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December 28, 1964

Dear Mr. __________:

This is in response to your letter of December 14, 1964, asking if we consider the granting of immediate credit on sight drafts supported by stock or notes of your bank as loaning on the security of such stock or notes.

It is our opinion that giving immediate credit on sight drafts is tantamount to loaning, irrespective of the fact the drafts may be paid the following day upon presentation, and if such advances are made primarily on the strength of the underlying stock or notes of your bank, such advances are in contravention of Section 3359 of the Financial Code. However, if the advances are made on an overnight basis entirely on the strength of the credit worthiness of the borrower and the security is taken only as additional protection, we will not consider such advances as in contravention of this Section.

Very truly yours,

JOHN A. O’KANE
Superintendent of Banks
By

JAMES AHLF
Chief Deputy Superintendent
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