Too often, the Farm Credit System’s (FCS) regulator, the Farm Credit Administration (FCA) defends the FCS when it should be rigorously regulating it. It doesn’t matter whether the FCS is under Congress’s, the news media’s or even taxpayers’ scope – the FCA always seems to have the System’s back and consistently covers for it.
One of the biggest benefits the Farm Credit System (FCS) has is its tax-advantaged status. The FCS is exempt from certain taxes: profits from non-real estate lending are exempt from state and local taxes, and income from real estate lending is exempt from corporate income taxes. Compared to other lenders, the FCS has massive advantages that tilt the playing field unfairly, meaning farmers and other producers can’t help but go to Farm Credit.
The Farm Credit System (FCS) operates under the Farm Credit Administration (FCA). As the FCS’s regulator, the FCA is supposed to keep an eye on the FCS’s various dealings. It’s a monumental task because the FCS is a colossus, with $335 billion in total assets.
The FCA needs resources to adequately monitor and examine all of the System’s institutions. On March 11, FCA Board Chairman and CEO Dallas Tonsager said as much when he presented testimony before the House and Senate Agriculture Appropriations Subcommittees. And to Tonsager’s credit, he has highlighted one of the FCA’s glaring deficits: it doesn’t have nearly enough examiners.
In 2017, Lone Star Ag Credit, a Farm Credit System (FCS) association in Texas, broke horrible news to its customers: Lone Star’s management was unable to issue its normal financial statements due to “appraisal and accounting irregularities affecting a segment of the Association’s lending portfolio.”
The Farm Credit Administration (FCA) is the Farm Credit System’s (FCS) regulator. But more often than it should, the FCA acts as Farm Credit’s facilitator. Under the FCA’s “regulation,” the FCS has gotten away with making loans to huge telecoms, letting a co-op go bankrupt due to lack of oversight, and merging its institutions to an intolerable degree. It has done all of this while failing to provide sufficient credit for young, beginning and small farmers.
As a veteran banker with a large agricultural portfolio in Kansas, I worked diligently with my colleagues from across rural America to convince Congress to stay the course and prevent granting the Farm Credit System additional lending authority in the recently enacted five-year farm bill. The ideas presented in the recent BankThink column by Lee Reiners to pursue the opposite path fundamentally ignore the reality on the ground in agricultural lending today. While rural America needs investment and support to thrive, any plan for long-term success should have commonsense proposals informed by full consideration of the facts. Simply put, the U.S. needs to let ag banks be ag banks, subject to the stringent regulations that protect consumers and taxpayers and ensure that the FCS adheres to its statutory mission. Continue Reading
On Friday, January 25, an agreement was reached to reopen the federal government after it had been shut down for the longest stretch in history. Federal workers went without pay, and even though many still worked during this time, essential services lapsed. Farmers across the country struggled, and many are still struggling, as crop insurance checks and operating loans normally issued by the US Department of Agriculture (USDA) were not available. Farmers need certainty, and barring that, they need reassurance.
The 2018 Farm Bill is now law, and with it come assurances for farmers, ranchers and producers across the country.
One assurance has been a long time coming.
The Congressional Black Caucus (CBC), the voice for the policy priorities of black members of Congress, touted one of its Farm Bill successes, now enacted into law: requiring the Government Accountability Office (GAO) to conduct a report on the loans the Farm Credit System (FCS) extends to socially disadvantaged farmers, including black farmers.
Ashby Farmers Cooperative Elevator (AFCE) is a cooperative in Minnesota with a financial relationship with CoBank, one of the Farm Credit System’s (FCS) banks, and the only FCS institution permitted to lend to cooperatives. But AFCE has fallen on hard times because its former general manager, Jerry Hennessey, allegedly embezzled money from the co-op “to bankroll big-game hunting trips and other personal expenses.”
Things just got much worse for Mr. Hennessey.
The Farm Credit System (FCS) is supposed to stand by young, beginning and small (YBS) farmers, ranchers and producers, making sure that they have reliable access to credit. And Farm Credit talks a big talk about the work it does to help YBS farmers.
Does it actually help? Last week, the Berkshire Eagle of western Massachusetts published a letter to the editor – a neighbor wrote in to call attention to the troubles of one of the last dairy farms in that part of the state. After working on the farm every day for forty years, the owners of Hav’s Farm are down but not out. They’re struggling with low milk prices, high feed costs and the fallout of a fire that could have engulfed the whole farm. Hav’s Farm has turned to a Go Fund Me campaign to stay afloat Continue Reading