Authority of the Federal Financing Bank to Provide Loans to the Resolution Trust Corporation

Authority of the Federal Financing Bank to Provide Loans to
the Resolution Trust Corporation

T h e R eso lu tio n T rust C orporation is a "federal a g e n c y ” w ithin the m eaning o f the Federal
F in an cin g B an k A ct o f 1973, and the RTC is authorized to issue financial obligations under
the F ed eral H o m e L oan Bank A ct. Accordingly, u n d er the F FB Act the F ederal F inancing
B a n k is au th o rized to provide loans to the RTC.

February 14, 1990

M em orandum O p in io n fo r t h e G en era l C o u n sel
Departm ent of the T rea su ry

This memorandum responds to your request for our views as to whether
the Federal Financing Bank (“the Bank”) is authorized to provide loans to
the Resolution Trust Corporation (“RTC”). Section 6 of the Federal Financ­
ing Bank Act of 1973 (“the FFB Act”), 12 U.S.C. § 2285, authorizes the
Bank to provide loans by directly purchasing notes or other obligations from
any “Federal agency” that is authorized to issue such obligations. As ex­
plained more fully below, we conclude that RTC is a “Federal agency” within
the meaning o f the FFB Act and that RTC is authorized to issue obligations
by virtue of its authority under section 21A(b)(4) o f the Federal Home Loan
Bank Act, 12 U.S.C. § 1441a(b)(4). Accordingly, we conclude that the Bank
may provide loans to RTC by directly purchasing RTC notes or obligations.

I. Background

The Federal Financing Bank was created in 1973 to reduce the cost of
federal and federally assisted borrowing by coordinating financing programs
among various federal agencies. Prior to enactment of the FFB Act, many
agencies financed their programs by issuing their own debt securities di­
rectly into the market. H.R. Rep. No. 299, 93d Cong., 1st Sess. 2 (1973),
reprinted in 1973 U.S.C.C.A.N. 3153, 3154. This required the agencies to
develop their own financing staffs and consequently to incur significant under­

20
writing costs. Lack of coordination among agencies in timing the introduc­
tion of various issues into the market and liquidity costs associated with having
a proliferation of competing small issues also increased borrowing costs. Id.
The FFB Act reduced these costs by allowing agencies to issue obligations
directly to the Bank, which would then issue its own securities into the
market or directly to the Treasury, which is the current procedure. Section 6
of the Act provides, in part, that “[a]ny Federal agency which is authorized to
issue, sell, or guarantee any obligation is authorized to issue or sell such
obligations directly to the Bank.” 12 U.S.C. § 2285(a). The Bank thus may
provide financing for the Resolution Trust Corporation if, within the meaning
of the FFB Act, (1) RTC is a “Federal agency,” and (2) RTC is authorized to
“issue, sell, or guarantee any obligation[s].”

II. Discussion

A. RTC is a "Federal Agency" Within the Meaning o f the FFB Act

We believe that RTC is a federal agency within the meaning of the FFB
Act. Section 3(a) of the Act provides that the term ‘“ Federal agency’ means”

an executive department, an independent Federal establishment,
or a corporation or other entity established by the Congress
which is owned in whole or in part by the United States.

12 U.S.C. § 2282(1). In our view, RTC is a “corporation or other entity
established by the Congress which is owned in whole or in part by the
United States.” 1

1. Scope o f the Corporation Coverage Clause

There is no dispute that RTC is a “corporation” and that it was “estab­
lished by the Congress.” See Federal Home Loan Bank Act, section
21A(b)(l)(A), as added by Financial Institutions Reform, Recovery and En­
forcement Act of 1989 (“FIRREA”), Pub. L. No. 101-73, § 501, 103 Stat.
183, 369 (codified at 12 U.S.C. § 1441a(b)(l)(A)) (“There is hereby estab­
lished a Corporation to be known as the Resolution Trust Corporation . . . .”).
The central question in determining whether RTC is a “Federal agency”
within the meaning of the FFB Act therefore is whether it is “owned in
whole or in part by the United States.”
The FFB Act does not define the phrase “owned in whole or in part by
the United States.” Ordinarily, ownership in a corporation is a function of
stock ownership: Under general principles of corporate law, one has an

1Throughout this opinion, we will refer to this phrase as the "corporation coverage clause.”

21
ownership interest in a corporation if he or she owns capital stock in that
corporation. Stock ownership in turn entitles the holder to certain owner­
ship rights. This conventional ownership test, however, is not especially
helpful in determining ownership in government corporations. Several gov­
ernm ent corporations, such as the Tennessee Valley Authority and the
Government National Mortgage Association, were intended to be “Federal
agencies” within the scope o f the corporation coverage clause, but they do
not issue stock at all.2 See 16 U.S.C. §§ 831-831dd (outlining powers and
duties o f TVA); 12 U.S.C. §§ 1716-1724 (1970 & Supp. Ill 1973) (outlining
powers and duties o f GNMA); see also infra pp. 22-24. Private capital
contributions to government corporations, moreover, do not always entitle
contributors to the kind of ownership rights that typically follow from capital
investment in private corporations. For example, although RTC issues “capi­
tal certificates” to the Resolution Funding Corporation (“REFCORP”), a private
corporation that raises money for RTC by selling REFCORP bonds, these
certificates entitle REFCORP to few of the usual rights of corporate owner­
ship. The certificates are nonvoting, pay no dividends, and do not provide
REFCORP with any control over the management of RTC. See infra pp. 29-
30. Thus, the precise scope o f the corporation coverage clause is difficult to
discern from the text of the clause alone.
The legislative history of the FFB Act, however, provides further guid­
ance on the meaning of the clause by providing examples of the kinds of
corporate entities that were and were not intended to be covered by the
clause. By contrasting the characteristics o f the included and excluded enti­
ties, one can glean a clearer understanding of the reach of the clause.
The legislative history shows that Congress intended the FFB Act3 to
cover a range o f corporate entities, including the Government National Mort­
gage Association, 118 Cong. Rec. 22,015 (1972); the Export-Import Bank of
the United States, 119 Cong. Rec. 36,004 (1973), 1973 House Hearings at
15; the Commodity Credit Corporation, id.-, S. Rep. No. 166, 93d Cong., 1st
Sess. 5 (1973); and the Tennessee Valley Authority, H.R. Rep. No. 299 at 5,
1973 U.S.C.C.A.N. at 3157; 1973 House Hearings at 33.4 In contrast to the
excluded corporations, see infra pp. 24-26, the essential characteristics of

2 D espite its eligibility to finance certain issues through the Bank, see Federal Financing Bank Act:
H earings Before the House Comm, on Ways and Means, 93d Cong., 1st Sess. 15 (1973) (“1973 House
H earings”) (GN M A mortgage-backed securities); 118 Cong. Rec. 22,015 (1972) (same), GNMA has
never done so.
3The original Federal Financing Bank bill, S. 3001. passed in the Senate during the second session of
the N inety-Second Congress in 1972 w as favorably reported by the House Ways and M eans Comm ittee.
T he full House, however, was not able to act upon the bill before adjournment. H.R. 5874, the bill
ultim ately enacted during the first session of the Ninety-Third Congress in 1973, was very sim ilar to S.
1001 and included the identical definition of “Federal agency." Compare S. 3001, 92d Cong., 2d Sess.
(1972) with H.R. 5874, 93d Cong., 1st Sess. (1973).
4By statute, all o f these entities were defined as “corporate” entities. 12 U.S.C. § 1717(a)(2)(A) (1970)
(G N M A ); id. § 635(a) (Export-Import Bank); 15 U.S.C. § 714(1970) (Commodity Credit Corporation);
16 U .S.C. § 831 (1970) (TVA). Although TVA is a “Federal agency” eligible to borrow from the Bank
under section 6 of the FFB Act, the TVA is exempt from the prior approval requirements of section 7 of
the Act, 12 U.S.C. § 2286. See infra note 7.

22
each o f these covered corporate entities were typical of the characteristics of
government entities generally. Each of these corporations received govern­
ment funding, was subject to significant federal oversight and, with one
exception, generally issued securities backed by the full faith and credit of
the federal government.5
Each of these four corporations received substantial government funding.
Two o f them received direct capital contributions from the United States, see
12 U.S.C. § 635b (1970) ($1,000,000,000 for Export-Import Bank); 15 U.S.C.
§ 714e (1970) ($100,000,000 for Commodity Credit Corporation), and at
least three received direct appropriations. See Pub. L. No. 93-137, 87 Stat.
491, 491 (1973) ($19,821,000 for GNMA); Pub. L. No. 93-135, 87 Stat. 468,
477 (1973) ($3,301,940,000 for Commodity Credit Corporation); Pub. L.
No. 93-97, 87 Stat. 318, 328 (1973) ($45,676,000 for TVA).
These corporations were generally subject to closer federal oversight than
were the excluded corporations, see infra pp. 25-26, although the precise
relationship of the various corporations to the federal government differed.
Indeed, two of the four covered corporations were placed within executive
departments. See 12 U.S.C. § 1717(a)(2)(A) (1970) (declaring GNMA to be
a body corporate within the Department of Housing and Urban Develop­
ment); id. § 1723(a) (powers and duties of GNMA vested in the Secretary of
HUD); 15 U.S.C. § 714 (1970) (Commodity Credit Corporation is an instru­
mentality of the United States within the Department of Agriculture and subject
to the general supervision and direction of the Secretary of Agriculture).6
The principal officers and directors of these covered corporations were
not elected by private entities; they were appointed directly by the President
or by the head of an executive department. See 12 U.S.C. § 1723(a) (1970)
(Secretary of HUD selects president, vice-president, and other principal of­
ficers of GNMA); id. § 635a(b) & (c) (board of directors of Export-Import
Bank, which includes its president and first vice-president, are appointed by
President with advice and consent of the Senate); 15 U.S.C. § 714g(a) (1970)
(six members of board of directors of Commodity Credit Corporation ap­
pointed by President with advice and consent of the Senate; Secretary of
Agriculture is a member ex officio and serves as Chairman); 16 U.S.C.
§ 831a(a) (1970) (board of directors of TVA appointed by President with
advice and consent of the Senate).

’ The significance o f the references to these corporations for purposes of determ ining congressional
intent is not so much that we know whether these particular corporations were to be covered or not
(although this is important), but rather that we know the types of corporations Congress did and did not
intend to be covered. Indeed, several of these particular entities have been substantially restructured
since the FFB Act was enacted in 1973. O f course, changes in the structure, managem ent and/or
funding o f these corporations after the date of enactment of the FFB Act are irrelevant to determining
Congress' intent in enacting the legislation. We have considered, therefore, only their structure and
operations at the time the FFB Act was considered and enacted.
‘ The other covered corporations functioned as independent agencies of the United States See, e.g., 12
U.S.C. § 635(a) (1970) (Export-Import Bank).

23
 Finally, each o f these corporations, except for the Tennessee Valley Au­
thority, generally issued obligations that were backed by the full faith and
credit of the United States government.7 See 12 U.S.C. § 635k (1970) (“All
guarantees and insurance issued by the [Export-Import] Bank shall be con­
sidered contingent obligations backed by the full faith and credit of the
Government o f the United States of America.”); 15 U.S.C. § 713a-4 (1970)
(obligations of Commodity Credit Corporation “shall be fully and uncondi­
tionally guaranteed both as to interest and principal by the United States”);
12 U.S.C. § 1721(g) (Supp. Ill 1973) (full faith and credit of United States
pledged to payment of certain GNMA obligations); but see 12 U.S.C. § 1721(b)
(1970) (certain other GNMA obligations not backed by government).
The characteristics of these covered corporations were very different from
the characteristics of those entities that we know from the legislative history
were intended to be excluded from coverage. The committee reports on the
FFB Act state that the Act would not cover the federal land banks, the
federal intermediate credit banks, the banks for cooperatives, the federal
home loan banks, the Federal Home Loan Mortgage Corporation, the Fed­
eral National Mortgage Association, and the federal reserve banks. H.R.
Rep. No. 299, at 5, 1973 U.S.C.C.A.N. at 3157; S. Rep. No. 166, at 3. At
the time, all of these excluded corporations were wholly privately financed,
had significant management independence and, with one exception,8 did not
issue'obligations backed by the full faith and credit of the United States.
The Federal National Mortgage Association, the federal home loan banks,
the banks for cooperatives, the federal land banks, and the federal intermedi­
ate credit banks were initially capitalized in part by contributions from the
United States.9 However, by the time the FFB Act was enacted, the shares

’ The bulk o f TVA’s existing borrowing authority in 1973 consisted o f obligations that were not guaran­
teed by the governm ent, see 16 U.S.C. § 831n-4(b) (1970), but TVA had previously issued bonds that
w ere backed by the full faith and credit o f the United States, see id. §§ 83 I n -1 & 831n-3. Indeed, in
order to exem pt TVA from the prior approval requirements of the FFB Act, Congress inserted a clause
into section 7 o f the A ct exempting from these requirements any “obligations issued or sold pursuant to
an Act o f Congress which expressly prohibits any guarantee of such obligations by the United States.”
12 U.S.C. § 2286(a). T his exemption w ould apply to few, if any, agencies other than TVA, because
virtually all federal agencies covered by the FFB Act issued obligations backed by the government.
* Federal Reserve notes were and continue to be “obligations of the United States,” 12 U.S.C. § 411
(1970), backed by the federal government. The FFB Act, however, expressly excludes from its coverage
“ Federal Reserve notes.” 12 U.S.C. § 2282(2). Thus, notwithstanding their private capitalization and
substantial day-to-day management independence, the federal reserve banks could not obtain financing
from the Bank by issuing “Federal Reserve notes" to the Bank.
’ See 12 U.S.C. § 1718(a) & (d) (1970) (FNMA); id. § 1426(f)
(federal hom e loan banks); id. § 1134d(a)(l) (banks for cooperatives), repealed by Pub. L. No. 92-
181, § 5.26(a), 85 Stat. 583, 624(1971); 12 U.S.C. §§ 692 & 695 (1970) (federal land banks), repealed
by Pub. L. No. 92-181, § 5.26(a); 12 U .S.C. § 1061(a)(1) (1970) (federal intermediate credit banks),
repealed by Pub. L. No. 92-181, § 5.26(a).

24
of the United States had been retired, and these entities were entirely pri­
vately capitalized.10 Although the federal reserve banks were originally
authorized to issue stock to the United States, they had never done so. See
12 U.S.C. note following section 284 (1970). The Federal Home Loan Mort­
gage Corporation (“FHLMC”) had, from its inception, obtained all of its
equity capital from private sources. See 12 U.S.C. § 1453 (1970).
In addition to being fully privately capitalized, these entities generally
relied solely upon their own income, rather than upon appropriations, to
fund their operating expenses. See 1974 Budget Appendix, supra note 10, at
1098 (“The entire operating expenses of the [Federal Home Loan Banks] are
paid from their own income and are not included in the budget of the United
States.”); id. at 1094 (banks for cooperatives); id. at 1097 (federal land banks);
id. at 1095 (federal intermediate credit banks).
These corporations were relatively independent in the management of
their day-to-day affairs, although the extent of direct federal supervision
differed substantially. With one exception,11 private entities elected a sub­
stantial majority of the boards of directors of each of these corporations, and
the shares issued by these corporations consisted o f voting stock. Thus,
two-thirds of the directors of the FNMA, the federal reserve banks, and the
federal home loan banks were elected by the respective shareholders and
members o f these entities. See 12 U.S.C. § 1723(b) (1970) (FNMA); id. §§
302 & 304 (federal reserve banks); id. § 1427(a) (federal home loan banks).
Similarly, private parties elected a substantial majority o f the boards of di­
rectors of the three types of farm credit banks. Under 12 U.S.C. § 2224
(Supp. Ill 1973), the same seven members of the board of directors of each
farm credit district served as the board of directors for the federal land bank,
the federal intermediate credit bank, and the bank for cooperatives of each
such district. Six of the seven members were elected by private entities:

10 See 12 U.S.C. § 1718(a) (1970) (requiring retirement of preferred shares in FNMA held by the Secre­
tary o f the Treasury); id. § 1426(g) (retirement o f stock held by the United States in federal home loan
banks); 12 U.S.C. § 2126 (Supp. Ill 1973) (providing for retirement of stock held by the Governor o f the
Farm Credit Administration in the banks for cooperatives); U.S. Bureau o f the Budget, The Budget o f the
United Stales Government, Fiscal Year 1974, Appendix at 1094 (1973) (“1974 Budget Appendix”) (U.S.
Governm ent capital m banks for cooperatives was fully retired on December 31,1968); id. at 1097 (“The
last o f the Government capital that had been invested in the [federal land banks] was repaid in 1947."); 12
U.S.C. § 2073(g) (Supp. Ill 1973) (providing for retirement of stock held by the Farm Credit Adm inistra­
tion in the federal intermediate credit banks); 1974 Budget Appendix at 1095 (government-held stock in
federal intermediate credit banks was fully retired on December 31, 1968). Although the various farm
credit banks were authorized to issue nonvoting stock to the Governor of the Farm Credit Adm inistration
on a tem porary basis when iieeded to meet emergency credit needs of borrowers, see 12 U.S.C. § 2151(a)
(Supp. Ill 1973); see also id. §§ 2013(d), 2073(d) & 2124(e) (authorizing issuance of nonvoting stock to
Governor o f the Farm Credit Administration), the ownership o f such stock was, for m ost purposes, e x ­
pressly “deemed to not change the status of ownership of the banks," id. § 2151(a), and such stock was
required to be retired when no longer needed. See id. § 2151(b)
" T h e members of the Federal Home Loan Bank Board, who were appointed by the President with the
advice and consent of the Senate, see Reorganization Plan No. 3 of 1947, § 2(a), 3 C.F.R. 1071, 1072
(1943-1948), reprinted in 12 U.S.C. § 1437 note at 2532 (1970), served as the board o f directors o f the
Federal Home Loan Mortgage Corporation. 12 U.S.C. § 1452(a) (1970).

25
two were elected by the shareholders o f the federal land bank for that farm
credit district, two by the shareholders of the federal intermediate credit
bank, and two by the shareholders of the bank for cooperatives. 12 U.S.C. §
2223(a) (Supp. Ill 1973).12
Finally, each o f these corporations (except the federal reserve banks13)
issued obligations that were not guaranteed by the full faith and credit of the
United States government. Indeed, for most of these corporations there was
an express statutory bar to full faith and credit pledges. See 12 U.S.C. §
1719(b) (1970) (FNMA); id. § 1435 (federal home loan banks); 12 U.S.C. §
2155(c) (Supp. Ill 1973) (federal land banks, federal intermediate credit
banks, and banks for cooperatives). Although no provision expressly barred
FHLMC from issuing obligations backed by the federal government, section
306(c) of the Federal Home Loan Mortgage Corporation Act, 12 U.S.C. §
1455(c) (1970), provided that the obligations of the corporation would be
guaranteed, if at all, by the federal home loan banks. There was no provi­
sion for FHLM C’s obligations to be backed by the full faith and credit of the
United States.
From this review of the entities that we know Congress considered and
determ ined were either covered or not, it is relatively clear that the Act was
intended generally to reach a range of federally created corporations that
receive substantial funding from the government, that are subject to signifi­
cant federal control, and that issue obligations guaranteed by the federal
government. On the other hand, the Act was intended generally to exclude
the fairly small group of federally created corporations that are wholly pri­
vately funded, that have a significant measure o f independence in their
m anagem ent, and that issue obligations not backed by the full faith and
credit of the federal government.14 The apparent purpose of excluding from
coverage this latter type of corporation was to prevent privately owned insti­

12Section 2223(a) provided, in part, that:
Two o f the district directors shall be elected by the Federal land bank associations, two
by the production credit associations, and two by the borrowers from or subscribers to
the guaranty fund o f the bank for cooperatives.
T hese three groups which, in turn, were fully privately owned and managed, see 12 U.S.C. §§ 2032 &
2034 (Supp. III 1973) (federal land bank associations — which were distinct entities from the federal
land banks); id. §§ 2092 & 2094 (production credit associations), were the respective shareholders o f the
federal land banks, id. § 2013(b), the federal intermediate credit banks, id. § 2073(b), and the banks for
cooperatives, id. §§ 2124(c) & 2127.
13Federal Reserve notes were obligations o f the United States backed by the federal government. See
supra note 8.
14O f course, any given corporation may not have all o f the principal characteristics of either the in­
cluded or excluded corporations mentioned above, or it may have the characteristics o f one or the other,
but to a lesser or greater extent. In these circum stances, one must determine, with due regard for the
purposes o f the FFB Act, whether the corporation's principal characteristics render it most analogous to
those corporations that were intended to be covered by the FFB Act or to those that were not.

26
tutions from obtaining the advantages of Bank financing, in particular the
benefit of financing backed by the full faith and credit of the United States.
See infra note 16.13
The few actual discussions of the scope of the corporation coverage clause
in Congress or in the materials submitted in connection with the legislation
are fully consonant with these conclusions concerning the scope of the clause.
The original Federal Financing Bank bill was proposed by the Department
of the Treasury, and the definition of “Federal agency” was taken unaltered
from the language of that original Treasury proposal. Compare 12 U.S.C. §
2282 with Letter from John B. Connally, Secretary of the Treasury, to Carl
B. Albert, Speaker of the House of Representatives (Dec. 9, 1971) (attaching
draft bill). In submitting the proposed bill, the Secretary of the Treasury
emphasized that the corporation coverage clause was intended to exclude
“Government-sponsored agencies which are entirely privately owned and
issue obligations which are not directly guaranteed by the Government.” Id.
The Secretary’s understanding of the clause as excluding from coverage
government corporations that were wholly privately owned and whose obli­
gations were not backed by the government is supported by testimony given
by Paul Volcker, then-Under Secretary of the Treasury for Monetary Affairs,
before the House Committee on Ways and Means. In the course of exten­
sive questioning concerning the coverage of the proposed legislation, Mr.
Volcker reiterated that wholly privately owned corporations were excluded
from coverage. He explained that one of the principal reasons for excluding
these corporations was to prevent them from issuing to the Federal Financ­
ing Bank securities that were not government-backed in exchange for Bank
financing that would be backed by the full faith and credit of the United
States.16 These comments, especially taken together with others to the effect

13 These conclusions as to the reach of the clause are supported by the treatment of governm ent-spon­
sored agencies in the annual Budgets o f the United States. The list of corporations that the House and
Senate Reports stated were excluded from the FFB Act’s coverage closely corresponds to the list of
“government-sponsored credit agencies” contained in the appendix to the annual Budget report. Thus,
for example, the appendix to the Fiscal Year 1974 Budget (which was the last to be submitted before the
FFB act was passed) lists six such entities: the FNMA, the banks for cooperatives, the federal interme­
diate credit banks, the federal land banks, the federal home loan banks, and the FHLMC See 1974
B udget Appendix at 1084, 1092-1100. This almost exact correspondence with the list o f excluded
corporations is not coincidental; these corporations are excluded from the normal budgetary process
because they are considered to be “privately owned.” Id. ; see also Report o f the President's Commission
on Budget Concepts 30 (1967) (“Government-sponsored enterprises [should] be omitted from the bud­
get when such enterprises are completely privately owned.”).
“ Mr. Volcker testified that there were two basic reasons for excluding certain “ privately owned enter­
prise agencies":
One is that these institutions are privately owned, and there is some philosophic question
in our mind, if you will, whether privately owned institutions should in the nature of
things have access to this bank, which, of course, will be emitting full faith and credit
securities of the United States.
[Second,] [i]f you look at the practicalities, these agencies . . . are large borrowers
and they are well established and have a niche in the market, so to speak. . . . Their
securities are somewhat more easily traded than many of the securities that we do cover
here.
Federal Financing Bank A ct: Hearings on S. 3001 Before the House Comm, on Ways and M eans, 92d
Cong., 2d Sess. 26-27 (1972) (“1972 House Hearings”).

27
that the term “Federal agency” was intended to have a broad reach, see, e.g.,
Federal Financing Authority: Hearings on S. 1015, S. 1699, S. 3001 & S.
3215 Before the Senate Comm, on Banking, Housing and Urban Affairs, 92d
Cong., 2d Sess. 14 (1972) (statement of Paul Volcker) (there were to be few
exceptions to the coverage of the FFB Act), confirm our conclusions con­
cerning the relatively narrow scope o f the exclusion.

2. The Resolution Trust Corporation

RTC clearly most resembles the corporate entities that were intended to
be covered by the Act. It has all of the principal characteristics of the
covered corporations; it has none of the principal characteristics of the enti­
ties that were intended to be excluded. First,17 RTC has received substantial
funding from the federal government. Congress ordered the Treasury to
provide RTC $18.8 billion in fiscal year 1989 and authorized the Secretary
to use the proceeds from the sale of Treasury securities to supply the neces­
sary funds. 12 U.S.C. § 1441a(b)(14).
Second, RTC is subject to significant federal oversight and control. The
day-to-day operations of RTC are managed by the Federal Deposit Insurance
Corporation (“FDIC”), subject to the ultimate oversight of a new federal
agency, the “Oversight Board.” Id. § 1441a(a). Unless removed by the
Oversight Board, see 12 U.S.C. § 1441a(m), the FDIC functions as the ex­
clusive manager of RTC, see 12 U.S.C. § 1441a(b)(l)(C), and the members
o f the FDIC board of directors serve as the board of directors of RTC, see
id. § 1441a(b)(8)(A). RTC’s directors therefore are not selected by private
entities; they are ex, officio members who were appointed to their respective
positions at the FDIC by the President with the advice and consent of the
S enate.18
The Oversight Board has ultimate oversight responsibility for RTC. 12
U.S.C. § 1441a(a).19 It sets the “overall strategies, policies, and goals” of

l7FIRREA describes RTC as "an instrumentality o f the United States,” declares that it is an “agency of
the U nited States” for certain purposes, and states that, despite the fact “that no Government funds may
be invested in the Corporation,” it shall be treated, for purposes o f the Government Corporation Control
Act, "as a m ixed-ow nership Government corporation which has capital of the Government.” 12 U.S.C.
§ 1 441a(b)(l) & (2). At first blush, it m ight appear that these references to RTC as a government
agency would alone resolve the question whether it is a federal agency within the meaning of the FFB
Act. However, several o f the corporations that Congress expressly intended to exclude from coverage
under the FFB Act were also considered to be “instrumentalities” and “ mixed-ownership Government
corporations” for certain purposes. See 12 U.S.C. § 2011 (Supp. Ill 1973) (federal land banks were
‘‘federally chartered instrumentalities o f the United States”); id. § 2071 (federal intermediate credit
banks); id. § 2121 (banks for cooperatives); 31 U.S.C. § 856 (1970) (federal hom e loan banks, federal
land banks, federal intermediate credit banks, and banks for cooperatives were “mixed-ownership Gov­
ernm ent corporations” for purposes of the Government Corporation Control Act).
"S ectio n 2 (a )(l)o fth e Federal Deposit Insurance Act, 12U.S.C § 1812(a)(1), as amended by FIRREA,
Pub. L. No. 101-73, tit. II, § 203, 103 Stat. 183, 188 (1989), provides that the board of directors of the
FD IC consists of five members; the Comptroller of the Currency, the Director of the Office of Thrift
Supervision, and three other individuals to be appointed by the President with the advice and consent of
the Senate. The D irector of the Office o f Thrift Supervision is also a presidential appointee, see 12
U.S.C. § 1462a(c)(l), as is the Comptroller of the Currency, see id. § 2.

28
RTC. Id. § 1441a(a)(6). This authority includes the power to establish the
general policies and procedures for RTC’s handling of case resolutions, its
management and disposition of assets, and its use of debt securities, as well
as the power to establish RTC’s overall financial goals and its budget. Id. §
1441a(a)(6)(A).
The Oversight Board also reviews all rules and regulations issued by
RTC, and may, within certain limits, require modifications in these regula­
tions. Id. § 1441a(a)(6)(C). The Oversight Board also periodically reviews
the overall performance of RTC. Id. § 1441a(a)(6)(D). Moreover, under
certain specified circumstances, the Oversight Board is authorized to remove
the FDIC as exclusive manager of RTC and to appoint a new board of
directors and chief executive officer. Thus, although the Oversight Board is
not involved in RTC’s day-to-day resolution of specific cases, see id. §
1441a(a)(8)(A); H.R. Conf. Rep. No. 222, 101st Cong., 1st Sess. 410, re­
printed in 1989 U.S.C.C.A.N. 432, 449, the Board’s expansive authority over
RTC’s operations illustrates the substantial degree of federal governmental
control over RTC.
Finally, FIRREA provides that the full faith and credit of the United
States is pledged to the payment of any obligation issued by RTC, provided
only that the obligation expressly states its principal amount and date of
maturity. 12 U.S.C. § 1441 a(j)(3).
RTC technically has not received capital contributions from the Treasury
in exchange for RTC capital certificates. This alone, however, does not
prevent RTC from being covered under the Act. First, other corporations
that were clearly intended to be covered by the FFB Act, such as GNMA
and TVA, had no outstanding stock owned by the United States. Second,
although RTC issues “capital certificates” to REFCORP20 in exchange for
REFCORP’s compulsory cash contributions, 12 U.S.C. § 1441a(b)(10)(M),
these certificates do not confer many of the ordinary entitlements of corpo­
rate ownership. The certificates are nonvoting, pay no dividends, and do not
provide REFCORP with any control over the management or operation of
RTC 2! xhird, if REFCORP’s possession of these certificates were alone
considered sufficient to render RTC a wholly privately owned entity, it would
be difficult to explain the need for two separate entities. REFCORP would

19 The Oversight Board is comprised of five members: the Secretary of the Treasury (who serves as
Chairman), the Chairman of the Board of Governors of the Federal Reserve System, the Secretary o f
Housing and Urban Development, and two other individuals appointed by the President with the advice
and consent o f the Senate. 12 U.S.C. § 1441a(a)(3).
“ REFCORP is a private entity which is fully capitalized by the federal home loan banks, and which
raises m oney for RTC by selling REFCORP bonds, which are not backed by the full faith and credit o f
the United States. 12 U.S.C. § 1441b(d)(3), (e), (0(4) & (10). FIRREA, however, does establish a
Financing Corporation Principal Fund, which consists of zero-coupon Treasury securities purchased
with funds obtained from the federal home loan banks, to ensure principal payments on REFCORP
bonds. FIRREA also provides that the Secretary of the Treasury shall provide funds for REFCORP
bond interest payments that are not otherwise covered. Id. § 1441b(f)(2)(E)(i) & (g)(2).
11 REFCORP does retain a residual claim on the net assets o f RTC, if any, after RTC is term inated. At
that point, RTC’s assets and liabilities are transferred to the “FSLIC Resolution Fund,” which, after
selling the assets, transfers any net proceeds to REFCORP. 12 U.S.C. §§ 1441a(o)(2) & 1821a(e).

29
be unnecessary if it were merely a funding mechanism for another private
corporation.
Because RTC receives substantial government funding, is subject to sig­
nificant federal control, and issues obligations backed by the full faith and
credit of the United States, w e believe that it is a “corporation . . . estab­
lished by the Congress which is owned in whole or in part by the United
States,” as that phrase is used in the FFB Act.22 Accordingly, we conclude
that RTC is a “Federal agency” within the meaning of the Act.23

B. RTC is Authorized to Issue “Obligations" Within the Meaning o f the
FFB A ct

RTC must not only be a Federal agency, but also must be authorized to
“ issue, sell, or guarantee any obligation” within the meaning of the FFB Act
to be eligible for FFB financing. Section 3(2) of the Act provides that the
term “obligation” means

any note, bond, debenture, or other evidence of indebtedness,
but does not include Federal Reserve notes or stock evidenc­
ing an ownership interest in the issuing federal agency.

12 U.S.C. § 2282(2). The term thus is broadly defined to include virtually
any paper evidencing indebtedness. As explained below, we conclude that
RTC is authorized to issue “obligations” within the meaning of the FFB Act
because FIRREA authorizes RTC to issue notes in connection with its case
resolution duties. »
No provision o f FIRREA expressly grants RTC the authority to issue
obligations. Subsection 21A(b)(4) of the Federal Home Loan Bank Act
(“the FHLB Act”) as added by FIRREA, however, provides that, subject to
certain limitations, RTC “shall have the same powers and rights to carry out
its duties with respect to [financial institutions subject to its resolution au­
thority] as the [FDIC] has under sections 11, 12, and 13 of the Federal
Deposit Insurance Act [“the FDI Act”] with respect to [depository institu­
tions insured by the FDIC].” 12 U.S.C. § 1441a(b)(4). Section 13(c) of the
FDI Act provides that the FDIC is authorized, among other things, to make
loans or contributions to, or make deposits in, certain insured depository
institutions or other companies under certain circumstances. See 12 U.S.C.

12 Because w e conclude that RTC comes within the corporation coverage clause, we need not address
w hether RTC m ight also be considered an “executive departm ent” or an ‘‘independent Federal estab­
lishm ent” w ithin the meaning o f section 3(1).
23 Our analysis o f RTC is supported by the fact that the Fiscal Year 1991 Budget treats RTC, not as a
privately ow ned government-sponsored enterprise, but as an independent federal agency. See Execu­
tive Office o f the President o f the United States, Budget o f the United States Government, Fiscal Year
1991 A -2 1 to A-23, A -140 to A -142, A -27 1, A -118 1 to A -1182, A -12 13 to A -1226 (1990). See supra
note IS.

30
§ 1823(c). This broad grant of authority to provide financial assistance in
case resolutions has been interpreted to include the authority to issue notes
evidencing the FDIC’s obligation to provide certain sums at a future time.
See infra note 29. Since FIRREA provides that RTC shall have the same
authority to provide assistance in case resolutions as the FDIC possesses
under sections 11, 12, and 13 of the FDI Act,24 it follows that RTC is autho­
rized to issue obligations when providing financial assistance in case
resolutions. Accordingly, we conclude that RTC has the authority under 12
U.S.C. § 1441a(b)(4) to issue “obligations.”
There is really no doubt that Congress intended RTC to have such author­
ity. There are repeated, explicit references throughout the statute to RTC’s
authority to issue obligations. Subsection 21A(b)(7) of the FHLB Act, as
added by FIRREA, for example, provides that “[RTC’s] authority to issue
obligations and guarantees shall be subject to general supervision by the
Oversight Board . . . and shall be consistent with subsection (j).” 12 U.S.C.
§ 1441a(b)(7) (emphasis added). Subsection