yearly periods, or less, thereafter. The maturity of no advance authorized under this subsection shall be later than the time of the enactment of legislation authorizing such institution to become a member or the expiration of such session of the legislature of the State, whichever is earlier.

"(f) The Secretary of the Treasury shall subscribe, on behalf of the United States, for such part of the minimum capital of each Federal Home Loan Bank as is not subscribed for by members under subsection (c) of this section within thirty days after books have been opened for stock subscriptions as provided in subsection (a). Payments for stock subscriptions by the Secretary of the Treasury shall be subject to call in whole or in part by the board, with the approval of the Secretary of the Treasury, at such time or times as may be deemed advisable. Each Federal Home Loan Bank receiving such payments shall issue receipts therefor to the Secretary of the Treasury, and such receipts shall be evidence of the stock ownership of the United States. The aggregate amount expended by the United States for the purchase of stock under this Act shall not exceed $125,000,000. The Reconstruction Finance Corporation Act, approved January 22, 1932, is amended by adding at the end of section 2 thereof the following new paragraph:

"In order to enable the Secretary of the Treasury to make payments upon stock of the Federal Home Loan Banks subscribed for by him in accordance with the Federal Home Loan Bank Act, the sum of $125,000,000, or so much thereof as may be necessary for such purpose, is hereby allocated and made available to the Secretary of the Treasury out of the capital of the corporation and/or the proceeds of notes, debentures, bonds, and other obligations issued by the corporation. For the purposes of this paragraph, the corporation shall issue such notes, bonds, debentures, and other obligations as may be necessary.'

(g) After the amount of capital of a Federal Home Loan Bank paid in by members equals the amount paid in by the Secretary of the Treasury under subsection (f), such bank shall apply annually to the payment and retirement of the shares of the capital stock held by the United States, 50 per centum of all sums thereafter paid in as capital until all such capital stock held by the United States is retired at par. Stock held by the United States may at any time, in the discretion of the Federal Home Loan Bank, and with the approval of the board, be paid off at par and retired in whole or in part; and the board may at any time require such stock to be paid off at par and retired in whole or in part if in the opinion of the board the Federal Home Loan Bank has resources available therefor: Provided, That accumulated dividends, as provided in subsection (k), have been paid. "(h) Stock subscribed for otherwise than by the United States, and the right to the proceeds thereof, shall not be transferred or hypothecated except as hereinafter provided and the certificates therefor shall so state.

"(i) Any member other than a Federal savings and loan association may withdraw from membership in a Federal Home Loan Bank six months after filing with the board written notice of intention so to do, and the board may, after hearing, remove any member from membership, or deprive any nonmember borrower of the privilege of ob

taining further advances, if, in the opinion of the board, such member or nonmember borrower (i) has failed to comply with any provision of this Act or regulation of the board made pursuant thereto; (ii) is insolvent: Provided, That any member of a bank which is a building and loan association, savings and loan association, cooperative bank, or homestead association shall be deemed insolvent if the assets of such member are less than its obligations to its creditors and others, including the holders of its withdrawable accounts; or (iii) has a management or home-financing policy of a character inconsistent with sound and economical home financing or with the purposes of this Act. In any such case, the indebtedness of such member or nonmember borrower to the Federal Home Loan Bank shall be liquidated, and the capital stock in the Federal Home Loan Bank owned by such member shall be surrendered and canceled. Upon the liquidation of such indebtedness such member or nonmember borrower shall be entitled to the return of its collateral, and, upon surrender and cancellation of such capital stock, the member shall receive a sum equal to its cash paid subscriptions for the capital stock surrendered, except that if at any time the board finds that the paid-in capital of a Federal Home Loan Bank is or is likely to be impaired as a result of losses in or depreciation of the assets held, the Federal Home Loan Bank shall on the order of the board withhold from the amount to be paid in retirement of the stock a pro rata share of the amount of such impairment as determined by the board.

"(j) A Federal Home Loan Bank may, with the approval of the board, permit the disposal of stock to another member, or to an institution eligible to become a member, but only to enable such an institution to become a member.

"(k) All stock of any Federal Home Loan Bank shall share in dividend distributions without preference.

"(1) Within one year after the enactment of this subsection, each member of each Federal Home Loan Bank shall acquire and hold and thereafter maintain its stock holding in an amount equal to at least 2 per centum of the aggregate of the unpaid principal of such member's home mortgage loans, home-purchase contracts, and similar obligations, but not less than $500. Such stock in excess of the amount hereby required may be purchased from time to time by members and may be retired from time to time as heretofore. One year after the enactment of this subsection, each Federal Home Loan Bank shall retire and pay off at par an amount of its stock held by the Secretary of the Treasury equivalent to the amount of its stock held by its members in excess of the amount required to be held by them by the first two sentences of subsection (c) of this section immediately prior to the enactment of this subsection and annually thereafter each Federal Home Loan Bank shall retire an amount of such Government stock equivalent to 50 per centum of the net increase of its stock held by members since the last previous retirement: Provided, That none of such Government capital shall at any time be retired so as to reduce the aggregate capital stock, reserves, surplus, and undivided profits of the Federal Home Loan Banks to less than $200,000,000: Provided further, That notwithstanding any provision of this subsection, nothing in this subsection shall limit or affect the operation of subsection (g) of this section."

Recommendations

Amend section 6 as follows: (1) by striking subsections (a), (e), (f) (g), and (1), and relettering subsections (b), (c), (d), (h), (i), (j), and (k) as subsections (a), (b), (c), (d), (e), (f), and (g), respectively; (2) by striking in subsection (b) (to be relettered as (a)) the second sentence and the language "issued thereafter" in the last sentence; (3) by striking in subsection (c) (to be relettered as (b)) the language in the first sentence "1 per centum of the aggregate of the unpaid principal of the subscriber's home mortgage loans" and inserting in lieu thereof the language "2 per centum of the aggregate of the unpaid principal of the subscriber's home mortgage loans, home-purchase contracts, and similar obligations"; (4) by striking in subsection (d) (to be relettered as (c)) the language "other than by the United States"; (5) by striking in subsection (h) (to be relettered as (d)) the language "otherwise than by the United States"; and (6) by inserting in subsection (i) (to be relettered as (e)), at the end of said subsection, the following new sentence: "The Board shall have power by regulations or otherwise to define, for the purposes of this subsection, management or home-financing policy of a character inconsistent with sound and economical home financing or with the purposes of this Act." Reasons

Amendments (1) through (5) would delete obsolete matter; the provisions relating to the original capitalization and establishment of the Federal home loan banks are now functus officio and all of the Government capital has been retired. Amendment (6) would give the Federal Home Loan Bank Board express authority to define what is management or home-financing policy inconsistent with sound and economical home financing or with the purposes of the act, and thus a ground for termination of Federal home loan bank membership. It is believed that it would be to the advantage both of the Board and of member institutions if express authority were given to the Board to set up standards on this matter.

123. DIRECTORS OF FEDERAL HOME LOAN BANKS

Existing law

Subsections (a) through (h) of section 7 of the Federal Home Loan Bank Act, as amended:

"(a) The management of each Federal Home Loan Bank shall be vested in a board of twelve directors, all of whom shall be citizens of the United States and bona fide residents of the district in which such bank is located: Provided, That the board may by regulation increase the number of elective directors of any Federal Home Loan Bank having a district which includes five or more States to a number not exceeding twice the number of States comprising such district, but such additional elective directors shall be apportioned as nearly as may be practicable in the same manner and order as is provided for the apportionment of elective directors under subsections (c) and (d) hereof: Provided further, That there shall be not less than one elective director from any of the States nor more than three elective directors from any of the States in any district referred to in the preceding proviso and in no event shall the total number of elective directors in any one district exceed eleven. The term 'States' as used in the

preceding provisos shall mean the States of the Union and the District of Columbia.

"(b) Four of such directors shall be appointed by the Board and shall hold office for terms of four years; except that the terms of office of the two such directors heretofore appointed shall expire at the end of the calendar years 1936 and 1937, respectively, and the terms of office of the first two such directors hereafter appointed shall expire at the end of the calendar years 1938 and 1939, respectively.

"(c) Six of such directors, two of whom shall be known as class A directors, two of whom shall be known as class B directors, and two of whom shall be known as class C directors, shall be elected as provided in subsection (e), and shall hold office for terms of two years; except that the terms of office of the directors heretofore elected or appointed shall expire at the end of the terms for which they were elected or appointed.

"(d) Two of such directors shall be elected by the members of the Federal Home Loan Bank without regard to classes under rules and regulations to be prescribed by the Board, and shall hold office for terms of two years; except that the term of office of one of the directors first elected under this subsection shall expire at the end of the calendar year 1936.

"(e) The board shall divide all the members of each Federal Home Loan Bank into three groups which shall be designated as groups A, B, and C, which groups shall represent, respectively, and as fairly as may be, group A, the large, group B, the medium-sized, and group C, the small members, the size of such members to be determined according to the aggregate unpaid principal of the member's home mortgage loans. The board may revise the membership of such groups from time to time. Of the directors elected as hereinafter provided, each class A director shall be an officer or director of a member in group A, each class B director shall be an officer or director of a member in group B, and each class C director shall be an officer or director of a member in group C. Each member shall be entitled to nominate suitably qualified persons for election as directors of the class corresponding to the group to which such member belongs, and shall cast one vote for each director in its class. The directors of each class shall be nominated and elected in accordance with such rules and regulations as may be prescribed by the board.

"(f) Any director appointed or elected as provided in this section to fill a vacancy shall hold office only until the expiration of the term of his predecessor.

"(g) The board shall designate one of the directors of each bank to be chairman, and one to be vice-chairman, of the board of directors of such bank.

"(h) If at any time when nominations are required, members shall hold less than $1,000,000 of the capital stock of the Federal Home Loan Bank, the board shall appoint a director or directors to fill the place or places for which such nominations are required. A director so appointed shall serve until the expiration of the calendar year during which he takes office."

Recommendations

Amend section 7 as follows: (1) by striking all of subsection (b) beginning with the semicolon and ending immediately before the

period and inserting in lieu thereof a colon and the following: “Provided, That in the fixing of the initial terms of appointive directorships of any Federal Home Loan Bank one such term shall expire at the end of the first, one at the end of the second, one at the end of the third, and one at the end of the fourth year beginning on the first day of January next following the commencement of said terms"; (2) by striking all of subsection (c) beginning with the semicolon and ending immediately before the period; (3) by striking all of subsection (d) beginning with the semicolon and ending immediately before the period; (4) by adding to subsection (f), immediately before the period, a colon and the following: "Provided, That if any director shall cease to have the qualifications set forth in subsection (a), or if any elective director shall cease to have the qualification set forth in the third sentence of subsection (e) or any similar qualification imposed by regulation under the first proviso to the first sentence of subsection (a), the office held by such director shall immediately become vacant, but such director may continue to act as such director until his successor shall have qualified or the term of such office shall have expired, whichever shall first occur"; and (5) by inserting in the first sentence of subsection (h), immediately before the period, a comma and the following: "and the Board may, prior to the filing of the certificate mentioned in section 12, appoint directors who shall be respectively designated by it as appointive directors and as elective directors, including class directors, in accordance with the provisions of this section."

Reasons

Amendments (1), (2), and (3) would remove obsolete matter relating to the original directorates of the Federal home loan banks. Amendment (4) is designed to make clear that where a director ceases to have the specified qualifications the office immediately becomes vacant but the director may continue to act until his successor has qualified or his term expires, whichever shall first occur; this amendment is needed to overcome legal problems which have arisen in this type of case. Amendment (5) would provide for interim directors in the case of the future establishment of a Federal home loan bank; such interim directors would be needed in such case because of the necessity for execution of the certificate provided for by the first sentence of section 12 of the act.

124. FEDERAL SAVINGS AND LOAN ADVISORY COUNCIL

Existing law

Section 8a of the Federal Home Loan Bank Act, as amended: "There is hereby created a Federal Savings and Loan Advisory Council, which shall consist of one member for each Federal Home Loan Bank district to be elected annually by the board of directors of the Federal Home Loan Bank in such district and six members to be appointed annually by the Board. Each such elected member shall be a resident of the district for which he is elected. All members of the Council shall serve without compensation, but shall be entitled to reimbursement from the Board for traveling expenses incurred in attendance at meetings of such Council. The Council shall meet at Washington, District of Columbia, at least twice a year and oftener