A-28550, SEPTEMBER 14, 1929, 9 COMP. GEN. 120

A-28550: Sep 14, 1929

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PROVIDING FOR INTEREST CHARGEABLE ON LOANS TO COOPERATIVE ASSOCIATIONS AND STABILIZATION CORPORATIONS AND ADVANCES FOR INSURANCE PURPOSES AT RATES "EQUAL TO THE LOWEST RATE OF YIELD OF ANY GOVERNMENT OBLIGATION * * * OUTSTANDING AT THE TIME THE LOAN AGREEMENT IS ENTERED INTO OR THE ADVANCE IS MADE BY THE BOARD. THE CONTROLLING DATE AS TO THE RATE OF INTEREST APPLICABLE IS THE DATE THE LOAN AGREEMENT WAS ENTERED INTO. AS FOLLOWS: A QUESTION WHICH WILL SOON ARISE IN CONNECTION WITH LOANS FROM THE REVOLVING FUND AUTHORIZED BY THE AGRICULTURAL MARKETING ACT RELATES TO THE DAY OR DAYS FROM WHICH THE INTEREST UPON SUCH LOANS SHALL BE COMPUTED. OUTSTANDING AT THE TIME THE LOAN AGREEMENT IS ENTERED INTO OR THE ADVANCE IS MADE BY THE BOARD.

A-28550, SEPTEMBER 14, 1929, 9 COMP. GEN. 120

PUBLIC FUNDS - INTEREST ON LOANS - FEDERAL FARM BOARD UNDER THE PROVISIONS OF SECTION 8 OF THE AGRICULTURAL MARKETING ACT OF JUNE 15, 1929, 46 STAT. 11, PROVIDING FOR INTEREST CHARGEABLE ON LOANS TO COOPERATIVE ASSOCIATIONS AND STABILIZATION CORPORATIONS AND ADVANCES FOR INSURANCE PURPOSES AT RATES "EQUAL TO THE LOWEST RATE OF YIELD OF ANY GOVERNMENT OBLIGATION * * * OUTSTANDING AT THE TIME THE LOAN AGREEMENT IS ENTERED INTO OR THE ADVANCE IS MADE BY THE BOARD," THE WORD "ADVANCE" RELATES TO ADVANCES FOR INSURANCE PURPOSES AND NOT TO LOAN ADVANCES, AND IN SO FAR AS IT CONCERNS LOANS, AS DISTINGUISHED FROM ADVANCES FOR INSURANCE PURPOSES, THE CONTROLLING DATE AS TO THE RATE OF INTEREST APPLICABLE IS THE DATE THE LOAN AGREEMENT WAS ENTERED INTO.

COMPTROLLER GENERAL MCCARL TO THE CHAIRMAN OF THE FEDERAL FARM BOARD, SEPTEMBER 14, 1929:

THERE HAS BEEN RECEIVED A LETTER DATED AUGUST 27, 1929, FROM THE HON. C. C. TEAGUE, A MEMBER OF YOUR BOARD, AS FOLLOWS:

A QUESTION WHICH WILL SOON ARISE IN CONNECTION WITH LOANS FROM THE REVOLVING FUND AUTHORIZED BY THE AGRICULTURAL MARKETING ACT RELATES TO THE DAY OR DAYS FROM WHICH THE INTEREST UPON SUCH LOANS SHALL BE COMPUTED. FOR EXAMPLE, ON A GIVEN DATE THE BOARD MAY EXPRESS ITS WILLINGNESS TO APPROVE A LOAN, CONTINGENT UPON SATISFACTORY COMPLIANCE WITH CERTAIN STIPULATIONS, A PART OF WHICH LOAN MAY BE ADVANCED 30 OR 60 DAYS AFTER APPROVAL, AND THE REMAINDER ON A SUBSEQUENT DAY OR DAYS.

SEC. 8 (A) OF THE ACT PROVIDES:

"LOANS TO ANY COOPERATIVE ASSOCIATION OR STABILIZATION CORPORATION AND ADVANCES FOR INSURANCE PURPOSES SHALL BEAR INTEREST AT A RATE OF INTEREST PER ANNUM EQUAL TO THE LOWEST RATE OF YIELD (TO THE NEAREST ONE-EIGHTH OF 1 PERCENTUM) OF ANY GOVERNMENT OBLIGATION BEARING A DATE OF ISSUE SUBSEQUENT TO APRIL 6, 1917 (EXCEPT POSTAL-SAVING BONDS), AND OUTSTANDING AT THE TIME THE LOAN AGREEMENT IS ENTERED INTO OR THE ADVANCE IS MADE BY THE BOARD, AS CERTIFIED BY THE SECRETARY OF THE TREASURY TO THE BOARD UPON ITS REQUEST: PROVIDED, THAT IN NO CASE SHALL THE RATE EXCEED 4 PERCENTUM PER ANNUM ON THE UNPAID PRINCIPAL.'

IN THE ABSENCE OF THE CHAIRMAN OF THE FEDERAL FARM BOARD, I SHOULD LIKE TO REQUEST THAT YOU ADVISE THE BOARD WHAT DAY OR DAYS IN CASES AS ABOVE OUTLINED SHALL DETERMINE THE RATE OR RATES OF INTEREST TO BE CHARGED ON SUCH LOANS.

THE PROVISION OF LAW QUOTED IN THIS LETTER DEALS WITH TWO SEPARATE MATTERS, AS SET FORTH THEREIN: (1) LOANS TO COOPERATIVE ASSOCIATIONS OR STABILIZATION CORPORATIONS AS PROVIDED IN SECTIONS 7 AND 9 OF THE AGRICULTURAL MARKETING ACT OF JUNE 15, 1929, 46 STAT. 11, AND (2) ADVANCES FOR INSURANCE PURPOSES AS PROVIDED BY SECTION 11 OF THE SAME ACT. THE SECTION QUOTED PROVIDES AS TO INTEREST THAT IT SHALL BE "EQUAL TO THE LOWEST RATE OF YIELD * * * OF ANY GOVERNMENT OBLIGATION * * * OUTSTANDING" --- IN THE CASE OF LOANS--- "AT THE TIME THE LOAN AGREEMENT IS ENTERED INTO" AND--- IN CASE OF ADVANCES FOR INSURANCE PURPOSES--- AT THE TIME "THE ADVANCE IS MADE BY THE BOARD.'

IT WOULD THUS APPEAR THAT IN SO FAR AS CONCERNS LOANS AS DISTINGUISHED FROM ADVANCES FOR INSURANCE PURPOSES, THE CONTROLLING DATE AS TO THE RATE OF INTEREST APPLICABLE IS THE DATE THE LOAN AGREEMENT IS ENTERED INTO, REGARDLESS OF THE FACT THAT PORTIONS OF THE LOAN MAY BE ADVANCED AT GIVEN DATES THEREAFTER. THE DATES UPON WHICH SUCH ADVANCES UPON THE LOAN ARE MADE HAVE NO BEARING UNDER THE LAW UPON THE RATE OF INTEREST APPLICABLE, AS THE WORD "ADVANCE" IN THE SECTION QUOTED RELATES NOT TO LOAN ADVANCES BUT TO THE ADVANCES FROM THE REVOLVING FUND FOR INSURANCE PURPOSES.