             Employment Status of the Members of the Board of
              Directors of the Federal Housing Finance Board


T h e F in a n c ia l In s titu tio n s R e fo rm , R ec o v e ry , an d E n fo rc e m e n t A c t o f 1989, w h ic h c re a te d th e
     F e d e ra l H o u sin g F in a n c e B o a rd , p e rm its th e m e m b e rs o f th e B o a rd o f D ire c to rs o f th e F H F B
     to serv e o n a p a rt-tim e b asis.


                                                                                                               July 11, 1990

                             M e m o r a n d u m O p in io n f o r t h e C h a ir m a n
                                     F e d e r a l H o u s i n g Fi n a n c e B o a r d



   This memorandum responds to your request for a summary which could
be made available to the Congress, of the reasoning underlying our January
31, 1990, opinion for the White House Counsel’s Office regarding the service of
the members of the Board of Directors of the Federal Housing Finance Board.

                                                I. BACKGROUND

         The Federal Housing Finance Board (“FHFB”) was established by
the Financial Institutions Reform, Recovery, and Enforcement Act of 1989
(“FIRREA”), Pub. L. No. 101-73, § 702(a), 103 Stat. 183, 413 (codified at
12 U.S.C. § 1422a(a)), for the purpose of overseeing and regulating the
Federal Home Loan Banks. The Federal Home Loan Bank Board (“FHLBB”)
had previously supervised the Federal Home Loan Banks. The FHLBB also
exercised regulatory supervision over federally insured savings and loan as­
sociations. See 12 U.S.C. §§ 1437, 1464-1470, & 1724-1730i (1988).
FIRREA abolished the FHLBB and distributed its duties among several agen­
cies. The Office of Thrift Supervision (“OTS”) was assigned prim ary
regulatory authority over the savings and loan industry, see 12 U.S.C. §
1462a(e), as added by FIRREA, § 301, 103 Stat. at 278-79, and the FHFB
was given regulatory authority over the Federal Home Loan Banks. See 12
U.S.C. § 1422a & 1422b, as added by FIRREA, § 702(a), 103 Stat. at 413-
14. Other functions previously performed by the FHLBB relating to the
management of deposit insurance and the resolution of cases were transferred

                                                                127
respectively to the Federal Deposit Insurance Corporation (“FDIC”) and the
Resolution Trust Corporation (“RTC”). FIRREA, §§ 202 & 501(a), 103
Stat. at 188, 363-93, (codified at 12 U.S.C. §§ 1811 & 1441a).
    The FHFB is to be managed by a Board of Directors comprising five
members: the Secretary of Housing and Urban Development and four indi­
viduals appointed by the President with the advice and consent of the Senate.
 12 U.S.C. § 1422a(b)(l).‘ The four directors appointed by the President are
required to have, among other qualifications, “extensive experience or train­
ing in housing finance” or “a commitment to providing specialized housing
credit.” Id. § 1422a(b)(2)(A). At least one of these four directors must be
chosen “from an organization with more than a 2-year history of represent­
ing consum er or community interests on banking services, credit needs,
housing, or financial consumer protections.” Id. § 1422a(b)(2)(B). These
four directors may not hold any other appointed office or serve as an officer
or director of a Federal Home Loan Bank or of any member of any such
Bank, nor may they have any financial interest in any such member. Id. §
1422a(b)(2)(A) & (C).

                                                 II. DISCUSSION

    No provision o f FIRREA expressly or impliedly requires that the mem­
bers o f the Board of Directors of the FHFB serve on either a full-time or a
part-tim e basis. Accordingly, the employment status of the members must
be determined by construing the relevant provision of FIRREA, as a whole,
in light of the Act’s legislative history.2
    There is little legislative history on this question. From the legislative
history that does exist, however, it appears that Congress contemplated that
members of the Board of Directors would serve on a part-time basis. The
conference report and the Senate report on the bill that became law are
silent on the part-time or full-time status of the members of Board of Direc­
tors. See H.R. Conf. Rep. No. 222, 101st Cong., 1st Sess. 423-24 (1989),
reprinted in 1989 U.S.C.C.A.N. 432, 462-63; S. Rep. No. 19, 101st Cong.,
1st Sess. 364-65 (1989) (discussing proposed “Federal Home Loan Bank


   ' R eg a rd less o f w h e th er the directors se rv e on a p art-tim e o r a fu ll-tim e basis, this schem e com ports
w ith th e A p p o in tm e n ts C la u se o f the C o n stitu tio n , A rticle II, Section 2, pursuant to w hich the P resident
a p p o in ts o ffic e rs o f th e U n ite d States w ith the ad v ice and co n sen t o f the Senate.
   5 W e d o not b e lie v e th a t th e m atter m ay be reso lv ed by a p p ly ing a presum ption that C o n g ress w ould
h a v e e x p re ss ly sp e c ifie d p art-tim e em p lo y m en t had it so intended. W hile such a presu m p tio n m ight be
a p p ro p ria te w h ere th e d u tie s o f the office a re such that fu ll-tim e em ploym ent m ust have been intended,
th a t is n o t th e c a s e here. See infra pp. 128-29. M oreover, on a num ber o f occasions C ongress has been
e q u a lly c le a r in e x p re ssly requiring/ii//-»/m e em ploym ent. See, e.g., 16 U .S .C . § 83 la (e ) ( “N o m em ber o f
th e [T en n essee V alley A u th o rity Board o f D irecto rs] shall, d u rin g his continuance in office, be engaged in
a n y o th e r b u sin ess, b u t each m em ber sh all d evote h im se lf to the w ork o f the C o rp o ra tio n .” ); 42 U .S.C .
§ 5 8 4 1 (e ) (“ N o m e m b e r o f the [Nuclear R eg u lato ry C o m m ission] shall engage in any b u siness, v oca­
tio n , o r e m p lo y m e n t o th e r th an that o f serv in g as a m em b er o f the C om m issio n .” ). T hus, there is no
m o re re a so n in th is c o n te x t to indulge a p resu m p tio n that C o n g ress intended for the D irectors to serve
fu ll-tim e , th a n th ere is th a t it intended fo r them to serve part-tim e.

                                                              128
Agency”). However, the House report on the bill reported by the House
Banking, Finance and Urban Affairs Committee does address this issue, and
there is no relevant difference between the applicable provisions in that bill
and those contained in the bill that was enacted into law.3 The House report
unequivocally states that “members of the Board of Directors will not serve
on a full-time basis.” H.R. Rep. No. 54(1), 101st Cong., 1st Sess. 455 (1989),
reprinted in 1989 U.S.C.C.A.N. 86, 251.
   An analysis of the provisions of FIRREA that created the FHFB and
defined its duties supports the conclusion that Congress expected that mem­
bers of the FHFB Board of Directors may serve on a part-time basis. Although
the members of the FHLBB served on a full-time basis, FIRREA divided the
duties of the FHLBB among at least four different agencies and assigned the
five members of the FHFB substantially fewer functions than had been per­
formed by the three members of the FHLBB. In particular, the burdensome
tasks of supervising thrift institutions and of managing case resolutions were
assigned to OTS and RTC respectively, not to the FHFB. Also, oversight of
deposit insurance was transferred to the Federal Deposit Insurance Corpora­
tion. The House report thus described the FHFB as “a small, effective and
efficient governing body.” H.R. Rep. No. 54(1), at 455, 1989 U.S.C.C.A.N.
at 251. In light of the fact that the FHFB is to perform substantially fewer
tasks with a greater number of members, it was fully reasonable for Con­
gress to conclude that full-time service would not be essential for members
of the FHFB Board.
   We also note that FIRREA authorizes the FHFB to “employ, direct, and
fix the compensation and number of employees, attorneys, and agents of the
Federal Housing Finance Board.” FIRREA, § 702(a), 103 Stat. at 414 (codi­
fied at 12 U.S.C. § 1422b(b)(l)). This provision permits the FHFB members
to employ a staff to whom it may delegate various functions.4 Congress’

   5It has b een argued that the p roposed status o f the B oard ch an g ed from part-tim e to fu ll-tim e w hen the
p roposed com p o sitio n o f the B oard in the H ouse bill w as ch an g ed to elim inate the tw o F ederal H om e
Loan B ank p residents. N ot only is there no evidence that the proposed part-tim e status w as a ttrib u tab le
to the in c lu sio n o f these bank presid en ts; there is no evidence, affirm ative o r inferential, th at C o n g ress
in te n d e d the statu s o f th e B oard to ch an g e fro m p a rt-tim e to fu ll-tim e as a c o n se q u e n c e o f the
reco m p o sitio n . If an y th in g , the ev id en ce is to the contrary becau se the S ecretary o f H o using and U rb an
D e v elop m en t is one o f the five m em bers o f the B oard o f D irectors. 1 2 U S .C .§ 1 4 2 2 a (b )(l)(A ). O b v i­
ously, C o n g ress did not expect the Secretary to serve full-tim e as a FH FB D irector.
   4 In its M ay 9, 1990, m em orandum on this subject, the A m erican Law D ivision o f the C o n g re ssio n a l
R esearch Service app eared to suggest that FIR R E A generally p rohibits the d elegation o f d iscretio n ary
d u ties by the FH FB . T h is suggestion is incorrect. FIRR EA m erely states that “in n o e v e n t shall the
B oard d e le g ate any fu n ctio n to any em ployee, ad m in istrativ e unit o f any B ank, or jo in t office o f the
Federal Home Loan Bank System " FIR R E A , § 702(a), 103 Stat at 414-15 (codified at 12 U .S C . §
14 2 2 b (b )( 1)) (em phasis added). Section 701 o f FIR R EA defin es the term “ Federal H om e L oan B ank
S y ste m ” to m ean “the Federal H om e Loan Banks under the superv ision o f the B oard ” 103 Stat at 412
(c o d ified at 12 U .S .C § 1422(2)(B )). A ccordingly, the nondelegation provision only o p e ra te s to p re ­
vent the FH FB from d eleg atin g discretionary supervisory duties to the Federal H om e L o a n B anks, th e ir
e m p lo y e es, o r th eir o ffices - the e n tities being regulated. It d oes not prohibit the FH FB fro m d eleg atin g
fu n c tio n s to its ow n em p lo y ees T his construction o f section 702 is confirm ed by the co m m en ts on the
S enate bill, from w hich this provision originated. See S. R ep. No. 19, at 364 ( “T h e A gency [la te r
ren am ed the FH FB ] m ay not delegate any o f its functions to any em ployee or ad m in istrativ e unit o f any
FHL B a n k") (em phasis added).

                                                          129
 decision to empower the FHFB both to employ however many employees it
 needs and to delegate to those employees many of its functions is consistent
 with C ongress’ apparent belief that part-time service would be permissible.
 Accordingly, we conclude that the members of the Board of Directors may
 serve on a part-time basis. Indeed, the only available direct evidence is that
 Congress expected that the Directors would serve part-time.
    We do not believe that any of the provisions of FIRREA are inconsistent
 with this conclusion. In particular, the fact that FIRREA provides for the
 Chairperson and other members of the Board of Directors to be compen­
 sated respectively at Levels III and IV of the Executive Schedule, see FIRREA,
 § 702(a), 103 Stat. at 415 (codified at 12 U.S.C. § 1422b(b)(l)), does not
 imply that these individuals must serve in a full-time capacity. This provi­
 sion merely fixes the rate of compensation. Federal law provides the formula
 for calculating the salary of a part-time employee from the Executive Sched­
ule if the annual rate of compensation is known. See 5 U.S.C. § 5505.
M oreover, the original House bill established the same rates of compensa­
tion for these officials, see H.R. 1278, § 723, 101st Cong., 1st Sess. (as
reported by the House Comm, on Banking, Finance and Urban Affairs),
reprinted in H.R. Rep. No. 54(1), at 190, at the same time that the House
report expressly acknowledged that these individuals would not serve full­
time. Id. at 455, 1989 U.S.C.C.A.N. at 251.
    Finally, we do not believe that the fact that FIRREA contains conflict-of-
interest and incompatibility provisions applicable to the FHFB implies that
the members o f the Board o f Directors must serve on a full-time basis.
Section 702 of FIRREA provides that each of the appointed members of the
Board of Directors of the FHFB may not “hold any other appointed office
during his or her term as director” and may not “serve as a director or
officer o f any Federal Home Loan Bank or any member of any Bank” or
“hold shares of, or any other financial interest, in, any member of any such
Bank.” 103 Stat. at 413 (codified at 12 U.S.C. § 1422a(b)(2)(A) & (C)).
These provisions serve purposes that are wholly independent of the employ­
ment status of the Board of Directors and do not in any way suggest that
Congress intended for these members to serve on a full-time basis. The
purpose o f the conflict-of-interest provisions is to ensure the impartiality
and objectivity o f the members of the Board. The incompatibility provision
ensures the FHFB’s status as an “independent agency in the executive branch,”
12 U.S.C. § 1422a(a)(2), by forbidding the simultaneous appointment of, for
example, a Treasury Department official to the Board of Directors of the
FHFB.5 The need for such restrictions exists regardless of whether the mem­
bers serve full-time or part-time. Indeed, if anything, the need for these


   3 T h e le g isla tiv e h isto ry indicates that C o n g ress w as co n cerned th at the FH FB not com e u n d e r the
in d ire c t c o n tro l o f o th e r executive b ra n c h ag en cies. See, e.g., H .R . Rep. N o. 54(1), at 4 5 4 , 1989
U .S .C .C .A .N . at 250 (“ The Treasury D epartm ent’s oversight and direction o f the D irector o f the O ffice o f
T hrift S u pervision shall not extend, directly o r indirectly, to the Federal H ousing Finance Board . . . ” ).

                                                          130
provisions is greater when members serve on a part-time basis and therefore
have more time available to engage in the kind of activities that Congress
wished to foreclose. The House report appears to have recognized as much
when it stated that “[although members of the Board of Directors will not
serve on a full-time basis, no appointive member o f the Federal Housing
Finance Board may hold any other federally appointive office.” H.R. Rep.
No. 54(1), at 455, 1989 U.S.C.C.A.N. at 251.

                              CONCLUSION

    Construing the relevant provisions of FIRREA in light of the A ct's legis­
lative history, we conclude that the members of the Board of Directors of
the FHFB may serve on a part-time basis. Indeed, the House report ex­
pressly states that the members would not serve full-time service. Part-time
service appears fully consistent with the reduced duties and increased m em ­
bership of the FHFB as compared with its predecessor, the FHLBB.

                                             J. MICHAEL LUTTIG
                                       Acting Assistant Attorney General
                                            Office o f Legal Counsel




                                     131
