All 70 Stat. 661.

class A stock if, in his judgment, the bank has resources available therefor, and the proceeds of such retirements shall be returned to such revolving fund.

"(2) Class B stock shall have a par value of $5 per share and may be issued only to production credit associations in series and amounts approved by the Farm Credit Administration. Such stock shall be issued only at par and may be transferred to another production credit association with the approval of the issuing bank. Whenever a bank has no class A stock outstanding it may pay like dividends on class B stock and participation certificates in an amount not to exceed 5 per centum in any year if declared by the board of directors. Dividends on class B stock and participation certificates shall not be cumulative. Within sixty days after the effective date of the Farm Credit Act of 1956, the production credit associations shall subscribe to class B stock in the banks in an aggregate amount equal to 15 per centum of the total amount of class A stock in all banks. Such required amount of subscriptions shall be allotted among the several districts in the proportion that the average amount of the bank's loans to and discounts for the production credit associations of the district, outstanding during the immediately preceding five fiscal years, is of the average of such loans and discounts of all banks outstanding during such five-year period. The amount so allotted to each district shall be further allotted to each production credit association on the basis of the proportion that its average indebtedness (loans and discounts) to the bank during the immediately preceding five fiscal years is of the average of such indebtedness of all production credit associations to the bank during such five-year period. Each production credit association shall subscribe to class B stock in the bank of the district in the amount so allotted to it. One-third of the purchase price of such stock subscription shall be paid at the time of such subscription, one-third shall be paid within one year after the effective date of said Act, and the balance shall be paid within two years after such effective date. Such class B stock shall be issued as payments therefor are made. Any production credit association chartered after the effective date of the Farm Credit Act of 1956 shall thereupon purchase class B stock in the bank in the amount of $5,000, and such amount shall be adjusted at the end of five years thereafter to an amount determined by applying to its average indebtedness to the bank during such fiveyear period the same percentage as the percentage which the initial subscriptions of other production credit associations was of their indebtedness, as provided in this subsection: Provided, That this provision shall not apply to any association owning stock in the bank in such required amount as a result of merger, consolidation, or reorganization of one or more associations. After all class A stock has been retired, the bank may retire class B stock at par and participation certificates at a face amount under policies established by the Farm Credit Administration. Class B stock and participation certificates shall be retired without preference and in such manner that the oldest outstanding stock or certificates at any given time will be retired first. In case of liquidation or dissolution of any production credit association or other financing institution, the stock or participation certificates of the bank owned by such association or institution may be retired by the bank at the fair book value thereof, not exceeding par or face amount, as the case may be.

"(b) LIEN ON STOCK AND PARTICIPATION CERTIFICATES.-Each Federal intermediate credit bank shall have a first lien on all stock in the bank owned by each production credit association and on all participation certificates owned by other financing institutions as additional collateral for any indebtedness of the holders thereof to the bank:

All 70 Stat. 662.

42 Stat. 1457.

Provided, That the bank shall make no loan or advance on the security of its own stock or participation certificates. In any case where the debt of a production credit association or other financing institution is in default, the bank may retire and cancel all or a part of the stock of the bank held by the association or of the participation certificates held by the other financing institution at the fair book value thereof, not exceeding par or face amount, as the case may be, in total or partial liquidation of the debt."

SEC. 103. Section 206 of the Federal Farm Loan Act, as amended,

12 USC 1062, 1072. is hereby amended to read as follows:

"APPLICATION OF EARNINGS

"SEC. 206. (a) ANNUAL APPLICATION.-At the end of its fiscal year, each Federal intermediate credit bank shall determine the amount of its net earnings after paying or providing for all operating expenses (including reasonable valuation reserves and losses in excess of any such applicable reserves) and shall apply such, net earnings as follows: (1) To the restoration of the amount of the impairment, if any, of capital stock and participation certificates, as determined by its board of directors; (2) to the restoration of the amount of the impairment, if any, of the surplus account established by this subsection, as determined by its board of directors; (3) 25 per centum of any remaining earnings shall be used to create and maintain a reserve account equal to 25 per centum of the outstanding capital stock and participation certificates of the bank; (4) if said bank shall have outstanding capital stock held by the United States during the whole or any part of its fiscal year, it shall next pay to the United States as a franchise tax, a sum equal to 25 per centum of its earnings then remaining, not exceeding, however, a rate of return on such Government capital calculated at a rate equal to the computed average annual rate of interest on all public issues of public debt obligations of the United States issued during the fiscal year of the United States Treasury ending next before such tax is due, as certified to the Farm Credit Administration by the Secretary of the Treasury; (5) dividends on class B stock and participation certificates may be declared as provided in section 205 (a) of this Act; and (6) any remaining net earnings shall be distributed as patronage refunds as provided in subsection (b) of this section. Notwithstanding the provisions of item (3) of this subsection, if at the end of any fiscal year the sum of the surplus and the reserve account of any bank is less than its outstanding capital stock and participation certificates, the bank shall continue to apply such 25 per centum of its net earnings to the reserve account until the sum of the surplus and the reserve account is equal to its outstanding capital stock and participation certificates. Each bank shall, on the effective date of the Farm Credit Act of 1956, establish a surplus account consisting of its earned surplus account, its reserve for contingencies, and the surplus of the production credit corporation transferred to the bank. No part of such surplus of any bank shall be distributed as patronage refunds or as dividends. In the event of a net loss in any fiscal year after providing for all operating expenses (including reasonable valuation reserves and losses in excess of any such applicable reserves), such loss shall be absorbed by: first, charges to the reserve account; second, charges to surplus other than that transferred from the production credit corporation of the district; third, charges to surplus transferred from the production credit corporation of the district; fourth, the impairment of class B stock and participation certificates; and fifth, the impairment of class A stock.

All 70 Stat. 663.

"(b) PATRONAGE REFUNDS.-Whenever at the end of its fiscal year a Federal intermediate credit bank has class A stock outstanding, patronage refunds declared for that year shall be paid in class B stock to production credit associations and in participation certificates to other financing institutions borrowing from or rediscounting with the bank during the fiscal year for which such refunds are declared. The recipients of such patronage refunds shall not be subject to Federal income taxes thereon. Whenever at the end of its fiscal year a Federal intermediate credit bank has no class A stock outstanding, patronage refunds declared for that year may be paid in such class B stock and participation certificates or in cash as determined by the bank. All patronage refunds shall be paid in the proportion that the amount of interest earned by the bank on its loans to and discounts for each production credit association or other financing institution bears to the total interest earned by the bank on all such loans and discounts outstanding during the fiscal year. Each participation certificate issued in payment of patronage refunds shall be in multiples of $5 and shall state on its face the rights, privileges, and conditions applicable thereto. Patronage refunds shall not be paid to any other Federal intermediate credit bank, or to any Federal land bank or bank for cooperatives.

"(c) DISTRIBUTION OF ASSETS ON LIQUIDATION OR DISSOLUTION.—In the case of liquidation or dissolution of any Federal intermediate credit bank, after payment or retirement, as the case may be, first, of all liabilities; second, of all class A stock at par; third, of all class B stock at par and all participation certificates at face amount; any remaining assets of the bank shall be distributed as provided in this subsection. Any of the surplus established pursuant to subsection (a) of this section (excluding that transferred from the production credit corporation of the district) which the Farm Credit Administration determines was contributed by financing institutions, other than the production credit associations, rediscounting with or borrowing from the bank on the effective date of the Farm Credit Act of 1956 shall be paid to such institutions, or their successors in interest as determined by the Farm Credit Administration, and the remaining portion of such surplus (including that transferred from the production credit corporation of the district) shall be paid to the holders of class A and class B stock pro rata. The contribution of each such financing institution under the preceding sentence shall be computed on the basis of the ratio of its patronage to the total patronage of the bank from the date of organization of the bank to the effective date of the Farm Credit Act of 1956. Any assets of the bank then remaining shall be distributed to the holders of class B stock and the holders of participation certificates pro rata."

SEC. 104. (a) Section 201 (b) of the Federal Farm Loan Act, as amended, is hereby amended by adding at the end thereof the following sentence: "The directors shall have power, subject to the approval of the Farm Credit Administration, to adopt such bylaws as may be necessary for the conduct of the business of the banks."

(b) Section 202 (a) of the Federal Farm Loan Act, as amended, is hereby amended to read as follows:

"SEC. 202. (a) The Federal intermediate credit banks, when chartered and established, shall have power, subject solely to the restrictions, limitations, and conditions contained in this Act or as may be prescribed by the Farm Credit Administration not inconsistent with the provisions of this Act—

"(1) to discount for, or purchase from, any production credit association organized under the Farm Credit Act of 1933, as amended, with its endorsement, any note, draft, or other such

Fed. intermediate credit banks.

42 Stat. 1454. 12 USC 1021. By laws.

12 USC 1031.

Powers.

48 Stat. 257.

All 70 Stat. 664.

12 USC 1131 note.

46 Stat. 816. 12 USC 1033.

42 Stat. 1456. 12 USC 1051.

Interest or

obligation presented by such association; and to make loans and advances to any such association secured by such collateral as may be approved by the Governor of the Farm Credit Administration;

"(2) to discount for, or purchase from, any national bank, State bank, trust company, agricultural credit corporation, incorporated livestock loan company, savings institution, credit union, and any association of agricultural producers engaged in the making of loans to farmers and ranchers, with its endorsement, any note, draft, or other such obligation the proceeds of which have been advanced or used in the first instance for any agricultural purpose, including the breeding, raising, fattening, or marketing of livestock; and to make loans and advances to any such financing institution secured by such collateral as may be approved by the Governor of the Farm Credit Administration: Provided, That no such loan or advance shall be made upon the security of collateral other than notes or other such obligations of farmers and ranchers eligible for discount or purchase under the provisions of this section, unless such loan or advance is made to enable the financing institution to make or carry loans for any agricultural purpose; and

"(3) to make loans to and discount paper for any other Federal intermediate credit bank, any Federal land bank, or any bank for cooperatives organized under the Farm Credit Act of 1933, as amended, all upon terms and at rates of interest or discount approved by the Farm Credit Administration."

(c) Section 202 (c) of the Federal Farm Loan Act, as amended, is amended by changing the word "three" to the word "five".

(d) Section 204 (a) of the Federal Farm Loan Act, as amended, is amended to read as follows:

"SEC. 204. (a) Loans and discounts by any Federal intermediate discount rates. credit bank shall bear such rates of interest or discount as the board of directors of the bank shall from time to time determine with the approval of the Farm Credit Administration, but the rates charged financing institutions other than production credit associations shall be the same as those charged production credit associations."

50 Stat. 708. 12 USC 781.

12 USC 1131 note.

49 Stat. 315. 12 USC 1041.

12 USC 1044, 1045.

48 Stat. 257. 12 USC 1131, 1134.

"Banks for cooperatives."

50 Stat. 704. 12 USC 640s.

(e). Section 13 of the Federal Farm Loan Act, as amended, is hereby amended by inserting in paragraph "Seventeenth", after the words "Federal land banks", a comma and the words "to Federal intermediate credit banks, or to banks for cooperatives organized under the Farm Credit Act of 1933, as amended,".

(f) Section 203 of the Federal Farm Loan Act, as amended, is amended (i) by inserting in subsection (a) thereof, after the words "outstanding consolidated debentures" the words "or other similar obligations"; and (ii) by inserting in subsections (d) and (e) thereof, after the word "debentures" wherever used therein, except in the last sentence of subsection (d), the words "or other similar obligations". SEC. 105. (a) Section 2 of the Farm Credit Act of 1933, as amended, is amended to read as follows:

"SEC. 2. The Governor of the Farm Credit Administration, hereinafter in this Act referred to as the 'Governor', is authorized and directed to organize and charter twelve banks to be known as 'banks for cooperatives'. One such bank shall be established in each city in which there is located a Federal land bank. The members of the several farm credit boards of the farm credit districts provided for in section 5 of the Farm Credit Act of 1937, as amended, shall be ex officio the directors of the respective banks for cooperatives. Such directors shall have power, subject to the approval of the Governor, to employ and fix the compensation of such officers and employees of

All 70 Stat. 665.

such banks as may be necessary to carry out the powers and duties conferred upon such banks under this Act."

12 USC 1131a,

(b) Section 3 of the Farm Credit Act of 1933 is amended by striking 48 Stat. 257. from the first sentence the words "the production credit corporations 1134a. and" and by striking from the second sentence the words "corpora

tions and".

(c) Section 4 of the Farm Credit Act of 1933 is hereby repealed. 12 USC 1131b. (d) Section 5 of the Farm Credit Act of 1933, as amended, is Revolving fund. amended (1) by changing "$120,000,000" in subsection (a) thereof to 48 Stat. 258, "$60,000,000"; (2) by striking from subsection (b) thereof the words 348. "the production credit corporations and"; (3) by changing "$40,000,000" in subsection (e) thereof to "$70,000,000"; and (4) by striking from subsection (e) thereof the words "and/or paid-in surplus".

12 USC 1131i.

(e) Section 6 of the Farm Credit Act of 1933, as amended, is 48 Stat. 259. amended to read as follows:

"INVESTMENT BY GOVERNOR IN STOCK OF PRODUCTION CREDIT

ASSOCIATIONS

12 USC 1131o.

"SEC. 6. The Governor may purchase class A stock of any production credit association in such amounts as he determines are required to meet the credit needs of farmers in the area served by such association. Payments for such stock purchased by the Governor shall be made out of the revolving fund authorized by section 5 (a) of this Act. Supra. The Governor may at any time require any production credit association to retire and cancel any class A stock held by him in such association if, in his judgment, the association has resources available therefor, and the proceeds of such stock retirements shall be paid into such revolving fund."

(f) Section 20 of the Farm Credit Act of 1933 is amended by chang- 48 Stat. 260. ing the fourth sentence to read as follows: "Such articles shall be signed 12 USC 1131d. by the individuals uniting to form the association and a copy thereof

shall be furnished to the Governor."

(g) Section 21 of the Farm Credit Act of 1933, as amended, is 48 Stat. 260. amended (1) by striking from the first sentence the words "production 12 USC 1131e. credit corporations" and substituting in lieu thereof the words "the Governor"; and (2) by deleting the last sentence thereof.

(h) Section 22 of the Farm Credit Act of 1933, as amended, is 48 Stat. 261. amended by striking out the words "production credit corporation", 12 USC 1131f. wherever they appear therein, and substituting in lieu thereof "Federal

intermediate credit bank".

(i) Section 23 of the Farm Credit Act of 1933, as amended, is 48 Stat. 261. amended (1) by changing the first sentence to read as follows: "Each 12 USC 1131g. production credit association shall, under such rules and regulations as may be prescribed by the farm credit board of the district with the approval of the Farm Credit Administration, invest its funds. and make loans to farmers for general agricultural purposes and other requirements of the borrowers."; (2) by deleting the second sentence; and (3) by striking from the third sentence the word "corporation" and inserting in lieu thereof the words "Federal intermediate credit bank".

(j) Section 34 of the Farm Credit Act of 1933, as amended, is 49 Stat. 317. hereby amended by adding before the semicolon at the end of "(b)" 12 USC 1134j. the words "or to Federal land banks or Federal intermediate credit

banks".

(k) Section 1 of the Farm Credit Act of 1933, as amended, is 49 Stat. 317. hereby amended by adding before the semicolon at the end of "(b)" 12 USC 11340. the words "or to Federal land banks or Federal intermediate credit

banks".