Forget the Farmers – Farm Credit Bets Big on Luxury Pursuits
Let’s examine the startling and true story of Patricia Kluge – the inheritor of a mansion and the recipient of $1 million in annual payments from a divorce settlement from her billionaire ex-husband.
Aiming to grow her fortune, she opened the 960-acre Kluge Estate Winery and Vineyard near the home. In an attempt to increase the winery’s output and construct luxury homes on the estate, Kluge sought – and somehow obtained – a $34 million loan from Farm Credit of Virginias (FCV).
That’s when reality hit.
A lack of consumer interest in the homes and the winery itself forced Kluge to sell the mansion and her personal belongings. Still in debt, she defaulted on the enormous Farm Credit loan.
Business mogul Donald Trump seized the opportunity, purchasing the estate and winery for tens of millions of dollars less than the original sticker price after a brief, stubborn refusal by FCV to part ways with the property that it had effectively helped subsidize.
It goes without saying then that this circumstance was an egregious violation of the spirit of the Farm Credit Act.
Farm Credit acknowledges that “Congress established the System in 1916 to provide a reliable source of credit for the nation’s farmers and ranchers,” yet Kluge was very clearly not a farmer nor a rancher, so it’s anyone’s guess as to why FCV thought it’d be wise to underwrite a massive line of credit to finance her proposed luxury estate and winery – a business that FCV seemingly did not understand.
Unfortunately for farmers, ranchers and taxpayers as a whole, this was not an isolated engagement, but rather a specific case of Farm Credit’s broader mission creep, loss of focus and penchant for risky loans.