Previous Document IconPrevious Legal Opinion Summary

Next Document IconNext Legal Opinion SummaryExam Manual Table of Contents IconList of Legal Opinion Summaries

Legal Opinion Summary
Topic:Incidental Authority/Excess Capacity: May a Farm Credit Bank use its excess staffing capacities to provide credit-related and marketing services to a non-Farm Credit System leasing corporation?
ID Number:01-01
Issue Date:02/15/2001

A farm credit bank (FCB) asked whether its credit, loan processing, and marketing departments could use their excess staffing capacities to perform credit-related and marketing services for a non-Farm Credit System (FCS) leasing corporation. The FCB indicated that it maintains excess capacity in “good faith”; the FCB’s current staff levels in each department are necessary to meet its core responsibilities, to keep needed expertise, and to continue to meet the district associations’ requests for services. OGC concluded that providing credit-related, lease documentation, and marketing services to a non-FCS leasing corporation is a permissible exercise of the FCB’s “incidental authorities” under the Act.

The FCB has incidental authority under section 1.5(21) of the Farm Credit Act (Act) (12 U.S.C. 2013(21)) to perform credit-related, lease documentation, and marketing services for itself and its district associations. OGC previously concluded that FCS institutions may also 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 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.

FCS institutions obtain excess capacity in good faith when they acquire resources intending to use them fully in the conduct of their business or when it is inefficient or impractical to acquire a lesser amount. FCS institutions keep excess capacity in good faith when, for example, they cannot reduce excess capacity because it is necessary for future expansion, to accommodate seasonal business cycles, or for necessary expertise. If an institution could feasibly reduce its excess capacity then it cannot, in good faith, use that excess capacity to provide otherwise-impermissible services under its incidental powers.

(February 15, 2001)