COLORADO SPRINGS -- Agriculture Secretary Mike Espy may be resigning under a cloud of scandal, but you wouldn't know it from the praise given by ag bankers who heard Mr. Espy's off-the-cuff speech about what's wrong with rural America.

"I was pleased to see that he threw the canned speech away and just basically gave us what his thoughts and comments were," said Henry K. Brandt, senior vice president of Peoples Bank of Maryland, in Denton, Md.

On Monday, at the American Bankers Association's National Agricultural Bankers Conference here, Mr. Espy threw his prepared speech away, and instead outlined what many bankers think is needed to improve farming communities -- ideas that many admitted would be hard to implement.

In his remarks at the Broadmoor Hotel, Mr. Espy said that government and the private sector must work together to combat poverty and spur development in rural areas.

He cited four things government must do. First, it must lead the way in promoting new global marlier-opportunities for U.S. agriculture, he said.

The government also must fund research projects that other entities cannot do to accelerate demand for nonfood uses of agricultural commodities, such as ethanol or soybean ink, he said.

Third, "Government should place a premium on service delivery to the farm and rural sectors," Mr. Espy said. "This election reminds us, if nothing else, that the American people demand smaller government."

He cited the Department of Agriculture's example. The department last week eliminated 14 agencies and by end of month, Mr. Espy said he said he will announce the closing of 1,100 county offices. Offices will be consolidated into a "one-stop shop" Consolidated Farm Service Agency. By 1999, he expects the department's employees will be reduced by 11,000.

Finally, Mr. Espy said government should recognize increased farm sector demand for additional credit and the role commercial banks play in serving that need. "The government must and should encourage greater private lending and investment by easing regulatory burden, reducing compliance costs, and restricting lender liability," he said.

Mr. Espy's department, among the Federal government's largest in terms of staff, oversees virtually every aspect of agricultural production in America. Through various agencies, including the Farmers Home Administration, it has a broad impact on the way farms are financed.

But Mr. Espy will be leaving at the end of this year. Earlier this fall, he resigned under the glare of an ethics investigation into his allegedly receiving gifts from corporate food producers.

Nonetheless, Boyd Waara, vice president of $75 million-asset First National Bank, Philip, S.D. said he was pleased with Mr. Espy's remarks. "I thought he was pretty candid. He didn't spend time defending himself. He talked about what they'd done and what he wanted to do and what he thought needed to be done."

Asked about Mr. Espy's comments during a later session with congressional aids, Mike Torrey, an agricultural legislative assistant for Sen. Bob Dole R-Kan, said the USDA reorganization is following a process begun by the Republicans.

However, he expects an outcry when the cuts begin to hit home, a feeling echoed by many bankers. "Everybody's for cutting out government -- until it's in your community," he said.

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