Act that eased the regulatory requirements for the Farm Credit System and gave the Federal Agricultural Mortgage Company, or Farmer Mac, the authority to pool (collect) loans.
Designed to improve the efficiency and operation of the Farmer Mac (Federal Agricultural Mortgage Corporation), the Farmer Mac Reform Act of 1995 made substantial changes to the Farm Credit Act of 1971, which governed agricultural real estate and rural housing loans. Farmer Mac guaranteed these loans from commercial banks, insurance companies, and the cooperative farm credit system.
Congress had originally established Farmer Mac to bring lower-cost, long-term real estate financing to farmers and ranchers who had survived the 1980s farm crisis, a period of higher interest rates and lower agricultural prices. The federal government intended Farmer Mac to become a new source of credit by creating government-supported programs for farm mortgages, as other government-sponsored enterprises such as Fannie Mae and Freddie Mac had done for the housing sector. Farmer Mac failed in its goals. Initially capitalized with $21 million in private investments by nonprofit institutions, that equity declined by more than $9.5 million, and the Office of Secondary Market Oversight (OSMO) estimated that Farmer Mac would fall short of sufficient core capital by the end of 1996.
The Farmer Mac Reform Act liberalized Farmer Mac’s charter. It eliminated the requirement that banks back each pool of loans by 10 percent subordinated interest [funds under the control of another authority] or cash reserves. During three years following the enactment of the Farmer Mac Reform Act, Congress also liberalized the statutory minimum capital requirements. The Farm Credit Administration (FCA) and the OSMO received an additional three years to implement risk-based capital requirements for Farmer Mac. In addition, the legislation required Farmer Mac institutions to streamline their business operations, for example, by requiring Federal Reserve banks to act as depositories and fiscal agents for Farmer Mac’s securities and providing for Farmer Mac’s access to the topic-entry system of the Federal Reserve system.
Federal Agricultural Improvement and Reform Act of 1996 (FAIR Act of 1996)
Legislation that scaled back government-subsidized agricultural production and gave farmers more flexibility in relying on market forces to decide the type and amount of crops they produced.
Congress passed the Federal Agricultural Improvement and Reform (FAIR) Act of 1996 during a period of economic prosperity in the United States and reflected a desire to significantly lower the influence of government agricultural assistance programs. The FAIR Act discontinued payments to farmers based on differences between target and market prices and put an end to production-adjustment programs. The act established a schedule of declining payments given to farmers heavily dependent on government aid, which aided them in making a gradual transition toward relying on market forces instead of government programs to determine the extent and types of crops they produced.
Other important provisions of the act addressed conservation and rural development. Congress promoted more environmentally responsible farming not only by limiting government-subsidized production but also by increasing funds for U.S. Department of Agriculture conservation programs. The FAIR Act of 1996 also created the Rural Performance Partnership Initiative to provide states more flexibility in how they use federal agricultural aid money, and it allocated $300 million for rural development and agricultural research. The act cut back or simplified many complex federal government agricultural programs. However, many in Democratic and liberal circles criticized the bill for not being able to provide enough financial security to U.S. farmers in tougher economic times. In addition, Congress omitted from the final legislation more effective conservation measures, such as paying farmers directly for environmentally responsible farming practices.
