Page 13 - Flipbook for non-members

COLORADO’S FARM CREDIT SYSTEM
REPORT BY BERT ELY
The Farm Credit System:
Its operations nationally and in Colorado
PRODUCED IN PARTNERSHIP

The Farm Credit System, the first government sponsored enterprise (GSE), was created almost a century
ago to finance farm mortgages that most commercial banks were either barred by l aw from providing
or were too small to safely finance. Over time that rationale faded away as commercial banks grew in
size and were empowered to finance agricultural real estate.
Over the years, Congress also granted the FCS broader lending powers, enabling it to become a nearly
$300 billion behemoth, larger than almost every bank in the United States. Even though the FCS is no
longer needed, and certainly would not be created today, it continues to grow as it pushes further and
further into non-agricultural lending, including providing credit to large, investor-owned enterprises
hardly in need of taxpayer-subsidized financing. The time has come for Congress to rein in the FCS.
KEY HIGHLIGHTS
The FCS gets tax money to compete with you – and that’s not its only advantage.
• If the FCS was a commercial banking company, it would be the eighth-largest banking company in the
United States – and it’s still subsidized by taxpayers
• The profits it generates from its real estate lending activities are exempt from all corporate income
taxes
• Profits from its non-real-estate lending activities are generally exempt from state and local income
taxes
• Many states have exempted the FCS from lien recordation fees and other fees and charges associated
with lending
• Combined, the FCS conservatively enjoyed a $2.3 billion taxpayer subsidy in 201 4 – a $ 1 .07 billion
interest subsidy (based on average debt outstanding during 2014 of $214 billion) plus a $ 1 .2 billion
income-tax subsidy
• As a GSE, the FCS can borrow at very favorable interest rates – slightly higher than rates at which the
U. S. Treasury borrows and at rates lower than what AAA- rated corporations can borrow 1.88% at the
end of 2012, to 1. 95% at the end of 2013, and to 2.25% at December 31, 2014
• Even after adding in agricultural lending in Colorado by banks headquartered outside the state, the
FCS clearly is the largest single agricultural lender in Colorado and most likely provides over half the
agricultural credit for Colorado farmers and ranchers