[Senate Hearing 112-505]
[From the U.S. Government Publishing Office]
S. Hrg. 112-505
NOMINATION HEARING OF
MICHAEL T. SCUSE, CHESTER J. CULVER
AND BRUCE J. SHERRICK
=======================================================================
HEARING
before the
COMMITTEE ON AGRICULTURE,
NUTRITION AND FORESTRY
UNITED STATES SENATE
ONE HUNDRED TWELFTH CONGRESS
FIRST SESSION
__________
DECEMBER 15, 2011
__________
Printed for the use of the
Committee on Agriculture, Nutrition and Forestry
Available via the World Wide Web: http://www.fdsys.gov/
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COMMITTEE ON AGRICULTURE, NUTRITION AND FORESTRY
DEBBIE STABENOW, Michigan, Chairwoman
PATRICK J. LEAHY, Vermont PAT ROBERTS, Kansas
TOM HARKIN, Iowa RICHARD G. LUGAR, Indiana
KENT CONRAD, North Dakota THAD COCHRAN, Mississippi
MAX BAUCUS, Montana MITCH McCONNELL, Kentucky
E. BENJAMIN NELSON, Nebraska SAXBY CHAMBLISS, Georgia
SHERROD BROWN, Ohio MIKE JOHANNS, Nebraska
ROBERT P. CASEY, Jr., Pennsylvania JOHN BOOZMAN, Arkansas
AMY KLOBUCHAR, Minnesota CHARLES E. GRASSLEY, Iowa
MICHAEL BENNET, Colorado JOHN THUNE, South Dakota
KIRSTEN GILLIBRAND, New York JOHN HOEVEN, North Dakota
Christopher J. Adamo, Majority Staff Director
Jonathan W. Coppess, Majority Chief Counsel
Jessica L. Williams, Chief Clerk
Michael J. Seyfert, Minority Staff Director
Anne C. Hazlett, Minority Chief Counsel
(ii)
C O N T E N T S
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Page
Hearing(s):
Nomination Hearing of Michael T. Scuse, Chester J. Culver and
Bruce J. Sherrick.............................................. 1
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Thursday, December 15, 2011
STATEMENTS PRESENTED BY SENATORS
Stabenow, Hon. Debbie, U.S. Senator from the State of Michigan,
Chairwoman, Committee on Agriculture, Nutrition and Forestry... 1
Grassley, Hon. Charles, U.S. Senator from the State of Iowa...... 2
Coons, Hon. Christopher A., U.S. Senator from the State of
Delaware....................................................... 4
Panel I
Culver, Hon. Chester John, Iowa, nominated to be a Member of the
Board of Directors for the Federal Agricultural Mortgage
Corporation.................................................... 14
Scuse, Michael T., Delaware, nominated to be Undersecretary of
Agriculture for Farm and Foreign Agricultural Services and to
be a Member of the Board of Directors of the Commodity Credit
Corporation.................................................... 5
Sherrick, Bruce J., Ph.D., Illinois, nominated to be a Member of
the Board of Directors of the Federal Agricultural Mortgage
Corporation.................................................... 16
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APPENDIX
Prepared Statements:
Chambliss, Hon. Saxby:....................................... 26
Culver, Hon. Chester John:................................... 28
Scuse, Michael T.:........................................... 31
Sherrick, Bruce J.:.......................................... 33
Document(s) Submitted for the Record:
Committee Questionnaire and Office of Government Ethics
Executive Branch Personnel Public Financial Disclosure
Report filed by Hon. Chester John Culver................... 36
Committee Questionnaire and Office of Government Ethics
Executive Branch Personnel Public Financial Disclosure
Report filed by Michael T. Scuse........................... 47
Committee Questionnaire and Office of Government Ethics
Executive Branch Personnel Public Financial Disclosure
Report filed by Bruce J. Sherrick.......................... 72
Question and Answer:
Chambliss, Hon. Saxby:
Written questions to Hon. Chester John Culver................ 81
Written questions to Michael T. Scuse........................ 87
Written questions to Bruce J. Sherrick....................... 91
Roberts, Hon. Pat:
Written questions to Hon. Chester John Culver................ 80
Written questions to Michael T. Scuse........................ 83
Written questions to Bruce J. Sherrick....................... 90
Thune, Hon. John:
Written questions to Hon. Chester John Culver................ 82
Written questions to Michael T. Scuse........................ 88
Written questions to Bruce J. Sherrick....................... 92
Brown, Hon. Sherrod:
Written questions to Michael T. Scuse........................ 86
Culver, Hon. Chester John:
Written response to questions from Hon. Pat Roberts.......... 80
Written response to questions from Hon. Saxby Chambliss...... 81
Written response to questions from Hon. John Thune........... 82
Scuse, Michael T.:
Written response to questions from Hon. Pat Roberts.......... 83
Written response to questions from Hon. Sherrod Brown........ 86
Written response to questions from Hon. Saxby Chambliss...... 87
Written response to questions from Hon. John Thune........... 88
Sherrick, Bruce J.:
Written response to questions from Hon. Pat Roberts.......... 90
Written response to questions from Hon. Saxby Chambliss...... 91
Written response to questions from Hon. John Thune........... 92
NOMINATION HEARING OF
MICHAEL T. SCUSE, CHESTER J. CULVER
AND BRUCE J. SHERRICK
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Thursday, December 15, 2011
United States Senate,
Committee on Agriculture, Nutrition and Forestry
Washington, DC
The Committee met, pursuant to notice, at 10:35 a.m., in
room 328A, Russell Senate Office Building, Hon. Debbie
Stabenow, Chairwoman of the Committee, presiding.
Present: Stabenow, Harkin, Conrad, Roberts, Cochran,
Grassley, and Thune.
STATEMENT OF HON. DEBBIE STABENOW, U.S. SENATOR FROM THE STATE
OF MICHIGAN, CHAIRWOMAN, COMMITTEE ON AGRICULTURE, NUTRITION
AND FORESTRY
Chairwoman Stabenow. Well, good morning and the Senate
Committee on Agriculture, Nutrition and Forestry, with a lot of
feedback through the microphone, is called to order. I hope we
are going to get that fixed. Thank you very much. We are in our
newly-refurbished, high tech Committee room, so I hope that
means that all the technology is going to work well here as we
are back.
Welcome. Today the Committee is meeting to consider
important nominations, the nomination of Michael T. Scuse,
Delaware, to be Under Secretary of Agriculture for Farm and
Foreign Agricultural Services, and a member of the Board of
Directors of the Commodity Credit Corporation; as well as two
nominees for the Board of Directors of the Federal Agricultural
Mortgage Corporation, also known as Farmer Mac. Governor Chet
Culver of Iowa and Dr. Bruce Sherrick of Illinois.
Welcome to all of you and congratulations on your
nominations. We extend a warm welcome to you and your family
and friends. I understand that, Mr. Scuse, your wife, Patrice,
is here with you and we welcome you as well. I would also like
to welcome Governor Culver's stepbrother, John, who I
understand is with him today. So welcome.
These positions are critically important, as we all know,
for American farmers and ranchers. The Under Secretary of
Agriculture for the Farm and Foreign Agriculture Services plays
a key role in enforcing accountability within the Farm Service
Agency, the Risk Management Agency, and the Foreign Agriculture
Services Agency.
The Under Secretary is responsible for making sure that
taxpayers are getting their money's worth and that we are doing
everything possible to make USDA services efficient and
effective for farmers, ranchers, and the families they serve.
Mr. Scuse, I would hope that you would use the perspective
you have gained as both a farmer and a long-time public servant
to improve the operations of the agencies you will continue to
oversee, assessing how the agencies are measuring performance
and efficiency, cutting down on duplication, and how customer
service is being administered and improved. I would appreciate
your focus in those areas.
Your nomination comes at a very important time as the
Committee continues to work to write the next Farm Bill. The
staff of the Department of Agriculture will be an indispensable
resource for us as we move forward, and you have been already--
we work very closely with the Department and appreciate the
input and expertise of the Department.
All of you really are the boots on the ground implementing
the programs that we have created and will create so that we
are able to provide valuable feedback on performance, and I
appreciate all of that work.
Governor Culver and Dr. Sherrick, you have been nominated
to serve as members of the Board for Farmer Mac. Of the 15
Board members, five are elected by the Farm Credit system
institutions, five are elected by other financial institutions
as we know, and five are nominated by the President and
confirmed by the Senate.
Those five are particularly important to preserve consumer
protections for the American people. As Board members, it will
be your responsibility to ensure that Farmer Mac is managed in
a safe and sound manner, and with an appropriate balance
between financial performance and fulfillment of its public
mission. The availability of credit in rural communities is
absolutely essential to growth and sustainable economic
development. It is the job of Farmer Mac to make sure that
credit is available in rural America.
I know I speak for all the members of the Committee when we
say that we take our obligation to advice and consent very
seriously. We look forward to all of your remarks and the
opportunity to exercise our constitutional duties. I know that
Senator Roberts will be joining us in just a bit, and at that
point, I will turn to him for opening comments.
Before turning to our excellent panel and the Senator from
Delaware to make an introduction as well, I do want to turn,
without objection, to Senator Grassley, who I know is going to
have to leave, but wants to comment on one of our nominees at
this point. So, Senator Grassley?
STATEMENT OF HON. CHARLES GRASSLEY, U.S. SENATOR FROM THE STATE
OF IOWA
Senator Grassley. Thank you for letting me go out of order,
and it will take about three or four minutes. But also, before
I introduce Governor Culver, I had the opportunity of meeting
Michael Scuse in my office and determined he is well-qualified
for that office. Coming from Delaware, you might not think he
knows much about agriculture, but he sure does know a lot about
agriculture and I know agriculture is very important to the
State of Delaware, even though a lot of times for a small state
you do not think so.
It is my pleasure, Madam Chairman and members of the
Committee, to introduce Governor Culver, and my colleague,
Senator Harkin, will be coming along later to do the same. I
speak very highly of him because in the years he served as
Secretary of State and the years he served as Governor, I had a
good working relationship with him and know well his devotion
to public service. And he comes from a family that has a
history of public service as well.
So I am pleased that one of the President's nominations for
Farmer Mac is an Iowan and I would personally congratulate the
Governor on his nomination and welcome him to this hearing
today. Governor Culver has served in statewide office in Iowa
for over a decade, first two terms as Secretary of State and
then as Governor. So he has seen first-hand many ups and downs
of the agricultural industry, as so commonly happens in any
state with agriculture, but it does in Iowa as well.
The agricultural economy is going through a strong period
right now, and part of the reason for that is that agricultural
credit systems have allowed farmers access to the resources
that they need and have otherwise had difficulty obtaining.
Governor Culver, living in Iowa his life, as well as serving
Iowans in those two positions, has a first-hand knowledge of
how important credit is and the ability to finance farming
operations, not only to the farmers, but to the prosperity of
both rural Iowa, and when you look at the job that faces him,
rural America as a whole.
While agriculture has had a bright spot in these tough
economic times, we are still seeing a lot of volatility in
commodity and import prices. We have to make sure that U.S.
farmers continue to have the resources available to them as
they continue to produce a safe and abundant food and fuel
supply. And Farmer Mac plays a very important role in ensuring
capital is available to farmers in rural communities.
So I think, and this Committee will know this after
Governor Culver testifies, that he will bring a valuable
perspective and a valuable understanding of rural issues to the
Board of Directors of Farmer Mac. I want you to know that I
enthusiastically support his nomination and I urge my
colleagues to join me in confirming him, and I hope that
confirmation can be done quickly before we go home for
Christmas, because obviously it will linger beyond into
February if we do not do that.
Again, I welcome Governor Culver and congratulate him on
his nomination. Thank you, Madam Chairman.
Chairwoman Stabenow. Well, thank you very much, Senator
Grassley. Governor Culver, that is high praise coming from a
very distinguished member of our Committee and we take that
very seriously. So thank you very much, Senator Grassley.
I am now going to turn to the Senator from Delaware to tell
us about Delaware agriculture. Would you like to respond?
STATEMENT OF HON. CHRISTOPHER A. COONS, U.S. SENATOR FROM THE
STATE OF DELAWARE
Senator Coons. I would love to. Thank you for the
opportunity. Senator Stabenow, as Senator Grassley and I have
previously discussed over breakfast, ag is the biggest business
in Delaware. Now, someone from a state the size of Michigan may
not think that is much of a big deal, but for our state, it is
a big deal.
Chairwoman Stabenow. That four farms? No, I'm sorry.
Senator Coons. We get no respect. We get no respect.
[Laughter.]
Senator Coons. Poultry is really the sort of beating heart
of the Delaware agriculture sector, but there are lots of other
components to it, and I just want to start by saying I am
grateful, Madam Chairman, for the opportunity to introduce my
friend and fellow Delawarean, Michael Scuse.
It is a rare and good day when I see good people advance
here in Washington, and Michael is one of the best I have ever
known. He and his wife, Patrice, have been good friends to my
wife, Annie, and I for a long time. I first got to know him
well in a public capacity when he was serving as Secretary of
Agriculture for the State of Delaware, and we had an
opportunity to get to know each other, both personally and
professionally. He is passionate about agriculture. He is hard-
working, he is smart, he is genuine, he is a decent man.
He and his brother continue to run a family farm in Smyrna.
Like me, he commutes to and from Delaware. His wife, Patrice,
is with him today and I know that he remains a connected part
of the tight-knit farm families that are the backbone of rural
Delaware.
I worked most closely with Michael when I was the New
Castle County Executive. The day I announced my candidacy for
that position, promoting farm preservation and strengthening
our partnership between the county and state, was one of the
things I was determined to do. And it was not easy and it
required a state Secretary of Agriculture who was innovative,
who was willing to find ways to adapt a program, and who was
willing to partner with me.
Largely because of Michael's leadership and the Governor
under whom he served, Delaware today has the highest percentage
of preserved productive agriculture farmland of any state in
the country.
We also worked together to promote agri-tourism and to
promote on-farm income sources that were non-traditional, which
in my county, which is rapidly becoming suburban, was one of
the few ways we could save for the long-term productive
agricultural properties.
So I just wanted to share with you, if I could, by way of
introduction, that I think Michael's critical work in the State
of Delaware and now here in Washington, in the United States
Department of Agriculture, gives him the skills and the
experience to build on his personal character and values to be
a great Under Secretary of Agriculture.
I also think he will contribute significant skills and
experience to the Commodity Credit Corporation. I think you
could do no better than to take this great Delawarean and give
him an opportunity to show everybody in the United States that
Delaware does not just have a great agriculture sector, it also
grows great agriculture community leaders and Michael Scuse is
one of the best. Thank you, Madam.
Chairwoman Stabenow. Thank you very much, and again, high
praise from a distinguished member of the Senate. So thank you,
Senator Coons, for being here. Let me now go forward to
specifically introduce our first nominee, Mr. Michael Scuse.
Prior to becoming Acting Under Secretary for Farm and
Foreign Agricultural Services, Mr. Scuse served as Deputy Under
Secretary for the Farm and Foreign Agricultural Services
mission area from 2009 to 2011 with primary responsibility over
our domestic programs at the Farm Services Agency and the Risk
Management Agency. Before joining USDA, Mr. Scuse was, as
Senator Coons, indicated, Delaware's Secretary of Agriculture
from May 2001 until September 2008 when Governor Ruth Ann
Minner named him as her Chief of Staff. He lives in----
Mr. Scuse. Smyrna.
Chairwoman Stabenow. Smyrna--I am sorry, I was saying that
wrong--Delaware with his wife, Patrice, as I indicated. And so,
now I have two things that I need to do, Mr. Scuse, first
administer an oath that we administer to all of our nominees. I
would ask you to stand and to raise your right hand.
Do you swear that the testimony you are about to present is
the truth, the whole truth, and nothing but the truth, so help
you God?
Mr. Scuse. I do.
Chairwoman Stabenow. Secondly, Mr. Scuse, do you agree that
if confirmed, you will appear before any duly-constituted
Committee of Congress if asked to appear?
Mr. Scuse. I will.
Chairwoman Stabenow. Thank you very much. At this point, we
would like to proceed to your testimony. As you know, we have
asked for five minutes of oral testimony and we are welcome to
receive any other written testimony you would like to give us.
So again, welcome, and please proceed.
TESTIMONY OF MICHAEL T. SCUSE, DELAWARE, NOMINATED TO BE
UNDERSECRETARY OF AGRICULTURE FOR FARM AND FOREIGN AGRICULTURAL
SERVICES AND TO BE A MEMBER OF THE BOARD OF DIRECTORS OF THE
COMMODITY CREDIT CORPORATION
Mr. Scuse. Thank you very much. Chairwoman Stabenow and
members of the Senate Committee on Agriculture, Nutrition and
Forestry, I want to thank you very much for this opportunity to
appear before you today. I would also like to thank Senator
Coons for his very kind introduction. The Senator and I have,
as he said, had the opportunity to work together for many
years. I am grateful for his support in the past, as well as
the Senator's support today.
Working together, we, I believe, accomplished a great deal
for Delaware and especially New Castle County, and I look
forward to working with members of this Committee to further
agriculture and achieve a tremendous amount as well. So thank
you very much, Senator Coons.
I would also like to take this opportunity to again
introduce to you my wife, Patrice, and as of this past Sunday,
we have been married 35 years, and much of what I have been
able to accomplish over the years is, in fact, due to her
strong support and understanding. I would like to thank her for
especially her patience and the sacrifices that she has made
over the last 35 years. You do not get in a position, the
positions that I have held unless you have someone who is very
strong helping you get there, and she certainly has been my
support throughout the years.
I consider it a tremendous honor to be before this
Committee nominated by the President and Secretary Vilsack to
serve as Under Secretary for the Farm and Foreign Agricultural
Service at the Department of Agriculture. As a farmer, I am
keenly aware of the responsibility and the privilege of this
position, the ability to positively impact America's farmers
and ranchers. Every decision I make I make with our farmers and
ranchers in mind.
If confirmed, I will continue this focus and examine
closely the impact of each and every decision that I make. We
have the best farmers and ranchers to be found anywhere in the
world. Our agricultural producers are deeply rooted in this
nation's history, and they are a big part of our strength as a
people.
Even as America recovers from the deepest recession since
the Great Depression, we are seeing a very strong agriculture
economy. Agriculture is responsible for one out of every 12
jobs in America. This year, net cash income and net farm income
are record in nominal terms, and adjusting for inflation or at
their highest levels since the early 1970s.
Farm credit is still tight for some, but expanding more and
more in many sectors of agriculture, and total farm equity is
up. U.S. agricultural exports for fiscal year 2011 reached a
record $137.4 billion. Taken as a whole, the United States is
in the midst of experiencing the three best years in our
history in the terms of agricultural exports.
This has also been a year of unprecedented disaster,
unfortunately, from above-average snow melt and excessive
rainfall, tornadoes, flooding, record drought, and finally,
several major storms. America's farmers and ranchers are the
best in the world and they are, without a doubt, resilient.
But at the end of the day, weather is beyond their control.
These disasters only emphasize the importance of a strong and
effective safety net for those farmers and ranchers who need
it. This is a moment of great opportunity in agriculture, and I
will not downplay the hard work that is needed, nor the long
road that lies in front of us towards the next Farm Bill.
If confirmed, I will look forward to working with the
members of this Committee, and your colleagues in the House, to
assist to answer any questions or provide any analysis that you
may need in your endeavor. I would like to recognize today
those with whom I have had the great privilege to serving at
USDA.
The three agencies that I have been working to oversee in
my current acting role are each staffed, without a doubt,
immensely capable and experienced public servants. In addition,
I would like to emphasize my commitment to turning a new page
on civil rights at USDA. Under Secretary Vilsack's leadership,
we have made great strides in resolving outstanding civil
rights claims. Discrimination in any form will not be
tolerated.
I would again like to thank you for this opportunity to
appear before you today, and if confirmed, it will be my
greatest honor to serve the American farmer and rancher and
earn his trust. Thank you, Madam Chairwoman.
[The prepared statement of Mr. Scuse can be found on page
31 in the appendix.]
Chairwoman Stabenow. Thank you very much. We have been
joined by my distinguished colleague, Senator Roberts, and with
his consent, we will proceed to our questions at this point.
Mr. Scuse, you have been Acting Under Secretary for nearly
a year. Can you explain to us what you have learned in that
role to date, and also what your plans and goals for FFAS, what
they are, should you be confirmed?
Mr. Scuse. Madam Chairwoman, thank you. I have learned
that, again, we have an outstanding and dedicated workforce at
USDA, and especially the three mission areas that are under me.
The Farm and Foreign Agricultural Service, we have a dedicated
workforce not just here, but in offices throughout the world to
help us facilitate trade and solve some of the trade issues and
problems that our companies face.
At the Farm Service Agency, I continue to brag on the work
that our people in our county offices do, helping our farmers
and ranchers sign up for programs and assist them. At the Risk
Management Agency, we have a very dedicated and capable
workforce there to help us offer new products. As I said
earlier, the crop insurance is a very important product to help
us through the very difficult times, and they continue to look
at ways to make improvements as well as come up with new
products.
Where I would like to see us in the future is, we need the
technology, and I think members of this Committee know that we
are headed in that direction with our MIDAS program. But the
need to improve the technology that we have currently in our
county offices is great, and I think that we need to find ways
that we can help our farmers and ranchers be more efficient and
save time in our county offices and save them time and money as
well.
The safety net, again, if you look at what we have
experienced this past year with all the disasters around the
United States, it is very important that we continue to have a
safety net to help our farmers and ranchers, whether or not
just difficult weather conditions, but also price problems as
well.
Chairwoman Stabenow. Thank you very much. Let us talk a
little bit more, when you talk about risk management programs,
and we all know as we have done hearings this year, field
hearings, and hearings before the Committee here in Washington
on important risk management tools, certainly crop insurance is
at the top of the list.
When we look at the volatility of the markets, the
volatility in the weather, the risks that our farmers and
ranchers face every single day, we know that risk management
tools are incredibly important. What is the USDA doing to
improve the delivery and to expand access of these risk
management tools to all farmers and ranchers?
Mr. Scuse. Well, thank you. I welcome the opportunity to
explain some of the things that we are doing. The Risk
Management Agency and the Federal Crop Insurance Corporation
Board continues to look at ways that we can offer new products.
Just as an example, the last--in this past couple of years, we
have developed a pilot program for camelina production. We have
also developed a program for sesame production as well to
protect those sesame growers. And we have been able to greatly
expand that acreage for that crop.
Right now we have pilot programs going that are about ready
to start this next year in California for some of the nut-
producing trees. We also have started a pilot program in
Louisiana for sweet potato production. So we continue to look
at ways to make new products available to protect those farmers
who do not grow what we consider the traditional crops that are
normally protected through crop insurance.
We will continue, again because it is important, that we
have a very good safety net for as many producers as we
possibly can.
Chairwoman Stabenow. Well, as you know and as we have
talked, obviously there are a whole range of underserved crops,
and certainly fruits and vegetables, specialty crops, are an
area where we need to make sure that we are doing much more
work around the crop insurance. We see that in certain regions,
certainly in the Northeast this year as well, where there was a
lot of damage and crop insurance was not available for those
crops. And so, very supportive and interested in seeing you
continue to move as quickly as you can to be able to expand the
reach of crop insurance and the effectiveness of crop
insurance.
Let me also just ask if you could give us a quick update,
and I am running out of time, on your efforts to reduce
paperwork, streamline processes, simplify reporting. This has
been another big priority for the Committee.
Mr. Scuse. Well, thank you. Again, I welcome the
opportunity to talk about one of the initiatives that we have
at the Risk Management Agency as well as the Farm Service
Agency, NAS, and NRCS. We are currently working on an acreage
crop reporting streamlining initiative. What this will do will
allow our producers to go into a Farm Service Agency county
office or to their crop insurance agent and give a single crop
report.
As the system is set up today, our farmers and ranchers
have to give two reports, one to the FSA office as well as
another one to their agent. We are looking at one-stop
reporting, and ultimately our goal will be for the farmers and
ranchers to actually do the crop report right from their home.
So this is one area that we are looking at to save not just
time for our county office staff, but the time that our farmers
and ranchers are having to spend in the office and providing
them the service that they should have.
Chairwoman Stabenow. Thank you very much. Senator Roberts?
Senator Roberts. Well, thank you, Madam Chairman. Michael,
thank you for coming by my office. We had a good talk at that
particular time and this sort of builds on the question posed
by the Chairwoman. Everywhere we went, Lansing, Wichita, and
then we had a little problem with some gang that got together
and decided to postpone things for a while, so that did not
work out.
But I can tell you that everywhere we went, the number one
issue of concern was crop insurance. And I know that you have
just talked about that. Farmers, bankers, ag input suppliers,
and the overall ag economy certainly depend on the security
provided by crop insurance. Let me just ask you, first off, do
you agree with this assessment?
Mr. Scuse. Crop insurance is, in my opinion, I think crop
insurance is one of the most important parts of the safety net
that we have, Senator.
Senator Roberts. Okay. I appreciate that. Now, you talk
about extension to other crops, and I appreciate that. Several
farm bills back, I think I was the person, after being boxed in
by several proponents of those specialty crops and other crops,
that finally yielded and said, Well, we have that for program
crops, but, you know, the producer that produces program crops
has to have an approved conservation plan, et cetera, et
cetera, et cetera, before they are eligible for title 1
programs.
I wondered if that shoe might fit on the other side. That
shoe did not fit, but at least I think if we are extending to
crops that we should and I am for that and I applaud you for
that effort. But if, in fact, we go back or we have a different
kind of farm program, whether it is counter cyclical, whether
it is revenue, whether it is target prices, whatever kind of
payment that we are talking about when farmers go through a
tough time--when they do not have a crop it does not apply--and
that is the key, that when farmers lose a crop, you have got to
have a good crop insurance program. And $14 billion was taken
from that program over the two previous farm bills.
I want to make sure that we strengthen and preserve crop
insurance. That is my number one goal in whatever farm bill
that we are able to put together. And we have worked pretty
hard on that. I just wanted to make very clear that if we
extend the crop insurance program to underserved crops, I want
to make sure that it does work for the program crops, which
combined, really make up the food and fiber that we use to feed
this country and a troubled and hungry world.
By that, I do not mean to underscore anything less than
importance in terms of extending crop insurance to underserved
crops. It should not be either/or. It should be a whole
program. Do you agree?
Mr. Scuse. Senator, I agree with the fact that we need to
continue to work with and strengthen the program, and if
confirmed, you have my commitment to work with you and members
of this Committee to continue to do what we can to strengthen
crop insurance for our farmers and ranchers.
Senator Roberts. All right. Thank you, sir. Back when we
were voting to ratify the trade agreements with Colombia,
Panama, and South Korea, there was a discussion about a need
for the Administration to re-engage with China and Japan on
beef market access. Can you give us a status report on where
these efforts stand?
Mr. Scuse. Well, currently, Senator, the Japanese
government is posing a question to their Food Security Council
regarding the beef issue, both domestic and foreign. We look
forward to working with them to resolve the issue on beef trade
and the age restrictions currently they have in place.
Ambassador Siddiqui and I were in China in October. We
engaged the Chinese, at that time, on the various issues that
are facing our beef producers, not just the age restriction,
but the offal situation as well, and the numbers that are
available. But we continue to engage these markets and we will
continue, Senator, especially if I am confirmed in this
capacity as the Under Secretary for Farm and Foreign
Agricultural Service, we will continue to engage these markets
and do what we can to open them for our farmers and ranchers.
Senator Roberts. Well, I think the situation is right. We
just had a delegation from Japan in my office and with the
exception of one Kobe beef producer who was a little worried
about tariffs, everybody there said it is time to act. And the
Ambassador here in Washington wants to go out to Kansas and see
10,000, 20,000 herd of cattle out there right next to Dodge
City. So we said we could certainly arrange that for him. But I
think the time is right and I hope we can seize the moment.
We do have some unresolved issues with the beef market
access in Mexico, in Taiwan as well. Do you have any status
report on those issues?
Mr. Scuse. I had the opportunity, Senator, to visit with
some Mexican officials at the Trinational Accord in Texas last
month. That is a forum where the secretaries and commissioners
from the states of the United States meet with their
counterparts from Mexico and Canada. We have had those
discussions about the issue and we will continue to have those
discussions to resolve the issues with the Mexicans on beef
trade.
Senator Roberts. I thank you for your testimony. Thank you
so much.
Chairwoman Stabenow. Thank you. Senator Conrad?
Senator Conrad. Mr. Scuse, first of all, thank you so much
for coming to North Dakota frequently and listening to the
concerns of producers in my state. I certainly appreciate that.
Is it not the case that you would be replacing Mr. Jim Miller
as Under Secretary?
Mr. Scuse. Yes, Senator, that would be the case. I would be
former Under Secretary Jim Miller's replacement.
Senator Conrad. And Jim Miller, of course, is my lead
agricultural advisor. Do you see him here in the room?
Mr. Scuse. Yes, sir. He has got different glasses on, but I
still recognize him.
Senator Conrad. He has had an upgrade. Let me just say
this. I want to publicly acknowledge the dramatic improvement
in operations----
[Laughter.]
Senator Conrad. --that you have brought to that agency.
[Laughter.]
Mr. Scuse. Thank you very much, Senator.
Senator Roberts. I thought you were going to talk about the
dramatic improvement of operations in your office.
Senator Conrad. Well, that, too.
[Laughter.]
Senator Conrad. You know, Jim Miller is, I think, somebody
highly regarded on both sides and I am so delighted that he
came back to help us with the Farm Bill. But I am also
delighted in your candidacy for this position, your nomination,
because you have demonstrated to me repeatedly that you deeply,
sincerely care about producers.
Of course, you come from a family that is in this business
and you have got soybeans and you have got wheat, you have got
corn in your family operation, and it has just been a delight
to have you out talking to our producers because you have got
so much in common. So I just want to say how strongly I support
this nomination. I just do not think the Administration could
have done better and we look forward to working with you very
much.
If I could just also say that I understand you are an avid
hunter.
Mr. Scuse. Yes, Senator.
Senator Conrad. But the word around FSA is that you do not
actually kill anything. Is this because you are a poor shot or
is this----
Mr. Scuse. Well, Senator, if I may, I am a true
conservationist and I practice shoot and release.
Senator Conrad. Well, my understanding is you shoot at and
do not hit.
Mr. Scuse. That is my version of shoot and release.
[Laughter.]
Senator Conrad. Let me just talk seriously for a moment
about something that is very much on the mind of my producers
and that is disaster assistance. As you know, this year in
North Dakota, and across much of the country, we had one
disaster after another. We had record prevent plant in the
State of North Dakota. You fly over North Dakota today there is
water everywhere. We joke that it is like Lake Agassiz is
reforming.
You know, we used to be a lake bed in North Dakota
thousands of years ago. And you fly over North Dakota today, it
is like Lake Agassiz is reforming. There is just water
everywhere, setting us up for another very, very tough year if
weather conditions continue. We had record flooding last year
and records that so far exceeded anything that had happened
before. It has raised questions in people's mind, What is going
on here? Because on the Souris River, we had record flood
levels, and not just a little bit above previous, but way above
anything previously seen.
On the Missouri, we had record releases from the dams, and
again, not just a little bit over the line, as Senator Roberts
knows, but dramatic records. And so, with respect to the
disaster program, the SURE program, what would happen, in your
judgment, if that was not available in this next year?
Mr. Scuse. Well, Senator, those five programs that we no
longer have as of the last of September were very important
programs to our farmers and ranchers. The SURE program
supplemented the crop insurance that most of our producers are
now today carrying. So it has been, in the last few years, a
very important part of the safety net.
As our livestock indemnity program, the emergency livestock
assistance program, these programs have been very important to
our producers across the United States for various crops.
Especially for the livestock producers who traditionally,
through past farm bills, have not had any assistance, this was
a major step forward.
So I think that is one of the reasons, when you looked at
what the President said that he would like to have, that he
said, you know, we would like to have these five programs or
something similar because of what they have done for our
farmers and ranchers across the United States.
Senator Conrad. Well, I appreciate that. My time has
expired, but, Madam Chairwoman, if I just might, on the next
panel, Governor Culver is here. He is a dear friend, somebody I
have high regard for, and I hope that we can report these
nominations quickly and get these people confirmed. We are
lucky to have people of this quality and character make
themselves available for public service.
Chairwoman Stabenow. Thank you very much. Senator Cochran?
Senator Cochran. Madam Chairman, thank you for convening
this hearing. I am pleased to join you and the other members in
welcoming our witnesses this morning. In hearing the witness
mention the seriousness of the challenge that we face with
flooding, and the Senator from North Dakota eloquently
describing the practice consequences of that in that part of
our country, we have had serious problems down in the
Southeast, too.
The Mississippi River has been backed up to cover record
flooded areas and we still have a lot of producers worried
about the long-term consequences of this. And I am glad to hear
the sympathetic and interested response that you gave to the
fact that we do have serious responsibilities at the Federal
level to try to help manage the challenges that this brings to
production agriculture and the producers themselves.
Do you have any suggestions at this point about changes in
commodity programs or any disaster assistance programs that
might be considered by this Committee as we propose
improvements or changes in agriculture disaster benefit
programs?
Mr. Scuse. Senator, as this Committee moves forward with
the crafting of the next Farm Bill, I and the staff under me
would be more than glad and willing to assist you in providing
you with information and any help that we can in the creation
of the next Farm Bill. So I, if confirmed, look forward to
working with you and members of this
Committee on that next Farm Bill and providing you with the
assistance that you need.
Senator Cochran. Well, thank you. I think your experience
and the contacts that you have in the agriculture communities
nationwide will be a big help in explaining what our challenges
are.
Mr. Scuse. Thank you, Senator.
Senator Cochran. So best wishes to you in this new
responsibility.
Mr. Scuse. Thank you.
Chairwoman Stabenow. Well, thank you very much. I
understand that Senator Harkin does not have questions at this
time, and so we will thank you for your presence and excuse you
and look forward to having the opportunity to vote and, I feel
confident, bring your nomination forward. So we look forward to
continuing to work with you, and I appreciate all of your
efforts. So thank you.
Mr. Scuse. Madam Chairwoman, I thank you again for the
opportunity to be here today and answer the questions posed by
the Committee. And, Senator Roberts, when I left your office
the other day, you said I should think of two things when I
wake up in the morning. This morning I woke up thinking of beef
and crop insurance. Thank you.
Chairwoman Stabenow. Well, I could give you a couple
others, too.
Mr. Scuse. I will be more than glad.
Chairwoman Stabenow. All right. Well, thank you very, very
much.
We would like to ask our second panel, two distinguished
nominees, to come forward at this time.
Good morning. It is our pleasure to have both of you, and I
am going to turn now to Senator Harkin to introduce Governor
Chet Culver.
Senator Harkin. Thank you very much, Madam Chair and
Ranking Member Roberts, members of the Committee. It is indeed
my honor this morning to introduce and highly commend to the
Committee someone I have known since he was a little boy. I
like to always comment that some people do not realize that
Chet Culver actually was little at one time. So that is my way
of saying I have known him all his life.
I strongly support his nomination to serve as a member of
the Board of Directors of the Federal Agricultural Mortgage
Corporation, commonly known as Farmer Mac. Chet Culver has
served Iowans as our 40th Governor from 2007 to 2011; prior to
that served eight years as our Secretary of State and served
with distinction and strong accomplishments in both positions.
During his tenure as Governor, Iowa was recognized as one
of the best run states in the nation. During a time of great
fiscal and economic challenges, he managed a $6 billion annual
state budget, improved our state's bond rating so that the
three major bond rating agencies awarded Iowa their highest
rating. That made Iowa one of only nine states to earn the
highest rating from all three agencies.
Thanks to Governor Culver's leadership, Forbes Magazine
ranked Iowa the number one place in America for business and
careers. CNBC rated Iowa one of the top states for business.
And again, this is during the height of recession.
So while balancing four budgets, Governor Culver increased
the minimum wage, increased teacher salaries to the national
average, expanded health care for uninsured Iowa children, and,
I think again, one of his signature accomplishments is
expanding early learning statewide. So we have statewide pre-
school in the State of Iowa.
In addition, he invested millions in new jobs, new roads,
bridges, renewable energy, flood prevention at a time when also
protecting our cash reserves. He successfully dealt with the
severe flooding in 2008, the worst natural disaster in Iowa's
history. I mentioned some of his achievements.
I would also mention the creation of the Iowa Office of
Energy Independence, the Iowa Power Fund, which has invested
more than $65 million in 40 Iowa renewable energy research and
development and early stage commercialization projects. I
mention this because this state investment leveraged over $200
million in private investment into Iowa's renewable energy
sector. Under Governor Culver's leadership, Iowa moved to first
in the world, not in the nation, but first in the world in per
capita use of renewable energy and now produces nearly 20
percent of all of our energy needs from renewable resources.
I go through all that because obviously with this
background and this experience, Governor Culver knows
agriculture, he knows rural communities, he knows business, how
to manage budgets and finances, and will be an outstanding
member of the Board of Directors of Farmer Mac.
Again, I know his wife could not be here with him, Mari,
and his kids are in school and could not be here, but I would
note in passing his great devotion to a great family he has in
his wife, Mari, and his two kids, Claire and John. And so, I
commend Governor Culver highly to this Committee for this
position.
Chairwoman Stabenow. Well, thank you very much. Very high
praise coming from a very distinguished member of this
Committee. So we welcome you and let me introduce our second
nominee as well for Farmer Mac, Dr. Bruce Sherrick. Dr.
Sherrick is currently a professor in the Department of
Agricultural Economics at the University of Illinois where he
teaches undergraduate and graduate courses in applied finance
and financial modeling. He is also a partner in the consulting
firm, Integrated Financial Analytics and Research.
Now I have two things that I need to ask both of you to do
and if you both stand and first let me administer the oath that
we have for all nominees, and if you would rise and raise your
right hand?
Do you swear that the testimony you are about to present is
the truth, the whole truth, and nothing but the truth, so help
you God?
Mr. Culver. I do.
Mr. Sherrick. I do.
Chairwoman Stabenow. Thank you. And secondly, do you agree
that if confirmed, you will appear before any duly constituted
Committee of Congress if asked to appear?
Mr. Culver. I will.
Mr. Sherrick. I will.
Chairwoman Stabenow. Thank you very much. Governor Culver,
we will ask you to proceed, and as you know, we ask for five
minutes of testimony. Anything else in writing you would like
to give us we would welcome.
TESTIMONY OF HON. CHESTER JOHN CULVER, IOWA, NOMINATED TO BE
MEMBER OF THE BOARD OF DIRECTORS FOR THE FEDERAL AGRICULTURAL
MORTGAGE CORPORATION
Mr. Culver. Well, first of all, Madam Chairwoman, thank you
very much, and Ranking Member Roberts, thank you as well for
holding this hearing today. I also want to acknowledge and
thank Senator Harkin for his kind words, and Senator Grassley
as well who made comments earlier.
All the distinguished members of this Committee, thank you
as well for having this hearing this morning. It is truly an
honor to be here with you. It is also an honor to be nominated
to serve as a member of the Board of Directors of the Federal
Agricultural Mortgage Corporation, and I want to thank
President Obama for the confidence he has shown in me by
nominating me to this Board.
As the former Governor of Iowa, I know the tremendous
responsibilities of Farmer Mac and the pivotal role that it
plays on a daily basis to increase the availability of long-
term credit at stable interest rates to segments of rural
America. As an Iowan, I have maintained a life-long love for
rural America, its rich and vibrant landscape, culture,
history, and its people.
I believe I understand the needs of rural citizens and the
particular economic development and infrastructure challenges
of the Midwest. Throughout my career, I have been fortunate to
work on behalf of all Iowans as a consumer and environmental
advocate, as an educator, as Secretary of State, and as
Governor, and now as a small business owner, to make Iowa and
this nation a better place to live, work, and raise a family.
I understand the needs and challenges that confront our
farmers, ranchers, small businesses, energy suppliers, rural
communities, and rural schools in this country. I am also aware
of the inter-relationship between agribusiness, urban
communities, manufacturers, and the financial sector. As we
like to say in Iowa, from silos to smokestacks.
If confirmed as a member of the Farmer Mac Board, I want to
assure you, the Congress, employees of Farmer Mac, and the
citizens of this great diverse country that I will do my utmost
to ensure that the Agency upholds its mandate effectively to
provide a secondary market for qualified agricultural mortgage
loans, rural utility loans, and the guaranteed portions of the
agricultural and rural development loans guaranteed by the U.S.
Department of Agriculture.
I am also motivated and committed to helping to provide a
stable and reliable financial backbone in rural America. In the
face of these difficult challenges, I remain optimistic about
the limitless potential rural America has to both feed the
world and help secure this country's energy future.
Chairwoman Stabenow.and Ranking Member Roberts, I welcome
the opportunity to tackle the challenges that lie ahead at
Farmer Mac and I sincerely thank you for this confirmation
hearing and for affording me the opportunity to offer this
brief statement today.
In closing, I want to thank the Committee staff for its
time and attention it has given to my nomination. If confirmed,
I intend to work closely with you, Madam Chairwoman, Senator
Roberts, members of this Committee, and your staffs to preserve
our shared objectives. I am committed to maintaining the very
productive and close working relationship that exists between
this Committee and Farmer Mac. I am happy and pleased to
respond to any questions that you may now have.
[The prepared statement of Mr. Culver can be found on page
28 in the appendix.]
Chairwoman Stabenow. Thank you very much. Dr. Sherrick,
welcome.
TESTIMONY OF BRUCE J. SHERRICK, Ph.D., ILLINOIS, NOMINATED TO
BE A MEMBER OF THE BOARD OF DIRECTORS OF THE FEDERAL
AGRICULTURAL MORTGAGE CORPORATION
Mr. Sherrick. Good morning. Thank you. Chairwoman Stabenow,
Ranking Member Roberts, and other distinguished members of the
Committee, I am very honored to have been nominated for service
on the Board of Directors of the Federal Agricultural Mortgage
Corporation. Thank you for your time and opportunity to appear
here today.
I want to provide a very brief background statement to give
a little bit of sense of who I am and some experiences that may
have some relevance for my service in that role. Like many
people in the agricultural community today, I was born and
raised on a small, very diversified farm in central Ohio, and I
was brought up with parents who view that as a teaching
laboratory, and I was expected to have as many agricultural
experiences as possible, each with the intent to do two things,
learn something new and earn money for college.
Eventually I did go to college and, at the Ohio State
University, completed all of my degrees with only a brief stint
in the middle working for a very large agribusiness firm in St.
Louis who produces a lot of chemicals, and I decided I really
did need to go back and finish a Ph.D., given that experience.
After that, I joined one of the top finance programs in the
country at the University of Illinois where I have been ever
since. I am currently a professor in agricultural and consumer
economics with responsibilities in teaching, research, and
outreach. I was glancing at the clock earlier because at this
moment, I am actually scheduled to be on a panel in western
Illinois near Iowa presenting some materials on crop insurance
reform, in fact, to a large group of farmers with some of my
colleagues. So this is a better venue, I assure you.
I have the privilege to be associated with a very dedicated
group of faculty colleagues at the University of Illinois, who
approach with sincere interest, promote every aspect of
agriculture that we can, and that group is known as the farmdoc
group. We are active in evaluating farm bill prospects at the
moment, have been active in developing crop insurance products
and programs, both from the producer level as assistants to RMA
with independent companies and even private market add-ons to
the existing insurance products as well.
I mention these experiences because they have some direct
relevance in representing poolable risks that also are a key
cornerstone in risk management activities that producers use to
manage the extreme agricultural production risk, much like the
activities of Farmer Mac.
With Farmer Mac, I have had a different set of professional
experiences. I was one of the original researchers who built
the original guarantee pricing model Farmer Mac had before they
even expanded their authorities to pool mortgages outside their
initial pools. Since that time, I have been involved with both
the regulator, their customers, independent research, examining
the role of securitization in providing conduits from the farm
through the capital markets in providing stable and reliable
access to credit in rural America.
From those experiences, I have had a great deal of a chance
to observe what they do and understand their role in the access
to that provision of capital. My current position, as I said,
it has given me access to an incredibly interesting and very
diverse set of experiences, but my personal interest has
allowed me to focus those in the arena of ag-finance, and that
is a really unique experience and I find myself very
privileged, both at the university level, with my consulting
organization, and now to have been considered for membership on
the Board of Directors to continue that set of interests, and
if confirmed, would again serve to the best of my abilities.
Again, I want to thank this group for the opportunity to be
here today and to be considered for nomination for the Board of
Directors of Federal Agriculture Mortgage Corporation. Be
pleased to answer any questions as well.
[The prepared statement of Mr. Sherrick can be found on
page 33 in the appendix.]
Chairwoman Stabenow. Well, thank you very much to both of
you, and I do want to say, Dr. Sherrick, as a Michigan State
University graduate, you can tell I am very open-minded that I
would let an Ohio State graduate appear before the Committee as
a nominee and not to attempt to block your nomination. We are
glad to have both of you.
Let me first start and ask both of you, I am sure you have
thought about goals and plans for your time on the Board if you
are confirmed. I wonder if you might talk more specifically
about what you would like to accomplish in your tenure and what
you see your role as being in helping to shape the work of
Farmer Mac? Governor Culver?
Mr. Culver. Well, thank you, Madam Chair. I really look
forward to working with Chairman Lowell Junkins and the Board
to continue to work every day to ensure that there is reliable
and capital available in rural America. I think they have done
a good job, last year in particular, during some tough times,
making sure that credit was available.
As Senator Conrad noted, rural America, and certainly in
Iowa and North Dakota and Illinois, we have been hit with real
disasters, natural disasters, which have caused new challenges
in many smaller communities. And so, we need to help those main
street businesses continue to offer services. I think that
could be a little tricky because some of them were under water
in communities like Oakville and Columbus Junction, for
example. The main streets were, and certainly residential and
businesses were impacted severely, in our case in 2008, with
historic flooding.
So I think we might see a new round of challenges, again as
Senator Conrad noted, due to the natural disasters throughout
the Midwest and we just have to continue to make sure that
credit is available to those farmers in those rural communities
and those businesses that we are counting on to keep our
economy strong.
Chairwoman Stabenow. Thank you. Dr. Sherrick?
Mr. Sherrick. Thank you. For purely coincidental reasons, I
happened to be at Lehman Brothers the day they declared
bankruptcy in September of 2008 and witnessed the complete
destruction, if you will, of the securitization system in
traditional mortgages and so on. And I have been watching with
great interest to see if there is any potential for similar
forces to present themselves in agricultural conduits.
I do not think there are, but I think it is critical to
preserve that possibility and the ability for those well-
functioning capital markets to taking full risks, divide them
up into sensibly-priced possible securities, and have a
matching of the demands for--and the liquidity services, of
course, in the sector right now are--you know, there is this
big bubble of liquidity at the moment. And so, there have been
some change in the role that Farmer Mac might play.
I think it is important, even more important in agriculture
because we have not had the same disruption that the other
economic--the other financial markets seem to have had. I have
tried to keep an informal count and I think since Sheila Bair,
the Chairwoman of the FDIC, made her comments last fall about
the possible land price bubble, I think I have been asked over
30 times now to comment on the possibility of an agricultural
land value bubble.
I think the lending side response in the '80s was
profoundly important in understanding how we got to that and
got out of it. I see that as a role to provide at Farmer Mac
some careful analysis of the same sort of activities, and to be
able to move forward through those periods is critical.
The second area, as Basel 2 becomes more completely
implemented, some more rational sort of capitalization schemes,
and that applies both in traditional financial markets and in
agricultural financial markets, and have been watching, and in
fact, helping to some degree with FCA's efforts to design
slightly more rational capital guidelines. And Farmer Mac is
the natural experiment and the natural place for which these
pooling activities should and could take place.
So those are two areas that I think are critical. They may
sound very macro, in a sense nebulous, from direct questions
about specific activities, but I think they are really
important, sort of overarching issues related to the function
of Farmer Mac as a secondary market for agricultural mortgages.
Chairwoman Stabenow. Well, I think that is very important
because folks do not think about that. We talk about rural
infrastructure a lot and they do not think about the important
role in the secondary market that Farmer Mac plays. And so, in
the 2008 Farm Bill, we, as you know, authorized Farmer Mac to
purchase and to guarantee securities backed by loans made by
cooperatives and electric and telecommunications infrastructure
and so on. So I think it is important to recognize the
significance of those activities. Thank you very much. Senator
Roberts?
Senator Roberts. Well, thank you, Madam Chairwoman.
Governor Culver, just off the subject a little bit, but I sure
want to thank you for your hands of friendship extended to our
State of Kansas, allowing some of your five-star basketball
athletes to come down to KU and K State and play. That is darn
right neighborly of you and we appreciate it.
[Laughter.]
Mr. Culver. We have helped North Carolina a little bit,
too, lately.
Senator Roberts. Right. Hope you do not put any tariffs or
have any trade--we do have a tariff, by the way, in terms of
our athletes. Not that many. And then also, I think that is
where Coach Snyder started out, at Kansas State, three times
coach of the year and just made it again with a team that was
not expected to do very well. Pardon me for----
Chairwoman Stabenow. Go right ahead.
Senator Roberts. --getting off on that. I will behave
myself doing that.
Chairwoman Stabenow. I have got leftover purple from my
visit to Kansas.
Senator Roberts. Well, Governor and Dr. Sherrick, as you
have stated, we must ensure--you must ensure the integrity of
our financial institutions through appropriate oversight. The
Chairwoman and I get that question every time we are on TV now
with regard to MF Global and the unexpected demise of that
trading company. Two hundred years of experience they had and
now we are witnessing a devastating impact all throughout farm
country, farmers, ranchers, investors, and businesses, and you
have all talked about the importance of capital in that very
important national enterprise.
So we must do everything possible to prevent any unexpected
collapses or calamities and these are the days where we have
unexpected collapses or calamities. One thing happens and then
another thing happens, something we do not expect, including
Farmer Mac.
The Board of Directors, it seems to me, must provide
oversight and ensure operations are conducted strictly, and I
would try to emphasize, within existing statutory authority. We
had four farmers testify and put a human face on what is going
on out there in farm country with MF Global. Every one of them
said existing laws were broken and that they are not screaming
for more regulation. They are screaming for less, so within
existing statutory authority.
What will each of you do to contribute to the Board of
Directors to ensure that Farmer Mac is managed in a safe and
sound manner according to the authority given by Congress? And
I know both of you have an extensive background and have the
ability to do that job and to do it well.
Mr. Culver. Well, Senator, as a former Governor, I am
familiar with those responsibilities and obligations, in my
case, with every state agency, and I think it starts with
having the best possible staff that are there every single day
helping to run the operation. I think it is important to have a
good working relationship with all of the Board members so that
we keep the lines of communication open and that we have
opportunities to voice any concern, if we have any, whether it
is within the organization or outside in terms of some of the
economic concerns that you raised or the potential related to
problems down the road.
But perhaps most importantly, it is keeping the lines of
communication open with this Committee and with your staff so
that as you see concerns or if you have questions, that we can
have that constant dialogue to together kind of stay in front
of some of these potential problems down the road.
Senator Roberts. Dr. Sherrick, would you like to say
something?
Mr. Sherrick. Thank you. In addition to echoing----
Senator Roberts. Let me preface it by saying I appreciate
your talk about the farmland bubble. There is an article in
today's Wall Street Journal about that same subject right on
the front page of the business section. I do not know how many
speculative pieces have been written about it, and I just told
the Chairwoman, We are going to talk our way into this if we
are not careful. But please feel free to----
Mr. Sherrick. Thank you. Had a very interesting set of
opportunities to respond to that issue as well, most recently
at a conference the Chicago Fed hosted. And again, there are
some very dramatic differences from the '80s, of course, when
there was much more of a lender contribution to the cause, in a
sense. And in this case, I think if we were to see a
capitalization change or a rate change that would lead to land
value changes, it would economy-wide, not agricultural
specific. So I think it is a very different circumstance.
It is partly the institutions, to come back to the other
question, the institutions are different, and one of the things
that is profoundly different is the environment, legal and
otherwise, in which they operate. And I have been very
impressed with Farmer Mac in the past decade or so with the
extreme attention to detail on simple things like FAS 133
happens or maintaining not just compliance with the letter, but
the intent of the law and the regulations while looking for
authority, perhaps expansion that allows them to provide more
liquidity services, more important services for agriculture in
rural communities.
In direct response to how, when I have specific activities
related to maintaining the provision of these services within
existing authorities or within a regulatory environment that is
meant to promote safe and sound operations, I think there are
two slightly overlooked, at this point, possible future avenues
of activity.
One is, as Basel 2-like things are becoming more and more
promulgated through the economy, there are banks and farm
credit institutions-like who find it more complicated to
operate in agricultural markets. I think you need a Farmer Mac
so that the community bank that cannot make an ag loan anymore
because it is more complicated, or a Met Life who does not
quite know how to deal with regulations when they decide
whether they are a bank or not a bank and has a large portfolio
of agricultural mortgages, it make sense to have a GSE.
Importantly, the GSE status, as affiliated with Farmer Mac,
provides the ability to do something that is part of the
confidence gain. The recent meltdown, in many ways, is very
much a battle for confidence. And I think it is very important
to be able to demonstrate that from a position like Farmer Mac
to the agricultural lending community.
There are two major, of course, potential sets of clientele
for Farmer Mac or farm credit institutions and banks,
commercial banks lending to agriculture, and they both will be
faced with increasing difficulty in a sense of maintaining good
and fair lending practices in agriculture as they go forward
and as other banking regulations evolve. So I think Farmer Mac
being able to hold that position and provide those services is,
in fact, critical to others also maintaining their behavior
within authorities.
Chairwoman Stabenow. Thanks very much. Senator Cochran.
Senator Cochran. Thank you very much for being responsive
to the questions that our Committee has had of you, and let me
join with others in congratulating you on your selection as
members of this Board. We appreciate your undertaking that
responsibility for us.
I wonder, in your experience, whether you have come to
recommend or have this Committee recommend changes in our farm
credit system that would help improve access to credit and the
effectiveness of our credit system as it relates to production
agriculture?
Mr. Culver. Well, thank you, Senator. I think overall and
generally speaking that Farmer Mac has worked. I mean, it has
really been a critically important institution in response to
the farm crisis in the '80s to try to avoid some serious
financial strains in rural America. So I do not have any
particular recommendations. I am anxious, as a new member of
the Board, to listen and learn and try to better understand
things that we can do to improve Farmer Mac. I would be
prepared, perhaps in the future, to come back to this Committee
with more specific recommendations.
But I think we need to continue to focus on some of the
positive things that Farmer Mac has been able to do to help
rural communities and farmers across this country. I think it
is my understanding that one of the things that they have done
well is they have always strived to reform themselves and make
improvements, which has enabled them, I think, to do a good job
over these years.
Senator Cochran. Dr. Sherrick?
Mr. Sherrick. Thank you for the question. I think it is
critical these days. If this were 1983, I would have had a much
more profound and interesting response. Farm credit finds
itself in incredibly healthy conditions right now with a very
large amount of both unrealized and unallocated earnings in
both forms, and prospects for future earnings look pretty good
as well.
I do not want to overstate, though, that the producers face
unprecedented levels of risk, high prices recently, high
incomes we have heard about, but very volatile margins. High
input costs as well. And that could change. Farm credit has
done a very good job, I think, in preparing for that.
I happen to have had again another just remarkably
fortunate experience to help FCA develop a stress test for
their associations and we have run the first one last fall to
look at the health of all the associations in the system and to
see what things would stress them. And they are preparing
differently than they used to.
Specific changes, I do not have any to promote. I think,
again, coming to grips with somewhat older capital regulations
right now, there may be some chances to improve those and to
become more consistent with other financial markets. But I
think it is a highly capitalized, fairly well-run system at the
moment and does not face potential big problems.
Again, Farmer Mac provides a natural place to warehouse
some of the risk, especially recognizing seasoning of risks
within the system, and their capital standards are, in a sense,
different by design and intent than Farmer Mac's, and the
secondary market does serve a good role for allocating those
risks appropriately. Beyond that, I do not have specific
suggestions.
Senator Cochran. Well, I am pleased to have an opportunity
to visit with both of you and to congratulate you on your
nomination, wish you all the best as you undertake these
responsibilities that are very important.
Mr. Sherrick. Thank you, Senator.
Chairwoman Stabenow. Thank you very much. Senator Thune?
Senator Thune. Thank you, Madam Chairwoman, and thank our
panel today for your willingness to serve, and welcome. It is
great to have you here. I wanted to just ask a question about a
trend that I see in my State of South Dakota and, Governor, you
probably see it in your State of Iowa, too.
According to Iowa State University, the value of Iowa
farmland jumped 32.5 percent in 2011, and crop land in the
northern plains in Minnesota was up 26 percent. I have read
about farmland sales, which are hard to believe, but as high as
$20,000 an acre. As you are going to be members of the Board of
Directors at Farmer Mac, my question has to do with what the ag
real estate lending community can do to keep itself stabilized
if and when agricultural real estate prices, land values take a
downturn.
I am really concerned about sort of a bubble out there. I
think that sometimes farm bill programs get capitalized in the
land prices. There are lots of things that are leading to this
right now and, of course, good strong commodity prices is
another good reason. But it seems that it is very hard to make,
at those types of land prices, an operation pencil out.
Now, the good news, I think, relative to previous times is
that producers are not as heavily leveraged as they were. A lot
of people have a lot of equity. They are paying cash for land,
you know, averaging it out with land they purchased earlier. So
there are some mitigating factors in that, but it still seems
like just these land values are completely out of whack with
what you would think would be normal given what inputs cost
today and what commodity prices are.
So how do the lenders--how do you work with the lenders to
make sure that if and when that happens that we do not have a
huge problem in the lending community like we saw in years past
when a similar-type circumstance occurred?
Mr. Culver. Well, thank you, Senator, for that question. If
Farmer Mac is not already having a special focus on just the
land values issues, as you have articulated, I think we need
to. I mean, within one of our six committees, perhaps we could
make an effort, on a regular basis, just to have an update on
the studies, the information out there on land values in rural
America, and to maybe take a little more time than we have in
the past to really focus on how real those values are.
When you asked the question, I remembered I vividly can see
in my mind a picture in the Des Moines Register of a land sale
where someone was--they were bidding and the price had gotten
up to $10,000, $15,000 an acre and it was something that they
had never seen in that part of the state. So we have to stay on
top of this and make sure that we are not getting carried away
in the hype, but we are really being more conservative in
focusing on the true value of property.
Mr. Sherrick. Thank you. Very important, very good
question. I have about a 30-page Power Point prepared on this
as well that I have been running around the country presenting.
The last two charts are particularly interesting. If you
capitalize the cash rent that we are observing by the extremely
low current interest rates we also are observing, you get
numbers that look somewhat irrational relative to history.
But it is different than the bubble. And again, I think
this is the fourth time I have heard the characterization of it
as a bubble with the question mark following. Is it a bubble is
an important thing to first determine. And the fundamentals
appeared to support current land values if you, again, just
simply capitalize cash rent in many parts of the country at
very high levels.
Now, there are still remarkable things that happen at
auctions when two neighbors bid for a farm in between that is
going to sell once in their lifetime.
Senator Thune. Yeah.
Mr. Sherrick. Or in my local community, we have a large
investor, large developer, and a heart surgeon who both want to
be the first to own a ring of land around all of Champaign. So
I do not think of those as being the rational question. Those
are the consumptive questions.
Senator Thune. Right.
Mr. Sherrick. But what can lenders do, I think, was part of
the question. And some of these factors are already happening.
At the origination level, rational and responsible lenders are
doing things like stress testing or applying limits on the
amount of dollars they will lend in per acre regardless of the
sale price. So farm credit institutions have largely limited
their LTV ratios more over the past couple of years that
effectively limit the total amount into a parcel of land on a
per-acre basis regardless of the sale price. So that is a good
rational, safe response.
There are other responses, and in your part of the world,
kind of the upper Mississippi, the whole section has had higher
land values that look even more profound because the starting
values were somewhat lower. In central Illinois, a $10,000 an
acre sale would be viewed as a bargain today. So I think
getting some relationship between the production capacity and
the cash flows associated with that are very important.
George Morrow in 1886, commented, for the first time that I
can find in the written record, that land does not cash flow,
that you should expect that some form of the return should
accumulate in the form of capital gains. And so, that is a
rational response that investors use to evaluate it. So it is
not just the cash flow. It is the long-term prospects for
change in value as well.
I think lenders, again in the '80s, if I could point back,
contributed, in a sense, to the problem rather than solved it.
And I think this time around, they are aware of that, in
general and in the large, in helping to prepare for that.
In the specific case of Farmer Mac, their own capital
stress test, people have very different views of it depending
on whether they like the number it presents or not, but it is
compliant with the particular definition of stress Congress
wrote 14, 15 years ago that looks at the worst case historic
land value decline ever experienced, and they continually
stress their model with the 23 percent land value decline.
I think that is a very responsible approach to dealing with
this. Twenty-three percent off of $15,000 an acre is, of
course, a different number than it was when it was 23 percent
off of $4,000 an acre. So continuing to keep these current and
modeling up and reflecting the current realities is the
important task.
Senator Thune. And I hope that as you work with the lending
community, keep this on your radar screen because I think you
are right. I think that the lenders are in a much better
position. They are not getting carried away like they did back
in the '80s, for example, when we went through that huge period
where we just lost a lot of farms because the farmers got over-
extended and the banks helped them. And the interest rate
situation is very different today.
But these land values really are. I mean, in my part of the
country where I come from, in the middle of South Dakota, we
are seeing land going for--and part of that, too, is that
people are bidding it up for pheasant hunting--we have got good
pheasant cover out there--that you have got some outside
interests that do that.
But just for a working farming operation and what use of
the land for production agriculture would support, it seems
like these land values are really out of whack. But I know that
farmers and ranchers themselves are much better capitalized
than they were before. I think banks are better capitalized and
sort of better prepared for this. But I just would put it on
your radar screen as something to keep an eye on. I see my time
has expired. Thank you, Madam Chairwoman.
Chairwoman Stabenow. Thank you very much. Good questions
today and we thank both of you. We are, I can speak for myself,
very impressed with both of you, your thoughtfulness and
competence. We are very pleased that both of you are willing to
come forward and to be involved in public service in this way.
As you know, we will not be voting today on your
nomination, but we are working to find a time for a business
meeting to be able to come together as soon as possible to be
able to vote. And to that end, I would ask any additional
questions for the record to be submitted by 5:00 p.m. today so
we might process those and have the opportunity to vote on your
nominations. Thank you very much.
Mr. Culver. Thank you, Madam Chair, and thank you, members
of the Committee.
Mr. Sherrick. Thank you as well.
Chairwoman Stabenow. We are adjourned.
[Whereupon, at 11:55 a.m., the hearing was adjourned.]
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A P P E N D I X
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DOCUMENTS SUBMITTED FOR THE RECORD
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QUESTIONS AND ANSWERS
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