This week at a press briefing in Washington, DC, three CEOs of Farm Credit System (FCS) institutions – AgriBank, Carolina Farm Credit and American AgCredit – announced that the System’s portfolio of “stressed” agricultural loans nearly doubled, from four percent to seven percent. Not long after, the System’s regulator, the Farm Credit Administration (FCA), released its 2020 National Oversight Plan.
It could not come at a better time. The FCA’s record on enforcing the Farm Credit Act and keeping the System in line is spotty at best. American agriculture is at risk, and the FCA needs to increase its oversight of the System so that it doesn’t leave farmers – especially young, beginning and small farmers – out to dry like it has in 2018.
The FCA’s Office of Examination has identified three issues facing the System: lending controls, internal audits and cybersecurity threats.
Lending controls: According to the FCA, net farm income has plummeted 40 percent from a record high in 2013. This is negatively impacting the “credit risk profile of some System institutions.”
Internal audits: But the FCA assures that, despite increased credit risk at some System institutions, there’s no cause for concern. Despite there being an Office of Examination explicitly dedicated to examining System institutions, the FCA “expect[s] institutions’ internal credit review or audit programs to assess and review these areas as needed.” It’s fanciful to think this self-policing will be adequate – simply ask members of scandal-stricken Ashby Farmers Cooperative Elevator and Lone Star Ag Credit.
Cybersecurity threats: Farm Credit institutions have increasingly reported “security incidents” related to cybersecurity breaches. System institutions are at risk from wire fraud, compromised credentials, unauthorized access to personally identifiable information and phishing attempts.
The FCA’s summary of its 2020 National Oversight Program does not inspire confidence. The farm economy’s in tough shape, and the FCA’s answer is to let Farm Credit institutions police themselves. At what level of enforcement can taxpayers really consider the FCA an effective regulator?
This plan, despite just being the broad strokes, leaves much to be desired. A Farm Credit institution’s failed because of “accounting irregularities,” an agricultural cooperative’s failed because of rampant embezzlement, and Congress needs to empower the FCA to do its job – beef up its Office of Examination so that it can crack down on Farm Credit Institutions and audit them thoroughly. It’s the least Congress can do to start to put taxpayers at ease.