Federal agency to develop minority businesses can’t only help minority businesses, Texas judge rules
A federal judge in Texas ruled on Tuesday that the Minority Business Development Agency, which provides support to businesses owned by people of color, is now barred from providing exclusive assistance to these entities.
The agency must now provide assistance to all businesses and owners, regardless of race, as a result of a lawsuit brought by white business owners who alleged the policies were unconstitutional.
The Minority Business Development Agency (MBDA) was formed under President Nixon as “the only federal agency tasked with promoting the growth and competitiveness of minority-owned businesses”, according to the agency’s website. Then known as the Minority Business Enterprise, Nixon used an executive order to address economic disparities and inequalities that resulted from racist policies and lack of access.
“This is not a substitute for the many other efforts that continue to be needed if we are to make headway against the ravages of poverty,” Nixon said of the executive order that established what was to become the MBDA.
“It is a supplement, dealing with a special but vital part of the broader effort to bring the members of our minority groups into full participation in the American society and economy. Its success will be measured by tangible results, not by the volume of studies.”
But, executive orders are not law, and for several decades the MBDA existed in a liminal space as a temporary agency. Over the years, the agency’s continued existence was uncertain.
In 2017, then president Donald Trump proposed eliminating the MBDA. That changed in 2021, when Joe Biden and the Congress enacted the Minority Business Development Act, making the MBDA a permanent agency. MBDA works to connect minority owned businesses with capital, contracts and markets, in addition to promoting said businesses with elected officials, policy makers and other business leaders, according to the organization’s website.
While the agency’s stated goal is to provide specific and targeted assistance to minorities, the three white plaintiffs still attempted to access MBDA’s services. Each plaintiff was told that they were ineligible for assistance because they were not on the agency’s list of qualified minorities, which includes Black Americans, Indigenous Americans, Hasidic Jews, Asian Americans, Hispanic Americans and Pacific Islanders.
The ruling, made by US district judge Mark Pittman, a Trump appointee, acknowledges that minority businesses “are two to three times more likely to be denied a loan” and “receive
less funding and pay higher interest rates on loans they do receive”.
“Minorities have less access to loans, get less money when they apply, and have to pay more for it. It’s little wonder ‘[d]isproportionate difficulty accessing commercial capital and credit’ is among the primary concerns voiced by minority entrepreneurs … Nobody can deny that’s a problem,” said Pittman. “But it cannot be a compelling government interest unless the Agency identifies concrete acts of past discrimination that caused it. And the Agency’s cited studies speak only to the phenomenon itself, not contributing factors.”
The US Department of Justice defended the agency in court. Though
MBDA’s attorneys argued that the agency’s efforts correct past discrimination in which the government may currently or did previously play a role, Pittman decided that, ultimately, the agency aided minority businesses at the expense of white businesses and punished white businesses.
The ruling is the latest in a series of walk-backs across the country, in which government agencies, educational institutions and private businesses pivot away from providing assistance and support to minority businesses and individuals.
Such initiatives and efforts have typically been challenged in courts, but some private and public groups are increasingly terminating their efforts to promote equity without being forced to do so.
The supreme court’s overturning of affirmative action was the harbinger of what was to come in regards to both private and public institutions and individuals attempting to address inequity and inequality. That ruling influenced Pittman’s decision.