New interactive timeline released by FCA this summer omits numerous details about Farm Credit’s outside lending and risk to American taxpayers
This summer, the Farm Credit Administration (FCA) released an interactive history timeline of the Farm Credit System (FCS), and congratulated it on its 105th anniversary. The timeline is extensive, but if you take the time to look through all of the dates, you’ll find that the earliest dates have the most detail about monumental shifts in policy. As time goes on, and as Farm Credit enters the last third of the 20th century, it seems to calcify to the point that more than a few of the years are only highlighted by who served as the FCA Board’s Chair.
Like any sweeping review of more than a century of history, it omits details about Farm Credit that can shed a brighter light on its true nature. There are a few points in this long span, included and not included, which deserve more attention.
The timeline is right to include that in 1919, there were 4,000 national farm loan associations providing credit to farmers, responding to their local needs. In 1987, the number of Farm Credit associations dropped to around 300. Now, there are only 67, an issue that Reform Farm Credit has covered extensively. And in 1987, at the tail-end of the 1980s Farm Crisis, Farm Credit received billions of dollars in support from U.S. taxpayers, which would likely be in the tens of billions if it were to happen again today. Any honest accounting of Farm Credit’s history should clearly highlight this alarming trend toward consolidation and Farm Credit’s volatile past.
In the timeline’s flood of dates and events, there stands at least one point that everyone should agree with: the FCA’s establishment in 1933 was and remains an excellent idea, and it deserves commemoration! What better way to honor the FCA’s regulatory ability than by ensuring that its three-person Board, which has only had two people serving on it for years now, is fully staffed? Right now, it only barely satisfies a quorum. All it takes to hobble this regulator is for one person on the Board to retire or not be able to fulfill their duties. It stands against reason to not put in place reform to guard against that possibility.
Slowly plodding toward present day, the timeline gives brief mention to a development that will recognizably change Farm Credit for the worse. In 1969, The Commission on Agricultural Credit recommended to Congress that Farm Credit be granted authority to finance non-farm rural homes, a recommendation which Congress passed into law in 1971. This seemingly benign, minor change opened the door to Farm Credit’s luxury housing financing line of business. Fifty years ago, when Congress passed the Farm Credit Act of 1971, it hardly imagined that it would be used to extend financing for a $25 million, 2-acre property on a California beach.
Another development farther along the timeline points to an area that has raised questions from lawmakers in recent years. In 1992, Farm Credit was now allowed to make loans to “similar entities”; that is, “entities that are ineligible to borrow directly from the FCS but need credit for activities that the System finances for its eligible borrowers.” This one rule has reshaped Farm Credit. Beginning thereafter, under the dubious and debatable justification of “serving rural America”, this government-sponsored enterprise (GSE) has lended billions of American taxpayer-backed dollars to publicly-traded companies like Louisiana-Pacific, Verizon, and CyrusOne LP. These companies can access public liquidity, and can do business with private lenders without having to resort to a lender backed by the American taxpayer.
Finally reaching the most recent decade, the timeline does little to recount Farm Credit’s most salient recent developments. While it’s right to note the restructuring of some institutions in 2018, it fails to mention Farm Credit’s struggle to provide much-needed Paycheck Protection Program (PPP) loans to farmers, its public pivot to lending for “non-agricultural purposes,” and its turn toward providing credit for health care, rather than agriculture.
There’s more to be said of Farm Credit’s deviation from its mission in the past few decades, and there is not much of a recent legacy for the FCA to boast of. Any shred that exists is far overshadowed by Farm Credit’s missteps. If there is anything to glean from this timeline, it’s that the System can be reformed; it has been reformed repeatedly in the past century, with the last major, Farm Credit-reform legislation passed 25 years ago. With 25 years now past, it’s time to modernize how Farm Credit is regulated so that it’s in line with the regulation of other financial institutions, and to reevaluate Farm Credit’s mission. America’s taxpayers deserve at least that much.