A RURAL LENDER IS BORN
A RURAL LENDER IS BORN
ARTICLE PROVIDED BY FARM CREDIT BANK OF TEXAS
The ranch next to your place is up for sale. The price is right, and the seller, a widow with no children, is giving you first opportunity to purchase the ranch.
Excited about the prospect of buying adjoining property, you talk to your local banker about a loan. But the bank will only give you a five-year note at 8 percent interest. Another bank’s best offer is 10 percent for five years, and a third bank won’t even consider financing ranchland.
That leaves you with two options — pay the high rate on a short-term note, or pass up the perfect opportunity to expand your ranch for your growing family.
Such a frustrating scenario may be unrealistic today, but in the early 1900s, this was the reality that American farmers and ranchers faced when they needed hard-to-find credit.
It was against this backdrop that the nation’s largest source of rural financing, the Farm Credit System, was born 100 years ago.
Rural Financing: A Hot Topic in Early 1900s
The seeds of the Farm Credit System were planted by President Theodore Roosevelt when he appointed a Country Life Commission in 1908 to address the various problems facing a predominantly rural population. At the time, agricultural real estate loans were scarce and carried high interest rates and short terms. Until 1913, for instance, federal law prohibited national banks from making loans with maturities beyond five years.
The commission’s report documented a lack of agricultural credit and led to several presidential and congressional studies over the next several years, including missions to Europe in search of solutions.
Eventually, some 70 rural credit measures were introduced into the 63rd Congress, but in the end, Congress settled on a cooperative credit system, patterned after the German Landschafts system, which had operated successfully since 1769.
On July 17, 1916, President Woodrow Wilson signed the Federal Farm Loan Act, setting the framework for a system of rural financing cooperatives that would be owned by farmers and ranchers. The following year, hundreds of these local lending cooperatives were established across the country, allowing farmers and ranchers to finally obtain longer-term loans at 5 percent interest.
Evolving Over the Century
Over the past century, Congress has updated Farm Credit’s charters several times, allowing the lending system to keep pace with the evolving needs of agriculture and rural America, while holding steadfast to its mission to be a reliable lender through good times and bad. Today, the Farm Credit System has $226.8 billion in loans outstanding to farmers, ranchers, agribusiness firms, country homeowners and other rural landowners throughout the country.
Yet in 100 years, the Farm Credit System’s cooperative structure and purpose have not changed. As it celebrates its centennial this year, Farm Credit remains dedicated to the same goals with which it started — to support rural communities and American agriculture with reliable, consistent credit and financial services, today and tomorrow.
For more information, visit FarmCreditBank.com. To find a lender in Texas, visit FindFarmCredit.com.