014-Umcaster Farming Saturday, July 20,1985
Farm Credit System establishes
central headquarters operation
DENVER, CO. - The Farm
Credit System, the nation’s largest
agricultural lending organization,
has formed a central headquarters
corporation that will help it ef
fectively manage problems
resulting from the continuing
financial stress being experienced
by the U.S. agricultural industry.
The new corporation, called the
Farm Credit Corporation of
America, is headquartered in
Denver, Colorado. Alton B. Cook,
formerly president of the Federal
Intermediate Credit Bank of
Louisville, and prior to that, the
FICB of Wichita, has been ap
pointed as interim CEO of the new
corporation. Recruitment for a
permanent CEO currently is un
derway.
“The creation of a corporate
headquarters for the Farm Credit
System is not simply a response to
the recent serious financial
problems in U.S. agriculture,”
Cook said. “The need for central
direction and decision-making for
the system was identified in a
major strategic planning study
that began in the fall of 1983.
“However,” he added, “the
worsening condition of the nation’s
agricultural economy and the
resulting impact on many of our
banks and associations did in
fluence the decision to create a
central policy and decision-making
mechanism as soon as possible.”
The charter for the Farm Credit
Corporation of America was of
ficially issued by the Farm Credit
Administration, the independent
federal agency which oversees the
operations of the Farm Credit
System.
In issuing the corporation’s
charter, FCA Governor Donald E.
Wilkinson said, “In chartering this
corporation, I see it as enabling the
Farm Credit System to begin to
function as a full-fledged member
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of the financial community. It will
allow the system to analyze
problems of the environment in
which it functions and
professionally and rapidly
evaluate options, select plans of
action and initiate the changes
necessary to permit the in
stitutions of the system to function
as true business entities.”
The Farm Credit Corporation
will serve as the central policy
making institution for the
nationwide cooperative lending
system and will carry out a self
regulatory function.
Cook emphasized that the new
corporation does not represent any
change in the system’s cooperative
principles in directorship and
control by farmer-stockholders.
“If anything,” Cook said, “the
Farm Credit Corporation provides
for stronger control by the
system’s stockholders.”
Cook explained that local and
district representation remains
unchanged with borrower
stockholders electing boards of
directors at the local association
and district bank levels.
“Now, however,” Cook said,
“each of the 12 Farm Credit
districts will elect one of its board
members to the board of the Farm
Credit Corporation of America. As
a result, each district will have a
direct voice in how the entire Farm
Credit System operates. Districts
have not had this kind of
representation and influence
before.”
The Farm Credit Corporation
will develop standardized policies,
set and enforce financial, credit
and financial reporting standards,
and oversee system capital
management including the ad
ministration of loss-sharing
agreements among the Farm
Credit banks.
The new corporation also will
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serve as the central spokesman to
present system views and
positions, and oversee appropriate
financial disclosure, to federal and
state legislators, regulatory and
other government officials, in
vestors and the public.
“One of our highest priorities is
the development and monitoring of
systemwide financial and credit
standards,” Cook said. “We
started working in this area even
before the Farm Credit Cor
poration was chartered. This is an
important step toward effectively
managing the problems that the
financial stress in agriculture
currently is causing some of em
banks,” he said.
The formation of the Farm
Credit Corporation of America
represents a major change in the
system’s structure and operations.
Cook noted that each of the 12
Farm Credit districts contains a
Federal Land Bank, a Federal
Intermediate Credit Bank and a
Bank for Cooperatives. There is
also a Central Bank for
Cooperatives located in Denver.
“Traditionally,” Cook said, “the
districts, and the three bank
systems, operated more or less
independently. Because of the
changes occurring in agriculture,
it’s important that we now operate
as a single, nationwide system.
This means common objectives, a
unified planning process and
uniform standards in finance and
credity.”
Cook admitted that the Farm
Credit System recently has gotten
criticism from the press, from
legislators, and in some cases from
its stockholders.
“Some of that criticism is due
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The Farm Credit System
either to misinformation, or a lack
of information, but some of it is
well informed,” Cook said.
“In general,” Cook said, “we
have not communicated as well as
we would have liked. This is partly
because we haven’t had any in
stitution that could make decisions
for the system or that could speak
for the system as a whole. Now we
do, through the Farm Credit
Corporation of America.”
Cook noted that all sectors of the
agriculture industry currently are
experiencing stress. But, he said,
lenders are especially vulnerable
because of agriculture’s current
dual problem in liquidity and
equity.
“Both commercial banks and
Farm Credit System institutions
are being affected by the
simultaneous problems of lack of
cash flow and declining land
values,” Cook said.
Cook explained that in the past
agriculture rarely has had to deal
with these two issues at the same
time. Usually, asset values in
creased enough to offset concerns
about cash flow. Now, however,
the recent declines in land values
have dramatically changed
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agriculture’s financial condition.
“liquidity problems are now
compounded by the erosion of
equity,” Cook said. “Both
problems affect debt repayment
capacity.
“We think the Farm Credit
System can deal effectively with
this situation as a unified
organization,” Cook said. “It’s
going to take several years before
things are back on an even keel.
But we feel we have the resources -
human and financial - to do it.
“Agriculture is undergoing, not
just a period of severe stress, but a
major restructuring as well,” Cook
said. “The key to success and
survival in agriculture - for far
mers, for agribusinesses and for
lenders - will continue to be an
ability to withstand and manage
risk in an increasingly high-risk
business.”
Cook views the Farm Credit
Corporation of America as the
system’s key to effectively
managing risk.
“If the Farm Credit System is
able to manage risk better, so will
the farmers, ranchers and
cooperatives who are its borrowers
and stockholders,” Cook said.
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Credit
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