Federal Farm Loan Act

Examples of Federal Farm Loan Act in the following topics:

• Anti-Trust Laws

  • Wilson sought to encourage competition and curb trusts by using the Federal Trade Commission to enforce the Clayton Antitrust Act.
  • For instance, the 1916 Federal Farm Loan Act provided for issuance of low-cost, long term mortgages to farmers, and the Adamson Act imposed an eight-hour workday in the railroad industry (prompted by the 1916 summer strike by railroad employees).
  • Wilson also attempted to curtail child labor with the Keating-Owen Act.
  • In addition to the Underwood tariff, which seemed to finally resolve the political debate over tariff rates, and the creation of the Federal Reserve, Wilson also supported anti-trust legislation.
  • The Federal Trade Commission effectively restricted unfair trade practices and enforced the 1914 Clayton Antitrust Act.

• Wilsonian Progressivism

  • Included among these were the Federal Reserve Act, Federal Trade Commission Act, the Clayton Antitrust Act, and the Federal Farm Loan Act.
  • Within a few years after the Revenue Act was implemented, the federal income tax replaced tariffs as the chief source of revenue for the government.
  • It was also aided through the passage of the Federal Farm Loan Act, (1916), which set up Farm Loan Banks to support farmers.
  • Despite the fact that the Act intended to diminish the influence of the New York banks, the New York branch continued to dominate the Federal Reserve until the New Deal reorganized and strengthened the Federal Reserve in the 1930s.
  • The Federal Trade Commission effectively restricted unfair trade practices and enforced the 1914 Clayton Antitrust Act.

• Agricultural Initiatives and Recovery

  • Farmers were not afraid to take loans to purchase newly introduced equipment (e.g. plows) that made production easier and more efficient.
  • In the aftermath of this decision, the Agricultural Adjustment Act of 1938 followed.
  • It revived the provisions of its predecessor but the financing was about to come from the federal government and not from a tax imposed on food processors.
  • Some of the measures employed by FSA were: low interest rates loans for farmers, building cooperative farms where the poorest farmers were resettled in order to farm collectively (the government would also buy the submarginal land from those farmers), and educational aid to rural families.
  • Rural Electrification Administration (REA, 1936): Provided low-cost federal loans to cooperative electric power companies in order to bring electricity to isolated rural areas.

• Government Financial Institutions

  • Federal, state, and local governments in the United States create government financial institutions that lend funds to the public.First, The U.S. government uses direct financing, when it creates a public corporation that sells bonds and commercial paper to investors in the financial markets.Then the public company uses the investors' money to lend to borrowers directly.For example, the Farm Credit System, a U.S. government agency, lends to farmers.Farmers use these loans to finance growing crops, equipment, or mortgage loans.Second, the U.S. government lends money to students who pursue a college education.For example, the Student Loan Market Association, known as Sallie Mae, lends directly to students or buys student loans from banks.Finally, the Federal National Mortgage Association (Fannie Mae) and Federal Home Loan Mortgage Corporation (Freddie Mac) grant mortgages to low-income households.They also buy and sell mortgages to boost the liquidity of the mortgage loan market.For the second method, a government can lend to the public through loan guarantees, which is similar to insurance.For example, a bank lends to a student to pay for an education, and the U.S.
  • Department of Education guarantees the loan.If the student defaults, subsequently, the U.S.
  • Department of Education repays the loan to the bank, and then the U.S. government uses its authority to collect from the student.
  • Some people question a government's role in financing.When a government directly lends, the government squeezes the financial institutions out of the loan market.Furthermore, the federal government loan guarantees increase the problem of moral hazard.Financial institutions receiving the loan guarantees might not screen borrowers as much, lending to borrowers with a high default risk.For example, the effects of the 2007 Great Recession continue to linger in the U.S. economy, even in 2014.Recession caused mass layoffs and doubled the unemployment rate.Then the housing values continue to plummet while foreclosures continue soaring.Consequently, the U.S. government might be liable for trillions of dollars in loan guarantees and bailout of public corporations.We explain several examples below:
  • Department of Education, SallieMae, and commercial banks granted college student loans that had surpassed $1 trillion in 2012.Unfortunately, college graduates continue to enter an abysmal job market in 2013.Student-loan default rate hovers around 24%.College students, on average, owe approximately $24,000 while law school graduates accumulate loans exceeding a $100,000.Unfortunately, a stagnant economy would force the U.S. government to pay billions in loan guarantees.

• Changes in Agricultural Production

  • In the United States, hundreds of thousands of farmers had taken out mortgages and loans to buy neighboring properties and were suddenly unable to meet the financial burden.
  • Farmers had a powerful voice in Congress and demanded federal subsidies, most notably the McNary-Haugen Farm Relief Act.
  • The act, which was co-authored by Charles L.
  • According to the bill, a federal agency would be created to support and protect domestic farm prices by attempting to maintain price levels that existed before the World War I.
  • By purchasing surpluses and selling them overseas, the federal government would take losses that would be paid for through fees against farm producers.

• Competing Solutions

  • Although Hoover was a committed Republican who believed in minimal government intervention, low taxes, and the power of free market, he also assumed that the federal government should act when the national economy and the well-being of citizens were at stake.
  • His advisers pushed for the creation of the Reconstruction Finance Corporation (RFC), a federal agency that would provide safe loans to banks, other financial institutions, and public utility companies (e.g., railroads).
  • First, in 1930, he signed the Smoot-Hawley Tariff Act that raised U.S. tariffs.
  • Finally, the 1932 Norris-La Guardia Anti-injunction Act supported the organized labor.
  • Among many initiatives, AAA provided farm subsidies in exchange for curbed agricultural production (farmers would not cultivate all of the land on their farms) and manipulated farm product prices by buying and temporary withholding products from the market .

• The Lender of Last Resort

  • The Fed provided loans to support a number of institutions from collapse, including AIG, Bank of America, and Morgan Stanley.
  • According to the Federal Reserve Bank of Minneapolis, "the Federal Reserve has the authority and financial resources to act as 'lender of last resort' by extending credit to depository institutions or to other entities in unusual circumstances involving a national or regional emergency, where failure to obtain credit would have a severe adverse impact on the economy. " Through its discount and credit operations, Reserve Banks provide liquidity to banks to meet short-term needs stemming from seasonal fluctuations in deposits or unexpected withdrawals.
  • The rate the Fed charges banks for these loans is the discount rate (officially the primary credit rate).
  • By making these loans, the Fed serves as a buffer against unexpected day-to-day fluctuations in reserve demand and supply.
  • For example, on September 16, 2008, the Federal Reserve Board authorized an $85 billion loan to stave off the bankruptcy of international insurance giant American International Group (AIG).

• Early Farm Policy

  • They agreed that all unsettled lands would come under the authority of the federal government, which could then sell it for $2.50 an acre ($6.25 a hectare).
  • This was finally accomplished through the Homestead Act of 1862, which opened vast tracts of western land to easy settlement.
  • Another law enacted the same year set aside a portion of federal land to generate income to build what became known as land-grant colleges in the various states.
  • The endowment of public colleges and universities through the Morrill Act led to new opportunities for education and training in the so-called practical arts, including farming.
  • Most of the farm workers were slaves.

• Financial Strains

  • During the Revolutionary War, colonists were forced to rely on a patchwork of paper currency, credit, loans, and aid from France.
  • The Americans attempted resistance through boycotts of British manufactured items, but the British responded with a rejection of American rights and the Intolerable Acts of 1774.
  • Morris used a French loan in 1782 to establish the private Bank of North America for financing the war.
  • The second issue quickly became nearly worthless—but it was redeemed by the new federal government in 1791 at 100 cents on the dollar.
  • These loans were repaid in full in the 1790s.

• The National Credit Union Administration (NCUA)

  • The NCUA is the independent federal agency created by the U.S.
  • The National Credit Union Administration (NCUA) is the United States independent federal agency that supervises and charters federal credit unions.
  • The chartering of credit unions in all states is due to the signing of the Federal Credit Union Act by President Franklin D.
  • At first, the newly created Bureau of Federal Credit Unions was housed at the Farm Credit Administration.
  • On July 22, 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act was signed into law and included permanently establishing the NCUA's standard maximum share insurance amount at $250,000.