Authority of the Federal Financing Bank to Provide Loans to

the Resolution Trust Corporation

T he R esolution Trust Corporation is a "federal agency” within the m eaning o f the Federal 

F inancing B ank Act o f 1973, and the RTC is authorized to issue financial obligations under 

the Federal H om e L oan Bank Act. Accordingly, under the FFB Act the Federal Financing 

B ank is authorized to provide loans to the RTC.

February 14, 1990

M e m o r a n d u m O p i n i o n f o r t h e G e n e r a l C o u n s e l

D e p a r t m e n t o f t h e T r e a s u r y

This memorandum responds to your request for our views as to whether 

the Federal Financing Bank (“the Bank”) is authorized to provide loans to 

the Resolution Trust Corporation (“RTC”). Section 6 of the Federal Financing Bank Act of 1973 (“the FFB Act”), 12 U.S.C. § 2285, authorizes the 

Bank to provide loans by directly purchasing notes or other obligations from 

any “Federal agency” that is authorized to issue such obligations. As explained more fully below, we conclude that RTC is a “Federal agency” within 

the meaning of the FFB Act and that RTC is authorized to issue obligations 

by virtue of its authority under section 21A(b)(4) of the Federal Home Loan 

Bank Act, 12 U.S.C. § 1441a(b)(4). Accordingly, we conclude that the Bank 

may provide loans to RTC by directly purchasing RTC notes or obligations.

I. Background

The Federal Financing Bank was created in 1973 to reduce the cost of 

federal and federally assisted borrowing by coordinating financing programs 

among various federal agencies. Prior to enactment of the FFB Act, many 

agencies financed their programs by issuing their own debt securities directly into the market. H.R. Rep. No. 299, 93d Cong., 1st Sess. 2 (1973), 

reprinted in 1973 U.S.C.C.A.N. 3153, 3154. This required the agencies to 

develop their own financing staffs and consequently to incur significant under20
writing costs. Lack of coordination among agencies in timing the introduction of various issues into the market and liquidity costs associated with having 

a proliferation of competing small issues also increased borrowing costs. Id.

The FFB Act reduced these costs by allowing agencies to issue obligations 

directly to the Bank, which would then issue its own securities into the 

market or directly to the Treasury, which is the current procedure. Section 6 

of the Act provides, in part, that “[a]ny Federal agency which is authorized to 

issue, sell, or guarantee any obligation is authorized to issue or sell such 

obligations directly to the Bank.” 12 U.S.C. § 2285(a). The Bank thus may 

provide financing for the Resolution Trust Corporation if, within the meaning 

of the FFB Act, (1) RTC is a “Federal agency,” and (2) RTC is authorized to 

“issue, sell, or guarantee any obligation[s].”

II. Discussion

A. RTC is a "Federal Agency" Within the Meaning o f the FFB Act

We believe that RTC is a federal agency within the meaning of the FFB 

Act. Section 3(a) of the Act provides that the term ‘“ Federal agency’ means”

an executive department, an independent Federal establishment, 

or a corporation or other entity established by the Congress 

which is owned in whole or in part by the United States.

12 U.S.C. § 2282(1). In our view, RTC is a “corporation or other entity 

established by the Congress which is owned in whole or in part by the 

United States.” 1

1. Scope o f the Corporation Coverage Clause

There is no dispute that RTC is a “corporation” and that it was “established by the Congress.” See Federal Home Loan Bank Act, section 

21A(b)(l)(A), as added by Financial Institutions Reform, Recovery and Enforcement Act of 1989 (“FIRREA”), Pub. L. No. 101-73, § 501, 103 Stat. 

183, 369 (codified at 12 U.S.C. § 1441a(b)(l)(A)) (“There is hereby established a Corporation to be known as the Resolution Trust Corporation . . . .”). 

The central question in determining whether RTC is a “Federal agency” 

within the meaning of the FFB Act therefore is whether it is “owned in 

whole or in part by the United States.”

The FFB Act does not define the phrase “owned in whole or in part by 

the United States.” Ordinarily, ownership in a corporation is a function of 

stock ownership: Under general principles of corporate law, one has an

1 Throughout this opinion, we will refer to this phrase as the "corporation coverage clause.”

21
ownership interest in a corporation if he or she owns capital stock in that 

corporation. Stock ownership in turn entitles the holder to certain ownership rights. This conventional ownership test, however, is not especially 

helpful in determining ownership in government corporations. Several government corporations, such as the Tennessee Valley Authority and the 

Government National Mortgage Association, were intended to be “Federal 

agencies” within the scope o f the corporation coverage clause, but they do 

not issue stock at all.2 See 16 U.S.C. §§ 831-831dd (outlining powers and 

duties of TVA); 12 U.S.C. §§ 1716-1724 (1970 & Supp. Ill 1973) (outlining 

powers and duties of GNMA); see also infra pp. 22-24. Private capital 

contributions to government corporations, moreover, do not always entitle 

contributors to the kind of ownership rights that typically follow from capital 

investment in private corporations. For example, although RTC issues “capital certificates” to the Resolution Funding Corporation (“REFCORP”), a private 

corporation that raises money for RTC by selling REFCORP bonds, these 

certificates entitle REFCORP to few of the usual rights of corporate ownership. The certificates are nonvoting, pay no dividends, and do not provide 

REFCORP with any control over the management of RTC. See infra pp. 29- 

30. Thus, the precise scope of the corporation coverage clause is difficult to 

discern from the text of the clause alone.

The legislative history of the FFB Act, however, provides further guidance on the meaning of the clause by providing examples of the kinds of 

corporate entities that were and were not intended to be covered by the 

clause. By contrasting the characteristics of the included and excluded entities, one can glean a clearer understanding of the reach of the clause.

The legislative history shows that Congress intended the FFB Act3 to 

cover a range of corporate entities, including the Government National Mortgage Association, 118 Cong. Rec. 22,015 (1972); the Export-Import Bank of 

the United States, 119 Cong. Rec. 36,004 (1973), 1973 House Hearings at 

15; the Commodity Credit Corporation, id.-, S. Rep. No. 166, 93d Cong., 1st 

Sess. 5 (1973); and the Tennessee Valley Authority, H.R. Rep. No. 299 at 5, 

1973 U.S.C.C.A.N. at 3157; 1973 House Hearings at 33.4 In contrast to the 

excluded corporations, see infra pp. 24-26, the essential characteristics of

2 Despite its eligibility to finance certain issues through the Bank, see Federal Financing Bank Act:

Hearings Before the House Comm, on Ways and Means, 93d Cong., 1st Sess. 15 (1973) (“1973 House

H earings”) (GNMA mortgage-backed securities); 118 Cong. Rec. 22,015 (1972) (same), GNMA has 

never done so.

3 The original Federal Financing Bank bill, S. 3001. passed in the Senate during the second session of 

the Ninety-Second Congress in 1972 was favorably reported by the House Ways and Means Committee. 

The full House, however, was not able to act upon the bill before adjournment. H.R. 5874, the bill 

ultim ately enacted during the first session of the Ninety-Third Congress in 1973, was very similar to S. 

1001 and included the identical definition of “Federal agency." Compare S. 3001, 92d Cong., 2d Sess. 

(1972) with H.R. 5874, 93d Cong., 1st Sess. (1973).

4 By statute, all of these entities were defined as “corporate” entities. 12 U.S.C. § 1717(a)(2)(A) (1970) 

(GNM A); id. § 635(a) (Export-Import Bank); 15 U.S.C. § 714(1970) (Commodity Credit Corporation); 

16 U.S.C. § 831 (1970) (TVA). Although TVA is a “Federal agency” eligible to borrow from the Bank 

under section 6 of the FFB Act, the TVA is exempt from the prior approval requirements of section 7 of 

the Act, 12 U.S.C. § 2286. See infra note 7.

22
each of these covered corporate entities were typical of the characteristics of 

government entities generally. Each of these corporations received government funding, was subject to significant federal oversight and, with one 

exception, generally issued securities backed by the full faith and credit of 

the federal government.5

Each of these four corporations received substantial government funding. 

Two of them received direct capital contributions from the United States, see

12 U.S.C. § 635b (1970) ($1,000,000,000 for Export-Import Bank); 15 U.S.C. 

§ 714e (1970) ($100,000,000 for Commodity Credit Corporation), and at 

least three received direct appropriations. See Pub. L. No. 93-137, 87 Stat. 

491, 491 (1973) ($19,821,000 for GNMA); Pub. L. No. 93-135, 87 Stat. 468, 

477 (1973) ($3,301,940,000 for Commodity Credit Corporation); Pub. L. 

No. 93-97, 87 Stat. 318, 328 (1973) ($45,676,000 for TVA).

These corporations were generally subject to closer federal oversight than 

were the excluded corporations, see infra pp. 25-26, although the precise 

relationship of the various corporations to the federal government differed. 

Indeed, two of the four covered corporations were placed within executive 

departments. See 12 U.S.C. § 1717(a)(2)(A) (1970) (declaring GNMA to be 

a body corporate within the Department of Housing and Urban Development); id. § 1723(a) (powers and duties of GNMA vested in the Secretary of 

HUD); 15 U.S.C. § 714 (1970) (Commodity Credit Corporation is an instrumentality of the United States within the Department of Agriculture and subject 

to the general supervision and direction of the Secretary of Agriculture).6

The principal officers and directors of these covered corporations were 

not elected by private entities; they were appointed directly by the President 

or by the head of an executive department. See 12 U.S.C. § 1723(a) (1970) 

(Secretary of HUD selects president, vice-president, and other principal officers of GNMA); id. § 635a(b) & (c) (board of directors of Export-Import 

Bank, which includes its president and first vice-president, are appointed by 

President with advice and consent of the Senate); 15 U.S.C. § 714g(a) (1970) 

(six members of board of directors of Commodity Credit Corporation appointed by President with advice and consent of the Senate; Secretary of 

Agriculture is a member ex officio and serves as Chairman); 16 U.S.C. 

§ 831a(a) (1970) (board of directors of TVA appointed by President with 

advice and consent of the Senate).

’ The significance of the references to these corporations for purposes of determining congressional 

intent is not so much that we know whether these particular corporations were to be covered or not 

(although this is important), but rather that we know the types of corporations Congress did and did not 

intend to be covered. Indeed, several of these particular entities have been substantially restructured 

since the FFB Act was enacted in 1973. Of course, changes in the structure, management and/or 

funding of these corporations after the date of enactment of the FFB Act are irrelevant to determining 

Congress' intent in enacting the legislation. We have considered, therefore, only their structure and 

operations at the time the FFB Act was considered and enacted.

‘ The other covered corporations functioned as independent agencies of the United States See, e.g., 12 

U.S.C. § 635(a) (1970) (Export-Import Bank).

23
Finally, each of these corporations, except for the Tennessee Valley Authority, generally issued obligations that were backed by the full faith and 

credit of the United States government.7 See 12 U.S.C. § 635k (1970) (“All 

guarantees and insurance issued by the [Export-Import] Bank shall be considered contingent obligations backed by the full faith and credit of the 

Government of the United States of America.”); 15 U.S.C. § 713a-4 (1970) 

(obligations of Commodity Credit Corporation “shall be fully and unconditionally guaranteed both as to interest and principal by the United States”); 

12 U.S.C. § 1721(g) (Supp. Ill 1973) (full faith and credit of United States 

pledged to payment of certain GNMA obligations); but see 12 U.S.C. § 1721(b) 

(1970) (certain other GNMA obligations not backed by government).

The characteristics of these covered corporations were very different from 

the characteristics of those entities that we know from the legislative history 

were intended to be excluded from coverage. The committee reports on the 

FFB Act state that the Act would not cover the federal land banks, the 

federal intermediate credit banks, the banks for cooperatives, the federal 

home loan banks, the Federal Home Loan Mortgage Corporation, the Federal National Mortgage Association, and the federal reserve banks. H.R. 

Rep. No. 299, at 5, 1973 U.S.C.C.A.N. at 3157; S. Rep. No. 166, at 3. At 

the time, all of these excluded corporations were wholly privately financed, 

had significant management independence and, with one exception,8 did not 

issue'obligations backed by the full faith and credit of the United States.

The Federal National Mortgage Association, the federal home loan banks, 

the banks for cooperatives, the federal land banks, and the federal intermediate credit banks were initially capitalized in part by contributions from the 

United States.9 However, by the time the FFB Act was enacted, the shares

’ The bulk o f TVA’s existing borrowing authority in 1973 consisted of obligations that were not guaranteed by the government, see 16 U.S.C. § 831n-4(b) (1970), but TVA had previously issued bonds that 

were backed by the full faith and credit o f the United States, see id. §§ 83 In -1 & 831n-3. Indeed, in 

order to exempt TVA from the prior approval requirements of the FFB Act, Congress inserted a clause 

into section 7 of the Act exempting from these requirements any “obligations issued or sold pursuant to 

an Act of Congress which expressly prohibits any guarantee of such obligations by the United States.”

12 U.S.C. § 2286(a). This exemption would apply to few, if any, agencies other than TVA, because 

virtually all federal agencies covered by the FFB Act issued obligations backed by the government.

* Federal Reserve notes were and continue to be “obligations of the United States,” 12 U.S.C. § 411 

(1970), backed by the federal government. The FFB Act, however, expressly excludes from its coverage 

“Federal Reserve notes.” 12 U.S.C. § 2282(2). Thus, notwithstanding their private capitalization and 

substantial day-to-day management independence, the federal reserve banks could not obtain financing 

from the Bank by issuing “Federal Reserve notes" to the Bank.

’ See 12 U.S.C. § 1718(a) & (d) (1970) (FNMA); id. § 1426(f)

(federal home loan banks); id. § 1134d(a)(l) (banks for cooperatives), repealed by Pub. L. No. 92- 

181, § 5.26(a), 85 Stat. 583, 624(1971); 12 U.S.C. §§ 692 & 695 (1970) (federal land banks), repealed

by Pub. L. No. 92-181, § 5.26(a); 12 U.S.C. § 1061(a)(1) (1970) (federal intermediate credit banks), 

repealed by Pub. L. No. 92-181, § 5.26(a).

24
of the United States had been retired, and these entities were entirely privately capitalized.10 Although the federal reserve banks were originally 

authorized to issue stock to the United States, they had never done so. See

12 U.S.C. note following section 284 (1970). The Federal Home Loan Mortgage Corporation (“FHLMC”) had, from its inception, obtained all of its 

equity capital from private sources. See 12 U.S.C. § 1453 (1970).

In addition to being fully privately capitalized, these entities generally 

relied solely upon their own income, rather than upon appropriations, to 

fund their operating expenses. See 1974 Budget Appendix, supra note 10, at 

1098 (“The entire operating expenses of the [Federal Home Loan Banks] are 

paid from their own income and are not included in the budget of the United 

States.”); id. at 1094 (banks for cooperatives); id. at 1097 (federal land banks); 

id. at 1095 (federal intermediate credit banks).

These corporations were relatively independent in the management of 

their day-to-day affairs, although the extent of direct federal supervision 

differed substantially. With one exception,11 private entities elected a substantial majority of the boards of directors of each of these corporations, and 

the shares issued by these corporations consisted of voting stock. Thus, 

two-thirds of the directors of the FNMA, the federal reserve banks, and the 

federal home loan banks were elected by the respective shareholders and 

members of these entities. See 12 U.S.C. § 1723(b) (1970) (FNMA); id. §§ 

302 & 304 (federal reserve banks); id. § 1427(a) (federal home loan banks). 

Similarly, private parties elected a substantial majority of the boards of directors of the three types of farm credit banks. Under 12 U.S.C. § 2224 

(Supp. Ill 1973), the same seven members of the board of directors of each 

farm credit district served as the board of directors for the federal land bank, 

the federal intermediate credit bank, and the bank for cooperatives of each 

such district. Six of the seven members were elected by private entities:

10 See 12 U.S.C. § 1718(a) (1970) (requiring retirement of preferred shares in FNMA held by the Secretary of the Treasury); id. § 1426(g) (retirement of stock held by the United States in federal home loan 

banks); 12 U.S.C. § 2126 (Supp. Ill 1973) (providing for retirement of stock held by the Governor of the 

Farm Credit Administration in the banks for cooperatives); U.S. Bureau of the Budget, The Budget o f the

United Stales Government, Fiscal Year 1974, Appendix at 1094 (1973) (“1974 Budget Appendix”) (U.S. 

Government capital m banks for cooperatives was fully retired on December 31,1968); id. at 1097 (“The 

last of the Government capital that had been invested in the [federal land banks] was repaid in 1947."); 12 

U.S.C. § 2073(g) (Supp. Ill 1973) (providing for retirement of stock held by the Farm Credit Administration in the federal intermediate credit banks); 1974 Budget Appendix at 1095 (government-held stock in 

federal intermediate credit banks was fully retired on December 31, 1968). Although the various farm 

credit banks were authorized to issue nonvoting stock to the Governor of the Farm Credit Administration 

on a temporary basis when iieeded to meet emergency credit needs of borrowers, see 12 U.S.C. § 2151(a) 

(Supp. Ill 1973); see also id. §§ 2013(d), 2073(d) & 2124(e) (authorizing issuance of nonvoting stock to 

Governor of the Farm Credit Administration), the ownership o f such stock was, for most purposes, expressly “deemed to not change the status of ownership of the banks," id. § 2151(a), and such stock was 

required to be retired when no longer needed. See id. § 2151(b)

"T h e members of the Federal Home Loan Bank Board, who were appointed by the President with the 

advice and consent of the Senate, see Reorganization Plan No. 3 of 1947, § 2(a), 3 C.F.R. 1071, 1072 

(1943-1948), reprinted in 12 U.S.C. § 1437 note at 2532 (1970), served as the board of directors of the 

Federal Home Loan Mortgage Corporation. 12 U.S.C. § 1452(a) (1970).

25
two were elected by the shareholders of the federal land bank for that farm 

credit district, two by the shareholders of the federal intermediate credit 

bank, and two by the shareholders of the bank for cooperatives. 12 U.S.C. § 

2223(a) (Supp. Ill 1973).12

Finally, each of these corporations (except the federal reserve banks13) 

issued obligations that were not guaranteed by the full faith and credit of the 

United States government. Indeed, for most of these corporations there was 

an express statutory bar to full faith and credit pledges. See 12 U.S.C. § 

1719(b) (1970) (FNMA); id. § 1435 (federal home loan banks); 12 U.S.C. § 

2155(c) (Supp. Ill 1973) (federal land banks, federal intermediate credit 

banks, and banks for cooperatives). Although no provision expressly barred 

FHLMC from issuing obligations backed by the federal government, section 

306(c) of the Federal Home Loan Mortgage Corporation Act, 12 U.S.C. § 

1455(c) (1970), provided that the obligations of the corporation would be 

guaranteed, if at all, by the federal home loan banks. There was no provision for FHLMC’s obligations to be backed by the full faith and credit of the 

United States.

From this review of the entities that we know Congress considered and 

determined were either covered or not, it is relatively clear that the Act was 

intended generally to reach a range of federally created corporations that 

receive substantial funding from the government, that are subject to significant federal control, and that issue obligations guaranteed by the federal 

government. On the other hand, the Act was intended generally to exclude 

the fairly small group of federally created corporations that are wholly privately funded, that have a significant measure of independence in their 

management, and that issue obligations not backed by the full faith and 

credit of the federal government.14 The apparent purpose of excluding from 

coverage this latter type of corporation was to prevent privately owned insti12 Section 2223(a) provided, in part, that:

Two o f the district directors shall be elected by the Federal land bank associations, two 

by the production credit associations, and two by the borrowers from or subscribers to 

the guaranty fund of the bank for cooperatives.

These three groups which, in turn, were fully privately owned and managed, see 12 U.S.C. §§ 2032 & 

2034 (Supp. III 1973) (federal land bank associations — which were distinct entities from the federal 

land banks); id. §§ 2092 & 2094 (production credit associations), were the respective shareholders of the 

federal land banks, id. § 2013(b), the federal intermediate credit banks, id. § 2073(b), and the banks for 

cooperatives, id. §§ 2124(c) & 2127.

13 Federal Reserve notes were obligations o f the United States backed by the federal government. See

supra note 8.

14 O f course, any given corporation may not have all of the principal characteristics of either the included or excluded corporations mentioned above, or it may have the characteristics of one or the other, 

but to a lesser or greater extent. In these circumstances, one must determine, with due regard for the 

purposes o f the FFB Act, whether the corporation's principal characteristics render it most analogous to 

those corporations that were intended to be covered by the FFB Act or to those that were not.

26
tutions from obtaining the advantages of Bank financing, in particular the 

benefit of financing backed by the full faith and credit of the United States. 

See infra note 16.13

The few actual discussions of the scope of the corporation coverage clause 

in Congress or in the materials submitted in connection with the legislation 

are fully consonant with these conclusions concerning the scope of the clause. 

The original Federal Financing Bank bill was proposed by the Department 

of the Treasury, and the definition of “Federal agency” was taken unaltered 

from the language of that original Treasury proposal. Compare 12 U.S.C. § 

2282 with Letter from John B. Connally, Secretary of the Treasury, to Carl 

B. Albert, Speaker of the House of Representatives (Dec. 9, 1971) (attaching 

draft bill). In submitting the proposed bill, the Secretary of the Treasury 

emphasized that the corporation coverage clause was intended to exclude 

“Government-sponsored agencies which are entirely privately owned and 

issue obligations which are not directly guaranteed by the Government.” Id.

The Secretary’s understanding of the clause as excluding from coverage 

government corporations that were wholly privately owned and whose obligations were not backed by the government is supported by testimony given 

by Paul Volcker, then-Under Secretary of the Treasury for Monetary Affairs, 

before the House Committee on Ways and Means. In the course of extensive questioning concerning the coverage of the proposed legislation, Mr. 

Volcker reiterated that wholly privately owned corporations were excluded 

from coverage. He explained that one of the principal reasons for excluding 

these corporations was to prevent them from issuing to the Federal Financing Bank securities that were not government-backed in exchange for Bank 

financing that would be backed by the full faith and credit of the United 

States.16 These comments, especially taken together with others to the effect

13 These conclusions as to the reach of the clause are supported by the treatment of government-sponsored agencies in the annual Budgets of the United States. The list of corporations that the House and 

Senate Reports stated were excluded from the FFB Act’s coverage closely corresponds to the list of 

“government-sponsored credit agencies” contained in the appendix to the annual Budget report. Thus, 

for example, the appendix to the Fiscal Year 1974 Budget (which was the last to be submitted before the 

FFB act was passed) lists six such entities: the FNMA, the banks for cooperatives, the federal intermediate credit banks, the federal land banks, the federal home loan banks, and the FHLMC See 1974

Budget Appendix at 1084, 1092-1100. This almost exact correspondence with the list of excluded 

corporations is not coincidental; these corporations are excluded from the normal budgetary process 

because they are considered to be “privately owned.” Id.; see also Report o f the President's Commission

on Budget Concepts 30 (1967) (“Government-sponsored enterprises [should] be omitted from the budget when such enterprises are completely privately owned.”).

“ Mr. Volcker testified that there were two basic reasons for excluding certain “privately owned enterprise agencies":

One is that these institutions are privately owned, and there is some philosophic question 

in our mind, if you will, whether privately owned institutions should in the nature of 

things have access to this bank, which, of course, will be emitting full faith and credit 

securities of the United States.

[Second,] [i]f you look at the practicalities, these agencies . . . are large borrowers 

and they are well established and have a niche in the market, so to speak. . . . Their 

securities are somewhat more easily traded than many of the securities that we do cover 

here.

Federal Financing Bank A ct: Hearings on S. 3001 Before the House Comm, on Ways and Means, 92d 

Cong., 2d Sess. 26-27 (1972) (“1972 House Hearings”).

27
that the term “Federal agency” was intended to have a broad reach, see, e.g.,

Federal Financing Authority: Hearings on S. 1015, S. 1699, S. 3001 & S.

3215 Before the Senate Comm, on Banking, Housing and Urban Affairs, 92d 

Cong., 2d Sess. 14 (1972) (statement of Paul Volcker) (there were to be few 

exceptions to the coverage of the FFB Act), confirm our conclusions concerning the relatively narrow scope of the exclusion.

2. The Resolution Trust Corporation

RTC clearly most resembles the corporate entities that were intended to 

be covered by the Act. It has all of the principal characteristics of the 

covered corporations; it has none of the principal characteristics of the entities that were intended to be excluded. First,17 RTC has received substantial 

funding from the federal government. Congress ordered the Treasury to 

provide RTC $18.8 billion in fiscal year 1989 and authorized the Secretary 

to use the proceeds from the sale of Treasury securities to supply the necessary funds. 12 U.S.C. § 1441a(b)(14).

Second, RTC is subject to significant federal oversight and control. The 

day-to-day operations of RTC are managed by the Federal Deposit Insurance 

Corporation (“FDIC”), subject to the ultimate oversight of a new federal 

agency, the “Oversight Board.” Id. § 1441a(a). Unless removed by the 

Oversight Board, see 12 U.S.C. § 1441a(m), the FDIC functions as the exclusive manager of RTC, see 12 U.S.C. § 1441a(b)(l)(C), and the members 

o f the FDIC board of directors serve as the board of directors of RTC, see

id. § 1441a(b)(8)(A). RTC’s directors therefore are not selected by private 

entities; they are ex, officio members who were appointed to their respective 

positions at the FDIC by the President with the advice and consent of the 

Senate.18

The Oversight Board has ultimate oversight responsibility for RTC. 12 

U.S.C. § 1441a(a).19 It sets the “overall strategies, policies, and goals” of

l7FIRREA describes RTC as "an instrumentality o f the United States,” declares that it is an “agency of 

the United States” for certain purposes, and states that, despite the fact “that no Government funds may 

be invested in the Corporation,” it shall be treated, for purposes of the Government Corporation Control 

Act, "as a mixed-ownership Government corporation which has capital of the Government.” 12 U.S.C. 

§ 1441a(b)(l) & (2). At first blush, it might appear that these references to RTC as a government 

agency would alone resolve the question whether it is a federal agency within the meaning of the FFB 

Act. However, several of the corporations that Congress expressly intended to exclude from coverage 

under the FFB Act were also considered to be “instrumentalities” and “mixed-ownership Government 

corporations” for certain purposes. See 12 U.S.C. § 2011 (Supp. Ill 1973) (federal land banks were 

‘‘federally chartered instrumentalities o f the United States”); id. § 2071 (federal intermediate credit 

banks); id. § 2121 (banks for cooperatives); 31 U.S.C. § 856 (1970) (federal home loan banks, federal 

land banks, federal intermediate credit banks, and banks for cooperatives were “mixed-ownership Governm ent corporations” for purposes of the Government Corporation Control Act).

"Section 2 (a)(l)o fth e Federal Deposit Insurance Act, 12U.S.C § 1812(a)(1), as amended by FIRREA, 

Pub. L. No. 101-73, tit. II, § 203, 103 Stat. 183, 188 (1989), provides that the board of directors of the 

FDIC consists of five members; the Comptroller of the Currency, the Director of the Office of Thrift 

Supervision, and three other individuals to be appointed by the President with the advice and consent of 

the Senate. The Director of the Office o f Thrift Supervision is also a presidential appointee, see 12 

U.S.C. § 1462a(c)(l), as is the Comptroller of the Currency, see id. § 2.

28
RTC. Id. § 1441a(a)(6). This authority includes the power to establish the 

general policies and procedures for RTC’s handling of case resolutions, its 

management and disposition of assets, and its use of debt securities, as well 

as the power to establish RTC’s overall financial goals and its budget. Id. § 

1441a(a)(6)(A).

The Oversight Board also reviews all rules and regulations issued by 

RTC, and may, within certain limits, require modifications in these regulations. Id. § 1441a(a)(6)(C). The Oversight Board also periodically reviews 

the overall performance of RTC. Id. § 1441a(a)(6)(D). Moreover, under 

certain specified circumstances, the Oversight Board is authorized to remove 

the FDIC as exclusive manager of RTC and to appoint a new board of 

directors and chief executive officer. Thus, although the Oversight Board is 

not involved in RTC’s day-to-day resolution of specific cases, see id. § 

1441a(a)(8)(A); H.R. Conf. Rep. No. 222, 101st Cong., 1st Sess. 410, reprinted in 1989 U.S.C.C.A.N. 432, 449, the Board’s expansive authority over 

RTC’s operations illustrates the substantial degree of federal governmental 

control over RTC.

Finally, FIRREA provides that the full faith and credit of the United 

States is pledged to the payment of any obligation issued by RTC, provided 

only that the obligation expressly states its principal amount and date of 

maturity. 12 U.S.C. § 1441 a(j)(3).

RTC technically has not received capital contributions from the Treasury 

in exchange for RTC capital certificates. This alone, however, does not 

prevent RTC from being covered under the Act. First, other corporations 

that were clearly intended to be covered by the FFB Act, such as GNMA 

and TVA, had no outstanding stock owned by the United States. Second, 

although RTC issues “capital certificates” to REFCORP20 in exchange for 

REFCORP’s compulsory cash contributions, 12 U.S.C. § 1441a(b)(10)(M), 

these certificates do not confer many of the ordinary entitlements of corporate ownership. The certificates are nonvoting, pay no dividends, and do not 

provide REFCORP with any control over the management or operation of 

RTC 2! xhird, if REFCORP’s possession of these certificates were alone 

considered sufficient to render RTC a wholly privately owned entity, it would 

be difficult to explain the need for two separate entities. REFCORP would

19 The Oversight Board is comprised of five members: the Secretary of the Treasury (who serves as 

Chairman), the Chairman of the Board of Governors of the Federal Reserve System, the Secretary of 

Housing and Urban Development, and two other individuals appointed by the President with the advice 

and consent of the Senate. 12 U.S.C. § 1441a(a)(3).

“ REFCORP is a private entity which is fully capitalized by the federal home loan banks, and which 

raises money for RTC by selling REFCORP bonds, which are not backed by the full faith and credit of 

the United States. 12 U.S.C. § 1441b(d)(3), (e), (0(4) & (10). FIRREA, however, does establish a 

Financing Corporation Principal Fund, which consists of zero-coupon Treasury securities purchased 

with funds obtained from the federal home loan banks, to ensure principal payments on REFCORP 

bonds. FIRREA also provides that the Secretary of the Treasury shall provide funds for REFCORP 

bond interest payments that are not otherwise covered. Id. § 1441b(f)(2)(E)(i) & (g)(2).

11 REFCORP does retain a residual claim on the net assets of RTC, if any, after RTC is terminated. At 

that point, RTC’s assets and liabilities are transferred to the “FSLIC Resolution Fund,” which, after 

selling the assets, transfers any net proceeds to REFCORP. 12 U.S.C. §§ 1441a(o)(2) & 1821a(e).

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be unnecessary if it were merely a funding mechanism for another private 

corporation.

Because RTC receives substantial government funding, is subject to significant federal control, and issues obligations backed by the full faith and 

credit of the United States, we believe that it is a “corporation . . . established by the Congress which is owned in whole or in part by the United 

States,” as that phrase is used in the FFB Act.22 Accordingly, we conclude 

that RTC is a “Federal agency” within the meaning of the Act.23

B. RTC is Authorized to Issue “Obligations" Within the Meaning o f the

FFB Act

RTC must not only be a Federal agency, but also must be authorized to 

“issue, sell, or guarantee any obligation” within the meaning of the FFB Act 

to be eligible for FFB financing. Section 3(2) of the Act provides that the 

term “obligation” means

any note, bond, debenture, or other evidence of indebtedness, 

but does not include Federal Reserve notes or stock evidencing an ownership interest in the issuing federal agency.

12 U.S.C. § 2282(2). The term thus is broadly defined to include virtually 

any paper evidencing indebtedness. As explained below, we conclude that 

RTC is authorized to issue “obligations” within the meaning of the FFB Act 

because FIRREA authorizes RTC to issue notes in connection with its case 

resolution duties. »

No provision of FIRREA expressly grants RTC the authority to issue 

obligations. Subsection 21A(b)(4) of the Federal Home Loan Bank Act 

(“the FHLB Act”) as added by FIRREA, however, provides that, subject to 

certain limitations, RTC “shall have the same powers and rights to carry out 

its duties with respect to [financial institutions subject to its resolution authority] as the [FDIC] has under sections 11, 12, and 13 of the Federal 

Deposit Insurance Act [“the FDI Act”] with respect to [depository institutions insured by the FDIC].” 12 U.S.C. § 1441a(b)(4). Section 13(c) of the 

FDI Act provides that the FDIC is authorized, among other things, to make 

loans or contributions to, or make deposits in, certain insured depository 

institutions or other companies under certain circumstances. See 12 U.S.C.

12 Because we conclude that RTC comes within the corporation coverage clause, we need not address 

whether RTC might also be considered an “executive department” or an ‘‘independent Federal establishm ent” within the meaning of section 3(1).

23 Our analysis of RTC is supported by the fact that the Fiscal Year 1991 Budget treats RTC, not as a 

privately owned government-sponsored enterprise, but as an independent federal agency. See Executive Office of the President of the United States, Budget o f the United States Government, Fiscal Year

1991 A -2 1 to A-23, A -140 to A -142, A -271, A -118 1 to A -1182, A -12 13 to A -1226 (1990). See supra

note IS.

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§ 1823(c). This broad grant of authority to provide financial assistance in 

case resolutions has been interpreted to include the authority to issue notes 

evidencing the FDIC’s obligation to provide certain sums at a future time. 

See infra note 29. Since FIRREA provides that RTC shall have the same 

authority to provide assistance in case resolutions as the FDIC possesses 

under sections 11, 12, and 13 of the FDI Act,24 it follows that RTC is authorized to issue obligations when providing financial assistance in case 

resolutions. Accordingly, we conclude that RTC has the authority under 12 

U.S.C. § 1441a(b)(4) to issue “obligations.”

There is really no doubt that Congress intended RTC to have such authority. There are repeated, explicit references throughout the statute to RTC’s 

authority to issue obligations. Subsection 21A(b)(7) of the FHLB Act, as 

added by FIRREA, for example, provides that “[RTC’s] authority to issue

obligations and guarantees shall be subject to general supervision by the 

Oversight Board . . . and shall be consistent with subsection (j).” 12 U.S.C. 

§ 1441a(b)(7) (emphasis added). Subsection <j)(l) even establishes a formula for calculating the maximum dollar amount of obligations that RTC 

may have outstanding at any given time. Id. § 1441a(j)(l).25 In addition, 

the provision that requires RTC to submit periodic financing requests to the 

Oversight Board states that such requests must include “any proposed use of 

notes, guarantees or other obligations." Id. § 1441a(b)(13)(C) (emphasis 

added). Finally, FIRREA provides that “[t]he full faith and credit of the 

United States is pledged to the payment of any obligation issued by [RTC],

with respect to both principal and interest,” if the obligation states its principal amount and its date of maturity. Id. § 1441a(j)(3) (emphasis added).

The legislative history of FIRREA affirmatively supports the conclusion 

that RTC has authority to issue obligations. In pressing for limitations on 

RTC’s authority to issue obligations, Congressman Gonzalez, the Chairman 

of the House Banking Committee and the principal sponsor of FIRREA in 

the House, pointed out that:

[UJnder this bill, the RTC will have all of the case resolution

powers of the FDIC and the FSLIC as we have known them.

24 See, e.g., 135 Cong. Rec. 12,110 (1989) ("RTC will have all of the case resolution powers of the FDIC 

and the FSLIC as we have known them.’’) (emphasis added). f

“ Subsection (j)(l) provides (hat:

Notwithstanding any other provision of this section, the amount which is equal to—

(A) the sum of—

(i) the total amount of contributions received from [REFCORP]; and

(ii) the total amount of outstanding obligations of [RTC]; minus

(B) the sum of—

(i) the amount of cash each held by [RTC]; and

(ii) the amount which is equal to 85 percent of [RTC’s] estimate of the

fair market value of other assets held by the Corporation, may not 

exceed $50,000,000,000.

12 U.S.C. § 1441 a(j)( 1). RTC thus may issue obligations up to the amount that is equal to $50 billion, 

plus its cash, plus 85% of its assets, less any amounts received from REFCORP.

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This broad grant of power includes the ability to provide financial assistance to acquirers of insolvent thrifts, assistance

such as notes.

135 Cong. Rec. 12,110 (1989) (emphasis added).26 Congressman Gonzalez 

and others even expressed concern over the extent to which FSLIC, in late 

1988, had exercised its authority to issue notes, and emphasized that since 

RTC would have this same authority, an explicit limit on the dollar amount 

of such obligations was necessary. See id. ; see also id. at 12,111 (statement 

of Rep. Price) (“Currently under both the House and the Senate bill, the 

RTC has the authority to issue notes or other obligations with no apparent 

limit.”); id. at 12,112 (statement of Rep. Wylie) (“The administration recognizes the need to place a cap on the aggregate amount of RTC notes and 

obligations based on last year’s FSLIC experience.”).27

Finally, and significantly, FSLIC, which previously fulfilled RTC’s case 

resolution role, had itself issued obligations under the authority of the case 

resolution powers conferred by 12 U.S.C. § 1729(f) (1988), repealed by

FIRREA, Pub. L. No. 101-73, § 407, 103 Stat. 183, 363 (1989).28 See 68 

Comp. Gen. 14 (1988) (FSLIC has authority to issue notes in connection with 

case resolutions).29 And, as noted previously, Congress intended RTC to have 

essentially the same case resolution powers that FSLIC had. See supra pp. 31-32.

26 See also Problems o f the Federal Savings and Loan Insurance Corporation: Hearings Before the

Senate Comm, on Banking, Housing, and Urban Affairs, 101st Cong., 1st Sess., pt. II, at 590 (1989) 

(“1989 Senate FSLIC Hearings") (statement of Richard Darman, Director, Office of Management and 

Budget) (RTC may, like FSLIC, issue promissory notes in resolving cases).

27 Congressman Gonzalez’s amendment was adopted by the House, and its key provisions ultimately 

became subsection 21 A(j) of the FHLB A ct, 12U .S .C .I 1441a(j).

J ,The text of former 12 U.S.C. § 1729(f)(l)-(4), which described FSLIC’s authority to provide assistance in case resolutions, used virtually identical language as the statute describing the comparable 

authority o f the FDIC, 12 U.S.C. § 1823(c)(l)-(4).

” In concluding that FSLIC had the authority to issue notes, the Comptroller General relied not only on 

FSLIC 's statutory authority to provide assistance in case resolutions, but also upon an express statutory 

grant o f authority "to issue notes, bonds, debentures or other such obligations.” 68 Comp. Gen. at 16 

(citing 12 U.S.C. § 1725(d) (1988), repealed by FIRREA, Pub. L. No. 101-73,§407, 103 Stat. at 363). 

The absence of a similar provision in the FDI Act might be taken to suggest that Congress intended the 

FDIC to have less case resolution authority than FSLIC. It is clear, however, in this context that this was 

not C ongress’ intent. The FDIC’s statutory authority to provide assistance, read together with other 

provisions of the FDI Act, which expressly recognize the power to issue obligations, see, e.g., 12 U.S.C. 

§ 1825(a) (discussing tax treatment of “notes, debentures, bonds, or other such obligations” issued by the 

FDIC); id. § 1825(c) (limits on FDIC’s authority to issue notes); id. § 1826 (directing Secretary of Treasury to prepare “forms of notes, debentures, bonds, or other such obligations” for issuance by FDIC), is 

sufficiently broad to encompass the issuance of notes in connection with case resolutions. Moreover, the 

FDIC has issued such notes in case resolutions. See 1989 Senate FSLIC Hearings at 168 (statement of L. 

W illiam Seidman, Chairman, Federal Deposit Insurance Corporation); Office of Management and Budget, Budget o f the United Slates Government, Fiscal Year 1990, Appendix at I-Z24 (1989) (listing notes 

issued to acquiring banks as a liability of FDIC).

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CONCLUSION

For the foregoing reasons, we conclude that RTC is a “Federal agency” 

authorized to issue “obligations,” within the meaning of the FFB Act. Accordingly, section 6 of the FFB Act authorizes RTC “to issue or sell such 

obligations directly to the Bank,” and further authorizes the Bank, in turn, to 

purchase such obligations. 12 U.S.C. § 2285. RTC is therefore authorized 

to issue directly to the Bank those promissory notes it would otherwise have 

issued to depository institutions or other companies in the course of resolving cases.

J. MICHAEL LUTTIG 

Principal Deputy

Assistant Attorney General

Office of Legal Counsel

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