Farmers were not the only ones hurting. The economic impact of the farm crisis rippled throughout the Midwest. The Farm Credit system faced its own collapse and eventually would be bailed out by the government. And rural bankers found themselves in unenviable positions.
Alan Tubbs: The first major impact on my mind from the 80s is the emotional stress that it caused for lenders as well as producers and the wedges that it could drive within communities that were really in large part not of their own making.
Tom Huston: I knew most of the bankers in the state of Iowa. Most of them knew me. I had been in many of their towns. I kind of made it a job to see to it that I knew where they were, what their town looked like, what their bank was. I tried to understand what was happening there in that town. And so when I had to go there I would be closing a bank on people that I considered as friends. And I knew the heartache that was going to come in that community.
The banks started closing and untold millions were lost. The scope of the crisis grew rapidly.
Neil Harl: Once something affects the financial side it has huge consequences. We lost 38 banks in the state of Iowa during that time period. This was all very destabilizing, destabilizing to everyone, even those who had good credit after their bank failed, they had trouble finding a new banking home because no one really wanted to take on an agriculture client.
The farm crisis decimated small towns where many businesses closed. It spread into the cities where manufacturers of farm implements and other agricultural supplies laid off thousands. In 1984 the Caterpillar Tractor Company plant in Burlington, Iowa closed. The Quad Cities in eastern Iowa and western Illinois lost an estimated 20,000 manufacturing jobs during this time. As demand plummeted, John Deere, the largest farm implement manufacturer in the region, laid off workers by the thousands. Waterloo, Iowa lost 14 percent of its population in the early 1980s and scores of homes were left abandoned.
Senator Charles Grassley: It devastated the economies of those cities which were so dependent upon agriculture because of agricultural machinery. If agriculture is not making money it's devastating.
Rural businesses were affected as farm families had little money to spend. It is estimated that for every four farms that went under one rural business closed.
Alan Tubbs: The farm crisis had a major impact on what happened in our downtowns. We had consolidation of farm equipment dealerships. We had feed stores that consolidated, retail stores downtown that changed. And so you see in many rural communities vacant store buildings and so forth because shopping patterns have changed. Now that's not just all from the crisis here. Some of that was going to happen anyway. But there was a lot of encouragement of that during those difficult years when agriculture didn't have the income to spend in their rural communities.