Definition of Federal Land Bank (FLB)

What is the Federal Land Bank (FLB)?

The Federal Land Bank (FLB) is a network of regional cooperative banks that provide long-term loans to farmers and ranchers. Founded in 1916, the federal land bank system is now regulated by the Agricultural Credit Administration (FCA).

There are more than 70 banks in the Agricultural Credit System (FCS) that specialize in loans for rural businesses, including farms, forestry services, fisheries, parks, and recreational services.

Key takeaways

  • The Federal Land Bank (FLB) system was created in 1916 to provide credit to American farmers and ranchers.
  • Today, it also finances parks and recreation areas, as well as the purchase of homes for rural buyers.
  • Member banks are cooperatives owned by their clients.

Understanding the Federal Land Bank

The Federal Land Bank was founded in 1916 under the presidency of Woodrow Wilson as a network of 12 regional banks dedicated to providing low-cost financing to farmers and ranchers. The new program addressed the urgent financing need of farmers at a time when interest rates were high and agricultural loans were difficult to obtain.

By 1922, a total of 74,000 farmers had borrowed $ 234 million from federal land banks, according to a Farm Credit Administration schedule.

In the 1930s, in the midst of the Great Depression, many farmers defaulted on their loans and about half of the land banks were on the brink of insolvency. President Franklin D. Roosevelt issued an executive order that allowed the government to purchase failed agricultural mortgages and refinance them at lower rates, essentially bailing out the land bank system.

The same executive order created the Agricultural Credit Administration, which exists to this day.


The amount of all current US farm debt issued by the Farm Credit System.

The program expanded over the years, especially during the Depression. The government created 12 other rural credit institutions dedicated to short- and medium-term financing for farms and ranches. The combined network was then called the Agricultural Credit System.

The FLB system got into trouble in 1985 when it posted a total loss of $ 2.7 billion, the largest loss in a year of any American financial institution at the time. Congress responded by adding more industry supervision and regulation and authorizing a cash infusion into troubled member banks.

The Federal Land Bank Today

Its purpose then and now was to provide long-term loans for the purchase of rural land, agricultural equipment, livestock feed, and other agricultural needs. In addition, the Agricultural Credit System provides loans to beginning farmers, rural infrastructure providers, and even rural home buyers.

Banks are cooperatives and are owned by their clients. The loans are no longer subsidized by the federal government. The banks paid off the last of their federal debts in 2005. Banks raise money as needed by issuing bonds to the public.

According to the Agricultural Credit Administration, 40.7% of the current agricultural debt was issued by the Agricultural Credit System.

The agricultural credit system

The Farm Credit System (FCS) is a nationwide loan network that specializes in serving the agricultural community. It is made up of cooperative banks and associations that provide credit to individuals and businesses throughout the United States. The FCS serves the rural community and organizations of all types and sizes, from small family farms to corporations with global operations.

The Agricultural Credit System is a crucial source of financing for the agribusiness industry, which traditional lenders consider high risk. Each of the member institutions of the FCS is managed by a board of directors chosen by the client.

The FCS makes loans for a variety of purposes, including:

  • Agricultural processing and marketing activities
  • Rural housing initiatives
  • Agriculture-related businesses
  • Construction and improvement of rural public services
  • Financing and promotion of global product exports.
  • Purchase of land to operate farms
  • Purchase of equipment and construction of the necessary facilities for the agricultural industry.

The Agricultural Credit System assists the agricultural industry with resources that include financial products such as credit life insurance, crop insurance, accounting tools, and cash management services. The organization also provides access to leasing programs that allow customers to purchase and finance vehicles, farm equipment, and other supplies.

The Farm Credit System does not work with government funds or tax dollars. The FCS raises funds by selling debt securities on the market. Loan proceeds help purchase and maintain the products and supplies needed by the people FCS serves

READ ALSO:  Seniors Say These 4 Things Make for a Happy Retirement
About the author

Mark Holland

Leave a comment: