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Nature of Suit Code: 890
Nature of Suit: Other Statutory Actions
Cause of Action: 

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United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued November 8, 2002 Decided July 29, 2003

No. 01-5366

LOUISIANA FEDERAL LAND BANK ASSOCIATION, FLCA, ET AL.,

APPELLANTS

v.

FARM CREDIT ADMINISTRATION, ET AL.,

APPELLEES

Appeal from the United States District Court

for the District of Columbia

(No. 00cv01582)

Daniel Joseph argued the cause for appellants. With him

on the briefs was Beth Hirschfelder Wilensky. C. Fairley

Spillman entered an appearance.

Edward Himmelfarb, Attorney, U.S. Department of Justice, argued the cause for federal appellees. With him on the

brief were Roscoe C. Howard, Jr., U.S. Attorney, and Robert

S. Greenspan, Attorney, U.S. Department of Justice.

 Bills of costs must be filed within 14 days after entry of judgment.

The court looks with disfavor upon motions to file bills of costs out

of time.

USCA Case #01-5366 Document #763224 Filed: 07/29/2003 Page 1 of 14
2

Kathleen C. Kauffman argued the cause for appellee First

South Farm Credit, ACA. With her on the brief were Nels J.

Ackerson and L. Keith Parsons.

Before: GINSBURG, Chief Judge, and EDWARDS and GARLAND,

Circuit Judges.

Opinion for the Court filed by Chief Judge GINSBURG.

GINSBURG, Chief Judge: The Farm Credit Administration

promulgated a rule eliminating geographical restrictions upon

certain activities of lenders within the Farm Credit System,

and thereby put them into competition with each other. The

plaintiffs-appellants – lenders within the System – challenged

the rule in district court, claiming it conflicted with the Farm

Credit Act and with a 1992 Amendment thereto, and that the

FCA promulgated the rule in violation of the procedural

requirements of the Administrative Procedure Act. The district court, holding the FCA had complied with the proper

procedures and the plaintiffs’ statutory arguments were either without merit or had been forfeited, entered summary

judgment for the FCA.

We hold the Agency was required by the APA to address

the plaintiffs’ comment before promulgating the rule. For

that reason we reverse the judgment of the district court so

this matter may be remanded to the FCA for further proceedings.

I. Background

The Congress established the Farm Credit System in order

to ‘‘improv[e] the income and well-being of American farmers

and ranchers by furnishing sound, adequate, and constructive

credit TTT to them.’’ 12 U.S.C. § 2001(a). The legislature

charged the FCA with oversight and regulation of the System. Id. §§ 2243, 2252. The System, which has been reorganized many times since its establishment in 1916, see Federal

Farm Loan Act, ch. 245, 39 Stat. 360 (1916) (revised as Farm

Credit Act of 1971, Pub. L. No. 92–181, 85 Stat. 583 (1971)

(codified as amended at 12 U.S.C. §§ 2001 et seq.)), currently

comprises six Farm Credit Banks (FCBs), an Agricultural

USCA Case #01-5366 Document #763224 Filed: 07/29/2003 Page 2 of 14
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Credit Bank (not relevant to this appeal), and over 100 local

‘‘associations,’’ such as the Louisiana Federal Land Bank

Association. The FCBs finance the local associations, which

in turn provide eligible borrowers with credit for agricultural

purposes and rural housing. 12 U.S.C. §§ 2013, 2015, 2017,

2075, 2093, 2279b. Plaintiff Farm Credit Bank of Texas

(FCBT) is an FCB; the other plaintiffs are local associations.

The Act authorizes two types of credit facilities relevant to

this case: direct loans and loan participations. In a loan

participation, an institution such as an FCB buys an interest

in a direct loan. See La. Fed. Land Bank Ass’n, FLCA v.

Farm Credit Admin., 180 F. Supp. 2d 47, 53 (D.D.C. 2001).

An FCB may participate in loans originated either by System

or by non-System banks. 12 U.S.C. § 2013(12). With regard

to a non-System bank, however, the FCB may participate

only in ‘‘loans TTT the [FCB] is authorized to make under this

subchapter [12 U.S.C. §§ 2011–2023].’’ Id. § 2013(12)(C).

The Act itself contains no geographic restriction upon

lending (except for a minor limitation imposed by the 1992

Amendment, discussed below). Nevertheless, the FCA historically has imposed such restrictions by chartering only one

lender of each type to serve any given geographic territory

and by regulation prohibiting an institution from making a

direct loan to a borrower located in another institution’s

territory without the latter’s consent. See 12 C.F.R.

§ 614.4070. Prior to the rulemaking here under review,

these restrictions also applied to loan participations; 12

C.F.R. § 614.4000(d)(2) authorized an FCB to ‘‘participate in

loans financing operations outside its chartered territory only

if the [consent] requirements of § 614.4070 are met.’’ 55

Fed. Reg. 24,861, 24,880 (June 19, 1990).

In November 1998 the FCA proposed a rule to modify 12

C.F.R. § 614.4070 by removing the geographic restrictions.

180 F. Supp. 2d at 54; see 63 Fed. Reg. 60,219, 60,219/2–3,

60,222/2 (Nov. 9, 1998). The Proposed Rule would have both

deleted what was then § 614.4000(d)(2), which had authorized

FCBs to participate in loans subject to the geographical

restrictions of § 614.4070, id. at 60,222/1, and revised

USCA Case #01-5366 Document #763224 Filed: 07/29/2003 Page 3 of 14
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§ 614.4070 to authorize an FCB to ‘‘make loans, participate in

loans, and provide related services to any eligible borrower.’’

Id. at 60,222/2. The preamble to the Proposed Rule emphasized the FCA’s desire to foster intra-System competition and

‘‘customer choice’’ by removing territorial restrictions both

upon direct lending and upon participations in loans originated by others. Id. at 60,220/3.

The FCA received more than 270 comments on the proposal, including one submitted by the plaintiffs, which argued

that the FCA lacked statutory authority to promulgate the

Proposed Rule, geographic limitations were integral to the

statutory scheme, and permitting out-of-territory lending

would hurt the System and its customers, especially small

farmers. The FCBT also argued that the 1992 Amendment,

which the Congress had enacted in the wake of the FCBT’s

acquisition of the assets of a failed Federal Land Bank,

barred the FCA from authorizing other System institutions to

engage in long-term lending within the failed bank’s territory.

On April 25, 2000 the FCA published the Final Rule, which

left § 614.4070 unchanged but removed the references to

§ 614.4070 from other regulations, including § 614.4000(d).

65 Fed. Reg. 24,101, 24,102/2. As the FCA explained, the

Final Rule thus removed geographic restrictions from loan

participations but not from direct loans, allowing an FCB to

participate in a loan outside its territory without the consent

of any other System institution. The FCA justified the rule

primarily in terms of market efficiency and risk pooling. Id.

at 24,101–24,102. The plaintiffs promptly asked the FCA to

withdraw the Final Rule and to re-propose it for an additional

comment period, but the Agency refused.

The FCBT and the other plaintiffs then sued the FCA in

district court, seeking a declaration that the Final Rule was

invalid. On cross-motions for summary judgment, the district

court held, among other things, that (1) the FCA adequately

responded to the comments presented to it, 180 F. Supp. 2d

at 62; (2) the Proposed Rule provided adequate notice of the

substance of the Final Rule, id. at 62–63; (3) the Final Rule

was not inconsistent with § 2013(12)(C) of the Act, id. at 57–

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59; and (4) the FCBT had forfeited its argument that the

Final Rule was inconsistent with the 1992 Amendment because it did not raise that argument before the FCA. Id. at

59–60.

II. Analysis

The plaintiffs make two arguments on appeal. First, they

claim the FCA did not comply with the notice and comment

requirement of the APA when it promulgated the Final Rule.

Second, they argue that the Final Rule violates the Farm

Credit Act. The FCBT also presses its argument that the

rule is barred by the 1992 Amendment.

A. Procedural Claims

The plaintiffs argue that the FCA’s promulgation of the

Final Rule was procedurally defective in two respects. First,

the comment the plaintiffs submitted to the FCA applied not

only to direct lending but also to loan participations and

therefore required a response in the final rulemaking, which

changes the regulation of participations. Second, the Proposed Rule did not provide adequate notice of the substance

of the Final Rule.

1. Failure to Address Comment

As noted above, the Proposed Rule prompted over 270

comments including the one submitted by the plaintiffs. The

preamble to the Final Rule said almost nothing about the

comments, noting merely:

No commenter cited any statutory provision that restricts the authority of System banks and associations to

participate in loans outside of their chartered territory.

Only one comment letter mentioned the statutory authorities of System institutions to participate in loans.

65 Fed. Reg. at 24,101/2. The plaintiffs claim this statement

did not adequately address their comment protesting the

introduction of competition by the lifting of the geographic

restrictions. In response the FCA points out that in the

preamble to the Proposed Rule it had discussed out-ofUSCA Case #01-5366 Document #763224 Filed: 07/29/2003 Page 5 of 14
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territory lending and out-of-territory participations separately, whereas the plaintiffs’ comment did not make such a

distinction and was not specifically directed to the part of the

Proposed Rule dealing with participations. Therefore, it

argues, none of the comments it received was relevant to the

Final Rule authorizing only out-of-territory participations and

none required a response.

The FCA should have responded to the plaintiffs’ comment.

Although the FCA is not required ‘‘to discuss every item of

fact or opinion included in the submissions’’ it receives in

response to a Notice of Proposed Rulemaking, Pub. Citizen,

Inc. v. Fed. Aviation Admin., 988 F.2d 186, 197 (D.C. Cir.

1993), it must respond to those ‘‘comments which, if true, TTT

would require a change in [the] proposed rule.’’ Am. Mining

Cong. v. United States EPA, 907 F.2d 1179, 1188 (D.C. Cir.

1990). In this case the plaintiffs’ comment was applicable

equally to a rule limited to participations and to one that also

removed the geographic restriction upon direct lending: it

argued against the introduction into the System of competition generally, without regard to form. In the first sentence

of the argument portion of their comment letter, the plaintiffs

asserted broadly that the FCA ‘‘does not have the statutory

authority to implement intra-system competition.’’ Letter

from Bill Zimmerman, General Counsel, FCBT, to Patricia

W. DiMuzio, Director, Regulation and Policy Division, FCA

10 (May 3, 1999) (Plaintiffs’ Comment). The plaintiffs complained that the Proposed Rule would, by authorizing ‘‘out-ofterritory lending,’’ effectively ‘‘abolish Congress’s carefully

wrought statutory scheme of geographic boundaries and limitations.’’ Id. at 15. That would be undesirable, the plaintiffs

argued, because ‘‘cooperation and interdependence are essential characteristics of the Farm Credit System.’’ Id. at 18–19.

We find unpersuasive the FCA’s response that the plaintiffs’ comment lacked adequate specificity to out-of-territory

participations. The plaintiffs argued that geographical

boundaries were required by the Act and that the Proposed

Rule would break down those boundaries; the Final Rule did

just that. True, it did so only as to participations, but that

was not a trivial part of what the plaintiffs had argued was

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unlawful. Specifically, the plaintiffs had argued that allowing

an FCB to compete outside its geographic territory without

the consent of the System lender whose territory is implicated would interfere with the cooperative nature of the system;

the Final Rule authorized FCBs to compete outside their

geographic territories as to participations without first obtaining that consent. The FCA asserts that the term ‘‘out-ofterritory lending’’ as used in the Plaintiffs’ Comment denotes

only direct loans and not loan participations, but it offers no

reason, and we see none, to believe that. We interpret the

plaintiffs’ comment, in keeping with the rationale that underlies it, to relate to all forms of out-of-territory lending,

including but not limited to participation in loans originated

by others. As such, their comment deserves an answer.*

2. Notice

The plaintiffs also argue that the Proposed Rule did not

give the public sufficient notice of what the Final Rule

ultimately contained; they claim the FCA therefore was

required to solicit a second round of comments before promulgating a rule removing the geographical restrictions upon

the participations only.

As the FCA points out, an agency may promulgate a final

rule that differs from the rule it has proposed without first

soliciting further comments if the final rule is a ‘‘logical

outgrowth’’ of the proposal. Nat’l Elec. Mfrs. Ass’n v. EPA,

99 F.3d 1170, 1172 (D.C. Cir. 1996). In this case, the Final

Rule clearly is a logical outgrowth of the Proposed Rule. The

Proposed Rule would have removed the geographical restrictions from loan participations, among other things. Specifi-

* The district court suggested that FCBT’s comment was ‘‘purely

speculative,’’ 180 F. Supp. 2d at 62, and therefore did not require a

response, citing Home Box Office, Inc. v. FCC, 567 F.2d 9, 35 n.58

(1977) (‘‘comments which themselves are purely speculative and do

not disclose the factual or policy basis on which they rest require no

response. There must be some basis for thinking a position taken

in opposition to the agency is true’’). Because none of the defendants urged this point as a basis for affirmance, we do not consider

it.

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cally, 12 C.F.R. § 614.4070 would have been revised to permit

System institutions to ‘‘make loans, participate in loans, and

provide related services to any eligible borrower,’’ 63 Fed.

Reg. at 60,222/2, and the preamble to the Proposed Rule

separately discussed deleting the geographical restrictions

upon direct loans and upon loan participations. Id. at 60,-

220/2–3. Therefore the Final Rule, which merely eliminated

the cross-reference in § 614.4000(d) to the geographical restrictions upon loan participations in § 614.4070, was a logical

outgrowth – indeed a natural subset – of the proposal.

The plaintiffs argue that the preamble to the Proposed

Rule, by describing the deletion of the cross-reference in

§ 614.4000(d) as a ‘‘conforming amendment[ ],’’ id. at 60,219/1,

60,220/3, implied the FCA would not promulgate that ‘‘amendment’’ by itself; their idea is that it is not logical to adopt a

‘‘conforming amendment’’ when there is nothing new to which

it makes the amended text conform. This is essentially a

technical argument, and not a convincing one. Although the

FCA’s chosen method for removing the geographical restriction upon loan participations – not by rewriting § 614.4070

but by deleting references to § 614.4070 in other regulations – was not heralded in the Proposed Rule, the result

surely was. The preamble to the Proposed Rule separately

discussed the possibility of lifting the restrictions upon loan

participations and lifting the restrictions upon direct lending.

Id. at 60,220. Moreover, it provided a separate rationale for

each aspect of the proposal. Id.

As the district court put the matter, ‘‘[n]owhere does the

Proposed Rule indicate that removal of geographic restriction

is an all-or-nothing proposal.’’ 180 F. Supp. 2d at 63. Under

these circumstances, we think the plaintiffs were clearly on

notice that if they had anything to say specifically about the

effect of removing geographic restrictions upon loan participations – either alone or in combination with the removal of

restrictions upon other activities – then they should have said

it during the period for comments on the Proposed Rule.

B. Substantive Claims

All the plaintiffs argue that the Final Rule violates the

Farm Credit Act by purporting to authorize FCBs to particiUSCA Case #01-5366 Document #763224 Filed: 07/29/2003 Page 8 of 14
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pate in loans prohibited to them by the Act. In addition, the

FCBT argues that permitting other System institutions to

operate in the territory of the former Federal Land Bank of

Jackson invades the exclusive lending rights given to the

FCBT by the 1992 Amendment.

1. The Farm Credit Act

Section 2013(12)(C) of Title 12 authorizes an FCB to participate with non-System lenders ‘‘in loans that the bank is

authorized to make under this subchapter.’’ The plaintiffs

argue that the Final Rule does not authorize an FCB to make

a direct loan to an out-of-territory borrower without the

consent of the System institutions located in the borrower’s

territory. Therefore, it reasons, an FCB is not ‘‘authorized to

make’’ such a direct loan ‘‘under this subchapter,’’ and the

rule, by authorizing it to participate in such a loan, runs afoul

of the statute. The FCA responds that, because Subchapter

I of the Act, 12 U.S.C. §§ 2011–2023, authorizes an FCB to

make certain ‘‘long-term real estate mortgage loans,’’ id.

§ 2015(a)(1), ‘‘section 2013(12)(C) simply restricts FCBs to

participating in’’ that type of out-of-territory loan.

In order to determine whether the FCA’s interpretation of

the Act it administers is permissible, we look to the standard

set out in Chevron U.S.A. Inc. v. Natural Resources Defense

Council, Inc., 467 U.S. 837 (1984). At Chevron step one, we

ask whether the Congress ‘‘has directly spoken to the precise

question at issue,’’ id. at 842; if so, then we must ‘‘give effect

to [its] unambiguously expressed intent.’’ Id. at 843. If the

intent of the Congress is ambiguous with respect to the

question before us, then at Chevron step two we defer to the

FCA’s interpretation so long as it is ‘‘based on a permissible

construction of the statute.’’ Id.

The plaintiffs argue that the ‘‘plain statutory text’’ prohibits

an FCB from ‘‘enter[ing] into a participation loan if the

[FCB] could not make the loan as a direct loan.’’ Not quite.

The ‘‘plain statutory text’’ states that an FCB may not

participate in a loan if that loan is one that ‘‘the bank is [not]

authorized to make under’’ Subchapter I. This of course

surfaces the question obscured by the plaintiffs’ formulation:

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Authorized by what? The statute itself authorizes FCBs to

make certain long-term real-estate mortgage loans, but the

FCA, exercising its delegated authority to promulgate regulations implementing the Act, restricted FCBs to a subset of

those loans. Thus the disputed statutory phrase, ‘‘loans that

the bank is authorized to make under this subchapter,’’ is

susceptible to at least two interpretations. It might mean

either ‘‘authorized [by the statute, as limited by the applicable

regulations,] to make under this subchapter,’’ or it might

mean ‘‘authorized to make under this subchapter [without

regard to any limiting regulations].’’ We conclude that in

these circumstances the intent of the Congress is unclear; it

did not speak directly to the precise issue before us.

Nothing in the legislative history of § 2013(12)(C) changes

our view of the statute. The plaintiffs point to the following

statement in the Senate Report: ‘‘land banks could partici[p]ate with nonsystem lenders only in real estate mortgage

loans that the land banks are authorized to make under the

Act.’’ S. Rep. No. 96–837, at 14 (1980). The plaintiffs argue

that if the Congress had intended the meaning now urged by

the FCA, then it would have ended this statement after the

word ‘‘loans’’ because the remainder would be superfluous.

But that is not correct because § 2015(a)(1) does not authorize FCBs to make any and all real estate mortgage loans.

Instead it authorizes FCBs to make such loans ‘‘in rural areas

TTT or to producers or harvesters of aquatic products.’’ Because the Act allows FCBs to participate only in a subset of

real estate mortgage loans, the remainder of the sentence is

not superfluous even upon the FCA’s interpretation; it invokes the limitation just quoted.

Having determined in Chevron step one that the Congress

did not directly address the question at issue, we move briefly

to Chevron step two. We need only say that, for the reasons

stated above, we think the FCA’s interpretation is reasonable.

The plaintiffs next claim the FCA’s interpretation of

§ 2013(12)(C) is not entitled to Chevron deference because

the Agency first presented that interpretation in this litigation. Although we would not defer to the mere litigating

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position of agency counsel, see, e.g., Inv. Co. Inst. v. Camp,

401 U.S. 617, 627–28 (1971), that is not what the FCA has

urged here. The Agency itself has long interpreted

§ 2013(12)(C) to authorize an FCB to participate with a nonSystem lender in a loan ‘‘of the type it is authorized to make

under title I of the Act.’’ See 12 C.F.R. § 614.4000(d)(1).

2. 1992 Amendment

The FCBT alone argues that the Final Rule conflicts with a

1992 Amendment to the Act; to understand this argument

requires a bit more history.

The relevant amendment, §§ 401(b)-(c) of the Farm Credit

Banks and Associations Safety and Soundness Act of 1992,

Pub. L. No. 102–552, 106 Stat. 4102, 4128, grew out of events

set in motion by the Agricultural Credit Act of 1987, Pub. L.

No. 100–233, 101 Stat. 1568 (1988), which effected a change in

the organization of the System, requiring the merger of thenexisting Federal Land Banks and Federal Intermediate Credit Banks to form the FCBs of the current System. The

Federal Land Bank of Jackson (Mississippi) – which was to

be merged with the Federal Intermediate Credit Bank of

Jackson – was placed in receivership in 1988, thus rendering

the merger impractical. Instead, the FCBT purchased from

the receiver the assets of the Federal Land Bank of Jackson,

and the FCA (1) approved an amendment to the charter of

the FCBT permitting it to operate in the territory of the

Federal Land Bank of Jackson, and (2) ordered a merger of

the FCBT with the Federal Intermediate Credit Bank of

Jackson. A suit by various System lending institutions challenged both the charter amendment and the merger. See

First S. Prod. Credit Ass’n v. Farm Credit Admin., 926 F.2d

339 (4th Cir. 1991). The Fourth Circuit held that the forced

merger was unlawful but did not reach the lawfulness of the

FCBT’s charter as amended. Id. at 344 n.2, 347.

The Congress then enacted the 1992 Amendment, which

confirmed that ‘‘[n]otwithstanding any other provision of law,

the Farm Credit Bank of Texas may act in accordance with

the exclusive charter of the bank, as amended.’’ § 401(b)

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(codified at 12 U.S.C. § 2011 note). The Amendment also

prevented the FCA from

issu[ing] a charter to, or approv[ing] an amendment to

the charter of, any institution TTT that would authorize

the institution to exercise lending authority TTT in a

territory in which the charter of another such institution

authorizes the other institution to exercise like authority

TTT except with the approval of [the other institution].

§ 401(c) (codified at 12 U.S.C. § 2252(a)(2)(B)). This restriction was made applicable only to the former Jackson territory. Id. (codified at 12 U.S.C. § 2252(a)(2)(C)). Thus the

1992 Amendment confirmed the authority of the FCBT to act

within the Jackson territory.

The FCBT claims § 401(b) gives it the exclusive right to

‘‘make or participate in long-term real estate mortgage loans’’

in the Jackson territory. It also claims § 401(c) prevents the

FCA from issuing a regulation that would have the same

effect as a prohibited charter amendment. The district court

held, and the FCA argues on appeal, that the FCBT forfeited

these claims. Like the district court, the FCA reasons that

the FCBT’s comment properly did not include an objection

based upon the 1992 Amendment because the comment did

not focus upon loan participations, which are the sole subject

matter of the Final Rule.

There was no forfeiture. The FCBT argued in its comment that because its charter authorized it to ‘‘make or

participate in long-term real estate mortgage loans’’ and was

exclusive, ‘‘only the Farm Credit Bank of Texas may engage

in long-term lending in the area its charter covers.’’ Plaintiffs’ Comment at 24 (emphasis added). The FCBT’s objection by its terms clearly extended both to direct lending and

to participations. Likewise, the FCBT stated that the FCA

could not permit another institution in the System ‘‘to exercise the same lending authority in any part of the former

Jackson district’’ without its consent. Plaintiffs’ Comment at

24 (emphasis added). ‘‘Lending authority’’ is the term used

in § 401(c), which suggests the FCBT’s objection was as

broad as the statute upon which it was relying. We think its

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comment fairly put the FCA on notice that the FCBT objected to permitting any other institution in the System to

exercise any lending authority, including participating in

loans originated by another, anywhere within its territory.

The focus of the district court and of the FCA upon the

FCBT’s failure in its comment to object specifically to the

authorization of loan participations in the Proposed Rule

misses the point. The FCBT did not object specifically to

direct lending either; it objected more broadly to the FCA

permitting any other institution in the System to ‘‘engage in

long-term lending’’ in its territory. Similarly, the FCBT’s

legal argument applies equally to direct lending and to participations, and it specifically mentioned that its assertedly

‘‘exclusive’’ charter authorized participations. In these circumstances it would be odd indeed to interpret the FCBT’s

comment as applying only to direct lending.

Turning to the merits of the FCBT’s objection, however, we

are unpersuaded. Section 401(c) clearly prohibits the FCA,

without the FCBT’s consent, from issuing or changing a

charter so as to allow competition in the former Jackson

territory; but it just as clearly does not prohibit the FCA

from doing anything else – such as changing a regulation –

that would have a similar effect. The FCBT has provided us

with no persuasive reason to read into the statute a wider

prohibition than the Congress expressly put there.

The FCBT’s other argument based upon the 1992 Amendment, that § 401(b) ratified the ‘‘exclusive’’ nature of its

charter, is also unavailing. The provision upon which the

FCBT relies is concerned with granting authority to the

FCBT rather than denying it to other institutions: ‘‘Notwithstanding any other provision of law, the Farm Credit Bank of

Texas may act in accordance with the exclusive charter of the

bank.’’ § 401(b). We understand the reference to the ‘‘exclusive charter of the bank’’ as recognizing the stricture

simultaneously imposed upon the FCA by § 401(c) rather

than an independent grant of authority, that is, rather than

an implicit and unremarked amendment to the FCBT’s charter. That the Congress enacted the 1992 Amendments in the

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aftermath of the First South litigation, in which the validity of

the FCBT’s charter was questioned, strongly reinforces this

understanding.

C. Remedy

There remains the matter of the proper remedy. The

plaintiffs have asked us to vacate the Final Rule. ‘‘[V]acatur

is not necessarily indicated,’’ however, ‘‘even if an agency acts

arbitrarily and capriciously in promulgating a rule.’’ Fox

Television Stations, Inc. v. FCC, 280 F.3d 1027, 1048 (D.C.

Cir. 2002), reh’g granted on other issue, 293 F.3d 537. Rather, ‘‘[t]he decision whether to vacate depends on the seriousness of the order’s deficiencies (and thus the extent of doubt

whether the agency chose correctly) and the disruptive consequences of an interim change that may itself be changed.’’

Id. (quoting Allied-Signal, Inc. v. United States Nuclear

Regulatory Comm’n, 988 F.2d 146, 150–51 (D.C. Cir. 1993)).

Here it is not unlikely the FCA ‘‘will be able to justify a

future decision to retain the Rule,’’ id. at 1049, inasmuch as

its only error was its failure to explain what seems to be a

policy difference with the plaintiffs. At the same time,

vacatur is sure to be ‘‘disruptive’’ because it would preclude a

set of voluntary transactions that both originating and participating System lenders find advantageous. In these circumstances, we think ‘‘the probability that the [FCA] will be able

to justify retaining the [Final] Rule is sufficiently high that

vacatur of the Rule is not appropriate.’’ Id.

III. Conclusion

For the foregoing reasons, the judgment is reversed and

the case is remanded to the district court with instructions to

enter judgment for the plaintiffs to the extent of remanding

the Final Rule to the Agency to respond to the plaintiffs’

comment.

So ordered.

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