the time of the sale of such obligations, notes and bonds have been withheld from the market whenever there was pending litigation or other circumstances presenting any serious question as to the validity of the instruments themselves or as to the legality of the issuing agency or of the project for which they were issued. This has resulted in the Federal Government's making the loans directly in these cases, with payment by the local agencies of the higher interest rates specified in the contracts with the Federal Government, thus increasing project costs and creating an additional financing burden upon the Treasury Department."

The purpose of the Administrator in submitting his question with regard to the effect of section 302 is to elicit an assurance that there is no reason in law for the existence of litigation or other similar adverse circumstance to hinder or prevent the marketing of a Government-approved issue of notes or bonds by a local urban renewal or public housing agency, or to jeopardize the value of the issue after marketing.

The answer to the Administrator's question is clearly in the affirmative, and I have no hesitation in giving the desired

assurance.

II

Before examining the rights of an investor who holds an urban renewal or public housing bond or note, I believe it will be helpful to consider the effect of litigation or other possible adverse circumstance on the Government's alternatives in the matter of the financing required by a local agency. When an agency that is under legal or other attack desires to raise funds to finance a project, the Administrator or other appropriate official must, among other things, determine whether the attack has sufficient merit and scope to present a significant hazard to the realization of the project or to the validity of the instruments of indebtedness to be issued. When that quantum of danger exists, he will approve neither a Treasury loan nor a private flotation. Absent such danger, he may choose between the two courses of action.

It is apparent that in any situation where the Government is willing to provide funds from the Treasury despite the existence of a lawsuit or other dispute, it will not be

legally disadvantaged by agreeing instead to a private flotation backed by the congressional pledge of full faith and credit and stipulation of incontestability in favor of a bearer. If the local agency is upheld in the litigation, harm to the Government has been avoided under either course of financing. If the local agency does not prevail, the Government is faced with the same degree of potential loss under one course as the other. Thus, there is no reason grounded on a differential in ultimate liability for the Government to withhold authorization for a private flotation.

III

The extent of the protection afforded by guaranties of the Government under various statutes has been considered on a number of occasions by my predecessors in recent years.* Their views were summarized by my immediate predecessor, with approval, as follows: 5

"A series of opinions of the Attorney General issued between 1953 and 1959 has established that a guaranty by a Government agency contracted pursuant to a congressional grant of authority for constitutional purposes is an obligation fully binding on the United States despite the absence of statutory language expressly pledging its 'faith' or 'credit' to the redemption of the guaranty and despite the possibility that a future appropriation might be necessary to carry out such redemption." (Footnotes omitted.)

As these opinions demonstrate, the United States may become liable upon its undertaking to buttress another's obligation whether or not the governing statute uses language specifically confirming such liability. Since section 302 spells out the assumption of unrestricted liability by the United States more plainly than any statutory provision

+41 Op. A.G. 138, 363, 403, 424; 42 Op. A.G. 21, 183.

5 42 Op. 21.

It should be noted that in the first of these opinions, 41 Op. A.G. 138, it was held that an agreement by the Government to pay annual contributions to a local public housing agency is valid and backed by the "faith of the United States." The ruling in substance confirmed that the agreed annual payments would be available for application to the outstanding obligations of the agency in the event of default. Section 302(b) of the Housing Act of 1961 in effect reaffirms the Government's guaranty and extends it directly to the owner of the local housing agency's bonds or notes.

considered in those opinions, the conclusion that such liability has been assumed follows a fortiori.

Aside from the support of precedent, section 302 by its terms provides protection to its intended beneficiaries—i.e., the holders of a local agency's instruments of indebtedness— without the slightest need for inference or statutory construction. Congress has joined unequivocal pledges of the Nation's full faith and credit, the highest order of obligation the United States can incur, with stipulations of incontestability, the equivalent of confessions of liability.' It would be difficult to conceive of means to make the guaranties of the section more impressive either in tenor or in law.

Thus, once the Administrator or other appropriate official has determined that outside financing by a local agency is in order and has evidenced his approval of the agency's obligations in the manner specified in section 302, the United States is bound by his action to see to it that any funds he has agreed to pay are provided in full. The pendency or outcome of a lawsuit or other possible adverse circumstance, whether existing before or after the authorization, issuance or sale of the securities, and whether calling into question the authority of the agency, the legality of its project or the validity of the issue, cannot reduce this commitment.

IV

To repeat, the answer to the Administrator's inquiry with respect to section 302 of the Housing Act of 1961 is in the affirmative. Emanating from that answer are dual assurances: (1) The Government may with propriety authorize

7 The legislative history of section 302 confirms its unequivocal character. Subsection (a), relating to urban renewal financing, originated in the Senate (S. 1922, 87th Cong.) and was characterized as follows (S. Rept. 281, 87th Cong., 1st sess., p. 25):

66⭑ * [It] is designed to remove any doubt by local bond companies as to the Federal Government's obligations under the loan agreement [between the companies and the local agencies]. It would make it clear that the full faith and credit of the United States is pledged to the payment of all amounts agreed to be paid by the Administrator under the private loan agreement." The House bill did not contain either subsection of section 302. However, subsection (a) was approved and subsection (b) added by the conference committee, with the following explanation (H. Rept. 602, 87th Cong., 1st sess., p. 51):

660 ✦✦ The conference substitute contains the Senate provision and also applies it to securities issued by local housing authorities."

resort by local urban renewal or public housing agencies to outside sources of credit as freely as to the United States Treasury, and (2) the investing public is safeguarded by section 302 regardless of the presence or absence of litigation or other attack.

8

It should be noted that the Department of Housing and Urban Development Act contains nothing that requires a modification of the views expressed in this opinion. They apply to any notes or bonds secured pursuant to section 302 that may be issued after, as well as those outstanding before, the transfer of the urban renewal and public housing programs to the Secretary of Housing and Urban Development by that act.

Respectfully,

NICHOLAS deB. KATZENBACH.

8 Public Law 89-174, approved September 9, 1965, 79 Stat. 667. The act will become effective November 9, 1965, unless earlier brought into force by order of the President (section 11(a)).

VALIDITY OF CERTAIN DOCUMENTS EXECUTED BY PERSONNEL OF THE DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

Certain documents executed by personnel of the Department of Housing and Urban Development on or after November 9, 1965, the date of its establishment, but before the appointment by the President of the Secretary of that Department, are effective, despite the vacancy in that office, to commit the full faith and credit of the United States, to obligate the United States upon contracts for the insurance of mortgage loans and to convey title to property.

THE PRESIDENT.

NOVEMBER 23, 1965.

MY DEAR MR. PRESIDENT: I have the honor to comply with your request for my opinion upon certain questions submitted by the Housing and Home Finance Administrator which have arisen in the administration of the newly established Department of Housing and Urban Development.1 The Administrator's questions relate to whether certain documents executed by personnel of the Department on or after November 9, 1965, in accordance with preexisting authorizations and delegations, are effective to commit the full faith and credit of the United States, to obligate the United States upon contracts for the insurance of mortgage loans, to convey title, or otherwise to accomplish the intended purposes of the documents.

For the reasons indicated hereafter, it is my opinion that all of the documents in question are valid and effective according to their terms.

Pursuant to section 11(a) of the Department of Housing and Urban Development Act the statute came into force upon the expiration of the first period of sixty calendar days following the date on which the act was approved. Since you signed the act on September 9, 1965, the effective date was November 9, 1965. By operation of section 3, the new De