(58) By the time Herbert Hoover assumed the presidency in 1929, Congress had created three government-sponsored enterprises (GSEs) that either directly or indirectly targeted frictions in agricultural credit markets: (1) the Farm Land Banks, (2) the War Finance Corporation, and (3) the Federal Intermediate Credit Banks. The creation of these enterprises reflected the congressional view that perceived dysfunction in the credit markets warranted targeted government intervention.
Hoover described his hopes for the new GSE in his official signing statement: "[The RFC Act] brings into being a powerful organization with adequate resources, able to strengthen weaknesses that may develop in our credit, banking, and railway structure, in order to permit business and industry to carry on normal activities free from the fear of unexpected shocks and retarding influences." (131) In its final form, the act gave the RFC the authority to lend to a broad set of financial intermediaries, including government-sponsored enterprises like the Federal Land Banks and Federal Intermediate Credit Banks, as well as to railroads, on a wide range of collateral.
(91) Section 404 of the Agricultural Credits Act of March 4, 1923, amended the Federal Reserve Act by adding Section 13a, which read: "That any Federal Reserve Bank may, subject to regulations and limitations to be prescribed by the Federal Reserve Board, rediscount such notes, drafts, and bills for any Federal Intermediate Credit Bank, except that no Federal Reserve Bank shall rediscount for a Federal Intermediate Credit Bank any such note or obligation which bears the indorsement of a nonmember State bank or trust company which is eligible for membership in the Federal Reserve System, in accordance with section 9 of this Act." The FICBs could not bring for discount at Federal Reserve Banks any bank loans secured by Treasury securities.
Those boards each govern three regional subsidiaries--the Banks for Cooperatives, as well as the Federal Land Banks and the Federal Intermediate Credit Banks, which oversee the Production Credit Associations (P.C.A.).
Nonetheless, an audit by the regional Federal Intermediate Credit Bank two months earlier had found Willamette Valley to be in good financial health, though it did note $2 million in loan losses because of declining collateral values.
If they formed and capitalized their own credit unions, he told me, they could acquire discounted loan funds from the Federal Intermediate Credit Bank under the 1971 Farm Credit Act.