Farm Credit Spotlight

Reform Farm Credit’s Year in Review!

Reform Farm Credit (RFC) has been working for two years to bring the accountability that the Farm Credit System (FCS) sorely needs. And the past year has seen some good movement in making sure the FCS is following its mission to provide reliable access to credit for all farmers – especially those who need it most.

In December, RFC exposed troubling news about the FCS – its largest bank, CoBank, made a $1.55 billion loan to a real estate investment trust (REIT) investing in global data centers, hardly an agricultural loan. RFC also found that the FCS could be ill-placed to make loans to support midsize farmers in addition to small farmers, despite passing a major milestone: as of this past September, the FCS holds $315 billion in assets.

And throughout election season, lawmakers across the country called the FCS out on its lack of accountability and its efforts to expand beyond its mission. Lawmakers have noted the FCS’s glaring issues and have taken steps to make sure farmers, and the economy at-large, are not adversely affected. In May the Senate Committee on Agriculture, Nutrition and Forestry took the FCS and the Farm Credit Administration (FCA), the FCS’s regulator, to task for their gross mismanagement. The fallout from the hearing was so severe that the Farm Credit Council, in Washington DC to celebrate the FCS’s 100 year anniversary, had to cancel an event to account for a “recently announced strategic shift in direction for reputation management.”

But lawmakers wouldn’t have been able to do excellent work in holding the FCS accountable without journalists and commentators uncovering the FCS’s abuses. In May Ralph Nader published a piece in The Huffington Post on “The Funny Business of Farm Credit” and The Washington Post’s Thomas Heath published an investigatory piece in April examining the FCS’s role in loans to Verizon, U.S. Cellular and Cracker Barrel.

In February, RFC discovered that a judge in Connecticut recently called for a federal investigation of Farm Credit East. The association, serving New England, was found to have “set up a new LLC in order to get additional funds from the federal government” for its client, a former state legislator.

Fortunately, 2016 began with the aftermath of the House Committee on Agriculture’s oversight hearing of the FCS and FCA in December 2015. Despite having two and a half hours to explain only some of the FCS’s egregious offenses, the panelists needed to submit extra testimony, the inaccuracies of which were exposed in RFC’s Check the Record series.

The Reform Farm Credit team has worked hard this year to return the FCS to its original purpose, but we can’t do it without your help. Keep visiting Reform Farm Credit to learn more about how you can help us continue the fight to hold the FCS accountable to its mission, to farmers and to taxpayers!

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Does Farm Credit Walk the Walk?

It’s no secret that farmers, especially young, beginning and small farmers, are struggling in this economy. To survive through the tough times, and to thrive during the good times, farmers need reliable access to credit. And the Farm Credit System’s (FCS) greatest defenders always say that the FCS and the Farm Credit Administration (FCA) are here to “ensure a safe, sound, and dependable source of credit and related services for agriculture and rural America.”

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It’s our two-year anniversary!

Although the holidays are in full swing, we hope you will take some time to read through our Reform Farm Credit blog during our two-year anniversary and learn why we keep pushing for reform to the Farm Credit System (FCS).

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Midsize farms are declining – is Farm Credit helping?

The FCS has a duty, outlined in statute, to provide reliable access to credit for small farmers. So far, it hasn’t done its best to provide that access. And when government agencies don’t follow their mission, it’s time for Congress to take them to task.

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The FCA’s Revolving Door

Hold onto your seats – the Farm Credit Administration (FCA) is going to reform itself in the next few years! Well, not really.

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USDA picks up CoBank’s slack

CoBank, the most prominent institution in the Farm Credit System (FCS), is authorized to make loans to cooperatives that provide essential services for rural areas –electricity and telephone access are the most common. Of course, CoBank has used this to justify its horrible history of lending to huge telecoms that aren’t cooperatives – Verizon, AT&T, Frontier Communications, US Cellular – and it’s only gotten worse.

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Why the FCA lags behind other Federal agencies

The Farm Credit System (FCS) and its regulator the Farm Credit Administration (FCA) had gotten a pass on nearly everything – failing its mission to help small farmers, lending for “automobiles, college tuition, investments, vacation homes or almost any credit need you may have” and lending to huge telecoms.

That is, until it was reprimanded at oversight hearings in the House and in the Senate.

But for all of the important questions that have been raised by senators and members of Congress, one extremely important point hadn’t been made, until now.

Earlier this month in his column in The Washington Post, George Will touched on an important issue – many agencies in the executive branch of government have five commissioners at the helm, so why are there agencies with three commissioners or fewer?

This may seem like a picky complaint to many, but this is an issue that strikes right to the core of our system of government and the philosophy it is based on. Checks and balances, redundancies and a diversity of opinions is what gives our system of government strength and adaptability. To have an agency or administration operate with fewer than five decision makers at the helm means that there is less room for dissent, less room for non-siloed thinking and less room for innovation. 

So it comes as no surprise to see that the FCA’s structure has likely contributed to its stagnation.

The FCA has a three-person board of directors, one of whom is the chairman. Each board member is appointed by the president for a term of six years – an appointment which could potentially outlast a president’s tenure in office. This three-person board structure leaves little room for dissent, innovation and fresh, bold leadership. 

This is a problem that Congress can fix easily – amend the Farm Credit Act to require the FCA to have five board members. With two additional board members, the current board members will be exposed to new ideas and to innovation – new ways to increase lending to small farmers, to clamp down on associations that don’t play by the rules and to make the FCS more financially stable. Without change soon, the FCA will continue on its path to total stagnation – and we might all eventually pay for it.

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Farm Credit Looms Larger and Larger

Year after year, the Farm Credit System (FCS) has grown larger and larger. A year ago, the size of the FCS was $291 billion in total assets. And as of March 31, 2016, the FCS’s size was $315 billion in total assets. 

Let that number sink in.

Most community banks, by total asset size, are a drop in the bucket compared to what the FCS has become. If the FCS were considered a bank, it would be the eighth largest in the US. And in just 6 months, the FCS grew by $24 billion – 8 percent.

The FCS’s defenders might claim that this has been an extraordinarily fruitful year, but the truth is in the data. Five years ago, the FCS had $230 billion in total assets. Ten years ago, the FCS had $162 billion. And 13 years ago, as far back as the Farm Credit Administration provides data, the FCS had $115 billion. In only 13 years, the FCS has nearly tripled in size.

Every financial institution has its good years and bad years, but this trend is outrageous. And with all of this explosive growth, you’d think that the FCS would be using these new resources to help young, beginning and small farmers, right?

Wrong. 

The FCS has continued to lend to telecoms, foreign subsidiaries of US companies and consumers looking to invest in luxury houses and vacation properties. And all of this, of course, while it receives tax breaks to help the young, beginning and small farmers it’s been short-changing 

But following an investigation by The Washington Post and commentary from consumer advocate Ralph Nader, legislators and policymakers have noticed that something is amiss.

The tide is turning, but now’s the time to press the advantage – Congress needs to reform the FCS, before it’s too late.

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Fannie and Freddie know their limit – does Farm Credit?

How will policymakers know when it’s in the best interests of the economy and the taxpayer to bail out the FCS? The issue lies at Congress’ feet: mandate stress testing and annual reports on the stability of the FCS or be prepared to remain in the dark on whether the FCS can withstand a devastating market crash – before it’s too late.

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Farm Credit’s Silent on CoBank’s Tell-All

The Farm Credit Council recently quashed an “Idea Share” because of the Farm Credit System’s (FCS) desperate need for a “strategic shift in direction for reputation management.” It’s possible that the problem with their reputation is the lack of transparency – – something that is clearly not their strong suit. But nothing can be hidden in each FCS bank’s annual report. CoBank’s annual report is especially revealing.

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