[Federal Register Volume 60, Number 24 (Monday, February 6, 1995)]
[Notices]
[Pages 7055-7058]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-2795]



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FEDERAL DEPOSIT INSURANCE CORPORATION


General Counsel's Opinion No. 7; Treatment of Assessments Paid by 
``Oakar'' Banks and ``Sasser'' Banks on SAIF-Insured Deposits

AGENCY: Federal Deposit Insurance Corporation (FDIC).

ACTION: Notice of FDIC General Counsel's Opinion No. 7.

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SUMMARY: The FDIC Legal Division has received inquiries concerning the 
opinion it expressed in a letter sent to the United States General 
Accounting Office on April 23, 1992. In the 1992 letter, the Legal 
Division concluded that assessments paid on deposits acquired from 
members of the Savings Association Insurance Fund (SAIF) by banks 
through a transaction under section 5(d)(3) of the Federal Deposit 
Insurance Act (FDI Act) (12 U.S.C. 1815(d)(3)) should remain in the 
SAIF and are not required to be allocated among the Financing 
Corporation, the Resolution Funding Corporation, or the FSLIC 
Resolution Fund. This General Counsel Opinion confirms the opinion 
expressed by the Legal Division in the 1992 letter and describes 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 SAIF 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, are likewise not available to the Financing Corporation.

FOR FURTHER INFORMATION CONTACT: Valerie Jean Best, Counsel, Legal 
Division (202/898-3812), Federal Deposit Insurance Corporation, 
Washington, D.C. 20429.

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 that 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 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 [[Page 7056]] 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)(1) 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.

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 of 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

    \1\Earlier 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. Sec. 503 at p. 400 (passed by the House June 1, 1989); S. 774, 
101st Cong., 1st Sess., Sec. 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 institution 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. 
Sec. 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. Sec. 512 at p. 240 and Sec. 206 at p. 
19-21 (1989).
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    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 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 [[Page 7057]] 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 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.

    \2\The 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''.
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    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

    \3\With 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).
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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.

    \4\At 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.
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    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 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 [[Page 7058]] 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.

    Dated: January 31, 1995.

Federal Deposit Insurance Corporation.
Robert E. Feldman,
Acting Executive Secretary.
[FR Doc. 95-2795 Filed 2-3-95; 8:45 am]
BILLING CODE 6714-01-P