[Federal Register Volume 61, Number 170 (Friday, August 30, 1996)]
[Notices]
[Pages 45970-45974]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-22213]


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FEDERAL DEPOSIT INSURANCE CORPORATION


General Counsel's Opinion No. 9; FICO Funding Sources

AGENCY: Federal Deposit Insurance Corporation (FDIC or Corporation).

ACTION: Notice of FDIC General Counsel's Opinion No. 9.

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SUMMARY: The FDIC has received inquiries on the availability of funding 
from FSLIC Resolution Fund (FRF) receiverships for Financing 
Corporation (FICO) to pay interest on its obligations. Specifically, 
one inquiry has questioned the availability of potential recoveries in 
the ``goodwill'' litigation currently pending against the government by 
some of the former RTC receiverships. This General Counsel Opinion sets 
forth the Legal Division's conclusions on the issues involved in 
determining the availability of funding for FICO interest payments from 
FSLIC Resolution Fund receiverships.

FOR FURTHER INFORMATION CONTACT: Pamela A. Shea, Assistant General 
Counsel, (202) 898-3521 or Linda L. Stamp, Counsel, Legal Division, 
(202)

[[Page 45971]]

898-7310, Federal Deposit Insurance Corporation, 550 17th Street, NW., 
Washington, DC 20429.

Text of General Counsel's Opinion

General Counsel's Opinion No. 9--FICO Funding Sources
By: William F. Kroener, III, General Counsel

Background

    FICO is a mixed-ownership government corporation created in 1987 to 
recapitalize the Federal Savings and Loan Insurance Corporation (FSLIC) 
by issuing bonds to purchase capital stock or capital certificates 
issued by the FSLIC.1 FICO was created in 1987 pursuant to the 
Competitive Equality Banking Act (CEBA), Pub. L. 100-86, as a way to 
augment the resources of the FSLIC, which had effectively been declared 
insolvent by the Federal Home Loan Bank Board (FHLBB) earlier that 
year. FICO is managed by a three-member directorate composed of the 
Director of the Office of Finance of the Federal Home Loan Banks and 
the presidents of two Federal Home Loan Banks (FHLBs).2 FICO was 
authorized to issue bonds in an amount of up to $10.825 billion with an 
annual net borrowing limit of $3.75 billion.3 FICO issued 30-year 
noncallable bonds in a principal amount of approximately $8.1 billion 
that mature in 2017 through 2019. FICO's authority to issue bonds ended 
on December 12, 1991.4 Under the terms of FICO's contracts with 
its bondholders, FICO's bonds are not redeemable before maturity.5 
The FHLBs were required to invest in nonvoting capital stock to 
capitalize FICO.6 FICO was required to invest in and hold in a 
segregated account noninterest bearing (zero coupon) securities having 
a total principal payable at maturity approximately equal to the 
aggregate amount of principal due at the maturity of the FICO 
bonds.7 The FICO bonds bear interest at a fixed rate of 8.60% or 
higher depending on the series and date of issue.8
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    \1\ Competitive Equality Banking Act (CEBA), Pub. L. 100-86, 
Title III, amending Sec. 21 of the Federal Home Loan Bank Act. 12 
U.S.C. Sec. 1441.
    \2\ Federal Home Loan Bank Act Sec. 21(b), 12 U.S.C. 
Sec. 1441(b).
    \3\ Federal Home Loan Bank Act Sec. 21(e), 12 U.S.C. 
Sec. 1441(e).
    \4\ Resolution Trust Corporation Refinancing, Restructuring and 
Improvement Act of 1991, Sec. 104.
    \5\ See FICO Information Statement Supplement dated September 
19, 1989.
    \6\ Federal Home Loan Bank Act Sec. 21(d), 12 U.S.C. 
Sec. 1441(d).
    \7\ Federal Home Loan Bank Act Sec. 21(g), 12 U.S.C. 
Sec. 1441(g).
    \8\ See FICO Information Statement Supplement dated September 
19, 1989.
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    The FHLBs pay the administrative expenses of FICO according to a 
statutory formula and the term administrative expenses is defined to 
exclude interest, issuance costs and custodian fees.9 FICO has 
limited sources of funding available to pay its interest and principal 
obligations because the obligations of the FICO and the interest 
payable on such obligations are not obligations of, or guaranteed as to 
principal or interest by the FHLBs, the United States, or the FSLIC 
Resolution Fund (FRF).10 The FICO statute, as amended by the 
Financial Institutions Reform, Recovery, and Enforcement Act of 1989 
(FIRREA), establishes the following as sources of funding for the 
interest, issuance costs and custodian fees on the FICO obligations:
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    \9\ Federal Home Loan Bank Act Sec. 21(b)(7), 12 U.S.C. 
Sec. 1441(b)(7).
    \10\ Federal Home Loan Bank Act Sec. 21(e)(6), 12 U.S.C. 
Sec. 1441(e)(6).
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    (1) FICO assessments made prior to FIRREA; 11
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    \11\ Federal Home Loan Bank Act Sec. 21(f)(1), 12 U.S.C. 
1441(f)(1). Under the statute, FICO's initial source of funds were 
pre-FIRREA assessments, but those funds are exhausted.
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    (2) FICO assessments on SAIF member Savings associations with the 
approval of the FDIC; 12
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    \12\ Federal Home Loan Bank Act Sec. 21(f)(2), 12 U.S.C. 
Sec. 1441(f)(2).
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    (3) Liquidating dividends and payments made on claims received by 
FRF (as established under section 11A of the Federal Deposit Insurance 
Act) from receiverships, subject to the priority claim of the 
Resolution Funding Corporation (REFCORP) for the Funding Corporation 
Principal Fund (Principal Fund); 13
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    \13\ Federal Home Loan Bank Act Sec. 21(f)(3), 12 U.S.C. 
Sec. 1441(f)(3) states:
    Receivership proceeds To the extent the amounts available 
pursuant to paragraphs (1) and (2) are insufficient to cover the 
amount of interest payments, issuance costs, and custodial fees, and 
if the funds are not required by the Resolution Funding Corporation 
to provide funds for the Funding Corporation Principal Fund under 
section 1441b of this title, the Federal Deposit Insurance 
Corporation shall transfer to the Financing Corporation, from the 
liquidating dividends and payments made on claims received by the 
FSLIC Resolution Fund (established under section 1821a of this 
title) from receiverships, the remaining amount of funds necessary 
for the Financing Corporation to make interest payments.
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    (4) Exit fees paid on ``conversion transactions'' in which the 
resulting or surviving institution is not a SAIF member.14
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    \14\ Federal Deposit Insurance Act Sec. 5(d)(2)(E), 12 U.S.C. 
Sec. 1815(d)(2)(E).
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    The statute clearly provides that funds from a higher priority 
source are to be used to the extent available before moving to the next 
lower priority source.15
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    \15\ Federal Home loan Bank Act Sec. 21(f), 12 U.S.C. 
Sec. 1441(f).
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Priority of Claims to Liquidating Dividends and Payments

    Today, the FRF consists of two distinct pools of assets and 
liabilities: 16 one composed of the assets and most of the 
liabilities of the FSLIC transferred to the FRF upon the dissolution of 
the FSLIC on August 9, 1989 (FRF-FSLIC) and the other composed of the 
assets and liabilities of the RTC transferred to the FRF upon the 
dissolution of the RTC on December 31, 1995 (FRF-RTC). The assets 
transferred from the RTC consist chiefly of the subrogated depositors' 
claims that the RTC acquired as it resolved the institutions within its 
jurisdiction, that is, thrifts that failed on or after January 1, 1989 
through June 30, 1995.
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    \16\ Separate accounting for each pool is maintained by the 
FDIC.
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    The Legal Division interprets the language in section 21(f)(3) of 
the Federal Home Loan Bank Act (``FHLB Act'') concerning FICO's access 
to ``liquidating dividends and payments made on claims received by the 
FSLIC Resolution Fund (established under section 11A of the Federal 
Deposit Insurance Act) from receiverships'' [emphasis added] to 
encompass only the FRF-FSLIC. Although a facial reading of section 
21(f)(3) of the FHLB Act does not explicitly distinguish between FRF-
FSLIC and FRF-RTC, it is the Legal Division's view that the italicized 
language should be read as defining the FRF as established at the date 
of FIRREA's passage, which did not include any assets or liabilities of 
RTC. This reading fits squarely with the general statutory design 
established by FIRREA to resolve the thrift crisis by assigning 
responsibilities for failed and failing thrift institutions (pre-FIRREA 
and post-FIRREA) to each of two entities, RTC and FRF.
    RTC was to resolve thrifts that failed after January 1, 1989, using 
$31.2 billion in off-budget funding provided to the RTC by the REFCORP 
and $18.8 billion from appropriations.17 Congress created REFCORP 
in 1989 to provide funding for the RTC as a part of FIRREA.18 RTC

[[Page 45972]]

acquired no assets of the FSLIC and assumed liability only for certain 
guarantees of FHLBs' advances issued by the FSLIC, relating to thrifts 
that had not failed as of the date of passage of FIRREA.19 RTC 
never had access to any funds provided by FICO to resolve the 
institutions within RTC's jurisdiction.20 However, to the extent 
all other funding sources are insufficient to cover the amount of 
interest payments on its obligations, REFCORP is authorized to obtain 
the additional amount needed from the Secretary of the Treasury, which 
authorization was NOT granted to FICO.21
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    \17\ Financial Institutions Reform, Recovery, and Enforcement 
Act of 1989 (``FIRREA''), Pub.L. 101-73, Secs. 501 and 511.
    \18\ FIRREA amending Sec. 21B of the Federal Home Loan Bank Act. 
12 U.S.C. Sec. 1441b. In a manner similar to the FICO, the 
administrative expenses of REFCORP are paid by the Federal Home Loan 
Banks (FHLBs) according to a statutory formula. 12 U.S.C. 
Sec. 1441b(c)(7). The Principal Fund is fully funded with zero 
coupon Treasury bonds purchased by REFCORP through capitalization 
from the FHLBs' mandatory stock purchases. See 12 U.S.C. 
Sec. 1441b(e) and the audited financial statements confirming the 
existence of the zero coupon Treasury bonds. (Section 21B(e)(7) of 
the FHLB Act also required that SAIF assessment income be used, if 
necessary, to fund REFCORP's Principal Fund. Id. At 1441b(e)(7). 
Because REFCORP's Principal Fund is fully funded, assessment income 
from SAIFmember institutions is no longer required for REFCORP 
purposes.) The statutes provide separate funding for interest 
payments on the bonds, notes, debentures and similar obligations 
issued by REFCORP. 12 U.S.C. Sec. 1441b(f). REFCORP collects the 
funding for interest from its earnings on assets not invested in 
Principal Fund; certain proceeds from the RTC to the extent 
available during its existence; from the FHLBs according to a 
statutory formula; through the net proceeds from the sale of assets 
transferred to the FRF by the RTC; and to the extent the other 
sources are insufficient, the Secretary shall pay the additional 
interest. In addition, when the FRF satisfies all of the liabilities 
of RTC, then the net proceeds of RTC asset sales are to be returned 
to REFCORP.
    \19\ Federal Home Loan Bank Act Sec. 21A(h), 12 U.S.C. 
Sec. 1441a(h), as added by Sec. 501 of FIRREA.
    \20\ See generally Federal Deposit Insurance Act, Sec. 11A 
(b)(3), 12 U.S.C. Sec. 1821a(b)(3)) and Federal Home Loan Bank Act, 
Sec. 21, 12 U.S.C. Sec. 1441. Under section 1441(f)(3) and 
1441b(7)(B), the Principal Fund could have received assets from FRF-
FSLIC, if its other sources of funding had been insufficient. This 
appears to have been an isolated instance of ``seed money'' provided 
by what remained of the former FSLIC to the entity (RTC) created to 
resolve formerly FSLIC-insured institutions going forward. In 
contrast, there are no instances in the FIRREA statutory framework 
where funding flows from the RTC to the FRF-FSLIC.
    \21\ Federal Home Loan Bank Act Sec. 21B(f)(2)(D), 12 U.S.C. 
Sec. 1441b(f)(2)(D).
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    By comparison, FIRREA provided that all other liabilities of the 
FSLIC and all of the assets of the FSLIC were transferred to the 
FRF.22 The FDIC succeeded the FSLIC as receiver or conservator for 
any thrift taken over by the government before January 1, 1989.23 
The liabilities to which the FRF succeeded consisted chiefly of the 
FSLIC's obligations under transactions resolving thrifts that failed 
prior to January 1, 1989, and the FSLIC's direct liability to 
depositors in thrifts that failed before that date. A further 
divergence in the treatment of the two FRF pools is illustrated by the 
fact that the FRF-FSLIC was given access to any funds borrowed by FICO 
beginning with the date of the enactment of FIRREA.24
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    \22\ Federal Deposit Insurance Act Sec. 11A(a)(2)(A), 12 U.S.C. 
Sec. 1821a(a)(2)(A).
    \23\ Federal Deposit Insurance Act Sec. 11A(a)(5)(A), 12 U.S.C. 
Sec. 1821a(a)(5)(A).
    \24\ Federal Deposit Insurance Act Sec. 11A(b)(3), 12 U.S.C. 
Sec. 1821a(b)(3).
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    If section 21(f)(3) of the FHLB Act were read to encompass 
liquidating dividends and payments on claims from RTC receiverships, 
the result would contradict the remaining statutory design. Under that 
interpretation, RTC assets would be used to pay for that portion of the 
thrift crisis that was expressly excluded from the RTC's jurisdiction. 
This view seems inconsistent with a Congressional intent that RTC's 
assets would not be used to pay for the portion the thrift crisis that 
Congress expressly excluded from the RTC's jurisdiction. Likewise, it 
would be inconsistent with Congressional intent to impose liability to 
pay the interest on the FICO obligations on the RTC assets, since the 
RTC received no FICO funding.
    The Legal Division's view that payment of FICO's interest, issuance 
costs and custodian fees is limited to liquidating dividends from 
former FSLIC receiverships is consistent with the language in section 
21B(f)(2)(D) of the FHLB Act, which contains the language that Congress 
used when it intended to have the FRF-RTC assets flow directly to 
REFCORP. This subsection states as follows:

    (D) Proceeds from sale of assets. To the extent the amounts 
available pursuant to subparagraphs (A), (B), and (C) are 
insufficient to cover the amount of interest payments, the FSLIC 
Resolution Fund shall transfer to the Funding Corporation any net 
proceeds from the sale of assets received from the Resolution Trust 
Corporation, which shall be used by the Funding Corporation to pay 
such interest.25

    \25\ Federal Home Loan Bank Act Sec. 21B(f)(2)(D), 12 U.S.C. 
Sec. 1441b(f)(2)(D).
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    This subsection shows that Congress intended to separate the FRF-
FSLIC from the FRF-RTC and that Congress identified the FRF-RTC as 
proceeds from the sale of a separate pool of assets intended to be used 
for different purposes than the FRF-FSLIC assets. Thus, although the 
assets and the liabilities of the RTC were transferred to the FRF when 
the RTC terminated, the RTC dissolution provisions require that after 
all outstanding liabilities of the RTC have been paid, the FRF is to 
transfer the net proceeds from the sale of the RTC assets to the 
REFCORP,26 which provided $31.2 billion in initial funding to the 
RTC.27 In addition, on a periodic basis, the net proceeds of 
former RTC asset sales are available to service REFCORP periodic 
interest obligations.28 These provisions are consistent with the 
statutory pattern whereby the RTC received its primary funding from 
REFCORP, to which net proceeds of any excess RTC assets are to return.
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    \26\ Federal Home Loan Bank Act Sec. 21A(m)(2), 12 U.S.C. 
Sec. 1441a(m)(2); and Federal Deposit Insurance Act Sec. 11A(e), 12 
U.S.C. Sec. 1821a(e). 12 U.S.C. Sec. 1441a (m)(2) states:
    Case resolutions transferred Simultaneous with the termination 
of the Corporation as provided in paragraph (1), all assets and 
liabilities of the Corporation shall be transferred to the FSLIC 
Resolution Fund. Thereafter, if there are no liabilities of the 
Corporation outstanding, the FSLIC Resolution Fund shall transfer 
any net proceeds from the sale of assets to the Resolution Funding 
Corporation.
    \27\ Federal Home Loan Bank Act Sec. 21B, 12 U.S.C. Sec. 1441b.
    \28\ Federal Home Loan Bank Act Sec. 21B(f), 12 U.S.C. 
Sec. 1441b(f).
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    This interpretation is supported by FICO' own post-FIRREA 
disclosure document in conjunction with the sale of its bonds, which 
does not mention RTC assets as a potential source of funds to pay 
interest. The disclosure states that ``the FDIC will transfer to FICO 
from the liquidating dividends and payments made on claims received by 
the FSLIC Resolution Fund (if any), the amount necessary for FICO to 
make interest payments, but only to the extent such funds are not 
required * * * by REFCORP.'' 29 When defining the FSLIC Resolution 
Fund, FICO disclosed the following information:

    \29\ FICO Information Statement dated September 19, 1989 at page 
4.
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    The FSLIC Resolution Fund was established by FIRREA and has 
assumed all the assets and liabilities of FSLIC as of the date of 
enactment of FIRREA except for those expressly transferred to or 
assumed by RTC. These assets and liabilities primarily relate to 
FSLIC's case resolution activity prior to 1989, while RTC is 
responsible for the management and resolution of all cases involving 
the appointment of a conservator or receiver for an Insured 
Institution after January 1, 1989 and prior to August 9, 1992. To 
meet its obligations, the FSLIC Resolution Fund may use its assets, 
returns from receiverships, amounts borrowed by FICO, and insurance 
assessments on SAIF-Insured Institutions to the extent that they are 
not required for interest on Obligations of FICO and not required by 
REFCORP for defeasance of REFCORP's obligations. FIRREA authorizes 
the future appropriation from the U.S. Treasury of funds needed by 
the FSLIC Resolution Fund to satisfy its obligations. The FSLIC 
Resolution Fund will be managed by the FDIC as a separate fund and 
will terminate when its debts are paid and its assets are 
sold.30
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    \30\ Id. at page 13.


[[Page 45973]]


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    FICO's disclosure document does not mention RTC assets transferred 
to FRF upon RTC dissolution as a source of funding for FICO.
    Additional indications that proceeds from FRF-RTC receiverships 
were never intended to be a source of funding for FICO are found in 
subsection section 21A(i) of the FHLB Act as added by the Resolution 
Trust Corporation Completion Act in 1993 when Congress provided the 
final appropriation authority to the RTC. This subsection provides in 
part that ``if the aggregate amount of funds transferred to the [RTC] 
pursuant to this subsection exceeds the amount needed [for RTC and 
certain SAIF purposes,] such excess amount shall be deposited in the 
general fund of the Treasury.''
    In the legislative history from the House Report showing the 
section-by-section analysis of section 21A(i) of the FHLB Act, Congress 
showed a clear intent that the money so provided be used for limited 
purposes. This report states as follows:

    Such funding can only be used to protect insured depositors or 
for the administrative expenses of the RTC. Shareholders of insured 
institutions in default may not benefit in any manner from such 
funding. In addition, any funds transferred to the RTC that are not 
needed for such purposes or for the Savings Association Insurance 
Fund (``SAIF'') must be deposited in the general fund of the 
Treasury.31

    \31\ P.L. 103-204, Resolution Trust Corporation Completion Act, 
H.R. REP. 103-103(I), H.R. Rep. No. 103(I), 103RD Cong., 1ST Sess. 
1993, 1993 U.S.C.C.A.N. 3040, 1993 WL 180206 (Leg. Hist.) in the 
Section-by-Section Analysis.
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Finally, we note that in preparation for the transition when the RTC 
would cease to be a separate entity, the RTC and FDIC prepared a 
memorandum dated October 12, 1995 to the Thrift Depositor Protection 
Oversight Board (Oversight Board) addressing the future funding needs 
of the FDIC when it would succeed to the RTC's responsibilities.32 
In this memorandum, the FDIC and the RTC recognized that Congress had 
limited the uses of the money appropriated to the RTC. When the 
Oversight Board acceded to the request of the FDIC and RTC by its 
Resolution dated and effective October 18, 1995, the Oversight Board 
inter alia relied on the representations of the FDIC and RTC that there 
would be ``separate accounting with respect to the former FSLIC and 
former RTC portions of the FRF, the results for both of which would be 
contained in the FDIC's public quarterly financial statements, 
commencing in 1996'' and that ``the FDIC intends to return to the 
Treasury on an ongoing basis cash receipts that are over and beyond 
cash that is needed for operating purposes or cash that might be needed 
in the future to complete remaining disposition responsibilities.'' 
Neither FDIC nor RTC identified any possibility that any of these funds 
could be subject to a claim by FICO for its interest payments. The 
Oversight Board acceded to the request of the FDIC and RTC and in its 
Resolution relied on these representations. The FDIC has acted and 
continues to act in accordance with these representations.
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    \32\ Memorandum entitled Revised Funding Request and 
Recommendations to Dietra L. Ford, Executive Director, Thrift 
Depositor Protection Oversight Board, from Barry S. Kolatch, Vice 
President for Planning, Research, and Statistics, RTC, and William 
A. Longbrake, Deputy to the Chairman for Finance and Chief Financial 
Officer, FDIC, dated October 12, 1995.
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    Therefore for all of the reasons stated above, proceeds from RTC 
receiverships are not available to pay FICO's obligations. 
Consequently, recoveries by RTC receiverships in the ``goodwill cases'' 
(none of which arise out of former FSLIC receiverships) would not be 
available to FICO.

FRF Monies Subject to FICO Call

    Next the meaning of the language, ``liquidating dividends and 
payments made on claims received by [FRF] * * * from receiverships,'' 
needs to be examined. This phrase on its face refers to the money that 
is distributed to the holders of claims against receiverships when the 
assets of the receiverships are sold, turned into cash proceeds and 
dividends are declared or payments are otherwise made to 
creditors.33 For the reasons discussed above, FICO will have 
access only to liquidating dividends paid by former FSLIC receiverships 
to FRF-FSLIC.
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    \33\ By statute since August 9, 1989, FRF has received funding 
from liquidating dividends and similar payments from receiverships. 
Section 215 of title II of FIRREA, 12 U.S.C. Sec. 1821a(b)(2). FRF 
is partially funded through liquidating dividends and such payments, 
except to the extent that these funds are required by REFCORP or 
FICO pursuant to sections 1441b or 1441, respectively. Neither 
REFCORP nor FICO have required this money during FRF's existence.
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    It might be argued that the phrase ``payments made on claims 
received by the [FRF] from receiverships'' should also include, e.g., 
proceeds from the sale of assets acquired by the FRF-FSLIC through 
corporate purchase under assistance agreements or other amounts 
recovered by the FRF-FSLIC in connection with assistance transactions, 
such as upon the disposition of a warrant position in an assisted 
entity. This argument is flawed because the FRF did not receive the 
assets or amounts in question from a receivership but from the assisted 
entity, often long after the time that the assisted transaction 
commenced (at the time of appointment of the receiver) and even after 
the receivership may have been terminated. Accordingly, it is our view 
that the phrase is meant to encompass only payments in the nature of 
liquidating dividends. Further, assets, such as stock warrants, that 
were owned by the FSLIC in its corporate capacity passed to the FRF, 
not any individual receivership, by operation of law under Section 11A. 
The proceeds from these assets will not be available to FICO because 
they do not derive from ``liquidating dividends and payments made on 
claims received by [FRF] * * * from receiverships.'' (emphasis added).

Current Payment Stream

    The Legal Division views the language of section 21(f)(3) of the 
FHLB Act as only referring at any given time to the current payment 
stream from receiverships as collected by the FRF-FSLIC 34 and 
does not require that all proceeds from receiverships be accumulated 
for the contingent claim of REFCORP and FICO whenever either might need 
this source of funding. Several reasons support this reading of the 
provision. First, the contingent nature of FICO's claim to this source 
of funding as contrasted with FRF's primary need for this source of 
money to pay the immediate and ongoing liabilities of the FSLIC is 
inconsistent with a Congressional intent that the payment stream be 
held or escrowed for the contingent future needs of FICO. The 
legislative history seems to show that Congress intended that FRF spend 
the receivership proceeds to pay the liabilities of FSLIC.35 
Second, FRF has lawfully spent money from this source since its 
inception and its financial results have been regularly reported to 
Congress and audited by General Accounting Office (GAO) without any 
questions being raised. The money received by FRF from this source has 
been spent to pay operating expenses,

[[Page 45974]]

assistance agreement liabilities, insured deposit claims, judgments, 
such amounts as were needed by SAIF for administrative and supervisory 
expenses from August 9, 1989 through September 30, 1992,36 and any 
other liabilities to which FRF succeeded. Third, FRF is intended to 
dissolve when its assets are sold and liabilities paid.37 FRF has 
no statutory requirement to continue to exist for speculative 
requirements of REFCORP or FICO. This factor seems to indicate that FRF 
had no duty to hold money for the requirements of REFCORP or FICO. 
Fourth, FRF is not directly liable for the FICO obligations, and the 
general assets of FRF are not available to FICO.38 Section 
21(f)(3) of the FHLB Act does not grant FICO a general claim to the 
assets of FRF.
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    \34\ Federal Home Loan Bank Act Sec. 21(f)(3), 12 U.S.C. 
Sec. 1441(f)(3).
    \35\ See discussion of FSLIC Resolution Fund:
    To meet its obligations, this Fund may use its assets, returns 
from receiverships, amounts borrowed by FICO, and insurance 
assessments on SAIF members through 1991 that are not required for 
interest on FICO bonds and not required by REFCORP for defeasance of 
its bonds. Any additional funds needed will be provided by the 
Treasury. The Fund will terminate when its debts are paid and its 
assets are sold. 135 Cong. Rec. H5172 (A&P), 101st Congress, First 
Session, Arnold & Porter Legislative History: P.L. 101-73 Debate; 
Congressional Record--House Proceedings and Debates of the 101st 
Congress, First Session, Conference Report on H.R. 1278 Financial 
Institutions Reform, Recovery, and Enforcement Act, 1989, August 4, 
1989; page 830.
    \36\ Federal Deposit Insurance Act Sec. 11A(a)(2)(B), 12 U.S.C. 
Sec. 1821a(a)(2)(B).
    \37\ Federal Deposit Insurance Act Sec. 11A(f), 12 U.S.C. 
Sec. 1821a(f).
    \38\ See Federal Home Loan Bank Act, Sec. 21(e)(6). 12 U.S.C. 
Sec. 1441(e)(6).
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    The time relevant to the analysis in this instance is the date 
FICO's assessment revenues become insufficient to cover interest 
payments, issuance costs and custodial fees. Therefore, FICO only has 
access to the future payment stream from liquidating dividends of 
former FSLIC receiverships beginning on the date that FICO's 
assessments become insufficient to cover interest payments, issuance 
costs, and custodial fees. Accordingly, liquidating dividends paid to 
the FRF before the ``shortfall date'' could not generally be reached by 
FICO.

Conclusion

    The determination of available funding sources for FICO cannot be 
made purely by reviewing the statutory provisions, rather the language 
must be interpreted in light of the entire statutory structure 
established to resolve the thrift crisis. The statutory scheme formed 
two separate entities--RTC and FRF. Later when the RTC terminated, two 
pools of assets and liabilities managed by the same entity remained--
FRF-FSLIC and FRF-FRTC. The results of the arrangement Congress created 
shows the Congressional intent to separate the RTC and the FRF-FSLIC. 
Congress could have used only one agency and one fund but chose not to 
do so. Accordingly, we conclude that only the FRF-FSLIC is available to 
FICO under section 21(f)(3) of the FHLB Act. In addition, the phrase 
``liquidating dividends and payments made on claims received by FRF'' 
includes only dividends paid to FRF from former FSLIC receiverships and 
not proceeds from the sale of assets acquired by FRF-FSLIC through 
corporate purchase or other amounts recovered by the FLSIC-FRF in 
connection with assistance transactions. Further, the quoted language 
only refers to the current payment stream from receiverships as 
collected by the FRF-FSLIC and there is no requirement to escrow those 
payments in anticipation of a need for them by FICO.

    By Order of the Board of Directors dated at Washington, D.C., 
this 21st day of August, 1996.

Federal Deposit Insurance Corporation
Jerry L. Langley,
Executive Secretary.
[FR Doc. 96-22213 Filed 8-29-96; 8:45 am]
BILLING CODE 6714-01-P