Testimony of the Honorable Jeffery S. Hall

Board Member

Farm Credit Administration

Before the U.S. Senate Committee 

on Agriculture, Nutrition, and Forestry

May 19, 2016

Chairman Roberts, Ranking Member Stabenow, and Members of the Committee, it’s a 

distinct honor to appear before you today. I am Jeff Hall and it has been a little over a year 

since this Committee forwarded my nomination for confirmation. I welcome this opportunity 

to return today to testify as a Board Member of the Farm Credit Administration (FCA).

The Farm Credit Administration is an independent, arm’s-length regulator of the Farm Credit 

System which includes Farmer Mac. Our agency examines the System institutions for their 

safety and soundness and their compliance with laws and regulations, providing heightened 

oversight of institutions with higher risk.

The Farm Credit System (FCS or System) was created to provide a permanent, reliable 

source of credit to U.S. agriculture. When Congress enacted the Federal Farm Loan Act in 

1916, credit often was not always available or affordable in some rural areas. Many lenders 

avoided farm loans due to the inherent production and price risks of agriculture. 

The FCS is now authorized to lend to eligible and credit worthy agricultural producers.

Loans may also be made to finance the processing and marketing activities of these 

borrowers; for home ownership in rural areas; certain farm or ranch-related businesses; 

and agricultural, aquatic, and public utility cooperatives.

The foundation of the System is its cooperative structure. Agriculture has changed in many 

ways and will continue to change, but the guiding principles of the cooperative model 

continue to stand the test of time. Member ownership and governance are a key ingredient

of the System’s success.

The System’s nearly century-long mission of providing sound, dependable credit for U.S. 

agriculture and rural America is just as relevant today as it ever was. The Farm Credit 

System is our nation’s leading lender to U.S. farmers, ranchers, and agricultural 

cooperatives. It has more than $220 billion in outstanding loans to more than 500,000 

members. 

The health of the System today is due in no small part to the foresight of many Members of 

this Committee. During the agriculture credit crisis of the 1980s, Congress made some very 

important changes to the Farm Credit System that gave it the opportunity to emerge 

stronger and better able to serve rural America and meet its mission.

As you well know, farm income is projected to decline for the third consecutive year.

Virtually all commodity prices are lower than any time in the past five years. Farm debt 

continues to increase and many farmers and ag business have been forced to draw from the 

equity they had built. Fortunately, agriculture has entered this down cycle from a position of 

strength with historically low interest rates helping to hold down debt levels. There are 

challenges ahead and the Farm Credit System is well situated to remain a reliable source of 

credit.
One of the fundamental strengths of the Farm Credit System is its diversity. The geographic 

diversity helps spread weather and production risks and the diversity of the various 

enterprises and commodities help spreads price risks. The diversification of the investment 

portfolio spreads industry risks. With over seventy different associations, management risk

is not isolated in just a few hands. The broad mix of small farms and large farms, young 

farmers and experienced farmers helps spread concentration risks.

Chairman Roberts told me as I sat at this table a little over a year ago to get outside of 

Washington and go meet people in the System. I am following that call to action and have 

experienced firsthand this diversity.

I’ve prioritized my travel in a way to meet with System borrowers, association boards and 

employees, the owners of the System, who are dealing with the present challenges and 

stress within the agriculture economy. Also, on my visits I want to learn about the 

consequences of the rules and regulations imposed by the Farm Credit Administration.

My trips and visits with member borrowers have helped greatly in my considerations and 

deliberations as a Board Member. Without input from the regulated community, my job 

would be much more difficult. I like to say that we may not always agree, but I will always 

listen.

At our March Board meeting, the Farm Credit Administration Board approved the new 

capital rule which will require the System to hold on to more and higher quality capital. By 

raising the capital requirements now, farmer borrower’s investment in their association is 

better protected from impairment.

From the beginning of my term, Chairman Spearman has made internal controls a stated 

priority. I appreciate that he was willing to take the additional time to reopen the comment 

period which resulted in a better rule.

The Farm Credit Administration Board also adopted a bookletter which provides guidance to 

the System on the use of similar entity lending authority. I understand reputation risk is a 

valid concern and adopting the bookletter’s increased examination and reporting 

requirements will give FCA an added tool to monitor similar entity lending activity. It will 

also give us an indication whether additional guidance is necessary from the Farm Credit 

Administration Board.

Both the capital rule and the similar entity bookletter are good examples of the additional 

focus on internal controls. Modern agriculture and the financial service industry is more 

complex than ever. The Farm Credit Administration and the System will continue to 

strengthen the internal controls in order to maintain your confidence and carry on the 

legacy of service to American agriculture and rural communities.

Thank you again for inviting me to testify. There are many challenges that face the Farm 

Credit System. Having been a Federal Land Bank borrower in the early 1980s, I can say 

with confidence that the Farm Credit System is a much different system than when I was a 

borrower. I don’t consider myself an advocate for the Farm Credit System. I do consider it 

my responsibility to assure a safe and sound source of credit to eligible borrowers and 

owners of this cooperative. When the System is safe and strong, we are doing our job as a 

regulator and the benefits of a dependable, competitive source of credit will keep rural 

America prosperous for many more years.