WASHINGTON — A federal bailout was approved Wednesday for the financially stressed farm credit system, but the extent of the bailout and the appropriation mechanism was left unresolved.
In a marathon session of the House of Representatives Agriculture Committee that was expected to continue into this morning, a deadlock over the funding for the massive farm credit system was overcome.
In Wednesday night's action, the House panel said that Congress should appropriate "such sums as may be necessary" for the farm credit system for fiscal years 1988 to 1992.
The troubled farm credit system, the nation's largest rural lender with a portfolio of about $50 billion, has lost $4.8 billion during the past 27 months because of unrepaid loans from farmers and is expected to lose billions more during the next few years.
Committee members are under a deadline to approve farm credit legislation before their August recess begins this week so that the full House can begin debate on the bill in September.
Concern has been mounting that some federal land banks within the huge farm credit system may not survive much longer because of a lack of operating collateral.
The farm credit system consists of 37 large regional banks that finance loans to farmers by selling bonds on Wall Street and then lend money to about 450 local farmer-owned associations. The system earlier this year asked for $6 billion in government aid.
One proposal submitted by committee members was that the farm credit system would use its excess collateral to issue a federally guaranteed bond, with the government paying the interest.
At the end of five years, the farm credit system would then be obligated to pay back the loan.
The bond proposal was met with sharp opposition by several committee members.
"If we are going to fix things, we should fix things right. We cannot borrow our way out of the mess we're in," Rep. Pat Roberts (R-Kan.) said.
Leading committee members said they were unwilling to commit a specific figure to fund the farm credit system and added that they were not ready to recommend a specific funding mechanism.
"We don't have the data, the knowledge, the information, to make that kind of decision," said Thomas Huckaby (D-La.). The funding debate is expected to continue on the House floor following the August recess.