The leadership of the House Financial Services Committee has asked the Farm Credit Administration to withdraw a proposal that would give Farm Credit System lenders more authority to finance nonfarm projects, such as hotels and hospitals.

In a letter to FCA Chairman Leland A. Strom, committee members said they are concerned the proposal would steer the government-sponsored lenders too far from their mission of primarily providing credit to farmers and ranchers. And they said any substantial changes to the Farm Credit System's policies should be decided by Congress, not the system's regulator.

The Rural Community Investments proposal, currently in a 60-day comment period, would make permanent a pilot program that allows the system's lenders to invest in bonds for nonfarm projects in communities with populations of less than 50,000. It would let them buy stakes in venture capital funds that invest in rural development, and includes a "catch-all" provision that would let the lenders finance other rural projects with approval from their regulator, which would examine requests on a case-by-case basis.

"This proposed rule would allow the Farm Credit System to exceed its legislative mandate by funding activities and businesses with few or no ties to the agricultural sector," said the July 10 letter, which was signed by Reps. Barney Frank, D-Mass.; Spencer Bachus, R-Ala.; Carolyn B. Maloney, D-N.Y.; and Judy Biggert, R-Ill. "We oppose the proposed rule and urge you to withdraw it."

The Farm Credit Administration declined to comment this week on the letter from the House committee, but a spokeswoman for the regulator said the agency was drafting a response.

Ken Auer, the president and chief executive of the Farm Credit Council, said the proposed rule aims to help the Farm Credit System finance hospitals and other projects that benefit farmers and all of rural America, not to turn it into a general credit provider.

"Farmers need access to health care; it is important to make all resources available to do so," said Mr. Auer, whose group represents Farm Credit lenders. "There are needs out there that need to be met. Here is a way to add a modest amount of help. You'd think folks would be out there embracing this wholeheartedly."

Mr. Auer also questioned why the committee members would suggest withdrawing the proposed rule during a comment period.

"It makes sense to allow the public to comment on it," he said.

The Farm Credit Administration issued the proposal for comment on June 16. In addition to the letter from the House committee, it has received eight comment letters, according to its Web site. Three system lenders and a developer supported it, and three private citizens and one bank opposed it.

Rep. Frank chairs the House Financial Services Committee and Rep. Bachus is its ranking member. Rep. Maloney chairs the Subcommittee on Financial Institutions and Consumer Credit and Rep. Biggert is the subcommittee's ranking member.

Just how much weight their terse message carries is unclear, since the Farm Credit System falls under the jurisdiction of the House Agricultural Committee. However, the proposed rule would move the Farm Credit System into territory covered by the financial services committee, said John Blanchfield, senior vice president of the American Bankers Association.

"This is an important committee of Congress and they are not going to let this go," Mr. Blanchfield said. "They believe the more Farm Credit acts like a general-purpose lender, the more their committee has some say over what they do."

The banking industry, which opposes any effort by the Farm Credit System to expand its lending authority, was instrumental in keeping some key initiatives supported by Farm Credit lenders out of a farm bill Congress recently passed. Both the ABA and the Independent Community Bankers of America have met with Rep. Frank to voice their concerns about the Farm Credit Administration's latest proposal.

The House committee members said in their letter that they found it "disturbing" that the Farm Credit Administration would be "championing" expansion of the Farm Credit System's lending authority after Congress had already rejected certain provisions in the farm bill "that would have significantly expanded the authority of the Farm Credit System beyond its statutory mission."

Farm Credit lenders are restricted to writing loans to farmers and ranchers and their businesses, as well as offering mortgages in towns with less than 2,500 people. Earlier this year Farm Credit System lenders gained the ability to offer loans to farmer-related processing companies, such as ethanol plants and orange juice factories.

The House committee members also said in their letter that "it would be a serious mistake" to let Farm Credit lenders make larger investments in venture capital funds, which they said are "vehicles for highly risky forms of speculative investment." Currently lenders can invest up to a quarter of their surplus capital in venture capital-like entities called rural business investment companies.

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