FDIC Law, Regulations, Related Acts
4000 - Advisory Opinions
Would a deposit made by the Federal Home Loan Bank of Boston be insured by the FDIC
October 30, 1998
Christopher L. Hencke, Counsel
This is in response to your letter dated October 1, 1997, requesting confirmation that a deposit made by the Federal Home Loan Bank of Boston ("FHLB-Boston") would be insured by the FDIC. As explained in your letter, FHLB-Boston has been requested to make a term or time deposit at the "Bank" ( ) in the approximate amount of $100,000. "Bank" is an FDIC-insured bank.
The FDIC insures the deposits at FDIC-insured depository institutions up to a limit of $100,000. See 12 U.S.C. § 1821(a); 12 U.S.C. § 1821(f). In part, a "deposit" is defined as "the unpaid balance of money or its equivalent received or held by a bank or savings association in the usual course of business and for which it has given or is obligated to give credit either conditionally or unconditionally, to a commercial, checking, savings, time, or thrift account, or which is evidenced by its certificate of deposit, thrift certificate, investment certificate, certificate of indebtedness, or other similar name . . . ." 12 U.S.C. § 1813(l)(1). This definition encompasses the proposed time deposit by FHLB-Boston at Bank. Therefore, the deposit would be insured up to $100,000 in accordance with the FDIC's insurance regulations. As discussed below, the applicable section of the regulations would depend upon whether the FHLB-Boston is classified as (1) a corporation; or (2) a public unit.
The FHLB-Boston and the other Federal Home Loan Banks are structured as corporations. See 12 U.S.C. § 1426 (providing for the issuance of stock for each Federal Home Loan Bank); 12 U.S.C. § 1427 (providing for the management of each Federal Home Loan Bank through a board of directors); 12 U.S.C. § 1432 (providing for the incorporation of each Federal Home Loan Bank). See also Walleri v. Federal Home Loan Bank of Seattle, 83 F.3d 1575, 1578 (9th Cir. 1996) (stating that the Federal Home Loan Banks are "operated as private corporations" for some purposes). Under the FDIC's insurance regulations, "[t]he deposit accounts of a corporation engaged in any independent activity shall be added together and insured up to $100,000 in the aggregate." 12 C.F.R. § 330.9(a). Therefore, if the FHLB-Boston is classified as a corporation, the time deposit at issue would be insured up to $100,000 in aggregation with any other deposits maintained by the FHLB-Boston at Bank.
Though structured as corporations, the Federal Home Loan Banks also could be described as instrumentalities of the United States. See 12 U.S.C. § 1431(e)(1) (referring to a Federal Home Loan Bank "or other instrumentality of the United States"). See also Fahey v. O'Melveny & Myers, 200 F.2d 420, 454 (9th Cir. 1952), cert. denied, 345 U.S. 952 (1953) (stating that the Federal Home Loan Banks for some purposes "are not private banking corporations but are public banking agencies of the United States"). Under the insurance regulations, "[e]ach official custodian of funds of the United States lawfully depositing such funds in an insured depository institution shall be separately insured in the amount of (i) Up to $100,000 in the aggregate for all time and savings deposits; and (ii) Up to $100,000 in the aggregate for all demand deposits." 12 C.F.R. § 330.14(a)(1). Therefore, if the FHLB-Boston (or the officer or director of the FHLB-Boston who controls the funds) is classified as an official custodian of United States funds, the time deposit at issue would be insured up to $100,000 in aggregation with any other United States time or savings deposits maintained by the same official custodian at BBC. "In order to qualify as an official custodian . . . such custodian must have plenary authority, including control, over funds owned by the public unit which the custodian is appointed or elected to serve." 12 C.F.R. § 330.14(b)(1). "Control of public funds includes possession, as well as the authority to establish accounts for such funds in insured depository institutions and to make deposits, withdrawals, and disbursements of such funds." Id.
You have not requested the FDIC to resolve the issue whether the FHLB-Boston--for deposit insurance purposes--should be classified as (1) a corporation; or (2) a public unit or official custodian of United States funds. Rather, you have requested confirmation that the proposed deposit would be insured in some manner. As discussed above, under 12 C.F.R. § 330.9(a) (governing the insurance of the deposits of corporations) or 12 C.F.R. § 330.14 (governing the insurance of the deposits of public units), the time deposit would be insured up to $100,000 (possibly in aggregation with other deposits).
In your letter, you state that the approximate amount of the deposit will be $100,000. Even if the deposit is not aggregated with any other deposit accounts under the regulations discussed above, the deposit will be uninsured to the extent that the balance--including interest--exceeds $100,000. See 12 C.F.R. § 330.3(i)(1) (for insurance purposes, "[t]he amount of a deposit is the balance of principal and interest unconditionally credited to the deposit account as of the date of default of the insured depository institution, plus the ascertainable amount of interest to that date . . .").
In paying insurance on deposits, the FDIC does not make determinations as to whether depositors--in making their deposits--have acted within the scope of their authority (statutory or contractual or otherwise). Accordingly, nothing in this letter should be construed as an opinion as to whether the FHLB-Boston possesses the statutory or other authority to make the proposed deposit. This letter merely addresses the issue whether the proposed deposit would be insured.
I hope that the information above is helpful. If you have any questions regarding this information, you may call me at (202) 898-8839.