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 

Dear Mr. Jaw: 

Rsr Authonlty of the State 

depoeltorg board to acoept “prellm*ary loan 

r&tea, isaued by public 

howing author$tlea” and 

“p8M.oipatlon oertlflOatoti isrued by the Federr1 NetIonaL ,Nortgage 

Amooiation” ae aollateral 

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 permlta 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 prlncipal 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 .: 

i&O (Tex. .Clv. 

v. Booth; 163 S,W.id 

App. 

‘Statu.tes’ Se 

&La tu.re .of Texa 

rror ref.; 39 s. 

In 1939 the 

427 (.cod.lfled. by Ve 

glalature ‘pa e 

tlcle 126$k-i 7 

passed quch.a special statute, which reads, in 

prt: . : 

~,t&,with~etandlng any reatrlotlona on lnvestment6 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 contrib;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.8 foliows: 

‘An aot to provide that bonds and other 

‘, i 

obilgat~lona :laeued by any public housing 

: authorlty.or ‘age.ncy, In the..Unlted Statee., 

when aeoured by:a pledge, of annual contrlsupplied-) .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 eupplement 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 lndlvldually to determine If this requirement has 

been met .” 

A copy of one of the “Preliminary Loan 

consideration hae been submitted ,to ua with 

The following guarantee appears therein: 

“PAYMENT AGREEMENT 

Notea” under 

your request. 

..nPureuant to section 102 c) of the Houein 

Act of 1949, a8 amended 42~ U.S.C. t 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 Agreement &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 

es f 

d on behalf of the United States by 

e du y authorized facelmlle signature of 

the Secretary of Housing and Urban Development, a8 of the Date of Issue of the within 

Note. 

UNITED STATES OF AMERICA 

By z/ Robert C. Weaver 

Secretary of Housing 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 consideration 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 Qblig8tiQnf4 in question is 

found on Individual examination to be guaranteed by the United 

States Qovernment or an egency thereof a8 to the entire prlnclpal and Intereat, t,he State Depository 

same ae collateral for State depoalts. 

Board may accept the 

SUMMARY --w---- 

accept both 

.-. . . 

The State Deooaitory Board may 

"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 COMMITTEE -,I 

Hawthorne Phillips, Chairman 

Kerns Taylor, Co-Chairman 

Hal Sharpley 

W.V. Geppert 

John Reeves 

Alvin Zimmerman 

Executive Assistant 

A. J. Carubbl, Jr. 

-951-