The Farm Credit Administration is finally getting into the regulation game.
If you thought CoBank had put a stop to their irresponsible mission creep, you’d be dead wrong. This time, CoBank, an affiliate bank of the Farm Credit System (FCS), has fallen back on one of its old standards: lending to huge telecoms.
Government-sponsored enterprises (GSEs) like the Farm Credit System (FCS), Fannie Mae and Freddie Mac are no strangers to huge federal bailouts. And while Congress has been willing, in the past, to bail them out when they’ve gone too far, Congress isn’t always willing to kowtow whenever Fannie, Freddie or the FCS make demands.
Eight and a half miles south of Union Station, Denver’s central hub, sits a majestic mansion. So why is the Farm Credit System (FCS) attempting to find a buyer so it can finance its sale?
While the Farm Credit System unabashedly advertised for recreational properties in high end magazines in the past, take note of these newer ventures: luxury properties in Hawaii.
According to renowned New York Times columnist and sustainable agriculture writer Mark Bittman who this week described the uncertainty facing America’s agriculture industry due to an aging populace of farmers. Bittman noted that while close to 30 percent of farmers are over the age of 65, less than 10 percent have yet to celebrate their 35th birthday.
As reported by the Washington Free Beacon, a USDA Office of the Inspector General (OIG) audit recently concluded that the department does not know – and has no way of determining – if its annual beginning farmers initiative totaling nearly $4 billion has had any positive impact whatsoever.
On February 5, the Farm Credit Council (FCC) sent a letter rife with errors, bent truths and deceptions to the House Committee on Agriculture in an effort to stave off the ever-growing cry for oversight. While trying to obfuscate the actual issues at hand, the FCC’s letter showed how out of touch it is with reality. Despite claiming “to serve agriculture and rural America as Congress intended” (link to another post), we have shown time (link) and time again just how far the Farm Credit System (FCS) has veered from its original charter.
The letter lists the many clients it has served in its 100 years, but conveniently places a catch-all term “others” at the end of the list — a clear effort to downplay its enormous deals with big telecom and other corporate entities like Cracker Barrel restaurants. Sadly, the FCC portrays the efforts of Reform Farm Credit and similar organizations to educate the public as an effort to “mislead” Congress.
Flawed logic, factual errors and logical inconsistencies abound throughout the letter. Despite trying to portray the Farm Credit System as “private” and “cooperatively-owned,” the FCS is a government sponsored enterprise (GSE) and, therefore, is not truly private. As the FCC wails about the purported advantages that commercial banks have, it begs the question of why then do Farm Credit institutions not become banks? The answer is clear: because they do not want to give up the many advantages they have as a GSE.
The FCC tries to spin its involvement in mineral rights retention, as well as its lack of ability to ensure that loans are only going to eligible borrowers, but that assertion just doesn’t hold up. The FCC fails to acknowledge the several complaints filed by insurance departments against FCS or why it refuses to work with state insurance regulators. It trumpets the patronage checks it distributes, but we know it better as an interest rebate — something it can afford to do because it enjoys a lower tax rate than most Americans and most banks as a GSE.
The Farm Credit System is doing whatever it can to hang on to its advantages. But American taxpayers deserve to know why more oversight and accountability of this enterprise is a bad thing.
It’s safe to say that most Americans wouldn’t categorize tax season as a “special time of year.”
So why, then, is Farm Credit joyously announcing it as such?
The answer is simple: the FCS doesn’t pay taxes like the rest of us.
Instead of taking careful stock of its finances like most Americans in the days and weeks leading up to the April 15 filing deadline, Farm Credit has been busy this year finding ways to celebrate. This is according to an advertising campaign by Southwest Georgia Farm Credit in which the publicly-backed lender virtually admits to having more cash than it can possibly handle by depicting money literally growing on a tree. On its website, the association portrays money sprouting from the ground.
For some context, Farm Credit in 2013 paid taxes at a rate of just 4.55 percent — a rate lower than 80 percent of Americans – despite $4.6 billion in subsidized profits. In 2014, Farm Credit similarly enjoyed a net profit of $4.7 billion while paying just 4.47 percent in combined federal, state and local taxes.
With exorbitant profits at hand and absent any responsibility to file its annual taxes at a rate comparable to other farm banks or individuals, Farm Credit has adopted a name for this time of year: patronage season. That’s right, Farm Credit takes its tax payer subsidies, lends to big telecom ($725 million to Verizon?), then turns around and doles out interest rebates to its constituents.
Its first bailout in 1987 cost taxpayers $4 billion. At the time, the System had total assets of $40 billion. Today, the System has grown substantially to more than $282 billion in assets – if it were to need another bailout, the cost to taxpayers would be much greater. This is a real concern given the state of Farm Credit’s lending portfolio, its clear loss of focus and the track record of government sponsored enterprise (GSE) counterparts Fannie Mae and Freddie Mac.
Just remember that while the average American may fret, scramble, worry – whatever it may be – over the implications of April 15 filing deadline, Farm Credit audaciously boasts of its subsidized profits, thanks to an astonishingly privileged tax responsibility.
Tax day is as good a time as any to remind Congress that Farm Credit needs immediate reform.
This week marks the 82nd birthday of the Farm Credit Administration.
If you haven’t heard of the FCA, you’re not alone. Since being charged by President Franklin Roosevelt in 1933 to begin regulating the Farm Credit System, the little-known federal agency has eluded scrutiny. This is disconcerting because the FCA has, at least in recent times, become Farm Credit’s chief enabler.