A SYSTEM OF FEDERAL HOME

LOAN BANKS

ONESDAY, MARCH 16, 1932

HOUSE OF REPRESENTATIVES, SURCOMMITTEE OF THE COMMITTEE,

ON BANKING AND CURRENCY,

Washington, D. C. et, pursuant to call, at 11 o'clock a. m., in the Couse Office Building, Representative Michael

tives Reilly (chairman of the subcommittee), uce, and Campbell.

hereupon proceeded to the consideration of the reate Federal home loan banks, to provide for f, and for other purposes.

20, Seventy-second Congress, first session]

Home Loan Banks, to provide for the supervision thereof, and for other purposes

Senate and House of Representatives of the United ngress assembled, That this Act may be cited as the k act."

DEFINITIONS

act

means the Federal home loan bank board.

al home loan bank" means a bank established by the this act.

includes the District of Columbia and the Territories

er" (except when used in reference to a member of stitution which has subscribed for the stock of a Fedid includes any institution which has, in lieu of subited cash or securities, as authorized in section 5 (e). nortgage loan means a loan made by a member upon Lortgage.

nortgage" means a first mortgage upon real estate upon dwelling for not more than three families, and shall rst liens other than mortgages as are commonly given eal estate by institutions authorized under this act to the laws of the State in which the same are located, instruments, if any, secured thereby.

I principal” when used in respect of a loan secured by the principal thereof less the sum of (1) payments , and (2) in cases where shares of stock pledged as ty, to the extent they are paid, be applied toward disof the loan, the amounts paid on such shares either lividends, or otherwise.

FEDERAL HOME LOAN BANKS

SEC. 3. As soon as practicable the board shall divide the continental United States and the Territories of Alaska and Hawaii into twelve districts. Such districts shall be apportioned with due regard to the convenience and customary course of business of the institutions eligible to and likely to subscribe for stock of a Federal home loan bank to be formed under this act but no such district shall contain a fractional part of any State. From time to time the board may adjust such districts and may create new districts, but the total number of such districts shall remain twelve. Such districts shall be known as Federal home loan bank districts and may be designated by number. As soon as practicable the board shall establish, in each district, a Federal home loan bank at such city as may be designated by the board... Its title shall include the name of the city at which it is established.

CAPITAL OF FEDERAL HOME LOAN BANKS AND SUBSCRIPTION THERETO

SEC. 4. (a) Such of the following as are duly organized under the laws of any State or of the United States, and are subject to inspection and regulation under the banking laws, or under similar laws, of the State or of the United States, shall be eligible to become a member of a Federal home loan bank:

(1) Building and loan associations, cooperative: banks, and homestead associations;

(2) Any of the following whose time deposits and financial condition, in the judgment of the board, warrant their making such home mortgage loans as, in the judgment of the board, are long-term loans: Savings banks, trist companies, and other banks; and

(3) Insurance companies.

(b). An institution eligible to become a member under this section may become a member only of the Federal home loan bank of the district in which is located the institution's principal place of business, or of the bank of a district adjoining such district.

SEC. 5. (a) As soon as practicable after the enactment of this act, the board, with the approval of the Secretary of the Treasury, shall determine the muni mum capital of each Federal home loan bank which shall be not less than $5,000,000. The board shall, as soon as practicable thereafter, open books in each district established under section 3 for subscription to the capital stock of the Federal home loan bank of the district.

(b) The capital stock of each Federal home loan bank shall be divided into shares of a par value of $100 each. The minimum capital stock shall be issued at par. Stock issued thereafter shall be issued at such price as may be fixed by the board.

(e) The original stock subscription for each institution eligible to become a member under section 4 shall be not less than $2.500, plus an amount equal to 1 per cent of the aggregate of the unpaid principal of the subscriber's home mortgages. The board shall from time to time adjust the amount of stock held by each member so that, as nearly as possible, such member shall at all times have invested in the stock of the Federal home loan bank at least an amount calculated in the same manner as in the ease of the member's original stock subscription.

(d) Stock subscriptions other than by the United States shall be paid for in ensh, or by certified check, and shall be paid for at the time of application therefor, or, at the election of the subscriber, in installments, but not less than one-fourth of the total amount payable shall be paid at the time of filing applicaion, and a further sum of not less than one-fourth of such total shall have been paid at the end of each succeeding period of four months.

(e) If the law of the State under which an institution described in section 4 operates does not permit such institution to subscribe for stock in the Federal Home Loan Bank, the board may permit such institution. In lieu of subscribing for stock, to deposit with the bank an amount of cash, short-term debenture bonds issued by the bank, or Federal Government securities, equal to the amount of the required stock subscription of such institution had it been authorized to subscribe for stock. The board shall prescribe terms and conditions under which such deposits are made so that the obligations of the institution to the bank will be adequately secured. Upon such deposit soch institution shall become a member for the purposes of this act. Upon the enactment of State legislation authorizing the subscription to Federal Home

member, the bank shall issue to such member an the value at that time of the property deposited nember under this subsection. In the case of any ome a member under the provisions of this section, nder which it operates does not at the end of fortyctment of this act permit stock subscription by such on shall cease to be a member, and the same prorespect to the termination of its relations with the k as apply in the case of the withdrawal of mem) of this section. The board shall not permit the curities in lieu of subscriptions to stock after State ted authorizing the institution to purchase Federal or after forty-two months after the enactment of ier. ibe regulations under which institutions enabled to uthority of this subsection shall, as nearly as pracghts, privileges, powers, and benefits, and be subject imitations, restrictions, and liabilities as institutions bers by reason of their purchase of capital stock of nks. For the purposes of the foregoing provision, is made in this act to amounts of capital stock subquired to be deposited under this subsection shall be if the reference is to amounts of capital stock paid nder this subsection shall be held to be included. the Treasury shall subscribe, on behalf of the United the minimum capital of each Federal Home Loan ed for by members under subsections (c) and (e) of ty days after books have been opened for stock subsubsection (a). Payments for stock subscriptions by reasury shall be subject to call in whole or in part approval of the Secretary of the Treasury, at such e deemed advisable. The aggregate amount expended the purchase of stock under this act shall not exceed ums as may be necessary for such purpose are hereby. riated out of any money in the Treasury not otherh Federal Home Loan Bank receiving such payments for to the Secretary of the Treasury, and such receipts › stock ownership of the United States.

t of capital of a Federal Home Loan Bank paid in by ount paid in by the Secretary of the Treasury under k shall apply annually to the payment and retirement pital stock held by the United States, 50 per centum paid in as capital until all such capital stock held by tired at par. Stock held by the United States may at etion of the Federal Home Loan Bank, and with the be paid off at par and retired in whole or in part; and ime require such stock to be paid off at par and retired in the opinion of the board the Federal Home Loan ilable therefor.

1 for otherwise than by the United States, and the hereof, shall not be transferred or hypothecated except , and the certificates therefor shall so state. ay withdraw from membership in a Federal Home after filing with the board written notice of intention may, after hearing, remove any member from memberof the board, such member has failed to comply with t or the regulations of the board made pursuant thereto. ndebtedness of such member to the Federal Home Loan ed, and the capital stock in the Federal Home Loan member shall be surrendered and canceled. Upon the lebtedness such member shall be entitled to the return upon surrender and cancellation of such capital stock, ive a sum equal to its cash paid subscriptions for the red, except that if at any time the board finds that the ederal Home Loan Bank is or is likely to be impaired n or depreciation of the assets held, the Federal Home he order of the board withhold from the amount paid

in retirement of the stock a pro rata share of the amount of such impairment as determined by the board.

(3) A Federal Home Loan Bank may, with the approval of the board, permit the disposal of stock to another member.

(k) No dividends shall be paid on stock subscribed for by the United States, but all other stock of any Federal Home Loan Bank shall share in dividend distributions without preference.

MANAGEMENT OF BANKS

SEC. 6. (a) The management of each Federal Home Loan Bank shall be vested in a board of eleven directors, all of whom shall be citizens of the United States and bona fide residents of the district in which such bank is located.

(b) Two of such directors shall be appointed by the board. The terms of such directors shall expire one year and two years, respectively, from the end of the calendar year 1932, and their successors shall be appointed by the board for terms of three years.

(c) Nine of such directors, three of whom shall be known as class A dlrectors, three of whom shall be known as class B directors, and three of whom shall be known as class C directors, shall be first appointed by the board, and shall serve until the end of the calendar year 1982. Their suc cessors shall be elected as provided in subsection (d), and of such successors first elected one of each such class shall serve for one, two, and three years, respectively. Thereafter all such directors shall serve for three years. Direc tors of classes A, B, and C. whether appointed or elected, shall be chosen from among persons connected with the home-financing business.

(d) The board shall divide 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, the large, mediumsized, and small members, the size of such members to be determined according to the net value of their holdings of home-loan mortgages. 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 correspond. ing to the group to which such member belongs, and shall cast one vote for ench 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.

(e) 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 prede

(f) The board shall designate one of the directors of ench bank to be chairman, and one to be vice chairman, of the board of directors of such bank.

(g) 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 until the expiration of the next calendar year or, in the case of a vacancy, until the expiration thereof, whichever period is the shorter.

(h) Each bank may pay its directors reasonable compensation for the time required of them, and their necessary expenses, in the performance of their duties, in accordance with the resolutions adopted by such directors, subject to the approval of the board.

(1) Such board of directors shall administer the affairs of the bank fairly and impartially and without discrimination in favor of or against any member, and shall subject to the provisions hereof, extend to each subscriber appli cant such advances as may be made safely and reasonably with due regard for the claims and demands of other members, with due regard to the maintenance of adequate credit standing for the Federal home loan bank and its obligations, and with due regard to the orderly provision of credit to aid in the conduct of home financing in the various communities within its district, and within the district as a whole.