Statement of Administration Policy: H.R. 4906 - Agricultural Credit Improvement Act

(SENT 7/28/92)
(House)
(English (D) OK and six others)

The Administration has no objection to House passage of H.R. 4906, but will seek amendments in the Senate. These amendments would:

—   Delete the provision that eliminates existing authority for a Farm Credit System (FCS) Insurance Corporation boardmember to serve as a non-voting member on the board of the FCS Funding Corporation. Such representation helps to ensure (1) timely repayment of certain FCS debt obligations guaranteed by the U.S. Treasury, and (2) continued sound FCS asset/liability management.

—   Delete the provision that allows the FCS to guarantee tax- exempt debt obligations. This guarantee would indirectly constitute a double subsidy from the Federal government to the tax-exempt issuer. One subsidy arises from exempting interest from taxation. A further subsidy comes from the lower interest rate afforded by the FCS guarantee.

—   Delete the provision that waives fees for unsubsidized loan guarantees by the Farmers Home Administration (FmHA). These standard FmHA fees are consistent with sound business practice.

—   Reduce the time period for loan eligibility. The bill limits direct loan eligibility to 10 years and guaranteed loan eligibility to 15 years. The Administration believes 7 and 10 years, respectively, would provide the necessary assistance while keeping with FmHA's mandate as the "temporary lender of last resort."

—   Retain flexibility to match the level of financial assistance to borrower needs. The bill sets the amount of interest subsidy for farm operating direct loans and subsidized guarantees equal to the limited resource rate on direct loans (currently 5%). This would not allow intermediate levels of assistance. Flexibility would make the program more effective and less costly.