The Farm Credit System:

Some Opportunities for Improvement

CED-80-12: Published: Jan 25, 1980. Publicly Released: Jan 25, 1980.

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A review was made of the operations of the Farm Credit Administration (FCA) and the banks and associations which make up the Farm Credit System. FCA is an independent Federal agency which provides credit to ranchers, rural homeowners, and farm-related businesses through three separate banking systems. The System obtains its funds through the sale of bonds and discount notes, and the borrowers/owners pay all expenses necessary to operate the System. In addition, the System enjoys some benefits not available to other institutions, such as usury and income tax law exemptions. The Federal Farm Credit Board (FFCB) is the policymaking body for FCA.

The three banking systems which make up the System have overlapping authority and fulfill similar credit needs. Every county is served by both a Federal Land Bank Association and a Production Credit Association. In many cases, their offices are located in the same or in adjacent buildings, yet each operates as a separate entity and competes for a share of the loan market. Under the current system, the borrower must often go to one lender for short-term operating needs and another for long-term real estate needs. Thus, borrowers often do not receive the benefit of a lender's help in planning a total financial package. Legislative constraints and the structure of the System have limited efforts by FFCB to correct the overlapping services offered by the three banking systems. In some instances, the System is making loans in metropolitan areas and to individuals for whom the program was not intended. Some of these loans are more expensive to process than rural and agricultural loans and the farmer shares in these additional costs.

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