U.S. banks refused to write off billions of dollars in loans to black farmers with money allocated by the government. The financial institutions are afraid of incurring losses from early repayment of debts and ask the authorities to pay compensations beyond the approved amount, writes The New York Times.
Four billion dollars has now been approved for debt relief for the nation's black agricultural workforce. The initiative seeks to address years of discrimination against minority rights by creditors and the United States Department of Agriculture (USDA). The U.S. Congress approved funding in March 2021 as part of a $1.9 trillion government stimulus package passed with the arrival of new President Joe Biden. The initiative is mired in controversy and litigation.
Three major banking organizations, the American Bankers Association, the Independent Community Bankers of America, and the National Rural Lenders Association, complain that early repayment of the massive debt would cost them dearly.
The banks' arguments are based on the fact that their organizations make money on loans. When granting a loan to a farmer, they take into account the amount of interest over the life of the loan and the possibility of reselling the debt to another investor. Thus, when borrowers repay their debts early, lenders lose the profits they were counting on. The banks insist that the country's Ministry of Agriculture give them more money so that they don't lose income.
If the department does not agree to such terms, the banks are threatening to deny loans to black farmers.
вЂњIf the USDA does not reimburse the banks for losses due to the insolvency of farmers and ranchers, it could lead to a complete stop of new loans to them,вЂќ the banks wrote in an April letter to the department.
National Black Farmers Association (NBFA) nonprofit president John Boyd Jr. expressed outrage that after decades of discrimination against blacks in lending, banks are complaining about lost profits.
The USDA has no plans to change its program and rejects the lenders' demands because additional funding for loan write-offs would place an undue burden on the nation's taxpayers вЂ” more than four billion dollars. Officials are confident that debt forgiveness will begin in the coming weeks.
Also in April, white farmers sued the U.S. Department of Agriculture, complaining that they were victims of reverse discrimination because of this initiative by the authorities.
The oppression of black people in their rights, including in lending, remains a serious problem and a subject of the struggle for equal rights in many developed countries around the world. According to real estate analysts, African ethnic minorities in Britain have no chance of earning their own homes in a lifetime, and it is almost impossible to get credit from major banks there as well.