Up to 13,000 Black and other minority farmers could start to see thousands of dollars in loan forgiveness beginning in June, as a part of the federal stimulus package that aimed to help disadvantaged farmers but has been delayed for months.
However, the U.S. Department of Agriculture Farm Service Agency announced on Friday that notices to disadvantaged farmers are going out, explaining that the debt relief money is now available, and that the agency expects to start paying the Farm Service Agency direct loans in early June.
Civil rights activists have said the debt relief program represents a big step toward righting a wrong after a century of mistreatment of farmers of color by the government and others. Meanwhile, White farmers and some lawmakers have criticized the program, calling it a form of reverse racism, and banks have warned it would financially harm lending institutions.
Agriculture secretary Tom Vilsack told The Washington Post he estimates that between 11,000 and 13,000 Black, American Indian, Hispanic, Alaskan Native, Asian American or Pacific Islander farmers will benefit from this program, with the entirety of their loans paid off by the U.S. Treasury. Eligible farmers and ranchers will also receive an additional 20 percent of that loan as a cash payment sent directly to them, to cover the tax burden that comes with such large debt relief.
“These folks will get a letter that advises them that their debt is in the process of being paid,” Vilsack said by phone. “It will specify the amount of the debt, principal and interest, whatever charges are involved, and if the farmer or rancher agrees that that number is accurate, they are to sign a copy of the letter and return it to the Department of Agriculture, at which time the department will, within a matter of weeks, send them a check for 20 percent of the loan that’s been forgiven.”
In a statement, Vilsack repeated his commitment to “ending discrimination wherever it exists at USDA and working like never before to gain the trust and confidence of America’s farmers and ranchers.”
Some Black farmer advocates aren’t so sanguine that this debt relief will heal old wounds.
Corey Lea, a beef and pork rancher in Murfreesboro, Tenn., and head of the Cowtown Foundation advocacy group, has sued the USDA a number of times alleging discrimination, most recently in 2019. He said that White farmers have received billions of dollars in pandemic relief and direct payments attempting to mitigate harm done during the Trump administration’s trade war with China.
“Socially disadvantaged farmers received 0.1 percent of pandemic relief,” Lea said, a number Vilsack does not dispute. “If indeed they are going to get money out in June, that’s great, the relief is definitely needed. However, there’s great concern that the Office of Civil Rights is still not allowing farmers to resolve their discrimination complaints.”
While the debt relief is an attempt to correct for historic harm done to Black farmers and to help farmers of color who have been disproportionately impacted by covid-19, critics say it’s discriminatory in the other direction.
In April, former Trump adviser Stephen Miller formed the America First Legal Foundation to file a lawsuit on behalf of Sid Miller, a White farmer (who separately serves as the Texas agriculture commissioner) in the U.S. District Court for the Northern District of Texas claiming the USDA program “disrupts our common progress towards becoming a more perfect union.”
Stephen Miller didn’t return a request for comment. But the lawsuit argues that codifying into law “socially disadvantaged group" runs afoul of the Constitution. It also argues that the definition of “socially disadvantaged group” should be expanded to include those who are members of groups that have, at some point, been subject to racial and ethnic prejudice, including Irish, Italians, Germans, Jews and eastern Europeans.
Also in April, a group of farmers from Wisconsin, Minnesota, South Dakota and Ohio sued the federal government, seeking a court order prohibiting the USDA from applying racial classifications when determining eligibility for loan forgiveness. And Rep. Tom Tiffany (R-Wis.) and Rep. Burgess Owens (R-Utah) announced plans to introduce the Agriculture Civil Rights and Equality Act, which would prohibit the USDA from discriminating or providing preferential treatment to any person on the basis of race, color, national origin or sex.
Vilsack directs those who perceive the USDA relief program as reverse racism to read a book by Natalie Baszile called “We Are Each Other’s Harvest.”
“There’s a very specific chapter about the steps that were taken by USDA over the last 100 years, policies were implemented that specifically twisted in a way that disadvantaged socially disadvantaged producers,” Vilsack said. “There’s no better example of that than the covid relief efforts. Billions of dollars went to White farmers, because the system is structured in a way that gives them significant advantages.”
Black farmers in America have lost more than 12 million acres of farmland over the past century, 85 percent of their land according to census data, which Vilsack said is due to discriminatory government and business policies that made it harder to get loans or buy equipment.
Today roughly 98 percent of American farmers are White. Over the past 30 years, several major civil rights lawsuits have compensated farmers for specific acts of discrimination. According to Tracy Lloyd McCurty, executive director of Black Belt Justice Center, which provides legal representation to Black farmers, these have largely proved “disastrous” for Black farmers.
“Our elder farmers had five demands: monetary compensation for economic harm, land, debt cancellation, federal and state tax relief, and access to non-extractive capital,” she said. “Debt cancellation is a necessary step to eradicating pervasive racial discrimination within USDA.”
Additionally, the new debt-relief program has faced challenges from the banking industry. Three of the biggest banking groups — the American Bankers Association, the Independent Community Bankers of America and National Rural Lenders Association — have come forward to say that this program could be harmful to lenders and their shareholders.
Mark Scanlan, senior vice president of agriculture and rural policy for the Independent Community Bankers of America, said that while banks “do not oppose this program,” lenders are concerned about how it is being implemented. As an example, Scanlan said that he knows of a small community bank with $200 million in farm loans to those who qualify as disadvantaged farmers, which could face “tens of millions of dollars” of losses if those loans are paid off early.
“When the loans get taken off the books, they stop producing income,” Scanlan said. "Banks have income projections, so when they sit down to do their bank exam with regulators, all of a sudden this changes dramatically overnight and can be a significant loss.”
He said that many of these farm loans are sold into the secondary market, allowing the bank more liquidity to make new loans.
Danny Creel, executive director of the National Rural Lenders Association, said that, while his organization supports the USDA loan payoff, the financial system is not designed to sustain such an immediate government-funded payoff of existing loans.
“This $4 billion payoff could have repercussions that were perhaps not considered in the development of the American Rescue Act,” Creel said. “Rural lenders provide millions of dollars in much-needed loans to socially disadvantaged farmers in their communities.”
Vilsack said that banks already have protection built in with prepayment penalties, which are fees that range from 3 to 5 percent of the overall loan that are triggered when loans are paid off early.
“And we are going to pay those prepayment penalties within the USDA. So they’re going to get a prepayment penalty payment. Banks will get that money back. And so, banks then can lend the money again," Vilsack said.
The framework for this loan relief program, which passed as a part of the American Rescue Plan Act, drew from a bill called the Emergency Relief for Farmers of Color Act, by Sen. Raphael G. Warnock (D-Ga.) and joined by Democratic Sens. Cory Booker (N.J.), Ben Ray Luján (N.M.) and Debbie Stabenow (Mich.), making it onto the federal stimulus law, despite opposition from Congressional Republicans.