$36-Billion Deficit Found in Farm Loans

The Farmers Home Administration, which acts as lender of last resort to farmers, has run up a deficit of $36 billion and its condition has “seriously deteriorated” in recent years, a federal audit found today.

The General Accounting Office, in a report to Agriculture Secretary Richard E. Lyng, said the huge deficit raises the possibility the agency “will require direct assistance from the Congress at levels significantly greater than Congress has provided in the past.”

FmHA borrowed $12 billion from the Treasury in fiscal 1987 to meet its obligations. It owes $85 billion to the Treasury and $24 billion of it is due in 1989.

Target of Criticism

For the last several years, FmHA has been on the receiving end of criticism.

When the agricultural recession started, congressmen accused the Reagan Administration of cold-heartedly running the agency and intervened to help farmers. There was a storm of criticism in mid-November when FmHA sent delinquency notices to 83,000 borrowers who owe $8.3 billion in loans.

FmHA Administrator Vance Clark has said a large portion of the delinquent loans probably will have to be written off.

GAO auditors said FmHA’s financial condition has deteriorated because it lends money at low interest rates, “many of its borrowers are, by commercial standards, not credit worthy,” the farm recession sparked congressional efforts “aimed at keeping farmers in business, and . . . many of the loans are delinquent and unlikely to be repaid.”

Farm Financing Required

FmHA was created four decades ago and is required by law to provide financing to farmers who cannot obtain credit elsewhere. It operates in a number of other areas, including housing loans.