A member of the board whichregulates the Farm Credit System predicted the troubled farm
lender may lose about 900 mln dlrs in the first half of 1987,
hastening the need for a federal rescue this year.
    Speaking to the House subcommittee responsible for farm
credit issues, Farm Credit Administration (FCA) board member
Jim Billington said "My recommendation is that legislation
(aiding the system) must be moved prior to June, 30, 1987, or
it will be difficult to close the (farm credit system) books."
    Billington's loss prediction is gloomier than either the
system or its regulator had previously admitted.
    The system itself has so far predicted losses for all of
1987 will reach only 1.1 billion dlrs, down from 1.9 billion in
1986 and 2.7 billion in 1985.
    However, Billington said the system is losing in excess of
400 mln dlrs per quarter, implying total losses for 1987 of
more than 1.6 billion.
    Losses of that magnitude would exhaust the 1.4 billion dlrs
in capital surplus the system held at the end of 1986.
    The system also has 4.2 billion dlrs in capital held by its
member borrowers, called borrower stock, which theoretically
could be used as capital.
    Billington said by the end of 1987, more than 1.6 billion
dlrs of the 4.2 billion in borrower stock would be downgraded
in value because of the mounting losses.
    Chairman of the FCA board, Frank Naylor, urged that
Congress begin to consider legislation rescuing the system by
Easter and that a bill be completed by the fall.
    Chairman of the House subcommittee, Rep. Ed Jones,
(D-Tenn.) said today "the time has arrived to consider
assistance to save the system."
    The Senate Democratic leadership indicated last month that
it would begin drafting a bailout bill by Easter.
    FCA board members differed on whether a direct government
infusion of cash will be needed to rescue the system.
    FCA chairman Naylor said a federal guarantee of both
borrower stock and system bonds held by investors might avoid
the need to provide "hard capital" to the system.
    However, Billington said "its not really that simple, in my
opinion," adding that government funds may be needed to rescue
the system.
    Neither regulator estimated how much money might be needed.
 Reuter
