4000 - Advisory Opinions
Whether Insured State Nonmember Banks May Invest in Farmer Mac Subordinated Securities
October 27, 1995
Pamela E.F. LeCren, Senior Counsel
The following is in response to your request for an opinion as to whether insured state nonmember banks may invest in Farmer Mac subordinated securities. In particular, you have inquired whether § 24 of the Federal Deposit Insurance Act ("FDI Act'', 12 U.S.C. 1831a) and Part 362 of the FDIC's regulations either prohibit such investments or require that an insured state nonmember bank obtain the FDIC's prior consent to making such investments.
Section 24 of the FDI Act provides, among other things, that an insured state nonmember bank may not make any equity investment that is not permissible for a national bank unless one of the statutory exceptions applies and that neither an insured
state nonmember bank nor its majority-owned subsidiary may engage as principal in any activity that is not permissible for a national bank unless the FDIC approves. Section 24 and Part 362 are not an issue if the particular equity investment or activity as principal is one that is permissible for a national bank.
I have reviewed the June 18, 1995 letter from Office of the Comptroller of the Currency, to ***, which you provided to me. As that letter concludes that national banks may invest in Farmer Mac subordinated securities, it is my conclusion that neither § 24 of the FDI Act nor Part 362 of the FDIC's regulations prohibit such investments for insured state nonmember banks or require that such investments receive the FDIC's prior consent.
If you have any further questions, please do not hesitate to contact me at (202) 898-3730.