b'Transactions Between the Federal Financing Bank and the\nDepartment of the Treasury\nT h is o p inion rev iew s a possible Federal F inancing B ank sale o f loan assets to the Civil S ervice R etire\xc2\xad\nm en t and D isab ility F u n d and other possible related transactions betw een the FFB an d the D epart\xc2\xad\nm en t o f the T reasu ry , an d concludes th a t the contem plated transactions w ould be perm issible under\nex istin g law .\n\nFebruary 13, 1996\nM e m o r a n d u m O p in io n f o r t h e G e n e r a l C o u n s e l\nDepa r tm en t o f th e T rea su ry\n\nThis memorandum responds to your request for advice concerning the legal\nissues raised by a possible Federal Financing Bank (\xe2\x80\x9c FFB\xe2\x80\x9d or \xe2\x80\x9c Bank\xe2\x80\x9d ) sale\nof loan assets to the Civil Service Retirement and Disability Fund (\xe2\x80\x9c CSRDF\xe2\x80\x9d\nor \xe2\x80\x9c Fund\xe2\x80\x9d ) and other related transactions between the FFB and the Department\nof the Treasury (\xe2\x80\x9c Treasury\xe2\x80\x9d ). The FFB loan assets would be sold to the CSRDF\nin exchange for a portion of the United States debt obligations (\xe2\x80\x9c public debt obli\xc2\xad\ngations\xe2\x80\x9d ) Treasury has previously issued to the CSRDF pursuant to 5 U.S.C.\n\xc2\xa7 8348 and chapter 31 of title 31, United States Code.\nYou have requested specific advice as to:\n(1) the FFB\xe2\x80\x99s authority to sell to the Fund loan assets evidencing\nindebtedness incurred by the United States Postal Service\n(\xe2\x80\x9c USPS\xe2\x80\x9d ) and Tennessee Valley Authority (\xe2\x80\x9c TVA\xe2\x80\x9d );\n(2) the Treasury Secretary\xe2\x80\x99s (\xe2\x80\x9c Secretary\xe2\x80\x9d ) authority to invest Fund\nmonies in obligations of the USPS and obligations of the TVA;\n(3) the FFB\xe2\x80\x99s authority to accept, in exchange for the USPS and\nTVA indebtedness, payment in the form of public debt obligations;\n(4) whether Treasury may legally enter into a transaction with the\nFFB whereby Treasury would secure the public debt obligations\nfrom the FFB in exchange for the cancellation by Treasury of FFB\nobligations of equivalent value held by Treasury;\n(5) whether the FFB may sell the public debt obligations to Treas\xc2\xad\nury and whether the FFB may accept as payment for the public\ndebt obligations the cancellation by Treasury of FFB obligations\nof equivalent value held by Treasury;\n64\n\n\x0cTransactions Between the Federal Financing Bank and the Department o f the Treasury\n\n(6) the implications of the proposed transfer of public debt obliga\xc2\xad\ntions to Treasury with respect to 31 U.S.C. \xc2\xa73101, the debt limit;\nand\n(7) whether the USPS and TVA obligations the FFB proposes to\nsell to the CSRDF are subject to the debt limit.\nFor the reasons indicated below, we conclude that the transactions you con\xc2\xad\ntemplate would be permissible under existing law. We conclude that the Federal\nFinancing Bank Act of 1973, Pub. L. No. 93-224, 87 Stat. 937 (codified as\namended at 12 U.S.C. \xc2\xa7\xc2\xa72281-2296) (\xe2\x80\x9c FFB Act\xe2\x80\x9d ), empowers the FFB to sell\nobligations that were issued by \xe2\x80\x9c federal agencies,\xe2\x80\x9d including obligations of the\nUSPS and TVA. We also conclude that the Secretary is authorized to invest\nCSRDF monies in the USPS and TVA obligations the FFB intends to sell. In\naddition, we conclude that the FFB has the authority to receive payment for the\nUSPS and TVA obligations in public debt obligations. Moreover, we conclude\nthat Treasury has the authority to enter into a transaction with the FFB whereby\nTreasury would acquire the public debt obligations from the FFB in exchange\nfor the cancellation by Treasury of FFB obligations of equivalent value held by\nTreasury. We also conclude that the FFB has the authority to accept the cancella\xc2\xad\ntion of the FFB obligations as payment for the public debt obligations. In addition,\nwe conclude that the transaction between Treasury and the FFB would result in\nTreasury\xe2\x80\x99s acquiring the previously issued public debt obligations, thus freeing\nup debt issuance capacity under the debt limit and permitting the Secretary to\nissue additional public debt obligations to the public in a commensurate amount.\nFinally, we conclude that the USPS and TVA obligations the FFB proposes to\nsell to the CSRDF in exchange for the previously issued public debt obligations\nare not subject to the debt limit.\nI. Background\nCongress established the FFB in 1973 to \xe2\x80\x9c assure coordination of [federal and\nfederally assisted borrowing] programs with the overall economic and fiscal poli\xc2\xad\ncies of the Government, to reduce the costs of Federal and federally assisted bor\xc2\xad\nrowings from the public, and to assure that such borrowings are financed in a\nmanner least disruptive of private financial markets and institutions.\xe2\x80\x9d 12 U.S.C.\n\xc2\xa72281. In order to further these purposes, the FFB is authorized to purchase the\nobligations of federal agencies. Id. \xc2\xa7 2285(a).1 As part of its regular financing\nactivities, the FFB acquired as loan assets certain obligations of the USPS and\nTVA. Under the proposed transactions, the FFB would sell those loan assets to\n\'T h e FFB Act also provides that \xe2\x80\x9c [a]ny [f]ederaJ agency which is authorized to issue, sell, or guarantee any\nobligation is authorized to issue or sell such obligations directly to the B ank." Id.\n\n65\n\n\x0cOpinions of the Office o f Legal Counsel in Volume 20\n\nthe CSRDF in exchange for public debt obligations of equivalent value that are\ncurrently being held by that government-managed trust fund. Treasury would then\nenter into a transaction with the FFB whereby Treasury would purchase the public\ndebt obligations received by the FFB in exchange for the cancellation by Treasury\nof FFB obligations of equivalent value held by Treasury. This series of trans\xc2\xad\nactions would result in Treasury\xe2\x80\x99s acquiring the public debt obligations that had\nbeen previously held by the CSRDF and the CSRDF\xe2\x80\x99s holding the USPS and\nTVA obligations that had been previously held by the FFB.\nYour office believes that such a series of transactions would create debt issuance\ncapacity under the debt limit in an amount equal to the public debt obligations\nthat would be transferred to Treasury from the CSRDF. In addition, your office\nbelieves it has sufficient legal authority to undertake all the transactions described\nabove. Moreover, your office holds the view that the USPS and TVA obligations\nthat would be used to replace the public debt obligations previously held by the\nCSRDF would not count against the debt limit.\nII. Legal Discussion\nA. The FFB has the authority to sell the USPS and TVA obligations it holds\nas loan assets.\nWe believe the FFB has the authority to sell the USPS and TVA obligations\nit currently holds as loan assets. Section 6 of the FFB Act authorizes the FFB\nto \xe2\x80\x9c make commitments to purchase and sell, and to purchase and sell on terms\nand conditions determined by the Bank, any obligation which is issued, sold, or\nguaranteed by a [f]ederal agency.\xe2\x80\x9d 12 U.S.C. \xc2\xa7 2285(a); see also Consolidated\nAluminum Corp. v. TVA , 462 F. Supp. 464, 469 (M.D. Tenn. 1978) (\xe2\x80\x9c The Federal\nFinancing Bank may resell in the public markets any bonds of federal agencies\nwhich it holds.\xe2\x80\x9d ).\nThe USPS and TVA obligations the FFB contemplates selling to the CSRDF\nare \xe2\x80\x9c obligations\xe2\x80\x9d as that term is defined in the FFB Act. The FFB Act defines\n\xe2\x80\x9c obligation\xe2\x80\x9d as \xe2\x80\x9c any note, bond, debenture, or other evidence of indebtedness.\xe2\x80\x9d\n12 U.S.C. \xc2\xa72282(2). According to your office, the USPS obligations the FFB\nintends to sell are indebtedness in the form of notes issued by the USPS under\n39 U.S.C. \xc2\xa72005. Your office has also informed us that the TVA obligations\nthe FFB intends to sell are indebtedness in the form of bonds issued by the TVA\nunder 16 U.S.C. \xc2\xa7831n-4. Accordingly, the USPS and TVA obligations the FFB\ncontemplates selling qualify as \xe2\x80\x9c obligations\xe2\x80\x9d within the terms of the FFB Act.\nBoth the USPS and the TVA satisfy the FFB A ct\xe2\x80\x99s defmition of \xe2\x80\x9c [f]ederal\nagency.\xe2\x80\x9d The FFB Act defines the term \xe2\x80\x9c federal agency\xe2\x80\x9d as \xe2\x80\x9c an executive de\xc2\xad\npartment, an independent [f]ederal establishment, or a corporation or other entity\nestablished by the Congress which is owned in whole or in part by the United\n66\n\n\x0cTransactions Between the Federal Financing Bank and the Department o f the Treasury\n\nStates.\xe2\x80\x9d 12 U.S.C. \xc2\xa72282(1). Section 201 of title 39, United States Code, the\nstatutory provision establishing the USPS, provides that the USPS is \xe2\x80\x9c an inde\xc2\xad\npendent establishment of the executive branch of the Government of the United\nStates.\xe2\x80\x9d The TVA, for its part, was created by Congress as a \xe2\x80\x9c body corporate,\xe2\x80\x9d\n16 U.S.C. \xc2\xa7831, and its board of directors is \xe2\x80\x9c appointed by the President, by\nand with the advice and consent of the Senate.\xe2\x80\x9d Id. \xc2\xa7831a. The TVA has also\nbeen described by federal courts as \xe2\x80\x9c an agency of the Federal Government,\xe2\x80\x9d\nAshwander v. TVA, 297 U.S. 288, 315 (1936), \xe2\x80\x9c an instrumentality of the United\nStates,\xe2\x80\x9d Tennessee Elec. Pow er Co. v. TVA, 306 U.S. 118, 134 (1939) and \xe2\x80\x9c a\nwholly owned corporate agency and instrumentality of the United States.\xe2\x80\x9d United\nStates ex rel. TVA v. An Easement And Right-Of-Way, 246 F. Supp. 263, 269\n(W.D. Ky. 1965), a ffd , 375 F.2d 120 (6th Cir. 1967).2 In sum, since the loan\nassets the FFB contemplates selling are \xe2\x80\x9c obligations\xe2\x80\x9d that were \xe2\x80\x9c issued\xe2\x80\x9d by enti\xc2\xad\nties that qualify as \xe2\x80\x9c federal agencies\xe2\x80\x9d under the FFB Act, the FFB has the author\xc2\xad\nity to sell them.\nB. The loan assets the FFB contemplates selling to the CSRDF are suitable\ninvestments for that government-managed trust fund.\nThe legality of the proposed transactions will also depend on whether the USPS\nand TVA obligations the FFB intends to sell are suitable investments for the\nCSRDF. We conclude that they are. The statutes authorizing the USPS and TVA\nobligations in question both provide that obligations issued thereunder \xe2\x80\x9c shall\xe2\x80\x9d :\nbe lawful investments and may be accepted as security for all fidu\xc2\xad\nciary, trust, and public funds, the investment or deposit of which\nshall be under the authority or control of any officer or agency\nof the [United States].\n39 U.S.C. \xc2\xa72005(d)(3) (emphasis added); 16 U.S.C. \xc2\xa7831n-4(d) (emphasis\nadded). Congress incorporated this boilerplate trust fund investment eligibility lan\xc2\xad\nguage3 in the statute authorizing the USPS to issue the obligations the FFB in\xc2\xad\ntends to sell in the Postal Reorganization Act, Pub. L. No. 91-375, sec. 2,\n\xc2\xa7 2005(d)(3), 84 Stat. 719, 740 (1970), several years after the initial enactment\nof the CSRDF\xe2\x80\x99s statutory investment provisions, which occurred in 1926. See Act\n2This Office has previously opined that \xe2\x80\x9c [sjeveral government corporations, such as the Tennessee Valley Author\xc2\xad\nity . . . were intended to be \xe2\x80\x98[f]ederai agencies\xe2\x80\x99 within the scope o f [section 2282\xe2\x80\x99s] corporation coverage clause.\xe2\x80\x9d\nAuthority o f the Federal Financing Bank to Provide Loans to the Resolution Trust Corporation, 14 Op. O.L.C.\n20, 22(1990).\n3 Congress has included this or similar language in several other statutes authorizing federal or congressionally\ncreated entities to borrow. See, e.g., 12 U.S.C. \xc2\xa71435 (obligations issued by the Federal Home Loan Banks); 15\nU.S.C. \xc2\xa7 7 13 a-4 (bonds, notes, o r debentures issued by the Commodity Credit Corporation); 12 U.S.C. \xc2\xa7 1723c (obli\xc2\xad\ngations of the Federal National Mortgage Association); 12 U.S.C. \xc2\xa7 2288(d) (obligations issued by the FFB).\n\n67\n\n\x0cOpinions o f the O ffice o f Legal Counsel m Volume 20\n\nof July 3, 1926, ch. 801, \xc2\xa711, 44 Stat. 904, 910-11.4 The language was similarly\nincluded in the statute authorizing the TVA obligations the FFB intends to sell\nwhen that statute was enacted into law in 1959. See Act of Aug. 6, 1959, Pub.\nL. No. 86-137, sec. 1, \xc2\xa715d(d), 73 Stat. 280, 283. Although the CSRDF statute\ncontains investment provisions delineating the types of obligations the Secretary\nis authorized to purchase on behalf of the CSRDF, these provisions essentially\nmirror boilerplate provisions contained in statutes governing the investments of\nother government-managed trust funds.5 Moreover, although the CSRDF statute\xe2\x80\x99s\ninvestment provisions have been amended from time to time since they were ini\xc2\xad\ntially enacted,6 our review of the amendments reveals no expressed intention on\nthe part of Congress to exempt the CSRDF from the effect of trust fund investment\neligibility provisions such as those included in the relevant USPS and TVA stat\xc2\xad\nutes. Accordingly, we conclude that CSRDF monies may be invested in the USPS\nand TVA obligations the FFB intends to sell in addition to the obligations specifi\xc2\xad\ncally delineated in 5 U.S.C. \xc2\xa78348.7\n4 Section 11, which appears to have been th e first provision specifically delineating the types of obligations in\nwhich C SR D F m onies could be invested, provided in relevant part:\nThe Secretary o f the Treasury shall invest from time to time, in interest-bearing securities of the United\nStates o r Federal farm-loan bonds, such portions o f the \xe2\x80\x9c civil-service retirement and disability fund\xe2\x80\x9d as\nin his judgm ent may not be immediately required for the payment o f annuities, refunds, and allowances\nas herein provided.\n44 Stat. at 910-11.\n5 The C SR D F statute states:\nThe Secretary shall immediately invest in interest-beanng securities o f the United States such currently\navailable portions o f the Fund as are not immediately required for payments from the Fund. The income\nderived from these investments constitutes a part o f the Fund.\n5 U.S.C. \xc2\xa7 8348(c). The statute further provides that the Secretary may invest CSRDF monies in public debt obliga\xc2\xad\ntions which carry interest rates determined by the Secretary based on a formula set forth in the statute. See id.\n\xc2\xa7 8348(d). In addition, the C SR D F statute authorizes the Secretary to \xe2\x80\x9c purchase other interest-bearing obligations\nof the U nited States, or obligations guaranteed as to both principal and interest by the United States, on original\nissue or at the market price only if he determines that the purchases are in the public interest.\xe2\x80\x9d Id. \xc2\xa7 8348(e). Lan\xc2\xad\nguage authorizing such investments is commonly found in the statutes setting forth investment criteria for govern\xc2\xad\nment-m anaged trust funds. See, e.g., 42 U.S.C. \xc2\xa7 401(d) (Social Security Trust Funds); 42 U.S.C. \xc2\xa7 1104(b) (Unem\xc2\xad\nployment Trust Fund); 20 U.S.C. \xc2\xa7 2009(b) (H arry S. Truman Memorial Scholarship Trust Fund); 20 U.S.C. \xc2\xa7 5202(b)\n(Eisenhow er Exchange Fellowship Program T rust Fund).\n6 The m ost notable changes in the CSRDF statu te\xe2\x80\x99s investment provisions occurred in 1956, when Congress first\nexpressly authorized the Secretary to purchase on behalf o f the CSRDF public debt obligations that carry interest\nrates determ ined by the Secretary based on a statutory formula, see Civil Service Retirement Act Amendments of\n1956, ch. 804, sec. 401, \xc2\xa7 17(d), 70 Stat. 736, 7 5 9 -6 0 , and in 1961, when Congress required the Secretary to invest\nFund monies in such public debt obligations unless he determines that it is in the public interest to invest the monies\nin other interest-bearing obligations of the U nited States. See Act o f Oct. 4, 1961, Pub. L. No. 87-350, sec. 1(a),\n\xc2\xa7 17(d), 75 Stat. 770, 770. The current wording o f the C SR D F statute\xe2\x80\x99s investment provisions is essentially the\nsame as it w as in 1961. See 5 U.S.C. \xc2\xa78348(c)-(e).\n7 The C SR D F statute\'s investment provisions do not prohibit the investment of CSRDF monies in the relevant\nUSPS and TVA obligations. G eneral rules o f statutory construction dictate that, if possible, statutes on the same\nsubject m atter should be construed in harmony with one another. See 2B Norman J. Singer, Sutherland Statutory\nConstruction \xc2\xa751.02, at 122 (5th ed. 1992); see also Watt v. Alaska, 451 U.S. 259, 267 (1981). If that cannot\nbe accomplished, \xe2\x80\x9c [i]t is an elementary tenet o f statutory construction that \xe2\x80\x98[w]here there is no clear intention other\xc2\xad\nwise, a specific statute will not be controlled o r nullified by a general o n e / \xe2\x80\x9d Guidry v. Sheet Metal Workers Nat\xe2\x80\x99I\nPension Fund , 493 U.S. 365, 375 (1990) (quoting Morton v. Mancari, 417 U.S. 535, 550-51 (1974)). Due to the\nboilerplate nature o f the C SRD F statute\'s investm ent provisions, we believe we are not here confronted with the\ntask o f reconciling a specific statute against a general one, but are, instead, confronted with the task o f reconciling\ntw o general statutes. Moreover, even if we w ere to accept the notion that the CSRDF statute\xe2\x80\x99s investment provisions\nare more specific, principles o f statutory construction require that those provisions be construed in harmony with\n\n68\n\n\x0cTransactions Between the Federal Financing Bank and the Department o f the Treasury\n\nOur conclusion concerning the relationship between the general trust fund in\xc2\xad\nvestment eligibility language contained in the USPS and TVA statutes and the\nCSRDF is consistent with established federal case law, the longstanding practice\nand understanding of the Treasury and Justice Departments, and a 1985 Comp\xc2\xad\ntroller General opinion. In M anchester Band o f Pomo Indians, Inc. v. United\nStates, 363 F. Supp. 1238, 1244\xe2\x80\x9445 (N.D. Cal. 1973), a federal district court deter\xc2\xad\nmined that trust fund investment eligibility language resembling that which is con\xc2\xad\ntained in the USPS and TVA statutes mentioned above made obligations issued\nunder statutes containing that language just as eligible for investment by govern\xc2\xad\nment-managed trust funds benefiting American Indians as investments specifically\nmentioned in the trust fund statutes themselves. The court expressly cited as eligi\xc2\xad\nble for investment by \xe2\x80\x9c all [g]ovemment managed trust funds\xe2\x80\x9d obligations issued\npursuant to 16 U.S.C. \xc2\xa7831n-4, the provision of the United States Code under\nwhich the TVA obligations the FFB intends to sell were issued. M anchester Band,\n363 F. Supp. at 1244. The court also found that its conclusion concerning the\neffect of the relevant trust fund investment eligibility language was \xe2\x80\x9c in accord\nwith the intent of Congress.\xe2\x80\x9d Id. at 1245.\nIn 1966, this Office opined that obligations of the federal land banks and the\nbanks for cooperatives are eligible investments for all government-managed trust\nfunds, where the statutes authorizing the issuance of such obligations contained\nlanguage similar to that contained in the relevant USPS and TVA statutes. See\nMemorandum for Fred B. Smith, General Counsel, Department of the Treasury,\nfrom Frank M. Wozencraft, Assistant Attorney General, Office of Legal Counsel\n(Oct. 7, 1966).8 In concluding that the specific trust fund investment eligibility\nlanguage at issue was sufficient to authorize investment by all government-man\xc2\xad\naged trust funds, this Office stated that statutory language essentially the same\nas that contained in the relevant USPS and TVA statutes \xe2\x80\x9c presents no problems\nof construction and plainly permits investments of the various Government trust\nfunds in the affected securities whether or not the statutes creating the trusts them\xc2\xad\nselves do so.\xe2\x80\x9d Id. at 2 .9 Similarly, in a 1934 opinion, Attorney General Homer\nCummings advised that, even though the specific trust fund statute at issue did\nnot expressly authorize it, government-managed postal savings funds could be in\xc2\xad\nthe trust fund investment eligibility language contained in the relevant USPS and TVA statutes. Because the CSRDF\nstatute\xe2\x80\x99s investment provisions do not purport to supersede other statutes establishing that obligations issued thereunder are eligible investments for government-managed trust funds and the relevant USPS and TVA statutes dem\xc2\xad\nonstrate Congress\xe2\x80\x99s intention that obligations issued thereunder be eligible investm ent for all government-managed\ntrust funds, the better interpretation is that the relevant USPS and TVA statutes have the effect of expanding the\nuniverse o f authorized CSRDF investments.\n8 The pertinent trust fund investment eligibility language pertaining to obligations o f the federal land banks and\nthe banks for cooperatives provided that obligations issued by those entities " \'s h a ll be a lawful investment for\nall fiduciary and trust funds, and may be accepted as security for al! public deposits.\xe2\x80\x99 \xe2\x80\x9d Id. at 1 (quoting section\n27 o f the Federal Farm Loan Act, ch. 245, 39 Stat. 360, 380 (1916), and section 1 of the Act o f August 23, 1954,\nch. 834, 68 Stat. 770, 771).\n9 The statutes to which this Office referred provided that the obligations issued thereunder \xe2\x80\x9c shall be lawful invest\xc2\xad\nments, and may be accepted as security, for all fiduciary, trust, and public funds the investment or deposit o f which\nshall be under the authority or control o f the United States or any officer or officers thereof.\xe2\x80\x9d Id. at 2 & n.3.\n\n69\n\n\x0cOpinions o f the Office o f Legal Counsel in Volume 20\n\nvested in bonds issued under the Federal Farm Mortgage Corporation Act on ac\xc2\xad\ncount of trust fund investment eligibility language contained in that act which\nwas similar to that contained in the relevant USPS and TVA statutes. Investment\no f P o sta l Savings Funds in B onds o f F ederal Farm M ortgage Corporation, 37\nOp. Att\xe2\x80\x99y Gen. 479, 480 (1934).10\nIt has been Treasury\xe2\x80\x99s longstanding practice to invest monies contained in govemment-managed trust funds, including the CSRDF, in public debt obligations\nor other obligations that have been authorized by Congress as legal investments\nfor all government-managed trust funds. See Temporary Increase in D ebt Ceiling:\nH earings Before the House Comm, on W ays and M eans, 90th Cong. 52 (1967)\n(statement of Hon. Henry H. Fowler, Secretary of the Treasury) (\xe2\x80\x9c 1967 Hear\xc2\xad\nings\xe2\x80\x9d ). 11\nDuring the 1985 debt limit crisis, Secretary of the Treasury James Baker in\xc2\xad\nvested CSRDF monies in obligations issued by the FFB pursuant to 12 U.S.C.\n\xc2\xa7 2288(a), which are not public debt obligations. That action was the subject of\na congressional hearing at which a Comptroller General opinion was presented.\nSee F ederal Financing Bank and the D eb t Ceiling: Hearing Before the Subcomm.\non Econom ic Stabilization of the House Comm, on Banking, Finance and Urban\nAffairs, 99th Cong. 28-34 (1985) (\xe2\x80\x9c Federal Financing Bank and the D ebt Ceil\xc2\xad\nin g\xe2\x80\x9d ). In concluding that the investment and related transactions met all applicable\n\nlegal requirements, the Comptroller General opinion stated that \xe2\x80\x9c 12 U.S.C.\n\xc2\xa7 2288(d) provides that the [FFB\xe2\x80\x99s] obligations \xe2\x80\x98shall be lawful investments, and\nmay be accepted as security for all fiduciary, trust, and public funds, the invest\xc2\xad\nment of which shall be under the authority or control of the United States.\xe2\x80\x99 \xe2\x80\x9d\nMemorandum for the Honorable John J. LaFalce, Chairman, Subcommittee on\nEconomic Stabilization, House Committee on Banking, Finance and Urban Af\xc2\xad\nfairs, from Milton J. Socolar, Comptroller General of the United States, B-138524,\nat 2 (Comp. Gen. 1985) (\xe2\x80\x9c Comp. Gen. Op.\xe2\x80\x9d ), reprinted in Federal Financing\nBank an d the D ebt Ceiling at 32.\nC. The FFB is authorized to receive payment for the loan assets it intends\nto seU to the CSRDF in public debt obligations.\nIn analyzing the proposed transactions, we must also consider whether it is per\xc2\xad\nmissible for the FFB to receive payment in the form of public debt obligations\n10The pertinent tnist fund investment eligibility language provided as follows: \xe2\x80\x9c \xe2\x80\x98Such bonds . . . may be accepted\nas security, for all fiduciary, trust, and public funds the investment or deposit o f which shall be under the authority\no r control o f the U nited States o r any officer o r officers thereof.\xe2\x80\x99 \xe2\x80\x9d Id. (quoting Federal Farm Mortgage Corporation\nA ct, ch. 7, \xc2\xa7 4(a), 48 Stat. 344, 345 (1934)).\n11 In testim ony before the House Ways and M eans Committee, Secretary Fow ler stated that, in practice. Treasury\nhad refrained from investing monies contained in government-managed trust funds in participation certificates issued\nby the Export-Im port Bank because, unlike the statute authorizing the issuance o f Federal National Mortgage Associa\xc2\xad\ntion participation certificates, the statute authorizing the issuance o f Export-Import Bank participation certificates\ndid not contain a provision making them generally eligible for investment by government-managed tnist funds. Id.-,\nsee also id. at 179-80.\n\n70\n\n\x0cTransactions Between the Federal Financing Bank and the Department o f the Treasury\n\nfor the USPS and TVA obligations it intends to sell. We conclude that the FFB\nis authorized to accept public debt obligations as a form of payment. As stated\nabove, the FFB Act authorizes the FFB to sell obligations issued by federal agen\xc2\xad\ncies \xe2\x80\x9c on terms and conditions determined by the Bank.\xe2\x80\x9d 12 U.S.C. \xc2\xa72285(a).\nWe believe this broadly worded statutory authority allows the FFB reasonably\nto negotiate and determine the form of compensation to be received upon such\na sale.12 Accordingly, no significant legal issues appear to be raised by the FFB\xe2\x80\x99s\nplan to receive public debt obligations in exchange for the USPS and TVA obliga\xc2\xad\ntions it intends to sell to the CSRDF.\nIn his 1985 opinion, the Comptroller General apparently concluded that no sig\xc2\xad\nnificant legal issues were raised by the FFB\xe2\x80\x99s acceptance of public debt obliga\xc2\xad\ntions in exchange for the sale of its own obligations to the CSRDF. See Comp.\nGen. Op. at 2, reprinted in Federal Financing Bank and the D ebt Ceiling at 32.\nIn view of the fact that we have found nothing in the FFB Act prohibiting the\nFFB\xe2\x80\x99s acceptance of public debt obligations in exchange for the loan assets it\nintends to sell, and in light of the Comptroller General\xe2\x80\x99s apparent view in 1985\nthat such activity did not raise legal issues, we see no reason why, under current\nconditions, the FFB should not be able to accept public debt obligations as com\xc2\xad\npensation for the USPS and TVA obligations it intends to sell.\nD. Treasury has the authority to enter into a transaction with the FFB\nwhereby Treasury would purchase the public debt obligations received by\nthe FFB in exchange for the cancellation by Treasury of FFB obligations of\nequivalent value held by Treasury.\nWe must also consider whether Treasury has the authority to enter into a trans\xc2\xad\naction with the FFB whereby Treasury would purchase the public debt obligations\nreceived by the FFB in exchange for the cancellation by Treasury of FFB obliga\xc2\xad\ntions of equivalent value held by Treasury. We conclude that Treasury has the\nauthority to enter into such a transaction.\nTreasury has the authority to redeem or purchase public debt obligations prior\nto maturity. Section 3111 of title 31, United States Code, states in pertinent part:\nAn obligation may be issued under this chapter to buy, redeem,\nor refund, at or before maturity, outstanding bonds, notes, certifi\xc2\xad\ncates of indebtedness, Treasury bills, or savings certificates of the\nUnited States Government. Under regulations of the Secretary of\nthe Treasury, money received from the sale of an obligation and\n12\n\nAs noted above, the FFB Act also grants the FFB the authority to purchase obligations issued by federal agencies.\n\nSee 12 U.S.C. \xc2\xa72285(a). Since the public debt obligations the FFB intends to receive in exchange for the USPS\nand TVA obligations were issued by Treasury, a \xe2\x80\x9c federal agency\xe2\x80\x99* under the FFB Act, it would appear that the\nFFB has the authority to purchase them from the CSRDF.\n\n71\n\n\x0cOpinions of the O ffice o f Legal Counsel in Volume 20\n\nother money in the general fund of the Treasury may be used in\nmaking the purchases, redemptions, or refunds.\n31 U.S.C. \xc2\xa73111.\nTreasury issued the public debt obligations currently being held by the CSRDF\npursuant to 5 U.S.C. \xc2\xa78348 and chapter 31 of title 31, United States Code. See\n5 U.S.C. \xc2\xa7 8348(d) (\xe2\x80\x9c The purposes for which obligations of the United States\nmay be issued under chapter 31 of title 31 are extended to authorize the issuance\nat par of public-debt obligations for purchase by the Fund.\xe2\x80\x9d ). All forms of public\ndebt obligations covered by 31 U.S.C. \xc2\xa73111 are authorized to be issued under\nchapter 31 of title 31, United States Code. See 31 U.S.C. \xc2\xa7\xc2\xa73102-3105. Accord\xc2\xad\ningly, although the CSRDF statute imposes greater limits on the Secretary\xe2\x80\x99s discre\xc2\xad\ntion to fashion terms and conditions of public debt obligations issued to the\nCSRDF than the statute setting forth the procedures for issuing public debt obliga\xc2\xad\ntions in general, com pare 5 U.S.C. \xc2\xa7 8348(d) with 31 U.S.C. \xc2\xa73121, the public\ndebt obligations currently being held by the CSRDF are no less subject to the\nterms of \xc2\xa7 3111 than public debt obligations held by the general public. Whether\na public debt obligation held by the CSRDF is a \xe2\x80\x9c bond,\xe2\x80\x9d \xe2\x80\x9c note,\xe2\x80\x9d or \xe2\x80\x9c certificate\nof indebtedness\xe2\x80\x9d for purposes of \xc2\xa73111 depends, therefore, on the instrument\xe2\x80\x99s\nterm of maturity, which was determined upon its issuance, and not on its status\nas an investment of a government-managed trust fund. Cf. 31 U.S.C. \xc2\xa7 3102(a)\n(specifying that bonds authorized to be issued under that section may be issued\neither \xe2\x80\x9c to the public\xe2\x80\x9d or \xe2\x80\x9c to Government accounts.\xe2\x80\x9d ). Your office has informed\nus that, based on this analysis, the public debt obligations the FFB plans to acquire\nfrom the CSRDF are all covered by the provisions of 31 U.S.C. \xc2\xa73111.\nAs fashioned, \xc2\xa73111 does not expressly authorize Treasury to finance the re\xc2\xad\ndemption prior to maturity of previously issued public debt obligations with all\npossible instruments of value under its control. However, it is reasonable to inter\xc2\xad\npret \xc2\xa73111 as not imposing strict limitations on the manner in which Treasury\nmay redeem public debt obligations, but rather as merely providing express author\xc2\xad\nity for the use by Treasury of two methods for raising the funds needed to effect\nsuch redemptions. A contrary interpretation of \xc2\xa73111 would produce the illogical\nresult of barring Treasury from using other means at its disposal that, depending\non the circumstances, might be less costly to the government or more fiscally\nand financially prudent than the methods expressly contemplated under the statute.\nAccordingly, we conclude that \xc2\xa7 3111 impliedly grants Treasury the authority to\nuse the FFB obligations to finance its purchase of the public debt obligations.\nOur conclusion that Treasury has implied authority under 31 U.S.C. \xc2\xa73111 to\nuse a portion of its FFB obligation holdings to purchase prior to maturity the\npublic debt obligations at issue is bolstered by the statutory authority granted to\nthe Secretary pursuant to 31 U.S.C. \xc2\xa7324 and 12 U.S.C. \xc2\xa7 2288(b). Section 324\nof title 31, United States Code, provides in relevant part:\n72\n\n\x0cTransactions Between the Federal Financing Bank and the Department o f the Treasury\n\n(a) The Secretary of the Treasury may \xe2\x80\x94\n(1) dispose of obligations \xe2\x80\x94\n(A) acquired by the Secretary for the United States Govern\xc2\xad\nment . . . .\n(b) The Secretary may dispose or extend the maturity of obligations\nunder subsection (a) of this section in the way, in amounts, a t prices\n(for cash, obligations, property, or a combination o f cash, obliga\xc2\xad\ntions, o r property), and on conditions the Secretary considers advis\xc2\xad\nable and in the public interest.\n\n31 U.S.C. \xc2\xa7324 (emphasis added). Treasury acquired the FFB obligations it cur\xc2\xad\nrently holds pursuant to 12 U.S.C. \xc2\xa7 2288(b). That statute authorizes the FFB to\n\xe2\x80\x9c issue its obligations to the Secretary\xe2\x80\x9d and authorizes the Secretary to purchase\nany such obligations.13 Accordingly, the FFB obligations currently being held\nby Treasury are \xe2\x80\x9c obligations . . . acquired by the Secretary for the United States\nGovernment,\xe2\x80\x9d as those terms are used in 31 U.S.C. \xc2\xa7324. Subsection (b) of \xc2\xa7324\ngrants the Secretary broad authority to dispose of the FFB obligations he holds.\nWe believe that authority includes the authority to use them as currency in acquir\xc2\xad\ning the public debt obligations.\nIn addition to general authority to dispose of \xe2\x80\x9c obligations . . . acquired by\nthe Secretary for the United States Government\xe2\x80\x9d under \xc2\xa7324, the Secretary has\nspecific authority to dispose of the FFB obligations he holds. Section 2288(b)\nof title 12, United States Code, provides that \xe2\x80\x9c [t]he Secretary . . . may sell, upon\nsuch terms and conditions and a t such price or prices as he shall determine,\n\nany of the obligations acquired by him under this subsection.\xe2\x80\x9d 12 U.S.C.\n\xc2\xa7 2288(b) (emphasis added). This broadly worded authority also provides support\nfor the conclusion that the Secretary may dispose of the FFB obligations he holds\nin a manner that allows him to acquire the public debt obligations, as it appears\nto allow the Secretary reasonably to determine the terms and conditions of such\na disposal.\nWe believe our conclusion that Treasury has the authority to use the FFB obliga\xc2\xad\ntions it currently holds to purchase the public debt obligations it has previously\nissued to the CSRDF is again consistent with the 1985 Comptroller General opin\xc2\xad\nion. In that opinion, the Comptroller General did not question Treasury\xe2\x80\x99s authority,\n13 Ln order to enable the FFB to support its financing activities, the FFB Act provides that, in addition to issuing\nup to $15 billion worth o f its debt obligations to the public, 4"the [FFB] is . . . authorized to issue its obligations\nto the Secretary o f the T rea su ry /\xe2\x80\x99 12 U.S.C. \xc2\xa7 2288(b), see also H.R. Rep. No. 92-1478, at 5 (1972) (\xe2\x80\x9c The Bank\xe2\x80\x99s\nactivities would be financed, in general, by . . . Bank obligations issued to the Secretary o f the Treasury.\xe2\x80\x9d ). The\nsame provision o f the FFB Act that authorizes the FFB to issue its obligations to Treasury also authorizes Treasury\nto purchase and agree to purchase such obligations. 12 U.S.C. \xc2\xa7 2288(b). No express limitation is placed on the\namount of its ow n obligations that the FFB may issue to Treasury. Treasury currently holds approximately $67\nbillion worth o f these obligations.\n\n73\n\n\x0cOpinions o f the O ffice o f Legal Counsel in Volume 20\n\nexercised in a similar manner, to purchase from the FFB prior to maturity the\npublic debt obligations it had previously issued to the CSRDF. See Comp. Gen.\nOp. at 2, reprinted in Federal Financing Bank and the D ebt Ceiling at 32.\nBased on the authorities granted to the Secretary under 31 U.S.C. \xc2\xa7\xc2\xa73111 and\n324, and 12 U.S.C. \xc2\xa7 2288(b), and the conclusions of the 1985 Comptroller Gen\xc2\xad\neral opinion, we conclude that Treasury would have the authority to purchase\nfrom the FFB prior to maturity the public debt obligations it has previously issued\nto the CSRDF pursuant to the transaction described above.\nE. The FFB has the authority to sell the public debt obligations to Treasury\nand to accept the cancellation by Treasury of FFB obligations of equivalent\nvalue as payment for the public debt obligations.\nTreasury\xe2\x80\x99s ability to complete the proposed transactions will also depend on\nwhether the FFB has the authority to sell the public debt obligations and accept\nthe cancellation by Treasury of FFB obligations of equivalent value as payment\nfor the public debt obligations. We conclude that the FFB has such authority.\nAs stated above, section 6 of the FFB Act grants the FFB the authority to sell\nobligations issued by federal agencies. 12 U.S.C. \xc2\xa7 2285(a). The public debt obli\xc2\xad\ngations the FFB intends to sell to Treasury are \xe2\x80\x9c obligations\xe2\x80\x9d within the terms\nof the FFB Act, as they are represented in the form of notes, bonds, debentures,\nor other evidence of indebtedness. Id. \xc2\xa72282(2). The public debt obligations also\nwere issued by the Department o f the Treasury, a \xe2\x80\x9c federal agency\xe2\x80\x9d as that term\nis defined in the FFB Act. See id. \xc2\xa72282(1). In sum, the FFB Act grants the\nFFB the authority to sell the public debt obligations to Treasury. Moreover, as\nstated above, the FFB Act authorizes the FFB to sell obligations issued by federal\nagencies \xe2\x80\x9c on terms and conditions determined by the Bank.\xe2\x80\x9d Id. \xc2\xa7 2285(a). This\nbroadly worded statutory authority allows the FFB reasonably to negotiate and\ndetermine the form of compensation to be received upon such a sale. Accordingly,\nthe FFB may, consistent with this authority, require and accept the cancellation\nof a portion of its own indebtedness held by Treasury as payment for the public\ndebt obligations.14\n\n14 The purchase authority provided to the F F B under section 6 o f the FFB Act also authorizes the FFB to accept\nthe cancellation o f a portion o f its own obligations held by Treasury as payment for the public debt obligations.\nBy accepting the cancellation o f the FFB obligations as payment for the public debt obligations, the FFB would\nbe effectively purchasing such obligations. B ecause the FFB obligations are \xe2\x80\x9c obligations\xe2\x80\x9d that were issued by the\nFFB, a \xe2\x80\x9c federal agency\xe2\x80\x9d under the FFB Act, see 12 U.S.C. \xc2\xa7\xc2\xa72282(1), 2283, the FFB has the authority to purchase\nthem in the m anner discussed above.\n\n74\n\n\x0cTransactions Between the Federal Financing Bank and the Department o f the Treasury\n\nF. Transfer of the relevant public debt obligations to Treasury would reduce\nthe amount of outstanding debt subject to limit by the amount of public debt\nobligations transferred.\nIn our analysis, we must also consider the effect on the debt limit of the pro\xc2\xad\nposed transfer of public debt obligations from the CSRDF to Treasury. We con\xc2\xad\nclude that the transfer of these obligations to Treasury would effectively cancel\nthem, reducing the amount of outstanding debt subject to limit and thus creating\nroom under the debt limit for additional public borrowing. The relevant provision\nof the debt limit statute, 31 U.S.C. \xc2\xa7 3 101(b), provides:\nThe face amount of obligations issued under this chapter and the\nface amount of obligations whose principal and interest are guaran\xc2\xad\nteed by the United States Government (except guaranteed obliga\xc2\xad\ntions held by the Secretary of the Treasury) may not be more than\n$4,900,000,000,000, outstanding at one time, subject to changes pe\xc2\xad\nriodically made in that amount as provided by law through the con\xc2\xad\ngressional budget process described in Rule XLIX of the Rules of\nthe House of Representatives or otherwise.\nQuite simply, if transferred to Treasury, the public debt obligations in question\nwould no longer be \xe2\x80\x9c outstanding\xe2\x80\x9d within the terms of the debt limit statute. Ac\xc2\xad\ncordingly, the amount of outstanding debt subject to limit would be reduced by\nthe amount of such public debt obligations. See The Secretary o f the Treasury\xe2\x80\x99s\nAuthority With Respect to the Civil Service Retirement and D isability Fund, 19\nOp. O.L.C. 286, 291 n.9 (1995); see also Comp. Gen. Op. at 2, reprinted in Fed\xc2\xad\neral Financing Bank and the D ebt Ceiling at 32 (Comptroller General opining\nthat \xe2\x80\x9c when the [FFB] prepaid $5 billion of its debt with Treasury\xe2\x80\x99s own obliga\xc2\xad\ntions, Treasury\xe2\x80\x99s outstanding debt was reduced by $5 billion. Therefore, Treasury\nwas able to borrow an additional $5 billion from the public.\xe2\x80\x9d ). The borrowing\ncapacity freed up by the transaction could be used to support additional Treasury\nborrowing up to the debt limit, if, as we indicate below, the loan assets the FFB\nintends to sell to the CSRDF as a replacement for the public debt obligations\nat issue are not themselves subject to the debt limit.\nG. The USPS and TVA obligations the FFB intends to sell to the CSRDF\nin exchange for the transferred public debt obligations are not themselves\nsubject to the debt limit.\nIn order to ensure that the series of transactions contemplated by Treasury would\nallow it legally to issue additional public debt obligations to the public in an\namount less than or equal to the amount of public debt obligations secured from\n75\n\n\x0cOpinions o f the O ffice o f Legal Counsel in Volume 20\n\nthe CSRDF through the FFB\xe2\x80\x99s sale of the loan assets, we must consider whether\nthe USPS and TVA obligations that would replace the transferred public debt\nobligations as CSRDF investments are not themselves subject to the debt limit.\nBased on the express terms and the legislative history of the relevant USPS and\nTVA borrowing statutes, we conclude that they are not.\nAs its express terms suggest, the debt limit applies to debt issued directly by\nTreasury pursuant to chapter 31 of title 31 of the United States Code. It also\napplies to direct borrowing by certain other federal agencies and corporations\nwhich is guaranteed as to principal and interest by the United States. See H.R.\nRep. No. 79-246, at 2-3 (1945); S. Rep. No. 79-106, at 2 (1945).15 As indicated\nby his 1985 opinion, the Comptroller General holds the view that the phrase \xe2\x80\x9c obli\xc2\xad\ngations whose principal and interest is guaranteed by the United States Govern\xc2\xad\nment\xe2\x80\x9d applies to the direct obligations of federal issuers other than Treasury if\nthe statutes authorizing such issuers to borrow expressly provide for such guar\xc2\xad\nantee or Congress has indicated its desire to provide the guarantee in the relevant\nlegislative history. See Comp. Gen. Op. at 2-3, reprinted in Federal Financing\nBank and the D e b t Ceiling at 32\xe2\x80\x9433 .\n\nThe USPS and TVA obligations the FFB intends to sell are not subject to the\ndebt limit. Obligations of the USPS and TVA are not issued by Treasury pursuant\nto chapter 31 of title 31 of the United States Code. Therefore, in order for the\nobligations the FFB intends to sell to be subject to the debt limit, they must be\n\xe2\x80\x9c obligations whose principal and interest are guaranteed by the United States\nGovernment.\xe2\x80\x9d The statute authorizing the issuance of USPS obligations provides\nthat such obligations shall \xe2\x80\x9c not be obligations of, nor shall payment of the prin\xc2\xad\ncipal thereof or interest thereon be guaranteed by, the Government of the United\nStates, except as provided in section 2006(c) of this title.\xe2\x80\x9d 39 U.S.C. \xc2\xa7 2005(d)(5).\nSection 2006(c) provides, in turn, that obligations issued by the USPS shall be\nguaranteed as to principal and interest by the United States,\ni f and to the extent that\xe2\x80\x94\n\n(1) the [USPS] requests the Secretary . . . to pledge the full faith\nand credit of the Government of the United States for the payment\nof principal and interest thereon; and\n15\nSee also Second Liberty Bond Aci, as Amended\xe2\x80\x94Participation Certificates Issued by Federal National Mortgage\nAssociation, 42 Op. A tt\xe2\x80\x99y Gen. 341, 342 (1967) (\xe2\x80\x9c [B]y the act o f April 3, 1945, c. 51, 59 Stat. 47, Congress\n\nbrought the borrowings o f certain agencies o th e r than the Treasury within the overall debt limitation. . . . The\n[relevant] Com m ittee reports . . . reveal that [the 1945 debt limit] amendment was adopted to embrace the bor\xc2\xad\nrowings o f each o f eight agencies, named in the reports, whose governing statutes provided that their obligations\nwere fully and unconditionally guaranteed as to principal and interest by the United States. . . . From this brief\nhistory, it is clear that [the debt limit] is concerned with debt that arises from borrowing, and with nothing else.\xe2\x80\x9d );\n1967 Hearings at 40 (Secretary o f the Treasury Henry H. Fowler testifying that \xe2\x80\x9c the history of [the 1945 act amending\nthe statutory debt limit], which first brought so-called guaranteed obligations w ithin the statutory debt limit, confirmed\nthat Congress had in mind only certain obligations of certain agencies. The com m ittee report named each Government\nagency then being affected. And there were cited the respective statutes authorizing the issuance o f the so-called\nobligations.\xe2\x80\x9d ).\n\n76\n\n\x0cTransactions Between the Federal Financing Bank and the Department o f the Treasury\n\n(2) the Secretary, in his discretion, determines that it would be in\nthe public interest to do so.\nId. \xc2\xa7 2006(c) (emphasis added).\n\nThe legislative history of the statutory provisions discussed above provides:\nObligations sold to the public would not be guaranteed by the\nUnited States and would not be within the debt ceiling unless the\nPostal Service requests the Secretary of the Treasury to pledge the\nfull faith and credit of the United States and the Secretary deter\xc2\xad\nmines that it would be in the public interest to do so.\nH.R. Rep. No. 91-1104, at 10 (1970), reprinted in 1970 U.S.C.C.A.N. 3649, 3659.\nYour office has informed us that the USPS obligations the FFB contemplates sell\xc2\xad\ning were not issued under the special conditions set forth in \xc2\xa7 2006(c), but were,\ninstead, issued pursuant to \xc2\xa72005. Based on this representation, we conclude that\nsuch obligations are not subject to the debt limit.\nSimilarly, the statutory provision authorizing the issuance of the TVA obliga\xc2\xad\ntions the FFB intends to sell to the CSRDF, 16 U.S.C. \xc2\xa7831n-4,16 provides that\nobligations issued thereunder \xe2\x80\x9c shall not be obligations of, nor shall payment of\nthe principal thereof or interest thereon be guaranteed by, the United States.\xe2\x80\x9d\n16 U.S.C. \xc2\xa7831n-4(b). Accordingly, the TVA obligations the FFB intends to sell\nto the CSRDF are also not subject to the debt limit.\nRICHARD L. SHIFFRIN\nDeputy Assistant A ttorney General\nOffice o f Legal Counsel\n\n16Section 831n\xe2\x80\x944{a) o f title 16 currently authorizes the TVA to issue up to $30 billion in debt obligations \xe2\x80\x9c to\nassist in financing its power program and to refund such [indebtedness].*\'\n\n77\n\n\x0c'


b"Legality of Government Honoraria Ban Following U.S. v.\nNational Treasury Employees Union\nNo p ortion o f \xc2\xa7 5 0 1 (b ) o f the Ethics in G o v ern m en t A ct o f 1978, w hich im poses an honoraria ban\non all g o v ern m en t em ployees, survives the S uprem e C o u rt\xe2\x80\x99s decision in United States v. National\n\nTreasury Employees Union.\n\nFebruary 26, 1996\nM e m o r a n d u m O p in io n f o r t h e A t t o r n e y G e n e r a l\n\nLast year, the Supreme Court held that section 501(b) of the Ethics in Govern\xc2\xad\nment Act of 1978 \xe2\x80\x94 which imposes a government-wide ban on the receipt of\nhonoraria by any government employee\xe2\x80\x94 violates the First Amendment. United\nStates v. N ational Treasury Em ployees Union, 513 U.S. 454, 477 (1995)\n(\xe2\x80\x9c N T E U \xe2\x80\x9d ). This memorandum examines, at the request of the Civil Division,\nthe question what, if any, portion of section 501(b) survives the NTEU decision.\nAs explained more fully below, we conclude that the answer to this question must\nbe \xe2\x80\x9c none.\xe2\x80\x9d Following the Supreme Court\xe2\x80\x99s invalidation of section 501(b) with\nrespect to the vast majority of the statute\xe2\x80\x99s targeted audience, what remains is\na very different statute from the one Congress enacted. We cannot know, nor\nshould we speculate, whether Congress would have enacted an honoraria ban as\nlimited in scope as that portion o f section 501(b) which the Supreme Court de\xc2\xad\nclined to strike down. The special constitutional solicitude accorded First Amend\xc2\xad\nment rights, moreover, cautions against any intrusion upon those rights without\nthe prior reflective judgment of the legislature.\nI.\n\nIn 1989, Congress enacted the Ethics Reform Act (the \xe2\x80\x9c Act\xe2\x80\x9d ), Pub. L. No.\n101-194, 103 Stat. 1716, 5 U.S.C. app. \xc2\xa7\xc2\xa7 101-505, in an effort to reinforce stand\xc2\xad\nards of integrity within the federal government. Concluding that \xe2\x80\x9c substantial out\xc2\xad\nside earned income creates at least the appearance of impropriety and thereby\nundermines public confidence in the integrity of government officials,\xe2\x80\x9d Report\nof Bipartisan Task Force on Ethics on H.R. 3660, reprinted at 135 Cong. Rec.\n30,740, 30,744 (1989) (\xe2\x80\x9c Bipartisan Task Force Report\xe2\x80\x9d ), Congress amended sec\xc2\xad\ntion 501(b) of the Ethics in Government Act of 1978 to create the following\n\xe2\x80\x9c Honoraria Prohibition\xe2\x80\x9d : \xe2\x80\x9c An individual may not receive any honorarium while\nthat individual is a Member, officer, or employee.\xe2\x80\x9d 5 U.S.C. app. \xc2\xa7 501(b). The\nAct broadly defines \xe2\x80\x9c officer or employee\xe2\x80\x9d to include nearly all employees of\nthe federal government. An \xe2\x80\x9c honorarium\xe2\x80\x9d is defined as \xe2\x80\x9c a payment of money\n78\n\n\x0cLegality o f Government Honoraria Ban Following U.S. v. National Treasury Employees Union\n\nor any thing of value for an appearance, speech or article.\xe2\x80\x9d 1 Id. \xc2\xa7505(3). Federal\nemployees are thus prohibited from receiving compensation for a wide variety\nof expressive activities, whether or not these are related to their official duties.\nVarious individuals challenged the constitutionality of the honoraria ban in fed\xc2\xad\neral district court and their cases were consolidated into a single class action.\nThe class was defined as \xe2\x80\x9c all Executive Branch employees \xe2\x80\x98below grade G S16, who\xe2\x80\x94 but for 5 U.S.C. app. 501(b) \xe2\x80\x94 would receive honoraria.\xe2\x80\x99 \xe2\x80\x9d NTEU, 513\nU.S. at 461. The district court granted the employees\xe2\x80\x99 motion for summary judg\xc2\xad\nment, holding the statute \xe2\x80\x9c unconstitutional insofar as it applies to Executive\nBranch employees of the United States government\xe2\x80\x9d ; it enjoined enforcement of\nthe statute against any executive branch employee. NTEU, 788 F. Supp. 4, 13\n(D.D.C. 1992). On appeal, the Court of Appeals affirmed, concluding that the\ngovernment\xe2\x80\x99s concededly strong interest in protecting the integrity and efficiency\nof public service did not justify a substantial burden on speech which did not\nadvance that interest. Determining that \xc2\xa7501(b)\xe2\x80\x99s application to executive branch\nemployees was severable, the Court of Appeals effectively rewrote the statute by\nstriking the words \xe2\x80\x9c \xe2\x80\x98officer or employee\xe2\x80\x99 from section 501(b), except in so far\nas those terms encompass members of Congress, officers and employees of Con\xc2\xad\ngress, judicial officers and judicial employees.\xe2\x80\x9d NTEU, 990 F.2d 1271, 1279 (D.C.\nCir. 1993) (emphasis added).\nBy a vote of 6 to 3, the Supreme Court, in an opinion written by Justice Stevens,\naffirmed in part and reversed in part. The Court began its analysis with the affir\xc2\xad\nmation that, even though respondent employees work for the federal government,\n\xe2\x80\x9c they have not relinquished \xe2\x80\x98the First Amendment rights they would otherwise\nenjoy as citizens to comment on matters of public interest.\xe2\x80\x99 \xe2\x80\x9d NTEU, 513 U.S.\nat 465 (citing Pickering v. Board o f Educ. o f Township High School D ist., 391\nU.S. 563, 568 (1968)). Because respondents\xe2\x80\x99 expressive activities fell \xe2\x80\x9c within the\nprotected category of citizen comment on matters of public concern,\xe2\x80\x9d id. at 466,\nthe Court applied Pickering's familiar balancing test:\nWhen a court is required to determine the validity of such a re\xc2\xad\nstraint [on speech], it must \xe2\x80\x9c arrive at a balance between the inter\xc2\xad\nests of the [employee], as a citizen, in commenting upon matters\nof public concern and the interest of the State, as an employer,\nin promoting the efficiency of the public services it performs\nthrough its employees.\xe2\x80\x9d\nId. at 465-66 (citing Pickering, 391 U.S. at 568).\n1 A 1991 amendment to the definition o f \xe2\x80\x9c honorarium'* provides one example o f some of the unusual distinctions\nmade by the statute. Under the amended defmition, which refers to \xe2\x80\x9c a series o f appearances speeches, or a rtic le s /'\npay is prohibited for a series o f articles only if a nexus exists between the author\xe2\x80\x99s employment and either the\nsubject matter o f the expression or the identity o f the payor. Id. However, for an individual article or speech, pay\nis prohibited regardless o f any such nexus.\n\n79\n\n\x0cOpinions o f the O ffice o f Legal Counsel in Volume 20\n\nLooking more closely at the far-reaching scope of the honoraria ban, the Court\nwas clearly concerned with its widespread impact: It alternately characterized\n\xc2\xa7501(b) as a \xe2\x80\x9c wholesale deterrent to a broad category of expression by a massive\nnumber of potential speakers,\xe2\x80\x9d id . at 454, \xe2\x80\x9c a sweeping statutory impediment to\nspeech,\xe2\x80\x9d which \xe2\x80\x9c chills potential speech before it happens,\xe2\x80\x9d id. at 467, 468, a\n\xe2\x80\x9c large-scale disincentive to Government employees\xe2\x80\x99 expression,\xe2\x80\x9d id. at 470, and\na \xe2\x80\x9c crudely crafted burden on respondents\xe2\x80\x99 freedom to engage in expressive activi\xc2\xad\nties.\xe2\x80\x9d Id. at 477. The heavy burden that the government bore in justifying the\nban was not, the Court concluded, satisfied by the government\xe2\x80\x99s concerns about\nthe potential for honoraria abuses and the need \xe2\x80\x9c to protect the efficiency of the\npublic service.\xe2\x80\x9d Id. at 474. These concerns were neither sustained by the record,\nwhich was devoid of evidence of honoraria misconduct by the vast rank and file\nof federal employees, nor supported by the text of the statute. The Court thus\nheld that \xc2\xa7 501(b) violated the First Amendment. Id. at 477.\nAlthough it affirmed the D.C. Circuit\xe2\x80\x99s holding with respect to the invalidity\nof the honoraria ban, the Court rejected the lower court\xe2\x80\x99s \xe2\x80\x9c overinclusive\xe2\x80\x9d remedy.\nInstead, it granted full relief to respondents, enjoining enforcement of the ban\nas to \xe2\x80\x9c all Executive Branch employees below Grade GS-16,\xe2\x80\x9d id. at 478, but\nrefusing to decide the applicability of the ban to senior executive branch officials.2\nThe Court noted that \xe2\x80\x9c the Government conceivably might advance a different\njustification for an honoraria ban limited to more senior officials, thus presenting\na different constitutional question than the one we decide today.\xe2\x80\x9d Id. Its \xe2\x80\x9c obliga\xc2\xad\ntion to avoid judicial legislation\xe2\x80\x9d also prevented the Court from crafting a nexus\nrequirement for the honoraria ban. How the ban should be limited\xe2\x80\x94 whether to\ncases involving an undesirable nexus between the speaker\xe2\x80\x99s official duties and\nthe subject matter of the speaker\xe2\x80\x99s expression or to those involving some nexus\nto the identity of the payor\xe2\x80\x94 was not, the Court said, a matter for judicial deter\xc2\xad\nmination. Rather, the task of drafting a narrower statute was properly left to Con\xc2\xad\ngress. Id. at 479.\nIn a separate concurrence, Justice O\xe2\x80\x99Connor made clear her understanding that\nthe majority\xe2\x80\x99s holding did not require invalidation of the entire statute. She argued\nthat the statute was still \xe2\x80\x9c capable of functioning independently\xe2\x80\x9d with respect to\nits \xe2\x80\x9c principal targets\xe2\x80\x9d \xe2\x80\x94 high-level executive branch employees and employees\nof the legislative and judicial branches. Id. at 489 (O\xe2\x80\x99Connor, J., concurring). Jus\xc2\xad\ntice O \xe2\x80\x99Connor would also have read a nexus requirement into the honoraria ban.\nDissenting Chief Justice Rehnquist, joined by Justices Scalia and Thomas, in\xc2\xad\nsisted that the honoraria ban was consistent with the First Amendment under the\nPickering test. Id. at 501. Chief Justice Rehnquist noted that even if he agreed\nwith the majority\xe2\x80\x99s conclusion that the ban violated the First Amendment, he\n2 The Court recognized that the class of respondents included one G S -1 6 employee to whom \xe2\x80\x9c [t]he rationale\nwe have set forth for o ur holding does not necessarily a p p ly /' Noting, however, that the government did not request\nreversal o f the low er c o u rt\xe2\x80\x99s judgm ent granting him relief, the Court left that part of the lower court's judgment\nintact. Id. at 478 n.23.\n\n80\n\n\x0cLegality o f Government Honoraria Ban Following U.S.\n\nv.\n\nNational Treasury Employees Union\n\nwould not accept the majority\xe2\x80\x99s failure to include a nexus requirement in its rem\xc2\xad\nedy. Because the majority had limited its analysis \xe2\x80\x9c to only those applications\nof the honoraria ban where there is no nexus between the honoraria and Govern\xc2\xad\nment employment,\xe2\x80\x9d in the Chief Justice\xe2\x80\x99s view, the Court properly should have\nlimited its remedy to such applications as well.3 Id. at 502. Thus, like Justice\nO\xe2\x80\x99Connor, the dissent would have \xe2\x80\x9c affirmed the injunction against the enforce\xc2\xad\nment of \xc2\xa7501(b) as applied to Executive Branch employees below grade GS16 who seek honoraria that are unrelated to their Government employment.\xe2\x80\x9d Id.\nat 503.\nII.\nOur analysis of NTEU begins with its holding: as written, the honoraria ban\nof \xc2\xa7 501(b) violates the First Amendment. While \xc2\xa7501(b) does not directly abridge\nspeech or discriminate among speakers on the basis of the content or viewpoint\nof their messages, its prohibition on compensation \xe2\x80\x9c unquestionably imposes a sig\xc2\xad\nnificant burden on expressive activity.\xe2\x80\x9d NTEU, 513 U.S. at 468. Whatever \xe2\x80\x9c spec\xc2\xad\nulative benefits,\xe2\x80\x9d id. at 477, the honoraria ban may provide the government are\ninsufficient to justify this \xe2\x80\x9c blanket burden on the speech of nearly 1.7 million\nfederal employees.\xe2\x80\x9d Id. at 474.\nFinding \xc2\xa7501(b) to be an invalid abridgment of government employees\xe2\x80\x99 First\nAmendment rights, the Supreme Court explicitly prohibited its enforcement\nagainst the class of employees represented by the NTEU plaintiffs, i.e., all execu\xc2\xad\ntive branch employees below grade GS-16. That group, the Court recognized,\nconsists of \xe2\x80\x9c an immense class of workers.\xe2\x80\x9d Id. at 473. By enjoining application\nof the honoraria ban with respect to this class, the Court drastically curtailed the\nscope that even arguably could be given to \xc2\xa7 501 (b).\nThe question is whether any remaining applications of \xc2\xa7501(b)\xe2\x80\x94 for example,\nto employees of the legislative and judicial branches and to high-level executive\nofficials\xe2\x80\x94 survive the NTEU decision. Under well-established canons of statutory\nconstruction, a portion of a statute that has been held invalid may be severed,\nleaving the rest to operate, if there is no evidence that the legislature considered\nthe valid and invalid portions to be \xe2\x80\x9c conditions, considerations, or compensations\nfor each other.\xe2\x80\x9d 2 Norman J. Singer, Sutherland Statutory Construction \xc2\xa744.06\n(5th ed. 1992). Only if severance of the invalid provision would result in the\ncreation of a law that the legislature would not have enacted, should the entire\nstatute be invalidated. Id. \xc2\xa744.04. \xe2\x80\x9c The final test [of severability] . . . is the\ntraditional one: the unconstitutional provision must be severed unless the statute\n3 I n a footnote, C hief Justice Rehnquist made clear that he \xe2\x80\x9c certainly could not condemn the Court for its refusal\nto rewrite the statute,\xe2\x80\x9d but was simply challenging \xe2\x80\x9c the Court\xe2\x80\x99s failure to tailor its remedy to match its selective\nanalysis.\xe2\x80\x9d Id. at S02 n.8.\n\n81\n\n\x0cOpinions o f the Office o f Legal Counsel in Volume 20\n\ncreated in its absence is legislation that Congress would not have enacted.\xe2\x80\x9d Alaska\nAirlines, Inc. v. B rock, 480 U.S. 678, 685 (1987).\n\nHowever, the courts\xe2\x80\x99 \xe2\x80\x98 \xe2\x80\x98 \xe2\x80\x98duty . . . to maintain [a challenged] act in so far as\nit is valid,\xe2\x80\x99 \xe2\x80\x9d id. at 684 (citation omitted), is not unlimited. Three considerations\nlead us to the conclusion that an attempt to apply \xc2\xa7 501(b) to anyone after NTEU\nwould run afoul of the courts\xe2\x80\x99 \xe2\x80\x9c obligation to avoid judicial legislation.\xe2\x80\x9d NTEU,\n513 U.S. at 479.\n1. As noted in N TEU itself, attempts to devise a constitutional construction of\na partially invalid statute are deeply problematic if they require the courts \xe2\x80\x9c to\ntamper with the text of the statute, a practice we strive to avoid.\xe2\x80\x9d Id. at 478.\nThis principle has special force when a proposed \xe2\x80\x9c construction\xe2\x80\x9d would essentially\nredraft the statute by treating general language as if it contained words limiting\nthe statute\xe2\x80\x99s scope. See, e.g., Eubanks v. Wilkinson, 937 F.2d 1118, 1125 (6th\nCir. 1991). Even in the presence of a severability clause making explicit the con\xc2\xad\ngressional intention that a partly invalid statute should be upheld to the greatest\nextent possible, the Supreme Court has held that it could not \xe2\x80\x98\xe2\x80\x98dissect an unconsti\xc2\xad\ntutional measure and reframe a valid one out of it by inserting limitations it does\nnot contain.\xe2\x80\x9d H ill v. Wallace, 259 U.S. 44, 70 (1922). Doing so would run the\nrisk of \xe2\x80\x9c creat[ing] a program quite different from the one the legislature actually\nadopted,\xe2\x80\x9d Sloan v. Lemon, 413 U.S. 825, 834 (1973), a danger that the NTEU\nCourt explicitly cited in refusing to adopt the government\xe2\x80\x99s proposal to insert\na nexus requirement into \xc2\xa7501(b)\xe2\x80\x99s honoraria ban. 513 U.S. at 479.\nWe believe that any attempt to identify a surviving core to \xc2\xa7 501(b) runs afoul\nof this principle, because what would be left is an entirely different statute from\nthe one Congress intended to enact. While the absence of a severability clause\nfrom the Act does not in itself create a presumption against severability, Alaska\nAirlines, 480 U.S. at 686, nothing in the text or legislative history of the honoraria\nban indicates that Congress was willing to limit the ban to high-level executive\nbranch officials and legislative and judicial branch employees. The primary focus\nof the legislative history, as both the district court and the Court of Appeals recog\xc2\xad\nnized, was Congress\xe2\x80\x99 concern with the receipt of honoraria by its own members.\nNTEU, 788 F. Supp. at 13; NTEU, 990 F.2d at 1278. There is no evidence, how\xc2\xad\never, that this was Congress\xe2\x80\x99 exclusive concern. While the discussion in the Bipar\xc2\xad\ntisan Task Force Report concentrates on potential honoraria abuses by Congress,\nthe report nevertheless recommends \xe2\x80\x9c that honoraria be abolished fo r all officers\nand em ployees o f the governm ent.\xe2\x80\x9d Bipartisan Task Force Report, 135 Cong. Rec.\nat 30,744 (emphasis added). Some of the language in the Senate floor debate sug\xc2\xad\ngests that a general honoraria ban was the \xe2\x80\x9c heart\xe2\x80\x9d of the proposed legislation.\nSee 135 Cong. Rec. at 29,660-61 (comments of Sen. Mitchell). Moreover, not\xc2\xad\nwithstanding any preoccupation in the legislative history with an honoraria ban\ndirected at Congress, the fact remains that the ban which Congress eventually\nd id enact was not limited to its own members, but extended to a broad class\n82\n\n\x0cLegality o f Government Honoraria Ban Following U.S. v. National Treasury Employees Union\n\nof government employees in coordinate branches.4 Any saving \xe2\x80\x9c construction\xe2\x80\x9d\nof \xc2\xa7501(b) would unavoidably upset the decision Congress actually made to enact\na honoraria ban extending across all three branches, and would require the courts\nto speculate as to which of the several possible narrower statutes \xe2\x80\x94 if any \xe2\x80\x94 Con\xc2\xad\ngress would have enacted if it had foreseen the decision in NTEU.\n2. A decision upholding as still valid some applications of \xc2\xa7501 (b) would not\nonly create a provision the scope of which was the product of judicial, not legisla\xc2\xad\ntive, creativity; it would also approve a regulatory scheme of vastly different prac\xc2\xad\ntical proportions than the one that Congress envisioned when it enacted the statute.\nThe honoraria ban that Congress understood itself to be enacting covered a very\nlarge number of persons, while any saving construction would reduce the group\naffected manyfold. Whatever the significance of attempting to reach the larger\nclass for First Amendment analysis, Congress might reasonably have considered\na broader approach more politically acceptable or even responsible. Cf. United\nStates v. Carotene Products Co., 304 U.S. 144 (1938). The drastic reduction in\nthe practical reach of the statute required after NTEU in itself suggests that the\nresulting honoraria ban is not one that is traceable to congressional intent. As\nthe Supreme Court has noted, the general presumption in favor of statutory validity\n\xe2\x80\x9c may disappear where the statute in question has already been declared unconsti\xc2\xad\ntutional in the vast majority of its intended applications, and it can fairly be said\nthat it was not intended to stand as valid . . . only in a fraction of the cases\nit was originally designed to cover.\xe2\x80\x9d United States v. Raines, 362 U.S. 17, 23\n(1960); Adams v. Askew, 511 F.2d 700, 704 (5th Cir. 1975). Precisely such a\nsituation is presented here. The NTEU decision invalidated \xc2\xa7 501(b) with respect\nto the vast majority of the applications Congress intended it to have. What we\nare left with is an entirely different statute from the one that Congress enacted.\n3. The need to exercise caution and restraint in evaluating congressional intent\nis particularly acute where, as here, First Amendment rights are implicated. We\nhold no freedom more inviolable than our First Amendment right to freedom of\nspeech. Because free and unfettered debate lies at the foundation of our republic,\nFirst Amendment rights \xe2\x80\x9c hold a preferred position in the hierarchy of the constitu\xc2\xad\ntional guarantees of the incidents of freedom.\xe2\x80\x9d Poulos v. New Hampshire, 345\nU.S. 395, 405 (1953).\nGiven the special constitutional solicitude granted First Amendment rights, a\nfederal statute will ordinarily not be construed to infringe upon those rights absent\na clear and affirmative expression of congressional intent. See NLRB v. Catholic\nBishop o f Chicago, 440 U.S. 490, 504 (1979). While we may be able to speculate\nfrom the legislative history that Congress might have enacted an honoraria ban\n4 W e note that, were we to agree that the legislative history\xe2\x80\x99s focus on the receipt of honoraria by members\no f Congress was dispositive o f the question o f congressional intent, such a position could, at most, support application\no f the statute to members o f Congress, not to other legislative, judicial o r executive branch employees. Justice O \xe2\x80\x99Con\xc2\xad\nnor, who urged this application in her concurrence, cited no legislative history to support such an expansion. Rather,\nthe legislative history she relied upon referred, again, only to members o f Congress.\n\n83\n\n\x0cOpinions o f the Office o f Legal Counsel in Volume 20\n\nmore limited than \xc2\xa7 501(b), we cannot say with certainty that Congress would\nhave done so, nor can we know what limitations Congress might have imposed\nor what rationale Congress might have offered. In NTEU, the Court refused to\ndraw a line between \xe2\x80\x9c categories of speech covered by [the] overly broad statute,\n[where] Congress has sent inconsistent signals as to where the new line or lines\nshould be drawn.\xe2\x80\x9d 513 U.S. at 479 n.26. A judicial decision choosing where to\ndraw the line between categories of speakers covered by the honoraria ban would\nbe a similar and equally unacceptable \xe2\x80\x9c invasion of the legislative domain.\xe2\x80\x9d Id.\nIn the absence of any clear legislative intent to restrict application of the honoraria\nban to high-level executive officials, and employees of the legislative and judicial\nbranches, \xc2\xa7 5 0 1(b) simply cannot stand.\nIII.\nAfter NTEU, there can be no doubt that the honoraria ban imposes a significant\nburden on the First Amendment rights of federal government employees. Govern\xc2\xad\nment protestations of possible honoraria abuses and administrative inefficiencies\nnotwithstanding, the Supreme Court effectively eviscerated \xc2\xa7 501(b) by prohibiting\nits application to executive branch employees below GS-16. Whether Congress\nwould have enacted an honoraria ban limited to those government employees not\nincluded within the N TEU class is an open question. Certainly these remaining\nemployees have First Amendment rights no less compelling than those of the\nNTEU class members, rights which cannot and should not be summarily abridged\non the basis of speculation as to congressional intent. We thus conclude that\n\xc2\xa7 501(b) does not survive the Supreme Court\xe2\x80\x99s ruling in NTEU.\nWALTER DELLINGER\nAssistant Attorney General\nOffice o f Legal Counsel\n\n84\n\n\x0c"