PDF _ RS21919 - Farm Credit Services of America?s Deal to Leave the Farm Credit System
24-Sep-2004; Jim Monke; 6 p.

Update: November 12, 2004

Abstract: In an unprecedented move, an institution of the Farm Credit System (FCS or System) ? a government-sponsored enterprise (GSE) ? has initiated procedures to terminate its status in the System and be purchased by a private company. On July 30, 2004, the board of directors of Farm Credit Services of America (FCSA) accepted an offer to be purchased by Rabobank for $600 million in borrower-owned stock, and a projected $800 million ¨exit fee¨ payable to the Farm Credit System Insurance Corporation. FCSA is the System lending association that serves farmers in Iowa, Nebraska, South Dakota, and Wyoming. Rabobank is a private banking company from the Netherlands with extensive lending experience in agriculture. The option to leave the System is allowed by statute under the Farm Credit Act of 1971, as amended, but has been exercised only once, and did not involve an outside purchaser.

The acquisition needs to be approved by the Farm Credit Administration, the federal regulator of the Farm Credit System, and by the farmer-borrower shareholders in the four-state region. If approved, the loans, facilities, and employees of FCSA would become part of Rabobank. New charters would need to be issued to allow new or existing FCS associations to begin lending in the four-state region. The approval process could be completed as early as the spring of 2005. Although Congress has no direct statutory role in the approval process, several members of Congress have stated that they will seek congressional hearings on the purchase, and its implications for System borrowers. This report will be updated as events warrant. [read report]

Topics: Agriculture

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