Rev. Rul. 57-509

Certificates of interest issued by the Commodity Credit Corporation held by commercial banks are considered to be 100 percent Government guaranteed loans for the purposes of paragraph 4 of Mimeograph 6209, C.B. 1947-2, 26, and, accordingly, should be entirely eliminated by such banks from their prior years accounts in computing percentages of their past bad debt losses, and also from their current year loans in computing allowable deductions for additions to their reserves for bad debts, under that Mimeograph. In Revenue Ruling 57-210, C.B. 1957-1, 94, it was held, inter alia , that the term `Government insured loans,' as used in paragraph 4 of Mimeograph 6209, supra , applies to all Government insured or guaranteed loans to the extent or percent insured or guaranteed. Although the instant certificates are interest-bearing and transferable (in accordance with their terms) and were `issued' by the Federal Reserve Bank of Chicago as Fiscal Agent for the Commodity Credit Corporation, they were expressly `issued to evidence participation in' and the holder's `interest in a pool of outstanding loans made pursuant to commodity loan programs' of the Corporation, in respect of which loans the borrowers who obtained them are the debtors. Also, the certificates are not obligations of, nor guaranteed by, the United States so as to be public debt securities. However, under their terms, the Commodity Credit Corporation is committed to `purchase' them at their full outstanding principal amount, plus accrued interest, at their maturity, or upon demand at any time except during the nine-day period preceding their maturity date. Thus, full payment of the certificates is, in effect, guaranteed by that Corporation. The authorized capital stock of the Corporation is all held by the United States. The corporation is managed by a Board of Directors, subject to the general supervision and direction of the Secretary of Agriculture, who is, ex officio, a Director and its Board Chairman. It is presently authorized to issue, and have outstanding at any time, bonds, notes, debentures, and other similar obligations, in an aggregate amount not exceeding $14,500,000,000. It is required to reserve a sufficient amount of its authorized borrowing power to enable it, with other funds available to it, to purchase, in accordance with its contracts with lending agencies, notes or other obligations evidencing loans made by them under its program, including outstanding certificates of interest such as those here considered.