Number of Imperiled Agricultural Banks Has Declined Recently Due to U.S. Aid
The number of agricultural banks headed toward failure appears to have peaked, largely because of massive federal farm subsidies and other government help.</br></br>But while the number of imperiled farm banks has declined in recent quarters, economists, bankers and bank regulators say they don't expect any substantial improvement in the agricultural economy soon.</br></br>Indeed, should the government pare its huge support package for farmers and their lenders -- including subsidies, regulator forbearance for troubled banks, and holding farm land off the market -- agriculture could head into another tailspin. "The government programs, in a number of ways, are serving to stablize conditions," said Mark Drabenstott, an economist at the Federal Reserve Bank of Kansas City, Mo.</br></br>Federal subsidies are expected to account this year for nearly three-fourths of farmers' incomes nationwide, which Mr. Drabenstott estimates at about $35 billion.</br></br>That infusion of money is helping many farmers and, thus, lenders hang on. According to the latest Federal Reserve Board data compiled by Veribanc Inc., a Woburn, Mass., consulting concern, the number of farm banks likely to fail has been declining since a year ago.