# 12 CFR § 250.142: Meaning of “obligor or maker” in determining limitation on securities investments by member State banks > Federal · Regulations · In force URL: https://www.frixlaw.com/law-library/statutes/ecfr-12-250.142 ## Section - **Citation:** 12 CFR § 250.142 - **Heading:** Meaning of “obligor or maker” in determining limitation on securities investments by member State banks - **Jurisdiction:** Federal - **Kind:** Regulations - **Status:** In force - **Text as of:** September 22, 2026 - **Source:** Publisher's official text - **Location:** Title 12—Banks and Banking > CHAPTER II—FEDERAL RESERVE SYSTEM > SUBCHAPTER A—BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM > PART 250—MISCELLANEOUS INTERPRETATIONS > Interpretations ## Text (a) From time to time the New York State Dormitory Authority offers issues of bonds with respect to each of which a different educational institution enters into an agreement to make rental payments to the Authority sufficient to cover interest and principal thereon when due. The Board of Governors of the Federal Reserve System has been asked whether a member State bank may invest up to 10 percent of its capital and surplus in each such issue. (b) Paragraph Seventh of section 5136 of the U.S. Revised Statutes (12 U.S.C. 24) provides that “In no event shall the total amount of the investment securities of any one obligor or maker, held by [a national bank] for its own account, exceed at any time 10 per centum of its capital stock * * * and surplus fund”. That limitation is made applicable to member State banks by the 20th paragraph of section 9 of the Federal Reserve Act (12 U.S.C. 335). (c) The Board considers that, within the meaning of these provisions of law, obligor does not include any person that acts solely as a conduit for transmission of funds received from another source, irrespective of a promise by such person to pay principal or interest on the obligation. While an obligor does not cease to be such merely because a third person has agreed to pay the obligor amounts sufficient to cover principal and interest on the obligations when due, a person that promises to pay an obligation, but as a practical matter has no resources with which to assume payment of the obligation except the amounts received from such third person, is not an obligor within the meaning of section 5136. (d) Review of the New York Dormitory Authority Act (N.Y. Public Authorities Law sections 1675-1690), the Authority's interpretation thereof, and materials with respect to the Authority's “Revenue Bonds, Mills College of Education Issue, Series A” indicates that the Authority is not an obligor on those and similar bonds. Although the Authority promises to make all payments of principal and interest, a bank that invests in such bonds cannot be reasonably considered as doing so in reliance on the promise and responsibility of the Authority. Despite the Authority's obligation to make payments on the bonds, if the particular college fails to perform its agreement to make rental payments to the Authority sufficient to cover all payments of bond principal and interest when due, as a practical matter the sole source of funds for payments to the bondholder is the particular college. The Authority has general borrowing power but no resources from which to assure repayment of any borrowing except from the particular colleges, and rentals received from one college may not be used to service bonds issued for another. (e) Accordingly, the Board has concluded that each college for which the Authority issues obligations is the sole obligor thereon. A member State bank may therefore invest an amount up to 10 percent of its capital and surplus in the bonds of a particular college that are eligible investments under the Investment Securities Regulation of the Comptroller of the Currency (12 CFR Part 1), whether issued directly or indirectly through the Dormitory Authority. (12 U.S.C. 24, 335) ## Nearby sections - [12 CFR § 250.141 § 250.141 Member bank purchase of stock of “operations subsidiaries.”](https://www.frixlaw.com/law-library/statutes/ecfr-12-250.141.md) - [12 CFR § 250.142 § 250.142 Meaning of “obligor or maker” in determining limitation on securities investments by member State banks.](https://www.frixlaw.com/law-library/statutes/ecfr-12-250.142.md) - [12 CFR § 250.143 § 250.143 Member bank purchase of stock of foreign operations subsidiaries.](https://www.frixlaw.com/law-library/statutes/ecfr-12-250.143.md) - [12 CFR § 250.160 § 250.160 Federal funds transactions.](https://www.frixlaw.com/law-library/statutes/ecfr-12-250.160.md) - [12 CFR § 250.163 § 250.163 Inapplicability of amount limitations to “ineligible acceptances.”](https://www.frixlaw.com/law-library/statutes/ecfr-12-250.163.md) - [12 CFR § 250.164 § 250.164 Bankers' acceptances.](https://www.frixlaw.com/law-library/statutes/ecfr-12-250.164.md) - [12 CFR § 250.165 § 250.165 Bankers' acceptances: definition of participations.](https://www.frixlaw.com/law-library/statutes/ecfr-12-250.165.md) - [12 CFR § 250.166 § 250.166 Treatment of mandatory convertible debt and subordinated notes of state member banks and bank holding companies as “capital”.](https://www.frixlaw.com/law-library/statutes/ecfr-12-250.166.md) - [12 CFR § 250.180 § 250.180 Reports of changes in control of management.](https://www.frixlaw.com/law-library/statutes/ecfr-12-250.180.md) - [12 CFR § 250.181 § 250.181 Reports of change in control of bank management incident to a merger.](https://www.frixlaw.com/law-library/statutes/ecfr-12-250.181.md) - [12 CFR § 250.182 § 250.182 Terms defining competitive effects of proposed mergers.](https://www.frixlaw.com/law-library/statutes/ecfr-12-250.182.md) - [12 CFR § 250.200 § 250.200 Investment in bank premises by holding company banks.](https://www.frixlaw.com/law-library/statutes/ecfr-12-250.200.md) - [12 CFR § 250.220 § 250.220 Whether member bank acting as trustee is prohibited by section 20 of the Banking Act of 1933 from acquiring majority of shares of mutual fund.](https://www.frixlaw.com/law-library/statutes/ecfr-12-250.220.md) - [12 CFR § 250.221 § 250.221 Issuance and sale of short-term debt obligations by bank holding companies.](https://www.frixlaw.com/law-library/statutes/ecfr-12-250.221.md) --- Source: Frix Law Library, https://www.frixlaw.com/law-library/statutes/ecfr-12-250.142. Check the current official text before relying on it. Not legal advice.