The banking industry is getting a second chance to voice its opposition to a proposal that would broaden the Farm Credit System's lending authority.
Bankers and their trade groups largely missed a Dec. 15 comment deadline on a
Between now and the new Feb. 26 deadline, the ICBA and the American Bankers Association will urge their members to write
"Our plan will be to provide our membership with information that will help them understand the implications of this proposed rule," said John M. Blanchfield, the director of the ABA's Center for Agricultural and Rural Banking. "This extension will give us the opportunity to do that education for sure."
Mark K. Scanlan, the director of agricultural finance at the ICBA, said, "A number of bankers are going to be interested in learning more details about it."
The government-sponsored Farm Credit System was created largely to ensure that farmers and ranchers have a reliable source of credit. The banking industry has long argued that the system's lenders use their federal tax exemption to undercut them on loans and opposes any effort to broaden their lending authority.
Farm Credit System lenders are seeking the authority to make loans to a broader range of firms that market or process farm products. These would include, for example, companies that press apples into juice or market farmers' products to grocery chains.
Under the current rules, a marketing or processing company can borrow from a Farm Credit System lender only if it is owned by a farmer or if farmers own more than 50% of it.
The regulator decided to revise the rule because such companies are often started by farmers but are often primarily owned by family members. So if a farmer's daughter owns the processing company but buys most of the raw materials from her father, she is not eligible for a Farm Credit loan, said Gary K. Van Meter, the deputy director of the office of regulatory policy at the Farm Credit Administration.
The proposal would let Farm Credit System lenders make loans to companies in which: farmers own 50% of the voting stock but not 50% of the total stock; farmers control the management but own less than 50% of the stock; and farmers own at least 25% of the voting stock and provide at least 20% of the raw materials for its operations.
The proposal "is not designed as a grand expansion of the lending authority," Mr. Van Meter said. "It is simply trying to meet the farmers' needs in light of how they structure their operations."
In October, the Farm Credit Administration asked for comment on the proposed rule by Dec. 15. Of the 239 comments received, only a few have been from bankers.
Mr. Blanchfield said the banking industry was focused on other issues pertaining to agricultural policy and that the proposal slipped through the cracks.
In its Dec. 15 letter, the ICBA said the proposed rule should be withdrawn or banks should at least have 90 more days to comment. The Farm Credit Administration responded Jan. 11 and extended the comment period for 45 days from that date.
The Farm Credit Council, the trade group for the system's roughly 100 lenders, sent a letter opposing any extension. The proposed rule is of "vital importance to America's farmers and ranchers and "ample time" has already been provided for comments, it said.
But Mr. Scanlan said the proposal is vague and could lead to a broad range of businesses' getting financing from the Farm Credit System. One interpretation, he said, is "that a grocery store could be a marketing firm because it markets agricultural products."
