Watershed Legislation
The Federal Farm Loan Act of 1916
Public Law No. 158, 64th Congress, approved July 17, 1916
An Act “To provide capital for agricultural development, to create a standard form of investment based upon farm mortgage, to equalize rates of credit upon farm loans, to furnish a market for United States bonds, to create Government depositaries and financial agents for the United States, and for other purposes.”
This legislation established Federal Land Banks in twelve districts across the country, and provided the mechanism for farmers to form National Farm Loan Associations, tasked with providing long-term amortized mortgages to farmers as they sought to develop and expand their farms. A portion of each farmer’s loan bought stock in the association, making the individual farmers the owners as well as the borrowers of the association.
Full text of the law:
UserFiles/file/FarmLoanAct.pdf
Agricultural Credits Act of 1923
Public Law N. 503, 67th Congress, approved March 4, 1923
The 1916 Act lacked a means of providing short-term credit, however, which many farmers needed to maintain their farms on an annual basis. In response to the increased cost of agricultural production due to improvements in machinery and the spread of mechanization during early 1920s, Congress created new Federal Intermediate Credit Banks, in the twelve Land Bank districts. The Intermediate Credit Banks served as banks of discount to agricultural cooperatives, commercial banks, and other institutions.
Executive Order 6084, Creation of the Farm Credit Administration
Issued March 27, 1933
An Executive Order by President Franklin D. Roosevelt consolidated all of the functions, powers, and funds of existing agricultural credit organizations under the supervision of a new agency, the Farm Credit Administration. The Farm Credit Administration operated independently until 1939, when it became part of the U.S. Department of Agriculture, but it was returned to independent status under the terms of the Farm Credit Act of 1953.
Full text from University of California at Santa Barbara, American Presidency Project:
www.presidency.ucsb.edu/ws/index.php?pid=9665
The Emergency Farm Mortgage Act of 1933
Public Law No. 10, 73rd Congress, approved May 12, 1933
The Emergency Farm Mortgage Act attempted to save farms delinquent on their loans by extending repayment schedules and offering emergency financing. This legislation reduced the interest rate to 4 ½ percent on all Land Bank loans for five years. It also established a fund containing $200 million for use in making new mortgage loans of up to 75% of normal value, to be administered by the Land Bank Commissioner (Land Bank Commissioner loans).
The Farm Credit Act of 1933
Public Law No. 75, 73rd Congress, approved June 16, 1933
The Farm Credit Act established additional cooperative lending institutions to provide short-, intermediate-, and long-term loans for agricultural purposes. All three types of lending were to be available in each district.
• The Federal Land Banks coordinated long-term agricultural real estate loans through Land Bank Associations
• The Federal Intermediate Credit Banks provided short- and intermediate-term credit to local Production Credit Associations that could then channel funds directly to agricultural producers
• The Banks for Cooperatives were created to supply credit for farmers’ cooperatives
• A Central Bank for Cooperatives was instituted to participate with the district Banks for Cooperatives in providing large loans
Farm Credit Act of 1953
Public Law No. 202, 83rd Congress, approved August 6, 1953
This law established the Farm Credit Administration as an independent agency in the executive branch, and reorganized the operation of the agency. The 1953 Act created a Federal Farm Credit Board with thirteen members--one from each district and one appointed by the Secretary of Agriculture--to develop policy for the Farm Credit Administration. This Board was designed to represent the interests of farmer-borrowers in the governance of the Farm Credit System.
President Eisenhower's remarks, from the American Presidency Project:
www.presidency.ucsb.edu/ws/index.php
1968 Repayment of Federal Capital Loans
After the institutions of the Farm Credit System repaid their Government capital in 1968, farmer-borrowers owned the capital of the entire System. As a result, the FCA determined that the guidelines governing its relationship with System institutions needed to be altered to reflect the new financial dynamic.
The Farm Credit Act of 1971
Public Law No. 181, 92nd Congress, approved December 10, 1971
In 1969 the Farm Credit Board established a Commission on Agricultural Credit to review the operation of the System, and the Commission recommended significant changes, resulting in new legislation. The Farm Credit Act of 1971 provided an updated charter for the System, giving banks and associations more flexibility in lending capital to farmers, raising the limits on land bank loans, and authorizing the expansion of the System’s mandate to include lending to commercial fishermen and rural homeowners.
Full text of debates in Congress:
www.archive.org/details/farmcreditacthe00conggoog
The Farm Credit Amendments Act of 1985
Public Law No. 205, 99th Congress, December 23, 1985
Coming on the heels of the worst economic crisis in the System’s history, the 1985 Act restructured Farm Credit Administration to give it increased oversight, regulatory, and enforcement powers similar to those of other Federal financial regulatory institutions. It also provided for a full-time, three-member Board, to be appointed by the president. Under the new rules, the Administration would conduct annual examinations of each institution. Moreover, the agency was granted new authority to enforce the use of sound banking practices on financially troubled institutions. The 1985 Act also created the Farm Credit System Capital Corporation to provide technical and financial assistance to System institutions.
President Reagan's remarks at signing ceremony:
www.reagan.utexas.edu/archives/speeches/1985/122385a.htm
The Agricultural Credit Act of 1987
Public Law 233, 100th Congress, January 6, 1987
In a further attempt to stabilize the Farm Credit System, this law authorized up to $4 billion in economic assistance to troubled System institutions. In addition to easing borrower flight by guaranteeing existing stock at par value, this legislation also strengthened borrower rights in a number of important ways. The Act mandated the implementation of a series of important structural changes to the management of System institutions, including the merger of the Land Banks and Intermediate Credit Banks into district-wide Farm Credit Banks. Production Credit Associations and Land Bank Associations in the same territory were granted the right to merge voluntarily into a new entity, an Agricultural Credit Association. By eliminating redundancy within the day-to-day operations of these institutions, this law made the System more efficient. The 1987 Act created the Farm Credit System Insurance Corporation, which was designed to ensure timely payment of interest and principal on bonds and other obligations issued by FCS banks. This legislation also created the Federal Agricultural Mortgage Corporation (Farmer Mac) to establish a secondary market for agricultural real estate and rural home mortgages.
President Reagan's remarks at signing ceremony:
www.reagan.utexas.edu/archives/speeches/1988/010688a.htm