On March 27, 1933, President Franklin D. Roosevelt issued an executive order creating the Farm Credit Administration (FCA). The FCA increased the amount of credit available to farmers during the Great Depression, made it easier for farmers to refinance their farm mortgages and pay off their debts, helped shore up struggling rural banks, and more effectively coordinated the government’s increasingly large and complex farm credit system.
After the stock market crash of October 1929, many people who had deposited money in banks began withdrawing their money. In order to get cash for depositors, banks responded to the accelerating number of withdrawals by calling in their loans. But in many rural communities, falling land and commodity prices during the 1920s made it difficult for farmers to meet their loan payments. Consequently, thousands of small rural banks ran out of money and shut down, while many more were barely solvent. The failure of so many rural banks caused a severe credit shortage for farmers; the number of mortgage foreclosures rose sharply; and many farmers lost their life savings as well as their farms.
To resolve the financial crisis gripping America’s banking system, President Herbert C. Hoover created the Reconstruction Finance Corporation, which was designed to help struggling banks increase their liquidity. But such efforts largely ignored the problems of farmers. Instead, Hoover relied on two institutions to extend credit to farmers: the Federal Farm Loan Board, which President Woodrow Wilson had created in 1916;
And the Federal Farm Board, which Hoover created in 1929 when he signed the Agricultural Marketing Act. Yet, despite the efforts of the Hoover presidency, the credit shortage facing American farmers continued to worsen.
When the FCA became operational on May 27, 1933, it disbanded the Federal Farm Loan Board and Federal Farm Board and took over their remaining activities. On June 16, 1933, Congress passed the Farm Credit Act, which gave congressional approval to Roosevelt’s executive order creating the FCA. The chairman of the Federal Farm Board became the governor of the FCA, and a 13-member Federal Farm Credit Board was appointed to serve as the FCA’s policymaking body. Roosevelt appointed Henry T. Morgenthau, Jr., as the first governor of the FCA, a position he held until early 1934 when he became secretary of the treasury.
The FCA supervised the operation of the nation’s federal land banks, intermediate credits banks, farm loan associations, and the central bank for cooperatives. On an average day, the FCA could refinance more than 300 mortgages; within its first 18 months of operation, the FCA refinanced more than 20 percent of all farm mortgages in the United States. Through the Crop Loan Act, the FCA also gave loans to farmers for crop production and harvesting, and under the Farm Mortgage Refinancing Act, issued up to $2 billion in bonds for refinancing farm debts. By the end of 1940, the FCA had made a total of nearly $7 billion in loans, saved hundreds of thousands of struggling farms from foreclosure, and stopped thousands of small rural banks from declaring bankruptcy.
Although originally established as an independent government agency, the FCA lost its independent status in 1939, when FDR, as part of his Executive Reorganization Act, transferred it to the Department of Agriculture. It remained part of the Department of Agriculture until the Farm Credit Act of 1953 reestablished it as an independent agency.
See also agriculture; Home Owners Loan Corporation.
Further reading: David E. Hamilton, From New Day to New Deal: American Farm Policy from Hoover to Roosevelt, 1928-1933 (Chapel Hill: University of North Carolina Press, 1991); Theodore Saloutos, The American Farmer and the New Deal (Ames: Iowa State University Press, 1982).
—David W. Waltrop
World History
