Opinion AGO 99-02.

• Case Date: February 09, 1999
• Court: Georgia

Georgia Attorney General Opinions 1999. Opinion AGO 99-02. February 9, 1999OFFICIAL OPINION 1999-2To: Director Office of Treasury and Fiscal ServicesRe: Standby letters of credit issued by a Federal Home Loan Bank do not meet the statutory criteria for collateral for deposits of public funds.You have asked whether Federal Home Loan Bank letters of credit are acceptable collateral for public deposits under O.C.G.A. § 50-17-59. You have indicated that any such letter of credit would be issued by the Federal Home Loan Bank of Atlanta using the form attached as Appendix I hereto. Federal Home Loan Banks are privately capitalized, cooperative, government-sponsored enterprises that were created by Congress in 1932. The Federal Home Loan Bank system consists of twelve regional Federal Home Loan Banks. The mission of the Federal Home Loan Banks is to support residential mortgage lending by their member-stockholders. Eligible members include commercial banks, savings institutions, credit unions, and insurance companies. Code Section 50-17-59 governs the deposit of funds of the State of Georgia in financial institutions that have been named as depositories for such public funds by the State Depository Board. Under Subsection (a) of Code Section 50-17-59, the director of the Office of Treasury and Fiscal Services (the "Director") cannot have on deposit at any one time in any of the depositories for a time longer than ten days a sum of money belonging to the state under a contract with the depository providing for the payment of interest by a depository which has not given a bond to the state in the amount as determined by the [State Depository] board. O.C.G.A. § 50-17-59(a). In lieu of the required bond, a depository may deposit with the Director certain enumerated securities to secure state funds on deposit at the depository. Among those enumerated as acceptable collateral are: [b]onds, bills, certificates of indebtedness, notes, or other obligations of a subsidiary corporation of the United States government, which are fully guaranteed by the United States government both as to principal and interest, or debt obligations issued by or securities guaranteed by the Federal Land Bank, the Federal Home Loan Bank, the Federal Intermediate Credit Bank, the Central Bank for Cooperatives, the Farm Credit Banks, the Federal Home Loan Mortgage Corporation, or the Federal National Mortgage Association. O.C.G.A. § 50-17-59(a)(5) (emphasis added). Thus, framed in statutory terms, you have asked whether a letter of credit issued by the Federal Home Loan Bank is a "debt obligation" issued by or a "security guaranteed" by the Federal Home Loan Bank. The answer to your question has to do with the nature of a letter of credit. Letters of credit, being contracts, are subject to the same general principles applicable to other written contracts. First Nat'l Bank v. Wynne, 149 Ga. App. 811 (1979). That is, letters of credit are contractual obligations. Under Georgia law, "[e]very debt is an obligation but not every obligation is a debt for the collection of which a suit may be maintained." Chavala Cooperative, Inc. v. Hortman, 93 Ga. App. 505, 505 (1956). A "debt" has been defined to be a sum of money due by a certain and...