A $7.1 billion bailout for American farmers hurt by depressed crop prices was approved Thursday by Congress. If approved by President Clinton, as is expected, the bill would make federal crop insurance cheaper and easier for farmers to buy.
The farm rescue package marks the third federal bailout for ranchers and growers in three years, protecting them against depressed grain prices and declining exports. Under the package approved by Congress Thursday, U.S. farmers would receive an average $3,750 apiece. The first round payments, totaling $5.5 billion, would be distributed in late August and September.
The bill also includes major changes to the federal crop insurance program to make it cheaper and easier for farmers to buy coverage over the next five years.
Rep. Charles Stenholm, a Texas Democrat, told the Associated Press he supported the legislation despite concerns that lawmakers were acting just months before harvest. “We have no hard numbers as to the extent of what kind of disaster assistance we may need this year,” Stenholm said, apparently referring to drought conditions in some crop-growing states, including Texas. “I would have been more comfortable in taking our time to fully assess the situation later this year.”
The other portion of the package includes $8 billion to modify the federal crop insurance program. The crop insurance subsidy would rise by $1.6 billion a year, making the coverage easier to swallow. Congress has approved more than $15 billion in emergency farm aid since 1998 in an effort to buffer farmers from the impact of low prices. A farm recovery in rural America remains at least a year away according to most analyst’s estimates.
Meanwhile, insurance agents breathed a sigh of relief earlier this month as a federal appellate court affirmed a lower-court ruling that overturned an Office of the Comptroller of the Currency decision permitting national banks to directly sell crop insurance. In December 1997, the OCC issued an interpretive ruling permitting national banks to sell crop insurance in conjunction with loans made to farmers, claiming the coverage was credit-related insurance and “part of or incidental to the business of banking.”
The Independent Insurance Agents of America challenged the federal banking regulator’s action, arguing that it circumvented Section 92 of the National Bank Act, which restricts national bank sales of insurance to offices located in places of less than 5,000 people. At the appeals court level, IIAA also argued that the OCC ruling had sidestepped provisions of the Gramm-Leach-Bliley Act, which requires banks to conduct insurance activities in operating subsidiaries or affiliates of the parent holding company.
In March 1999, the U.S. District Court for the District of Columbia ruled that the OCC’s interpretive ruling was baseless because authorization for small-town national banks to sell insurance precludes national banks not located in small towns from selling insurance.
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