Resolution 2002-01

Resolution 2002-01
of the Meeting of the Board of Directors of
the Federal Financing Bank
September 12, 2002

FEDERAL FINANCING BANK
WASHINGTON, D.C. 20220

RESOLUTION OF THE BOARD OF DIRECTORS

          WHEREAS, the Federal Financing Bank Lending Policy adopted by the Board of Directors by resolution dated June 10, 1975, as modified by the Board of Directors by resolutions dated November 14, 1975 and February 14, 1996, is currently in effect (the "Bank Lending Policy"); and

          WHEREAS, the Bank Lending Policy currently provides, in part, that it is the policy of the Bank to charge a rate 1/8% above the new issue curve of marketable U.S. Treasury securities; and

          WHEREAS, current Bank management proposes modification of the Bank Lending Policy to allow the Bank to lend at interest rates that capture the liquidity premium between Treasury securities and the private sector lending rate, and to charge a rate that fully reflects the risk inherent in a borrower or transaction when such a rate will accomplish a broader public policy goal; and

          WHEREAS, modification of the Bank Lending Policy as proposed should eliminate the corporate subsidy provided to private sector banks that earn the spread between the interest rate on their cost of funds and the interest rate on a 100% Federally guaranteed loan, and should also reduce the cost to the Government of the loan guarantee through the collection of the interest rate spread between Treasury securities and the interest rate on a loan;

          WHEREAS, the proposed modification of the Bank Lending Policy has been presented at this meeting of the Board of Directors for consideration;

          NOW THEREFORE, BE IT RESOLVED, that the modification of the Bank Lending Policy which has been presented to the Board of Directors is hereby adopted and the Bank Lending Policy is revised in its entirety to read as provided in the document attached.

BOARD-RESOLUTION NO. 2002 - 01