Farm Credit Administration

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 lienslien,
claim or charge held by one party, on property owned by a second party, as security for payment of some debt, obligation, or duty owed by that second party. A lien may arise by agreement between the parties or by operation of law from the relation of the parties or the
..... Click the link for more information.  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 DepressionGreat Depression,
in U.S. history, the severe economic crisis generally considered to have been precipitated by the U.S. stock-market crash of 1929. Although it shared the basic characteristics of other such crises (see depression), the Great Depression was unprecedented in its
..... Click the link for more information. , 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) provided federal assistance in response to a financial crisis affecting farmers and the FCS, and established the Farm Credit System Insurance Corporation, the Federal Agricultural Mortgage Corporation (Farmer Mac), and other institutions and requirements to strengthen the FCS.