The chairman and chief executive officer of the Farm Credit Administration says she would support congressional action to raise Farmer Mac's capital requirements."We do support the General Accounting Office's recommendations to Congress that enhancements are needed in the future," Nancy Pellett told the House Agriculture Committee. "We especially support greater flexibility to set minimum capital requirements for Farmer Mac." A GAO official testified that Farmer Mac has increased it risk profile by making $3.1 billion in standby purchase commitments, which guarantee the performance of specific loan pools that remain on the books of Farm Credit System institutions. The capital requirement in these off-balance-sheet commitments is 0.75%, instead of the 2.75% required for on-balance-sheet assets. "This really does change and increase the risk profile of the Farmer Mac," GAO Director Davi D'Agostino testified. Farmer Mac president and CEO Henry Edelman explained that standby commitments are really a "permutation" of a swap transaction and that they free up equity for the FCS institutions so they can make more loans. "We stand ready to absorb the losses just like a mortgage-backed security," he said.

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