What is a Federal Land Bank?

A Federal Land Bank (FLB) is a government-run lending agency that handles loans and financing for the development or purchase of rural land. In the United States, the Federal Land Bank system was created in 1916 to aid farmers in purchasing, developing, and improving new land. The Federal Land Bank system no longer exists in the US, its function having been rolled into the much more comprehensive Farm Credit Bank (FCB).

As big business swelled in the post-Industrial Revolution United States, the government sought a way to keep small farms and family farms in business. Once the hallmark of American hardiness and dedication, small farms were quickly falling by the wayside at the introduction of huge company-run farms and expensive but vital new farming machinery. In 1916, US President Woodrow Wilson signed the Federal Farm Loan Act, which established the Federal Land Bank in twelve regional offices. Jump-started by government funds, the regional banks promised good rates for small businesses as well as a high borrowing limit.

Federal land banks were seen by supporters as crucial to halting the spread of monopolies. With the rise of robber barons and tycoons, the working farmers were severely at risk of failing. Without the market competition created by a wide group of farm suppliers, large companies could have gained full control over pricing and supply, leading to undesirable economic conditions. The concept of the Federal Land Bank was not a new one; some historians say it was heavily influenced by similar programs throughout Europe, especially the agricultural credit system that had existed in Germany for centuries.

The Federal Land Bank program proved an immediate success; by 1917, more than $200 million US dollars (USD) had already been borrowed from the regional offices. Yet the Great Depression of the 1930s nearly destroyed this thriving industry as the financial crisis swept the country. In 1933, US President Franklin Roosevelt made a bid to save the industry by signing laws allowing short-term loans and giving delinquent farmers more time to pay off mortgages owed the federal government. Roosevelt's gamble worked, leading to a major increase in lending throughout the farming industry.

By 2005, the debt to the government had been entirely repaid, making the banks fully owned by investors and farmers. While still government-backed, the organization is managed by private citizens. Since the turn of the 21st century, all 12 original regional offices of the Federal Land Bank system have merged into the larger Farm Credit Bank, leaving no Federal Land Banks in existence in the US.