EMPLOYMENT OF EXPERTS AND CONSULTANTS No federal statute has been found which expressly prohibits the employment by the Corporation of experts and consultants nor places any limitations on the amount of compensation that may be paid by the Corporation for services rendered to it. Limitations imposed by section 3109 of title 5, United States Code, with respect to the employment by Government agencies of experts and consultants do not apply to the Federal Deposit Insurance Corporation, a Government controlled corporation. (See 5 U.S.C. 5721.) The Corporation, in the past, has conducted and sponsored research in banking through the employment of experts and consultants for special projects or through contracts for the services of certain professional personnel as experts or consultants. Authority to conduct and to sponsor such research has been claimed to rest in both paragraph "Third" of section 9 of the Federal Deposit Insurance Act (12 U.S.C. 1819 "Third"), which authorizes the Corporation to make contracts, and in paragraph "Fifth" of section 9 (12 U.S.C. 1819 "Fifth"), which authorizes the Board of Directors to appoint-“. such officers and em ployees as are not otherwise provided for in this Act, to define their duties, fix their compensation, require bonds of them and fix the penalty thereof, and to dismiss at pleasure such officers or employees." In prior projects, however, research has generally been conducted specifically for the Corporation or has involved fields of study pertinent to the functions of the Federal Deposit Insurance Corporation. The expenditure of a portion of the Corporation's funds for the employment of personnel for research bearing no relationship to the functions of the Corporation or to the structure and regulation of insured banks as affecting those functions might therefore be highly suspect. Accordingly, it is the opinion of the General Counsel that experts and professional consultants can be retained by the Corporation for research in connection with so much of the proposed Presidential Commission's study as may be assigned to the Corporation if the Board of Directors (1) determines, on the basis of information now available to it, that the Commission's studies and recommendations-because of their relationship to the insurance, examination. or ancillary functions of the Corporation or to the structure and regulation of insured banks as affecting those functions-will be of probable benefit to the Corporation and (2) obtains assurances from the Commission that that portion of the study which may be assigned to the Corporation will involve fields of study pertinent to the functions of the Corporation. Authority for the detail of Corporation employees-whether they be regular employees or special (expert or professional consultant) employees-to a Presidential commission would seem to be specifically authorized by that portion of paragraph "Fifth" of section 9 of the Federal Deposit Insurance Act (12 U.S.C. 1819 "Fifth") which provides that nothing in either the Federal Deposit Insurance Act or any other Act shall be construed to prevent the appointment and compensation as an officer or employee of the Corporation of any officer or employee of the United States in any board, commission, independent establishment, or executive department thereof. Moreover, the Congress has specifically authorized the detail of employees to the Office of the President. Section 107 of title 3, United States Code, expressly provides that "Employees of the executive departments and independent establishments of the executive branch of the Government may be detailed from time to time to the White House Office for temporary assistance." Both statutes would appear to authorize the Corporation to employ experts and professional consultants for detail to the Commission staff, without limitation as to the extent and nature of their duties. CASH CONTRIBUTIONS No federal statute has been found which explicitly authorizes the Corporation to make cash contributions of corporate revenues to Government commissions, agencies, or other organizations. However, section 2 of the Federal Deposit Insurance Act, as amended (12 U.S.C. 1812), vests the management of the Federal Deposit Insurance Corporation in a Board of Directors consisting of three members. Section 9 of the Act, as amended (12 U.S.C. 1819), authorizes the Corporation, among other things, to make contracts and to regulate through bylaws prescribed by its Board of Directors "... the manner in which its general business may be conducted, and the privileges granted to it by law may be exercised and enjoyed." Another paragraph of that section authorizes the Corporation, either by its Board of Directors or through duly authorized officers or agents, to exercise not only those powers specifically conferred upon it by the Federal Deposit Insurance Act but also such incidental powers as shall be necessary for carrying out the powers specifically granted it by the Act. (See paragraph "Seventh" of section 9 of the Federal Deposit Insurance Act (12 U.S.C. 1819 "Seventh").) In addition, and perhaps most significantly, section 10 (a) of the Act (12 U.S.C. 1820 (a)) requires the Board of Directors of the Corporation to . . . . determine and prescribe the manner in which its obligations shall be incurred and its expenses allowed and paid." (Emphasis supplied.) The precise limits of the Board's authority to determine and prescribe the manner in which its obligations shall be incurred and its expenses allowed and paid have never been clearly defined. Even the Comptroller General of the United States has indicated that questions regarding the expenditures of Government corporations have not been finally resolved. More specifically, in a letter to the Chairman of the House Select Committee on Foreign Aid concerning the Committee's 1948 investigations with respect to the organization and administration of foreign aid and recovery programs, the Comptroller General stated: "2. Expenditures.-In the matter of expenditures there is not a clear line of distinction for the reason that, while corporations were formed largely for the reason that administrators preferred to find a method of procedure which would permit expenditures by whatever rules they, themselves, chose to adopt, this feature has not until very recent times been the subject of general congressional enactment, and it cannot be said with confidence that Congress has announced a policy with respect to expenditures of corporations as such. Instead, the approach has been to grant to certain corporations an all-inclusive authority to determine for themselves the character and necessity of their expenditures and the manner in which they shall be incurred, allowed, and paid. Where such language appears in the act chartering the corporation, there can be no question but that Congress has determined that the congressional or statutory rules otherwise directing how the public moneys shall be spent are not of their own force to apply to the corportion, but rather that the corporation shall determine for itself what methods, procedures, etc., should be employed. "Where the language as to determining the manner of expenditure, etc., does not appear in the corporate charter, the question is not at all clear. "H.R. Rep. No. 1845, 80th Cong., 2d Sess. 776-777 (1948) (emphasis supplied). At the time of the Comptroller General's letter, pertinent provisions of statutes governing the operations of the Reconstruction Finance Corporation, the Federal Crop Insurance Corporation, and certain other Government corporations specifically provided that "Except as may be otherwise provided in this Act or in the Government Corporation Control Act, the board of directors of the Corporation shall determine the necessity for and the character and amount of its obligations and expenditures under this Act and the manner in which they shall be incurred, allowed, paid, and accounted for, without regard to the provisions of any other laws governing the expenditure of public funds and such determinations shall be final and conclusive upon all other officers of the Government." See, e.g., section 1 of the Act of June 30, 1947 (61 Stat. 203) (emphasis supplied). The language of the Federal Deposit Insurance Act, on the other hand, does not expressly grant the Corporation or its Board of Directors an all-inclusive authority to determine the necessity for and the character and amount of its expenditures; it merely authorizes the Board to determine and prescribe the manner (generally defined as meaning the method) in which its obligations shall be incurred and its expenses allowed and paid. Nevertheless, that language, when interpreted in conjunction with that provision of the Act which authorizes the Corporation to exercise such incidental powers as shall be necessary to carry out the powers specifically granted it by the Federal Deposit Insurance Act, would appear to authorize cash contributions by the Corporation to a Presidential commission expected to be charged with responsibility for an examination of needed changes in the Nation's financial institutions and regulatory structure if the Board of Directors determines, on the basis of information now available to it, that the commission's studies and recommendations-because of their relationship to the insurance, examination, or ancillary functions of the Corporation or to the structure and regulation of insured banks as affecting those functions-will be of probable benefit to the Corporation. Even then, however, the amount of the Corporation's contributions should bear some reasonable relationship to that portion of the Commission's time that will be devoted to matters pertinent to the Corporation's functions and should be allocated specifically for the purpose of helping to defray the expenses of that part of the Commission's study which will relate to the insurance, examination, or ancillary functions of the Corporation or to the structure and regulation of insured banks as affecting those functions. Preliminary announcements regarding the anticipated scope of the proposed Presidential Commission's mandate would, in my opinion, warrant a determination of probable benefit to the Corporation. The President's first announcement concerning the appointment of the Commission stated that "Because our expanding and dynamic economy must have strong and innovative financial institutions if our national savings are to be utilized effectively. I shall appoint a commission to study our financial structure and make recommendations to me for needed changes." Economic Report of the President, p. 9 (Feb. 2, 1970). The announcement of the appointment of the Commission was expanded by the Council of Economic Advisers: "Our expanding and increasingly complex economy must have financial institutions reflecting the vitality that comes from vigorous innovation and competition. Financial services required by tomorrow's economy will differ in as yet undefinable ways from those appropriate today. The demands on our flow of national savings . . . will be heavy in the years ahead, and our financial institutions and financial structure must have the flexibility that will permit a sensitive response to changing demands. Thus the time has come for a thorough examination of needed changes in our financial institutions and our regulatory structure. This study will be carried out by a commission to be appointed by the President early this year." The Annual Report of the Council of Economic Advisers, p. 104 (1970). Moreover, spokesmen for the Department of the Treasury as well as certain Members of the Congress have openly speculated that the study expected to be conducted by the Presidential Commission on Financial Structure and Regulation promises to be the most in-depth study of the Nation's financial structure since the study which resulted in the creation of the Federal Reserve System in 1913. The Commission's mandate is almost certain to include a requirement, as proposed by pending legislation, for study and appraisal of restrictions on bank entry, restrictions on the formation of branches of banks, restrictions on the investment powers of banks, restrictions on the payment of interest on bank deposits, reserve requirements of banks, merger policies affecting banks, restrictions on banks engaging in nonbanking activities, restrictions on bank holding companies, and the desirability of consolidating Federal bank supervisory functions. Inasmuch as the resolution of each of these issues and the Commission's recommendations with respect thereto would have a profound effect upon the Corporation's powers and functions, a Board determination of probable benefit to the Corporation from the Commission's studies and recommendations— based on their relationship to the functions of the Corporation or to the structure and regulation of insured banks as affecting those functions-would appear to be in order. Given a determination by the Board of Directors that the Commission's studies and recommendations will be of probable benefit to the Corporation because of their relationship to the Corporation's functions or to the structure and regulation of insured banks as affecting those functions, there would be no legal objection to an advance of funds to the Commission during it organizational phase, subject to repayment out of other funds legally available to the Commission, if the Corporation receives written assurances from the Commission that the advance contribution will be repaid if the Commission's mandate does not in fact include a requirement for study and appraisal of matters pertinent to the functions of the Corporation. USE OF PUBLIC MONEYS FOR EXPENSES OF COMMISSIONS The opinions expressed in earlier pargraphs of this memorandum are not altered by reference to section 9 of the Act of March 4, 1909 (31 U.S.C. 673), which provides that "... hereafter no part of the public moneys, or of any appropriation heretofore or hereafter made by Congress, shall be used for the payment of compensation or expenses of any commission, council, board, or other similar body, or any members thereof, or for expenses in connection with any work or the results of any work or action of any commission, council, board, or other similar body, unless the creation of the same shall be or shall have been authorized by law; nor shall there be employed by detail, hereafter or heretofore made, or otherwise personal services from any executive department, or other government establishment in connection with any such commission, council, board, or other similar body." The statute is not deemed to be applicable to a transfer of funds or to a detail of employees by the Corporation to the Presidential Commission on Financial Structure and Regulation. If the Commission is authorized in a general way by law, a specific authorization is not required by a statute. In 40 Comp. Gen. 478 (1961), the Comptroller General considered the above provision and stated that it does not necessarily require that commissions be specifically established by statute. "General or specific authority to perform functions or duties is sufficient to allow payment of the expenses of boards, commissions, etc., if such duties or functions can be performed only by such a group or if it is generally accepted that such duties can be performed best by such a group. [Citations omitted.]" 40 Comp. Gen. 478, supra, at 479. (Emphasis supplied.) If this Commission is lawfully established by the President, it must therefore be said to be authorized by law. The planned wide-ranging study can probably best be performed by a commission having the sanction of the President. Any transfer of funds or detail of employees by the Federal Deposit Insurance Corporation would therefore not be in violation of the specific statute. SUMMARY AND RECOMMENDATIONS In summary, it is the opinion of the General Counsel, after a review of pertinent statutes and established precedent, that (1) experts and professional consultants can be retained by the Corporation for research in connection with so much of the Commission's study as may be assinged to the Corporation if the Board of Directors determines, on the basis of information now available to it, that the study to be conducted will have a relationship to the functions of the Corporation or to the structure and regulation of insured banks as affecting those functions and will consequently be of probable benefit to the Corporation and if the Board obtains assurances from the Commission that that portion of the Commission's study which may be assigned to the Corporation will involve fields of study pertinent to the functions of the Corporation; (2) experts and professional consultants may be retained by the Corporation for detail to the Commission staff without limitation as to the extent and nature of their duties; (3) the Corporation may make cash contributions to the Commission for the payment of a part of its expenses if the Board determines, on the basis of information now available to it, that the Commission's studies and recommendations will be of probable benefit to the Corporation because of their relationship to the functions of the Corporation or to the structure and regulation of insured banks as affecting those funtcions and makes the contributions specifically for the purpose of helping to defray the expenses of that part of the Commission's study that will relate to the insurance, examination, or ancillary functions of the Corporation or to the structure and regulation of insured banks as affecting those functions; and (4) given a determination by the Board that the Commission's studies and recommendations will be of probable benefit to the Corporation because of their relationship to the Corporation's functions or to the structure and regulation of insured banks as affecting those functions, the Corporation may advance funds to the Commission during its organizational phase, subject to repayment out of other funds legally available to the Commission, if the Corporation receives written assurances from the Commission that the advance contribution will be repaid if the Commission's mandate does not in fact include a requirement for study and appraisal of matters pertinent to the functions of the Corporation. However, given the fact that even the Comptroller General has conceded that questions regarding the expenditures of Government corporations have not been finally resolved, it is respectfully suggested that the Board of Directors may deem it prudent, subsequent to the making of an advance contribution but prior to a permanent transfer of funds, to obtain the opinion of the Comptroller General as to the legality of such cash contributions, for although the Board of Directors may now determine that the Commission's studies and recommendations will be of probable benefit to the Corporation, subsequent developments could render those studies and recommendations of little or no value to the Corporation. That possibility could result in a determination by the Comptroller Generalnoted in his annual report on the audit of the Corporation pursuant to section 17(c) of the Federal Deposit Insurance Act (12 U.S.C. 1827 (c))—that an expenditure has been made without authority of law. LESLIE H. FISHER, General Counsel. Hon. CHARLS E. WALKER, FEDERAL DEPOSIT INSURANCE CORPORATION, Under Secretary of the Treasury, DEAR CHARLIE: Enclosed herewith is a copy of a letter and the opinion of our General Counsel which I have today sent to Chairman Hunt outlining the various ways in which the Federal Deposit Insurance Corporation can legally be of assistance to the Presidential Commission on Financial Structure and Regulation. I understand from Allen Rule that Commission action necessary to support the FDIC employment of consultants or staff or an FDIC cash contribution will be on the agenda for the August meeting of the full Commission. Following such action, the FDIC Board of Directors will meet promptly to consider the Commission's proposals for FDIC assistance. In the meantime, we will continue to make available office space, meeting rooms, and past FDIC research in accordance with the requirements of the Commission's staff. Sincerely, FRANK WILLE, Chairman. Mr. FRANK WILLE, THE UNDER SECRETARY OF THE TREASURY, Chairman, Federal Deposit Insurance Corporation, DEAR FRANK: Thank you very much for the copy of the letter your General Counsel sent to Reed Hunt outlining the ways the FDIC can assist in the efforts of the Presidential Commission on Financial Structure and Regulation. I certainly appreciate the excellent cooperation of your organization in this major project. With best wishes, CHARLS E. WALKER. Hon. FRANK WILLE, COMMISSION ON FINANCIAL STRUCTURE AND REGULATION, Chairman, Federal Deposit Insurance Corporation, DEAR MR. WILLE: I am writing as Chairman of the Presidential Commission on Financial Structure and Regulation to request the continued assistance and cooperation of the Federal Deposit Insurance Corporation in accomplishing the |