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(a) Section 3(a) of
Pub. L. 90-505, approved September 21, 1968, amended the eighth
paragraph of section 13 of the Federal Reserve Act (12 U.S.C. 347) to
authorize advances thereunder to member banks ``secured by such
obligations as are eligible for purchase under section 14(b) of this
Act.'' The relevant part of such paragraph had previously referred
only to ``notes * * * eligible * * * for purchase'', which the Board
had construed as not including obligations generally regarded as
securities. (See 1962 Federal Reserve Bulletin 690, Sec. 201.103(d).)
(b) Under section 14(b) direct obligations of, and
obligations fully guaranteed as to principal and interest by, the
United States are eligible for purchase by Reserve Banks. Such
obligations include certificates issued by the trustees of Penn
Central Transportation Co. that are fully guaranteed by the Secretary
of Transportation. Under section 14(b) direct obligations of, and
obligations fully guaranteed as to principal and interest by, any
agency of the United States are also eligible for purchase by Reserve
Banks. Following are the principal agency obligations eligible as
collateral for advances:
(1) Federal Intermediate Credit Bank debentures;
(2) Federal Home Loan Bank notes and bonds;
(3) Federal Land Bank bonds;
(4) Bank for Cooperative debentures;
(5) Federal National Mortgage Association notes, debentures
and guaranteed certificates of participation;
(6) Obligations of or fully guaranteed by the Government
National Mortgage Association;
(7) Merchant Marine bonds;
(8) Export-Import Bank notes and guaranteed participation
certificates;
(9) Farmers Home Administration insured notes;
(10) Notes fully guaranteed as to principal and interest by
the Small Business Administration;
(11) Federal Housing Administration debentures;
(12) District of Columbia Armory Board bonds;
(13) Tennessee Valley Authority bonds and notes;
(14) Bonds and notes of local urban renewal or public housing
agencies fully supported as to principal and interest by the full
faith and credit of the United States pursuant to section 302 of the
Housing Act of 1961 (42 U.S.C. 1421a(c), 1452(c)).
(15) Commodity Credit Corporation certificates of interest in
a price-support loan pool.
(16) Federal Home Loan Mortgage Corporation notes,
debentures, and guaranteed certificates of participation.
(17) U.S. Postal Service obligations.
(18) Participation certificates evidencing undivided
interests in purchase contracts entered into by the General Services
Administration. (19) Obligations entered into by the
Secretary of Health, Education, and Welfare under the Public Health
Service Act, as amended by the Medical Facilities Construction and
Modernization Amendments of 1970.
(20) Obligations guaranteed by the Overseas Private
Investment Corp., pursuant to the provisions of the Foreign Assistance
Act of 1961, as amended.
(c) Nothing less than a full guarantee of principal and
interest by a Federal agency will make an obligation eligible. For
example, mortgage loans insured by the Federal Housing Administration
are not eligible since the insurance contract is not equivalent to an
unconditional guarantee and does not fully cover interest payable on
the loan. Obligations of international institutions, such as the
Inter-American Development Bank and the International Bank for
Reconstruction and Development, are also not eligible, since such
institutions are not agencies of the United States.
(d) Also eligible for purchase under section 14(b) are
``bills, notes, revenue bonds, and warrants with a maturity from date
of purchase of not exceeding 6 months, issued in anticipation of the
collection of taxes or in anticipation of the receipt of assured
revenues by any State, county, district, political subdivision, or
municipality in the continental United States, including irrigation,
drainage and reclamation districts.''\\ In determining the eligibility
of such obligations as collateral for advances, but the Reserve Bank
will satisfy itself that sufficient tax or other assured revenues
earmarked for payment of such obligations will be available for that
purpose at maturity, or within 6 months from the date of the advance
if no maturity is stated. Payments due from Federal, State or other
governmental units may, in the Reserve Bank's discretion, be regarded
as ``other assured revenues''; but neither the proceeds of a
prospective issue of securities nor future tolls, rents or similar
collections for the voluntary use of government property for
non-governmental purposes will normally be so regarded. Obligations
with original maturities exceeding 1 year would not ordinarily be
self-liquidating as contemplated by the statute, unless at the time of
issue provision is made for a redemption or sinking fund that will be
sufficient to pay such obligations at maturity.
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