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Farming and your Freedom - Rabobank or not to Rabobank, that is the question
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By: Pete Graham
| 10/14/2004 |
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During the first presidential debate, Sept. 30, there was brief discussion of "outsourcing" when Democratic candidate John Kerry said President Bush had "outsourced" the fight against Osama Bin Laden in Afghanistan. Outsourcing of another type has riled up the farming community recently.
The case in hand is the proposed sale of Omaha, Neb.-based Farm Credit Services of America (FCSA) to the Dutch banking firm, Rabobank. No, not ROboCOP! The sleeping giant that is the entirety of the Farm Credit System has been awakened by the shocking and controversial announcement. Opinions abound. Several other would-be sleeping giants have also awakened. They are South Dakota Senators Tom Daschle and Tim Johnson, and Iowa State University Economist Neil Harl. The broth is thickening!
The proposed sale goes beyond the nuts and bolts of one firm selling to another. The future of the farm credit system is a stake. At least, that's what the Illinois Farm Bureau and a coalition of farmers thinks. They oppose the sale. In addition, good old free enterprise has reared its ugly head: AgStar Financial Services, Mankato, Minn. has offered a second bid for the Omaha bank. If it is successful the bank would remain in the farm credit system. If Rabobank wins, the assets will, as they say, go away.
Rabobank and the FCSA agreed to terms of the sale in late July, but the change does not take place until the bureaucrats at the Farm Credit System and the firm's stockholders sign off on it. That leaves room for outside parties to jockey for position.
If the FCSA is allowed to opt out of the system by paying $600 million in hard-working farmers' money to stockholders and $800 million as a charge for exiting the system, it could fundamentally change the complexion of the system and leave many questions about its efficacy. It would, at least, put an $800 million goody in the farm credit system insurance fund.
Economist Harl weighed in on the sale in Farm News by saying, "If this sale goes unchallenged, it may have a ripple effect on the farm credit system. At stake is whether the farm credit system survives." That sentiment is echoed by the politicians and apparently by the Illinois Farm Bureau which has urged Congress to support legislation that would close a provision allowing Farm Credit banks to sell outside the system. A coalition of farmers within the FCSA area has formed to oppose the sale, as well.
Complicating the picture, but perhaps offering a way out for stockholders of the FCSA is the bid by AgStar. That proposal would pay them $650 million to stay in the system and stockholders would receive an annual dividend from the merged company. AgStar has 12,000 stockholders in Minnesota and Wisconsin, and FCSA has 51,000 in Iowa, Nebraska, South Dakota and Wyoming. The merged company would be a big deal!
The AgStar proposal calls for stockholders of FCSA to continue an ownership role and to help run the corporation. The easy fix would be to accept the AgStar bid. However, there are those who point out that the Rabobank deal is a good one, was negotiated in good faith and should be allowed to go through. Change is good. Privatization is key, yada-yada.
Harl said he thought the AgStar bid was a reflection on the fact that farmers are concerned about the future of farm credit if banks can exit the system at will. Harl said that it is up to the Farm Credit Administration to approve the sale, but the FCA isn't sure it has the authority to approve or disapprove a member sale.
That could be the entrance cue for the aforementioned Daschle and Johnson, et al. Congress may have to step up and make a determination. No one knows how that would play out. This is a complex issue, but one that won't make the presidential debates. Maybe it should.
A major concern for farmers is that the Rabobank purchase would give the giant firm a toe-hold in the United States, and since it would not be a member of the farm credit system it would be open to create branch offices in a four-state region of the Heartland. Oh my.
Enter Iowa Sen. Charles Grassley who has observed that the Rabobank sale would create healthy competition in ag banking, which he termed a good thing. Harl, for his part, is concerned about the tax status of Rabobank and whether or not farmers should be able to profit from the sale outside the FCA which Congress created to help farmers with their complex and volatile lending needs. What would Rabobank provide when times are tough on the farm?
I'll see ya!
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©MISSOURI VALLEY TIMES - NEWS 2009
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