White House Offers New Proposals on Farm Debt

The Reagan Administration took new proposals to Capitol Hill late Thursday in response to mounting pressure to take immediate action to ease the farm debt crisis.

Agriculture Secretary John R. Block and Budget Director David A. Stockman met for about two hours with 17 senators and offered a farm credit package. The senators said after the meeting that the Administration must make further refinements.

Block and Stockman spent two hours with congressmen and apparently did not win approval. Block left saying “there were no absolute, firm guarantees” and Stockman said “we were simply discussing the options available.” Stockman said credit aid was not offered in exchange for support on farm program cuts. Rep. Edward R. Madigan (R-Ill.) said there were suggestions of a linkage.

“It (the plan) was not well received by members of our committee,” said Madigan, the lead Republican on the House Agriculture Committee. “If you asked me if the Administration proposal has the support (of congressmen), the answer clearly is no.”

Block and Stockman did not say whether there would be action anyway on farm credit, Madigan said. Rep. Cooper Evans (R-Iowa) said: “There might be.”

Madigan also said that he believed that commercial banks “could be more forthcoming than they are at this point” on farm credit.

Senate Agriculture Committee Chairman Jesse Helms (R-N.C.) said after meeting with Block and Stockman that senators were “pretty well satisfied” with the package.

Sen. Charles E. Grassley (R-Iowa), who has been leading the charge for strengthening the farm debt relief program, said the package would permit banks to write down interest rates on farm loans to qualify for 90% federal guarantees of the loans.

Under an under-utilized farm debt relief effort announced by President Reagan last fall, banks must write down principal to qualify for federal guarantees. Only $25 million out of $650 million has been used, with banks balking because writing off principal could jeopardize their assets that are closely monitored by federal regulators.

Grassley also said the effort would call for special teams to handle emergency loan guarantees and credit hot lines.

The package also calls for bank regulators to let up pressure on banks that has led to increased foreclosures.

Senators said the Treasury Department is working with the Federal Reserve Board, the Federal Deposit Insurance Corp. and the Comptroller of the Currency to fashion a policy on loan foreclosures.

“They have come a long way to answer our concerns but they also want a commitment to accept their farm program,” Grassley said.

Sen. Mark Andrews (R-N.D.) said that senators asked for refinements on the plan and that Administration attempts to trade a farm credit package for support of Administration farm bill proposals quickly fell apart. The farm bill proposals to be announced next week call for lower price supports and phasing down government involvement in agriculture.

Andrews said the credit proposals showed that the Administration understands the emergency and is serious about devising a response.

“They got an earful of necessity,” he said.

Also at the meeting were presidents of farm bureaus of several states.

The Capitol Hill meetings came after a crescendo of pressure from lawmakers and farmers who said something had to be done in 30 to 60 days, before farm loans come due March 1 and farmers must borrow funds before spring planting.

President Reagan got directly involved this week as the issue was considered at a Cabinet meeting, and it was discussed at other Cabinet-level meetings.

The farm debt crisis stems from low farm income, high interest rates and falling values of land that serves as collateral for farm debt.