                                                                                   January 31, 1978


 78-91         MEMORANDUM OPINION FOR THE COUNSEL
               TO THE PRESIDENT

               Federal Reserve Board— Vacancy With the Office of
               the Chairman— Status of the Vice Chairman (12
               U.S.C. §§ 242, 244)


   You have requested us to consider the status o f the chairmanship of the
Federal Reserve Board in the event that the President’s nominee has not been
confirmed as Chairman by January 31, 1978, the date on which the incum­
bent’s term expires. We have considered three possible resolutions of this
question and have reached the following conclusions: First, the incumbent
cannot hold over and continue to exercise the powers o f the office as de fa c to
Chairman; second, under relevant statutory authority, the Vice Chairman is
only authorized to preside in the C hairm an’s absence although an argument
could be made that the Vice Chairman possesses inherent authority to assume
the duties o f the Chairman when a vacancy has occurred. Such an approach, in
our opinion, is of doubtful legality. Third, in light of the limited authority of the
Vice Chairm an, we believe that it is necessary for the President to designate
one o f the Board members as acting Chairman.

                                     I. Holdover Chairman

   Section 242 of Title 12, U .S. Code, provides that “ one [member of the
Federal Reserve Board] shall be designated by the President as chairman and
one as vice chairman o f the Board to serve as such for a term o f four years.’’1
The statutory assurance that “ m em bers” whose terms have expired should
serve “ until their successors are appointed and qualified,” 12 U .S.C . § 242
does not address the continuance in office o f the Chairman qua Chairman and
therefore, is inapplicable under these circum stances. Thus, the Chairm an’s


   ‘The 1977 am endm ents to the Federal Reserve A ct, 91 Stat. 1387 (not yet applicable), require
designation o f the Chairm an to be accom panied by the advice and consent o f the Senate; they also
alter the way in which the 4-year term is to fun, but are not otherw ise o f significance to the question
at hand.

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 term expires by operation of law after the statutory term has run. B adger v.
 United States, 93 U.S. 599, 601 (1876). There the court stated:
       When this four years comes round, [the officer’s] right or power to
       perform the duties o f the office is at an end, as completely as if he had
       never held the office . . . . W hether a successor has been elected, or
       whether he has qualified, does not enter into the question. [Id. at
       601.]
 Because the incumbent is not entitled to continue to exercise his powers absent
 reappointment, see 11 Op. Atty. Gen. 286 (1865), a vacancy in the position
 results.2

                    II. Inherent Authority of the Vice Chairman

    Section 244 of Title 12 provides that the Vice Chairman is to “ preside” at
 Board meetings in the “ absence” o f the Chairman but does not otherwise
 specify his duties. The term “ absence” normally connotes a failure to be
 present that is temporary in contradistinction to the term “ vacancy” caused, for
example, by death of the incumbent or his resignation. With regard to
 numerous other agencies Congress has directed that the Vice Chairman is to
 serve in the event o f the Chairm an’s absence or incapacity or as a result of a
 vacancy in the office o f the Chairman. See, e .g ., 16 U.S.C. § 792 (1976)
 (Federal Power Commission); 42 U .S.C . § 2000e-4 (1976) (Equal Employ­
ment Opportunity Commission). Arguably, since Congress could have done the
same here, the absence o f such language must be regarded as meaningful.
   A review o f the legislative history o f § 244 reveals no discussion of this
point. See H. Rept. No. 150, 73d Cong., 1st sess. (1933); H. Rept. No. 254,
73d Cong., 1st sess. (1933); S. Rept. No. 77, 73d Cong., 1st sess. (1933). It is
likely that the problem was not even considered since the change to a fixed
term, and the resulting possibility of a vacancy in the chairmanship, did not
occur until 2 years later. See 49 Stat. 705 (1935).3
   It might be contended that no great significance should be attached to this
specification o f very limited duties. Instead, it could be argued that it would be
reasonable to assume that Congress did not mean to preclude the Vice
Chairman from exercising what might be regarded as an inherent function o f his

   2Counsel for (he Federal Reserve Board has suggested that the incumbent could continue to serve
as a de facto officer whose actions will be given legal effect with regard to innocent third parties
who have assumed such actions to be authorized. See. Waite v. City o f Santa Clara, 184 U .S. 302,
323 (1902). Such will not be the case, however, where the defects in the o fficer's title are so
notorious as to make those relying on his acts chargeable with knowledge thereof. 63 Am. Jur. 2d.
Officers holding over § 507 (1972). Because the expiration o f the incum bent's term is a w ell-known
fact it would appear that even innocent third parties could not claim lack o f knowledge in this case.
Moreover, intentional reliance on this stop-gap doctrine is ill-advised where more effective steps
can be taken to assure that the chairm anship is legally and continuously filled.
   3O riginally, service as “ governor” and “ vice governor” was at the pleasure o f the President and
was not limited by the specification o f a fixed term. See 38 Stat. 260, 42 Stat. 620; see also 48 Stat.
167 (Chairman and Vice Chairm an). No problem o f succession was created since a m em ber could
hold office until his successor had been qualified, at which time the President could designate the
new m em ber as Chairm an.

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 office and temporarily assuming the duties o f the chairmanship whenever that
 office is vacant.4 In light of the statute’s clear language, however, we believe
 that this contention should not control and that a third altemative-designation
 by the President o f an acting Chairman, is preferable.

                III. Presidential Designation of an Acting Chairman

    The Vacancy Act, 5 U .S.C . §§ 3345-3348 (1976), which limits Presidential
 authority to fill Executive branch vacancies on a temporary basis under certain
 circumstances, by its terms applies only to executive departments and therefore
 not to the Federal Reserve Board. We have consistently taken the position that
 the President possesses inherent authority to make temporary appointments
 necessary to ensure the continuing operation of the Executive branch. Although
 no court has squarely addressed the point, the Court o f Appeals for the District
of Columbia in W illiams v. Phillips, 482 F.(2d) 669 (D .C. Cir. 1973) seemed
 to regard this theory as plausible.5
    Such power has most often been exercised with respect to Executive branch
agencies rather than independent regulatory bodies that have under certain
circumstances, see, H um phrey's E xecutor v. U nited States, 295 U.S. 602
(1935), been protected from Presidential control. Where it has deemed
 insulation from such control necessary, Congress has, however, provided that
independent regulatory bodies should choose their own temporary chairm en.6
Congress has not limited the President’s authority with regard to the Federal
Reserve Board in such a fashion; nor has it otherwise clearly specified the
procedure to be used in handling a vacancy in the chairmanship. Under such
circumstances, action by the President would appear to be appropriate. His
discretion in selecting a temporary Chairman is not confined by the statutory
scheme. It is therefore our view that he is free to select the Vice Chairman or
some member to serve in this capacity.

                                         IV. Conclusion

   Because o f his limited term, the present Chairman may not hold over in
office and continue to perform his official functions. In light of the specific

    4Som e support for this position may be gained from the past practice o f the Federal Reserve
 Board. A ccording to the Counsel for the C hairm an, vacancies occurred in both the office of
 Chairm an and that o f Vice Chairm an early in 1948. On February 3, 1948, the Board met and
 elected the form er Chairm an as Chairm an pro tempore. He served until the new Chairm an had been
 designated and qualified. In follow ing this procedure, the Board appears to have adopted the
approach outlined in 12 U .S .C . § 244, albeit that the pertinent language speaks o f "a b se n c e "
 rather than “ v acan c y ." ( “ In the absence o f the chairm an and the vice chairm an, the Board shall
elect a m em ber to act as chairm an pro tem p o re.” )
    ’Since the President has already subm itted the nam e o f the nom inee to the Senate for
confirm ation, no problem o f the sort at issue in the Phillips case— use o f the tem porary
appointm ent pow er to avoid the necessity for Senate confirm ation— is presented here.
   6A lthough the President is charged with designating the Chairm an o f the Federal Com m unica­
tions C om m ission, see 47 U .S .C . § 155(a) (1976), the Com m ission itself is authorized to choose an
acting Chairm an should that becom e necessary. Id.

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statutory limitation concerning service during the Chairm an’s “ absence ” the
better view is that the Vice Chairman may not, under his statutory authority,
automatically serve as Chairman during a temporary vacancy in the office of
the Chairman. In the absence of any statutorily prescribed mechanism for
filling vacancies, the President may designate one of the members of the Board
to serve as acting Chairman until such time as the nominee has been confirmed.

                                           Larry A . H   ammond

                                    D eputy A ssistant A ttorney G eneral
                                                    Office o f L egal Counsel




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