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thorized capital stock of $850,000,000. (7) A third source of funds available Of the total capital stock actually sub- to the bank is the social progress trust scribed ($813,160,000 since Cuba did not fund of $500,000,000 which the United become a member), $381,580,000 is paid States Government has established for in capital, including $150,000,000 con- social development programs in Latin tributed by the United States, and America as part of the Alliance for $431,580,000 is callable capital, $200,000,- progress program. The Bank will ad000 of it subscribed by the United States. minister $394,000,000 of this fund. TO Provision has been made to increase call- date 40 loans aggregating $243,000,000 able capital by $500,000,000.
have been made from this fund which (3) The ordinary capital resources are were used for land improvement, agriused to make loans to private enter- cultural credit, financing community prise, to governments, to government water supply and sanitation projects, agencies to help finance industrial, improvement of advanced education, agricultural and mining development etc. projects and to help expand and improve (8) Thus, in a period of 18 months, the such needs as electric power, water sup- Inter-American Development Bank has ply, irrigation works and arable land. committed about $500,000,000 as part of Loans thus made are for periods from a program to improve the standard of ten to twenty years and bear interest living and productivity in all of its memat 534 percent. It is not the policy of ber countries in Latin America. the bank wholly to undertake the financ- (9) At present, the Bank has one seing of large-scale projects. The Bank, curities issue outstanding of $24,200,000 however, will generally consider partici- in Lire which it floated in the Italian pation with other financial institutions market in April of this year. It is exin these projects. As a general rule, pected that the Bank will go into the only those projects involving loans in United States market in the near future excess of $100,000 will be considered. In and the Bank desires our ruling as to the addition to loaning directly, the Bank eligibility for investment of these securiwill also guarantee certain loans.
ties. These securities are comparable to (4) Up to this time 55 loans aggregat- those issued by the World Bank, ing $191,000,000 were made from the (10) The Secretary of the Treasury Bank's ordinary capital resources. Of has urged the States to enact legislation this, $84,000,000 went to private enter- to make bonds of the Bank legal for inprise, $34,000,000 for financing water vestment by institutional and fiduciary supply and sewage projects and investors in their respective jurisdic$72,000,000 for governments and govern- tions, and many States have done so. ment agencies and enterprises for farm (c) Ruling. We conclude that securisettlement, colonization, mining devel- ties issued by the Inter-American Development, irrigation, electric power expan. opment Bank are eligible for purchase sion, etc.
by national banks. Under the provisions (5) It will be the usual policy of the
of 12 U.S.C. 24 specifically applying to Bank to finance only projects in which obligations of the Bank, therefore, such
securities are eligible for purchase, dealthe borrower makes a substantial invest
ing in, or underwriting by national ment. In loans to private borrowers, the Bank ordinarily will not advance banks, provided that no such bank may
so hold them in a total amount exceeding more than 50 percent of the cost of the
10 per cent of capital and surplus. For project. In the case of loans to govern
this purpose securities as to which & ments, consideration is to be given to
bank is under commitment to purchase the individual country's contribution to
are deemed to be held by it. Under 12 the total development effort. (6) In addition to the ordinary capital
U.S.C. 335 the foregoing is applicable to
state member banks. resources, the Bank has established a
(27 F.R. 10827, Nov. 7, 1962. Redesignated special operations fund which
28 F.R 8280, Aug. 13, 1963) created to deal with special circumstances and conditions. This fund consists
§ 1.119 Savings Banks Trust Company, of
New York, New York. $100,000,000 which was contributed by the United States. Through mid-August (a) Request. The Comptroller of the of this year, 24 loans aggregating Currency has been requested to rule $76,000,000 were made out of this fund. whether the Collateral Trust Notes of the
tembre THE OL the quisiti
Savings Banks Trust Company, New equipment which will be leased to the York, New York, constitute investment United States Rubber Company. The securities within the meaning of Para- site will be used by the lessee in the mangraph Seventh of 12 U.S.C. 24.
ufacture of tires for passenger cars. The (b) Opinion. (1) The Savings Banks bonds are secured by a pledge and asTrust Company proposes to issue notes signment of the Board's interest in the under a Collateral Trust Indenture. Lease Agreement and the revenues and The collateral to be pledged for the notes receipts derived by the Board from the will be: notes of various New York sav- leasing. They will be additionally seings banks which are secured by mort- cured by a Mortgage Indenture and gages, obligations of the United States Deed of Trust covering the real estate, or its agencies or instrumentalities, or plant, and leased equipment. The oblicash; mortgages insured by the Federal gation of the Company to make rental Housing Commissioner or guaranteed by payments and all other payments prothe Veterans' Administration, constitut- vided for in the agreement is absolute ing legal investments being held under and unconditional. Such payments will short term repurchase agreements; be sufficient to pay the principal and incash; or obligations of the United States, terest on the bonds as they become due. its agencies or instrumentalities.
In the event of default, the Board may (2) The proposed obligations will be re-enter and take possession of the plant, in the form of promissory notes, and rent the same to another, and hold will be issued in denominations of $1,000
the United States Rubber Company lior any multiple thereof. There is no able for any deficiency in payment creaggregate limitation as to the amount of ated thereby. The credit quality of the notes which may be issued under the issue clearly rests upon the financial indenture. They may be issued at any responsibility and history of the lessee. time, from time to time, carrying various
The earnings of the company warrant dates, maturities and interest rates. It is the conclusion that the subject bonds anticipated that they will be of a short fall within section 2(c) of the Investterm nature. The proposed notes will be ment Securities Regulation of the Compsigned by an authorized officer of the troller. However, each individual bank Bank and need not be authenticated by
must determine on the basis of its own the Indenture Trustee.
review whether these securities are ap(c) Ruling. We conclude from the propriate in all respects for its investforegoing, and a study of the Collateral ment portfolio. Trust Indenture, that the subject notes (c) Ruling. We conclude that the subdo not constitute investment securities ject bonds are eligible for investment by within the meaning of 12 U.S.C. 24.
national banks within the limitations of They are however, loans subject to the Paragraph Seventh of 12 U.S.C. 24. limitations of 12 U.S.C. 84.
(27 F.R. 12399, Dec. 14, 1962. Redesignated (R.S. 5200; 12 U.S.C. 84) [27 F.R. 10674,
28 F.R. 8280, Aug 13, 1963)
$ 1.122 Public Building Commission of § 1.121 City of Opelika, Alabama.
Chicago. (a) Request. The Comptroller of the (a) Request. The Comptroller of the Currency has been requested to rule on Currency has been requested to rule on the eligibility of the $21,000,000 bond the eligibility of the $81,000,000 Public issue of The Industrial Development
Building Revenue Bonds, Series of 1963, Board of the City of Opelika, Alabama, of Public Building Commission of Chidated September 1, 1962, for investment cago, for purchase, dealing in, underwritby national banks under the provisions
ing, and unlimited holding by national of Paragraph Seventh of 12 U.S.C. 24. banks under the provisions of Para
(b) Opinion. The subject issue con- graph Seventh of 12 U.S.C. 24. sists of special revenue bonds due seri- (b) Opinion. (1) The Public Buildally in various amounts beginning Sep
ing Commission of Chicago was ortember 1, 1964, and with the final matu- ganized under an Act of the General rity on September 1, 1987. The proceeds Assembly of the State of Illinois which of the bonds are to be applied to the ac- provides for the creation of public buildquisition of a plant site and construction ing commissions on a county basis for of a plant thereon including certain various purposes including borrowing
money and the construction and leasing description of the Corporation's legal sta-
development loans to all types of busi
ness activity. It shall be a municipal corporation and a
is expected that
$7,500,000 of the Class A Bonds and body corporate and politic separate and
$1,500,000 of Class B Revenue Bonds apart from any other public agency or will be offered at public sale in municipal corporation. Under Illinois
June, 1963. The proceeds from the sale law the City of Chicago and the County
of both classes of bonds will be used to of Cook have authority to lease real
begin the lending activities of the Corpoand personal property from the commis
ration. Three of the seven directors of sion for corporate purposes.
the Corporation must be bankers and all (2) The proceeds from the sale of
loans must be made through a bank these bonds will be used to acquire a
which must retain a participation of at site and to construct and equip a 31
least 10 percent in each loan. Reserve story Civic Center Courthouse and Office
funds and funds not immediately reBuilding. The rentable space in the
quired for loans will be deposited in building will be leased 31 percent to the
banks or invested in obligations of the City of Chicago and 68 percent to the
United States, the State of Alaska or its County of Cook. The rentals payable
political subdivisions. Class A Bonds by the city and county will be sufficient
have specified priorities in the payment to carry fully the expenses of operating
of principal and interest over other oblithe building, to pay the accruing interest,
gations of the Corporation, and are adand to pay the bonds at maturity as well
ditionally protected by the requirement as to meet all other debt service require
that the amount of Class A Bonds outments. The bonds are, thus, supported
standing at any time may not exceed by lease rental obligations which are
five times the amount of Class B Bonds general obligations of the City of Chi
outstanding. cago and the County of Cook.
(2) The Class A Bonds to be offered (c) Ruling. Following the principles
are the result of a long and carefully deapplied in the ruling on the Georgia
veloped effort by the Alaskan authorities State Authorities, $ 1.111, we conclude
in conjunction with businessmen, comthat the bonds are general obligations of
mercial banks, and professional investthe City of Chicago and the County of
ment advisers, to find a reasonable Cook within the meaning of Paragraph
vehicle for the provision of critically Seventh of 12 U.S.C. 24. Accordingly,
needed business development capital in they are eligible for purchase, dealing the State of Alaska. It is apparent that in, underwriting and unlimited holding
the State of Alaska and the Alaska State by National Banks.
Development Corporation will have an [28 F.R. 8280, Aug. 13, 1963)
over-riding long-term responsibility for
the most prudent and businesslike manAlaska State Development Cor
agement of this program in order to enporation.
courage investors within and without (a) Request. The Comptroller of the Alaska to continue to invest in the develCurrency has been requested to rule on
opment of the Alaskan economy. the eligibility of the $15,000,000 Alaska (3) There are obvious risks in loans to State Development Corporation Class A new businesses in a State at the threshRevenue Bonds for purchase by national old of its economic development. The banks under Paragraph Seventh of 12 provisions of the enabling legislation,
however, reflect the special reliance U.S.C. 24.
(b) Opinion. (1) The Alaska State which will be placed on Alaskan banks Development Corporation was created by in processing loan applications to assure Acts of the Legislature of the State of that prudent banking judgment will be Alaska as a public corporation of the exercised in the making of loans. In State: an instrumentality of the State addition, the required participation of with legal existence separate from the the Alaska banks will insure that loans State. The Supreme Court of the State will be subject to all of the restrictions of Alaska has confirmed this legislative applicable to bank loans generally.
Alther TUNCE etool
(c) Ruling. We conclude that the ity, local school notes transferred to the Class A Bonds of the Alaska State De- Authority from the Literary Fund and velopment Corporation are eligible for the income accruing from these obligapurchase by national banks within the tions. The local school bonds and notes limitations of Paragraph Seventh of 12 will be general obligations of Virginia U.S.C. 24, but that such purchases may local governments possessing powers of not exceed 5 per centum of the purchas- general property taxation. ing bank's capital and surplus. These (3) Thus, the bonds of the Authority bonds will be under continuing review by are general obligations of a political subthis Office while the Corporation accu- division of the Commonwealth of Virmulates operating experience.
ginia, and are payable from resources 128 FR. 8281, Aug. 13, 1963)
which consist principally of general
obligations of other political subdivisions § 1.124 Virginia Public School Au.
of the Commonwealth of Virginia. The thority.
notes transferred from the Literary (a) Request. The Comptroller of the Fund provide a substantial reserve to Currency has been requested to rule on assure that there will be funds suficient the eligibility of the $15,000,000 Virginia to provide for all payments required in Public School Authority, School Financ- connection with the bonds of the ing Bonds, Series 1963A, for purchase, Authority. dealing in, underwriting and unlimited (c) Ruling. We conclude that the holding by national banks under Para- subject bonds are eligible for purchase, graph Seventh of 12 U.S.C. 24.
dealing in, underwriting and unlimited
holding by national banks under Para(b) Opinion. (1) The Virginia Pub
graph Seventh of 12 U.S.C. 24.
[28 FR. 8281, Aug. 13, 1963)
$ 1.125 General State Authority of the subdivision, and an agency and instru
Commonwealth of Pennsylvania. mentality of the Commonwealth of Virginia. The purpose of the Authority is (a) Request. The Comptroller of the to facilitate and lessen the cost of fi
Currency has been requested to rule on nancing the construction of public the eligibility of the $50,000,000 Eightschools through the purchase of school
eenth Series, Bonds of the General State bonds of counties, cities and towns in
Authority of the Commonwealth of Virginia. In order to provide funds for
Pennsylvania for purchase, dealing in, this purpose the Authority is authorized underwriting and unlimited holding by to issue its bonds. The General Assem- national banks under the provisions of bly of Virginia has provided for the Au- Paragraph Seventh of 12 U.S.C. 24. thority a reserve available for operating
(b) Opinion. (1) The General State expenses and as security for its bonds Authority was created in 1949, by an Act by transferring to it assets having a of the General Assembly of the Commonvalue in excess of $50,000,000. These wealth of Pennsylvania, as a body corassets, consisting of school notes of coun- porate and politic, a public corporation ties, cities and towns in Virginia, were and a governmental instrumentality. transferred from and represent loans The purpose of the Authority is the acmade by the Literary Fund, a fund for quisition, construction, and improvement school purposes provided for in the Con- of various public projects. In order to stitution of Virginia. The Supreme provide funds for this purpose the AuCourt of Appeals of Virginia has re- thority is authorized to issue its bonds viewed the Acts creating the authority and to pledge, for the payment thereof, and transferring assets of the Literary its revenues, receipts and its full faith Fund and has found that they are not and credit. It is not authorized, howin conflict with any provision of the Con- ever, to pledge the credit or the taxing stitution of Virginia.
power of the Commonwealth. (2) The proceeds from the sale of the (2) The proceeds from the sale of the bonds of the Authority will be used to Bonds of the Authority will be used for begin its lending activities. The bonds various projects which are to be leased of the Authority will be payable from to the Commonwealth. The leases will all the resources of the Authority. These provide for payment, out of the current resources will consist principally of local revenues of the Commonwealth, of anschool bonds purchased by the Author- nual rentals sufficient to meet the an
nual principal and interest requirements provide income sufficient for debt servon the bonds. In the event the current ice requirements. During this initial revenues of the Commonwealth for any period the Treasury Bonds and the balyear are not sufficient to pay the entire ance of the proceeds will be the sole rental, the balance of such rental will security for the 1963 bonds. The probe paid out of the current revenue of suc- ceeds of the 1959 bonds have been used ceeding years. The bonds will be direct for the construction of a dam and hydroand general obligations of the Authority electric generating plant which is 98 perand will be secured equally with all other cent completed. It is expected that probonds of the authority, issued or to be is- duction of power from six of the ten sued, by the full faith and credit of the generators will begin in September, 1963, Authority and by the pledge of all ren- and that there will be full commercial tals payable by the Commonwealth on production of power in January, 1964. projects leased from the Authority. Existing long-term contracts provide for
(3) The Bonds of the Authority are the sale of 98 percent of the project's the general obligations of a public au- total output of power. Contracts coverthority of the Commonwealth of Penn- ing approximately 90 percent of the total sylvania. The resources of the Author- output of power are with major electric ity include the obligation of the Com- companies. Each of these contracts monwealth to make lease rental pay- provides for the payment of pro rata ments which will be sufficient to provide shares of specified costs during an initial for all required payments in connection period which is expected to end on Januwith the bonds. The lease rental obli- ary 1, 1965, and, thereafter, for the gation of the Commonwealth, though payment of pro rata shares of operating payable from the current revenues of costs plus an amount equal to 115 persuccessive years, is not limited to any cent of annual debt service requirements. particular source of revenue and is, The contracts provide that such paytherefore, supported by the general tax- ments will be made from the date of ing power and the full faith and credit
initial operation throughout the entire of the Commonwealth. The Common- term of the contract whether or not wealth has, thus, undertaken to provide power production is interrupted, susfor the payment of the obligations of its pended or interferred with, in whole or duly constituted authority.
in part. After the redemption and re(c) Ruling. Following the principles tirement of the 1959 bonds the 1963 bonds applied in the ruling on the Georgia
will be secured by a pledge of the gross State Authorities, $ 1.111, it is our con- revenues of the power project. clusion that the Bonds of the General (c) Ruling. It is our conclusion that State Authority of the Commonwealth the Wanapum Hydroelectric Refunding of Pennsylvania, Eighteenth Series, are Revenue Bonds, Series of 1963, of the eligible for purchase, dealing in, under- Public Utility District No. 2 of Grant writing and unlimited holding by Na- County, Wash., are eligible for investtional Banks, under Paragraph Seventh ment by National Banks within the limiof 12 U.S.C. 24.
tations of Paragraph Seventh of 12 U.S.C.
24. [28 F.R. 8281, Aug. 13, 1963]
[28 F.R. 8282, Aug. 13, 1963) $ 1.126 Wanapum Hydroelectric
Refunding Revenue Bonds.
§ 1.127 Washington State Public School (a) Request. The Comptroller of the Plant Facility Bonds and Public
Building Bonds. Currency has been requested to rule on the eligibility of Wanapum Hydroelec- (a) Request. The Comptroller of the tric Refunding Revenue Bonds, Series of Currency has been requested to rule on 1963, of the Public Utility District No. 2 the eligibility of the $25,750,000 Public of Grant County, Wash., for investment School Plant Facilities Bonds, 1961 and by National Banks within the limitations the $10,000,000 Public Building Bonds, of Paragraph Seventh of 12 U.S.C. 24. 1961, of the State of Washington for
(b) Opinion. The proceeds from the purchase, dealing in, underwriting, and sale of these bonds will be used in 1970 unlimited holding by National Banks to refund an outstanding 1959 series. under Paragraph Seventh of 12 U.S.C. Until this refunding takes place these 24. proceeds will be invested in United States (b) Opinion. (1) These bonds are to Treasury Bonds which are expected to be issued by the State of Washington