UNITED STATES COURT OF APPEALS FOR THE D.C. CIRCUIT


INDEP BNKR ASSN AMER

v.

FARM CRDT ADMIN


98-5020a

D.C. Cir. 1999


*	*	*


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


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  


__________

n 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




__________

n 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


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 


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 




__________

n 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


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


[i]t is the objective of each bank and association, except  for banks
for cooperatives, to provide full credit, to the 




__________

n 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


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 




__________

n 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


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


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 ...




__________

n 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


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, 




__________

n 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


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 


"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




__________

n 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, 


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


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


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




__________

n 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- 




__________

n 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


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 




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n 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


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.


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.




__________

n 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.