After an intensified lobbying effort by bank and farm groups this week, the Senate approved $7.4 billion of agricultural relief for farmers struggling through one of their worst crises in decades.
Representatives of both the American Bankers Association and the Independent Community Bankers of America testified before the Senate Agriculture Committee on Wednesday.
On an 89 to 8 vote later that day, the Senate added the relief package to a broader $68 billion Agriculture Department spending bill, which was passed by voice vote.
Agriculture lenders have grown increasingly anxious about whether farmers dealing with low prices nationwide and drought in the Northeast would be able to repay their loans.
"Rising crop surpluses and continued low prices could lead to further financial stress, affecting a broad cross section of American agriculture, including farmers, small businesses, and entire rural communities," said Jim Caspary, president of First National Bank in Clifton, Ill., and chairman of the ICBA's Agriculture-Rural America Committee.
Bumper crops and slumping demand are expected to force 1999 prices for corn, hogs, and soybeans down by 30% or more from their five-year averages, said Dan Glickman, the secretary of agriculture. Farm income this year is expected to be at its lowest since 1995, he said.
This could affect banks through loan defaults. At the end of 1998, banks held more than $70 billion, or 41%, of the outstanding loans to farmers and ranchers, said Dennis Everson, chairman of the ABA's Agricultural and Rural Bankers Committee.
"Even some of our most productive, best managed, and best capitalized customers had a tough time last year," he said, "and they are worried about what will happen this year and next." Mr. Everson is senior vice president of First Dakota National Bank in Yankton, S.D.
Both leading farm groups, the National Farmers Union and the American Farm Bureau Federation, earlier had asked for about double the aid that the Senate bill provides.
The ABA and ICBA said it was important for the Senate to pass some relief package this week before Congress recesses today. Then when Congress reconvenes Sept. 8, a Senate and House conference committee could begin immediately to resolve differences between the Senate bill and a $4.3 billion aid package the House passed weeks ago.
Separately on Tuesday, the House Agriculture Committee approved a crop insurance reform bill. The ABA and the ICBA say this is an important step, but both groups doubted whether the Senate or even the House would be able to advance the issue before the recess.