Fed Bank Pres: Land Price Runup "based on fundamentals" not a "bubble"

Published on: 10:33AM Dec 03, 2010

Mike Walsten

Not all bank officials are talking farmland "bubble." Federal Reserve Bank of Chicago President Charles Evans is quoted in the Des Moines Register as saying: "You've certainly seen an increase in prices and values, but it's based on fundamentals." Evans' views came during a meeting with the newspaper's reporters and editors this week. Click here for the story.

Federal Deposit Insurance Corporation Chair Sheila Bair recently expressed concerns an asset bubble could be forming in farmland. Her caution was followed shortly after by similar warnings from Federal Reserve Bank of Kansas City President Thomas Hoenig at a national meeting of agricultural bankers. While Hoenig said he did not currently see a bubble, he warned that rising land values could tempt farmers and lenders to over-leverage farmland purchases. "What I worry about are the incentives we're placing in the market that then create the conditions for a bubble," he said.

Evans expressed optimisim about agriculture in general and said lenders are keeping leverage down on large loans by requiring a high downpayment.

Click here for the full story in the Register.

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