I strongly disagree with The Post's Aug. 27 editorial, "Farmer Mac." As the original Republican cosponsor of the principal agriculture secondary market bill, and a member of the House Agriculture Committee and appointee to the ad hoc task force on secondary markets that struck the final compromise, I find the editorial shortsighted.
First, while it is asserted in a negative light that Farmer Mac permits commercial banks to wipe out their risk and replenish their coffers, it is not made clear that these benefits also extend to the financially troubled Farm Credit System (FCS). It also is not stated that this replenishment will benefit rural Americans. Dollars for rural economic development will become available where the same dollars before Farmer Mac were tied up in agriculture real estate loans.
Second, The Post reiterates the often-made claim that a secondary market will compound FCS's financial woes by skimming the best loans from FCS's portfolio for sale on the secondary market. But what The Post fails to tell its readers is that the bill also allows the sale of FCS mortgage-backed securities outside of Farmer Mac. Because of FCS's quasi-agency status, this would provide it with an advantage over non-FCS institutions in selling rural utility, short-term operating, community facility, export financing and cooperative loans.
Third, the steel, textile and oil industries are used as examples to suggest that if the federal government will guarantee a secondary market for agriculture real estate loans, then it should provide these troubled industries with cheap credit as well. The federal government, however, has not turned a blind eye toward these industries.
Steel, for example, through a transition rule in the Tax Reform Act of 1986 is being allowed to cash in unused investment tax credits at a discount. This special tax break is worth $400 million. And legislation is now pending in Congress to aid both the oil and textiles industries.
The Post should have compared FCS's situation to other famous federal bailouts -- Lockheed, Conrail, New York City and Chrysler -- rather than concluding that a secondary market for agriculture real estate loans would place farmers and their financial institutions in a specially graced category.
STEVE GUNDERSON U.S. Representative (R-Wis.) Washington
How curious that The Post would characterize "Farmer Mac" as a sop to lenders who are the Farm Credit System's competition when most farmer advocates and commodity groups, including the American Farm Bureau, the Wheat and Corn Growers, the Soybean and Cattlemen's Associations, to name only a few, consider a secondary market for agricultural real estate to be a clear benefit to the American farmer.
By 1982, when the Farm Credit System's problems began, they and the Farmers Home Administration held 72.9 percent of all long-term farm debt. Could it be that such a low level of competition, because of the system's market dominance, led to sloppy management and operating inefficiencies that were neither in the system's best interest nor in the interest of their farmer stockholder/borrowers?
The American farmer and rancher can only benefit from fair competition among agricultural lenders: farmers will receive improved financial services at lower interest rates and the Farm Credit System will benefit because it will be forced to become a more efficient and better managed organization. The failure of the 1985 amendments to the Farm Credit Act to effect the intended management improvements and operating efficiencies proves, I think, that such actions cannot be legislated, but must be market driven.
A Farm Credit System bailout without a secondary market mechanism will ensure that the only source of long-term credit to agriculture will be the American taxpayer.
KATHLEEN W. LAWRENCE Alexandria The writer is a former deputy undersecretary for agriculture.