The Farm Credit Administration (FCA) is the Farm Credit System’s (FCS) ostensible regulator. Occasionally, it does its job and enforces the letter and the spirit of the Farm Credit Act. But usually, it falls woefully short of holding the FCS accountable, such as allowing it to extend loans to a publicly-traded real estate investment trust (REIT) for “server farms.” At the very least, its inefficacy is public.

But last week the FCA unveiled a nasty surprise. On September 12, the FCA issued a news release providing a recap of the FCA’s monthly board meeting. Buried at the bottom of the release is a list of “notational votes,” which are “actions taken by the FCA board between board meetings.” On August 9, the FCA board “approved a request by AgCredit, ACA, to purchase bonds to be issued by a skilled nursing and rehabilitation facility in rural Wyoming.”

Two problems stand out. First, AgCredit, ACA is an FCS association based in Ohio under the jurisdiction of AgFirst, which itself administers Farm Credit in the southeast, extending up to Pennsylvania. Why is an association in Ohio entering into a financial relationship with a facility in Wyoming? Let’s be charitable and assume that the FCA’s missive is incorrect, and that the FCA authorized a financial relationship between this facility and Idaho AgCredit, ACA or Western AgCredit, ACA, based in Idaho and Utah respectively. Still, a reasonable observer should ask: why is a Farm Credit association entering into a financial relationship with a nursing and rehabilitation facility?

There’s no doubt that a nursing and rehabilitation facility is worthy of credit. But is it worthy of Farm Credit? What rationale do Farm Credit’s defenders use to defend this investment? Are there not other financial institutions that could supply this credit? What does this facility have to do with farming?

Unfortunately this isn’t a new phenomenon. The FCA granted itself the authority to approve such “investments.” In prior congressional inquiries, the FCA was unable to explain the substantive difference between a loan and an investment. The only meaningful distinction here is that an investment is the FCA’s work-around to allow FCS institutions to enter into financial relationships with entities that would not be eligible for a straightforward loan.

If this isn’t bad enough, this controversial measure was passed on August 9, just one day after its last monthly meeting and subsequent public disclosure and summary. So, the FCA board made a controversial decision at the most convenient time possible, just long enough for most people to not notice. That is shameful.

The FCA took a step forward in prohibiting a bad actor from further employment at FCS institutions. Now it has taken two steps back. Congress must investigate why the FCA has allowed this “investment,” and whether the timing of the vote was meant to draw attention away from it.

As a sprawling, $349 billion government-sponsored enterprise (GSE), the Farm Credit System (FCS) needs a government regulator to make sure it’s acting lawfully and in line with its mission. The System’s regulator, the Farm Credit Administration (FCA), is largely ineffective, letting the System get away with underserving Indian tribes and socially disadvantaged farmers and ranchers, and failing young, beginning and small farmers in 2018.

It’s hard to imagine things getting worse.

As an independent agency, the FCA is led by a board, comprising three members, one of whom is the chairman of the board and the CEO of the FCA. The board is the executive authority of the FCA: it approves rules and regulations, facilitates the examination of Farm Credit institutions, and requires reports from Farm Credit institutions as it deems fit. The board is integral to the operations of the FCA, and by extension the regulation of a massive, national enterprise with hundreds of billions in assets.

If the board can’t operate, then the FCA can’t.

Earlier this year, the FCA’s chairman passed away, leaving just two members on the board. And the Farm Credit Act requires a quorum of at least two board members to “transact business.” If either of the two sitting board members is incapacitated or otherwise unavailable, the activity of the board comes to a standstill. If the activity of the board comes to a standstill, then the executive function of the FCA comes to a standstill too.

The regulation of the System, then, hangs by a thread. All it takes for the regulator of this behemoth to stop in its tracks is an illness or a career change from one of the board members.

That’s not right, and it doesn’t have to be that way.

There are two options available to pull the FCA back from stopping in its tracks. The first is for the Senate to review and confirm an existing nominee, Rod Brown.

The second option is for Congress to amend the Farm Credit Act to expand the board’s numbers. Then the president would nominate persons to serve on the expanded board, and the Senate would review them and confirm them if it thought appropriate.

The first option is far more reasonable and expedient. And Rod Brown, at the very least, deserves a confirmation hearing. His experience is extensive: a Kansas native with generations of farmers in his family, he has served as the CEO of a community bank in California, one of the largest agricultural states in the country. The FCA would benefit greatly from his wealth of experience, and the Senate Agriculture Committee would do well to assess his qualifications.

The FCA’s ability to regulate the System effectively is at risk. Congress should consider Rod Brown’s nomination before the System lurches toward a crisis.

It’s campaign season! Even though the 2020 elections are more than a year away, presidential candidates have hit the campaign trail to discuss policy and share their vision with voters.

Reform Farm Credit is pleased to announce that reforming Farm Credit is now a 2020 campaign issue!

Earlier this month, Senator Elizabeth Warren (D-MA) released her proposal for “A New Farm Economy.” Detailed and thorough, it outlines her many ideas on how to reinvigorate rural America, including how to expand farmers’ access to credit by reforming the Farm Credit System (FCS).

Continue Reading

When Congress reconsidered federal agricultural policy in the 2018 Farm Bill, it made a few changes to the Farm Credit System (FCS).

Among the Farm Bill’s many important provisions, Congress tasked the Government Accountability Office (GAO), commonly known as “Congress’ watchdog,” with investigating how Farm Credit is addressing the agricultural credit needs of socially disadvantaged farmers and ranchers (SDFRs).

Farm Credit’s got a lot of work to do.

Continue Reading

The Farm Credit System’s (FCS) constituent associations are no strangers to funding luxury purchases extraneous to its mission to support American agriculture. Loans for mansions in the Denver suburbs, purchasing the naming rights for a golf tournament and loans for luxury properties in Hawaii find their place on Farm Credit associations’ ledgers. 

Those entries won’t be lonely any time soon.

Continue Reading

It’s no secret that agriculture is hard, especially for young, beginning and small farmers who have fewer resources at their command. If a downturn is imminent, will the Farm Credit System (FCS) be able to weather the storm?

According to a recent report by the Financial Times, shaky land values are propping up borrowing by farmers now, but that could soon change. The report states in no uncertain terms that loan “delinquencies are also creeping up inside the government-sponsored Farm Credit System, which accounts for 40 percent of US farm debt.”

Continue Reading

Congress reconsiders federal agricultural policy every five years in a massive piece of legislation called the Farm Bill. The latest Farm Bill, passed in 2018, made some big changes to the Farm Credit System (FCS).

One of the more important provisions enacted by the Farm Bill is a directive to the Government Accountability Office (GAO), commonly known as “Congress’ watchdog,” to investigate the agricultural credit needs of Indian tribes, what barriers stand in the way, and how Farm Credit’s lending activities play into the status quo. Continue Reading

The Farm Credit System (FCS) has a legal obligation to furnish sound and constructive credit to young, beginning and small (YBS) farmers and producers. And after a number of questions were raised about many loans the system has made to these farmers, the FCS’s regulator, the Farm Credit Administration (FCA), has decided that after twenty long years, it needs to reform its regulations on YBS farmers.

But not if Farm Credit Council (the FCS’s lobbying arm) has its way.

Continue Reading

Every five years the U.S. Department of Agriculture (USDA) conducts a Census of Agriculture to gather information on the state of agriculture in the US. And this year brings bad news for the Farm Credit System (FCS) and the young, beginning and small farmers and producers that it has a legal duty to serve.

Continue Reading

It’s no secret that rural America has seen tough times in recent years. Low commodity prices, tariffs and poor weather haven’t helped. In the words of Compeer Financial’s CEO Rod Hebrink, “There’s a bleeding going on.”

Continue Reading