Farm Credit Amendments Act of 1985


Act that reorganized and rescued the Farm Credit System, a network of borrower-owned lending institutions and service organizations for farmers, ranchers, producers, or harvesters of agricultural products.

Because of the 1980s farm crisis in rural America—caused by farming overexpansion, overinvestment in land and technology, and a 1979 wheat embargo against the Soviet Union that hurt U.S. wheat farmers—the Farm Credit System (FSC) remained in a precarious situation. Congress designed the Farm Credit Amendments Act of 1985 to centralize the process for obtaining credit and to optimize lending efficiency among the Farm Credit System’s five credit banks and one agricultural bank. The Farm Credit Administration (FCA) assumed responsibility for regulating the FSC. A three-member board of directors nominated by the president and confirmed by the Congress, each of whom serves a single six-year term, governs the FCA. The board regulates the Farm Credit System in much the same way that the Federal Deposit Insurance Corporation regulates commercial banks. The president names a chair to oversee the agency instead of the board appointing a FCA governor. The three-member board of directors has become an advisory panel stripped of almost all its power. The FCA sets loan security requirements and interest rates, regulates the transfer of funds, oversees annual independent audits of each institution, and approves bond issues. The act establishes and enforces minimum levels of capital reserves for each member institution. The FCA can also issue cease-and-desist orders against officers or institutions for violation of regulations and can correct these violations. It can remove any directors or officers of the institutions as it deems necessary.

The act also created a new institution called the Farm Credit System Capital Corporation, owned and controlled by participating banking institutions, which has the power to redistribute capital resources among the institutions to resolve financial problems. The Farm Credit System Capital Corporation took over bad loans and centralized about $7 million in surplus reserve. A five-member board of directors—including three members elected by the farm credit banks, which own voting stock in the corporation, and two members appoint the FSC chair—oversees the corporation’s operations. This basic system currently governs the Farm Credit System.

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