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UNITED STATES GENERAL ACCOUNTING OFFICE
WASHINGTON, D.C. 20548
OFFICE OF GENERAL COUNsEL
B-181432
Si .. .I 5 17
Mr, Francis X. Reed, President r
Manufacturers Hanover Trust Company VC
P. 0, Box 75
Latham, New York 12110
Dear Mr. Reed;
This is in response to your letter concerning a loan guaranteed by
*the Smnll Business Administration (SBA) that your bank--Manufactureu.. IWLGtofo
Hanover Trust Companyr-made to the Ideal Steel Corporation, Aipparerntly,
SBA refused your request for it to purchase the guaranteed portion of
this loan on the basis of our decision, B-181432, March 13, 1975, be-
cause the Bank had not paid the required guarantee fee prior to default
by the borrower.
Your letter requests our Office to re-examine this matter, bearing
in mind the mutually satisfactory relationship that has long existed be-
tween Manufacturers Hanover and the U. 8 Small Business Administratioa,
Elsewhere in your letter you indicate that you have requested our Office
to reconsider this matter because of our recent denial of your requent
to $BA for it to purchase the guaranteed portion of the loan,
We believe that you are under a misapprehension. Although SBA'n
refusal to purchase the loan was presumably based on our decision of
March 13, 1975, in which we held that SBA could notpurchase the guaran-
teed portion of a loan if the required guarantee fee had not been paid
before the borrower defaulted, our Office was never asked by SBA, or
anyone else to rule on the propriety of SBA's purchasing the specific
loan your bank made to the Tdeal Steel Corporation and we have absolutely
no knowledge of the facts Ih this case. The approval or disapproval of
a specific purchase requeW 'in, in the first instnnce, always a matter
for decision by SBA, the ddministrative agency charged with responsibility
for this program. Ordinarily, we become involved only when SBA is uncertain
how to proceed in a particular situation and requests our opinion on the
legality of a propooed course of action.
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