Service by Federal Officials on the Board of Directors of the
               Bank for International Settlements
18 U .S.C . § 208(a) does not prohibit the C hairm an o f the Federal Reserve B oard and the President
   o f the F ederal R eserve B ank of New Y ork from serving in their official capacities on the Board
   o f D irectors o f the B ank for International Settlem ents

                                                                                                May 6, 1997

                     M   em o ran d u m   O p in io n   fo r t h e   G en e r a l C o u n sel
                                     Fe d e r a l R e s e r v e B o a r d


    You have asked whether, absent a waiver, 18 U.S.C. § 208(a) would forbid the
 Chairman of the Federal Reserve Board and the President of the Federal Reserve
 Bank of New York from serving in their official capacities on the Board of Direc­
 tors of the Bank for International Settlements (“ BIS” ). We believe that the statute
 would not forbid this service.
    The BIS was formed in 1930 “ for the main purpose of collecting and transfer­
 ring German reparations.” Charles J. Woelfel, Encyclopedia o f Banking and
 Finance 95 (10th ed. 1994). It is now “ the major forum for consultation, coopera­
 tion, and information exchange among central banks, including member central
banks of thirty-two countries of which eight are on the BIS Board.” Letter for
 Hon. Donald W. Riegle, Jr., Chairman, Committee on Banking, Housing and
Urban Affairs, United States Senate, from Alan Greenspan, Chairman, Federal
Reserve Board at 1 (June 20, 1994). Central banks own about 85 percent of the
BIS’s stock, with the remaining 15 percent in the hands of private shareholders.
E ncyclopedia o f Banking and Finance at 96. Although the BIS is a profit-making
institution and declares an annual dividend, “ [t]he right of representation and
voting, in proportion to the number o f shares subscribed by each country, may
be exercised by the central bank of that country, or by its nominee, or in cases
where the central bank does not nominate an institution, the BIS may designate
a financial institution not objected to by the central bank of the country in ques­
tion.” Federal Reserve Board Staff, Background Note on the Federal R eserve’s
Relationship with the Bank fo r International Settlements at 11 (June 1994).
    The BIS reserves two seats on its Board for the central bank of the United
States, but the Federal Reserve Board did not take up these seats until 1994. At
that time, the Chairman assumed one seat and the President of the Federal Reserve
Bank o f New York assumed the other.
    Under 18 U.S.C. § 208(a) (1994), an officer or employee of the executive branch
may not participate personally or substantially in any particular matter in which
he or she has a financial interest. The statute also imputes certain other financial
interests to the officer and employee. These interests include those of any
“ organization in which [the officer o r employee] is serving as . . . director.”

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   Service by Federal Officials on the Board o f Directors o f the Bank fo r International Settlements


An opinion of our office, issued November 19, 1996, concluded that 18 U.S.C.
§ 208(a) “ would prevent a government employee from serving on the board of
directors of an outside organization in his or her official capacity, in the absence
of: (1) statutory authority or a release of fiduciary obligations by the organization
that might eliminate the conflict of interest, or (2) a waiver of the requirements
of § 208(a), pursuant to 18 U.S.C. § 208(b).” Service on the B oard o f D irectors
o f Non-Federal Entities by Federal Bureau o f Investigation Personnel in Their
Official Capacities, 

, 379 (1996). We reasoned that an
‘ ‘employee performs official duties for [his or her agency] in serving on the board
of the outside organization” and that, therefore, “ §208 would apply to any action
the employee takes as a director that affects the financial interests of the outside
organization.” 

However, where Congress has authorized the service
by statute, the official “ serves . . . in an ex officio rather than personal capacity,”
owes a duty only to the United States, and does not violate § 208. See Applicability
o f 18 U.S.C. § 2 0 8 to Proposed Appointment o f Government Official to the Board
o f Connie Lee, 

, 138 (1994).
' On the particular facts here, we believe that the Chairman of the Federal Reserve
Board and the President of the Federal Reserve Bank of New York have statutory
authority to serve on BIS’s Board and that §208 thus does not preclude or affect
that service. The Federal Reserve Board has broad statutory authority over negotia­
tions between elements of the central banking system in the United States and
foreign banks:

        The Board of Governors of the Federal Reserve System shall exer­
        cise special supervision over all relationships and transactions o f
        any kind entered into by any Federal reserve bank with any foreign
        bank or banker, or with any group o f foreign banks or bankers,
        and all such relationships and transactions shall be subject to such
        regulations, conditions, and limitations as the Board may prescribe.
        No officer or other representative of any Federal reserve bank shall
        conduct negotiations of any kind with the officers or representatives
        of any foreign bank or banker without first obtaining the permission
        of the Board of Governors of the Federal Reserve System. The
        Board o f Governors o f the Federal Reserve System shall have the
        right, in its discretion, to be represented in any conference or nego­
        tiations by such representative or representatives as the Board may
        designate.

12 U.S.C. §348a (1994) (emphasis added). The “ special supervision” provided
for by §348a extends not only to transactions but also to “ relationships,” which
are subject to conditions prescribed by the Board of Governors. Relationships with
groups of foreign banks are specifically covered. The Board of Governors, more­

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                     Opinions o f the Office o f Legal Counsel in Volume 21


 over, possesses not only the power to regulate the specified international activities
 of the member banks but also the right to take part in such international activities
 in its own behalf.
    To be sure, we ordinarily might well find that a provision of this nature would
 not amount to such statutory authority for service on an outside board as would
 overcome 18 U.S.C. § 208(a). The specific focus of the provision is the Board
 of Governors’ control over Federal reserve banks, rather than its own authority
 to enter into “ relationships” with foreign banking organizations. Furthermore, the
 provision does not expressly refer to directorships.
    Nevertheless, there is an additional consideration that weighs in favor of reading
 §348a as authority for the Chairman and the President of the Federal Reserve
 Bank of New York to serve on B IS ’s Board. That service is a means by which
 the United States negotiates with foreign governments, through their central banks.
 As President Bush suggested in a signing statement dealing with a provision that
 would have required Federal banking agencies to hold certain discussions with
 the BIS, the President has the power to control such communications because
 they are an exercise of his “ constitutional authority to conduct the international
 relations of the United States.” Statement on Signing the Federal Deposit Insur­
ance Corporation Improvement Act o f 1991, 2 Pub. Papers of George Bush 1649,
 1650(1991).
    In this area, the President has broad latitude. See, e.g.. Department o f Navy
 v. Egan , 

, 529 (1988) (the Supreme Court has “ recognized ‘the gen­
erally accepted view that foreign policy was the province and responsibility of
the Executive’ ” ) (quoting Haig v. Agee, 

, 293-94 (1981)); Alfred
Dunhill o f London, Inc. v. Republic o f Cuba, 

, 705-06 n.18 (1976)
( “ [T]he conduct of [foreign policy] is committed primarily to the Executive
Branch . . . .” ); United States v. Louisiana, 

, 35 (1960) (the President
is “ the constitutional representative of the United States in its dealings with for­
eign nations” ). See also Earth Island Inst. v. Christopher, 

, 652-54
(9th Cir. 1993); Ward v. Skinner, 

, 160 (1st Cir. 1991) (Breyer,
J.) ( “ [T]he Constitution makes the Executive Branch . . . primarily responsible”
for the exercise of “ the foreign affairs power.” ), cert, denied, 

(1992); Sanchez-Espinoza v. Reagan, 

, 210 (D.C. Cir. 1985) (Scalia,
J ) (“ [B]road leeway” is “ traditionally accorded the Executive in matters o f for­
eign affairs.” ). For example, statutory qualifications for officials who negotiate
for the United States are suspect. See Constitutionality o f Statute Governing
Appointment o f United States Trade Representative, 

(1996).
Although we do not doubt that Congress may impose conflict of interest restric­
tions on those who engage in such negotiations, the breadth of the President’s
power counsels a broad reading o f congressional authorization for particular
means by which the power may be exercised. See United States v. Curtiss-Wright
Export C orp., 

, 320-22 (1936).

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   Service by Federal Officials on the Board o f Directors o f the Bank fo r International Settlements


   Here, Secretary of State Christopher expressed the view “ that active participa­
tion of the Federal Reserve on the BIS Board will serve U.S. foreign policy
interests” and declared that “ Federal Reserve membership on the BIS Board has
the full support of the Department of State.” Letter for Alan Greenspan, Chair­
man, Board of Governors, Federal Reserve System, from Warren Christopher, Sec­
retary of State (June 15, 1994). The directorships in question, like the United
States’ membership in other international bodies, is a mode of conducting our
foreign relations. Given this setting, we believe that 12 U.S.C. § 348a constitutes
statutory authority for holding the directorships, notwithstanding 18 U.S.C.
§ 208(a).

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




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