Some Farm Credit System banks are still losing ground despite efforts to buttress their financial status, in part because of excess overhead, their chief regulator said yesterday.
Overhead for the financially troubled system of 37 banks and 387 associations, all owned cooperatively, is running at $800 million a year, Farm Credit Administration Chairman Frank Naylor told a group of farm writers.
"We simply can't have that kind of overhead," said Naylor, whose agency regulates the $55 billion network of institutions that, despite huge losses in recent years, remains the nation's largest farm lender.
Legislation approved by the House Agriculture Committee recently would restructure the system and could cut down on overhead.
Naylor said his agency would not take a stand on the bill. "We will continue to be an arm's length regulator," he said.
He expressed confidence that Congress would send a bill to the president this year. The administration has already made a commitment to save the system, he said.
"The question is not whether you're going to maintain the viability of the system, but what you're going to do to maintain the viability of the system," he said.
Naylor said any bill should provide strong regulatory authority to force institutions within the system to engage in sound business practices.
Some institutions that have been aggressive about contacting tardy borrowers have succeeded in collecting 80 percent of the interest due, while others have been reluctant to get in touch with borrowers, he said.
He said the average collection of overdue interest in the system is 11 percent.