Farm Credit Act of 1933

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Farm Credit Act of 1933

Ross Rosenfeld and Jeff Zavatsky

Excerpt from the Farm Credit Act

The Governor of the Farm Credit Administration, herein after in this Act referred to as the "governor," is authorized and directed to organize and charter twelve corporations to be known as "Production Credit Corporations" and twelve banks to be known as "Banks for Cooperatives." One such corporation and one such bank shall be established in each city in which there is located a Federal land bank. The directors of the several Federal land banks shall be ex officio the directors of the respective Production Credit Corporations and Banks for Cooperatives.

The Farm Credit Act of 1933 (48 Stat. 257) made it possible for many farmers to keep their farms and survive the Great Depression. It did so by offering short-term loans for agricultural production as well as extended low interest rates for farmers threatened by foreclosure. Small farmers were able to refinance their mortgages with the aid of twelve district banks, called Banks for Cooperatives. A thirteenth bank served larger farming operations. Local Production Credit Associations provided short and intermediate term loans for seasonal production, insuring that farmers would not lose out on essential crop yields.

The act was passed on June 16, 1933, the last day of President Franklin D. Roosevelt's "Hundred Days" initiative, an effort by his Administration to quickly put in place measures to fight the Depression. Its stated purpose was to "provide for organizations within the Farm Credit Administration to make loans for the production and marketing of agricultural products, to amend the Federal Farm Loan Act, to amend the Agricultural Marketing Act, to provide a market for obligations of the United States, and for other purposes."

CIRCUMSTANCES LEADING TO THE ACT

The Federal Farm Loan Act had been passed under President Woodrow Wilson's administration in 1916. It created twelve Federal Land Banks to provide long-term loans for farmers. The Agricultural Marketing Act provided loans to cooperatives, but it collapsed when prices fell in 1930. The Farm Credit Act built on these ideas by expanding the federal government's role and establishing short-term loan institutions. The Farm Credit Act coincided with the Emergency Farm Mortgage Act (passed on May 12, the same day as the Agricultural Adjustment Act), which provided $200 million in loans for farmers facing foreclosure. Under Executive Order No. 6340 (October 16, 1933), Roosevelt officially formed the Farm Credit Administration to oversee the day-to-day operations as set forth in the act.

From 1910 to 1930 the number of farms in the United States had decreased by 71,000, but nearly a quarter of the nation's 123 million people were still farmers. With 300,000 more people becoming tenant farmers, the day of the migrant worker or "day laborer" was quickly setting in. Technological advances made it possible for one person to do more work, and the average farm size grew from 139 to 157 acres. Unfortunately, the technology could not provide rain.

Since 1931 a period of severe drought had been destroying crops in the midwestern and southern plains. This region became known as the Dust Bowl. "Black blizzards" of dust settled over dry, overplowed land. The stock market crash and ensuing Great Depression exacerbated the problem by creating a lack of buying power. This resulted in production surpluses, causing farm and dairy prices to decline. Farmers found themselves without the necessary capital to support crop growth, and soon many of them were facing foreclosure.

During the campaign of 1932, Franklin Roosevelt had promised to reorganize the Department of Agriculture, lower taxes on farmers, raise tariffs, and provide federal credit for farm mortgages. Roosevelt may have been taking a cue from his famous uncle Theodore, who as president had proposed "an effective cooperation among farmers" back in 1908. The second Roosevelt, however, was more aggressive than the first on this subject. In addition to extending loan institutions, the administration advocated destroying crops and killing piglets to cut surpluses and prop up prices. Three months after the Farm Credit Act passed through Congress, six million piglets were put to death. Backlash from a deprived, often starving public, though, caused Roosevelt to reverse himself on this issue, and the administration instead offered subsidies for voluntary reduction.

RELATED ACTS

During the Great Depression, approximately three million people were forced to move off their farms. It is impossible to say exactly how many people the Farm Credit Act saved, but it is reasonable to estimate that without it the number forced off their farms would have been much larger. Other initiatives taken by Roosevelt and Congress to aid the farmer included the Frazier-Lemke Farm Bankruptcy Act, which limited the ability of banks to evict farmers during hard times, and the Emergency Relief Appropriation Act, which allocated $525 million for drought relief. The Farm Tenancy Act of 1937 helped tenant farmers buy their own land. Better farming methods also became a priority. The Soil Conservation Service taught farmers to preserve soil and prevent irreversible damage through techniques such as strip cropping and crop rotation.

Like many New Deal laws, the Farm Credit Act was a tool of the times. But the idea took hold. Following the Depression, it went through many stages, being reworked in 1953, then repealed in 1966. In 1971 a new Farm Credit Act was drawn up, and it is the basis for the Farm Credit system today, which continues to help balance the risks of farming.

See also: Agricultural Adjustment Act ; Farmers's Home Administration Act ; National Industrial Recovery Act .