occurs at the Treasury redemption is to be made out of the deposit of the issuing bank kept for such purpose, or if that deposit is inadequate such redemption may be made out of the deposit of another bank. The bank on behalf of which such redemption is made must reimburse the deposit of the other bank.

Section 7 (a) requires each intermediate credit bank which issues notes to return notes which it receives and which are issued by another intermediate credit bank to the Treasury or to the issuing bank for redemption. The committee is given the power to require Federal Reserve banks similarly to present for redemption notes received by them. Subsection (b) requires notes received by the Treasury to be returned to the bank of issue for the credit of the United States. Subsection (c) authorizes an issuing bank to reduce its liability for notes by depositing notes or other lawful money with the Treasury. Under subsection (d) notes returned to or redeemed by an issuing bank or deposited with the Secretary of the Treasury are not to be reissued except upon compliance with the terms of an original issue. Subsection (e) gives the Secretary of the Treasury the power to prescribe regulations governing the return of notes to an issuing bank and the cancelation and destruction of notes and governing the prevention of reissue of notes except upon compliance with the terms of an original issue.

Section 8 authorizes the Federal Reserve banks to perform services in connection with the execution of powers under the act for the issuing banks, the Farm Loan registrars, the committee, or the Comptroller of the Currency. The Federal Reserve banks may receive such compensation as may be agreed upon for such services. Section 9 authorizes Intermediate Credit banks to make direct loans to Federal land banks. Such loans may be made on the security of direct obligations of the United States, Federal Farm Mortgage Corporation bonds, Consolidated Federal land-bank bonds, Federal land-bank bonds, or other security approved by the Governor of the Farm Credit Administration. For the purpose of enabling this lending power to be effective, the short limitations on maturity of loans which the Intermediate Credit banks may make and the limitations on the rate of interest which may be charged original borrowers are removed in the case of such loans to land banks. These matters then become the subject of regulation by the Intermediate Credit Commissioner, with the approval of the Governor of the Farm Credit Administration. This last amendment is made under section 10 (a) which also authorized the fixing of interest and discount rates by the Intermediate Credit Commissioner, with the approval of the Governor, in all other classes of loans made by Intermediate Credit banks. Section 10 (b) provides that loans to cooperative associations by the Central Bank for Cooperatives and the regional banks for cooperatives shall bear rates of interest prescribed by the Cooperative Credit Commissioner, with the approval of the Governor of the Farm Credit Administration. Specific power is given in both cases to make different rates for different banks and different classes and maturities of loans and discounts.

Section 11 authorizes the necessary changes in charters and bylaws of corporations affected by the act so that the charters and bylaws may conform to its requirements.

Section 12 authorizes the deposit of funds with the Federal Farm Mortgage Corporation by corporations organized under the Federal Farm Loan Act, the Farm Credit Act of 1933, as amended, and by corporations in which any Production Credit Corporation organized under the Farm Credit Act holds stock and by regional agricultural credit corporations organized under the Emergency Relief and Construction Act, and by receivers of such organizations. The deposits are authorized to be accepted by the Federal Farm Mortgage Corporation upon such terms and conditions as may be prescribed by it, but interest paid on various classes of deposits is to be subject to the approval of the Secretary of the Treasury. The Federal Farm Mortgage Corporation is authorized to invest the deposits in such manner as is authorized by law in the case of unobligated funds held by it. Sections 13 and 14 reduce interest rates on land bank and Commissioner loans made hereafter.

Under section 13 (a) loans made after the effective date of the act are to be made at an interest rate not in excess of 2 percent per annum which is to apply to the unpaid amount of the loan not in excess of $5,000. This reduced interest rate applies up to that maximum during the entire life of the loan. Similarly, under subsection (b) the rates of interest on direct loans made by land banks after the date of the enactment of the act are to be one-half of 1 percent in excess of the rates of interest (not less than 2 percent herein before described) on so much of the amount remaining unpaid of the loan as does not exceed $5,000.

Under subsection (c) of section 13 the Secretary of the Treasury is authorized and directed to pay quarterly to each land bank the amount which the Land Bank Commissioner finds constitutes the reduction in the amount of interest received by the land bank during that quarter on account of the reduced interest rates provided for in subsections (a) and (b). The amount which the Secretary of the Treasury pays, however, is to be reduced by the amount that the Land Bank Commissioner finds is the savings during that quarter in interest payable by the land bank. The saving referred to is the saving based on the difference between the amount of interest which the land bank would have had to pay on its bonds and the amount which it did have to pay on its borrowing at the intermediate credit bank. The calculation in such cases is to be determined by ascertaining what the interest payment would have been had the land bank been obliged to issue bonds to obtain the money equal to the total amount of its borrowing at the intermediate credit bank during that quarter.

Section 14 reduces the interest rates on loans made by the Land Bank Commissioner on behalf of the Federal Farm Mortgage Corporation under section 32 of the Emergency Farm Mortgage Act of 1933. This provision applies only to loans hereafter made. The interest rate in such cases may not exceed 2 percent. This reduced interest rate applies only to so much of the unpaid balance of the loan as does not exceed $5,000. In the case of both a first and second mortgage loan to the same borrower under the section the reduced interest rate is to apply to the first-mortgage loan and applies only to so much of the second-mortgage loan as is equal to $5,000 minus the unpaid amount of the first-mortgage loan. A similar provision applies in the case in which the borrower is obligated both on a land-bank loan and a second-mortgage commissioner loan. The effect of these

H. Repts., 74-1, vol, 2—29

two provisions is to limit the reduced interest rate to a total debt of $5,000 on both mortgages and to apply the reduced interest rate up to its limits to the first-mortgage loan.

CHANGES IN EXISTING LAW

In compliance with paragraph 2a of rule XIII of the Rules of the House of Representatives, changes in existing law made by the bill are shown as follows: Existing law proposed to be omitted is enclosed in black brackets; new matter is printed in italics; existing law in which no change is proposed is shown in roman.

FEDERAL FARM LOAN ACT

SEC. 7. * * * 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] associations, or, in the case of any such direct loan made after the date of the enactment of the Agricultural Bank Note Act, one half of 1 per centum in excess of the rate provided in paragraph "Seventeenth" of section 13 on so much of the unpaid balance of such loan as does not exceed $5,000.

(Sec. 12) Twelfth. Notwithstanding the provisions of paragraph "Second", the rate of interest on any loans on mortgage made through national farm-loan associations or through agents as provided in section 15, or purchased from jointstock land banks, by any Federal land bank, outstanding on the date this paragraph takes effect or made through national farm-loan associations within two years after such date, shall not exceed 42 per centum per annum for all interest payable on installment dates occurring within a period of five years commencing sixty days after the date this paragraph takes effect; and no payment of the principal portion of any installment of any such loan shall be required during such five-year period if the borrower shall not be in default with respect to any other condition or covenant of his mortgage. The foregoing provisions shall apply to loans made by Federal land banks through branches, except that the rate of interest on such loans for such five-year period shall be 5 per centum in lieu of 41⁄2 per centum. The Secretary of the Treasury shall pay each Federal land bank, as soon as practicable after October 1, 1933, and after the end of each quarter thereafter, such amount as the Land Bank Commissioner certifies to the Secretary of the Treasury is equal to the amount by which interest payments on mortgages held by such bank have been reduced, during the preceding quarter, by reason of this paragraph; but in any case in which the Land Bank Commissioner finds that the amount of interest payable by such bank during any quarter has been reduced by reason of the refinancing of bonds under section 32 of this Act, the amount of the reduction so found shall be deducted from the amount payable to such bank under this paragraph. The Secretary of the Treasury shall pay each Federal land bank, as soon as practicable after October 1, 1935, and after the end of each quarter thereafter, such amount as the Land Bank Commissioner finds is equal to the amount by which interest payments made to such bank, during the preceding quarter, are less, by reason of the rates of interest applicable under the provisions of paragraph "Seventeenth" of section 13 and section 7 to unpaid balances, not in excess of $5,000, of mortgage loans, than interest payments would be without regard to such provisions; but in any case in which the Land Bank Commissioner finds that the amount of interest payable by such bank during any such quarter has been reduced by reason of loans and advances made to it by Federal intermediate credit banks under section 202 (a) (3) of this Act, as amended, there shall be deducted from the amount payable under this amendatory paragraph for such quarter the amount which the Commissioner finds is the difference between the amount which would have been payable for such quarter as interest on farm loan bonds of a face value equal to the amount of loans and advances on which such bank was obligated to Federal intermediate credit banks during such quarter under such section 202 (a) (3) and the amount of interest payable for such quarter on such loans and advances to such bank under such section 202 (a) (3). There is authorized to be appropriated, out of any money in the Treasury not otherwise appropriated, such sums as may be necessary to make the payments authorized by this amendatory paragraph.

SEC. 13. Every Federal land bank shall have power, subject to the limitations and requirements of this Act

*

Seventeenth. In the case of any loan on mortgage made after the date of the enactment of the Agricultural Bank Note Act, the rate of interest on so much of the unpaid balance of such loan as does not exceed $5,000 shall not exceed 2 per centum per

SEC. 202. (a) Federal intermediate credit banks shall have power

(4) To make loans or advances direct to any Federal Land Bank on the security of direct obligations of the United States, Federal Farm Mortgage Corporation Bonds, Consolidated Federal Land Bank Bonds, Federal Land Bank Bonds, or other security approved by the Governor of the Farm Credit Administration. The limitations on maturity of loans provided in section 202 (c) of this Act and the provisions of section 204 (b) of this Act (relating to rates of interest charged original borrowers) shall not apply with respect to loans or advances made under this paragraph.

SEC. 204. [(a) That before making any discounts under the provisions of this title, each Federal intermediate credit bank shall establish and promulgate a rate of discount to be approved by the Farm Credit Administration. Any Federal intermediate credit bank which has made an issue of debentures under the provision of this title may thereafter establish, with the approval of the Farm Credit Administration, a rate of discount not exceeding by more than 1 per centum per annum the rate borne by its last preceding issue of debentures: Provided, That the Farm Credit Administration may classify loans and debentures according to maturity, and if debentures of different classes sell at a different rate the Federal intermediate credit banks may differentiate in rates on like classes of loans in the same ratio.]

(a) The Intermediate Credit Commissioner, with the approval of the Governor of the Farm Credit Administration, shall fix the discount rates and interest rates to be charged by Federal Intermediate Credit Banks. Different rates may be fixed for different banks and for different classes and maturities of loans and discounts made by the same bank.

AGRICULTURAL MARKETING ACT

SEC. 8. [(a) Loans to any cooperative association shall bear such rates of interest as the Governor of the Farm Credit Administration shall by regulation prescribe, but in no case shall the rate be less than 3 per centum per annum or more than 6 per centum per annum on the unpaid principal. In fixing such rates of interest, the governor shall fix such rates as he deems the needs of the lending agencies require and in the case of loans made for the purposes of section 7 (a) (1) the rate shall, as nearly as practicable, conform to a rate 1 per centum per annum in excess of the Federal Intermediate Credit Bank discount rate at the time the loan is made, and in the case of loans made for the purposes of section 7 (a) (2) the rate of interest shall, as nearly as practicable, conform to the prevailing rate on mortgage loans made to members of national farm-loan associations at the time the loan is made.]

(a) Loans to any cooperative association shall bear such rates of interest as may be prescribed by the Cooperative Credit Commissioner, with the approval of the Governor of the Farm Credit Administration. In fixing such rates of interest, the Commissioner shall fix such rates as he deems the needs of the lending agencies require, and different rates may be fixed for different banks and for different classes and maturities of loans made by the same bank.

EMERGENCY FARM MORTGAGE ACT OF 1933

SEC. 32. The Reconstruction Finance Corporation is authorized and directed to allocate and make available to the Land Bank Commissioner the sum of $200,000,000, or so much thereof as may be necessary, to be used for the purpose of making loans as hereinafter provided to any farmer, secured by a first or second mortgage upon the whole or any part of the farm property, real or personal, including crops, of the farmer. The amount of the mortgage given by any farmer, together with all prior mortgages or other evidences of indebtedness secured by such farm property of the farmer, shall not exceed 75 per centum of

the normal value thereof, as determined upon an appraisal made pursuant to the Federal Farm Loan Act, as amended; nor shall a loan in excess of $7,500 be made to any one farmer. Every mortgage made under this section shall contain an agreement providing for the repayment of the loan on an amortization plan by means of a fixed number of annual or semiannual installments, sufficient to cover (1) interest on unpaid principal at a rate not to exceed 5 per centum per annum and (2) such payments equal in amount to be applied on principal as will extinguish the debt within an agreed period of not more than ten years or, in the case of a first or second mortgage secured wholly by real property and made for the purpose of reducing and refinancing an existing mortgage within an agreed period no greater than that for which loans may be made under the Federal Farm Loan Act, as amended, from the date the first payment on principal is due: Provided, That during the first three years the loan is in effect payments of interest only may be required if the borrower shall not be in default with respect to any other condition or covenant of his mortgage. No loan shall be made under this section unless the holder of any prior mortgage or instrument of indebtedness secured by such farm property arranges to the satisfaction of the Land Bank Commissioner to limit his right to proceed against the farmer and such farm property for default in payment of principal. Loans under this section shall be made for the following purposes only: (1) Refinancing, either in connection with proceedings under chapter VIII of the Bankruptcy Act of July 1, 1898, as amended (relating to agricultural compositions and extensions), or otherwise, any indebtedness, secured or unsecured, of the farmer, (2) providing working capital for his farm operations, and (3) enabling any farmer to redeem and/or repurchase farm property owned by him prior to foreclosure which has been foreclosed at any time between July 1, 1931, and the date of the enactment of this Act, or which is foreclosed after the enactment of this Act. The provisions of paragraph "Ninth "of section 13 of the Federal Farm Loan Act, as amended (relating to charges to applicants for loans and borrowers from the Federal land banks), shall, so far as practicable, apply to loans made under this section. used in this section, the term "farmer" means any individual who is bona fide engaged in farming operations, either personally or through an agent or tenant, or the principal part of whose income is derived from farming operations, and includes a personal representative of a deceased farmer. Until February 1, 1936, the Land Bank Commissioner shall, in his name, make loans under this section on behalf of the Federal Farm Mortgage Corporation, either in cash or in bonds of the corporation at his election, but no such loans shall be made by him after February 1, 1936, except for the purpose of refinancing loans previously made by him under this section. Not to exceed $600,000,000 of the bonds and proceeds thereof issued under section 4 of the Federal Farm Mortgage Corporation Act are hereby made available for the purposes of this section, in addition to the amounts transferred to such corporation under section 3 of such Act.

As

In the case of any first or second mortgage loan made under this section after the date of the enactment of the Agricultural Bank Note Act, the rate of interest on so much of the unpaid balance of such loan as does not exceed $5,000 shall not exceed 2 per centum per annum. Whenever a borrower obligated under a second-mortgage loan made under this section is also obligated under a first-mortgage loan made under this section, or under a first-mortgage loan made by a Federal Land Bank the interest rate on the unpaid balance, not in excess of $5,000, of which is determined under section 13 of the Agricultural Bank Note Act, the reduced interest rate provided in this paragraph shall apply to an amount of the unpaid balance of the second-mortgage loan equal to the amount by which the unpaid balance of such first-mortgage loan is less than $5,000, and this sentence shall apply regardless of the priority in the time of making such first and second mortgage loans.