This section of the FEDERAL REGISTER

contains regulatory documents having general

applicability and legal effect, most of which

are keyed to and codified in the Code of

Federal Regulations, which is published under

50 titles pursuant to 44 U.S.C. 1510.

The Code of Federal Regulations is sold by

the Superintendent of Documents. Prices of

new books are listed in the first FEDERAL

REGISTER issue of each week.

Rules and Regulations Federal Register

61657 

Vol. 73, No. 202 

Friday, October 17, 2008 

1The primary, secondary, and seasonal credit 

rates described in this section apply to both 

advances and discounts made under the primary, 

secondary, and seasonal credit programs, 

respectively. 

FEDERAL RESERVE SYSTEM 

12 CFR Part 201 

[Regulation A] 

Extensions of Credit by Federal 

Reserve Banks 

AGENCY: Board of Governors of the 

Federal Reserve System. 

ACTION: Final rule. 

SUMMARY: The Board of Governors of the 

Federal Reserve System (Board) has 

adopted final amendments to its 

Regulation A to reflect the Board’s 

approval of a decrease in the primary 

credit rate at each Federal Reserve Bank. 

The secondary credit rate at each 

Reserve Bank automatically decreased 

by formula as a result of the Board’s 

primary credit rate action. 

DATES: The amendments to part 201 

(Regulation A) are effective October 17, 

2008. The rate changes for primary and 

secondary credit were effective on the 

dates specified in 12 CFR 201.51, as 

amended. 

FOR FURTHER INFORMATION CONTACT: 

Jennifer J. Johnson, Secretary of the 

Board (202/452–3259); for users of 

Telecommunication Devices for the Deaf 

(TDD) only, contact 202/263–4869. 

SUPPLEMENTARY INFORMATION: The 

Federal Reserve Banks make primary 

and secondary credit available to 

depository institutions as a backup 

source of funding on a short-term basis, 

usually overnight. The primary and 

secondary credit rates are the interest 

rates that the twelve Federal Reserve 

Banks charge for extensions of credit 

under these programs. In accordance 

with the Federal Reserve Act, the 

primary and secondary credit rates are 

established by the boards of directors of 

the Federal Reserve Banks, subject to 

the review and determination of the 

Board. 

The Board approved requests by the 

Reserve Banks to decrease by 50 basis 

points the primary credit rate in effect 

at each of the twelve Federal Reserve 

Banks, thereby decreasing from 2.25 

percent to 1.75 percent the rate that 

each Reserve Bank charges for 

extensions of primary credit. As a result 

of the Board’s action on the primary 

credit rate, the rate that each Reserve 

Bank charges for extensions of 

secondary credit automatically 

decreased from 2.75 percent to 2.25 

percent under the secondary credit rate 

formula. The final amendments to 

Regulation A reflect these rate changes. 

The 50-basis-point decrease in the 

primary credit rate was associated with 

a similar decrease in the target for the 

federal funds rate (from 2.00 percent to 

1.50 percent) approved by the Federal 

Open Market Committee (Committee) 

and announced at the same time. A 

press release announcing these actions 

indicated that: 

Incoming economic data suggest that the 

pace of economic activity has slowed 

markedly in recent months. Moreover, the 

intensification of financial market turmoil is 

likely to exert additional restraint on 

spending, partly by further reducing the 

ability of households and businesses to 

obtain credit. Inflation has been high, but the 

Committee believes that the decline in energy 

and other commodity prices and the weaker 

prospects for economic activity have reduced 

the upside risks to inflation. 

The Committee will monitor economic and 

financial developments carefully and will act 

as needed to promote sustainable economic 

growth and price stability. 

Regulatory Flexibility Act Certification 

Pursuant to the Regulatory Flexibility 

Act (5 U.S.C. 605(b)), the Board certifies 

that the new primary and secondary 

credit rates will not have a significantly 

adverse economic impact on a 

substantial number of small entities 

because the final rule does not impose 

any additional requirements on entities 

affected by the regulation. 

Administrative Procedure Act 

The Board did not follow the 

provisions of 5 U.S.C. 553(b) relating to 

notice and public participation in 

connection with the adoption of these 

amendments because the Board for good 

cause determined that delaying 

implementation of the new primary and 

secondary credit rates in order to allow 

notice and public comment would be 

unnecessary and contrary to the public 

interest in fostering price stability and 

sustainable economic growth. For these 

same reasons, the Board also has not 

provided 30 days prior notice of the 

effective date of the rule under section 

553(d). 

12 CFR Chapter II 

List of Subjects in 12 CFR Part 201 

Banks, Banking, Federal Reserve 

System, Reporting and recordkeeping. 

Authority and Issuance 

■ For the reasons set forth in the 

preamble, the Board is amending 12 

CFR Chapter II to read as follows: 

PART 201—EXTENSIONS OF CREDIT 

BY FEDERAL RESERVE BANKS 

(REGULATION A) 

■ 1. The authority citation for part 201 

continues to read as follows: 

Authority: 12 U.S.C. 248(i)–(j), 343 et seq., 

347a, 347b, 347c, 348 et seq., 357, 374, 374a, 

and 461. 

■ 2. In § 201.51, paragraphs (a) and (b) 

are revised to read as follows: 

§ 201.51 Interest rates applicable to credit 

extended by a Federal Reserve Bank.1

(a) Primary credit. The interest rates 

for primary credit provided to 

depository institutions under § 201.4(a) 

are: 

Federal Reserve 

Bank Rate Effective 

Boston ................ 1.75 October 8, 2008. 

New York ........... 1.75 October 8, 2008. 

Philadelphia ........ 1.75 October 8, 2008. 

Cleveland ........... 1.75 October 8, 2008. 

Richmond ........... 1.75 October 8, 2008. 

Atlanta ................ 1.75 October 8, 2008. 

Chicago .............. 1.75 October 8, 2008. 

St. Louis ............. 1.75 October 9, 2008. 

Minneapolis ........ 1.75 October 8, 2008. 

Kansas City ........ 1.75 October 8, 2008. 

Dallas ................. 1.75 October 8, 2008. 

San Francisco .... 1.75 October 8, 2008. 

(b) Secondary credit. The interest 

rates for secondary credit provided to 

depository institutions under 201.4(b) 

are: 


jlentini on PROD1PC65 with RULES
61658 Federal Register / Vol. 73, No. 202 / Friday, October 17, 2008 / Rules and Regulations 

1Public Law 110–343 (October 3, 2008). 2 12 CFR 564.3(b)(2)(1989). 

Federal reserve 

bank Rate Effective 

Boston ................ 2.25 October 8, 2008. 

New York ........... 2.25 October 8, 2008. 

Philadelphia ........ 2.25 October 8, 2008. 

Cleveland ........... 2.25 October 8, 2008. 

Richmond ........... 2.25 October 8, 2008. 

Atlanta ................ 2.25 October 8, 2008. 

Chicago .............. 2.25 October 8, 2008. 

St. Louis ............. 2.25 October 9, 2008. 

Minneapolis ........ 2.25 October 8, 2008. 

Kansas City ........ 2.25 October 8, 2008. 

Dallas ................. 2.25 October 8, 2008. 

San Francisco .... 2.25 October 8, 2008. 

* * * * * 

By order of the Board of Governors of the 

Federal Reserve System, 

Dated: October 9, 2008. 

Jennifer J. Johnson, 

Secretary of the Board. 

[FR Doc. E8–24519 Filed 10–16–08; 8:45 am] 

BILLING CODE 6210–01–P 

FEDERAL DEPOSIT INSURANCE 

CORPORATION 

12 CFR Part 330 

RIN 3064–AD36 

Deposit Insurance Regulations; 

Temporary Increase in Standard 

Coverage Amount; Mortgage Servicing 

Accounts 

AGENCY: Federal Deposit Insurance 

Corporation (FDIC). 

ACTION: Interim rule with request for 

comments. 

SUMMARY: The FDIC is adopting an 

interim rule to amend its deposit 

insurance regulations to reflect 

Congress’s recent action to temporarily 

increase the standard deposit insurance 

amount from $100,000 to $250,000 and 

to simplify the deposit insurance rules 

for funds maintained in mortgage 

servicing accounts. 

The FDIC’s main goals in revising its 

insurance rule on mortgage servicing 

accounts are to simplify a rule that has 

become increasingly complex in 

application due to developments in 

securitizations and to provide 

additional certainty with respect to the 

deposit insurance coverage of these 

accounts at a time of turmoil in the 

housing and financial markets. The 

FDIC believes this regulatory change 

will help improve public confidence in 

the banking system. 

DATES: The effective date of the interim 

rule is October 10, 2008. Written 

comments must be received by the FDIC 

not later than December 16, 2008. 

ADDRESSES: You may submit comments 

by any of the following methods: 

• Agency Web Site: http:// 

www.fdic.gov/regulations/laws/federal. 

Follow instructions for submitting 

comments on the Agency Web Site. 

• E-mail: Comments@FDIC.gov. 

Include ‘‘Mortgage Servicing Accounts’’ 

in the subject line of the message. 

• Mail: Robert E. Feldman, Executive 

Secretary, Attention: Comments, Federal 

Deposit Insurance Corporation, 550 17th 

Street, NW., Washington, DC 20429. 

• Hand Delivery/Courier: Guard 

station at the rear of the 550 17th Street 

Building (located on F Street) on 

business days between 7 a.m. and 5 p.m. 

(EST). 

• Federal eRulemaking Portal: http:// 

www.regulations.gov. Follow the 

instructions for submitting comments. 

Public Inspection: All comments 

received will be posted without change 

to http://www.fdic.gov/regulations/laws/ 

federal including any personal 

information provided. Paper copies of 

public comments may be ordered from 

the Public Information Center by 

telephone at (877) 275–3342 or (703) 

562–2200. 

FOR FURTHER INFORMATION CONTACT: 

Joseph A. DiNuzzo, Counsel, Legal 

Division (202) 898–7349 or Christopher 

Hencke, Counsel, Legal Division (202) 

898–8839, Federal Deposit Insurance 

Corporation, Washington, DC 20429. 

SUPPLEMENTARY INFORMATION: 

I. Background 

A. Temporary Increase in Insurance 

Coverage 

The Emergency Economic 

Stabilization Act of 2008 temporarily 

increased the standard maximum 

deposit insurance amount (‘‘SMDIA’’) 

from $100,000 to $250,000, effective 

October 3, 2008, and ending December 

31, 2009.1 After that date, the SMDIA 

will, by law, return to $100,000. In the 

interim rule the FDIC is amending its 

deposit insurance regulations to reflect 

the temporary increase in the SMDIA. 

B. Mortgage Servicing Accounts 

The FDIC was established to maintain 

public confidence and stability in the 

United States banking system and 

protect insured depositors. The 

regulations governing deposit insurance 

coverage are codified at 12 CFR part 

330, and they include specific rules on 

deposits of payments collected by 

mortgage servicers and placed into 

accounts at insured depository 

institutions. 12 CFR 330.7(d) (‘‘mortgage 

servicing accounts’’). Accounts 

maintained by a mortgage servicer, in a 

custodial or other fiduciary capacity, 

may include funds paid by mortgagors 

for principal, interest and escrowed 

amounts for taxes and insurance 

premiums. Principal and interest funds 

are insured for the interest of each 

owner (mortgagee, investor or security 

holder) in those accounts. Under section 

330.7(d) funds maintained by a servicer, 

in a custodial or other fiduciary 

capacity, which represent payments by 

mortgagors of taxes and insurance 

premiums are added together and 

insured for the ownership interest of 

each mortgagor in those accounts. 

The FDIC’s rules for mortgage 

servicing accounts were adopted in 

1990, after the Financial Services 

Reform, Recovery, and Enforcement Act 

of 1989, abolished the Federal Savings 

and Loan Insurance Corporation 

(‘‘FSLIC’’) and transferred the insurance 

of savings association deposits to the 

FDIC. Prior to that time, the FDIC did 

not have specific rules for mortgage 

servicing accounts, and the FSLIC’s 

rules provided insurance coverage for 

principal and interest funds based on 

the interest of each mortgagor.2

As described above, under section 

330.7(d), funds representing payments 

of principal and interest are insurable 

on a pass-through basis to each 

mortgagee, investor or security holder. 

In contrast, funds representing 

payments of taxes and insurance are 

insurable on a pass-through basis to 

each mortgagor or borrower. When the 

FDIC adopted these rules in 1990, it 

focused largely on the fact that principal 

and interest funds are owned by the 

investors, on whose behalf the servicer, 

as agent, accepts the principal and 

interest payments, and are not owned by 

the borrowers. By contrast, under the 

current rule, taxes and insurance funds 

are insured to the mortgagors or 

borrowers on the theory that the 

borrower still owns the funds until the 

tax and insurance bills are actually paid 

by the servicer. 

Over the past several years, 

securitization methods and vehicles for 

mortgages have become more layered 

and complex. The FDIC believes that it 

has become much more difficult and 

time-consuming for a servicer to 

identify and determine the share of any 

investor in a securitization and in the 

principal and interest funds on deposit 

at an insured depository institution. 

Under the current regulation, in the 

event of the failure of an FDIC-insured 

depository institution, the FDIC is 

concerned that there could be 

unexpected loss to securitization 

investors of principal and interest 

payments deposited at the institution by 


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