Treasury: Farmer Mac LOC Uncertain

Farmer Mac may not have access to a $1.5 billion line of credit with the U.S. Treasury under certain circumstances, a Treasury Department official has told the House Agriculture Committee.Gregory Zerzan, deputy assistant secretary of the Treasury, said the department is sticking with a 1997 opinion that says: "We have serious questions as to whether the Treasury would be obligated to make advances to Farmer Mac to allow it to perform on its guarantee with respect to the securities it held in its own portfolio -- that is where Farmer Mac's guarantee essentially runs to Farmer Mac itself." The small government-sponsored enterprise, which creates a secondary market for agricultural mortgages, generally retains most of the agriculture mortgage-backed securities it guarantees in portfolio instead of selling them to investors. "Treasury has not changed its position on this issue," Mr. Zerzan told the committee chairman, Rep. Bob Goodlatte, R-Va. Rep. Goodlatte asked whether the Treasury would like Congress to clarify the status of the line of credit. "It would not be unwelcome," the Treasury official said. However, Farmer Mac officials don't consider Treasury's position to be a handicap. "If Farmer Mac were coming under pressure to fund its guarantee obligations, it would sell to third parties any AMBS it held long before it needed to access the Treasury line of credit," according to testimony submitted by Farmer Mac.