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Financial Stress in the 1980s
As American agriculture plummeted into recession in the early and mid 1980s, Farm Credit predictably suffered severe financial stress. During a three-year period from 1985-1987, Congress passed several laws to deal with recessionary economic and agricultural conditions.
After this devastating period of rising inflation and collapsing farmland values, the legislation of the mid-80s made several major revisions to the structure and operations of the Farm Credit System and provided financial assistance in the form of a fully repayable, privately financed line of credit which was guaranteed by the federal government.
As a result of the Congress' efforts:
- FCA became a fully independent arm's-length regulator;
- A limited and temporary government-guaranteed line of privately financed assistance was provided to stressed System institutions;
- Risk-based capital standards were mandated, to be determined by FCA;
- The Farm Credit System Insurance Fund was created, financed by annual contributions from System banks; and
- The Federal Farm Credit Banks Funding Corp., which manages the sale of Farm Credit Systemwide debt securities, was formally established by statute as a System entity.
- In the early 1980s, the Farm Credit System was comprised of 37 banks and more than 1,000 local lending associations. Today, there are only four Farm Credit System banks and 78 local lending associations.
- As the 1980s drew to a close, and agricultural producers began their recovery from the recession, Farm Credit began a return to financial health, a trend that continued and strengthened into the 1990s.