Transactions Between the Federal Financing Bank and the
                   Department of the Treasury

T h is o p inion rev iew s a possible Federal F inancing B ank sale o f loan assets to the Civil S ervice R etire­
     m en t and D isab ility F u n d and other possible related transactions betw een the FFB an d the D epart­
     m en t o f the T reasu ry , an d concludes th a t the contem plated transactions w ould be perm issible under
     ex istin g law .


                                                                                                  February 13, 1996

                        M e m o r a n d u m O p in io n f o r t h e G e n e r a l C o u n s e l
                                      Depa r tm en t o f th e T rea su ry


   This memorandum responds to your request for advice concerning the legal
issues raised by a possible Federal Financing Bank (“ FFB” or “ Bank” ) sale
of loan assets to the Civil Service Retirement and Disability Fund (“ CSRDF”
or “ Fund” ) and other related transactions between the FFB and the Department
of the Treasury (“ Treasury” ). The FFB loan assets would be sold to the CSRDF
in exchange for a portion of the United States debt obligations (“ public debt obli­
gations” ) Treasury has previously issued to the CSRDF pursuant to 5 U.S.C.
§ 8348 and chapter 31 of title 31, United States Code.
   You have requested specific advice as to:

          (1) the FFB’s authority to sell to the Fund loan assets evidencing
          indebtedness incurred by the United States Postal Service
          (“ USPS” ) and Tennessee Valley Authority (“ TVA” );

          (2) the Treasury Secretary’s (“ Secretary” ) authority to invest Fund
          monies in obligations of the USPS and obligations of the TVA;

         (3) the FFB’s authority to accept, in exchange for the USPS and
         TVA indebtedness, payment in the form of public debt obligations;

         (4) whether Treasury may legally enter into a transaction with the
         FFB whereby Treasury would secure the public debt obligations
         from the FFB in exchange for the cancellation by Treasury of FFB
         obligations of equivalent value held by Treasury;

         (5) whether the FFB may sell the public debt obligations to Treas­
         ury and whether the FFB may accept as payment for the public
         debt obligations the cancellation by Treasury of FFB obligations
         of equivalent value held by Treasury;

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         Transactions Between the Federal Financing Bank and the Department o f the Treasury


          (6) the implications of the proposed transfer of public debt obliga­
          tions to Treasury with respect to 31 U.S.C. §3101, the debt limit;
          and

          (7) whether the USPS and TVA obligations the FFB proposes to
          sell to the CSRDF are subject to the debt limit.

   For the reasons indicated below, we conclude that the transactions you con­
template would be permissible under existing law. We conclude that the Federal
Financing Bank Act of 1973, Pub. L. No. 93-224, 87 Stat. 937 (codified as
amended at 12 U.S.C. §§2281-2296) (“ FFB Act” ), empowers the FFB to sell
obligations that were issued by “ federal agencies,” including obligations of the
USPS and TVA. We also conclude that the Secretary is authorized to invest
CSRDF monies in the USPS and TVA obligations the FFB intends to sell. In
addition, we conclude that the FFB has the authority to receive payment for the
USPS and TVA obligations in public debt obligations. Moreover, we conclude
that Treasury has the authority to enter into a transaction with the FFB whereby
Treasury would acquire the public debt obligations from the FFB in exchange
for the cancellation by Treasury of FFB obligations of equivalent value held by
Treasury. We also conclude that the FFB has the authority to accept the cancella­
tion of the FFB obligations as payment for the public debt obligations. In addition,
we conclude that the transaction between Treasury and the FFB would result in
Treasury’s acquiring the previously issued public debt obligations, thus freeing
up debt issuance capacity under the debt limit and permitting the Secretary to
issue additional public debt obligations to the public in a commensurate amount.
Finally, we conclude that the USPS and TVA obligations the FFB proposes to
sell to the CSRDF in exchange for the previously issued public debt obligations
are not subject to the debt limit.

                                              I. Background

  Congress established the FFB in 1973 to “ assure coordination of [federal and
federally assisted borrowing] programs with the overall economic and fiscal poli­
cies of the Government, to reduce the costs of Federal and federally assisted bor­
rowings from the public, and to assure that such borrowings are financed in a
manner least disruptive of private financial markets and institutions.” 12 U.S.C.
§2281. In order to further these purposes, the FFB is authorized to purchase the
obligations of federal agencies. 

As part of its regular financing
activities, the FFB acquired as loan assets certain obligations of the USPS and
TVA. Under the proposed transactions, the FFB would sell those loan assets to

  'T h e FFB Act also provides that “ [a]ny [f]ederaJ agency which is authorized to issue, sell, or guarantee any
obligation is authorized to issue or sell such obligations directly to the B ank." 

of the Office o f Legal Counsel in Volume 20


the CSRDF in exchange for public debt obligations of equivalent value that are
currently being held by that government-managed trust fund. Treasury would then
enter into a transaction with the FFB whereby Treasury would purchase the public
debt obligations received by the FFB in exchange for the cancellation by Treasury
of FFB obligations of equivalent value held by Treasury. This series of trans­
actions would result in Treasury’s acquiring the public debt obligations that had
been previously held by the CSRDF and the CSRDF’s holding the USPS and
TVA obligations that had been previously held by the FFB.
  Your office believes that such a series of transactions would create debt issuance
capacity under the debt limit in an amount equal to the public debt obligations
that would be transferred to Treasury from the CSRDF. In addition, your office
believes it has sufficient legal authority to undertake all the transactions described
above. Moreover, your office holds the view that the USPS and TVA obligations
that would be used to replace the public debt obligations previously held by the
CSRDF would not count against the debt limit.

                                 II. Legal Discussion

A. The FFB has the authority to sell the USPS and TVA obligations it holds
as loan assets.

   We believe the FFB has the authority to sell the USPS and TVA obligations
it currently holds as loan assets. Section 6 of the FFB Act authorizes the FFB
to “ make commitments to purchase and sell, and to purchase and sell on terms
and conditions determined by the Bank, any obligation which is issued, sold, or
guaranteed by a [f]ederal agency.” 12 U.S.C. § 2285(a); see also Consolidated
Aluminum Corp. v. TVA , 

, 469 (M.D. Tenn. 1978) (“ The Federal
Financing Bank may resell in the public markets any bonds of federal agencies
which it holds.” ).
   The USPS and TVA obligations the FFB contemplates selling to the CSRDF
are “ obligations” as that term is defined in the FFB Act. The FFB Act defines
“ obligation” as “ any note, bond, debenture, or other evidence of indebtedness.”
12 U.S.C. §2282(2). According to your office, the USPS obligations the FFB
intends to sell are indebtedness in the form of notes issued by the USPS under
39 U.S.C. §2005. Your office has also informed us that the TVA obligations
the FFB intends to sell are indebtedness in the form of bonds issued by the TVA
under 16 U.S.C. §831n-4. Accordingly, the USPS and TVA obligations the FFB
contemplates selling qualify as “ obligations” within the terms of the FFB Act.
   Both the USPS and the TVA satisfy the FFB A ct’s defmition of “ [f]ederal
agency.” The FFB Act defines the term “ federal agency” as “ an executive de­
partment, an independent [f]ederal establishment, or a corporation or other entity
established by the Congress which is owned in whole or in part by the United

                                             66
         Transactions Between the Federal Financing Bank and the Department o f the Treasury


States.” 12 U.S.C. §2282(1). Section 201 of title 39, United States Code, the
statutory provision establishing the USPS, provides that the USPS is “ an inde­
pendent establishment of the executive branch of the Government of the United
States.” The TVA, for its part, was created by Congress as a “ body corporate,”
16 U.S.C. §831, and its board of directors is “ appointed by the President, by
and with the advice and consent of the Senate.” 

TVA has also
been described by federal courts as “ an agency of the Federal Government,”
Ashwander v. TVA, 

, 315 (1936), “ an instrumentality of the United
States,” Tennessee Elec. Pow er Co. v. TVA, 

, 134 (1939) and “ a
wholly owned corporate agency and instrumentality of the United States.” United
States ex rel. TVA v. An Easement And Right-Of-Way, 

, 269
(W.D. Ky. 1965), a ffd , 

(6th Cir. 1967).2 In sum, since the loan
assets the FFB contemplates selling are “ obligations” that were “ issued” by enti­
ties that qualify as “ federal agencies” under the FFB Act, the FFB has the author­
ity to sell them.

B. The loan assets the FFB contemplates selling to the CSRDF are suitable
investments for that government-managed trust fund.

  The legality of the proposed transactions will also depend on whether the USPS
and TVA obligations the FFB intends to sell are suitable investments for the
CSRDF. We conclude that they are. The statutes authorizing the USPS and TVA
obligations in question both provide that obligations issued thereunder “ shall” :

          be lawful investments and may be accepted as security for all fidu­
          ciary, trust, and public funds, the investment or deposit of which
          shall be under the authority or control of any officer or agency
          of the [United States].

39 U.S.C. §2005(d)(3) (emphasis added); 16 U.S.C. §831n-4(d) (emphasis
added). Congress incorporated this boilerplate trust fund investment eligibility lan­
guage3 in the statute authorizing the USPS to issue the obligations the FFB in­
tends to sell in the Postal Reorganization Act, Pub. L. No. 91-375, sec. 2,
§ 2005(d)(3), 84 Stat. 719, 740 (1970), several years after the initial enactment
of the CSRDF’s statutory investment provisions, which occurred in 1926. See Act

   2This Office has previously opined that “ [sjeveral government corporations, such as the Tennessee Valley Author­
ity . . . were intended to be ‘[f]ederai agencies’ within the scope o f [section 2282’s] corporation coverage clause.”
Authority o f the Federal Financing Bank to Provide Loans to the Resolution Trust Corporation, 

, 22(1990).
   3 Congress has included this or similar language in several other statutes authorizing federal or congressionally
created entities to borrow. See, e.g., 12 U.S.C. §1435 (obligations issued by the Federal Home Loan Banks); 15
U.S.C. § 7 13 a-4 (bonds, notes, o r debentures issued by the Commodity Credit Corporation); 12 U.S.C. § 1723c (obli­
gations of the Federal National Mortgage Association); 12 U.S.C. § 2288(d) (obligations issued by the FFB).


                                                        67
                             Opinions o f the O ffice o f Legal Counsel m Volume 20


of July 3, 1926, ch. 801, §11, 44 Stat. 904, 910-11.4 The language was similarly
included in the statute authorizing the TVA obligations the FFB intends to sell
when that statute was enacted into law in 1959. See Act of Aug. 6, 1959, Pub.
L. No. 86-137, sec. 1, §15d(d), 73 Stat. 280, 283. Although the CSRDF statute
contains investment provisions delineating the types of obligations the Secretary
is authorized to purchase on behalf of the CSRDF, these provisions essentially
mirror boilerplate provisions contained in statutes governing the investments of
other government-managed trust funds.5 Moreover, although the CSRDF statute’s
investment provisions have been amended from time to time since they were ini­
tially enacted,6 our review of the amendments reveals no expressed intention on
the part of Congress to exempt the CSRDF from the effect of trust fund investment
eligibility provisions such as those included in the relevant USPS and TVA stat­
utes. Accordingly, we conclude that CSRDF monies may be invested in the USPS
and TVA obligations the FFB intends to sell in addition to the obligations specifi­
cally delineated in 5 U.S.C. §8348.7
   4 Section 11, which appears to have been th e first provision specifically delineating the types of obligations in
which C SR D F m onies could be invested, provided in relevant part:
      The Secretary o f the Treasury shall invest from time to time, in interest-bearing securities of the United
      States o r Federal farm-loan bonds, such portions o f the “ civil-service retirement and disability fund” as
      in his judgm ent may not be immediately required for the payment o f annuities, refunds, and allowances
      as herein provided.
44 Stat. at 910-11.
   5 The C SR D F statute states:
      The Secretary shall immediately invest in interest-beanng securities o f the United States such currently
      available portions o f the Fund as are not immediately required for payments from the Fund. The income
      derived from these investments constitutes a part o f the Fund.
5 U.S.C. § 8348(c). The statute further provides that the Secretary may invest CSRDF monies in public debt obliga­
tions which carry interest rates determined by the Secretary based on a formula set forth in the statute. See 

In addition, the C SR D F statute authorizes the Secretary to “ purchase other interest-bearing obligations
of the U nited States, or obligations guaranteed as to both principal and interest by the United States, on original
issue or at the market price only if he determines that the purchases are in the public interest.” 

Lan­
guage authorizing such investments is commonly found in the statutes setting forth investment criteria for govern­
ment-m anaged trust funds. See, e.g., 42 U.S.C. § 401(d) (Social Security Trust Funds); 42 U.S.C. § 1104(b) (Unem­
ployment Trust Fund); 20 U.S.C. § 2009(b) (H arry S. Truman Memorial Scholarship Trust Fund); 20 U.S.C. § 5202(b)
(Eisenhow er Exchange Fellowship Program T rust Fund).
   6 The m ost notable changes in the CSRDF statu te’s investment provisions occurred in 1956, when Congress first
expressly authorized the Secretary to purchase on behalf o f the CSRDF public debt obligations that carry interest
rates determ ined by the Secretary based on a statutory formula, see Civil Service Retirement Act Amendments of
 1956, ch. 804, sec. 401, § 17(d), 70 Stat. 736, 7 5 9 -6 0 , and in 1961, when Congress required the Secretary to invest
Fund monies in such public debt obligations unless he determines that it is in the public interest to invest the monies
in other interest-bearing obligations of the U nited States. See Act o f Oct. 4, 1961, Pub. L. No. 87-350, sec. 1(a),
§ 17(d), 75 Stat. 770, 770. The current wording o f the C SR D F statute’s investment provisions is essentially the
same as it w as in 1961. See 5 U.S.C. §8348(c)-(e).
   7 The C SR D F statute's investment provisions do not prohibit the investment of CSRDF monies in the relevant
USPS and TVA obligations. G eneral rules o f statutory construction dictate that, if possible, statutes on the same
subject m atter should be construed in harmony with one another. See 2B Norman J. Singer, Sutherland Statutory
Construction §51.02, at 122 (5th ed. 1992); see also Watt v. Alaska, 

, 267 (1981). If that cannot
be accomplished, “ [i]t is an elementary tenet o f statutory construction that ‘[w]here there is no clear intention other­
wise, a specific statute will not be controlled o r nullified by a general o n e / ” Guidry v. Sheet Metal Workers Nat’I
Pension Fund , 

, 375 (1990) (quoting Morton v. Mancari, 

, 550-51 (1974)). Due to the
boilerplate nature o f the C SRD F statute's investm ent provisions, we believe we are not here confronted with the
task o f reconciling a specific statute against a general one, but are, instead, confronted with the task o f reconciling
tw o general statutes. Moreover, even if we w ere to accept the notion that the CSRDF statute’s investment provisions
are more specific, principles o f statutory construction require that those provisions be construed in harmony with


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         Transactions Between the Federal Financing Bank and the Department o f the Treasury


   Our conclusion concerning the relationship between the general trust fund in­
vestment eligibility language contained in the USPS and TVA statutes and the
CSRDF is consistent with established federal case law, the longstanding practice
and understanding of the Treasury and Justice Departments, and a 1985 Comp­
troller General opinion. In M anchester Band o f Pomo Indians, Inc. v. United
States, 

, 1244—45 (N.D. Cal. 1973), a federal district court deter­
mined that trust fund investment eligibility language resembling that which is con­
tained in the USPS and TVA statutes mentioned above made obligations issued
under statutes containing that language just as eligible for investment by govern­
ment-managed trust funds benefiting American Indians as investments specifically
mentioned in the trust fund statutes themselves. The court expressly cited as eligi­
ble for investment by “ all [g]ovemment managed trust funds” obligations issued
pursuant to 16 U.S.C. §831n-4, the provision of the United States Code under
which the TVA obligations the FFB intends to sell were issued. M anchester 

. The court also found that its conclusion concerning the
effect of the relevant trust fund investment eligibility language was “ in accord
with the intent of Congress.” 

   In 1966, this Office opined that obligations of the federal land banks and the
banks for cooperatives are eligible investments for all government-managed trust
funds, where the statutes authorizing the issuance of such obligations contained
language similar to that contained in the relevant USPS and TVA statutes. See
Memorandum for Fred B. Smith, General Counsel, Department of the Treasury,
from Frank M. Wozencraft, Assistant Attorney General, Office of Legal Counsel
(Oct. 7, 1966).8 In concluding that the specific trust fund investment eligibility
language at issue was sufficient to authorize investment by all government-man­
aged trust funds, this Office stated that statutory language essentially the same
as that contained in the relevant USPS and TVA statutes “ presents no problems
of construction and plainly permits investments of the various Government trust
funds in the affected securities whether or not the statutes creating the trusts them­
selves do so.” 

.9 Similarly, in a 1934 opinion, Attorney General Homer
Cummings advised that, even though the specific trust fund statute at issue did
not expressly authorize it, government-managed postal savings funds could be in­
the trust fund investment eligibility language contained in the relevant USPS and TVA statutes. Because the CSRDF
statute’s investment provisions do not purport to supersede other statutes establishing that obligations issued there-
under are eligible investments for government-managed trust funds and the relevant USPS and TVA statutes dem­
onstrate Congress’s intention that obligations issued thereunder be eligible investm ent for all government-managed
trust funds, the better interpretation is that the relevant USPS and TVA statutes have the effect of expanding the
universe o f authorized CSRDF investments.
   8 The pertinent trust fund investment eligibility language pertaining to obligations o f the federal land banks and
the banks for cooperatives provided that obligations issued by those entities " 's h a ll be a lawful investment for
all fiduciary and trust funds, and may be accepted as security for al! public deposits.’ ” 

(quoting section
27 o f the Federal Farm Loan Act, ch. 245, 39 Stat. 360, 380 (1916), and section 1 of the Act o f August 23, 1954,
ch. 834, 68 Stat. 770, 771).
   9 The statutes to which this Office referred provided that the obligations issued thereunder “ shall be lawful invest­
ments, and may be accepted as security, for all fiduciary, trust, and public funds the investment or deposit o f which
shall be under the authority or control o f the United States or any officer or officers thereof.” 

& n.3.


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                             Opinions o f the Office o f Legal Counsel in Volume 20


vested in bonds issued under the Federal Farm Mortgage Corporation Act on ac­
count of trust fund investment eligibility language contained in that act which
was similar to that contained in the relevant USPS and TVA statutes. Investment
o f P o sta l Savings Funds in B onds o f F ederal Farm M ortgage Corporation, 37
Op. Att’y Gen. 479, 480 (1934).10
   It has been Treasury’s longstanding practice to invest monies contained in gov-
emment-managed trust funds, including the CSRDF, in public debt obligations
or other obligations that have been authorized by Congress as legal investments
for all government-managed trust funds. See Temporary Increase in D ebt Ceiling:
H earings Before the House Comm, on W ays and M eans, 90th Cong. 52 (1967)
(statement of Hon. Henry H. Fowler, Secretary of the Treasury) (“ 1967 Hear­
ings” ). 11
   During the 1985 debt limit crisis, Secretary of the Treasury James Baker in­
vested CSRDF monies in obligations issued by the FFB pursuant to 12 U.S.C.
§ 2288(a), which are not public debt obligations. That action was the subject of
a congressional hearing at which a Comptroller General opinion was presented.
See F ederal Financing Bank and the D eb t Ceiling: Hearing Before the Subcomm.
on Econom ic Stabilization of the House Comm, on Banking, Finance and Urban
Affairs, 99th Cong. 28-34 (1985) (“ Federal Financing Bank and the D ebt Ceil­
in g” ). In concluding that the investment and related transactions met all applicable
legal requirements, the Comptroller General opinion stated that “ 12 U.S.C.
§ 2288(d) provides that the [FFB’s] obligations ‘shall be lawful investments, and
may be accepted as security for all fiduciary, trust, and public funds, the invest­
ment of which shall be under the authority or control of the United States.’ ”
Memorandum for the Honorable John J. LaFalce, Chairman, Subcommittee on
Economic Stabilization, House Committee on Banking, Finance and Urban Af­
fairs, from Milton J. Socolar, Comptroller General of the United States, B-138524,
at 2 (Comp. Gen. 1985) (“ Comp. Gen. Op.” ), reprinted in Federal Financing
Bank an d the D ebt Ceiling at 32.

C. The FFB is authorized to receive payment for the loan assets it intends
to seU to the CSRDF in public debt obligations.

 In analyzing the proposed transactions, we must also consider whether it is per­
missible for the FFB to receive payment in the form of public debt obligations
    10The pertinent tnist fund investment eligibility language provided as follows: “ ‘Such bonds . . . may be accepted
as security, for all fiduciary, trust, and public funds the investment or deposit o f which shall be under the authority
o r control o f the U nited States o r any officer o r officers thereof.’ ” 

Farm Mortgage Corporation
A ct, ch. 7, § 4(a), 48 Stat. 344, 345 (1934)).
    11 In testim ony before the House Ways and M eans Committee, Secretary Fow ler stated that, in practice. Treasury
had refrained from investing monies contained in government-managed trust funds in participation certificates issued
by the Export-Im port Bank because, unlike the statute authorizing the issuance o f Federal National Mortgage Associa­
tion participation certificates, the statute authorizing the issuance o f Export-Import Bank participation certificates
did not contain a provision making them generally eligible for investment by government-managed tnist funds. Id.-,
see also 

                                                          70
        Transactions Between the Federal Financing Bank and the Department o f the Treasury


for the USPS and TVA obligations it intends to sell. We conclude that the FFB
is authorized to accept public debt obligations as a form of payment. As stated
above, the FFB Act authorizes the FFB to sell obligations issued by federal agen­
cies “ on terms and conditions determined by the Bank.” 12 U.S.C. §2285(a).
We believe this broadly worded statutory authority allows the FFB reasonably
to negotiate and determine the form of compensation to be received upon such
a sale.12 Accordingly, no significant legal issues appear to be raised by the FFB’s
plan to receive public debt obligations in exchange for the USPS and TVA obliga­
tions it intends to sell to the CSRDF.
   In his 1985 opinion, the Comptroller General apparently concluded that no sig­
nificant legal issues were raised by the FFB’s acceptance of public debt obliga­
tions in exchange for the sale of its own obligations to the CSRDF. See Comp.
Gen. Op. at 2, reprinted in Federal Financing Bank and the D ebt Ceiling at 32.
In view of the fact that we have found nothing in the FFB Act prohibiting the
FFB’s acceptance of public debt obligations in exchange for the loan assets it
intends to sell, and in light of the Comptroller General’s apparent view in 1985
that such activity did not raise legal issues, we see no reason why, under current
conditions, the FFB should not be able to accept public debt obligations as com­
pensation for the USPS and TVA obligations it intends to sell.

D. Treasury has the authority to enter into a transaction with the FFB
whereby Treasury would purchase the public debt obligations received by
the FFB in exchange for the cancellation by Treasury of FFB obligations of
equivalent value held by Treasury.

   We must also consider whether Treasury has the authority to enter into a trans­
action with the FFB whereby Treasury would purchase the public debt obligations
received by the FFB in exchange for the cancellation by Treasury of FFB obliga­
tions of equivalent value held by Treasury. We conclude that Treasury has the
authority to enter into such a transaction.
   Treasury has the authority to redeem or purchase public debt obligations prior
to maturity. Section 3111 of title 31, United States Code, states in pertinent part:

             An obligation may be issued under this chapter to buy, redeem,
          or refund, at or before maturity, outstanding bonds, notes, certifi­
          cates of indebtedness, Treasury bills, or savings certificates of the
          United States Government. Under regulations of the Secretary of
          the Treasury, money received from the sale of an obligation and

  12   As noted above, the FFB Act also grants the FFB the authority to purchase obligations issued by federal agencies.
See 12 U.S.C. §2285(a). Since the public debt obligations the FFB intends to receive in exchange for the USPS
and TVA obligations were issued by Treasury, a “ federal agency’* under the FFB Act, it would appear that the
FFB has the authority to purchase them from the CSRDF.


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                    Opinions of the O ffice o f Legal Counsel in Volume 20


       other money in the general fund of the Treasury may be used in
       making the purchases, redemptions, or refunds.

31 U.S.C. §3111.
   Treasury issued the public debt obligations currently being held by the CSRDF
pursuant to 5 U.S.C. §8348 and chapter 31 of title 31, United States Code. See
5 U.S.C. § 8348(d) (“ The purposes for which obligations of the United States
may be issued under chapter 31 of title 31 are extended to authorize the issuance
at par of public-debt obligations for purchase by the Fund.” ). All forms of public
debt obligations covered by 31 U.S.C. §3111 are authorized to be issued under
chapter 31 of title 31, United States Code. See 31 U.S.C. §§3102-3105. Accord­
ingly, although the CSRDF statute imposes greater limits on the Secretary’s discre­
tion to fashion terms and conditions of public debt obligations issued to the
CSRDF than the statute setting forth the procedures for issuing public debt obliga­
tions in general, com pare 5 U.S.C. § 8348(d) with 31 U.S.C. §3121, the public
debt obligations currently being held by the CSRDF are no less subject to the
terms of § 3111 than public debt obligations held by the general public. Whether
a public debt obligation held by the CSRDF is a “ bond,” “ note,” or “ certificate
of indebtedness” for purposes of §3111 depends, therefore, on the instrument’s
term of maturity, which was determined upon its issuance, and not on its status
as an investment of a government-managed trust fund. Cf. 31 U.S.C. § 3102(a)
(specifying that bonds authorized to be issued under that section may be issued
either “ to the public” or “ to Government accounts.” ). Your office has informed
us that, based on this analysis, the public debt obligations the FFB plans to acquire
from the CSRDF are all covered by the provisions of 31 U.S.C. §3111.
   As fashioned, §3111 does not expressly authorize Treasury to finance the re­
demption prior to maturity of previously issued public debt obligations with all
possible instruments of value under its control. However, it is reasonable to inter­
pret §3111 as not imposing strict limitations on the manner in which Treasury
may redeem public debt obligations, but rather as merely providing express author­
ity for the use by Treasury of two methods for raising the funds needed to effect
such redemptions. A contrary interpretation of §3111 would produce the illogical
result of barring Treasury from using other means at its disposal that, depending
on the circumstances, might be less costly to the government or more fiscally
and financially prudent than the methods expressly contemplated under the statute.
Accordingly, we conclude that § 3111 impliedly grants Treasury the authority to
use the FFB obligations to finance its purchase of the public debt obligations.
   Our conclusion that Treasury has implied authority under 31 U.S.C. §3111 to
use a portion of its FFB obligation holdings to purchase prior to maturity the
public debt obligations at issue is bolstered by the statutory authority granted to
the Secretary pursuant to 31 U.S.C. §324 and 12 U.S.C. § 2288(b). Section 324
of title 31, United States Code, provides in relevant part:

                                             72
         Transactions Between the Federal Financing Bank and the Department o f the Treasury


          (a) The Secretary of the Treasury may —
             (1) dispose of obligations —

                     (A) acquired by the Secretary for the United States Govern­
                     ment . . . .

          (b) The Secretary may dispose or extend the maturity of obligations
          under subsection (a) of this section in the way, in amounts, a t prices
          (for cash, obligations, property, or a combination o f cash, obliga­
          tions, o r property), and on conditions the Secretary considers advis­
          able and in the public interest.

31 U.S.C. §324 (emphasis added). Treasury acquired the FFB obligations it cur­
rently holds pursuant to 12 U.S.C. § 2288(b). That statute authorizes the FFB to
“ issue its obligations to the Secretary” and authorizes the Secretary to purchase
any such obligations.13 Accordingly, the FFB obligations currently being held
by Treasury are “ obligations . . . acquired by the Secretary for the United States
Government,” as those terms are used in 31 U.S.C. §324. Subsection (b) of §324
grants the Secretary broad authority to dispose of the FFB obligations he holds.
We believe that authority includes the authority to use them as currency in acquir­
ing the public debt obligations.
   In addition to general authority to dispose of “ obligations . . . acquired by
the Secretary for the United States Government” under §324, the Secretary has
specific authority to dispose of the FFB obligations he holds. Section 2288(b)
of title 12, United States Code, provides that “ [t]he Secretary . . . may sell, upon
such terms and conditions and a t such price or prices as he shall determine,
any of the obligations acquired by him under this subsection.” 12 U.S.C.
§ 2288(b) (emphasis added). This broadly worded authority also provides support
for the conclusion that the Secretary may dispose of the FFB obligations he holds
in a manner that allows him to acquire the public debt obligations, as it appears
to allow the Secretary reasonably to determine the terms and conditions of such
a disposal.
   We believe our conclusion that Treasury has the authority to use the FFB obliga­
tions it currently holds to purchase the public debt obligations it has previously
issued to the CSRDF is again consistent with the 1985 Comptroller General opin­
ion. In that opinion, the Comptroller General did not question Treasury’s authority,
   13 Ln order to enable the FFB to support its financing activities, the FFB Act provides that, in addition to issuing
up to $15 billion worth o f its debt obligations to the public, 4"the [FFB] is . . . authorized to issue its obligations
to the Secretary o f the T rea su ry /’ 12 U.S.C. § 2288(b), see also H.R. Rep. No. 92-1478, at 5 (1972) (“ The Bank’s
activities would be financed, in general, by . . . Bank obligations issued to the Secretary o f the Treasury.” ). The
same provision o f the FFB Act that authorizes the FFB to issue its obligations to Treasury also authorizes Treasury
to purchase and agree to purchase such obligations. 12 U.S.C. § 2288(b). No express limitation is placed on the
amount of its ow n obligations that the FFB may issue to Treasury. Treasury currently holds approximately $67
billion worth o f these obligations.


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exercised in a similar manner, to purchase from the FFB prior to maturity the
public debt obligations it had previously issued to the CSRDF. See Comp. Gen.
Op. at 2, reprinted in Federal Financing Bank and the D ebt Ceiling at 32.
  Based on the authorities granted to the Secretary under 31 U.S.C. §§3111 and
324, and 12 U.S.C. § 2288(b), and the conclusions of the 1985 Comptroller Gen­
eral opinion, we conclude that Treasury would have the authority to purchase
from the FFB prior to maturity the public debt obligations it has previously issued
to the CSRDF pursuant to the transaction described above.

E. The FFB has the authority to sell the public debt obligations to Treasury
and to accept the cancellation by Treasury of FFB obligations of equivalent
value as payment for the public debt obligations.

  Treasury’s ability to complete the proposed transactions will also depend on
whether the FFB has the authority to sell the public debt obligations and accept
the cancellation by Treasury of FFB obligations of equivalent value as payment
for the public debt obligations. We conclude that the FFB has such authority.
As stated above, section 6 of the FFB Act grants the FFB the authority to sell
obligations issued by federal agencies. 12 U.S.C. § 2285(a). The public debt obli­
gations the FFB intends to sell to Treasury are “ obligations” within the terms
of the FFB Act, as they are represented in the form of notes, bonds, debentures,
or other evidence of indebtedness. 

public debt obligations also
were issued by the Department o f the Treasury, a “ federal agency” as that term
is defined in the FFB Act. See 

sum, the FFB Act grants the
FFB the authority to sell the public debt obligations to Treasury. Moreover, as
stated above, the FFB Act authorizes the FFB to sell obligations issued by federal
agencies “ on terms and conditions determined by the Bank.” 

This
broadly worded statutory authority allows the FFB reasonably to negotiate and
determine the form of compensation to be received upon such a sale. Accordingly,
the FFB may, consistent with this authority, require and accept the cancellation
of a portion of its own indebtedness held by Treasury as payment for the public
debt obligations.14




   14 The purchase authority provided to the F F B under section 6 o f the FFB Act also authorizes the FFB to accept
the cancellation o f a portion o f its own obligations held by Treasury as payment for the public debt obligations.
By accepting the cancellation o f the FFB obligations as payment for the public debt obligations, the FFB would
be effectively purchasing such obligations. B ecause the FFB obligations are “ obligations” that were issued by the
FFB, a “ federal agency” under the FFB Act, see 12 U.S.C. §§2282(1), 2283, the FFB has the authority to purchase
them in the m anner discussed above.


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F. Transfer of the relevant public debt obligations to Treasury would reduce
the amount of outstanding debt subject to limit by the amount of public debt
obligations transferred.

  In our analysis, we must also consider the effect on the debt limit of the pro­
posed transfer of public debt obligations from the CSRDF to Treasury. We con­
clude that the transfer of these obligations to Treasury would effectively cancel
them, reducing the amount of outstanding debt subject to limit and thus creating
room under the debt limit for additional public borrowing. The relevant provision
of the debt limit statute, 31 U.S.C. § 3 101(b), provides:

          The face amount of obligations issued under this chapter and the
       face amount of obligations whose principal and interest are guaran­
       teed by the United States Government (except guaranteed obliga­
       tions held by the Secretary of the Treasury) may not be more than
       $4,900,000,000,000, outstanding at one time, subject to changes pe­
       riodically made in that amount as provided by law through the con­
       gressional budget process described in Rule XLIX of the Rules of
       the House of Representatives or otherwise.

Quite simply, if transferred to Treasury, the public debt obligations in question
would no longer be “ outstanding” within the terms of the debt limit statute. Ac­
cordingly, the amount of outstanding debt subject to limit would be reduced by
the amount of such public debt obligations. See The Secretary o f the Treasury’s
Authority With Respect to the Civil Service Retirement and D isability Fund, 

, 291 n.9 (1995); see also Comp. Gen. Op. at 2, reprinted in Fed­
eral Financing Bank and the D ebt Ceiling at 32 (Comptroller General opining
that “ when the [FFB] prepaid $5 billion of its debt with Treasury’s own obliga­
tions, Treasury’s outstanding debt was reduced by $5 billion. Therefore, Treasury
was able to borrow an additional $5 billion from the public.” ). The borrowing
capacity freed up by the transaction could be used to support additional Treasury
borrowing up to the debt limit, if, as we indicate below, the loan assets the FFB
intends to sell to the CSRDF as a replacement for the public debt obligations
at issue are not themselves subject to the debt limit.

G. The USPS and TVA obligations the FFB intends to sell to the CSRDF
in exchange for the transferred public debt obligations are not themselves
subject to the debt limit.

   In order to ensure that the series of transactions contemplated by Treasury would
allow it legally to issue additional public debt obligations to the public in an
amount less than or equal to the amount of public debt obligations secured from
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the CSRDF through the FFB’s sale of the loan assets, we must consider whether
the USPS and TVA obligations that would replace the transferred public debt
obligations as CSRDF investments are not themselves subject to the debt limit.
Based on the express terms and the legislative history of the relevant USPS and
TVA borrowing statutes, we conclude that they are not.
  As its express terms suggest, the debt limit applies to debt issued directly by
Treasury pursuant to chapter 31 of title 31 of the United States Code. It also
applies to direct borrowing by certain other federal agencies and corporations
which is guaranteed as to principal and interest by the United States. See H.R.
Rep. No. 79-246, at 2-3 (1945); S. Rep. No. 79-106, at 2 (1945).15 As indicated
by his 1985 opinion, the Comptroller General holds the view that the phrase “ obli­
gations whose principal and interest is guaranteed by the United States Govern­
ment” applies to the direct obligations of federal issuers other than Treasury if
the statutes authorizing such issuers to borrow expressly provide for such guar­
antee or Congress has indicated its desire to provide the guarantee in the relevant
legislative history. See Comp. Gen. Op. at 2-3, reprinted in Federal Financing
Bank and the D e b t Ceiling at 32—33 .
   The USPS and TVA obligations the FFB intends to sell are not subject to the
debt limit. Obligations of the USPS and TVA are not issued by Treasury pursuant
to chapter 31 of title 31 of the United States Code. Therefore, in order for the
obligations the FFB intends to sell to be subject to the debt limit, they must be
“ obligations whose principal and interest are guaranteed by the United States
Government.” The statute authorizing the issuance of USPS obligations provides
that such obligations shall “ not be obligations of, nor shall payment of the prin­
cipal thereof or interest thereon be guaranteed by, the Government of the United
States, except as provided in section 2006(c) of this title.” 39 U.S.C. § 2005(d)(5).
Section 2006(c) provides, in turn, that obligations issued by the USPS shall be
guaranteed as to principal and interest by the United States,

           i f and to the extent that—

           (1) the [USPS] requests the Secretary . . . to pledge the full faith
           and credit of the Government of the United States for the payment
           of principal and interest thereon; and
  15   See also Second Liberty Bond Aci, as Amended—Participation Certificates Issued by Federal National Mortgage
Association, 42 Op. A tt’y Gen. 341, 342 (1967) (“ [B]y the act o f April 3, 1945, c. 51, 59 Stat. 47, Congress
brought the borrowings o f certain agencies o th e r than the Treasury within the overall debt limitation. . . . The
[relevant] Com m ittee reports . . . reveal that [the 1945 debt limit] amendment was adopted to embrace the bor­
rowings o f each o f eight agencies, named in the reports, whose governing statutes provided that their obligations
were fully and unconditionally guaranteed as to principal and interest by the United States. . . . From this brief
history, it is clear that [the debt limit] is concerned with debt that arises from borrowing, and with nothing else.” );
1967 Hearings at 40 (Secretary o f the Treasury Henry H. Fowler testifying that “ the history of [the 1945 act amending
the statutory debt limit], which first brought so-called guaranteed obligations w ithin the statutory debt limit, confirmed
that Congress had in mind only certain obligations of certain agencies. The com m ittee report named each Government
agency then being affected. And there were cited the respective statutes authorizing the issuance o f the so-called
obligations.” ).


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         Transactions Between the Federal Financing Bank and the Department o f the Treasury


          (2) the Secretary, in his discretion, determines that it would be in
          the public interest to do so.

(emphasis added).
   The legislative history of the statutory provisions discussed above provides:

          Obligations sold to the public would not be guaranteed by the
          United States and would not be within the debt ceiling unless the
          Postal Service requests the Secretary of the Treasury to pledge the
          full faith and credit of the United States and the Secretary deter­
          mines that it would be in the public interest to do so.

H.R. Rep. No. 91-1104, at 10 (1970), reprinted in 1970 U.S.C.C.A.N. 3649, 3659.
Your office has informed us that the USPS obligations the FFB contemplates sell­
ing were not issued under the special conditions set forth in § 2006(c), but were,
instead, issued pursuant to §2005. Based on this representation, we conclude that
such obligations are not subject to the debt limit.
   Similarly, the statutory provision authorizing the issuance of the TVA obliga­
tions the FFB intends to sell to the CSRDF, 16 U.S.C. §831n-4,16 provides that
obligations issued thereunder “ shall not be obligations of, nor shall payment of
the principal thereof or interest thereon be guaranteed by, the United States.”
16 U.S.C. §831n-4(b). Accordingly, the TVA obligations the FFB intends to sell
to the CSRDF are also not subject to the debt limit.

                                                                       RICHARD L. SHIFFRIN
                                                                Deputy Assistant A ttorney General
                                                                    Office o f Legal Counsel




   16Section 831n—4{a) o f title 16 currently authorizes the TVA to issue up to $30 billion in debt obligations “ to
assist in financing its power program and to refund such [indebtedness].*'


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