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4000 - Advisory Opinions

Meaning of "Deposits Backed by Full Faith and Credit of U.S. Government" Under CEBA Explained


October 17, 1988

Douglas J. Jones, Deputy General Counsel

Your September 12 letter inquires whether title IX of the Competitive Equality Banking Act of 1987 ("CEBA", Pub. L. 100-86, 1001 Stat. 552) means what it appears to say "that deposits up to the statutorily prescribed amount in federally insured depository institutions are backed by the full faith and credit of the United States."

As a technical matter, FDIC has no authority to issue a legally binding opinion on this issue. It is our view, however, that title IX of CEBA represents an expression of the intent of Congress to support the federal deposit insurance funds should the need arise. That is, should the claims against the insurance funds arising from insured deposits exceed the resources available to the funds, Congress has indicated that it would take such additional steps as may be necessary to protect these deposits.

Any final analysis of whether insured deposits are full faith and credit obligations of the government rests with the Attorney General of the United States and, ultimately, with the courts. In this connection, enclosed for your information is a copy of a recent United States district court decision which concludes that:

"it was the clear and unambiguous intention of the Congress [in Title IX of CEBA] to guarantee the resources of federal depository institutions with the full faith and credit of the United States. Having explicitly done so, it need not either authorize or appropriate funds for this purpose until it deems it necessary." (page 15)

We note that this conclusion was not essential to the result reached by the court in this case and we do not know whether it will be appealed. Thus, the decision should not be viewed as dispositive, but it does give an indication of how at least one court analyzed the issue.

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