In written testimony provided Wednesday to members of a U.S House Agriculture subcommittee, executives of a private, Netherlands-based bank argued that protest to its unprecedented takeover of a Midwest Farm Credit Bank is contradictory.

Rabobank claims some of the opponents of its plan to acquire Farm Credit Services of America, headquartered in Omaha, Neb., are also the ones who reached out to Rabobank in recent years about forging a public/private venture.

Farm Credit Services is one of five financial institutes under the umbrella of the 88-year-old Farm Credit Administration, which re-adopted a statute in 2002 that would conditionally permit a bank’s “exit” from its umbrella.

“Obviously, given their current stance, they have changed their position regarding the exit provision,” Rabobank’s testimony reads. “We are also surprised that the validity of the exit provision is only being seriously challenged for the first time now that someone wants to actually use it.”

Critics from the Farm Credit Council charge that such a merger goes against the primary purpose of the FCA system – financially assisting farmers of all types and sizes – and are asking Congress to revoke the statute. The change could also, according to some opposition, irreversibly weaken the FCA and cause changes system-wide, including possibly into the Delta.

But Rabobank, which announced intentions of the merger on July 30, contends that position is not credible. “This is a hard case to make, in that FCSAmerica currently comprises well under 10 percent of the entire System’s assets.”

The House Agriculture Subcommittee on Conservation, Credit, Rural Development and Research discussed implications of the potential merger. Any merger would first need approval from the FCA and then approval from FCS stockholders.

FCS reportedly has about 51,000 stockholders in South Dakota, Iowa, Nebraska and Wyoming.

Rabobank boasts that its takeover of the bank would be beneficial on several levels. It notes that the $600-million merger fee paid to the FCS stockholders would be new money that would be directly reinvested into farming. It described concerns that any future profits would be redistributed into company business in the Netherlands as “groundless fear.”

“The net profits earned and generated by FCSAmerica, as a part of Rabobank, will stay in the U.S. and be reinvested in the business,” bank officials write.

Furthermore, the bank argues that the acquisition would result in expanded, global resource opportunities for rural U.S. farmers. Rabobank, founded in 1896, ranks among the 25 largest banks in the world and has operations in Ireland, Canada and Poland.

The company notes that in 1994 it entered the Australian agribusiness during a period of serious drought. Today, Rabobank says it has 10 times the number of clients it started with in that country.

Under existing conditions due to government restrictions, the bank says, FCS decisions are limited to financial products and services within the four-state boundaries. The private merger would eliminate such borders, while simultaneously ensuring that policies and business decisions remain strictly domestic.

“It is reasonable, even professionally responsible, for an agricultural lender such as FCSAmerica to seek to enable itself to meet the challenging needs of its customer base, and to equip itself to better serve needs of tomorrow’s customer,” testimony reads.

Finally, Rabobank criticized the timing of the FCA and Congress’s discussion of rescinding the exit provision.

“To consider changing those regulations now, in mid-stream … would seem to call into question the purpose and credibility of Farm Credit System regulations in general.”

e-mail: abell@primediabusiness.com