Flash back to May 2013: St. Joseph’s College in Rensselaer, Indiana, is facing “a ‘dire’ financial situation.” The $15 million to $20 million offered by the Mayo Clinic was not enough — St. Joseph’s College needed “a total cash influx of $100 million,” according to Inside Higher Ed. Between a rock and a hard place, this established institution, nearing its 125th anniversary, was given the chance to work with an unorthodox lender.
Enter Farm Credit Mid-America.
Farm Credit Mid-America, an association of the Farm Credit System (FCS), is there to offer “unique solutions” for their customers’ needs. And Farm Credit Mid-America was there for its client, to the tune of a $27 million loan.
Sound strange? It should.
St. Joseph’s secured the loan from Farm Credit Mid-America under a dubious pretense: at one point, St. Joseph’s had been gifted 8,000 acres of farmland. No mention is made of whether this farmland was used to produce crops or even for educational purposes. Any common observer can see that this farmland was nothing more than a foot in the door for Farm Credit Mid-America to make a loan outside of its scope.
Outside of its scope is certainly bad enough, but Farm Credit Mid-America’s failure is compounded by the fact that it will likely face a severe loss. St. Joseph’s operations have been suspended for the foreseeable future, and as of June 30, its board resigned the institution’s accreditation. It is unfortunate for everyone involved, but the truth of the matter is that a venerable institution of higher learning has had to close its doors, and Farm Credit Mid-America is trying to make a quick buck through an unauthorized, dubious deal.
And to top it off, will Farm Credit Mid-America even recoup the losses on this loan? Shouldn’t Farm Credit Mid-America have had the sense to not endanger taxpayer funds by extending a loan to an institution that almost no other credit institution was willing to lend to? How big of a financial hit will Farm Credit Mid-America take?
Farm Credit Mid-America will lose millions of dollars because it chose to invest poorly. The opportunity cost of that $27 million is staggering: how many young, beginning and small farmers could have used those loans to jumpstart their businesses? How many towns throughout the Midwest could have used that capital infusion to revive their communities?
There are no winners in this: Farm Credit Mid-America’s loan, and the loss that will result from it, will compound the misfortune resulting from St. Joseph’s closure, and young, beginning and small farmers throughout the Midwest will be deprived of loans they desperately need. We won’t know the full loss stemming from this ill-planned, possibly unauthorized loan. But what we do know is that Farm Credit Mid-America’s loan to St. Joseph’s exemplifies the FCS’s major problem: loaning to large, risky entities while thousands of potential young, beginning and small farmers are left in the dust. That isn’t right, and our leaders in Congress need to act now to keep the FCS honest.