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The FDIC may soon have another option for resolving failed banks whose assets include farm loans. Traditional banks are not welcoming the expected change.
May 10
Farm Credit System lenders have finally won permission from their regulator to bid on the assets of failed banks.
But, in a significant modification to a rule first proposed a year ago, the Farm Credit Administration said System lenders could only bid on farm-related loans that are similar to those already on their books.
Under the rule first proposed in May 2010, System lenders would have been eligible to bid on broader pools of loans — including non-farm consumer and commercial loans — that the Federal Deposit Insurance Corp. retains after a bank fails. But the FCA ran into stiff opposition from bankers and their trade groups, who argued in comment letters that the proposal was an attempt by government-backed System lenders to expand beyond their mission of providing credit to farmers and ranchers.
"In response to comments, FCA modified the proposed rule to authorize only the purchase of agricultural loans that are eligible for System financing," the agency said in a news release Thursday.
Still, the rule change is unlikely to appease rural bankers, said John Blanchfield, the director at the American Bankers Association's Center for Agricultural and Rural Banking.
"It's still an expansion of the Farm Credit System through the regulatory process that we do not believe Congress authorized," Blanchfield said.
