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B-202453 1 (1982-07-13)

handle is hein.gao/gaobadkmm0001 and id is 1 raw text is: OtECIBION THI COMPTROLLER GE.NP RA I fl CPS TH UNITED TATUE WASHINGTONe 0.0. 90548 FILL: fD-202453 DATEr July 13, 1982 MATThR C DIGEBT: DF: Private Borrower-Private Lender Requirement in Public Works and Economic Dew.lopment Act of 1965 Economic Development Administration (EDA) does not ha. cuthurity to implement proposal whereby public lenders wLld be permitted to purchase guaranteed portion of loans made by private lending institutions to private borrowers under 42 U.S.C S 3142. Whether purchase of the guaranteed note by the public lender is necessarily conterplated when loan guarantee is initially approved or occurs in the ordinary course of unrestricted second- ary market trading, such purchase would violate statu- tory requirement that EDA can only guarantee loans made by private lending institutions. B-194153, Septeber 6, 1979, is expended and affirmed. This decision is in response to a request from Mr. Alfred Meisner-the former Acting General Counsel of the United States Department of Cornwrce--on behalf of the Economic Development Administration (MPA), for our legal opinion concerning the scope of the private borrower-private lender requirement set forth in section 202 of the Public Works and Economic Development Act of 1965, as amnded, 42 U.S.C. S 3142. As explained in EDA's letter, EDA has authority under 42 U.S.C. 5S3142(a) to guarantee up to 90 percent of guaranteed loans made to private borraders by private lending Institutions for the purpose of fostering ecornomic developrent in economically depressed areas. EDA is presently considering a proposal to allow the sale of the guaranteed portion of these loana in the secondary money market. As stated in EDA's letter, once the guaranteed note Is sold Li the secondary market, the purchas.r becomes the actual if not the direct source of funds for the underlying loan trams- action, in effect, the lender. If secondary macket sales are not restricted, it is possible, If not likely, that the purchasers of the guaranteed note would not always be a private lending institu- tion that could have qualified for a guarantee initially. The specific question presented to us is whether the private lender requirement of the statute extends to subsequent parties to the loan transaction, such as secondary market purchasers. For the reason' set forth hereafter, we believe that question must be answered affirmatively. ~ 8 e 'PP*W CtrWSOttV n tniq *,e .495 wUr * ..... -. - SW rb e.-... - ~'. Y ~s4fte~~.mpwIq7 7* ~ ~q -AMP -W-ft 0-

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