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F e d e r a l R e s e r v e Ba n k o f D a lla s DALLAS. TEXAS 75222 Circular No. 77-40 March 21, 1977 FUNDS O B T A IN E D FROM S T A T E A N D M U N IC IP A L HOUSING A U T H O R IT IE S U N D E R " L O A N -T O -L E N D E R " PROGRAMS In d e fin ite Suspension of R egulations D and Q R e quirem ents T O A L L MEM BER BANKS A N D O THERS C O NCE RNE D IN TH E E LE V E N TH FEDERAL RESERVE D IS T R IC T : In this B a n k 's C i r c u l a r N o. 7 5 -1 5 3 , dated O ctober 14, 1975, you w e re a d vis ed th a t the Board of G o v e rn o rs of the F e d e ra l R e s e rv e S ys te m , p e n d in g f u r th e r r e v i e w , had suspended its e a r l i e r action s u b je c tin g funds obtained by m em ber banks th ro u g h " L o a n -t o -L e n d e r " p ro g ra m s to r e s e r v e re q u ire m e n ts and in te re s t ra te lim ita tio n s . A f t e r an e x te n s iv e r e v ie w of such p r o g r a m s , the Board of G o v e r nors has d e cid e d to continue th a t suspension fo r an in d e fin ite p e r io d . P rin te d on th e r e v e r s e of th is c ir c u l a r is the te x t of the notice issued by the Board of G o v e rn o rs as subm itted fo r p u b lic a tio n in the F E D E R A L R E G IS T E R . Questions r e la tin g to Regulation D , "R e s e rv e s o f M e m b e r B a n k s ," should be d i rected to A lla n Y . N e a le , E x t. 6334, or the A c co u n tin g D e p a rtm e n t a t our El Paso, Houston, o r San A ntonio B r a n c h . Questions r e la tin g to R eg ulation Q , " In te r e s t on D e p o s its ," should be d ir e c te d to R ic h a r d B . West of o u r R e gu lations D e p a rtm e n t, E x t. 6171. S in c e r e ly y o u r s , R o b e rt H . B o y k in F ir s t V ic e P re s id e n t Banks and others are encouraged to use the fo llo w in g to ll-fr e e incoming WATS numbers in contacting th is Bank: 1-8 0 0-492-4403 (intra s ta te ) and 1 -8 0 0 -52 7 -4 97 0 (in te rs ta te ). For c a lls placed lo c a lly , p lease use 651 plus the extension referred to above. This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org) TtHe 12—Banks and Sm M nc CHAPTER II— FEDERAL RESERVE 8VSTEM SUBCHAFTER A— BOARD OF WMCRHORS OF THE FEDERAL RESERVE SYSTEM [D o ck et N o. R—0085; B egs. D a n d Q ] PART 204— RESERVES OF MEMBER BANKS PART 217— INTEREST ON DEPOSITS "Loan-to-Lender" E x tr a c t From F E D E R A L R E G IS T E R , V O L . 42, N O . 47, T h u r s d a y , M a rc h 10, 1977 p . 13296 Programs— Notice of Continuaiton of Waiver of Reserve Re quirem ents and Interest Rate Limitations T he B oard of G overnors h as recon sidered th e question of th e deposit sta tu s u n d er its R egulations D a n d Q of funds obtained by m em ber banks on th e ir notes Issued to S ta te or m unicipal housing au th o ritie s u n d er “L o an -to -L en d er" type program s. T h e B oard h as d eterm ined to continue th e waiver of reserve req u ire m ents a n d in te re st r a te lim itatio n s a n nounced in S eptem ber 1975 w ith respect to funds o btained by m em ber banks u n der these program s. T his action is based upon th e B o ard ’s a u th o rity to determ in e w h at types of obligations sh a ll be deem ed a deposit u n d er section 19(a) of th e F ed era l Reserve Act, 12 U.S.C. 461, a n d Its reg ulatory a u th o rity u n d er § 204.1(f) of R egulation D a n d 9 217.1(f) of R eg u la tio n Q. H ie following n o tice h as been issued to all F ed eral Reserve B anks: L o a n -t o -L en d er P rogram s T h e B o a rd h a s rev iew ed th e q u e s tio n of w h e th e r f u n d s o b ta in e d b y m e m b e r b a n k s o n t h e i r n o te s Issu e d to S ta te a n d m u n ic ip a l h o u s in g a u th o r itie s u n d e r “ L o a n -to -L e n d e r" a g re e m e n ts s h o u ld b e re g a rd e d a s " d e p o s its ” u n d e r t h e B o a rd ’s R e g u la tio n D (S 2 0 4 .1 (f)) a n d R e g u la tio n Q ( i 2 1 7 .1 ( f) ) . “L o a n -to -L e n d e r” p ro g ra m s u s u a lly In v olve th e Iss u a n c e b y a S ta te o r m u n ic ip a l h o u s in g a u th o r ity o f ta x -e x e m p t b o n d s a n d t h e s u b s e q u e n t le n d in g o f t h e b o n d re v e n u e f u n d s to fin a n c ia l I n s titu tio n s u n d e r t h e r e q u ir e m e n t t h a t th e s e f u n d s b e u s e d to m a k e s p e c i fied ty p e s o f re a l e s ta te lo a n s (g e n e ra lly m o rtg a g e lo a n s to low o r m o d e ra te in co m e h o m e b u y e r s ) . T h e f u n d s a d v a n c e d to f in a n c ia l in s t i t u t i o n s p u r s u a n t to a “L o a n -to L e n d e r” p ro g ra m a re e v id e n c e d b y a lo a n a g re e m e n t a n d a p ro m is so ry n o te Issu e d b y t h e fin a n c ia l I n s titu tio n to t h e h o u s in g a u th o r ity . T h e se p ro g ra m s e n a b le S ta te a n d m u n ic ip a l a u th o r itie s t o c h a n n e l f u n d s o b t a in e d I n to h o u s in g p ro g ra m s th r o u g h f in a n c ia l I n s titu tio n s p o sse ssin g s p e c ia lise d e x p e r tis e In re a l e s ta te le n d in g a n d c o n s tru c tio n fin a n c in g . A t th e p r e s e n t tim e s u c h p r o ^ a m s a re In o p e r a tio n in 11 S ta te s . T h ir te e n o th e r S ta te le g is la tu re s h a v e a p p ro v e d le g is la tio n a u th o r iz in g s u c h p ro g ra m s. O n t h e b a s is o f a v a ila b le In fo rm a tio n , “L a a n -to -L e n d n r” p r o g ra m s c u r r e n tly r e p re s e n t a p p ro x im a te ly $800 m illio n In f u n d s l e n t fo r th e s e p u rp o se s. B y le t t e r o f A u g u s t 8, 1978, t h e B o a rd r e q u e s te d t h a t t h e F e d e ra l R e serv e B a n k s i n fo rm m e m b e r b a n k s In t h e i r d is tr ic ts t h a t f u n d s o b ta in e d b y m e m b e r b a n k s o n th e ir n o te s Issu e d to S ta te o r m u n ic ip a l h o u s in g a u th o r itie s u n d e r " L o a n -to -L e n d e r1' p ro g ra m s a r e f u n d s to b e u s e d In th e b a n k in g b u s in e s s a n d , th e re fo re , s h o u ld b e tr e a te d a s d e p o s its s u b je c t to R e g u la tio n D re se rv e r e q u ir e m e n ts a n d R e g u la tio n Q I n te re s t r a t e lim ita tio n s . O n S e p te m b e r 29, 1978, t h e B o a rd a n n o u n c e d t h a t , In re sp o n s e t o re q u e s ts fo r s u c h a c tio n . I t w o u ld rev iew th e d e p o s it s t a tu s at f u n d s re c e iv e d b y m e m b e r b a n k s o n t h e i r n o te s Iss u e d t o S ta te a n d m u n ic ip a l h o u s in g a u th o r itie s u n d e r " L o a n -to -L e n d e r” ty p e p ro g ra m s . S t c o n ju n c tio n w ith t h a t r e view , t h e B o a rd s u s p e n d e d t h e e ffe c tiv e n e ss o f I t s d e te r m in a tio n o f A u g u s t 8, 1978, a n d w ai v e d t h e m a in te n a n c e o f r e q u ire d reserv es cm “L o a n -to -L e n d e r" o b lig a tio n s . T h e B o a rd h a s c o n d u c te d a n e x te n s iv e r e v iew o f a ll k n o w n “L o a n -to -L e n d e r" ty p e p ro g ra m s . B a sed u p o n t h i s rev iew , t h e B o a rd h a s d e te r m in e d to c o n tin u e , f o r a n in d e fin ite p e rio d , t h e s u s p e n s io n o f Its A u g u s t 8, 197S, d e te r m in a tio n re g a rd in g t h e d e p o s it s t a tu s o f “L o a n -to -L e n d e r” f u n d s . (T h is s u s p e n s io n w as f ir s t a n n o u n c e d o n S e p te m b e r 29, 1978.) T h is a c tio n Is b a s e d u p o n t h e B o a rd ’* b e lie f t h a t a d e te r m in a tio n o n t h e d e p o s it s t a tu s o f f u n d s o b ta in e d b y m e m b e r b a n k s u n d e r “L o a n -to -L e jid e r” p ro g ra m s s h o u ld b e d e fe rre d p e n d in g t h e c o m p le tio n o f b ro a d e r b a s e d s tu d ie s o f p o ssib le s t a tu t o r y a n d re g u la to r y re fo rm s p e r ta in in g to I n te r e s t o n d e p o s its a n d re se rv e s h e ld b y m e m b e r b a n k s . T h e c o n tin u e d su s p e n s io n w ill also p ro v id e t h e B o a rd w ith f u r t h e r o p p o r tu n ity to assess t h e p o te n tia l Im p a c t o f a p p lic a tio n o f re se rv e r e q u ire m e n ts a n d I n te r e s t r a te lim ita tio n s o n f u n d s o b ta in e d b y m e m b e r b a n k s th r o u g h p a r tic ip a tio n In “L o a n -to -L e n d e r” p ro g ra m s. T h e B o a rd re c o g n iz e s t h a t its d e c is io n to defex fo r a n I n d e fin ite p e rio d a fin a l d e te r m in a tio n re g a rd in g t h e d e p o s it s t a t u s o f f u n d s o b ta in e d b y m e m b e r b a n k s u n d e r “L o a n -to -L e n d e r” a g re e m e n ts m a y r e s u lt In so m e u n c e r ta in ty a m o n g m e m b e r b a n k s p re s e n tly p a r tic ip a tin g in s u c h p ro g ra m s o r c o n te m p la tin g p a r tic ip a tio n a t a f u t u r e d a te . A cco rd in g ly , I n o rd e r to a v o id a n y u n c e r t a i n t y w ltt^ re s p e c t t o m e m b e r b a n k p a r tic ip a tio n i n “L o a n -to -L e n d e r” p ro g ra m s d u r in g t h e tim e t h i s s u s p e n s io n Is I n effect, t h e B o a rd h a s d e te rm in e d t h a t a n y f u n d s o b ta in e d b y m e m b e r b a n k s a s th e r e s u lt o f “L o a n -to -L e n d e r” a g re e m e n ts e n te r e d I n to d u r in g t h i s s u s p e n s io n p e rio d w ill c o n tin u e to b e e x e m p t, fro m in te r e s t r a te lim ita tio n s a n d reserv e r e q u ire m e n ts , re g a rd le ss o f a n y f u t u r e d e c is io n o f t h e B o a rd to r e in s ta te its d e te r m in a tio n o f A u g u s t 6, 1975. W h ere “L o a n -to -L e n d e r” p ro g ra m s a re b e in g o ffered. I t Is s u g g e ste d t h a t y o u In fo rm m e m b e r b a n k s I n y o u r d is tr ic t o f t h e B o a rd ’B d e c is io n to c o n tin u e , In d e fin ite ly , th e s u s p e n s io n o f t h e effe c tiv e n e ss o f I ts A u g u s t 8, 1978, d e te r m in a tio n re g a rd in g t h e ” d e p o s it s ta tu s o f s u c h fu n d s . B oard of G overnors of th e F ederal R e serve System , M arch 2, 1977. T h e o d o r e E . A l l is o n , Secretary of the Board. [F R D oc.77-6996 F ile d 3 -9 -7 7 :9 :1 0 am ]
@FedFRASER