The Farm Credit System, banker to a large part of the nation's farmers, is under renewed attack from critics who say it has failed to come to the aid of many troubled farms.
As the system struggles to solve financial problems at a number of its Federal Land Banks, some farmers and agricultural experts cite numerous examples of alleged failure to comply with a law designed to bail out the FCS just six months ago."There are areas out there where FCS clearly does not want to follow the law, and won't until pressure is brought to bear," said one Senate aide involved in recent hearings on the system.
FCS, which holds $52 billion in farm loans, or about one-third of all U.S. farm debt, was granted a $4 billion bailout last year by Congress when it passed the Agricultural Credit Act of 1987 in December.
In return, FCS was required to offer more lenient terms to financially troubled farmers whenever doing so would cost less than foreclosing on their farms.
Critics, however, charge that FCS has frequently failed to restructure problem farm loans. For instance, officials at one FCS-affiliated land bank in Wichita, Kan., have not offered to restructure any of 100 loans examined by one advocate group, the group said.
"We are not aware of any restructuring under the Agricultural Credit Act," said Ron Johnson, a staffer at a farm hotline sponsored by the Oklahoma Conference of Churches. "We've been in contact with roughly 100 farmers who have applied," he said.
Johnson claimed that the FCS foreclosed on one Oklahoma farmer before the farmer even became delinquent on his loan.
"He applied for a restructuring. (FCS officials) said his plan failed. So they initiated a foreclosure on his farm," Johnson said.
Critics also claim that FCS officials have not offered farmers the right to repurchase land repossessed by FCS. The 1987 act requires system officials to give farmers who lost land in a foreclosure the first chance to buy it back.
In Louisville, Ky., FCS officials refused to sell land back to its previous owner, who had lined up investors willing to buy the farm, said Susan Bright, a farmer and activist from Richmond, Ind.
FCS, instead, sought out a higher bid, Bright charged. "They said they were trying to protect shareholders. To me, that's sort of a mafia tactic," she said.
Some critics cite instances of FCS officials being openly hostile toward farmers.
"The Farm Credit System assumes every borrower is going to be a swindler or cheater," said Christopher Kelley, a specialist in farm law at William Mitchell College of Law in St. Paul, Minn.
FCS officials said they are doing their best to help farmers.
The system's federal regulator, the Farm Credit Administration, will conduct examinations of system banks to ensure compliance with the 1987 law, said FCA Chairman Frank Naylor.
Don Theuninck, vice president of FCS's district office in St. Paul, said, "We have to balance the concerns of all of our members, not only the ones who are in trouble. We've gone the extra mile."
The problems of the cooperatively owned FCS were underlined by the May 20 failure of one part of the system, the Federal Land Bank in Jackson, Miss.
That bank, which lends money to farmers in a three-state region in the South, lost $44.3 million last year and $4.7 million a month since January.
Other Federal Land Banks are also in trouble. Banks in Louisville and St. Paul have been forced to seek financial help from the system. Agricultural sources say the land bank in Omaha, Neb., may also be having financial problems.
The system is coming under close scrutiny from other federal panels.