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76-2

Los Angeles Office

March 17, 1976

ATTENTION: _____________

General Manager

Gentlemen:

This is a response to your inquiry as to our opinion as to whether a 90% guaranteed Small Business Administration loan secured by a first lien on real property would qualify as a security to be deposited with the California State Treasurer for the faithful performance by the bank of all obligations entered into in this state.

It is this department’s present position that a S.B.A. loan, per se, does not qualify as a security of the type set forth in Section 1542. Under certain circumstances the Small Business Administration may reject a claim for payment under its guarantee and it is therefore our position that the full faith and credit of the United Stakes is not unconditionally pledged for the payment of the obligation.

It also appears to us that the Small Business Administration has an interest in the collateral securing the S.B.A. loan, and therefore, not having clear and complete title to the lien on real property securing the loan, the bank could not properly pledge it to the State Treasurer.

Yours very truly,

CARL J. SCHMITT Superintendent of Banks

By:

J. L. TAUFER Deputy Superintendent of Banks

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