Linda and Richard Oswald, June 16, 1968
Photo: Courtesy of Richard Oswald
Linda and I were married right out of high school in 1968.
I remember when her Dad told us that as married adults, it was up to us to pay for the insurance on her car. We called the insurance agent, Jim, to tell him things were changing, and he offered to come by the house to sign us up.
When Jim stepped through the front door he stopped, looked at both of us and asked, "How old are you kids anyway?"
We told him. He just shook his head and said that we were too young to be married. Not long after that we changed insurance carriers"¦ not because we were mad at Jim, but because we found cheaper insurance.
We may have been young, but we weren't THAT young.
Being young has its advantages. Young people are physically strong and mentally quick, but inexperienced. Farming in the '60s and '70s was a tough business for anyone new to the game. Five years after Jim told us we were too young to be married, we were a family of 4, gaining lots of experience, and getting nowhere.
Richard and Linda Oswald
Rock Port, Missouri
June 16, 1968
Photo: Courtesy of Richard Oswald
In 1973, we had the chance to buy a farm. It wasn't a very good farm, but it was cheap. In fact, most land around here was cheap in 1973 partly because it was hard to make a living even on the very best.
We had a down payment and needed a loan for the other 70%. First we asked our banker for the loan. He told us that his bank didn't make long term loans. Then we went to a long-term lender who looked at our financial statement and the land we wanted to buy. He denied the loan. Then we went to FmHA and talked to the administrator. He told us we were better off without the farm. On the last try to borrow the money, we went to a different ag lender who agreed to a 7-year intermediate-term loan with a flexible interest rate and a balloon payment due at the end of the seventh year. Since we used everything we had for a down payment, we also had to borrow money from the same lender to pay farm operating expenses.
Our repayment ability was limited to what the farm would earn. Back then, our projected annual income from the additional acres was only about $6000, the same amount as the payment. Before we finalized the loan I asked my loan officer what would happen if interest rates on the loan went up. He answered that he had never seen rates on this kind of loan fluctuate more than one half of one percent.
That was 1973. By 1975, the interest rate on our farm loan had risen 10% to 17.5%. The payment had doubled to $12000, and we were in a heap of trouble.
1974 and 1975 were bad crop years. My lender cautioned me not to sell any farm produce without bringing the money to him. Every time we sold something, the money had to be applied to our loans. We didn't have money for operating expenses, or for our living.
We were just weeks away from a forced sale of the farm and everything else we owned when I made one last attempt to salvage our farm and our life. I went back to FmHA and told the administrator, Coburn Jackson, my predicament.
Coburn was about 6'3", had prominent features and a booming voice that filled the office when he was excited, which was most of the time. At first I was a little leery of him, but I soon learned that if I was honest in my dealings, he would be honest with me.
He gave me some forms to fill out, and told me he'd be in touch.
Two days later the phone rang right at noon. It was Coburn. He said he might be able to help us, and gave me an appointment time to come in and talk it over.
The next day when I went to his office, Coburn said he wouldn't loan a dime on the farm, and never would"¦ no matter what. To Coburn a mistake was a mistake. I had made a mistake buying that farm that he wouldn't compound by getting involved. But he said he knew a long term lender who would take on the mortgage provided FmHA would furnish an operating loan. So that's what he did. I got a long term mortgage back at the rate I first agreed to of 7.5%, while Coburn bailed me out with a loan that enabled us to pay off our other lender and keep on farming.
It's amazing what a few thousand dollars at the right moment can do to help people keep on working and making a living.
House built by Farm Security Administration workers
on property leased from farmers near Radford, Virginia, 1941
Photo: Marion Post Wolcott [1] via Library of Congress
Farmers Home Administration has been the lender of last resort for beginning and troubled farms in the US since 1946. An offshoot of Roosevelt's Farm Security Administration that was established in 1933, FmHA helped tenant farmers, especially returning war veterans, to farm and purchase land. In the 1960s, FmHA became part of Lyndon Johnson's war on poverty. Johnson used it to inject over $4 billion into the rural economy. That's when a lot of rural towns, with the help of FmHA, received low interest loans and grants to help build subsidized housing and other infrastructure. Such housing complexes can be found in nearly every small town in Northwest Missouri (except Langdon).
FmHA lending, now combined under the auspices of the reorganized Farm Service Agency or FSA, has remained on the scene since Johnson's day, but has occasionally had to struggle when Congress reduced funding. Still, it has its purpose by making beginning farmer loans, operating loans, and offering low interest emergency loans to people like us, farmers who sometimes find it impossible to overcome weather and economic disasters, especially when they occur together, at the same time.
With all the current talk of bailing out carmakers, investment banks and insurance companies, it's worthwhile to note that for more than 60 years nearly all the financial aid farmers have received from FmHA, now FSA, has been mostly in the form of loans; Loans that are repaid with interest and backed by collateral in the form of land, equipment, crops, and livestock.
Kristen Coro stood in knee deep mud in the cornfield of neighboring dairy farmers Tom, Mike and Gerry Audet, Orwell, Vermont. The Audets' farm flooded in July 2006.
Photo: Laura Coro [2] via Farm Service Agency
Over the last couple of years, FSA has increased lending to beginning farmers. That's partly because some in the Democratic Congress have wisely seen the need to renew our aging farm population. Even with an increase in loan funds, finding young people willing to use them is harder than ever.
Through our neglect of rural communities, we've convinced an entire generation of young rural Americans that happiness and wealth await them not at home, but in the city.
It seems that every decade sees a farm recession. Our problem in the mid-1970s was only a lead off to the '80s farm recession. The '80s farm recession was one of the worst because it came at the end of a boom/bust cycle of unprecedented proportions. Farmers who expanded without limits were called "Young Tigers" for their willingness to bid up the cost of land through cash rent or direct purchases. When interest rates soared and commodity prices collapsed, a lot of young tigers did too. Just like the land we bought in the '70s, the land they acquired could no longer sustain the debt against it.
It took almost 10 years for the land market and agriculture in general to recover from the '80s farm recession.
Linda and I avoided big problems then because we'd gained some experience, we had Coburn in our corner, and we'd grown the size of our farm through attrition; one of our neighbors retired and we rented some of the land he farmed on crop shares rather than inflated cash rent.
During the farm recession of the '80s it was easy and even popular to vilify FmHA for making farm foreclosures. While there may have been some in FmHA who were insensitive to the plight of their borrowers, I never met any of them.
Sometimes we simply can't be saved from our own mistakes.
That's something to remember when we listen to the news about hundreds of billions in bailouts. It's one thing to help hardworking people find their way through trouble with a loan and some forbearance.
But helping to sustain the unsustainable for MBAs who ought to know better?
That's something else.