Seeking Alpha
All posts from Seeking Alpha
Seeking Alpha in Seeking Alpha - Read, Decide, Invest.,

Farmer Mac: Super Profitable But Cheap Due To GSE Aversion

Farmer Mac's Birth

During the late 1980s, plunging agricultural prices threatened the solvency of the Farm Credit System ((FCS)), a problem congress tried to address in the usual manner. They bailed it out. Non-FCS banks weren't happy about that since they thought the FCS' ("unfair") advantages were the primary cause of the boom-bust cycle that required the bailout in the first place. So congress chartered Farmer Mac (AGM) to help level the playing field for banks by providing a secondary market for their loans.

The FCS is old and big; it was chartered by the Feds in 1916 and it supplies ~40% of US farm credit. (All you really need to know about the FCS is that its institutions have lower long-term funding costs than deposit fueled banks; and they're supposed to restrict their lending to agricultural and certain rural development situations.) It's hierarchically structured and cooperatively owned. Agricultural… Read More …