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De ON Funds Management Group
University Corporate Center

a 1100 Reynolds Bivd.

3rd. Floor, Section C
Winston-Salem, NC 27105

September 17, 1999

U.S. Treasury

Ms. Cynthia L. Johnson, Director

Cash Management Policy & Planning Division
Financial Management Service

Room 420

401 14th Street, SW

Washington, DC 20227

Dear Ms. Johnson:

I am responding to the proposed Amendment to the Treasury Tax & Loan Rate of
Interest.

Branch Banking and Trust Company is within the Richmond district of the Federal
Reserve Bank. We currently have Direct Investment lines at our three primary affiliate
banks of $1 billion, $10 million, and $6 million. In addition, we are contemplating
raising the line at one of the smaller affiliates to $250 million because of recent
acquisitions. We also set up Special Direct Investment lines this year that total
approximately $2 billion.

Our short term borrowing position can be volatile depending upon the activity from
Direct Investment and Special Direct Investment. One of the main reasons we have been
willing to accept the potential volatility within our overnight position is the fact that
TT&L/Direct Investment/Special Direct Investment balances are at a lower cost than Fed
funds. Should the pricing change to more closely mirror overnight repurchase or Fed
fund rates, I believe our best course of action would be to bring the control of how much
is borrowed back to the bank. That is, if we would not be compensated for the option the
Treasury currently owns regarding when and how much we borrow, we would be more
inclined to be able to control the timing of borrowing. It would be in the bank’s best
interest to control when, where, and how we best use our collateral when borrowing in
the short-term markets given a relatively equal cost of funds. Should the proposed rate of
interest change not be passed, we look forward to our continued involvement in this
program.

One would suspect that whether or not you receive comments from a majority of the
banks participating in these programs, the activity across the country would diminish
considerably should the pricing change. I would envision many banks dropping out of
the Direct Investment program to favor the Special Direct Investment program.
However, involvement in that program requires a higher degree of operational work from
a bank and participation in the Borrower In Custody program. As you know, collateral


September 17, 1999
Page 2

under Special Direct Investment programs may be loans that a bank may not be able to
utilize in the repurchase market. Investment securities utilized in the Direct Investment
program can be used in the dealer repurchase market at comparable rates to the proposal,
and banks may opt for controlling the timing of such borrowings.

In conclusion, BB&T would need to reassess its involvement in TT&L/Direct
Investment/Special Direct Investment programs should this proposal be adopted. Our
decision would entail looking at lowering our caps or possibly reverting back to the
remittance option, and reviewing the operational costs versus the benefit of the Special
Direct Investment program using loan collateral given the historical infrequent usage of
this program.

Please consider this as strongly opposing the proposed rule to change the Treasury
Tax and Loan Rate of Interest.

Sincerely,

Brian D. Hodgson
Vice President

Cc: Michele Clewis
Donna C. Goodrich