FARM CREDIT ADMINISTRATION

The Farm Credit Administration (FCA) is an independent agency of the executive branch of the federal government. It supervises and coordinates the Farm Credit System, which is a centralized banking system designed to serve U.S. agricultural interests by granting short- and long-term credit through regional banks and local associations. Although initially capitalized by the federal government, the banks and associations that make up the Farm Credit System are now financed entirely through stock that is owned by members, borrowers, or the associations. The FCA ensures the safe operation of these lending institutions and protects the interests of their borrowers.

The Farm Credit System was established in 1916 in response to the unique credit needs of farmers. Federal land banks were established to provide adequate and dependable credit to farmers, ranchers, producers or harvesters of aquatic products, providers of farm services, rural homeowners, and agricultural associations. During the 1930s, the Depression and falling farm prices increased debt delinquencies and led to a serious decline in farm values. Many loan companies and credit institutions failed. In 1933, President franklin d. roosevelt directed Congress to create the FCA to oversee the entities that grant credit to farmers and ranchers. All government farm credit programs, including the land banks and intermediate credit banks, were unified under the new agency, which was established by the Farm Credit Act of 1933 (U.S. Pub. Law 73-76, 48 Stat. 257).

The modern FCA derives its authority from the Farm Credit Act of 1971 (12 U.S.C.A. § 2241 et seq.), which superseded all prior authorizing legislation. The FCA examines the lending institutions that constitute the Farm Credit System to certify that they are sound. It also ensures compliance with the regulations under which the Farm Credit institutions operate. To that end, it is authorized to issue cease-and-desist orders, levy civil monetary penalties, remove officers and directors, and impose financial and operating reporting requirements. It may directly intervene in the management of an institution whose practices violate the Farm Credit Act or its regulations. It also may step in to correct an unsafe practice or to assume formal conservatorship over an institution.

The FCA is managed by the Farm Credit Administration Board, whose three full-time members are appointed to six-year terms by the President of the United States, with the advice and consent of the Senate. The board meets monthly to set policy objectives and to approve the rules and regulations that govern the FCA's responsibilities.

The FCA also manages the Federal Agricultural Mortgage Corporation, known as Farmer Mac. According the FCA web site, Farmer Mac provides a secondary market for agricultural real estate and rural housing mortgages. It guarantees prompt payment of principal and interest on securities representing interests in, or obligations backed by, mortgage loans secured by first liens on agricultural real estate or rural housing. It also guarantees securities backed by the guaranteed portions of farm ownership and operating loans, rural business and community development loans, and certain other loans guaranteed by the u.s. department of agriculture.

As of January 1, 2003, according to the FCA web site, the Farm Credit System was composed of Five Farm Credit Banks that provide loan funds to 81 Agricultural Credit Associations (ACAs), and 13 Federal Land Credit Associations (FLCAs). ACAs make short-, intermediate-, and long-term loans, and FLCAs make long-term loans. The Farm Credit System also had one Agricultural Credit Bank (ACB), which has the authority of an FCB and provides loan funds to five ACAs. In addition, the ACB makes loans of all kinds to agricultural, aquatic, and public utility cooperatives and is authorized to finance U.S. agricultural exports and provide international banking services for farmer-owned cooperatives.

The Farm Credit Administration web site offers extensive information about its roles and duties at www.fca.gov.

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Agricultural Law.

Farm Credit Administration (FCA), an independent agency of the executive branch of the federal government that supervises and regulates the Farm Credit System (FCS) for American agriculture. The Farm Credit Act of 1971, which superseded all previous legislation, authorizes the FCS to provide long-term and short-term credit to farmers and their cooperatives. Long-term mortgage loans help farmers acquire property or refinance existing debts; short-term loans are needed to finance crop and livestock production and marketing. In addition, the FCS makes emergency crop and feed loans to farmers who cannot obtain funds from other sources. Legislation in 1985 separated the FCA from the FCS and made the FCA a regulatory body with respect to the FCS.

Credit used by farmers and cooperatives is provided in the FCS through a network of farm credit banks, federal land bank associations, production credit associations, and banks for cooperatives. The farm credit banks make loans to agricultural cooperatives for periods ranging from six months to three years. The loans are secured by warehouse receipts for crops or by liens on livestock. The land banks function as credit wholesalers, raising funds in the investment markets through the sale of bonds and lending the money to farmers at low interest rates. Production credit associations finance short-term credit associations, and banks for cooperatives finance cooperative marketing. Other components of the FCS include the Agricultural Credit Bank, agricultural credit associations, and federal land credit associations.

History

The origins of FCA and FCS date to 1916, when the Federal Farm Loan Bureau, the Federal Farm Loan Board, and Federal Land Banks were established in response to farmer requests for liberal credit facilities and low interest rates. A system for mortgage credit was created; 12 regional farm land banks were set up, with most of the original capital supplied by the government. It was intended that the farmer-borrowers should ultimately own the banks. An act of 1923 further extended federal aid to farmers, establishing 12 intermediate credit banks (one in the district of each land bank), with capital supplied by the government.

Six years later the whole structure of the land banks was severely hit by the Great Depression , with falling prices of farm products, increased debt delinquencies, and decline in the value of farms. In 1932 the government invested $125 million in the bonds of the land banks to bolster them and thus again became the majority stockholder. All then existing federal agricultural-credit organizations were unified into one agency, the FCA, by executive order in 1933. Congress authorized that agency to extend the system of farm-mortgage credit. Funds were made available for loans on easy terms for first or second mortgages—the so-called land bank commissioner loans—to debtors whose collateral was so low in value or so encumbered by debt as to make refinancing by the land banks unfeasible. The FCA was also authorized to establish 12 production credit corporations and banks for cooperatives. The result was a centralized source of farm credit.

A part of the Dept. of Agriculture after 1939, the FCA again became an independent agency in 1953. During the farm crisis of the 1980s, the Farm Credit Amendments Act (1985) gave the FCA more regulatory authority over the farm credit system and established a full-time FCA board of three persons, who are appointed for six-year terms. The Agricultural Credit Act (1987) established the Farm Credit System Insurance Corporation, the Federal Agricultural Mortgage Corporation (Farmer Mac), and other institutions to strengthen the FCS.

FARM CREDIT ADMINISTRATION

In 1933 the United States was mired in the Great Depression. President Franklin Roosevelt (1933–1945) instructed Congress to create the Farm Credit Administration (FCA) to assist agricultural workers who found loans and credit increasingly hard to come by during the difficult economic times.

Still functioning to this day, the FCA supervises the institutions that grant credit to farmers and ranchers and also coordinates the Farm Credit System. The Farm Credit System is a centralized banking system designed to serve U.S. agricultural interests by granting short- and long-term credit through regional banks and local associations.

The Farm Credit System was established in 1916. Its purpose is to provide dependable credit to agricultural workers. When the Great Depression arrived in the 1930s, farmers were hit hard. Farm property values dropped sharply and debt delinquencies grew quickly. Many of the loan companies involved with agricultural workers failed. Thus, when the Farm Credit Administration was created, the banks and associations comprising the Farm Credit System were supported completely by the federal government in an attempt to give the agricultural economy more stability in the uncertain day of the Depression. Today, these organizations are financed entirely by the sale of stock.

Franklin Roosevelt developed the Farm Credit Administration to unify all government farm credit programs under one agency. In addition to overseeing the Farm Credit System, the FCA also sets regulations, ensures compliance with established procedures, and has the authority to intervene when an institution violates those regulations.

See also: Great Depression, Franklin Delano Roosevelt