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F e d e r a l R e s e r v e Ba n k
DALLAS. TEXAS

of

Dallas

75222

Circular No. 71-135
June 10, 1971

To A l l Member Banks in the
E leventh F ed eral Reserve D i s t r i c t :

Reproduced below is the t e x t o f a l e t t e r sent to a member
bank regarding p o t e n t ia l bidding on p u b lic funds. This l e t t e r is
sent f o r your in fo rm a tio n and guidance.
A t your re q u e s t, we have again reviewed the
question o f whether or not an in d iv id u a l a c tin g as
tre a s u re r f o r a p u b lic body could e n te r a b id in excess
o f the R egulation Q c e ilin g ra te s f o r p u b lic funds to be
h e ld by the tr e a s u r e r .
Such a procedure would not v i o l a t e the l e t t e r
o f the law but would c e r t a in ly be in v io la t io n o f i t s
s p i r i t . Both you and I know t h a t t h is procedure would
be a means o f avoiding R eg u latio n Q and t h a t an in d iv id u a l
would not be l i k e l y to e n te r such a b id i f he d id not have
a d ir e c t t i e to a banking i n s t i t u t i o n .
The F ed eral Reserve is powerless to stop p u b lic
i n s t it u t io n s from requesting such b id s , but we consider a
b id o f t h is nature from a banker to be a means o f avoiding
R egulation Q. I , p e rs o n a lly , hope th a t the banks in the
Eleventh F ed eral Reserve D i s t r i c t w i l l not e n te r in to such
a b id arrangement w ith o u t an agreement to abide by the
c e ilin g s a p p lic a b le to banks. The F ed eral Reserve w i l l
take in to account any a c tio n o f t h is nature by a banker
in fu tu re re g u la to ry dealings w ith h is bank.
Very t r u l y yours,
P. E. C o ldw ell
P resident

This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org)


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