WASHINGTON — The Biden administration’s efforts to provide $4 billion in debt relief to minority farmers is encountering stiff resistance from banks, which are complaining that the government initiative to pay off the loans of borrowers who have faced decades of financial discrimination will cut into their profits and hurt investors.
The debt relief was approved as part of the $1.9 trillion stimulus package that Congress passed in March and was intended to make amends for the discrimination that Black and other nonwhite farmers have faced from lenders and the United States Department of Agriculture over the years. But no money has yet gone out the door.
Instead, the program has become mired in controversy and lawsuits. In April, white farmers who claim that they are victims of reverse discrimination sued the U.S.D.A. over the initiative.
Now, three of the biggest banking groups — the American Bankers Association, the Independent Community Bankers of America and National Rural Lenders Association — are waging their own fight and complaining about the cost of being repaid early.
They also want other investors who bought the loans in the secondary market to get government money that would make up for whatever losses they might incur from the early payoff.
Bank lobbyists, in letters and virtual meetings, have been asking the Agriculture Department to make changes to the repayment program, a U.S.D.A. official said. They are pressing the U.S.D.A. to simply make the loan payments, rather than wipe out the debt all at once. And they are warning of other repercussions, including long-term damage to the U.S.D.A.’s minority lending program.
In a letter sent last month to Tom Vilsack, the agriculture secretary, the banks suggested that they might be more reluctant to extend credit if the loans were quickly repaid, leaving minority farmers worse off in the long run. The intimation was viewed as a threat by some organizations that represent Black farmers.
they wrote to Mr. Vilsack in April.
The U.S.D.A. has shown no inclination to reverse course. An agency official said that obliging the banks would put an undue burden on taxpayers and that the law did not allow the agency to pay interest costs or reimburse secondary market investors. The agency hopes to be able to begin the debt relief process in the coming weeks, according to the official, who requested anonymity because they were not authorized to comment on the program.
The relief legislation that Congress passed in March provided “sums as may be necessary” from the Treasury Department to help minority farmers and ranchers pay off loans granted or guaranteed by the Agriculture Department. Most of the loans are made directly to farmers, but about 12 percent, or 3,078, are made through lenders and guaranteed by the U.S.D.A.
The Congressional Budget Office estimated that the loan forgiveness provision would cost $4 billion over a decade.
While America’s banks have flourished in the last century, the number of Black-owned farms has declined sharply since 1920, to less than 40,000 today from about a million. Their demise is the result of industry consolidation as well as onerous loan terms and high foreclosure rates.
Black farmers have been frustrated by the delays and say they are angry that banks are demanding additional money, slowing down the debt relief process.
“Look at the two groups: You have the Black men and women who have gone through racism and discrimination and have lost their land and their livelihood,” said Bill Bridgeforth, a farmer in Alabama who is on the board of the National Black Growers Council. “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.”