Senate Panel OKs Farm Credit Program

A Senate Agriculture subcommittee tentatively adopted a measure Wednesday to create a vehicle to raise more funds for farm lending by pooling and selling farm mortgages as securities.

The Senate panel debated structural issues surrounding the secondary market, which would be known as Farmer Mac, and left some of the issues unresolved until it resumes deliberations in another week. But senators ignored a fight over regulation in the securities that has erupted in the House.

In other action, the panel adopted a provision to encourage state programs to mediate between lenders and financially troubled farmers to try to prevent farm foreclosures.

The provision would authorize $15 million a year for two years to pay half the cost of state mediation programs, with a limit of $750,000 a year per state.

The farm credit provisions were part of a larger credit measure that would bail out the farmer-owned Farm Credit System, which lost $4.6 billion over the past two years.

The legislation would authorize sale of up to $4 billion worth of bonds to shore up the FCS, with interest payments paid fully by taxpayers in the first five years, shared by taxpayers and the system in the second five years and paid by the system in the third five years.

The House is scheduled Monday to take up its version of the farm credit legislation, which would authorize a bailout without specifying how much money is needed or how it would be raised.

The House, however, was embroiled in a controversy over its version of the farm mortgage securities.

Chairman John D. Dingell (D-Mich.) of the House Energy and Commerce Committee, charged that the secondary market language lacks sufficient regulatory safeguards and sought to delete the language from the bill.

Efforts to negotiate tighter language with the House Agriculture Committee to avoid a floor fight appeared to have failed.

“The (Agriculture) committee will hold to its position,” said one staff official.

The Senate panel’s mediation language would offer federal aid to existing state programs for two years. All new programs and, after two years, existing programs would have to adhere to basic federal guidelines such as the suspension of foreclosures while mediation occurs.

Currently, mandatory farm mediation programs are in place in Iowa, Minnesota, Colorado, California and Illinois.

Voluntary programs are in place in Wyoming, Mississippi, Kansas, Oklahoma, Nebraska, Missouri, Indiana, New York, North Dakota and South Dakota.