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<br />approved for collateral: <br /> <br />c. United States Treasury notes, bills or bonds or obligations fully and <br />unconditionally guaranteed as to principal and interest by the full faith <br />and credit of the United States, with a stated maturity of two years or <br />less; <br />d. Obligations of the Federal Home Loan Bank, Federal Home Loan <br />Mortgage Corporation or Federal National Mortgage Association, with <br />a stated maturity of two years or less; <br />e. Obligations of the State of Texas that are fully and unconditionally <br />guaranteed as to principal and interest by the full faith and credit of the <br />State of Texas, with a stated maturity of two years or less; and <br />f. FDIC and FSLlC insurance coverage. <br /> <br />The City will not allow Government National Mortgage Association securities or any other <br />asset backed/pooled type securities as collateral. All collateral shall be subject to inspection <br />and audit by the City or the City's independent auditors. The use of a surety bond will not <br />be considered by the City to meet the required collateral requirements. <br /> <br />Required level of Collateral for the City <br /> <br />2.2.6 Ensure that all accounts are secured by pledged collateral with a market value equal <br />to no less than 103 percent of the principal plus accrued interest less an amount insured <br />by the FDIC. Norwest will mark the securities comprising the pledge to market value on the <br />last day of each month. The securities so pledged, the amounts thereon, and the time for <br />pledging same will satisfy the requirements of the Texas Collateral for Public Funds Act, <br />contained in Chapter 2257 of the Texas Government Code. <br /> <br />Collateral Substitution: <br /> <br />2.2.7 Substitute approved securities in the pledge account, with the City's prior approval, <br />so long as the total value of securities pledged meets the required levels. These <br />substitutions may be made by Norwest after obtaining written authorization from the City. <br />Norwest may also request permission to release securities whenever the total amount <br />pledged is in excess of the City requirements. <br />Custodian of Collateral: <br /> <br />2.2.8 Ensure that securities pledged as collateral will be retained by a third party custodian <br />that is a subscriber to the Federal Security Wire and held in joint safekeeping for Norwest <br />and the City. The custodian must be approved by the City and be: <br /> <br />a. a state or national bank domiciled in Texas, <br />b. a federal home loan bank, or <br />c. a Federal Reserve Bank or branch of a Federal Reserve Bank. <br /> <br />8 <br />