FEDERAL AGRICULTURAL MORTGAGE CORP (Form: 10-Q, Received: 08/12/2008 06:02:27)

As filed with the Securities and Exchange Commission on

August 12, 2008

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2008

Commission File Number 001-14951

FEDERAL AGRICULTURAL MORTGAGE CORPORATION

(Exact name of registrant as specified in its charter)

Federally chartered instrumentality
of the United States	52-1578738
(State or other jurisdiction of incorporation or organization)	(I.R.S. employer identification number)

1133 Twenty-First Street, N.W., Suite 600
Washington, D.C.	20036
(Address of principal executive offices)	(Zip code)

(202) 872-7700

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes S

No £

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer £	Accelerated filer S

Non-accelerated filer £	Smaller reporting company £

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes £

No S

As of August 1, 2008, the registrant had 1,030,780 shares of Class A Voting Common Stock, 500,301 shares of Class B Voting Common Stock and 8,499,698 shares of Class C Non-Voting Common Stock outstanding.

PART I - FINANCIAL INFORMATION

Item 1.

Condensed Consolidated Financial Statements

The following interim unaudited condensed consolidated financial statements of the Federal Agricultural Mortgage Corporation (“Farmer Mac” or the “Corporation”) have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). These interim unaudited condensed consolidated financial statements reflect all normal and recurring adjustments that are, in the opinion of management, necessary to present a fair statement of the financial condition and the results of operations and cash flows of Farmer Mac for the interim periods presented. Certain information and footnote disclosures normally included in annual consolidated financial statements have been condensed or omitted as permitted by SEC rules and regulations. The December 31, 2007 consolidated balance sheet presented in this report has been derived from the Corporation’s audited 2007 consolidated financial statements. Management believes that the disclosures are adequate to present fairly the condensed consolidated financial position, condensed consolidated results of operations and condensed consolidated cash flows as of the dates and for the periods presented. These interim unaudited condensed consolidated financial statements should be read in conjunction with the audited 2007 consolidated financial statements of Farmer Mac included in the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2007. Results for interim periods are not necessarily indicative of those that may be expected for the fiscal year.

The following information concerning Farmer Mac’s interim unaudited condensed consolidated financial statements is included in this report beginning on the pages listed below:

Condensed Consolidated Balance Sheets as of June 30, 2008 and December 31, 2007	3
Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2008 and 2007	4
Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2008 and 2007	5
Notes to Condensed Consolidated Financial Statements	6

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FEDERAL AGRICULTURAL MORTGAGE CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited)

	June 30,			December 31,
	2008			2007
	(in thousands)
Assets:
Cash and cash equivalents	$	712,374		$	101,445
Investment securities:
Available-for-sale, at fair value (includes securities pledged to counterparties of $3.7 million and $7.2 million, respectively, as of June 30, 2008 and December 31, 2007)		1,503,473			2,616,187
Trading, at fair value		186,514			8,179
Total investment securities		1,689,987			2,624,366
Farmer Mac Guaranteed Securities:
Held-to-maturity, at amortized cost		518,792			959,865
Available-for-sale, at fair value		1,293,543			338,958
Trading, at fair value		892,247			-
Total Farmer Mac Guaranteed Securities		2,704,582			1,298,823
Loans:
Loans held for sale, at lower of cost or fair value		142,695			118,629
Loans held for investment, at amortized cost		640,864			649,280
Allowance for loan losses		(1,592	)		(1,690	)
Total loans, net of allowance		781,967			766,219

Real estate owned, at lower of cost or fair value		590			590
Financial derivatives, at fair value		3,184			2,288
Interest receivable		76,436			91,939
Guarantee and commitment fees receivable		55,623			57,804
Deferred tax asset, net		34,477			30,239
Prepaid expenses and other assets		5,170			3,900
Total Assets	$	6,064,390		$	4,977,613

Liabilities and Stockholders' Equity:
Liabilities:
Notes payable:
Due within one year	$	5,006,317		$	3,829,698
Due after one year		651,267			744,649
Total notes payable		5,657,584			4,574,347

Financial derivatives, at fair value		56,420			55,273
Accrued interest payable		47,933			50,004
Guarantee and commitment obligation		50,631			52,130
Accounts payable and accrued expenses		12,134			20,069
Reserve for losses		2,197			2,197
Total Liabilities		5,826,899			4,754,020

Stockholders' Equity:
Preferred stock:
Series A, stated at redemption/liquidation value, $50 per share, 700,000 shares authorized, issued and outstanding		35,000			35,000
Common stock:
Class A Voting, $1 par value, no maximum authorization, 1,030,780 shares issued and outstanding		1,031			1,031
Class B Voting, $1 par value, no maximum authorization 500,301 shares issued and outstanding		500			500
Class C Non-Voting, $1 par value, no maximum authorization, 8,491,482 and 8,363,580 shares issued and outstanding as of June 30, 2008 and December 31, 2007, respectively		8,491			8,364
Additional paid-in capital		92,669			87,134
Accumulated other comprehensive loss		(17,337	)		(2,793	)
Retained earnings		117,137			94,357
Total Stockholders' Equity		237,491			223,593

Total Liabilities and Stockholders' Equity	$	6,064,390		$	4,977,613

See accompanying notes to condensed consolidated financial statements.

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FEDERAL AGRICULTURAL MORTGAGE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

(in thousands, except per share amounts)

	Three Months Ended						Six Months Ended
	June 30, 2008			June 30, 2007			June 30, 2008			June 30, 2007
Interest income:
Investments and cash equivalents	$	35,402		$	41,530		$	76,910		$	80,522
Farmer Mac Guaranteed Securities		19,767			18,782			38,537			38,185
Loans		11,643			11,199			23,474			22,518
Total interest income		66,812			71,511			138,921			141,225
Total interest expense		42,454			63,032			96,625			123,664

Net interest income		24,358			8,479			42,296			17,561
Recovery/(provision) for loan losses		-			-			-			215
Net interest income after recovery/(provision) for loan losses		24,358			8,479			42,296			17,776

Non-interest income/(loss):
Guarantee and commitment fees		6,659			6,354			13,293			12,212
Gains/(losses) on financial derivatives		31,050			19,892			(10,670	)		15,866
Losses on trading assets		(17,268	)		(67	)		(7,157	)		(74	)
Impairment losses on available-for-sale investment securities		(5,344	)		-			(5,344	)		-
Gains on sale of available-for-sale investment securities		150			21			150			21
Gains on the sale of real estate owned		-			32			-			32
Other income		662			42			1,123			451
Non-interest income/(loss)		15,909			26,274			(8,605	)		28,508

Non-interest expense:
Compensation and employee benefits		3,929			3,719			7,579			6,856
General and administrative		2,242			2,237			4,270			4,574
Regulatory fees		512			550			1,025			1,100
Real estate owned operating costs, net		38			-			87			-
Provision/(recovery) for losses		-			100			-			(313	)
Non-interest expense		6,721			6,606			12,961			12,217

Income before income taxes		33,546			28,147			20,730			34,067

Income tax expense		11,555			9,218			6,436			10,656
Net income		21,991			18,929			14,294			23,411
Preferred stock dividends		(560	)		(560	)		(1,120	)		(1,120	)
Net income available to common stockholders	$	21,431		$	18,369		$	13,174		$	22,291

Earnings per common share and dividends:
Basic earnings per common share	$	2.15		$	1.79		$	1.33		$	2.15
Diluted earnings per common share	$	2.13		$	1.74		$	1.31		$	2.10
Common stock dividends per common share	$	0.10		$	0.10		$	0.20		$	0.20

See accompanying notes to condensed consolidated financial statements.

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FEDERAL AGRICULTURAL MORTGAGE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

	Six Months Ended
	June 30, 2008			June 30, 2007
	(in thousands)
Cash flows from operating activities:
Net income	$	14,294		$	23,411
Adjustments to reconcile net income to net cash provided by operating activities:
Net amortization of premiums and discounts on loans and investments		2,752			(803	)
Amortization of debt premiums, discounts and issuance costs		47,430			62,956
Proceeds from repayment of trading investment securities		628			5,091
Purchases of loans held for sale		(30,685	)		(27,222	)
Proceeds from repayment of loans held for sale		5,792			4,201
Net change in fair value of trading securities and financial derivatives		7,408			(14,654	)
Amortization of SFAS 133 transition adjustment on financial derivatives		156			209
Impairment losses on available-for-sale investment securities		5,344			-
Gains on sale of available-for-sale investment securities		(150	)		(21	)
Gains on the sale of real estate owned		-			(32	)
Total (recovery)/provision for losses		-			(528	)
Deferred income taxes		(3,537	)		(2,231	)
Stock-based compensation expense		2,284			1,508
Decrease/(increase) in interest receivable		15,503			(9,321	)
Decrease/(increase) in guarantee and commitment fees receivable		2,181			(16,283	)
Decrease in other assets		131			2,502
(Decrease)/increase in accrued interest payable		(2,071	)		18,861
(Decrease)/increase in other liabilities		(8,122	)		20,716
Net cash provided by operating activities		59,338			68,360

Cash flows from investing activities:
Purchases of available-for-sale investment securities (1)		(1,017,845	)		(2,238,930	)
Purchases of Farmer Mac II Guaranteed Securities and AgVantage Farmer Mac Guaranteed Securities		(221,053	)		(122,122	)
Purchases of loans held for investment		(60,621	)		(34,278	)
Purchases of defaulted loans		(1,189	)		(1,483	)
Proceeds from repayment of investment securities (2)		296,048			1,567,668
Proceeds from repayment of Farmer Mac Guaranteed Securities		152,670			131,609
Proceeds from repayment of loans held for investment		65,262			84,931
Proceeds from sale of available-for-sale investment securities		288,275			32,109
Proceeds from sale of real estate owned		-			230
Proceeds from sale of Farmer Mac Guaranteed Securities		13,876			1,324
Net cash used in investing activities		(484,577	)		(578,942	)

Cash flows from financing activities:
Proceeds from issuance of discount notes		74,710,734			56,058,511
Proceeds from issuance of medium-term notes		1,011,944			795,000
Payments to redeem discount notes		(73,636,115	)		(56,100,859	)
Payments to redeem medium-term notes		(1,050,000	)		(537,083	)
Tax benefit from tax deductions in excess of compensation cost recognized		175			346
Proceeds from common stock issuance		3,368			5,589
Purchases of common stock		(830	)		(13,186	)
Dividends paid on common and preferred stock		(3,108	)		(3,189	)
Net cash provided by financing activities		1,036,168			205,129
Net increase/(decrease) in cash and cash equivalents		610,929			(305,453	)

Cash and cash equivalents at beginning of period		101,445			877,714
Cash and cash equivalents at end of period	$	712,374		$	572,261

(1)	Includes purchases of $349.0 million and $1.3 billion related to auction-rate certificates for the six months ended June 30, 2008 and 2007, respectively. See Note 2 to the condensed consolidated financial statements.

(2)	Includes proceeds, through the normal auction process, of $268.0 million and $1.3 billion related to auction-rate certificates for the six months ended June 30, 2008 and 2007, respectively. See Note 2 to the condensed consolidated financial statements.

See accompanying notes to condensed consolidated financial statements.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Note 1.

Accounting Policies

(a)

Cash and Cash Equivalents and Statements of Cash Flows

Farmer Mac considers highly liquid investment securities with original maturities of three months or less at the time of purchase to be cash equivalents. Changes in the balance of cash and cash equivalents are reported in the condensed consolidated statements of cash flows. The following table sets forth information regarding certain cash and non-cash transactions for the six months ended June 30, 2008 and 2007.

	Six Months Ended
	June 30, 2008		June 30, 2007
	(in thousands)
Cash paid for:
Interest	$	57,410	$	49,164
Income taxes		21,500		7,000
Non-cash activity:
Loans acquired and securitized as Farmer Mac Guaranteed Securities		1,390		1,324
Transfers of investment securities from available-for-sale to trading from the effect of adopting SFAS 159		600,468		-
Transfers of Farmer Mac II Guaranteed Securities from held-to-maturity to trading from the effect of adopting SFAS 159		428,670		-
Transfers of available-for-sale investment securities to available-for-sale Farmer Mac Guaranteed Securities - Rural Utilities		902,420		-
Transfers of trading investment securities to trading Farmer Mac Guaranteed Securities - Rural Utilities		459,026		-

(b)

Allowance for Losses

As of June 30, 2008, Farmer Mac maintained an allowance for losses to cover estimated probable losses on loans held, real estate owned, and loans underlying long-term standby purchase commitments (“LTSPCs”) and Farmer Mac I Guaranteed Securities issued after the Farm Credit System Reform Act of 1996 (the “1996 Act”) in accordance with Statement of Financial Accounting Standards No. 5, Accounting for Contingencies (“SFAS 5”), and Statement of Financial Accounting Standards No. 114, Accounting by Creditors for Impairment of a Loan , as amended (“SFAS 114”).

The allowance for losses is increased through periodic provisions for loan losses that are charged against net interest income and provisions for losses that are charged to non-interest expense and is reduced by charge-offs for actual losses, net of recoveries. Negative provisions for loan losses or negative provisions for losses are recorded in the event that the estimate of probable losses as of the end of a period is lower than the estimate at the beginning of the period.

-6-

Farmer Mac’s methodology for determining its allowance for losses incorporates the Corporation’s proprietary automated loan classification system. That system scores loans based on criteria such as historical repayment performance, loan seasoning, loan size and loan-to-value ratio. For the purposes of the loss allowance methodology, the loans in Farmer Mac’s portfolio of loans and loans underlying post-1996 Act Farmer Mac I Guaranteed Securities and LTSPCs have been scored and classified for each calendar quarter since first quarter 2000. The allowance methodology captures the migration of loan scores across concurrent and overlapping three-year time horizons and calculates loss rates separately within each loan classification for (1) loans underlying LTSPCs and (2) loans held and loans underlying post-1996 Act Farmer Mac I Guaranteed Securities. The calculated loss rates are applied to the current classification distribution of Farmer Mac’s portfolio to estimate inherent losses, on the assumption that the historical credit losses and trends used to calculate loss rates will continue in the future. Management evaluates this assumption by taking into consideration factors including:

economic conditions;

geographic and agricultural commodity/product concentrations in the portfolio;

the credit profile of the portfolio;

delinquency trends of the portfolio;

historical charge-off and recovery activities of the portfolio; and

other factors to capture current portfolio trends and characteristics that differ from historical experience.

Management believes that its use of this methodology produces a reliable estimate of probable losses, as of the balance sheet date, for all loans held, real estate owned and loans underlying post-1996 Act Farmer Mac I Guaranteed Securities and LTSPCs in accordance with SFAS 5 and SFAS 114.

-7-

The following table summarizes the changes in the components of Farmer Mac’s allowance for losses for the three and six months ended June 30, 2008 and 2007:

	June 30, 2008
	Allowance for Loan Losses			REO Valuation Allowance		Reserve for Losses		Total Allowance for Losses
	(in thousands)
Three Months Ended:
Beginning balance	$	1,651		$	-	$	2,197	$	3,848
Provision/(recovery) for losses		-			-		-		-
Charge-offs		(69	)		-		-		(69	)
Recoveries		10			-		-		10
Ending balance	$	1,592		$	-	$	2,197	$	3,789

Six Months Ended:
Beginning balance	$	1,690		$	-	$	2,197	$	3,887
Provision/(recovery) for losses		-			-		-		-
Charge-offs		(108	)		-		-		(108	)
Recoveries		10			-		-		10
Ending balance	$	1,592		$	-	$	2,197	$	3,789

	June 30, 2007
	Allowance for Loan Losses			REO Valuation Allowance			Reserve for Losses			Total Allowance for Losses
	(in thousands)
Three Months Ended:
Beginning balance	$	1,730		$	-		$	2,197		$	3,927
Provision/(recovery) for losses		-			100			-			100
Charge-offs		(49	)		(100	)		-			(149	)
Recoveries		-			-			-			-
Ending balance	$	1,681		$	-		$	2,197		$	3,878

Six Months Ended:
Beginning balance	$	1,945		$	-		$	2,610		$	4,555
Provision/(recovery) for losses		(215	)		100			(413	)		(528	)
Charge-offs		(49	)		(100	)		-			(149	)
Recoveries		-			-			-			-
Ending balance	$	1,681		$	-		$	2,197		$	3,878

Prior to third quarter 2007, no allowance for losses had been made for loans underlying Farmer Mac I Guaranteed Securities issued prior to the 1996 Act (“Pre-1996 Act Farmer Mac I Guaranteed Securities”), AgVantage securities or securities issued under the Farmer Mac II program (“Farmer Mac II Guaranteed Securities”). Pre-1996 Act Farmer Mac I Guaranteed Securities are supported by unguaranteed first loss subordinated interests, which are expected to exceed the estimated credit losses on those loans. Through June 30, 2008, Farmer Mac had charged off $0.4 million related to one loan underlying Pre-1996 Act Farmer Mac I Guaranteed Securities. The remaining $2.4 million of Pre-1996 Act Farmer Mac I Guaranteed Securities represent interests in seasoned performing loans with low loan-to-value ratios. Farmer Mac does not expect to incur any further losses on the remaining Pre-1996 Act Farmer Mac I Guaranteed Securities in the future. Each AgVantage security is a general obligation of an issuing institution approved by Farmer Mac and is collateralized by eligible mortgage loans. As of June 30, 2008, there were no probable losses inherent in Farmer Mac’s AgVantage securities due to the high credit quality of the obligors, as well as the underlying collateral. As of June 30, 2008, Farmer Mac had not experienced any credit losses on any AgVantage Securities and does not expect to incur any such losses in the future. The guaranteed portions collateralizing Farmer Mac II Guaranteed Securities are guaranteed by the United States Department of Agriculture (“USDA”). Each USDA guarantee is an obligation backed by the full faith and credit of the United States. As of June 30, 2008, Farmer Mac had not experienced any credit losses on any Farmer Mac II Guaranteed Securities and does not expect to incur any such losses in the future.

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On May 22, 2008, Congress enacted into law the Food, Conservation and Energy Act of 2008 (the “Farm Bill”), which expanded Farmer Mac’s authorities to include providing a secondary market for rural electric and telephone loans made by cooperative lenders. During second quarter 2008, Farmer Mac placed its guarantee on $430.7 million of securities representing interests in rural electric cooperative loans and $900.0 million principal amount of obligations collateralized by rural electric cooperative loans previously held as mission-related investments under authority granted by the Farm Credit Administration (“FCA”). Farmer Mac evaluated these $1.3 billion of Farmer Mac Guaranteed Securities – Rural Utilities and determined that there were no probable losses inherent in the securities or the underlying rural utilities loans. Accordingly, no allowance for losses was recorded as of June 30, 2008 with respect to those securities.

The table below summarizes the components of Farmer Mac’s allowance for losses as of June 30, 2008 and December 31, 2007:

	June 30,		December 31,
	2008		2007
	(in thousands)
Allowance for loan losses	$	1,592	$	1,690
Real estate owned valuation allowance		-		-
Reserve for losses:
On-balance sheet Farmer Mac I Guaranteed Securities		857		857
Off-balance sheet Farmer Mac I Guaranteed Securities		645		655
LTSPCs		695		685
Farmer Mac Guaranteed Securities - Rural Utilities		-		-
Total	$	3,789	$	3,887

As of June 30, 2008, Farmer Mac individually analyzed $10.1 million of its $46.0 million of impaired assets for collateral shortfalls against updated appraised values, other updated collateral valuations or discounted values. Farmer Mac evaluated the remaining $35.9 million of impaired assets, for which updated valuations were not available, in the aggregate in consideration of their similar risk characteristics and historical statistics. All of the $10.1 million of assets analyzed individually were adequately collateralized. Accordingly, Farmer Mac did not record any specific allowances for any of its impaired assets as of June 30, 2008. Similarly, as of December 31, 2007, Farmer Mac did not record any specific allowances related to its $36.6 million of impaired assets as of that date.

-9-

Farmer Mac recognized interest income of approximately $0.9 million and $2.1 million on impaired loans during the three and six months ended June 30, 2008, respectively, compared to $0.8 million and $1.7 million, respectively, during the same periods in 2007. During the three and six months ended June 30, 2008, Farmer Mac’s average investment in impaired loans was $43.6 million and $41.3 million, respectively, compared to $50.4 million and $51.3 million, respectively, for the same periods in 2007.

(c)

Adoption of Fair Value Accounting Standards

Effective January 1, 2008, Farmer Mac adopted Statement of Financial Accounting Standards No. 157, Fair Value Measurements (“SFAS 157”) and Statement of Financial Accounting Standards No. 159, The Fair Value Option for Financial Assets and Financial Liabilities – Including an amendment of FASB Statement No. 115 (“SFAS 159”). These standards require disclosures about financial assets and liabilities that are measured at fair value and provide an election option to report financial instruments at fair value with changes in fair value recorded in earnings as they occur.

Fair Value Measurements

SFAS 157 defines fair value, establishes a framework for measuring fair value under other accounting pronouncements that permit or require fair value measurements, and expands disclosures about fair value measurements. In particular, disclosures are required to provide information on the extent to which fair value is used to measure assets and liabilities, the inputs used to develop measurements and the effects of certain of the measurements on earnings or changes in net assets.

The principal impact of SFAS 157 to Farmer Mac is to require expanded disclosures regarding fair value measurements. SFAS 157 establishes a fair value hierarchy that prioritizes inputs to valuation techniques used to measure fair value. The hierarchy gives highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Farmer Mac’s assets and liabilities recorded at fair value have been categorized based upon a fair value hierarchy in accordance with SFAS 157. The levels of fair value hierarchy are described below:

Basis of Fair Value Measurement

Level 1

Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. Farmer Mac has classified exchange-traded Treasury futures as Level 1 measurements.

Level 2

Quoted prices in markets that are not active or financial instruments for which all significant inputs are observable, either directly or indirectly. Level 2 inputs include inputs other than quoted prices that are observable for the financial instrument, such as interest rates and yield curves that are observable at commonly quoted intervals. Farmer Mac has classified financial instruments for which there are continuous and verifiable pricing sources as Level 2 inputs, including certificates of deposit, commercial paper, asset-backed securities, corporate debt securities, mortgage-backed securities, preferred stock, and most financial derivatives.

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Level 3

Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable. Level 3 inputs include situations where there is little, if any, market activity for the financial instrument. For financial instruments that are thinly traded, Farmer Mac uses as its primary fair value source analytical models that project cash flows based on internal and external inputs, including transaction terms, yield curves, benchmark data, volatility data, prepayment assumptions and default assumptions. Financial instruments requiring Level 3 inputs include available-for-sale Farmer Mac I Guaranteed Securities, trading Farmer Mac II Guaranteed Securities, available-for-sale and trading Farmer Mac Guaranteed Securities – Rural Utilities, auction-rate certificates, basis swaps and loans held for sale.

In some cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the level in the fair value hierarchy within which the fair value measurement in its entirety falls has been determined based on the lowest level input that is significant to the fair value measurement in its entirety. Farmer Mac’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the financial instrument.

Both observable and unobservable inputs may be used to determine the fair value of positions that Farmer Mac has classified within the Level 3 category. As a result, the unrealized gains and losses for assets and liabilities within the Level 3 category presented in the following tables may include changes in fair value that were attributable to both observable (e.g., changes in market interest rates) and unobservable (e.g., changes in long-dated volatilities) inputs.

The following table presents information about Farmer Mac’s assets and liabilities measured at fair value on a recurring and nonrecurring basis as of June 30, 2008, and indicates the fair value hierarchy of the valuation techniques utilized by Farmer Mac to determine such fair value.

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Assets and Liabilities Measured at Fair Value as of June 30, 2008

	Level 1		Level 2		Level 3		Total
Recurring:	(in thousands)
Assets:
Investment Securities:
Available-for-sale:
Fixed rate certificates of deposit	$	-	$	142,086	$	-	$	142,086
Fixed rate commercial paper		-		9,939		-		9,939
Floating rate auction-rate certificates backed by Government guaranteed student loans		-		-		209,360		209,360
Floating rate asset-backed securities		-		97,935		-		97,935
Floating rate corporate debt securities		-		537,110		-		537,110
Floating rate Government/GSE guaranteed mortgage-backed securities		-		396,805		-		396,805
Fixed rate GSE guaranteed mortgage-backed securities		-		7,577		-		7,577
Floating rate GSE subordinated debt		-		55,505		-		55,505
Floating rate GSE preferred stock		-		47,156		-		47,156
Total available-for-sale		-		1,294,113		209,360		1,503,473

Trading:
Floating rate asset-backed securities		-		-		7,414		7,414
Fixed rate GSE preferred stock		-		179,100		-		179,100
Total trading		-		179,100		7,414		186,514
Total investment securities		-		1,473,213		216,774		1,689,987

Farmer Mac Guaranteed Securities:
Available-for-sale:
Farmer Mac I		-		-		391,904		391,904
Rural Utilities		-		-		901,639		901,639
Total available-for-sale		-		-		1,293,543		1,293,543

Trading:
Farmer Mac II		-		-		450,562		450,562
Rural Utilities		-		-		441,685		441,685
Total trading		-		-		892,247		892,247
Total Farmer Mac Guaranteed Securities		-		-		2,185,790		2,185,790

Financial Derivatives		-		3,184		-		3,184
Total Assets at fair value	$	-	$	1,476,397	$	2,402,564	$	3,878,961

Liabilities:
Financial Derivatives	$	5	$	54,958	$	1,457	$	56,420
Total Liabilities at fair value	$	5	$	54,958	$	1,457	$	56,420

Nonrecurring:
Loans held for sale	$	-	$	-	$	142,695	$	142,695

-12-

The following tables present additional information about assets and liabilities measured at fair value on a recurring and nonrecurring basis and for which Farmer Mac has used Level 3 inputs to determine fair value for the three and six months ended June 30, 2008.

Level 3 Assets and Liabilities Measured at Fair Value for the Three Months Ended June 30, 2008
	Beginning Balance			Purchases, Sales, Issuances and Settlements, Net			Realized and Unrealized Gains/(Losses) included in Income			Unrealized Gains/(Losses) included in Other Comprehensive Income			Net Transfers In and/or Out			Ending Balance
Recurring:	(in thousands)
Assets:
Investment Securities:
Available-for-sale:
Floating rate auction-rate certificates backed by Government guaranteed student loans	$	229,360		$	(20,000	)	$	-		$	-		$	-		$	209,360
Floating rate corporate debt securities		399,331			-			-			-			(399,331	)		-
Fixed rate corporate debt securities		503,089			-			-			-			(503,089	)		-
Total available-for-sale		1,131,780			(20,000	)		-			-			(902,420	)		209,360

Trading:
Floating rate asset-backed securities (1)		7,179			(205	)		440			-			-			7,414
Fixed rate mortgage-backed securities (1)		459,026			-			-			-			(459,026	)		-
Total trading		466,205			(205	)		440			-			(459,026	)		7,414
Total investment securities		1,597,985			(20,205	)		440			-			(1,361,446	)		216,774
Farmer Mac Guaranteed Securities:
Available-for-sale:
Farmer Mac I		325,272			68,979			-			(2,347	)		-			391,904
Rural Utilities		-			-			-			(781	)		902,420			901,639
Total available-for-sale		325,272			68,979			-			(3,128	)		902,420			1,293,543

Trading:
Farmer Mac II (2)		445,202			9,515			(4,155	)		-			-			450,562
Rural Utilities (1)		-			-			(17,341	)		-			459,026			441,685
Total trading		445,202			9,515			(21,496	)		-			459,026			892,247
Total Farmer Mac Guaranteed Securities		770,474			78,494			(21,496	)		(3,128	)		1,361,446			2,185,790

Total Assets at fair value	$	2,368,459		$	58,289		$	(21,056	)	$	(3,128	)	$	-		$	2,402,564
Liabilities:
Financial Derivatives (3)	$	(3,507	)	$	-		$	2,050		$	-		$	-		$	(1,457	)
Total Liabilities at fair value	$	(3,507	)	$	-		$	2,050		$	-		$	-		$	(1,457	)

Nonrecurring:
Loans held for sale	$	-		$	-		$	(61	)	$	-		$	142,756		$	142,695

(1)	Unrealized gains/(losses) are attributable to assets still held as of June 30, 2008 and are recorded in losses on trading assets.

(2)	Includes unrealized gains of approximately $1.8 million attributable to assets still held as of June 30, 2008 that are recorded in losses on trading assets.

(3)	Unrealized gains are attributable to liabilities still held as of June 30, 2008 and are recorded in gains/(losses) on financial derivatives.

-13-

Level 3 Assets and Liabilities Measured at Fair Value for the Six Months Ended June 30, 2008
	Beginning Balance			Purchases, Sales, Issuances and Settlements, Net			Realized and Unrealized Gains/(Losses) included in Income			Unrealized Gains/(Losses) included in Other Comprehensive Income			Net Transfers In and/or Out			Ending Balance
Recurring:	(in thousands)
Assets:
Investment Securities:
Available-for-sale:
Floating rate auction-rate certificates backed by Government guaranteed student loans	$	-		$	79,931		$	-		$	(2,115	)	$	131,544		$	209,360
Floating rate corporate debt securities		-			400,000			-			(669	)		(399,331	)		-
Fixed rate corporate debt securities		500,138			-			-			2,951			(503,089	)		-
Total available-for-sale		500,138			479,931			-			167			(770,876	)		209,360

Trading:
Floating rate asset-backed securities (1)		8,179			(628	)		(137	)		-			-			7,414
Fixed rate mortgage-backed securities (1)		415,813			29,367			13,846			-			(459,026	)		-
Total trading		423,992			28,739			13,709			-			(459,026	)		7,414
Total investment securities		924,130			508,670			13,709			167			(1,229,902	)		216,774
Farmer Mac Guaranteed Securities:
Available-for-sale:
Farmer Mac I		338,958			49,226			-			3,720			-			391,904
Rural Utilities		-			-			-			(781	)		902,420			901,639
Total available-for-sale		338,958			49,226			-			2,939			902,420			1,293,543

Trading:
Farmer Mac II (2)		428,670			20,497			1,395			-			-			450,562
Rural Utilities (1)		-			-			(17,341	)		-			459,026			441,685
Total trading		428,670			20,497			(15,946	)		-			459,026			892,247
Total Farmer Mac Guaranteed Securities		767,628			69,723			(15,946	)		2,939			1,361,446			2,185,790

Total Assets at fair value	$	1,691,758		$	578,393		$	(2,237	)	$	3,106		$	131,544		$	2,402,564
Liabilities:
Financial Derivatives (3)	$	(1,106	)	$	-		$	(351	)	$	-		$	-		$	(1,457	)
Total Liabilities at fair value	$	(1,106	)	$	-		$	(351	)	$	-		$	-		$	(1,457	)

Nonrecurring:
Loans held for sale	$	-		$	-		$	(61	)	$	-		$	142,756		$	142,695

(1)	Unrealized gains/(losses) are attributable to assets still held as of June 30, 2008 and are recorded in losses on trading assets.

(2)	Includes unrealized gains of approximately $1.8 million attributable to assets still held as of June 30, 2008 that are recorded in losses on trading assets.

(3)	Unrealized losses are attributable to liabilities still held as of June 30, 2008 and are recorded in gains/(losses) on financial derivatives.

Fair Value Option

SFAS 159 permits entities to make a one-time election to report financial instruments at fair value with changes in fair value recorded in earnings as they occur. The objective is to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions.

-14-

Farmer Mac adopted the provisions of SFAS 159 on January 1, 2008 and recorded a cumulative effect of adoption adjustment of $12.1 million, net of tax, as an increase to the beginning balance of retained earnings. The fair value option election was made for certain available-for-sale investment securities and certain held-to-maturity Farmer Mac II Guaranteed Securities. These assets were selected for the fair value option under SFAS 159 because they were funded or hedged principally with financial derivatives and, therefore, the changes in fair value of the assets provide partial economic and financial reporting offsets to the related financial derivatives.

Impact of Adopting SFAS 159 to Retained Earnings as of January 1, 2008
	Carrying Value as of January 1, 2008 Prior to Adoption of Fair Value Option		Transition Gain		Fair Value as of January 1, 2008 After Adoption of Fair Value Option
	(in thousands)
Available-for-sale Investment Securities:
Fixed rate GSE preferred stock (1)	$	184,655	$	2,783	$	184,655
Fixed rate mortgage-backed securities (1)		415,813		14,504		415,813

Held-to-maturity Farmer Mac Guaranteed Securities:
Farmer Mac II Guaranteed Securities		427,330		1,340		428,670

Pre-tax cumulative effect of adoption				18,627

Tax effect				6,519

Cumulative effect of adoption to beginning retained earnings			$	12,108

(1) Farmer Mac adopted the fair value option for certain securities classified within its investment portfolio previously classified as available-for-sale. These securities are presented in the condensed consolidated balance sheet at fair value in accordance with Statement of Financial Accounting Standards No. 115, Accounting for Certain Investments in Debt and Equity Securities and the amount of the transition gain was recognized in accumulated other comprehensive loss prior to the adoption of SFAS 159.

(d)

Financial Derivatives

Farmer Mac enters into financial derivative transactions principally to protect against risk from the effects of market price or interest rate movements on the value of certain assets, future cash flows or debt issuance, not for trading or speculative purposes. Farmer Mac enters into interest rate swap contracts principally to adjust the characteristics of its short-term debt to match more closely the cash flow and duration characteristics of its longer-term mortgage and other assets, and also to adjust the characteristics of its long-term debt to match more closely the cash flow and duration characteristics of its short-term assets, thereby reducing interest rate risk and also to derive an overall lower effective cost of borrowing than would otherwise be available to Farmer Mac in the conventional debt market. Farmer Mac is required also to recognize certain contracts and commitments as derivatives when the characteristics of those contracts and commitments meet the definition of a derivative as promulgated by Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities , as amended (“SFAS 133”).

-15-

Farmer Mac manages the interest rate risk related to loans it has committed to acquire, but has not yet purchased and permanently funded, through the use of forward sale contracts on mortgage-backed securities and the debt of other government-sponsored enterprises (“GSEs”), futures contracts involving U.S. Treasury securities and interest rate swaps. Farmer Mac uses forward sale contracts on GSE securities to reduce its interest rate exposure to changes in both Treasury rates and spreads on Farmer Mac debt and Farmer Mac Guaranteed Securities. The notional amounts of these contracts are determined based on a duration-matched hedge ratio between the hedged item and the hedge instrument. Gains or losses generated by these hedge transactions should offset changes in funding costs or Farmer Mac Guaranteed Securities sale prices that occur during the hedge period.

All financial derivatives are recorded on the balance sheet at fair value as a freestanding asset or liability in accordance with SFAS 133. Farmer Mac does not designate its financial derivatives as fair value hedges or cash flow hedges; therefore, the changes in the fair values of financial derivatives are reported as gains or losses on financial derivatives in the condensed consolidated statements of operations.

The following table summarizes information related to Farmer Mac’s financial derivatives as of June 30, 2008 and December 31, 2007:

	June 30, 2008					December 31, 2007
	Notional		Fair			Notional		Fair
	Amount		Value			Amount		Value
	(in thousands)
Interest rate swaps:
Pay-fixed	$	1,547,344	$	(48,382	)	$	1,411,772	$	(52,941	)
Receive-fixed		1,775,000		(3,386	)		1,098,000		1,065
Basis		150,172		(1,457	)		161,967		(1,106	)
Agency forwards		1,125		(6	)		4,233		(2	)
Treasury futures		3,000		(5	)		1,000		(1	)

Total	$	3,476,641	$	(53,236	)	$	2,676,972	$	(52,985	)

As of June 30, 2008, Farmer Mac had approximately $0.3 million of net after-tax unrealized losses on financial derivatives included in accumulated other comprehensive loss related to the SFAS 133 transition adjustment. These amounts will be reclassified into earnings in the same period or periods during which the hedged forecasted transactions (either the payment of interest or the issuance of discount notes) affect earnings or immediately when it becomes probable that the original hedged forecasted transaction will not occur within two months of the originally specified date. Over the next 12 months, Farmer Mac estimates that $0.2 million of the amount currently reported in accumulated other comprehensive loss will be reclassified into earnings.

As of June 30, 2008, Farmer Mac had outstanding basis swaps with a related party with a notional amount of $150.2 million and a fair value of $(1.5) million. As of December 31, 2007, these swaps had an outstanding notional amount of $162.0 million and a fair value of $(1.1) million. Under the terms of those basis swaps, which are not in designated hedge relationships, Farmer Mac pays Constant Maturity Treasury-based rates and receives London Interbank Offered Rate, or LIBOR. Those swaps hedge most of the interest rate basis risk related to loans Farmer Mac purchases that pay a Constant Maturity Treasury-based rate and the discount notes Farmer Mac issues to fund the loan purchases. Historically, the pricing of discount notes has correlated to LIBOR rates. Farmer Mac recorded an unrealized gain on those basis swaps of $2.1 million during second quarter 2008 and a $0.4 million unrealized loss for the six month period ended June 30, 2008. See Note 3 “Related Party Transactions” in the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2007, as filed with the SEC on March 17, 2008, for additional information on these related party transactions.

-16-

(e)

Earnings Per Common Share

Basic earnings per common share are based on the weighted-average number of shares of common stock outstanding. Diluted earnings per common share are based on the weighted-average number of shares of common stock outstanding adjusted to include all potentially dilutive common stock options and stock appreciation rights (“SARs”). The following schedule reconciles basic and diluted earnings per common share (“EPS”) for the three and six months ended June 30, 2008 and 2007:

-17-

	Three Months Ended
	June 30, 2008						June 30, 2007

	Net Income		Shares		$ per Share		Net Income		Shares		$ per Share
	(in thousands, except per share amounts)
Basic EPS

Net income available to common stockholders	$	21,431		9,964	$	2.15	$	18,369		10,287	$	1.79

Effect of dilutive securities:
Stock options and SARs (1)				108						255
Diluted EPS	$	21,431		10,072	$	2.13	$	18,369		10,542	$	1.74

(1)	For the three months ended June 30, 2008 and 2007, stock options and SARs of 1,546,664 and 230,168, respectively, were outstanding but not included in the computation of diluted earnings per share of common stock because they were anti-dilutive.

	Six Months Ended
	June 30, 2008						June 30, 2007

	Net Income		Shares		$ per Share		Net Income		Shares		$ per Share
	(in thousands, except per share amounts)
Basic EPS

Net income available to common stockholders	$	13,174		9,916	$	1.33	$	22,291		10,377	$	2.15

Effect of dilutive securities:
Stock options and SARs (1)				112						216
Diluted EPS	$	13,174		10,028	$	1.31	$	22,291		10,593	$	2.10

(1)	For the six months ended June 30, 2008 and 2007, stock options and SARs of 1,385,929 and 335,504, respectively, were outstanding but not included in the computation of diluted earnings per share of common stock because they were anti-dilutive.

In February 2007, Farmer Mac announced the establishment of a program to repurchase up to one million shares of the Corporation’s outstanding Class C Non-Voting Common Stock. The aggregate number of shares purchased by Farmer Mac under that stock repurchase program reached the maximum number of authorized shares during first quarter 2008, thereby terminating the program according to its terms. During the three months ended March 31, 2008, Farmer Mac repurchased 31,691 shares of its Class C Non-Voting Common Stock at an average price of $26.13 per share pursuant to the stock repurchase program. These repurchases reduced the Corporation’s stockholders’ equity by approximately $0.8 million . All of the shares repurchased under Farmer Mac’s stock repurchase program were purchased in open market transactions and were retired to become authorized but unissued shares available for future issuance.

-18-

(f)

Stock-Based Compensation

In 1997, Farmer Mac adopted a stock option plan for directors, officers and other employees to acquire shares of Class C Non-Voting Common Stock. Upon stock option exercise, new shares are issued by the Corporation. Under the plan, stock options awarded vest annually in thirds, with the first third vesting one year after the date of grant. If not exercised, any options granted under the 1997 plan expire 10 years from the date of grant, except that options issued to directors since June 1, 1998, if not exercised, expire five years from the date of grant. For all stock options granted, the exercise price is equal to the closing price of the Class C Non-Voting Common Stock on or immediately preceding the date of grant. As of June 30, 2008, the plan had terminated pursuant to its terms and no further grants will be made under it.

At the June 5, 2008 Annual Meeting of Stockholders, Farmer Mac’s stockholders approved the 2008 Omnibus Incentive Compensation Plan that authorizes the grants of restricted stock, options and SARs, among other alternative forms of equity-based compensation, to directors, officers and other employees. At its June 5, 2008 meeting, the Board and the Compensation Committee awarded SARs to Farmer Mac’s directors and officers. Under the grants, the SARs awarded to officers vest annually in thirds, with the first third vesting on May 31, 2009, and awards to directors vesting in full on May 31, 2009. If not exercised or terminated earlier due to the termination of employment or service on the Board, any SARs granted June 5, 2008 to officers expire on June 5, 2018 and those granted to directors expire on June 5, 2015. For all SARs granted, the exercise price is equal to the closing price of the Class C Non-Voting Common Stock on the date of grant.

Farmer Mac recognized $0.7 million and $0.9 million of compensation expense during the three and six months ended June 30, 2008, respectively, and $0.4 million and $0.8 million of compensation expense during the three and six months ended June 30, 2007, respectively, related to the non-vested portion of stock option awards that were outstanding as of December 31, 2005. Additionally, Farmer Mac recognized $0.7 million and $1.4 million of compensation expense related to stock options and SARs awarded subsequent to December 31, 2005 for the three and six months ended June 30, 2008, respectively, compared to $0.4 million and $0.7 million of similar compensation expense for the three and six months ended June 30, 2007, respectively.

-19-

The following table summarizes stock option and SARs activity for the three and six months ended June 30, 2008 and 2007:

	June 30, 2008					June 30, 2007
	Stock Options and SARs			Weighted- Average Exercise Price		Stock Options and SARs			Weighted- Average Exercise Price
Three Months Ended:
Outstanding, beginning of period		2,218,199		$	25.48		2,133,965		$	23.85
Granted		339,770			28.92		456,427			29.33
Exercised		(157,966	)		21.05		(253,459	)		21.44
Canceled		(18,500	)		28.79		(31,334	)		27.11
Outstanding, end of period		2,381,503		$	26.24		2,305,599		$	25.15

Six Months Ended:
Outstanding, beginning of period		2,218,199		$	25.48		2,145,705		$	23.83
Granted		339,770			28.92		457,427			29.32
Exercised		(157,966	)		21.05		(262,864	)		21.44
Canceled		(18,500	)		28.79		(34,669	)		26.76
Outstanding, end of period		2,381,503		$	26.24		2,305,599		$	25.15

Options and SARs exercisable at end of period		1,597,527		$	25.06		1,408,361		$	24.04

The cancellations of stock options were due either to unvested options terminating in accordance with the provisions of the applicable stock option plans upon directors’ or employees’ departures from Farmer Mac or vested options terminating unexercised on their expiration date. For the three and six months ended June 30, 2008, the additional paid-in capital received from stock option exercises was $3.2 million, compared to $5.1 million and $5.3 million for the comparable periods in 2007. For the three and six months ended June 30, 2008, the reduction of income taxes to be paid as a result of the deduction for stock option exercises was $0.6 million, compared to $0.7 million and $0.8 million for the comparable periods in 2007.

-20-

The following table summarizes information regarding stock options and SARs outstanding as of June 30, 2008:

		Outstanding			Exercisable
Range of Exercise Prices		Stock Options and SARs		Weighted- Average Remaining Contractual Life	Stock Options and SARs		Weighted- Average Remaining Contractual Life

$	10.00 - $19.99		81,822	5.7 years		81,822	5.7 years
	20.00 - 24.99		759,183	4.7 years		728,260	4.5 years
	25.00 - 29.99		1,326,830	7.4 years		597,777	6.3 years
	30.00 - 34.99		213,668	3.6 years		189,668	2.9 years
			2,381,503			1,597,527

The weighted-average grant date fair values of stock options and SARs granted during the six months ended June 30, 2008 and 2007 were $11.33 and $11.25 per share, respectively. The fair values were estimated using the Black-Scholes option pricing model based on the following assumptions:

	2008			2007
Risk-free interest rate		2.5	%		4.8	%
Expected years until exercise	6 years			6 years
Expected stock volatility		43.2	%		35.9	%
Dividend yield		1.4	%		1.4	%

(g)

Reclassifications

Certain reclassifications of prior period information were made to conform to the current period presentation.

(h)

New Accounting Standards

In September 2006, the Financial Accounting Standards Board (“FASB”) issued SFAS 157, which defined fair value, established a framework for measuring fair value under other accounting pronouncements that permit or require fair value measurements, and expanded disclosures about fair value measurements. In particular, disclosures are required to provide information on the extent to which fair value is used to measure assets and liabilities, the inputs used to develop measurements and the effects of certain of the measurements on earnings or changes in net assets. In February 2008, FASB issued a final FASB Staff Position (“FSP”) No. FAS 157-2, Effective Date of FASB Statement No. 157 . This FSP delayed the effective date of SFAS 157, for all nonfinancial assets and nonfinancial liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis. In addition, the FSP removed certain leasing transactions from the scope of SFAS 157. The effective date of SFAS 157 for nonfinancial assets and liabilities has been delayed by one year to fiscal years beginning after November 15, 2008 and interim periods within those fiscal years. SFAS 157 for financial assets and liabilities was effective for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years. Farmer Mac’s adoption of SFAS 157 on January 1, 2008 did not result in a material difference to its fair value measurements.

-21-

In February 2007, the FASB issued SFAS 159, which permitted entities to make a one-time election to report financial instruments at fair value with changes in fair value recorded in earnings as they occur. The objective was to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. Farmer Mac adopted the provisions of SFAS 159 on January 1, 2008 and recorded a cumulative effect of adoption adjustment of $12.1 million, net of tax, as an increase to the beginning balance of retained earnings. The fair value option election was made for certain available-for-sale investment securities and certain held-to-maturity Farmer Mac II Guaranteed Securities. These assets were selected for the fair value option under SFAS 159 because they were funded or hedged principally with financial derivatives and, therefore, the changes in fair value of the assets provide partial economic and financial reporting offsets to the related financial derivatives.

In November 2007, the SEC issued Staff Accounting Bulletin No. 109, Written Loan Commitments Recorded at Fair Value Through Earnings (“SAB 109”), which expressed the SEC’s views regarding written loan commitments that are accounted for at fair value through earnings. SAB 109 revised and rescinded portions of Staff Accounting Bulletin No. 105, Application of Accounting Principles to Loan Commitments . SAB 109 revised the SEC’s views on incorporating expected net future cash flows related to loan servicing activities in the fair value measurement of a written loan commitment. SAB 109 retained the SEC’s views on incorporating net future cash flows related to internally-developed intangible assets in the fair value measurement of a written loan commitment. SAB 109 was effective on a prospective basis to derivative loan commitments issued or modified in fiscal quarters beginning after December 15, 2007. The adoption of SAB 109 did not have a material effect on Farmer Mac’s results of operations or financial position.

In April 2007, the FASB issued FASB Staff Position No. FIN 39-1, Amendment of FASB Interpretation No. 39 (“FSP FIN 39-1”). This FSP amended FIN 39 to allow an entity to offset cash collateral receivables and payables reported at fair value against derivative instruments (as defined by SFAS 133) for contracts executed with the same counterparty under master netting arrangements. The decision to offset cash collateral under this FSP must be applied consistently to all derivatives counterparties where the entity has master netting arrangements. If an entity nets derivative positions as permitted under FIN 39, this FSP requires the entity to also offset the cash collateral receivables and payables with the same counterparty under a master netting arrangement. FSP FIN 39-1 was effective for fiscal years beginning after November 15, 2007. The adoption of FSP FIN 39-1 did not have a material effect on Farmer Mac’s results of operations or financial position.

In March 2008, the FASB issued Statement of Financial Accounting Standards No. 161, Disclosures about Derivative Instruments and Hedging Activities – an amendment of FASB Statement No. 133 (“SFAS 161”). This standard applies to derivative instruments, non-derivative instruments that are designated and qualify as hedging instruments and related hedged items accounted for under SFAS 133. SFAS 161 does not change the accounting for derivatives and hedging activities, but requires enhanced disclosures concerning the effect on the financial statements from their use. SFAS 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008. Since SFAS 161 only requires additional disclosures, it will not have an impact on Farmer Mac’s results of operations or financial position.

-22-

In April 2008, the FASB voted to eliminate Qualifying Special Purpose Entities (“QSPEs”) from the guidance in SFAS No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities and FIN No. 46R, Consolidation of Variable Interest Entities and is considering changes to the consolidation model prescribed by FIN 46R. While revised standards have not been finalized and the FASB’s proposals will be subject to a public comment period, these changes may result in the consolidation of assets and liabilities onto Farmer Mac’s consolidated balance sheet in connection with trusts that currently meet the QSPE criteria. The FASB initially proposed that the amendments be effective for all variable interest entities (except for certain existing QSPEs) and new transfers of financial assets for fiscal years beginning after November 15, 2008. A one-year deferral was proposed for existing QSPEs meeting certain criteria. In July 2008, the FASB voted to delay the effective date until fiscal years beginning after November 15, 2009. The revised timeline does not affect the implementation date for existing QSPEs, which remains for fiscal years beginning after November 15, 2009.

-23-

Note 2.

Investments

The following tables present the amortized cost and fair values of Farmer Mac’s investments as of June 30, 2008 and December 31, 2007.

	As of June 30, 2008
	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value
	(in thousands)
Available-for-sale:
Fixed rate certificates of deposit	$	142,086	$	-	$	-		$	142,086
Fixed rate commercial paper		9,939		-		-			9,939
Floating rate auction-rate certificates backed by Government guaranteed student loans (1)		211,475		-		(2,115	)		209,360
Floating rate asset-backed securities		98,048		90		(203	)		97,935
Floating rate corporate debt securities		560,321		-		(23,211	)		537,110
Floating rate Government/GSE guaranteed mortgage-backed securities (2)		392,665		4,461		(321	)		396,805
Fixed rate GSE guaranteed mortgage-backed securities		7,695		-		(118	)		7,577
Floating rate GSE subordinated debt		70,000		-		(14,495	)		55,505
Floating rate GSE preferred stock (3)		47,156		-		-			47,156
Total available-for-sale		1,539,385		4,551		(40,463	)		1,503,473

Trading:
Floating rate asset-backed securities		7,804		-		(390	)		7,414
Fixed rate GSE preferred stock		181,237		2,384		(4,521	)		179,100
Total trading		189,041		2,384		(4,911	)		186,514
Total investment securities	$	1,728,426	$	6,935	$	(45,374	)	$	1,689,987

(1)

AAA-rated callable auction-rate certificates collateralized by pools of Federal Family Education Loan Program ("FFELP") guaranteed student loans that are backed by the full faith and credit of the United States, the interest rates of which are reset through an auction process, most commonly at intervals of 28 days or at formula-based floating rates in the event of a failed auction.

(2)	Includes $3.7 million fair value of floating rate GSE mortgage-backed securities that Farmer Mac has pledged as collateral and for which the counterparty has the right to sell or repledge.

(3)	Includes a $5.3 million other-than-temporary impairment loss on Fannie Mae floating rate preferred stock. The amortized cost of this investment was written down to its fair value of $47.2 million as of June 30, 2008.

-24-

	As of December 31, 2007
	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value
	(in thousands)
Available-for-sale:
Fixed rate certificates of deposit	$	181,864	$	-	$	-		$	181,864
Fixed rate commercial paper		66,339		-		-			66,339
Floating rate auction-rate certificates backed by Government guaranteed student loans (1)		131,544		-		-			131,544
Floating rate asset-backed securities		30,000		13		-			30,013
Floating rate corporate debt securities		561,193		1		(19,345	)		541,849
Fixed rate corporate debt securities (2)		501,490		138		(3	)		501,625
Fixed rate mortgage-backed securities (3)		401,309		14,504		-			415,813
Floating rate Government/GSE guaranteed mortgage-backed securities (4)		437,680		5,016		(192	)		442,504
Fixed rate GSE guaranteed mortgage-backed securities		8,330		1		(47	)		8,284
Floating rate GSE subordinated debt		70,000		-		(4,397	)		65,603
Floating rate GSE preferred stock		52,500		-		(6,406	)		46,094
Fixed rate GSE preferred stock		181,873		4,206		(1,424	)		184,655
Total available-for-sale		2,624,122		23,879		(31,814	)		2,616,187

Trading:
Floating rate asset-backed securities (5)		8,432		-		(253	)		8,179
Total trading		8,432		-		(253	)		8,179
Total investment securities	$	2,632,554	$	23,879	$	(32,067	)	$	2,624,366

(1)

(2)	Fixed rate corporate debt securities included $500.0 million of mission-related investments that were transferred to Farmer Mac Guaranteed Securities - Rural Utilities in June 2008 pursuant to the expanded authorities granted in the Farm Bill.

(3)	Fixed rate mortgage-backed securities are comprised of mission-related investments that were transferred to Farmer Mac Guaranteed Securities - Rural Utilities in June 2008 pursuant to the expanded authorities granted in the Farm Bill.

(4)	Includes $7.2 million fair value of floating rate GSE mortgage-backed securities that Farmer Mac has pledged as collateral and for which the counterparty has the right to sell or repledge.

(5)	Floating rate asset-backed securities are comprised of mission-related investments.

During the three months ended June 30, 2008, Farmer Mac recorded a $5.3 million other-than-temporary impairment related to its investment in Fannie Mae floating rate preferred stock. The amortized cost of this investment was written down to its fair value of $47.2 million as of June 30, 2008 and the impairment loss was recognized as “Impairment losses on available-for-sale investment securities” in the condensed consolidated statements of operations.

-25-

As of June 30, 2008 and December 31, 2007, unrealized losses on available-for-sale investment securities were as follows:

	As of June 30, 2008
	Available-for-Sale Investment Securities
	Unrealized loss position for less than 12 months					Unrealized loss position for more than 12 months
	Fair Value		Unrealized Loss			Fair Value		Unrealized Loss
	(in thousands)
Floating rate auction-rate certificates backed by Government guaranteed student loans	$	209,360	$	(2,115	)	$	-	$	-
Floating rate asset-backed securities		76,038		(203	)		-		-
Floating rate corporate debt securities		320,437		(8,207	)		216,673		(15,004	)
Floating rate Government/GSE guaranteed mortgage-backed securities		105,446		(307	)		351		(14	)
Fixed rate GSE guaranteed mortgage-backed securities		6,812		(80	)		765		(38	)
Floating rate GSE subordinated debt		-		-			55,505		(14,495	)
Total	$	718,093	$	(10,912	)	$	273,294	$	(29,551	)

	As of December 31, 2007
	Available-for-Sale Investment Securities
	Unrealized loss position for less than 12 months					Unrealized loss position for more than 12 months
	Fair Value		Unrealized Loss			Fair Value		Unrealized Loss
	(in thousands)
Floating rate corporate debt securities	$	493,458	$	(16,732	)	$	47,369	$	(2,613	)
Fixed rate corporate debt securities		1,488		(3	)		-		-
Floating rate Government/GSE guaranteed mortgage-backed securities		35,610		(185	)		499		(7	)
Fixed rate GSE guaranteed mortgage-backed securities		-		-			7,748		(47	)
Floating rate GSE subordinated debt		65,603		(4,397	)		-		-
Floating rate GSE preferred stock		-		-			46,094		(6,406	)
Fixed rate GSE preferred stock		89,385		(1,424	)		-		-
Total	$	685,544	$	(22,741	)	$	101,710	$	(9,073	)

The temporary unrealized losses presented above are principally due to a general widening of credit spreads or absence of active market trading from the dates of acquisition to June 30, 2008 and December 31, 2007, as applicable, and not due to any significant deterioration in credit rating. As of June 30, 2008 and December 31, 2007, all of the investment securities in an unrealized loss position were at least “A” rated, except two that were rated “BBB” as of June 30, 2008. The unrealized losses were on 110 and 65 individual available-for-sale investment securities as of June 30, 2008 and December 31, 2007, respectively.

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As of June 30, 2008, 14 of the securities in loss positions had been in loss positions for more than 12 months and had a total unrealized loss of $29.6 million. As of December 31, 2007, 11 of the securities in loss positions had been in loss positions for more than 12 months and had a total unrealized loss of $9.1 million. The unrealized losses on those securities are principally due to a general widening of credit spreads from the dates of acquisition and not due to any significant underlying credit deterioration of the issuers. Securities with unrealized losses aged 12 months or more have a fair value as of June 30, 2008 that is at least 79 percent of their amortized cost basis and, on average, approximately 90 percent of their amortized cost basis. All aged unrealized losses are recoverable within a reasonable period of time by way of changes in credit spreads or maturity. Accordingly, Farmer Mac has concluded that none of the unrealized losses on its available-for-sale investment securities represent other-than-temporary impairment as of June 30, 2008. Farmer Mac has the intent and ability to hold its investment securities in loss positions until either the market value recovers or the securities mature.

As of June 30, 2008, Farmer Mac did not own any held-to-maturity investments. As of June 30, 2008, Farmer Mac owned trading investment securities that mature after five years with an amortized cost of $189.0 million, a fair value of $186.5 million, and a weighted average yield of 8.04 percent. The amortized cost, fair value and weighted average yield of investments by remaining contractual maturity for available-for-sale investment securities as of June 30, 2008 are set forth below. Asset- and mortgage-backed securities are included based on their final maturities, although the actual maturities may differ due to prepayments of the underlying assets or mortgages.

	Investment Securities
	Available-for-Sale
	as of June 30, 2008
	Amortized Cost		Fair Value		Weighted Average Yield
	(dollars in thousands)
Due within one year	$	272,005	$	270,737		2.98	%
Due after one year through five years		487,055		465,101		2.92	%
Due after five years through ten years		125,594		125,698		3.36	%
Due after ten years		654,731		641,937		3.76	%
Total	$	1,539,385	$	1,503,473

-27-

Note 3.

Farmer Mac Guaranteed Securities

The following table sets forth information about on-balance sheet Farmer Mac Guaranteed Securities as of June 30, 2008 and December 31, 2007.

	June 30, 2008
	Held-to- Maturity			Available- for-Sale			Trading			Total
	(in thousands)
Farmer Mac I	$	33,606		$	391,904		$	-		$	425,510
Farmer Mac II		485,186			-			450,562			935,748
Farmer Mac Guaranteed
Securities - Rural Utilities		-			901,639			441,685			1,343,324
Total	$	518,792		$	1,293,543		$	892,247		$	2,704,582

Amortized cost	$	518,792		$	1,283,818		$	878,503		$	2,681,113
Unrealized gains		1,097			10,909			14,129			26,135
Unrealized losses		(573	)		(1,184	)		(385	)		(2,142	)
Fair value	$	519,316		$	1,293,543		$	892,247		$	2,705,106

	December 31, 2007
	Held-to- Maturity			Available- for-Sale			Trading		Total
	(in thousands)
Farmer Mac I	$	33,961		$	338,958		$	-	$	372,919
Farmer Mac II		925,904			-			-		925,904
Total	$	959,865		$	338,958		$	-	$	1,298,823

Amortized cost	$	959,865		$	334,592		$	-	$	1,294,457
Unrealized gains		628			5,412			-		6,040
Unrealized losses		(1,562	)		(1,046	)		-		(2,608	)
Fair value	$	958,931		$	338,958		$	-	$	1,297,889

The temporary unrealized losses presented above are principally due to changes in interest rates from the date of acquisition to June 30, 2008 and December 31, 2007, as applicable. The available-for-sale unrealized losses were on 4 and 9 individual securities as of June 30, 2008 and December 31, 2007, respectively.

As of June 30, 2008, one of the available-for-sale Farmer Mac Guaranteed Securities in loss positions had been in a loss position for more than 12 months and had a total unrealized loss of less than one thousand dollars. As of December 31, 2007, four of the available-for-sale Farmer Mac Guaranteed Securities in loss positions had been in loss positions for more than 12 months and had a total unrealized loss of $1.0 million. The unrealized losses on those securities are due to overall changes in market interest rates. As of June 30, 2008 and December 31, 2007, all of the available-for-sale securities with unrealized losses aged greater than 12 months have losses that are less than one percent and two percent of the amortized security cost, respectively. All aged unrealized losses are recoverable within a reasonable period of time by way of changes in market interest rates. Accordingly, Farmer Mac has concluded that none of the unrealized losses on its available-for-sale Farmer Mac Guaranteed Securities represent other-than-temporary impairment as of June 30, 2008 or December 31, 2007. Farmer Mac has the intent and ability to hold its on-balance sheet Farmer Mac Guaranteed Securities until either the market value recovers or the securities mature.

-28-

The table below presents a sensitivity analysis for the Corporation’s on-balance sheet Farmer Mac Guaranteed Securities as of June 30, 2008.

	June 30, 2008
	(dollars in thousands)

Fair value of beneficial interests retained in Farmer Mac Guaranteed Securities	$	2,705,106

Weighted-average remaining life (in years)		3.5

Weighted-average prepayment speed (annual rate)		5.1	%
Effect on fair value of a 10% adverse change	$	(36	)
Effect on fair value of a 20% adverse change	$	(50	)

Weighted-average discount rate		4.7	%
Effect on fair value of a 10% adverse change	$	(30,016	)
Effect on fair value of a 20% adverse change	$	(60,332	)

These sensitivities are hypothetical. Changes in fair value based on 10 percent or 20 percent variations in assumptions generally cannot be extrapolated because the relationship of the change in assumptions to the change in fair value may not be linear. Also, the effect of a variation in a particular assumption on the fair value of the retained interest is calculated without changing any other assumption. In fact, changes in one factor may result in changes in another (for example, increases in market interest rates may result in lower prepayments), which might amplify or counteract the sensitivities.

-29-

The table below presents the outstanding principal balances for Farmer Mac Guaranteed Securities, loans, and LTSPCs as of June 30, 2008 and December 31, 2007.

	June 30,		December 31,
	2008		2007
	(in thousands)
On-balance sheet assets:
Farmer Mac I:
Loans	$	779,525	$	762,319
Guaranteed Securities		418,987		367,578
Farmer Mac II:
Guaranteed Securities		929,517		921,802
Farmer Mac Guaranteed
Securities - Rural Utilities		1,330,676		-
Total on-balance sheet	$	3,458,705	$	2,051,699


Off-balance sheet assets:
Farmer Mac I:
LTSPCs	$	1,997,172	$	1,948,941
AgVantage		2,425,000		2,500,000
Guaranteed Securities		1,850,791		2,018,300
Farmer Mac II:
Guaranteed Securities		30,761		24,815
Total off-balance sheet	$	6,303,724	$	6,492,056

Total	$	9,762,429	$	8,543,755

When particular criteria are met, such as the default of the borrower, Farmer Mac becomes entitled to purchase the defaulted loans underlying Farmer Mac Guaranteed Securities (commonly referred to as “removal-of-account” provisions). Farmer Mac records these loans at their fair values in the condensed consolidated financial statements during the period in which Farmer Mac becomes entitled to purchase the loans and therefore regains effective control over the transferred loans. Fair values are determined by current collateral valuations or management’s estimate of discounted collateral values, and represent the cash flows expected to be collected. Farmer Mac records, at acquisition, the difference between each loan’s acquisition cost and its fair value, if any, as a charge-off to the reserve for losses. Subsequent to the purchase, such defaulted loans are treated as nonaccrual loans and, therefore, interest is accounted for on the cash basis. Any decreases in expected cash flows are recognized as impairment. No impairment was recognized during the three and six months ended June 30, 2008 and 2007. The following table presents information related to Farmer Mac’s acquisition of defaulted loans for the three and six months ended June 30, 2008 and 2007 and the outstanding balances and carrying amounts of all such loans as of June 30, 2008 and December 31, 2007, respectively.

-30-

	Three Months Ended				Six Months Ended
	June 30, 2008		June 30, 2007		June 30, 2008		June 30, 2007
	(in thousands)

Fair value at acquistion date	$	26	$	650	$	1,189	$	1,483
Contractually required payments receivable		26		659		1,352		1,530
Impairment recognized subsequent to acquisition		-		-		-		-


	As of
	June 30,		December 31,
	2008		2007
	(in thousands)

Outstanding balance	$	31,650	$	38,621
Carrying amount		27,948		34,541

Net credit losses for the six months ended June 30, 2008 and 2007 and 90-day delinquencies as of June 30, 2008, December 31, 2007 and June 30, 2007 for Farmer Mac Guaranteed Securities, loans and LTSPCs are presented in the table below. Information is not presented for loans underlying Pre-1996 Act Farmer Mac I Guaranteed Securities, AgVantage securities, Farmer Mac Guaranteed Securities – Rural Utilities or Farmer Mac II Guaranteed Securities. Pre-1996 Act Farmer Mac I Guaranteed Securities are supported by unguaranteed first loss subordinated interests, which are expected to exceed the estimated credit losses on those loans. Through June 30, 2008, Farmer Mac had charged off $0.4 million related to one loan underlying Pre-1996 Act Farmer Mac I Guaranteed Securities. The remaining $2.4 million of Pre-1996 Act Farmer Mac I Guaranteed Securities represent interests in seasoned performing loans with low loan-to-value ratios. Farmer Mac does not expect to incur any further losses on the remaining Pre-1996 Act Farmer Mac I Guaranteed Securities in the future. Each AgVantage security is a general obligation of an issuing institution approved by Farmer Mac and is collateralized by eligible mortgage loans. As of June 30, 2008, there were no probable losses inherent in Farmer Mac’s AgVantage securities due to the high credit quality of the obligors, as well as the underlying collateral. As of June 30, 2008, Farmer Mac had not experienced any credit losses on any AgVantage Securities and does not expect to incur any such losses in the future. The guaranteed portions collateralizing Farmer Mac II Guaranteed Securities are guaranteed by the USDA. Each USDA guarantee is an obligation backed by the full faith and credit of the United States. As of June 30, 2008, Farmer Mac had not experienced any credit losses on any Farmer Mac II Guaranteed Securities and does not expect to incur any such losses in the future. As of June 30, 2008, there were no 90-day delinquencies, nor had Farmer Mac incurred any net credit losses, on loans underlying Farmer Mac Guaranteed Securities – Rural Utilities.

-31-

	90-Day						Net Credit
	Delinquencies (1)						Losses (2)
	As of June 30,		As of December 31,		As of June 30,		For the Six Months Ended June 30,
	2008		2007		2007		2008		2007
	(in thousands)
On-balance sheet assets:
Farmer Mac I:
Loans	$	3,883	$	10,024	$	13,561	$	98	$	49
Total on-balance sheet	$	3,883	$	10,024	$	13,561	$	98	$	49


Off-balance sheet assets:
Farmer Mac I:
LTSPCs	$	1,287	$	560	$	1,202	$	-	$	-
Total off-balance sheet	$	1,287	$	560	$	1,202	$	-	$	-

Total	$	5,170	$	10,584	$	14,763	$	98	$	49

(1)

Includes loans and loans underlying post-1996 Act Farmer Mac I Guaranteed Securities and LTSPCs that are 90 days or more past due, in foreclosure, restructured after delinquency, and in bankruptcy, excluding loans performing under either their original loan terms or a court-approved bankruptcy plan.

(2)	Includes loans and loans underlying post-1996 Act Farmer Mac I Guaranteed Securities and LTSPCs.

Note 4.

Comprehensive Income

Comprehensive income represents all changes in stockholders’ equity except those resulting from investments by or distributions to stockholders, and is comprised primarily of net income and unrealized gains and losses on securities available-for-sale, net of related taxes. The following table sets forth Farmer Mac’s comprehensive income for the three and six months ended June 30, 2008 and 2007:

-32-

	Three Months Ended					Six Months Ended
	June 30, 2008		June 30, 2007			June 30, 2008			June 30, 2007
	(in thousands)

Net income	$	21,991	$	18,929		$	14,294		$	23,411

Available-for-sale securities, net of tax:
Net unrealized holding gains/(losses)		8,595		(11,639	)		(6,839	)		(6,951	)
Reclassification for realized net losses/(gains)		3,376		(14	)		3,376			(14	)
Net change from available-for-sale securities (1)		11,971		(11,653	)		(3,463	)		(6,965	)

Financial derivatives, net of tax:
Reclassification for amortization of SFAS 133 transition adjustment (2)		84		118			156			209
Other comprehensive income/(loss), net of tax		12,055		(11,535	)		(3,307	)		(6,756	)

Comprehensive income	$	34,046	$	7,394		$	10,987		$	16,655

(1)

Unrealized gains/(losses) on available-for-sale securities is shown net of income tax (expense)/benefit of $(6.4) million and $6.3 million for the three months ended June 30, 2008 and 2007, respectively, and $1.9 million and $3.8 million for the six months ended June 30, 2008 and 2007, respectively.

(2)	Amortization of SFAS 133 transition adjustment is shown net of income tax expense of $45,000 and $0.1 million for the three months ended June 30, 2008 and 2007, respectively, and $0.1 million and $0.1 million for the six months ended June 30, 2008 and 2007, respectively.

The following table presents Farmer Mac’s accumulated other comprehensive loss as of June 30, 2008 and December 31, 2007 and changes in the components of accumulated other comprehensive loss for the six months ended June 30, 2008 and the year ended December 31, 2007.

	June 30, 2008			December 31, 2007
	(in thousands)
Available-for-sale securities:
Beginning balance	$	(2,320	)	$	5,802
Reclassification adjustment to retained earnings for SFAS 159 adoption, net of tax		(11,237	)		-
Adjusted beginning balance		(13,557	)		5,802
Net unrealized losses, net of tax		(3,463	)		(8,122	)
Ending balance	$	(17,020	)	$	(2,320	)

Financial derivatives:
Beginning balance	$	(473	)	$	(846	)
Amortization of SFAS 133 transition adjustment on financial derivatives, net of tax		156			373
Ending balance	$	(317	)	$	(473	)

Accumulated other comprehensive loss, net of tax	$	(17,337	)	$	(2,793	)

-33-

Note 5.

Off-Balance Sheet Guarantees and Long-Term Standby Purchase Commitments

Overview

Farmer Mac offers approved lenders two credit enhancement alternatives to increase their liquidity or lending capacity while retaining the cash flow benefits of their loans: (1) Farmer Mac Guaranteed Securities, which are available through each of the Farmer Mac I, Farmer Mac II and Rural Utilities programs; and (2) LTSPCs, which are available only through the Farmer Mac I and Rural Utilities programs. Both of these alternatives result in the creation of off-balance sheet obligations for Farmer Mac in the ordinary course of its business. Farmer Mac accounts for these transactions and other financial guarantees in accordance with FASB Interpretation No. 45, Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others (“FIN 45”). In accordance with FIN 45, Farmer Mac records, at the inception of a guarantee, a liability for the fair value of its obligation to stand ready to perform under the terms of each guarantee and an asset that is equal to the fair value of the fees that will be received over the life of each guarantee. The fair values of the guarantee obligation and asset at inception are based on the present value of expected cash flows using management’s best estimate of certain key assumptions, including prepayment speeds, forward yield curves and discount rates commensurate with the risks involved. Because the cash flows of these instruments may be interest rate path dependent, these values and projected discount rates are derived using a Monte Carlo simulation model. The guarantee obligation and corresponding asset are subsequently amortized into guarantee and commitment fee income in relation to the decline in the unpaid principal balance on the underlying agricultural real estate mortgage and rural utilities loans.

Off-Balance Sheet Farmer Mac Guaranteed Securities

Eligible loans and other eligible assets may be placed into trusts that are used as vehicles for the securitization of the transferred assets and the Farmer Mac-guaranteed beneficial interests in the trusts are sold to investors. The following table summarizes cash flows received from and paid to these trusts:

	Six Months Ended
	June 30, 2008		June 30, 2007
	(in thousands)
Proceeds from new securitizations	$	1,390	$	1,324
Guarantee fees received		6,145		5,145
Purchases of assets from the trusts		304		247
Servicing advances		6		14
Repayment of servicing advances		2		24

-34-

The following table presents the maximum principal amount of potential undiscounted future payments that Farmer Mac could be required to make under all off-balance sheet Farmer Mac Guaranteed Securities as of June 30, 2008 and December 31, 2007, not including offsets provided by any recourse provisions, recoveries from third parties or collateral for the underlying loans.

Outstanding Balance of Off-Balance Sheet
Farmer Mac Guaranteed Securities
	June 30,		December 31,
	2008		2007
	(in thousands)
Post-1996 Act Farmer Mac I Guaranteed Securities	$	4,275,791	$	4,518,300
Farmer Mac II Guaranteed Securities		30,761		24,815
Total Farmer Mac I and II	$	4,306,552	$	4,543,115

For those securities issued or modified on or after January 1, 2003, Farmer Mac has recorded a liability for its obligation to stand ready under the guarantee in the guarantee and commitment obligation on the condensed consolidated balance sheet. This liability approximated $33.4 million as of June 30, 2008 and $36.4 million as of December 31, 2007. As of June 30, 2008, the weighted-average remaining maturity of all loans underlying off-balance sheet Farmer Mac Guaranteed Securities, excluding AgVantage securities, was 14.3 years.

Long-Term Standby Purchase Commitments (LTSPCs)

An LTSPC is a commitment by Farmer Mac to purchase on one or more unspecified future dates, from a segregated pool of eligible loans, either: (a) loans delinquent 120 days or more at par plus accrued interest, or (b) performing loans at a mark-to-market negotiated price. As consideration for its assumption of the credit risk on loans underlying an LTSPC, Farmer Mac receives a commitment fee payable monthly in arrears in an amount approximating what would have been the guarantee fee if the transaction were structured as a swap for Farmer Mac Guaranteed Securities.

As of June 30, 2008 and December 31, 2007, the maximum principal amount of potential undiscounted future payments that Farmer Mac could be requested to make under all LTSPCs, not including offsets provided by any recourse provisions, recoveries from third parties or collateral for the underlying loans, was $2.0 billion and $1.9 billion, respectively.

As of June 30, 2008, the weighted-average remaining maturity of all loans underlying LTSPCs was 14.8 years. For those LTSPCs issued or modified on or after January 1, 2003, Farmer Mac has recorded a liability for its obligation to stand ready under the commitment in the guarantee and commitment obligation on the condensed consolidated balance sheet. This liability approximated $17.2 million as of June 30, 2008 and $15.7 million as of December 31, 2007.

-35-

Note 6.

Subsequent Events

As discussed in Note 2, Farmer Mac recorded a $5.3 million other-than-temporary impairment related to its investment in Fannie Mae floating rate preferred stock. The amortized cost of this investment was written down to its fair value of $47.2 million as of June 30, 2008. Subsequent to June 30, 2008, this security experienced further price declines and volatility. As of August 1, 2008, the fair value was $30.6 million. If this security does not otherwise recover in value, additional impairment losses would be recognized during third quarter 2008.

-36-

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Financial information is consolidated to include the accounts of Farmer Mac and its wholly-owned subsidiary, Farmer Mac Mortgage Securities Corporation.

This discussion and analysis of financial condition and results of operations should be read together with: (1) the interim unaudited condensed consolidated financial statements and the related notes that appear elsewhere in this report; and (2) Farmer Mac’s Annual Report on Form 10-K for the fiscal year ended December 31, 2007.

The discussion below is not necessarily indicative of future results.

Special Note Regarding Forward-Looking Statements

Some statements made in this report are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 pertaining to management’s current expectations as to Farmer Mac’s future financial results, business prospects and business developments. Forward-looking statements include, without limitation, any statement that may predict, forecast, indicate or imply future results, performance or achievements, and typically are accompanied by, and identified with, such terms as “anticipates,” “believes,” “expects,” “intends,” “should” and similar phrases. The following management’s discussion and analysis includes forward-looking statements addressing Farmer Mac’s:

prospects for earnings;

prospects for growth in loan purchase, guarantee, securitization and LTSPC volume;

trends in net interest income;

trends in portfolio credit quality and provisions for losses;

trends in expenses;

trends in non-program investments;

changes in capital position; and

other business and financial matters.

Management’s expectations for Farmer Mac’s future necessarily involve a number of assumptions and estimates and the evaluation of risks and uncertainties. Various factors or events could cause Farmer Mac’s actual results to differ materially from the expectations as expressed or implied by the forward-looking statements, including the factors discussed under “Risk Factors” in Part I, Item 1A of Farmer Mac’s Annual Report on Form 10-K for the year ended December 31, 2007, as filed with the SEC on March 17, 2008, and uncertainties regarding:

lender interest in Farmer Mac credit products and the Farmer Mac secondary market;

increases in general and administrative expenses attributable to growth of the business and regulatory environment, including the hiring of additional personnel with expertise in key functional areas;

the rate and direction of development of the secondary market for agricultural mortgage and rural utilities loans;

the general rate of growth in agricultural mortgage and rural utilities indebtedness;

borrower preferences for fixed-rate agricultural mortgage indebtedness;

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legislative or regulatory developments that could affect Farmer Mac;

the willingness of investors to invest in Farmer Mac Guaranteed Securities;

	·	developments in the financial markets, including possible investor, analyst and rating agency reactions to events involving GSEs, including Farmer Mac; and
	·	fluctuations in the value and liquidity of assets held by Farmer Mac, particularly auction-rate certificates ( “ ARCs ” ) and Fannie Mae preferred stock.

In light of these potential risks and uncertainties, no undue reliance should be placed on any forward-looking statements expressed in this report. Furthermore, Farmer Mac undertakes no obligation to release publicly the results of revisions to any forward-looking statements that may be made to reflect new information or any future events or circumstances, except as otherwise mandated by the SEC.

Critical Accounting Policies and Estimates

The critical accounting policies that are both important to the portrayal of Farmer Mac’s financial condition and results of operations and require complex, subjective judgments are the accounting policies for the allowance for losses and fair value measurements.

Allowance for Losses . For a discussion of Farmer Mac’s accounting policy for the allowance for losses and the related use of estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and related notes for the periods presented, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policy and Estimates” in the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2007, as filed with the SEC on March 17, 2008.

Fair Value Measurement . During first quarter 2008, Farmer Mac determined that its accounting policy for measurement of fair values was a critical accounting policy. A significant portion of Farmer Mac’s assets consists of financial instruments that are measured at fair value in the condensed consolidated balance sheets. For financial instruments that are complex in nature or for which observable inputs are not available, the measurement of fair value requires significant management judgments and assumptions. These judgments and assumptions, as well as changes in market conditions, may have a material impact on the condensed consolidated balance sheets and statements of operations. While Farmer Mac’s fair value measurement methods had not changed from reporting periods prior to 2008, additional disclosures of such measurement methods are required by the adoption of SFAS 157 as described in Note 1(c) to the condensed consolidated financial statements.

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in a transaction between market participants at the measurement date. The amount of judgment involved in measuring the fair value of a financial instrument is affected by a number of factors, such as the type of investment, the liquidity of the markets for the instrument and the contractual characteristics of the instrument. Farmer Mac uses one of the following three practices for estimating fair value, the selection of which is based on the reliability and availability of relevant market data: (1) quoted market prices for identical instruments, (2) quoted prices, from multiple third parties, in markets that are not active or for which all significant inputs are observable, either directly or indirectly, or (3) analytical models that employ techniques such as discounted cash flow approach and that include market-based assumptions such as prepayment speeds, forward yield curves and discount rates commensurate with the risks involved. Price transparency tends to be limited in less liquid markets where quoted market prices or observable market data may not be available. Farmer Mac refines and enhances its valuation methodologies to correlate more closely to observable market data. When observable market prices or data are not readily available or do not exist, the estimation of fair value may require significant management judgment and assumptions. The estimates are subject to change in future reporting periods if such conditions and information change. For example, volatility in credit markets could result in wider credit spreads, which may change fair value measurements for certain financial instruments.

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Farmer Mac’s assets and liabilities presented at fair value in the condensed consolidated balance sheet on a recurring basis include:

Investment securities;

Farmer Mac Guaranteed Securities classified as available-for-sale and trading; and

Financial derivatives.

The changes in fair value from period to period are recorded either in the condensed consolidated balance sheet to accumulated other comprehensive income/(loss) or in the condensed consolidated statement of operations as gains/(losses) on financial derivatives or gains/(losses) on trading assets.

As of June 30, 2008, Farmer Mac’s assets and liabilities recorded at fair value included financial instruments valued at $2.5 billion whose fair values were estimated by management in the absence of readily determinable fair values (i.e., Level 3). These financial instruments measured as Level 3 represented 42 percent of total assets and 62 percent of financial instruments measured at fair value as of June 30, 2008. Assets underlying these financial instruments measured as Level 3 primarily include the following:

Type of Financial Instrument		Underlying Assets

Farmer Mac I Guaranteed Securities		Agricultural mortgage loans eligible under Farmer Mac’s credit underwriting, collateral valuation, documentation and other standards.

Farmer Mac II Guaranteed Securities		Portions of loans guaranteed by USDA pursuant to the Consolidated Farm Rural Development Act.

Farmer Mac Guaranteed Securities – Rural Utilities		General obligations of the National Rural Utilities Cooperative Finance Corporation (“Nat Rural”) and/or loans made to rural electric distribution cooperatives by Nat Rural.

Auction-rate certificates		Guaranteed student loans that are backed by the full faith and credit of the United States.

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Due to the absence of an active auction market or other market trading in ARCs, during first quarter 2008 Farmer Mac transferred all of its ARCs from Level 2 to Level 3 and recorded the ARCs as of March 31, 2008 at fair values of between 99 percent of par and par as described below in “—Liquidity and Capital Resources – Liquidity.” The discounted values reflect uncertainty regarding the ability to obtain par in the absence of any active market trading. On April 22, 2008, Farmer Mac received a par tender offer for $20.0 million of its ARC holdings. Farmer Mac tendered those bonds and received par upon settlement on May 21, 2008. As of June 30, 2008, Farmer Mac’s remaining ARC holdings were recorded at fair values of approximately 99 percent of par.

Results of Operations

Overview . Net income available to common stockholders for second quarter 2008 was $21.4 million or $2.13 per diluted common share, compared to $18.4 million or $1.74 per diluted common share for second quarter 2007. Net income available to common stockholders for the six months ended June 30, 2008 was $13.2 million or $1.31 per diluted common share, compared to $22.3 million or $2.10 per diluted common share for the six months ended June 30, 2007. These fluctuations, both the increase in the quarterly net income comparison and the decrease in the six month net income comparison, were due principally to volatility resulting from gains and losses on financial derivatives used to manage interest rate risk. Additionally, net interest income was higher for the three and six month periods ended June 30, 2008, in comparison to the same periods in 2007, driven by wider investment spreads and significantly more advantageous short-term funding spreads below LIBOR.

Results for the three and six month periods ended June 30, 2008 reflect an other-than-temporary impairment loss of $5.3 million recorded in second quarter 2008 to write down an investment in GSE (Fannie Mae) floating rate preferred stock to its fair value of $47.2 million as of June 30, 2008. Subsequent to June 30, 2008, this security experienced further price declines and volatility. As of August 1, 2008, the fair value was $30.6 million. If this security does not otherwise recover in value, additional impairment losses would be recognized during third quarter 2008.

Although Farmer Mac’s financial derivatives provide highly effective economic hedges of interest rate risk, accounting elected under SFAS 133 required the gains and losses on the financial derivatives to be reflected in net income for the three and six months ended June 30, 2008, while a majority of the offsetting economic gains and losses on the hedged items were not reflected in net income. Similarly, under SFAS 133, the gains on financial derivatives for the three and six months ended June 30, 2007 were reflected in net income, while the offsetting economic losses on the hedged items were not. As a result of Farmer Mac’s classification of its financial derivatives as undesignated hedges under SFAS 133, factors unrelated to the performance of the Corporation’s business, such as changes in interest rates, may cause the Corporation’s earnings under accounting principles generally accepted in the United States of America (“GAAP”) to be more volatile than – and even counter-directional to – the underlying economics of its business operations. Notwithstanding that increased volatility, the Corporation intends to continue to use financial derivatives to manage interest rate risk and optimize its cost of funds. The Board and management of Farmer Mac focus on the long-term growth of its business and its overall economic return to stockholders, rather than the short-term volatility of GAAP net income.

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On January 1, 2008, with the adoption of SFAS 159, Farmer Mac elected to measure $600.5 million of investment securities and $427.3 million of Farmer Mac II Guaranteed securities at fair value, with changes in fair value reflected in earnings as they occur. Upon adoption, Farmer Mac recorded a cumulative effect of adoption adjustment of $12.1 million, net of tax, as an increase to the beginning balance of retained earnings. During the three and six months ended June 30, 2008, Farmer Mac elected to measure $36.4 million and $61.1 million, respectively of Farmer Mac II Guaranteed Securities at fair value, with changes in fair value reflected in earnings as they occur. These assets were selected for the fair value option under SFAS 159 because they were funded or hedged principally with financial derivatives and, therefore, the changes in fair value of the assets provide partial economic and financial reporting offsets to the related financial derivatives. For the three and six month periods ended June 30, 2008, Farmer Mac recorded net losses on trading assets of $17.7 million and $7.0 million, respectively for changes in fair values of the assets selected for the fair value option.

Beyond the impacts of SFAS 133 and SFAS 159 on net income, Farmer Mac’s financial results in 2008 were driven by growth in guarantee and commitment fees and a significant increase in net interest income due to continuing interest rate and credit spread volatility in the capital markets. As a result of Farmer Mac’s regular issuance of discount notes and medium-term notes and its status as a federally-chartered instrumentality of the United States, Farmer Mac has had ready access to the capital markets at favorable rates. Throughout this period, Farmer Mac’s short-term funding spreads below the corresponding London Interbank Offered Rate, or LIBOR, were significantly more advantageous than historical levels. Consequently, Farmer Mac’s net interest yield on investments and program assets was significantly higher during the first half of 2008 than its net interest yields earned on such assets in its historical experience. Also, the widening of credit market spreads during 2008 caused a decline in the fair value of many corporate securities in Farmer Mac’s investment portfolio, resulting in increased unrealized losses, some of which may be realized in the future if those securities are not held to maturity and do not otherwise recover in value.

Farmer Mac’s outstanding program volume as of June 30, 2008 was $9.8 billion, compared to $8.4 billion as of March 31, 2008. During second quarter 2008, Farmer Mac:

added $116.5 million of Farmer Mac I loans under LTSPCs;

purchased $53.8 million of newly originated and current seasoned Farmer Mac I loans;

placed the Farmer Mac guarantee on $900.0 million of Nat Rural obligations backed by rural utilities loans and $430.7 million of securities representing interests in rural utilities loans previously held as mission-related investments; and

purchased $79.7 million of Farmer Mac II USDA-guaranteed portions of loans.

The enactment of the Farm Bill on May 22, 2008 expanded Farmer Mac’s authorities to include providing a secondary market for rural electric and telephone loans made by cooperative lenders. Pursuant to this expanded authority, during second quarter 2008, Farmer Mac placed its guarantee on securities previously held by the Corporation as mission-related investments under authority granted by FCA. Farmer Mac categorizes these program assets as part of its new Rural Utilities program, which is separate from the existing Farmer Mac I and Farmer Mac II programs. While Farmer Mac believes important new business opportunities could result from this expansion of its statutory guarantee authorities, at this time no assurance can be given that it will result in significant additional business volume for Farmer Mac.

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As part of Farmer Mac’s continuing evaluation of the overall credit quality of its portfolio, the state of the U.S. agricultural economy, the continued upward trends in agricultural land values, and the level of Farmer Mac’s outstanding guarantees and commitments, Farmer Mac determined that the appropriate allowance for losses as of June 30, 2008 was $3.8 million, which was 8 basis points relative to the outstanding post-1996 Act Farmer Mac I portfolio (excluding AgVantage securities). The allowance for losses was $3.9 million and 8 basis points as of both December 31, 2007 and June 30, 2007.

As of June 30, 2008, Farmer Mac’s 90-day delinquencies (Farmer Mac I loans purchased or placed under Farmer Mac I Guaranteed Securities or LTSPCs after enactment of the 1996 Act that were 90 days or more past due, in foreclosure, restructured after delinquency, or in bankruptcy, excluding loans performing under either their original loan terms or a court-approved bankruptcy plan) were $5.2 million, representing 0.11 percent of the principal balance of the outstanding post-1996 Act Farmer Mac I portfolio (excluding AgVantage securities), compared to $14.8 million (0.30 percent) as of June 30, 2007.

Set forth below is a more detailed discussion of Farmer Mac’s results of operations.

Net Interest Income . Net interest income was $24.4 million for second quarter 2008, compared to $8.5 million for second quarter 2007. Net interest income was $42.3 million for the six months ended June 30, 2008, compared to $17.6 million for the six months ended June 30, 2007. The net interest yield was 149 basis points for the six months ended June 30, 2008, compared to 70 basis points for the six months ended June 30, 2007.

Net interest income includes guarantee fees for loans purchased after April 1, 2001 (the effective date of Statement of Financial Accounting Standards No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities (“SFAS 140”)), but not for loans purchased prior to that date. The effect of SFAS 140 was the classification of approximately $1.8 million (6 basis points) of guarantee fee income as interest income for the six months ended June 30, 2008, compared to $1.7 million (7 basis points) for the six months ended June 30, 2007.

As discussed in Note 1(d) to the condensed consolidated financial statements, Farmer Mac accounts for its financial derivatives as undesignated financial derivatives. Accordingly, the Corporation classifies the net interest income and expense realized on financial derivatives as gains and losses on financial derivatives. For the six months ended June 30, 2008 and 2007, this classification resulted in an increase of the net interest yield of $10.1 million (36 basis points) and no effect on the net interest yield, respectively.

The net interest yields for the six months ended June 30, 2008 and 2007 included the benefits of yield maintenance payments of $2.9 million (10 basis points) and $2.2 million (9 basis points), respectively. Yield maintenance payments represent the present value of expected future interest income streams and accelerate the recognition of interest income from the related loans. Because the timing and size of these payments vary greatly, variations do not necessarily indicate positive or negative trends to gauge future financial results. For the six months ended June 30, 2008 and 2007, the after-tax effects of yield maintenance payments on net income and diluted earnings per share were $1.9 million or $0.19 per diluted share and $1.4 million or $0.14 per diluted share, respectively.

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The following table provides information regarding interest-earning assets and funding for the six months ended June 30, 2008 and 2007. The balance of non-accruing loans is included in the average balance of interest-earning loans and Farmer Mac Guaranteed Securities presented, though the related income is accounted for on the cash basis. Therefore, as the balance of non-accruing loans and the income received increases or decreases, the net interest yield will fluctuate accordingly. Net interest income and the yield will also fluctuate due to the uncertainty of the timing and size of yield maintenance payments. The average rate earned on cash and investments reflects lower short-term market rates partially offset by wider investment spreads during the six months ended June 30, 2008 compared to the six months ended June 30, 2007 and the short-term or floating rate nature of most investments acquired or reset during 2008. The lower average rate on loans and Farmer Mac Guaranteed Securities during the six months ended June 30, 2008 reflects the decline in market rates reflected in the rates on loans acquired or reset during that period compared to the rates on loans that have matured. The lower average rate on Farmer Mac’s notes payable due within one year is consistent with general trends in average short-term rates during the periods presented. The downward trend in the average rate on notes payable due after one year reflects the retirement of older debt and the issuance of new debt at lower market rates during 2008.

	Six Months Ended
	June 30, 2008							June 30, 2007
	Average Balance		Income/ Expense		Average Rate			Average Balance		Income/ Expense		Average Rate
	(dollars in thousands)
Interest-earning assets:
Cash and investments	$	3,553,861	$	76,910		4.33	%	$	3,014,546	$	80,522		5.34	%
Loans and Farmer Mac
Guaranteed Securities		2,108,105		62,011		5.88	%		2,013,241		60,703		6.03	%
Total interest-earning assets		5,661,966		138,921		4.91	%		5,027,787		141,225		5.62	%

Funding:
Notes payable due within one year		3,784,194		58,187		3.08	%		3,277,815		84,340		5.15	%
Notes payable due after one year		1,653,313		38,438		4.65	%		1,570,149		39,324		5.01	%
Total interest-bearing liabilities		5,437,507		96,625		3.55	%		4,847,964		123,664		5.10	%

Net non-interest-bearing funding		224,459							179,823
Total funding	$	5,661,966		96,625		3.41	%	$	5,027,787		123,664		4.92	%
Net interest income/yield			$	42,296		1.49	%			$	17,561		0.70	%

The following table sets forth information regarding the changes in the components of Farmer Mac’s net interest income for the periods indicated. For each category, information is provided on changes attributable to changes in volume (change in volume multiplied by old rate) and changes in rate (change in rate multiplied by old volume). Combined rate/volume variances, the third element of the calculation, are allocated based on their relative size. The decreases in income due to changes in rate reflect the reset of variable-rate investments and adjustable-rate mortgages to lower rates and the acquisition of new lower-yielding investments, loans and Farmer Mac Guaranteed Securities, as described above. The decreases in expense reflect the decreased cost of funding due to the decrease in capital markets interest rates.

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	Six Months Ended June 30, 2008
	Compared to Six Months Ended
	June 30, 2007
	Increase/(Decrease) Due to
	Rate			Volume		Total
	(in thousands)
Income from interest-earning assets:
Cash and investments	$	(16,691	)	$	13,079	$	(3,612	)
Loans and Farmer Mac Guaranteed Securities		(1,506	)		2,814		1,308
Total		(18,197	)		15,893		(2,304	)
Expense from interest-bearing liabilities		(40,772	)		13,733		(27,039	)
Change in net interest income	$	22,575		$	2,160	$	24,735

Guarantee and Commitment Fees . Guarantee and commitment fees, which compensate Farmer Mac for assuming the credit risk on loans underlying Farmer Mac Guaranteed Securities and LTSPCs, were $6.7 million for second quarter 2008 and $13.3 million for the six months ended June 30, 2008, compared to $6.4 million and $12.2 million, respectively, for the same periods in 2007. The effect of SFAS 140 classified guarantee fees as interest income in the amount of $0.9 million and $1.8 million for second quarter 2008 and the six months ended June 30, 2008, respectively, compared to $0.8 million for second quarter 2007 and $1.7 million for the six months ended June 30, 2007, although management considers the amounts to have been earned in consideration for the assumption of credit risk. That portion of the difference or “spread” between the cost of Farmer Mac’s debt funding for loans and the yield on post-1996 Act Farmer Mac I Guaranteed Securities held on its books compensates for credit risk. When a post-1996 Act Farmer Mac I Guaranteed Security is sold to a third party, Farmer Mac continues to receive the guarantee fee component of that spread, which continues to compensate Farmer Mac for its assumption of credit risk. The portion of the spread that compensates for interest rate risk would not typically continue to be received by Farmer Mac if the asset were sold.

Expenses . General and administrative expenses were $2.2 million for second quarter 2008, and $4.3 million for the six months ended June 30, 2008, compared to $2.2 million and $4.6 million, respectively, for the same periods in 2007. Compensation and employee benefits were $3.9 million for second quarter 2008 and $7.6 million for the six months ended June 30, 2008, compared to $3.7 million and $6.9 million respectively, for the same periods in 2007. The increases in compensation and employee benefits were attributable to reductions in management’s assumptions related to employee turnover rates related to the vesting of stock options and the reduced vesting period for director SARs granted in second quarter 2008. For more information on stock-based compensation, see Note 1(f) to the condensed consolidated financial statements.

Regulatory fees for second quarter 2008 and the six months ended June 30, 2008 were $0.5 million and $1.0 million, respectively, compared to $0.6 million and $1.1 million, respectively, for the same periods in 2007. FCA has advised the Corporation that its estimated fees for the federal fiscal year ended September 30, 2008 will be $2.1 million, compared to $2.2 million for the federal fiscal year ended September 30, 2007. After the end of a federal government fiscal year, FCA may revise its prior year estimated assessments to reflect actual costs incurred, and has issued both additional assessments and refunds in the past.

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Farmer Mac expects all of the above-mentioned expenses and regulatory fees to continue at approximately the same levels through the end of 2008.

During the six months ended June 30, 2008, Farmer Mac made no provision for its allowance for losses, compared to a release of $0.5 million for the same period in 2007, which included the provision of $0.1 million for the allowance for losses during second quarter 2007. See “—Risk Management—Credit Risk” for additional information regarding Farmer Mac’s provision for losses, provision for loan losses and Farmer Mac’s methodology for determining its allowance for losses. As of June 30, 2008, Farmer Mac’s total allowance for losses was $3.8 million, which was 8 basis points relative to the outstanding post-1996 Act Farmer Mac I portfolio (excluding AgVantage securities), compared to $3.9 million and 8 basis points as of December 31, 2007.

Gains and Losses on Financial Derivatives and Trading Assets . SFAS 133 requires the change in the fair values of financial derivatives to be reflected in a company’s net income or accumulated other comprehensive income. As discussed in Note 1(d) to the condensed consolidated financial statements, the Corporation accounts for its financial derivatives as undesignated financial derivatives. The net gains and losses on financial derivatives for the three and six month periods ended June 30, 2008 were gains of $31.1 million and losses of $10.7 million, respectively, compared to net gains of $19.9 million and $15.9 million, respectively, for the same periods in 2007. On January 1, 2008, with the adoption of SFAS 159, Farmer elected to measure $600.5 million of investment securities and $427.3 million of Farmer Mac II Guaranteed Securities at fair value, with changes in fair value reflected in earnings as they occur. During the three and six months ended June 30, 2008, Farmer Mac elected to measure $36.4 million and $61.1 million, respectively, of Farmer Mac II Guaranteed Securities at fair value, with changes in fair value reflected in earnings as they occur. Farmer Mac selected these assets for the fair value option under SFAS 159 because they were funded or hedged principally with financial derivatives and, therefore, the changes in fair value of the assets provide partial economic and financial reporting offsets to the related financial derivatives. During the three and six month periods ended June 30, 2008, the net decrease in fair value of assets selected for the fair value option and other investment securities classified as trading assets resulted in Farmer Mac recording net losses on trading assets of $17.3 million and $7.2 million, respectively. Net losses recorded on trading assets for the three and six month periods ended June 30, 2007 were both $0.1 million.

Farmer Mac records financial derivatives at fair value on its balance sheet with the related changes in fair value recognized in the condensed consolidated statement of operations. Although the Corporation’s use of financial derivatives achieves its economic and risk management objectives, its classification of financial derivatives as undesignated hedges elected under SFAS 133 allows factors unrelated to the economic performance of the Corporation’s business, such as changes in interest rates, to increase the volatility – or even change the direction – of the Corporation’s earnings under GAAP.

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Farmer Mac enters into financial derivative transactions principally to protect against risk from the effects of market price or interest rate movements on the value of certain assets, future cash flows or debt issuance, not for trading or speculative purposes. Farmer Mac enters into interest rate swap contracts principally to adjust the characteristics of its short-term debt to match more closely the cash flow and duration characteristics of its longer-term mortgage and other assets, and also to adjust the characteristics of its long-term debt to match more closely the cash flow and duration characteristics of its short-term assets, thereby reducing interest rate risk and also to derive an overall lower effective cost of borrowing than would otherwise be available to Farmer Mac in the conventional debt market. Specifically, interest rate swaps convert economically the variable cash flows related to the forecasted issuance of short-term debt into effectively fixed-rate medium-term and long-term notes that match the anticipated duration, repricing and interest rate characteristics of the corresponding assets. Since this strategy provides Farmer Mac with approximately the same cash flows as those that are inherent in the issuance of medium-term notes, Farmer Mac uses either the bond market or the swap market based upon their relative pricing efficiencies.

Farmer Mac uses callable interest rate swaps (in conjunction with the issuance of short-term debt) as an alternative to callable medium-term notes with equivalently structured maturities and call options. The call options on the swaps are designed to match the implicit prepayment options on those mortgage assets without prepayment protection. The blended durations of the swaps are also designed to match the duration of the related mortgages over their estimated lives. If the mortgages prepay, the swaps can be called and the short-term debt repaid; if the mortgages do not prepay, the swaps remain outstanding and the short-term debt is rolled over, effectively providing fixed-rate callable funding over the lives of the related mortgages. Thus, the economics of the assets are closely matched to the economics of the interest rate swap and funding combination.

Business Volume . New business volume for second quarter 2008 was $250.0 million. In addition to that new business volume, the expansion of Farmer Mac’s authorities to include rural utilities loans enabled Farmer Mac to place its guarantee on $1.3 billion of mission-related investment securities previously purchased by the Corporation. The combination of the new business volume and the expanded mission brought Farmer Mac’s outstanding program volume as of June 30, 2008 to $9.8 billion. Farmer Mac’s business volume in first quarter 2008 and second quarter 2007 was $143.9 million and $1.3 billion, respectively. Much of Farmer Mac’s business volume in recent years has been a product of the Corporation’s ongoing efforts to diversify its marketing focus to include large program transactions that emphasize high asset quality, with greater protection against adverse credit performance and commensurately lower compensation for the assumption of credit risk and administrative costs, resulting in projected risk-adjusted marginal returns on equity approximately equal to those of other Farmer Mac program transactions. These transactions tend to be larger portfolio transactions that have ranged up to $1.0 billion. No such large transactions were completed during second quarter 2008. The design of these transactions is such that the ongoing guarantee and commitment fee income from prior transactions continues to contribute to earnings in the current and future reporting periods. Moreover, Farmer Mac sees prospects for additional similar large portfolio transactions related to rural utilities loans as well as agricultural mortgages, though no assurance can be given at this time as to the certainty or timing of similar transactions in the future.

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Looking ahead, Farmer Mac remains confident of opportunities for increased business volume and income growth as a result of the Corporation’s product development and marketing efforts. Farmer Mac’s marketing initiatives, which continue to generate business opportunities for 2008 and, it believes, beyond, include:

increased use of AgVantage transactions, targeting highly-rated financial institutions with large agricultural mortgage and rural utilities portfolios;

agribusiness, rural utilities and rural development loans, in fulfillment of Farmer Mac’s Congressional mission;

new structures for LTSPC transactions, including risk sharing provisions; and

an alliance with the American Bankers Association (“ABA”), under which Farmer Mac facilitates access and offers improved pricing to ABA member institutions and the ABA promotes member participation in the Farmer Mac I program.

Some of the agribusiness and rural utilities initiatives will require Farmer Mac to consider credit risks that expand upon or differ from those the Corporation has accepted previously. For example, the credit risks related to rural utilities loans include political, environmental and technological factors dissimilar from those affecting the repayment of agricultural mortgage loans. Farmer Mac will use underwriting standards appropriate to those credit risks, and likely will draw upon outside expertise to analyze and evaluate the credit and funding aspects of loans submitted pursuant to those initiatives.

Notwithstanding these efforts and developments, Farmer Mac’s business with agricultural mortgage and rural utilities lenders has been and may continue to be constrained by:

changes in the capital, liquidity or funding needs of major business partners;

alternative sources of capital, funding and credit enhancement for agricultural mortgage and rural utilities lenders;

political, environmental and technological developments affecting rural utilities; and

increased competition in the secondary market for agricultural mortgage loans.

For a more detailed discussion of these factors and the related effects on Farmer Mac’s business volume, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations—Outlook for 2008” in the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2007, as filed with the SEC on March 17, 2008.

USDA’s most recent publications (as available on USDA’s website as of August 1, 2008) forecast:

2008 net cash farm income to be $96.6 billion, an increase of $9 billion over 2007 estimates, and a 42 percent premium over the 10-year average of $68 billion.

2008 net farm income to be $92.3 billion, an increase of $3.6 billion over 2007 estimates, and a sizable increase ($31 billion) over the 10-year average of $61.1 billion.

Total direct U.S. government payments to be $13.4 billion in 2008, up from $12 billion in 2007, but still 20 percent below the 5-year average. Direct payment rates are fixed in legislation and are not affected by the level of program crop prices.

Countercyclical payments to decrease to $0.93 billion in 2008 from $1.2 billion in 2007.

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Marketing loan benefits, which include loan deficiency payments, marketing loan gains, and certificate exchange gains, to drop to $8 million in 2008 from $947 million in 2007.

The value of U.S. farm real estate to increase 14.9 percent in 2008 to $2.2 trillion from the current projection of $1.9 trillion for 2007.

The amount of farm real estate debt to increase by 2.8 percent in 2008 to $120.8 billion, compared to the current projection of $117.5 billion in 2007.

The USDA forecasts referenced above relate to U.S. agriculture generally, but should collectively be favorable for Farmer Mac’s financial condition relative to its exposure to outstanding guarantees and commitments, as they indicate strong borrower cash flows, and increased farm real estate values in most U.S. agricultural regions.

The following table sets forth Farmer Mac I, Farmer Mac II and Rural Utilities loan purchase and guarantee activities for newly originated and current seasoned loans during the periods indicated:

	Three Months Ended				Six Months Ended
	June 30, 2008		June 30, 2007		June 30, 2008		June 30, 2007
	(in thousands)
Loan purchase and guarantee and commitment activity:
Farmer Mac I:
Loans	$	53,838	$	39,856	$	91,306	$	61,500
LTSPCs		116,472		152,402		169,753		548,724
AgVantage		-		1,000,000		-		1,000,000
Farmer Mac II Guaranteed Securities		79,700		59,149		132,814		112,697
Farmer Mac Guaranteed Securities -Rural Utilities		1,330,676		-		1,330,676		-
Total purchases, guarantees and commitments	$	1,580,686	$	1,251,407	$	1,724,549	$	1,722,921

As part of fulfilling its guarantee obligations for Farmer Mac I Guaranteed Securities and commitments to purchase eligible loans underlying LTSPCs, Farmer Mac purchases defaulted loans, all of which are at least 90 days delinquent at the time of purchase, out of the loan pools underlying those securities and LTSPCs, and records the purchased loans as such on its balance sheet. The purchase price for defaulted loans purchased out of Farmer Mac I Guaranteed Securities is the current outstanding principal balance of the loan plus accrued and unpaid interest. The purchase price for defaulted loans purchased under an LTSPC is the then-current outstanding principal balance of the loan, with accrued and unpaid interest on the defaulted loans payable out of any future loan payments or liquidation proceeds as received. The purchase price of a defaulted loan is not an indicator of the expected loss on that loan; many other factors affect expected loss, if any, on loans so purchased. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Risk Management—Credit Risk—Loans” in the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2007, as filed with the SEC on March 17, 2008.

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The following table presents Farmer Mac’s loan purchases of newly originated and current seasoned loans and defaulted loans purchased underlying Farmer Mac I Guaranteed Securities and LTSPCs:

	Three Months Ended				Six Months Ended
	June 30, 2008		June 30, 2007		June 30, 2008		June 30, 2007
	(in thousands)
Farmer Mac I newly originated and current seasoned loan purchases	$	53,838	$	39,856	$	91,306	$	61,500

Defaulted loans purchased underlying off-balance sheet Farmer Mac I Guaranteed Securities		-		247		304		247

Defaulted loans underlying on-balance sheet Farmer Mac I Guaranteed Securities transferred to loans		-		131		859		964

Defaulted loans purchased underlying LTSPCs		26		272		26		272

Total loan purchases	$	53,864	$	40,506	$	92,495	$	62,983

The weighted-average ages of the Farmer Mac I newly originated and current seasoned loans purchased during second quarter 2008 and second quarter 2007 was less than one month. Of the Farmer Mac I newly originated and current seasoned loans purchased during second quarter 2008 and second quarter 2007, 73 percent and 61 percent, respectively, had principal amortization periods longer than the maturity date, resulting in balloon payments at maturity, with a weighted-average remaining term to maturity of 15.3 years and 15.1 years, respectively. The weighted-average age of delinquent loans purchased out of securitized pools and LTSPCs during second quarter 2008 and second quarter 2007 was 28.7 years and 8.0 years, respectively.

Balance Sheet Review

As of June 30, 2008, Farmer Mac had $712.4 million of cash and cash equivalents compared to $101.4 million as of December 31, 2007. The increase was a result of a shift toward shorter term investments that are accounted for as cash and cash equivalents. As of June 30, 2008, Farmer Mac had $1.7 billion of investment securities compared to $2.6 billion as of December 31, 2007. The decrease in investment securities during the six months ended June 30, 2008 reflects the transfer of $1.4 billion of rural utilities loan-related securities from investment securities to Farmer Mac Guaranteed Securities with Farmer Mac’s guarantee of those securities pursuant to the expanded authorities granted in the Farm Bill. Accordingly, during the six months ended June 30, 2008, Farmer Mac Guaranteed Securities increased by $1.4 billion to $2.7 billion.

Consistent with the net increase in total assets of $1.1 billion during the six months ended June 30, 2008, total liabilities also increased $1.1 billion during the same period. The increase in liabilities was primarily due to the $1.1 billion increase in notes payable, the proceeds of which were used to fund the purchase of assets. For further information regarding off-balance sheet program activities, see “—Off-Balance Sheet Program Activities” below.

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During the six months ended June 30, 2008, accumulated other comprehensive loss increased $14.5 million, which was primarily the result of $17.0 million after-tax unrealized losses on securities available-for-sale as of June 30, 2008, compared to $2.3 million after-tax unrealized losses on securities available-for-sale as of December 31, 2007. Accumulated other comprehensive loss is not a component of Farmer Mac’s core capital or regulatory capital.

Farmer Mac is required to hold capital at the higher of the statutory minimum capital requirement or the amount required by the risk-based capital stress test. As of June 30, 2008, Farmer Mac’s core capital totaled $ 254.8 million, compared to $226.4 million as of December 31, 2007. As of June 30, 2008, Farmer Mac’s core capital exceeded the statutory minimum capital requirement of $ 214.8 million by $ 40.0 million.

Farmer Mac was in compliance with its risk-based capital standards as of June 30, 2008. The risk-based capital stress test generated a regulatory capital requirement of $48.8 million as of June 30, 2008, compared to $30.4 million as of March 31, 2008. In the June 5, 2008 issue of the Federal Register, FCA published a final rule containing a revised risk-based capital stress test. That revised risk-based capital stress test became effective July 25, 2008. The revised risk-based capital stress test would have generated a regulatory capital requirement of $56.8 million had it been in effect as of June 30, 2008, compared to $39.1 million as of March 31, 2008. The quarter-to-quarter increase in the risk-based capital requirement under either test is the result of decreased projected net interest income due to reduced net interest spreads on investments and program assets as of June 30, 2008 compared to March 31, 2008. As of June 30, 2008, Farmer Mac’s regulatory capital of $258.6 million exceeded the risk-based capital requirement of $48.8 million by approximately $209.8 million.

Off-Balance Sheet Program Activities

Risk Management

Interest Rate Risk . Farmer Mac is subject to interest rate risk on all assets held for investment because of possible timing differences in the cash flows of the assets and related liabilities. This risk is primarily related to loans held and on-balance sheet Farmer Mac Guaranteed Securities due to the ability of borrowers to prepay their mortgages before the scheduled maturities, thereby increasing the risk of asset and liability cash flow mismatches. Cash flow mismatches in a changing interest rate environment can reduce the earnings of the Corporation if assets repay sooner than expected and the resulting cash flows must be reinvested in lower-yielding investments when Farmer Mac’s funding costs cannot be correspondingly reduced, or if assets repay more slowly than expected and the associated debt must be replaced by higher-cost debt.

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Yield maintenance provisions and other prepayment penalties contained in many agricultural mortgage loans reduce, but do not eliminate, prepayment risk, particularly in the case of a defaulted loan where yield maintenance may not be collected. Those provisions require borrowers to make an additional payment when they prepay their loans so that, when reinvested with the prepaid principal, yield maintenance payments generate substantially the same cash flows that would have been generated had the loan not prepaid. Those provisions create a disincentive to prepayment and compensate the Corporation for some of its interest rate risks. As of June 30, 2008, 44 percent of the outstanding balance of all loans held and loans underlying on-balance sheet Farmer Mac I Guaranteed Securities (including 80 percent of all loans with fixed interest rates) were covered by yield maintenance provisions and other prepayment penalties. Of the Farmer Mac I fixed rate loans purchased in second quarter 2008, 9 percent had yield maintenance or another form of prepayment protection. As of June 30, 2008, none of the USDA-guaranteed portions underlying Farmer Mac II Guaranteed Securities had yield maintenance provisions; however, 18.7 percent contained prepayment penalties. Of the USDA-guaranteed portions purchased in second quarter 2008, 12.1 percent contained various forms of prepayment penalties.

Taking into consideration the prepayment provisions and the default probabilities associated with its mortgage assets, Farmer Mac uses prepayment models to project and value cash flows associated with these assets. Because borrowers’ behavior in various interest rate environments may change over time, Farmer Mac periodically evaluates the effectiveness of these models compared to actual prepayment experience and adjusts and refines the models as necessary to improve the precision of subsequent prepayment forecasts.

Cash equivalents and investment securities pose only limited interest rate risk to Farmer Mac, due to their closely matched funding. Farmer Mac’s cash equivalents mature within three months and are match-funded with discount notes having similar maturities. As of June 30, 2008, $1.5 billion of the $1.7 billion of investment securities (89 percent) were floating rate securities with rates that adjust within one year or fixed rate securities with original maturities between three months and one year. Such securities are funded with floating rate medium term notes or discount notes that closely match the rate adjustment dates of the associated investments.

The goal of interest rate risk management at Farmer Mac is to create and maintain a portfolio that generates stable earnings and value across a variety of interest rate environments. Farmer Mac’s primary strategy for managing interest rate risk is to fund asset purchases with liabilities that have similar durations and cash flows so that they will perform similarly as interest rates change. To achieve this match, Farmer Mac issues discount notes and both callable and non-callable medium-term notes across a spectrum of maturities. Farmer Mac issues callable debt to offset the prepayment risk associated with some mortgage assets. By using a blend of liabilities that includes callable debt, the interest rate sensitivities of the liabilities tend to increase or decrease as interest rates change in a manner similar to changes in the interest rate sensitivities of the assets. Farmer Mac also uses financial derivatives to alter the duration of its assets and liabilities to better match their durations, thereby reducing overall interest rate sensitivity.

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An important “stress test” of Farmer Mac’s exposure to long-term interest rate risk is the measurement of the sensitivity of its market value of equity (“MVE”) to yield curve shocks. MVE represents the present value of all future cash flows from on- and off-balance sheet assets, liabilities and financial derivatives, discounted at current interest rates and spreads. The following schedule summarizes the results of Farmer Mac’s MVE sensitivity analysis as of June 30, 2008 and December 31, 2007 to an immediate and instantaneous uniform or “parallel” shift in the yield curve. During second quarter 2008, Farmer Mac maintained a low level of interest rate sensitivity through ongoing asset and liability management activities.

	Percentage Change in MVE from Base Case
Interest Rate	June 30,	December 31,
Scenario	2008	2007

+ 300bp	-12.9%		-10.6%
+ 200bp	-7.7%		-6.3%
+ 100bp	-3.0%		-2.5%
- 100bp	0.3%		-0.1%
- 200bp	N/A*		-1.4%
- 300bp	N/A*		-3.4%

*	As of June 30, 2008, a parallel shift of -200 and -300 basis points of the U.S. Treasury yield curve produced negative interest rates for maturities of 3 months and shorter.

As of June 30, 2008, a parallel increase of 100 basis points would have decreased Farmer Mac’s net interest income (“NII”), a shorter-term measure of interest rate risk, by 2.5 percent, while a parallel decrease of 100 basis points would have increased NII by 0.1 percent. Farmer Mac also measures the sensitivity of both MVE and NII to a variety of non-parallel interest rate shocks, including flattening and steepening yield curve scenarios. As of June 30, 2008, both MVE and NII showed similar or lesser sensitivity to non-parallel shocks than to the parallel shocks. As of June 30, 2008, Farmer Mac’s effective duration gap, another standard measure of interest rate risk that measures the difference between the sensitivities of assets compared to that of liabilities, was plus 0.9 months, compared to plus 0.7 months as of December 31, 2007. Duration matching helps to maintain the correlation of cash flows and stable portfolio earnings even when interest rates are not stable. Farmer Mac believes the relative insensitivity of its MVE and NII to both parallel and non-parallel interest rate shocks, and its duration gap, indicate that Farmer Mac’s approach to managing its interest rate risk exposures is effective.

As of June 30, 2008, Farmer Mac had $3.5 billion combined notional amount of interest rate swaps with terms ranging from 1 to 15 years. Of those interest rate swaps, $1.5 billion were floating-to-fixed rate interest rate swaps, $1.8 billion were fixed-to-floating interest rate swaps and $0.2 billion were basis swaps.

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Credit Risk . Farmer Mac’s primary exposure to credit risk is the risk of loss resulting from the inability of borrowers to repay their mortgages in conjunction with a deficiency in the value of the collateral relative to the amount outstanding on the mortgage and the costs of liquidation. Farmer Mac has established underwriting, collateral valuation (appraisal) and documentation standards (including interest rate shock tests for adjustable rate mortgages with initial reset periods of five years or less) for agricultural mortgage loans to mitigate the risk of loss from borrower defaults and to provide guidance concerning the management, administration and conduct of underwriting and appraisals to all participating sellers and potential sellers in its programs.

Farmer Mac’s allowance for losses is presented in three components on its condensed consolidated balance sheets:

an “Allowance for loan losses” on loans held;

a valuation allowance on real estate owned, which is included in the balance sheet under “Real estate owned”; and

an allowance for losses on loans underlying post-1996 Act Farmer Mac I Guaranteed Securities, LTSPCs and Farmer Mac Guaranteed Securities – Rural Utilities, which is included in the balance sheet under “Reserve for losses.”

Farmer Mac’s provision for losses is presented in two components on its condensed consolidated statements of operations:

a “Provision for loan losses,” which represents losses on Farmer Mac’s loans held; and

a “Provision for losses,” which represents losses on loans underlying post-1996 Act Farmer Mac I Guaranteed Securities, LTSPCs, Farmer Mac Guaranteed Securities – Rural Utilities, and real estate owned.

Farmer Mac’s methodology for determining its allowance for losses incorporates the Corporation’s proprietary automated loan classification system. That system scores loans based on criteria such as historical repayment performance, loan seasoning, loan size and loan-to-value ratio. For the purposes of the loss allowance methodology, the loans in Farmer Mac’s portfolio of loans and loans underlying post-1996 Act Farmer Mac I Guaranteed Securities and LTSPCs have been scored and classified for each calendar quarter since first quarter 2000. The allowance methodology captures the migration of loan scores across concurrent and overlapping 3-year time horizons and calculates loss rates separately within each loan classification for (1) loans underlying LTSPCs and (2) loans held and loans underlying post-1996 Act Farmer Mac I Guaranteed Securities. The calculated loss rates are applied to the current classification distribution of Farmer Mac’s portfolio to estimate inherent losses, on the assumption that the historical credit losses and trends used to calculate loss rates will continue in the future. Management evaluates this assumption by taking into consideration factors including:

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economic conditions;

geographic and agricultural commodity/product concentrations in the portfolio;

the credit profile of the portfolio;

delinquency trends of the portfolio;

historical charge-off and recovery activities of the portfolio; and

other factors to capture current portfolio trends and characteristics that differ from historical experience.

Prior to third quarter 2007, no allowance for losses had been made for loans underlying Pre-1996 Act Farmer Mac I Guaranteed Securities, AgVantage securities or Farmer Mac II Guaranteed Securities. Pre-1996 Act Farmer Mac I Guaranteed Securities are supported by unguaranteed first loss subordinated interests, which are expected to exceed the estimated credit losses on those loans. Through June 30, 2008, Farmer Mac had charged off $0.4 million related to one loan underlying Pre-1996 Act Farmer Mac I Guaranteed Securities. The remaining $2.4 million of Pre-1996 Act Farmer Mac I Guaranteed Securities represent interests in seasoned performing loans with low loan-to-value ratios. Farmer Mac does not expect to incur any further losses on the remaining Pre-1996 Act Farmer Mac I Guaranteed Securities in the future. Each AgVantage security is a general obligation of an issuing institution approved by Farmer Mac and is collateralized by eligible mortgage loans. As of June 30, 2008, there were no probable losses inherent in Farmer Mac’s AgVantage securities due to the high credit quality of the obligors, as well as the underlying collateral. As of June 30, 2008, Farmer Mac had not experienced any credit losses on any AgVantage securities and does not expect to incur any such losses in the future. The guaranteed portions collateralizing Farmer Mac II Guaranteed Securities are guaranteed by the USDA. Each USDA guarantee is an obligation backed by the full faith and credit of the United States. As of June 30, 2008, Farmer Mac had not experienced any credit losses on any Farmer Mac II Guaranteed Securities and does not expect to incur any such losses in the future.

On May 22, 2008, Congress enacted into law the Farm Bill, which expanded Farmer Mac’s authorities to include providing a secondary market for rural electric and telephone loans made by cooperative lenders. During second quarter 2008, Farmer Mac placed its guarantee on $430.7 million of securities representing interests in rural electric cooperative loans and $900.0 million principal amount of obligations collateralized by rural electric cooperative loans previously held as mission-related investments under authority granted by the FCA. Farmer Mac evaluated these $1.3 billion of Farmer Mac Guaranteed Securities – Rural Utilities and determined that there were no probable losses inherent in the securities or the underlying rural utilities loans. Accordingly, no allowance for losses was recorded as of June 30, 2008 with respect to those securities.

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The following table summarizes the changes in the components of Farmer Mac’s allowance for losses for the three months and six months ended June 30, 2008 and 2007:


	June 30, 2008
	Allowance for Loan Losses			REO Valuation Allowance		Reserve for Losses		Total Allowance for Losses
	(in thousands)
Three Months Ended:
Beginning balance	$	1,651		$	-	$	2,197	$	3,848
Provision/(recovery) for losses		-			-		-		-
Charge-offs		(69	)		-		-		(69	)
Recoveries		10			-		-		10
Ending balance	$	1,592		$	-	$	2,197	$	3,789

Six Months Ended:
Beginning balance	$	1,690		$	-	$	2,197	$	3,887
Provision/(recovery) for losses		-			-		-		-
Charge-offs		(108	)		-		-		(108	)
Recoveries		10			-		-		10
Ending balance	$	1,592		$	-	$	2,197	$	3,789

	June 30, 2007
	Allowance for Loan Losses			REO Valuation Allowance			Reserve for Losses			Total Allowance for Losses
	(in thousands)
Three Months Ended:
Beginning balance	$	1,730		$	-		$	2,197		$	3,927
Provision/(recovery) for losses		-			100			-			100
Charge-offs		(49	)		(100	)		-			(149	)
Recoveries		-			-			-			-
Ending balance	$	1,681		$	-		$	2,197		$	3,878

Six Months Ended:
Beginning balance	$	1,945		$	-		$	2,610		$	4,555
Provision/(recovery) for losses		(215	)		100			(413	)		(528	)
Charge-offs		(49	)		(100	)		-			(149	)
Recoveries		-			-			-			-
Ending balance	$	1,681		$	-		$	2,197		$	3,878

During second quarter 2008, Farmer Mac made no provision for its allowance for losses, compared to a provision of $0.1 million in second quarter 2007. During second quarter 2008, Farmer Mac had $0.1 million of charge-offs against the allowance for losses and $10,000 of recoveries. During second quarter 2007 Farmer Mac charged off $0.1 million against the allowance for losses. There was no previously accrued or advanced interest on loans or Farmer Mac I Guaranteed Securities charged off in second quarter 2008 or second quarter 2007. As of June 30, 2008, Farmer Mac’s allowance for losses totaled $3.8 million, or 8 basis points of the outstanding principal balance of loans held and loans underlying post-1996 Act Farmer Mac I Guaranteed Securities (excluding AgVantage securities) and LTSPCs, compared to $3.9 million (8 basis points) as of December 31, 2007.

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As of June 30, 2008, Farmer Mac’s 90-day delinquencies totaled $5.2 million and represented 0.11 percent of the principal balance of all loans held and loans underlying post-1996 Act Farmer Mac I Guaranteed Securities (excluding AgVantage securities) and LTSPCs, compared to $14.8 million (0.30 percent) as of June 30, 2007. As of June 30, 2008, Farmer Mac’s non-performing assets (which include 90-day delinquencies, loans performing in bankruptcy, and real estate owned) totaled $28.2 million and represented 0.57 percent of the principal balance of all loans held and loans underlying post-1996 Act Farmer Mac I Guaranteed Securities (excluding AgVantage securities) and LTSPCs, compared to $37.2 million (0.76 percent) as of June 30, 2007. Loans that have been restructured after delinquency were insignificant and are included within the reported 90-day delinquency and non-performing asset disclosures. From quarter to quarter, Farmer Mac anticipates that 90-day delinquencies and non-performing assets will fluctuate, both in dollars and as a percentage of the outstanding portfolio, with higher levels likely at the end of the first and third quarters of each year corresponding to the semi-annual (January 1 st and July 1 st ) payment characteristics of most Farmer Mac I loans.

The following table presents historical information regarding Farmer Mac’s non-performing assets and 90-day delinquencies:

	Outstanding Post-1996 Act Farmer Mac I Loans, Guarantees (1), LTSPCs, and REO		Non- performing Assets		Percentage			Less: REO and Performing Bankruptcies		90-Day Delinquencies		Percentage
	(dollars in thousands)
As of:
June 30, 2008	$	4,937,870	$	28,230		0.57	%	$	23,060	$	5,170		0.11	%
March 31, 2008		4,933,720		31,640		0.64	%		20,666		10,974		0.22	%
December 31, 2007		5,063,164		31,924		0.63	%		21,340		10,584		0.21	%
September 30, 2007		4,891,525		37,364		0.76	%		20,341		17,023		0.35	%
June 30, 2007		4,904,592		37,225		0.76	%		22,462		14,763		0.30	%
March 31, 2007		4,905,244		50,026		1.02	%		21,685		28,341		0.58	%
December 31, 2006		4,784,983		39,232		0.82	%		19,577		19,655		0.41	%
September 30, 2006		4,621,083		44,862		0.97	%		16,425		28,437		0.62	%
June 30, 2006		4,633,841		40,083		0.87	%		19,075		21,008		0.46	%

(1) Excludes loans underlying AgVantage securities.

As of June 30, 2008, approximately $1.3 billion (27.2 percent) of Farmer Mac’s outstanding loans held and loans underlying post-1996 Act Farmer Mac I Guaranteed Securities (excluding AgVantage securities) and LTSPCs were in their peak delinquency and default years (approximately years three through five after origination), compared to $1.4 billion (28.9 percent) as of June 30, 2007.

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As of June 30, 2008, Farmer Mac individually analyzed $10.1 million of its $46.0 million of impaired assets for collateral shortfalls against updated appraised values, other updated collateral valuations or discounted values. Farmer Mac evaluated the remaining $35.9 million of impaired assets, for which updated valuations were not available, in the aggregate in consideration of their similar risk characteristics and historical statistics. All of the $10.1 million of assets analyzed individually were adequately collateralized. Accordingly, Farmer Mac did not record any specific allowances for any of its impaired assets as of June 30, 2008. Farmer Mac’s non-specific or general allowances were $3.8 million as of June 30, 2008.

As of June 30, 2008, the weighted-average original loan-to-value (“LTV”) ratio for all loans held and loans underlying post-1996 Act Farmer Mac I Guaranteed Securities (excluding AgVantage securities) and LTSPCs was 49.8 percent, and the weighted-average original LTV ratio for all post-1996 Act non-performing assets was 57.6 percent. The following table summarizes the post-1996 Act non-performing assets by original LTV ratio:

Distribution of Post-1996 Act Non-performing
Assets by Original LTV Ratio
as of June 30, 2008
(dollars in thousands)
	Post-1996 Act
	Non-performing
Original LTV Ratio	Assets		Percentage
0.00% to 40.00%	$	1,090		4	%
40.01% to 50.00%		5,464		19	%
50.01% to 60.00%		12,088		43	%
60.01% to 70.00%		8,478		30	%
70.01% to 80.00%		471		2	%
80.01% +		639		2	%
Total	$	28,230		100	%

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The following table presents outstanding loans held and loans underlying post-1996 Act Farmer Mac I Guaranteed Securities (excluding AgVantage securities) and LTSPCs and post-1996 Act non-performing assets as of June 30, 2008 by year of origination, geographic region and commodity/collateral type:

Farmer Mac I Post-1996 Act Non-performing Assets

	Distribution of Outstanding Loans, Guarantees and LTSPCs			Outstanding Loans, Guarantees and LTSPCs (1)		Post-1996 Act Non- performing Assets (2)		Non- performing Asset Rate
	(dollars in thousands)
By year of origination:
Before 1997		10	%	$	499,542	$	5,751		1.15	%
1997		4	%		198,528		3,025		1.52	%
1998		7	%		327,841		6,719		2.05	%
1999		8	%		378,741		4,545		1.20	%
2000		4	%		196,005		3,257		1.66	%
2001		7	%		362,651		3,034		0.84	%
2002		9	%		463,923		582		0.13	%
2003		10	%		481,394		937		0.19	%
2004		7	%		346,245		149		0.04	%
2005		11	%		520,286		81		0.02	%
2006		11	%		566,899		150		0.03	%
2007		9	%		437,186		-		0.00	%
2008		3	%		158,629		-		0.00	%

Total		100	%	$	4,937,870	$	28,230		0.57	%

By geographic region (3):
Northwest		16	%	$	806,539	$	19,064		2.36	%
Southwest		39	%		1,911,623		2,729		0.14	%
Mid-North		22	%		1,097,840		1,325		0.12	%
Mid-South		11	%		533,148		2,297		0.43	%
Northeast		8	%		398,284		1,047		0.26	%
Southeast		4	%		190,436		1,768		0.93	%

Total		100	%	$	4,937,870	$	28,230		0.57	%

By commodity/collateral type:
Crops		41	%	$	2,014,778	$	13,170		0.65	%
Permanent plantings		19	%		949,731		9,757		1.03	%
Livestock		26	%		1,290,335		3,516		0.27	%
Part-time farm/rural housing		7	%		352,599		1,787		0.51	%
Ag storage and processing (including ethanol facilities)		6	%		292,575		-		0.00	%
Other		1	%		37,852		-		0.00	%

Total		100	%	$	4,937,870	$	28,230		0.57	%

(1)	Excludes loans underlying AgVantage securities.

(2)	Includes loans 90 days or more past due, in foreclosure, restructured after delinquency, in bankruptcy (including loans performing under either their original loan terms or a court-approved bankruptcy plan), and real estate owned.

(3)	Geographic regions - Northwest (AK, ID, MT, ND, NE, OR, SD, WA, WY); Southwest (AZ, CA, CO, HI, NM, NV, UT); Mid-North (IA, IL, IN, MI, MN, MO, WI); Mid-South (KS, OK, TX); Northeast (CT, DE, KY, MA, MD, ME, NC, NH, NJ, NY, OH, PA, RI, TN, VA, VT, WV); and Southeast (AL, AR, FL, GA, LA, MS, SC).

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The following table presents Farmer Mac’s cumulative net credit losses relative to the cumulative original balance for all loans purchased and loans underlying post-1996 Act Farmer Mac I Guaranteed Securities (excluding AgVantage securities) and LTSPCs as of June 30, 2008, by year of origination, geographic region and commodity/collateral type.

Farmer Mac I Post-1996 Act Credit Losses Relative to all
Cumulative Original Loans, Guarantees and LTSPCs
	Cumulative Original Loans, Guarantees and LTSPCs (1)			Cumulative Net Credit Losses		Cumulative Loss Rate
	(dollars in thousands)
By year of origination:
Before 1997	$	3,436,335		$	1,593		0.05	%
1997		758,156			2,493		0.33	%
1998		1,134,776			3,885		0.34	%
1999		1,150,600			1,291		0.11	%
2000		742,578			2,285		0.31	%
2001		1,084,397			701		0.06	%
2002		1,091,869			-		0.00	%
2003		893,967			-		0.00	%
2004		613,729			-		0.00	%
2005		729,989			115		0.02	%
2006		694,167			-		0.00	%
2007		511,870			-		0.00	%
2008		162,641			-		0.00	%

Total	$	13,005,074		$	12,363		0.10	%

By geographic region (2):
Northwest	$	2,411,216		$	6,891		0.29	%
Southwest		5,234,013			4,784		0.09	%
Mid-North		2,214,497			57		0.00	%
Mid-South		1,090,501			336		0.03	%
Northeast		1,142,452			66		0.01	%
Southeast		912,395			229		0.03	%

Total	$	13,005,074		$	12,363		0.10	%

By commodity/collateral type:
Crops	$	5,275,868		$	15		0.00	%
Permanent plantings		2,919,368			9,349		0.32	%
Livestock		3,330,225			2,677		0.08	%
Part-time farm/rural housing		927,165			322		0.03	%
Ag storage and processing (including ethanol facilities)		413,582	(3)		-		0.00	%
Other		138,866			-		0.00	%

Total	$	13,005,074		$	12,363		0.10	%

(1)	Excludes loans underlying AgVantage securities.

(2)	Geographic regions - Northwest (AK, ID, MT, ND, NE, OR, SD, WA, WY); Southwest (AZ, CA, CO, HI, NM, NV, UT); Mid-North (IA, IL, IN, MI, MN, MO, WI); Mid-South (KS, OK, TX); Northeast (CT, DE, KY, MA, MD, ME, NC, NH, NJ, NY, OH, PA, RI, TN, VA, VT, WV); and Southeast (AL, AR, FL, GA, LA, MS, SC).

(3)	Several of the loans underlying agricultural storage and processing LTSPCs are for facilities under construction, and as of June 30, 2008, approximately$52.4 million of the loans were not yet disbursed by the lender.

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Liquidity and Capital Resources

Farmer Mac has sufficient liquidity and capital resources to support its operations for the next 12 months and for the foreseeable future and, in accordance with Farmer Mac’s commitment to FCA, has a liquidity contingency plan to manage unanticipated disruptions in its access to the capital markets. Consistent with FCA regulations, Farmer Mac maintains a minimum of 60 days of liquidity and a target of 90 days of liquidity. During second quarter 2008, Farmer Mac maintained an average of 78 days of liquidity.

Debt Issuance . Section 8.6(e) of Farmer Mac’s statutory charter (12 U.S.C. § 2279aa-6(e)) authorizes Farmer Mac to issue debt obligations to purchase eligible mortgage loans and Farmer Mac Guaranteed Securities and to maintain reasonable available cash and cash equivalents for business operations, including adequate liquidity. Farmer Mac funds its purchases of program (loans and Farmer Mac Guaranteed Securities) and non-program assets primarily by issuing debt obligations of various maturities in the public capital markets. Debt obligations issued by Farmer Mac include discount notes and fixed and floating rate medium-term notes, including callable notes. Farmer Mac also issues discount notes and medium-term notes to obtain funds to finance its investments, transaction costs, guarantee payments and LTSPC purchase obligations.

The interest and principal on Farmer Mac’s debt are not guaranteed by and do not constitute debts or obligations of FCA or the United States or any agency or instrumentality of the United States other than Farmer Mac. Farmer Mac is an institution of the Farm Credit System (“FCS”), but is not liable for any debt or obligation of any other institution of the FCS. Likewise, neither the FCS nor any other individual institution of the FCS is liable for any debt or obligation of Farmer Mac. Income to the purchaser of a Farmer Mac discount note or medium-term note is not exempt under federal law from federal, state or local taxation. The Corporation’s discount notes and medium-term notes are not currently rated by a nationally recognized statistical rating organization.

Farmer Mac’s board of directors has authorized the issuance of up to $7.0 billion of discount notes and medium-term notes (of which $5.7 billion was outstanding as of June 30, 2008), subject to periodic review of the adequacy of that level relative to Farmer Mac’s borrowing requirements. Farmer Mac invests the proceeds of such issuances in loans, Farmer Mac Guaranteed Securities, and non-program investment assets in accordance with policies established by its board of directors.

Liquidity . The funding and liquidity needs of Farmer Mac’s business programs are driven by the purchase and retention of eligible loans and Farmer Mac Guaranteed Securities; the maturities of Farmer Mac’s discount notes and medium-term notes; and payment of principal and interest on Farmer Mac Guaranteed Securities. Farmer Mac’s primary sources of funds to meet these needs are:

principal and interest payments and ongoing guarantee and commitment fees received on loans, Farmer Mac Guaranteed Securities, and LTSPCs;

principal and interest payments received from investment securities; and

the issuance of new discount notes and medium-term notes.

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As a result of Farmer Mac’s regular issuance of discount notes and medium-term notes and its status as a federally-chartered instrumentality of the United States, Farmer Mac has had ready access to the capital markets at favorable rates. Farmer Mac’s access to capital markets funding has remained strong despite recent market volatility. Farmer Mac has also used floating-to-fixed interest rate swaps, combined with discount note issuances, as a source of fixed-rate funding. While the swap market may provide favorable fixed rates, swap transactions expose Farmer Mac to the risk of future widening of its own issuance spreads versus corresponding LIBOR rates. If the spreads on the Farmer Mac discount notes were to increase relative to LIBOR, Farmer Mac would be exposed to a commensurate reduction on its net interest yield on the notional amount of its floating-to-fixed interest rate swaps and other LIBOR-based floating rate assets.

Farmer Mac maintains cash and liquidity investments in cash equivalents (including commercial paper and other short-term money market instruments) and liquid investment securities that can be drawn upon for liquidity needs. As of June 30, 2008, Farmer Mac’s portfolio of non-program investments consisted of: $712.4 million of cash and cash equivalents; $686.1 million of securities issued or guaranteed by GSEs or the U.S. Government and its agencies; $9.9 million of commercial paper; $142.1 million of commercial bank certificates of deposit; $307.3 million of asset-backed securities (principally backed by Government guaranteed student loans); and $537.1 million of corporate debt securities, including financial institutions. Farmer Mac did not hold any investments in securities backed by sub-prime or Alt-A residential or commercial mortgages or home-equity loans.

Farmer Mac’s asset-backed investment securities include callable, AAA-rated auction-rate certificates (“ARCs”), the interest rates on which are reset through an auction process, most commonly at intervals of 28 days, or at formula-based floating rates in the event of a failed auction. All ARCs held by Farmer Mac are collateralized entirely by pools of Federal Family Education Loan Program (“FFELP”) guaranteed student loans that are backed by the full faith and credit of the United States. Farmer Mac held $209.4 million of ARCs as of June 30, 2008 and $131.5 million as of December 31, 2007. From mid-February through mid-August 2008, there were widespread failures of the auction mechanism designed to provide regular liquidity to these types of securities. Consequently, Farmer Mac has not sold any of its ARCs into the auctions since that time and there may be no efficient auction mechanism for selling these securities in the near term. Farmer Mac continues to believe that the credit quality of these securities is high, based on that guarantee and the securities’ continued AAA ratings. To date, Farmer Mac has received all interest due on ARCs it holds and expects to continue to do so. Farmer Mac does not believe that the auction failures will affect the Corporation’s liquidity or its ability to fund its operations or make dividend payments. All ARCs held by Farmer Mac are callable by the issuers at par at any time and Farmer Mac believes it is likely they will be called or repurchased during the next two years. Due to the absence of an active auction market or other market trading in ARCs, during first quarter 2008 Farmer Mac transferred all of its ARCs from Level 2 to Level 3 and recorded the ARCs as of March 31, 2008 at fair values of approximately 99 percent of par and par. The discounted values reflect uncertainty regarding the ability to obtain par in the absence of any active market trading. On April 22, 2008, Farmer Mac received a par tender offer for $20.0 million of its ARC holdings. Farmer Mac tendered those bonds and received par upon settlement on May 21, 2008. As of June 30, 2008, Farmer Mac’s remaining ARC holdings were recorded at fair values of approximately 99 percent of par.

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Capital . During first quarter 2007, Farmer Mac announced the establishment of a program to repurchase up to one million shares of the Corporation’s outstanding Class C Non-Voting Common Stock. During first quarter 2008, the aggregate number of shares repurchased by Farmer Mac under the 2007 program reached the maximum number of authorized shares, thereby terminating that program according to its terms.

Other Matters

Since fourth quarter 2004, Farmer Mac has paid quarterly dividends of $0.10 per share on each of the Corporation’s three classes of common stock – Class A Voting Common Stock, Class B Voting Common Stock, and Class C Non-Voting Common Stock. Each dividend was paid on the last business day of each quarter to holders of record as of a fixed day at least two weeks prior to the dividend payment date. On August 7, 2008, Farmer Mac’s board of directors declared a quarterly dividend of $0.10 per share on the Corporation’s three classes of common stock payable on September 30, 2008 to holders of record as of September 15, 2008. Farmer Mac expects to continue to pay comparable quarterly cash dividends for the foreseeable future, subject to the outlook and indicated capital needs of the Corporation and the determination of the board of directors. Farmer Mac’s ability to declare and pay dividends could be restricted if it were to fail to comply with the applicable regulatory capital requirements. See “Business—Government Regulation of Farmer Mac—Regulation—Capital Standards—Enforcement levels” in Farmer Mac’s Annual Report on Form 10-K for the fiscal year ended December 31, 2007, as filed with the SEC on March 17, 2008. Farmer Mac’s ability to pay dividends on its common stock is also subject to the payment of dividends on its outstanding preferred stock.

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Supplemental Information

The following tables present quarterly and annual information regarding loan purchases, guarantees and LTSPCs and outstanding guarantees and LTSPCs.

Farmer Mac Purchases, Guarantees and LTSPCs
	Farmer Mac I						Farmer Mac
	Loans and Guaranteed Securities		LTSPCs (1)		Farmer Mac II		Guaranteed Securities - Rural Utilities			Total
	(in thousands)
For the quarter ended:

June 30, 2008	$	53,838	$	116,472	$	79,700	$	1,330,676	(2)	$	1,580,686
March 31, 2008		37,468		53,281		53,114		-			143,863
December 31, 2007		40,664		265,135		48,294		-			354,093
September 30, 2007		25,545		156,930		49,049		-			231,524
June 30, 2007		1,039,856		152,402		59,149		-			1,251,407
March 31, 2007		21,644		396,322		53,548		-			471,514
December 31, 2006		24,046		318,064		54,136		-			396,246
September 30, 2006		1,018,253		177,885		74,217		-			1,270,355
June 30, 2006		26,114		570,595		61,204		-			657,913

For the year ended:
December 31, 2007		1,127,709		970,789		210,040		-			2,308,538
December 31, 2006		1,598,673		1,139,699		234,684		-			2,973,056

(1)	During 2005, Farmer Mac began issuing LTSPCs for the construction of agricultural storage and processing facilities. As of June 30, 2008, approximately $52.4 million of the loans underlying those $377.8 million of LTSPCs were not yet disbursed by the lender.

(2)

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Outstanding Balance of Farmer Mac Loans,
Guarantees and LTSPCs
	Farmer Mac I
	Post-1996 Act								Farmer Mac
	Loans and Guaranteed Securities		LTSPCs		Pre-1996 Act		Farmer Mac II		Guaranteed Securities - Rural Utilities		Total
	(in thousands)
As of:
June 30, 2008	$	5,471,897	$	1,997,172	$	2,406	$	960,278	$	1,330,676	$	9,762,429
March 31, 2008		5,519,539		1,943,181		2,406		959,444		-		8,424,570
December 31, 2007		5,645,023		1,948,941		3,174		946,617		-		8,543,755
September 30, 2007		5,691,797		1,724,328		3,174		943,183		-		8,362,482
June 30, 2007		5,783,879		1,644,413		3,611		942,443		-		8,374,346
March 31, 2007		4,508,595		1,920,848		3,748		932,056		-		7,365,247
December 31, 2006		4,338,698		1,969,734		5,057		925,799		-		7,239,288
September 30, 2006		4,267,309		1,884,223		5,802		900,835		-		7,058,169
June 30, 2006		3,014,614		2,149,677		9,922		863,778		-		6,037,991

The Loans and Guaranteed Securities and LTSPCs amounts in the table above reflect the following conversions of existing LTSPCs to Farmer Mac I Guaranteed Securities at the request of program participants.

Conversions of LTSPCs to
Farmer Mac I Guaranteed Securities
(in thousands)

During the quarter ended:
June 30, 2008	$	-
March 31, 2008		-
December 31, 2007		-
September 30, 2007		17,189
June 30, 2007		360,777
March 31, 2007		303,766
December 31, 2006		143,582
September 30, 2006		341,164
June 30, 2006		550,114

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Outstanding Balance of Loans Held and Loans Underlying
On-Balance Sheet Farmer Mac Guaranteed Securities
	Fixed Rate		5-to-10-Year ARMs & Resets		1-Month-to- 3 Year ARMs		Total Held in Portfolio
	(in thousands)
As of:
June 30, 2008	$	1,974,048	$	772,859	$	739,642	$	3,486,549
March 31, 2008		963,336		748,584		342,496		2,054,416
December 31, 2007		962,320		750,472		352,250		2,065,042
September 30, 2007		932,134		735,704		366,573		2,034,411
June 30, 2007		914,890		752,991		399,147		2,067,028
March 31, 2007		899,628		743,891		417,722		2,061,241
December 31, 2006		891,429		761,754		452,656		2,105,839
September 30, 2006		863,000		744,903		459,604		2,067,507
June 30, 2006		885,875		749,289		441,063		2,076,227

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Item 3.

Quantitative and Qualitative Disclosures About Market Risk

Farmer Mac is exposed to market risk attributable to changes in interest rates. Farmer Mac manages this market risk by entering into various financial transactions, including financial derivatives, and by monitoring its exposure to changes in interest rates. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Risk Management—Interest Rate Risk” for more information about Farmer Mac’s exposure to interest rate risk and strategies to manage such risk. For information regarding Farmer Mac’s use of and accounting policies for financial derivatives, see Note 1(d) to the interim unaudited condensed consolidated financial statements contained in this report. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources” for further information regarding Farmer Mac’s debt issuance and liquidity risks.

Item 4.

Controls and Procedures

(a) Management’s Evaluation of Disclosure Controls and Procedures . Farmer Mac maintains disclosure controls and procedures designed to ensure that information required to be disclosed in the Corporation’s periodic filings under the Securities Exchange Act of 1934 (the “Exchange Act”), including this report, is recorded, processed, summarized and reported on a timely basis. These disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed under the Exchange Act is accumulated and communicated to the Corporation’s management on a timely basis to allow decisions regarding required disclosure. Management, including Farmer Mac’s Chief Executive Officer (the “CEO”) and Chief Financial Officer (the “CFO”), has evaluated the effectiveness of the design and operation of the Corporation’s disclosure controls and procedures (as defined under Rules 13a-15(e) and 15d-15(e) of the Exchange Act) as of June 30, 2008.

The Corporation carried out the evaluation required by paragraph (b) of Exchange Act Rules 13a-15 and 15d-5, under the supervision and with the participation of management, including the CEO and CFO, of the effectiveness of Farmer Mac’s disclosure controls and procedures. Based upon this evaluation, the CEO and CFO concluded that as of June 30, 2008, the Corporation’s disclosure controls and procedures were not effective to provide reasonable assurance that the information required to be disclosed under Item 5.02(e) of Form 8-K regarding the compensatory arrangements of certain officers was recorded, processed, summarized and reported accurately. The Corporation believes that the deficiency has been remediated by requiring the Chair of the Compensation Committee to review and approve in writing all material information regarding compensatory arrangements of certain officers that the Corporation is required to disclose under Item 5.02(e) of Form 8-K.

(b) Changes in Internal Control Over Financial Reporting . There were no changes in Farmer Mac’s internal control over financial reporting during the quarter ended June 30, 2008 that has materially affected, or is reasonably likely to materially affect, Farmer Mac’s internal control over financial reporting.

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PART II - OTHER INFORMATION

Item 1.

Legal Proceedings

Farmer Mac is not a party to any material pending legal proceedings.

Item 1A.

Risk Factors

There were no material changes from the risk factors previously disclosed in Farmer Mac’s Annual Report on Form 10-K for the year ended December 31, 2007, as filed with the SEC on March 17, 2008.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

(a)

Farmer Mac is a federally chartered instrumentality of the United States and its Common Stock is exempt from registration pursuant to Section 3(a)(2) of the Securities Act of 1933.

On April 10, 2008, pursuant to Farmer Mac’s policy that permits directors of Farmer Mac to elect to receive shares of Class C Non-Voting Common Stock in lieu of their annual cash retainers, Farmer Mac issued an aggregate of 817 shares of its Class C Non-Voting Common Stock, at an issue price of $26.10 per share, to the seven directors who elected to receive such stock in lieu of their cash retainers.

On June 4, 2008, Farmer Mac granted options to purchase 3,000 shares of Class C Non-Voting Common Stock, at an exercise price of $27.70 per share, under its 1997 Incentive Plan to an employee in connection with the commencement of employment. On June 5, 2008, Farmer Mac granted an aggregate amount of 336,770 stock appreciation rights under its 2008 Omnibus Incentive Plan, at a grant price of $28.94 per share, to the fifteen directors and six officers of the Corporation.

(b)

Not applicable.

(c)

None.

Item 3.

Defaults Upon Senior Securities

(a)

None.

(b)

None.

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Item 4.

Submission of Matters to a Vote of Security Holders

(a)

Farmer Mac’s Annual Meeting of Stockholders was held on June 5, 2008.

(b)

In addition to the ten directors elected at the Annual Meeting of Stockholders on June 5, 2008 as described in paragraph (c)(1) below, the following directors appointed by the President of the United States continue to serve as directors of Farmer Mac:

Fred L. Dailey (Chairman)

Lowell L. Junkins (Vice Chairman)

Julia Bartling

Grace T. Daniel

Glen O. Klippenstein

Election of Directors (cumulative voting):

Class A Stockholders

Name of Nominee		Number of Votes For
James R. Engebretsen*		620,800
Clark B. Maxwell*		620,800
Dennis A. Everson		524,564
Dennis L. Brack		431,531
Mitchell A. Johnson		428,030
Timothy F. Kenny		404,097
Charles E. Kruse		403,597

Class B Stockholders

Name of Nominee		Number of Votes For
Paul A. DeBriyn		506,369
Brian J. O’Keane*		504,052
Ernest M. Hodges		503,681
John Dan Raines		423,270
Michael A. Gerber		323,466
Ralph “Buddy” Cortese		194,665

* Not nominated by the Board nor identified in the Corporation’s Proxy Statement.

Farmer Mac’s federal charter provides that five directors are elected by a plurality of the votes of the holders of Class A Voting Common Stock and five directors are elected by a plurality of the votes of the holders of Class B Voting Common Stock. Based on the results set forth above, the following individuals were elected to serve as directors of Farmer Mac for one-year terms beginning June 5, 2008: Dennis L. Brack, Paul A. DeBriyn, James R. Engebretsen, Dennis A. Everson, Michael A. Gerber, Ernest M. Hodges, Mitchell A. Johnson, Clark B. Maxwell, Brian J. O’Keane, and John Dan Raines.

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(2)

Selection of Independent Registered Public Accounting Firm (Deloitte & Touche LLP):

Class A Stockholders and Class B Stockholders (combined)

		Number of Votes
For		1,249,585
Against		1,550
Abstain		1,100
Broker Non-Vote		0

(3)

Approval of 2008 Omnibus Incentive Compensation Plan:

Class A Stockholders and Class B Stockholders (combined)

		Number of Votes
For		1,087,027
Against		110,463
Abstain		2,900
Broker Non-Vote		51,845

(d)

Not applicable.

Item 5.

Other Information

(a)

None.

(b)

None.

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Item 6.

Exhibits

**	3.1	-	Title VIII of the Farm Credit Act of 1971, as most recently amended by the Food, Conservation and Energy Act of 2008.

*	3.2	-	Amended and Restated By-Laws of the Registrant (Form 10-K filed March 17, 2008).

*	4.1	-	Specimen Certificate for Farmer Mac Class A Voting Common Stock (Form 10-Q filed May 15, 2003).

*	4.2	-	Specimen Certificate for Farmer Mac Class B Voting Common Stock (Form 10-Q filed May 15, 2003).

*	4.3	-	Specimen Certificate for Farmer Mac Class C Non-Voting Common Stock (Form 10-Q filed May 15, 2003).

*	4.4	-	Certificate of Designation of Terms and Conditions of Farmer Mac 6.40% Cumulative Preferred Stock, Series A (Form 10-Q filed May 15, 2003).

*	4.5.1	-	Master Terms Agreement for Farmer Mac’s Universal Debt Facility dated as of July 28, 2005 (Previously filed as Exhibit 4.3 to Form 8-A filed August 4, 2005).

*	4.5.2	-	Supplemental Agreement for 4.25% Fixed Rate Global Notes Due July 29, 2008 (Previously filed as Exhibit 4.4 to Form 8-A filed August 4, 2005).

†*	10.1	-	Amended and Restated 1997 Incentive Plan (Form 10-Q filed November 14, 2003).

†*	10.1.1	-	Form of stock option award agreement under 1997 Incentive Plan (Form 10-K filed March 16, 2005).

†**	10.1.2	-	2008 Omnibus Incentive Plan.

†*	10.1.3	-	Form of SAR Agreement under the 2008 Omnibus Incentive Plan (Previously filed as Exhibit 10 to Form 8-K filed June 11, 2008).

†*	10.2	-	Compiled Amended and Restated Employment Agreement dated June 5, 2008 between Henry D. Edelman and the Registrant (Form 8-K filed August 1, 2008).

_________________

*	Incorporated by reference to the indicated prior filing.

**	Filed with this report.

†	Management contract or compensatory plan.

#	Portions of this exhibit have been omitted pursuant to a request for confidential treatment.

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†**	10.3	-	Compiled Amended and Restated Employment Agreement dated June 5, 2008 between Nancy E. Corsiglia and the Registrant.

†**	10.4	-	Compiled Amended and Restated Employment Contract dated as of June 5, 2008 between Tom D. Stenson and the Registrant.

†**	10.5	-	Compiled Amended and Restated Employment Contract dated June 5, 2008 between Timothy L. Buzby and the Registrant.

†**	10.6	-	Compiled Amended and Restated Employment Contract dated June 5, 2008 between Mary K. Waters and the Registrant.

*	10.7	-	Farmer Mac I Seller/Servicer Agreement dated as of August 7, 1996 between Zions First National Bank and the Registrant (Form 10-Q filed November 14, 2002).

*	10.8	-	Medium-Term Notes U.S. Selling Agency Agreement dated as of October 1, 1998 between Zions First National Bank and the Registrant (Form 10-Q filed November 14, 2002).

*	10.9	-	Discount Note Dealer Agreement dated as of September 18, 1996 between Zions First National Bank and the Registrant (Form 10-Q filed November 14, 2002).

*#	10.10	-	ISDA Master Agreement and Credit Support Annex dated as of June 26, 1997 between Zions First National Bank and the Registrant (Form 10-Q filed November 14, 2002).

*#	10.11	-	Amended and Restated Master Central Servicing Agreement dated as of May 1, 2004 between Zions First National Bank and the Registrant (Previously filed as Exhibit 10.11.2 to Form 10-Q filed August 9, 2004).

*#	10.12	-	Loan Closing File Review Agreement dated as of August 2, 2005 between Zions First National Bank and the Registrant (Form 10-Q filed November 9, 2005).

*#	10.13	-	Long Term Standby Commitment to Purchase dated as of August 1, 1998 between AgFirst Farm Credit Bank and the Registrant (Form 10-Q filed November 14, 2002).

*#	10.13.1	-	Amendment No. 1 dated as of January 1, 2000 to Long Term Standby Commitment to Purchase dated as of August 1, 1998 between AgFirst Farm Credit Bank and the Registrant (Form 10-Q filed November 14, 2002).

_________________

*	Incorporated by reference to the indicated prior filing.

**	Filed with this report.

†	Management contract or compensatory plan.

#	Portions of this exhibit have been omitted pursuant to a request for confidential treatment.

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*	10.13.2	-	Amendment No. 2 dated as of September 1, 2002 to Long Term Standby Commitment to Purchase dated as of August 1, 1998, as amended by Amendment No. 1 dated as of January 1, 2000, between AgFirst Farm Credit Bank and the Registrant (Form 10-Q filed November 14, 2002).

*	10.14	-	Lease Agreement, dated June 28, 2001 between EOP – Two Lafayette, L.L.C. and the Registrant (Previously filed as Exhibit 10.10 to Form 10-K filed March 27, 2002).

*#	10.15	-	Long Term Standby Commitment to Purchase dated as of August 1, 2007 between Farm Credit Bank of Texas and the Registrant (Previously filed as Exhibit 10.20 to Form 10-Q filed November 8, 2007).

*#	10.16	-	Long Term Standby Commitment to Purchase dated as of June 1, 2003 between Farm Credit Bank of Texas and the Registrant (Form 10-Q filed November 9, 2004).

*#	10.16.1	-	Amendment No. 1 dated as of December 8, 2006 to Long Term Standby Commitment to Purchase dated as of June 1, 2003 between Farm Credit Bank of Texas and the Registrant (Form 10-K filed March 15, 2007).

*#	10.17	-	Central Servicer Delinquent Loan Servicing Transfer Agreement dated as of July 1, 2004 between AgFirst Farm Credit Bank and the Registrant (Form 10-Q filed November 9, 2004).

†*	10.18	-	Form of Indemnification Agreement for Directors (Previously filed as Exhibit 10.1 to Form 8-K filed April 9, 2008).

†*	10.19	-	Description of compensation agreement between the Registrant and its directors (Form 10-Q filed August 9, 2007).

	21	-	Farmer Mac Mortgage Securities Corporation, a Delaware corporation.

**	31.1	-	Certification of Chief Executive Officer relating to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2008, pursuant to Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

**	31.2	-	Certification of Chief Financial Officer relating to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2008, pursuant to Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

_________________

*	Incorporated by reference to the indicated prior filing.

**	Filed with this report.

†	Management contract or compensatory plan.

#	Portions of this exhibit have been omitted pursuant to a request for confidential treatment.

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Certification of Chief Executive Officer and Chief Financial Officer relating to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2008, pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

_________________

*	Incorporated by reference to the indicated prior filing.

**	Filed with this report.

†	Management contract or compensatory plan.

#	Portions of this exhibit have been omitted pursuant to a request for confidential treatment.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

FEDERAL AGRICULTURAL MORTGAGE CORPORATION

August 11, 2008

	By:	/s/ Henry D. Edelman
		Henry D. Edelman
		President and Chief Executive Officer
		(Principal Executive Officer)

		/s/ Nancy E. Corsiglia
		Nancy E. Corsiglia
		Executive Vice President and Chief Financial Officer
		(Principal Financial Officer)

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Exhibit 3.1

Title VIII of the Farm Credit Act of 1971, as amended
12 U.S.C. 2279aa et seq.	As of May 22, 2008

AGRICULTURAL MORTGAGE SECONDARY MARKET

Subtitle A — Establishment and Activities of Federal Agricultural Mortgage Corporation

SEC. 8.0. DEFINITIONS.

For purposes of this title:

(1) AGRICULTURAL REAL ESTATE. — The term "agricultural real estate" means —

(A) a parcel or parcels of land, or a building or structure affixed to the parcel or parcels, that —

(i) is used for the production of one or more agricultural commodities or products: and

(ii) consists of a minimum acreage or is used in producing minimum annual receipts, as determined by the Corporation; or

(B) principal residence that is a single family, moderate-priced residential dwelling located in a rural area, excluding —

(i) any community having a population in excess of 2,500 inhabitants; and

(ii) any dwelling, excluding the land to which the dwelling is affixed, with a value exceeding $100,000 (as adjusted for inflation).

(2) BOARD. — The term "Board" means —

(A) the interim board of directors established in section 8.2(a); and

(B) the permanent board of directors established in section 8.2(b); as the case may be.

(3) CERTIFIED FACILITY. — The term "certified facility" means —

(A) an agricultural mortgage marketing facility that is certified under section 8.5; or

(B) the Corporation and any affiliate thereof.

(4) CORPORATION. — The term "Corporation" means the Federal Agricultural Mortgage Corporation established in section 8.1.

(5) GUARANTEE. — The term "guarantee" means the guarantee of timely payment of the principal and interest on securities representing interests in, or obligations backed by, pools of qualified loans, in accordance with this title.

(6) INTERIM BOARD. — The term "interim board" means the interim board of directors established in section 8.2(a).

(7) ORIGINATOR. — The term "originator" means any Farm Credit System institution, bank, insurance company, business and industrial development company, savings and loan association, association of agricultural producers, agricultural cooperative, commercial finance company, trust company, credit union, or other entity that originates and services agricultural mortgage loans.

(8) PERMANENT BOARD. — The term "permanent board" means the permanent board of directors established in section 8.2(b).

(9) QUALIFIED LOAN. — The term "qualified loan" means an obligation —

(A) (i) that is secured by a fee-simple or leasehold mortgage with status as a first lien on agricultural real estate located in the United States that is not subject to any legal or equitable claims deriving from a preceding fee-simple or leasehold mortgage;

(ii) of —

(I) a citizen or national of the United States or an alien lawfully admitted for permanent residence in the United States; or

(II) a private corporation or partnership whose members, stockholders, or partners holding a majority interest in the corporation or partnership are individuals described in subclause (I); and

(iii) of a person, corporation, or partnership that has training or farming experience that, under criteria established by the Corporation, is sufficient to ensure a reasonable likelihood that the loan will be repaid according to its terms;

(B) that is the portion of a loan guaranteed by the Secretary of Agriculture pursuant to the Consolidated Farm and Rural Development Act (7 U.S.C. 1921 et seq.), except that —

(i) subsections (b) through (d) of section 8.6, and sections 8.8 and 8.9, shall not apply to the portion of a loan guaranteed by the Secretary or to an obligation, pool, or security representing an interest in or obligation backed by a pool of obligations relating to the portion of a loan guaranteed by the Secretary; and

(ii) the portion of a loan guaranteed by the Secretary shall be considered to meet all standards for qualified loans for all purposes under this Act; or

(C) that is a loan, or an interest in a loan, for an electric or telephone facility by a cooperative lender to a borrower that has received, or is eligible to receive, a loan under the Rural Electrification Act of 1936 (7 U.S.C. 901 et seq.).

(10) STATE. — The term "State" has the meaning given such term in section 5.51.

SEC. 8.1. FEDERAL AGRICULTURAL MORTGAGE CORPORATION. —

(a) ESTABLISHMENT. —

(1) IN GENERAL. — There is hereby established a corporation to be known as the Federal Agricultural Mortgage Corporation, which shall be a federally chartered instrumentality of the United States.

(2) INSTITUTION WITHIN FARM CREDIT SYSTEM. — The Corporation shall be an institution of the Farm Credit System.

(3) LIABILITY. —

(A) CORPORATION. — The Corporation shall not be liable for any debt or obligation of any other institution of the Farm Credit System.

(B) SYSTEM INSTITUTIONS. — The Farm Credit System and System institutions (other than the Corporation) shall not be liable for any debt or obligation of the Corporation.

(b) DUTIES. — The Corporation shall —

(1) in consultation with originators, develop uniform underwriting, security appraisal, and repayment standards for qualified loans;

(2) determine the eligibility of agricultural mortgage marketing facilities to contract with the Corporation for the provision of guarantees for specific mortgage pools;

(3) provide guarantees for the timely repayment of principal and interest on securities representing interests in, or obligations backed by, pools of qualified loans ; and

(4) purchase qualified loans and issue securities representing interests in, or obligations backed by, the qualified loans, guaranteed for the timely repayment of principal and interest.

SEC. 8. 2 . BOARD OF DIRECTORS. —

(a) INTERIM BOARD. —

(1) NUMBER AND APPOINTMENT. — Until the permanent board of directors established in subsection (b) of this section first meets with a quorum of its members present, the Corporation shall be under the management of an interim board of directors composed of 9 members appointed by the President within 90 days after the date of the enactment of this title as follows:

(A) 3 members appointed from among persons who are representatives of banks, other financial institutions or entities, and insurance companies.

(B) 3 members appointed from among persons who are representatives of the Farm Credit System institutions.

(C) 2 members appointed from among persons who are farmers or ranchers who are not serving, and have not served, as directors or officers of any financial institution or entity, of which not more than 1 may be a stockholder of any Farm Credit System institution.

(D) 1 member appointed from among persons who represent the interests of the general public and are not serving, and have not served, as directors or officers of any financial institution or entity.

(2) POLITICAL AFFILIATION. — Not more than 5 members of the interim board shall be of the same political party.

(3) VACANCY. — A vacancy in the interim board shall be filled in the manner in which the original appointment was made.

(4) CONTINUATION OF MEMBERSHIP. — If —

(A) any member of the interim board who was appointed to such board from among persons who are representatives of banks, other financial institutions or entities, insurance companies, or Farm Credit System institutions ceases to be such a representative: or

(B) any member who was appointed from among persons who are not or have not been directors or officers of any financial institution or entity becomes a director or an officer of any financial institution or entity;

such member may continue as a member for not longer than the 45-day period beginning on the date such member ceases to be such a representative or becomes such a director or officer, as the case may be.

(5) TERMS. — The members of the interim board shall be appointed for the life of such board.

(6) QUORUM. — 5 members of the interim board shall constitute a quorum.

(7) CHAIRPERSON. — The President shall designate 1 of the members of the interim board as the chairperson of the interim board.

(8) MEETINGS. — The interim board shall meet at the call of the chairperson or a majority of its members.

(9) VOTING COMMON STOCK. —

(A) INITIAL OFFERING. — Upon the appointment of sufficient members of the interim board to convene a meeting with a quorum present, the interim board shall arrange for an initial offering of common stock and shall take whatever other actions are necessary to proceed with the operations of the Corporation.

(B) PURCHASERS. — Subject to subparagraph (C), the voting common stock shall be offered to banks, other financial entities, insurance companies, and System institutions under such terms and conditions as the interim board may adopt.

(C) DISTRIBUTION. — The voting stock shall be fairly and broadly offered to ensure that no institution or institutions acquire a disproportionate amount of the total amount of voting common stock outstanding of a class and that capital contributions and issuances of voting common stock for the contributions are fairly distributed between entities eligible to hold class A and class B stock, as provided under section 8.4.

(10) TERMINATION. — The interim board shall terminate when the permanent board of directors established in subsection (b) of this section first meets with a quorum present.

(b) PERMANENT BOARD. —

(1) ESTABLISHMENT. — Immediately after the date that banks, other financial institutions or entities, insurance companies, and System institutions have subscribed and fully paid for at least $20,000,000 of common stock of the Corporation, the Corporation shall arrange for the election and appointment of a permanent board of directors. After the termination of the interim board, the Corporation shall be under the management of the permanent board.

(2) COMPOSITION. — The permanent board shall consist of 15 members, of which —

(A) 5 members shall be elected by holders of common stock that are insurance companies, banks, or other financial institutions or entities:

(B) 5 members shall be elected by holders of common stock that are Farm Credit System institutions; and

(i) which members shall not be, or have been, officers or directors of any financial institutions or entities;

(ii) which members shall be representatives of the general public;

(iii) of which members not more than 3 shall be members of the same political party; and

(iv) of which members at least 2 shall be experienced in farming or ranching.

(3) PRESIDENTIAL APPOINTEES. — The President shall appoint the members of the permanent board referred to in paragraph (2)(C) not later than the later of —

(A) the date referred to in paragraph (1); or

(B) the expiration of the 270-day period beginning on the date of the enactment of this title.

(4) VACANCY. —

(A) ELECTED MEMBERS. — Subject to paragraph (6), a vacancy among the members elected to the permanent board in the manner described in subparagraph (A) or (B) of paragraph (2) shall be filled by the permanent board from among persons eligible for election to the position for which the vacancy exists.

(B) APPOINTED MEMBERS. — A vacancy among the members appointed to the permanent board under paragraph (2)(C) shall be filled in the manner in which the original appointment was made.

(5) CONTINUATION OF MEMBERSHIP. — If —

(A) any member of the permanent board who was appointed or elected to the permanent board from among persons who are representatives of banks, other financial institutions or entities, insurance companies, or Farm Credit System institutions ceases to be such a representative; or

(B) any member who was appointed from persons who are not or have not been directors or officers of any financial institution or entity becomes a director or an officer of any financial institution or entity;

such member may continue as a member for not longer than the 45-day period beginning on the date such member ceases to be such a representative, officer, or employee or becomes such a director or officer, as the case may be.

(6) TERMS. —

(A) APPOINTED MEMBERS. — The members appointed by the President shall serve at the pleasure of the President.

(B) ELECTED MEMBERS. — The members elected under subparagraphs (A) and (B) of subsection (b)(2) of this section shall each be elected annually for a term ending on the date of the next annual meeting of the common stockholders of the Corporation and shall serve until their successors are elected and qualified. Any seat on the permanent board that becomes vacant after the annual election of the directors shall be filled by the members of the permanent board from the same category of directors, but only for the unexpired portion of the term.

(C) VACANCY APPOINTMENT. — Any member appointed to fill a vacancy occurring before the expiration of the term for which the predecessor of the member was appointed shall be appointed only for the remainder of such term.

(D) SERVICE AFTER EXPIRATION OF TERM. — A member may serve after the expiration of the term of the member until the successor of the member has taken office.

(7) QUORUM. — 8 members of the permanent board shall constitute a quorum.

(8) NO ADDITIONAL PAY FOR FEDERAL OFFICERS OR EMPLOYEES. — Members of the permanent board who are full-time officers or employees of the United States shall receive no additional pay by reason of service on the permanent board.

(9) CHAIRPERSON. — The President shall designate 1 of the members of the permanent board who are appointed by the President as the chairperson of the permanent board.

(10) MEETINGS. — The permanent board shall meet at the call of the chairperson or a majority of its members.

(c) OFFICERS AND STAFF. — The Board may appoint, employ, fix the pay of, and provide other allowances and benefits for such officers and employees of the Corporation as the Board determines to be appropriate.

SEC. 8.3. POWERS AND DUTIES OF CORPORATION AND BOARD. —

(a) GUARANTEES. — After the Board has been duly constituted, subject to the other provisions of this title and other commitments and requirements established pursuant to law, the Corporation may provide guarantees on terms and conditions determined by the Corporation of securities issued on the security of, or in participation in, pooled interests in qualified loans.

(b) DUTIES OF THE BOARD. —

(1) IN GENERAL. The Board shall —

(A) determine the general policies that shall govern the operations of the Corporation;

(B) select, appoint, and determine the compensation of qualified persons to fill such offices as may be provided for in the bylaws of the Corporation; and

(C) assign to such persons such executive functions, powers, and duties as may be prescribed by the bylaws of the Corporation or by the Board.

(2) EXECUTIVE OFFICERS AND FUNCTIONS. — The persons elected or appointed under paragraph (1)(B) shall be the executive officers of the Corporation and shall discharge the executive functions, powers, and duties of the Corporation.

(1) To operate under the direction of its Board.

(2) To issue stock in the manner provided in section 8.4.

(3) To adopt, alter, and use a corporate seal which shall be judicially noted.

(4) To provide for a president, 1 or more vice presidents, secretary, treasurer, and such other officers, employees, and agents as may be necessary, define their duties and compensation levels, all without regard to Title 5, United States Code, and require surety bonds or make other provisions against losses occasioned by acts of such persons.

(5) To provide guarantees in the manner provided under section 8.6.

(6) To have succession until dissolved by a law enacted by the Congress.

(7) To prescribe bylaws, through the Board, not inconsistent with law, that shall provide for —

(A) the classes of the stock of the Corporation; and

(B) the manner in which —

(i) the stock shall be issued, transferred, and retired;

(ii) the officers, employees, and agents of the Corporation are selected;

(iii) the property of the Corporation is acquired, held, and transferred;

(iv) the commitments and other financial assistance of the Corporation are made;

(v) the general business of the Corporation is conducted; and

(vi) the privileges granted by law to the Corporation are exercised and enjoyed;

(8) To prescribe such standards as may be necessary to carry out this title.

(9) To enter into contracts and make payments with respect to the contracts.

(10) To sue and be sued in its corporate capacity and to complain and defend in any action brought by or against the Corporation in any State or Federal court of competent jurisdiction.

(11) To make and perform contracts, agreements, and commitments with persons and entities both inside and outside of the Farm Credit System.

(12) To acquire, hold, lease, mortgage or dispose of, at public or private sale, real and personal property, purchase or sell any securities or obligations, and otherwise exercise all the usual incidents of ownership of property necessary and convenient to the business of the Corporation.

(13) To purchase, hold, sell, or assign a qualified loan, to issue a guaranteed security, representing an interest in, or an obligation backed by, the qualified loan, and to perform all the functions and responsibilities of an agricultural mortgage marketing facility operating as a certified facility under this title.

(14) To establish, acquire, and maintain affiliates (as such term is defined in section 8.11(e)) under applicable State laws to carry out any activities that otherwise would be performed directly by the Corporation under this title.

(15) To exercise such other incidental powers as are necessary to carry out the powers, duties, and functions of the Corporation in accordance with this title.

(d) FEDERAL RESERVE BANKS AS DEPOSITORIES AND FISCAL AGENTS. — The Federal Reserve banks shall act as depositories for, and as fiscal agents or custodians of, the Corporation.

(e) ACCESS TO BOOK-ENTRY SYSTEM. — The Corporation shall have access to the book-entry system of the Federal Reserve System.

SEC. 8.4. STOCK ISSUANCE —

(a) VOTING COMMON STOCK. —

(1) ISSUE. — The Corporation shall issue voting common stock having such par value as may be fixed by the Board from time to time. Each share of voting common stock shall be entitled to one vote with rights of cumulative voting at all elections of directors. Voting shall be by classes as described in section 8.2(a)(9). The stock shall be divided into two classes with the same par value per share. Class A stock may be held only by entities that are not Farm Credit System institutions and that are entitled to vote for directors specified in section 8.2(b)(2)(A), including national banking associations (which shall be allowed to purchase and hold such stock). Class B stock may be held only by Farm Credit System institutions that are entitled to vote for directors specified in section 8.2(b)(2)(B).

(2) LIMITATION ON ISSUE. — After the date the permanent board first meets with a quorum of its members present, voting common stock of the Corporation may be issued only to originators and certified facilities.

(3) AUTHORITY OF BOARD TO ESTABLISH TERMS AND PROCEDURES. — The Board shall adopt such terms, conditions, and procedures with regard to the issue of stock under this section as may be necessary, including the establishment of a maximum amount limitation on the number of shares of voting common stock that may be outstanding at any time.

(4) TRANSFERABILITY. — Subject to such limitations as the Board may impose, any share of any class of voting common stock issued under this section shall be transferable among the institutions or entities to which shares of such class of common stock may be offered under paragraph (1), except that, as to the Corporation, such shares shall be transferable only on the books of the Corporation.

(5) MAXIMUM NUMBER OF SHARES. — No stockholder, other than a holder of class B stock, may own, directly or indirectly, more than 33 percent of the outstanding shares of such class of the voting common stock of the Corporation.

(b) REQUIRED CAPITAL CONTRIBUTIONS.—

(1) IN GENERAL — The Corporation may require each originator and each certified facility to make, or commit to make, such nonrefundable capital contributions to the Corporation as are reasonable and necessary to meet the administrative expenses of the Corporation.

(2) STOCK ISSUED AS CONSIDERATION FOR CONTRIBUTION. — The Corporation, from time to time, shall issue to each originator or certified facility voting common stock evidencing any capital contributions made pursuant to this subsection.

(1) IN GENERAL. — Such dividends as may be declared by the Board, in the discretion of the Board, shall be paid by the Corporation to the holders of the voting common stock of the Corporation pro rata based on the total number of shares of both classes of stock outstanding.

(2) RESERVES REQUIREMENT. — No dividend may be declared or paid by the Board under this section unless the Board determines that adequate provision has been made for the reserve required under section 8.10(c)(1).

(3) DIVIDENDS PROHIBITED WHILE OBLIGATIONS ARE OUTSTANDING. — No dividend may be declared or paid by the Board under this section while any obligation issued by the Corporation to the Secretary of the Treasury under section 8.13 remains outstanding.

(d) NONVOTING COMMON STOCK. — The Corporation is authorized to issue nonvoting common stock having such par value as may be fixed by the Board from time to time. Such nonvoting common stock shall be freely transferable, except that, as to the Corporation, such stock shall be transferable only on the books of the Corporation. Such dividends as may be declared by the Board, in the discretion of the Board, may be paid by the Corporation to the holders of the nonvoting common stock of the Corporation, subject to paragraphs (2) and (3) of subsection (c) of this section.

(e) PREFERRED STOCK. —

(1) AUTHORITY OF BOARD. — The Corporation is authorized to issue nonvoting preferred stock having such par value as may be fixed by the Board from time to time. Such preferred stock issued shall be freely transferable, except that, as to the Corporation, such stock shall be transferred only on the books of the Corporation.

(2) RIGHTS OF PREFERRED STOCK. — Subject to paragraphs (2) and (3) of subsection (c) of this section, the holders of the preferred stock shall be entitled to such rate of cumulative dividends, and such holders shall be subject to such redemption or other conversion provisions, as may be provided for at the time of issuance. No dividends shall be payable on any share of common stock at any time when any dividend is due on any share of preferred stock and has not been paid.

(3) PREFERENCE OF TERMINATION OF BUSINESS. — In the event of any liquidation, dissolution, or winding up of the business of the Corporation, the holders of the preferred shares of stock shall be paid in full at the par value thereof, plus all accrued dividends, before the holders of the common shares receive any payment.

SEC. 8. 5 . CERTIFICATION OF AGRICULTURAL MORTGAGE MARKETING FACILITIES. —

(a) ELIGIBILITY STANDARDS. —

(1) ESTABLISHMENT REQUIRED. — Within 120 days after the date on which the permanent board first meets with a quorum present, the Corporation shall issue standards for the certification of agricultural mortgage marketing facilities (other than the Corporation), including eligibility standards in accordance with paragraph (2).

(2) MINIMUM REQUIREMENTS. — To be eligible to be certified under the standards referred to in paragraph (1), an agricultural mortgage marketing facility (other than the Corporation) shall —

(A) be an institution of the Farm Credit System or a corporation, association, or trust organized under the laws of the United States or of any State;

(B) meet or exceed capital standards established by the Board;

(C) have as one of the purposes of the facility, the sale or resale of securities representing interests in, or obligations backed by, pools of qualified loans that have been provided guarantees by the Corporation;

(D) demonstrate managerial ability with respect to agricultural mortgage loan underwriting, servicing, and marketing that is acceptable to the Corporation;

(E) adopt appropriate agricultural mortgage loan underwriting, appraisal, and servicing standards and procedures that meet or exceed the standards established by the Board;

(F) for purposes of enabling the Corporation to examine the facility, agree to allow officers or employees of the Corporation to have access to all books, accounts, financial records, reports, files, and all other papers, things, or property, of any type whatsoever, belonging to or used by the Corporation that are necessary to facilitate an examination of the operations of the facility in connection with securities, and the pools of qualified loans that back securities, for which the Corporation has provided guarantees; and

(G) adopt appropriate minimum standards and procedures relating to loan administration and disclosure to borrowers concerning the terms and rights applicable to loans for which guarantee is provided, in conformity with uniform standards established by the Corporation.

(3) NONDISCRIMINATION REQUIREMENT. — The standard established under this subsection shall not discriminate between or against Farm Credit System and non-Farm Credit System applicants.

(b) CERTIFICATION BY CORPORATION. — Within 60 days after receiving an application for certification under this section, the Corporation shall certify the facility if the facility meets the standards established by the Corporation under subsection (a)(1) of this section.

(c) MAXIMUM TIME PERIOD FOR CERTIFICATION. — Any certification by the Corporation of an agricultural mortgage marketing facility shall be effective for a period determined by the Corporation of not to exceed 5 years.

(d) REVOCATION. —

(1) IN GENERAL. — After notice and an opportunity for a hearing, the Corporation may revoke the certification of an agricultural mortgage marketing facility if the Corporation determines that the facility no longer meets the standards referred to in subsection (a) of this section.

(2) EFFECT OF REVOCATION. — Revocation of a certification shall not affect any pool guarantee that has been issued by the Corporation.

(e) AFFILIATION OF FCS INSTITUTIONS WITH FACILITY. —

(1) ESTABLISHMENT OF AFFILIATE AUTHORIZED. — Notwithstanding any other provision of this Act, any Farm Credit System institution acting for such institution alone or in conjunction with one or more other such institutions, may establish and operate as an affiliate, an agricultural mortgage marketing facility if, within a reasonable time after such establishment, such facility obtains and thereafter retains certification under subsection (b) of this section as a certified facility.

(2) EXCLUSIVE AGENCY AGREEMENT AUTHORIZED. — Any number of Farm Credit System institutions (other than the Corporation) may enter into an agreement with any certified facility (including an affiliate established under paragraph (1)) to sell the qualified loans of such institutions exclusively to or through the facility.

SEC. 8. 6 . GUARANTEE OF QUALIFIED LOANS. —

(a) GUARANTEE AUTHORIZED FOR CERTIFIED FACILITIES. —

(1) IN GENERAL. — Subject to the requirements of this section and on such other terms and conditions as the Corporation shall consider appropriate, the Corporation —

(A) shall guarantee the timely payment of principal and interest on the securities issued by a certified facility that represents interests solely in, or obligations fully backed by, any pool consisting solely of qualified loans which meet the applicable standards established under section 8.8 and which are held by such facility; and

(B) may issue a security, guaranteed as to the timely payment of principal and interest, that represents an interest solely in, or an obligation fully backed by, a pool consisting of qualified loans that —

(i) meet the applicable standards established under section 8.8; and

(ii) have been purchased and held by the Corporation.

(2) INABILITY OF FACILITY TO PAY. — If the facility is unable to make any payment of principal or interest on any security for which a guarantee has been provided by the Corporation under paragraph (1) of this section the Corporation shall make such payment as and when due in cash and on such payment shall be subrogated fully to the rights satisfied by such payment.

(3) POWER OF CORPORATION. — Notwithstanding any other provision of law, the Corporation is empowered, in connection with any guarantee under this subsection, whether before or after any default, to provide by contract with the facility for the extinguishment, on default by the facility, of any redemption, equitable, legal, or other right, title, or interest of the facility in any mortgage or mortgages constituting the pool against which the guaranteed securities are issued. With respect to any issue of guaranteed securities, in the event of default and pursuant otherwise to the terms of the contract, the mortgages that constitute such pool shall become the absolute property of the Corporation subject only to the unsatisfied rights of the holder of the securities based on and backed by such pool.

(b) OTHER RESPONSIBILITIES OF AND LIMITATIONS ON CERTIFIED FACILITIES. — As a condition for providing any guarantees under this section for securities issued by a certified facility that represent interests in, or obligations backed by, any pool of qualified loans, the Corporation shall require such facility to agree to comply with the following requirements:

(1) LOAN DEFAULT RESOLUTION. — The facility shall act in accordance with the standards of a prudent institutional lender to resolve loan defaults.

(2) SUBROGATION OF UNITED STATES AND CORPORATION TO INTERESTS OF FACILITY. — The proceeds of any collateral, judgments, settlements or guarantees received by the facility with respect to any loan in such pool, shall be applied, after payment of costs of collection —

(A) first, to reduce the amount of any principal outstanding on any obligation of the Corporation that was purchased by the Secretary of the Treasury under section 8.13 to the extent the proceeds of such obligation were used to make guarantees in connection with such securities: and

(B) second, to reimburse the Corporation for any such guarantee payments.

(3) LOAN SERVICING. — The originator of any loan in such pool shall be permitted to retain the right to service the loan.

(4) MINORITY PARTICIPATION IN PUBLIC OFFERINGS. — The facility shall take such steps as may be necessary to ensure that minority owned or controlled investment banking firms, underwriters, and bond counsels throughout the United States have an opportunity to participate to a significant degree in any public offering of securities.

(5) NO DISCRIMINATION AGAINST STATES WITH BORROWERS RIGHTS. — The facility may not refuse to purchase qualified loans originating in States that have established borrowers rights laws either by statute or under the constitution of such States, except that the facility may require discounts or charge fees reasonably related to costs and expenses arising from such statutes or constitutional provisions.

(c) ADDITIONAL AUTHORITY OF THE BOARD. — To ensure the liquidity of securities for which guarantees have been provided under this section, the Board shall adopt appropriate standards regarding —

(1) the characteristics of any pool of qualified loans serving as collateral for such securities; and

(2) transfer requirements.

(d) AGGREGATE PRINCIPAL AMOUNTS OF QUALIFIED LOANS. —

(1) INITIAL YEAR. — During the first year after the date of the enactment of this title, the Corporation may not provide guarantees for securities representing interests in, or obligations backed by, qualified loans (other than loans which back securities issued by Farm Credit System institutions for which the Corporation provides a guarantee) in an aggregate principal amount in excess of 2 percent of the total agricultural real estate debt outstanding at the close of the prior calendar year (as published by the Board of Governors of the Federal Reserve System), less all Farmers Home Administration agricultural real estate debt.

(2) SECOND YEAR. — During the year following the year referred to in paragraph (1), the Corporation may not provide guarantees for securities representing interests in, or obligations backed by, qualified loans (other than loans which back securities issued by Farm Credit System institutions for which the Corporation provides a guarantee) in an additional principal amount in excess of 4 percent of the total agricultural real estate debt outstanding at the close of the prior calendar year, less all Farmers Home Administration agricultural real estate debt.

(3) THIRD YEAR. — During the year following the year referred to in paragraph (2), the Corporation may not provide guarantees for securities representing interests in, or obligations backed by, qualified loans (other than loans which back securities issued by Farm Credit System institutions for which the Corporation provides a guarantee) in an additional principal amount in excess of 8 percent of the total agricultural real estate debt outstanding at the close of the prior calendar year, less all Farmers Home Administration agricultural real estate debt.

(4) SUBSEQUENT YEARS. — In years subsequent to the year referred to in paragraph (3), the Corporation may provide guarantees without regard to the principal amount of the qualified loans guaranteed.

(e) PURCHASE OF GUARANTEED SECURITIES. —

(1) PURCHASE AUTHORITY. — The Corporation (and affiliates) may purchase, hold, and sell any securities guaranteed under this section by the Corporation that represent interests in, or obligations backed by, pools of qualified loans. Securities issued under this section shall have maturities and bear rates of interest as determined by the Corporation.

(2) ISSUANCE OF DEBT OBLIGATIONS. — The Corporation (and affiliates) may issue debt obligations solely for the purpose of obtaining amounts for the purchase of any securities under paragraph (1), for the purchase of qualified loans (as defined in section 8.0(9), and for maintaining reasonable amounts for business operations (including adequate liquidity) relating to activities under this subsection.

(3) TERMS AND LIMITATIONS. —

(A) TERMS. — The obligations issued under this subsection shall have maturities and bear rates of interest as determined by the Corporation, and may be redeemable at the option of the Corporation before maturity in the manner stipulated in the obligations.

(B) REQUIREMENT. — Each obligation shall clearly indicate that the obligation is not an obligation of, and is not guaranteed as to principal and interest by, the Farm Credit Administration, the United States, or any other agency or instrumentality of the United States (other than the Corporation).

(C) AUTHORITY. — The Corporation may not issue obligations pursuant to paragraph (2) under this subsection while any obligation issued by the Corporation under section 8.13(a) remains outstanding.

SEC. 8. 7 . [REPEALED]

SEC. 8. 8. STANDARDS FOR QUALIFIED LOANS. —

(a) STANDARDS. —

(1) IN GENERAL. — The Corporation shall establish underwriting, security appraisal, and repayment standards for qualified loans taking into account the nature, risk profile, and other differences between different categories of qualified loans.

(2) SUPERVISION, EXAMINATION, AND REPORT OF CONDITION. — The standards shall be subject to the authorities of the Farm Credit Administration under section 8.11.

(3) MORTGAGE LOANS. — In establishing standards for qualified loans, the Corporation shall confine corporate operations, so far as practicable, to mortgage loans that are deemed by the Board to be of such quality so as to meet, substantially and generally, the purchase standards imposed by private institutional mortgage investors.

(b) MINIMUM CRITERIA. — To further the purpose of this title to provide a new source of long-term fixed rate financing to assist farmers and ranchers to purchase agricultural real estate, the standards established by the Board pursuant to subsection (a) with respect to loans secured by agricultural real estate of this section shall, at a minimum —

(1) provide that no agricultural mortgage loan with a loan-to-value ratio in excess of 80 percent may be treated as a qualified loan;

(2) require each borrower to demonstrate sufficient cash-flow to adequately service the agricultural mortgage loan;

(3) contain sufficient documentation standards;

(4) contain adequate standards to protect the integrity of the appraisal process with respect to any agricultural mortgage loans;

(5) contain adequate standards to ensure that the farmer or rancher is or will be actively engaged in agricultural production, and require the borrower to certify to the originator that the borrower intends to continue agricultural production on the farm or ranch involved;

(6) minimize speculation in agricultural real estate for nonagricultural purposes; and

(7) in establishing the value of agricultural real estate, consider the purpose for which the real estate is taxed.

(1) IN GENERAL. — A loan secured by agricultural real estate may not be treated as a qualified loan if the principal amount of such loan exceeds $2,500,000, adjusted for inflation, except as provided in paragraph (2).

(2) ACREAGE EXCEPTION. — Paragraph (1) shall not apply with respect to any agricultural mortgage loan described in such paragraph if such loan is secured by agricultural real estate that, in the aggregate, comprises not more than 1,000 acres.

(d) NONDISCRIMINATION REQUIREMENT. — The standards established under subsection (a) shall not discriminate against small originators or small agricultural mortgage loans that are at least $50,000. The Board shall promote and encourage the inclusion of qualified loans for small farms and family farmers in the agricultural mortgage secondary market.

SEC. 8. 9 . EXEMPTION FROM RESTRUCTURING AND BORROWERS RIGHTS PROVISIONS FOR POOLED LOANS. —

(a) RESTRUCTURING. — Notwithstanding any other provision of law, sections 4.14, 4.14A, 4.14B, 4.14C, and 4.14D and 4.36 shall not apply to any loan included in a pool of qualified loans backing securities or obligations for which the Corporation provides guarantee. The loan servicing standards established by the Corporation shall be patterned after similar standards adopted by other federally sponsored secondary market facilities.

(b) BORROWERS RIGHTS. — At the time of application for a loan, originators that are Farm Credit System institutions shall give written notice to each applicant of the terms and conditions of the loan, setting forth separately terms and conditions for pooled loans and loans that are not pooled. This notice shall include a statement, if applicable, that the loan may be pooled and that, if pooled, sections 4.14, 4.14A, 4.14B, 4.14C, and 4.14D and 4.36 shall not apply. This notice also shall inform the applicant that he or she has the right not to have the loan pooled. Within 3 days from the time of commitment, an applicant has the right to refuse to allow the loan to be pooled, thereby retaining rights under sections 4.14, 4.14A,, 4.14B, 4.14C, and 4.14D and 4.36, if applicable.

SEC. 8. 10 . FUNDING FOR GUARANTEE; RESERVES OF CORPORATION. —

(a) GUARANTEE. — The Corporation shall provide guarantees for securities representing interests in, or obligations backed by, pools of qualified loans through commitments issued by the Corporation providing for guarantees.

(b) GUARANTEE FEES. —

(1) INITIAL FEE. — At the time a guarantee is issued by the Corporation, the Corporation shall assess the certified facility a fee of not more than 1/2 of 1 percent of the initial principal amount of each pool of qualified loans.

(2) ANNUAL FEES. — Beginning in the second year after the date the guarantee is issued under paragraph (1), the Corporation may, at the end of each year, assess the certified facility an annual fee of not more than 1/2 of 1 percent of the principal amount of the loans then constituting the pool.

(3) DETERMINATION OF AMOUNT. — The Corporation shall establish such fees on the amount of risk incurred by the Corporation in providing the guarantees with respect to which such fee is assessed, as determined by the Corporation. Fees assessed under paragraphs (1) and (2) shall be established on an actuarially sound basis.

(4) ANNUAL REVIEW BY GAO. — The Comptroller General of the United States may review, and submit to the Congress a report regarding, the actuarial soundness and reasonableness of the fees established by the Corporation under this subsection. —

(1) IN GENERAL. — So much of the fees assessed under this section as the Board determines to be necessary shall be set aside by the Corporation in a segregated account as a reserve against losses arising out of the guarantee activities of the Corporation.

(2) EXHAUSTION OF RESERVE REQUIRED. — The Corporation may not issue obligations to the Secretary of the Treasury under section 8.13 in order to meet the obligations of the Corporation with respect to any guarantees provided under this title until the reserve established under paragraph (1) has been exhausted.

(d) FEES TO COVER ADMINISTRATIVE COSTS AUTHORIZED. — The Corporation may impose charges or fees in reasonable amounts in connection with the administration of its activities under this title to recover its costs for performing such administration.

SEC. 8. 11 . SUPERVISION, EXAMINATION, AND REPORT OF CONDITION. —

(a) REGULATION. —

(1) AUTHORITY. — Notwithstanding any other provision of this Act, the Farm Credit Administration shall have the authority to provide, acting through the Office of Secondary Market Oversight —

(A) for the examination of the Corporation and its affiliates; and

(B) for the general supervision of the safe and sound performance of the powers, functions, and duties vested in the Corporation and its affiliates by this title, including through the use of the authorities granted to the Farm Credit Administration under —

(i) part C of title V; and

(ii) beginning 6 months after the date of enactment of this section, section 5.17(a)(9).

(2) CONSIDERATIONS. — In exercising its authority pursuant to this section, the Farm Credit Administration shall consider —

(A) the purposes for which the Corporation was created;

(B) the practices appropriate to the conduct of secondary markets in agricultural loans; and

(3) OFFICE OF SECONDARY MARKET OVERSIGHT. —

(A) Not later than 180 days after the date of enactment of this paragraph, the Farm Credit Administration Board shall establish within the Farm Credit Administration the Office of Secondary Market Oversight.

(B) The Farm Credit Administration Board shall carry out the authority set forth in this section through the Office of Secondary Market Oversight.

(C) The Office of Secondary Market Oversight shall be managed by a full-time Director who shall be selected by and report to the Farm Credit Administration Board.

(b) EXAMINATIONS AND AUDITS. —

(1) IN GENERAL. — The financial transactions of the Corporation shall be examined by examiners of the Farm Credit Administration in accordance with the principles and procedures applicable to commercial corporate transactions under such rules and regulations as may be prescribed by the Administration.

(2) FREQUENCY. — The examinations shall occur at such times as the Farm Credit Administration Board may determine, but in no event less than once each year.

(3) ACCESS. — The examiners shall —

(A) have access to all books, accounts, financial records, reports, files, and all other papers, things, or property belonging to or in use by the Corporation and necessary to facilitate the audit; and

(B) be afforded full access for verifying transactions with certified facilities and other entities with whom the Corporation conducts transactions.

(c) ANNUAL REPORT OF CONDITION. — The Corporation shall make and publish an annual report of condition as prescribed by the Farm Credit Administration. Each report shall contain financial statements prepared in accordance with generally accepted accounting principles and contain such additional information as the Farm Credit Administration may by regulation prescribe. The financial statements of the Corporation shall be audited by an independent public accountant.

(d) FCA ASSESSMENTS TO COVER COSTS. — The Farm Credit Administration shall assess the Corporation for the cost to the Administration of any regulatory activities conducted under this section, including the cost of any examination.

(e) DEFINITION OF AFFILIATE. — As used in this title, the term "affiliate" shall mean an entity effectively controlled or owned by the Corporation, except that such term shall not include an originator (as defined in section 8.0(7)).

(f) The Farm Credit Administration Board shall ensure that —

(1) the Office of Secondary Market Oversight has access to a sufficient number of qualified and trained employees to adequately supervise the secondary market activities of the Corporation; and

(2) the supervision of the powers, functions, and duties of the Corporation is performed, to the extent practicable, by personnel who are not responsible for the supervision of the banks and associations of the Farm Credit System.

SEC. 8. 12 . SECURITIES IN CREDIT ENHANCED POOLS. —

(a) FEDERAL LAWS. —

(1) APPLICABILITY OF CERTAIN FEDERAL SECURITIES LAWS. — For purposes of section 3(a)(2) of the Securities Act of 1933, no security representing an interest in, or obligations backed by, a pool of qualified loans for which guarantees have been provided by the Corporation shall be deemed to be a security issued or guaranteed by a person controlled or supervised by, or acting as an instrumentality of, the Government of the United States. No such security shall be deemed to be a "government security" for purposes of the Securities Exchange Act of 1934 or for purposes of the Investment Company Act of 1940.

(2) NO FULL FAITH AND CREDIT OF THE UNITED STATES. — Each security for which credit enhancement has been provided by the Corporation shall clearly indicate that the security is not an obligation of, and is not guaranteed as to principal or interest by, the Farm Credit Administration, the United States, or any other agency or instrumentality of the United States (other than the Corporation).

(b) STATE SECURITIES LAWS. —

(1) GENERAL EXEMPTION. — Any security or obligation that has been provided a guarantee by the Corporation shall be exempt from any law of any State with respect to or requiring registration or qualification of securities or real estate to the same extent as any obligation issued by, or guaranteed as to principal and interest by, the United States or any agency or instrumentality of the United States.

(2) STATE OVERRIDE. — The provisions of paragraph (1) shall not be applicable to any State that, during the 8-year period beginning on the date of the enactment of this title, enacts a law that —

(A) specifically refers to this subsection; and

(B) expressly provides that paragraph (1) shall not apply to the State.

(1) IN GENERAL. — Securities representing an interest in, or obligations backed by, pools of qualified loans with respect to which the Corporation has provided a guarantee shall be authorized investments of any person, trust, corporation, partnership, association, business trust, or business entity created pursuant to or existing under the laws of the United States or any State to the same extent that the person, trust, corporation, partnership, association, business trust, or business entity is authorized under any applicable law to purchase, hold, or invest in obligations issued by or guaranteed as to principal and interest by the United States or any agency or instrumentality of the United States. Such securities or obligations may be accepted as security for all fiduciary, trust, and public funds, the investment or deposits of which shall be under the authority and control of the United States or any State or any officers of either.

(2) STATE LIMITATIONS ON PURCHASE, HOLDING, OR INVESTMENT. — If State law limits the purchase, holding, or investment in obligations issued by the United States by the person, trust, corporation, partnership, association, business trust, or business entity, securities or obligations of a certified facility issued on which the Corporation has provided a guarantee shall be considered to be obligations issued by the United States for purposes of the limitation.

(3) NONAPPLICABILITY OF PROVISIONS. —

(A) SUBSEQUENT STATE LAW. — Paragraphs (1) and (2) shall not apply with respect to a particular person, trust, corporation, partnership, association, business trust, or business entity, or class thereof, in any State that, prior to the expiration of the 8-year period beginning on the date of the enactment of this title, enacts a law that specifically refers to this section and either prohibits or provides for a more limited authority to purchase, hold, or invest in the securities by any person, trust, corporation, partnership, association, business trust, or business entity, or class thereof, than is provided in paragraphs (1) and (2).

(B) EFFECT OF SUBSEQUENT STATE LAW. — The enactment by any State of a law of the type described in subparagraph (A) shall not affect the validity of any contractual commitment to purchase, hold, or invest that was made prior to the effective date of the law and shall not require the sale or other disposition of any securities acquired prior to the effective date of the law.

(d) STATE USURY LAWS SUPERSEDED. — A provision of the Constitution or law of any State shall not apply to an agricultural loan made by an originator or a certified facility in accordance with this title for sale to the Corporation or to a certified facility for inclusion in a pool for which the Corporation has provided, or has committed to provide, a guarantee, if the loan, not later than 180 days after the date the loan was made, is sold to the Corporation or included in a pool for which the Corporation has provided a guarantee, if the provision —

(1) limits the rate or amount of interest, discount points, finance charges, or other charges that may be charged, taken, received, or reserved by an agricultural lender or a certified facility; or

(2) limits or prohibits a prepayment penalty (either fixed or declining), yield maintenance, or make-whole payment that may be charged, taken, or received by an agricultural lender or a certified facility in connection with the full or partial payment of the principal amount due on a loan by a borrower in advance of the scheduled date for the payment under the terms of the loan, otherwise known as a prepayment of the loan principal.

SEC. 8. 13 . AUTHORITY TO ISSUE OBLIGATIONS TO COVER GUARANTEE LOSSES OF CORPORATION. —

(a) SALE OF OBLIGATIONS TO TREASURY. —

(1) IN GENERAL. — Subject to the limitations contained in section 8.10(c) and the requirement of paragraph (2), the Corporation may issue obligations to the Secretary of the Treasury the proceeds of which may be used by the Corporation solely for the purpose of fulfilling the obligations of the Corporation under any guarantee provided by the Corporation under this title.

(2) CERTIFICATION. — The Secretary of the Treasury may purchase obligations of the Corporation under paragraph (1) only if the Corporation certifies to the Secretary that

(A) the requirements of section 8.10(c) have been fulfilled; and

(B) the proceeds of the sale of such obligations are needed to fulfill the obligations of the Corporation under any guarantee provided by the Corporation under this title.

(b) EXPEDITIOUS TRANSACTION REQUIRED. — Not later than 10 business days after receipt by the Secretary of the Treasury of any certification by the Corporation under subsection (a)(2) of this section, the Secretary of the Treasury shall purchase obligations issued by the Corporation in an amount determined by the Corporation to be sufficient to meet the guarantee liabilities of the Corporation.

(c) LIMITATION ON AMOUNT OF OUTSTANDING OBLIGATIONS. — The aggregate amount of obligations issued by the Corporation under subsection (a)(1) of this section which may be held by the Secretary of the Treasury at any time (as determined by the Secretary) shall not exceed $1,500,000,000.

(d) TERMS OF OBLIGATION. —

(1) INTEREST. — Each obligation purchased by the Secretary of the Treasury shall bear interest at a rate determined by the Secretary, taking into consideration the average rate on outstanding marketable obligations of the United States as of the last day of the last calendar month ending before the date of the purchase of such obligation.

(2) REDEMPTION. - The Secretary of the Treasury shall require that such obligations be repurchased by the Corporation within a reasonable time.

(e) COORDINATION WITH TITLE 31, UNITED STATES CODE. —

(1) AUTHORITY TO USE PROCEEDS FROM SALE OF TREASURY SECURITIES. — For the purpose of purchasing obligations of the Corporation, the Secretary of the Treasury may use as a public debt transaction the proceeds from the sale by the Secretary of any securities issued under chapter 31, of title 31, United States Code, and the purposes for which securities may be issued under such chapter are extended to include such purchases.

(2) TREATMENT OF TRANSACTIONS. - All purchases and sales by the Secretary of the Treasury of obligations issued by the Corporation under this section shall be treated as public debt transactions of the United States.

(f) AUTHORIZATION OF APPROPRIATIONS. — There is authorized to be appropriated to the Secretary of the Treasury $1,500,000,000, without fiscal year limitation, to carry out the purposes of this title.

SEC. 8. 14 . FEDERAL JURISDICTION. —

Notwithstanding section 1349 of Title 28, United States Code, or any other provision of law:

(1) The Corporation shall be considered an agency under sections 1345 and 1442 of such title.

(2) All civil actions to which the Corporation is a party shall be deemed to arise under the laws of the United States and, to the extent applicable, shall be deemed to be governed by Federal common law. The district courts of the United States shall have original jurisdiction of all such actions, without regard to amount of value.

(3) Any civil or other action, case, or controversy in a court of a State or any court, other than a district court of the United States, to which the Corporation is a party may at any time before trial be removed by the Corporation, without the giving of any bond or security —

(A) to the District Court of the United States for the district and division embracing the place where the same is pending; or

(B) if there is no such district court, to the District Court of the United States for the district in which the principal office of the Corporation is located, by following any procedure for removal for causes in effect at the time of such removal.

(4) No attachment or execution shall be issued against the Corporation or any of the property of the Corporation before final judgment in any Federal, State, or other court.

Subtitle B — Regulation of Financial Safety and Soundness of Federal Agricultural Mortgage Corporation

SEC. 8.3 1 . DEFINITIONS.

For purposes of this subtitle:

(1) COMPENSATION. — The term 'compensation' means any payment of money or the provision of any other thing of current or potential value in connection with employment.

(2) CORE CAPITAL. — The term 'core capital' means, with respect to the Corporation, the sum of the following (as determined in accordance with generally accepted accounting principles):

(A) The par value of outstanding common stock.

(B) The par value of outstanding preferred stock.

(D) Retained earnings.

(3) DIRECTOR. — The term 'Director' means the Director of the Office of Secondary Market Oversight of the Farm Credit Administration, selected under section 8.11(a)(3).

(4) OFFICE. — The term 'Office' means the Office of Secondary Market Oversight of the Farm Credit Administration, established in section 8.11(a).

(5) REGULATORY CAPITAL. — The term 'regulatory capital' means, with respect to the Corporation, the core capital of the Corporation plus an allowance for losses and guarantee claims, as determined in accordance with generally accepted accounting principles.

(6) STATE. — The term 'State' means the States of the United States, the District of Columbia, the Commonwealth of Puerto Rico, the Commonwealth of the Northern Mariana Islands, Guam, the Virgin Islands, American Samoa, the Trust Territory of the Pacific Islands, and any other territory or possession of the United States.

SEC. 8. 3 2 . RISK-BASED CAPITAL LEVELS.

(a) RISK-BASED CAPITAL TEST. — Not sooner than the expiration of the 3-year period beginning on the date of enactment of the Farm Credit System Reform Act of 1996, the Director of the Office of Secondary Market Oversight shall, by regulation, establish a risk-based capital test under this section for the Corporation. When applied to the Corporation, the risk-based capital test shall determine the amount of regulatory capital for the Corporation that is sufficient for the Corporation to maintain positive capital during a 10-year period in which both of the following circumstances occur.

(1) CREDIT RISK. —

(A) IN GENERAL. — With respect to securities representing an interest in, or obligations backed by, a pool of qualified loans owned or guaranteed by the Corporation and other obligations of the Corporation, losses on the underlying qualified loans occur throughout the United States at a rate of default and severity (based on any measurements of default reasonably related to prevailing industry practice in determining capital adequacy) reasonably related to the rate and severity that occurred in contiguous areas of the United States containing an aggregate of not less than 5 percent of the total population of the United States that, for a period of not less than 2 years (as established by the Director), experienced the highest rates of default and severity of agricultural mortgage losses, in comparison with such rates of default and severity of agricultural mortgage losses in other such areas for any period of such duration, as determined by the Director.

(B) RURAL UTILITY LOANS. — With respect to securities representing an interest in, or obligation backed by, a pool of qualified loans described in section 8.0(9)(C) owned or guaranteed by the Corporation, losses occur at a rate of default and severity reasonably related to risks in electric and telephone facility loans (as applicable), as determined by the Director.

(2) INTEREST RATE RISK. — Interest rates on Treasury obligations of varying terms increase or decrease over the first 12 months of such 10-year period by not more than the lesser of (A) 50 percent (with respect to the average interest rates on such obligations during the 12-month period preceding the 10-year period), or (B) 600 basis points, and remain at such level for the remainder of the period. This paragraph may not be construed to require the Director to determine interest rate risk under this paragraph based on the interest rates for various long-term and short-term obligations all increasing or all decreasing concurrently.

(b) CONSIDERATIONS. —

(1) ESTABLISHMENT OF TEST. — In establishing the risk-based capital test under subsection (a) —

(A) the Director shall take into account appropriate distinctions based on various types of agricultural mortgage products, varying terms of Treasury obligations, and any other factors the Director considers appropriate;

(B) the Director shall conform loan data used in determining credit risk to the minimum geographic and commodity diversification standards applicable to pools of qualified loans eligible for guarantee;

(C) the Director may take into account retained subordinated participating interests under section 8.6(b)(2) (as in effect before the date of the enactment of the Farm Credit System Reform Act of 1996);

(D) the Director may take into account other methods or tests to determine credit risk developed by the Corporation before the date of the enactment of this section; and

(E) the Director shall consider any other information submitted by the Corporation in writing during the 180-day period beginning on the date of the enactment of such Act.

(2) REVISING TEST. — Upon the expiration of the 8-year period beginning on the date of the enactment of this section, the Director shall examine the risk-based capital test under subsection (a) and may revise the test. In making examinations and revisions under this paragraph, the Director shall take into account that, before the date of the enactment of this section, the Corporation has not issued guarantees for pools of qualified loans. To the extent that the revision of the risk-based capital test causes a change in the classification of the corporation within the enforcement levels established under section 8.35, the Director shall waive the applicability of any additional enforcement actions available because of such change for a reasonable period of time, to permit the Corporation to increase the amount of regulatory capital of the Corporation accordingly.

(c) RISK-BASED CAPITAL LEVEL. — For purposes of this subtitle, the risk-based capital level for the Corporation shall be equal to the sum of the following amounts:

(1) CREDIT AND INTEREST RATE RISK. — The amount of regulatory capital determined by applying the risk-based capital test under subsection (a) to the Corporation, adjusted to account for foreign exchange risk.

(2) MANAGEMENT AND OPERATIONS RISK. — To provide for management and operations risk, 30 percent of the amount of regulatory capital determined by applying the risk-based capital test under subsection (a) to the Corporation.

(d) SPECIFIED CONTENTS. —

(1) In General. — The regulations establishing the risk-based capital test under this section shall—

(A) be issued by the Director for public comment in the form of a notice of proposed rulemaking, to be first published after the expiration of the period referred to in subsection (a); and

(B) contain specific requirements, definitions, methods, variables, and parameters used under the risk-based capital test and in implementing the test (such as loan loss severity, float income, loan-to-value ratios, taxes, yield curve slopes, default experience, prepayment rates, and performance of pools of qualified loans).

(2) SPECIFICITY. — The regulations referred to in paragraph (1) shall be sufficiently specific to permit an individual other than the Director to apply the test in the same manner as the Director.

(e) AVAILABILITY OF MODEL. — The Director shall make copies of the statistical model or models used to implement the risk-based capital test under this section available for public acquisition and may charge a reasonable fee for such copies.

SEC. 8. 3 3 . MINIMUM CAPITAL LEVEL.

(a) IN GENERAL. — Except as provided in subsection (b), for purposes of this subtitle, the minimum capital level for the Corporation shall be an amount of core capital equal to the sum of —

(1) 2.75 percent of the aggregate on-balance sheet assets of the Corporation, as determined in accordance with generally accepted accounting principles; and

(2) 0.75 percent of the aggregate off-balance sheet obligations of the Corporation, which, for the purposes of this subtitle, shall include —

(A) the unpaid principal balance of outstanding securities that are guaranteed by the Corporation and backed by pools of qualified loans;

(B) instruments that are issued or guaranteed by the Corporation and are substantially equivalent to instruments described in subparagraph (A); and

(b) TRANSITION PERIOD. —

(1) IN GENERAL.— For purposes of this subtitle, the minimum capital level for the Corporation —

(A) prior to January 1, 1997, shall be the amount of core capital equal to the sum of—

(i) 0.45 percent of the aggregate off-balance sheet obligations of the Corporation;

(ii) 0.45 percent of designated on-balance sheet assets of the Corporation, as determined under paragraph (2); and

(iii) 2.50 percent of on-balance sheet assets of the Corporation other than assets designated under paragraph (2);

(B) during the 1-year period ending December 31, 1997, shall be the amount of core capital equal to the sum of —

(i) 0.55 percent of aggregate off-balance sheet obligations of the Corporation;

(ii) 1.20 percent of designated on-balance sheet assets of the Corporation, as determined under paragraph (2); and

(iii) 2.55 percent of on-balance sheet assets of the Corporation other than assets designated under paragraph (2);

(i) if the Corporation’s core capital is not less than $25,000,000 on January 1, 1998, the sum of —

(I) 0.65 percent of aggregate off-balance sheet obligations of the Corporation;

(II) 1.95 percent of designated on-balance sheet assets of the Corporation, as determined under paragraph (2); and

(III) 2.65 percent of on-balance sheet assets of the Corporation other than assets designated under paragraph (2); or

(ii) if the Corporation’s core capital is less than $25,000,000 on January 1, 1998, the amount determined under subsection (a); and

(D) on and after January 1, 1999, shall be the amount determined under subsection (a).

(2) DESIGNATED ON-BALANCE SHEET ASSETS.— For purposes of this subsection, the designated on-balance sheet assets of the Corporation shall be —

(A) the aggregate on-balance sheet assets of the Corporation acquired under section 8.6(e); and

(B) the aggregate amount of qualified loans purchased and held by the Corporation under section 8.3(c)(13).

SEC. 8.34. CRITICAL CAPITAL LEVEL.

For purposes of this subtitle, the critical capital level for the Corporation shall be an amount of core capital equal to 50 percent of the total minimum capital amount determined under section 8.33.

SEC. 8. 3 5 . ENFORCEMENT LEVELS.

(a) IN GENERAL. — The Director shall classify the Corporation, for purposes of this subtitle, according to the following enforcement levels:

(1) LEVEL I. — The Corporation shall be classified as within level I if the Corporation —

(A) maintains an amount of regulatory capital that is equal to or exceeds the risk-based capital level established under section 8.32; and

(B) equals or exceeds the minimum capital level established under section 8.33.

(2) LEVEL II. — The Corporation shall be classified as within level II if —

(A) the Corporation —

(i) maintains an amount of regulatory capital that is less than the risk-based capital level; and

(ii) equals or exceeds the minimum capital level; or

(B) the Corporation is otherwise classified as within level II under subsection (b) of this section.

(3) LEVEL III. — The Corporation shall be classified as within level III if —

(A) the Corporation —

(i) does not equal or exceed the minimum capital level; and

(ii) equals or exceeds the critical capital level established under section 8.34; or

(B) the Corporation is otherwise classified as within level III under subsection (b) of this section.

(4) LEVEL IV. — The Corporation shall be classified as within level IV if the Corporation —

(A) does not equal or exceed the critical capital level; or

(B) is otherwise classified as within level IV under subsection (b) of this section.

(b) DISCRETIONARY CLASSIFICATION. — If at any time the Director determines in writing (and provides written notification to the Corporation and the Farm Credit Administration) that the Corporation is taking any action not approved by the Director that could result in a rapid depletion of core capital or that the value of the property subject to mortgages securitized by the Corporation or property underlying securities guaranteed by the Corporation, has decreased significantly, the Director may classify the Corporation —

(1) as within level II, if the Corporation is otherwise within level I;

(2) as within level III, if the Corporation is otherwise within level II; or

(3) as within level IV, if the Corporation is otherwise within level III.

(c) QUARTERLY DETERMINATION. — The Director shall determine the classification of the Corporation for purposes of this subtitle on not less than a quarterly basis (and as appropriate under subsection (b)). The first such determination shall be made for the quarter ending March 31, 1992.

(d) NOTICE. — Upon determining under subsection (b) or (c) that the Corporation is within level II or III, the Director shall provide written notice to the Congress and to the Corporation —

(1) that the Corporation is within such level;

(2) that the Corporation is subject to the provisions of section 8.36 or 8.37, as applicable; and

(3) stating the reasons for the classification of the Corporation within such level.

(e) IMPLEMENTATION. — Notwithstanding paragraphs (1) and (2) of subsection (a), during the period beginning on December 13, 1991, and ending on the effective date of the risk based capital regulation issued by the Director under section 8.32, the Corporation shall be classified as within level I if the Corporation equals or exceeds the minimum capital level established under section 8.33.

SEC. 8. 3 6 . MANDATORY ACTIONS APPLICABLE TO LEVEL II.

(a) CAPITAL RESTORATION PLAN. — If the Corporation is classified as within level II, the Corporation shall, within the time period determined by the Director, submit to the Director a capital restoration plan and, after approval, carry out the plan.

(b) RESTRICTION OF DIVIDENDS. — If the Corporation is classified as within level II, the Corporation may not make any payment of dividends that would result in the Corporation being reclassified as within level III or IV.

(c) RECLASSIFICATION FROM LEVEL II TO LEVEL III. — The Director shall immediately reclassify the Corporation as within level III (and the Corporation shall be subject to the provisions of section 8.37), if —

(1) the Corporation is within level II; and

(2) (A) the Corporation does not submit a capital restoration plan that is approved by the Director; or

(B) the Director determines that the Corporation has failed to make, in good faith, reasonable efforts necessary to comply with such a capital restoration plan and fulfill the schedule for the plan approved by the Director.

(d) EFFECTIVE DATE. — This section shall take effect upon the expiration of the 30-month period beginning on the date of the enactment of this section.

SEC. 8. 3 7 . SUPERVISORY ACTIONS APPLICABLE TO LEVEL III.

(a) MANDATORY SUPERVISORY ACTIONS. —

(1) CAPITAL RESTORATION PLAN. — If the Corporation is classified as within level III, the Corporation shall, within the time period determined by the Director, submit to the Director a capital restoration plan and, after approval, carry out the plan.

(2) RESTRICTIONS ON DIVIDENDS. —

(A) PRIOR APPROVAL. — If the Corporation is classified as within level III, the Corporation —

(i) may not make any payment of dividends that would result in the Corporation being reclassified as within level IV; and

(ii) may make any other payment of dividends only if the Director approves the payment before the payment.

(B) STANDARD FOR APPROVAL. — If the Corporation is classified as within level III, the Director may approve a payment of dividends by the Corporation only if the Director determines that the payment (i) will enhance the ability of the Corporation to meet the risk-based capital level and the minimum capital level promptly, (ii) will contribute to the long-term safety and soundness of the Corporation, or (iii) is otherwise in the public interest.

(3) RECLASSIFICATION FROM LEVEL III TO LEVEL IV. — The Director shall immediately reclassify the Corporation as within level IV if —

(A) the Corporation is classified as within level III; and

(B) (i) the Corporation does not submit a capital restoration plan that is approved by the Director; or

(ii) the Director determines that the Corporation has failed to make, in good faith, reasonable efforts necessary to comply with such a capital restoration plan and fulfill the schedule for the plan approved by the Director.

(b) DISCRETIONARY SUPERVISORY ACTIONS. — In addition to any other actions taken by the Director (including actions under subsection (a)), the Director may, at any time, take any of the following actions if the Corporation is classified as within level III;

(1) LIMITATION ON INCREASE IN OBLIGATIONS. — Limit any increase in, or order the reduction of, any obligations of the Corporation, including off-balance sheet obligations.

(2) LIMITATION ON GROWTH. — Limit or prohibit the growth of the assets of the Corporation or require contraction of the assets of the Corporation.

(3) PROHIBITION ON DIVIDENDS. — Prohibit the Corporation from making any payment of dividends.

(4) ACQUISITION OF NEW CAPITAL. — Require the Corporation to acquire new capital in any form and in any amount sufficient to provide for the reclassification of the Corporation as within level II.

(5) RESTRICTION OF ACTIVITIES. — Require the Corporation to terminate, reduce, or modify any activity that the Director determines creates excessive risk to the Corporation.

(6) CONSERVATORSHIP. — Appoint a conservator for the Corporation consistent with this Act.

SEC. 8.38 RECAPITALIZATION OF THE CORPORATION.

(a) Mandatory Recapitalization.— The Corporation shall increase the core capital of the Corporation to an amount equal to or greater than $25,000,000, not later than the earlier of—

(1) the date that is 2 years after the date of enactment of this section; or

(2) the date that is 180 days after the end of the first calendar quarter that the aggregate on-balance sheet assets of the Corporation, plus the outstanding principal of the off-balance sheet obligations of the Corporation, equal or exceed $2,000,000,000.

(b) RAISING CORE CAPITAL.— In carrying out this section, the Corporation may issue stock under section 8.4 and otherwise employ any recognized and legitimate means of raising core capital in the power of the Corporation under section 8.3.

(c) LIMITATION ON GROWTH OF TOTAL ASSETS.— During the 2-year period beginning on the date of enactment of this section, the aggregate on-balance sheet assets of the Corporation, plus the outstanding principal of the off-balance sheet obligations of the Corporation, may not exceed $3,000,000,000 if the core capital of the Corporation is less than $25,000,000.

(d) ENFORCEMENT.— If the Corporation fails to carry out subsection (a) by the date required under paragraph (1) or (2) of subsection (a), the Corporation may not purchase a new qualified loan, or issue or guarantee a new loan-backed security until the core capital of the Corporation is increased to an amount equal to or greater than $25,000,000.

SEC. 8.41. CONSERVATORSHIP; LIQUIDATION; RECEIVERSHIP .

(a) VOLUNTARY LIQUIDATION.— The Corporation may voluntarily liquidate only with the consent of, and in accordance with a plan of liquidation approved by, the Farm Credit Administration Board.

(b) INVOLUNTARY LIQUIDATION.—

(1) IN GENERAL.— The Farm Credit Administration Board may appoint a conservator or receiver for the Corporation under the circumstances specified in section 4.12(b).

(2) APPLICATION.— In applying section 4.12(b) to the Corporation under paragraph (1)—

(A) the Corporation shall also be considered insolvent if the Corporation is unable to pay its debts as they fall due in the ordinary course of business;

(B) a conservator may also be appointed for the Corporation if the authority of the Corporation to purchase qualified loans for issue or guarantee loan-backed securities is suspended; and

(i) (I) the authority of the Corporation to purchase qualified loans or issue or guarantee loan-backed securities is suspended; or

(II) the Corporation is classified under section 8.35 as within level III or IV and the alternative actions available under subtitle B are not satisfactory; and

(ii) the Farm Credit Administration determines that the appointment of a conservator would not be appropriate.

(3) NO EFFECT ON SUPERVISORY ACTIONS.— The grounds for appointment of a conservator for the Corporation under this subsection shall be in addition to those in section 8.37.

(1) QUALIFICATIONS.— Notwithstanding section 4.12(b), if a conservator or receiver is appointed for the Corporation, the conservator or receiver shall be—

(A) The Farm Credit Administration or any other governmental entity or employee, including the Farm Credit System insurance Corporation; or

(B) Any person that—

(i) has no claim against, or financial interest in, the Corporation or other basis for a conflict of interest as the conservator or receiver; and

(ii) has the financial and management expertise necessary to direct the operations and affairs of the Corporation and, if necessary, to liquidate the Corporation.

(2) COMPENSATION.—

(A) IN GENERAL.— A conservator or receiver for Corporation and professional personnel (other than a Federal employee) employed to represent or assist the conservator or receiver may be compensated for activities conducted as, or for, a conservator or receiver.

(B) LIMIT ON COMPENSATION.— Compensation may not be provided in amounts greater than the compensation paid to employees of the Federal Government for similar services, except that the Farm Credit Administration may provide compensation at higher rates that are not in excess of rates prevailing in the private sector if the Farm Credit Administration determines that compensation at higher rates is necessary in order to recruit and retain competent personnel.

(C) CONTRACTUAL ARRANGEMENTS.— The conservator or receiver may contract with any governmental entity, including the Farm Credit System Insurance Corporation, to make personnel, services, and facilities of the entity available to the conservator or receiver on such terms and compensation arrangements as shall be mutually agreed, and each entity may provide the same to the conservator or receiver.

(3) EXPENSES.— A valid claim for expenses of the conservatorship or receivership (including compensation under paragraph (2)) and a valid claim with respect to a loan made under subsection (f) shall—

(A) be paid by the conservator or receiver from funds of the Corporation before any other valid claim against theCorporation; and

(B) may be secured by a lien, on such property of the Corporation as the conservator or receiver may determine, thatshall have priority over any other liens.

(4) LIABILITY.— If the conservator or receiver for the Corporation is not a Federal entity, or an officer or employee for the Federal Government, the conservator or receiver shall not be personally liable for damages in tort or otherwise for an act or omission performed pursuant to and in the course of the conservatorship or receivership, unless the act or omission constitutes gross negligence or any form of intentional tortuous conduct or criminal conduct.

(5) INDEMNIFICATION.— The Farm Credit Administration may allow indemnification of the conservator or receiver from the asset of the conservatorship or receivership on such terms as the Farm Credit Administration considers appropriate.

(d) JUDICIAL REVIEW OF APPOINTMENT.—

(1) IN GENERAL.— Notwithstanding subsection (i)(1), not later than 30 days after a conservator or receiver is appointed under subsection (b), the Corporation may bring an action in the United States District court for the District of Columbia for an order requiring the Farm Credit Administration Board to remove the conservator or receiver. The court shall, on the merits, dismiss the action or direct the Farm Credit Administration Board to remove the conservator or receiver.

(2) STAY OF OTHER ACTIONS.— On the commencement of an action under paragraph (1), any court having jurisdiction of any other action or enforcement proceeding authorized under this Act to which the Corporation is party shall stay the action or proceeding during the pendency of the action for removal of the conservator or receiver.

(e) GENERAL POWERS OF CONSERVATOR OR RECEIVER.— The conservator or receiver for the Corporation shall have such powers to conduct the conservatorship or receivership as shall be provided pursuant to regulations adopted by the Farm Credit Administration Board. Such powers shall be comparable to the powers available to a conservator or receiver appointed pursuant section 4.12(b).

(f) BORROWINGS FOR WORKING CAPITAL.—

(1) IN GENERAL.— If the conservator or receiver of the Corporation determines that it is likely that there will be insufficient funds to pay the ongoing administrative expenses of the conservatorship or receivership or that there will be insufficient liquidity to fund maturing obligations of the conservatorship or receivership, the conservator or receiver may borrow funds in such amounts, from such sources, and at such rates of interest as the conservator or receiver considers necessary or appropriate to meet the administrative expenses or liquidity needs of the conservatorship or receivership.

(2) WORKING CAPITAL FROM FARM CREDIT BANKS.— A Farm Credit bank may loan funds to the conservator or receiver for a loan authorized under paragraph (1) or, in the event of receivership, a Farm Credit bank may purchase assets of the Corporation.

(g) AGREEMENTS AGAINST INTERESTS OF CONSERVATOR OR RECEIVER.— No agreement that tends to diminish or defeat the right, title, or interest of the conservator or receiver for the Corporation in any asset acquired by the conservator or receiver as conservator or receiver for the Corporation shall be valid against the conservator or receiver unless the agreement—

(1) is in writing;

(2) is executed by the Corporation and any person claiming an adverse interest under the agreement, including the obligor, contemporaneously with the acquisition of the asset by the Corporation;

(3) is approved by the Board or an appropriate committee of the Board, which approval shall be reflected in the minutes of the Board or committee; and

(4) has been, continuously, from the time of the agreement's execution, an official record of the Corporation.

(h) REPORT TO THE CONGRESS.— On a determination by the receiver for the Corporation that there are insufficient assets of the receivership to pay all valid claims against the receivership, the receiver shall submit to the Secretary of the Treasury, the Committee on Agriculture of the House of Representatives, and the Committee on Agriculture, Nutrition, and Forestry of the Senate a report on the financial condition of the receivership.

(i) TERMINATION OF AUTHORITIES.—

(1) CORPORATION.— The charter of the Corporation shall be canceled and the authority provided to the Corporation by this title shall terminate, on such date as the Farm Credit Administration Board determines is appropriate following the placement of the Corporation in receivership, but not later than the conclusion of the receivership and discharge of the receiver.

(2) OVERSIGHT.— The Office of Secondary Market Oversight established under section 8.11 shall be abolished, and section 8.11(a) and subtitle B shall have no force or effect, on such date as the Farm Credit Administration Board determines is appropriate following the placement of the Corporation in receivership, but not later than the conclusion of the receivership and discharge of the receiver.

PROVISIONS OF THE FARM CREDIT SYSTEM REFORM ACT OF 1996 (P.L. 104-105, 110 STAT. 162) DIRECTLY IMPACTING FARMER MAC PROGRAM:

SEC. 206 BORROWER STOCK.

Section 4.3A of the Farm Credit Act of 1971 (12 U.S.C. 2154a) is amended --

(1) by redesignating subsections (f) and (g) as subsections (g) and (h), respectively; and

(2) by inserting after subsection (e) the following:

(f) LOANS DESIGNATED FOR SALE OR SOLD INTO THE SECONDARY MARKET.—

(1) IN GENERAL.— Subject to paragraph (2) and notwithstanding any other provision of this section, the bylaws adopted by a bank or association under subsection (b) may provide—

(A) in the case of a loan made on or after the date of enactment of this paragraph that is designated, at the time the loan is made, for sale into a secondary market, that no voting stock or participation certificate purchase requirement shall apply to the borrower for the loan; and

(B) in the case of a loan made before the date of enactment of this paragraph that is sold into a secondary market, that all outstanding voting stock or participation certificates held by the borrower with respect to the loan shall, subject to subsection (d)(1), be retired.

(2) APPLICABILITY.—Notwithstanding any other provision of this section, in the case of a loan sold to a secondary market under title VIII, paragraph (1) shall apply regardless of whether the bank or association retains a subordinated participation interest in a loan or pool of loans or contributes to a cash reserve.

(3) EXCEPTION.—

(A) IN GENERAL. — Subject to subparagraph (B) and notwithstanding any other provision of this section, if a loan designated for sale under paragraph (1)(A) is not sold into a secondary market during the 180-day period that begins on the date of the designation, the voting stock or participation certificate purchase requirement that would otherwise apply to the loan in the absence of a bylaw provision described in paragraph (1)(A) shall be effective.

(B) RETIREMENT. — The bylaws adopted by a bank or association under subsection (b) may provide that if a loan described in subparagraph (A) is sold into a secondary market after the end of the 180-day period described in the subparagraph, all outstanding voting stock or participation certificates held by the borrower with respect to the loan shall, subject to subsection (d)(1), be retired.

SEC. 208 BORROWERS’ RIGHTS .

(a) DEFINITION OF LOAN. — Section 4.14A(a)(5) of the Farm Credit Act of 1971 (12 U.S.C. 2202a(a)(5)) is amended to read as follows—

(5) LOAN. —

(A) IN GENERAL. — Subject to subparagraph (B), the term “loan” means a loan made to a farmer, rancher, or producer or harvester of aquatic products, for any agricultural or aquatic purpose and other credit needs of the borrower, including financing for basic processing and marketing directly related to the borrower’s operations and those of other eligible farmers, ranchers, and producers or harvesters of aquatic products.

A new subsection (B) is added to the end as follows:

(B) EXCLUSION FOR LOANS DESIGNATED FOR SALE INTO SECONDARY MARKET. —

(i) IN GENERAL. —Except as provided in clause (ii), the term "loan" does not include a loan made on or after the date of enactment of this subparagraph that is designated, at the time the loan is made, for sale into a secondary market.

(ii) UNSOLD LOANS. —

(I) IN GENERAL. —Except as provided in subclause (II), if a loan designated for sale under clause (i) is not sold into a secondary market during the 180-day period that begins on the date of the designation, the provisions of this section and sections 4.14, 4.14B, 4.14C, 4.14D, and 4.36 that would otherwise apply to the loan in the absence of the exclusion described in clause (i) shall become effective with respect to the loan.

(II) LATER SALE. — If a loan described in subclause (I) is sold into a secondary market after the end of the 180-day period described in subclause (I), subclause (I) shall not apply with respect to the loan beginning on the date of the sale.

(b) BORROWERS' RIGHTS FOR POOLED LOANS. — The first sentence of section 8.9(b) of the Farm Credit Act of 1971 (12 U. S. C. 2279aa-9(b)) is amended by inserting "(as defined in section 4.14A(a)(5))" after “application for a loan.”

PROVISIONS OF THE FARM CREDIT ACT OF 1971, AS AMENDED, DIRECTLY IMPACTING FARMER MAC:

SEC. 5.61B. AUTHORITY TO REGULATE GOLDEN PARACHUTE AND INDEMNIFICATION PAYMENTS

PARACHUTE AND INDEMNIFICATION PAYMENTS

(a)	DEFINITIONS. In this section:

(1)

GOLDEN PARACHUTE PAYMENT. The term “golden parachute payment” ---

(A)

means a payment (or any agreement to make a payment) in the nature of compensation for the benefit of any institution-related party under an obligation of any Farm Credit System institution that –

(i)

is contingent on the termination of the party’s relationship with the institution; and

(ii)

is received on or after the date on which –

(I)

the institution is insolvent;

(II)

a conservator or receiver is appointed for the institution;

(III)

the institution has been assigned by the Farm Credit Administration a composite CAMEL rating of 4 or 5 under the Farm Credit Administration Rating System, or an equivalent rating; or

(IV)

the Corporation otherwise determines that the institution is in a troubled condition (as defined in regulations issued by the Corporation); and

(B)

includes a payment that would be a golden parachute payment but for the fact that the payment was made before the date referred to in subparagraph (A)(ii) if the payment was made in contemplation of the occurrence of an event described in any subclause of subparagraph (A); but

(C)

does not include –

(i)

a payment made under a retirement plan that is qualified (or is intended to be qualified) under section 401 of the Internal Revenue Code of 1986 or other nondiscriminatory benefit plan;

(ii)

a payment made under a bona fide supplemental executive retirement plan, deferred compensation plan, or other arrangement that the Corporation determines, by regulation or order, to be permissible; or

(iii)

a payment made by reason of the death or disability of an institution-related party.

(2)

INDEMNIFICATION PAYMENT. The term “indemnification payment” means a payment (or any agreement to make a payment) by any Farm Credit System institution for the benefit of any person who is or was an institution-related party, to pay or reimburse the person for any liability or legal expense with regard to any administrative proceeding or civil action instituted by the Farm Credit Administration that results in a final order under which the person–

(A)

is assessed a civil money penalty; or

(B)

is removed or prohibited from participating in the conduct of the affairs of the institution.

(3)

INSTITUTION-RELATED PARTY. The term “institution-related party” means---

(A)

a director, officer, employee, or agent for a Farm Credit System institution or any conservator or receiver of such an institution;

(B)

a stockholder (other than another Farm Credit System institution), consultant, joint venture partner, or any other person determined by the Farm Credit Administration to be a participant in the conduct of the affairs of a Farm Credit System institution; and

(C)

an independent contractor (including any attorney, appraiser, or accountant) that knowingly or recklessly participates in any violation of any law or regulation, any breach of fiduciary duty, or any unsafe or unsound practice that caused or is likely to cause more than a minimal financial loss to, or a significant adverse effect on, the Farm Credit System institution.

(4)

LIABILITY OR LEGAL EXPENSE. The term “liability or legal expense” means–

(A)

a legal or other professional expense incurred in connect with any claim, proceeding, or action;

(B)

the amount of, and any cost incurred in connection with, any settlement of any claim, proceeding, or action; and

(C)

the amount of, and any cost incurred in connection with, any judgment or penalty imposed with respect to any claim, proceeding, or action.

(5)

PAYMENT. The term “payment” means–

(A)

a direct or indirect transfer of any funds or any asset; and

(B)

any segregation of any funds or assets for the purpose of making, or under an agreement to make, any payment after the date on which the funds or assets are segregated, without regard to whether the obligation to make the payment is contingent on–

(i)

the determination, after that date, of the liability for the payment of the amount; or

(ii)

the liquidation, after that date, of the amount of the payment.

(b)

PROHIBITION. The Corporation may prohibit or limit, by regulation or order, any golden parachute payment or indemnification payment by a Farm Credit System institution (including any conservator or receiver of the Federal Agricultural Mortgage Corporation) in troubled condition (as defined in regulations issued by the Corporation).

(c)	FACTORS TO BE TAKEN INTO ACCOUNT. The Corporation shall prescribe, by regulation, the factors to be considered by the Corporation in taking any action under subsection (b). The factors may include–

(1)

whether there is a reasonable basis to believe that an institution-related party has committed any fraudulent act or omission, breach of trust or fiduciary duty, or insider abuse with regard to the Farm Credit System institution involved that has had a material effect on the financial condition of the institution;

(2)

whether there is a reasonable basis to believe that the institution-related party is substantially responsible for the insolvency of the Farm Credit System institution, the appointment of a conservator or receiver for the institution, or the institution’s troubled condition (as defined in regulations prescribed by the Corporation);

(3)

whether there is a reasonable basis to believe that the institution-related party has materially violated any applicable law or regulation that has had a material effect on the financial condition of the institution;

(4)

whether there is a reasonable basis to believe that the institution-related party has violated or conspired to violate–

(A)

section 215, 657, 1006, 1014, or 1344 of title 18, United States Code; or

(B)

section 1341 or 1343 of title 18, United States Code, affecting a Farm Credit System institution;

(5)

whether the institution-related party was in a position of managerial or fiduciary responsibility; and

(6)

the length of time that the party was related to the Farm Credit System institution and the degree to which---

(A)

the payment reasonably reflects compensation earned over the period of employment; and

(B)

the compensation represents a reasonable payment for services rendered.

(d)	CERTAIN PAYMENTS PROHIBITED. No Farm Credit System institution may prepay the salary or any liability or legal expense of any institution-related party if the payment is made–

(1)

in contemplation of the insolvency of the institution or after the commission of an act of insolvency; and

(2)

with a view to, or with the result of–

(A)

preventing the proper application of the assets of the institution to creditors; or

(B)

preferring 1 creditor over another creditor.

(e)	RULE OF CONSTRUCTION. Nothing in this section---

(1)

prohibits any Farm Credit System institution from purchasing any commercial insurance policy or fidelity bond, so long as the insurance policy or bond does not cover any legal or liability expense of any institution described in subsection (a)(2); or

(2)

limits the powers, functions or responsibilities of the Farm Credit Administration.

Exhibit 10.1.2

Federal Agricultural Mortgage Corporation

2008 Omnibus Incentive Plan

Effective June 5, 2008

As Approved by the Board of Directors

April 3, 2008

As Approved by the Stockholders

June 5, 2008

	Article 1. Establishment, Purpose, and Duration	A-2
	Article 2. Definitions	A-2
	Article 3. Administration	A-6
	Article 4. Shares Subject to This Plan and Maximum Awards	A-7
	Article 5. Eligibility and Participation	A-9
	Article 6. Stock Options	A-9
	Article 7. Stock Appreciation Rights	A-13
	Article 8. Restricted Stock and Restricted Stock Units	A-15
	Article 9. Performance Units/Performance Shares	A-17
	Article 10. Cash-Based Awards and Other Stock-Based Awards	A-18
	Article 11. Transferability of Awards	A-19
	Article 12. Performance Measures	A-19
	Article 13. Nonemployee Director Awards	A-20
	Article 14. Dividend Equivalents	A-21
	Article 15. Beneficiary Designation	A-21
	Article 16. Rights of Participants	A-21
	Article 17. Amendment, Modification, Suspension, and Termination	A-22
	Article 18. Withholding	A-23
	Article 19. Successors	A-23
	Article 20. General Provisions	A-23

Federal Agricultural Mortgage Corporation

2008 Omnibus Incentive Plan

Article 1. Establishment, Purpose, and Duration

1.1 Establishment . Federal Agricultural Mortgage Corporation, a federally chartered instrumentality of the United States (hereinafter referred to as the “Company”), establishes an incentive compensation plan to be known as the Federal Agricultural Mortgage Corporation 2008 Omnibus Incentive Plan (hereinafter referred to as the “Plan”), as set forth in this document.

This Plan permits the grant of Nonqualified Stock Options, Incentive Stock Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units, Performance Shares, Performance Units, Cash-Based Awards, and Other Stock-Based Awards.

This Plan shall become effective upon shareholder approval (the “Effective Date”) and shall remain in effect as provided in Section 1.3 hereof.

1.2 Purpose of this Plan . The purpose of this Plan is to provide a means whereby Employees and Directors of the Company develop a sense of proprietorship and personal involvement in the development and financial success of the Company, and to encourage them to devote their best efforts to the business of the Company, thereby advancing the interests of the Company and its shareholders. A further purpose of this Plan is to provide a means through which the Company may attract able individuals to become Employees or Directors of the Company and to provide a means whereby those individuals upon whom the responsibilities of the successful administration and management of the Company are of importance, can acquire and maintain stock ownership, thereby strengthening their concern for the welfare of the Company.

1.3 Duration of this Plan . No Awards may be granted under the Plan after the date that is ten (10) years after the Effective Date. Notwithstanding the foregoing, no Incentive Stock Options may be granted more than ten (10) years after the earlier of: (a) adoption of this Plan by the Board, or (b) the Effective Date.

Article 2. Definitions

Except as otherwise provided in an applicable Award Agreement, the following capitalized terms shall have the meanings set forth below for purposes of the Plan and any Award.

2.1

“Annual Award Limit” or “Annual Award Limits” have the meaning set forth in Section 4.3.

2.2

“Award” means a grant under this Plan of Nonqualified Stock Options, Incentive Stock Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units, Performance Shares, Performance Units, Covered Employee annual incentive awards, Cash-Based Awards, or Other Stock-Based Awards (or any combination thereof), in each case subject to the terms of this Plan.

2.3

“Award Agreement” means a written agreement (including in electronic form) setting forth the terms and provisions applicable to an Award granted under this Plan, including any amendment or modification thereof.

2.4

“Board” or “Board of Directors” means the Board of Directors of the Company.

2.5

“Cash-Based Award” means an Award, settled in cash, granted pursuant to Article 10.

2.6

“Code” means the U.S. Internal Revenue Code of 1986, as amended, and the applicable rulings, regulations and guidance thereunder.

2.7

“Committee” means the Compensation Committee of the Board or a subcommittee thereof, or any other committee designated by the Board to administer this Plan. The members of the Committee shall be appointed from time to time by and shall serve at the discretion of the Board. The Committee shall consist solely of two (2) or more Directors, each of whom shall qualify as (i) a “nonemployee director” as defined in Rule 16b-3 promulgated under the Exchange Act and (ii) an “outside director” for purposes of Code Section 162(m). If the Committee does not exist or cannot function for any reason, the Board may take any action under the Plan that would otherwise be the responsibility of the Committee.

2.8

“Company” means Federal Agricultural Mortgage Corporation, a federally chartered instrumentality of the United States, and any successor thereto as provided in Article 19 herein.

2.9

“Covered Employee” means any key Employee who is or may become a “Covered Employee,” as defined in Code Section 162(m), and who is designated, either as an individual Employee or class of Employees, by the Committee within the shorter of: (a) ninety (90) days after the beginning of the Performance Period, or (b) twenty-five percent (25%) of the Performance Period has elapsed, as a “Covered Employee” under this Plan for such applicable Performance Period.

2.10

“Director” means any individual who is a member of the Board of Directors of the Company.

2.11

“Effective Date” has the meaning set forth in Section 1.1.

2.12

“Employee” means any individual designated as an employee of the Company or its Subsidiaries on the payroll records thereof. An Employee shall not include any individual during any period he or she is classified or treated by the Company or a Subsidiary as an independent contractor, a consultant, a nonemployee Director or any employee of an employment, consulting, or temporary agency or any other entity other than the Company or a Subsidiary, without regard to whether such individual is subsequently determined to have been or is subsequently retroactively reclassified as a common-law employee of the Company or any Subsidiary during such period.

2.13

“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the applicable rulings and regulations thereunder.

2.14

“Fair Market Value” or “FMV” means, as of any date, the value of a Share that is based on the closing price of a Share reported on the New York Stock Exchange (“NYSE”) or other established stock exchange (or exchanges) on the applicable date, the preceding trading day, the next succeeding trading day, or an average of trading days, as determined by the Committee in its discretion. Unless the Committee determines otherwise, Fair Market Value shall be deemed to be equal to the reported closing price of a Share on the most recent date on which Shares were publicly traded. In the event Shares are not publicly traded at the time a determination of their value is required to be made hereunder, the determination of their Fair Market Value shall be made by the Committee in such manner as it deems appropriate. For purposes of any Nonqualified Stock Option or Stock Appreciation Right that is intended to be exempt from Code Section 409A pursuant to Treasury Regulation Section 1.409A-1(b)(5), FMV shall not be less than the fair market value of a Share determined in accordance with the requirements of Treasury Regulation Section 1.409A-1(b)(5)(iv).

2.15

“Full-Value Award” means an Award other than in the form of an ISO, NQSO, or SAR, and which is settled by the delivery of Shares .

2.16

“Grant Price” means the FMV at the time of grant of an SAR pursuant to Article 7, used to determine the amount of any payment due to the Participant upon exercise of the SAR.

2.17

“Incentive Stock Option” or “ISO” means an Option granted to an Employee to purchase Shares pursuant to Article 6, which Option is designated as an Incentive Stock Option intended to satisfy the requirements of Code Section 422, or any successor provision thereto.

2.18

“Nonemployee Director” means a Director who is not an Employee .

2.19

“Nonemployee Director Award” means any NQSO, SAR, or Full-Value Award granted, whether singly, in combination, or in tandem, to a Participant who is a Nonemployee Director pursuant to such applicable terms, conditions, and limitations as the Board may establish in accordance with this Plan.

2.20

“Nonqualified Stock Option” or “NQSO” means an Option granted to an Employee to purchase Shares pursuant to Article 6, which Option is not intended to meet the requirements of Code Section 422, or that otherwise does not meet such requirements.

2.21

“Option” means an Incentive Stock Option or a Nonqualified Stock Option, as described in Article 6.

2.22

“Option Price” means the price at which a Share may be purchased by a Participant pursuant to an Option.

2.23

“Other Stock-Based Award” means an equity-based or equity-related Award not otherwise described by the terms of this Plan, granted pursuant to Article 10.

2.24

“Participant” means any eligible individual as set forth in Article 5 to whom an Award is granted.

2.25

“Performance-Based Compensation” means compensation under an Award that is intended to satisfy the requirements of Code Section 162(m) for certain performance-based compensation paid to Covered Employees. Notwithstanding the foregoing, nothing in this Plan shall be construed to mean that an Award which does not satisfy the requirements for performance-based compensation under Code Section 162(m) does not constitute performance-based compensation for other purposes, including Code Section 409A.

2.26

“Performance Measures” means measures as described in Article 12 on which the performance goals are based and which are approved by the Company’s shareholders pursuant to this Plan in order to qualify Awards as Performance-Based Compensation.

2.27

“Performance Period” means the period of time during which the performance goals must be met in order to determine the degree of exercisability, vesting, distribution, and/or payment with respect to an Award.

2.28

“Performance Share” means an Award under Article 9 herein and subject to the terms of this Plan, denominated in Shares, the value of which at the time it is payable is determined as a function of the extent to which corresponding performance criteria have been achieved.

2.29

“Performance Unit” means an Award under Article 9 herein and subject to the terms of this Plan, denominated in United States dollars, the value of which at the time it is payable is determined as a function of the extent to which corresponding performance criteria have been achieved.

2.30

“Period of Restriction” means the period when Restricted Stock or Restricted Stock Units are subject to a substantial risk of forfeiture for purposes of Code Section 83 (based on the performance of services, the achievement of performance goals, or upon the occurrence of other events as determined by the Committee, in its discretion), as provided in Article 8.

2.31

“Plan” means this Federal Agricultural Mortgage Corporation 2008 Omnibus Incentive Plan, as amended from time to time.

2.32

“Plan Year” means the calendar year.

2.33

“Prior Plan” means the Company’s 1997 Incentive Plan, as amended and restated.

2.34

“Restricted Stock ” means an Award of Shares granted or sold to a Participant pursuant to Article 8.

2.35

“Restricted Stock Unit” means a right, granted to a Participant pursuant to Article 8, to receive on a future date Shares or an amount in cash equal to the FMV of such Shares.

2.36

“Share” means a share of Class C Non-Voting common stock of the Company, $1.00 par value per share.

2.37

“Stock Appreciation Right” or “ SAR ” means a right, granted to a Participant pursuant to Article 7, to receive upon exercise of such right, in cash or Shares (or a combination thereof), an amount equal to the increase in the FMV of a number of Shares over the Grant Price.

2.38

“Subsidiary” means any corporation or other entity in which the Company has or obtains, directly or indirectly, a proprietary interest of more than fifty percent (50%) by reason of stock ownership or otherwise.

Article 3. Administration

3.1 General . The Committee shall be responsible for administering this Plan, subject to the provisions of this Plan. The Committee may engage attorneys, consultants, accountants, agents, and other individuals, any of whom may be an Employee, and the Committee, the Company, and its officers and Directors shall be entitled to rely upon the advice, opinions, or valuations of any such individuals. All actions taken and all interpretations and determinations made by the Committee shall be final, binding and conclusive upon the Participants, the Company, and all other interested parties.

3.2 Authority of the Committee . The Committee shall have full and exclusive discretionary power to interpret the terms and the intent of this Plan and any Award Agreement or other agreement or document ancillary to or in connection with this Plan, to determine eligibility for Awards, and to adopt such rules, regulations, forms, instruments, and guidelines for administering this Plan as the Committee may deem necessary or proper. Such authority shall include, but not be limited to, selecting Award recipients, establishing all Award terms and conditions, including the terms and conditions set forth in Award Agreements, granting Awards as an alternative to or as the form of payment for grants or rights earned or due under compensation plans or arrangements of the Company, construing any provision of the Plan or any Award Agreement, and, subject to Article 17, adopting modifications and amendments to this Plan or any Award Agreement.

3.3 Delegation . To the extent permitted by applicable law, regulation or rule, the Board or the Committee may designate one or more officers of the Company, Employees, or agents to assist with administration of the Plan and may grant authority to one or more officers of the Company to execute Award Agreements or other documents on behalf of the Company. Any authority granted to an officer of the Company, Employee, or agent by the Board or the Committee pursuant to this Section 3.3 shall be subject to such restrictions and limitations as the Board or the Committee may specify from time to time, and the Board or the Committee may at any time rescind the authority so delegated or appoint one or more other officers of the Company, Employees, or agents to assist with administration of the Plan. An officer of the Company, Employee, or agent appointed under this Section 3.3 to assist with the administration of the Plan shall serve in such capacity at the pleasure of the Board or the Committee.

3.4 Nonemployee Director Awards . The Board shall be responsible for administering this Plan with respect to Awards to Nonemployee Directors, subject to the provisions of this Plan. With respect to the administration of the Plan as it relates to Awards granted to Nonemployee Directors, references in this Plan to the “Committee” shall refer to the Board.

Article 4. Shares Subject to This Plan and Maximum Awards

4.1 Number of Shares Available for Awards .

(a)

Subject to adjustment as provided in Section 4.4, the maximum number of Shares available for delivery to Participants and approved by shareholders under this Plan (the “Share Authorization”) shall be:

(i)

One million five hundred thousand (1,500,000) Shares, plus

(ii)

Any Shares subject to outstanding awards under the Company’s Prior Plan as of the Effective Date that on or after the Effective Date cease for any reason to be subject to such awards (other than by reason of exercise or settlement of the awards to the extent they are exercised for or settled in vested and nonforfeitable Shares) up to an aggregate maximum of one million (1,000,000) Shares.

(b)

The maximum number of Shares of the Share Authorization that may be delivered pursuant to ISOs under this Plan shall be one million five hundred thousand (1,500,000) Shares.

4.2 Share Usage . Shares covered by an Award shall only be counted as used to the extent they are actually delivered. Any Shares related to Awards which terminate by expiration, forfeiture, cancellation, or otherwise without the delivery of such Shares, are settled in cash in lieu of Shares, or are exchanged with the Committee’s permission, prior to the delivery of Shares, for Awards not involving Shares, shall be available again for grant under this Plan. Moreover, if the Option Price of any Option granted under this Plan or the tax withholding requirements with respect to any Award granted under this Plan are satisfied by tendering Shares to the Company (by either actual delivery or by attestation), or if an SAR is exercised, only the number of Shares delivered, net of the Shares tendered, if any, will be deemed delivered for purposes of determining the maximum number of Shares available for delivery under this Plan. The Shares available for delivery under this Plan may be authorized and unissued Shares or treasury Shares.

4.3 Annual Award Limits . Unless and until the Committee determines that an Award to a Covered Employee shall not be designed to qualify as Performance-Based Compensation, the following limits (each an “Annual Award Limit” and, collectively, “Annual Award Limits”) shall apply to grants of such Awards under this Plan:

(a)

Options : The maximum aggregate number of Shares subject to Options granted in any one Plan Year to any one Participant shall be 300,000.

(b)

SARs : The maximum number of Shares subject to Stock Appreciation Rights granted in any one Plan Year to any one Participant shall be 300,000.

(c)

Restricted Stock or Restricted Stock Units : The maximum aggregate grant with respect to Awards of Restricted Stock or Restricted Stock Units in any one Plan Year to any one Participant shall be 150,000.

(d)

Performance Units or Performance Shares : The maximum aggregate Award of Performance Units or Performance Shares that a Participant may receive in any one Plan Year shall be 150,000 Shares, or equal to the value of 150,000 Shares determined as of the date of vesting or payout, as applicable.

(e)

Cash-Based Awards : The maximum aggregate amount awarded or credited with respect to Cash-Based Awards to any one Participant in any one Plan Year may not exceed the value of $2,000,000 dollars determined as of the date of vesting or payout, as applicable.

(f)

Other Stock-Based Awards : The maximum aggregate grant with respect to Other Stock-Based Awards pursuant to Section 10.2 in any one Plan Year to any one Participant shall be 150,000.

4.4 Adjustments in Authorized Shares . In the event of any corporate event or transaction, including, but not limited to, a change in the Shares or the capitalization of the Company, a merger, consolidation, reorganization, recapitalization, separation, partial or complete liquidation, stock dividend, stock split, reverse stock split, split up, spin-off, or other distribution of stock or property of the Company, combination of Shares, exchange of Shares, dividend in-kind, or other like change in capital structure, number of outstanding Shares or distribution (other than normal cash dividends) to shareholders of the Company, or any similar corporate event or transaction, the Committee, in order to prevent dilution or enlargement of Participants’ rights under this Plan and outstanding Awards, shall substitute or adjust, as applicable, the number and kind of Shares (or cash) that may be delivered under this Plan or under particular forms of Awards, the number and kind of Shares (or cash) subject to outstanding Awards, the Option Price or Grant Price applicable to outstanding Awards, the Annual Award Limits, and the terms and conditions of outstanding Awards. Notwithstanding anything herein to the contrary, the Committee may not take any such action described in this Section 4.4 that would cause an Award that is otherwise exempt from Code Section 409A to become subject to Code Section 409A, or cause an Award that is subject to the requirements of Code Section 409A to fail to comply with such requirements.

The Committee shall also make appropriate adjustments in the terms of any Awards under this Plan to reflect or related to such changes or distributions and to modify any other terms of outstanding Awards, including modifications of performance goals and changes in the length of Performance Periods. The determination of the Committee as to the foregoing adjustments, if any, shall be final, conclusive and binding on the Company and its Subsidiaries, and all Participants and other parties having any interest in an Award under this Plan.

Subject to the provisions of Article 17 and notwithstanding anything else herein to the contrary, without affecting the number of Shares reserved or available hereunder, the Committee may authorize the issuance or assumption of benefits, or grant of substitute Awards under this Plan in connection with any merger, consolidation, acquisition of property or stock, or reorganization upon such terms and conditions as it may deem appropriate (including, but not limited to, a conversion of equity awards into Awards under this Plan in a manner consistent with paragraph 53 of FASB Interpretation No. 44), subject to compliance with the rules under Code Sections 409A, 422, and 424, and other applicable law, rules or regulations.

Article 5. Eligibility and Participation

5.1 Eligibility . Individuals eligible to participate in this Plan include all Employees and Directors.

5.2 Actual Participation . Subject to the provisions of this Plan, the Committee may, from time to time, select from all eligible individuals, those individuals to whom Awards shall be granted and shall determine, in its sole discretion, the nature of, any and all terms permissible by law, and the amount of each Award.

Article 6. Stock Options

6.1 Grant of Options . Subject to the terms and provisions of this Plan, Options may be granted to Participants in such number, and upon such terms, and at any time and from time to time as shall be determined by the Committee, in its sole discretion; provided that ISOs may be granted only to eligible Employees of the Company or its Subsidiaries (as permitted under Code Sections 422 and 424). However, an Employee who is employed by a Subsidiary and is subject to Code Section 409A may only be granted Options to the extent the Shares corresponding to the Options qualify as “service recipient stock” for purposes of Code Section 409A.

6.2 Option Award Agreement . Each Option Award shall be evidenced by an Award Agreement that shall specify the Option Price, the maximum duration of the Option, the number of Shares to which the Option pertains, the conditions upon which an Option shall become vested and exercisable, and such other provisions as the Committee shall determine which are not inconsistent with the terms of this Plan. The Award Agreement also shall specify whether the Option is intended to be an ISO or an NQSO.

6.3 Option Price . The Option Price for each grant of an Option under this Plan shall be determined by the Committee in its sole discretion and shall be specified in the Award Agreement; provided , however , the Option Price must be at least equal to one hundred percent (100%) of the FMV of the Shares as determined on the date of grant.

6.4 Term of Options . Each Option granted to a Participant shall expire at such time as the Committee shall determine at the time of grant; provided , however , no Option shall be exercisable later than the tenth (10 th ) anniversary date of its grant.

6.5 Exercise of Options . Options granted under this Article 6 shall be exercisable at such times and be subject to such restrictions and conditions as the Committee shall in each instance approve, which terms and restrictions need not be the same for each grant or for each Participant.

6.6 Payment . Subject to the provisions of the applicable Award Agreement, Options granted under this Article 6 shall be exercised by the delivery of a notice of exercise to the Company or an agent designated by the Company in a form specified or accepted by the Committee, or by complying with any alternative procedures which may be authorized by the Committee, setting forth the number of Shares with respect to which the Option is to be exercised, accompanied by full payment for the Shares.

A condition of the delivery of the Shares as to which an Option shall be exercised shall be the payment of the Option Price. The Option Price of any Option shall be payable to the Company in full either: (a) in cash or its equivalent; (b) by tendering (either by actual delivery or attestation) previously acquired Shares having an aggregate fair market value at the time of exercise equal to the Option Price; (c) by a cashless (broker-assisted) exercise; (d) by withholding Shares otherwise deliverable in connection with the exercise of the Option; (e) by any other method approved or accepted by the Committee in its sole discretion; or (f) by a combination of any of the foregoing, subject to such terms and conditions as the Committee, in its discretion, may impose.

Subject to any governing rules or regulations, as soon as practicable after receipt of written notification of exercise and full payment (including satisfaction of any applicable tax withholding), the Company shall deliver to the Participant evidence of book entry Shares, or upon the Participant’s request, Share certificates in an appropriate amount based upon the number of Shares purchased under the Option(s).

Unless otherwise determined by the Committee, all cash payments shall be made in United States dollars.

6.7 Restrictions . The Committee may impose such restrictions on any Shares acquired pursuant to the exercise of an Option granted under this Article 6 as it may deem advisable, including, without limitation, minimum holding period requirements, restrictions under applicable federal and state laws, blackout periods or under the requirements of any stock exchange or market upon which such Shares are then listed and/or traded.

6.8 Termination of Employment . Each Participant’s Award Agreement shall set forth the extent to which the Participant shall have the right to exercise the Option following termination of the Participant’s employment or provision of services to the Company or its Subsidiaries. Such provisions shall be determined in the sole discretion of the Committee, shall be included in the Award Agreement, need not be uniform among all Options granted pursuant to this Article 6, and may reflect distinctions based on the reason for termination.

Except as provided in the Award Agreement and as provided below, if a Participant ceases for any reason to be employed by the Company or its Subsidiaries (unless such termination of employment was for “Cause”), the Participant may, at any time within ninety (90) days after the effective date of such termination of employment, exercise his or her Options to the extent that he or she would be entitled to exercise them on such date, but in no event shall any Option be exercisable more than ten (10) years from the date it was granted; provided, however , that the Committee shall have the discretion to determine whether Options not yet exercisable at the date of termination of employment shall become immediately exercisable for ninety (90) days thereafter. The Committee shall determine, subject to applicable law, whether a leave of absence shall constitute a termination of service.

If a Participant ceases to be employed by the Company or its Subsidiaries for “Cause,” the Participant’s unexercised Options shall terminate immediately. For purposes of this Section 6.8, “Cause” shall be defined as in the employment agreement, if any, between the Company or its Subsidiaries and such Participant, or, if there is no employment agreement, shall mean: (a) the willful failure of the Participant substantially to perform his or her duties, other than any such failure resulting from incapacity due to physical or mental illness, or (b) the willful engagement by the Participant in activities contrary to the best interests of the Company.

Unless otherwise provided in the Award Agreement, if a Participant dies while employed by the Company or its Subsidiaries, or within ninety (90) days after having retired with the consent of the Company or its Subsidiaries, the Shares which the Participant was entitled to exercise on the date of the Participant’s death under an Option or Options granted under the Plan may be exercised at any time after the Participant’s death by the Participant’s beneficiary; provided, however , that no Option may be exercised after the earlier of: (a) one (1) year after the Participant’s death, or (b) the expiration date specified for the particular Option in the Award Agreement; and provided, further, that any unvested Option or Options shall immediately vest upon the death of a Participant while employed by the Company or its Subsidiaries and may be exercised as provided in this Section 6.8.

Unless otherwise provided in the Award Agreement, if a Participant terminates employment by reason of Disability (as defined below), any unexercised Option held by the Participant shall, if unvested, immediately vest and shall expire one (1) year after the Participant has a termination of employment because of such “Disability” and such Option may only be exercised by the Participant or his or her beneficiary to the extent that the Option was exercisable on the date of termination of employment because of such “Disability;” provided, however , no Option may be exercised after the expiration date specified for the particular Option in the Award Agreement. “Disability” shall mean: (a) in the case of a Participant whose employment with the Company or a Subsidiary is subject to the terms of an employment agreement between such Participant and the Company or Subsidiary, which employment agreement includes a definition of “Disability,” the term “Disability” as used in this Plan or any Award Agreement shall have the meaning set forth in such employment agreement during the period that such employment agreement remains in effect; and (b) in all other cases, the term “Disability” as used in this Plan or any Award Agreement shall mean a condition that (in the opinion of an independent medical consultant) has rendered the Participant mentally or physically incapable of performing the services required to be performed by the Participant and has resulted in the termination of the directorship or employment relationship, as the case may be.

6.9 Notification of Disqualifying Disposition . If any Participant shall make any disposition of Shares delivered pursuant to the exercise of an ISO under the circumstances described in Code Section 421(b) (relating to certain disqualifying dispositions), such Participant shall notify the Company of such disposition within ten (10) days thereof.

6.10 No Other Feature of Deferral . No Option granted pursuant to this Plan shall provide for any feature for the deferral of compensation subject to Code Section 409A, unless such deferral complies with the requirements of Code Section 409A.

6.11 Right of First Refusal . The Committee may, in its discretion, include in any Award Agreement relating to an Option granted under the Plan a condition that the Participant shall agree to grant the Company a Right of First Refusal, which, if so included, shall have the following terms and conditions:

(a)

The Participant shall give the Company written notice (the “Offer Notice”) of the Participant’s intention to sell any Shares acquired (or to be acquired) upon exercise of an Option (the “Offered Shares”). The Company shall have three (3) business days (the “Exercise Period”) following receipt of the Offer Notice to determine whether to exercise its Right of First Refusal, which may be exercised either as to all or as to none of the Offered Shares. By the end of the Exercise Period, the Company shall have given written notice to the Participant of its election to exercise (the “Acceptance Notice”) or not to exercise (the “Rejection Notice”) its Right of First Refusal. The Participant shall tender the Offered Shares to the Company within ten (10) business days after receipt of an Acceptance Notice. Upon receipt of a Rejection Notice, the Participant may sell the Offered Shares free and clear of such Right of First Refusal.

(b)

The price to be paid by the Company for the Offered Shares shall be the Fair Market Value of the Company’s Shares.

Article 7. Stock Appreciation Rights

7.1 Grant of SARs . Subject to the terms and conditions of this Plan, SARs may be granted to Participants at any time and from time to time as shall be determined by the Committee. However, an Employee who is employed by a Subsidiary and is subject to Code Section 409A may only be granted SARs to the extent the Shares corresponding to the SARs qualify as “service recipient stock” for purposes of Code Section 409A.

Subject to the terms and conditions of this Plan, the Committee shall have complete discretion in determining the number of SARs granted to each Participant and in determining the terms and conditions pertaining to such SARs which are not inconsistent with the terms of this Plan.

The Grant Price for each grant of an SAR shall be determined by the Committee and shall be specified in the Award Agreement; provided, however , the Grant Price on the date of grant must be at least equal to one hundred percent (100%) of the FMV of the Shares as determined on the date of grant.

7.2 SAR Award Agreement . Each SAR Award shall be evidenced by an Award Agreement that shall specify the Grant Price, the term of the SAR, and such other provisions as the Committee shall determine which are not inconsistent with the terms of this Plan.

7.3 Term of SAR . The term of an SAR granted under this Plan shall be determined by the Committee, in its sole discretion, and except as determined otherwise by the Committee and specified in the SAR Award Agreement, no SAR shall be exercisable later than the tenth (10 th ) anniversary date of its grant.

7.4 Exercise of SARs . SARs may be exercised upon whatever terms and conditions the Committee, in its sole discretion, imposes.

7.5 Settlement of SARs . Upon the exercise of an SAR, a Participant shall be entitled to receive payment from the Company in an amount determined by multiplying:

(a)

The excess of the Fair Market Value of a Share on the date of exercise over the Grant Price; by

(b)

The number of Shares with respect to which the SAR is exercised.

At the discretion of the Committee, the payment upon SAR exercise may be in cash, Shares, or any combination thereof, or in any other manner approved by the Committee in its sole discretion. The Committee’s determination regarding the form of SAR payout shall be set forth in the Award Agreement pertaining to the grant of the SAR.

7.6 Termination of Employment . Each Award Agreement shall set forth the extent to which the Participant shall have the right to exercise the SAR following termination of the Participant’s employment with or provision of services to the Company or its Subsidiaries. Such provisions shall be determined in the sole discretion of the Committee, shall be included in the Award Agreement, need not be uniform among all SARs granted pursuant to this Plan, and may reflect distinctions based on the reason for termination.

Except as provided in the Award Agreement and as provided below, if a Participant ceases for any reason to be employed by the Company or its Subsidiaries (unless such termination of employment was for “Cause”), the Participant may, at any time within ninety (90) days after the effective date of such termination of employment, exercise his or her SARs to the extent that he or she would be entitled to exercise them on such date, but in no event shall any SAR be exercisable more than ten (10) years from the date it was granted; provided, however , that the Committee shall have the discretion to determine whether SARs not yet exercisable at the date of termination of employment shall become immediately exercisable for ninety (90) days thereafter. The Committee shall determine, subject to applicable law, whether a leave of absence shall constitute a termination of service.

If a Participant ceases to be employed by the Company or its Subsidiaries for “Cause,” the Participant’s unexercised SARs shall terminate immediately. For purposes of this Section 7.6, “Cause” shall be defined as in the employment agreement, if any, between the Company or its Subsidiaries and such Participant, or, if there is no employment agreement, shall mean: (a) the willful failure of the Participant substantially to perform his or her duties, other than any such failure resulting from incapacity due to physical or mental illness, or (b) the willful engagement by the Participant in activities contrary to the best interests of the Company.

Unless otherwise provided in the Award Agreement, if a Participant dies while employed by the Company or its Subsidiaries, or within ninety (90) days after having retired with the consent of the Company or its Subsidiaries, the Shares which the Participant was entitled to exercise on the date of the Participant’s death under an SAR or SARs granted under the Plan may be exercised at any time after the Participant’s death by the Participant’s beneficiary; provided, however , that no SAR may be exercised after the earlier of: (a) one (1) year after the Participant’s death, or (b) the expiration date specified for the particular SAR in the Award Agreement; and provided, further, that any unvested SAR or SARs shall immediately vest upon the death of a Participant while employed by the Company or its Subsidiaries and may be exercised as provided in this Section 7.6.

Unless otherwise provided in the Award Agreement, if a Participant terminates employment by reason of Disability (as defined below), any unexercised SAR held by the Participant shall, if unvested, immediately vest and shall expire one (1) year after the Participant has a termination of employment because of such “Disability” and such SAR may only be exercised by the Participant or his or her beneficiary to the extent that the SAR was exercisable on the date of termination of employment because of such “Disability;” provided, however , no SAR may be exercised after the expiration date specified for the particular SAR in the Award Agreement. “Disability” shall mean: (a) in the case of a Participant whose employment with the Company or a Subsidiary is subject to the terms of an employment agreement between such Participant and the Company or Subsidiary, which employment agreement includes a definition of “Disability,” the term “Disability” as used in this Plan or any Award Agreement shall have the meaning set forth in such employment agreement during the period that such employment agreement remains in effect; and (b) in all other cases, the term “Disability” as used in this Plan or any Award Agreement shall mean a condition that (in the opinion of an independent medical consultant) has rendered the Participant mentally or physically incapable of performing the services required to be performed by the Participant and has resulted in the termination of the directorship or employment relationship, as the case may be.

7.7 Restrictions . The Committee shall impose such other conditions and/or restrictions on any Shares received upon exercise of an SAR granted pursuant to this Plan as it may deem advisable or desirable. These restrictions may include, but shall not be limited to, a requirement that the Participant hold the Shares received upon exercise of an SAR for a specified period of time, restrictions under applicable federal and state laws, blackout periods or under the requirements of any stock exchange or market upon which such Shares are then listed and/or traded.

7.8 No Other Feature of Deferral . No SAR granted pursuant to this Plan shall provide for any feature for the deferral of compensation subject to Code Section 409A unless such deferral complies with the requirements of Code Section 409A.

Article 8. Restricted Stock and Restricted Stock Units

8.1 Grant of Restrict ed Stock or Restricted Stock Units . Subject to the terms and provisions of this Plan, the Committee, at any time and from time to time, may grant Shares of Restricted Stock and/or Restricted Stock Units to Participants in such amounts as the Committee shall determine.

8.2 Restricted Stock and Restricted Stock Unit Award Agreement . Each Restricted Stock and/or Restricted Stock Unit Award shall be evidenced by an Award Agreement that shall specify the Period(s) of Restriction, the number of Shares of Restricted Stock or the number of Restricted Stock Units granted, and such other provisions as the Committee shall determine which are not inconsistent with the terms of this Plan.

8.3 Restrictions . The Committee shall impose such other conditions and/or restrictions on any Shares of Restricted Stock or Restricted Stock Units granted pursuant to this Plan as it may deem advisable including, without limitation, a requirement that Participants pay a stipulated purchase price for each Share of Restricted Stock or each Restricted Stock Unit, restrictions based upon the achievement of specific performance goals, service-based restrictions on vesting following the attainment of the performance goals, service-based restrictions, and/or restrictions under applicable laws or under the requirements of any stock exchange or market upon which such Shares are listed or traded, or holding requirements or sale restrictions placed on the Shares by the Company upon vesting of such Restricted Stock or Restricted Stock Units.

To the extent deemed appropriate by the Committee, the Company may retain the certificates representing Shares of Restricted Stock in the Company’s possession until such time as all conditions and/or restrictions applicable to such Shares have been satisfied or lapse.

Except as otherwise provided in this Article 8, Shares of Restricted Stock subject to each Restricted Stock Award shall become freely transferable by the Participant after all conditions and restrictions applicable to such Shares have been satisfied or lapse (including satisfaction of any applicable tax withholding obligations), and Restricted Stock Units shall be paid in cash, Shares, or a combination of cash and Shares as the Committee, in its sole discretion, shall determine.

8.4 Certificate Legend . In addition to any legends placed on certificates pursuant to Section 8.3, each certificate representing Shares of Restricted Stock granted pursuant to this Plan may bear a legend such as the following or as otherwise determined by the Committee in its sole discretion:

The sale or transfer of Shares of stock represented by this certificate, whether voluntary, involuntary, or by operation of law, is subject to certain restrictions on transfer as set forth in the Federal Agricultural Mortgage Corporation 2008 Omnibus Incentive Plan, and in the associated Award Agreement. A copy of this Plan and such Award Agreement may be obtained from Federal Agricultural Mortgage Corporation.

8.5 Voting Rights . Shares corresponding to Awards under this Plan have no voting rights.

8.6 Termination of Employment . Each Award Agreement shall set forth the extent to which the Participant shall have the right to retain Restricted Stock and/or Restricted Stock Units following termination of the Participant’s employment with or provision of services to the Company or its Subsidiaries. Such provisions shall be determined in the sole discretion of the Committee, shall be included in the Award Agreement entered into with each Participant, need not be uniform among all Shares of Restricted Stock or Restricted Stock Units delivered pursuant to this Plan, and may reflect distinctions based on the reasons for termination.

8.7 Section 83(b) Election . The Committee may provide in an Award Agreement that the Award of Restricted Stock is conditioned upon the Participant making or refraining from making an election with respect to the Award under Code Section 83(b). If a Participant makes an election pursuant to Code Section 83(b) concerning a Restricted Stock Award, the Participant shall be required to file promptly a copy of such election with the Company.

8.8 No Other Feature of Deferral . No Restricted Stock Unit granted pursuant to this Plan shall provide for any feature for the deferral of compensation subject to Code Section 409A unless such deferral complies with the requirements of Code Section 409A.

Article 9. Performance Units/Performance Shares

9.1 Grant of Performance Units/Performance Shares . Subject to the terms and provisions of this Plan, the Committee, at any time and from time to time, may grant Performance Units and/or Performance Shares to Participants in such amounts and upon such terms as the Committee shall determine.

9.2 Performance Unit and Performance Share Award Agreement . Each Performance Unit and/or Performance Share Award shall be evidenced by an Award Agreement that shall specify the number of Performance Units and/or Performance Shares granted, the performance goals, and the applicable Performance Period, and such other provisions as the Committee shall determine which are not inconsistent with the terms of this Plan.

9.3 Value of Performance Units/Performance Shares . Each Performance Unit shall have an initial value that is established by the Committee at the time of grant. Each Performance Share shall have an initial value equal to the Fair Market Value of a Share on the date of grant. The Committee, in its discretion, shall set performance goals for each Performance Period which, depending on the extent to which they are met, will determine the value and/or number of Performance Units/Performance Shares that will be paid out or distributed to the Participant.

9.4 Earning of Performance Units/Performance Shares . Subject to the terms of this Plan, after the applicable Performance Period has ended, the holder of Performance Units/Performance Shares shall be entitled to receive payout of the value and/or distribution of the number of Performance Units/Performance Shares earned by the Participant over the Performance Period, to be determined as a function of the extent to which the corresponding performance goals have been achieved.

9.5 Form and Timing of Distribution or Payment of Performance Units/Performance Shares . Distribution of Shares or payment of the value earned pursuant to Performance Units/Performance Shares shall be as determined by the Committee and as evidenced in the Award Agreement. Subject to the terms of this Plan, the Committee, in its sole discretion, may pay earned Performance Units/Performance Shares in the form of cash or in Shares (or in a combination thereof) equal to the value of the earned Performance Units/Performance Shares at the close of the applicable Performance Period, unless the terms of the Award require payment at some later date. Any Shares delivered pursuant to Performance Share Awards may be subject to any restrictions deemed appropriate by the Committee. The determination of the Committee with respect to the form of payout of such Awards shall be set forth in the Award Agreement pertaining to the grant of the Award.

9.6 Termination of Employment . Each Award Agreement shall set forth the extent to which the Participant shall have the right to retain Performance Units and/or Performance Shares following termination of the Participant’s employment with or provision of services to the Company or its Subsidiaries. Such provisions shall be determined in the sole discretion of the Committee, shall be included in the Award Agreement entered into with each Participant, need not be uniform among all Awards of Performance Units or Performance Shares granted pursuant to this Plan, and may reflect distinctions based on the reasons for termination.

Article 10. Cash-Based Awards and Other Stock-Based Awards

10.1 Grant of Cash-Based Awards . Subject to the terms and provisions of the Plan, the Committee, at any time and from time to time, may grant Cash-Based Awards to Participants in such amounts and upon such terms as the Committee may determine.

10.2 Other Stock-Based Awards . The Committee may grant other types of equity-based or equity-related Awards not otherwise described by the terms of this Plan (including the grant or offer for sale of unrestricted Shares) in such amounts and subject to such terms and conditions as the Committee shall determine. Such Awards may involve the transfer of actual Shares to Participants, or payment in cash or otherwise of amounts based on the value of Shares, and may include, without limitation, Awards designed to comply with or take advantage of the applicable local laws of jurisdictions other than the United States.

10.3 Cash-Based and Other Stock-Based Award Agreements . Each Cash-Based and/or Other Stock-Based Award shall be evidenced by an Award Agreement that shall specify the payment amount or the number of Shares granted, the performance goals and the Performance Period, if applicable, the time and form of payment or distribution, and such other provisions as the Committee shall determine which are not inconsistent with the terms of this Plan.

10.4 Value of Cash-Based and Other Stock-Based Awards . Each Cash-Based Award shall specify a payment amount or formula for calculating the payment amount, as determined by the Committee. Each Other Stock-Based Award shall be expressed in terms of Shares or units based on Shares, as determined by the Committee. The Committee may establish performance goals in its discretion. If the Committee exercises its discretion to establish performance goals, the number and/or value of Cash-Based Awards or Other Stock-Based Awards that will be paid out to the Participant will depend on the extent to which the performance goals are met.

10.5 Payment of Cash-Based Awards and Other Stock-Based Awards . Payment, if any, with respect to a Cash-Based Award or an Other Stock-Based Award shall be made in accordance with the terms of the Award, in cash or Shares as the Committee determines.

10.6 Termination of Employment . The Committee shall determine the extent to which the Participant shall have the right to receive payment or distribution under any Cash-Based Awards or Other Stock-Based Awards following termination of the Participant’s employment with or provision of services to the Company or its Subsidiaries. Such provisions shall be determined in the sole discretion of the Committee, may be included in an agreement entered into with each Participant, but need not be uniform among all Awards of Cash-Based Awards or Other Stock-Based Awards granted pursuant to the Plan, and may reflect distinctions based on the reasons for termination.

Article 11. Transferability of Awards

11.1 Transferability . Except as provided in Section 11.2 below, during a Participant’s lifetime, his or her Awards shall be exercisable only by the Participant. Awards shall not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated other than by will or the laws of descent and distribution; no Awards shall be subject, in whole or in part, to attachment, execution, or levy of any kind; and any purported transfer in violation hereof shall be null and void. The Committee may establish such procedures as it deems appropriate for a Participant to designate a beneficiary to whom any amounts payable or Shares deliverable in the event of, or following, the Participant’s death, may be provided.

11.2 Committee Action . The Committee may, in its discretion, determine that notwithstanding Section 11.1, any or all Awards other than ISOs shall be transferable to and exercisable by such transferees, and subject to such terms and conditions as the Committee may deem appropriate.

Article 12. Performance Measures

12.1 Performance Measures . The performance goals upon which the payment or vesting of an Award to a Covered Employee that is intended to qualify as Performance-Based Compensation shall be limited to the following Performance Measures:

(a)

Net earnings or net income (before or after taxes, the impact of changes in the fair value of derivatives, stock plan expenses, yield maintenance and/or loan losses) or any other measure that uses all or part of such components;

(b)

Earnings per share;

(c)

Revenues or mission volume or growth therein;

(d)

Net operating profit;

(e)

Return measures (including, but not limited to, return on assets, capital, invested capital, equity, sales, or revenue);

(f)

Cash flow (including, but not limited to, operating cash flow, free cash flow, cash flow return on equity, and cash flow return on investment);

(g)

Earnings before or after taxes, interest, depreciation, and/or amortization;

(h)

Gross or operating margins;

(i)

Productivity ratios;

(j)

Share price (including, but not limited to, growth measures and total shareholder return);

(k)

Expense targets;

(l)

Margins;

(m)

Operating efficiency

(n)

Market share;

(o)

Customer satisfaction;

(p)

Working capital targets;

(q)

Delinquency rate;

(r)

Net charge-offs; and

(s)

Economic value added or EVA (net operating profit after tax minus the sum of capital multiplied by the cost of capital).

Any Performance Measure(s) may be used to measure the performance of the Company and/or Subsidiary as a whole or any business unit of the Company and/or Subsidiary, or any combination thereof, as the Committee may deem appropriate, or any of the above Performance Measures as compared to the performance of a group of comparator companies, or published or special index that the Committee, in its sole discretion, deems appropriate, or the Company may select Performance Measure (j) above as compared to various stock market indices. The Committee also has the authority to provide for accelerated vesting of any Award based on the achievement of performance goals pursuant to the Performance Measures specified in this Article 12.

12.2 Evaluation of Performance . The Committee may provide in any such Award that any evaluation of performance may include or exclude any of the following events that occurs during a Performance Period: (a) asset write-downs; (b) litigation or claim judgments or settlements; (c) the effect of changes in tax laws, accounting principles, or other laws or provisions affecting reported results; (d) any reorganization and restructuring programs; (e) extraordinary nonrecurring items as described in Accounting Principles Board Opinion No. 30 and/or in management’s discussion and analysis of financial condition and results of operations appearing in the Company’s annual report to shareholders for the applicable year; (f) acquisitions or divestitures; and (g) foreign exchange gains and losses. To the extent such inclusions or exclusions affect Awards to Covered Employees, they shall be prescribed in a form that meets the requirements of Code Section 162(m) for deductibility.

12.3 Adjustment of Performance-Based Compensation . Awards that are intended to qualify as Performance-Based Compensation may not be adjusted upward. The Committee shall retain the discretion to adjust such Awards downward, either on a formula or discretionary basis, or any combination as the Committee determines.

12.4 Committee Discretion . In the event that applicable tax and/or securities laws change to permit Committee discretion to alter the governing Performance Measures without obtaining shareholder approval of such changes, the Committee shall have sole discretion to make such changes without obtaining shareholder approval. In addition, in the event the Committee determines that it is advisable to grant Awards that shall not qualify as Performance-Based Compensation, the Committee may make such grants without satisfying the requirements of Code Section 162(m) and base vesting on Performance Measures other than those set forth in Section 12.1.

Article 13. Nonemployee Director Awards

Nonemployee Directors may only be granted Nonemployee Director Awards under the Plan in accordance with this Article 13. From time to time, the Board shall set the amount(s) and type(s) of equity awards that shall be granted to all Nonemployee Directors on a periodic basis pursuant to the Plan. The Board shall grant such Nonemployee Director Awards to Nonemployee Directors as it shall from time to time determine.

Article 14. Dividend Equivalents

Any Participant selected by the Committee may be granted dividend equivalents based on the dividends declared on Shares that are subject to any Award, to be credited as of dividend payment dates, during the period between the date the Award is granted and the date the Award is exercised, vests, or expires, as determined by the Committee. Such dividend equivalents shall be converted to cash or additional Shares by such formula and at such time and subject to such limitations as may be determined by the Committee when the decision to grant the Award is made, unless the Award is not deferred compensation for purposes of Code Section 409A.

Article 15. Beneficiary Designation

Each Participant under this Plan may, from time to time, name any beneficiary or beneficiaries (who may be named contingently or successively) to whom any benefit under this Plan is to be paid in case of his death before he receives any or all of such benefit. Each such designation shall revoke all prior designations by the same Participant, shall be in a form prescribed by the Committee, and will be effective only when filed by the Participant in writing with the Company during the Participant’s lifetime. In the absence of any such beneficiary designation, benefits remaining unpaid or rights remaining unexercised at the Participant’s death shall be paid to or exercised by the Participant’s executor, administrator, or legal representative.

Article 16. Rights of Participants

16.1 Employment . Nothing in this Plan or an Award Agreement shall interfere with or limit in any way the right of the Company or its Subsidiaries to terminate any Participant’s employment or service on the Board or to the Company or its Subsidiaries at any time or for any reason not prohibited by law, nor confer upon any Participant any right to continue his employment or service as a Director for any specified period of time.

Neither an Award nor any benefits arising under this Plan shall constitute an employment contract with the Company or its Subsidiaries and, accordingly, subject to Articles 3 and 17, this Plan and the benefits hereunder may be terminated at any time in the sole and exclusive discretion of the Committee without giving rise to any liability on the part of the Company or its Subsidiaries.

16.2 Participation . No individual shall have the right to be selected to receive an Award under this Plan, or, having been so selected, to be selected to receive a future Award.

16.3 Rights as a Shareholder . Except as otherwise provided herein, a Participant shall have none of the rights of a shareholder with respect to Shares covered by any Award until the Participant becomes the record holder or beneficial owner of such Shares.

Article 17. Amendment, Modification, Suspension, and Termination

17.1 Amendment, Modification, Suspension, and Termination . Subject to Section 17.3, the Board or the Committee may, at any time and from time to time, alter, amend, modify, suspend, or terminate this Plan and any Award Agreement in whole or in part; provided, however , that without the prior approval of the Company’s shareholders and except as provided in Section 4.4, Options or SARs granted under this Plan will not be repriced, replaced, or regranted through cancellation, or by lowering the Option Price of a previously granted Option or the Grant Price of a previously granted SAR, nor will any outstanding Options having an Option Price or SARs having a Grant Price less than the current FMV be canceled in exchange for cash or other Awards, and no material amendment of this Plan shall be made without shareholder approval if shareholder approval is required by law, regulation, stock exchange rule or otherwise.

17.2 Adjustment of Awards Upon the Occurrence of Certain Unusual or Nonrecurring Events . The Committee may make adjustments in the terms and conditions of, and the criteria included in, Awards in recognition of unusual or nonrecurring events (including, without limitation, the events described in Section 4.4 hereof) affecting the Company or the financial statements of the Company or of changes in applicable laws, regulations, or accounting principles, whenever the Committee determines that such adjustments are appropriate in order to prevent unintended dilution or enlargement of the benefits or potential benefits intended to be made available under this Plan. The determination of the Committee as to the foregoing adjustments, if any, shall be conclusive and binding on Participants under this Plan.

17.3 Awards Previously Granted . Notwithstanding any other provision of this Plan to the contrary (other than Section 17.4), no termination, amendment, suspension, or modification of this Plan or an Award Agreement shall adversely affect in any material way any Award previously granted under this Plan, without the written consent of the Participant holding such Award.

17.4 Amendment to Conform to Law . Notwithstanding any other provision of this Plan to the contrary, the Board or the Committee may unilaterally amend the Plan or an Award Agreement in accordance with the following:

(a)

The Board or the Committee may amend the Plan or an Award Agreement to take effect retroactively or otherwise, as deemed necessary or advisable for the purpose of conforming the Plan or an Award Agreement to any present or future law relating to plans of this or similar nature, and to the administrative regulations and rulings promulgated thereunder. By accepting an Award under this Plan, a Participant agrees to any amendment made pursuant to this Section 17.4 to any Award granted under the Plan without further consideration or action.

(b)

The Board or the Committee may amend the Plan or an Award Agreement to: (i) exempt the Award from the requirements of Code Section 409A or preserve the intended tax treatment of the benefits provided with respect to the Award, or (ii) comply with the requirements of Section 409A of the Code.

Article 18. Withholding

18.1 Tax Withholding . The Company shall have the power and the right to deduct or withhold, or require a Participant to remit to the Company, the minimum statutory amount to satisfy federal, state, and local taxes, required by law or regulation to be withheld with respect to any taxable event relating to an Award.

18.2 Share Withholding . With respect to withholding required upon the exercise of Options or SARs, upon the lapse of restrictions on Restricted Stock and Restricted Stock Units, or upon the achievement of performance goals related to Performance Shares, or any other taxable event arising as a result of an Award granted hereunder, Participants may elect, subject to the approval of the Committee, to satisfy the withholding requirement, in whole or in part, by having the Company withhold Shares having a fair market value on the date the tax is to be determined equal to the minimum statutory total tax that could be imposed on the transaction. All such elections shall be irrevocable, made in writing, and signed by the Participant, and shall be subject to any restrictions or limitations that the Committee, in its sole discretion, deems appropriate.

Article 19. Successors

All obligations of the Company under this Plan with respect to Awards granted hereunder shall be binding on any successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation, or otherwise, of all or substantially all of the business and/or assets of the Company.

Article 20. General Provisions

20.1 Forfeiture Events . The Committee may specify in an Award Agreement that the Participant’s rights, payments, and benefits with respect to an Award shall be subject to reduction, cancellation, forfeiture, or recoupment upon the occurrence of certain specified events, in addition to any otherwise applicable vesting or performance conditions of an Award.

20.2 Legend . The certificates for Shares may include any legend which the Committee deems appropriate to reflect any restrictions on transfer of such Shares.

20.3 Gender and Number . Except where otherwise indicated by the context, any masculine term used herein also shall include the feminine, the plural shall include the singular, and the singular shall include the plural.

20.4 Severability . In the event any provision of this Plan shall be held illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining parts of this Plan, and this Plan shall be construed and enforced as if the illegal or invalid provision had not been included.

20.5 Requirements of Law . The granting of Awards and the delivery of Shares under this Plan shall be subject to all applicable laws, rules, and regulations, and to such approvals by any governmental agencies or national securities exchanges as may be required.

20.6 Delivery of Title . The Company shall have no obligation to issue or deliver evidence of title for Shares granted pursuant to this Plan prior to:

(a)

Obtaining any approvals from governmental agencies that the Company determines are necessary or advisable; and

(b)

Completion of any registration or other qualification of the Shares under any applicable federal or state law or ruling of any governmental body that the Company determines to be necessary or advisable.

20.7 Inability to Obtain Authority . The inability of the Company to obtain authority from any regulatory body having jurisdiction, which authority is deemed by the Company’s counsel to be necessary to the lawful delivery or sale of any Shares hereunder, shall relieve the Company of any liability in respect of the failure to deliver or sell such Shares as to which such requisite authority shall not have been obtained.

20.8 Uncertificated Shares . To the extent that this Plan provides for issuance of certificates to reflect the transfer of Shares, the transfer of such Shares may be effected on a noncertificated basis, to the extent not prohibited by applicable law or the rules of any stock exchange.

20.9 Unfunded Plan . Participants shall have no right, title, or interest whatsoever in or to any investments that the Company or its Subsidiaries may make to aid it in meeting its obligations under this Plan. Nothing contained in this Plan, and no action taken pursuant to its provisions, shall create or be construed to create a trust of any kind, or a fiduciary relationship between the Company and its Subsidiaries and any Participant, beneficiary, legal representative, or any other individual. To the extent that any individual acquires a right to receive payments from the Company or its Subsidiaries under this Plan, such right shall be no greater than the right of an unsecured general creditor of the Company or a Subsidiary, as the case may be. All payments to be made hereunder shall be paid from the general funds of the Company or a Subsidiary, as the case may be, and no special or separate fund shall be established and no segregation of assets shall be made to assure payment of such amounts except as expressly set forth in this Plan.

20.10 No Fractional Shares . No fractional Shares shall be issued or delivered pursuant to this Plan or any Award. The Committee shall determine whether cash, Awards, or other property shall be delivered or paid in lieu of fractional Shares or whether such fractional Shares or any rights thereto shall be forfeited or otherwise eliminated.

20.11 Retirement and Welfare Plans . Neither Awards made under this Plan nor Shares or cash paid pursuant to such Awards may be included as “compensation” for purposes of computing the benefits payable to any Participant under the Company’s or any Subsidiary’s retirement plans (both qualified and nonqualified) or welfare benefit plans unless such other plan expressly provides that such compensation shall be taken into account in computing a Participant’s benefit.

20.12 Code Section 409A . Notwithstanding any provision in this Plan or any Award Agreement to the contrary, if any provision of this Plan or any Award Agreement contravenes any regulations or guidance promulgated under Code Section 409A or could cause any Award to be subject to additional taxes, accelerated taxation, interest or penalties under Code Section 409A, the Company may, in its sole discretion and without the Participant’s consent, modify this Plan or any Award Agreement: (i) to comply with, or avoid being subject to, Code Section 409A, or to avoid the imposition of any taxes, accelerated taxation, interest or penalties under Code Section 409A, and (ii) to maintain, to the maximum extent practicable, the original intent of the applicable provision without contravening the provisions of Code Section 409A. This section does not create an obligation on the part of the Company to modify this Plan or any Award Agreement and does not guarantee that the Awards will not be subject to interest or penalties under Code Section 409A.

20.13 Nonexclusivity of this Plan . The adoption of this Plan shall not be construed as creating any limitations on the power of the Board or Committee to adopt such other compensation arrangements as it may deem desirable.

20.14 No Constraint on Corporate Action . Nothing in this Plan shall be construed to: (a) limit, impair, or otherwise affect the Company’s or a Subsidiary’s right or power to make adjustments, reclassifications, reorganizations, or changes of its capital or business structure, or to merge or consolidate, or dissolve, liquidate, sell, or transfer all or any part of its business or assets; or (b) limit the right or power of the Company or a Subsidiary to take any action which such entity deems to be necessary or appropriate.

20.15 Governing Law, Exclusive Jurisdiction, and Venue . The Plan and each Award Agreement shall be governed by federal law, to the extent federal law incorporates state law, that law shall be the laws of the District of Columbia, excluding any conflicts or choice of law rule or principle that might otherwise refer construction or interpretation of this Plan to the substantive law of another jurisdiction. Unless otherwise provided in the Award Agreement, recipients of an Award under this Plan are deemed to submit to the exclusive jurisdiction and venue of the federal courts in the District of Columbia, to resolve any and all issues that may arise out of or relate to this Plan or any Award Agreement.

20.16 Indemnification . Subject to requirements of federal law, each individual who is or shall have been a member of the Board, or a Committee appointed by the Board, or an officer of the Company to whom authority was delegated in accordance with Article 3, shall be indemnified and held harmless by the Company against and from any loss, cost, liability, or expense that may be imposed upon or reasonably incurred by him or her in connection with or resulting from any claim, action, suit, or proceeding to which he or she may be a party or in which he or she may be involved by reason of any action taken or failure to act under this Plan and against and from any and all amounts paid by him or her in settlement thereof, with the Company’s approval, or paid by him or her in satisfaction of any judgment in any such action, suit, or proceeding against him or her, provided he or she shall give the Company an opportunity, at its own expense, to handle and defend the same before he or she undertakes to handle and defend it on his/her own behalf, unless such loss, cost, liability, or expense is a result of his/her own willful misconduct or except as expressly provided by statute.

The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such individuals may be entitled under the Company’s Certificate of Incorporation or Bylaws, as a matter of law, or otherwise, or any power that the Company may have to indemnify them or hold them harmless.

-END-

Exhibit 10.3

COMPILED AMENDED AND RESTATED

EMPLOYMENT AGREEMENT

This will confirm the offer of employment I have made to you on behalf of the Federal Agricultural Corporation (FAMC), on the following terms and conditions:

1. Term . The Term of this Agreement shall continue until July 1, 2012 or any earlier effective date of termination pursuant to Paragraph 8 hereof (the “Term”). 1

2. Scope of Authority and Employment . You will report directly to the President of Farmer Mac. You will have responsibility for the treasury and financial activities of Farmer Mac under business plans submitted by management to, and approved by, the Board of Directors of Farmer Mac. You shall be an officer of Farmer Mac, with the title of Executive Vice President – Chief Financial Officer.

You will devote your best efforts and substantially all your time and endeavor to your duties hereunder, and you will not engage in any other gainful occupation without the prior written consent of Farmer Mac; provided , however , that this provision will not be construed to prevent you from personally, and for your own account or that of members of your immediate family, investing or trading in real estate, stocks, bonds, securities, commodities, or other forms of investment, so long as such investing or trading is not in conflict with the best interests of Farmer Mac. You will be employed to perform your duties at the principal office of Farmer Mac. Notwithstanding this, it is expected that you will be required to travel a reasonable amount of time in the performance of your duties under this Agreement. 2

3. Compensation . FAMC will pay to you the following aggregate compensation for all services rendered by you under this Agreement:

(a) Base Salary . As of July 1, 2008, you will be paid a base salary (the Base Salary) during the Term of Three Hundred Seventy-Two Thousand Thirty Dollars ($372,030) per year, payable in arrears on a bi-weekly basis; and 3

(b) Incentive Compensation . In addition to your Base Salary, you will be paid additional payments during the term of this Agreement in respect of work performed by you during the preceding Planning Year (June 1 through May 31), or portion thereof as follows: on June 1 of each year through and including the effective date of termination, an additional payment in an amount at the sole discretion of the Board of Directors if it determines that you have performed in an extraordinary manner your duties, pursuant to business plans proposed by management and approved by the Board of Directors, during the preceding Planning Year. 4

__________________________

1 Last revised by Amendment No. 20, June 5, 2008.

2 Amendment No. 19, June 7, 2007.

3 Structure of 3(a) revised by Amendment No. 6, June 1, 1995. Compensation amount last revised by Amendment No. 20, June 5, 2008.

4 Structure of 3(b) first revised by Amendment No. 3, June 1, 1993. Existing structure of 3(b) dates to Amendment No. 7, February 8, 1996.

4. Expenses . FAMC will reimburse you for your reasonable and necessary expenses incurred in carrying out your duties under this Agreement, including, without limitation, expenses for: travel; attending approved business meetings, conventions and similar gatherings; and business entertainment. Reimbursement will be made to you within ten (10) days after presentation to FAMC of an itemized accounting and documentation of such expenses. You will use your best efforts to notify the President of FAMC prior to incurring any such expenses of an extraordinary or unusual nature.

5. Vacation and Sick Leave . You will be entitled to four (4) weeks of paid vacation per year, to be taken in spans not exceeding two (2) weeks each. 5 Vacation rights will vest on June 10th of each year during the Term, and must be exercised within fourteen (14) months thereafter or forfeited. 6 You will be entitled to reasonable and customary amounts of sick leave.

6. Employee Benefits . FAMC will provide you with all employee benefits regularly provided to employees of FAMC, and the following other (or upgraded) benefits: the best level of personal and family health insurance provided by Blue Cross-Blue Shield; major medical insurance; personal and family dental and vision insurance; an annual medical examination; business travel and personal accident insurance; life insurance in the amount of two hundred fifty thousand dollars ($250,000); disability benefits at least equal to statutory benefits in the State of New York; a plan to set aside before-tax income to pay for future unreimbursed medical, dental, vision, and dependent day care expenses; and a savings plan established under Paragraph 401(k) of the Internal Revenue Code. The providers of any insurance will be listed in Best’s Insurance Guide. All of the foregoing is subject to the limitation that the total cost thereof will not exceed twenty five percent (25%) of your Base Pay, exclusive of administrative expense. In the event that such cost limitation would be exceeded in any year, you will select among the foregoing a group of benefits within that cost limitation.

7. Relocation Expenses . It is agreed between the parties that you will be required to relocate your residence from that stated in the first paragraph of this Agreement to the Washington, D.C. metropolitan area. FAMC will assume these expenses as follows:

(a) Moving Expenses . FAMC will assume the reasonable costs of moving your household goods and personal property. FAMC will pay directly for packing, crating, in-transit storage, and insurance costs in connection with the move.

(b) Apartment Location or Home Purchase . At your option, FAMC will reimburse your for either (but not both): (i) reasonable and customary fees of a broker who assists you in locating an apartment in the Washington, D.C. metropolitan area for which you sign a lease; or (ii) normal and customary closing costs of a new residence, excluding any fees that are calculated as a percentage of the price of the new residence, including, without limitation, applicable sales taxes, mortgage taxes, and document recording fees.

__________________________

5 Amendment No. 1, December 14, 1989.

6 Amendment No. 16, August 3, 2004 removed language added by Amendment No. 10, June 4, 1998.

(c) Exploratory Trips . FAMC will reimburse you for your expenses in making not more than three (3) two-day exploratory trips from New York to Washington to secure a new residence, including travel, lodging and meals.

(d) Temporary Living Expenses . If you precede the move of your residence to Washington to begin work, FAMC will reimburse you for reasonable travel between New York and Washington and living expenses for a period not to exceed ninety (90) days.

(e) Adjustment for Taxes . To the extent that any of the foregoing relocation expenses are treated as wages for federal, state or local income tax purposes, FAMC will “gross up” its reimbursement to you so that the net amount of reimbursement after tax will equal the actual amount of the reimbursement required to be paid to you.

Reimbursement of any of the foregoing Relocation Expenses incurred directly by you will be made to you within ten (10) days after presentation to FAMC of an itemized accounting and documentation of such expenses.

8. Termination .

(a) Events of Termination . This Agreement will be terminated and the employment relationship between you and FAMC will be severed as set forth below:

(i) FAMC may terminate your employment effective upon notice to you if you die or are incapacitated or disabled by accident, sickness or otherwise so as to render you (in the opinion of an independent medical consultant on the full-time faculty of Georgetown University School of Medicine) mentally or physically incapable of performing the services required to be performed by you under the terms of this Agreement for a period of at least sixty (60) consecutive days, or for sixty (60) days (whether consecutive or not) during any six-month period.

(ii) FAMC may terminate your employment effective upon notice to you at any time for “cause.” For the purposes of this subsection, “cause” will mean only: (A) your willful failure to perform substantially your duties hereunder, other than any such failure resulting from your incapacity due to physical or mental illness; or (B) your willful engagement in activities contrary to the best interests of Farmer Mac. For purposes of this subsection, no act, or failure to act on your part, shall be considered “willful” unless done, or omitted to be done, by you not in good faith and without reasonable belief that your action or omission was in the best interests of Farmer Mac. 7

__________________________

7 Amendment No. 9, August 7, 1997.

(iii) Farmer Mac may terminate your employment without “cause” at any time. Such termination shall become effective on the earlier of July 1, 2012, or two years from the date of notice of such termination. 8

(iv) Notwithstanding the provisions of subsection 8(a)(iii) above, FAMC may terminate the employment of the Employee at any time after the passage by the Board of Directors of FAMC of a resolution authorizing the dissolution of FAMC. Such termination of the Employee’s employment shall become effective on the later of eighteen (18) months after notice of termination or the date that such dissolution of FAMC becomes final as a matter of law, provided, however, that neither of the following shall be deemed to be a dissolution for purposes of this Agreement: (1) dissolution of FAMC which becomes final as a matter of law more than twelve (12) months after adoption of the resolution of dissolution; or (2) incorporation, organization or reorganization of a corporation or other business entity which is substantially similar to FAMC and which uses substantially the same assets or equity as FAMC, within twelve (12) months of adoption of the resolution of dissolution. As used herein, the term “reorganization” shall have the same meaning as in Section 368(a) of the Internal Revenue Code of 1986. 9

(b) Payment of Accrued Compensation.

(i) Upon termination of this Agreement pursuant to preceding subsection (a), you (or your estate or heirs, as the case may be) will be entitled to receive all Base Salary, annual Bonuses, expense reimbursements, vacation pay, and similar amounts accrued and unpaid as of the date of such termination. The obligations of FAMC under this subsection (b) will survive any termination of this Agreement.

(ii) In the event of your voluntary termination of employment hereunder, FAMC will not be obligated to make any further compensation payments to you beyond those accrued prior to the effective date of such termination.

(c) Disability Pay . Upon termination of this Agreement pursuant to preceding subsection (a)(i), FAMC, in its discretion, will either:

(i) continue to pay you (or your estate or heirs, as the case may be) for the lesser of twenty-four (24) months or the 10 balance of the Term the difference between your current Base Salary and the amount of disability insurance payments received by you under insurance policies provided by FAMC in accordance with this Agreement; or

__________________________

8 Last revised by Amendment No. 20, June 5, 2008.

9 Amendment No. 2, February 14, 1991.

10 Amendment No. 2, February 14, 1991.

(ii) pay you (or your estate or heirs, as the case may be) the present value of the payments described in preceding subsection (c)(i), discounted at a rate equal to the yield then available for two-year U.S. Treasury Notes, plus 50 basis points (0.50%).

(d) Severance Pay . Upon termination of this Agreement pursuant to preceding subsection 8(a)(iii), FAMC will pay you within thirty (30) days after such termination an aggregate amount in cash equal to one hundred percent (100%) of all Base Salary scheduled to be paid and not yet paid to you under this Agreement for the balance of the Term. 11

(e) Constructive Termination . You may, at your option, deem this Agreement to have been terminated by FAMC in the event of its breach, including prospective breach, of any term hereof unremedied for thirty (30) days after notice thereof to FAMC. Upon notice to FAMC of your exercise of this option, you will have the same rights under such a constructive termination as if FAMC had terminated your employment pursuant to preceding subsection (a)(iii).

9. “Pari Passu” It is understood that the terms of this Agreement other than Base Salary, but including Bonus and length of term, will at your option be renegotiated on or within thirty (30) days after December 31, 1989, retroactively to the date of this Agreement with a view to placing you in a position as close as possible to that of other Vice Presidents of FAMC hired before that date and after the date hereof.

10. Notices . Any notice given under this Agreement will be sufficient if in writing and either: (a) mailed postage prepaid by registered or certified mail, return receipt requested; or (b) delivered by hand to, in the case of Farmer Mac, 1133 Twenty-First Street, N.W., Washington, D.C. 20036, attention President or, in the case of the Employee, 2737 Devonshire Place, N.W., Washington, DC 20008 (or to such other addresses as may be from time to time designated by notice from the recipient party to the other). Any such notice will be effective upon actual receipt or refusal thereof. 12

11. Miscellaneous.

(a) Governing Law . This Agreement will be governed by, interpreted and enforced in accordance with the laws of the District of Columbia.

(b) Waiver . The waiver by any party of a breach of any provision of this Agreement will not operate as a waiver of any other breach of any provision of this Agreement by any party.

__________________________

11 Amendment No. 7, February 8, 1996.

12 Amendment No. 18, June 1, 2006.

(c) Entire Agreement . This Agreement sets forth the entire understanding of the parties concerning the subject matter hereof, and may not be changed or modified except by a written instrument duly executed by or on behalf of the parties hereto.

(d) Successors and Assigns . This Agreement will inure to the benefit of and be binding upon the parties hereto and their respective, successors, heirs, personal representatives and assigns. This subsection is not to be construed to permit you to assign your obligation to perform the duties of your employment hereunder. This subsection permits FAMC the right to assign this Agreement to a successor entity.

(e) Severability . If any term, condition, or provision of this Agreement or the application thereof to any party or circumstances will, at any time or to any extent be invalid or unenforceable, the remainder of this Agreement, or the application of such term, condition or provision to parties or circumstances other than those to which it is held invalid or unenforceable, will not be affected thereby, and each term, condition and provision of their Agreement will be valid and enforceable to the fullest extent permitted by law.

(f) Action by FAMC . Except as expressly provided otherwise in this Agreement, reference to actions, decisions, determinations or similar occurrences by FAMC (other than the execution of this Agreement and any modifications hereto or notices given hereunder) will mean the action, decision or determination of the President or a majority of the Board of Directors of FAMC.

12. Agreement Not to Compete with Farmer Mac . Notwithstanding anything in this Agreement to the contrary, in the event of the termination of your employment, for a period of two years thereafter, you shall not, without the prior written consent of Farmer Mac, directly or indirectly, engage in any business or activity, whether as principal, agent, officer, director, partner, employee, independent contractor, consultant, stockholder or otherwise, alone or in association with any other person, firm, corporation or other business organization, that directly or indirectly competes with any of the businesses of Farmer Mac in any manner, including without limitation, the acquisition and securitization (for capital market sale) of agricultural mortgage loans or USDA “guaranteed portions” (hereinafter referred to as “Farmer Mac Qualified Loans”); provided, however, that such prohibited activity shall not include the ownership of up to 20% of the common stock in a public company. 13

13. Agreement Not to Use Confidential or Proprietary Information . Farmer Mac and you both recognize that you have access to and acquire, and may assist in developing, confidential and proprietary information relating to the business and operations of Farmer Mac as a result of your employment or association with Farmer Mac. You hereby covenant and agree that you will retain all “Confidential Information” (as defined below) in trust for the sole benefit of Farmer Mac and its successors and assigns. You hereby covenant further that, in addition to your fiduciary responsibilities as an officer not to disclose certain information of or relating to Farmer Mac, you will not, at any time during or after the term of this Agreement, without the prior written consent of Farmer Mac, directly or indirectly communicate or divulge any such Confidential Information to any person, firm, corporation or other business organization, or use any such Confidential Information for your own account or for the account of any other person, except as required in connection with the performance of your services hereunder. The term “Confidential Information” shall mean any trade secret, data or other confidential or proprietary information related to the business and activities of Farmer Mac. Notwithstanding the foregoing, Confidential Information shall not include any information that is or becomes a part of the public domain or generally available to the public (unless such availability occurs as a result of any breach by you of this Section 11), or becomes available to you on a non-confidential basis from a source (other than Farmer Mac) that is not bound by a confidentiality agreement and does not breach his or her fiduciary responsibilities. The provisions of this Section 13 shall survive the termination of this Agreement and the termination of your employment hereunder. 14

__________________________

13 Amendment No. 9, August 7, 1997.

14 Amendment No. 9, August 7, 1997.

14. Agreement Not to Solicit Farmer Mac Employees . For a period of two years after the termination of your employment hereunder, you shall not, directly or indirectly, induce any employee of Farmer Mac who is a “member of management” (as defined below) or is directly involved in the acquisition and securitization (for capital market sale) of Farmer Mac Qualified Loans to engage in any activity in which you are prohibited from engaging in under this Agreement, or to terminate such person’s employment with Farmer Mac. You shall not directly or indirectly, either individually or as owner, agent, employee, consultant or otherwise, employ, offer employment to, lure, entice away or assist others in recruiting or hiring any person who is or was employed by Farmer Mac unless such person shall have ceased to be employed by Farmer Mac for a period of at least six months and is not subject to any non-compete covenants substantially similar in nature to those contained in Section 12 hereof. “Member of management” means the President, any Senior Vice President, Vice President or the Controller of Farmer Mac. 15

Please signify your acceptance of the foregoing terms of employment by signing and returning to me the copy of this letter enclosed for the purpose.

- END -

__________________________

15 Amendment No. 9, August 7, 1997.

Exhibit 10.4

COMPILED AMENDED AND RESTATED

EMPLOYMENT CONTRACT

COMPILED AMENDED AND RESTATED EMPLOYMENT AGREEMENT (this Agreement) made as of the 5th day of June, 2008, amends and restates the Employment Agreement dated the 1 st day of September 1997, as amended and restated through June 5, 2008 between the Federal Agricultural Mortgage Corporation (“Farmer Mac”), a federally-chartered instrumentality of the United States with its principal place of business at 1133 Twenty-First Street, N.W., Washington, D.C. and Tom D. Stenson (“Employee” or “you”),

1. Term. The Term of this Agreement shall continue until July 1, 2012 or any earlier effective date of termination pursuant to Paragraph 7 hereof (the “Term”).

2. Scope of Authority and Employment. You will report directly to the President of Farmer Mac. You will have responsibility for the operational and business development activities of Farmer Mac under business plans submitted by management to, and approved by, the Board of Directors of Farmer Mac. You shall be an officer of Farmer Mac, with the title of Executive Vice President and Chief Operating Officer.

You will devote your best efforts and substantially all your time and endeavor to your duties hereunder, and you will not engage in any other gainful occupation without the prior written consent of Farmer Mac; provided, however, that this provision will not be construed to prevent you from personally, and for your own account or that of members of your immediate family, investing or trading in real estate, stocks, bonds, securities, commodities, or other forms of investment, so long as such investing or trading is not in conflict with the best interests of Farmer Mac. You will be employed to perform your duties at the principal office of Farmer Mac. Notwithstanding this, it is expected that you will be required to travel a reasonable amount of time in the performance of your duties under this Agreement.

3. Compensation. Farmer Mac will pay to you the following aggregate compensation for all services rendered by you under this Agreement:

(a) Base Salary. As of July 1, 2008, you will be paid a base salary (the Base Salary) during the Term of Three Hundred Sixty-Six Thousand Ninety-Seven Dollars ($366,097) per year, payable in arrears on a bi-weekly basis.;

(b) Incentive Compensation. In addition to your Base Salary, you will be paid additional payments during the term of this Agreement in respect of the work performed by you during the preceding “Planning Year”, or portion thereof as follows: on July 1 of each year through and including the effective date of termination, an additional payment in an amount at the sole discretion of the Board of Directors if it determines that you have performed in an extraordinary manner your duties, pursuant to business plans proposed by management and approved by the Board of Directors, during the preceding Planning Year.

4. Expenses. Farmer Mac will reimburse you for your reasonable and necessary expenses incurred in carrying out your duties under this Agreement, including, without limitation, expenses for: travel; attending approved business meetings, conventions and similar gatherings; and business entertainment. Reimbursement will be made to you within ten (10) days after presentation to Farmer Mac of an itemized accounting and documentation of such expenses. You will notify the President of Farmer Mac prior to incurring any such expenses of an extraordinary or unusual nature.

5. Vacation and Sick Leave. You will be entitled to four (4) weeks of paid vacation for each full Planning Year thereafter during the Term of this Agreement, to be taken in spans not exceeding two (2) weeks each. Vacation rights must be exercised within two months after the end of the Planning Year or forfeited. You will be entitled to reasonable and customary amounts of sick leave.

6. Employee Benefits. Farmer Mac will provide you with all employee benefits regularly provided to employees of Farmer Mac and the following other (or upgraded) benefits: the best level of personal and family health insurance obtainable by Farmer Mac on reasonable terms; an annual medical examination; business travel and personal accident insurance; life insurance in the amount of Two Hundred Fifty Thousand Dollars ($250,000); disability benefits at least equal to statutory benefits in the District of Columbia; participation in the Farmer Mac Pension Plan; and participation in a savings plan established under Paragraph 401(k) of the Internal Revenue Code. The providers of any insurance will be listed in Best’s Insurance Guide. All of the foregoing is subject to the limitation that the total cost thereof will not exceed twenty five percent (25%) of your Base Salary, exclusive of administrative expense. In the event that such cost limitation would be exceeded in any year, you may be required to select from among the foregoing a group of benefits within that cost limitation.

7. Termination.

(a) Events of Termination. This Agreement will be terminated and the employment relationship between you and Farmer Mac will be severed as set forth below:

(1) Farmer Mac may terminate your employment effective upon notice to you if you die or are incapacitated or disabled by accident, sickness or otherwise so as to render you (in the opinion of an independent medical consultant on the full-time faculty of Georgetown University School of Medicine) mentally or physically incapable of performing the services required to be performed by you under the terms of this Agreement for a period of at least sixty (60) consecutive days, or for sixty (60) days (whether consecutive or not) during any six-month period.

(2) Farmer Mac may terminate your employment effective upon notice to you at any time for “cause.” For the purposes of this subsection, “cause” will mean only: (A) your willful failure to perform substantially your duties hereunder, other than any such failure resulting from your incapacity due to physical or mental illness; or (B) your willful engagement in activities contrary to the best interests of Farmer Mac. For purposes of this subsection, no act, or failure to act on your part, shall be considered “willful” unless done, or omitted to be done, by you not in good faith and without reasonable belief that your action or omission was in the best interests of Farmer Mac.

(3) Farmer Mac may terminate your employment without “cause” at any time. Such termination shall become effective on the earlier of July 1, 2012, or two years from the date of notice of such termination.

(4) Notwithstanding the provisions of subsection 7(a)(3) above, Farmer Mac may terminate your employment at any time after the passage by the Board of Directors of Farmer Mac of a resolution authorizing the dissolution of Farmer Mac. Such termination of your employment shall become effective on the later of eighteen (18) months after notice of termination or the date that such dissolution of Farmer Mac becomes final as a matter of law, provided, however, that neither of the following shall be deemed to be a dissolution for the purposes of this Agreement: (i) dissolution of Farmer Mac which becomes final as a matter of law more than twelve (12) months after adoption of the resolution of dissolution; or (ii) incorporation, organization or reorganization of a corporation or other business entity which is substantially similar to Farmer Mac and which uses substantially the same assets or equity as Farmer Mac, within twelve (12) months after adoption of the resolution of dissolution. As used herein, the term “reorganization” shall have the same meaning as in Section 368(a) of the Internal Revenue Code of 1986.

(b) Payment of Accrued Compensation.

(1) Upon termination of this Agreement pursuant to preceding subsection (a), you (or your estate or heirs, as the case may be) will be entitled to receive all Base Salary, Incentive Compensation, expense reimbursements, vacation pay, and similar amounts accrued and unpaid as of the date of such termination. The obligations of Farmer Mac under this subsection (b) will survive any termination of this Agreement.

(2) In the event of your voluntary termination of employment hereunder, Farmer Mac will not be obligated to make any further compensation payments to you beyond those accrued prior to the effective date of such termination.

(c) Disability Pay . Upon termination of this Agreement pursuant to the preceding subsection (a)(1), Farmer Mac, in its discretion, will either:

(1) continue to pay you (or your estate or heirs, as the case may be) for the lesser of two (2) years or the balance of the Term the difference between your current Base Salary and the amount of disability insurance payments received by you under insurance policies provided by Farmer Mac in accordance with this Agreement; or

(2) pay you (or your estate or heirs, as the case may be) the present value of the payments described in preceding subsection (c)(1), discounted at a rate equal to the yield then available for two-year U.S. Treasury Notes, plus 50 basis points (0.50%).

(d) Severance Pay. Upon termination of this Agreement pursuant to preceding subsection 7(a)(3) or 7(a)(4), Farmer Mac will pay you within thirty (30) days after such termination an aggregate amount in cash equal to one hundred percent (100%) of all Base Salary scheduled to be paid and not yet paid to you under this Agreement for the balance of the Term.

In the event of Farmer Mac's severance of your employment pursuant to preceding subsection 7(a)(1), (3), or (4), the amount to be paid by Farmer Mac to you hereunder will not be mitigated by any subsequent earnings by you from any source.

(e) Constructive Termination. You may, at your option, deem this Agreement to have been terminated by Farmer Mac in the event of its breach, including prospective breach, of any term hereof unremedied for thirty (30) days after notice thereof to Farmer Mac. Upon notice to Farmer Mac of your exercise of this option, you will have the same rights under such a constructive termination as if Farmer Mac had terminated your employment pursuant to preceding subsection (a)(3).

8. Agreement Not to Compete with Farmer Mac. Notwithstanding anything in this Agreement to the contrary, in the event of the termination of your employment, for a period of two years thereafter, you shall not, without the prior written consent of Farmer Mac, directly or indirectly, engage in any business or activity, whether as principal, agent, officer, director, partner, employee, independent contractor, consultant, stockholder or otherwise, alone or in association with any other person, firm, corporation or other business organization, that directly or indirectly competes with any of the businesses of Farmer Mac in any manner, including without limitation, the acquisition and securitization (for capital market sale) of agricultural mortgage loans or USDA “guaranteed portions” (hereinafter referred to as “Farmer Mac Qualified Loans”); provided, however, that such prohibited activity shall not include the ownership of up to 20% of the common stock in a public company.

9. Agreement Not to Use Confidential or Proprietary Information. Farmer Mac and you both recognize that you have access to and acquire, and may assist in developing, confidential and proprietary information relating to the business and operations of Farmer Mac as a result of your employment or association with Farmer Mac. You hereby covenant and agree that you will retain all “Confidential Information” (as defined below) in trust for the sole benefit of Farmer Mac and its successors and assigns. You hereby covenant further that, in addition to your fiduciary responsibilities as an officer not to disclose certain information of or relating to Farmer Mac, you will not, at any time during or after the term of this Agreement, without the prior written consent of Farmer Mac, directly or indirectly communicate or divulge any such Confidential Information to any person, firm, corporation or other business organization, or use any such Confidential Information for your own account or for the account of any other person, except as required in connection with the performance of your services hereunder. The term “Confidential Information” shall mean any trade secret, data or other confidential or proprietary information related to the business and activities of Farmer Mac. Notwithstanding the foregoing, Confidential Information shall not include any information that is or becomes a part of the public domain or generally available to the public (unless such availability occurs as a result of any breach by you of this Section 11), or becomes available to you on a non-confidential basis from a source (other than Farmer Mac) that is not bound by a confidentiality agreement and does not breach his or her fiduciary responsibilities. The provisions of this Section 9 shall survive the termination of this Agreement and the termination of your employment hereunder.

10. Agreement Not to Solicit Farmer Mac Employees. For a period of two years after the termination of your employment hereunder, you shall not, directly or indirectly, induce any employee of Farmer Mac who is a “member of management” (as defined below) or is directly involved in the acquisition and securitization (for capital market sale) of Farmer Mac Qualified Loans to engage in any activity in which you are prohibited from engaging in under this Agreement, or to terminate such person’s employment with Farmer Mac. You shall not directly or indirectly, either individually or as owner, agent, employee, consultant or otherwise, employ, offer employment to, lure, entice away or assist others in recruiting or hiring any person who is or was employed by Farmer Mac unless such person shall have ceased to be employed by Farmer Mac for a period of at least six months and is not subject to any non-compete covenants substantially similar in nature to those contained in Section 8 hereof. “Member of management” means the President, any Senior Vice President, Vice President or the Controller of Farmer Mac.

11. Notices. Any notice given under this Agreement will be sufficient if in writing and either: (a) mailed postage prepaid by registered or certified mail, return receipt requested; or (b) delivered by hand to, in the case of Farmer Mac, 1133 Twenty-First Street, N.W., Washington, D.C. 20036, attention President or, in the case of the Employee, (or to such other addresses as may be from time to time designated by notice from the recipient party to the other). Any such notice will be effective upon actual receipt or refusal thereof.

12. Miscellaneous.

(a) Governing Law. This Agreement will be governed by, and interpreted and enforced in accordance with, the laws of the District of Columbia.

(b) Waiver. The waiver by any party of a breach of any provision of this Agreement will not operate as a waiver of any other breach of any provision of this Agreement by any party.

(c) Entire Agreement. This Agreement sets forth the entire understanding of the parties concerning the subject matter hereof, and may not be changed or modified except by a written instrument duly executed by or on behalf of the parties hereto.

(d) Successors and Assigns. This Agreement will inure to the benefit of and be binding upon the parties hereto and their respective, successors, heirs, personal representatives and assigns. This subsection is not to be construed to permit you to assign your obligation to perform the duties of your employment hereunder. This subsection permits Farmer Mac the right to assign this Agreement to a successor entity.

(e) Severability. If any term, condition, or provision of this Agreement or the application thereof to any party or circumstances will, at any time or to any extent be invalid or unenforceable, the remainder of this Agreement, or the application of such term, condition or provision to parties or circumstances other than those to which it is held invalid or unenforceable, will not be affected thereby, and each term, condition and provision of this Agreement will be valid and enforceable to the fullest extent permitted by law.

(f) Action by Farmer Mac. Except as expressly provided otherwise in this Agreement, reference to actions, decisions, determinations or similar occurrences by Farmer Mac (other than the execution of this Agreement and any modifications hereto or notices given hereunder) will mean the action, decision or determination of the Board of Directors or the President of Farmer Mac.

-END-

Exhibit 10.5

COMPILED AMENDED AND RESTATED

EMPLOYMENT CONTRACT

COMPILED AMENDED AND RESTATED EMPLOYMENT AGREEMENT (this Agreement) made as of the 5th day of June, 2008, amends and restates the Employment Agreement dated the 5th day of June 2003, as amended and restated through June 5, 2008 between the Federal Agricultural Mortgage Corporation (“Farmer Mac”), a federally-chartered instrumentality of the United States with its principal place of business at 1133 Twenty-First Street, N.W., Washington, D.C. and Timothy L. Buzby (“Employee” or “you”).

1. Term. The Term of this Agreement shall continue until July 1, 2012 or any earlier effective date of termination pursuant to Paragraph 7 hereof (the “Term”).

2. Scope of Authority and Employment. You will report directly to the President of Farmer Mac. You will have responsibility for the general accounting affairs of the corporation under business plans submitted by management to, and approved by, the Board of Directors of Farmer Mac. You shall be an officer of Farmer Mac, with the title of Vice President – Controller.

You will devote your best efforts and substantially all your time and endeavor to your duties hereunder, and you will not engage in any other gainful occupation without the prior written consent of Farmer Mac; provided, however, that this provision will not be construed to prevent you from personally, and for your own account or that of members of your immediate family, investing or trading in real estate, stocks, bonds, securities, commodities, or other forms of investment, so long as such investing or trading is not in conflict with the best interests of Farmer Mac. You will be employed to perform your duties at the principal office of Farmer Mac. Notwithstanding this, it is expected that you will be required to travel a reasonable amount of time in the performance of your duties under this Agreement.

3. Compensation. Farmer Mac will pay to you the following aggregate compensation for all services rendered by you under this Agreement:

(a) Base Salary. As of July 1, 2008, you will be paid a base salary (the Base Salary) during the Term of Two Hundred Fifty-Six Thousand Three Hundred and Eleven Dollars ($256,311) per year, payable in arrears on a bi-weekly basis.

4. Expenses. Farmer Mac will reimburse you for your reasonable and necessary expenses incurred in carrying out your duties under this Agreement, including, without limitation, expenses for: travel; attending approved business meetings, continuing legal education, conventions and similar gatherings; and business entertainment. Reimbursement will be made to you within ten (10) days after presentation to Farmer Mac of an itemized accounting and documentation of such expenses. You will notify the President of Farmer Mac prior to incurring any such expenses of an extraordinary or unusual nature.

5. Vacation and Sick Leave. You will be entitled to four (4) weeks of paid vacation for each full Planning Year during the Term of this Agreement, to be taken in spans not exceeding two (2) weeks each. Vacation rights must be exercised within two months after the end of the Planning Year or forfeited. You will be entitled to reasonable and customary amounts of sick leave.

7. Termination.

(a) Events of Termination. This Agreement will be terminated and the employment relationship between you and Farmer Mac will be severed as set forth below:

(1) Farmer Mac may terminate your employment effective upon notice to you (or your legal representative) if you die or are incapacitated or disabled by accident, sickness or otherwise so as to render you (in the opinion of an independent medical consultant on the full-time faculty of Georgetown University School of Medicine) mentally or physically incapable of performing the services required to be performed by you under the terms of this Agreement for a period of at least sixty (60) consecutive days, or for sixty (60) days (whether consecutive or not) during any six-month period.

(4) Notwithstanding the provisions of subsection 7(a)(3) above, Farmer Mac may terminate your employment at any time after the passage by the Board of Directors of Farmer Mac of a resolution authorizing the dissolution of Farmer Mac. Such termination of your employment shall become effective on the later of twelve (12) months after notice of termination or the date that such dissolution of Farmer Mac becomes final as a matter of law, provided, however, that neither of the following shall be deemed to be a dissolution for the purposes of this Agreement: (i) dissolution of Farmer Mac which becomes final as a matter of law more than twelve (12) months after adoption of the resolution of dissolution; or (ii) incorporation, organization or reorganization of a corporation or other business entity which is substantially similar to Farmer Mac and which uses substantially the same assets or equity as Farmer Mac, within twelve (12) months after adoption of the resolution of dissolution. As used herein, the term “reorganization” shall have the same meaning as in Section 368(a) of the Internal Revenue Code of 1986.

(b) Payment of Accrued Compensation.

(c) Disability Pay . Upon termination of this Agreement pursuant to the preceding subsection (a)(1), Farmer Mac, in its discretion, will either:

10. Agreement Not to Solicit Farmer Mac Employees. For a period of two years after the termination of your employment hereunder, you shall not, directly or indirectly, induce any employee of Farmer Mac who is a “member of management” (as defined below) or is directly involved in the acquisition and securitization (for capital market sale) of Farmer Mac Qualified Loans to engage in any activity in which you are prohibited from engaging in under this Agreement, or to terminate such person’s employment with Farmer Mac. You shall not directly or indirectly, either individually or as owner, agent, employee, consultant or otherwise, employ, offer employment to, lure, entice away or assist others in recruiting or hiring any person who is or was employed by Farmer Mac unless such person shall have ceased to be employed by Farmer Mac for a period of at least six months and is not subject to any non-compete covenants substantially similar in nature to those contained in Section 8 hereof. “Member of management” means the President, any Vice President, the Controller of Farmer Mac or attorney or paralegal in the employ of Farmer Mac.

11. Notices. Any notice given under this Agreement will be sufficient if in writing and either: (a) mailed postage prepaid by registered or certified mail, return receipt requested; or (b) delivered by hand to, in the case of Farmer Mac, 1133 Twenty-First Street, N.W., Washington, D.C. 20006, attention President or, in the case of the Employee, __________________ (or to such other addresses as may be from time to time designated by notice from the recipient party to the other). Any such notice will be effective upon actual receipt or refusal thereof.

12. Miscellaneous.

(a) Governing Law. This Agreement will be governed by, and interpreted and enforced in accordance with, the laws of the District of Columbia.

(b) Waiver. The waiver by any party of a breach of any provision of this Agreement will not operate as a waiver of any other breach of any provision of this Agreement by any party.

(c) Entire Agreement. This Agreement sets forth the entire understanding of the parties concerning the subject matter hereof, and may not be changed or modified except by a written instrument duly executed by or on behalf of the parties hereto.

(d) Successors and Assigns. This Agreement will inure to the benefit of and be binding upon the parties hereto and their respective successors, heirs, personal representatives and assigns. This subsection is not to be construed to permit you to assign your obligation to perform the duties of your employment hereunder. This subsection permits Farmer Mac the right to assign this Agreement to a successor entity.

(e) Severability. If any term, condition, or provision of this Agreement or the application thereof to any party or circumstances will, at any time or to any extent be invalid or unenforceable, the remainder of this Agreement, or the application of such term, condition or provision to parties or circumstances other than those to which it is held invalid or unenforceable, will not be affected thereby, and each term, condition and provision of this Agreement will be valid and enforceable to the fullest extent permitted by law.

-END-

Exhibit 10.6

COMPILED AMENDED AND RESTATED

EMPLOYMENT CONTRACT

COMPILED AMENDED AND RESTATED EMPLOYMENT AGREEMENT (this Agreement) made as of the 5th day of June, 2008, amends and restates the Employment Agreement dated the 20th day of June 2005, as amended and restated through June 5, 2008 between the Federal Agricultural Mortgage Corporation (“Farmer Mac”), a federally-chartered instrumentality of the United States with its principal place of business at 1133 Twenty-First Street, N.W., Washington, D.C. and Mary K. Waters (“Employee” or “you”).

1. Term. The Term of this Agreement shall continue until July 1, 2010 or any earlier effective date of termination pursuant to Paragraph 7 hereof (the “Term”).

2. Scope of Authority and Employment. You will be an officer of Farmer Mac, with the title of Vice President – Corporate Relations, subject to annual appointment by the Board of Directors of Farmer Mac, reporting directly to the President of Farmer Mac. You will have responsibility for the corporate relations activities of the Corporation, including the maintenance of relationships and communications with the U.S. Congress, state legislatures, federal, state and local governmental agencies, commodities groups, borrowers, other members of the agricultural community, Farmer Mac stockholders, and the media. These activities are to be carried out under business plans submitted by management to, and approved by, the Board of Directors of Farmer Mac.

You will devote your best efforts and substantially all your time and endeavor to your duties hereunder, and you will not engage in any other occupation without the prior written consent of Farmer Mac; provided, however, that this provision will not be construed to prevent you from personally, and for your own account or that of members of your immediate family, investing or trading in real estate, stocks, bonds, securities, commodities, or other forms of investment, so long as such investing or trading is not in conflict with the best interests of Farmer Mac. You will be employed to perform your duties at the principal office of Farmer Mac. Notwithstanding this, it is expected that you will be required to travel a reasonable amount of time in the performance of your duties under this Agreement.

3. Compensation. Farmer Mac will pay to you the following aggregate compensation for all services rendered by you under this Agreement:

(a) Base Salary. As of July 1, 2008, you will be paid a base salary (the Base Salary) during the Term of One Hundred Ninety-Four Thousand Eight Hundred Thirty-Four Dollars ($194,834) per year, payable in arrears on a bi-weekly basis.

(b) Incentive Compensation. In addition to your Base Salary, you will be paid additional payments during the term of this Agreement in respect of the work performed by you during the preceding “Planning Year” (July 1 through June 30), or portion thereof as follows: on July 1 of each year through and including the effective date of termination, an additional payment in an amount at the sole discretion of the Board of Directors if it determines that you have performed in an extraordinary manner your duties, pursuant to business plans proposed by management and approved by the Board of Directors, during the preceding Planning Year; except that, with respect to the Planning Year 2005-06, you will be paid a cash incentive amount of $30,000.

4. Expenses. Farmer Mac will reimburse you for your reasonable and necessary expenses incurred in carrying out your duties under this Agreement, including, without limitation, expenses for: travel, attending approved business meetings, continuing legal education, conventions and similar gatherings; and business entertainment. Reimbursement will be made to you within ten (10) days after presentation to Farmer Mac of an itemized accounting and documentation of such expenses. You will notify the President of Farmer Mac prior to incurring any such expenses of an extraordinary or unusual nature.

6. Employee Benefits. Farmer Mac will provide you with all employee benefits regularly provided to employees of Farmer Mac and the following other (or upgraded) benefits: the best level of personal and family health insurance obtainable by Farmer Mac on reasonable terms; an annual medical examination; business travel and personal accident insurance; life insurance in the amount of Two Hundred Fifty Thousand Dollars ($250,000); disability benefits at least equal to statutory benefits in the District of Columbia; participation in the Farmer Mac Money Purchase Plan; and participation in a savings plan established under Paragraph 401(k) of the Internal Revenue Code. The providers of any insurance will be listed in Best’s Insurance Guide. All of the foregoing is subject to the limitation that the total cost thereof will not exceed twenty-five percent (25%) of your Base Salary, exclusive of administrative expense. In the event that such cost limitation would be exceeded in any year, you may be required to select from among the foregoing a group of benefits within that cost limitation.

7. Termination.

(a) Events of Termination. This Agreement will be terminated and the employment relationship between you and Farmer Mac will be severed as set forth below:

(1) Farmer Mac may terminate your employment effective upon notice to you (or your legal representative) if you die or are incapacitated or disabled by accident, sickness or otherwise so as to render you (in the opinion of an independent medical consultant on the full-time faculty of George Washington University Medical Center) mentally or physically incapable of performing the services required to be performed by you under the terms of this Agreement for a period of at least sixty (60) consecutive days, or for sixty (60) days (whether consecutive or not) during any six-month period.

(3) Farmer Mac may terminate your employment without “cause” at any time. Such termination shall become effective on the earlier of July 1, 2010, or one year from the date of notice of such termination.

(4) Notwithstanding the provisions of preceding subsection 7(a)(3), Farmer Mac may terminate your employment at any time after the passage by the Board of Directors of Farmer Mac of a resolution authorizing the dissolution of Farmer Mac. Such termination of your employment shall become effective on the later of twelve (12) months after notice of termination or the date that such dissolution of Farmer Mac becomes final as a matter of law, provided, however, that neither of the following shall be deemed to be a dissolution for the purposes of this Agreement: (i) dissolution of Farmer Mac which becomes final as a matter of law more than twelve (12) months after adoption of the resolution of dissolution; or (ii) incorporation, organization or reorganization of a corporation or other business entity which is substantially similar to Farmer Mac and which uses substantially the same assets or equity as Farmer Mac, within twelve (12) months after adoption of the resolution of dissolution. As used herein, the term “reorganization” shall have the same meaning as in Section 368(a) of the Internal Revenue Code of 1986.

(b) Payment of Accrued Compensation.

(c) Disability Pay . Upon termination of this Agreement pursuant to the preceding subsection (a)(1), Farmer Mac, in its discretion, will either:

10. Agreement Not to Solicit Farmer Mac Employees. For a period of two years after the termination of your employment hereunder, you shall not, directly or indirectly, induce any employee of Farmer Mac who is a “member of management” (as defined below) or is directly involved in the acquisition and securitization (for capital market sale) of Farmer Mac Qualified Loans to engage in any activity in which you are prohibited from engaging in under this Agreement, or to terminate such person’s employment with Farmer Mac. “Member of management” means the President, any Vice President, attorney or paralegal in the employ of Farmer Mac. You shall not directly or indirectly, either individually or as owner, agent, employee, consultant or otherwise, employ, offer employment to, lure, entice away or assist others in recruiting or hiring any person who is or was employed by Farmer Mac unless such person shall have ceased to be employed by Farmer Mac for a period of at least six months and is not subject to any non-compete covenants substantially similar in nature to those contained in Section 8 hereof.

11. Notices. Any notice given under this Agreement will be sufficient if in writing and either: (a) mailed postage prepaid by registered or certified mail, return receipt requested; or (b) delivered by hand to, in the case of Farmer Mac, 1133 Twenty-First Street, N.W., Washington, D.C. 20036, attention President or, in the case of the Employee,__________________ (or to such other addresses as may be from time to time designated by notice from the recipient party to the other). Any such notice will be effective upon actual receipt or refusal thereof.

12. Miscellaneous.

(a) Governing Law. This Agreement will be governed by, and interpreted and enforced in accordance with, the laws of the District of Columbia.

(b) Waiver. The waiver by any party of a breach of any provision of this Agreement will not operate as a waiver of any other breach of any provision of this Agreement by any party.

(c) Entire Agreement. This Agreement sets forth the entire understanding of the parties concerning the subject matter hereof, and may not be changed or modified except by a written instrument duly executed by or on behalf of the parties hereto.

(e) Severability. If any term, condition, or provision of this Agreement or the application thereof to any party or circumstances will, at any time or to any extent be invalid or unenforceable, the remainder of this Agreement, or the application of such term, condition or provision to parties or circumstances other than those to which it is held invalid or unenforceable, will not be affected thereby, and each term, condition and provision of this Agreement will be valid and enforceable to the fullest extent permitted by law.

-END-

Exhibit 31.1

CERTIFICATION

I, Henry D. Edelman, certify that:

1.	I have reviewed this Quarterly Report on Form 10-Q of the Federal Agricultural Mortgage Corporation for the fiscal quarter ended June 30, 2008;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 11, 2008
	/s/ Henry D. Edelman
	Henry D. Edelman
	Chief Executive Officer

Exhibit 31.2

CERTIFICATION

I, Nancy E. Corsiglia, certify that:

1.	I have reviewed this Quarterly Report on Form 10-Q of the Federal Agricultural Mortgage Corporation for the fiscal quarter ended June 30, 2008;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

(a)

(b)

(c)

(d)

5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 11, 2008
	/s/ Nancy E. Corsiglia
	Nancy E. Corsiglia
	Chief Financial Officer

Exhibit 32

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of the Federal Agricultural Mortgage Corporation (the “Corporation”) for the quarterly period ended June 30, 2008 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, Henry D. Edelman, Chief Executive Officer of the Corporation, and Nancy E. Corsiglia, Chief Financial Officer of the Corporation, each hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to his or her knowledge:

(1)

The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Corporation.

/s/ Henry D. Edelman
Henry D. Edelman
Chief Executive Officer


/s/ Nancy E. Corsiglia
Nancy E. Corsiglia
Chief Financial Officer

Date: August 11, 2008