FCA Regulation Gone Rogue

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The Farm Credit Administration (FCA), notorious for sitting back and letting the Farm Credit System (FCS) regulate itself (poorly), is finally getting into the regulation game.

Who would have thought?

Now, the FCA is finally getting into the business of regulating banks – just not FCS banks. On October 30th, the FCA, along with a few other regulatory agencies, issued a joint release detailing the finalization of a rule to establish “minimum margin requirements for swaps and security-based swaps that are not cleared through a clearinghouse.” That’s clear enough on the surface: the FCA and other regulatory agencies want to “ensure the safety and soundness of swap trading.”

Except for when it comes to the FCS.

The FCA’s release outlines a few of exceptions to this new rule, stating that it “would not apply to swaps of small banks, savings associations [and] Farm Credit System institutions.” Now, it’s understandable that small banks are exempt, but putting the FCS, a behemoth $283 billion dollar government-sponsored enterprise (GSE), on the same level as a small community bank is absurd. Other than this implicit explanation, the FCA doesn’t offer any further clarification as to why the FCS is exempt.

Double-standards and a lack of transparency are par for the course when it comes to the FCA and the FCS. When will Congress exercise its oversight authority over the FCA? If this sort of blatant double-standard isn’t a cause for Congress to investigate, then what is? Congress needs to act to level the playing field and make sure that Farm Credit is playing by the rules.