We believe that the current limits on operating loans are realistic, and should be preserved. Without a doubling of the total amount of operating loan money available, we fear that increased loan levels will enable a small number of larger borrowers to exhaust the supply of available operating money. If the current loan level is preserved, a greater number of farmers will be served by these additional funds.

Current ceilings on FmHA farm operating loans are appropriate to serve the Agency's traditional clientele of family farm borrowers. Without this limit on loan levels, FmHA risks becoming a lender for oversized, over-extended borrowers who may not necessarily benefit from additional operating capital. RAF/NSF believes that FmHA's original public purpose to serve the nation's family-sized farmers can best be met by preserving the current limits on FmHA's farm operating loans.

ECONOMIC EMERGENCY LOAN PROGRAM

H.R. 1190 proposes to re-activate the Economic Emergency
While we recognize the need for additional

loan program.

credit in the farm sector, we question the distribution of funds through the Economic Emergency (EE) loan program.

In the past, the EE loan program has not included a family farm size requirement, nor has it placed a ceiling on the total amount of EE funds which could be loaned by an individual borrower. As a result, FmHA opened its doors to larger than family-size farm borrowers. In many cases, EE loans have gone to farms that far exceed the size necessary to achieve full efficiency. FmHA data shows that 40.9% of the EE loan money went to farms that exceed $100,000 in gross farm sales. A 1981 USDA report on FmHA lending priorities concludes, "Economic analyses reveal neither gains in economic efficiency to farmers nor lower food costs for consumers from making subsidized loans to the larger farms."

We recommend that the Economic Emergency program be re-activated with a family-size farm requirement and a loan ceiling of $100,000.

Thank you for your consideration of these issues.

Statement by Representative Bill Alexander House Agriculture Committee, Subcommittee Conservation and Credit February 14, 1983

Mr. Chairman:

I am pleased to be able to present this testimony regarding the emergency situation facing farmers in my district who may be unable to secure adequate agricultural credit in 1983.

I do not need to repeat the sequence of disasterous events
which have brought us to the current crisis. I have done so
on other occasions and so have many in this body. We are
beginning the fourth year of the agricultural depression in
my district and many of my producers are near the end of
their rope.
We must throw them a lifeline that will prevent

their permanent exodus from agriculture!

needs of

In order to receive direct grass roots assistance in
proposing workable solutions tailored to meet the
my constituents, I have appointed several citizens'
advisory committees during the past two months. The first
one of those was a farm credit advisory committee composed
of farmers, agribusinessmen and bankers familiar with the
agricultural credit situation in the First Congressional
District of Arkansas.

The committee met in late January under the chairmanship of
Mr. Ed. Cherry of Jonesboro, Arkansas. Mr.Cherry is an
active farmer, businessman and former state director of the
Farmer's Home Administration in Arkansas. The committee
reported to me that between 15 percent and 25 percent of the
farmers in my district may ultimately be denied credit
this year due to the inadequacy of their equity and
collateral or the lack of positive cash flow projections due
to depressed farm prices.

This staggering figure includes those facing possible credit denial by banks and other commercial lenders, the production credit associations, and the Farmer's Home Administration.

I asked the Advisory Committee to come up with recommendations on how best to keep productive and

successful farmers in business despite the dreadful economic climate of today.

The Committee was unanimous in the view that todays farm depression can be laid at the feet of government and that it is the obligation of the government to provide relief. Political manipulation of export markets, grain embargoes, disastrous fiscal and monetary policies and deliberate

cheap food policies by the government were identified as major causes of their dilemma by the Committee members. They were unanimous in the view that farmers were the victims of these misguided policies and that they could not continue in business under these conditions.

For those facing denial of credit by their lenders, the decision to liquidate farming operations will be made for them unless Congress acts to provide relief. Those decisions are being made in my district each day and every day brings new telephone calls and letters to my office pleading for assistance and relief.

The Committee also reported to me that they no longer believe the Farmer's Home Administration is adequate to effectively handle its existing workload and still provide any meaningful assistance to new borrowers denied credit by other lenders. In other words, even though FmHA remains the "lender of last resort," it is unrealistic to expect that the agency can absorb large numbers of new borrowers. FmHA County supervisors simply do not have the time nor the capability to service a greatly expanded loan portfolio. There is plenty of evidence in my district that they have more to cope with now than is realistically possible.

Furthermore, the Administration has not provided any assurances that it will extend credit to a new class of borrowers. Therefore, those denied credit by private and commercial lenders are finding themselves caught between the public and private systems of credit with nowhere to go.

There is a solution to this dilemma which I believe we can

provide through a legislative remedy. It would provide a temporary bridge between the public and private credit systems, using the existing authority of the FMHA to provide loan guarantees in cases where producers would otherwise be denied adequate credit by commercial lenders.

The solution advanced by the farm credit advisory committee in my district can be found in title I of H. R. 1311, a bill I introduced on February 8. This bill authorizes the Secretary of Agriculture to contract with the Farm Credit System to provide administrative assistance in implementing loan guarantees which are already in existing law.

The Farm Credit system, through the local production credit associations and federal land banks, has offices representing every farming community in America.

They are efficient and effective in the delivery of credit service to their borrowers.

The bill specifies that the Secretary shall enter into

agreements to provide loan guarantees when a farmer is unable to immediatly make payments_on his indebtedness due to circumstances beyond his control. If he is facing foreclosure due to an inability to obtain credit or credit refinancing, the guaranteed loan authority specified in the consolidated Farm and Rural Development Act (USC 1942 (a)) would be made available as a means of keeping the farmer in business.

The bill also provides that there will be a deferral of payments of principal and interest until September 30, 1984. At that time, it would be the intent of this legislation to provide refinancing and repayment terms consistent with the financial situation of the farmer.

The unique aspect of this legislation is that the Farmers Home Administration could call upon the assistance of the Farm Credit System to make these guarantees available in those areas where the FmHA offices have reached their maximum effective workload. The costs of doing so could be built into the loan guarantee and no more than 90 percent of the principal and interest would be guaranteed by this procedure, as in the existing law.

Finally, I urge the subcommittee to act quickly on the reauthorization of Farmers Home Administration legislation. The provision in last years FmHA reauthorizatin bill which prohibits foreclosure of FHA loans is found in title II of H.R. 1311. I urge that the House act with dispatch on this proposal to prevent the termination and foreclosure of large numbers of farmers across the country.

It is my view and that of most farmers in my Congressional District that emergency farm credit legislation must be put on a "fast track" if we are to prevent the liquidation of thousands of farm operations, particularly in the Southern States. Those farmers are the victims of a farm depression made in large part in Washington, D.C. and they are looking to us for relief.