$100M Scam to Defraud Federal Crop Insurance System

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Sept. 12 (Bloomberg) –- Bloomberg’s Nela Richardson discusses how the crop insurance burden falls on taxpayers and efforts to reform the system. She speaks with Erik Schatzker and Sara Eisen on Bloomberg Television's "Market Makers." (Source: Bloomberg)

Prosecutors call at the $100 million scam and the u.s. friends are picking up the tab.

Critics say it goes to show that it is well past time to reform the crop insurance program.

It is great to see you here in new york city.

Good to be here with you.

. about crop insurance.

Not many people know exactly how it works.

Fewer still know how much it costs.

It costs a lot.

It started out as a small-scale program in 1938 and it has ballooned -- 75 years ago.

Yeah.

And it has ballooned to program the costs of the government $14 billion to operate last year.

His is a program that doesn't take advantage of the modern financial system, that has a well-developed markets to help farmers manage its risks during ultimately, taxpayers pay the cost.

I know the bloomberg has done a series of articles on this and the political push to change that.

Where does that stand?

Right now, we have a stalled peace of legislation in the farm act.

What is going on right now in this crowded legislative agenda is whether we can get the house and the senate on board in the separated farm act, which separates the farm act from the -- farm insurance from the food stamp program.

I wouldn't call you a free marketeer, but it sounds as though -- well, you have a balanced view of the world.

I try to be balanced.

Absolutely.

But it seemed like you are advocating more free-market principles when it comes to how we manage the nation's agriculture industry.

I'm not against subsidies.

I was born and bred in the midwest.

I know how important farming is for the america need those.

At the with the subsidies are carried out is very important.

Most of the country subsidizes agriculture.

But when you insured -- when you subsidize it through the insurance program, he also subsidize the profits of companies like wells fargo.

Is that really good policy?

When you over insure against risky behavior in any market, it leads to more risky behavior.

In agriculture, it incentivizing farmers to overpower not be sustainable.

What is a bed -- what is a better version?

If we keep the subsidies, how should they be doled out so it doesn't skew the system toward bad behavior?

Three fourths of the insurance or graham are in congo muscle war, upbeat, and sugar.

We have derivatives to help mark critz -- to help farmers manage their risks.

They are really good a provided this sharing mechanism.

But with the government in the middle of it, the markets will not innovate and help taylor risk for farmers.

Who is at risk, the individual market or the -- the insurance company or the farmer?

They are making out very good with this current system, both

This text has been automatically generated. It may not be 100% accurate.

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