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316 8-218 Reg. F-25 INTERPRETATION OF LAW OR REGULATION (Copies To Be Sent To All Federal Reserve Banks) May 9, 1940 Mr. First Vice President, Federal Reserve Bank of Dear Mr. It has been noted from the reports of examination of The Trust Company, , , as of December 3, 1938, and October 38, 1939, that such bank had deposited real estate mortgage loans with its trust department with the view of complying with the following condition of membership: "If trust funds held by such bank are deposited in its banking department or otherwise used in the conduct of its business, it shall deposit with its trust department security in the same manner and to the same extent as is required of national banks exercising fiduciary powers." As 3'ou know, the securities used f or this purpose must come within one of the following classes of securities approved by the Board in section 9(b) of Regulation F: "(l) Bonds, notes, bills, certificates of indebtedness or other direct obligations of the United States, or obligations fully guaranteed by the United States as to principal and interest; or "(2) Other readily marketable securities of the classes in which State trust companies or State banks exercising trust powers are authorized or permitted to invest trust funds under the laws of the State in which such national bank is located; or "(3) Other readily marketable securities of the classes defined as 'investment securities' pursuant to section 5136 of the Revised States of the United States, as amended." -<dw S-218 Reg. F-25 317 The examiner apparently considered the real, estate mortgage loans as coming within the second class of approved securities. However, in view of the fact that the securities are required to be readily marketable, the Board has frequently expressed the view that real estate mortgage loans do not qualify unless they comply with the requirements relating to marketability contained in the regulation of the Comptroller of the Currency concerning investment securities, and that the usual real estate mortgage loan does not comply with such requirements. It is requested that at the time of the next examination of The Trust Company, or prior thereto if you deem it desirable, the matter be discussed with the bank in order that it may, as soon as practicable, take such action as may be necessary to comply with the condition of membership as so construed. Very truly yours, (Signed) L. P. Bethea L. P. Bethea, Assistant Secretary.
@FedFRASER