Federal Government Corporations: An Overview Page: 7 of 24
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CRS-4
governmental institutions. For example, the 109th Congress is considering bills that
would create a Louisiana Reconstruction Corporation (H.R. 4100 and S. 2172). This
federal entity would engage in commercial-type transactions, such as purchasing and
selling property, in areas of Louisiana affected by Hurricane Katrina.
A government corporation is not a panacea for contemporary public
management problems. There are times when it may be an appropriate choice and
times when it may not. Understanding the unique character of government
management, based as it is upon tenets of public law, provides guidance in weighing
these choices.13
Evolution of the Federal Government Corporation
Historically, the federal government has been involved in few commercial
enterprises. There were some early instances of the federal government participating
in otherwise private corporate enterprises on a shared ownership basis, most notably
the first and second Banks of the United States. This practice came into question,
however, as a consequence of a Supreme Court ruling in 1819.'4 From that time to
this, the federal government, with few exceptions, has consciously avoided shared
ownership involvement with private, nongovernmental entities.
The first time the federal government acquired a corporation outright occurred
in 1903, when the Panama Railroad Company was purchased from the French
Panama Canal Company." Since then, a number of corporate bodies have been
established as part of the federal government, with growth in that number tending to
come in spurts and generally in response to emergencies. The first large-scale use of
the corporate option accompanied the mobilization for World War 1.16 Later, the
Depression of the 1930s fostered numerous corporations (e.g., the Reconstruction
Finance Corporation, and Tennessee Valley Authority).'7 Finally, World War II
prompted additional federal corporations. After the passing of each of these
13 See, for example, Ronald C. Moe, "The Importance of Public Law: New and Old
Paradigms of Government Management," in Phillip J. Cooper and Chester A. Newland, eds.
Handbook of Public Law and Administration (San Francisco: Jossey-Bass Publishers,1997), pp. 41-57.
'" McCulloch v. Maryland (17 U.S. (4 Wheat.) 315 (1819)). The Supreme Court's ruling
implied that partial federal ownership of a corporation, in this instance the Bank of the
United States, assigned the corporation certain attributes normally reserved to the sovereign
authority (e.g., non-taxable status). The Court also declared that the Necessary and Proper
Clause of the Constitution (Art. I, sec. 8, cl. 18) permitted Congress to establish
corporations. See also Osborn v. Bank of the United States, 17 U.S. (4 Wheat.) 738 (1824).
5 Marshall Dimock, Government-Operated Enterprises in the Panama Canal Zone
(Chicago: University of Chicago Press, 1934).
16 Harold A. Van Dorn, Government Owned Corporations (New York: Alfred A. Knopf,
1926).
'" John Thurston, Government Proprietary Corporations in English-Speaking Countries
(Cambridge: Harvard University Press, 1937).
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Moe, Ronald C. & Kosar, Kevin R. Federal Government Corporations: An Overview, report, March 23, 2006; Washington D.C.. (https://digital.library.unt.edu/ark:/67531/metacrs9156/m1/7/: accessed April 30, 2024), University of North Texas Libraries, UNT Digital Library, https://digital.library.unt.edu; crediting UNT Libraries Government Documents Department.