A-80709, OCTOBER 17, 1936, 16 COMP. GEN. 389

A-80709: Oct 17, 1936

Additional Materials:

Contact:

Edda Emmanuelli Perez
(202) 512-2853
EmmanuelliPerezE@gao.gov

 

Office of Public Affairs
(202) 512-4800
youngc1@gao.gov

WHICH PROVIDES THAT "THE REPEAL OF ANY STATUTE SHALL NOT HAVE THE EFFECT TO RELEASE OR EXTINGUISH ANY PENALTY. " IS PRIMARILY CONCERNED WITH ACTIONS BY THE GOVERNMENT INCIDENT TO THE ENFORCEMENT OF PENALTIES. IS NOT FOR APPLICATION TO THE REPEAL OF A LEGISLATIVE GRANT OF AUTHORITY UNDER WHICH FINANCIAL INSTITUTIONS HAVE BEEN INSURED BY THE UNITED STATES. THE FEDERAL HOUSING ADMINISTRATOR IS WITHOUT AUTHORITY TO MAKE LOANS TO FINANCIAL INSTITUTIONS TO WHICH CONTRACTS OF INSURANCE HAD BEEN GRANTED BY HIM UNDER THE ORIGINAL ACT ON THE SECURITY OF OBLIGATIONS INSURED UNDER THE PROVISIONS OF SECTION 2. PROVIDE IN PART: THE ADMINISTRATOR IS AUTHORIZED AND EMPOWERED. WHICH ARE APPROVED BY HIM AS ELIGIBLE FOR CREDIT INSURANCE.

A-80709, OCTOBER 17, 1936, 16 COMP. GEN. 389

FEDERAL HOUSING ADMINISTRATION - REPEAL OF STATUTE AUTHORIZING LOANS TO FINANCIAL INSTITUTIONS - GOVERNMENT OBLIGATION UNDER PRIOR CONTRACTS OF INSURANCE - EFFECT OF REPEAL SAVING STATUTE SECTION 13, REVISED STATUTES, WHICH PROVIDES THAT "THE REPEAL OF ANY STATUTE SHALL NOT HAVE THE EFFECT TO RELEASE OR EXTINGUISH ANY PENALTY, FORFEITURE, OR LIABILITY INCURRED UNDER SUCH STATUTE, UNLESS THE REPEALING ACT SHALL SO EXPRESSLY PROVIDE," IS PRIMARILY CONCERNED WITH ACTIONS BY THE GOVERNMENT INCIDENT TO THE ENFORCEMENT OF PENALTIES, ETC., AND IS NOT FOR APPLICATION TO THE REPEAL OF A LEGISLATIVE GRANT OF AUTHORITY UNDER WHICH FINANCIAL INSTITUTIONS HAVE BEEN INSURED BY THE UNITED STATES. SECTION 3, TITLE I, OF THE NATIONAL HOUSING ACT OF JUNE 27, 1934, HAVING BEEN REPEALED, WITHOUT RESERVATION, BY THE ACT OF APRIL 3, 1936, 49 STAT. 1187, THE FEDERAL HOUSING ADMINISTRATOR IS WITHOUT AUTHORITY TO MAKE LOANS TO FINANCIAL INSTITUTIONS TO WHICH CONTRACTS OF INSURANCE HAD BEEN GRANTED BY HIM UNDER THE ORIGINAL ACT ON THE SECURITY OF OBLIGATIONS INSURED UNDER THE PROVISIONS OF SECTION 2, TITLE I, OF SAID ACT, NOTWITHSTANDING THE PROVISIONS OF SUCH CONTRACTS OF INSURANCE, THE RIGHTS CONFERRED UPON SUCH INSTITUTIONS TO RECEIVE LOANS HAVING EXISTED BY VIRTUE OF THE SECTION NOW REPEALED, RATHER THAN THE CONTRACTS OF INSURANCE MADE THEREUNDER.

ACTING COMPTROLLER GENERAL ELLIOTT TO THE ADMINISTRATOR, FEDERAL HOUSING ADMINISTRATION, OCTOBER 17, 1936:

THERE HAS BEEN CONSIDERED YOUR LETTER OF SEPTEMBER 19, 1936, AND ALSO IN REPLY TO YOUR LETTER OF OCTOBER 7, 1936, REQUESTING DECISION AS TO WHETHER THE FEDERAL HOUSING ADMINISTRATOR HAS AUTHORITY UNDER THE NATIONAL HOUSING ACT OF JUNE 27, 1934 (48 STAT. 1246), AS AMENDED, TO MAKE LOANS TO FINANCIAL INSTITUTIONS TO WHICH CONTRACTS OF INSURANCE HAD BEEN GRANTED PRIOR TO APRIL 1, 1936, ON THE SECURITY OF OBLIGATIONS INSURED UNDER THE PROVISIONS OF SECTION 2, TITLE I, OF SAID ACT PRIOR TO APRIL 1, 1936.

SECTIONS 2 AND 3, TITLE I, OF THE NATIONAL HOUSING ACT, SUPRA, COVERING INSURANCE OF, AND LOANS TO, FINANCIAL INSTITUTIONS, PROVIDE IN PART:

THE ADMINISTRATOR IS AUTHORIZED AND EMPOWERED, UPON SUCH TERMS AND CONDITIONS AS HE MAY PRESCRIBE, TO INSURE BANKS, TRUST COMPANIES, PERSONAL FINANCE COMPANIES, MORTGAGE COMPANIES, BUILDING AND LOAN ASSOCIATIONS, INSTALLMENT LENDING COMPANIES, AND OTHER SUCH FINANCIAL INSTITUTIONS, WHICH ARE APPROVED BY HIM AS ELIGIBLE FOR CREDIT INSURANCE, AGAINST LOSSES WHICH THEY MAY SUSTAIN AS A RESULT OF LOANS AND ADVANCES OF CREDIT, AND PURCHASES OF OBLIGATIONS REPRESENTING LOANS AND ADVANCES OF CREDIT, MADE BY THEM SUBSEQUENT TO THE DATE OF ENACTMENT OF THIS ACT AND PRIOR TO JANUARY 1, 1936, OR SUCH EARLIER DATE AS THE PRESIDENT MAY FIX BY PROCLAMATION, FOR THE PURPOSE OF FINANCING ALTERATIONS, REPAIRS, AND IMPROVEMENTS UPON REAL PROPERTY. * * *

THE ADMINISTRATOR IS FURTHER AUTHORIZED AND EMPOWERED TO MAKE LOANS TO INSTITUTIONS WHICH ARE INSURED UNDER SECTION 2, AND TO ENTER INTO LOAN AGREEMENTS WITH SUCH INSTITUTIONS, UPON THE SECURITY OF OBLIGATIONS WHICH MEET THE REQUIREMENTS PRESCRIBED UNDER SECTION 2. SUCH LOANS OR AGREEMENTS MAY BE MADE FOR THE FULL FACE VALUE OF THE OBLIGATIONS OFFERED AS SECURITY, AND SHALL BE AT SUCH RATES AND UPON SUCH TERMS AND CONDITIONS AS THE ADMINISTRATOR SHALL DETERMINE.

SECTION 28 OF THE ACT OF MAY 28, 1935 (49 STAT. 293, 299), MADE CERTAIN CHANGES IN THE NATIONAL HOUSING ACT, INCLUDING AN AMENDMENT OF THE FIRST SENTENCE OF SECTION 2 THEREOF, BY "STRIKING OUT ,JANUARY" AND INSERTING IN LIEU THEREOF "APRIL" * * *.'

IN ACCORDANCE WITH THE QUOTED PROVISIONS OF SECTIONS 2 AND 3, TITLE I, OF THE BASIC ACT, THE FEDERAL HOUSING ADMINISTRATOR CAUSED TO BE PREPARED A FORM "CONTRACT OF INSURANCE," FOR GENERAL USE IN INSURING AND IN LOANING TO ELIGIBLE INSTITUTIONS. THE PROVISIONS THEREIN PERTAINING TO LOANS PROVIDE IN PERTINENT PART AS FOLLOWS:

THE ADMINISTRATOR FURTHER AGREES TO LEND, PURSUANT TO THE PROVISIONS OF TITLE I, SECTION 3, OF THE NATIONAL HOUSING ACT, TO THE FINANCIAL INSTITUTION, UPON THE SECURITY OF NOTES IN GOOD STANDING AND COVERED BY THE INSURANCE, SUCH AMOUNTS, UP TO 100 PERCENT OF THE CURRENT FACE VALUE OF SUCH NOTES OFFERED FOR SECURITY, AS THE FINANCIAL INSTITUTION MAY REQUEST, AT A RATE OF INTEREST TO BE DETERMINED BY THE ADMINISTRATOR. SUCH LOANS WILL BE MADE SUBJECT TO DUE EXECUTION OF AN AGREEMENT ON THE PART OF THE FINANCIAL INSTITUTION SATISFACTORY TO THE ADMINISTRATOR, PLACING THE DUTY UPON THE FINANCIAL INSTITUTION TO COLLECT PAYMENTS ON SUCH NOTES AND TO HOLD THE SAME IN TRUST FOR, OR REMIT TO, THE FEDERAL HOUSING ADMINISTRATION TO APPLY AGAINST THE LOAN, OR OTHERWISE, AS THE ADMINISTRATOR MAY DIRECT.

THIS CONTRACT MAY BE TERMINATED AT ANY TIME BY THE ADMINISTRATOR UPON GIVING THE FINANCIAL INSTITUTION AT LEAST FIVE DAYS PRIOR WRITTEN NOTICE OF HIS INTENTION SO TO DO, AND IN ALL EVENTS THIS CONTRACT SHALL TERMINATE AT THE CLOSE OF BUSINESS ON DECEMBER 31, 1935, PROVIDED, HOWEVER, THAT IN THE ABSENCE OF FRAUD ON THE PART OF THE FINANCIAL INSTITUTION THE TERMINATION OF THIS CONTRACT SHALL NOT AFFECT THE INSURANCE COVERAGE AS TO THOSE NOTES TAKEN OR PURCHASED WHILE THIS CONTRACT WAS IN EFFECT AND SHALL NOT AFFECT THE AGREEMENT OF THE ADMINISTRATOR TO LEND TO THE FINANCIAL INSTITUTION AS ABOVE SET FORTH.

THE ACT OF APRIL 3, 1936, 49 STAT. 1187, REPEALED SECTION 3, TITLE I, OF THE BASIC ACT AND MADE SEVERAL AMENDMENTS IN SECTION 2 THEREOF, ONE OF WHICH EXTENDED THE DATE FOR INSURING FINANCIAL INSTITUTIONS TO APRIL 1, 1937, OR SUCH EARLIER DATE AS MAY BE FIXED BY PROCLAMATION OF THE PRESIDENT.

THE GENERAL RULE WITH RESPECT TO THE EFFECT OF THE REPEAL OF A STATUTE IS THAT, IN THE ABSENCE OF A SAVING CLAUSE OR OTHER CLEAR EXPRESSION OF INTENTION, THE STATUTE REPEALED IS BLOTTED OUT--- EXCEPT AS TO TRANSACTIONS PASSED AND CLOSED--- AS COMPLETELY AS IF IT HAD NEVER EXISTED AND ALL PROCEEDINGS UNDER IT ARE TERMINATED. 59 C.J. 1185, 1189; GATES V. OSBORNE, 9 WALL. 567; UNITED STATES V. PRESTON, 3 PET. 57; THE RACHEL, 6 CRANCH 329; LOUISVILLE AND N.R.CO. V. WESTERN UNION TELEGRAPH CO., 268 FED. 4, 254 U.S. 650.

A REFERENCE TO THE LEGISLATIVE HISTORY OF THE REPEAL ACT SHOWS THAT THE REPORTS OF BOTH THE HOUSE AND THE SENATE, STATED WITHOUT RESERVATION OR QUALIFICATION THAT "SECTION 3 OF THE TITLE WHICH AUTHORIZES THE ADMINISTRATOR TO MAKE LOANS UPON THE SECURITY OF INSURED NOTES IS REPEALED.' IN OTHER WORDS, THERE EXISTS NO EVIDENCE OF ANY LEGISLATIVE INTENT OF SAVING TO THE INSURED FINANCIAL INSTITUTIONS THE RIGHT TO SECURE FURTHER LOANS UNDER ANY CONDITION. ALSO, THE HEARINGS BEFORE A SUBCOMMITTEE OF THE COMMITTEE ON BANKING AND CURRENCY, UNITED STATES SENATE, CLEARLY SHOW THAT THE REPEAL OF SECTION 3 WAS ADVOCATED "BY THE FEDERAL HOUSING ADMINISTRATION FOR THE EXPRESS PURPOSE OF" REMOVING THE CONTINGENT LIABILITY AT THE TREASURY ON ACCOUNT OF INSURANCE ON OUTSTANDING LOANS BASED ON THE POTENTIAL RIGHT OF THE INSURED INSTITUTIONS TO OBTAIN LOANS TO THE LIMIT OF SUCH OUTSTANDING OBLIGATIONS. IN THIS CONNECTION SEE SAID HEARINGS BEGINNING ON PAGE 11, AS FOLLOWS:

MR. FERGUSON. * * *

THE NEXT AMENDMENT IS THAT WE ARE REPEALING SECTION 3 OF TITLE I. SECTION 3 OF TITLE I IS THE SECTION WHICH GIVES THE ADMINISTRATOR AUTHORITY TO "LEND" TO INSTITUTIONS ON THE SECURITY OF THESE INSURED LOANS. IN OTHER WORDS, IF A BANK HAD $100,000 WORTH OF THESE LOANS AND WANTED TO BORROW MONEY ON THEM, THE ADMINISTRATOR IS AUTHORIZED TO LEND THE MONEY TO THE BANK ON THE SECURITY OF THESE LOANS. WE ARE REPEALING THAT BECAUSE OF TWO THINGS:

IN THE FIRST PLACE, OUR EXPERIENCE HAS SHOWN THAT THERE IS ABSOLUTELY NO NEED FOR IT. WE HAVE MADE ONLY TWO LOANS. ONE OF THOSE HAS BEEN PAID OFF LONG AGO, AND THE OTHER IS CURRENT. THERE IS NO REAL NEED FOR IT. THERE IS AN AMPLE MARKET FOR THESE NOTES. THEY CAN BE BOUGHT AND SOLD ALL THE TIME. THE FINANCE COMPANIES WILL BUY THEM JUST AS FAST AS THEY CAN GET THEM.

IN ADDITION TO THAT, THE BUDGET BUREAU HAD TO CARRY AN ENORMOUS CONTINGENT LIABILITY AGAINST US BECAUSE OF THIS PARTICULAR SECTION, BECAUSE WE HAD THE POTENTIAL RIGHT TO LEND ON THEM ALL.

SENATOR WAGNER. THE IDEA, AT THE TIME, WAS TO MAKE THEM LIQUID.

MR. FERGUSON. YES.

SENATOR WAGNER. AND EXPERIENCE SHOWS THAT THEY ARE LIQUID.

MR. FERGUSON. THEY HAVE LIQUIDITY, AND WE DO NOT THINK THERE IS ANY NEED FOR IT AT ALL.

SENATOR BULKLEY. AND THE PURPOSE OF REPEALING IT IS TO CANCEL THAT CONTINGENT ACCOUNT IN THE BUDGET BUREAU?

MR. FERGUSON. THAT IS RIGHT; AT THE SUGGESTION OF THE BUDGET BUREAU.

SENATOR BULKLEY. THAT IS VERY SOUND. * * *

THE CONTENTION IS NOW ADVANCED BY COUNSEL FOR THE FEDERAL HOUSING ADMINISTRATION THAT THERE HAD VESTED IN THE INSURED INSTITUTIONS, BY VIRTUE OF THE CONTRACTS OF INSURANCE, A RIGHT TO LOANS TO THE EXTENT OF THE SECURITY OF OBLIGATIONS INSURED UNDER SECTION 2, TITLE I, OF THE BASIC ACT, AS AMENDED.

THE NATIONAL HOUSING ACT, AS AMENDED, GRANTS INSURANCE FREE OF CHARGE ON CERTAIN CONDITIONS. IT FURTHER AUTHORIZES THE ADMINISTRATOR TO GRANT LOANS AS AN INCIDENT TO SUCH INSURANCE. SUCH PRIVILEGES, EXTENDED TO FINANCIAL INSTITUTIONS UNDER THE "CONTRACT OF INSURANCE," PURSUANT TO SECTIONS 2 AND 3 OF SAID ACT, CAN CREATE NO VESTED RIGHT AND SUCH BENEFITS MAY BE WITHDRAWN AT ANY TIME. (SEE LYNCH V. UNITED STATES, 292 U.S. 571, 577, AND AUTHORITIES THEREIN CITED.)

IT IS FURTHER CONTENDED THAT THE REPEAL OF SECTION 3 SHOULD NOT OPERATE TO AFFECT THE RIGHT OF THE ADMINISTRATOR TO MAKE LOANS TO INSURED INSTITUTIONS, SINCE SECTION 13, REVISED STATUTES, MUST BE REGARDED AS A RULE OF CONSTRUCTION APPLICABLE, WHEN NOT OTHERWISE PROVIDED, AS A GENERAL SAVING CLAUSE TO BE READ AND CONSTRUED AS A PART OF ALL SUBSEQUENT REPEALING STATUTES IN ORDER TO GIVE EFFECT TO THE WILL AND INTENT OF CONGRESS.

SECTION 13, REVISED STATUTES, PROVIDES:

THE REPEAL OF ANY STATUTE SHALL NOT HAVE THE EFFECT TO RELEASE OR EXTINGUISH ANY PENALTY, FORFEITURE, OR LIABILITY INCURRED UNDER SUCH STATUTE, UNLESS THE REPEALING ACT SHALL SO EXPRESSLY PROVIDE, AND SUCH STATUTE SHALL BE TREATED AS STILL REMAINING IN FORCE FOR THE PURPOSE OF SUSTAINING ANY PROPER ACTION OR PROSECUTION FOR THE ENFORCEMENT OF SUCH PENALTY, FORFEITURE, OR LIABILITY.

AS EVIDENCED BY THE USE OF THE WORD "PROSECUTION" THIS STATUTE IS PRIMARILY CONCERNED WITH ACTIONS BY THE GOVERNMENT INCIDENT TO THE ENFORCEMENT OF "PENALTY," "LIABILITY," AND FORFEITURE. IT OPERATES IN FAVOR OF THE GOVERNMENT AND AN ATTEMPT TO READ IT INTO AN ACT REPEALING A LEGISLATIVE GRANT OF AUTHORITY WOULD HAVE AN EFFECT DIAMETRICALLY OPPOSITE TO THE LEGISLATIVE INTENT.

SUCH RIGHTS AS WERE CONFERRED UPON THE INSURED INSTITUTIONS TO RECEIVE LOANS EXISTED BY VIRTUE OF SECTION 3 OF THE NATIONAL HOUSING ACT, RATHER THAN UNDER ANY CONTRACT LEGALLY BINDING ON THE UNITED STATES, AND IN VIEW OF THE REPEAL OF SAID SECTION, WITHOUT RESERVATION, THERE EXISTS NO LEGAL BASIS FOR FURTHER LOANS.