Cassandra Jones Havard
Excerpted from: Cassandra Jones Havard,
African-American Farmers and Fair Lending: Racializing Rural Economic
Space, 12 Stanford Law and Policy Review 333-347, 333-334 (Spring
In the context of small farm policy, two core democratic principles--
federalism and neutrality--are ultimately flawed as applied.
"[T]he rules and the law may be color-blind, [but] people are
-J. L. Chestnut, Plaintiffs' Attorney Pigford v. Glickman.
The relationship of the federal government to the economic
development of the minority-owned farm as a business raises issues of
political authority. The United States Department of Agriculture's
(USDA) loan qualification scheme allows locally elected farmers--who,
with few exceptions, are white--to make substantive decisions regarding
an applicant farmer's creditworthiness. For many African-American
farmers, this structure has resulted in a sustained lack of access to
USDA's low-cost funds and, eventually, to land loss.
The congressional decision that local farmers are able to make the
best determinations concerning borrower eligibility for federal
agricultural loan funds leads to concerns as to whether Congress'
federalism objective of delegation of authority to local constituents
can ever be met. As an issue of political authority, the balance of
power in the USDA loan scheme between the federal government and local
citizens is unique and uneven. The USDA process-- calling for the
election of local representatives among the population of farmers within
a particular county--gives elected farmers both critical discretion
regarding loan eligibility and an opportunity for self- aggrandizement.
Racial minority farmers' lack of access to credit--the by- product of
this long-standing federal scheme--provides fertile ground for
challenging the devolution of authority to local landowners. In the
context of small farm policy, two core democratic principles, federalism
and neutrality, are ultimately flawed as applied. The ideal of
federalism--that state and local governments can share power with the
federal government--is lost when programs are not monitored for
compliance with stated goals and objectives. The presumed neutrality of
the USDA's process for disbursing federal funds raises questions about
the congressional purpose given a result that is, at best, described as
the deleterious sacrifice of land owned by minority small farmers.
Negative biases that should not color a neutral governmental process
have been given the aura of federal approval.
This article focuses on how to measure loss when racial
discrimination dominates economic policies and results in identifiable
economic injustice. More importantly, it draws a nexus between credit
availability and intergenerational property transmission. This article
concludes that the loss of African-American owned farmland due to
discriminatory credit decisions decreases opportunities for inheritance
of real property. The proposed changes in federal law set forth in this
article can help to remedy the cumulative effects of USDA's financing
Part I of this paper presents an overview of USDA's role as a
financial intermediary. It identifies the goals of the federal
agricultural lending program and explains the authority and policy
choices given to locally elected farmers. It illustrates the direct
competition between friends and neighbors for low-cost loan funds and
summarizes the recent class action settlement of claims between
African-American farmers and USDA.
Part II describes USDA's approach as one with federalist and economic
underpinnings. It identifies the arguments supporting devolution of
power from the federal government to local jurisdictions. It also
examines the competing theories of information costs, transaction costs,
and agency costs as they relate to USDA as a financial intermediary.
Finally, it critiques both the federalism and economic justifications of
USDA's decision to allow local farmers to make credit decisions.
Challenging the fairness to minority constituent concerns of locally
controlled political processes, the article suggests that local
constituencies that do not mandate accountability for minority interests
may unfairly influence the supposedly democratic majoritarian regime.
Given the absence of monitoring for compliance within the federal
programs, there is inadequate justification for the role of the county
committee in the lending process.
Part III discusses fair credit law and concludes that the applicable
statute, the Equal Credit Opportunity Act (ECOA) is an inadequate remedy
when credit discrimination affects small businesses. That section
proposes an alternative way to measure the harm and to correct the
authority and operational imbalances. It recommends a change in the
make-up of the county committee by allowing locally qualified citizens,
who are not farmers, to make the credit decisions. Next, it argues for
more stringent monitoring, record keeping and reporting requirements in
order to determine promptly whether discriminatory lending patterns
Finally, the article recommends an alternative way to measure actual
loss by allowing compensation for loss of prospective inheritance.