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Leaving the tunnel

Agriculture.com Staff 02/12/2016 @ 10:41pm

Jamie Stewart's 14th-floor office at 10 Exchange Place in Jersey City, New Jersey, has a sweeping view of the Manhattan skyline across the Hudson River.

New York's metro area seems an unlikely spot for one of American agriculture's key institutions. Here, the Federal Farm Credit Banks Funding Corporation, with a staff of 40, issues bonds that finance the Farm Credit System's $163 billion loan portfolio -- almost 40% of U.S. ag loans.

For more than a year, Stewart, the Funding Corporation's CEO, hasn't had much time to admire the view.

"We take a great deal of pride in the fact that during the panic, which I think is the right word for it, we were able to provide access to credit for our borrowers," he says.

"We went into this thing in pretty good shape," he recalls. "We also saw, early on, some worrying signs that the credit markets were getting kind of crazy."

In March of 2008, Bear Stearns, an investment bank that pioneered reselling subprime loans, collapsed. Summer brought calm. Meanwhile, the Funding Corporation advised Farm Credit lenders to shore up loan portfolios. It scaled back overnight borrowing. Then in September, home mortgage giants Fannie Mae and Freddie Mac got a federal bailout, days before the bankruptcy of investment bank Lehman Brothers triggered the Great Recession.

The Farm Credit System has only this in common with Fannie Mae and Freddie Mac: It, too, is a government-sponsored enterprise selling bonds with implied backing of the U.S. government. Unlike Fannie Mae, the System is sound. Its growing surplus tops $20 billion.

In the darkest days of 2008, the Funding Corporation carried on, reassuring investors. "Even the very basics of being a cooperative took a lot of explaining," says Funding Corporation vice president Regina Gill. "And we also had to explain that we're not in the subprime mortgage business," Stewart adds.

Jamie Stewart's 14th-floor office at 10 Exchange Place in Jersey City, New Jersey, has a sweeping view of the Manhattan skyline across the Hudson River.

Today the light is a bit brighter at the end of the Holland Tunnel linking New York's financial district with Jersey City. After nearly a year of not being able to sell bonds maturing much beyond five years, an insurance company asked the Funding Corporation in September to issue 30-year bonds. Longer term bonds make a better match with intermediate and long-term loans that allow fixed rates for machinery and land loans.

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