in an issue of debentures, the Farm Credit Administration shall have a statement in writing by a Custodian of collateral for consolidated debentures of the banks for cooperatives that the collateral held by him or for his account securing consolidated debentures which will be outstanding on behalf of the bank making the application, including the debentures applied for, as of the date of their issuance, will be adequate according to law and the rules and regulations of the Farm Credit Administration.

§ 73.2

CUSTODIANSHIP OF COLLATERAL

Custodian and Acting Custodian. The Chief, Collateral Section, Farm Credit Administration, shall serve, ex officio, as Custodian of Collateral pledged by the Central Bank for Cooperatives for consolidated debentures. The Chief, Securities Section, Farm Credit Administration, shall serve, ex officio, as Acting Custodian of collateral pledged by the Central Bank for Cooperatives for consolidated debentures, in the event the said Custodian is unable to serve for any reason. The Farm Loan Registrar in each farm credit district shall serve, ex officio, as Custodian of collateral pledged by the bank for cooperatives of the district for consolidated debentures; and the Deputy Registrar in the first farm credit district and the Acting Deputy Registrar in each other farm credit district shall serve, ex officio, as Acting Custodian of collateral pledged by the bank for cooperatives of the district for consolidated debentures, in the event the said Custodian is unable to serve for any reason. The operating titles when so serving shall be Custodian and Acting Custodian, respectively.

§ 73.3 Bonding of Custodian and Acting Custodian.

Each Custodian and Acting Custodian shall be covered under a fidelity bond with a corporate surety on the approved list of the Treasury Department and in the amounts of $50,000 and $25,000, respectively, to insure the faithful performance of their duties and provide against financial loss.

(a) Each deposit of collateral with a Custodian shall be accompanied by a specific assignment to him in trust of such collateral. All the collateral shall be held by him, or for his account, in trust for the joint, ratable benefit of all owners of consolidated debentures of the banks for cooperatives outstanding irrespective of the dates of issue of such debentures. No duty or responsibility shall be assumed by or imposed upon a Custodian to determine the values, genuineness, or legal sufficiency of any collateral deposited with him, but he shall be satisfied that (1) such collateral is of the character authorized by law and appears to be legal and sufficient on its face; and (2) the collateral assigned to him is at all times not less in amount than the amount of debentures outstanding.

(b) Except as provided in § 73.9, a Custodian shall release to the bank for cooperatives which he serves any collateral requested by it which is not needed for meeting the collateral requirements specified by law, and any additional collateral requirements specified by the Farm Credit Administration, for outstanding consolidated debentures of the banks for cooperatives. Further, except

as provided in § 73.9, a Custodian shall release to the bank for cooperatives which he serves any collateral held by him or for his account upon the substitution of cash or other collateral of the character authorized by law sufficient in amount to maintain the collateral requirements specified, as mentioned in paragraph (a) of this section.

§ 73.8 Subcollateral.

Subcollateral, consisting of all valuable items securing collateral which directly secures outstanding consolidated debentures of the banks for cooperatives, shall be held either by a Custodian of collateral, a bank for cooperatives, or a local custodian employed by a bank for cooperatives. When subcollateral is not held by the Custodian, he shall be furnished with a statement by the holder that it is held in trust for the Custodian's account, and with periodic reports by the holder of the subcollateral thus held. § 73.9 Disposition of collateral and subcollateral in the event of default on consolidated debentures.

In the event of default by any bank for cooperatives in the payment of principal or interest on any consolidated debentures outstanding on its behalf, all collateral and subcollateral held by or for the Custodian under assignment by such bank shall automatically with the occurrence of the default be held subject to the order of the Governor of the Farm Credit Administration for the protection of debenture holders, and the withdrawal and substitution provisions of § 73.7 shall be suspended.

§ 73.10 Accounts and reports.

Each Custodian shall keep a separate account of all his transactions relating to consolidated debentures of the banks for cooperatives and the collateral security, and shall furnish such reports and other documents as may be required by the Governor of the Farm Credit Administration.

LOST, STOLEN, DESTROYED, MUTILATED, OR

DEFACED DEBENTURES

§ 73.12 Authorization for relief.

Whenever a consolidated debenture of the banks for cooperatives, or a coupon detached from such a debenture, is lost, stolen, destroyed, or so mutilated or defaced as to impair its value to the owner, the Director of Cooperative Bank Service may authorize the issuance of a new debenture or payment for the coupon at maturity, upon the owner's compliance with the requirements set forth in §§ 73.13 through 73.18. Wherever the term "owner" is used in said sections, it shall be deemed to include the authorized representative of the owner.

§ 73.13 Application.

In the event of the loss, theft, destruction, mutilation, or defacement of a consolidated debenture or coupon, the owner should file an application with the Director of Cooperative Bank Service for the issuance of another debenture or for payment of the coupon at maturity. Such application must be filed within a reasonable time after the loss, theft, destruction, mutilation, or defacement is discovered.

The owner of the consolidated debenture or coupon which has been lost, stolen, destroyed, mutilated, or defaced shall furnish to the Director of Cooperative Bank Service his affidavit duly acknowledged before a notary public or other officer authorized by law to administer oaths, setting forth:

(a) That he is the lawful owner of such debenture or coupon and that he is legally entitled to its possession;

(b) A complete identification of such debenture or coupon including serial number, date of issue, face amount, date of maturity, and interest rate;

(c) A detailed statement of the circumstances surrounding the loss, theft, destruction, mutilation, or defacement of such debenture or coupon;

(d) A statement that the affidavit is made for the purpose of obtaining a new debenture or payment for the coupon at maturity and an undertaking that should the original debenture or coupon come into the possession or control of the deponent, he will immediately surrender it to the Director of Cooperative Bank Service.

§ 73.15 Bond of indemnity.

(a) The owner of a lost, stolen, or destroyed consolidated debenture or coupon, or his authorized representative, shall also furnish to the Director of Cooperative Bank Service a bond of indemnity in a penal amount equal to 110 percent of the principal and interest to maturity of the said debenture, or equal to 110 percent of the face amount of said coupon, with corporate surety satisfactory to the Director of Cooperative Bank Service and with conditions to indemnify and save harmless the Farm Credit Administration and the 13 banks for cooperatives and any and all of their officers, employees, or representatives, from all liability, loss, claims, or demands arising in any manner by reason or on account of the debenture or coupon concerning which relief is requested.

(b) The owner of a mutilated or defaced consolidated debenture or coupon shall, before relief is granted, surrender such debenture or coupon or as much thereof as remains to the Director of Cooperative Bank Service and shall, if required by him, also furnish a bond of indemnity in a penal sum satisfactory to the Director of Cooperative Bank Service with corporate surety and conditions as stated in paragraph (a) of this section.

(c) A bond of indemnity which is otherwise satisfactory will be accepted if the corporation which is surety thereon holds a certificate from the Secretary of the Treasury as being acceptable on surety bonds. A list of such corporations may be obtained from the Surety Bonds Branch, Bureau of Accounts, United States Treasury Department, Washington, D. C.

The owner of a lost, stolen, mutilated, defaced, or destroyed consolidated debenture or coupon shall also furnish such other and further evidence relating to the loss, theft, destruction, mutilation, or defacement of the debenture or coupon for which relief is requested as may be required by the Director of Cooperative Bank Service in any specific case. § 73.17 Recovery of debenture or coupon reported lost, stolen, or destroyed.

If a consolidated debenture or coupon reported lost, stolen, or destroyed is re

covered by the owner prior to the issuance of a new debenture or payment for the coupon, the Director of Cooperative Bank Service should be notified immediately whereupon the application for relief will be canceled and any bond or affidavit relative to it will be returned to the owner. If the original debenture or coupon is recovered by the owner after relief has been granted, the said original shall be returned to the Director of Cooperative Bank Service for cancellation, whereupon the bond and affidavit relative to it will be returned to the owner. § 73.18 Immaterial mutilation or de

facement.

Where a mutilation or defacement of a consolidated debenture or a coupon is such that the debenture or coupon may be clearly identified and the missing fragments could not by any possibility form the basis of a claim against the 13 banks for cooperatives, the Farm Credit Administration, or the Director of Cooperative Bank Service, the Director of Cooperative Bank Service may authorize the issuance of a new debenture, upon application therefor and the surrender of the defaced or mutilated debenture or coupon, without requiring an affidavit or indemnity bond, or may authorize that such debenture or coupon be accepted and paid at maturity as if no mutilation or defacement had occurred.

§ 73.19

Restrictive endorsements of bearer securities.

When consolidated debentures issued by the 13 banks for cooperatives are being presented to Federal Reserve Banks or Branches, or to the Treasurer of the United States, by or through banks (including banks for cooperatives) for redemption, such debentures may be restrictively endorsed. The restrictive endorsement shall be placed thereon in substantially the same manner and with the same effects as prescribed in United States Treasury Department regulations, now or hereafter in force, governing like transactions in United States bonds; and consolidated debentures issued by the 13 banks for cooperatives so endorsed shall be prepared for shipment and shipped in the manner prescribed in such regulations for United States bonds. (See 31 CFR 328.1-328.6.)

[23 F.R. 3139, May 13, 1958]

PART 200-PROCEDURES

Sec. 200.1 Loans pursuant to section 4 of Rural Electrification Act.

200.2 Loans pursuant to section 5 of Rural Electrification Act.

200.3 Loans pursuant to section 201 of Rural Electrification Act.

200.4 Studies, investigations, and reports. 200.5 Loan security activities. 200.6 Issuances implementing procedures.

AUTHORITY: §§ 200.1 to 200.6 issued under 49 Stat. 1363-1367, as amended, 58 Stat. 740, 63 Stat. 948; 7 U. S. C. 901-915, 921-924.

SOURCE: §§ 200.1 to 200.6 appear at 20 F. R. 8587, Nov. 22, 1955.

§ 200.1 Loans pursuant to section 4 of Rural Electrification Act.

(a) General. These loans are made to finance the construction and operation of generating plants, electric transmission and distribution lines or systems to serve persons in rural areas not receiving central station electric service. The loans must be self-liquidating within a period of not to exceed thirtyfive years, bear interest at the rate of two per centum per annum, and must be reasonably secured in the judgment of the Administrator. They may be made to persons, corporations, public bodies, and to cooperative, nonprofit, or limited dividend associations.

(b) Loan applications. Applications for these loans are made on REA Form 740a, copies of which are made available by REA on request. Applicants for an initial loan from the Rural Electrification Administration for the construction of a rural power system are assisted in perfecting their organization, in the conduct of their surveys and in the preparation of the loan application.

After the information provided by the application has been examined, the applicant is notified of any further steps to be taken. If an application is acceptable after legal, engineering, economic, and financial studies, funds are obligated by a loan contract and the borrower gives a note, mortgage, and in some cases, other security.

(c) Construction. Under the loan agreements, REA reserves the right to approve the design and construction of the facilities, and to require progress reports on construction, and audits of the borrower's records relating to construction.

(d) Advance of loan funds. Loan funds are advanced on the basis of requisitions submitted by borrowers in accordance with the loan contract.

§ 200.2

Loans pursuant to section 5 of Rural Electrification Act.

(a) General. These loans are made to finance the wiring of the premises of persons in rural areas and the purchase and installation of electrical and plumbing appliances and equipment. The loans are generally required to be repaid over a period of five years and bear interest at two per centum per annum. The loans are ordinarily made to REA borrowers for relending to their consumers.

(b) Loan applications. There is no standard or prescribed form of application for this type of loan. The information submitted in support of such an application should set forth the purposes for which the loan is requested and the amnt required for each purpose. If the Administrator approves a loan proposal, the applicant is notified and loan papers are forwarded for the signature of the borrower.

(c) Advance of loan funds. Loan funds are advanced on the basis of requisitions submitted by borrowers in accordance with the loan contract.

§ 200.3

Loans pursuant to section 201 of Rural Electrification Act.

(a) General. These loans are made for the purpose of financing the improvement, expansion, construction, acquisition, and operation of telephone lines, facilities, or systems to furnish or improve telephone service in rural areas. Borrowers are required to provide a portion of the investment themselves. The loans must be self-liquidating within a period of not to exceed thirty-five years, bear interest at the rate of two per centum per annum, and must be reasonably secured in the judgment of the Administrator. The loans may be made to any type of commercial or nonprofit corporation now providing or who may hereafter provide telephone service in rural areas.

(b) Loan applications. Applications for these loans should be made on Form 490, copies of which are made available by REA on request. Applicants for an initial loan from the Rural Electrification Administration for the construction of a rural telephone system are assisted in perfecting their organization, in the conduct of their surveys, and in the preparation of loan applications. After the information provided by the application has been examined, the applicant is notified of any further steps to be taken. If an application is acceptable after legal, engineering, economic, and financial studies, funds are obligated by a loan contract and the borrower gives a note, mortgage, and, in some cases, other security.

(c) Construction. Under the loan agreements, REA reserves the right to approve the design and construction of the facilities, and to require progress reports on construction and audits of the borrower's records relating to construction.

(d) Advance of loan funds. Loan funds are advanced on the basis of requisitions submitted by borrowers in accordance with the loan contract.

§ 200.4 Studies, investigations, and reports.

Pursuant to section 2 of the act, the agency may make or cause to be made studies, investigations, and reports concerning the condition and progress of electrification and telephony in rural areas in the several States and territories and may publish and disseminate information with respect thereto.

§ 200.5 Loan security activities.

In carrying out the program of rural electrification and rural telephony provided by the act, and in the interest of loan security, the agency requires of borrowers periodic reports on operations, annual audits, etc., and provides limited specialized and technical accounting, engineering, and other managerial assistance to borrowers in respect to the construction and operation of their facilities, and to help them establish efficient and economical service in rural areas.