[Congressional Record (Bound Edition), Volume 150 (2004), Part 14]
[Senate]
[Pages 19476-19477]
[From the U.S. Government Publishing Office, www.gpo.gov]




                  ENSURING A STRONG FARM CREDIT SYSTEM

  Mr. DASCHLE. Mr. President, the Farm Credit System is a nationwide 
network of borrower-owned financial institutions consisting of four 
farm-credit banks, one agricultural-credit bank, and nearly 100 locally 
owned farm-credit associations.
  These institutions were created as a result of the 1916 Farm Credit 
Act, whose fundamental purpose was to establish a network of 
government-sponsored enterprises that would provide America's farmers 
and ranchers with a reliable source of credit at fair and competitive 
interest rates.
  Over the years, the Farm Credit System has provided critical credit 
and related services to farmers, ranchers, rural homeowners, farm-
related businesses, and cooperatives, including rural utilities.

[[Page 19477]]

  In fact, the Farm Credit System provides over $90 billion in loans to 
more than a half-a-million producers, agribusiness, and agricultural 
cooperatives. Overall, more than 25 percent of the credit needs of 
American agriculture are met by these important farm credit 
institutions.
  These institutions have the unique attribute of being organized as 
cooperative businesses, each owned by its member-borrower stockholders, 
who have the right to participate in director elections and vote on 
issues impacting business operations.
  One of the largest farm-credit institutions serving South Dakota is 
Farm Credit Services of America, or FCSA. FCSA also provides services 
in Iowa, Nebraska, and Wyoming, and it holds nearly $8 billion in 
assets, which is about 8 percent of the entire Farm Credit System 
portfolio.
  On July 30, the board of FCSA approved an agreement to be acquired by 
the Rabobank Group, a Dutch banking giant and international farm 
lender.
  The agreement is subject to approval by the regulatory agency which 
oversees these institutions--the Farm Credit Administration or FCA. It 
is also subject to stockholder approval and the expiration or 
termination of antitrust waiting periods.
  Under the agreement, FCSA would become a wholly-owned subsidiary of 
Rabobank and would seek to exit the Farm Credit System under the 
termination provisions of the FCA's regulations.
  FCSA has over 51,000 farmer and rancher customers--thousands of which 
are in my State of South Dakota.
  Having spent a great deal of time in South Dakota over the past few 
months, I can say without any doubt that this proposed sale of one of 
our leading Farm Credit System institutions to a foreign bank has 
created a whirlwind of confusion and uncertainty.
  While the tentative deal would pay producer-members $600 million in 
patronage, FCSA would also have to pay the Federal Government an $800 
million ``exit fee,'' which is required should a member-institution 
pull out of the system.
  The $800 million would go to the system's insurance fund. If the 
agreement is approved, FCSA would no longer exist.
  At the same time, another banking interest--AgStar, which is also 
part of the Farm Credit System, and which operates out of Minnesota--
has also sought to enter into a merger with FCSA.
  Under AgStar's proposal, the new, merged AgStar would pay producers-
owners $650 million in patronage--a full $50 million more than the 
Rabobank offer.
  Plus, AgStar would not have to pay the $800 million termination fee 
that the Rabobank deal would require.
  Finally, AgStar would make a commitment to provide future patronage 
payments to farmers and rancher-owners.
  Looking solely at these figures, the Babobank offer appears 
questionable. But a decision like this should not be taken lightly, and 
more time is needed to fully analyze all the facts and determine what 
would be in the best interest of the producer-owners of FCSA, and in 
the best interest of the overall Farm Credit System.
  Senator Johnson and I have sought to ensure that public hearings on 
these matters be held by both the FCA and the appropriate committees in 
Congress.
  The FCA has said that they will hold at least one meeting or hearing. 
In addition, the first of what I hope could be several congressional 
hearings will be held by a House Agriculture Subcommittee tomorrow.
  Unfortunately, the current time line under which the Farm Credit 
Administration must operate would require a decision within 60 days of 
FCSA's submission of a termination notice--a notice which could be 
filed as early as this week.
  If the FCA approves the sale, a final vote by the FCSA shareholders 
could theoretically come before the end of the year, when Congress will 
likely be out of session.
  It would be extremely difficult for the FCA to hold the public 
meetings or hearings that many of us think are needed, and make a 
thoughtful decision about the termination, within the initial 60-day 
time frame.
  That is why, today, Senator Johnson and I are introducing legislation 
to ensure that when a Farm Credit System institution seeks to leave the 
system and terminate its status, the FCA will hold no less than one 
public meeting or hearing in each of the States in which that 
institution is chartered.
  In this case there would be no less than one meeting or hearing in 
South Dakota, Iowa, Nebraska and Wyoming.
  The bill would also require the FCA to wait at least six months 
before making a decision on the termination request by the 
institution--in this case, FCSA.
  At best, the proposed sale of FCSA to Rabobank raises more questions 
than answers.
  Farmers and ranchers in South Dakota and in the other impacted States 
fear they will have to vote on a deal before studying it and having all 
the appropriate information they need.
  And the Farm Credit Administration, which is not a large agency, is 
at risk of being overburdened by an unrealistic time line.
  A decision to leave the system is really monumental in the world of 
rural credit, and it could have a huge impact on rural America.
  The Farm Credit System has served our Nation's rural communities 
exceedingly well for nearly 90 years.
  Before any action is taken that may jeopardize that impressive 
record, we need to ensure that farmers, ranchers, and rural residents, 
as well as members of the FCA, have the time they need to analyze this 
profoundly important decision and reach the right conclusion.
  I yield the floor.

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