Legal Definitions - federal intermediate credit bank

A federal intermediate credit bank was a specialized financial institution that operated as part of the U.S. government's Farm Credit System. Established to support American agriculture, its primary function was to provide short- and intermediate-term credit to agricultural producers and their cooperatives. However, these banks did not lend directly to individual farmers or ranchers. Instead, they acted as "wholesalers" of credit, lending funds to local lending associations, such as Production Credit Associations (PCAs), and other financial institutions. These local associations then used the funds to make direct loans to farmers and ranchers for operational expenses, equipment purchases, and other agricultural needs. These banks were eventually consolidated into Agricultural Credit Banks in 1987.

• Example 1: Funding for a Cooperative's Expansion

  In the 1970s, a large fruit growers' cooperative in Washington State sought a significant loan to build a new cold storage facility to better preserve its members' harvest. The cooperative would have approached a local Production Credit Association (PCA) for this financing. The PCA, in turn, would secure the necessary capital from its regional federal intermediate credit bank. This arrangement allowed the federal intermediate credit bank to indirectly support the cooperative's infrastructure development by providing wholesale funds to the direct lender.

• Example 2: Supporting Seasonal Operating Loans for Farmers

  During the planting season in the early 1980s, a Production Credit Association (PCA) in the Midwest experienced a high demand for operating loans from its farmer members who needed funds for seeds, fertilizer, and fuel. To meet this surge in demand, the PCA would borrow a substantial amount of money from its designated federal intermediate credit bank. This enabled the PCA to have sufficient capital to disburse numerous individual operating loans to farmers, illustrating the federal intermediate credit bank's crucial role in ensuring liquidity for local agricultural lenders.

• Example 3: Financing Equipment for a Livestock Producer

  A cattle rancher in Texas in the mid-1960s needed an intermediate-term loan to purchase new fencing and a feed mixer for their operation. The rancher would apply for this loan through a local Production Credit Association. The federal intermediate credit bank would then provide the wholesale funding to that PCA, empowering the PCA to extend the necessary loan to the rancher for the equipment acquisition. This demonstrates how these banks indirectly facilitated individual farmers' and ranchers' access to capital for essential agricultural investments.