Magazine article American Banker

Broker Proposals May Jeopardize Industrial Bonds

Magazine article American Banker

Broker Proposals May Jeopardize Industrial Bonds

Article excerpt

WASHINGTON -- The proposed broker deposit regulations could have a detrimental impact on approximately $2 billion of industrial development bonds backed by federal insurance.

If the proposal are not changed before they are put into effect, transactions involving tax-exempt bonds and certificates of deposit would have to be refinanced at conventional rates, or projects involving the loans would have to be foreclosed.

The regulations, proposed by the Federal Home loan Bank Board and the Federal Deposit Insurance Corp., would limit deposit insurance to $100,000 per broker for each financial institution. The ruling would take effect Oct. 1.

Both the Bank Board and the FDIC are expected to take up the proposals at March 26 meetings, sources said.

Additionally, the House subcommittee on commerce, consumer, and monetary affairs may hold hearings on the matter and could subsequently override the regulations, a subcommittee staff member said.

The concerns regarding the impact of the proposed regulations on federally backed, tax-exempt bonds surfaced in comment letters to the FDIC and the House subcommittee on commerce, consumer, and monetary affairs.

A letter from the Washington, D.C., law office of Ballard, Spahr, Andrews and Ingersoll alerted the agencies and Congress to the problems the regulations would cause for tax-exempt financing. The firm requested these issues be exempted from the proposed regulations.

Nearly all the bond issues affected are multifamily housing bonds. …

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