Oil derricks. Vertical wells. Hydraulic fracturing. Doesn’t sound like agriculture, does it? It does to the Farm Credit System (FCS).
The Farm Credit System (FCS) has a well-documented history of operating out of the bounds of its charter to its advantage. The last time it over-expanded, it held its hand out expectantly, waiting for the Treasury to issue it a $4 billion bailout.
Yes, you read that correctly. CoBank, a Farm Credit System (FCS) affiliate worth over $100 billion, wants to finance a failing, foreign company with tax-exempt, taxpayer-backed dollars.
Following reports that Carolina Farm Credit underwrote publicly backed loans to maintain a luxurious private golf course, the Farm Credit System (FCS), through its affiliate CoBank, has made the news again.
Government-sponsored enterprises (GSE) Fannie Mae, Freddie Mac and Farm Credit have a shared history of federal bailouts. They’re also predisposed to shower their senior leadership with staggering compensation packages. The saga continued this month as The Washington Times reported that the chief executives of Fannie Mae and Freddie Mac would receive monumental pay increases from $600,000 to $4 million.
Are farms and golf courses one in the same?
We don’t think so, either.
But don’t tell that to Carolina Farm Credit, whose idea of “serving the credit needs of rural America” evidently includes underwriting publicly-backed loans for manicured putting greens, challenging bunkers and pristine fairways.
Bert Ely first reported in 2002 that Carolina Farm Credit had lent $4.5 million earlier that year to Fox Den Development Company for 400 acres of developable land that would include “an exciting 18-hole championship golf course” to be complemented by “luxurious” homes.
As it turns out, the loan, which for starters should raise questions over interpretations of the Farm Credit Act, went belly up.
The Charlotte Observer reported last year that “a limited liability company called Fox Den Acquisitions acquired the golf course and other property…after Carolina Farm Credit initiated foreclosure when Fox Den Development Co. defaulted on other loans.”
It’s not surprising, but no less alarming, that this is hardly an isolated incident.
Whether lending to – and later foreclosing on – a millionaire’s winery or seeking the “recreational property” business of Garden & Gun’s readership, the Farm Credit System is unafraid and unashamed to expend resources on non-agricultural loans at the expense of those it was intended to serve in rural America. This is reflected in the 15 percent decrease of Farm Credit’s total volume of loans to small farmers over the past 10 years.
This pattern of behavior would almost be comical if it weren’t gravely true. For today’s FCS, a loss of focus leading to luxury pursuits including golf courses is, unfortunately, par for the course.
After forking over an astounding $1.5 billion in credit to four of the world’s largest telecom corporations, CoBank – Farm Credit’s largest subsidiary and supposed ag lender– is at it again, this time committing hundreds of millions of dollars in new loans to major utility companies across the country.
Here’s how it unfolded:
While it’s anyone’s guess as to why CoBank’s regulator does not speak out against such egregious lending activities, the fact remains that these large customers have more than enough capacity to engage the private sector rather than tap into the taxpayer-subsidized credit provided by CoBank and other Farm Credit associations.
CoBank’s seemingly endless portfolio of non-agricultural loans is unsettling because it represents a wildly stretched interpretation of the Farm Credit Act of 1971. While lawmakers passed the decades-old legislation with the intent of enabling lending to important activities and enterprises to support rural America, they likely did not foresee Farm Credit viewing it as a green light for its current “anything goes” approach.
CoBank will continue to run amok until its activities are reined in and refocused on the farm. This begs the question, when will Congress finally step in to take a look at these non-agricultural loans from CoBank and other large GSE’s masquerading as farm lenders?