OPINIONS OF HON. WILLIAM D. MITCHELL, OF MINNESOTA APPOINTED MARCH 4, 1929 CONSTRUCTION OF SECTION 2 OF THE RECONSTRUCTION FINANCE CORPORATION ACT Loans made pursuant to section 2 of the Act creating the Reconstruction Finance Corporation (47 Stat. 5), should not be made in the name of the Secretary of Agriculture, but may be made either in the name of "the United States of America, acting through the Secretary of Agriculture" or in the name of "the Reconstruction Finance Corporation, acting through the Secretary of Agriculture' or in the name of "the Secretary of Agriculture, acting pursuant to section 2 of the Reconstruction Finance Corporation Act," as may be most convenient for administrative reasons to be determined after consultation with the officers of the Reconstruction Finance Corporation. Funds collected by the Secretary of Agriculture from loans made under the provisions of section 2 of the Reconstruction Finance Corporation Act, and any unexpended balance of funds allocated to the Secretary of Agriculture under the provisions of section 2 of said Act, should be returned to the Reconstruction Finance Corporation or disposed of as the Corporation may direct. The Secretary of Agriculture has authority to appoint and fix compensation of persons employed by him in carrying out the provisions of the Reconstruction Finance Corporation Act, without regard to other laws applicable to the employment and compensa. tion of officers and employees of the United States, provided such persons are not otherwise employed in the service of the United States. In using such part of the funds allocated to him under the provisions of section 2 of the Act, supra, as may be necessary for the payment of personnel and for defraying all other expenses incident to carrying out the provisions of said section 2, the Secretary of Agriculture is not subject to the restrictions imposed by statute upon the expenditure and disbursement of funds belonging to the United States. DEPARTMENT OF JUSTICE, SIR: I have the honor to acknowledge the receipt of your letter of January 28, 1932, wherein you refer to section 2 of NOTE. The publication of this opinion was delayed. 1 the Act of January 22, 1932 (Public, No. 2), creating the Reconstruction Finance Corporation, and Joint Resolution H. J. 230, making an appropriation to carry into effect the provisions of that Act, and in connection therewith request my opinion upon the following questions: "1. As to whether loans from the funds allocated to the Secretary of Agriculture, under the provisions of section 2 of the Act creating the Reconstruction Finance Corporation, should be made by the Secretary of Agriculture (a) solely in the name of the Secretary of Agriculture, or (b) by the Secretary of Agriculture in the name of the United States. "2. What disposition should be made of funds collected by the Secretary of Agriculture from loans made under the provisions of section 2 of the Act, and also of any unexpended balance of funds allocated to the Secretary of Agriculture under the provisions of section 2 of said Act; that is, should such funds be paid into the Treasury of the United States, or to the Reconstruction Finance Corporation? "3. Under the terms of said Act, has the Secretary of Agriculture the authority to appoint and fix the compensation of the personnel and to use such part as may be necessary of the funds allocated to him under the provisions of section 2 of the Act for the payment of personnel and for defraying all other expenses incident to carrying out the provisions of section 2 of said Act, without reference to any restrictions of law outside of those contained in the Act creating the Reconstruction Finance Corporation?" Section 1 of the Act (47 Stat. 5), creates a body corporate to be known as the Reconstruction Finance Corporation. Section 2 provides as follows: "The corporation shall have capital stock of $500,000,000, subscribed by the United States of America, payment for which shall be subject to call in whole or in part by the board of directors of the corporation. "There is hereby authorized to be appropriated, out of any money in the Treasury not otherwise appropriated, the sum of $500,000,000, for the purpose of making payments upon such subscription when called: Provided, That $50,000,000 of the amount so subscribed, and the expansion of same through the notes, debentures, bonds, or other obligations as set out in section 9 shall be allocated and made available to the Secretary of Agriculture, which sum, or so much thereof as may be necessary, shall be expended by the Secretary of Agriculture for the purpose of making loans or advances to farmers in the several States of the United States in cases where he finds that an emergency exists as a result of which farmers are unable to obtain loans for crop production during the year 1932: Provided further, That the Secretary of Agriculture shall give preference in making such loans or advances to farmers who suffered from crop failures in 1931. Such advances or loans shall be made upon such terms and conditions and subject to such regulations as the Secretary of Agriculture shall prescribe. A first lien on all crops growing, or to be planted and grown, shall, in the discretion of the Secretary of Agriculture, be deemed sufficient security for such loan or advance. All such loans or advances shall be made through such agencies as the Secretary of Agriculture may designate, and in such amounts as such agencies, with the approval of the Secretary of Agriculture, may determine. Any person who shall knowingly make any material false representation for the purpose of obtaining an advance or loan, or in assisting in obtaining such advance or loan under this section shall, upon conviction thereof, be punished by a fine of not exceeding $1,000 or by imprisonment not exceeding six months, or both. Receipts for payments by the United States of America for or on account of such stock shall be issued by the corporation to the Secretary of the Treasury and shall be evidence of the stock ownership of the United States of America." Section 4 provides that the Corporation shall have succession for a period of ten years; shall have power to adopt, alter and use a corporate seal; to make contracts; to lease such real estate as may be necessary for the transaction of its business; to sue and be sued; to complain and to defend in any court of competent jurisdiction, State or Federal; to select, employ and fix the compensation of such officers, employees, attorneys and agents as shall be necessary for the transaction of the business of the Corporation, without regard to the provisions of other laws applicable to the employment and compensation of officers or employees of the United States; to determine and prescribe the manner in which its obligations shall be incurred and its expenses allowed and paid. Joint Resolution H. J. 230 appropriates, out of any money in the Treasury not otherwise appropriated, the sum of $500,000,000 for the purchase of the capital stock of the Reconstruction Finance Corporation. (47 Stat. 14.) Thus it appears that the scheme of the Act is that the public funds made available to the Corporation through subscriptions to its capital stock constitute the capital fund represented by shares. To impair the integrity of the capital structure, including the capital fund created by the Act, would obviously defeat the declared purpose of Congress. From this corporate structure, created by the Act, definite legal conceptions arise, including the ownership and integrity of the capital fund, which must necessarily be preserved if the purpose of the statute is to be accomplished. Consequently it follows that in construing the Act there is no room for any construction in conflict with the legal concept of a corporation having a capital fund represented by shares, unless it be required by some express provision of the Act. This fundamental principle must be the basis for any opinion as to your operations under the statute. It follows from this principle that the funds which are to be allocated and made available to the Secretary of Agriculture out of the amount subscribed by the United States for the capital stock of the Corporation are, and will continue to be, a part of the capital of the Corporation. The Secretary is authorized to make loans or advances of these funds as provided in section 2 of the Act, and in so doing he will be lending moneys belonging to the Corporation. Under these circumstances the loans should not be made by the Secretary of Agriculture in his own name. They may properly be made either by "the United States of America, acting through the Secretary of Agriculture " or in the name of "the Reconstruction Finance Corporation, acting through the Secretary of Agriculture" or in the name of "the Secretary of Agriculture, acting pursuant to section 2 of the Reconstruction Finance Corporation Act." Such methods and perhaps some others would be consistent with the provisions of the Act, and the method chosen |