The Farm Credit Administration (FCA) is the Farm Credit System’s (FCS) ostensible regulator. Occasionally, it does its job and enforces the letter and the spirit of the Farm Credit Act. But usually, it falls woefully short of holding the FCS accountable, such as allowing it to extend loans to a publicly-traded real estate investment trust (REIT) for “server farms.” At the very least, its inefficacy is public.
But last week the FCA unveiled a nasty surprise. On September 12, the FCA issued a news release providing a recap of the FCA’s monthly board meeting. Buried at the bottom of the release is a list of “notational votes,” which are “actions taken by the FCA board between board meetings.” On August 9, the FCA board “approved a request by AgCredit, ACA, to purchase bonds to be issued by a skilled nursing and rehabilitation facility in rural Wyoming.”
Two problems stand out. First, AgCredit, ACA is an FCS association based in Ohio under the jurisdiction of AgFirst, which itself administers Farm Credit in the southeast, extending up to Pennsylvania. Why is an association in Ohio entering into a financial relationship with a facility in Wyoming? Let’s be charitable and assume that the FCA’s missive is incorrect, and that the FCA authorized a financial relationship between this facility and Idaho AgCredit, ACA or Western AgCredit, ACA, based in Idaho and Utah respectively. Still, a reasonable observer should ask: why is a Farm Credit association entering into a financial relationship with a nursing and rehabilitation facility?
There’s no doubt that a nursing and rehabilitation facility is worthy of credit. But is it worthy of Farm Credit? What rationale do Farm Credit’s defenders use to defend this investment? Are there not other financial institutions that could supply this credit? What does this facility have to do with farming?
Unfortunately this isn’t a new phenomenon. The FCA granted itself the authority to approve such “investments.” In prior congressional inquiries, the FCA was unable to explain the substantive difference between a loan and an investment. The only meaningful distinction here is that an investment is the FCA’s work-around to allow FCS institutions to enter into financial relationships with entities that would not be eligible for a straightforward loan.
If this isn’t bad enough, this controversial measure was passed on August 9, just one day after its last monthly meeting and subsequent public disclosure and summary. So, the FCA board made a controversial decision at the most convenient time possible, just long enough for most people to not notice. That is shameful.
The FCA took a step forward in prohibiting a bad actor from further employment at FCS institutions. Now it has taken two steps back. Congress must investigate why the FCA has allowed this “investment,” and whether the timing of the vote was meant to draw attention away from it.