[Congressional Record Volume 141, Number 103 (Thursday, June 22, 1995)]
[Extensions of Remarks]
[Pages E1318-E1319]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]


                 REFORM OF THE REA ELECTRIC LOAN PROGRAM

                                 ______


                         HON. RICHARD H. BAKER

                              of louisiana

                    in the house of representatives

                         Thursday, June 22, 1995
  Mr. BAKER of Louisiana. Mr. Speaker, I rise to discuss an important 
issue that has received little attention thus far in the 104th 
Congress: reform of the REA's subsidized loan program for electric 
cooperatives.
  The REA has long been the target of loud criticism by many who 
believe the Federal Government's role in direct, subsidized lending to 
utilities should be curtailed. The REA has changed its name to the 
Rural Utilities Service [RUS], but it continues to provide subsidized 
loans to many healthy, financially stable electric co-ops at a cost of 
millions of dollars each year. Legislation I have introduced today, the 
Rural Electrification Loan Reform Act, would bring reform to this 
program which needs an overhaul.
  I believe we should reform the REA electric loan program in a manner 
consistent with the free-market principles that motivate our balanced 
budget proposal. The concept driving this reform legislation is simple: 
If an electric co-op is able to obtain credit at a reasonable rate and 
terms from private lenders, then that co-op should not be able to 
participate in the taxpayer-subsidized REA program. The Federal 
Government simply should not be the lender of first resort for many of 
these co-ops. Other Federal programs, including Small Business 
Administration [SBA] and Farmers' Home loans, now use this reasonable 
credit-elsewhere test in an effective manner. Farmers and small 
businesses must try to obtain credit from banks and other private 
lenders before turning to Federal loan programs. We should enact this 
reform to bring the REA program in line with other Federal lending 
programs.
  Instituting a credit-elsewhere test is a responsible way to reform 
the program in order to push the healthier electric co-ops toward 
private lenders, while preserving a scaled-back REA subsidized loan 
program for the struggling co-ops in the most distressed parts of rural 
America. My legislation will not terminate this REA program. Rather, it 
would concentrate the loan program for only those co-ops that can show 
a true need for assistance. Many do not realize that most electric co-
ops now must obtain 30 percent of their financing from private sources, 
while the other 70 percent comes from the REA loan program at a 
subsidized interest rate. Congress should require co-ops to try to 
obtain 100 percent of their credit from a source other than the Federal 
Government, and retain the REA program for those co-ops that cannot 
access private capital. I certainly recognize the continuing need for 
subsidized credit assistance in some parts of rural America--including 
some parts of rural Louisiana. And if this legislation is enacted, 
these areas would continue to receive loan assistance from the REA 
program. But Congress must now make many difficult choices if we want 
to reach a balanced budget by 2002. I believe these are Federal dollars 
which could be better spent. [[Page E 1319]] 
  As a longtime member of the House Banking Committee and the current 
chairman of the Subcommittee on Capital Markets, I have an interest in 
encouraging the use of private sources of credit wherever possible. I 
believe there is a larger, more active role private lenders can play in 
addressing the credit needs of electric co-ops. I ask the House 
Agriculture Committee to hold hearings to explore these reforms of the 
electric loan program.


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