The Waterbury Democrat., 1933-11-25
H.O.L. Bonds Receive
 Priority Cummings
Attorney General Holds Government Must Wait Until
 Holders Are Paid Before U. s. Get Payments

In the opinion of Attorney Gen. eral Homer S. Cummings the Unit ed States Is not entitled to prefer ence oyer holders of the Home Owners Loan corporation bonds in the matter of payment. A copy of Attorney General Cummings, com plete opinion which was submitted to President Roosevelt upon re- quest of the chairman of the Fed eral Home Loan bank board was recently received by Attorney John H. Burns, manager of the local Home Loan office.
 Congress voted to advance $20O,- 00O,00 to the Home Loan corpora ton to be used for the payment of interest on the bonds. The question then arose whether the government would be paid back first on the money advanced, or whether the holders of the bonds would be paid at the bonds maturity. Because there is considerable interest in the Home Owners bonds in this city, and because this city leads other state cities in the number of loans advanced, it was thought 1t would be a good plan to print the entire opinion of Attorney General Cum mings, as follows:
 "The President,
 The White House.
 Sir: have the honor to reply to your request for my opinion upon the following question submitted by the chairman of the Federal Home Loan bank board in his let ter to you of october 19, 1893:
 If the United States pays interest on the bonds of Home Owners Loan corporation under itsh guar anty of such interest, will the United States be entitled to a prefE erence for sums so paid over the holders of bonds of the corpora- tfon, or will it be on a parity with the bondholders, or will it's claim be inferior to that of the bond holders?
 Section 4 (a) of the Home own- CTS Loan act of 1888, GA, 48 stat 12S. 129, provides:
 The board is hereby authorized and directed to create corpora ton, which shall be an instrument tality of the United States,
 Section Co provides that all capital stock of the corporation shall be subscribed and paid for by the secretary of the treasury on be- half of the United States.
 With these provisions of the statute in view 1t will be convenient to consider separately the questions submitted. So far as the question of priority is concerned, I have no doubt that the United States will not be entitled to a preference over the holders of bonds of the Home owners Loan corporation on ac- count of interest advanced under it's guarantee. This conclusion is re- quired because the guarantee of the United States would be almost wholly illusory if the payments gavs the United States a claim against the assets of the corpora tioIl which must be satisfied before the bondholders could be paid. It is of course obvious on the face of the legislation that the purpose of congress was to increase the mar ketability of the bonds and not to impair them; and this result would plainly not be reached if the United States was to receive prior payment on account of advances of interest. The statute provides that the interest on the bonds is fully and internationally guaranteed" by ShC OIistCu oldICSs A pdyIIlcHI interest made subject to the condi- ton that it was to be repaid before the bondholders received anything on their principal would certainly not be a full and unconditional payment within the meaning of the statute.
 Whatever right the United States may have to priority does not de- pend upon sovereign prerogative but exists only when express pro- vision is made for it by statute. United States vs Bank of North Carolina, Peters 29,' 35; Price vs United States, 269 U. S. 492, 499- 500. The only statute providing for priority of payment to the United States of debts (other than taxes) is the general provision conjtained in section 3466 of the revised statutes GU. s. c. title 31, sec 191). But this statute. wholly general in its terms, Is not in my opinion ap- plicable to the claim of the United Staets against the Home Owners Loan corporation for advances of interest. since, as has already been observed, the effect of such appli- cation Is wholly inconsistent with the obvious purpose of the act.
 There remains the question whether the United States would be entitled to be repaid for ad- vances of interest to the corpora ton on a parity with the bondhold- CTS. While this question Is not free from doubt, am constrained to believe that 1t was never in the contemplation of congress, when 1t provided that the government fspIl av v1I guarantee the interest on the bonds that the United States would be en. titled to share in the assets of the corporation for the repayment of such advances before the bond holders had been paid in full.
 s, The question depends almost en- tirely on the meaning which is to be attributed to the sentence in sec- tion 4 Co of the statute, which provides that:
 Upon the payment of such inter- est by the secretary of the treasury the amount so paid shall become an obligation to the United States of the corporation and shall bear interest at the same rate as that borne by the bonds upon which the interest has ben so paid.
 A construction of the statute which would render these words meaningless should, of course, be avoided. The sentence might be given effect as providing that the obligation of the corporation to the United States shall be on a parity with the claims of bondholders and of other creditors of the corpora ton. It may, however, also be given effect as providing that the claim of the United States shall be sub- ordinate to the claim of the bond holders but on a parity with the claims of other creditors of the corporation. There is, therefore, an ambiguity in the statute which must be resolved.
 An examination of the statute as a whole, including a consideration of its obvious purpose and other relevant material. leads me to the conclusion that the second of these possible constructions is the correct one. The statute is an emergency