TERE A~TOKNEY GENERAL
OFTEXAS
AUWFIN. Trwc~n 78711
February 5, 1968
IimpFable Jesse James opinion No. M-197
staCe meaeurer
State Capital BuAldlng
Aucltln, Texao 78711 Rsr Authonlty of the State
depoeltorg board to ac-
oept “prellm*ary loan
r&tea, isaued by public
howing author$tlea” and
“p8M.oipatlon oertlfl-
Oatoti isrued by the Fed-
err1 NetIonaL ,Nortgage
Amooiation” ae aollateral
Dear Mr. Jaw: for Statq deposits,
You, heive submitted .printed ‘material.8 def$oMaing oertaln
obllgatlone~ 18syod ‘bJi-pub110 housing ai!thorltiea, to-wit:
1;. “Preliminary loan notee”; and’,
-~2. “Partlolptlon oertifloates ierued by the Federal
National Mortgage A8soolrtlon;”
Based upon the lnfornntlon furnirhed, you have requested
our opinion.as to whethbr auoh obligation8 may be accepted as
collateral for State depoalte.
Attomep Oeneralc~e Opinion WW-11-(lW)‘~tieads, In part,’
aa follower
..
“Your reaent letter tireeente ,ths ‘qtieetiop of
whether bond@ lsmed by 8 FubLla Hourlng~Authorlty
&?iy be uaed aa collateral to oeaure the deposit of
State funds,
“Artlale 2520, V.OIS,, lo the st@tute whloh per-
mlta a deporltory of State funds to ‘poet a eurety bond
or pledge certain type8 or eeaurltiee ae, oollateral
for State deposits. None of the enumerated types of
seaurltlee will oovar the obllgatlone leeued or to be
iesued by a Publia Houelng Authority unless the language
‘all other bonds which are guaranteed ae to both prln-
cipal and interest by the United Statee’ la applicable.
-948-
Exczeble Jesse James, page 2 M-197
I,
. . .
“The State Depository Law, Insofar a8 the
enumerated ellgl’ble eecur1,tle.e .are concerned,
is the general law, and where a apeolal act
a-dtea that an additional security may be uaed
aa coliatere.1, tha.t special aot wlll.be treated
ES an exception to the normal rule In order ..,
-at both enactments may apply to their ap-:
proprlate~.spberes .: v. Booth; 163 S,W.id
i&O (Tex. .Clv. App. rror ref.; 39 s.
‘Statu.tes’ Se In 1939 the
&La tu.re .of Texa glalature ‘pa e
427 (.cod.lfled. by Ve tlcle 126$k-i 7
passed quch.a special statute, which reads, in
prt: .:
~,t&,with~etandlng any reatrlotlona on ln-
vestment6 contained In any lawa of this.
state, the state and all public offlcere
. . , may iegaily .inyeat any sinking funds
. . in any bond . lsaued by.a hcuelng
:uthorlty pureuant’to ihe Housing Authority
Law (Article 1269k, V.C.S.) .,. or. issued
by any other public houslng &ihorlty or
.agency l.n .the United States, when auoh bonds
are seoured by a pledge’-oPannual con-
trib;tlon to be paid by the United States
Government :or .any agency thereof, .and euch
bond8 . . . shall be authorized. secur’lty for
all publla deposits . . .I @mphaals supplied).
“The caption of.the aat. reada,, ,ln part a.8foliows:
‘, i
‘An aot to provide that bonds and other
obilgat~lona :laeued by any public housing
: authorlty.or ‘age.ncy, In the..Unlted Statee.,
when aeoured by:a pledge, of annual contrl-
supplied-) .I :_
.,
“The ,effeat. of the i939 statute & to add, by
special engctme,nt, ,an additional type of eligible
-949-
Honorable Jeeee James, page 3 M-197
security a8 collateral for state deposita. In no
other manner are the provisions of Article 2529, V.C.S.
affected . . . .
4,. . . you and the State Depository Board
are respectfully advised that the obligations may
be accepted a8 collateral for state deposits only
if the Federal Government guarantees that annual
cQntributiOnz will be made, aufflclent to eupple-
ment looal funds, 80 a8 to meet the principal
and Interest requirements of the pertlcular bonds
tendered ae the came ahall become due. Each
bond transorlpt will have to be examined ln-
dlvldually to determine If this requirement has
been met .”
A copy of one of the “Preliminary Loan Notea” under
consideration hae been submitted ,to ua with your request.
The following guarantee appears therein:
“PAYMENTAGREEMENT
..nPureuant to section 102 c) of the Houein
Act of 1949, a8 amended t 42~ U.S.C. 1452(c ),
the United State6 hereby unconditionally
agrees that on the Ueturlty Date of the within
Preliminary Loan Note It will pay or cause to
be paid to the bearer thereof the principal
-of and interest thereon, upon the prei3entatiOn
and surrender oft such Note to the Peylng Agent
designated therein, and the full faith and credit
of the United States is pledged to such payment.
Under eectlon 102(a) of the Aot, this Agree-
ment &all be oonetrued separate and apart from
the loan oontract referred to In the within
Note and shall be lnoontestable In the handa
of a bearer.
“IN WITNESS WHEREOF,thla Agreement haz been
eaut d on behalf of the United States by
es e du f y authorized facelmlle signature of
the Secretary of Housing and Urban Develop-
ment, a8 of the Date of Issue of the within
Note.
UNITED STATES OF AMERICA
By z/ Robert C. Weaver
Secretary Housing
of and
Urban Development”
-950-
Honorable Jesse James, page 4 M-197
It Is our understanding that all other "preliminary loan
notes" which are under consideration aa collateral for State
deposita, and that all "partlclpatlon certificates lsaued by
the Federal Mortgage Association" which are under considera-
tion a8 collateral for State deposits, are similarly guaranteed
by the United States Government or an agency thereof a8 to the
entire principal and interest. Each of said obligations must
be examined lndlvldually to determine If this requirement has
been met.
Assuming that each of the Qblig8tiQnf4in question is
found on Individual examination to be guaranteed by the United
States Qovernment or an egency thereof a8 to the entire prln-
clpal and Intereat, t,he State Depository Board may accept the
same ae collateral for State depoalts.
SUMMARY
--w----
The State Deooaitory Board may accept
.-. . both.
"prellmlnar~ loan notes issued by pu~llc nouslng
authorities and"participatiQn certificates issued
by the Federal National Mortgage Assoolatlon" a8
collateral for State deposits, If upon Individual
examination, each of the obl$gatlona proves to be
guaranteed by the United States GQvernment, or an
agency thereof, at! to the entire principal and
Intereat.
General of Texas
Prepared by Larry Craddock
Aeeletant Attorney Qeneral
APPROVED:
OPINION
-,I COMMITTEE
Hawthorne Phillips, Chairman
Kerns Taylor, Co-Chairman
Hal Sharpley
W.V. Geppert
John Reeves
Alvin Zimmerman
Executive Assistant
A. J. Carubbl, Jr.
-951-