EXTENSIONS of REMARKS 26931 EXTENSIONS of REMARKS RECOGNITION of the CHIEF of Turning Sour; If the Farm Economy Weak Study Commissioned by Mr
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October 7, 1987 EXTENSIONS OF REMARKS 26931 EXTENSIONS OF REMARKS RECOGNITION OF THE CHIEF of turning sour; if the farm economy weak study commissioned by Mr. Buegler, which EXECUTIVE OFFICER OF THE ens, that number would soar. hasn't been released, says that in many ST. PAUL DISTRICT OF FARM Raging around Mr. Buegler is a storm over cases loan officers were under such tight CREDIT, MR. LARRY D. how to revive the ailing farmer-owned Farm deadlines that they didn't have time to get BUEGLER Credit System, which operates banks across appraisals and income statements. A midlev the country. The system-federally char el official who is quitting after 17 years tered but not financed or insured by the complains that a lot of mistakes were made U.S.-has had $4.8 billion in losses over the because his staff was given weeks to restruc HON. BRUCE F. VENTO past 2¥2 years. Federal regulators expect it ture loans that required months of research OF MINNESOTA to have an additional $1.2 billion in losses and negotiation. for the last half of this year. The system IN THE HOUSE OF REPRESENTATIVES wants a government bailout of as much as "There were a lot of seat-of-the-pants Wednesday, October 7, 1987 $6 billion, and Mr. Buegler's approach is judgments," says Mr. Lins, who was also one getting attention as one of the least expen of the study's authors. Mr. VENTO. Mr. Speaker, it is indeed fitting sive alternatives. The pressure isn't easing. Bad loans keep that yesterday when the House debated the "He has raised a lot of eyebrows," says sprouting. The district is scrambling to re merits of H.R. 3030, the Agricultural Credit Act Neil Harl, a farm economist at Iowa State structure an additional $500 million in loans of 1987, that the accomplishments of Larry D. University. Adds U.S. Rep. Steven Gunder by the end of this year and anticipates more Buegler, the Chief executive officer of the St. son, a Wisconsin Republican: "He is not the next year. Paul District of the Farm Credit System, were most popular man in Farm Credit Services. He is much more popular in Congress." Mr. And Mr. Buegler has yet to figure out how highlighted in the Wall Street Journal. Mr. Buegler's strategy solves a political dilem to rebuild loan business at a time when few Buegler has shown commendable foresight, ma: How to clean up Farm Credit without farmers are willing to go deeper into debt; ability and courage in turning around the per forcing more farmers out of business. more are turning to commercial banks and the lower interest rates they offer. He even formance of the St. Paul district and I would REPUTATION FOR TURNAROUNDS like to share this article with my colleagues. tually wants to offer farmers mutual funds, A slow-talking Minnesotan who unwinds estate planning and brokerage services. [From the Wall Street Journal, Oct. 6, 19871 by taking Las Vegas gambling trips-"! have never gambled with anyone else's money," Mr. Buegler also has made peace with PLANTING SEEDS OF DEBT RELIEF FOR some of the district's traditional adversaries. FARMERS he hastens to add-Mr. Buegler was consid ered the ideal candidate to take over the St. Last summer, he had breakfast with James <By Scott Kilman> Paul district. He was an outsider to the M. Corum, a Minnesota lawyer who repre ST. PAUL. Minn.-By all rights, Ruben Farm Credit System-something federal sents farmers in disputes with Farm Credit Maisel should have lost his farm last year. regulators pushed for. He brought a flock of Services. "It was the first time that anyone For two years, he hadn't paid his biggest ideas from commercial banking, where he over there has drawn me out," Mr. Corum lender, the Farm Credit Services in St. Paul, had built a reputation for turning around says. and he didn't have the money to start ailing banks, generally by trimming staff As a condition of any government bailout, paying anytime soon. and courting clients. Congress will probably demand sweeping But the threat of foreclosure evaporated At the Farm Credit district, he decided cuts in the Farm Credit System's bloated after a banker named Larry D. Buegler took quickly that he had to slash the size of the bureaucracy. In a pre-emptive move. Mr. over the St. Paul district, one of the weakest loans owed by farmers in default, often by writing them down to the value of the land Buegler is negotiating a merger with the in the Farm Credit System, and put in place Omaha, Neb., district. It isn't certain that a radical plan. The strategy: restructure and stretching out payment terms. The move is pumping money into the coffers; he will get the top job, but he is likely to half of its $1.3 billion portfolio of bad loans remain a key player. in six months. before the revamping, so many farmers were paying their loans late that the district "Not many people get an opportunity to One-third of Mr. Maisel's debt was forgiv was losing $480,000 a day just paying the walk into an institution that had lost a bil en and his interest rate halved to 8%. He'll bonds floated to make the loans. lion dollars," he says. "It was an opportuni start making payments again in January. What's more, the traditional solution ty to look good." "If Larry Buegler hadn't come in, I would foreclosing on bad loans-wasn't working have had to file bankruptcy," he says. because land values had fallen to a fraction Mr. Maisel is one of a legion of Midwest of the loans they backed, says Dave Lins, a farmers plucked from the brink of foreclo University of Illinois professor. Now the dis A NATION IN DECLINE? sure by Mr. Buegler, the 50-year-old presi trict says it will come out ahead even if one dent and chief executive of the St. Paul dis third of the reworked loans fail again after trict, which covers four states. Regulators two years. Meanwhile, getting farmers HON. FORTNEY H. (PETE) STARK and bankers say Mr. Buegler, who left a paying again-even if the amount is smaller fast-track banking career with Norwest than what they should have been paying OF CALIFORNIA Corp. of Minneapolis, has restructured the produced a $7 million second-quarter profit IN THE HOUSE OF REPRESENTATIVES loans of more borrowers in less time than for the district, compared with a $210.7 mil any private U.S. banker they know of lion year-earlier loss. Wednesday, October 7, 1987 about 5,000 farmers holding approximately "I personally have a problem with restruc Mr. STARK. Mr. Speaker, forewarned is $709 million of loans. turing loans," says John Shaffer, a farmer forearmed. A MODEL FOR THE SYSTEM and a director of a Farm Credit office in In recent years, Americans have come to In Congress, some are calling Mr. Worthington, Minn. "But the old ways don't Buegler's strategy a model for how the work anymore." accept incompetence, stupidity, and dishones Farm Credit System, the nation's largest Yet Mr. Buegler's strategy involves big ty from their government and leaders. It farm lender, should mend itself. But it has risks. For one, it almost encourages farmers doesn't have to be that way. We need to take scared just as many; the plan involves enor to default: It is an easy way to get big parts of their debt forgiven. Others worry that it a good, hard look at where we're headed mous risks that are driving away creditwor and change course as fast as we can. thy borrowers and may only postpone the only postpones the problem, that more day when the district must face up to its farmers are destined to fail in any event. I recommend the following essay by the bad loans. Mr. Buegler's staff calculates TIGHT DEADLINES eminent American historian Barbara W. Tuch that each of the 5,152 loans it rescheduled Such concerns are fueled by talk that Mr. man. It should wake us up. in the first quarter has a one-in-five chance Buegler's loan restructurings were hasty. A The essay follows: e This "bullet" symbol identifies statements or insertions which are not spoken by a Member of the Senate on the floor. Matter set in this typeface indicates words inserted or appended, rather than spoken, by a Member of the House on the floor. 26932 EXTENSIONS OF REMARKS October 7, 1987 [From the New York Times Magazine, Sept. force. Consequently, the Stark could not or of the Spanish conquistadors in 1519. He be 20, 1987] did not defend itself. stowed gifts on them, even received them in A NATION IN DECLINE? THE AUTHOR FEARS A In the case of the Stark, no one was tried his court. His downfall and death soon fol DETERIORATING ETHIC IN THE U.S. WITH by court-martial to establish a clear verdict lowed at their hands. INCOMPETENCE AND INEFFICIENCY THREATEN of responsibility. In 1756, in an analagous Lawlessness often accompanies incompe ING SURVIVAL situation, the Brjtish Navy sent an inad tence. When the President authorized the <By Barbara W. Tuchman> equate and poorly manned fleet to fight off arms sale to Iran without informing Con a French attack on Minorca. When the com gress, he may have violated the Arms Decline of a nation or a society is a pro mander, Adm.