Farm Credit System: Difference between revisions

{{Short description|Network of financial institutions}}

Congress established the Farm Credit System in 1916 to provide a reliable source of credit for farmers and ranchers, <ref name=":0">{{Cite journal |last=Shaw |first=Christopher W. |date=2018 |title='Tired of Being Exploited': The Grassroots Origin of the Federal Farm Loan Act of 1916 |url=https://www.jstor.org/stable/10.3098/ah.2018.092.4.512 |journal=Agricultural History |volume=92 |issue=4 |pages=512-540 |via=JSTOR}}</ref> by making loans to qualified borrowers at competitive rates and providing insurance and related services.

===Farm Credit Bank (FCB)===

The three FCBs are:

*[[AgFirst]]

*[[AgriBank]]

There is also one Agricultural Credit Bank, with the authority of a FCB (and a Bank for Cooperatives):

* [[CoBank]]

===Bank for Cooperatives (BC)===

[[CoBank]] is an Agricultural Credit Bank (ACB) and has the authority of a Farm Credit Bank and a BC. The last standalone BC, the St. Paul Bank for Cooperatives, merged into CoBank on July 1, 1999.

===Federal Land Credit Association (FLCA)===

The Agricultural Credit Act of 1987 authorized an FCS bank to transfer its direct-lending authority for long-term mortgage loans to a FLBA. These Associations are designated as FLCAs. Unlike a FLBA, a FLCA owns its loan assets. An FLCA obtains funds from an FCS bank to make and service long-term mortgage loans to farmers and ranchers, and to rural residents for housing. An FLCA also makes loans to these borrowers for basic processing and marketing activities, and to farm-related businesses. Most present-day FLCAs are now subsidiaries of ACAs. Only nine FLCAs operate independently.

===Federal Intermediate Credit Bank (FICB)===

The Agricultural Credits Act of 1923<ref>{{Cite book |last=Shaw |first=Christopher W. |title=Money, Power, and the People: The American Struggle to Make Banking Democratic |publisher=University of Chicago Press |year=2019 |isbn=978-0226636337 |location=Chicago |pages=111-114}}</ref> provided for the creation of 12 FICBs to discount farmers' short- and intermediate-term notes made by commercial banks, livestock loan companies, thrift institutions, and, beginning in 1933, Production Credit Associations. On July 6, 1988, 11 of the 12 then-existing FICBs merged with the Federal Land Banks in their respective districts to form Farm Credit Banks. The mergers were required by the Agricultural Credit Act of 1987. The last remaining FICB, the FICB of Jackson, merged with the FCB of Columbia, which has since been renamed AgFirst Farm Credit Bank on October 1, 1993.

===Federal Land Bank (FLB)===

The Federal Farm Loan Act of 1916 provided for the establishment of 12 FLBs to provide long-term mortgage credit to farmers and ranchers, and later to rural homebuyers.<ref name=":0" /> On May 20, 1988, the FLB of Jackson was placed in receivership and liquidated. On July 6, 1988, the 11 remaining FLBs merged with the Federal Intermediate Credit Banks in their respective districts to form Farm Credit Banks. The mergers were required by the Agricultural Credit Act of 1987.

In the 1980s, the United States faced a major [[1980s farm crisis|farm crisis]]. With low crop prices, and the value of farm land falling, many farmers were unable to service their debts. This severely affected the Farm Credit System, which experienced losses of $2.7 billion in 1985.<ref name=troubled>''Troubled Fields: Men, Emotions, and the Crisis in American Farming'', Ramírez-Ferrero, Eric ([[Columbia University Press]], 2005), introduction {{isbn|9780231130257}}</ref> Investor confidence in FCS bonds declined, with increased spreads over U.S. treasury debt. The federal government responded by amending the [[Farm Credit Act of 1971]] in 1985 and 1986, and then enacting the [[Agricultural Credit Act of 1987]] to help strengthen the FCS.<ref>[https://www.everycrsreport.com/files/19890428_89-290_2d07f42fbfd572709e37575b7d6087df5c50d057.pdf Financial Crises of the 1970s and 1980s: Causes, Developments, and Government Responses. CRS Report For Congress April 28, 1989]</ref>

== See also ==