Block Offers Farmers New Emergency Aid; Key Groups Ask More

Agriculture Secretary John R. Block on Wednesday announced a new set of emergency measures to help debt-ridden farmers, but key banking and farming groups said that the assistance was not nearly enough and that they would go to Congress for more.

In disclosing the new steps, Block acknowledged that a farm credit package put into operation last fall has done little to ease an economic crisis that has gripped most of the rural Midwest and parts of California’s San Joaquin Valley.

However, the secretary asserted that the federal government can do only so much to help stricken farmers, and he called on state governments, rural banks and farmers’ creditors to lend a hand.

“Almost everyone concerned has an obligation to play a part in working for a solution,” Block said at a news conference.

90% Loan Guarantees

A key item of the plan will offer 90% federal guarantees of existing bank loans if bankers agree to reduce interest charges, helping farmers balance their income and expenses.

Banks, required last fall to “forgive” part of the loan principal to qualify for a loan guarantee, now will be given the option of marking down the loan’s interest rate instead.

Many small and middle-size farm operators live from harvest to harvest and borrow to finance spring planting operations. In recent years, farmers have faced low commodity prices and high interest rates, leading to excessive debt. Exacerbating the problem has been declining values of land, which often serves as collateral for farm loans.

Thomas H. Olson, a Nebraska banker heading a credit task force for the Independent Bankers Assn., said he doubts that banks will take advantage of Block’s new concession because “writing down” interest would eat too much into earnings--just as writing down principal would hurt banks’ capital assets too much, he said.

Olson noted that banks have used only $25 million of the $650 million authorized by Congress last fall for federal guarantees of agricultural loans. He said his group will push for legislation in Congress to create a $100-million loan subsidy program under which the government would finance a 2-percentage-point reduction in a loan’s interest rate, matched by banks marking down the interest rate by at least 2%.

Sen. Edward Zorinsky (D-Neb.), who has agreed to sponsor comprehensive relief legislation embracing the loan subsidy proposal, called Block’s measures “heavy on public relations gimmicks and short on the things needed to head off thousands of farm failures later this year.”

Congressional reaction was mixed, however. Sen. Mark Andrews (R-N.D.) applauded the Block plan as “good news for rural communities.” Andrews said Congress will act swiftly if the credit crunch worsens in the next two or three weeks.

Robert Denman of the National Farmers Union asserted that Block’s actions are not enough, but Thomas Datt of the more conservative American Farm Bureau Federation said they are about all the government can be expected to do.

Other measures announced by Block:

The Agriculture Department will set up a new program to guarantee loans for farmers who previously borrowed from banks that have failed. Block said many farmers have had difficulty getting new loans from banks that are not familiar with them.

The Treasury Department will try to restrain federal banking regulatory agencies from putting undue pressure on banks to crack down on farmers with delinquent loans.

Block will head a task force of federal farm credit agencies to coordinate assistance to financial institutions, communities and farmers.

The Agriculture Department will help operate “credit hot lines” in various states to provide financial information and advice to troubled farmers.