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.
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.”
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.
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.
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.”
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.”