B-167006, APR 8, 1971, 50 COMP GEN 712

B-167006, APR 8, 1971, 50 COMP GEN 712

DISTRICT OF COLUMBIA - FEDERAL CITY COLLEGE - INVESTMENTS SINCE THE FEDERAL CITY COLLEGE IS A LAND GRANT COLLEGE WITHIN THE PURVIEW OF THE "FIRST MORRILL ACT" AS PROVIDED BY THE DISTRICT OF COLUMBIA EDUCATION ACT, THE LAND GRANT FUNDS AVAILABLE TO THE COLLEGE ARE EXEMPTED FROM 47 D.C. CODE 135, WHICH DIRECTS INVESTMENT IN UNITED STATES TREASURY SECURITIES, AND THE CONGRESS IN THE EDUCATION ACT APPROVED INVESTMENT IN ACCORDANCE WITH THE LAND GRANT ACT IN "BONDS OF THE UNITED STATES OR OF THE STATES OR SOME OTHER SAFE BONDS." "OTHER SAFE BONDS" ARE THE OBLIGATIONS OF VARIOUS FEDERAL AGENCIES, OTHER THAN TREASURY SECURITIES, THAT ARE GUARANTEED BY THE U.S., INDUSTRIAL BONDS APPROVED FOR INVESTMENT BY FIDUCIARIES UNDER THE RULES OF THE U.S. DISTRICT COURT, AND CERTIFICATES OF DEPOSIT IN FEDERALLY INSURED BANKS, BUT NOT SAVINGS ACCOUNTS IN BANKS OR SAVINGS AND LOAN ASSOCIATIONS. FURTHERMORE, DEFICIENCIES FROM INVESTMENTS MAY BE MADE UP FROM APPROPRIATIONS, AND TO MINIMIZE LOSSES, BONDS MAY BE SOLD BEFORE MATURITY.

TO THE MAYOR-COMMISSIONER, DISTRICT OF COLUMBIA, APRIL 8, 1971:

REFERENCE IS MADE TO YOUR LETTER OF JANUARY 18, 1971, WITH ENCLOSURES, CONCERNING THE INVESTMENT OF THE LAND-GRANT ENDOWNMENT TO FEDERAL CITY COLLEGE, PURSUANT TO THE PROVISIONS OF PUBLIC LAW 90-354, APPROVED JUNE 20, 1968, 82 STAT. 241.

PUBLIC LAW 90-354 AMENDED TITLE I OF THE DISTRICT OF COLUMBIA PUBLIC EDUCATION ACT, PUBLIC LAW 89-791, TO PROVIDE THAT THE FEDERAL CITY COLLEGE, AN EDUCATIONAL INSTITUTION OF THE DISTRICT OF COLUMBIA, SHALL BE CONSIDERED TO BE A LAND-GRANT COLLEGE IN ACCORDANCE WITH THE PROVISIONS OF THE ACT OF JULY 2, 1862, AS AMENDED, KNOWN AS THE "FIRST MORRILL ACT," 7 U.S.C. 301-305, 307, 308. IN LIEU OF THE DONATION OF PUBLIC LANDS OR LAND SCRIP FOR THE ENDOWMENT AND MAINTENANCE OF THE COLLEGE, THE ACT AUTHORIZED APPROPRIATIONS IN THE AMOUNT OF $7,241,706 AND PROVIDED THAT AMOUNTS APPROPRIATED SHALL BE CONSIDERED TO HAVE BEEN GRANTED TO THE DISTRICT SUBJECT TO THOSE PROVISIONS OF THE FIRST MORRILL ACT APPLICABLE TO THE PROCEEDS FROM THE SALE OF LAND OR LAND SCRIP. THE ACT ALSO PROVIDED THAT THE TERM "STATE" AS USED IN THE FIRST MORRILL ACT, AS WELL AS OTHER APPLICABLE LEGISLATION, SHALL INCLUDE THE DISTRICT OF COLUMBIA. IN MAY 1970, PURSUANT TO THIS ACT, THE COLLEGE WAS THE RECIPIENT OF A LAND-GRANT AWARD OF $7,240,000 WHICH WAS INVESTED, IN ACCORDANCE WITH THE LONGSTANDING POLICY OF THE DISTRICT, IN UNITED STATES TREASURY SECURITIES.

IN ORDER TO ACHIEVE A HIGHER RATE OF RETURN THAN THAT NORMALLY AFFORDED BY TREASURY SECURITIES, THE DISTRICT OF COLUMBIA BOARD OF HIGHER EDUCATION PROPOSES TO INVEST A PORTION OF THESE FUNDS IN OTHER THAN TREASURY SECURITIES. SPECIFICALLY, YOU STATE THE BOARD PROPOSES TO INVEST IN:

1. CERTIFICATES OF DEPOSIT IN DISTRICT OF COLUMBIA BANKS;

2. IN A BLACK-ORIENTED SAVINGS AND LOAN ASSOCIATION IN THE DISTRICT;

3. IN INDUSTRIAL BONDS WHICH ARE ON THE LIST APPROVED FOR INVESTMENTS BY THE DISTRICT OF COLUMBIA FIDUCIARIES, AND;

4. U.S. GOVERNMENT INVESTMENTS OTHER THAN U.S. TREASURY SECURITIES.

AS NOTED IN YOUR LETTER, SECTION 4 OF THE FIRST MORRILL ACT, 7 U.S.C. 304, PROVIDES, IN PERTINENT PART:

*** ALL MONEYS DERIVED FROM THE SALE OF LANDS *** AND FROM THE SALE OF LAND SCRIP SHALL BE INVESTED IN BONDS OF THE UNITED STATES OR OF THE STATES OR SOME OTHER SAFE BONDS; OR THE SAME MAY BE INVESTED BY THE STATES HAVING NO STATE BONDS IN ANY MANNER AFTER THE LEGISLATURES OF SUCH STATES SHALL HAVE ASSENTED THERETO AND ENGAGED THAT SUCH FUNDS SHALL YIELD A FAIR AND REASONABLE RATE OF RETURN, TO BE FIXED BY THE STATE LEGISLATURES, AND THAT THE PRINCIPAL THEREOF SHALL REMAIN FOREVER UNIMPAIRED: PROVIDED, THAT THE MONEYS SO INVESTED OR LOANED SHALL CONSTITUTE A PERPETUAL FUND, THE CAPITAL OF WHICH SHALL REMAIN FOREVER UNDIMINISHED ***

YOU ENCLOSED A LETTER DATED SEPTEMBER 2, 1970, TO THE DISTRICT BOARD OF HIGHER EDUCATION, IN WHICH THE ASSOCIATE COMMISSIONER FOR HIGHER EDUCATION, UNITED STATES DEPARTMENT OF HEALTH, EDUCATION, AND WELFARE ADVISED THAT THE PROPOSED INVESTMENTS "WOULD IN OUR VIEW BE LEGALLY PERMISSIBLE INVESTMENTS OF LAND-GRANT FUNDS UNDER SECTION 4 OF THE FIRST MORRILL ACT (7 U.S.C. 304) TO THE EXTENT THAT EACH IS FULLY INSURED BY AN AGENCY OF THE UNITED STATES OR IS A PERMISSIBLE INVESTMENT OF TRUST FUNDS BY FIDUCIARIES UNDER RULE 23 OF THE LOCAL RULES OF THE U.S. DISTRICT COURT FOR THE DISTRICT OF COLUMBIA."

WHILE YOU NOTE THAT THE OPINION OF THE ASSOCIATE COMMISSIONER "CANNOT CONTROL ANY RESTRICTIONS, LEGAL OR OTHERWISE, WHICH MIGHT EXIST INSOFAR AS INVESTMENTS BY THE DISTRICT OF COLUMBIA ARE CONCERNED," IN VIEW OF HIS OPINION AND THE ABOVE QUOTED PORTIONS OF THE FIRST MORRILL ACT, YOU RAISE THE FOLLOWING FOUR QUESTIONS:

QUESTION 1: MAY THE DISTRICT OF COLUMBIA INVEST LAND GRANT FUNDS IN OTHER THAN UNITED STATES GOVERNMENT SECURITIES?

QUESTION 2: IF THE ANSWER TO QUESTION 1 IS IN THE AFFIRMATIVE, DO CERTIFICATES OF DEPOSIT, PASSBOOK SAVINGS ACCOUNTS AND/OR INDUSTRIAL BONDS FALL WITHIN THE INVESTMENT INTENT OF SECTION 304, TITLE 7, U.S. CODE?

QUESTION 3D: WHAT CONSTITUTES "OTHER SAFE BONDS" OR "INVESTMENTS IN ANY MANNER" AS STATED IN SECTION 304, TITLE 7, U.S. CODE?

QUESTION 4: WOULD INVESTMENT IN FEDERAL LAND BANK BONDS, BANKS FOR COOPERATIVE DEBENTURES, FEDERAL NATIONAL MORTGAGE ISSUES, AND GOVERNMENT NATIONAL MORTGAGE ASSOCIATION PARTICIPATION CERTIFICATES CONSTITUTE "INVESTMENT IN BONDS OF THE UNITED STATES" OR "OTHER SAFE BONDS?"

YOU FURTHER QUOTE FROM SECTION 5 OF THE FIRST MORRILL ACT, AS AMENDED, 7 U.S.C. 305, WHICH PROVIDES, IN PERTINENT PART:

*** IF ANY PORTION OF THE FUND INVESTED, AS PROVIDED BY SECTION 304, OF THIS TITLE, OR ANY PORTION OF THE INTEREST THEREON, SHALL, BY ANY ACTION OR CONTINGENCY, BE DIMINISHED OR LOST, IT SHALL BE REPLACED BY THE STATE TO WHICH IT BELONGS, SO THAT THE CAPITAL OF THE FUND SHALL REMAIN FOREVER UNDIMINISHED ***

SINCE ENGAGEMENT IN AN INVESTMENT PROGRAM SUCH AS THAT PROPOSED COULD RESULT IN LOSS OF PRINCIPAL, YOU ASK:

QUESTION 5: WOULD APPROPRIATIONS OF THE DISTRICT OF COLUMBIA BE AVAILABLE TO OFFSET A LOSS OR SHORTAGE IN THE PRINCIPAL OR INTEREST, AS REQUIRED BY SECTION 305, TITLE 7, U.S. CODE?

IN OUR VIEW THE LAND-GRANT ENDOWMENT FUNDS RECEIVED BY THE DISTRICT MAY BE INVESTED IN OTHER THAN UNITED STATES TREASURY SECURITIES. SECTION 1 OF PUBLIC LAW 90-354 GRANTS TO THE DISTRICT OF COLUMBIA THE STATUS OF A "STATE" AS THAT TERM IS USED IN THE FIRST MORRILL ACT, AS WELL AS OTHER APPLICABLE LAW. THE PURPOSE OF PUBLIC LAW 90-354 IS TO PROVIDE TO THE CITIZENS OF THE DISTRICT THE SAME EDUCATIONAL OPPORTUNITIES AVAILABLE TO THE CITIZENS OF THE 50 STATES, EACH OF WHICH ALREADY HAS A LAND-GRANT COLLEGE, BY CREATING IN THE DISTRICT A LAND GRANT COLLEGE. THE DISTRICT IS TO BE TREATED AS THOUGH IT WERE A STATE AND THE FINANCIAL BENEFITS INURING UNDER THE ACT TO FEDERAL CITY COLLEGE, INCLUDING THE $7.2 MILLION CAPITAL GRANT, ARE CALCULATED AS THOUGH THE DISTRICT WERE A STATE. THERE ARE NO SPECIFIC RESTRICTIONS IN PUBLIC LAW 90-354 ON THE TYPES OF INVESTMENTS IN WHICH THE DISTRICT MAY INVEST THIS MONEY.

PUBLIC LAW 90-354 PROVIDES, IN PART, THAT THE AMOUNTS APPROPRIATED PURSUANT TO THE AUTHORIZATION THEREIN TO APPROPRIATE THE SUM OF $7,241,706 SHALL BE HELD AND CONSIDERED TO HAVE BEEN GRANTED TO THE DISTRICT OF COLUMBIA SUBJECT TO THOSE PROVISIONS OF THE 1862 ACT APPLICABLE TO THE PROCEEDS FROM THE SALE OF LAND OR LAND SCRIP. SECTION 305 OF TITLE 7, U.S.C. PROVIDES IN EFFECT, THAT BEFORE A MORRILL ACT GRANT MAY BE MADE TO A STATE THE STATE, BY LEGISLATIVE ACT, MUST SIGNIFY ITS ASSENT TO THE PROVISIONS SET OUT IN 7 U.S.C. 301-304, AS WELL AS TO THE CONDITIONS SET FORTH IN 7 U.S.C. 305. IN THIS CONNECTION, INSOFAR AS THE DISTRICT OF COLUMBIA IS CONCERNED, SECTION 110 OF TITLE I OF THE DISTRICT OF COLUMBIA PUBLIC EDUCATION ACT, AS AMENDED BY PUBLIC LAW 90-354, 31 D.C. CODE 1610, PROVIDES THAT THE ENACTMENT OF SECTIONS 107 AND 109 OF TITLE I, 31 D.C. CODE 1607 AND 1609, SHALL, AS RESPECTS THE DISTRICT OF COLUMBIA, BE DEEMED TO SATISFY ANY REQUIREMENT OF STATE CONSENT CONTAINED IN ANY OF THE LAWS OR PROVISIONS OF LAW REFERRED TO IN SUCH SECTIONS. THE LEGISLATIVE HISTORY OF PUBLIC LAW 90-354 DISCLOSES THE PURPOSE OF SECTION 110 TO BE AS FOLLOWS (H. REPT. NO. 1465, 90TH CONG., PAGE 11):

SECTION 110 OF THE AMENDMENT CONFORMS TO THE REQUIREMENTS OF THE FIRST MORRILL ACT, WHICH PROVIDES THAT THE PROVISIONS OF THAT ACT SHALL NOT BECOME EFFECTIVE AS TO ANY STATE UNTIL THE LEGISLATURE OF THE JURISDICTION SIGNIFIES ITS ACCEPTANCE OF THE TERMS AND CONDITIONS OF THE ACT. THE CONGRESS, AS THE LEGISLATURE FOR THE DISTRICT OF COLUMBIA, PROVIDES THE NECESSARY ACCEPTANCE OF THE TERMS AND CONDITIONS OF THE ACT IN THIS SECTION, WHICH, COUPLED WITH THE ENABLING AUTHORITY IN SECTIONS 107 AND 109, PROVIDES FOR THE FULL PARTICIPATION BY THE DISTRICT OF COLUMBIA.

THUS, IT MAY REASONABLY BE SAID THAT THE CONGRESS HAS ACCEPTED, OR ASSENTED TO, FOR THE DISTRICT OF COLUMBIA, THE PROVISIONS OF 7 U.S.C. 304, INCLUDING THE INVESTMENT OF THE MONEYS "IN BONDS OF THE UNITED STATES OR OF THE STATES OR SOME OTHER SAFE BONDS."

ALSO, WHILE THERE IS NO SPECIFIC MENTION OF THIS MATTER IN THE LEGISLATIVE HISTORY AVAILABLE TO US, IT APPEARS FROM THE REPORTS OF BOTH THE HOUSE AND SENATE COMMITTEES ON THE DISTRICT OF COLUMBIA THAT THE CONGRESS ASSUMED THAT THE FUNDS MIGHT BE INVESTED IN OTHER THAN TREASURY SECURITIES. THUS, ON PAGE 3 OF HOUSE REPORT NO. 1465, WHICH ACCOMPANIED H.R. 15280, 90TH CONGRESS, IT IS STATED THAT THE FUNDS ARE " *** TO BE AN ENDOWMENT TO BE INVESTED IN BONDS *** ." THERE IS NO INDICATION THAT THE BONDS MUST BE BONDS OF THE UNITED STATES. IN ADDITION, THE SAME REPORT STATES THAT THE PRINCIPAL MAY NOT BE IMPAIRED AND " *** IF DIMINISHED WOULD HAVE TO BE RESTORED BY THE DISTRICT." SINCE THE PRINCIPAL WOULD PRESUMABLY NOT BE IMPAIRED IF INVESTED IN GOVERNMENT SECURITIES, THE CLEAR IMPLICATION OF THIS LANGUAGE IS THAT IT IS EXPECTED THAT THE MONEYS MIGHT BE INVESTED IN BONDS OTHER THAN BONDS OF THE UNITED STATES. SIMILAR LANGUAGE IS EMPLOYED IN SENATE REPORT NO. 888, WHICH ACCOMPANIED S. 1999, 90TH CONGRESS.

CONSIDERING THE FOREGOING, IT IS OUR OPINION THAT THESE LAND-GRANT ENDOWMENT FUNDS DO NOT COME WITHIN THE PURVIEW OF SECTION 135 OF TITLE 47, D.C. CODE, WHICH AUTHORIZES, WITH APPROVAL OF THE SECRETARY OF THE TREASURY, THE INVESTMENT IN UNITED STATES GOVERNMENT SECURITIES, OF *** GENERAL, SPECIAL, OR TRUST FUNDS, OF THE DISTRICT OF COLUMBIA, NOT NEEDED TO MEET CURRENT EXPENSES *** ." IT IS OUR VIEW THAT THE DISTRICT OF COLUMBIA MAY INVEST MORRILL ACT LAND-GRANT ENDOWMENT FUNDS IN "BONDS OF THE UNITED STATES OR OF THE STATES OR SOME OTHER SAFE BONDS." HOWEVER, INVESTMENTS IN ANY OTHER MANNER MUST BE ASSENTED TO BY THE LEGISLATURE OF THE DISTRICT OF COLUMBIA; I.E., THE CONGRESS OF THE UNITED STATES. YOUR FIRST QUESTION IS ANSWERED ACCORDINGLY.

THE SECOND, THIRD AND FORTH QUESTIONS YOU PRESENT RELATE TO THE INTERPRETATION OF THE PHRASE "BONDS OF THE UNITED STATES OR OF THE STATES OR SOME OTHER BONDS" AND WILL BE ANSWERED IN RELATION TO THE PROPOSED INVESTMENT PROGRAM QUOTED EARLIER.

ONE OF THE PROPOSED INVESTMENTS IS IN OBLIGATIONS OF VARIOUS FEDERAL AGENCIES, OTHER THAN TREASURY SECURITIES, SUCH AS FEDERAL LAND BANK BONDS. THOSE OBLIGATIONS WHICH ARE GUARANTEED BOTH AS TO PRINCIPAL AND INTEREST BY THE FULL FAITH AND CREDIT OF THE UNITED STATES MAY, IN OUR OPINION, BE CONSIDERED TO BE "BONDS OF THE UNITED STATES" UNDER THE FIRST MORRILL ACT. IN THIS REGARD WE NOTED THAT CERTAIN AGENCY ISSUES, INCLUDING FEDERAL LAND BANK BONDS, ARE NOT SO GUARANTEED. HOWEVER, IF THE DEPARTMENT OF HEALTH, EDUCATION, AND WELFARE (HEW), WHICH ADMINISTERS THE FIRST MORRILL ACT, DETERMINES THAT SUCH AGENCY OBLIGATIONS ARE "OTHER SAFE BONDS," WE WILL HAVE NO OBJECTION TO YOUR INVESTING THE DISTRICT'S LAND- GRANT FUNDS IN THEM.

THE BOARD OF HIGHER EDUCATION ALSO PROPOSES TO INVEST SOME OF THE LAND- GRANT FUNDS IN INDUSTRIAL BONDS, IN CERTIFICATES OF DEPOSIT IN FEDERALLY INSURED DISTRICT OF COLUMBIA BANKS, AND IN SAVINGS ACCOUNTS IN FEDERALLY INSURED DISTRICT SAVINGS AND LOAN ASSOCIATIONS. THE ISSUE PRESENTED HERE IS WHETHER THESE TYPES OF INVESTMENTS QUALIFY AS BONDS WITHIN THE MEANING OF THE PHRASE "OTHER SAFE BONDS." THE LEGISLATIVE HISTORY INDICATES THAT THE PHRASE IS INTENDED TO ASSURE "AN ABSOLUTELY SAFE INVESTMENT, WITH NO FLUCTATION, BRINGING IN A CERTAIN AMOUNT OF REVENUE." SEE 67 CONG. REC. 6529, CONTAINING THE HOUSE FLOOR DEBATE OF MARCH 29, 1926, ON THE ACT OF APRIL 13, 1926, CH. 130, 44 STAT. 247. THIS PHRASE, AS ENACTED BY THE ACT OF APRIL 13, 1926, REPRESENTS A SLIGHT MODIFICATION OF THE LANGUAGE ENACTED IN THE ACT OF JULY 2, 1862, THE FIRST MORRILL ACT. IT IS APPARENTLY HEW'S VIEW THAT WITHIN THE CONTEXT OF SAFE INVESTMENTS, THE PHRASE "OTHER SAFE BONDS" SHOULD BE GIVEN A LIBERAL INTERPRETATION.

IN REGARD TO THE PROPOSED INVESTMENT IN INDUSTRIAL BONDS, IT APPEARS FROM THE LETTER OF SEPTEMBER 2, 1970, FROM THE ASSOCIATE COMMISSIONER FOR HIGHER EDUCATION, QUOTED IN PART ABOVE, THAT HEW CONSIDERS BONDS APPROVED FOR INVESTMENTS BY FIDUCIARIES BY RULE 23 OF THE RULES OF THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA TO BE "OTHER SAFE BONDS." WE AGREE WITH HEW'S DETERMINATION THAT BONDS APPROVED FOR INVESTMENTS BY FIDUCIARIES MAY BE CONSIDERED "OTHER SAFE BONDS." THEREFORE, IT IS OUR VIEW THAT THE DISTRICT MAY INVEST ITS LAND-GRANT FUNDS IN INDUSTRIAL BONDS WHICH ARE APPROVED FOR INVESTMENT BY FIDUCIARIES UNDER RULE 23 OF THE RULES CITED ABOVE.

IN SUPPORT OF THE PROPOSED INVESTMENTS IN SAVINGS ACCOUNTS AND CERTIFICATES OF DEPOSIT, MR. CHARLES A. HORSKY OF THE BOARD OF HIGHER EDUCATION STATED IN HIS LETTER OF JUNE 18, 1970, TO THE DEPUTY COMMISSIONER OF EDUCATION, HEW, AS FOLLOWS:

AGAIN, WHEN A DEPOSIT, SUCH AS IN A BLACK-ORIENTED SAVINGS AND LOAN ASSOCIATION, IS INSURED BY AN AGENCY OF THE UNITED STATES, IT WOULD APPEAR AGAIN UNLESS THE WORD "BONDS" IS TO BE READ HYPERTECHNICALLY, THAT THE CONGRESSIONAL INTENTION EXPRESSED IN SECTION 304 IS MET. THE FORM IS DIFFERENT, BUT THE UNITED STATES IS BEHIND THE INVESTMENT. FINALLY, THE CERTIFICATES OF DEPOSIT ALSO APPEAR PROPER. UP TO A CERTAIN AMOUNT - WHICH COULD IF NECESSARY MARK THE CEILING ON THIS TYPE OF INVESTMENT - THEY STAND IN THE SAME POSTURE AS THE SAVINGS AND LOAN, BACKED BY FEDERAL INSURANCE. MOREOVER, WHILE THEY MAY NOT BE CALLED "BONDS" ANY MORE THAN TREASURY BILLS ARE, THEY ARE OF THE SAME CHARACTER AS THE USUAL INDUSTRIAL BONDS.

WE UNDERSTAND INFORMALLY FROM HEW THAT THEIR LETTER OF SEPTEMBER 2, 1970, WAS INTENDED TO APPROVE INVESTMENTS IN SAVINGS ACCOUNTS AND CERTIFICATES OF DEPOSIT, TO THE EXTENT EACH IS INSURED BY AN AGENCY OF THE FEDERAL GOVERNMENT.

CERTIFICATES OF DEPOSIT CREATE A CONTRACTUAL RELATIONSHIP OF DEBTOR CREDITOR BETWEEN THE BANK OF THE CERTIFICATE HOLDER, SINCE THE LEGAL EFFECT OF A DEPOSIT IS THAT OF A LOAN TO THE BANK. SEE 10 AM. JUR. BANKS 340, 455, AND BLAKEY V BRINSON, 286 U.S. 254 (1932). THE CERTIFICATE IS SIMILAR TO A BOND IN THAT THE ESSENCE OF EACH IS AN UNCONDITIONAL PROMISE TO PAY A SUM CERTAIN, INCLUDING INTEREST, IN RETURN FOR A LOAN OF MONEY. MOST CERTIFICATES, LIKE MOST BONDS, ARE FREELY TRANSFERABLE AND THE CERTIFICATE IS GENERALLY CONSIDERED TO BE A NEGOTIABLE INSTRUMENT. SEE BASKET V HASWELL, 107 U.S. 602 (1882), AND SECTION 3-104(1), (2)(C), OF THE UNIFORM COMMERCIAL CODE. SEE GENERALLY 10 AM. JUR. 2D BANKS, SECTION 455 ET SEQ. THERE ARE ALSO SOME DISTINCTIONS BETWEEN CERTIFICATES AND BONDS. HOWEVER, IT IS OUR VIEW THAT CERTIFICATES OF DEPOSIT HAVE ENOUGH OF THE ESSENTIAL CHARACTERISTICS OF BONDS THAT WE WILL NOT QUESTION A DETERMINATION BY HEW THAT, FOR THE PURPOSES OF THE FIRST MORRILL ACT, CERTIFICATES OF DEPOSIT MAY BE CONSIDERED BONDS.

WE ALSO AGREE WITH THE VIEW OF HEW THAT CERTIFICATES OF DEPOSIT, IN AND OF THEMSELVES, DO NOT GIVE DEPOSITORS A SUFFICIENT DEGREE OF SECURITY TO QUALIFY THEM AS "OTHER SAFE BONDS." THE HOLDER OF A CERTIFICATE HAS, GENERALLY, NO SPECIAL SECURITY INTEREST IN THE BAND'S ASSETS AND STANDS IN SUBSTANTIALLY THE SAME SHOES AS THE BANK'S OTHER GENERAL CREDITORS. THUS, HEW CONSIDERS CERTIFICATES OF DEPOSIT TO BE "OTHER SAFE BONDS" ONLY TO THE EXTENT TO WHICH THEY ARE INSURED BY AN AGENCY OF THE FEDERAL GOVERNMENT. WE CONCUR IN THIS VIEW.

PASSBOOK SAVINGS ACCOUNTS ARE IN MOST RESPECTS SIMILAR TO CERTIFICATES OF DEPOSIT. THE LEGAL EFFECT OF A SAVINGS ACCOUNT DEPOSIT IS THAT OF A LOAN TO THE BANK AND THE DEPOSITOR IS GENERALLY CONSIDERED TO BE A CREDITOR OF THE BANK. SEE 10 AM. JUR. 2D BANKS, SECTION 340. WHILE SAVINGS ACCOUNTS ARE TRANSFERABLE, IN CONTRAST TO MOST CERTIFICATES OF DEPOSIT AND BONDS, THEY ARE NOT CONSIDERED NEGOTIABLE INSTRUMENTS. SEE ORNBAUN V FIRST NATIONAL BANK OF CLOVERDALE, 8 P.2D (1932). MOREOVER, THEY DIFFER FROM BOTH CERTIFICATES OF DEPOSITS AND BONDS IN THAT THE BANK GENERALLY IS NOT CONTRACTUALLY LIABLE TO PAY A SET RATE OF INTEREST AND THUS MAY UNILATERALLY RAISE AND LOWER THE INTEREST RATES PAYABLE ON SAVINGS ACCOUNTS. WHILE A FEDERALLY INSURED SAVINGS ACCOUNT IS GENERALLY A SECURE INVESTMENT, WE BELIEVE THAT THE DIFFERENCES, NOTED IMMEDIATELY ABOVE, BETWEEN A SAVINGS ACCOUNT AND A BOND ARE SO SUBSTANTIAL THAT WE ARE UNABLE TO CONCLUDE THAT SUCH ACCOUNTS MAY BE CONSIDERED WITHIN THE DEFINITION OF "BONDS" FOR MORRILL ACT PURPOSES. THUS, IT IS OUR VIEW THAT THE DISTRICT MAY NOT INVEST THE LAND-GRANT FUNDS IN SAVINGS ACCOUNTS IN BANKS OR SAVINGS AND LOAN ASSOCIATIONS. YOUR SECOND, THIRD, AND FOURTH QUESTIONS ARE ANSWERED ACCORDINGLY.

YOUR FIFTH QUESTION CONCERNS THE AVAILABILITY OF DISTRICT APPROPRIATIONS TO REPLACE A LOSS OR SHORTAGE IN THE PRINCIPAL OR INTEREST (OF MORRILL ACT LAND-GRANT ENDOWMENT FUNDS) AS REQUIRED BY 7 U.S.C. 305. SECTION 301(A) OF THE DISTRICT OF COLUMBIA PUBLIC EDUCATION ACT, PUBLIC LAW 89-791, 80 STAT. 1433, AUTHORIZES APPROPRIATIONS OF NOT TO EXCEED $50 MILLION TO CARRY OUT THE PURPOSES OF TITLES I AND II OF SUCH ACT. SINCE AS INDICATED ABOVE, FEDERAL CITY COLLEGE WAS, IN EFFECT, MADE A LAND-GRANT COLLEGE BY TITLE I OF THE DISTRICT OF COLUMBIA PUBLIC EDUCATION ACT, AS AMENDED BY PUBLIC LAW 90 354, APPROPRIATIONS MADE PURSUANT TO THE AUTHORITY CONTAINED IN SECTION 305 OF SUCH ACT WOULD BE AVAILABLE TO MAKE UP DEFICIENCIES IN PRINCIPAL OR INTEREST IN THE LAND-GRANT ENDOWMENT FUNDS WHICH OCCUR FOR REASONS BEYOND THE DISTRICT'S CONTROL. IN THIS CONNECTION, WE WOULD LIKE TO POINT OUT THAT IT HAS BEEN HELD THAT SECURITIES PURCHASED WITH MORRILL ACT LAND-GRANT ENDOWMENT FUNDS MAY NOT BE SOLD PRIOR TO MATURITY FOR LESS THAN THEIR PURCHASE PRICE OR FACE VALUE. SEE IN RE MONTANA TRUST AND LEGACY FUND, 388 P.2D 366 (1964). OF COURSE, IN THE INTEREST OF GOOD MANAGEMENT IT IS OUR VIEW THAT THE DISTRICT MAY SELL SUCH SECURITIES AT LESS THAN THE PURCHASE PRICE OR FACE VALUE (I.E., AT A LOSS) WHERE IT REASONABLY APPEARS SUCH ACTION IS NECESSARY IN ORDER TO AVOID A GREATER LOSS OF PRINCIPAL. YOUR FIFTH QUESTION IS ANSWERED ACCORDINGLY.