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U.S. OFFICE OF SPECIAL COUNSEL
1730 M Street, N.W., Suite 218
Washington, D.C. 20036-4505
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Federal Hatch Act Advisory:
Federal Reserve Bank Board of Directors Not Covered
Re: OSC File No. AD-01-xxxx
Dear Mr. __________:
This letter is in response to your request for an
advisory opinion concerning the Hatch Act. The Office of Special Counsel is
authorized pursuant to 5 U.S.C. § 1212(f) to issue binding opinions under
the Act. We apologize for the delay in responding to your request. OSC has
received a large number of advisory requests, and we are responding to them
as quickly as possible.
Specifically, you asked whether an individual who
serves on the board of directors for one of the Federal Reserve Banks is
subject to the restrictions of the Hatch Act. As previously explained during
telephone conversations with our office, we have concluded that an
individual who serves on the board of directors for a Federal Reserve Bank
is not covered by the restrictions of the Act.
The Hatch Act, 5 U.S.C. §§ 7321-7326, governs the
political activities of individuals employed or holding office within the
federal executive branch. Specifically, section 7322 provides that the Act
applies to “any individual, other than the President and the Vice President,
employed or holding office in – (A) an Executive agency other than the
General Accounting Office.”
In 1913, the Federal Reserve Act created the Federal
Reserve System to serve as the Nation’s central bank. See 12 U.S.C. § 221 et
seq. As such, its major responsibility is the execution of monetary policy
that contributes to the strength and vitality of the U.S. economy. Within
the Federal Reserve System, the Federal Reserve Act created 12 Federal
Reserve Banks.
The Federal Reserve Act requires each of the 12 Federal
Reserve Banks to be “conducted under the supervision and control of a broad
of directors.” 12 U.S.C. § 301. Each Reserve Bank has nine directors, who
represent the interests of their Reserve District for a term of three years.
12 U.S.C. § 308. The nine directors of each Reserve Bank are divided equally
into three designated classes: class A, class B, and class C. 12 U.S.C. §
302. The six directors of class A and class B are elected by the
stockholding member banks; while the three class C directors are appointed
by the Federal Reserve Board of Governors. 12 U.S.C. §§ 304, 305. The board
of director positions are part-time positions.
Pursuant to the Federal Reserve Act, the board of
directors shall administer the affairs of the Federal Reserve bank. Their
responsibilities include: contributing to the formulation of monetary
policy, commenting on major organizational changes, appraising management
performance, and reviewing officers’ salaries. 12 U.S.C. § 301. The
directors also approve all Federal Bank officers and select their District’s
representative each year to the Federal Advisory Council. In addition, the
Reserve Bank directors establish their District’s discount rate at least
once every 14 days, subject to the Board of Governors’ approval. Id.
As explained above, the Hatch Act restricts the
political activities of any individual employed or holding office in a
federal executive agency. The Act does not further define the terms
“employed” or “holding office.” In addition, the legislative history of the
Act is void of any reason or explanation of what Congress meant by the terms
“employed” or “holding office.” Lastly, there is no case law interpreting
the terms in section 7322(1), nor are the Act’s regulations, 5 C.F.R. Part
734, instructive.
Therefore, OSC examined other sources for guidance as
to what Congress intended by the terms “employed” or “holding office.” Title
5 of the United States Code defines the terms “employee” and “officer.”
Specifically, section 2104 provides that an “officer” is an individual who
meets three criteria. First, the individual is “required by law to be
appointed in the civil service” by one of the following acting in an
official capacity: the President; a court of the United States; the head of
an Executive agency; or the Secretary of a military department. 5 U.S.C. §
2104(a)(1). Next, the individual must be “engaged in the performance of a
Federal function under authority of law or an Executive act.”
5 U.S.C. § 2104(a)(2). Third, the individual must be “subject to the
supervision of [an individual named in section 2104(a)(1)] while engaged in
the performance of the duties of this office.” 5 U.S.C. § 2104(a)(3).
Similarly, section 2105 provides that an “employee” is
an individual who meets three criteria. First, the individual must have been
“appointed in the civil service” by a person with appropriate appointing
authority. 5 U.S.C. 2105(a)(1). Second, the individual must be “engaged in
the performance of a Federal function under authority of law or an Executive
act.” 5 U.S.C. § 2105(a)(2). Third, the individual must be “subject to the
supervision of an individual [with appropriate appointing authority] while
engaged in the performance of the duties of this position.” 5 U.S.C. §
2105(a)(3).
Using the above definitions as guidance, we have
concluded that any individual “employed” or “holding office” within the
executive branch of the federal government must, in addition to other
requirements, be “appointed in the civil service.” The General Counsel’s
Office of the Federal Reserve System explained that none of the individuals
who serve on the board of directors for a Federal Reserve Banks is appointed
to the federal civil service system by a person with appropriate appointing
authority as described above. On the contrary, the General Counsel’s Office
stated that the board of directors consists of private sector individuals;
they are not considered federal employees or officers.
Based on the above, we have concluded that an
individual who serves on the board of directors for a Federal Reserve Bank
is not an individual who is “employed” or “holding office” in an executive
branch agency. Consequently, the individual is not subject to the
restrictions of the Hatch Act.
Please be advised, however, that since 1915 the Federal
Reserve Board of Governors has imposed restrictions on the political
activities of the Federal Reserve Bank board of directors. Therefore, you
may wish to consult the appropriate agency officials at the Federal Reserve
System for more information concerning the political limitations imposed on
an individual who serves as a Federal Reserve Bank board director.
Please contact me at (202) 254-3667 if you have any
further questions.
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Sincerely,
____/s/___________
Amber A. Bell
Attorney, Hatch Act Unit
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__________
1Prior to the 1993 Amendments, the Act’s restrictions applied to
“an employee in an Executive agency or an individual employed by the
government of the District of Columbia.” 5 U.S.C. § 7324(a)(1) (1992). In
1993, Congress amended the Act and added the language “holding office” to
the definition of those individuals who are subject to the restrictions of
the Act. 5 U.S.C. § 7322 (2003).
2
Persons with appropriate appointing authority include the
President, a Member of Congress, and other individuals who are employees
under § 2105. 5 U.S.C. § 2105(a)(1).
3 This conclusion appears
to be consistent with the language found in 18 U.S.C. § 208. In section 208,
Congress defines which individuals are subject to the penalties in 18 U.S.C.
§ 216. Section 208 provides, in relevant part: “whoever, being an officer or
employee of the executive branch of the United States Government, or of any
independent agency of the United States, a Federal Reserve bank director,
officer, or employee, or an officer or employee of the District of Columbia,
. . . .” If Federal Reserve bank directors were considered officers or
employees of the executive branch, there would have been no reason for
Congress to specifically name them in section 208.
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