The Reagan administration called yesterday for quick passage of a bill to reshape the Farm Credit System, but drew a firm line against federal financial assistance for the troubled farmer-operated lending network.
"The system does not now need the government's financial support in any fashion," Charles O. Sethness, an assistant Treasury secretary, told the House Agriculture subcommittee on credit.
Instead, Sethness said, the administration wants Congress to empower the FCS to deploy its earned surpluses of $5.5 billion to points of stress within the system and to transform the federal Farm Credit Administration into a more potent regulator.
Sethness said the FCS has "a capital base that would be the envy of other financial institutions" and has enough reserves to sustain loan losses estimated at between $3 billion and $5.5 billion through 1987.
But system officials and Donald E. Wilkinson, head of the Farm Credit Administration, repeated earlier warnings to the panel that the FCS would require up to $6 billion of federal aid in the next two years to avert a collapse.
They and Sethness were testifying on a bipartisan bill drawn up by farm state congressmen that would carry out most of the FCS changes and regulatory reforms sought by the administration and also give the treasury secretary authority to provide federal aid.
As originally drafted, the measure called for a last-resort line of credit of up to $3 billion to shore up the FCS and to calm the bond market, where trouble stories have sent the system's borrowing rates shooting upward.
The final version, however, omitted a dollar figure, a move that sources said was prompted by legislators' desires to avoid a confrontation with the White House and by disagreement over the amount the FCS might need.
The FCS, with more than 700 banks and lending associations, holds roughly a third of the nation's $214 billion agricultural debt. Low farm prices, declining markets and falling land values have created a crisis atmosphere in some parts of the system and caused record losses.
Although the administration insisted that it would not consider financial aid for the system until the internal and regulatory changes are ordered by Congress, Sethness refused to flatly reject a federal bailout at some point.
Under questioning by Rep. James Weaver (D-Ore.), an opponent of federal aid for the FCS, Sethness would not give a yes-or-no answer about future federal help. He also refused to say if President Reagan would veto the bill as it is written.
Agriculture Committee Chairman E (Kika) de la Garza (D-Tex.), chief sponsor of the bill, said it was his "perception that a decision has been made that we will assist the FCS if assistance is needed."
Weaver, however, said, "It would be a ghastly mistake until the farmer-borrowers are put in a position that they can pay back their loans." He said the proposed bill was another way of tapping the Treasury to protect FCS bond holders.
Among other things, the legislation proposes creation of an FCS capital corporation that would be the main source of financial aid to member banks and associations. It would be empowered to sell acquired properties and loans and to refinance or adjust borrowers' debts on such loans.
House lawmakers intend to try to pass the bill before Congress quits for the year. "Time is of the essence," said Rep. E. Thomas Coleman (R-Mo.), another cosponsor. "It is critical that we calm the fears on Wall Street."