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Saturday, February 22, 1997

Bankers, congressmen plead for better federal farm loan plan

By MARK BABINECK Associated Press Writer

LUBBOCK, Texas (AP) - West Texas congressmen and a panel of bankers on Friday implored the Farm Service Agency to improve and streamline the way it handles agricultural loans.

Speakers at the field hearing, bemoaned the cumbersome paperwork and red tape that accompany the guaranteed FSA loans worth $16.9 billion.

At one point chairman U.S. Rep. Larry Combest (R-Lubbock) compared a comprehensive loan taken out on a multi-faceted farm and ranch against a simple cotton farm loan made through the FSA's guaranteed program. The regular bank loan was about 2-inches thick, while FSA paperwork bulged the guaranteed loan to 6-inches.

"I'm going to use it for wallpaper on my new house someday," said Mike Mauldin, president of Security Bank in Idalou, Texas, who provided Combest's props.

"It must be a big house," replied Combest.

Mauldin, representing the Texas Bankers Association, complained that redundant and complicated applications, slow the process. He said unwillingness by FSA officials to back defaulted guaranteed loans also has hamstrung the process.

"The claim process is unreliable, unpredictable and excessively lengthy," Mauldin said. "The program is worthless if you can't get a claim paid timely."

Spearman banker Don Townsen said he's made one claim on a defaulted guaranteed loan. That claim has taken two years and still hasn't been settled, he said.

Harold Bob Bennett, Texas' FSA director, said that the October 1995 reorganization that created the agency still is taking its toll on efficiency. He said improved service is a priority this year.

Of the $16.9 billion in national FSA loans last year, $10.5 billion was money lent directly to producers from the U.S. Agriculture Department. Of that amount, $3.6 billion is delinquent, or 34 percent.

The FSA also guaranteed up to 90 percent of another $6.4 billion in loans from private institutions. Of that amount, $280 million, or 4.4 percent, is delinquent.

The bankers suggested that the FSA mimic some of the Small Business Administration's reforms of the 1980s. The SBA shifted from a lending entity to an underwriter with oversight responsibilities, improving efficiencies for lenders and borrowers.

Combest agreed that the FSA might be better suited to supervising banks who make guaranteed loans rather than micromanaging every farmer's application. He added that the proper safeguards must be installed to protect the taxpayers' money that backs all guaranteed loans.

"We must make certain that the penalty for a bank that violates (FSA lending rules) is so severe that it's something they can't afford to do," Combest said.

Charles Stenholm (D-Stamford) added that balancing lender autonomy with governmental oversight has proved to be an "elusive goal."

Discussion also centered on a provision in the 1996 Farm Bill that restricted about 70,000 producers who have received debt forgiveness in the past from getting federal credit.

Jim Radintz, director for the FSA's loan making division, suggested that debtors who have received write-downs or other forgiveness should be subject to something less than the current lifetime exclusion.

"We're proposing basically to allow people to come back after some period of time has passed," Radintz said of a legislative proposal the FSA intends to submit to Congress. "Basically, that allows whatever the cause of the problem was to have had a chance to be worked out." Send a Letter to the Editor about This Story | Start or Join A Discussion about This Story
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