farm credit

Credit where credit’s due

If it were a bank, the Farm Credit System (FCS) would be the seventh largest in the country. At $320 billion in total assets, the FCS has grown beyond its mission. How did it get there?
There are many reasons, but one’s certain: it has neglected the credit needs of young, beginning and small farmers.

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Farm Credit’s Lax Standards

Congress needs to act. The FCS has shown, repeatedly, that it cares more about profits than it does farmers, especially young, beginning and small farmers. Congress, take action: keep the FCS in line by cracking down and making sure that a certain percentage of loans are for small, young and beginning farmers. Future Americans will thank you.

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CT Judge Calls for Federal Investigation of Farm Credit East

The FCS has had its fair share of unauthorized loans and transgressions, but this one takes the cake.

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Farm Credit Conceals Unauthorized Lending

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.

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CoBank Hangs Up on Farmers and Lends to Telecoms…Again

If you thought CoBank had put a stop to their irresponsible mission creep, you’d be dead wrong. This time, CoBank, an affiliate bank of the Farm Credit System (FCS), has fallen back on one of its old standards: lending to huge telecoms.

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Farm Credit System: Luxury Housing Division

Eight and a half miles south of Union Station, Denver’s central hub, sits a majestic mansion. So why is the Farm Credit System (FCS) attempting to find a buyer so it can finance its sale?

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Funding Luxury? Par for the Course

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.

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News of Farm Credit Fragility Hits Washington

The Farm Credit System (FCS), much like other government-sponsored enterprises (GSEs) such as Fannie Mae and Freddie Mac, has a history of catastrophic near-collapse, saved at the last minute by federal bailouts. And as the FCS edges closer and closer to its breaking point, taxpayers may soon be responsible for picking up the pieces.

The FCS’ position is so precarious that it’s been making the rounds in Washington. In her July 29 article in the Washington Examiner, Emilie Padgett reported that the FCS has grown so massive and unwieldy that members of Congress are calling for more oversight before it’s too late.

This spring, Reps. Marlin Stutzman (R-IN) and Mick Mulvaney (R-SC) issued letters calling on the FCS to clear away the cobwebs and provide answers. In his letter to the CEO of the Farm Credit Administration (FCA), Rep. Mulvaney expressed his concerns, noting that “The FCS has grown exponentially in size…If FCS were a private financial institution, it would be the 9th largest bank in the United States.” Rep. Stutzman’s letter to the Government Accountability Office (GAO) voiced the same concerns and called on the GAO to “study the impact the Farm Credit System is having on taxpayers, the agriculture community, and the private banking industry.”

These letters came in the wake of the FCS’ ambitious expansion into lending far outside of its mandate. In 2013, CoBank, a member of the FCS’ tax-advantaged network, granted Verizon Wireless $725 million in loans under the claim that it was a “‘similar entity’ to a rural telephone company and was supplying some infrastructure to rural telecommunications.” In a troubling turn, the FCS issued in 2011 a $750 million loan to restaurant chain Cracker Barrel, which is hardly an agricultural business — unless McDonalds, Burger King and other restaurant chains are considered agricultural businesses too.

Ms. Padgett’s article is a good first step in ensuring that Washington sees what was clear all along: the FCS’ mission creep may soon leave taxpayers holding the bag. Bending the rules for Verizon and Cracker Barrel is bad enough, but leaving taxpayers on the hook for FCS’ faulty judgement is far worse. It’s been too long — Congress should turn its eye to the FCS before it skips out on its tab and leaves taxpayers with the bill.

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Farms =/= Golf Courses

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.

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Dear Farm Credit Council:

On February 5, the Farm Credit Council (FCC) sent a letter rife with errors, bent truths and deceptions to the House Committee on Agriculture in an effort to stave off the ever-growing cry for oversight. While trying to obfuscate the actual issues at hand, the FCC’s letter showed how out of touch it is with reality. Despite claiming “to serve agriculture and rural America as Congress intended” (link to another post), we have shown time (link) and time again just how far the Farm Credit System (FCS) has veered from its original charter.

The letter lists the many clients it has served in its 100 years, but conveniently places a catch-all term “others” at the end of the list — a clear effort to downplay its enormous deals with big telecom and other corporate entities like Cracker Barrel restaurants. Sadly, the FCC portrays the efforts of Reform Farm Credit and similar organizations to educate the public as an effort to “mislead” Congress.

Asking for oversight is not unreasonableFlawed logic, factual errors and logical inconsistencies abound throughout the letter. Despite trying to portray the Farm Credit System as “private” and “cooperatively-owned,” the FCS is a government sponsored enterprise (GSE) and, therefore, is not truly private. As the FCC wails about the purported advantages that commercial banks have, it begs the question of why then do Farm Credit institutions not become banks? The answer is clear: because they do not want to give up the many advantages they  have as a GSE.

The FCC tries to spin its involvement in mineral rights retention, as well as its lack of ability to ensure that loans are only going to eligible borrowers, but that assertion just doesn’t hold up. The FCC fails to acknowledge the several complaints filed by insurance departments against FCS or why it refuses to work with state insurance regulators. It trumpets the patronage checks it distributes, but we know it better as an interest rebate — something it can afford to do because it enjoys a lower tax rate than most Americans and most banks as a GSE.

The Farm Credit System is doing whatever it can to hang on to its advantages. But American taxpayers deserve to know why more oversight and accountability of this enterprise is a bad thing.

FCS oversight summary snippet

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