It can be safely asserted that while the industries remain largely in private hands and management retains many prerogatives, the economic regulatory power of the agencies is, in theory, sufficient to control the ability of any particular company to survive. The pervasive presence of the agency in the most vital economic matters which a company must faceprofit margin, ability to borrow, issue stock, and merger-cannot be denied and should satisfy any test based on sufficiency of contacts. Analysis of the relationship between the agencies and the regulated industries to determine the substantiality of the former's involvement with the latter represents one approach to establishing a constitutional duty on the part of the agencies to enforce and the industries to follow nondiscriminatory practices. Another approach would turn from an examination of the contacts between agency and industry and instead would focus on the failure of the agency to issue nondiscriminatory practice rules. It can be argued that whatever the contacts between agencies and industries, the agencies must exercise their power to issue such rules because failure to do so involves them in discriminatory practices through inaction. One of the key factors in Burton was the State's failure to inIclude a nondiscrimination clause in the lease. The Court condemned this failure: "[b]y its inaction . . . the State has . . . made itself a party to the refusal of service." 23 In another context, a district court has held a State contracting authority responsible for insuring nondiscrimination by those awarded contracts: "[W]here a state . . . undertakes to perform essential government functions with the aid of private persons it cannot avoid the responsibilities imposed on it by the 14th amendment by merely ignoring or failing to perform them." 24 In the case of Federal agencies and regulated industries it can be argued that the agencies are under an affirmative duty to end any discriminatory practices (including employment) of their own and that this obligation extends to all who deal with the agency whether the relationship be grantee, contractor, or regulated licensee. When the agency undertakes the essentially governmental function of regulation, 23 365 U.S. at 725. "Ethridge v. Rhodes, 268 F. Supp. 83, 87 (S.D. Ohio 1967). it cannot fail to impose nondiscriminatory rules on the private parties who come within its jurisdiction. It is important to note that at least one Federal administrative agency has taken the position that it is not only prohibited from discriminating on the basis of race, but also from sanctioning such discrimination.25 In addition, on July 5, 1968, upon the recommendation of the United Church of Christ, the U.S. Civil Rights Commission, and others, the Federal Communications Commission issued a policy statement prohibiting employment discrimination in the broadcasting industry.26 The FCC policy statement was adopted as a rule on June 4, 1969. The rule currently applies only to broadcasters and it remains for the FCC to issue a similar rule for common carriers.27 Likewise, other regulatory agencies have yet to issue such a policy statement or rule. Based on this analysis of the constitutional prohibitions against racial discrimination contained in the fifth and 14th amendments, it appears that Federal regulatory agencies are so closely involved in the practices of the private entities within their jurisdiction as to bring such practices within the scope of the fifth amendment. These agencies are therefore constitutionally required to make efforts to assure nondiscrimination in the fields they regulate. re 25 The National Labor Relations Board has scinded the certification as bargaining representative under the National Labor Relations Act of labor unions which have engaged in racial discrimination. Holding that it was constitutionally required to take this action, the Board stated: "Specifically, we hold that the Board cannot validly render aid under section 9 of the act to a labor organization which discriminates racially when acting as a statutory bargaining representative." Independent Metal Workers Union, Local No. 1, 147 NLRB 1573, 1577 (1964). See fuller discussion in text, supra. 27 In addition to the rule prohibiting employment discrimination by broadcasting stations, the FCC adopted on Nov. 19, 1969, a "Notice of Proposed Rulemaking," stating that its policy prohibiting employment discrimination would also be extended to the common carriers (telephone and telegraph companies). The FCC statement indicated that the same considerations of public policy which prompted its rule regarding broadcasters were applicable to common carriers subject to their jurisdiction. As of April 1970, the policy statement had not yet been adopted. II. PROGRAMS OF INSURANCE AND GUARANTEE Just as the Constitution imposes a duty on Federal regulatory agencies to assure nondiscrimination, so it obligates the Federal Government not to permit discrimination through its programs of insured and guaranteed loans. The standards of nondiscrimination imposed upon the Federal Government by the fifth and 14th amendments are applicable in any situation in which there is a sufficient link between the Government and the "private" activity. With programs of insured and guaranteed loans, the extent of Federal involvement with the private sector is less readily apparent than it is in the case of regulatory agencies. Yet it is extensive enough to bring these programs within the ambit of the fifth amendment, under the reasoning of Burton and Bolling v. Sharpe. The Federal Government administers a large number of programs in which the form of assistance is insurance and guarantee of loans obtained from private lenders. Unlike grant programs, the beneficiary does not receive Federal financial aid. Rather, he obtains a loan from a private lender, which is guaranteed against loss by the Federal agency administering the program. The agencies issue regulations and guidelines which determine eligibility for programs of insured and guaranteed loans, and they also have the authority to approve or reject individual applications. The best known of these programs are insured and guaranteed loans for home ownership, administered by the Federal Housing Administration and the Veterans Administration. However, there are a multiplicity of others, most of which are under the direction of five departments and three independent agencies.28 The financial involvement of the Federal Government in these programs is substantial. The value of all loans insured or guaranteed will amount to approximately $40 billion in 1971.29 The total value of all Government insured and guaranteed loans outstanding is approximately $145 billion.30 The Federal Government also plays a major role in the areas in which it provides insurance and guarantees through the criteria it establishes for eligibility for an insured loan, and through the conditions it imposes upon the beneficiary (the recipient of the loan) and the intermediary (the lending institution). Finally, these Federal programs have a significant impact upon the social and economic development of the country, just as regulatory agencies help shape the industries within their jurisdiction. The programs of insurance and guarantee in the field of housing are an excellent example of the close involvement between the administering agency and the area of the private sector which it services. 31 The individual home loans insured by FHA and VA 32 enable persons to buy houses who might otherwise be unable to do so, since loans are for a long period of time, reducing the amount of monthly payments. Also, banks are more willing to make loans if the risk of nonpayment is removed. Finally, these programs encourage housing construction, since builders are more sure of finding a market for their houses. In addition to insuring loans, the FHA is involved in the planning and construction of both single family and multifamily projects in connection with approval of an insured loan. Typically, the FHA requires the execution of a regulatory agreement in which the ownermortgagor acknowledges that he will "comply with the requirements of the National Housing Act and the regulations adopted by the Commissioner pursuant thereto." 33 31 A Federal district court described the role of Government insurance and guarantees as follows: "The involvement of the Government (through FHA and VA) in the construction of a housing community . . . consists of a guarantee to various banks and lending institutions that money advanced by them to purchasers of individual properties will be repaid, incidental to which guarantee and for the purpose of minimizing the risk of loss to the Government is the prescribing of the conditions upon which the Government will undertake to guarantee the loans." Johnson v. Levitt & Sons, Inc., 131 F. Supp. 114, 116 (E.D. Pa. 1955). 3212 U.S.C. sec. 1709, 38 U.S.C. secs. 1810, 1814. The Farmers Home Administration administers a similar program in rural areas, 42 U.S.C. secs. 1484, 1487. "FHA Form No. 2466 (rev. Feb. 1963). For both single and multifamily projects the Commissioner has established standards regarding such matters as planning, construction, heating, plumbing and sanitation, electricity, and site improvements. Consequently, from the inception of these projects, through their construction and continuing into their operation, the FHA is not only involved, but exercises substantial control. Many of the programs of insurance and guarantee in areas other than housing give the Federal Government an influential role. The existence of insurance and guarantees spurs development, whereas lack of them can make development more costly and, therefore, slower. The Farmers Home Administration of the Department of Agriculture administers programs of insurance and guarantee for such diverse projects as the acquisition and development of grazing land, soil and water conservation, and the development of recreational facilities. For all of these, the recipient must make monthly progress reports to the FMHA county supervisor for the first year after he has received the insured loan, and submit books for an annual audit in following years.35 37 34 The Department of Health, Education, and Welfare insures student loans or postsecondary education under the Higher Education Act of 1965.36 In 1969, more than 780,000 such loans, valued at approximately $60 million were made. In connection with these insured loans, HEW requires that educational institutions compile semi-annual reports on the status of students who have received such loans, and that participating lending institutions submit quarterly reports of the loans outstanding under the program.38 Thus, HEW assumes a monitoring function over both the participating student's activity and the financial institution. The program, as indicated by its volume, enables many persons to go to college who would not otherwise be able to do so. A final illustration of the significance of programs of insurance and guarantee are those administered by the Small Business Administration. The insurance and guarantee of loans for rental of property, purchase of equipment, working capital, and the general needs of lowincome businesses 39 serve to keep this part of the economy viable. Thus, programs of insurance and guarantee involve the Federal Government in a number of significant ways with the lending institution and the loan recipient. In all instances, the administering agency exercises control over the intermediary and beneficiary of the program, in the form of preaward conditions, periodic reports, and audits. No program of insurance or guarantee involves only a financial commitment by the Federal Government. Rather, there is always some control over the purpose and quality of the project for which the loan is used. Furthermore, programs of insurance and guarantee have been a major stimulus to areas such as housing construction, development of rural areas, private entrepreneurship, and higher education. They have had a direct impact on American economic and social development. This involvement of the Federal Government is extensive enough to make applicable the fifth amendment's prohibition against discrimination in any aspect of a program of insurance or guarantee, under judicial interpretation of this constitutional provision. Following the reasoning of the Court in Burton that a State cannot abdicate its responsibility to guarantee nondiscrimination by ignoring that duty, it is clear that Federal agencies are under an obligation to assure nondiscrimination by intermediaries or beneficiaries in connection with programs of insurance and guarantee. 915 U.S.C. secs. 636, 687, 692-94; 42 U.S.C. secs. 2901, 2902, 2905, and 2906. 40 See note 23, supra. INDEX Citations marked with asterisk indicate introductory, summary, or appendix materials. AGRICULTURAL Stabilization and Conserva- complaint procedures, 261. Conservation program, 258–259. AGRICULTURE Department. see Department AID to Families with Dependent Children, 2, AIRPORTS, FAA compliance reviews, 224. AIRCRAFT industry, employment discrimina- ALABAMA, Cooperative Extension Service, Dept. of Pensions, 244. employment discrimination, 12-13. ALABAMA Power Co., 44, 83, 269–270. ALEXANDER, Clifford, 89, 96, 110, 115. Allen v. Mississippi Commission on Law En- ALLEN-BRADLEY, 68-69. AMERICAN Can Co., 13, 44. AMERICAN Chinchilla Corp., 290. AMERICAN Civil Liberties Union, 40. AMERICAN Federation of Labor-Congress of Industrial Organizations, 65-66. AMERICA Indians, 1, 16. Civil Rights Division, 322-323. Federal employment, 345. rights staffs, 210. Justice Dept., 348. reports of discrimination, 173, 174. Subcabinet Group on Civil Rights, 332. ASSISTANT Attorney General for Civil ASSISTANT Director for Management ASSISTANT General Counsel for Civil Rights Regional Administrator for ASSISTANT Secretary for Equal Opportunity housing summary, 176. Title VI personnel, 206–207. ASSISTANT Secretary for Housing Produc- ASSISTANT Secretary for Mortgage Credit ASSISTANT Secretary of Defense (Installa- ASSISTANT to the Secretary for Civil Rights ASSISTED Programs Division (HUD), 146 |