Banks are resisting the Biden administration's push to provide $4 billion in a debt relief program for minority farmers, saying the government's initiative to pay off the borrowers' loans will hurt the financial institutions' profits and investors.
The American Bankers Association, the Independent Community Bankers of America, and the National Rural Lenders Association, three of the nation's largest banking groups, say the program would result in loans being repaid early, resulting in losses of interest it can collect from the farmers, reports The New York Times.
Their complaints come after white farmers who claimed they were the victims of reverse discrimination sued the United States Department of Agriculture.
The debt relief for minority farmers came with the $1.9 trillion stimulus package passed by Congress in March. No money has yet been allocated.
The banks say the federal government, rather than simply paying off the loans, should pay extra money to the banks so that they and their investors won't lose the interest income or money they would have made reselling loans to other investors.
They also said they want the other investors who bought up loans in the secondary market to get some government money to make up for the losses they face from the early payoffs.
A USDA official said that bank lobbyists have been pushing for changes to the repayment program and want the federal government to make the farmers' loan payments rather than wipe out all of their debt at one time.
The banks also warned that they might be more reluctant to extend credit for loans that are quickly repaid, which would harm minority farmers more in the long run.
Organizations that represent Black farmers say the banks, which made the suggestion in a letter to Agriculture Secretary Tom Vilsack in April, are posing the threat to keep the government from taking action.
An agency official, however, said that giving in to the banks will create an undue burden on taxpayers and that under the law, the agency can't pay interest costs or reimburse investors from the secondary market.
The official, who requested anonymity, said the USDA hopes that it can start the debt relief program in the upcoming weeks.
Under the relief legislation, "sums as may be necessary" would be provided through the Treasury Department to help minority farmers and ranchers pay off their loans that had been guaranteed or granted through the USDA.
Most loans are made directly but about 12% go through lenders and include the USDA guarantee.
According to the Congressional Budget Office, the provision to forgive loans will cost $4 billion over 10 years.
Meanwhile, Black-owned farms have been on the decline for years, dropping from about a million in 1920 to fewer than 40,000 now, with the drop blamed on industry consolidation, high loan terms, and large numbers of foreclosures.
Black farmers say they are angry that banks are demanding extra money.
"You have the Black men and women who have gone through racism and discrimination and have lost their land and their livelihood, and then you have the American Bankers Association, which represents the wealthiest folks in the land, and they’re whining about the money they could potentially lose," said Bill Bridgeforth, a farmer in Alabama who serves on the board of the National Black Growers Council
Sandy Fitzgerald ✉
Sandy Fitzgerald has more than three decades in journalism and serves as a general assignment writer for Newsmax covering news, media, and politics.
© 2023 Newsmax. All rights reserved.