For Immediate Release  #01-27

ICBA Applauds Treasury's FCA National Charter Letter

Washington, D.C. (May 7, 2001)—The U.S. Department of the Treasury has now weighed in against a controversial proposed regulation by the Farm Credit Administration to grant all interested Farm Credit System institutions nationwide lending charters. “The Treasury’s letter makes several forceful points against national charters that ICBA has been raising for many months. FCA’s proposal is inappropriate for a government sponsored enterprise and would dramatically change the structure and focus of the FCS. We hope the FCA will heed this wise advice and withdraw its national charter proposal,” stated ICBA Chairman Bob Gulledge, the chairman, president and CEO of Citizens' Bank Inc., Robertsdale, Ala.

“We continue to have concerns and recommend that the FCA withdraw this proposal,” a Treasury official wrote May 2. Contrary to FCA’s assertions that the proposal would reduce safety-and-soundness risks, Treasury wrote, “In a cooperative network of lending associations that are jointly and severally liable for each other’s debts, encouraging intra-system competition might be counterproductive to safety and soundness.”

The Treasury's three-page letter, submitted as part of the public comment process, also pointed out that national charters may benefit the largest farmers while adversely affecting other farmers. “National charters may indeed be beneficial to the largest, most financially sound System members—and may be a boon to the most aggressive and expansion-minded associations—while leading to the disenfranchisement of other borrowers served by the system today.”

Treasury officials also questioned whether national charters are an appropriate proposal by the FCA noting that FCS institutions should exist to overcome a market failure in credit availability to agriculture. “We believe there are strong arguments against this policy. . . . The system is a GSE, operating with a federal charter, a federal mission and federal subsidies . . . given the system’s unique role as a GSE in agricultural credit markets, at its core, the national charter issue raises questions about the system’s future role in agricultural credit markets."

"These are critical questions, but questions that should not be answered by the FCA alone,” the Treasury Department concluded.

ICBA is the primary voice for the nation’s community banks, representing 5,000 institutions at nearly 17,000 locations nationwide.  Community banks are independently owned and operated and are characterized by attention to customer service, lower fees and small business, agricultural and consumer lending.  ICBA's members hold more than $486 billion in insured deposits, $592 billion in assets and more than $355 billion in loans for consumers, small businesses and farms. They employ nearly 239,000 citizens in the communities they serve. For more information, visit www.icba.org.

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