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. The Treasury issued a bailout in 1987 and the FCS was back in business, shamelessly promoting products beyond its scope.
But this time, it looks like it was caught with its tail between its legs.
At the FCS oversight hearing held by the House Committee on Agriculture in December, a member of Congress on the committee cited reports from his district that the local Farm Credit association offered “a loan for a car wash in a small town in Tennessee, another was funding a vacation home on the Gulf Coast for a local farmer, there’s funding to acquire property for an exotic animal hobby farm, and there’s even funding for a local restaurant chain.” To be sure, these are egregious, but they’re simply reports from unidentified sources. And one would think that the farm credit associations wouldn’t be so foolish as to openly advertise that they’re overstepping their boundaries, would they?
In fact, it looks like that’s exactly the case!
Cape Fear Farm Credit in North Carolina openly advertised that it offered non-agricultural loans, including “loans for automobiles, college tuition, investments, vacation homes or almost any credit need you may have as a farm owner or operator.”
But even worse than that, Cape Fear Farm Credit has now concealed the fact after the hearing. And they’re not the only ones – a site that once hosted listings for luxury property in Colorado and Hawaii now includes a hearty disclaimer.
The FCS only tried to erase its past and reverse its policies after an intensive congressional hearing where it was torn to shreds. Where was its regulator, the Farm Credit Administration (FCA), before this happened? The House Committee on Agriculture won’t be able to monitor the FCS daily, so who will? The FCA clearly wasn’t up to the task. Reform Farm Credit can’t be the regulator because it’s not a part of the government. That means it’s up to Congress to set the stage for farm credit reform.