A government-backed organization founded a century ago to provide loans to farmers has recently exploded in size, branching out into massive transactions that go far beyond its original purpose, potentially putting taxpayers on the hook for a major bailout.
This rapid expansion has prompted calls for oversight from members of Congress and heightened fears that the Farm Credit System could be America's next Fannie Mae. Fannie Mae, the government-linked mortgage financier, collapsed when the housing bubble burst along with Freddie Mac, prompting a taxpayer bailout that reached $187.5 billion.
The FCS was created in 1916 as a tax-exempt and taxpayer backed organization to provide loans to farmers and rural communities. But it has since deviated from this narrow purpose, and assets have burgeoned to $283 billion, making it equal in size to the nation's ninth largest bank. This staggering number comes after a rapid 10 years of doubling FCS assets.
"Unfortunately, a too-big-to-fail approach has allowed this ... government-sponsored enterprise to overstep its purpose and crowd out private lenders," Rep. Marlin Stutzman, R-Ind., wrote in a May letter to the comptroller general at the Government Accountability Office. "Unless we return the Farm Credit System to its original mission, taxpayers could be on the hook for a bailout in the near future and farmers' access to credit could be reduced."