Watch That Gap Management

Local bankers aren’t nearly as concerned about playing interest rate limbo as the possibility of rates rising again. But 11 rate cuts during the last 12 months have made gap management — balancing the void between the interest banks are charging and paying — a study in fiscal Darwinism.

The general consensus in the industry is that rates have bottomed out. Prudent local bankers have already developed their strategies for rising interest rates. In the parlance of bankers, remaining “asset sensitive” so that the bank’s assets (loans) reprice faster than its liabilities (deposits) is one way.

Having the discipline to fix rates for no more than 24 to 36 months is another. Economists say it takes six months to feel the effect of a rate cut on the economy. So considering the momentum that’s built for the next upswing, expect rates to rise as rapidly as they fell.

One company to watch is Bank of Fayetteville, which started 2001 with an interest margin of 4.22 percent and ended the year at 4.26. Given the sagging economy, that’s like moving the fences back and still hitting the ball out.

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Senators Do Farmers Right

A study by the University of Arkansas on the impact of the House and Senate versions of the farm bill shows the Senate bill’s limits on farm support payments would affect about 40 percent of Arkansas rice and cotton farmers. It could result in farm losses as large as $382 million annually, according to the analysis requested by Sen. Blanche Lincoln, D-Ark.

The analysis shows the impact of the payment limits in the Senate bill on the total Arkansas economy would be a loss of $621 million. It takes into account farm input, food processing and all other economic sectors.

In 2000, Arkansas farmers received $842 million in price and income supports. The new House version of the bill would pay $955 million. The Senate’s would pay $708 million.

Depressed farm prices have reduced Arkansas’ net farm income without government support 60 percent, the report said. Even with price and income supports, net incomes for Arkansas farmers have declined by nearly a third since since 1996.

And the USDA Economic Research Service forecasts that 48 percent of the farms in the Delta will be losing money in 2002.

Lincoln is right. The Senate version of the farm bill is bad news for Arkansas and its farmers. We applaud her and Sen. Tim Hutchinson, R-Ark., for standing in opposition.