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Office Correspondence

FEDERAL RESERVE

Date March 8, 1955. _

To Governor Eocles

Subject: Housing subsidy under pending

From Mr. Vest, Assistant Counsel.

Emergency Relief Appropriation Act .of, 1935.
BPO

In accordance with your suggestion I have talked with Mr*
Frank Yfetson with regard to the provisions of the proposed Emergency
Relief Appropriation Act of 1935 (hereinafter referred to as "the
bill") which is now pending before the Senate. The bill which has
been reported out by the Senate Committee on Appropriations provides
an appropriation "to provide relief and work relief" and of the amount
appropriated makes available $450,000,000 for "housing".
OPINION
There is a possibility that those interpreting the law would
be forced by the practical situation to give it a very liberal construction under which direct gifts or grants to individuals for private
housing construction would be authorized.

This, however, is open to

serious question and it is more probable, in my judgment, that the
Comptroller General would not recognize such an authority in the bill
if passed in its present form.

Certainly it cannot safely be assumed

that the bill would be so interpreted as to uphold such an authority.
However, it is believed that the same result might be accomplished, indirectly and in a somewhat devious way, under the authority
contained in the bill for the President to acquire real property or
interest therein and to "grant, sell * * * or otherwise dispose of"
such property.




10—8f>2

Governor Eccles

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DISCUSSION
In our discussion of this subject, Mr, Yfatson suggested that
the provisions of the bill may, under a liberal construction, be interpreted as permitting grants and loans to finance private housing construction projects.

In this connection he pointed out that there are

a number of provisions in the bill whose interpretation is doubtful
and that in order that the bill may be workable and practicable it
will be necessary to interpret it in a liberal manner. For example,
he suggested that although a sum is made available for public projects
of States or political subdivisions thereof, there is no specific authority for loans or grants for this purpose, and, accordingly, that
unless authority for such loans or grants is implied, the effect of
the bill in this respect will be restricted to cases in which the Federal Government employs directly the workers on such projects (an impracticable interpretation which would substantially nullify the provision). He feels, therefore, that it is not improbable that a liberal
interpretation will be forced upon those construing the statute, and
that under such a liberal interpretation grants as well as loans might
be made in the case of such public projects of States or political subdivisions and, on the same principles, that loans and grants could be
made to individuals for private housing construction. He recognizes,
however, that there is doubt as to whether this interpretation would
be adopted,
I think it may be assumed that, under the rules relating to
the interpretation of statutes, the provisions of the bill should be




Governor Eccles

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liberally construed because of the remedial purpose involved and the
obvious intent of Congress to confer broad and comprehensive authority
upon the President, However, as a practical matter, the bill must be
interpreted by the Comptroller General of the United States, and if he
follows his usual practice in such matters, he will not be inclined to
give the bill any broader construction than is clearly required by its
provisions or clearly necessary in order to make the bill substantially
workable. Accordingly, I feel that there is considerable doubt as to
whether, as a practicable matter, such a liberal interpretation would
prevail as to permit the funds allocated to housing to be used to make
gifts or grants to private individuals for the purpose of housing construction (except through the indirect procedure hereafter described)•
In this connection it is to be noted that there were provisions in the
bill as it passed the House which authorized the President !tto make
grants and/or loans and/or contracts", but this specific authority has
been stricken from the now pending bill. Moreover it is believed that
the courts or the Comptroller General would be naturally more reluctant
to hold that Congress has, merely by implication, authorized appropriated
funds to be given away than they would be to uphold an implied authority
to make loans; and this would seem to be especially true as to cases in
which the recipients would not be those who are themselves in need of
relief, but presumably men of moderate circumstances able to finance at
least a part of their home construction. A provision formerly in the
bill to the effect that specific powers vested in the President by other




Governor Eccles

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sections of the bill should not be construed as limiting the general
powers and discretion vested in him by Section 1, has also been stricken
out, a technical indication of an intent for a none too liberal construction*
In connection with this matter a recent decision of the Comptroller General is of interest.

Congress appropriated #3,300,000,000

to carry out the provisions of the National Industrial Recovery Act and
provided that it might be expended "in the discretion and under the
direction of the President11 and it was contended that the authority of
the President under this language was broad enough to permit expenditures
in disregard of other laws.

The Comptroller General stated: wThis view

overlooks the fact that when an undefined discretion is granted by law
it is a legal discretion and not a discretion to disregard or to violate
statutory law —

and that when a broader authority is intended, for

instance, active disregard of other laws, the form of legislation long
followed by the Congress has been to specifically include the 7fords
'notwithstanding the provisions of other laws1 or other words having
like meaning•"
Authority to Acquire and Dispose of Real Estate,
Even though the bill is construed as not authorizing direct
gifts or grants to individuals for private construction, the provisions
of section 4 of the bill would seem broad enough to permit the same result to be accomplished through an indirect and rather roundabout method
which might or might not be found practical. This section authorizes the
President, within the limits of the appropriation made in section 1, to




Governor Eccles

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acquire by purchase or by the power of eminent domain any real property
or any interest therein and to improve, develop, grant, sell, lease or
otherwise dispose of such property or such interest. Under this it
would seem that the President would be authorized, in order to provide
n

reliefn or "work relief" to purchase a lot or an interest therein and

grant or give the same to an individual on condition that he erect a
building on such lot; or the President might purchase an interest in a
lot owned by a certain individual with an agreement to reconvey the same
to such individual without consideration when the latter had erected a
residence or other building thereon. This procedure would be cumbersome
and somewhat impractical but I believe that it would be permissible under
the terms of the bill.
The argument may be made that the word "grant" in this connection
does not authorize an outright gift but merely a conveyance of property
for a consideration.

The bill, however, apparently uses the word "grant"

in contradistinction to the words "sell" and "lease", and, moreover, the
word "grant" means to give.
Irlhile this method may be cumbersome and not at all practicable
in many cases, it does seem to be a possible course of action which might
be legally justified under the terms of the present bill.
Possible Revision of Bill in Conference*
It is quite probable that in the consideration of the bill in
conference between the House and Senate, considerable revision of its
provisions will be necessary, because there is so much doubt as to the
correct interpretation of its various provisions that it may be regarded




Governor Eccles

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as impracticable or non-workable in its present form.

It is possible

that in conference the provisions of the House bill will be in large
measure restored, which would probably mean the incorporation of provisions in effect authorizing grants for private housing construction.
This, of course, is problematical at this time.

In my judgment, there

can be no reasonable certainty that funds appropriated by the bill may
be used for gifts of grants (except by the devious method described)
unless the. point is specifically covered or unless a provision similar
to that contained in the bill as it passed the House authorizing the
making of grants and/or loans is restored to the bill.
Attention is invited to Section 8 of the bill as now pending
which requires all mechanical sanitary work on construction projects
undertaken under the bill to be let separately and by contract and
awarded to the lowest qualified bidder. A requirement of this kind may
be found to be an obstacle in connection with making grants or loans for
private housing construction, as many individual home builders would not
care to have separate contracts for plumbing and to award such contracts
to the lowest qualified bidder.




Respectfully,

Geg/rge B. Vest,
Assistant Counsel.