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Legal Department
Atlanta
November 15, 1993

James H. Shelton
TX4-213-32-07/Houston

Regulation U - Lines of Credit



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I am enclosing for your information the following Board Interpretations and Opinion
Letters relating to the application of Regulation U to Lines of Credit:

1. Staff Opinion Letter dated December 5, 1974 (Paragraph 5-890.1).

2. Staff Opinion Letter dated August 16, 1983 (Paragraph 5-900.13).

3. Staff Opinion Letter dated December 2, 1987 (Paragraph 5-900.16).

4. Staff Opinion Letter dated February 29, 1988 (Paragraph 5-900.18).

5. Staff Opinion Letter dated November 9, 1983 (Paragraph 5-917.16).

To try to clarify what these opinion letters state, the Bank may treat a revolving line
of credit either as a single loan or as multiple loans. If the revolving credit is to be
treated as a single loan, all of the collateral would be pledged at the beginning,
providing a two-to-one coverage for the entire line of credit.

As an alternative, the Bank can treat the revolving line of credit as a series of loans
and would only need collateral sufficient to cover each disbursement. Each advance
under the line would require additional collateral having a maximum loan value
sufficient to cover such advance (calculated using the market value as of the time of
the draw).

A third alternative is a hybrid of the previous options. The customer could pledge
more collateral than needed for the first draw, but not enough to cover the entire
amount of the revolving credit. In this case, the Bank could lend the customer any
amount up to the maximum loan value of the collateral pledged (50 % of the market
value as of the commitment date), regardless of subsequent drops in collateral value.
If the customer wanted to borrow in excess of the maximum loan value of the
collateral held, the customer would be required to pledge additional collateral (valued
as of the date of the advance) to cover such advance.

BOA/FBI/LAY: 33927

BF001-00946

GOVERNMENT
EXHIBIT
  122
  Crim. No. H-04-25 (S-2)


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It might help if we go through a few examples (one assumption throughout examples
is that all collateral is margin stock):

1. All collateral pledged at the beginning of the loan.

Line of Credit: $1,000,000.00.
Market Value of Collateral pledged at establishment of Line:
$2,300,000-00.

The Borrower may request advances under the Line without any regard
to the market value of the collateral during the term of the Line.

2. Bank and Borrower treat each advance under the line of credit as a
series of loans.

Line of Credit amount: $1,000,000.00.
Market value of collateral pledged at establishment of line: 0.
Date Line of Credit is established: January 1, 1993.
Maturity date: January 1, 1994.

a. On January 15, 1993, the Customer requests an advance under
the Line in the amount of $200,000.00. The Bank must require
collateral having a market value of at least $400,000.00 (market
value to be determined at time of advance).

[200M x 2 = 400M]

b. On March 16, the Customer requests an additional advance of
$300,000.00. The outstanding principal balance after funding
the advance is $500,000.00. The market value of the existing
collateral on such date is $600,000.00. The Customer would be
required to pledge additional collateral with a market value of at
least $400,000.00 in order to obtain the $300,000.00 advance.

[500M x 2 = 1MM. 1MM - 600M = 400M]
[300M x 2 = 600M]
Lesser of 2 calculations: 400M

c. On April 15, the Customer requests an additional advance of
$200,000.00. The outstanding principal balance after funding
the advance is $700,000.00. The aggregate market value of all
collateral is $1,500,000.00. The Customer would not be
required to provide additional collateral.

BOA/FBI/LAY: 33928

BF001-00947


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[700M x 2 = 1.400M. 1.400M - 1.500M = N/A]
[200M x 2 = 400M]
Lesser of 2 calculations: N/A

d. On July 7, the Customer requests an additional advance of
$100,000.00. The outstanding principal balance after funding
the advance is $800,000.00. The aggregate market value of all
collateral on such date is $1,300,000.00. The Customer would
be required to provide additional collateral with a market value
of at least $200,000.00 to obtain the advance of $100,000.00.

[800M x 2 = 1.600M. 1.600M. 1.600M - 1.300M = 300M.]
[100M x 2 = 200M]
Lesser of 2 calculations: 200M

(The Customer would only be required to provide sufficient
collateral to maintain a two-to-one margin against the advance.)

3. Partial pledge of collateral at the beginning of the loan.

Line of Credit: $1,000,000.00.
Market value of collateral pledged at establishment of line:
$600,000.00.
Date Line of Credit is established: January 1, 1993.
Maturity Date: January 1, 1994.

  (Note: The Customer could borrow up to $300,000.00 at any time
during the term of the loan without a requirement of additional
collateral being pledged.)

a. On February 1, the Customer requests an advance under the line
in the amount of $100,000.00. The Customer would not be
required to provide additional collateral for the advance.

  [100M x 2 = 200M. 200M - 600M = N/A]

b. On March 18, the Customer requests an additional advance of
$150,000.00. The outstanding principal balance after funding
the advance is $250,000.00. The Customer would not be
required to provide additional collateral for such advance.

[250.M x 2 = 500M. 500M - 600M = N/A]

BOA/FBI/LAY: 33929


BF001-00948


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c. On April 20, the Customer. requests an additional advance of
$200,000.00. The outstanding principal balance after funding of
the advance is $450,000.00. The aggregate market value of all
collateral is $500,000.00. The Customer would be required to
provide additional collateral with a market value of at least
$300,000.00.

[450M x 2 = 900M. 900M - 500M = 400M.]
[200M x 2 = 400M. 400M - 100M = 300M. Note: 100M of
the original collateral is available to apply towards this
advance.]

If you have any further questions `egarding Regulation U or if you would like to
discuss any of theses examples i> greater detail, please do not hesitate to contact me.

  ?wa-(~
Linda M. Zimmerman
GA 1-006-05-10/(404)6

Enclosures

LMZ:sb

BOA/FBI/LAY: 33930

.BF001-00949