With more than $400 billion in assets backed by taxpayer dollars, the Farm Credit System (FCS) should be receiving more regular oversight from its regulator, the Farm Credit Administration (FCA), and Congress, which has the oversight authority over both the FCS and the FCA. Is strong oversight a thing of the past?
The Lugar Center, a good-government nonprofit founded by the late U.S. Senator Richard Lugar (R-IN), brings together a collection of expert voices to comment on a number of different issues the Senator championed. One such issue is the quality of congressional oversight.
There’s much work to be done.
The Center has published a database, the Congressional Oversight Hearing Index (COHI), which tracks oversight hearings, going all the way back to 2009. In this current Congress, the 117th, the Senate and House Committees on Agriculture received failing grades. Last session, the Senate Agriculture Committee earned a disappointing, but still passing D+ score. The House Agriculture Committee, meanwhile, earned a D.
But a focus on just congressional oversight may be counterproductive. Though oversight is one of the committees’ mandates, committees are often inundated with matters to handle day-to-day. Committees have other mandates as well—arguably, the most important of which is to create policy. It’s understandable, to some degree, if their focus is on those other mandates too.
What’s inexcusable is for the FCA, Farm Credit’s regulator, to shrug off its duty to oversee Farm Credit. The FCA is the first line of defense against Farm Credit’s questionable activity. And it’s abundantly clear that the FCA needs to increase its oversight activities substantially.
There should be no shortage of FCA oversight activity while Farm Credit continues its current course. Just this year, FCS institutions have loaned tens of millions to a publicly-traded company, a wellness and beauty company, and a global industrial packaging corporation. At the same time, the System as a whole has increased its total assets, ballooning from $365 billion in 2019 to $400 billion at the end of 2020. Its income, buoyed by special tax exemptions, has grown higher too, reaching $6 billion in 2020.
Regulatory agencies like the FCA are empowered to be the first line of defense to check against this sort of activity. But observers would be right to question whether it has been up to the task. Earlier this year, the FCA’s Chairman conceded that the System “bump[s] against our authority.” Bumping up against authority is one thing, but Farm Credit has, as we’ve seen, flouted the spirit of the Farm Credit Act while reaping profits aided by special tax exemptions. And although it may have just been a slip of the tongue, the FCA’s concession suggests a cozy relationship between the FCA and Farm Credit, one in which they view themselves as one and the same. That’s unacceptable for a regulatory agency.
Congressional Agriculture Committees create substantive policy and conduct oversight. The FCA implements policy, and conducts its own oversight. It starts with the FCA. If the FCA isn’t doing a good enough job, then Congress needs to act.