required of them. And the Secretary of the Treasury shall require of the Federal land banks and joint stock land banks thus designated satisfactory security, by the deposit of United States bonds or otherwise, for the safekeeping and prompt payment of the public money deposited with them, and for the faithful performance of their duties as financial agents of the Government. No Government funds deposited under the provisions of this section shall be invested in mortgage loans or farm loan bonds. (July 17, 1916, sec. 6, 39 Stat. 365; 12 U. S. C., sec. 701.)

638-43. National farm-loan associations; organization; articles of association; signature; copies for land banks.-That corporations, to be known as national farm loan associations, may be organized by persons desiring to borrow money on farm mortgage security under the terms of this Act. Such persons shall enter into articles of association which shall specify in general terms the object for which the association is formed and the territory within which its operations are to be carried on, and which may contain any other provision, not inconsistent with law, which the association may see fit to adopt for the regulation of its business and the conduct of its affairs. Said articles shall be signed by the persons uniting to form the association, and a copy thereof shall be forwarded to the Federal land bank for the district, to be filed and preserved in its office. (July 17, 1916, sec. 7, 39 Stat. 365; 12 U. S. C., sec. 711.)

638 44. Directors; officers; loan committee. The board of directors of every national farm loan association shall consist of not less than five nor more than seven members, who shall be elected by the shareholders of the association. Elections of such directors shall be held once each year at an annual meeting of the shareholders. Every national farm loan association shall at the first annual meeting of its shareholders subsequent to the enactment of the Farm Credit Act of 1937 elect two directors for a term of three years, two directors for a term of two years, and the remainder of its board of directors for a term of one year. Thereafter directors shall be chosen to serve for terms of three years, and the shareholders of each association shall annually elect as many directors as may be necessary to fill the places of those directors whose terms expire during the year. Any vacancy that may occur in the board of directors through death, resignation or other cause shall be filled at the next annual meeting of shareholders by the election of a director to serve out the unexpired portion of the term, or a special meeting of shareholders may be called for this purpose. Until such election the remaining directors shall have power to fill the vacancy for the time being by appointing a temporary director to serve until the next meeting of shareholders. All directors shall hold office until their successors are elected and have qualified. It shall be the duty of said board of directors to choose in such manner as they may prefer a secretary-treasurer, who shall receive such compensation as said board of directors shall determine. The board of directors shall elect a president, a vice president, and a loan committee of three members. (July 17, 1916, sec. 7, 39 Stat. 365; Aug. 19, 1937, sec. 21, 50 Stat. 710; 12 U. S. C., sec. 712.) 638-45. Compensation and qualifications of directors.-The directors and all officers except the secretary-treasurer shall serve without compensation, unless the payment of salaries to them shall be ap

proved by the Federal Farm Loan Board [now Farm Credit Administration]*. All officers and directors except the secretary-treasurer shall, during their term of office, be bona fide residents of the territory within which the association is authorized to do business, and shall be shareholders of the association. (July 17, 1916, sec. 7, 39 Stat. 365; 12 U. S. C., sec. 713.)

638-46. Secretary-treasurer; powers and duties; bond; reports; misconduct in office. It shall be the duty of the secretary-treasurer of every national farm loan association to act as custodian of its funds and to deposit the same in such bank as the board of directors may designate, to pay over to borrowers all sums received for their account from the Federal land bank upon first mortgage as in this Act prescribed, and to meet all other obligations of the association, subject to the orders of the board of directors and in accordance with the by-laws of the association. It shall be the duty of the secretarytreasurer, acting under the direction of the national farm loan association, to collect, receipt for, and transmit to the Federal land bank payments of interest, amortization installments, or principal arising out of loans made through the association. He shall be the custodian of the securities, records, papers, certificates of stock, and all documents relating to or bearing upon the conduct of the affairs of the association. He shall furnish a suitable surety bond to be prescribed and approved by the Federal Farm Loan Board [now Farm Credit Administration]* for the proper performance of the duties imposed upon him under this Act, which shall cover prompt collection and transmission of funds. He shall make a quarterly report to the Federal Farm Loan Board [now Farm Credit Administration]* upon forms to be provided for that purpose. Upon request from said board [now administration]* said secretary-treasurer shall furnish information regarding the condition of the national farm loan association for which he is acting, and he shall carry out all duly authorized orders of said board [now administration]*. He shall assure himself from time to time that the loans made through the national farm loan association of which he is an officer are applied to the purposes set forth in the application of the borrower as approved, and shall forthwith report to the land bank of the district any failure of any borrower to comply with the terms of his application or mortgage. He shall also ascertain and report to said bank the amount of any delinquent taxes on land mortgaged to said bank and the name of the delinquent. No such secretary-treasurer shall engage in the making of land mortgage loans eligible at a Federal land bank through or for any other land mortgage company or agency, and the making of any such loan by any secretary-treasurer shall forthwith work a forfeiture of his office. (July 17, 1916, sec. 7, 39 Stat. 365; Mar. 4, 1923, sec. 305, 42 Stat. 1476; 12 U. S. C., sec. 714.)

638-47. Expenses and salaries; payment from general funds; assessments. The reasonable expenses of the secretary-treasurer, the loan committee, and other officers and agents of national farm loan associations, and the salary of the secretary-treasurer, shall be paid from the general funds of the association, and the board of directors is authorized to set aside such sums as it shall deem requisite for that purpose and for other expenses of said association. When no such

*Seo Ex. Or. 6084, p. 254, this volume,

funds are available, the board of directors may levy an assessment on members in proportion to the amount of stock held by each, which may be repaid as soon as funds are available, or it may secure an advance from the Federal land bank of the district, to be repaid with interest at the rate of six per centum per annum, from dividends belonging to said association. Said Federal land bank is hereby authorized to make such advance and to deduct such repayment. (July 17, 1916, sec. 7, 39 Stat. 365; 12 U. S. C., sec. 715.)

638-48. Number of incorporators; organization; directors; secretarytreasurer. Ten or more persons who are the owners, or about to become the owners, of farm lands qualified as security for a mortgage loan under section 12 of this Act, may unite to form a national farmloan association. They shall organize subject to the requirements and the conditions specified in this section and in section four of this Act, so far as the same may be applicable: Provided, That the board of directors may consist of five members only, and instead of a secretary and a treasurer there shall be a secretary-treasurer, who need not be a shareholder of the association. As used in this section, the term "person" includes an individual, an incorporated association, and a corporation which is eligible for a loan under section 12 of this Act. (July 17, 1916, sec. 7, 39 Stat. 365; June 3, 1935, sec. 19 (a), (b), 49 Stat. 319; 12 U. S. C., sec. 716.)

638-49. Report and affidavit accompanying articles of association.-When the articles of association are forwarded to the Federal land bank of the district as provided in this section, they shall be accompanied by the written report of the loan committee as required in section ten of this Act, and by an affidavit stating that each of the subscribers is the owner, or is about to become the owner, of farm land qualified under section twelve of this Act as the basis of a mortgage loan; that the loan desired by each person is not more than $10,000, nor less than $100, and that the aggregate of the desired loans is not less than $20,000; that said affidavit is accompanied by a subscription to stock in the Federal land bank equal to five per centum of the aggregate sum desired on mortgage loans; and that a temporary organization of said association has been formed by the election of a board of directors, a loan committee, and a secretary-treasurer who subscribes to said affidavit, giving his residence and post office address. (July 17, 1916, sec. 7, 39 Stat. 365; 12 U. S. C., sec. 717.)

638-50. Investigation of solvency of applicants for incorporation.-Upon receipt of such articles of association, with the accompanying affidavit and stock subscription, the directors of said Federal land bank shall send an appraiser to investigate the solvency and character of the applicants and the value of their lands, and shall then determine whether in their judgment a charter should be granted to such association. They shall forward such articles of association and the accompanying affidavit to the Federal Farm Loan Board [now Farm Credit Administration]* with their recommendation. If said recommendation is unfavorable, the charter shall be refused. (July 17, 1916, sec. 7, 39 Stat. 365; 12 U. S. C., sec. 718.)

638-51. Grant or refusal of charter; modification.-If said recommendation is favorable, the Federal Farm Loan Board [now Farm Credit Administration]* shall thereupon grant a charter to the applicants

*See Ex. Or. 6084, p. 254, this volume.

therefor, designating the territory in which such association may make loans, and shall forward said charter to said applicants through said Federal land bank: Provided, That said Federal Farm Loan Board now Farm Credit Administration]* may for good cause shown in any case refuse to grant a charter. The boundaries of the territory designated in the charter of any national farm loan association may be readjusted from time to time to meet the farm loan needs of the locality, as determined by the Farm Credit Administration. (July 17, 1916, sec. 7, 39 Stat. 365; Aug. 19, 1937, sec. 8, 50 Stat. 707; 12 U.S. C., sec. 719.)

638-52. Authorization to receive funds to be loaned to members.-Upon receipt of its charter such national farm loan association shall be authorized and empowered to receive from the Federal land bank of the district sums to be loaned to its members under the terms and conditions of this Act. (July 17, 1916, sec. 7, 39 Stat. 365; 12 U. S. C., sec. 720.)

638-53. Securing loans for members; subscriptions to stock of land bank as collateral; retirement of stock.-Whenever any national farm loan association shall desire to secure for any member a loan on first mortgage from the Federal land bank of its district it shall subscribe for capital stock of said land bank to the amount of five per centum of such loan, such subscription to be paid in cash upon the granting of the loan by said land bank. Such capital stock shall be held by said land bank as collateral security for the payment of said loan, but said association shall be paid any dividends accruing and payable on said capital stock while it is outstanding. Such stock may, in the discretion of the directors, and with the approval of the Federal Farm Loan Board [now Farm Credit Administration]*, be paid off at par and retired, and it shall be so paid off and retired upon full payment of the mortgage loan. In such case the national farm loan association shall pay off at par and retire the corresponding shares of its stock which were issued when said land bank stock was issued. (July 17, 1916, sec. 7, 39 Stat. 365; 12 U. S. C., sec. 721.)

638-54. Federal land banks; limitation on reduction of capital stock.The capital stock of a Federal land bank shall not be reduced to an amount less than five per centum of the principal of the outstanding farm loan bonds issued by it. (July 17, 1916, sec. 7, 39 Stat. 365; 12 U.S. C., sec. 722.)

638-55. Federal land banks; direct loans.

Authorization to make direct loans; provisions relative to loans through associations, applicable to direct loans. Whenever it shall appear to the Land Bank Commissioner that national farm-loan associations have not been formed in any locality in the continental United States, or that the farmers residing in the territory covered by the charter of a national farm-loan association are unable to apply to the Federal land bank of the district for loans on account of the inability of the bank to accept applications from such association, the Land Bank Commissioner shall authorize said bank to make direct loans to borrowers secured by first mortgages on farm lands situated within any such locality or territory. Except as herein otherwise specifically provided, all provisions of this Act applicable with respect to loans made through national farm-loan associations shall, insofar as practicable,

*See Ex. Or. 6084, p. 254, this volume.

apply with respect to such direct loans, and the Land Bank Commissioner is authorized to make such rules and regulations as he may deem necessary with respect to such direct loans.

Interest rate. The rate of interest on such direct loans made at any time by any Federal land bank shall be one-half of 1 per centum per annum in excess of the rate of interest charged to borrowers on mortgage loans made at such time by the bank through national farm-loan associations.

Subscription to stock; retirement of stock. Each borrower who obtains a direct loan from a Federal land bank shall subscribe and pay for stock in such bank in the sum of $5 for each $100 or fraction thereof borrowed. Such stock shall be held by such Federal land bank as collateral security for the loan of the borrower and shall participate in all dividends. Upon full payment of the loan such stock shall, if still outstanding, be canceled at par, or, in the event that such stock shall have become impaired, at the estimated value thereof as approved by the Land Bank Commissioner, and the proceeds thereof shall be paid to the borrower. Any borrower's interest in such stock may be transferred or hypothecated, by him or by operation of law, to the Federal Farm Mortgage Corporation.

Organization of national farm loan association by direct borrowers. Each such borrower may covenant in his mortgage that, whenever there are ten or more borrowers who have obtained from a Federal land bank direct loans under the provisions of this section aggregating not less than $20,000, and who reside in a locality which may, in the opinion of the Land Bank Commissioner, be conveniently covered by the charter of and served by a national farm-loan association, he will unite with such other borrowers to form a national farm-loan association. Such borrowers shall organize the association subject to the requirements and the conditions specified in this section, so far as the same may be applicable, and in accordance with rules and regulations of the Land Bank Commissioner. As soon as the organization of the association has been approved by the Land Bank Commissioner, the stock in the Federal land bank held by each of the members of such association shall be canceled at par, and in lieu thereof the bank shall issue in the name of the association an equal amount of stock in said bank, which stock shall be held by said bank as collateral security as provided in this section with respect to other loans through national farm-loan associations. Thereupon there shall be issued to each such member an amount of capital stock in the association equal to the amount which he previously held in said bank, which stock shall be held by said association as collateral security as provided in section 8 of this Act. The board of directors of said association shall adopt a resolution authorizing and directing its secretary-treasurer on behalf of said association to endorse, and thereby become liable for the payment of, the mortgages taken from its charter members by the Federal land bank. When it shall appear to the satisfaction of the Land Bank Commissioner that all the foregoing conditions have been complied with, and upon the granting of the charter by the Land Bank Commissioner, the interest rate paid by each charter member of such association whose loan is in good standing shall, beginning with his next regular installment date, be reduced to the rate of interest paid by borrowers on new loans made through national farm-loan associa