Friday, September 6, 1935
Page 2
Daily Nebraskan
1KSS
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New
U.S. ag lender facing crisis
WASHINGTON (AP) - The Farm
Credit System, the nation's largest
farm lender, is facing its most severe
crisis since the Depression and could
be forced to begin liquidation within
two years unless the federal govern
ment comes to the rescue, thesystem's
top regulatory official said Thursday.
Donald E. Wilkinson, governor of the
Farm Credit Administration, said
increased losses in the system's mort
gage lending arm will result this year in
the first operating loss since the 1930s
for the 37-bank, $74 billion system.
Wilkinson said at a news conference
he will begin exploring with Congress
and the Reagan administration ways
the government can help the system
survive a severe crunch expected to hit
within 18 to 24 months.
"If we are unsuccessful. . .we will
begin to face the necessity of possible
liquidation of portions of the Farm
Credit System" including some of its
regional banks, Wilkinson said. "This, I
think, would be a very unfortunate
situation."
While many are unaware of the
extent to which the system is tied to
America's financial network, Wilkin
son said, many institutions includ
ing banks and insurance companies
are major holders of Farm Credit
securities.
He declined to specify the size of the
federal bailout needed, but said it will
be "multibillions of dollars." Members
of Congress familiar with farm lending
have put the potential cost to taxpay
ers at $5 billion to $20 billioa
The Farm Credit System, founded
early in this century to make credit
more easily available to agriculture, is
cooperatively owned by its farmer-borrowers
and raises money through bond
sales. Since it paid off the last federal
seed money in the 1960s, the system has
used no government funds.
The loose confederation of 31 regional
banks and their local branches is regu
lated by the Farm Credit Administra
tion, an independent federal regulatory
body. 1
Emergency rule
While it is exploring possible avenues
for a federal bailout, Wilkinson said,
the system will operate under an emer
gency rule that enables money to be
shifted between various banks in the
system to meet operating losses that
have been concentrated in areas hard
est hit by a farm depression.
Bonds sold to provide farm loan
money are backed by the entire system.
Although it has in place a loss-sharing
arrangement, that process has been too
cumbersome to help in many cases, he
said. Eleven production credit associa
tions, the local conduits for short-term
operating loans, have been forced into
liquidation during the past two years.
The system's board of directors
approved the expedited loss-sharing
procedure on Wednesday. It will, in
effect, override the objections local
farm credit banks may have to shifting
system funds and is likely to anger
some local credit officials who have
guarded their administrative powers
and object to centralizing the system.
But Wilkinson said the move was
necessary to allow quick response to
problems and to demonstrate that the
system is doing everything it can inter
nally before going to the federal
government for help..
Among possible long-term remedies
for the system's ills are increased regu
latory authority for the Farm Credit
Administration, government guarantees
for Farm Credit bonds and loans, crea
tions of an institution to take over bad
farm debt, a direct infusion of federal
cash and a so-called buydown of inter
est rates, Wilkinson said.
He said while he expects rural
members of Congress to embrace such
solutions, to get the urban majority and
the Reagan administration to go along
will require "the ultimate of nego
tiation." He said the system's current prob
lems, as well as those of other farm
lenders, stem from a rapid retrench
ment from the expansionary period of
the late 1970s, when farm exports were
booming, commodity prices were high
and farmers were encouraged to borrow
'President Reagan
had best wake up
to the fact that he
can't ignore this
mess any longer and
that the day of reck
oning is upon us.'
Sen. J. James Exon
even at high interest rates because
inflation was expected to continue.
"Farmers themselves signed notes,
and they have and I think must accept
some blame. Their lenders who cooper
ated with them in providing that credit
did not have the foresight to know
when the inflationary cycle would turn
to such a downtrend, and they too must
accept some responsibility."
Members of Congress and other fed
eral officials reacted with relief to the
surprise announcment.
"Finally!" said Rep. Ed Jones, D
Tenn., chairman of the House Agricul
ture credit subcommittee, after getting
word of the switch on Wednesday.
"We're going to have to do a bailout,
just like Chrysler and New York City,"
added Jones, who had scheduled hear
ings on the issue for next week.
Farm Credit Administration spokes
man Roger Stromberg said the system
still is expected to be able to manage
its problems for the immediate future.
But he said worsening farm financial
projections indicate that an infusion of
cash will be necessary in 18 to 24
months.
Wilkinson had been insisting the
banks could handle their losses through
fund transfers, increased interest rates
and economy moves. This week he
shifted positions, saying further deter
ioration in the farm sector makes
potential loan losses more than the
system can absorb.
"He recognizes that it's got to be
faced at some point," said Rep. Cooper
Evans, R-Iowa, who has advanced a long
list of legislation to bolster the sys
tem's finances. Evans said Wilkinson's
public admission of the system's prob
lems would make it easier to get reme
dial legislation through Congress.
Agriculture Secretary John R. Block
at a news conference Wednesday
declined to say what kind of bailout the
administration might support or when
its recommendations would be ready.
Survival important
Survival of the system is important,"
he said, "but I want farmers to survive
too. And farmers cannot survive with 16
percent interest. They need to have
competitive interest rates."
Some Midwestern Farm Credit banks
have been charging higher interest
rates to help offset loan losses.
In Lincoln, U.S. Sen. J. James Exon
said reports that Farm Credit System
losses are more than the system can
absorb may be a measure of good news
in disguise.
"I hope Donald Wilkinson's com
ments will blast a sense of urgency and
reason into the White House thinking,
or lack thereof," Exon saidln a news
release Thursday. "President Reagan
had best wake up to the fact that he
can't ignore this mess any longer and
that the day of reckoning is upon us.
"I have been ringing the alarm bell
of pending economic disaster in rural
America for more than a year," Exon
said. "My warnings, and those of my
colleagues, have been largely ignored
by President Reagan, who expressed
his opinion when he vetoed the emer
gency farm credit legislation I fought
for earlier this year."
WS STI Si k ST S A roundup of the day's happenings
Lebanese President Amin Gamayel went to Bonn
West Germany, on Thursday for talks expected to focus on
political issues and economic aid.
Soviet dissident Andrei Sakharov, 64, and his wife,
Yelena Bonner, allegedly have disappeared from their
home in exile in Gorky, and have not been seen for more
than three weeks, a fellow dissident says. Sakharov was
banished to Gorky in 1980 because of his activities in a
human rights organization.
Israeli foreign minister Yitzhak Shamir left for a
five-day trip to Japan aimed at increasing economic coop
eration and to present Israel's view on the Middle East.
Shamir is the first Israeli minister to make an official visit
to Japan. Bilateral trade between the two countries totals
nearly $400 million a year, with Israel exporting mostly
diamonds and chemicals and Japan exporting mainly
cars.
AT&T is offering for testing a million-bit memory
chip that can quadruple memory capacities and "shrink
desktop computers to briefcase size." The chip should be
ready for full production early next year.
Refrigerated salads with a shelf life of up to one
month will be available from Campbell Soup Co. in Phila
delphia and the Southwest later this month. Nine salad
varieties will be packed in plastic containers and sold for
$1.19 and $2.59.
President Reagan, less than two months after major
cancer surgery, now begins a grueling eight-week, cross
country campaign to rouse support for reform of the tax
code he calls a disgrace and dumb economics.
Six people were killed, eight wounded and 577
arrested in nationwide protests against Chile's military
rulers, in demonstrations labeled by Chile's pro-government
newspapers as "an orgy of violence and looting." The dem
onstrations coincide with the 15th anniversary of the
election of leftist President Salvador Allende, killed in the
coup that brought President Augusto Pinochet to power.
U.N. Secretary General Javier Perez de Cuellar of
Peru says the United Nations has made a "good start" in
its first 40 years and governments now must decide
whether to cooperate in building on its strengths or end
up with a "rambling, contentious slum." The General
Assembly's 40th anniversary session opens Sept. 17.
Challenger Garry Kasparov continued to carry the
fight against world chess champion Anatoly Karpov by
adjourning the second game of their title rematch with
what judges deem is a "definite advantage."
United Press International deadlocked with its
union over the issue of staff salary concessions, says it will
ask a bankruptcy court judge next Monday to void its
union contract. The wire news service, which listed $45
million in liabilities and $20 million in assets in its April
bankruptcy filing, is trying to find a buyer or investor to
restore its financial health. UP I seeks union agreement on
scaling back salary increases and reducing pension, and
other benefits.
In Peking, people pulled apart a 200-year-old
female corpse uncovered by workmen and carried off
jewelry, jade ornaments and bronze mirrors dating back to
the Manchu Dynasty. The work crew foreman tried to get
his men to return Buddhist prayer beads, but they replied:
"What sort of reward will we get? If there's no reward, we
won't give up one bead."
From News Wires
Bit
S. Africa rioting reaches white area
JOHANNESBURG, South Africa Rioting spilled into a white area of
South Africa for the first time In 19 months of violence Thursday as
residents fired guns at an estimated 100 mixed-race youths who attacked
homes reserved for whites with gasoline bombs, police said.
"The white backlash has started already," warned the leader of the
hardline white Conservative Party, Andries Treumicht, who urged the
government to act more firmly and use live bullets to control the unrest
Residents of the suburb, Windsor Park, drove the youths off by firing
pistols and shotguns. Two of the youths were injured. Although black
townships have seen 19 months of riots against the country's apartheid
race laws and some 680 people have died, this was the first time violence
reached a white area.
Deficit, red ink lead U.S. concerns
WASHINGTON Americans are preoccupied with issues that hit them
where they live and work federal deficits and foreign trade competition
and aren't shy about saying so to their representatives in Washington.
More than 40 members of Congress surveyed by Reuters at they
returned trom a montn tacx none taxing tne pyisa ot tneir constituents,
said they found a public worried about government red ink that they will
have to pay for sooner or later. .
Another big worry was the loss of jobs to cheap foreign labor if
. President Bssgan continues to refuse relief for domestic industries suffer
ing froza low-priced imports. The congressmen found the people care little
about events overseas, from violence in South Africa to the November
summit between Reason and Soviet leader R'ilihcil Gorbachev. Most are
preoccupied with issues of concern to their cvn ccr.r.ur.lties.
Students 'doomed to fair
NEW YORX - Corporate leaders charged Thursday that an alarming
number of young people leave school lacking the discip line, work habits,
command of English and other skills needed for job success. Their
107-page report, "Investing in Our Children: Business and The Public
Schools," represents the first clear statement of what the business world
expects from public schools
It said schools are failing to stress what it called the "invisible
curriculum" of teamwork, honesty, reliability and "learning how to learn"
traits the business world considers a3 important to success in college
and career as "reading, writing and arithmetic."
"Young people who have not learned discipline and mastered basic
skills and especially mastery of English are doomed to failure and unem
ployeability in later life," said Owen B. Butler, chairman of Procter &
Gamble Co. and head of the 60-member panel that produced the report,
sponsored by the Council for Economic Development.
U.S. experts fear new Soviet weapon
WASHINGTON A Soviet warning that it could deploy a space-based
anti-satellite weapon if the United States goes ahead with an ASAT test
may indicate Moscow is preparing a new extra terrestrial killer, U.S.
analysts said Thursday.
The official Soviet news agency Tass reported Wednesday that if the
United States tested ASAT weapons as scheduled this month "the Soviet
Union will consider itself free of its unilateral commitment not to place
anti-satellite weapons In spaca"
Analysts focused on the statements specific reference to the placing of
weapons in space and said that it implied Moscow was thinking of a
weapon other than its old plan for a ground-based ASAT system.
"I'm positive they're not referring to the old, antiquated, totally ineffi
cient system they have shown us before," said former Rear Adm. Eugene
Carroll of the Center for Defense Information. "My estimation is that what
they will announce they are doing will by horrifying."
New cancer research under way
LONDON British doctors said Thursday they have killed previously
incurable cancer cells in experiments with mice and have now begun
clinical trials on human beings.
Robert Baldwin, a pioneer in cancer research, said his team at the
University of Nottingham had treated bone and colon (intestinal) cancer
in the laboratory.
The new technique involves injecting patients with bio-engineered
anti-bodies armed with toxins that kill tumor cells without damaging
healthy tissues.
Revised AIDS guideline, announced
ATLANTA In revised guidelnes aimed at eliminating the AIDS virus
from the blood supply, federal health officials recommended Thursday,
that any man who has had sex with another man even once in the last
eight years refrain from donating blood.
The national Centers for Disease Control has for years considered
homosexual or bisexual men with multiple sexual partners to be at
increased risk for acquired immune deficiency syndrome. But the latest
recommendation from the Food and Drug Administration, published by
the Atlanta-based CDC, applies even to men "who may have had only a
single contact, and who do not consider themselves homosexual or
bisexual."
Australian opposition chief ousted
CANBERRA, Australia Australian politics took a new direction
Thursday when John Howard, a firm believer in free enterprise, unexpect
edly replaced Andrew Peacock as opposition leader at a stormy party
meeting Peacock, 46, nicknamed the "Sunlamp Kid" because of his
perennial tan and youthful looks, qui as head cf the Liberal Party after
losing the biggest gamble of his political career. .
Howard, 46, a Sydney lawyer, said he would present Australians with a
clear choice when he leads the Liberal-National Party coalition into the
next election against the Labor government of former trade union leader
Bob Hawke. Howard wants smaller government, less powerful trade
unions, the sale of public enterprises, tax reform and a free hand for
business to prosper without official interference.
- From News Wires