NEW YORK, March 11 (Reuters) - Farmer Mac, the government-sponsored agricultural finance company, on Thursday said broker-dealer Morgan Keegan will help it expand its ability to shoulder credit risk from banks.
Morgan Keegan will offer bank customers the ability to offload credit risk to help restore their ability to expand their balance sheets, the two companies said in a statement.
Washington-based Farmer Mac (AGM.N), which describes itself as “a stockholder-owned instrumentality of the United States,” is a tiny fraction of the size of residential funding giants Fannie Mae and Freddie Mac, but has a similar goal of funneling investor cash to credit markets.
Fannie Mae and Freddie Mac for decades have been the biggest providers of funding for residential loans. But the companies benefited shareholders at the risk of taxpayers, who in the housing crisis are now paying billions of dollars to keep the companies afloat. Congress is planning an overhaul of their business model.
Farmer Mac since its inception in the 1980s has always had additional checks on its business, including registration with the Securities and Exchange Commission, a spokeswoman said. Congress in 2008 expanded Farmer Mac’s authority, she added.
Farmer Mac had a capital surplus of $126 million as of September, up from $13 million at the end of 2008. Its shares are up more than 200 percent over the past year.
The company will primarily offer its “long-term standby purchase commitments,” which let banks shift credit risk on pools of agricultural real estate loans to Farmer Mac, Farmer Mac and Morgan Keegan said in the statement.
The commitments became controversial in 2002 as investor William Ackman questioned their risks and other operations, fueling a row over his bets against the company’s stock. (Reporting by Al Yoon; Editing by Leslie Adler)