FCS loan pricing: Where is FCA? (March 1999)

Bert Ely

American Bankers Association, 1999, vol. 12, issue 3

Abstract: The Farm Credit Administration (FCA) showed that it is more a cheerleader than a regulator of the FCS in a February 11, 1999, memorandum it sent to all FCS institutions. The FCA told the FCS that it was acceptable for FCS lenders to set interest rates on FCS loans at the lower of the lender's costs or market rates. Today, the big question is whether or not the FCA is encouraging FCS lenders to ignore a key proviso in the Farm Credit Act which clearly states that in no circumstance is any borrower to be charged a below-market rate of interest, despite growing banker complaints about increasingly aggressive loan pricing by the FCS. Absent the proviso, which Congress enacted in 1986, FCS lenders could run amok again, as they did in the 1970s, grabbing market share by using their tax and funding cost advantages to set interest rates below what taxpaying private-sector lenders can charge.

Keywords: Agricultural; Finance (search for similar items in EconPapers)
Date: 1999
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