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Has HORIZONS Sunk Out Of Sight?
Bert Ely’s FARM CREDIT WATCH®
There is an old saying, well known to farmers, ranchers, and ag lenders, about unworkable ideas: “that dog won’t hunt.” Last Thursday evening, the House of Representatives agreed, by rejecting the HORIZONS provisions the FCS managed to get the House Agriculture Committee to include in the 2007 Farm Bill. This rejection occurred when the House, by an overwhelming voice vote, adopted an amendment knocking the HORIZONS provisions out of the Farm Bill. The amendment was offered by Rep. Barney Frank, Chairman of the House Financial Services Committee, and Rep. Spencer Bachus, the committee’s top Republican.
House members understood that the HORIZONS provisions in the Farm Bill would only expand the FCS’s off-farm lending while weakening farmer control of the FCS. Specifically, these provisions would have broadened the range of businesses which the FCS could lend to (in the guise of funding renewable energy sources), raised from 2,500 to 6,000 the population of communities in which the FCS can make home mortgages, weakened farmer-borrower control of FCS associations, and watered down the already minimal stock-purchase requirement for FCS borrowers. CoBank appears to be the only FCS winner in the Farm Bill as CoBank borrowers, which are not cooperatives, can become voting stockholders in CoBank. It is not known why CoBank wanted this provision, but perhaps it paves the way for CoBank to privatize itself.
Two reasons stand out for why the House rejected the HORIZONS provisions. First, the FCS has never made a convincing case that there is an insufficient supply of off-farm credit in rural America. As Chairman Frank pointed out in the floor debate on the amendment, the Financial Services Committee had not previously been told “about a problem of a lack of availability of credit from the banking system for alternative energy.” The House Ag Committee, which tends to give the FCS what it wants, never demanded that the FCS make that case. Apparently, the FCS and its trade association, the Farm Credit Council (FCC), believed that simply asserting that there are unmet off-farm credit needs would carry the day in Congress.
Second, former FCA Chairman Mike Reyna issued a powerful statement supporting the Frank-Bachus amendment. He noted that Congress tried to focus “the public benefits of [the FCS] by limiting the types of loans that the [FCS] can make as well as where and to whom these loans can be made. Unsatisfied with the wisdom of Congress, the [FCS] has applied relentless pressure in recent years on its regulator, the FCA, to grant ever broader lending authority” to it. “As the immediate past Chairman of the FCA, I have directly experienced the [FCS’s] pressure to get the FCA to give the [FCS] what it wants” [emphasis in the original]. It cannot be said with certainty what impact Reyna’s statement had on the House, but it was not insignificant.
The FCC seems to have been blindsided by the House’s rejection of HORIZONS, stating that its defeat “was brought to you by the vitriolic and disingenuous opposition promoted by an entirely self-interested banking lobby.” That statement provided absolutely no introspective insight by the FCC or the FCS as to why HORIZONS lost in the House. Ironically, the FCC invited the “congressional banking committees” to engage in the debate over the cost and availability of credit in rural America. According to Chairman Frank, the Financial Services and Agriculture Committees plan to hold joint hearings on the availability of credit to finance alternative energy projects.
The HORIZONS battle, though, is far from over as it now moves to the Senate, where the Senate Ag Committee has yet to write its version of the 2007 Farm Bill. The FCS has not given up on getting its HORIZONS agenda plugged into the Farm Bill, for as the FCC stated, “Congress can make great progress toward meeting the changing needs of U.S. agriculture and rural America, and [the FCS] will continue to work with lawmakers to address these needs.” However, the House’s resounding rejection of HORIZONS weakens the ability of the FCS to get the Senate to give it what it wants. If Congress does not include any HORIZONS provisions in the Farm Bill, the FCS will have suffered a major defeat, a defeat that should raise serious questions within the FCS about its future as a GSE.
The House rejection of HORIZONS also should raise questions within the FCA about its advocacy of HORIZONS, which has reinforced the perception that the FCA is much more a cheerleader for the FCS than a regulator who puts the public interest ahead of the FCS’s parochial, self-serving interests. If the FCA continues to stretch the law by granting broader lending powers to the FCS while looking the other way at FCS lending abuses, it could be setting itself up for hearings by the House Financial Services and Senate Banking Committee to examine the growth in the FCS’s non-farm lending. Not only did the HORIZONS dog not hunt, but a continued lax regulatory regime at the FCA is another dog that may not hunt much longer.
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