The farmers and bad debts have become synonymous. Little wonder then that a bank that carr

ies a third of all loans to America's farmers is in trouble. But when that bank's total debt is $ 60 billion, more than half the size of Brazil's, and its losses over the past two years, at $ 4.8 billion, exceed anything in American banking history, the problem becomes political as well as financial. Congress began this week to discuss a bill to rescue the Farm Credit System.

The Farm Credit System is not strictly a bank. It is a peculiar animal, a federation of 37 banks (three in each of 12 regions and one to sell bonds to Wall Street) containing 387 lending associations, owned by the farmers who borrow from them. It was set up by the federal government in the early years of the century to give farmers an alternative source of credit to the banks, but has long ago paid off any federal debts and so, in theory, is now independent.

The system got into trouble by lending too readily in farming's good times, the 1970s, as land prices rose and farm profits grew. Total farm debt quadrupled between 1970 and 1984. Farmers flocked to the Farm Credit System because its interest rates, based on a moving average, lagged behind those of the market. But the falling profits and falling land prices of the early 1980s coincided with raising interest rates, putting many farmers in difficulty. When interest rates began to fall, the moving average responded slowly, so many farmers found themselves paying well above market rates for their loans. They promptly refinanced them with other banks. Even as its bad debts grew (they are now $ 7 billion), the Farm Credit System's loans shrank, from over $ 80 billion to about $ 50 billion today.

In May the system went to Congress and asked for $ 6 billion to see it through its present crisis. Although the worst losses are past, at least two of the banks in the system will have run out of capital altogether by the end of the year. Congress has reacted some impatience, for this was the third request for help in three years, though admittedly the first two had not been for money. In 1985 the Farm Credit System was allowed to share a capital between its banks, so that its rich members could bail out its poor ones. In 1986 it asked to be allowed to fiddle its accounts so as to defer losses. Congress, to its shame, agreed. The first measure helped little, because the shareholders of the richer banks sued to stop their money being used to help the poorer. The second measure simply stored up trouble for the future. Now the system needs dollars soon.

This time, however, Congress has demanded changes in the way the system is run. Mr. Charles Stenholm, a Democrat from Texas, wants to fuse the 37 banks into seven and devolve the lending and rate-setting powers to the 387 local lending associations, thus cutting out some of the bureaucratic overlaps (accounts are audited three times, for example). The shareholders would almost certainly sue. But the threat has concentrated the minds of the system's directors, who have produced a plan for cutting the system's 12 districts to six with one bank in each.

The bill before the House of Representatives (the Senate is still working on its version) would, in return for such changes, put in place a federally controlled organization that would seek money to stave off bankruptcy, as necessary. It would also throw commercial banks a present by creating a secondary market in farm mortgages, nicknamed Farmer Mac; this would, in effect, pass on some of the benefits of a bail-out to the private banks.

Representative John Dingell of Michigan threatened to fight this on the floor of the House and rolled out some big guns, including the chairman of the Federal Reserve Board, Mr. Alan Greenspan, and his predecessor, Mr. Paul Volcker, to try to stop it. The secondary market would enable the banks to take away the system's best loans, they said,

A．Agriculture history of America.

B．Conflicts between farmers and creditors.

C．Means of expanding farming.

D．Help for the Farm Credit System.