News of Farm Credit Fragility Hits Washington

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The Farm Credit System (FCS), much like other government-sponsored enterprises (GSEs) such as Fannie Mae and Freddie Mac, has a history of catastrophic near-collapse, saved at the last minute by federal bailouts. And as the FCS edges closer and closer to its breaking point, taxpayers may soon be responsible for picking up the pieces.

The FCS’ position is so precarious that it’s been making the rounds in Washington. In her July 29 article in the Washington Examiner, Emilie Padgett reported that the FCS has grown so massive and unwieldy that members of Congress are calling for more oversight before it’s too late.

This spring, Reps. Marlin Stutzman (R-IN) and Mick Mulvaney (R-SC) issued letters calling on the FCS to clear away the cobwebs and provide answers. In his letter to the CEO of the Farm Credit Administration (FCA), Rep. Mulvaney expressed his concerns, noting that “The FCS has grown exponentially in size…If FCS were a private financial institution, it would be the 9th largest bank in the United States.” Rep. Stutzman’s letter to the Government Accountability Office (GAO) voiced the same concerns and called on the GAO to “study the impact the Farm Credit System is having on taxpayers, the agriculture community, and the private banking industry.”

These letters came in the wake of the FCS’ ambitious expansion into lending far outside of its mandate. In 2013, CoBank, a member of the FCS’ tax-advantaged network, granted Verizon Wireless $725 million in loans under the claim that it was a “‘similar entity’ to a rural telephone company and was supplying some infrastructure to rural telecommunications.” In a troubling turn, the FCS issued in 2011 a $750 million loan to restaurant chain Cracker Barrel, which is hardly an agricultural business — unless McDonalds, Burger King and other restaurant chains are considered agricultural businesses too.

Ms. Padgett’s article is a good first step in ensuring that Washington sees what was clear all along: the FCS’ mission creep may soon leave taxpayers holding the bag. Bending the rules for Verizon and Cracker Barrel is bad enough, but leaving taxpayers on the hook for FCS’ faulty judgement is far worse. It’s been too long — Congress should turn its eye to the FCS before it skips out on its tab and leaves taxpayers with the bill.