Order Code RS21977
Updated March 8June 12, 2007
Agricultural Credit: Institutions andFarm Bill Issues
Jim Monke
Analyst in Agricultural Policy
Resources, Science, and Industry Division
Summary
The federal government has a long history of providing credit assistance to farmers
by issuing direct loans and guarantees, and creating rural lending institutions. These
institutions include the Farm Service Agency (FSA) of the U.S. Department of
Agriculture (USDA), which makes or guarantees loans to farmers who cannot qualify
at other lenders, and the Farm Credit System (FCS), which is a network of borrowerowned lending institutions operating as a government-sponsored enterprise.
The 110th Congress is expected to address agricultural credit through both
appropriations and authorizations bills. Appropriators will consider funding for FSA’s
farm loan programs, and the agriculture committees may consider changes to FSA and
FCS lending programs. The 2007 farm bill is expected to be the venue for many of the
authorizing issues, although stand-alone legislation may be used for extensive reforms.
2007 farm bill and appropriations bills offer Congress opportunities to address
agricultural credit. The House agriculture subcommittee markup of the farm bill
includes several adjustments to the FSA loan program, and limited expansion of FCS
lending authorities for renewable energy and rural housing. The FCS provisions are
particularly controversial, between FCS desires for expansion in their Horizons project
and opposition from commercial banks. Separately, appropriators will consider annual
funding levels for FSA’s farm loan programs. This report will be updated.
Background
The federal government has a long history of providing credit assistance to farmers.
First, USDA’s Farm Service Agency (FSA) issues direct loans and offers guarantees on loans
loans made by commercial lenders. The direct and guaranteed loans are intended to assist
farmer borrowers to farmers who do not qualify for regular commercial loans
credit. Therefore, FSA is
called a lender of last resort. TheSecond, the Farm Credit System (FCS), second only to commercial
banks as a holder of farm debt, is chartered by the federal government as
(FCS) is a cooperatively
owned commercial lender that is federally chartered to serve only
agriculture-related borrowers. FCS makes loans
to creditworthy farmers much like commercial banks, and is not a
lender of last resort.
Statutory authority for both the FSA and FCS lending programs is permanent, but
omnibus farm bills, such as the expected 2007 farm bill,farm bills often make adjustments to the
eligibility criteria and operations of the loan programsthe scope of operations.
Other sources of credit for agriculturefarm credit include commercial banks, life insurance
companies,
and individuals, merchants, and dealers. Figure 1 shows that commercial
banks lend the largest portion
most of the farm sector’s total debt (37%), followed by the Farm
Credit System (30%),
individuals and others (21%), and life insurance companies (5%).
The Farm Service
Agency provides 3% of the debt through direct loans, and guarantees
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another 4% of the
market (through loans issued byof commercial banks and FCS). Ranked
by type of loan, the FCS has the largest share of real
estate loans (38%), and commercial
banks have the largest share of; commercial banks lead for non-real estate loans (49%).
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Figure 1. Market Shares of Farm Debt, by Lender
Total: $214 billion in 2005
Farm Credit System
30%
Commercial banks
37%
Farm Service
Agency
Direct
3%
Guaranteed
4%
Life insurers
5%
Individuals and others
21%
Source: CRS, using USDA-ERS and FSA data at
[http://www.ers.usda.gov/Briefing/FarmIncome/Data/Bs_t6.htm]
Credit is an important input to agriculture, with all lenders holdingThe farm sector has about $214
billion in outstanding farm loans in 2005debt. Yet only about 66% of farmers have
any debt
(farm or nonfarm), and only 38% have farm debt. The types of farms holding the most
debt include the larger commercial farms that produce most of the output, and mediumsized family farms.
Most of the debt is owed by
medium-sized family farms and large commercial farms. Creditworthy farmers generally
have adequate access to loans, mostly from the
largest suppliers — commercial banks, FCS, and merchants and dealers. According to
reports from lenders, credit. Credit conditions are generally good, and default rates have been trending
lower to levels not seen since before the credit crisis of the 1980s. Overall, USDA data
show that debt-to-asset ratios for the farm sector have been stable or slightly declining
over the past decade, indicating that the sector is not highly leveraged with debt. Recent
strength in farm income has given farmers more capacity to repay their loans or borrow
new funds. Farm equity has been rising because increases in debt typically have been
more than offset by larger gains in land values.
Nonetheless, despite the relatively strong farm economy in recent years, some
farmers continue to experience financial stress due to individual circumstances, and may
be unable to qualify for loans. Agriculture is also
been declining. USDA data show stable or slightly declining debt-to-asset ratios, rising
equity, and strength in farmers’ ability to repay debts.
Nonetheless, some farmers continue to experience financial stress, and agriculture
is prone to business cycles that may pose
financial difficulties. Thus, many interests in production agriculture
continue to see some
need for federal intervention in agricultural credit markets.
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Farm Lending Institutions
Commercial Banks, Life Insurers, and Individuals. Together, commercial
Commercial banks, life
insurance companies, and individuals and others provide 63% of total farm
debt without
federal support or mandate. Commercial banks provide most of the loans
to farmers
through both small community banks and large multi-bank institutions.1 Life
insurance insurance
companies historically also have looked to farm real estate mortgages for
diversification. Another important category of lenders is
The “individuals and others.” This
” category consists of seller-financed and personal loans from private
individuals, and the
growing business segment of “captive financing” by equipment dealers and input
suppliers (e.g., John Deere Credit and Pioneer Hi-Bred Financial Services)agribusinesses.
Farm Credit System (FCS).2 Congress established the Farm Credit System in
1916 to provide a dependable and affordable source of credit to rural areas at a time when
commercial lenders avoided farm loans. Operating as a government-sponsored enterprise,
FCS is a network of borrower-owned lending institutions. It is not a government agency
or guaranteed by the U.S. government. FCS is not a lender of last resort; it is a for-profit
lender with a statutory mandate to serve agriculture. Funds are raised through the sale of
FCS bonds and notes on Wall Street. Five large banks allocate these funds to 96 credit
FCS is not a government agency nor guaranteed
1
Commercial bank issues are summarized by the American Bankers Association at [http://www.
aba.com/Industry+Issues/issues_ag_menu.htm].
2
Farm Credit System institutions are described at [http://www.fca.gov/FCS-Institutions.htm].
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by the U.S. government, but is a network of borrower-owned lending institutions. It is not
a lender of last resort; it is a for-profit lender with a statutory mandate to serve agriculture.
Funds are raised through the sale of bonds on Wall Street. Five large banks allocate these
funds to 96 credit associations that, in turn, make loans to eligible creditworthy borrowers.
Statute and oversight by the agriculture committees determine the scope of FCS
activity, and provide benefits such as tax exemptions. The system is regulated by the
Farm Credit Administration (FCA). The program has permanent authority under the Farm
as a government-sponsored enterprise (GSE), and provide benefits such as tax
exemptions. Eligibility is limited to farmers and ranchers, farm input suppliers, rural
home owners in towns with less than 2,500 population, and cooperatives. The system is
regulated by the Farm Credit Administration (FCA). Permanent authority exists in the
Farm Credit Act of 1971, as amended (12 U.S.C. 2001 et seq.). Major amendments generally
generally have been enacted as stand-alone legislationbills, but Congress has used omnibus farm bills
to make
minor adjustments to the law.
FCS does not receive an annual appropriation, but is privately funded. Appropriators
inIn recent
years, however, haveappropriators placed a limit on the size of the FCA’s budget, which is
funded by
assessments on FCS institutions. For more background about FCS, see CRS
Report Report
RS21278, Farm Credit System, by Jim Monke.
USDA’s Farm Service Agency (FSA).3 The USDA Farm Service Agency
(FSA) is a lender of last resort because it makes direct loans to family-sized farms that are
unable to obtain commercial credit.4 FSA also guarantees timely payment of principal
and and
interest on qualified loans made by commercial lenders such as banks and the Farm
Credit System. The programs have permanent authority under Credit
System. Permanent authority exists in the Consolidated Farm and
Rural Development
Act (CONACT, 7 U.S.C. 1921 et seq.). However, Congress uses
omnibus farm bills to make changes to the terms, conditions, and eligibility requirements.
1
Commercial bank issues are summarized by the American Bankers Association at [http://www.
aba.com/Industry+Issues/issues_ag_menu.htm] and the Independent Community Bankers of
America at [http://www.icba.org].
2
Farm Credit System institutions are described at [http://www.fca.gov/FCS-Institutions.htm].
3
USDA Farm Service Agency loan programs are described at [http://www.fsa.usda.gov/dafl].
4
Historically, the USDA’s lending agency was the Farmers’ Home Administration (FmHA),
created in 1945. A reorganization in 1995 moved the farm lending programs into FSA.
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make changes to the terms, conditions, and eligibility requirements.
FSA makes farm ownership and operating loans to operators of family-sized farms.
The maximum direct loans are $200,000 per borrower, while the maximum guaranteed
loans are $852,000 per borrower (adjusted
who can demonstrate enough cash flow to make payments. Direct loans are limited to
$200,000 per borrower. Guaranteed loans are limited to $899,000 per borrower (adjusted
annually for inflation). Emergency loans are
available for qualifying natural or other
disasters. Some guaranteed loans have a
subsidized (below-market) interest rate. To qualify for an FSA guaranteed or direct loan,
farmers must demonstrate enough cash flow to make payments.
Since the 1980s, the .
Since the 1980s, emphasis within the FSA farm loan program has gradually
shifted toward making relatively fewer from making
direct loans andtoward issuing more in guarantees. This
lessens farmers’ reliance on direct
federal lending, and helps leverageleverages federal dollars since
guaranteed loans guarantees are cheaper to subsidize.
In the late 1990s, about 30% of USDA farm
30% of loan authority was for direct loans. That ratio dropped to about 21% in FY2003, before
rising again to about 25% in FY2004-FY2006; that ratio is now about 25%.
Certain portions of the FSA farm loan program are reserved for beginning farmers
and ranchers (7 U.S.C. 1994 (b)(2)). For direct loans, 70% of the amount for farm
ownership loans and 35% of direct operating loans are reserved for beginning farmers for
the first 11 months of the fiscal year (until September 1). For guaranteed loans, 25% is
reserved for such farmers for ownership loans and 40% for farm operating loans for the
first six months of the fiscal year (until April 1). Funds are also targeted to “socially
disadvantaged” farmers based on race, gender, and ethnicity (7 U.S.C. 2003).5
As an example of the type of statutory changes made in a farm bill, Title V of the
2002 farm bill (P.L. 107-171) authorized funding levels for FSA loans for FY2003FY2007 and expanded access to loans for beginning farmers. The 2002 law also increased
the percentage that USDA may lend for real estate loan down-payments and extended the
duration of eligible loans. It created a pilot program to guarantee seller-financed land
contracts, available to five contracts per year in each eligible state (originally implemented
in Indiana, Iowa, North Dakota, Oregon, Pennsylvania, and Wisconsin; in 2005, the
program expanded to include California, Minnesota, and Nebraska).
Authorizations and Appropriations for Farm Loans. The 2002 farm bill
authorized a 4
3
USDA Farm Service Agency loan programs are described at [http://www.fsa.usda.gov/dafl].
4
For more background on FSA loan programs, see “Evaluating the Relative Cost Effectiveness
(continued...)
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Farm Bill Issues
Farm Service Agency. Authority for the size of FSA’s farm loan program is
specified in the 2002 farm bill and expires at the end of FY2007. The 2007 farm bill is
seen as a vehicle to set new loan authorization levels for FSA, although actual funding
would continue to be set by annual appropriations acts. The 2002 farm bill authorized a
maximum loan authority of $3.796 billion for direct and guaranteed loans
for each of
fiscal years 2003-2007 (7 U.S.C. 1994(b)(1)). Also, the law, and specified how this
would be divided between direct and guaranteed loans, and within each of these
categories how much could be used for ownership loans versus operating loans. The farm
bill further instructed that not more than $750 million of the guaranteed operating loan
amount may be used for the interest assistance (subsidized) guaranteed loan program (7
U.S.C. 1999), which reduces the interest rate on the loan by 4%.
Although the agriculture committee authorizes the farm bill with the multi-year “loan
authority,” the appropriations committee controls the annual discretionary appropriation
to FSA to cover the actual cost of making loans (the “loan subsidy”). This loan subsidy
is directly related to any interest rate subsidy provided by the government, as well as a
5
Further background on FSA programs and delivery mechanisms are available in a USDA report
to Congress, “Evaluating the Relative Cost Effectiveness of the Farm Service Agency’s Farm
Loan Programs,” by Charles Dodson and Steven Koenig, at [http://www.fsa.usda.gov/
Internet/FSA_File/farm_loan_study_august_06.pdf]
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projection of anticipated loan losses. The actual amount of lending that can be made (the
appropriated would be divided
among different types of loans. Appropriators have funded between about 81% to 95%
of the total authorization, with more than 100% for some loan types. The House
Agriculture Subcommittee markup of the farm bill did not address new loan authorization
levels.
The House Agriculture Subcommittee markup would increase to $300,000 the
current $200,000 limit per farmer on direct farm ownership and operating loans. These
limits were set in 1984 for direct farm ownership loans, and in 1986 for direct operating
loans, and have not kept pace with inflation. (Limits for guaranteed loans were raised in
1998 and indexed for inflation.) The House subcommittee markup also would create a
conservation loan guarantee program.
Another potential issue is the “term limits” set in statute for farmer eligibility. Term
limits are intended to prevent chronically inefficient farms from continuing to receive
federally subsidized credit, but the political and social prospects of eliminating support
are sometimes unpleasant. Currently farmers are limited to receiving direct operating loan
eligibility for seven years, and guaranteed operating loans for 15 years (7 U.S.C. 1949).
A provision in the 2002 farm bill (Sec. 5102 of P.L. 107-171) suspended application of
the 15-year limit through the end of 2006, and P.L. 109-467 extended the suspension
provision until September 30, 2007. An increasing number of farmers are reaching their
term limits. Thus, there will be pressures to again extend the eligibility allowance or
revisit the purpose of the term limits requirement. The House subcommittee markup did
not address any extension for the suspension of term limits.
Appropriations for FSA Farm Loans. Although the agriculture committee
authorizes the multi-year “loan authority,” the appropriations committee controls the
annual discretionary appropriation to cover the actual cost of making loans (the “loan
subsidy”). The loan subsidy varies with any interest rate subsidy and the projection of
anticipated loan losses. The actual amount of lending that can be made (the appropriated
loan authority) is several times larger than the appropriated loan subsidy.
For FY2007, the farm loan program is unchanged from FY2006 under the year-long
continuing resolution (P.L. 110-5). $150 million in total loan subsidy is supporting the
A loan subsidy of $150 million supports $3.52 billion
in loan authority. This results in an effective, resulting in a “multiplier” of 23 ($23 dollars
of loan authority for each
$1 of loan subsidy). Guaranteed loans have higher multipliers
than direct loans, and farm
ownership loans have higher multipliers than operating loans.
The highest multiplier in FY2006 is 208,is
4
(...continued)
of the Farm Service Agency’s Farm Loan Programs,” by Charles Dodson and Steven Koenig, at
[http://www.fsa.usda.gov/Internet/FSA_File/farm_loan_study_august_06.pdf]
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208 for guaranteed farm ownership loans. The
lowest is eight, for subsidized guaranteed operating loans, which have a 4% interest rate
subsidy. Appropriations for the salaries and expenses of FSA personnel administering the
operating loans. Expenses to administer the loan program are an additional $309 million in FY2007.
For FY2008, the Administration requests $3.37 billion in loan authority (-4.3%) to
be supported by $152 million of loan subsidy (+1.7%). Guaranteed loan levels would
decline less than 1% overall, although subsidized operating loans would decrease 8%.
Greater reductions impact the direct farmThe direct loan program, which would decline 12%,
including a decrease of 18% an 18% decrease for direct
ownership loans and 6% for direct farm operating
operating loans. Despite the reduction in direct loan
authority, subsidies for the direct loan
programs would rise by over 10%. Administrative
expenses would increase by 3.3%. As
in recent years, nothing is requested for emergency
loans due to carryover funds.
Policy Issues for Congress
Farm Service Agency. Authority for the size of FSA’s farm loan program is
specified in the 2002 farm bill and expires at the end of FY2007. The 2007 farm bill is
seen as a vehicle to set new loan authorization levels for FSA, although actual funding
would continue to be set by annual appropriations acts.
Some have expressed a desire to increase the $200,000 limit per farmer on direct
farm ownership and operating loans.6 These limits were set in 1984 for direct farm
ownership loans, and in 1986 for direct operating loans, and have not kept pace with
inflation. (Limits for guaranteed loans were raised in 1998 and indexed for inflation.)
Another potential issue is the “term limits” set in statute for farmer eligibility.
Currently farmers are limited to receiving direct operating loan eligibility for seven years,
and guaranteed operating loans for 15 years (7 U.S.C. 1949). A provision in the 2002 farm
bill (Sec. 5102 of P.L. 107-171) suspended application of the 15-year limit through the
end of 2006, and P.L. 109-467 extends the suspension provision until September 30,
2007. An increasing number of farmers are reaching their term limits, and may face
financial collapse if they are not able to “graduate” to commercial credit. Term limits are
intended to prevent chronically inefficient farms from continuing to receive federally
subsidized credit, but the political and social consequences of letting these family farms
fail are sometimes unpleasant. Thus, there will be pressures to again extend the eligibility
allowance or revisit the purpose of the term limits requirement.
6
Glenn Keppy (Associate Administrator, USDA-FSA), testimony before Senate Agriculture
Committee hearing, “Review USDA Farm Loan Programs,” June 13, 2006, at
[http://agriculture.senate.gov/Hearings/hearings.cfm?hearingId=1940].
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Farm Credit System. In recent years, FCS has expanded its lending, to a limited
degree, beyond traditional farm loans and into more rural housing and non-farm
businesses. FCS also generally desires to update the Farm Credit Act of 1971, which last
was amended comprehensively in 1987. In early 2006, FCS released a report titled
Horizons, which highlights perceived needs for greater lending authority to serve a
changing rural America.7 Some see Horizons as a precursor to legislative action to
expand lending authorities, possibly in the 2007 farm bill, or to more regulatory changes
expanding the allowed scope of lending.8
The scope of lending authority could grow under an October 2006 proposed rule to
expand eligibility for farm processing and marketing loans (71 FR 60678, October 16,
2006). The intent appears to be to allow financing for larger value-added farm processing
firms that are being built with more outside capital and involvement than in previous
decades. Opponents fear that the regulation could allow more non-agriculture financing.
Selected FCS institutions also have begun investing in “agricultural and rural
community bonds” as a pilot project, with the approval of FCA. The bonds, issued by
private or public enterprises, are assets to the FCS institution with structured payment
terms. The bonds effectively result in loans to businesses and communities, some of
which may not otherwise qualify for FCS loans. For the FCS institution, the bonds are
treated as an investment and thus not subject to loan eligibility regulations.
Commercial banks oppose expanding FCS lending authority, saying that commercial
credit in rural areas is not constrained and that FCS’s government-sponsored enterprise
(GSE) status provides an unfair competitive advantage. Commercial banks assert that,
with financial deregulation and integration, there is no credit shortage for agriculture and
the federal benefits for FCS are no longer necessary. FCS counters this by asserting its
statutory mandate to serve agriculture (and by extension, rural areas) through good times
and bad, unlike commercial lenders without such a mandate.
The controversy over GSE status and lending authority was highlighted in 2004
when a private bank, Netherlands-based Rabobank, tried to purchase an FCS association.
The board of directors of Omaha-based Farm Credit Services of America (FCSA) initially
voted for the sale, indicating to some that FCS may no longer need government
sponsorship. A general outcry led FCSA to withdraw from the deal.9 Commercial bankers
say that institutions should be allowed to leave FCS if they want more lending authorities.
In 2004, FCS asked Congress to eliminate the provision allowing institutions to leave the
system (12 U.S.C. 2279d). It is not clear whether Congress, in 1987, intended the
provision to be used by outside companies to purchase parts of FCS. In 2006, the Farm
Credit Administration amended the rules governing how an FCS institution may terminate
its charter (71 FR 44409, August 4, 2006). The changes allow more time for FCA to
review the request, more communication, and more shareholder involvement.
7
The Horizons report is available at [http://www.fchorizons.com].
8
Bert Ely, “The Farm Credit System: Lending Anywhere but on the Farm,” at [http://
www.aba.com/NR/rdonlyres/E1577452-246C-11D5-AB7C-00508B95258D/45256/Horizons
2006ELYFINAL.pdf].
9
Farm Credit System. In recent years, FCS has expanded its lending, to a limited
degree, beyond traditional farm loans and into more rural housing and non-farm
businesses. In early 2006, FCS released a report titled Horizons, which highlights
perceived needs for greater lending authority to serve a changing rural America.5 Some
see Horizons as a guide for legislative action to expand lending authorities, possibly in
the 2007 farm bill.6 The primary objectives in the Horizons project include (1) expanding
lending authorities to include rural housing in towns with up to 50,000 population
(currently 2,500), (2) expanding lending authorities by adding agribusinesses to the list
of eligible borrowers (regardless of farmer ownership or throughput), and (3) replacing
the numerical stock-holding requirements for borrowers with FCS discretion.
Commercial banks oppose any expansion of FCS lending authority, saying that
commercial credit in rural areas is not constrained and that FCS’s government-sponsored
enterprise (GSE) status provides an unfair competitive advantage. Commercial banks
assert that, with financial deregulation and integration, there is no credit shortage for
agriculture. They say that the federal tax benefits for FCS are no longer necessary, or at
least should not be extended to non-farm, non-agriculture loans. FCS counters this by
asserting its statutory mandate to serve agriculture (and by extension, rural areas) through
good times and bad, unlike commercial lenders without such a mandate.
Farm bill markup at the House agriculture subcommittee level would expand FCS
lending authorities, albeit less than FCS desires in Horizons, and change borrower stock
owning requirements. The markup’s primary changes would (1) increase the population
cutoff for rural housing loans from 2,500 population to 6,000 population, (2) add a
general agribusiness category to the list of eligible borrowers, except that it would limit
these new types of agribusiness loans to renewable energy projects only, and (3) replace
the borrower stock-holding requirement, which is currently a numerical target (the lesser
of $1,000 or 2% of the loan), with the discretion of the institution.
The policy decision of whether to expand FCS lending authority has become less
about “farm” credit, and more about the ideological role of a retail GSE lender competing
with private lenders. Committee jurisdiction even has been called into question by the
5
6
The Horizons report is available at [http://www.fchorizons.com].
Bert Ely, “The Farm Credit System: Lending Anywhere but on the Farm,” at [http://
www.aba.com/NR/rdonlyres/E1577452-246C-11D5-AB7C-00508B95258D/45256/Horizons
2006ELYFINAL.pdf].
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House Financial Services committee. In letters to the Agriculture Committee,
Representatives Frank and Bachus of the Financial Services Committee assert their
committee’s jurisdiction for nonfarm lending (Feb. 28, 2007) and their specific
opposition to Horizons (May 22, 2007).
Regarding stock ownership, many observers believe that giving FCS discretion to
set the borrower stock-holding requirement may reduce the cooperative nature of FCS,
which has been one of its hallmarks since inception. But so long as the provision is
interpreted for borrowers to purchase at least $1 of voting stock, they still would be
entitled to one vote as a shareholder, regardless of the loan size or shares owned. Thus,
this could affect the principle of cooperative ownership more than of cooperative control.
Beyond the farm bill, the scope of lending authority also could grow under an stillpending October 2006 proposed rule to expand eligibility for farm processing and
marketing loans (71 FR 60678, October 16, 2006). The intent is to allow FCS to finance
larger value-added farm processing firms that are being built with more outside capital
and involvement than in the past. Opponents fear that the regulation could allow more
non-agriculture financing.
Some also have questioned FCA’s recent approval of a pilot program that allows
“mission-related” investments in what sometimes are called “Rural America Bonds.”
Like banks, FCS institutions can make investments in additional to issuing loans, usually
in negotiable instruments like Treasury bonds. However, the pilot program allows
investments in certain private or public bonds (e.g., for rural community facilities). This
effectively results in lending, sometimes for purposes that otherwise may not qualify for
FCS loans. For FCS institutions, the investments are not subject to statutory restrictions
on borrower eligibility.7 FCA promotes the program “to allow greater flexibility” and “to
better serve the changing needs of agriculture and rural areas.” Commercial banks assert
that the investments allow FCS to exceed its statutory lending scope.
Lending authorities and GSE preferences were highlighted again in 2004 when a
private bank, Netherlands-based Rabobank, tried to purchase an FCS association. The
board of directors of Omaha-based Farm Credit Services of America (FCSA) initially
voted for the sale, indicating to some that FCS may no longer need government
sponsorship. A general outcry led FCSA to withdraw from the deal.8 At that time,
commercial bankers said that FCS institutions should be allowed to leave if they want
more lending authorities, while FCS asked Congress to eliminate the provision allowing
institutions to leave the system (12 U.S.C. 2279d). It is not clear whether Congress, in
1987, intended the provision to be used by outside companies to purchase parts of FCS.
The Farm Credit Administration has since amended the regulations for FCS institutions
terminating their charter (71 FR 44409, August 4, 2006). The changes allow more time
for FCA to review the request, more communication, and more shareholder involvement.
crsphpgw
7
For background, see FCA, “Investments In Rural America,” presentation to the Farm Credit
Council Annual Meeting, Jan. 2006 [http://www.fccouncil.com/uploads/Laurie_Rae_FCA.ppt];
and FCA, Informational Memorandum on Investments in Rural America, June 25, 2004.
8
For further background, see CRS Report RS21919, Farm Credit Services of America Ends
Attempt to Leave the Farm Credit System, by Jim Monke.