging the Farm Credit Administration to go through a formal, public process. Bank groups have urged their members to write to the regulator to voice disapproval.

"The Farm Credit Administration has always been a relatively careful agency, but this is a stinko deal and was very poorly handled," said John Blanchfield, director of the American Bankers Association's center for agricultural and rural banking.

Michael M. Reyna, the Farm Credit Administration's chairman and chief executive officer, said he would rather not comment at length on the matter before he has sent Rep. Leach a written reply, which should reach the congressman this week. Mr. Reyna did say, however, that the system needs National Chartering to make its regional lenders less reliant on one region or, in some cases, on one particular crop.

"By geographically diversifying, you're able to spread the risk among different commodities and areas to reduce the risk," he said.

Bankers fear that the Farm Credit Administration is trying to slide through most of the provisions in the failed Customer Choice proposal one at a time. For instance, another pending proposal would allow so-called Production Credit Associations, which make only short-term operating loans, to branch out into real estate. The converse would go for Federal Land Credit Associations.

Customer Choice included such expansions of power along with a national-chartering provision. But the Farm Credit Administration abandoned the broad Customer Choice this year after receiving more than 200 letters - the majority negative - about the proposal.

Many of those panning the proposal were Farm Credit lenders themselves - especially in Alabama, Louisiana, Mississippi, New Mexico, and Texas.

Lenders in those states argued during the Customer Choice debate that FCA rules guarantee them exclusivity in their own lending districts. Many of those same institutions also oppose National Chartering.

But the proposal has the support of the Farm Credit Council, the system's trade group, said Stephen Phelps, general counsel for the Farm Credit Council. "There are some in the system who have concerns, but most of our membership supports this, and so do we," he said.

No matter what the name, the banking industry opposes any rule changes that might increase competition from Farm Credit lenders. Banks long have accused the lenders of using their tax-exempt status to undercut them on interest rates.

"They're already a tough competitor," said Doug Pfeifer, vice president of $28 million-asset Siouxland National Bank in South Sioux City, Neb. "They picked off our best customer earlier this year, and they've prevented us from making headway with other customers."

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