You have reached your limit of free articles this month.

Enjoy unlimited access to SpringfieldNewsSun.com

Starting at just 99¢ for 8 weeks.

GREAT REASONS TO SUBSCRIBE TODAY!

  • IN-DEPTH REPORTING
  • INTERACTIVE STORYTELLING
  • NEW TOPICS & COVERAGE
  • ePAPER
X

You have read of premium articles.

Get unlimited access to all of our breaking news, in-depth coverage and interactive features. Starting at just 99c for 8 weeks.

X

Welcome to SpringfieldNewsSun.com

Your source for Clark and Champaign counties’ hometown news. All readers have free access to a limited number of stories every month.

If you are a News-Sun subscriber, please take a moment to login for unlimited access.

Commentary: Big salaries, big loans, big questions


If you want to get the attention of the $240-billion Farm Credit System (FCS), just mention the $725-million loan CoBank, a System lender, made to Verizon in 2013 to help finance Verizon’s $130-billion buyout of Vodafone, a European telecommunications giant.

The far-from-the-farm loan incensed commercial bankers, the System’s largest competitors, who howled to Congress about CoBank’s outrageous “mission creep.” It was, said one, a “clear breach of FCS lending authority and misuse of the taxpayer-backed GSE’s” — government sponsored enterprise — “implicit subsidies.”

Congress, caught napping, held a few scolding hearings and then went back to sleep. The FCS’s watchdog, the Farm Credit Administration, who approved the loan, promised to reexamine it. Right.

Bosses at the System’s 80-or-so lending associations around the U.S., however, saw the inaction as a green light to grow more, merge more, and make even more questionable loans.

One of those mergers — that of AgStar Financial Services, a FCS lender in Minnesota and Wisconsin, with two other FCS lenders, Badgerland Financial and 1st Farm Credit Services — was reviewed here two weeks ago.

In that review, it was noted that the merged lender, to be called Compeer Financial, would be an $18.5-billion loan juggernaut from east of St. Louis to north of St. Paul. Also noted was that there was no compelling reason for the merger; bigness and the ability for “CEOs to pay themselves much bigger salaries” seemed to be the two fuels propelling the deal.

Last week, the associations sent financial documents to their borrower-clients explaining the pending deal. The detailed documents confirm that assessment: bigness and big salaries are indeed driving the deal.

(In a hasty vote, signed mail-in ballots are due April 6. To pass, the deal must be approved by a majority of voters in each association.)

For example, the total cost of the merger, estimated between $10.5 and $18 million, is nearly equal to its largest one-time savings, an estimated $12.1 to $18.6 million based on the elimination of just 55 of Compeer’s collective 1,200 jobs.

More interestingly, the analysis shows AgStar’s balance sheet getting a small boost from the better-capitalized Badgerland and 1st Farm Credit. It also suggests AgStar’s borrowers pay higher interest rates than borrowers of the other two lenders.

Do these differences mean Badgerland and 1St Farm Credit borrowers are in for an interest rate surprise after the merger? The disclosure documents don’t say.

They do show AgStar, the biggest lender of the three, as the force behind the deal: Six of Compeer’s 10 senior managers will be AgStar alums and former AgStar members will occupy at least six, possibly seven, seats on Compeer’s 17-member board.

That also means AgStar’s lending subsidiaries—two of which are called Agri-Access and Capital Markets — will likely continue to write loans both inside and outside their System designated areas.

For example, explains AgStar’s website, Agri-Access “focuses primarily on purchasing participations in agricultural real estate loans, rural home loans and leases on a wholesale basis” from offices in Iowa, California, and Idaho.

That nationwide push infuriates commercial ag lenders who see System subsidiaries like Agri-Access as unregulated competitors that undercut local and regional banks because System lenders can access credit markets more cheaply through their quasi-government, or GSE, status.

That GSE advantage, combined with creative rule-bending and ballooning size, allowed AgStar to report that 46 percent of its 2015 “loan volume” originated outside its System-defined Minnesota-Wisconsin area.

Commercial banks point to numbers like that to confirm the System has pushed its presence far beyond anything envisioned by Congress. They say Congress should either update the System’s charter to allow such moves or enforce current rules to better regulate the System.

No one at any legislative level seems willing to do either. As such, System lenders continue to grow, merge, and make whale-sized loans like the Verizon one.

Unless, of course, the farm, ranch, and rural owners of the Farm Credit System begin to question their hired hands about all the rule-stretching loans and million-dollar salaries.



Reader Comments ...


Next Up in Community News

Woman lashes out about Confederate flag on man's 'Dukes of Hazzard' car
Woman lashes out about Confederate flag on man's 'Dukes of Hazzard' car

Activist Ybia Anderson confronted the unnamed owner of a replica General Lee muscle car at a heritage festival last Saturday and the resulting video has gone viral. Anderson, who is black, began videoing the car, a 1969 Dodge Charger similar to the one featured on the television show "The Dukes of Hazzard" as it was “front...
Missing NC teen found safe in Georgia more than a year after she vanished
Missing NC teen found safe in Georgia more than a year after she vanished

A missing North Carolina teenager, who vanished last year, has turned up at a home in Georgia. Hailey Burns, now 17, has been reunited with her family at an undisclosed location in Georgia, according to law enforcement sources. A FBI special agent in Charlotte learned of information that led investigators to a home in Duluth, Georgia, where they found...
Georgia women’s college trying to atone for Ku Klux Klan legacy
Georgia women’s college trying to atone for Ku Klux Klan legacy

Like other first year students corralled in Wesleyan College’s auditorium in Macon, Georgia, Dana Amihere didn’t know what to make of the spectacle unfolding on stage. It was fall 2006 and the freshman had been awakened in the dead of night. A group of sophomores stood on stage yelling, screaming and cheering as part of a hazing ritual...
Janet Jackson loving motherhood as she gets back into her music, producer says
Janet Jackson loving motherhood as she gets back into her music, producer says

Janet Jackson welcomed her very first child, son Eissa, in January and is having a great time being a mom! “She’s so happy,” her longtime producer, Jimmy Jam, told Entertainment Tonight. “I get FaceTime [calls] at like two in the morning, usually when I’m wrapping up in the studio. It’s always just Isa [on FaceTime]...
Gov. John Kasich’s website hacked
Gov. John Kasich’s website hacked

Ohio Gov. John Kasich’s website was hacked today by a grouip claiming to support the Islamic State. The Ohio Department of Corrections and Rehabilitation was also hacked. A screen appeared saying: “Anti: Govt all word. You will be held accountable Trump, you and all your people. For every drop of blood flowing in Muslim countries. I love...
More Stories