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NUMBER 225

Washington, Tuesday, November 18, 1958
TITLE 12 BANKS AND
BANKING
Chapter II Federal Reserve System Subchapter A Board of Governors of the Federal Reserve System Reg. U
Part 221 L oans b y B a n k s for P urpose of P urchasing Stocks
or
C a rrying R egistered
LOAN TO OPEN-END INVESTMENT COMPANY

221.109 Loan to open-end invest ment company. In response to a ques tion regarding a possible loan by a bank to an open-end investment company that customarily purchases stocks regis tered on a national securities exchange, the Board stated that in view of the gen eral nature and operations of such a company, any loan by a bank to such a company should be presumed to be sub ject to this part as a loan for the pur pose of purchasing or carrying registered stocks. This would not be altered by the fact that the open-end company had used, or proposed to use, its own funds or proceeds of the loan,to redeem some of its own shares, since mere application of the proceeds of a loan to some other Use cannot prevent the ultimate purpose of a loan from being to purchase or carry registered stocks.
Sec. 23, 48 Stat. 901, as amended; 15 TJ. S. C.
78w. Interprets or applies secs. 3, 7, 17, 48
btat. 882, as amended, 886, as amended, 897, as amended; 15 U. S. C. 78c, 78g, 78q
seal

B oard o f G overnors o f th e F ederal R eserve S y s t e m , M erritt S h e r m a n ,
Secretary.
! R. Doc. 58-9513; Filed, Nov. 17, 1958;8:47 a. m.

Reg. Y
P art 222 B a n k H o l d in g C o m p a n ie i d isc o u n t s o f c o m m o d it y c r e d it
CORPORATION CERTIFICATES

o l l 21 8 "Viscounts of Commod Then c rPr

tion ?ifr .recently considered the qu<
11 A e th e r section 6 a 4 of t
Bank Holding Company Act of 1956 ap plies to transfers of Commodity Credit Corporation Certificates of Interest be tween banks which are subsidiaries of the same bank holding company.
b In the General Contract Corpora tion case, Federal Reserve Bulletin for March 1958, at page 260, the Board ex pressed the view that the nonrecourse purchase of paper by a bank from an other subsidiary of the same bank hold ing company constitutes a discount within the meaning of section 6 a 4
of the Bank Holding Company Act, which forbids any bank to make any loan, discount or extension of credit to its bank holding company or any fellow subsidiary.
c The Boards Statement in that case said, among other things, that;
It is to be understood, of course, that the purchases referred to here are purchases of paper promissory notes, bills of exchange and the like. As the Examiner indicated bank discounts as commonly under stood do not apply to a banks acquisition through purchase of other assets, securities or obligations, such as, for example, corpo rate stocks, bonds or debentures.

d As indicated by this quotation from the Boards Statement, it seems appropriate to consider the limitation on discounts as, in general, applying to those assets usually considered, to be loans and not applying to those usually considered to be securities.
e W ith that in mind, and looking to the nature of the present Certificates, it is seen that the call report of condition of State member banks treats these Cer tificates as loaris. They are included on the reverse side of the form under Sched ule A, Loans and Discounts, as Item 4
a Loans directly guaranteed by the Commodity Credit Corporation and Cer tificates of Interest representing owner ship thereof. It may also be noted that under section 2 b 2 of the Boards Regulation A, 201.2 b 2 of this Chapter relating to advances and dis counts by Federal Reserve Banks, these Certificates are treated, in effect, as being eligible paper under the Federal Re serve Act. It is also understood that these Certificates are ndt considered to be subject to the limitation on the public Continued on p. 8947

CONTENTS
Agricultural Conservation Pro gram Service Rules and regulations:
Assignment of payment; num ber and effect_________________

Page
8956

Agricultural Marketing Service Proposed rule making :
P e a c h e s , fresh, grown in Georgia_____ __ !____ __________
Rules and regulations :
Dates, domestic, produced or packed in designated area of California______________ _____
Milk in Central Mississippi m ar keting area; termination or der____________________________
Walnuts grown in California, O r e g o n , and Washington;
budget of expenses of Walnut Control Board and rates of as sessment for marketing year beginning August 1, 1958____

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Agriculture Department See also Agricultural Conservation Program Service; Agricultural Marketing Service; Commodity Stabilization Service.
Notices;
Arkansas; designation for pro duction emergency loans_____

8966

Alien Property Office Notices:
Kresch, Alfred and Harry; in tention to return vested prop erty
8968

Atomic Energy Commission Proposed rule making:
Licensing of production and uti lization facilities_____________
Rules and regulations:
Special nuclear material; re quirements for approval of applications___________________

8965

8956

Commodity Stabilization Service Rules and regulations:
Allotments of sugar quotas, 1958:
Domestic beet sugar area____
Mainland cane sugar area___
Continental sugar requirements and area quotas; revision of proration of 1958 quota defi cits________________- _______ ___
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