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Return to Comments
Investment Eligibility Amendments Proposed rule
Type: Regulation
Federal Register Document Type: Proposed
Proposed Amendments to 615.5140 (b)

Text of Comment Letter

November 15, 2019

Mr. Barry F. Mardock

Office of Regulatory Policy

Farm Credit Administration

1501 Farm Credit Drive

McLean, VA 22102-5090


RE:      Comment to RIN 3052-AD35  – Buying and Selling USDA Loan Guarantees of non-FCS Lenders   Investment Eligibility Federal Register, Vol. 84, No. 181, Wednesday, September 18, 2019

Dear Mr. Mardock:

Royal Bank is a $450 million community bank located in central and southwest Wisconsin.  Almost all of our 19 locations are located in very rural areas of Wisconsin, and a significant portion of our loan portfolio is made to all sectors of agriculture and associated agricultural businesses.

I am writing to express my views on the Farm Credit Administration’s intent to allow Farm Credit System (FCS) institutions to buy and hold the guaranteed portion of USDA loans that are originated by non-FCS lenders.

These non-FCS lenders would largely be community banks, like Royal Bank.

I oppose FCA’s proposal.

We utilize Farmer Mac for a significant amount of secondary market fixed rate sales of farm real estate and USDA loan guarantees, including FSA and RD loans.

FCA’s proposal allows the FCS to duplicate the activities of Farmer Mac, established by Congress, would harm and impair Farmer Mac and would impair their stability. 

Allowing the FCS, who has a much larger financial network, to mirror key aspects of Farmer Mac’s activities, would allow FCS to undermine Farmer Mac’s secondary market activities. This will financially harm hundreds of community banks and to thousands of rural borrowers.

Simply put:  we do not need 2 entities, that were established by Congress, to compete and cannibalize each other to the detriment of farmers in rural areas and community banks and further bring instability to the rural capital markets.

The FCS would easily be able to offer discounts to Farmer Mac’s rate sheets in an effort to lowball Farmer Mac pricing or cherry pick desired loans. The secondary market is and will be quite robust without the FCS seeking to compete as an alternative secondary market provider. There already exist an adequate number of loan purchasers in the market without needing FCS’s presence. I fail to see in FCA’s proposed rule any efforts FCA would undertake to protect Farmer Mac from the cutthroat and below market pricing activities of FCS institutions or even an effort to closely monitor such FCS activities on an ongoing basis.

In order to prevent the problems this proposal would cause if adopted, I suggest FCA withdraw the proposed rule or at least require FCS institutions to buy the guaranteed portion of such loans only from Farmer Mac or sell the guaranteed portion of USDA loans that FCS originates to Farmer Mac. This approach would actually enhance the secondary market while preventing FCS from taking control of the secondary market and would minimize disruptive behavior by FCS lenders seeking to manipulate the secondary market. FCA is also supposed to protect the interests of Farmer Mac, which it also regulates.

Thank you.


Jeff Gruetzmacher
Senior Vice President

Royal Bank

142 Hwy 61 N

Lancaster, WI  53813

Jeff Gruetzmacher | Senior Vice President 
142 Hwy 61 N. | P.O. Box 70 | Lancaster, WI 53813 
Office: 608.723.1550 | Cell: 608.732.8951 | NMLS#: 1230509
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