In his more than six years on the board of the Farm Credit System's regulator, including four as its chairman, Michael M. Reyna says he was too busy regulating to advocate for wholesale changes to the system.
But now that he has left the board, he is offering some ideas for modernizing the system and improving its governance.
Specifically, Mr. Reyna suggested in an interview last week that the system be included in any legislation that aims to create a new regulator for Fannie Mae, Freddie Mac, and the Federal Home Loan banks - a proposal that would be popular with banks but not with Farm Credit System lenders.
He also argues that commercial banks and other rural lenders should have access to the Farm Credit System's financing arm, the Federal Farm Credit Banks Funding Corp.
Mr. Reyna acknowledged that this idea also would not go over well with Farm Credit lenders, but he said it would benefit rural America by providing more competition among lenders to farmers and ranchers.
"The Farm Credit System is the only retail GSE lender," he said. "Other GSEs help provide liquidity to private-sector lenders. I believe this is an area that is ripe for focus by Congress."
Mr. Reyna was the chairman of the Farm Credit Administration from January 2000 until May 2004. He kept his seat on the board until Dec. 2, when Dallas C. Tonsanger succeeded him.
The FCA regulates the Farm Credit System, a group of lenders that makes loans to farmers, and Farmer Mac, which buys and securitizes farm loans.
His argument for including the Farm Credit System and Farmer Mac in any GSE reform is similar to one others have made about Fannie and Freddie: taxpayers would potentially be on the hook to bail out Farmer Mac and the Farm Credit System if they run into financial trouble.
A common regulator also makes sense because, like the housing GSEs, Farmer Mac and the Farm Credit System have a public service mission, for which they receive government support in terms of funding and tax breaks, he said.
"To be intellectually consistent, if you were starting from ground zero designing a regulatory scheme for GSEs, you would not leave out Farmer Mac or the Farm Credit System," Mr. Reyna said.
Earnings restatements and accounting problems at Fannie, Freddie, and the Home Loan banks have led Congress to consider changes in the way the government oversees GSEs, including the establishment of an umbrella regulator.
No lawmakers have proposed lumping the farm GSEs into a larger bill, and Mr. Reyna acknowledged that because the $117 billion-asset Farm Credit System and the $3.8 billion-asset Farmer Mac are small compared to the other GSEs, they probably will not be included in any legislation.
Bankers also point out the logistical issues of an all-encompassing bill, including the fact that the congressional financial services committees oversee the housing GSEs, while the agricultural committees oversee the farm GSEs.
Still, the banking industry, which has long complained that Farm Credit lenders use their tax-exempt status to undercut banks on rates, likes what it is hearing from Mr. Reyna.
John M. Blanchfield, the director of the American Bankers Association's Center for Agricultural and Rural Banking, said that there is nothing fundamentally different between a loan secured by farm real estate and one secured by residential real estate.
Mr. Blanchfield said that the ownership structures of the Home Loan banks (which are owned by commercial banks in a cooperative structure) and Fannie and Freddie (which are owned by the public) have led to calls for a strong regulator to protect investors' interests.
"The fact that the Farm Credit System is owned by farmers and ranchers is a compelling reason that they have a strong regulator looking out for their interests," he said.
Farm Credit lenders, on the other hand, are less enthused with the idea.
Jack Cassidy, a senior vice president at $30 billion-asset CoBank ACB in Denver, said that from CoBank's perspective, the housing and farm GSEs are not dealing with the same issues and should maintain separate regulators.
Another change Mr. Reyna said would be useful is making the funding used by the Farm Credit System available to all rural lenders. Providing low-cost funding to everyone who lends in rural America would give borrowers there more options, because all the lenders would have more liquidity and could offer low-cost loans, he said.
Mark K. Scanlan, the director of agricultural finance at the Independent Community Bankers of America, strongly endorsed that idea. Banks have partial access to the funds through a program that lets banks set up an entity that can borrow from the Farm Credit System, but the fees that normally go along with the borrowing make the loans unattractive, he said.
Mr. Reyna said that even if the system's funds were made available to other lenders, the system would still have a place as a direct lender to farmers, because farmers own Farm Credit lenders and therefore would still borrow from them.
His concern, though, is that some of the system's lenders have moved away from being cooperatives that serve farmers' interests and now look more like commercial banks.
The Farm Credit System has consolidated rapidly in the last five years - it now is made up of about 100 lenders - so the average asset size of a Farm Credit lender has increased from about $250 million in 2000 to nearly $1 billion today, Mr. Reyna said.
"When you get into associations that are that large and have huge geographical territory, how is a local farmer supposed to feel connected?" he asked.
Mr. Reyna said he had hoped that Rabobank International's application to buy the $8 billion-asset Farm Credit Services of America, of Omaha, which was announced in July, would have brought these issues into public debate. But because the application was never filed and the deal was called off in October, the agency never had the chance to explore the issues that led Farm Credit Services to consider leaving the system, he said.
Though his recommendations probably will not be well received by the system, Mr. Reyna insists that his ideas are not meant as criticism, but rather as ways to help the system better fulfill its mission of making sure credit is available to those who might not qualify for bank loans.
He said one of the things that he was proudest of accomplishing during his tenure at the FCA was adding a second M, "mission," to the Camels - capital, assets, management, earnings, liquidity, and sensitivity - rating system for Farm Credit System exams.
"My hope was that the system would put a great emphasis on young, beginning, and small farmers, and I think they did," Mr. Reyna said.
From 2000 to 2003 the number of the system's loans to young borrowers increased 20%, and loans to beginning borrowers increased 37%. Loans to borrowers on small farms rose 32%.
Mr. Reyna, 48, hopes to continue to work in the financial services industry, and he would like to work in the private sector in his native Texas. Mr. Reyna, who has worked in housing, economic development, and electoral reform in addition to agricultural lending, said he is taking his time in his job hunt.
"I want to find something that is right, not just something that is quick," he said. "I want to be able to work on issues that I care passionately about with people I enjoy working with."
