THE HOUSE AGRICULTURE Committee has sent to the floor a farm credit bill that faces and fudges the grim truth of the matter all in the same short phrase. The idea is to bail out the tottery Farm Credit System. The fundamental questions in all bailouts are the same: Who will pay, how much and through what means? For a while in working out this one the members fooled around with a device to blur the answers by borrowing the necessary funds. In the end they sensibly abandoned this.
The bill now makes no bones about who must pay -- the taxpayers, through the appropriations process. But the members couldn't quite bring themselves to take the next step and estimate how much. For one thing, except that the amount is surely in the billions, no one knows, and with farm programs already costing $26 billion a year, neither is it politic to say. The legislation, in an engaging mix of openness and guile, simply authorizes "such sums as may be necessary."
This is the second such bailout to begin making its way through Congress this year; the first, just passed, affects the hurting savings and loans. If you want proof of the tenuous state of the current prosperity, as well as the continuing need for a tax increase, you need look no further. The Farm Credit System is a fuzzy federation of several hundred local lending institutions across the country. Federally established but up to now not federally financed, it makes about a third of the nation's farm loans. In recent years a lot of these have gone bad. In many cases the farmers can no longer make their payments, and their land is no longer worth as much as they owe. To avert default in the bond markets where it raises funds, the system is in need of extra cash.
The healthier banks in the system still have reserves. The administration would like to tap these before turning to the Treasury; the government isn't exactly rolling in cash these days. But it isn't clear that this appropriation of reserves either could be done legally or should be done as a matter of policy, in that the healthy banks would then also be weakened. The all-in-the-same-boat approach was tried two years ago and failed; the committee was right not to venture into it again. In other respects the bill does strengthen the system. The member banks would have to meet new capital requirements and pay into an insurance fund like the ones now in place for commercial banks and savings and loans.
There are also some mushier provisions. The member banks, for example, would have to exercise a degree of forbearance toward farmers behind on their loans. That's fine for the Farmers Home Administration, which makes loans to needy farmers; it's not a stricture that should apply to the Farm Credit System, where the normal rules of risk should prevail.
Basically you have here a pretty good bill from a committee that was in difficult and unfamiliar territory. For several years the administration and Congress have been tiptoeing around the farm credit issue in hopes that it would go away, as of course it hasn't. A bill that finallyconfronts the problem can be forgiven a lot of lesser fault