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4000 - Advisory Opinions
Would a deposit made by the Federal Home Loan Bank of Boston be
insured by the FDIC
FDIC--97--8
October 30, 1998
Christopher L. Hencke, Counsel
This is in response to your letter dated October 1, 1997,
requesting confirmation that a deposit made by the Federal Home Loan
Bank of Boston ("FHLB-Boston") would be insured by the FDIC. As
explained in your letter, FHLB-Boston has been requested to make a term
or time deposit at the "Bank" ( ) in the approximate
amount of $100,000. "Bank" is an FDIC-insured bank.
The FDIC insures the deposits at FDIC-insured depository
institutions up to a limit of $100,000. See
12 U.S.C. § 1821(a);
12 U.S.C. § 1821(f). In
part, a "deposit" is defined as "the unpaid balance of money
or its equivalent received or held by a bank or savings association in
the usual course of business and for which it has given or is obligated
to give credit either conditionally or unconditionally, to a
commercial, checking, savings, time, or thrift account, or which is
evidenced by its certificate of deposit, thrift certificate, investment
certificate, certificate of indebtedness, or other similar
name . . . ." 12 U.S.C.
§ 1813(l)(1). This definition encompasses the proposed time
deposit by FHLB-Boston at Bank. Therefore, the deposit would be insured
up to $100,000 in accordance with the
{{12-31-98 p.4984.24}}FDIC's insurance regulations. As
discussed below, the applicable section of the regulations would depend
upon whether the FHLB-Boston is classified as (1) a corporation; or (2)
a public unit.
The FHLB-Boston and the other Federal Home Loan Banks are structured
as corporations. See 12 U.S.C. § 1426 (providing for the
issuance of stock for each Federal Home Loan Bank); 12 U.S.C. § 1427
(providing for the management of each Federal Home Loan Bank through a
board of directors); 12 U.S.C. § 1432 (providing for the
incorporation of each Federal Home Loan Bank). See also Walleri
v. Federal Home Loan Bank of Seattle, 83 F.3d 1575, 1578 (9th Cir.
1996) (stating that the Federal Home Loan Banks are "operated as
private corporations" for some purposes). Under the FDIC's
insurance regulations, "[t]he deposit accounts of a corporation
engaged in any independent activity shall be added together and insured
up to $100,000 in the aggregate." 12 C.F.R. § 330.9(a). Therefore,
if the FHLB-Boston is classified as a corporation, the time deposit at
issue would be insured up to $100,000 in aggregation with any other
deposits maintained by the FHLB-Boston at Bank.
Though structured as corporations, the Federal Home Loan Banks also
could be described as instrumentalities of the United States. See
12 U.S.C. § 1431(e)(1) (referring to a Federal Home Loan Bank
"or other instrumentality of the United States"). See also
Fahey v. O'Melveny & Myers, 200 F.2d 420, 454 (9th Cir. 1952),
cert. denied, 345 U.S. 952 (1953) (stating that the Federal
Home Loan Banks for some purposes "are not private banking
corporations but are public banking agencies of the United States").
Under the insurance regulations, "[e]ach official custodian of
funds of the United States lawfully depositing such funds in an insured
depository institution shall be separately insured in the amount of (i)
Up to $100,000 in the aggregate for all time and savings deposits; and
(ii) Up to $100,000 in the aggregate for all demand deposits." 12
C.F.R. § 330.14(a)(1). Therefore, if the FHLB-Boston (or the officer
or director of the FHLB-Boston who controls the funds) is classified as
an official custodian of United States funds, the time deposit at issue
would be insured up to $100,000 in aggregation with any other United
States time or savings deposits maintained by the same official
custodian at BBC. "In order to qualify as an official
custodian . . . such custodian must have plenary authority,
including control, over funds owned by the public unit which the
custodian is appointed or elected to serve." 12 C.F.R.
§ 330.14(b)(1). "Control of public funds includes possession, as
well as the authority to establish accounts for such funds in insured
depository institutions and to make deposits, withdrawals, and
disbursements of such funds." Id.
You have not requested the FDIC to resolve the issue whether the
FHLB-Boston--for deposit insurance purposes--should be classified as
(1) a corporation; or (2) a public unit or official custodian of United
States funds. Rather, you have requested confirmation that the proposed
deposit would be insured in some manner. As discussed above, under 12
C.F.R. § 330.9(a) (governing the insurance of the deposits of
corporations) or 12 C.F.R. § 330.14 (governing the insurance of the
deposits of public units), the time deposit would be insured up to
$100,000 (possibly in aggregation with other deposits).
In your letter, you state that the approximate amount of the deposit
will be $100,000. Even if the deposit is not aggregated with any other
deposit accounts under the regulations discussed above, the deposit
will be uninsured to the extent that the balance--including
interest--exceeds $100,000. See 12 C.F.R. § 330.3(i)(1)
(for insurance purposes, "[t]he amount of a deposit is the balance
of principal and interest unconditionally credited to the deposit
account as of the date of default of the insured depository
institution, plus the ascertainable amount of interest to that date
. . .").
In paying insurance on deposits, the FDIC does not make
determinations as to whether depositors--in making their deposits--have
acted within the scope of their authority (statutory or contractual or
otherwise). Accordingly, nothing in this letter should be construed as
an opinion as to whether the FHLB-Boston possesses the statutory or
other authority to make the proposed deposit. This letter merely
addresses the issue whether the proposed deposit would be
insured.
{{12-31-98 p.4984.25}}
I hope that the information above is helpful. If you have any
questions regarding this information, you may call me at (202)
898-8839.
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