To combat the deepening debt crisis that was vanquishing farm owners nationwide, Franklin D. Roosevelt issued an executive order on March 27, 1933, establishing the Farm Credit Administration (FCA). The agency extended vital relief to debt-ridden farmers throughout the country by refinancing farm mortgages and offering credit under favorable terms. The FCA was an important part of the Roosevelt administration's broad program of federal assistance to agriculture. During its first two years alone, the FCA refinanced one-fifth of all farm mortgages and saved tens of thousands of farmers from foreclosure.
By 1933 farmers urgently needed mortgage relief and loans to cover their annual crop-production costs. The vast network of locally owned banks that had served as the primary source of farm finance in rural areas could no longer support loans to farmers. As farm income and commodity prices plummeted, the system of farm credit collapsed. In 1930 and 1931, more than 3,600 banks failed. Among the hardest hit ones were undercapitalized rural banks serving small farming communities.
In creating the FCA, the Roosevelt administration set out to alleviate the indebtedness of farmers and to overhaul the government's large but ineffectual system of farm credit. Nine existing farm agencies fell under the control of the FCA, including the Federal Farm Board, the Federal Farm Loan Board, the federal land banks, the federal intermediate credit banks, and the loaning activities of the secretary of agriculture and the Reconstruction Finance Corporation. William I. Myers, a Cornell University economics professor, conceived this consolidation and reorganization of disparate farm agencies into the FCA. As David E. Hamilton argues in From New Day to New Deal (1991), Myers was committed to cooperative public-private partnerships and associative principles. Although the farm debt crisis required that the government take the lead in making credit available to farmers, the ultimate goal of the FCA was to create a cooperative credit system run by farmers themselves, financed privately and administered through local credit associations. Roosevelt appointed Henry Morgenthau, who had served as Roosevelt's commissioner of agriculture when he was governor of New York, to the position of governor of the FCA, and he named Myers the deputy governor. When Morgenthau became secretary of the treasury in 1934, Myers took his place as head of the FCA and retained the post until 1938.
The FCA included four divisions. The Land Bank Division controlled the twelve federal land banks and fifty joint-stock land banks. The Intermediate Credit Division supervised the twelve intermediate credit banks that made direct loans to cooperatives and helped private banks become active lenders. The Production Credit Division directed the twelve regional production credit corporations, and the Cooperative Bank Division supervised the Central Bank for Cooperatives, which made short- and long-term loans to the agricultural cooperatives.
In addition to refinancing one-fifth of all farm mortgages, the FCA reduced the interest rates on federal loans to 3.5 percent and, between 1933 and 1936, extended about $800 million in long-term loans. By 1939, the federal land banks held nearly 40 percent of the farm mortgage debt. That same year, the FCA fell under the control of the department of agriculture, then regained its status as an independent agency in 1953. Since 1971, the FCA has continued to provide credit to farmers, and has assumed the additional responsibility of regulating the farm credit system.
See Also: AGRICULTURE; FARMERS' HOLIDAY ASSOCIATION (FHA); FARMERS HOME ADMINISTRATION (FMHA); FARM FORECLOSURES; FARM POLICY.
BIBLIOGRAPHY
Case, H. C. M. "Farm Debt Adjustment during the Early 1930s." Agricultural History 34, no. 4: 173-181.
Feder, Ernest. "Farm Debt Adjustment during the Depression—The Other Side of the Coin." Agricultural History 35, no. 2: 78-81.
Hamilton, David E. From New Day to New Deal: American Farm Policy from Hoover to Roosevelt, 1928–1933. 1991.
Hoag, W. Gifford. The Farm Credit System: A History of Financial Self-Help. 1976.
Stokes, W. N., Jr. Credit to Farmers: The Story of the Federal Intermediate Credit Banks and Production Credit Associations. 1973.
Adrienne M. Petty
