The Farm Credit System (FCS) is a federally chartered network of cooperatives and related service organizations that lends to agricultural producers, rural homeowners, farm-related businesses, and agricultural, aquatic, and public utility cooperatives in the United States. Federal oversight by the Farm Credit Administration (FCA) is designed to provide for the safety and soundness of FCS institutions.
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Congress established FCS as a government sponsored enterprise when it enacted the Federal Farm Loan Act in 1916. Current authority is in the Farm Credit Act of 1971 (P.L. 92-181, as amended; 12 U.S.C. 1200 et seq.).
Its mission is to provide a permanent, reliable source of credit to American farmers, ranchers, producers or harvesters of aquatic products, their cooperatives, and farm-related businesses. It does so by making appropriately structured loans to qualified individuals and businesses at competitive rates and providing financial services and advice to those persons and businesses.
Consistent with this of serving rural America, it also make loans for the purchase of rural homes, to finance rural communication, energy and water infrastructures, to support agricultural exports, and to finance other eligible entities.
The Farm Credit Banks (FCBs) provide loan funds to 80 Agricultural Credit Associations (ACAs) that in turn provide short-, intermediate-, and long-term loans, and 9 Federal Land Bank Associations (FLCAs) that in turn provide long-term loans, to farmers, ranchers, producers and harvesters of aquatic products, rural residents for housing, and certain farm-related businesses. As government-sponsored enterprises, their combined debt stood at US$ 61.9 billion as of July 1997.[1]
There exist 4 Farm Credit Banks (FCBs):
FCBs were created on July 6, 1988, in 11 of the 12 then-existing FCS districts when the Federal Land Bank and Federal Intermediate Credit Bank in each district merged. The mergers were required by the Agricultural Credit Act of 1987.
There exists an Agricultural Credit Bank (ACB), CoBank, which has the authority of an FCB and provides loan funds to 4 ACAs, as well as the authority of a Bank for Cooperatives (BC) that provides loans to of all kinds to agricultural, aquatic, and public utility cooperatives.
An Agricultural Credit Association (ACA) obtains funds from a Farm Credit Bank (FCB) or an Agricultural Credit Bank (ACB) to provide short-, intermediate-, and long-term credit to farmers, ranchers, producers and harvesters of aquatic products, and to rural residents for housing. An ACA also makes loans to these borrowers for basic processing and marketing activities, and to farm-related businesses.
The ACA is the result of the merger of a Federal Land Bank Association (FLBA) or a Federal Land Credit Association (FLCA) and a Production Credit Association (PCA) and has the combined authority of the two institutions. All ACAs operate with a parent-subsidiary structure, with the ACA as the parent and a wholly owned PCA and FLCA as subsidiaries.
A Federal Land Credit Association (FLCA) obtains funds from a Farm Credit Bank (FCB) or an Agricultural Credit Bank (ACB) to make and service long-term mortgage loans to farmers and ranchers, and to rural residents for housing. An FLCA also makes loans to these borrowers for basic processing and marketing activities, and to farm-related businesses. Most present-day FLCAs are now subsidiaries of ACAs; only nine FLCAs operate independently.
The Federal Farm Credit Banks Funding Corporation (FFCBFC) markets the securities — chiefly bonds and discount notes — that the banks sell in the Nation’s capital markets to raise loan funds. This is how FCS institutions obtain the majority of their loan funds.
The Federal Agricultural Mortgage Corporation (FSMC, Farmer Mac) is a government-sponsored enterprise (GSE) that provides a secondary market in agricultural loans such as mortgages for agricultural real estate and rural housing. The company purchases loans from agricultural lenders, and sells instruments such as mortgage-backed securities (MBSs) backed by those loans.
There are several entities which have been authorized by law but which have been subsumed by other entities, which usually retain their authority.
The Federal Land Banks (FLBs) provided long-term mortgage credit to farmers and ranchers, and later to rural homebuyers.
They were created by the Federal Farm Loan Act of 1916. On May 20, 1988, the FLB of Jackson was placed in receivership and liquidated. As a result of the Agricultural Credit Act of 1987, on July 6, 1988 the 11 remaining FLBs merged with the Federal Intermediate Credit Banks (FICBs) in their respective districts to form Farm Credit Banks (FCBs).
The Federal Intermediate Credit Banks (FICBs) discounted farmers’ short- and intermediate-term notes made by commercial banks, livestock loan companies, thrift institutions, and Production Credit Associations.
They were created under the Agricultural Credits Act of 1923 (Pub.L. 67-503, 42 Stat. 1454, enacted March 4, 1923). As a result of the Agricultural Credit Act of 1987, on July 6, 1988 11 of the 12 then-existing FICBs merged with the Federal Land Banks (FLBs) in their respective districts to form Farm Credit Banks (FCBs).
A Bank for Cooperatives (BC) provides lending and other financial services to farmer-owned cooperatives, rural utilities (electric and telephone), and rural sewer and water systems. A BC is also authorized to finance U.S. agricultural exports and provide international banking services for farmer-owned cooperatives.
They were created under the Farm Credit Act of 1933. The last standalone BC in the FCS, the St. Paul Bank for Cooperatives, merged into CoBank on July 1, 1999.
A Production Credit Association (PCA) delivered short- and intermediate-term loans to farmers and ranchers, and to rural residents for housing. A PCA also made loans to these borrowers for basic processing and marketing activities, and to farm-related businesses. A PCA obtained funds from an FCS bank to lend to its members. PCAs own their loan assets.
They were created under the Farm Credit Act of 1933. All present-day PCAs are now subsidiaries of ACAs.
The Federal Land Bank Associations (FLBAs) were lending agents for Federal Land Banks (FLBs), the Farm Credit Banks (FCBs) and the Agricultural Credit Bank (ACB). FLBAs originated and serviced long-term mortgage loans to farmers and ranchers, and to rural residents for housing. FLBAs did not own the loan assets but originated loans on behalf of the FLBs/FCBs/ACB with which they were affiliated.
FLBAs either merged with Production Credit Associations (PCAs) to form Agricultural Credit Associations (ACAs) or became direct-lender Federal Land Credit Associations (FLCAs) when Farm Credit Banks (FCBs) transferred their authority to make long-term mortgage loans to their affiliated FLBAs.
The FCS Financial Assistance Corporation (FAC) issued uncollateralized bonds, notes, debentures, and similar obligations, guaranteed as to the timely payment of principal and interest by the Secretary of the Treasury and backed by the full faith and credit of the United States, to provide funds to financially stressed FCS institutions. All bonds have been called or have matured as of June 2005. The Financial Assistance Corporation's charter was canceled by the FCA Board as of December 31, 2006.