|
[Main Tabs]
[Table of Contents - 5500]
[Index]
[Previous Page]
[Next Page]
[Search]
5500 - General Counsel's Opinions
{{2-28-95 p.5529}}
TREATMENT OF ASSESSMENTS PAID BY ``OAKAR'' BANKS AND
``SASSER'' BANKS ON SAIF-INSURED DEPOSITS
General Counsel's Opinion No. 7
Text
Opinion
The FDIC Legal Division has received inquiries concerning the
opinion it expressed in a letter sent to the United States General
Accounting Office (GAO) on April 23, 1992. This General Counsel Opinion
confirms the opinion expressed by the Legal Division in the 1992 letter
and sets out in greater detail the reasoning underlying that opinion.
In addition, this General Counsel Opinion sets forth the Legal
Division's position that assessments paid to the Savings Association
Insurance Fund (SAIF) by any former savings association that has
converted from a savings association charter to a bank charter but
remains a SAIF member pursuant to section 5(d)(2)(G) of the Federal
Deposit Insurance Act (FDI) Act, are not available to the Financing
Corporation (FICO).
In the 1992 letter, the Legal Division advised the GAO that
assessments paid on deposits acquired by banks from SAIF members under
section 5(d)(3) of the FDI Act (12
U.S.C. 1815(d)(3)), the so-called "Oakar" provision,
should remain in the SAIF, retroactive to the enactment of the
Financial Institutions Reform, Recovery, and Enforcement Act of 1989
(FIRREA), and were not required to be allocated among the FICO, the
Resolution Funding Corporation (REFCORP), or the FSLIC Resolution Fund
(FRF). The GAO described this conclusion as "reasonable" in a
letter dated May 11, 1992, from Charles A. Bowsher, Comptroller General
of the United States, to the FDIC Board of Directors. Comptroller
General Bowsher wrote: "Based on our review of the applicable
statutory provisions and information FDIC provided, we believe its
conclusion and treatment of Oakar assessments are reasonable." The
relevant financial statements were restated and prepared in reliance on
the Legal Division's opinion, and the GAO subsequently cited the Legal
Division's conclusion in its audits of the 1990, 1991, and 1992
financial statements of SAIF and FRF.
The principal reason stated in the 1992 letter for this conclusion
was that Oakar banks (i.e., banks that had acquired deposits from SAIF
members pursuant to section 5(d)(3) of the FDI Act) are members of the
Bank Insurance Fund (BIF), not SAIF; thus, assessments paid by such BIF
members are not subject to FICO, REFCORP or FRF draws because the
applicable statutory provisions (12 U.S.C. 1441(f)(2), 1441b(e)(7), and
1821a(b)(4)) require
contributions only from SAIF members. An additional basis for the Legal
Division's conclusion, although not expressly stated, was the FICO's
assessment authority extends only to savings associations which are
SAIF members and therefore does not extend to Oakar banks since Oakar
banks are not savings associations.
Conclusion
The express statutory language of FICO's enabling legislation grants
assessment authority to FICO only over insured depository institutions
which are both (1) savings associations and (2) SAIF members. Even if
Oakar banks could be regarded as members of both BIF and SAIF rather
than just BIF (which we do not think is the correct view), they are not
savings associations. Where, as here, the relevant statutory language
(which, in this case, limits FICO's assessment authority to savings
associations that are SAIF members) is clear and unambiguous,
well-established principles of statutory construction dictate that the
plain meaning of the statute must be given effect. The Legal Division
concludes that the opinion expressed in the 1992 letter--that SAIF
assessments paid by Oakar banks should remain in the SAIF and are not
subject to FICO, REFCORP, or FRF draws--remains correct.
Further, the Legal Division concludes that SAIF assessments paid by
any former savings association that (i) has converted from a savings
association charter to a bank charter, and (ii) remains a SAIF member
pursuant to section 5(d)(2)(G) of the FDI Act (a so-called
"Sasser" bank), are likewise not subject to draws by FICO.
The FDI Act expressly provides
{{2-28-95 p.5530}}that any such institution
is a bank. Since FICO's assessment authority extends only to savings
associations which are SAIF members, and since Sasser banks are not
savings associations, SAIF assessments paid by Sasser banks are not
subject to draws by FICO.
Discussion
I. FICO's Assessment Authority
In relevant part, section 21(f)(2) of the Federal Home Loan Bank Act
(FHLB Act) provides,
(f) Sources of funds for interest
payments; Financing Corporation assessment authority The Financing
Corporation shall obtain funds for anticipated interest payments,
issuance costs, and custodial fees on obligations issued hereunder from
the following sources:
* * * * *
(2) New assessment authority. To the
extent the amounts available pursuant to paragraph (1) are insufficient
to cover the amount of interest payments, issuance costs, and custodial
fees, the Financing Corporation, with the approval of the Board of
Directors of the [FDIC], shall assess against each Savings
Association Insurance Fund member an assessment (in the same manner as
assessments are assessed against such members by the [FDIC] under
section 7 of the FDI Act * * *
12 U.S.C. 1441(f)(2) (emphasis added).
Section 21(k)(l) of the FHLB Act defines
the term "Savings Association Insurance Fund member" as "a
savings association which is a Savings Association Insurance Fund
member as defined by section 7(l) of the FDI Act." 12 U.S.C.
1441(k)(1).
Thus, with the approval of the FDIC Board of Directors, FICO has the
statutory authority to levy assessments against each "savings
association which is a (SAIF) member." Read together, these
statutory provisions limit FICO's assessment authority to an
institution which is both a savings association and a SAIF member as
defined in section 7(l) of the FDI
Act.
II. An Oakar Bank Is Neither a Savings Association Nor a
SAIF Member and Thus Is Not Subject to FICO Draws
A. An Oakar Bank Is Not a "Savings Association"
The term "savings association" is defined in the FHLB Act by
reference to section 3 of the FDI Act. 12 U.S.C. 1422(9). In turn,
section 3(b) of the FDI Act provides:
(b) Definition of Savings Associations and
Related Terms.
(1) Savings Association.--The term "savings
association" means--
(A) any Federal savings association;
(B) any State savings association; and
(C) any corporation (other than a bank) that
the [FDIC] Board of Directors and the Director of the Office of
Thrift Supervision jointly determine to be operating in substantially
the same manner as a savings association.
(2) Federal Savings Association.--The term
"Federal savings association" means any Federal savings
association or Federal savings bank which is chartered under section 5
of the Home Owners' Loan Act.
(3) State Savings Association.--The term "State
savings association" means--
(A) any building and loan association,
savings and loan association, or homestead association; or
(B) any cooperative bank (other than a
cooperative bank which is a State bank as defined in subsection
(a)(2)),
which is organized and operating according to the
laws of the State * * * in which it is chartered or
organized.
{{2-28-95 p.5531}}
12 U.S.C. 1813(b).
Pursuant to section 3 of the FDI Act, the term "bank" means
any national bank, State bank, District bank, and any Federal branch
and insured branch.
Although the FDI Act does not further define the term "bank,"
the FDIC, throughout its history, has required that a state-chartered
financial institution be chartered by its state or incorporation as a
bank if that institution is to be regarded as a bank by the FDIC. In
determining a financial institution's status as a bank rather than a
savings association, the FDIC will generally look to the
characterization of the institution by the laws under which the
institution is created. An Oakar bank is an institution that
pre-existed the merger or assumption in which it gained Oakar-bank
status and, prior to that merger or assumption, it was a "bank"
in every way.
Whether or not the limitations contained in the moratorium provision
(12 U.S.C. 1815(d)(2)) or the
Oakar provision apply in any given situation depends solely on the fund
membership of the participating institutions; neither provision
specifically refers to the charter of a covered institution. Thus, the
statutory language of the moratorium and the Oakar provisions does not
provide any basis for concluding that a bank participating in an Oakar
transaction thereby forfeits its bank charter and somehow becomes a
savings association. In this regard, we note that the sponsor of the
Oakar Amendment emphasized that the Amendment had been drafted with
great care and further emphasized that the Amendment would benefit the
SAIF. Rep. Oakar commented:
I am exceedingly proud of this language as
it is and always was intended to utilize private capital from the bank
holding companies to bolster the SAIF fund * * * [A]s we briefed
staffs of the Senate Banking and House Banking Committees and they in
turn, briefed their members, support for the amendment grew. This was
due to the benefit to taxpayer[s] and to the SAIF fund. But also to
[the] care with which the amendment had been drafted.
135 Cong. Rec. H4970 (daily ed. Aug. 3, 1989) (statement of Rep.
Oakar).
The Oakar provision was added to the pending legislation, for the
first time, at the Committee of Conference level.
Both the Oakar provision and the provision governing FICO's
assessment authority were before the Committee of Conference, and the
Committee had available to it alternative language that would have
extended FICO's authority to the assessments paid to SAIF by BIF-member
Oakar banks. The Committee chose to adopt language that limits FICO's
assessment authority to savings associations that are SAIF
members. 1
Since FICO was granted the authority to assess savings associations
but not banks, and a bank that acquires SAIF deposits pursuant to
section 5(d)(3) of the FDI Act does not
{{2-28-95 p.5532}}thereby relinquish or modify
its bank charter to become a "savings association," we conclude
that SAIF assessments paid by Oakar banks should remain in the SAIF and
are not subject to draws by FICO.
B. An Oakar Bank Is Not a SAIF Member
1. Definition of the Term "SAIF Member." As noted
above, FICO has the statutory authority to levy assessments against
each savings association which is a "Savings Association Insurance
Fund member as defined by section 7(l)."
The term "Savings Association Insurance Fund member," means
"any depository institution the deposits of which are insured by the
Savings Association Insurance Fund." 12 U.S.C.
1817(l)(5). The term "Bank Insurance Fund
member" means "any depository institution the deposits of which
are insured by the Bank Insurance Fund."
12 U.S.C.
1817(l)(4).
With regard to fund membership, section 7(l) of
the FDI Act provides as follows:
Designation of fund membership for newly insured
depository institutions; definitions. For purposes of this
section:
(1) Bank insurance fund. Any institution
which--
(A) becomes an insured depository institution; and
(B) does not become a Savings Association Insurance
Fund member pursuant to paragraph (2), shall be a Bank Insurance Fund member.
(2) Savings association insurance fund. Any
savings association, other than any Federal savings bank chartered
pursuant to section 5(o) of the Home Owners' Loan Act, which becomes an
insured depository institution shall be a Savings Association Insurance
Fund member.
(3) Transition provision.
(A) Bank insurance fund. Any depository
institution the deposits of which were insured by the [FDIC] on the
day before [August 9, 1989], including--
(i) any Federal savings bank chartered pursuant to
section 5(o) of the Home Owners Loan Act; and
(ii) any cooperative bank, shall be a Bank Insurance Fund member as of [August 9, 1989].
(B) Savings association insurance fund. Any
savings association which is an insured depository institution by
operation of section 4(a)(2) shall be a Savings Association Insurance
Fund member as of [August 9, 1989].
12 U.S.C.
1817(l)(1)--(3).
The FDI Act does not explicitly state that a depository institution
cannot be a member of both SAIF and BIF at the same time, but the FDI
Act implies that this is so. By designating any newly insured
depository institution that does not become a SAIF member to be a BIF
member, the FDI Act indicates that membership in one fund necessarily
excludes membership in the other fund. The designation of depository
institutions insured prior to the enactment of FIRREA as either SAIF
members or BIF members, lends further support to the view that a
depository institution cannot belong to both funds at the same time.
Since the SAIF and the BIF were first established by FIRREA the FDIC
has treated an insured depository institution as either a SAIF member
or a BIF member but not both.
2. A Bank Retains its Status as a BIF Member When it Acquires
Deposits from A Savings Association Pursuant to Oakar. Nothing in
5(d)(3) of the FDI Act indicates that an institution forfeits its
fund-designation by virtue of participating in an Oakar transaction.
Rather, section 5(d)(3) provides that in the case of any "acquiring,
assuming, or resulting depository institution which is a Bank Insurance
Fund member," that portion of the deposits of such member
attributable to the former SAIF member "shall be treated as"
deposits which are SAIF-insured for purposes of calculating the
assessment to be paid to
{{8-30-96 p.5533}}SAIF, and for purposes of
allocating costs in the event of
default. 2
The fact that section 5(d)(3) refers to the acquiring, assuming, or
resulting depository institution as a BIF member, and the use of the
phrase "treated as" SAIF deposits--as opposed to "are" SAIF
deposits--indicates that a BIF member acquiring deposits from a SAIF
member pursuant to section 5(d)(3) retains its status as a BIF member.
Since FICO's assessment authority extends only to "a savings
association which is a [SAIF] member," and (1) a depository
institution cannot be a member of BIF and SAIF at the same time, and
(2) a BIF member that acquires deposits from a SAIF member pursuant to
section 5(d)(3) of the FDI Act retains its status as a BIF member, it
is our opinion that SAIF assessments paid by BIF-member Oakar banks
should remain in the SAIF and are not subject to draws by FICO.
Moreover, neither REFCORP nor FRF are permitted to assess BIF-member
Oakar banks since their assessment authority extends only to
"Savings Association Insurance Fund
members." 3
C. BIF-Member Oakar Banks Are Not Subject to FICO Draws
Nothing in the legislative history of section 21 of the FHLB Act
indicates that Congress intended a result other than that required by
the plain language of the statute. There is no specific evidence to
suggest that Congress intended the phrase "a savings association
which is a [SAIF] member", as used in that Act, to have any
meaning other than the normal meaning of the words. The best, if not
the only, manifestation of congressional intent in this instance is the
language of the statute; we cannot base our interpretation on a
supposed intent that is not spelled out in the statutory text or the
legislative history.
The conclusion that an Oakar bank is not subject to FICO draws
because it is neither a savings association nor a SAIF member finds
ample support in the relevant statutory text. A contrary interpretation
would disregard the explicit statutory language which grants assessment
powers to FICO only over savings associations that are SAIF
members. 4
Moreover, the conclusion that an Oakar bank is not subject to REFCORP
or FRF draws because an Oakar bank is not a SAIF member finds ample
support in the relevant statutory text.
It is consistent with the purposes of the legislation to retain
these SAIF assessments in SAIF. Under section 5(d)(3), the SAIF, rather
than the Resolution Trust Corporation (RTC), is required to bear the
cost of any loss attributable to the SAIF-insured deposits held by an
Oakar bank. Thus, SAIF was and is responsible for losses attributable
to resolving the SAIF-insured part of BIF-member Oakar banks. In the
absence of the 1992 letter, SAIF would have had no funding to cover
insurance losses for which it was and is responsible by statute. The
FDIC and Federal Government agencies have relied on the views expressed
in the 1992 letter to allocate the cost of resolving failed
institutions between the SAIF and the RTC. The FDIC has relied on the
letter to allocate assessments between the SAIF and the FRF.
III. A Sasser Bank is Not a ``Savings Association'' and
Thus is not Subject to FICO Draws
Likewise, it is our opinion that SAIF assessments paid by any former
savings association that (i) has converted from a savings association
charter to a bank charter, and (ii) remains
{{8-30-96 p.5534}}a SAIF member pursuant to
section 5(d)(2)(G) of the FDI Act, are not subject to FICO draws. As
explained above with regard to Oakar banks, FICO's assessment authority
extends only to savings associations which are SAIF members. Sasser
institutions are not savings associations. Rather, the FDI Act
expressly provides that Sasser institutions are banks. More
specifically, section 3(a)(1) of the FDI Act provides:
(a) Definition of Bank and Related Terms.
(1) Bank.--The term "bank"--
(A) means any national bank, State bank, and District bank, and
any Federal branch and insured branch;
(B) includes any former savings association that--
(i) has converted from a savings association charter; and
(ii) is a Savings Association Insurance Fund member.
12 U.S.C. 1813(a)(1).
Although a Sasser bank is a SAIF member, it is classified as a
"bank" by the FDI Act. As a result, such an institution is not
subject to draws by FICO. In contrast to BIF-member Oakar banks,
however, Sasser banks are subject to draws by REFCORP and FRF. This is
because REFCORP and FRF have statutory authority to assess SAIF members
regardless of the SAIF member's charter.
Based on the foregoing, the Legal Division concludes that the
opinion expressed in the 1992 letter remains correct, and further
concludes that assessments paid to SAIF by any former savings
association that (i) has converted from a savings association charter,
and (ii) is a SAIF member, are likewise not subject to FICO draws.
[Source: 60 Fed. Reg. 7059, February 6,
1995]
1Earlier drafts of the legislation governing FICO's assessment
authority did not restrict FICO's assessment authority to a "savings
association" which is a SAIF member. Specifically, the House and
Senate versions sent to the Committee of Conference provided that FICO
had assessment authority over each "Savings Association Insurance
Fund member." H.R. 1278, 101st Cong., 1st Sess. § 503 at p. 400
(passed by the House June 1, 1989); S. 774, 101st Cong., 1st Sess.
§ 503, 135 Cong. Rec. S4350 (April 19, 1989). While these earlier
versions defined the term "savings association," neither version
contained a definition for "SAIF member." If either provision had
been enacted as drafted at that time, FICO's assessment authority would
have extended to all SAIF members, regardless of charter. In fact, the
definition of the term "SAIF member" elsewhere in the Senate bill
included "any other financial instituton that is required to pay
assessments into the [SAIF]." Id. 135 Cong. Rec. at S4311. The
House version defined SAIF member to mean "any financial institution
the deposits of which are insured by the [SAIF]." H.R. 1278, 101st
Cong., 1st Sess. § 207 at p. 71 (passed by the House June 1, 1989).
Had the Senate definition of SAIF member been adopted, FICO would have
had the authority to draw on assessments paid to SAIF by BIF-member
Oakar banks. The Committee of Conference did not adhere to either
version, however. Instead, the Committee chose to add the current
SAIF-member definition to the FICO provision, thereby limiting FICO's
authority to savings associations which are SAIF members. H.R. Conf.
Rep. No. 1278, 101st Cong., 1st Sess. § 512 at p. 240 and § 206 at
p. 19--21 (1989). Go Back to Text
2The deposits that are attributable to the former SAIF member
are calculated under a formula prescribed at FDI Act section
5(d)(3)(C). The dollar amount resulting from the statutorily prescribed
formula is the "adjusted attributable deposit amount" or
"AADA". Go Back to Text
3With regard to REFCORP's assessment authority, see 12 U.S.C.
1441b(e)(7), 1441b(k)(8), 1817(l). With regard to
FRF's assessment authority, see 12
U.S.C. 1821a(b)(4),
1817(l). Go Back to Text
4At the urging of the Federal Housing Finance Board (the
"FHF-Board"), the Office of Thrift Supervision has decided not to
require Oakar banks and "Sasser" banks (SAIF-member savings
associations that convert to bank charters but remain SAIF members) to
maintain Federal Home Loan Bank membership. 58 FR 14510, 14512 (March
18, 1993). The FHF-Board concluded that it had no authority to prohibit
a savings association that converts to a commercial bank or state
savings bank charter from withdrawing from membership. The FHLB Act
prohibits federal savings associations from withdrawing from Federal
Home Loan Bank membership, but does not apply to institutions with
other types of charters. Go Back to Text
[Main Tabs]
[Table of Contents - 5500]
[Index]
[Previous Page]
[Next Page]
[Search]
|
