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B-194153 1 (1981-05-13)

handle is hein.gao/gaobadjjv0001 and id is 1 raw text is: ~THE CDOJiFTROLLER GENERAL OECISICN OF THE UNITED 9TATEs WASHINGTON. D.C. 20548 N~ITS~ FILE: B-194153 DATE: May 13, 1981 MATTER OF: Split-interest rates on guaranteed and non-guaranteed portions of loan 1G E S T: onomic Development Administrat ion (E) h authority to allow guaranteed loans to be represented by two notes with fully guaranteed note--representing 90 percent of loan amount-having a lower interest rate than unguaranteed note--representing remain- ing 10 percent of loan. Notwithstanding statements to contrary in B-194153, Septem- ber 6, 1979, in which we said two note procedure could only be used if substantive terms of notes, including maturity dates and interest rates, were same, EDA is not prohib- ited from using split interest rates orovided other substantive terms remain same. This decision to the Administrator of the Economic Development Administration (EDA), an agency within the Department of Commerce, is in response to a request from its former General Counsel that we reconsider a statement we made in an opinion, B-194153, September 6, 1979, to Senator Charles H. Percy concerning the establishment of a then proposed pilot program designed to bring new industrial development projects to several depressed areas in the City of Chicago. One of the issues we considered in that case was whether EDA's statutory authority under 42 U.S.C. § 3142 (1976) to guarantee loans to private borrowers by private lending institutions would allow EDA to implement a program whereby EDA would guarantee loans made by coiwmercial banks with the guaranteed portions of those loans to be subsequently assigned to the City of Chicago, which would finance their purchase with funds raised through the public credit markets. We held that, since the City of Chicago is not private, is not a lending institution and could not have qualified for a quarantee initially, the proposed program, which would require EDA to guaran- tee'notes held by the City, would allow EDA to do indirectly that which it could not do directly, and would therefore exceed its statu- tory authority. EDA is-not now questioning the ultimate conclusion we reached in that opinion. However, one issue we also considered was whether an EDA guaranteed loan could legally be evidenced by two notes--with one

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