WASHINGTON, May 6, 2015 – American Bankers Association (ABA) CEO Frank Keating may not have anticipated negative feedback when he advocated doing away with the Farm Credit System, arguing that FCS threatens small-town banks and poses potential dangers for taxpayers.
His suggestion didn’t sit well with mainstream farm and rural development organizations. Led by the American Farm Bureau Federation, 42 grower and processor groups ranging from apples to wheat wrote Keating May 1 to “register our strong objection to your goal to eliminate the FCS.” The objectors included trade associations for farm suppliers and rural utility cooperatives.
Instead of proposing to eliminate rural bankers’ main competitor, the group said in the letter that “it would make more sense to find improved ways to work collaboratively with Farm Credit and other credit providers for the benefit of farmers, ranchers and rural communities.” The groups told Keating, “The stakes are simply too high for rural America to have fewer financing options to meet the challenges of advancing rural economic growth. We want you to know that your effort to reduce competition is not supported by those of us whose members live, work and form the economic foundation in rural areas.”
Keating had revived ABA’s off-again, on-again campaign against Farm Credit earlier this year with a letter asking members of Congress to hold oversight hearings. He wrote that ABA’s members are “alarmed at the growth and questionable practices of” the system’s four banks and 78 local and regional lending associations.
He raised the ante with an op-ed column in North Dakota’s Grand Forks Herald April 17. In the interview with local radio stations, he said that Congress not only should look at tax treatment of Farm Credit, but also that “the next step of course is to not just have the debate but actually get rid of the Farm Credit System.”
The Farm Credit Council (FCC), the trade association of FCS banks and lending associations, said in a recent newsletter that Keating’s argument that FCS threatens farmers and community banks is undermined by ABA’s own data that “consistently show that the ABA-defined sector of commercial ‘farm banks’ reliably outperform commercial banks in general and is typically the most profitable banking sector overall – despite 100 years of competition from Farm Credit.” FCC quoted ABA’s 2014 Farm Bank Performance Report as saying that more than 96 percent of all farm banks were profitable and that 787 farm banks in the Plains region increased farm loans by 15 percent, or $4.8 billion, to more than $36.5 billion in 2014, from a year earlier.
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