Are Obligations Guaranteed by the FDIC Permitted Indenture or Legal Investments?
Public Finance Update December 12, 2008 As eligible entities follow the lead of Goldman Sachs, JPMorgan and Morgan Stanley and issue debt guaranteed by the FDIC under its Debt Guarantee Program, one of the issues that arises is whether such guaranteed debt obligations would constitute securities eligible for deposit with a Trustee or other representative of holders of debt securities for purposes of defeasance provisions in indentures or similar instruments or would constitute other permitted indenture investments or permitted investments for purposes of laws regulating the investment of public funds by States (including territories and possessions) and their cities, counties, towns and other political subdivisions and instrumentalities (“municipalities”). The discussion below highlights, in general terms, the subsidiary issues that may be relevant for consideration in reaching a conclusion on that interpretive issue.
