In This Issue

• Farm Credit Watch Highlights FCS Loans to Ineligible Borrowers
• ABA Launches Groupsite for Ag Bankers
• NCUA Final Rule Relaxes CU Acquired Property Requirements
• Freedom Caucus' First-100-Day Plan Targets CU Biz Lending Rule
• ABA Meets with Hensarling to Discuss Reg Reform

• Supreme Court to Hear Key Patent Troll Case

Farm Credit Watch Highlights FCS Loans to Ineligible Borrowers

 
In the latest edition of Farm Credit Watch out yesterday, Bert Ely pointed out the continued abuses of Farm Credit lender CoBank, which has recently made several large loans to borrowers that are not connected to agriculture in any way.

The first of these loans--a participation in a $1.55 billion credit facility to CyrusOne, a company that leases buildings used to house computer data centers--was the subject of a Dec. 1 letter from ABA to the Farm Credit Administration. The association objected to the loan, as CyrusOne is neither a public utility nor a “similar entity” eligible to receive FCS funding. While CoBank’s portion of the loan participation was not disclosed, it “could easily fall into the $50-$100 million range,” Ely said.

CoBank also recently participated in a $434 million tax equity investment and construction term loan to sPower, a solar utility firm that is a portfolio company of Fir Tree Partners, a privately-owned global hedge fund. Ely pointed out that the three solar projects financed by the loan would be used to power the urban city of Los Angeles, and that the company has no connection to agriculture other than the fact that the projects are located in an unincorporated, rural area in California. Read Farm Credit Watch.  

ABA Launches Groupsite for Ag Bankers

To help agricultural bankers stay connected and address ongoing industry issues, ABA has launched the new ABA Ag Bank Network. The network is an online forum, available only to ABA members, that allows participants to share questions, concerns, documents and other information related to agricultural lending.

“We wanted to bring the success of our other groupsites to our ag banker members,” said Steve Apodaca, senior vice president, ABA’s Center for Agricultural and Rural Banking. “It’s an opportunity for bankers to compare notes with their peers, ask questions and bring real solutions back to their bank.” Join the ag banking network. 

NCUA Final Rule Relaxes CU Acquired Property Requirements

The National Credit Union Administration on Wednesday finalized a rule easing restrictions on federal credit unions’ ability to acquire and lease commercial real estate and make speculative real estate investments. The rule eliminates a requirement for credit unions to achieve full occupancy of acquired premises. 

Under the rule, credit unions will only be required to “partially occupy” acquired properties within six years of acquisition. The rule defines partial occupancy to mean “occupation and use, on a full-time basis, of at least 50 percent of the premises by the FCU, or by a combination of the FCU and a credit union service organization in which the FCU has a controlling interest in accordance with generally accepted accounting principles.” 

ABA has strongly opposed this rule, pointing out that it would incentivize credit unions to maximize non-mission related income by leasing out its properties. Since FCUs do not pay unrelated business income taxes, the rule would incentivize credit unions to occupy only the minimum amount of space required under regulation and lease out the remaining area--a further abuse of the credit union tax exemption, the association said.

ABA noted that the rule also raises safety and soundness concerns for credit unions (and in turn, for the American taxpayer), as speculative investments leave FCUs open to operational and market risks. Read the final rule. For more information, contact ABA's Brittany Kleinpaste.  

Freedom Caucus' First-100-Days Plan Targets CU Biz Lending Rule

The House Freedom Caucus last week released its plan for the first 100 days of the next administration, which includes a detailed list of more than 200 rules and regulations it will target for rollback. Among these are the National Credit Union Administration’s controversial member business lending rule, which significantly loosened the limitations on business lending by credit unions by allowing them to circumvent congressionally-imposed lending caps.

ABA strongly opposes the rule and is currently supporting a lawsuit filed by the Independent Community Bankers of America challenging the rule’s legality.

Other items recommended for removal include the FDIC’s deposit recordkeeping final rule; the margin and capital requirements for covered swap entities; and an executive order establishing the Export-Import Bank as the official export creditor of the U.S. View the plan. 

ABA Meets with Hensarling to Discuss Reg Reform

  
ABA President and CEO Rob Nichols, Chairman-Elect Ken Burgess and EVP James Ballentine met with House Financial Services Committee Chairman Jeb Hensarling (R-Texas) in Dallas last week to discuss regulatory reform plans for the 115th Congress. Hensarling expects to advance a wide-ranging reform bill that includes several ABA-advocated relief provisions for banks of all sizes and has invited ABA and other financial trade groups to provide additional feedback and ideas.

The meeting underscores the increased potential for winning meaningful reg relief in Congress this year. Bipartisan support will still be needed for legislation to clear the Senate, however. That is why ABA, as well as the SDBA, is urging as many bankers as possible to attend the Government Relations Summit on March 20-22 and come to Washington to personally lobby members of Congress. Register for the Summit. 

Supreme Court to Hear Key Patent Troll Case

The Supreme Court last week said it would hear the case of TC Heartland v. Kraft, which ABA is watching closely due to its implications for banks that face litigation from patent trolls.

The case hinges on whether patent trolls--entities that hold patents, often of dubious quality, but use them primarily as the basis for threats of litigation--can bring cases in any federal court district or must bring them only where defendants are incorporated or doing business. ABA and other trade groups submitted a joint friend-of-the-court brief encouraging the Supreme Court to hear the case.

Last year, 40 percent of patent suits were filed in just one of 94 federal judicial districts: the Eastern District of Texas, known for its friendliness to patent trolls. The appellate court’s decision in TC Heartland upholds a broad understanding of corporate residence--rejected by the Supreme Court in a different case--that would allow patent trolls to continue cherry-picking friendly courts for patent cases against faraway defendants, further increasing pressure to settle cases. Read ABA’s brief.