Ancient history. In the early decades of the last century, farmers and more broadly rural America as a whole had serious banking and credit deficits. Even if your local country bank was competently managed and well capitalized, there was no competition and borrowers were at the mercy of often inadequate local lending institutions. By the 1930's, 40% of the nation's population was still rural, 25% was still on the farm, and rural incomes were less than half the national average. The inadequacy of rural credit system was fingered as a major obstacle to economic development. So, by fits and starts, a series of federal initiatives morphed into what became the Farmers Home Administration, which in the 1990's split into USDA Rural Development (rural utilities, home and business lending) and the Farm Services Agency (farm lending).
Critics will say that this is all anachronistic and that the legacy, ex FmHA programs should be terminated, given modern communications and internet access to a sophisticated banking and credit system. But nothing is quite that simple in government.
While Farmers Home and its successor agencies were quietly doing their thing in rural America, the federal government got into the urban housing and business incubator business in a big way via HUD, the Small Business Administration, and host of other agencies, largely located in Commerce. Since Farmers Home was already doing the rural piece, a rough division of labor ensured. HUD would concentrate on the bigger cities. USDA, which lives, eats, and breathes rural, would do the small towns and big empty spaces.
This offends some flow chart people, but it actually makes some sense. HUD and Commerce want to play in Atlanta, Philadelphia, Los Angeles, etc.; they don't want to be bothered with communities of 234 people 300 miles from the nearest commercial airport. This is why USDA does rural housing, rural water, sewer, and electric infrastructure, and rural business development.
Reformers sometimes come along and argue for a consolidation of these programs under one roof. The counterargument is that size matters. Say you are providing support for modern water and sewer systems in low income communities. (These programs are pretty generally means-tested.) You cannot take an unincorporated rural community of 83 people with a volunteer town board and no one in town who even knows what the federal register is, and toss it into loan/grant competition with mega-counties like Fairfax/Orange/Westchester, or cities like Boston/Chicago/San Antonio/Tucson, and say it's a fair competition. USDA does rural. USDA likes small communities. And USDA is trained and organized to work with local officials in communities that don't have battalions of professional planners and grantwriters on staff.
And brain surgeons are trained and organized to operate on brains. So what? These loans have nothing to do with agriculture and should not be part of the USDA. It’s nonsense like this and the associated rationalizations that lead the trillions in debt.
“And USDA is trained and organized to work with local officials in communities that don’t have battalions of professional planners and grantwriters on staff.”
Lots of farmers lost their lands to crooked bankers. A bank would loan a farmer money for the crop. If the harvest was bad the bank would refinance it until next year. When the farmer couldn’t pay it all the next year the bank would foreclose.
Sears and Roebuck forced a lot of small businesses to sell by giving them a huge order for their products. When the business couldn’t deliver they’d get a loan and expand their facilities. The next year Sears wouldn’t give them an order but would offer to buy them out.