The past three months posed unprecedented challenges for farmers across America as the country responded to the COVID-19 coronavirus. The most significant relief came from the federal government: on March 27, President Trump signed the CARES Act into law, establishing, among many other provisions, the Paycheck Protection Program (PPP). Administered by the Small Business Administration (SBA), Congress designed the PPP to help small businesses, including farms, ranches and other agricultural producers, keep employees on payrolls.
As of April 16, the PPP has helped tens of thousands of farmers with more than $4.37 billion in loan guarantees. Even though the Farm Credit System (FCS) is a lender specifically designated to “provide a dependable source of competitive credit for agriculture and rural America in good times and in bad,” FCS gets little credit for connecting farmers and ranchers to these PPP loans.
The timeline for Farm Credit’s failure to respond to this crisis could not be more straightforward:
- The PPP came into being on Friday, March 27;
- SBA published guidance on Thursday, April 2 which clarified that farms are eligible, as there had been initial confusion;
- By Tuesday, April 7, the Farm Credit Administration (FCA), issued a memorandum to System institutions to provide further clarification; and
- By Friday, April 10, the Farm Credit Council (FCC), the FCS’s lobbying arm, had to admit that the FCS was woefully behind.
According to a spokesman for the FCC, “most [FCS lenders] remain unable to access the system to begin taking applications from customers,” and “many Farm Credit institutions are racing to reinvent their own lending systems to handle loans guaranteed by SBA and begin taking applications from customers.” This ineptitude even led the FCC spokesman to acknowledge that “Farm Credit lenders that have not yet been approved to begin lending are advising customers to try applying through the commercial bank with whom they have a depository relationship.”
Critics of Farm Credit have questioned its competence, but this sets a new bar. Farm Credit’s lending system wasn’t able to handle loans guaranteed by the SBA, and this failure was so great that they had to advise customers to go to a community bank? Even seasoned critics of Farm Credit should be shocked.
A week after this revelation, on April 17, the FCC’s CEO, Todd Van Hoose, came up with excuse after excuse for Farm Credit: “Fundamentally, the SBA system is built for a much smaller universe and they had to add thousands of new lenders, including Farm Credit…We feel like the rules were set up in a way, not intentionally by anybody, that disadvantaged agriculture…The net result was agriculture was put at the back of the line.”
If agriculture was put “at the back of the line,” then how does Mr. Van Hoose explain the 46,000 loans to the agriculture industry made by April 16, amounting to more than $4.37 billion? While the FCS, whose sole mission is agricultural lending, had problems providing loans to the agriculture industry, banks or other lenders stepped up to provide credit. Why didn’t these lenders have the same problems that Farm Credit did?
Community banks leapt into the fray as soon as possible. Take, for example, Union Bank & Trust in Nebraska — according to the Washington Post, “72 hours into the emergency lending program, it ranked second in the nation for number of loans approved, according to the Small Business Administration.” During uncertain times, Union Bank & Trust and countless other community banks supported small businesses and farmers. What held Farm Credit institutions back?
By June 6, the public had an even better picture of Farm Credit’s inability to provide much-needed PPP loans. Of those lenders facilitating PPP loans with under $1 billion in total assets, 3,570 were banks and only 54 were FCS institutions. Participating banks provided nearly 982,363 loans, amounting to nearly $83 billion in loan volume. The 54 participating FCS institutions provided 14,115 loans, amounting to just $1.22 billion. In total, the agricultural sector received 129,258 individual loans, amounting to $7.63 billion – including loans from both banks and FCS. Assuming that FCS lent only to farmers and other agriculture business, FCS loans accounted for only 16 percent of all dollars loaned to farmers, ranchers and other agricultural business, and only 11 percent of all loans to the agricultural sector.
These numbers speak for themselves. While the FCS floundered in the weeks after the federal government established the PPP, community banks were there to protect and shore-up farmers, ranchers and producers. Two weeks after the PPP was established, the FCS pushed customers to get emergency loans through community banks. A week later, the FCC shifted the blame. A month after that, the numbers tell the real story that Farm Credit wasn’t able to help farmers and ranchers when they needed loans the most. The entire Farm Credit ecosystem – the FCS, the FCA, and the FCC – have failed America’s farmers when they needed it the most.
Farm Credit’s defenders often say it’s there “during the good times and the bad.” The bad times are here – where has Farm Credit been?