§347b Advances to Individual Member Banks on Time or Demand Notes; Maturities; Time Notes Secured by Mortgage Loans Covering One-to-four Family Residences

Summary

Federal Reserve banks may make short-term loans to member banks on time or demand notes that mature in not more than four months, if the loan is secured to the Reserve bank’s satisfaction. They may also lend on time notes of maturities the Board allows when those notes are backed by mortgage loans on one-to-four family homes. The interest charged must equal the lowest discount rate the local Federal Reserve bank has in effect on the date of the note. If a bank is undercapitalized, loans under this rule generally cannot be outstanding for more than 60 days in any 120-day period. That 60-day period can be extended in 60-day increments if the head of the appropriate federal banking agency or the Board’s Chairman certifies in writing in advance that the bank is viable. That certification power cannot be delegated. The Board may elect to treat an institution as critically undercapitalized and apply special rules. If a bank becomes critically undercapitalized, loans outstanding or made after a 5-day window may create limited Board liability to the FDIC if the Deposit Insurance Fund suffers excess loss; that liability is capped and the Board must pay the FDIC and report to Congress within 6 months. A Federal Reserve bank is not required to make or extend any advance. Definitions (one line each): “appropriate Federal banking agency” — same as in section 1813 of this title; “critically undercapitalized” — same as in section 1831o of this title; “depository institution” — same as in section 1813 of this title; “undercapitalized depository institution” — either undercapitalized as in section 1831o or has a CAMEL rating of 5; “viable” — Board or agency finds it not critically undercapitalized, not likely to become so, and not likely to be placed in conservatorship or receivership.