FARM CREDIT ADMINISTRATION News June/July 1999 • Vol. 1, No. 6 FCA Predicts Overall Condition of Farm Credit System To Remain Sound in Short Term Even under the “worst case” Smith noted that six FCS associa- The System’s risk funds totaled scenario for the agricultural environ- tions, representing 1.4 percent of $14.4 billion at December 31, 1998, ment, the Farm Credit System is total assets of all direct lending and covered more than 21 percent of expected to remain financially sound associations, project adverse assets in System loans. during the next 12 to 24 months, proportion to risk funds of greater “This is a substantial improve- according to a recent internal Stress than 90 percent. In addition, 43 ment from 10 years ago when risk Analysis Report prepared by FCA’s associations would have adverse funds totaled $3.9 billion and Office of Examination (OE). assets to risk funds of greater than covered slightly less than 8 percent of “Because of the System’s strong 60 percent at yearend 2000. An System loans,” said Smith. financial condition, we don’t see a association’s risk funds include The study also includes “most material threat emerging during the at-risk capital, surplus, and allowance likely” scenarios. Copies are available next 12 months,” said OE Chief for losses. from FCA’s Office of Congressional Examiner Roland Smith. “However, “While these 43 associations and Public Affairs, 1501 Farm Credit there may be pockets of stress in collectively present a definite con- Drive, McLean, VA 22102-5090; certain regions for several FCS cern, they would not materially phone, 703-883-4056; e-mail, info- institutions,” he added. impair the safety or soundness of the email@example.com. Under “worst case” conditions, System,” Smith said. FCA Responds Quickly to FCS Funding Requests Obtaining loan funds in the To facilitate the process, FCA issuing large and simply structured nation’s money markets is one of the Chairman and CEO Marsha Pyle securities,” said McKenzie. “There- keys to the Farm Credit System’s Martin delegated the authority to fore, under this program, it plans to success in financing America’s approve most funding requests to bring at least $1 billion of fixed-rate, farmers, ranchers and cooperatives. McKenzie or his designee. McKenzie intermediate-term securities to the It’s also important that the FCS, can approve routine funding re- market on at least a quarterly basis.” through the Federal Farm Credit quests, but must consult with the The Designated Bond program Banks Funding Corporation (Fund- Chairman and CEO on non-routine is similar to Fannie Mae’s Benchmark ing Corporation), is able to act issues. Also, only the Chairman and program. In addition, Freddie Mac quickly when issuing debt securities. CEO can disapprove funding re- and the Federal Home Loan Banks “FCA does its part in this quests. have similar programs. critical process by promptly respond- “Recently a new kind of funding The Funding Corporation held ing to System institutions’ funding request was presented for FCA its first Designated Bond sale on requests,” said Tom McKenzie, approval — the Designated Bond March 25, 1999. It was a 2-year fixed Director of the Office of Policy and program,” said McKenzie. He noted rate $1 billion offering. The sale was Analysis (OPA). “FCA responds to the Funding Corporation developed successful and the bonds were priced funding requests usually within 24 this new initiative to consolidate only 1 to 1.5 basis points higher than hours or sooner, so the FCS can take certain of the System banks’ term Fannie Mae’s well-established advantage of capital market opportu- debt needs into large, non-callable, Benchmark bonds. The Fannie Mae nities,” he said. “In fact, it’s highly regularly announced issues. program is considered the “standard” unusual to take overnight to approve “The Funding Corporation sees for large liquid issues by Govern- a funding request.” a distinct pricing advantage in ment-sponsored enterprises. Page 2 • June/July 1999 FCA Newsline Ceremony Honors Michael Reyna as Newest Farm Credit Administration Board Member A celebration was held May 24 in California’s State Capitol building to ceremonially swear in Michael M. Reyna as FCA’s newest Board Member. The event was attended by more than 150 friends and well-wishers, including representatives of Western-AgAmerica Farm Credit Bank, Sacramento Valley Farm Credit, ACA, and the Farm Credit Administration. Following the event, guests attended a reception in the Capitol Rotunda. Reyna was sworn in by Mario Obledo, a recipient of the Presidential Medal of Freedom — the nation’s highest civilian award — for his leadership on civil rights issues. Also participating in the event were State Senator John Vasconcellos and Sacramento Mayor Joe Serna. Participants described Reyna as a “man of integrity” and spoke of his long record of public service. California’s Governor, Gray Davis, sent a congratulatory letter that was delivered to Reyna during the ceremony. After taking the Oath of Office, Reyna spoke of being encouraged by Michael M. Reyna, left, takes the oath of former Congresswoman Barbara Jordan to consider doing “the people’s office as a Member of the Farm Credit business” by pursuing a career in public service. He also spoke about being Administration Board during the formal motivated by former President Kennedy’s challenge to “Ask not what your swearing-in ceremony. Also pictured, left country can do for you, but what you can do for your country.” On a to right, are Karen Reyna, Mario Obledo, personal note, Reyna spoke of his belief that because each of us are part of a and Keda Alcala-Obledo. common humanity, we have an ethical and moral responsibility to help others — each in our own way — improve their quality of life. Steady Growth in S Corporations Creates More Competition for FCS Commercial banks filing as S that many FCS institutions file their a bill introduced in Congress last Corporations increased 23 percent in taxes under Subchapter T of the IR January that would let a company the first quarter of 1999 compared Code, which provides similar benefits qualify for S Corporation status if it with the last quarter of 1998. A total of single level taxation. has no more than 150 stockholders. of 1,253 commercial banks have “Many rural and community If enacted, this legislation would converted to S Corporations. The banks now have the same tax expand eligibility and, with other FDIC estimates that 500 of these are advantage available to all FCS proposed changes, make it easier for agricultural banks. institutions through Subchapter T,” small banks to convert to S corpora- “In 1998, S Corporations repre- said Sherman. “The competitive tions. sented 12 percent of all commercial implications for FCS institutions are “This added tax relief will make banks. The number is expected to significant.” them even more competitive with the be even higher in 1999,” said Linda Also on the horizon is H.R. 242, FCS,” said Sherman. Sherman of the Risk Analysis Division. She said in 1997 small, investor- The FCA Newsline is a publication of the Chairman and CEO owned banks with fewer than 75 Farm Credit Administration. Suggestions, Marsha Pyle Martin comments or questions should be sent to: shareholders received the authority to Board Members reorganize as S Corporations under Editor Ann Jorgensen new IRS laws. Commercial banks Office of Congressional and Public Affairs Michael M. Reyna that convert to S corporations pass Farm Credit Administration through all of the income and 1501 Farm Credit Drive The Farm Credit Administration is the McLean, VA 22102-5090 Federal agency responsible for the expenses associated with their Phone: 703-883-4056 regulation and examination of the Farm operations to their stockholders, Fax: 703-790-3260 Credit System, a nationwide network of achieving single-level taxation, and a E-mail: firstname.lastname@example.org cooperatively owned agricultural lending higher level of earnings available to Web site: http://www.fca.gov institutions and their service organizations. retain or reinvest. Sherman noted FCA Newsline Page 3 • June/July 1999 FCSIC Makes Adjustments to Reviews of Premium Decisions The Farm Credit System Insur- growth projections to include that may be necessary due to interim ance Corporation (FCSIC) Board some FCS associations in addition events. “This change will not affect recently approved several changes to banks. the second premium review for 1999, relating to the periodic review and “We hope the timing change will which will be conducted shortly after communication of Insurance Fund allow us to advise FCS institutions of midyear,” Reyna added. premium decisions. These changes premium rate changes in advance of Since the FCSIC Board increased include: a new fiscal year so they can plan for premium rates earlier this year, the • Adjusting the timing for FCSIC’s the new rates in their budget pro- Insurance Fund as a percentage of semiannual premium reviews to cess,” said FCSIC Board Chairman adjusted insured debt rose from 1.94 September and March. Michael M. Reyna. He noted the percent at yearend 1998 to 1.98 • Making most premium rate September 1999 adjustment will percent on March 31, 1999. By law, changes effective prospectively establish the premium for calendar the FCSIC Board must maintain the rather than retroactively. year 2000, with the March 2000 Insurance Fund at 2 percent of • Expanding the survey of market review reserved for any adjustment insured debt outstanding. FCA’s Best People, Best Practices, Best Products Recognized Vice President Gore’s Hammer from OE; and Stephen Smith and Award Jeannie Schaffer from the Informa- FCA’s Office of General Counsel tion Resources Division. (OGC) received the prestigious The Hammer Award is presented Hammer Award for creation of a to teams of Federal employees for legal “hot line.” using reinvention principles to create OGC partnered with FCA’s a government that works better, costs Office of Examination (OE) to less, and delivers results. The Award reinvent the way it provides legal is the Vice President’s answer to services to examiners conducting yesterday’s government and its $400 examinations of Farm Credit System hammer. Fittingly, the award institutions. The result was the Law consists of a $6 hammer, a red, white Line, which allows examiners to e- and blue ribbon, and a note from mail legal questions that arise during Vice President Gore, all in an an exam directly to legal staff. An aluminum frame. More than 1,250 Roland Smith, Chief Examiner, and Jean attorney is always “on duty.” OGC Hammer Awards have been pre- Noonan, General Counsel, proudly display provides an informal, plain English sented to teams who are working to the Hammer Award, which was given by the response by close of business the build a better government. National Partnership for Reinventing next business day. The result is a The Hammer Award is given Government in recognition of the creation of simple, yet highly efficient, way to under the auspices of the National a legal “hot line.” conduct business and has resulted in Partnership for Reinventing Govern- large savings for the Agency. ment (formerly the National Perfor- The CFC is the annual fund- Individual certificates of recogni- mance Review), which is the raising drive conducted by Federal tion were given to employees who Clinton-Gore Administration’s employees in their workplace each played a role in developing and initiative to reform the way the fall. Each year Federal employees making a success of the Law Line. Federal government works. It is the and military personnel raise millions They are: Jean Noonan, Kathleen longest-running reform effort in U.S. of dollars through the CFC that Buffon, Vic Cohen, Joy Strickland, history. benefit thousands of non-profit James Morris, Gary Van Meter, FCA Receives Top Awards for charities. Wendy Laguarda, Richard Katz, Jane Creative Communication, For the fifth year in a row FCA Virga, Rebecca Cohn, Antonya Charitable Giving earned the President’s Award, the Brown, Kay Livingston, and Debra FCA and FCSIC employees won highest award a Federal agency can Buccolo from OGC; Roland Smith, the triple crown as a result of their receive for CFC contributions. To Charlotte Miller, Michael Anderson, generous contributions to the qualify, 75 percent of an agency’s Gordon Hansen, and Bill Stevens Combined Federal Campaign (CFC). employees must contribute to the (continued on next page) Page 4 • June/July 1999 FCA Newsline Recognized (continued) CFC and the per capita gift must be Nichols, FCSIC, as Dorothy; John finalist in the selection of the 1998 at least $150. FCSIC won the Hays, OPA, as Scarecrow; Doug Federal Library/Information Center President’s Award for the second year Valcour, IRD, as Tin Man; and Gary of the Year. The competition is in a row and for the third time since Van Meter, OGC, as Lion. Costume sponsored by the Federal Library 1995. design, make-up, music, and art and Information Center Committee FCA and FCSIC also won the direction were provided by Becky (FLICC) of the Library of Congress. Pacesetter Award, which recognizes McLeod, Linda Toki, and Pat The FLICC praised the FCA Infor- agencies that exceed the previous Hickerson of IRD’s Publications mation Center “for consistently year’s contributions by a specified Group, and Ruth Surface, IRD. proactive and creative efforts to percentage. The criterion this past Claire Rusk served as vice-chair provide timely and relevant informa- year was a 2.2 percent increase. FCA for the FCA and FCSIC CFC Cam- tion and services to fulfill the employees’ contributions were 8 paign and Kathleen Reddaway, IRD, agency’s mission.” Members of the percent above the previous year. was program manager. Employees FCA Information Center team are: This was the second year in a row who contributed their time to Patty McLaughlin, Vicki Perlstein, that FCSIC won the Pacesetter canvassing coworkers were: Ava Bell, Claire Robb, Cheryl Thomas, John Award. Joy Burr, Leslie Fridley, and John von von Reyn, and Jean Weaver. FCA also was a winner in the Reyn, who served as team captains. The National Institutes of Health CFC’s Communication Contest, Also, Winston Black, Irma Library and the Defense Technical taking top honors for the Best Kick Blankenship, Antonya Brown, Gaye Information Center share the 1998 Off or Victory Celebration in the Calhoun, Tom Gist, Sara Glover, Federal Library/Information Center small agency category. The winning JoAnn Kissal, Sara Kreger, Anna of the Year Award. The first annual entry was a take-off on “The Wizard Lacey, Lori McGuin, Mary Meyer, FLICC Awards recognize the innova- of Oz,” which was produced under Charlotte Miller, Nan Mitchem, Ruth tive ways Federal libraries, librarians the creative direction of Claire Rusk, Surface, and Michael Wilson. and library technicians fulfill the Office of Congressional and Public Federal Library/Information information demands of government, Affairs. Cast members were: Bob Center of the Year business, scholarly communities and Orrick, Office of Policy and Analysis The FCA Information Center the American public. (OPA), as the Wizard; Dorothy received an honorable mention as a In Brief . . . Claire Donovan Rusk has been named Executive Assistant to FCA Board Member Michael Reyna. She came to the Agency in September 1993 from the White House Presidential Personnel Office. Since then she has served as FCA’s White House Liaison and as a Congressional and Public Affairs Specialist. Before joining FCA, Rusk worked on the Presidential Transition Team. During the Clinton/Gore Presidential Campaign, she was a member of the staff of the late Ambassador to France, Pamela Harriman. Prior to her Government service she had 10 years’ experience in human resources as a training coordinator and personnel director and also was employed as a personnel consultant and recruiter. Rusk is a graduate of Virginia Tech where she earned a B.S. in marketing and distributive education. In 1997 she earned the certified meeting professional (CMP) designation. Andrew Jacob has been named Assistant Director for the Office of Policy and Analysis (OPA). He will lead OPA’s budgeting process, planning and reporting, communication services, and other policy development and administrative matters. Jacob will supervise OPA’s data management services and the funding approval process. He began his FCA career more than 12 years ago in the Sacramento Field Office as an examiner. Commissioned as an examiner in 1990, Jacob has worked in the capital markets area for most of his career. He has been the primary analyst for funding requests of the System since 1993. He has participated in regulation and policy develop- ment initiatives where, most recently, he has been heavily involved with developing a capital model for the Farmer Mac risk-based capital rule. Jacob earned a bachelor’s degree from the University of California at Davis in Agricultural and Managerial Finance and an M.B.A. from George Mason University.