Abstract

Federal credit policies toward agriculture reflect the human values of maintaining the farm production sector largely as an industry characterized by small-scale, family farms. The Farmers Home Administration has implemented various credit programs designed to carry out this policy objective. As a result of the prolonged financial crisis in the farm economy, the agricultural community is becoming more aware of the controversies surrounding the mission of FmHA and its debt restructuring program. This paper discusses the debt restructuring program administered by the Farmers Home Administration (FmHA), as authorized by the Agricultural Credit Act of 1987, and amended by the recently enacted Farm Bill of 1990. It discusses the key provisions of the Agricultural Credit Act authorizing FmHA to establish a debt restructuring and debt forgiveness program aimed at achieving the public policy objective of keeping financially stressed farmers in business, whenever possible.In the course of reviewing the restructuring program, FmHA officials and congressional committees reviewed the FmHA's mission and its program implementation. This review indicated that several unintended negative consequences resulted from several abuses stemming from inadequate administrative mechanisms and controls and conflicting legislative objectives of debt forgiveness and federal tax policy. In enacting the 1990 Farm Bill, Congress sought to reorient FmHA's mission to a temporary source of credit and to eliminate various abuses associated with the implementation of FmHA's debt restructuring program. The 1990 Farm Bill reflects an effort by Congress to address some the controversies surrounding federal credit policies toward agriculture. Although Congress placed limits on debt restructuring, the overall public policy objective of maintaining a family-farm posture in the agricultural sector continues to be an important social value