The farm subsidy insurance program meant to protect farmers against catastrophic losses may have another huge beneficiary: big Wall Street insurers, according to story from Bloomberg.
The crop insurance program was established in 1938 to help farmers survive during periods of drought and disease, Bloomberg explains. But today's expanded insurance subsidies benefit big financial institutions like Wells Fargo — last year, taxpayers spent $14 billion on the insurance program. Taxpayers pay nearly 60 percent of insurance premiums for farmers, and the insurers are making substantial profit as a result.
"What we’ve got is a money-laundering operation," Harwood Schaffer of the University of Tennessee’s Agricultural Policy Analysis Center told Bloomberg. "It looks like we’re doing a free market thing and it’s not free market at all."
Bloomberg reported that politicians from both sides oppose expansion of the farm subsidy program. President Obama has "proposed cutting $11.7 billion from the program over the next decade," while Rep. Paul Ryan, R-Wi., has "proposed cutting crop coverage subsidies as part of a $31 billion reduction over the next decade in farm expenditures."
"We should have a crop insurance system that helps protect people from catastrophic losses," Ryan told MSNBC, according to the Bloomberg article. "But we shouldn’t be playing what I call, you know, crony capitalism."
But the House may vote this week on a bill, which would expand the crop insurance system while cutting money from the food stamp program, according to Reuters. A report by the New York Times earlier this year also reported that while fraud is being used as a reason to make cuts in the food stamp program, not much attention is paid to fraud in farm subsidies. The Times wrote, "The food stamp error rate is 3.8 percent, according to Agriculture Department data, while the rate for the crop insurance program is 4.7 percent."