Legislators Try to Ease Farm Credit Crunch

More than 50 legislative leaders from 12 Midwestern states met here Saturday to search for formulas to ease the region’s rapidly mounting farm crisis and to seek a federal bail-out of financially ailing farmers.

“It’s not a case of ‘the sky is falling,’ ” said Democrat Lowell Junkins, majority leader of the Iowa Senate. “The sky has fallen.”

“We’re sitting on a tinderbox,” said Minnesota Sen. Charles A. Berg, a Republican.

The daylong, hastily convened bipartisan meeting focused on immediate ways to ease a credit crunch that could leave tens of thousands of farmers unable to borrow money next month to plant their spring crops. If that happens, economists fear there will be a wave of farm sales and foreclosures before summer.

12,000 May Not Get Credit

In Iowa alone, where the problem is most severe, 12,000 farmers are unlikely to get credit next month, said Don Avenson, the Democratic House Speaker. “We’re now starting to see a body count among farmers,” he said.

Farmers are facing a credit crisis because most who borrow use their land as collateral, and land values throughout the region have dropped sharply in the wake of chronically low grain prices, falling export demand and persistently high interest rates. As a result, said Iowa State University economist Neil E. Harl, 42.5% of all Midwestern farmers have debt-to-asset ratios that are causing them extreme financial stress.

Nationally, Harl said, “the financial position of roughly one-half of the farmers is deteriorating.”

“This is the most serious economic crisis in agriculture in a half century and it is affecting more than farmers,” Harl said. “It is a rural community problem.”

To prevent a collapse, the legislators adopted a range of resolutions calling on the federal government to provide up to $3 billion in emergency loan guarantees and interest subsidies. They agreed to ask Congress to “seriously consider” a four-year, $10-billion program to lower farm interest rates.

Some of the proposals called for aid to be provided in a joint state-federal partnership with the U.S. government carrying the lion’s share of the costs.

However, the proposals come at a time when the Reagan Administration is submitting a 1986 fiscal year budget that recommends the sharpest reductions in aid to farmers in half a century.

“I can remember when the U.S. government bailed out (Chicago’s) Continental Bank, Chrysler and New York City,” said Iowa Assemblyman Dale M. Cochran, chairman of the Assembly Agriculture Committee. “But when you look at agriculture, what is happening could have more of an impact on the national economy than (the failure) of any of those. Farmer bankruptcies are causing business to close and literally wiping out small towns.”

Traditionally Conservative

There was also some startling discussion from this group of politicians representing the traditionally conservative Farm Belt. For example:

--Wisconsin House Speaker Thomas A. Loftus proposed a total freeze on federal spending, including a freeze on military spending. “Why should the Pentagon get $700 screwdrivers and the farmers get screwed?” he asked.

--Iowa’s Junkins suggested that legislators “get out the old camping gear . . . and camp on the White House lawn,” in protest later this month when the nation’s legislative leaders hold a scheduled meeting in Washington.

--South Dakota Sen. George Shanard suggested seeking a 1-cent federal sales tax for six months to raise money for agricultural credit.

“It’s a radical approach, but we must help ourselves some way,” Shanard said.

In addition to Iowa, Minnesota, South Dakota and Wisconsin, the states that took part in the conference were Illinois, Nebraska, North Dakota, Michigan, Kansas, Missouri and Indiana.