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Legal Opinion Summary
Topic:Incidental Authority/Excess Capacity: May a Farm Credit Bank use its excess capacity to provide information technology services to a non-Farm Credit System leasing corporation?
ID Number:01-04
Issue Date:06/19/2001

A farm credit bank (FCB) asked whether it could use its excess capacity to provide information technology (IT) services to a non-System leasing corporation. The FCB acquired IT equipment, applications, and staff in its information services department to engage in a full range of IT activities for itself and to meet its district associations’ requests for services. The FCB indicated that it could not reduce its excess capacity without risking its ability to provide quality IT services. Because the FCB acquired and maintains excess IT capacity in “good faith,” OGC concluded that the FCB may provide IT services to a non-Farm Credit System (FCS) leasing corporation.

Under the Farm Credit Act (Act), an FCB has incidental authority to maintain an IT department in order to effectively carry out its lending functions, including underwriting, credit analysis, loan and lease processing, document preparation, and internal administration. See Act 1.5(5) (12 U.S.C. 2013(5)) (authorizing FCBs to acquire, hold, dispose of, and use property necessary or convenient to their business) and 1.5(21) (12 U.S.C. 2013(21)) (authorizing FCBs to exercise “incidental powers as may be necessary or expedient” to carry on their business). The FCB also has the incidental authority to provide services - including IT services - to the district associations it supervises. See Act, 2.0(b)(2), 2.2, 2.2(10), 2.2(11), 2.2(12), 2.2(13), 2.2(15), 2.2(18), 2.2(19), 2.3(b)(2), 2.4(a), 2.4(b)(2), 2.4(c)(1), 2.4(c)(4), 2.5 (12 U.S.C. 2071(b)(2), 2073, 2073(10), 2073(11), 2073(12), 2073(13), 2073(15), 2073(18), 2073(19), 2074(b)(2), 2075(a), 2075(b)(2), 2075(c)(1), 2075(c)(4), 2076)).

OGC has issued several legal opinions over the past few years concluding that FCS institutions may provide similar services to non-FCS entities when they have obtained excess capacity in good faith in order to make full economic use of their resources. See OGC opinions dated February 15, 2001, August 18, 1999, August 13, 2000, April 29, 1999, April 14, 1999, January 13, 1999, January 6, 1999, November 5, 1998, and March 27, 1998. The FCB’s excess capacity to perform IT services parallels the excess capacity situations addressed in our earlier legal opinions and in the court and OCC opinions that OGC has relied upon in approving past excess capacity requests.

(June 19, 2001)