81-3

San Francisco, California

December 22, 1881

Re: Retail Repurchase Agreements

Dear ________ :

This is in response to your letter dated September 30 and November 2, 1981.

You have requested reconsideration of our oral advice that retail repurchase agreements (“retail repos”) should be structured as sales of direct, undivided interests in United States government securities. Rather, you wish to structure the retail repos as a sale of an obligation of the bank, secured by such securities.

You believe that if the retail repos are drafted in accordance with our oral advice, your client banks may encounter difficulties with the Investment Company Act of 1940, and the anti-fraud provisions of the securities laws. Without commenting on the merits of your arguments, we do recognize that the law on these issues is not clear. Therefore, we have no objection to the use of documents which characterize retail repos as the sale of a bank’s obligation, which is secured by government securities. This comports with the Department’s retail repurchase agreement policy in the Weekly Bulletin dated September 4, 1981.

If you have any questions, please do not hesitate to contact us.

Very truly yours,
RICHARD DOMINGUEZ
Superintendent of Banks
By
KATHLEEN QUENNEVILLE
Counsel
KQ:nd