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(The following was submitted for the record :)
DEPARTMENT OF JUSTICE,
Washington, June 11, 1946. Hon. CARTER MANASCO, Chairman, Committee on Expenditures in the Executive Departments,
House of Representatives, Washington, D. C. MY DEAR MR. CONGRESSMAN: I enclose herewith a memorandum, prepared at your request, discussing the question whether Reorganization Plan No. 2 of 1946, with respect to the United States Employees' Compensation Commission, complies with section 5 (a) (6) of the Reorganization Act of 1945.
This memorandum supplements my oral statement to a subcommittee of the House Committee on Expenditures in the Executive Departments, at a hearing on House Concurrent Resolutions 151, 154, and 155, on June 5, 1946. It is respectfully requested that this memorandum be made part of the record of the hearing.
Further material supplementing other parts of my statement is now in preparation and upon completion will be submitted to your committee. Sincerely yours,
GEORGE T. WASHINGTON, Acting Assistant Solicitor General.
REORGANIZATION AFFECTING UNITED STATES EMPLOYEES COMPENSATION COMMIS· SION-COMPLIANCE WITH SECTION 5(A) (6) OF THE REORGANIZATION ACT OF
The United States Employees' Compensation Commission determines workmen's compensation claims of employees of the Federal Government and of the District of Columbia and, in certain cases, of employees of private employers. It is composed of three members, no more than two of whom may be members of the same political party (5 U. S. C. 778).
Section 3 of Reorganization Plan No. 2 of 1946 transfers the functions of the Commission to the Federal Security Agency and abolishes the Commission. The section also provides that the functions thus transferred are to be performed in such manner and under such rules and regulations as the Federal Security Administrator shall prescribe; and that these regulations shall provide for a board of three persons, to be designated or appointed by the Administrator, with authority to hear and decide appeals on claims of Government employees.
The question has been raised whether section 3 of the plan complies with section 5 (a) (6) of the Reorganization Act of 1945. By the terms of this provision, no reorganization plan submitted under the act shall provide for or have the effect of
“(6) imposing, in connection with the exercise of any! quasi-judicial or quasi-legislative function possessed by an independent agency, any greater limitation upon the exercise of independent judgment and discretion, to the full extent authorized by law, in the carrying out of such function, than existed with respect to the exercise of such function by the agency in which it was vested prior to the taking effect of such reorganization ; except that this prohibition shall not prevent the abolition of any such function.”
The question presented is whether the transfer of functions from the Compensation Commission to the Federal Security Agency will impose a greater limitation, than now exists, upon the exercise of independent judgment and discretion in the performance of such functions.
The plan does not subject the Federal Security Agency, in discharging these functions, to outside controls to any greater extent than now obtains with respect to the Compensation Commission. Under the plan, the Federal Security Agency, to the same extent as the Compensation Commission, will have authority to pass on compensation claims without interference from any other agency. Of course, section 3 of the plan does not affect any existing right to court review, since it states expressly that the board's decisions on appeal shall be "final," "subject to applicable law.” The full discretion now vested by law in one independent agency of the Government, the Compensation Commission, is transferred by section 3 of the plan to another independent agency of the Government, the Federal Security Agency. (See S. Rept. 638, 79th Cong., 1st sess., Senate committee report on S. 1120, appendix III, p. 31.) It follows, therefore, that under the provisions of the plan the Federal Security Agency may fulfill the functions transferred with no "greater limitation upon the exercise of independent judgment and discre
tion, to the full extent authorized by law” than now exists in the case of the Compensation Commission. The suggestion has been made that the reorganization under consideration does not satisfy the requirements of section 5 (a) (6) of the statute, because the Federal Security Agency is headed by a single administrator, whereas the Compensation Commission has a bipartisan membership. The application of section 5 (a) (6) does not turn, however, on the number or political affiliation of agency members. As noted above, the test is whether the plan increases the dependence of an agency, in exercising a given function, upon any other agency; and such dependence is not enhanced merely because a function is transferred from a bipartisan agency to an agency headed by one official. Moreover, the legislative history does not show that the Congress intended section 5 (a) (6) to prevent all such transfers. The plan does not impose any political or other outside control upon the Federal Security Agency in connection with the exercise of the functions transferred. It may perform these functions as independently as the Compensation Commission, even though it has a single, rather than bipartisan, head. There is no reason whatever for believing that it will not discharge these functions completely without partisanship or political favor. Indeed, it is already responsible for the administration of other benefit programs requiring an equal freedom from political partisanship. Under these circumstances, there is no warrant for inferring that the Congress intended to prohibit the transfer in question. It has also been suggested that the appeal board mechanism may not be consistent with section 5 (a) (6), but this point is clearly not well taken. The function of hearing administrative appeals, in Government-employee cases, is now performed by an undifferentiated group within the Compensation Commission. (See 5 U. S. C. 787; S. Doc. No. 10, 77th Cong., 1st sess. Monograph of Attorney General's Committee on Administrative Procedure, U. S. Employees' Compensation Commission, pp. 50–52.) The appeal board, to be created by the Federal Security Administrator within the Federal Security Agency, will act finally on Government-employee appeals (except for such right of appeal to the courts as may exist). The effect is to segregate more sharply than the Compensation Commission does the functions of making initial determinations and of making decisions on appeal, and consequently to increase the employee's opportunity of securing full consideration of the merits of his claim. The appeal board gives the employee a chance to obtain a separate, independent review of his case. The plan, therefore, far from imposing greater limitations on the independence with which the compensation functions may be performed, actually increases such independence. That the appeal mechanism does not constitute an infringement of section 5 (a) (6) is plainly evident from its language and purpose. The conclusion reached is that the reorganization of the United States Employees' Compensation Commission complies with the provisions of section 5 (a) (6) of the Reorganization Act of 1945. GEORGE. T. WASHINGTON, Acting Assistant Solicitor General.
t DEPARTMENT OF JUSTICE, Washington, June 13, 1946. Hon. CARTER MANASCO, Chairman, Committee on Earpenditures in the Earecutive Departments, House of Representatives, Washington, D. C.
My DEAR MR. CoNGRESSMAN: At a hearing on House Concurrent Resolutions 151, 154, and 155, by a subcommittee of the House Committee on Expenditures in the Executive Departments, held June 5, 1946, you requested that I file a memorandum discussing the corporate status of the Federal Public Housing Authority, under Reorganization Plan No. 1 of 1946, and the power of this Authority to borrow money under the charter of the United States Housing Authority. I am enclosing a memorandum on this subject.
I referred in my statement at the hearing on June 5, 1946, to the legislative history of section 2 (c) of the Reorganization Act of 1945. I am also enclosing a supplementary memorandum with respect to this legislative history.
I should like permission to make these memoranda part of the record of the hearing. -
Acting Assistant Solicitor General.
CORPORATE STATUS OF FEDERAL PUBLIC HOUSING AUTHORITY
Reorganization Plan No. 1 of 1946 consolidates the agencies and functions of the National Housing Agency established under the First War Powers Act, 1941 (55 Stat. 838), by Executive Order No. 9070 of February 24, 1942 (7 F. R. 1529), to form a permanent agency of the same name. Section 504 (a) of the plan provides that the Federal Public Housing Authority shall be a constituent unit of the National Housing Agency and that it "shall succeed to the corporate status of the United States Housing Authority." The questions have been raised whether, under the plan, (1) the Federal Public Housing Authority is a corporation and (2) such Authority may borrow money under the charter of the United States Housing Authority.
The United States Housing Authority, a permanent corporation, was created by the United States Housing Act of 1937, 42 U. S. C. 1401-30, and was given borrowing authority up to $800,000,000. It was consolidated with other agencies by Executive Order No. 9070 to form the wartime National Housing Agency. The Executive order also provided that the United States Housing Authority should be "administered as the Federal Public Housing Authority, one of the main constituent units.” If Reorganization Plan No, I becomes effective, the United States Housing Authority will simply continue as a corporation with authority to borrow as conferred by the 1937 act, but under the name of Federal Public Housing Authority.
Under the plan, the United States Housing Authority as a corporation merely undergoes a permanent change of name, as authorized by section 4 (1) of the Reorganization Act, which provides that “any reorganization plan transmitted by the President-(1) shall change, in such cases as he deems necessary, the name of any agency affected by a reorganization, * * *” Thus, the Federal Public Housing Authority validly has the corporate status and borrowing authority of the United States Housing Authority, pursuant to the provisions of the Reorganization Act of 1945.
GEORGE T. WASHINGTON, Acting Assistant Solicitor General.
LEGISLATIVE HISTORY OF SECTION 2 (C) OF REORGANIZATION ACT OF 1945
Section 2 (c) of the Reorganization Act of 1945 provides as follows:
"It is the expectation of the Congress that the transfers, consolidations, coordinations, and abolitions under this Act shall accomplish an over-all reduction of at least 25 per centum in the administrative costs of the agency or agencies affected.”
H. R. 4129, the reorganization bill, was reported to the House of Representatives, and passed by it, with a provision in section 3 requiring the President in his message transmitting a reorganization plan to "state, to such extent as he deems practicable, approximately the reduction of expenditures, if any, which it is probable will be brought about by the taking effect of the reorganizations specified in the plan.” The House-Senate conference eliminated this provision from the bill. The Reorganization Act of 1945, as finally enacted, does not contain any provision similar to the deleted clause. (See H. Rept. 1378, 79th Cong., 1st sess. ; Statement of the managers on the part of the House, p. 9).
During the debate on H. R. 4129 in the House of Representatives the following provision was proposed as an amendment to the bill :
"It is the policy and expectation of the Congress that the transfers, consolidations, and abolitions contained in any reorganization plan under this Act shall accomplish an over-all reduction of at least 25 per centum in the administrative costs of the agency or agencies affected by such plan." [Italics supplied.]
This amendment to the bill was adopted by the House after it was explained by Congressman Martin, its proponent, that the provision was not "mandatory" (Congressional Record, October 4, 1945, pp. 9571-9574).
The House-Senate Conference struck this paragraph from the bill and substituted section 2 (c) now found in the act. Thus, the reference to any savings with respect to a particular plan was eliminated. (See statement of House managers, cited above.)
GEORGE T. WASHINGTON, Acting Assistant Solicitor General.
The CHAIRMAN. Gentlemen, the next witness will be Mr. Horace Russell, general counsel, United States Savings and Loan League, Chicago, Ill.
I understand Mr. Russell desires to testify regarding Reorganization Plan No. 1.
You may proceed, Mr. Russell. STATEMENT OF HORACE RUSSELL, GENERAL COUNSEL, UNITED
STATES SAVINGS AND LOAN LEAGUE, CHICAGO, ILL. Mr. RUSSELL. I am Horace Russell, a lawyer, 7 South Dearborn Street, Chicago 3, Ill. I represent the Savings and Loan and Cooperative Bank people who customarily finance more than one-third of American homes and who have financed more than 75 percent of the first 100,000 veterans' loans. We object to Reorganization Plan No. 1 of 1946 under the Reorganization Act of 1945, first, because we believe it to be illegal, and second, because we believe part V provides an unwarranted method of governmental organization to deal with housing, home ownership, and home financing.
The Reorganization Act of 1945 in section 5, subsection (a), paragraph 3, makes it entirely clear that no reorganization plan which provides for, and no reorganization under the act shall have the effect of continuing any agency beyond the period authorized by law for its existence, or beyond the time when it would have terminated if the reorganization had not been made.
Executive Order 9070 issued in February 1942, under the First War Powers Act, created the National Housing Agency as a temporary war emergency agency and under the express provisions of said act and Executive order it is to terminate 6 months after the present war. It is perfectly clear that Reorganization Plan No. 1 of 1946 is illegal under the Reorganization Act of 1945, and I know of no other law which gives to the President the power to legislate in this manner.
Gentleman of the committee, I would like to point out informally in addition to what I have already said on the foregoing, two additional things. Section 5 (a) (3) of the Reorganization Act prohibits continuation of a temporary war agency, and section 5 (a) (4) pro.hibits the continuation of war functions. They are two separate and
distinct propositions. I submit, Mr. Chairman and gentleman, that . the provisions of Reorganization Plan No. 1 do continue a war agency. I want to discuss that separate from the function question.
Here is the Federal Housing Administration and here is the Federal Home Loan Bank Board, and here is the United States Housing Authority, and here is a temporary agency, a temporary war agency.
Mr. JUDD. That is the National Housing Authority.
Mr. RUSSELL. That was imposed upon those three independent agencies of the Government created by Congress, as a new agency of Government. I have a copy of the Budget of the United States Government for the fiscal year ending June 30, 1947. I have examined the past Budgets of the United States since the order was issued February 24, 1942, studying up the National Housing Agency, and I submit to you, that it was set up as an agency under the First War Powers Act, that it was set up temporary as provided in that act, and the order says it is temporary. It says it shall expire, and if that agency as such is a temporary agency and the whole substance of part V, or Reorganization Order No. 1 is intended to and does undertake to perpetuate that agency which is in the Budget in direct conflict with section 5 (a) (3) of the Reorganization Act of 1945.
Taking up the function—and let me point out that the function of these three constituent independent agencies was provided for by law and is permanent under permanent law. They are provided for by appropriations from year to year, both before the Executive Order No. 9070 and since that order.
Their functions are provided for in the same manner in an appropriation bill before Executive Order 9070, and since, and in addition, the functions of the National Housing Agency, a temporary war agency, are provided for in the appropriation bill, and those functions which are temporary, are undertaken to be carried over.
Here the proposed Budget for the next fiscal year that has the money in there to carry them over. It also has all the money to carry these admittedly permanent functions in three constituent agencies.
There were several questions asked about economy. I submit to you gentlemen most seriously that the creation of that agency did not save any money in either one of these agencies when it was set up, the appropriations have been greater. I wish that you would call Mr. Foley up here, and Mr. John Fay up here and ask them whether it saved them any money or not. I know some people who have spent a lot of time since that time in what they call liaison work in Washington. In addition to what they would have spent if National Hoosing Agency had not been created, they have had that additional expense.
The CHAIRMAN. Mr. Russell, at that point, let us assume that this present Reorganization Act that has been in effect, in September 1941, when Executive Order 9070 was issued pursuant to the War Powers Act. The creation of the National Housing Agency then, if it had been under this present law, would have been legal, would it not, and would have been in conformity with present Reorganization Act ? Mr. RUSSELL. I think it would have, Mr. Chairman.
The CHAIRMAN. Therefore, under the present Reorganization Act then we are not granting any additional functions to the National Housing Agency that are not in existence at the present time and cannot extend any of the functions beyond their life under the War, Powers Act.
Mr. RUSSELL. Mr. Chairman, if you will let Reorganization Plan No. 1 go into effect, you will continue a temporary war agency by virtue of it and there is no doubt about that. You will also continue certain functions which have been developed under that agency, and which were not in these three constituent agencies, and that were not provided for by law in the permanent law.
You and I have been in Washington enough to know that functions grow in Washington and they have grown to the extent that in this Budget here is $450,000 for the functions of the National Housing Agency. In addition to the functions in these others there is that request for authorization for money. And in addition it authorizes money which they collect from my clients to run that office. Therefore, an agency will be continued in violation of the statute and those functions will be continued in violation of the statute.
The CHAIRMAN. Let us assume that the name had been changed from National Housing Agency to National Housing Department.