THE EERIE THING about the Farm Credit System bailout on which congressional conferees have now agreed is not how extensive it would be, but how little controversy it has generated. Lesser bailouts in the 1970s for such hurting entities as Lockheed, New York City and Chrysler were bitterly fought over. By contrast, this has almost glided to passage.
The system's very size may be a partial explanation. Though not all its units are in trouble, this little-known network makes a third of all the nation's farm loans. In a year that has required a substantial shoring-up of the savings-and-loan industry as well, Congress and the public may also have become a little bored by financial failure. What's so new or even dangerous about a fallen bank?
This is a sturdy bill. There is a little bit of fudging as to cost. To cover nonperforming loans and faded collateral, up to $4 billion of assistance would be made available over 15 years through the issuance of bonds. The government would back the bonds and pay part of the interest -- all the first five years, half the next five, with the system responsible for the rest. The hope is that, by the time the principal would also have to be repaid, the sick banks would be well enough to do so. If not, the Treasury would ultimately have to pay more than the interest, but the Congress that would have to deal with that is not yet even a gleam in the electorate's eye.
The bill would also strengthen the system to avert future failures and improve the likelihood that it could pay. Capital requirements would be increased for member banks, which would also be required to subscribe to an insurance fund like those now in existence for commercial banks and savings and loans. But Congress always oscillates in matters such as these, wanting to seem both businesslike and warm-hearted in the same sitting. Thus the bill also requires both the member banks and the Farmers Home Administration to deal tenderly with farmers who have fallen behind in their loans.
To help commercial banks in the farm regions, which have also been hard-pressed in the last few years, the bill would also authorize a secondary market for farm loans such as the government already helps maintain for housing. Proponents say the secondary market would increase the supply and reduce the cost of farm credit. Critics note wryly that it would also increase the exposure and presence of the federal government in the credit markets and reduce the risk of supposedly private lenders. But the secondary market was the price of the banking industry's support.
The bailout bill is the other shoe in the farm crisis. For several years now farm support costs have been high. They have now begun to recede. But a great deal of financial wreckage remains in the Farm Belt. This bill is the cost of removing it.