Date: 1991-11-05
Speaker: DE LA GARZA (democrat)
Chamber: H

Mr. Speaker. I yield myself such time as I may consume. Mr. Speaker. today the Committee on Agriculture brings to the floor H.R. 3298. legislation designed to ensure the continued safety and soundness of the Farm Credit System. The health of the Nations agricultural economy is very dependent on the availability of affordable credit to finance the production of crops and livestock. The cooperatively owned institutions of the Farm Credit System provide lending and related services for a significant percentage of our Nations farmers and agricultural cooperatives. as well as rural homeowners. certain farmrelated businesses. and rural utilities. The Omnibus Budget Reconciliation Act of 1990 [OBRA] required the appropriate committees of jurisdiction to report back to the House of Representatives legislation designed to ensure the financial soundness of Governmentsponsored enterprises and to minimize the possibility that a GSE might require assistance from the Government. The Committee on Agriculture has jurisdiction over two socalled GSEs. The Farm Credit System. the oldest GSE. was established in 1916. The Federal Agricultural Mortgage Corp. was authorized in 1987. The bill. H.R. 3298. has been drafted to meet the Committee on Agricultures obligation under OBRA to provide for the enhanced safety and soundness of the Farm Credit System. The collapse of the agricultural economy during the first half of the 1980s forced Congress to review and restructure much of the Farm Credit Systems operations during the mid1980s. Needless to say. it was a painful experience for many at the time. The good news in 1991 is that as a result of our previous actions. the Congressional Budget Office. the Department of the Treasury. and the General Accounting Office all agree that the Farm Credit Administration today possesses adequate regulatory powers to provide for the effective financial oversight of the banks and associations of the Farm Credit System. The effective regulatory structure for the Farm Credit Administration establish by the 1985 and 1986 legislation. coupled with the System restructuring and financial assistance provisions mandated by the Agricultural Credit Act of 1987. continue to serve the best interests of the System. the taxpayer. and American farmers. The success of the 1987 act is evidenced by the fact that the Farm Credit System posted net income of $423 million for the first 6 months of 1991. The importance of this fact is placed in context by the staggering System losses mounting to $1.9 billion as recently as 1986. Currently. all 15 of the System banks have met the capital requirements set by the Farm Credit Administration. Twelve banks have exceeded the 7percentofassets minimum permanent capital standard. Most of the institutions of the Farm Credit System are to be commended for their hard work and dedication to fulfilling the goals and purposes of the Agricultural Credit Act of 1987. Mr. Speaker. the congressional review of GSEs gave the Committee on Agriculture an opportunity to do a little finetuning to better ensure the continued soundness of the Farm Credit System operations. Briefly. here is what H.R. 3298 does: The bill ensures that the Farm Credit System will repay the debt resulting from the financial assistance provided by the Federal Government under the 1987 act. It does so by establishing a system by which System banks will make annual payments to the Farm Credit System Financial Assistance Corporation. The bill also requires that the four institutions that received assistance under the 1987 act make annual payments from their earnings into a special account. This special account will ensure that sufficient funds are available to fund the retirement of the preferred stock purchased from the banks by FAC when the bonds issued to fund the stock purchases matrue In 2003 and 2005. H.R. 3298 requires each System bank to record as an expense the annual accrual of their obligation to pay the bonds issued by FAC to finance the retirement of protected borrower stock and the expenses of the Farm Credit System Assistance Board. The bill also requires System banks to make annual payments toward the repayment of the interest on FAC debt paid by the Treasury and continues to ensure that the entire amount of Treasury interest will be repaid by the System. While imposing this requirement. the bill also recognizes the need to not make these requirements so stringent that they might force System institutions into insolvency at the taxpayers expense. The bill provides that System banks will be liable for all obligations Of the System to repay the principal of bonds issued by FAC and the interest paid by the Treasury. including repayment obligations placed on System associations by current law. The banks will be required to pass obligations on to their affiliated associations as necessary to ensure that the obligations are fully discharged. H.R. 3298 clarifies that the Farm Credit System Insurance Corporation will serve as the statutory successor to agreements between Arm Credit System institutions and the Farm Credit System Assistance Board following the termination of the Assistance Board. The bill also authorizes the representation of stockholders on association and bank boards based on election from specific geographic areas. H.R. 3298 also clarifies the authority of the Farm Credit Administration to require the merger of any remaining Federal intermediate credit banks that were not merged pursuant to section 410 of the Agricultural Credit Act of 1987. consistent with Congress determination that such banks should be eliminated through merger. This provision will allow borrowers of the remaining Federal. intermediate credit bank to reap the benefit of the reduced. overhead costs and enhanced safety and soundness resulting from the merger. as the rest of the System has experienced since the other section 410 mergers were completed in On the whole. the bill represents a delicate balancing of the interests of the System. its farmerborrowers. and the taxpayer. It requires System banks to repay the Treasury for assistance provided under the 1987 act n a manner that does not force the weaker banks to seek further Government assistance. Mr. Speaker. this bill requires the repayment of every dollar of Federal assistance to the System. At the same time. it recognizes the cooperative interests of the System and ensures that affordable credit from the System remains available to the American farmer for years to come. Mr. Speaker. as is often the case with legislation. this bill is not perfect. A few Members may still have problems with a single provision here or there. However. within the art of the possible. we believe that the bill enhances the safety and soundness of the System within the framework of the very successful 1987 act. I urge my colleagues to support this legislation that was drafted pursuant to OBRAs requirements. and with the valuable input from the CBO. the Treasury. the GAO. and the Farm Credit Administration. Mr. Speaker. I reserve the balance of my time.