Farm Credit System (FCS) institutions span the country, extending questionable loans, raking in gobs of cash, and doing so with only light regulation by the Farm Credit Administration (FCA), an independent agency within the executive branch. Congress, in turn, oversees the FCA’s regulatory program.
The Farm Credit System (FCS) primarily serves its customers through individual associations. For the most part, each association has a defined territory, and this patchwork of different territories covers the entire country. But over the past few decades, the number of associations has dropped considerably – the result of a wave of consolidations – resulting in a loss of local control.
Imagine a sprawling, nationwide network of businesses with $365 billion in assets, paying only a minuscule amount of taxes, undercutting its competition, and not receiving the congressional oversight it deserves.
Imagine no more – this is the Farm Credit System’s reality (FCS).
The end of 2020 and the beginning of 2021 brings us a time-honored tradition – New Year’s resolutions! Reform Farm Credit has a few to share with the Farm Credit System (FCS) and its regulator, the Farm Credit Administration (FCA).
First, and this shouldn’t come as any surprise, the FCS needs to stop any sort of “lending for nonagricultural purchases.” Farmers need credit for more than just farming, but Farm Credit shouldn’t be extending loans for any purpose other than to sustain agriculture. This is on the FCA too: enforce the spirit of the Farm Credit Act, and stop FCS lenders from lending outside of their mission.
It’s the end of 2020, and with 2021 fast approaching, many are looking in the rearview mirror at this year’s most memorable events. Reform Farm Credit is no exception. For the Farm Credit System (FCS), 2020 has been a year packed with memorable news.
Earlier this year, Farm Credit acknowledged that Farm Credit Services of Hawaii was defunct – it was absorbed by American AgCredit based in California. While the number of associations dwindles, the overall size of the System grows larger and larger, ballooning from $353 billion in September 2019 to nearly $385 billion in September 2020.
The Farm Credit System (FCS), a nationwide network of lenders backed by the federal government to support farmers, has a knack for finding clients right on the edge of what constitutes “agriculture.” These clients are just close enough to net Farm Credit a steady profit, but they’re taken on at the expense of the young, beginning and small farmers that Farm Credit was created to serve.
This time, Farm Credit has extended financing to Ohio-based Greif, Inc., a “global leader in industrial packaging products and services.” CoBank, the largest FCS institution, will lead other System lenders in a syndicated deal for $225 million, on which Greif estimates it will pay less than three percent in interest.
If there’s one thing you can trust the Farm Credit System (FCS) to do, it’s to stretch the rules – especially the “similar entity” rule – and twist the spirit of Farm Credit’s mission. Its explicit mission in the Farm Credit Act: “improving the income and well-being of American farmers and ranchers by furnishing sound, adequate, and constructive credit and closely related services to them, their cooperatives, and to selected farm-related businesses necessary for efficient farm operations.” But year after year, this last clause has been twisted and tortured to support Farm Credit’s unrestrained, out-of-bounds growth.
This week, Farm Credit of the Virginias, serving Virginia and West Virginia, engaged in Farm Credit’s time-honored tradition of grossly expanding its mission. Farm Credit of the Virginias proudly shared this graphic with the public, letting everyone know that for full time farmers, “non-agricultural purchases can be considered.” In case there were any lingering doubts about whether Farm Credit was going to adhere to its mission, Farm Credit of the Virginias has made it clear that it doesn’t care about that.
The Farm Credit System (FCS), the United States’ first government-sponsored enterprise (GSE), exists to provide credit to America’s farmers, especially its young, beginning and small farmers. Its regulator, the Farm Credit Administration (FCA), exists ostensibly to keep the FCS true to its mission. It does this by taking account of agricultural credit markets, updating its regulations so they’re current and applicable, and enforcing them.
Since 2016, new loans to young farmers fell nearly 24 percent, new loans to beginning farmers fell nearly 18 percent, and new loans to small farmers fell more than 20 percent. That’s a staggering drop.