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

Trump seeks $52B increase in defense spending
Trump seeks $52B increase in defense spending

The Trump administration unveiled a $639.1 billion defense budget proposal Tuesday that it says is a step toward restoring military readiness levels that would boost the number of airmen in uniform. As part of the budget, however, the administration is asking for a new round of military base closures in 2021. RELATED: Trump budget calls for $3.6T in...
Tampa Bay mayor’s joke about shooting media, watch them ‘cry like little girls,’ falls flat
Tampa Bay mayor’s joke about shooting media, watch them ‘cry like little girls,’ falls flat

  A Florida mayor’s joke about firing blanks from a machine gun at the media has landed him in hot water.  Tampa Mayor Bob Buckhorn, who joked about pointing the gun at reporters as part of a military exercise, said he has told that same joke before but it didn’t get much criticism until he told it again at a Special Operations...
Police: Manhunt underway for killers who lured 2 people in Craigslist-type transaction
Police: Manhunt underway for killers who lured 2 people in Craigslist-type transaction

A multiagency manhunt is underway for the people who allegedly killed two men during a robbery in Georgia. Sheriff Joe Chapman said the two men were lured to Clegg Farm Road in Social Circle, Georgia, on Monday to be robbed. They ended up being shot. Tire marks can be seen where a truck veered off the road and crashed into the fence. Investigators...
Elderly man memorializes wife by continuing her blanket sewing charity
Elderly man memorializes wife by continuing her blanket sewing charity

An elderly man is keeping his wife’s memory alive by sewing blankets for those in need. “I just felt there was a need,” said Clayton Shelburne, 88, of Zionsville, Ind. “I enjoy doing it. If my wife was here, she would be happy I’m doing this too.” For 10 years, Clayton and his wife, Delores, spent their free time...
COMMENTARY: Trump ‘s warm welcome in Middle East is no surprise

“We just got back from the Middle East,” President Trump said to the president of Israel after his flight from Riyadh, Saudi Arabia, to Tel Aviv, which is also in the Middle East. As Trumpisms go, this one is easy to forgive, particularly given how exhausted the president must have been after a weekend of jet-lagged diplomacy, (non-alcoholic)...
More Stories