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F

ederal

Reserve

bank of

DALLAS. TEXAS

Dallas

75222
C ir c u la r N o. 78-106
A u g u s t 10, 1978

T R E A S U R Y T A X A N D LO A N I N V E S T M E N T P R O G R A M

T O T H E C H IE F E X E C U T IV E O F F IC E R , EACH B A N K
IN T H E E L E V E N T H F E D E R A L R E S E R V E D I S T R I C T :
T h e T r e a s u r y D e p a r t m e n t has n o t i f ie d us t h a t im p le m e n ta tio n o f the T r e a s u r y T a x a n d
Loan I n v e s t m e n t P r o g r a m w i l l p r o b a b l y b e g i n on T h u r s d a y , S e p t e m b e r 7 . E n c lo s e d f o r y o u r i n ­
f o r m a t io n a r e S t a r t - U p P r o c e d u r e s c o n c e r n i n g th e p r o g r a m .

A l s o , lis te d b e l o w a r e s e v e r a l q u e s ­

tio n s a n d t h e i r a n s w e r s w h i c h w e r e p o se d a t v a r i o u s m e e t in g s in M a y o f t h i s y e a r .
n e e d f u r t h e r e la b o r a t i o n on a n y o f the s u b j e c t s m e n t io n e d , p le a s e c a ll:

S h o u ld y o u

D a lla s O f fic e

Jack A . C ly m e r o r T r u d y L a n p h ie r

E x t . 6340 o r 6341

El Paso B r a n c h
H o u s to n B r a n c h

J e r r y S i Iv e y o r J o e l L . Koonce
J am e s L o c k h a r t , O n e z ia D o n a ld s o n ,

(9 1 5 ) 5 4 4 -4 7 3 0
(7 1 3 ) 6 5 9 -4 4 3 3

S a n A n t o n io B r a n c h

T o n y V a l e n c i a o r T h o m a s C . C o le

o r S a m m ie C . C l a y

1.

(5 1 2 ) 2 24 -2 14 1

Q u e s tio n :

H o w w i l l the l i q u i d i t y r a t i o be c a lc u la t e d b y tho se b a n k s e le c t i n g t h e N o te O p tio n ?

A n sw er:

It is the o p in io n o f t h is B a n k a n d o t h e r s w h o h a v e b e e n c o n s u lt e d t h a t th e s e f u n d s
w i l l be in c lu d e d in th e f o r m u la a s t h e y a r e n o w u n d e r th e p r e s e n t p r o g r a m .

S in ce

t h e s e f u n d s a r e o r i g i n a l l y d e p o s i t s , y o u w o u l d n o t c o n s i d e r them a s a loan in d e ­
v e lo p in g y o u r b a n k 's liq u id ity .
2.

Q u e s tio n :

Is th e F e d F u n d s R a te b a s e d on a w e e k l y o r a m o n t h l y a v e r a g e ?

A nsw er:

T h e F ed F u n d s R a t e as p u b l i s h e d in th e F e d e r a l R e s e r v e B u l l e t i n is a n a v e r a g e
w e e k l y r a t e ( T h u r s d a y t h r o u g h W e d n e s d a y ) . T h i s r a t e le s s 25 b a s is p o in ts w i l l b e
a p p l i e d to the a p p r o p r i a t e a v e r a g e w e e k l y b a l a n c e in th e T r e a s u r y T a x a n d Loan
N o te a c c o u n t s .

3.

Q u e s tio n :

W ill th e b a n k s be a b l e to u se th e F ed F u n d s R a t e p u b l i s h e d in th e W a ll Street

Journal to m o n it o r the i n t e r e s t rate?
A n sw er:

In o r d e r t h a t the b a n k s c a n m o n it o r the r a t e , w e h a v e b e e n in f o r m e d t h a t th e W a ll

Street Journal p u b l i s h e s th e s e r a t e s on F r i d a y o f e a c h w e e k , u n d e r th e c a p t io n
" F e d e r a l R e s e r v e D a t a . " T h e r a t e s lis te d d a i l y u n d e r th e c a p t io n " F i n a n c i n g B u s i ­
n e s s , " s u b c a p t io n " M o n e y R a t e s " is o n l y a s u r v e y o f N e w Y o r k b a n k s a n d m a y o r
m a y n o t be a n in d ic a t io n o f the r a t e y o u w i l l be c h a r g e d .

4

Q u e s tio n :

H o w w i l l d e p o s i t a r i e s u n d e r th e N o te O p t io n r e p o r t t h e s e b a l a n c e s on t h e i r " R e p o r t
o f C o n d itio n " ?

A nsw er:

M e m b e r B a n k s - T h e s e b a la n c e s s h o u ld be a c c o u n t e d f o r in th e total in Item 2 9 ,
" O t h e r L i a b i l i t i e s . " A l s o , th e T r e a s u r y T a x a n d L oan n o te b a l a n c e w i l l b e d e t a ile d

Banks and others are encouraged to use the following incoming W A T S numbers in contacting this Bank:
1-8 00 -4 9 2 -4 4 0 3 (intrastate) and 1 -8 00 -527 -497 0 (interstate). For calls placed locally, please 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)

- 2 in S c h e d u l e H N o . 8 , " A l l O t h e r . "

O n D e c e m b e r 3 1 , 1 97 8, a r e v i s e d R e p o r t o f

C o n d i t io n w i l l b e c o m p l e t e d , a n d th e s e b a la n c e s w i l l b e r e p o r t e d u n d e r Item 2 6 A ,
" I n t e r e s t B e a r i n g D e m a n d N otes Is s u e d to th e T r e a s u r y . "
T e x a s a n d N e w M e x i c o N o n m e m b e r B a n k s - T h e y w i l l r e p o r t th e s e item s a s t h e y do
u n d e r th e p r e s e n t s y s te m s in c e th e S t a te C o m m is s io n e r o f B a n k i n g in e a c h o f th e s e
s ta te s h a s r u l e d t h a t the N o te A c c o u n t f o r n o n m e m b e r b a n k s w i l l s t il l b e c o n s id e r e d
a dem and account.
c a ll:

S h o u ld y o u h a v e a n y q u e s t i o n s r e g a r d i n g t h i s r u l i n g , p le a s e

T e x a s — A r c h ie C la y to n —

(5 1 2 ) 4 7 5 -4 4 5 1

N e w M e x ic o — E d w a r d S t . P e t e r —

(5 0 5 ) 8 2 7 -2 2 1 7

O k la h o m a a n d L o u is ia n a N o n m e m b e r B a n k s - T h e y w i l l r e p o r t th e s e b a l a n c e s as if
t h e y w e r e loan s fro m th e T r e a s u r y .

I f y o u h a v e a n y q u e s t i o n s , p le a s e c a ll :

O k la h o m a — D o n a ld V a n H o r n — (4 0 5 ) 5 2 1 -2 7 8 2
L o u is ia n a — J i m m y W h i t t in g t o n - - (5 0 4 ) 9 2 5 -4 6 6 0
Q u e s tio n :

D oes a n o n m e m b e r b a n k s t il l h a v e r e s e r v e r e q u i r e m e n t s o n th e N o te A co u nt?

A n sw er:

5.

T e x a s a n d N e w M e x ic o - Y E S .

T h e S t a te C o m m is s io n e r o f B a n k i n g h as r u l e d t h a t

th e s e d e p o s it s a r e d e m a n d a c c o u n t s a n d r e s e r v e s a r e r e q u i r e d .

S h o u ld y o u h a v e

a n y q u e s t i o n s , p le a s e c a ll th e n u m b e r lis te d a b o v e f o r y o u r s ta te .
O k la h o m a a n d

L o u is ia n a - N O .

a n d no r e s e r v e s a r e r e q u i r e d .

T h e fu n d s a r e c o n s i d e r e d lo a n s f r o m th e T r e a s u r y
S h o u ld y o u h a v e a n y q u e s t i o n s , p le a s e c a ll th e n u m ­

b e r li s t e d a b o v e f o r y o u r s ta te .
6.

Q u e s tio n :

W h y d o e s n 't th e F D IC c o n s i d e r the N o te A c c o u n t a tim e o r d e m a n d d e p o s it a n d a llo w
c o v e r a g e r e g a r d i n g c o l la t e r a l?

A n sw er:

T h e F D IC c o n s i d e r s th e s e d e p o s it s to be b o r r o w e d f u n d s a f t e r 24 h o u r s a n d , t h e r e ­
f o r e , no c o v e r a g e is a l l o w e d . S h o u ld y o u h a v e q u e s t i o n s r e g a r d i n g t h is r u l i n g ,
p le a s e c a ll C h a r l e s P i c k e t t , R e g io n a l C o u n s e l - F D I C , a t (2 1 4 ) 7 4 9 - 7 6 9 1 .

7.

Q u e s tio n :

W ill th e B o a r d o f G o v e r n o r s o f the F e d e r a l R e s e r v e S y s te m e l i m i n a t e r e s e r v e r e ­
q u i r e m e n t s on th e N o te A c c o u n t f o r m e m b e r b an k s?

A n sw er:

A m e n d m e n ts to R e g u la t i o n s D a n d Q w e r e d i s t r i b u t e d J u n e 7 , 1 9 7 8 .

T h e y p r o v id e d that

b a la n c e s in th e N o te A c c o u n t s w i l l no t be r e g a r d e d as d e p o s it s s u b j e c t to r e s e r v e
r e q u i r e m e n t s ( R e g u la t io n D ) o r s u b j e c t to i n t e r e s t r a t e li m it a t io n ( R e g u la t io n Q ) .
It s h o u ld b e n o te d t h a t f u n d s d e p o s it e d in T T & L a c c o u n t s r e t a i n t h e i r s ta tu s a s d e ­
m a n d d e p o s it s u n t i l t h e y a r e in v e s t e d in the n o te o b lig a t i o n s o f t h e d e p o s i t a r y b a n k
o r r e m it t e d to th e T r e a s u r y .
8.

Q u e s tio n :

H o w w i l l m e m b e r b a n k s w h o r e p o r t w e e k l y on th e " R e p o r t o f C o n d i t io n " in d ic a t e
n o te b a la n c e s ?

A n sw er:

T h i s total w i l l b e i n d ic a t e d in Item N o . 1 1 , " O t h e r L i a b i l i t i e s .

- 3 9.

Q u e s tio n :

W i ll s ta te w a r r a n t s be a c c e p t a b le p a y m e n t o f t a x e s c o l le c t e d f r o m th e v a r i o u s s ta te
offices?

A nsw er:

Y E S , t h e y a r e a c c e p t a b le , b u t a d e p o s i t a r y a c c e p t s them a t t h e i r o w n c h o o s in g s in c e
t h e y a r e n o t r e q u i r e d to a c c e p t a n y c h e c k n o t d r a w n on t h e m s e lv e s .

1 0. Q u e s tio n :

A nsw er:

W h a t a r e th e r a m if ic a t io n s o f a b a n k a c c e p t in g a c h e c k n o t d r a w n o n i t s e l f in p a y m e n t
o f F e d e r a l taxes?
B a n k s s h o u ld be a w a r e t h a t w h e n e v e r t h is t y p e o f p a y m e n t is a c c e p t e d , t h e y w i l l i n c u r
t h e f lo a t a n d w i l l a ls o b e g i n p a y i n g i n t e r e s t on th e s e f u n d s , s h o u ld t h e y e le c t th e
N o te O p t i o n .

U n d e r th e R e m itt a n c e O p t i o n , th e f u n d s c o u l d p r o b a b l y b e w i t h d r a w n

fr o m th e T r e a s u r y T a x a n d Loan a c c o u n t b e f o r e th e c h e c k h as b ee n c o l l e c t e d .
1 1. Q u e s tio n :

In r e f e r e n c e to r e i m b u r s e m e n t f o r F e d e r a l ta x d e p o s it t r a n s a c t i o n s , w i l l th e m o n t h l y
s ta te m e n ts m a ile d on th e 2 0th o f th e f o l l o w i n g m o n th r e f l e c t th e n u m b e r o f c a r d s
h a n d le d a n d th e total in c o m e f o r the c y c le ?

A n sw er:
Q u e s tio n :

Is n e x t d a y d e l i v e r y o f a d v i c e s m a n d a t o r y f o r R e m itt a n c e O p t io n b an k s?

A n sw er:

12.

YES.

Y E S . R e m itt a n c e O p t io n 1 — T h e d e l i v e r y r e q u i r e m e n t is v e r y s t r i n g e n t f o r th is
c la s s o f b a n k s s in c e c o n t in u a l la te d e p o s it s w i l l f o r c e th e b a n k in to th e N o te O p t i o n .
NO.

R e m itt a n c e O p t io n 2 — T h e d e l i v e r y r e q u i r e m e n t in t h is c la s s is less s t r i c t .

L a te fee s on d e l a y e d d e p o s it s w i l l be u s e d to n e t o u t F e d e r a l ta x d e p o s it fe e s d u e
to th e d e p o s i t a r y .

T h e b a n k w i l l n o t be f o r c e d in to th e N o te O p t io n i f t h e y a r e

c o n t i n u a l l y la te .
If a b a n k f e e ls t h a t it c a n m e e t the d e l i v e r y r e q u i r e m e n t b y s e n d in g t h e i r a d v ic e s
o f c r e d i t to a n o t h e r o ffic e in th e E l e v e n t h D i s t r i c t , w e e n c o u r a g e y o u to d o s o . A
l e t t e r n o t i f y i n g u s o f y o u r p r e f e r e n c e to sen d to a n o t h e r o ff ic e w i l l b e s u f f i c i e n t
n o t i f ic a t io n .
I t s h o u ld b e n o te d h e r e t h a t o n l y th e o r i g i n a l c o p y o f F o rm 2 2 8 4 , " A d v i c e o f C r e d i t F e d e r a l T a x e s , " s h o u ld be s e n t to the F e d e r a l R e s e r v e . T h e sec on d c o p y s h o u ld
b e s e n t to the I n t e r n a l R e v e n u e S e r v i c e w i t h th e t a x p a y e r ' s F e d e r a l t a x c a r d s a t ­
t a c h e d . M a n y b a n k s r e v e r s e t h is p ro c e s s o r a tt a c h th e t a x p a y e r ' s c a r d s to th e o r i g ­
in a l a d v i c e . W e a s k t h a t y o u r e v i e w t h i s o p e r a t io n w i t h y o u r p e r s o n n e l f o r c o m p l i ­
a n c e s in c e s u c h e r r o r s c a u s e u n n e c e s s a r y p a p e r w o r k a n d d e l a y s in p r o c e s s i n g .
13. Q u e s tio n :

W ill c u s t o d i a n r e c e i p t s b e m a n d a t o r y f o r a ll n o n m e m b e r b a n k s p l e d g i n g c o l l a t e r a l
to T r e a s u r y T a x a n d Loan?

A nsw er:

D u e to th e p o s s i b i l i t y o f th e F e d e r a l R e s e r v e B a n k o f D a l la s a n d its B r a n c h e s b e i n g
l i m it e d on s p a c e f o r d e f i n i t i v e c o l l a t e r a l p le d g e d to T r e a s u r y T a x a n d L o a n , it m a y
be n e c e s s a r y f o r n o n m e m b e r in s t i t u t io n s to s u b m it c u s t o d i a n r e c e i p t s . L is te d b e lo w
a r e tho s e c u s t o d ia n b a n k s q u a l i f i e d f o r s u c h t r a n s a c t i o n s in t h e E l e v e n t h D i s t r i c t .

A l b u q u e r q u e N a tio n a l B a n k
T h e F i r s t N a tio n a l B a n k in A l b u q u e r q u e

A l b u q u e r q u e , N e w M e x ic o
A l b u q u e r q u e , N e w M e x ic o

-

a -

G u a ran ty B ank and T r u s t Com pany

A l e x a n d r i a , L o u is ia n a

T h e A m e r i c a n N a tio n a l B a n k o f A m a r i l l o

A m a rillo , T ex as

T h e F i r s t N a tio n a l B a n k o f A m a r i l l o
T h e A m e r i c a n N a tio n a l B a n k o f A u s t i n

A u s tin , T e x a s

T h e A u s t i n N a tio n a l B a n k
T h e C a p it a l N a tio n a l B a n k in A u s t i n
C i t y N a t io n a l B a n k
A m e ric a n B an k and T r u s t C om pany

A m a rillo , T ex as

A u s tin , T e x a s
A u s tin , T e x a s
A u s tin , T e x a s
B ato n R o u g e , L o u is ia n a

L o u is ia n a N a tio n a l B a n k
F i r s t S e c u r i t y N a tio n a l B a n k

B a to n R o u g e , L o u is ia n a

C o n t in e n t a l I l l i n o i s N a t io n a l B a n k
a n d T r u s t C o m p a n y o f C h ic a g o

C h ic a g o , Illin o is

T h e F i r s t N a tio n a l B a n k o f C h ic a g o
C orpus C h ris ti B ank & T r u s t

C h ic a g o , Illin o is
C h ic a g o , Illin o is
C orpus C h ris ti, T exas

C o r p u s C h r i s t i N a tio n a l B a n k

C orpus C h ris ti, T exas

C i t i z e n s N a tio n a l B a n k o f D a l la s

D a lla s , T e x a s

N o rth e rn T r u s t Com pany

B e a u m o n t, T e x a s

T e x a s A m e r ic a n B a n k -D a lla s N o rth

D a lla s , T e x a s

F i r s t N a tio n a l B a n k in D a lla s
M e r c a n t i l e N a tio n a l B a n k a t D a l la s

D a lla s , T e x a s
D a lla s , T e x a s

N a tio n a l B a n k o f C o m m e r c e o f D a l la s

D a lla s , T e x a s

R e p u b l i c N a tio n a l B a n k o f D a l la s

D a lla s , T e x a s
D a lla s , T e x a s

T e x a s B a n k & T r u s t C o m p a n y o f D a l la s
U n it e d N a tio n a l B a n k
T h e El Paso N a tio n a l B a n k
C o n t in e n t a l N a tio n a l B a n k o f F o r t W o r t h

D a lla s , T e x a s
El P a so , T e x a s
F o rt W orth, T e x a s

F i r s t N a tio n a l B a n k o f F o r t W o r t h

F o rt W orth, T e x a s

F o rt W orth B a n k a nd T r u s t C om pany

F o rt W o rth , T e x a s

F o r t W o r t h N a tio n a l B a n k

F o rt W orth, T e x a s

A llie d B a n k of T e x a s
B a n k o f t h e S o u t h w e s t , N a t io n a l A s s o c ia t io n

H o u s to n , T e x a s
H ouston, T e x a s

C a p it a l N a tio n a l B a n k

H o u s to n , T e x a s

F a n n in B a n k
F i r s t C i t y N a tio n a l B a n k o f H o us ton

H ouston, T e x a s
H o u s to n , T e x a s

F i r s t I n t e r n a t i o n a l B a n k o f H o u s to n

H o u s to n , T e x a s

H o u s to n N a tio n a l B a n k

H o u s to n , T e x a s

S o u t h e r n N a tio n a l B a n k o f H o us ton
T e x a s C o m m e r c e B a n k , N a tio n a l A s s o c ia t io n

H o u s to n , T e x a s

D e p o s it G u a r a n t y N a tio n a l B a n k
C o m m e r c e B a n k of K a n s a s C i t y , M i s s o u r i

J a c k s o n , M is s i s s i p p i
Kansas C it y , M iss o u ri

N a tio n a l A s s o c ia t io n
T h e F i r s t N a tio n a l B a n k o f K a n s a s C i t y

Kansas C it y , M iss o u ri

F i r s t N a tio n a l B a n k a t L u b b o c k
F i r s t N a tio n a l B a n k o f M e m p h is

Lubbock, Texas
M e m p h is , T e n n e s s e e

H o u s to n , T e x a s

- 5 N a t io n a l B a n k o f C o m m e r c e

M e m p h is , T e n n e s s e e

F i r s t N a tio n a l B a n k o f M i d l a n d

M id la n d , T exas

C entral Bank

M o n r o e , L o u is ia n a

O u a c h it a N a tio n a l B a n k
F i r s t N a tio n a l B a n k o f C o m m e r c e

M o n r o e , L o u is ia n a
N e w O r l e a n s , L o u is ia n a

T h e H i b e r n i a N a tio n a l B a n k in N e w O r l e a n s

N e w O r l e a n s , L o u is ia n a
N e w O r l e a n s , L o u is ia n a
New Y o r k , New Y o r k

W h i t n e y N a tio n a l B a n k
T h e B a n k of New Y o r k
B an kers T r u s t Company

New Y o r k , N ew Y o r k

T h e C h a s e M a n h a t t a n B a n k , N a tio n a l A s s o c ia t io n

New Y o r k , N ew Y o r k

C h e m ic a l B a n k

New Y o r k , New Y o r k
New Y o r k , New Y o r k
New Y o r k , New Y o r k

F i r s t N a tio n a l C i t y B a n k
Ir v in g T r u s t Com pany
M a n u fa c tu re rs H anover T r u s t Com pany
M o rg a n G u a ra n ty T r u s t C o m pany of N ew Y o r k

New Y o r k , New Y o r k

F i d e l i t y B a n k , N a tio n a l A s s o c ia t io n

O k la h o m a C i t y , O k la h o m a

F i r s t N a tio n a l B a n k a n d T r u s t C o m p a n y

O k la h o m a C i t y , O k la h o m a

o f O k la h o m a C i t y
T h e L i b e r t y N a tio n a l B a n k a n d T r u s t C o m p a n y

O k la h o m a C i t y , O k la h o m a

o f O k la h o m a C it y
F i r s t N a tio n a l B a n k o f A r i z o n a

New Y o r k , New Y o r k

V a l l e y N a tio n a l B a n k

P h o e n ix , A riz o n a
P h o e n ix , A riz o n a

T h e C e n t r a l N a tio n a l B a n k o f S a n A n g e lo

San A n g e lo , T e x a s

S a n A n g e l o N a tio n a l B a n k

San A n g e lo , T e x a s

T h e A la m o N a tio n a l B a n k o f S a n A n to n io
B e x a r C o u n t y N a tio n a l B a n k o f S a n A n to n io
F i r s t N a tio n a l B a n k o f S a n A n t o n io

San A n to n io , T e x a s
San A n to n io , T e x a s
Sa n A n t o n i o , T e x a s

F r o s t N a tio n a l B a n k
T h e G ro o s N a tio n a l B a n k o f S a n A n t o n io

San A n to n io , T e x a s
San A n to n io , T e x a s

N a tio n a l B a n k o f C o m m e r c e o f S a n A n t o n io
W e lls F a r g o B a n k , N a tio n a l A s s o c ia t io n

San A n to n io , T e x a s
San F ra n c is c o , C a lifo rn ia

F i r s t N a tio n a l B a n k in S t . L o u is

S t . L o u is , M i s s o u r i

C o m m e r c ia l N a tio n a l B a n k in S h r e v e p o r t

S h r e v e p o r t , L o u is ia n a

T h e F i r s t N a tio n a l B a n k o f S h r e v e p o r t

S h r e v e p o r t , L o u is ia n a

T y l e r B ank and T r u s t C om pany
T h e F i r s t N a tio n a l B a n k a n d T r u s t C o m p a n y

T y le r, Texas

of T u ls a
V ic to ria B ank and T r u s t Company
T h e A m e r i c a n B a n k o f Waco
T h e C i t i z e n s N a tio n a l B a n k o f Waco

T u l s a , O k la h o m a
V ic to ria , T exas
Waco, T e x a s

F i r s t N a tio n a l B a n k in W ic h it a

Waco, T e x a s
Waco, T e x a s
W i c h i t a , K an s as

C i t y N a tio n a l B a n k in W ic h it a F a l ls

W i c h it a F a l l s , T e x a s

T h e F i r s t - W i c h i t a N a tio n a l B a n k o f W ic h it a F a l ls

W i c h it a F a l l s , T e x a s

T h e F i r s t N a tio n a l B a n k o f Waco

- 6 A d d i t i o n a l c o p ie s o f t h i s c i r c u l a r m a y b e o b ta in e d fr o m th e F is c a l A g e n c y D e p a r t m e n t
a t th e D a l la s o f f ic e .
S in c e re ly y o u rs ,
R o b e r t H . B o y k in
F ir s t V ic e P re s id e n t
E n c lo s u r e

START-UP PROCEDURES

These procedures are organized into three sections - I. Principles
II. Examples and III. Chronology.
The procedures assume a September 7 effec­
tive date for illustrative purposes.
The dates specified should be modified
to correspond to the dates of the reporting cycle in which the program is
implemented.
I.

PRINCIPLES
1.

Handling existing balances and transmittal processing A.

B.

2.

Note Option depositaries - Balances in the Treasury tax and
loan account as of opening of business on September 7 will
be converted into the opening note account balance on
September 7. Advices dated prior to September 7 but received
and processed September 7 or later will be added to the note
balance on the day processed. Advices dated on or after
September 7 will be included in the closing note account balance
on the business day after the advice of credit date.
Remittance Option depositaries - Balances in the TT&L account
as of opening of business on September 7 will be withdrawn on
September 7. Advices of credit dated prior to September 7 and
processed at the Reserve Bank on or after the September 7
effective date will be withdrawn from the TT&L account on the
date processed and will not be subject to late fees or analysis
credits.
Advices dated on or after September 7 will be with­
drawn from the TT&L account on the date processed and will be
subject to late fees or analysis credits if applicable.

Collateral A.

Sufficiency - (1) Note Option depositaries should be advised
by
the Federal Reserve Bank that sufficient collateral security
must be pledged on September 7 to cover both the balances in the
note account and the closing balances in the TT&L account.
Federal
Deposit Insurance Corporation coverage may be used to reduce the
collateral pledge for balances in the Treasury tax and loan account.
FDIC coverage does not apply to balances in the note account.
(2) Remittance Option depositaries should be advised by the Federal
Reserve Bank that on September 7 the depositaries’ closing balance
in the TT&L account, less FDIC insurance coverage, should be fully
collateralized.

B.

Policing - Treasury will in the future issue instructions to
the
Reserve Banks finalizing specifications for an end-of-reportingcycle comparison between balances each day during the cycle on the
books of the depositary and the actual collateral pledged each day.
After such specifications are finalized, Reserve Banks will have at
least thirty days lead time until this procedure is to be implemented.

During the interim period, Reserve Banks will continue
to use the current procedure for collateral policing.
This
procedure consists of a daily comparison of balances as re­
ported on the books of the Reserve Bank versus collateral
pledged.
For a Note Option depositary, the Reserve Bank
will compare the balance in the note account each day to the
amount of collateral pledged.
For a Remittance Option deposi­
tary, the Reserve Bank will compare the total credits to
the TT&L account each day less deposit insurance coverage,
if applicable, to the amount of collateral pedged.
Deficien­
cies will be resolved under current FRB procedures.
This
daily procedure is currently in effect and shall continue
in effect without interruption during implementation of the
investment program.
Handling savings and loan association, credit union and savings
bank applications The Treasury is coordinating finalizing drafts of the
agreement forms, for use by financial institutions seeking
designation under the revised 31 CFR Parts 203 and 214, with
the Federal Reserve Banks. Upon receipt of the finalized
agreement forms from Treasury the Reserve Banks should pro­
vide general information, including copies of the revised
regulations and the Procedural Instructions for Treasury Tax
and Loan Depositaries, and the agreement forms, to requesting
S&Ls, credit unions and savings banks.
Completed agreement
forms received should be logged or time-stamped and processed
on a first-in, first-out basis.
As workload conditions permit,
the Reserve Banks should process requests for designation as
follows:
A.

Federally-chartered S&Ls and Credit Unions
To date, the Federal regulatory agencies for savings and
loan associations and credit unions have not finalized their
regulations to conform with Treasury's requirements for deposi­
taries.
Until such regulations are finalized, Federally-char­
tered financial institutions governed by the Federal Home Loan
Bank Board and the National Credit Union Administration may
not be designated. Treasury will advise the Reserve Bank when
the required revisions to the regulations are complete.

B.

State-chartered S&Ls, Credit Unions and Savings Banks
No general statement can be made for State-chartered sav­
ings and loan associations, credit union and savings banks con­
cerning eligibility under the tax and loan investment program.
The revised agreement forms require the applying financial
institution to certify that:

- 3 -

(a)

It possesses under its charter and regulations
issued by its chartering authority either gen­
eral or specific authority permitting the main­
tenance of the note account (if applicable) and
the tax and loan account as accounts, the balances
in which are payable on demand without previous
notice of intended withdrawal.

(b)

it possesses under its charter and regulations
issued by its chartering authority either general
or specific authority permitting the pledging of
collateral to secure funds in a note account (if
applicable) and the tax and loan account, and

(c)

it is otherwise eligible under 31 CFR 203.3(b)

(1) (i).

To supplement the certifications of such institutions,
the Reserve Bank of the District shall request from the
appropriate state chartering authority, an opinion concerning
the capabilities of the financial institutions under the laws
of the states and their governing charters and regulations to
meet (a), (b) and (c) above.
The opinion can provide blanket
approval for the specific class of financial institutions within
that state
and should be requested as such.
For example the
opinion should specify if all S&Ls chartered under state statutes
have the capabilities to meet (a), (b) and (c) above.
Such an
opinion is necessary before the designation of the financial in­
structions as Treasury tax and loan depositaries.
When the territorial boundaries of a state are divided
among two or more Reserve Banks, the request for an opinion
from the state shall be coordinated by the Reserve Banks to
ensure only one request is submitted to the state.
When an affirmative opinion is received from the state,
the Reserve Bank will accept such opinion as evidence that
the financial institutions in question have the capabilities
specified in (a), (b) and (c) above. However, if the opinion
received relies on Federal law (P.L. 95-147) to supercede state
law as evidence that the financial institutions in question
have the capabilities specified in (a), (b) and (c) above,
designation of the class of institutions covered by such an
opinion should be withheld and the opinion forwarded to the
Treasury (Office of the Fiscal Assistant Secretary)for further
review.
4.

Adjustments A.

Opening balances - Adjustments to opening balances in the TT&L
account on the effective date which are made after the effective
date will use the effective date as the beginning point for any
interest adjustments due.

- 4 -

B.

5.

Transmittal processing - The date processed at the Reserve
Bank provides the benchmark for adjustments to advices of
credit dated prior to but received on or after the effective
date.
For Note Option depositaries, interest related to
advices of credit dated prior to but received on or after
the effective date, will accrue from the date such advices
are processed by the Reserve Bank. The date processed will
be used as the beginning point for computing interest adjust­
ments.
For Remittance Option depositaries the advice of
credit balances will be withdrawn from the TT&L account on
the date processed.
The date processed will be used as the
beginning point for any interest adjustments required.
Remit­
tance Option depositaries will not be subject to late fees or
analysis credits for advices of credit dated prior to the
effective date.

Non-TT&L depositaries Under existing regulations, a depositary may be designated a
Depositary for Federal Taxes without being designated a Treasury
Tax and Loan Depositary. As of September 7, a depositary must
hold both designations to handle FTDs. A financial institution
can be a Treasury Tax and Loan Depositary without being a Depositary
for Federal Taxes.
The Reserve Bank should take action to advise each existing
depositary designated as a Depositary for Federal Taxes but not
as a Treasury Tax and Loan Depositary of the requirements under
the regulations effective September 7.

6.

Start-up procedures for depositaries Each Reserve Bank should provide start-up procedures to exist­
ing depositaries by August 7. To accomplish this, the Reserve Bank
should draft procedures to incorporate items 1 and 2A of these
principles plus any additional operating procedures with respect to
start-up established by the Reserve Bank.

II.

EXAMPLES
The examples that follow are provided to clarify several principles
set forth in Section I.
1.

Handling existing balances and transmittal
Facts:

processing -

(a)

The TT&L balance opening of business September 7 is $ 100,000.

(b)

An advise of credit dated September 3 is for $ 10,000 and
received at the FRB on September 10.

(c)

An advice of credit dated September 7 is for $ 20,000 and
received at the FRB on September 10.

- 5 -

A.

Note Option (1)

On September 7, the opening balance of $ 100,000 is
withdrawn from the TT&L account and automatically
added to the note account.

(2)

On September 10, the advice dated September 3 is re­
ceived and processed at the Reserve Bank. The $ 10,000
is added to the closing balance of the note account for
September 10.

(3)

B.

Remittance Option (assume Class 1 for illustration purposes) (1)

(2)

(3)

2.

On September 10,
the advice dated September 7 is received
at the Reserve Bank.
The $ 20,000 will be added to the
closing balance of the note account for September 8.

On September 7 the opening balance of $ 100,000 is withdrawn
,
from the TT&L account and added to Treasury's account.
On September 10,
the advice dated September 3 is received
and processed at theReserve Bank.
The $ 10,000 is with­
drawn from the TT&L account and added to Treasury's account
at the FRB on September 10. The depositary is not subject
to a late fee.
On September 10, the advice dated September 7 is received at
the Reserve Bank prior to the cutoff and processed.
The
$ 20,000 is withdrawn from the TT&L account and added to
Treasury's account at the FRB on September 10. The deposi­
tary is subject to a late fee for 2 days, representing
September 8, and 9, during which the advice was late.

Adjustments Facts:

The balance of $ 100,000 opening of business September
includes an advice of credit for $ 50,000 dated August

(b)

A.

(a)

7
29.

An advice of credit dated August 30 is for $ 10,000 and
is received at the FRB on September 10.

Opening Balances On September 7, the opening balance of $ 100,000 is withdrawn
from the TT&L account and placed into the note account.
On
September 13, the advice dated August 29 for $ 50,000 is identified
as overstated.
The correct amount should have been $ 5,000.
The
adjusting transaction will return the principal amount of $ 45,000
(in accordance with the principles of the adjustment package, re­
leased May 1, 1978) and reduce the closing note balance for interest
computation purposes for the period September 7, but not including
September 13.

-

6

-

If the depositary was participating under the Remittance
Option, the adjusting transaction would return the $ 45,000
principal (in accordance with the principles of the adjust­
ment package, released May 1, 1978) and compensation for the
period September 7 to, but not including September 13.
B.

Transmittal processing The advice of credit dated August 30 is received and
processed on September 10. Under either option, the depositary
is not subject to interest for any portion of the period
August 30 to, but not including, September 10.
On September 21, the advice of August 30 for $ 10,000 is
identified as overstated.
The correct amount should be $ 5,000.
The adjusting transaction under the Note Option will return the
principal amount of $ 5,000 (in accordance with the principles
of the adjustment package, released May 1, 1978) and reduce the
closing note balances for interest computation purposes for the
period September 10 to, but not including September 21.
If the depositary was participating under the Remittance
Option, the adjusting transaction would return the principal
amount of $ 5,000 (in accordance with the principles of the ad­
justment package, released on May 1, 1978) and compensation for
the period September 10 to, but not including, September 21.

III.

CHRONOLOGY
Specific procedures on the operations mentioned in this chronol­
ogy are provided in the FRB manual for continuing operations and
Section I of this paper for start-up principles.
To determine the appropriate date, the rule stated should be
applied to the effective date.
Rule

Action

Business day after
effective date

a.

Withdraw all prior balances for
Remittance Option depositaries

b.

Effective date

Automatically convert all prior
balances for Note Option depositaries
to note account balances

a.

Collateral policing under investment
procedures continues (same under
previous system).

- 7

b

12th of month following
the reporting cycle I f

Begin reporting TT&L investment
program data on the daily balance
wire.
The balance wire for the
effective date due at Treasury by
8:30 a.m. Eastern Time

FTD payment tape received by this date.

13th of month following
the reporting cycle 2 /

If FTD payment tape not received by
12:00 noon, contact the service center
to locate it.

15th of the month
following the report­
ing cycle 2J

Interest rates provided to Reserve Banks

20th of month following
the reporting cycle 1/

a.

FTD apyment tape run

b.

Statement for first reporting cycle
prepared and sent to depositaries

c.

Administrative wire on amount of fee
payments to depositaries sent to BGFO

a.

Accomplish payments to Treasury and
to the depositaries through the
Reserve Account mechanism

b.

Funds transfer message transmitted
through the FRCS to Treasury con­
cerning interest and late fees.

c.

SF 5515, Debit Voucher, completed and
submitted to Treasury to support the
payment of fees to depositaries

25th of month following
the reporting cycle 2/

Business day after
payments accomplished

Return payment tape to service center.

1/

Prior business day if the specified day is a non-business day.

2/

Subsequent business day if the specified day is a non-business day.