Document Type


Publication Date

Spring 2001


This article critiques the federal policy and legislation that makes USDA a financial intermediary designed to give farmers access to credit in light of the federal class action settlement of claims between African-American farmers and USDA. The challenged statutory scheme allows locally elected farmers to make decisions regarding these low-cost loan funds. USDA's approach has both federalist and economic underpinnings. The article identifies the arguments supporting devolution of power from the federal government to local jurisdictions and 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. Finally, the article proposes more stringent monitoring, record keeping and reporting requirements in order to determine promptly whether discriminatory lending patterns exists and recommends an alternative way to measure actual loss by allowing compensation for loss of prospective inheritance.



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