Congressional panel says state of ag loans unclear

GREELEY – Following its July 7 field hearing in Greeley, the Congressional Oversight Panel concluded that more information is needed on the state of agricultural loan performance.

The COP has been charged with examining various aspects of the Troubled Asset Relief Program. The most recent report, released on Tuesday, focuses on the need and mechanisms for farm loan restructuring. The panel concluded that while the agricultural industry has taken a hit, it seems to be outperforming most of the overall economy. The report points out that while U.S. Department of Agriculture projects that net farm income will decrease by 20 percent this year, it remains above a running 10-year average.

The report also states that the need for a specific farm loan restructuring program is not clear due to “a lack of definitive data on trends in farm loan restructurings and farm foreclosures.”

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The COP recommends that Congress, banking regulators and the Farm Credit System collect and analyze such data in order to identify continued downward trends. If such trends were identified, the panel reports that a farm loan restructuring mandate could be put in place for TARP recipients, a separate program could be formed under TARP or existing agricultural assistance programs could be more widely used.

The panel recognized that New Frontier Bank’s April failure had a major impact on credit availability locally but questioned whether such an event would occur if other ag lenders around the country had a similar fate.

“… reports of possibly lax lending standards raise questions as to whether analogous localized credit contractions would result if other farm banks become insolvent,” the report read.

For more information on the panel and TARP, see this story from the July 17 issue of the Business Report.