Farmer Mac Needs Work
No, Farmer Mac is not a new burger served in Kansas. It is instead the "Federal Agriculture Mortgage Corporation," a government-sponsored enterprise (GSE) like its better know relatives Freddie Mac and Fannie Mae. A GSE is a federally chartered, privately owned corporation established by Congress to provide a continuing source of credit nationwide to a specific economic sector. Congress created Farmer Mac in 1987 to create a secondary market in agricultural real estate and rural housing loans, and to improve the availability of agricultural mortgage credit. Farmer Mac is publicly traded , and it is regulated by the Farm Credit Administration. If something bad happens to Farmer Mac, something bad happens to its investors; to US agriculture; and to every taxpayer in the country. Like Freddie and Fannie, the Government--which means you and me (well maybe not me because I'm just a dog)--will have to bail out Farmer Mac if it is unable to take care of itself financially. The only good thing one can say about a Farmer Mac collapse is that it probably wouldn't be as catastrophic as a Freddie or Fannie collapse.

Beginning in the 1990s, Congress asked the Government Accounting Office to investigate and report on Farmer Mac. GAO's continuing study of the GSE has identified numerous problems and made numerous recommendations for reform. Many of these recommendations have not been implemented. In October 2003, GAO issued its latest written report. On June 2, 2004, GAO's Davi M. D'Agostino, Director, Financial Markets and Community Investment, testified on Farmer Mac before the House Committee on Agriculture.

GAO's primary concerns are with Farmer Mac's risk management practices and line of credit with the Treasury Department; its mission-related activities; its board structure; and its oversight by FCA. In other words, GAO is concerned with most aspects of Farmer Mac. GAO "found that Farmer Mac, FCA, and Congress could all take actions to help improve Farmer Mac's safety and soundness and ability to carry out its public policy mission." Specific GAO recommendations include strengthening Farmer Mac's risk management and corporate governance, and reevaluating some operational strategies. GAO also recommended more effective outside oversight by FCA and Congress.

Perhaps the most troubling GAO recommendation is "that Congress consider establishing measurable goals to hep FCA assess how well Farmer Mac is meeting is mission." Like the other GSEs, Farmer Mac is very important. It should have had "measurable goals" years ago.