United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued October 9, 1998 Decided January 19, 1999
No. 98-5020
Independent Bankers Association of America and
American Bankers Association,
Appellants
v.
Farm Credit Administration,
Appellee
Appeal from the United States District Court
for the District of Columbia
(No. 97cv00695)
Michael F. Crotty argued the cause for appellants. With
him on the briefs were John J. Gill and Leonard J. Rubin.
Michael S. Raab, Attorney, U.S. Department of Justice,
argued the cause for appellee. With him on the brief were
Frank W. Hunger, Assistant Attorney General, Wilma A.
Lewis, U.S. Attorney, and Mark B. Stern, Attorney, U.S.
Department of Justice.
Arvid E. Roach, II, argued the cause and filed the brief for
amicus curiae Farm Credit Council.
Before: Silberman, Rogers and Garland, Circuit Judges.
Opinion for the Court filed by Circuit Judge Rogers.
Rogers, Circuit Judge: Since 1916, the federal government
has provided assistance to farmers in securing agricultural
loans. With the enactment of the Federal Farm Loan Act,
ch. 245, 39 Stat. 360 (1916), and the Farm Credit Act of 1933,
ch. 98, 48 Stat. 257 (1933), Congress established a system of
banks and cooperative lending associations, known as the
Farm Credit System, designed to provide credit to agricultur-
al producers and farm-related businesses. In 1971, Congress
revised the System in the Farm Credit Act of 1971, Pub. L.
No. 92-181, 85 Stat. 583 (1971) (codified as amended at 12
U.S.C. s 2001, et seq.). At issue here are the regulations
promulgated by the Farm Credit Administration on January
30, 1997, to expand the availability of credit to farmers and
certain businesses. See 62 Fed. Reg. 4429 (1997) (codified at
12 C.F.R. pts. 613-615, 618-620, and 626). Several commer-
cial banks opposed the revised regulations on the ground that
they exceeded the scope of the agency's authority under the
statute. When the agency rejected these contentions, two
national trade groups, appellants Independent Bankers Asso-
ciation and American Bankers Association, filed suit. Object-
ing to the expansion of Farm Credit System loan availability
to farm-related service businesses, processing and marketing
operations, legal entities in general, and rural home owners,
appellants argued that only Congress can authorize these
expansions of credit to individuals and entities that previously
had been barred by the regulations from receiving System
loans.1 The district court granted summary judgment to the
agency and denied appellants' cross-motion for summary
judgment. See Independent Bankers Ass'n of Am. v. Farm
Credit Admin., 986 F. Supp. 633 (D.D.C. 1997). We hold
that, with two exceptions, the revised regulations are consis-
tent with the statute. The two exceptions are the regulations
allowing Farm Credit Banks to extend loans to farm-related
businesses for activities beyond those listed in s 2019(c)(1),
and rural housing loans to non-owner-occupied residences.
Accordingly, we affirm in part and reverse in part.
I.
The Farm Credit Administration regulates a system of
banks and cooperative lending associations designed to im-
prove "the income and well-being of American farmers and
ranchers by furnishing sound, adequate, and constructive
credit and closely related services to them, their cooperatives,
and to selected farm-related businesses necessary for efficient
farm operations." 12 U.S.C. s 2001(a) (1994). Congress
sought to assure that "American farmers have available a
dependable supply of credit on terms tailored to their special
needs and capabilities and adjusted regularly to changing
economic and agricultural conditions." S. Rep. No. 92-307, at
7 (1971). The Farm Credit Loan System currently includes,
according to the agency's brief, over 200 cooperative lending
associations and eight banks--six Farm Credit Banks, one
bank for cooperatives, and one agricultural credit bank. See
generally 12 U.S.C. s 2002(a) (1994).
On September 11, 1995, the agency announced a proposed
revision to its regulations that would modify eligibility re-
quirements and the scope of permissible lending, with the
intent "to eliminate unnecessary regulatory restrictions and
__________
1 In the district court, appellants also objected to a new regula-
tion regarding System lending to service cooperatives. The district
court accepted the agency's representation that this modification
did not affect any substantive change to the old regulation and
found that "[p]laintiffs at this time have no basis to challenge the
agency's new regulation." Independent Bankers Ass'n of Am. v.
Farm Credit Admin., 986 F. Supp. 633, 643 (D.D.C. 1997). Appel-
lants do not challenge this ruling on appeal.
implement statutory changes" from the early 1990s. See 60
Fed. Reg. 47103, 47103 (1995). This effort included removing
regulatory restrictions on lending that the agency concluded
were not required by the statute. In promulgating its final
rule on January 30, 1997, see 62 Fed. Reg. 4429 (1997), the
agency rejected the argument of several commercial banks
that the statute and its legislative history mandated that the
Farm Credit System be "a lender of last resort serving only
those rural credit markets that have been abandoned by
other lenders." Id. at 4434. The agency expanded who
qualified for System loans and the circumstances under which
the System would make loans available. Appellants object to
six of these changes, which took effect on March 11, 1997.
As to farm-related businesses, the agency adopted a re-
vised version of 12 C.F.R. s 613.3020(a), which provides that
"[a]n individual or legal entity that furnishes farm-related
services to farmers and ranchers that are directly related to
their agricultural production is eligible to borrow from a
Farm Credit bank or association that operates under titles I
or II of the Act."2 The new regulations removed the prior
requirement that farm-related businesses were eligible for
lending only if they engaged in providing "custom-type farm-
related services directly related" to farmers' "on-farm operat-
ing needs." 12 C.F.R. s 613.3050(a) (repealed 1997).3 These
services are defined as "tasks that farmers and ranchers can
perform for themselves, but instead hire outside contractors
to perform." 62 Fed. Reg. at 4438. The agency explained
the change by noting that the statute did not mention the
term "custom-type services" and that a reasonable interpreta-
tion of the term "farm-related services" should include tech-
__________
2 Title I governs federal land banks and federal land bank
associations, while Title II governs federal intermediate credit
banks and production credit associations. See Farm Credit Act of
1971, 85 Stat. at 583. Farm Credit Banks are banks established by
a merger of a federal intermediate credit bank and a federal land
bank, see 12 U.S.C. s 2011 (1994), and are governed by 12 U.S.C.
ss 2011-2023.
3 All further citations to farm credit regulations are in Title 12
of the Code of Federal Regulations, unless otherwise indicated.
nologically advanced services that directly relate to agricul-
tural production but which farmers could not provide for
themselves. Id.
The agency also expanded the type of farm-related busi-
ness activities that qualify for lending. Under the old regula-
tion, a farm-related business could receive "long-term real
estate mortgage loans ... for necessary sites, capital struc-
tures, equipment, and initial working capital for such ser-
vices." s 613.3050(c)(1) (repealed 1997). The new regula-
tion, however, permits financing for "[a]ll of the farm-related
business activities" of a business, provided that a majority of
its income arises from furnishing farm-related services.4
s 613.3020(b)(1) (1998).
Finally as to farm-related businesses, the new regulation
removes the former prohibition on lending to commercial
businesses that "purchase farm products from or sell inputs
to farmers or ranchers unless substantially all of such inputs
handled are used incident to the services provided."
s 613.3050 (b)(2) (repealed 1997). The regulations eliminate
this requirement, as s 613.3020 now allows "whole-firm fi-
nancing" of businesses that derive a majority of their income
from providing farm-related services. See 62 Fed. Reg. at
4438.
As for processing and marketing loans, the agency loosened
the ownership requirements for loan applicants. Previously,
the agency had required that "bona fide farmers"5 and other
agricultural producers own 100 percent of a processing and
marketing operation if the operation and its owners produced
__________
4 If the borrower derives 50 percent or less of its income from
such services, however, the regulation limits the approval of loans to
"farm-related services...directly related to the agricultural produc-
tion of farmers and ranchers." s 613.3020(b)(2) (1998).
5 The regulation defines the term "bona fide farmer" as "a
person owning agricultural land or engaged in the production of
agricultural products, including aquatic products under controlled
conditions." s 613.3000(a)(1) (1998).
under 50 percent of the annual "throughput."6
s 613.3045(b)(2)(iii) (repealed 1997); see also 61 Fed. Reg. at
42,105. Under the new regulation, a legal entity engaging in
processing and marketing qualifies for financing so long as
"eligible borrowers under s 613.3000(b) own more than 50
percent of the voting stock" and the entity or its owners
"regularly produce[ ] some portion of the throughput."7
s 613.3010(a)(1)-(2) (1998). The agency explained that this
revision expanded the pool of potential borrowers yet still
reflected a congressional concern that farmers exercise "sub-
stantial control" over the borrowing entity--in this case, a
majority interest. 62 Fed. Reg. at 4437.
The agency also changed the ownership requirements for
legal entities in general. Previously, legal entities were eligi-
ble for credit only if (1) they were majority owned by
agricultural producers, (2) a majority of their assets related
to agricultural production, or (3) a majority of their income
arose from farming or the harvesting of aquatic products.
s 613.3020(b) (amended 1997). The agency repealed these
restrictions so that "all legal entities ... will now be eligible
for [System] financing on the same basis as other farmers."
62 Fed. Reg. at 4437. The new regulations, however, retain a
prior limitation that restricts credit to farmers "as the em-
phasis moves away from the full-time bona fide farmer" to
businesses whose focus is "essentially other than farming."
Compare s 613.3005(a) (1998) with s 613.3005(a) (amended
1997). Both new and old regulations state that
[i]t is the objective of each bank and association, except
for banks for cooperatives, to provide full credit, to the
__________
6 "Throughput" is the raw materials used in the processing and
marketing operation. See S. Rep. No. 101-357, at 14-15, 258 (1990),
reprinted in 1990 U.S.C.C.A.N. 4656.
7 Section 613.3000(b) defines an eligible borrower as "a bona
fide farmer or rancher, or producer or harvester of aquatic prod-
ucts."
extent of creditworthiness, to the full-time bona fide
farmer (one whose primary business and vocation is
farming ...); and conservative credit to less than full-
time farmers for agricultural enterprises, and more re-
stricted credit for other credit requirements as needed to
ensure a sound credit package ... as long as the total
credit results in being primarily an agricultural loan.
s 613.3005 (1998); see also s 613.3005(a) (repealed 1997)
(using almost identical language).
Further, the new regulations expand who qualifies for rural
home loans. Prior to the revisions, the Farm Credit System
provided financing only for those rural residences that were
owner-occupied. s 613.3040(b) (repealed 1997). The old reg-
ulation explicitly prohibited loans "to purchase or construct a
rural residence for the express purpose of rental or resale."
s 613.3040(c) (repealed 1997). The new regulations provide
that "[a]ny rural homeowner is eligible to obtain financing on
a rural home," although he or she is only eligible for loans on
"one rural home at any one time." s 613.3030(b) (1998).
Both versions limit these loans to "buying, building, remodel-
ing, improving, repairing," or refinancing rural homes. Com-
pare s 613.3030(c) (1998), with s 613.3040(c) (repealed 1997).
Appellants filed suit in the district court, alleging that the
regulations violated the plain language of the statute as well
as congressional intent. They also asserted that the adoption
of ss 613.3020 (financing for farm-related service businesses),
613.3100 (domestic lending), 613.3010 (financing for process-
ing and marketing operations), 613.3000 (definitions), and
613.3030 (rural home financing) was arbitrary and capricious,
in violation of the Administrative Procedure Act, 5 U.S.C.
s 706(2). The district court granted summary judgment to
the agency, concluding that "[t]he broad, permissive language
of the statute clearly covers the more expansive lending
under the new regulations.... [T]he mere fact that the
agency had not seized upon the full scope of its lending
authority in the past in no way precludes it now from
reasonably adopting such regulations."8 Independent Bank-
ers, 986 F. Supp. at 640.
II.
This court reviews de novo the district court's grant and
denial of the parties' motions for summary judgment. See
Heller v. Fortis Benefits Ins. Co., 142 F.3d 487, 491-92 (D.C.
Cir.), cert. denied, 119 S. Ct. 337 (1998); Consumer Fed'n of
Am. v. United States Dep't of Health & Human Serv., 83
F.3d 1497, 1501 (D.C. Cir. 1996). In evaluating an agency's
interpretation of a statute it administers, courts apply the
deferential standard articulated in Chevron U.S.A., Inc. v.
Natural Resources Defense Council, Inc., 467 U.S. 837 (1984).
Under this test, courts must consider
[f]irst, ... whether Congress has directly spoken to the
precise question at issue. If the intent of Congress is
clear, that is the end of the matter; for the court, as well
as the agency, must give effect to the unambiguously
expressed intent of Congress. If, however, the court
determines Congress has not directly addressed the pre-
cise question at issue, the court does not simply impose
its own construction on the statute.... Rather, if the
statute is silent or ambiguous with respect to the specific
issue, the question for the court is whether the agency's
answer is based on a permissible construction of the
statute.
Id. at 842-43. With the exception of regulations governing
rural housing and certain Farm Credit Bank loans to farm-
related businesses, we hold that the agency's regulations are
__________
8 The district court also ruled that "Plaintiffs clearly have
associational standing in this case to bring the claim on behalf of
their members." Independent Bankers, 986 F. Supp. at 639. The
agency no longer challenges appellants' standing in light of Nation-
al Credit Union Admin. v. First Nat'l Bank & Trust Co., 118 S. Ct.
927 (1998).
consistent with the statute's language and congressional in-
tent.
Farm-Related Businesses. Appellants object to three
aspects of the new regulations regarding farm-related ser-
vices: (1) the expansion of credit by farm credit banks for all
of a farm-related businesses' activities, rather than just for
"necessary sites, capital structures, equipment and initial
working capital," see s 613.3050(c) (repealed 1997), (2) the
removal of the requirement that the services be "custom-type
services" that farmers could otherwise do by themselves, and
(3) the agency's alleged failure to restrict sufficiently loans to
businesses providing goods, rather than services, to farmers.
The statute provides that "[t]he credit and financial ser-
vices authorized in this subchapter may be made available ...
[to] persons furnishing to farmers and ranchers farm-related
services directly related to their on-farm operating needs."
12 U.S.C. s 2017 (1994). It further provides that loans by
farm credit banks "to persons furnishing farm-related ser-
vices ... may be made for the necessary capital structures
and equipment and initial working capital for such services."9
12 U.S.C. s 2019(c)(1). The district court found that the
language of these provisions was permissive and therefore did
not restrict the Farm Credit System to providing loans only
for the circumstances explicitly listed in the statute. See
Independent Bankers, 986 F. Supp. at 641. It therefore
reasoned that the agency had not exceeded the scope of the
statute by permitting loans to "[a]ll of the farm-related
business activities of an eligible borrower who derives more
than 50 percent of its annual income ... from furnishing
__________
9 Production credit associations are governed on this point by
12 U.S.C. s 2075(a)(3) (1994), which provides that loans may be
made to "persons furnishing to farmers and ranchers farm-related
services directly related to their on-farm operating needs." Appel-
lants acknowledge that s 2019(c) does not apply to production
credit associations and other providers of short-term and
intermediate-term loans.
farm-related services that are directly related to the agricul-
tural production of farmers and ranchers." See
s 613.3020(b)(1) (1998).
Appellants, however, contend that s 2019(c)(1) limits Farm
Credit Bank lending to the purposes listed in the statute,
such as "necessary sites, capital structures." They note that
s 2019(a), which governs lending to farmers, uses much
broader language, in that a Farm Credit Bank may make
loans for "any agricultural or aquatic purpose and other
credit needs of the applicant." 12 U.S.C. s 2019(a)(1) (1994).
The agency, in turn, responds that the statute uses permis-
sive language, such as "may," and that the list of activities in
s 2019(c)(1) is illustrative rather than exclusive. In addition,
appellants maintain that, if Congress intended s 2019(c)(1) to
cover activities as extensively as s 2019(a), it could have used
similarly broad language rather than listing specific qualify-
ing purposes for the extension of credit. We agree. If
Congress had wanted businesses providing farm-related ser-
vices to receive loans from farm credit banks on the same
basis as farmers, it could easily have used expansive language
in subsection (c)(1). " '[W]here Congress includes particular
language in one section of a statute but omits it in another
section of the same Act, it is generally presumed that Con-
gress acts intentionally and purposely in the disparate inclu-
sion or exclusion.' "10 Russello v. United States, 464 U.S. 16,
__________
10 The Senate Report states that "loans to persons furnishing
farm related services to borrowers ... will include credit for capital
equipment and initial working capital...." S. Rep. No. 92-307, at
20 (emphasis added); see also H.R. Rep. No. 92-593, at 17 (1971),
reprinted in 1971 U.S.C.C.A.N. 2091 (regarding House version of
the bill). This language suggests that Congress did not contem-
plate that Farm Credit Banks would provide credit to farm-related
services other than for "the necessary capital structures and equip-
ment and initial working capital" listed in the statute. Cf. Halver-
son v. Slater, 129 F.3d 180, 187 n.10 (D.C. Cir. 1997).
23 (1983) (quoting United States v. Wong Kim Bo, 472 F.2d
720, 722 (5th Cir. 1972)); see also Halverson v. Slater, 129
F.3d 180, 185 (D.C. Cir. 1997). For these reasons, we con-
clude that the agency's extension of Farm Credit Bank loans
for any business activities of a farm-related service business
is contrary to the language of the statute and congressional
intent.
Appellants also challenge the change relating to custom-
type services. Prior to the new regulations, the agency
defined farm-related services to include only those "[c]ustom-
type services ... that farmers and ranchers can perform for
themselves, but instead hire outside contractors to perform."
See 62 Fed. Reg. at 4438. In removing this restriction, the
agency explained that the statute itself never mentions
custom-type services, that the examples of custom-type ser-
vices listed in the legislative history are "illustrative," see id.,
and that eliminating this requirement advances the broad
purpose of the statute "because farmers today rely on techno-
logically advanced services that they cannot perform for
themselves." 61 Fed. Reg. at 42,108. The use of these
services, in turn, allows farmers to "(1) [i]ncrease their in-
come; (2) reduce their operating costs; (3) improve farm
productivity; and (4) satisfy consumer demands for improved
food quality and specialty food products." Id.
The plain language of the statute does not mandate that
farm-related services only include "custom-type services."
Section 2017(2) provides that loans may be made available to
"persons furnishing to farmers and ranchers farm-related
services directly related to their on-farm operating needs."
12 U.S.C. s 2017(2) (1994). The use of technologically ad-
vanced services that farmers cannot provide for themselves
appears to qualify as a "farm-related service[ ] directly relat-
ed" to the farmer's operational needs. 12 U.S.C. s 2075(a)(3)
(1994). Allowing financing for services that modern farming
requires but which farmers could not traditionally provide for
themselves is reasonably consistent with the statute's broad
purposes.
"Where, as here, the plain language of the statute is clear,
the court generally will not inquire further into its meaning,
at least in the absence of a clearly expressed legislative intent
to the contrary." Lin Qi-Zhuo v. Meissner, 70 F.3d 136, 140
(D.C. Cir. 1995) (citations and internal quotation marks omit-
ted). Appellants contend, however, that the term "farm-
related services" had an accepted meaning at the time of the
law's adoption to include only custom-type services. For
support, they cite several arguably ambiguous portions of the
legislative history discussing the need to extend financing to
businesses providing custom-type services, without necessari-
ly excluding other types of businesses.11 None of the pas-
sages relied upon indicate that Congress ascribed a special
meaning to the term "farm-related services," only that some
individuals may have wanted lending to farm-related busi-
nesses to be limited to custom-service providers. The court
has previously avoided giving undue weight to the testimony
of witnesses at congressional hearings because their views
__________
11 For example, the governor of the Farm Credit Administra-
tion, testified that financing "should be limited to those [farm
related businesses] who are providing services to the farmer ...
which he traditionally has done himself but which, in the light of
modern-day technology and conditions in agriculture, can be done
more efficiently or effectively by a custom service or other business
service." Farm Credit Act of 1971: Hearings on S. 1483 Before the
Subcomm. on Agric. Credit and Rural Electrification of the Senate
Comm. on Agric. and Forestry, 92d Cong. 211 (1971) (emphasis
added). To the same effect, the chairman of the Senate Committee
on Agriculture and Forestry noted that "farmers frequently turn to
custom operators who provide on-the-farm services," and that to
assure lending to such businesses "would not take in the entire
agribusiness area, the committee restricted loans to persons fur-
nishing services directly related to farm operating needs. These
would be services which the farmer, under ordinary circumstances,
would provide for himself." 117 Cong. Rec. 27,992 (1971).
may not reflect those of the legislators who actually voted on
the bill. See Austasia Intermodal Lines, Ltd. v. Federal
Maritime Comm'n, 580 F.2d 642, 645 (D.C. Cir. 1978). Like-
wise, "[t]he remarks of a single legislator, even the sponsor,
are not controlling in analyzing legislative history." Chrysler
Corp. v. Brown, 441 U.S. 281, 311 (1979). Given the clear
language of the statute, selected and arguably ambiguous
snippets of the legislative history are insufficient to under-
mine that language. See Avco Corp. v. United States Dep't of
Justice, 884 F.2d 621, 623 (D.C. Cir. 1989).
Nor, as appellants contend, is the agency's interpretation
due "considerably less deference" because it "is a major
deviation" from the agency's position at the time the statute
was enacted--i.e., the agency itself limited lending to custom-
service providers only. The Supreme Court has noted, that,
although long-standing agency interpretations may have "a
certain credential of reasonableness, ... neither antiquity nor
contemporaneity with the statute is a condition of validity."
Smiley v. Citibank (South Dakota), N.A., 517 U.S. 735, 740
(1996). "An initial agency interpretation is not instantly
carved in stone. On the contrary, the agency, to engage in
informed rulemaking, must consider varying interpretations
and the wisdom of its policy on a continuing basis." Chevron,
467 U.S. at 863-64. In the instant case, given the absence of
any restrictive language within the statute and given the
agency's judgment that providing financing for technological-
ly advanced services furthers the broad goals of the statute,
the agency's removal of the custom-services requirement
reflects a permissible interpretation.
Appellants also raise a goods-versus-services objection.
The old regulations provided that "[l]oans shall not be made
to commercial businesses which purchase farm products from
or sell inputs to farmers or ranchers unless substantially all
of such inputs handled are used incident to the services
provided." s 613.3050(b)(2) (repealed 1997). The new regu-
lations lack this requirement. Under the new s 613.3020, a
legal entity that derives more than 50 percent of its annual
income from furnishing farm-related services is eligible for
"whole firm" financing--i.e., it can obtain loans for "[a]ll of
[its] farm-related business activities." If, however, the legal
entity derives 50 percent or less of its income from such
services, loans will be available only for its "farm-related
services activities."
Section 2019(c)(1) provides that "[l]oans to persons furnish-
ing farm-related services to farmers and ranchers directly
related to their on-farm operating needs may be made for the
necessary capital structures and equipment and initial work-
ing capital of such services." 12 U.S.C. s 2019(c)(1) (1994).
Sections 2017(2) and 2075(a)(3), in turn, permit loans to
persons who furnish "farm-related services directly related to
... on-farm operating needs." The agency argues that
"[n]othing in the statute renders [these] persons ineligible to
obtain System credit for the purchase or sale of farm-related
goods."12
Appellants do not object to the prior regulation, which
allowed lending to businesses dealing in "inputs" to farmers if
"substantially all of such inputs" were used in the providing of
services. Yet, this prior regulation allowed lending to busi-
nesses who sold goods. The new regulation, like the old, ties
the availability of loans to the provision of services: either (1)
the business must make a majority of its income from provid-
ing services or, (2) if it does not, it may only obtain loans for
the provision of services. Hence, it is unclear why appellants
object to the new regulation and not the old, as both allow
loans to businesses that furnish goods so long as those goods
__________
12 Appellants highlight a colloquy between two senators in the
legislative history, in which the chairman of the Senate Committee
on Agriculture and Forestry assures another that credit would not
extend to "agribusiness operations which would deliver gas and oil
to farms ... because those are products, and not services." 117
Cong. Rec. 27,993 (1971). The agency notes, however, that the
example cited involved a business "engaged exclusively or predomi-
nantly in the sale of goods or products rather than services" and
that such businesses would not receive loans "to finance the opera-
tions relating to such sales" under the new regulations.
are tied to services. If the concern is providing loans to
businesses that provide goods, the old regulation would also
seem, under appellants' view, to be an unwarranted expansion
of the agency's authority. The new regulations, however, are
consistent with the plain language of ss 2017(2) and
2075(a)(3), which contemplate loans to businesses that furnish
services, without limiting financing to exclude all goods. The
agency's adoption of these modifications is a reasonable inter-
pretation of the statute.
Processing and Marketing Loans. Section 2019(a)(1)
provides that loans may be made
to farmers, ranchers, and producers or harvesters of
aquatic products ... for any agricultural or aquatic
purpose and other credit needs of the applicant, including
financing for basic processing and marketing directly
related to the applicant's operations and those of other
eligible farmers, ... except that the operations of the
applicant shall supply some portion of the total process-
ing or marketing for which financing is extended.13
12 U.S.C. s 2019(a)(1) (1994); see also 12 U.S.C. s 2075(a)(1)
(1994) (allowing production credit associations to make short-
__________
13 Prior to the Food, Agriculture, Conservation and Trade Act
of 1990, the statute required that System banks only finance
processing and marketing operations of farmers contributing at
least 20 percent of throughput. See S. Rep. No. 101-357, at 258;
see also 12 U.S.C. s 2019(a) (1994). Congress apparently adopted
this change to "provide greater flexibility to farmers and to prevent,
in the future, a farmer from becoming ineligible for System financ-
ing due to the success and growth of a marketing and processing
operation. The Committee specifically sets no bottom limit for
what portion the on-farm production must make up of the total
throughput." S. Rep. No. 101-357, at 258. The agency contends
that these changes demonstrate congressional intent to reduce the
restrictions placed on lending to processors and marketers.
and intermediate-term loans under similar circumstances).
Appellants claim that the plain language of the statute re-
quires that the applicant be an agricultural producer and
therefore only smaller, farmer-owned processing and market-
ing operations should be eligible for financing.
The new regulation removes the requirement that legal
entities applying for such loans be owned 100 percent by bona
fide farmers. 61 Fed. Reg. at 42105. Now, a legal entity
providing processing and marketing qualifies for financing if
bona fide farmers own more than 50 percent of the voting
stock and the applicant and its owner "regularly produce[ ]
some portion of the throughput used" by the operation.
s 613.3010(a) (1998). Under either regulation, legal entities
could obtain financing for their processing and marketing
operations, provided that they were controlled by actual
farmers. Appellants' objection is thus one of degree: how
much ownership of the legal entity is enough before the
business is no longer farmer-controlled. The statute does not
directly address this issue, and appellants fail to demonstrate
that the agency's requirement that farmers have a majority-
ownership of the operation is not a reasonable interpreta-
tion.14
Eligibility of Legal Entities. Appellants further contend
that the new regulations permit any corporation to be "eligi-
ble for System lending so long as it engages in farming as
any part of its business, to the extent of its involvement in
__________
14 Appellants rely on a senator's comments warning that "[w]e
do not intend that [the provisions regarding processing and market-
ing] should ever be used to authorize a loan to a joint venture
composed of eligible and noneligible persons if the noneligible
persons exercise substantial control of the facility or activity fi-
nanced by the loan." 126 Cong. Rec. 33,982 (1980). This quote,
however, suggests that the senator understood that a joint venture
in which noneligible persons did not exercise substantial control
would be eligible for loans, thereby undercutting appellants' argu-
ment that the congressional intent mandates 100 percent control of
the operation by otherwise eligible borrowers. It appears reason-
able that requiring farmers to own a majority-interest in an opera-
tion is consistent with the senator's concern that joint venture
operations not be substantially controlled by noneligible outsiders.
that business." They object that this regulation represents
an abandonment of the prior focus on natural persons as the
major beneficiaries of the statute and that it broadens lending
authority to corporations. Indeed, the new regulations re-
move prior requirements that legal entities either be majority
owned by farmers, have a majority of their assets related to
agricultural products, or have a majority of their income arise
from farming. See s 613.3020 (amended 1997). The new
regulation adopts a sliding scale in which banks and associa-
tions are to provide full credit to full-time bona fide farmers,
conservative credit to part-time farmers, and "more restricted
credit for other credit requirements as needed to ensure a
sound credit package ... as long as the total credit results in
being primarily an agricultural loan." s 613.3005 (1998).
In appellants' view the new regulations read the word
"bona fide" out of s 2017's eligibility requirements, which
define eligible borrowers as "bona fide farmers, ranchers, or
producers or harvesters of aquatic products." The statute
does not define the term "bona fide," although the agency
defines a bona fide farmer as "a person owning agricultural
land or engaged in the production of agricultural products,
including aquatic products under controlled conditions."
s 613.3000(a)(1) (1998). The agency defines "person" to
mean "an individual who is a citizen of the United States or a
foreign national who has been lawfully admitted into the
United States...." s 613.3000(a)(3) (1998).
The prior regulations allowed a number of legal entities to
receive financing so long as a majority of their ownership,
assets, or income was related to farmers or farming. The
new regulations simply allow the agency greater flexibility in
determining whether a legal entity should receive financing,
while retaining that paramount concern that such financing
"be primarily an agricultural loan." s 613.3005 (1998). Un-
der this system, "full-time bona fide" farmers continue to be
the most favored applicants for loans. Id. The new regula-
tions do not conflict with the statutory scheme, and the
agency's regulation is a reasonable effort to establish a hier-
archy of preferred borrowers consistent with the statute.
Indeed, the statute itself indicates that Congress' objective
was to "encourage farmer- and rancher-borrowers partic-
ipation in the management, control, and ownership of a
permanent system of credit for agriculture which will be
responsive to the credit needs of all types of agricultural
producers having a basis for credit...." 12 U.S.C. s 2001(b)
(1994) (emphasis added).
Rural Housing. Finally, appellants object to the elimina-
tion of the ban on financing of rural housing that is not
owner-occupied. The agency no longer requires applicant
owners to live in their rural residences, provided that they
receive loans on only one rural home, which must be used as a
principal residence by either their tenant or themselves. See
62 Fed. Reg. at 4438. The agency retained restrictions that
prevented lenders from financing housing in suburban and
urban areas, by defining qualifying communities as having
populations of 2,500 people or less. Id. at 4438-39.
The statute provides that "[l]oan and discounts may be
made to rural residents for rural housing financing under
regulations of the Farm Credit Administration," provided
that such housing "be for single-family, moderate-priced
dwellings and their appurtenances" in rural areas where the
population in a given community does not exceed 2,500 inhab-
itants. 12 U.S.C. s 2019(b)(1)-(3) (1994). Appellants inter-
pret the phrase "rural residents" to mean that owners must
reside in the rural home to qualify for the loan. They further
maintain that this modification will "extend System financing
to wealthy, big-city dwelling passive investors who wish to
build or acquire rural housing for lease to residents." The
agency, in turn, considers that this expansion of credit is
necessary "to ensure the availability of affordable housing for
rural residents." 62 Fed. Reg. at 4438.
The statute provides that "owners of rural homes" are
eligible for "credit and financial services authorized in this
subchapter." 12 U.S.C. s 2017 (1994). Section 2019(b), in
turn, states that the rural home financing "may be made to
rural residents." The plain language of the statute refers to
"residents" as the recipients of lending for this purpose. The
statute does not define the term "rural resident" in s 2019,
although the most natural reading of the statute suggests
that Congress contemplated individuals who actually resided
in rural areas. Although s 2017 identifies homeowners as
eligible for lending, s 2019 establishes the purposes for which
lending can be allowed and specifically notes that loans shall
be made "to rural residents." The agency's interpretation
effectively reads the statute as permitting lending to owners
if rural residents are an indirect beneficiary of such loans.
Such a reading of the statute conflicts with its plain lan-
guage.15
Accordingly, we affirm in part and reverse in part the
grant of summary judgment to the agency, reversing as to
the regulations that extend lending to farm-related businesses
by Farm Credit Banks for activities beyond those listed in
s 2019(c)(1), and that allow home-owners to receive loans for
non-owner-occupied rural housing. We also reverse in part
the denial of summary judgment to appellants with respect to
these two regulations and remand that part of the case to the
district court for appropriate action.
__________
15 The legislative history also supports requiring owner-
occupancy as a condition of receiving credit, as both the Senate and
House Reports contemplated lending to individuals residing in rural
areas. See S. Rep. No. 92-307, at 5; H.R. Rep. No. 92-593, at 2.