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Recently the Secretary of the Treasury was made a member of the Loan Policy Board of the Reconstruction Finance Corporation which has the duty of developing the loan policies of that Corporation consistent with the requirements of other broad programs of the Government. Reconstruction Finance Corporation subscriptions to the nonassessable preferred stock of insurance companies (or loans secured by such stock) can be made only upon certification by the Secretary of the Treasury of the necessity for action to increase the capital funds of the companies concerned. In addition, the Secretary of the Treasury, or an officer of the Treasury designated by him, is a member of the Board of Directors of the Federal Farm Mortgage Corporation. Also, the Secretary's approval is required on interest rates in excess of the statutory minimum (a) on loans under Title III of the Servicemen's Readjustment Act of 1944, and (b) on mortgages on large-scale housing projects insured by the Federal Housing Administration.2

Many of the lending agencies are authorized to finance their operations through borrowing from the Treasury. The Secretary of the Treasury is authorized to purchase obligations of certain agencies and, within the framework of directives laid down by the President and the Congress, to fix the terms and conditions of such obligations. The President made the following statement in his 1948 Budget Message (January 3, 1947) :

From now on most corporation programs will be revenue-producing. Accordingly, I recommend that corporations be required to reimburse the Treasury for the full cost to it of money advanced to the corporations. Interest paid on borrowings from the Treasury should be based upon the current average rate on outstanding marketable obligations of the United States-now about 1.8%.

Since January 1947, the Congress has provided in several laws relating to Government corporations that the Secretary of the Treasury, in determining the interest rate on borrowings by corporations from the Treasury, shall take into consideration the average interest rate on outstanding marketable securities of the United States.

The Secretary of the Treasury has a certain amount of leeway in determining the interest rate on corporation borrowings from the Treasury, although generally the rate has been based upon the average rate on outstanding marketable securities. Where that average interest rate is not a multiple of one-eighth of 1 percent, the procedure is to fix the rate at the nearest multiple of one-eighth of 1 percent next lower than such average rate.

Under the Government Corporation Control Act, the securities issued for sale to the public by wholly-owned or mixed-ownership Government corporations, "shall be in such forms and denominations, shall have such maturities, shall bear such rates of interest, shall be subject to such terms and conditions, shall be issued in such manner and at such times and sold at such prices as have been or as may be approved by the Secretary of the Treasury," except that any mixedownership Government corporation from which Government capital has been entirely withdrawn is exempt from this provision during the period it remains without Government capital. In addition, the Federal intermediate credit banks, the production credit corporations,

1 Reorganization Plan No. 1 of 1951.

2 See Sec. 500 (b) of the Servicemen's Readjustment Act of 1944, as amended (38 U. S. C. Supp. IV 694 (b)); and Sec. 611 of the National Housing Act, as amended (12 U. S. C. Supp. IV 1746 (b) (4)).

the Central Bank for Cooperatives, the regional banks for cooperatives, and the Federal land banks are specifically exempted from this provision, but are required to consult with the Secretary of the Treasury prior to issuing securities; and, in the event an agreement is not reached on the terms of the securities, the Secretary of the Treasury may make a report in writing to the corporation involved, to the President, and to the Congress stating the grounds for his disagreement.

It should be mentioned that in cases where Government capital has been entirely withdrawn from corporations, such corporations have continued to maintain their regular contacts and consultations with the Treasury regarding the terms and conditions of their security issues.

Although the wholly-owned Government corporations and credit agencies do their borrowing directly from the Treasury, there are three agencies that can issue guaranteed securities to the public. These are the Commodity Credit Corporation, the Federal Housing Administration, and the Maritime Administration. The Federal Housing Administration issues guaranteed obligations in settlement of claims in connection with defaults on insured mortgages on real property. Similarly, the Maritime Administration can issue guaranteed obligations in settlement of claims in connection with defaults on insured mortgages on ships and vessels, although in fact this authority has not been used to date. In addition to these agencies that can issue guaranteed obligations, two other wholly owned Government corporations-the Inland Waterways Corporation and the Federal National Mortgage Association-can issue securities in the market, although such securities are not guaranteed by the United States Government. All of these obligations require the approval of the Secretary of the Treasury as to terms, conditions, and interest rates. The Commodity Credit Corporation is authorized to enter into commodity purchase programs, and makes contracts with private banks for the issuance of letters of credit and for the payment of drafts and invoices by the banks for the account of the Corporation to carry out such programs. Under the terms of these contracts, the banks accept and pay drafts for account of the Commodity Credit Corporation, accept sales proceeds, verify documents and perform other administrative work. The Commodity Credit Corporation pays interest to the banks on funds paid out for its account plus, in some cases, a small fee for services performed by the banks. Since the obligations of the Commodity Credit Corporation held by the banks under these programs are fully guaranteed by the United States, they are subject to approval of the Secretary of the Treasury as to terms, conditions, and interest rates.

There is a special provision of law relating to the Commodity Credit Corporation that does not apply to the other corporations and credit agencies. Under the Act of March 8, 1938, as amended (15 U. S. C. 713a-1), the Secretary of the Treasury is required to make an annual appraisal of the assets and liabilities of the Commodity Credit Corporation. In the event that any such appraisal discloses that the net worth of the Corporation is less than $100,000,000 (which means in effect that the Corporation has operated at a deficit during the preceding year), the Secretary of the Treasury, on behalf of the United States, restores the amount of the capital impairment by a contribution to the Corporation in the amount of such impairment. Although

the Congress has authorized appropriations for this purpose, usually the capital impairment has been restored by the Congress authorizing the Secretary of the Treasury to cancel notes of the Corporation held by the Treasury.

In the event that any annual appraisal establishes that the net worth of the Commodity Credit Corporation is in excess of $100,000,000 (which means in effect that the Corporation has operated at a surplus during the preceding year), such excess is required to be deposited in the Treasury as miscellaneous receipts and is required to be used to retire an equivalent amount of the public debt.

Under the provisions of the Government Corporation Control Act, most of the Government corporations and credit agencies must secure the approval of the Secretary of the Treasury for the sale and purchase of United States securities and guaranteed securities in the market in amounts which aggregate more than $100,000 at any one time. The banks for cooperatives, the Federal intermediate credit banks, and the production credit corporations are not required to obtain prior approval of the Secretary of the Treasury, but are required to consult with the Secretary of the Treasury before taking action on the sale and purchase of United States securities and guaranteed securities in the market in amounts which at any one time aggregate more than $100,000.

Under the Government Corporation Control Act, most Government corporations are required to keep their checking accounts with the Treasurer of the United States, although, with the approval of the Secretary of the Treasury, such accounts may be kept with Federal Reserve Banks, or with private banks designated as depositaries or fiscal agents of the United States. The banks for cooperatives, the Federal intermediate credit banks, and the production credit corporations are not required to obtain the approval of the Secretary of the Treasury in order to maintain checking accounts in private banks, but they are required to report annually to the Treasury the names of the depositaries in which they keep such accounts.

In addition to the utilization of Federal Reserve Banks as depositaries and fiscal agents of the United States and the designation of private banks as Government depositaries, the Secretary of the Treasury is authorized by law to designate certain Government corporations to act as depositaries or fiscal agencies of the United States. Generally, however, it has not been necessary to utilize this authority. The following enumerates in more detail many of the powers and functions of the Treasury Department with respect to the operations of the Federal lending agencies with citations to the applicable

statutes:

2. Detailed Enumeration

(a) Representation on Policy Boards.-The Treasury has limited participation in management and lending policies through representation on policy boards governing the activities of Government agencies, as follows:

Reconstruction Finance Corporation. The Secretary of the Treasury was recently made a member of the Policy Board of the Corporation, pursuant to Reorganization Plan No. 1 of 1951. National Advisory Council.-The Secretary of the Treasury is Chairman of the Council, which coordinates foreign lending poli

cies under Section 4 of the Bretton Woods Agreements Act of July 31, 1945 (22 U. S. C. 286b).

Federal Deposit Insurance Corporation.—The Comptroller of the Currency is a director of the Corporation as provided in the Act approved September 21, 1950 (12 U. S. C. Supp. IV 1812).

Federal Farm Mortgage Corporation.-The Fiscal Assistant Secretary of the Treasury represents the Secretary on the Board of Directors of the Corporation in accordance with the provisions of Section 1 of the Act approved January 1, 1934 (12 U. S. C. 1020).

(b) Borrowing from the Treasury.-Many of the lending agencies are authorized to borrow from the Secretary of the Treasury in order to finance their operations. Also, Section 304 of the Defense Production Act of 1950 (50 U. S. C. Supp. IV War App. 2094) authorizes departments and agencies designated by the President to borrow from the Treasury moneys necessary to carry out functions delegated to them by the President, including the making of loans for defense production purposes. All such borrowing is accomplished by the Secretary's purchasing obligations of the agencies and fixing the terms and conditions of such securities. There follows a list of agencies which are authorized to borrow from the Secretary of the Treasury:

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Housing Loans to Educational Institutions_ 12 U. S. C. Supp. IV 1749 (b)

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(c) Borrowing in the Market.-The following agencies are authorized to borrow money in the market by issuing securities, the terms of which must, pursuant to the provision of law cited below, be approved by the Secretary of the Treasury. Securities of the Commodity Credit Corporation are guaranteed as to principal and interest by the United States Government.

Name of Agency

Commodity Credit Corporation_-_.

Federal National Mortgage Association_‒‒‒
Inland Waterways Corporation---.

U. S. Code or other Authorization

31 U. S. C. 868 (a)

12 U. S. C. Supp. IV 1717 31 U. S. C. 868 (a)

Under provisions of Section 303 (d) of the Government Corporation Control Act (31 U. S. C. 868 (d)), the Federal home loan banks were required to secure the approval of the Secretary of the Treasury as to terms of their borrowings only when they had Government capital. At the present time, their Government capital has been entirely repaid to the Treasury.

The following agencies are required, pursuant to the provision of law cited below, to consult with the Secretary of the Treasury prior to taking any action involving the issuance of their obligations to the public. Securities of these agencies are not guaranteed by the United States Government.

Name of Agency

Banks for Cooperatives.

Federal Intermediate Credit Banks_

U. S. Code or other Authorization
31 U. S. C. 868 (d)
31 U. S. C. 868 (d)

Under provisions of Section 303 (d) of the Government Corporation Control Act (31 U. S. C. 868 (d)), the Federal land banks are required to consult with the Secretary of the Treasury only when they have Government capital. At the present time, their Government capital has been entirely repaid to the Treasury.

(d) Lending Operations. The only cases where the Secretary of the Treasury has any specific authority with respect to lending operations relate to certain loans (1) made by the Reconstruction Finance Corporation, (2) guaranteed by the Veterans' Administration, and (3) insured by the Federal Housing Administration, as follows:

Under the Reconstruction Finance Corporation Act, as amended (15 U. S. C. Supp. IV 604 (a)), subscriptions to nonassessable preferred stock of insurance companies by the Reconstruction Finance Corporation (or loans secured by such stock) can be made only upon certification by the Secretary of the Treasury of the necessity for action to increase the capital funds of the companies concerned.

Under Section 500 (b) of the Servicemen's Readjustment Act of 1944, as amended (38 U. S. C. Supp. IV 694 (b)), the Administrator of Veterans Affairs has the authority, with the approval of the Secretary of the Treasury, to raise the permissible rate of interest on loans guaranteed under Title III of this Act from the rate specified in the law, namely 4 percent, to a maximum of 42 percent.

Under Section 611 of the National Housing Act, as amended (12 U. S. C. Supp. IV 1746 (b) (4)), the Federal Housing Commissioner has the authority, with the approval of the Secretary of the Treasury, to insure mortgages on large-scale housing projects with rates in excess of the statutory minimum specified in the law, namely 4 percent, but not in excess of 42 percent.

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