               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-
