Congress reconsiders federal agricultural policy every five years in a massive piece of legislation called the Farm Bill. The latest Farm Bill, passed in 2018, made some big changes to the Farm Credit System (FCS).
One of the more important provisions enacted by the Farm Bill is a directive to the Government Accountability Office (GAO), commonly known as “Congress’ watchdog,” to investigate the agricultural credit needs of Indian tribes, what barriers stand in the way, and how Farm Credit’s lending activities play into the status quo.
There’s a lot that needs changing – Indian tribes aren’t getting the agricultural loans they need.
The federal government holds around 56 million acres of land in trust for Indian tribes and their members, and around 46 million acres (roughly 80 percent) is used for agricultural purposes. That’s a huge amount of land, the farmers of which should reasonably be able to acess credit. But there are barriers: administrative processing delays, legal concerns and loan readiness, among others.
The foremost barrier, though, is FCS associations’ concerns about recovering loan collateral involving tribal lands because tribes are “distinct, independent political communities.” The GAO contacted 11 FCS associations, seven of which “reported concerns about their ability to recover loan collateral if the borrower defaulted on a loan involving tribal lands,” and six of which “said they had experienced the issues themselves.”
It makes sense that the FCS associations wouldn’t lend to borrowers situated on tribal lands, but only if you don’t think about it too much. Why is the FCS under-serving these communities?
The FCS receives a massive tax break every year. In 2018, its effective tax rate increased to 2.3%. This massive, $349 billion behemoth only paid $126 million in taxes.
Why is Farm Credit getting a tax break if it isn’t fulfilling a public need to its fullest? Even if a Farm Credit association weren’t able to recover collateral in full, wouldn’t the tax subsidy neutralize the negative impact? Why are taxpayers effectively subsidizing a mediocre status quo?
For too long, Farm Credit has gotten away with having its cake and eating it too. Congress has taken the first step by identifying the problem. The next step is holding Farm Credit accountable with annual oversight hearings.