situation: Bank receives application from husband, who wants to open a small business. Bank receives all financial information, including joint tax returns, and submits this information to a gov't agency (who will guarantee the loan). Government agency requires bank to get wife to sign as a guarantor, as a requirement to close the loan. Her income does contribute to meeting household obligations, but is not necessary in meeting this note obligation.
Question: can gov't agency require this guarantee? Does reg B require to gov't secured loans?

Classic example of left hand not knowing what right hand is doing. Short answer - you CANNOT violate Reg B just because a government agency tells you to.

Call your regulator on this one and tell them what the government agency is trying to do. Get the name of the person you spoke with at your regalatory agency, and then call the government agency and tell them what your regulator says - quoting the sections of Reg B, etc. If necessary, you may need to go to the next higher office of the agency.

And yes - we got stung by the requirement of a government agency's required guaranty. And yes - it's a violation. And no - you can't hide behind the requirement of the government agency.

I remember reading that the ECOA does not apply to government lending - like the SBA. For instance, the SBA asks for race and sex info on all loans - yet this would be prohibited on all but home loans. I think the idea is "Why would the government discriminate against the people is was designed to represent?"

Does anyone know the source of this? Maybe I'm just dreaming.

Government agencies periodically stray afoul of Regulation B (although there are some occasions when they can violate it, such as requirements in program legislation for spousal signatures.) The best thing to do is to call the FRB in Washington (202-452-3667) and tell them about the problem. As a former FRB-er, I can tell you that they will contact the agency and tell them to stop the practice. It is also a good idea to tell your own regulator as well -- to protect yourself.