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not matter who invested the bond proceeds in the GIC's, so long
as someone (anyone) invested the bond proceeds in the GIC's:
While the Housing Authority did not directly purchase
the GIC's and, presumably, did not intend that the Bond
proceeds be used to purchase the GIC's, the GIC's were
in fact purchased with the proceeds of the Bonds and
committed to provide funds for the repayment of
principal and interest on the Bonds rather than for the
governmental purpose of constructing multifamily
housing. Thus, the GIC's fall within the statutory
definition of nonpurpose investments. [Id. at 29-30.]
Section 148(f)(6)(A) defines the term "nonpurpose
investment". The operative provision, however, is section
148(f)(2)(A), which provides that the rebatable excess of an
arbitrage bond is determined by starting with "the amount earned
on all nonpurpose investments". An important question, of
course, is: investment by whom? The majority's analysis
implicitly leads to the conclusion that, if A lends bond proceeds
to B, who lends them to C, who makes an investment of the bond
proceeds that, in A's hands, would be a nonpurpose investment,
the bonds issued by A can be arbitrage bonds under section
148(f). A's balance sheet, however, shows only B's obligation,
and the only investment made by A is in a loan to B. The
majority's analysis, in effect, attributes C's use of the bond
proceeds to A. Generally, unless there is some special
arrangement between the parties to a loan, we would not attribute
the actions of the borrower to the lender. If A lends money to
B, who, without any instruction from A, buys drugs with the
money, we do not attribute the drugs to A. A pertinent
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