Full text of Mimeograph Letters and Statements of the Board : Opinions of Attorney General, Number 93, Volume 1, Page 120

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93. •

Washington, D. C.
December 19, 1914.

Secretary McAdoo today made public the following opinion
from the Attorney Generali




OFFICE OF THE ATTORNEY GENERAL
Washington, D. C.

The Honorable
The Secretary of the Treasury,
Washington, D. C.
Sir:
I

have the honor to acknowledge your letter of October 29th,

1914, wherein you request my opinion (a) whether accounts of moneys
derived from the semi-annual assessment to be levied on Federal Re­
serve Banks by the Federal Reserve Board, are subject to audit by
one of the auditors of the Treasury Department, and (b) as to the
status of the Federal Reserve Board, particularly with reference to
the Treasury Department.
Section 10 of the "Federal Reserve Act" of December 23, 1913
(the act authorizing the assessment), provides:
"The Federal Reserve Board 3hall have power to levy semi­
annually, upon the Federal Reserve Banks, in proportion to
their capital stock and surplus, an assessment sufficient to
pay its estimated expenses and the salaries of its members
and employees for the half year succeeding the levy of such
assessment, together with any deficit carried forward from,
the preceding half year."
The answer to your first question depends on whether the moneys
so levied by the Federal Reserve Board are, when received, "public
moneys."

If so, they are clearly to be. audited under Sections 7 and

10 of the Act of July 31, 1894,

(28 Stat. 207) either by the auditor

provided for in the first paragraph of said Section 7 or by the audi-




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...11-

f'W

2

tor provided in the fifth paragraph, such paragraphs (so far as
material) reading as follows:
FIRST. "The Auditor for the Treasury Department shall re­
ceive and examine all accounts of salaries and incidental ex­
penses of tho office of the Secretary of the Treasury and all
bureaus and offices under his direction, all accounts relating
to . . . and all other business within the jurisdiction of the
Department of the Treasury and certify the balances arising
thereon to the Division of Bookkeeping and Warrants."
FIFTH. "The Auditor for the State and other departments
shall receive and examine all accounts of . . . and accounts
of all boards, commissions and establishments of the Govern­
ment not within the jurisdiction of any of the Executive De­
partments.
He shall certify the balances arising thereon to
the Division of Bookkeeping and Warrants."
Section 10 (so far as material), provides for a Division of
Bookkeeping and Warrants, and that:
'Upon the books of this division shall be kept all accounts
of receipts and expenditures of public money" etc.
Reference is also to be made to the Act of February 19, 1897
(29 Stat. 550), reading (so far as material) as follows:
"All books, papers and other matters relating to the office
or accounts of . . . commissions, boards and establishments
of the Government in the District of Columbia, shall at all
times be subject to inspection and examination by the Comp­
troller of the Treasury and the Auditor of the Treasury author­
ized to settle such accounts, or by the duly authorized agents
of either of said officials."
(This statute plainly applying to boards etc., located within the
District of Columbia, rather than to boards of the District Govern•,

V V.

•
.

».. . .

......

;

ment; and the Federal Reserve Board being located within the ^District.)
I

am of opinion that moneys received by the Federal. Reserve Board,

under Section 10 of the Act of December 23, 1913, are "public moneys"
within the meaning of these auditing statutes, for the following reasons,
among others:



(1)

The assessments are levied by a board whose members in re­

spect to appointment, tenure, duties, and compensation meet all re­
quirements of the definition "public officers" and "officers of the
United States".
(2)

The assessments are levied by such officers .pursuant tc the

provision of a Federal statute and are devoted to the payment of of­
ficial salaries and the expenses cf this official board.
(3)

These moneys after collection, are no longer the property of

the paying banks, and must be viewed as moneys belonging to the United
States, and therefore public moneys as defined by the Supreme Court of
the United States in Branoh v . United States. 100 U. S. 673* In United
States v. Bromlev 12 How. 88, it was held, that postal collections from
stamp sales are public revenues;
"The revenue of the Post Office Department being raised by a
tax on mailable matter conveyed in the mail and which is dis­
bursed in the public service, is as much a part of the income of
the Government as moneys collected for duties on imports."
The analogy is marked for the reason that in like manner as the
money assessed by the Federal Reserve Board is for the special purpose
of meeting the salaries and expenses of the Board, so the use of the
postal collections is confined to sustaining the specific service by and
in which they are collected.
(4)

Other previsions of the Federal Reserve Act (S'ecs.ll-c and 16),

dealing with interest charges, taxes and penalties, can only be satisfied
by deposit in the Treasury of the levies, taxes and penalties so imposed,




(4 )

and there seems to be no logical ground for distinction between such
assessments and the ones in question.

The idea of necessary public

control is also strengthened by the requirements of Rev. Stat. Sec.
3639.
The moneys received by the Federal Reserve Board under Section 10
of the Act of December 23, 1913, being thus, in my opinion, public
mon^rs and consequently subject to audit by one of the auditors of
the Treasury Department, the question is then directly presented under
which paragraph of the Act of July 31, 1894, supra, the audit is to be
made.

This involves the further question on which you have asked my

opinion: namely, whether the Federal Reserve Board is an independent
board, commission or Government establishment or whether it is a bureau
office or division or otherwise a part of the Treasury Department.
That the Federal Reserve Board is a "board" or "establishment" of
the Government within the meaning and intent of those words as used in
the Fifth Paragraph of Section 7 of the Act of July 31, 1894, is plain
from the provisions of the Federal Reserve Act and the explanation of
the status of the Board contained in the Reports accompanying the origi
nal bills in Congress.

This conclusion is sustained by reason and an^

alogy, when reference is had to the considerable number of boards or
establishments of far less general or National scope which have been so
esteemed and uniformly treated.

(See Report of Joint Commission to

Inquire into Executive Departments, October 9, 1893.
1st Session, 53rd Congress, Report No. 88).




House Reports,

4i Ol
(5 )

Consideration of the history of the Federal Reserve Bank Act, of
the general scheme of the whole act, of the functions to be performed
by the Federal Reserve Board end of the method of their performance,
leads me to the clear opinion that the Board is an independent board
or government establishment.
The Federal,Reserve Board is not merely a supervisory, but is a
distinctly administrative board with extensive powers. It is described
as follows in the Report of the Committee on Banking and Currency to
the House of Representatives (63d Congress, 1st Sees., Report No*69)t
p«16.

p.18.

p.42»

"In order that these banks may be effectively inspected and
in order that they may pursue a banking policy which shall be
uniform and harmonious for the country as a whole, the committee
propos es a general board of management intrusted with the power
to overlook and direct the general functions of the banks refer­
red to. To this it assigns the title of "The Federal Reserve Board."

"The only factor of centralization which has been provided
in the committee’s plan is found in the Federal Reserve Board,
which is to be a strictly Government organization created for
the purpose of inspecting existing banking institutions and of
regulating relationships between Federal reserve banks and be­
tween them and the Government itself." ............... .

"Section 11. In this section provision has been made for the
creation of a general board of control acting on behalf of the
National Government..... ......
The report of Senator Owen from the Senate Committee on Banking
and Currency (63d Congress, 1st Session, Report 133,papt 2) says merely:

"The Federal Reserve Board consisting of the Secretary of
the Treasury and six members appointed by the President of the
United States and confirmed by the Senate for terns of six years,
are given the following powers: "(Here follows an enumeration of
powers.,)
The broad functions outlined in these Reports are assigned to the
Board in twelve subdivisions of Section 11 of the Act giving to it
certain powers and authority, and in various other sections containing



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4

(6)

specific grants of authority to exercise about forty other powers.
Moreover, in subdivision (I) of Section 11 the all-embracing require­
ment appears that "said board shall perform the duties, functions or
service specified in this Act, and make all rules and regulations
necessary to enable said board effectively to perform'the same.'*
The Act, further, contains no express provision that the Federal
Reserve Board shall be considered as a bureau, division or office of
the Treasury Department

a significant omission in view of the fact

that Congress had under consideration's Bureau of that Department when
in Section 16 it amended the Revised Statutes relative to that "bureau"
of which the Comptroller of the Currency was the "chief officer": and
the provision in Section 10 that "the.Secretary of the Treasury may as­
sign offices in the Department of the Treasury for the use of the
Federal Roserve Board" (a provision added to the House Bill by the
Senate Committee) would be highly superfluous if the Board wore a
bureau of that Department for which the Secretary already possessed com­
plete authority to assign offices in his own departmental buildings.
The history of the bill develops thG following facts of signifi­
cance.
In Section 11 of H. R. 7837 (Section 10 of the Act), it is pro­
vided:
"The manager of the Federal Reserve Board, subject to the
supervision of the Secretary of the Treasury and Federal Reserve
Board, shall bo the executive officer of the Federal Reserve Board."
This clearly contemplated that the Secretary of the Treasury and
the Federal Reserve Board were distinct entities.



In the xt as passed, (Section 10) the supervision of the Sec­
retary of the Treasury is stricken out, leaving the Governor(lianager)
subject only to supervision of the Board.
In Section 16 of II. R. 7837 (Section 16 of the Act) it is provided:
"The Secretary of the treasury shall subject to the approval
of the Federal Reserve 3oard from time to time apportion the funds
of the Government among the said Federal reserve banks, distribut­
ing then- as far as practicable equitably between different sec­
tsxens #..*
This also clearly contemplated the Secretary and the Board as co- •
ordinate officials.

The whole provision was stricken from the Act as
'
i
passed but nothing was substituted for it.
In Section 11 of H. 2. 7837 (Section 10 of the Act) the Comptroller
of the Currency was to perform his duties "tinder the general direction
of the Secretary of the Treasury acting as chairman of tho Federal -Re­
serve Board.
In the Act as passed the words "acting as chairman of the Federal
Reserve .Board" wore stricken out, showing an intention to distinguish
clearly between placing tho Comptroller under the Secretary as head of
the Treasury Department and tho Secretary as ex officio chairman of the
Board.
The moot significant change made in II. R. 7837 by tho Act as passed
was the insertion, in Section 10 of the Act, of the following clause:




•! "nothing in this act contained shall be construed as talcing
away any powers heretofore vested by law in tho Secretary of tho
Treasury which relate to tho supervision, management, and control
of tho Treasury Department and bureaus under such department, and
whereover any power vested by this Act in the Federal Reserve Board
or the Federal reserve agent appears to conflict with the powers
of the Secretary of tho Treasury, such powers shall be exorcised
subject to the supervision and control of the Secretary."

*(

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(8)

It is evident that, while the purpose of this clause was, amongst
other things, to insure the preservation and supremacy of all existing
powers of the Secretary of the Treasury in all cases where it might be
claimed that such powers overlapped,,or conflicted with those Of the Fed­
eral Reserve Board, nevertheless by this very provision the Act dearly
recognized the existence of powers of the Board independent of the Sec­
retary in cases where no such conflict existed.




Very respectfully,
(Signed) T. W*. Gregory
Attorney General.

*