Farm Credit System

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The Farm Credit System is a network of borrower-owned cooperative lending institutions and related service organizations in the United States serving all 50 states and Puerto Rico. These institutions provide credit and related services to farmers, ranchers, producers and harvesters of aquatic products, rural homeowners, and agricultural, aquatic, and public utility cooperatives. Loans are also made to finance the processing and marketing activities of agricultural borrowers.

All System banks and associations are governed by boards of directors elected by the stockholders who are borrowers of each institution. Additionally, the Farm Credit Act of 1971, as amended, requires that at least one member of the board be from outside the System. System institutions, unlike commercial banks or thrifts, do not take deposits.

Four Farm Credit Banks and one Agricultural Credit Bank provide funding for Agricultural Credit Associations (ACAs) and/or Federal Land Credit Associations (FLCAs). As of December 1, 2006, the System was composed of 81 Agricultural Credit Association (ACAs), and 9 Federal Land Credit Associations (FLCAs). ACAs make short, intermediate, and long term loans. FLCAs make only long term loans. In addition to funding its five affiliated ACAs, the ACB makes loans 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.

Although the System banks and associations are not commonly owned or controlled, they are financially and operationally interdependent. The financial interdependence of the banks is a result of the statutory joint and several liability of banks for all Systemwide debt. The interdependence of the banks and associations results, in part, from the banks serving as the intermediary between the financial markets and the retail lending activities of their affiliated associations.

The banks are the primary source of funding and have some oversight responsibilities related to certain activities of their affiliated associations. Banks raise funds principally through the sale of consolidated Systemwide bonds and notes to the public, through the Federal Farm Credit Banks Funding Corporation. Banks and associations are not authorized to accept deposits and cannot borrow from other financial institutions without the approval of their affiliated bank. As a result, loans made by the associations to agricultural borrowers are substantially funded by the issuances of Systemwide debt securities by the banks. The repayment of Systemwide debt securities is therefore dependent upon the ability of System borrowers to repay their loans.

The Farm Credit Administration (FCA) is delegated authority by Congress to regulate System institutions. The FCA examines the activities of System institutions and certain actions by these entities are subject to the FCA's prior approval.

Borrowers of the System, who owe about $86 billion and number over 500,000, include: farmers, ranchers, producers and harvesters of aquatic products, rural homeowners, certain farm-related businesses, agricultural and aquatic cooperatives, and rural utilities.

The Farm Credit System is a Government-Sponsored Enterprise (GSE) which operates a network of borrower-owned cooperative lending institutions and related service organizations in the United States serving all 50 states and Puerto Rico.

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