the amount of 5 per centum of such loan, such subscription to be paid in cash upon the granting of the loan by said land bank. Such capital stock shall be held by said land bank as collateral security for the payment of said loan, but said association shall be paid any dividends accruing and payable on said capital stock while it is outstanding. Such stock may, in the discretion of the directors, and with the approval of the Farm Credit Administration, be paid off at par and retired, and it shall be so paid off and retired upon full payment of the mortgage loan. In such case the national farm loan association shall pay off at par and retire the corresponding shares of its stock which were issued when said land bank stock was issued. (July 17, 1916, ch. 245, § 7, 39 Stat. 365; Ex. Ord. No. 6084, Mar. 27, 1933.)

12 U. S. C. § 722

Federal land banks; limitation

on reduction of capital stock

F. F. L. Act § 7

The capital stock of a Federal land bank shall not be reduced to an amount less than five per centum of the principal of the outstanding farm loan bonds issued by it. (July 17, 1916, ch. 245, § 7, 39 Stat. 365.)

12 U. S. C. § 723

Federal land banks; direct loans

(a) Authorization to make direct loans;

provisions relative to loans through associations, applicable to direct loans

F. F. L. Act § 7

Whenever it shall appear to the Land Bank Commissioner that national farm loan associations have not been formed in any locality, or that the farmers residing in the territory covered by the charter of a national farm loan association are unable to apply to the Federal land bank of the district for loans on account of the inability of the bank to accept applications from such association, the Land Bank Commissioner shall authorize said bank to make direct loans to borrowers secured by first mortgages on farm lands situated within any such locality or territory. Except as herein otherwise specifically provided, all provisions of this chapter applicable with respect to loans made through national farm loan associations shall, insofar as practicable, apply with respect to such direct loans, and the Land Bank Commissioner is authorized to make such rules and regulations as he may deem necessary with respect to such direct loans.

(b) Interest rate

The rate of interest on such direct loans made at any time by any

excess of the rate of interest charged to borrowers on mortgage loans made at such time by the bank through national farm loan associations. (c) Subscription to stock; retirement of stock

Each borrower who obtains a direct loan from a Federal land bank shall subscribe and pay for stock in such bank in the sum of $5 for each $100 or fraction thereof borrowed. Such stock shall be held by such Federal land bank as collateral security for the loan of the borrower and shall participate in all dividends. Upon full payment of the loan such stock shall, if still outstanding, be canceled at par, or, in the event that such stock shall have become impaired, at the estimated value thereof as approved by the Land Bank Commissioner, and the proceeds thereof shall be paid to the borrower. Any borrower's interest in such stock may be transferred or hypothecated, by him or by operation of law, to the Federal Farm Mortgage Corporation.

(d) Organization of national farm

loan association by direct borrowers

Each such borrower may covenant in his mortgage that, whenever there are ten or more borrowers who have obtained from a Federal land bank direct loans under the provisions of this section aggregating not less than $20,000, and who reside in a locality which may, in the opinion of the Land Bank Commissioner, be conveniently covered by the charter of and served by a national farm loan association, he will unite with such other borrowers to form a national farm loan association. Such borrowers shall organize the association subject to the requirements and the conditions specified in sections 711-723 of this title, so far as the same may be applicable, and in accordance with rules and regulations of the Land Bank Commissioner. As soon as the organization of the association has been approved by the Land Bank Commissioner, the stock in the Federal land bank held by each of the members of such association shall be canceled at par, and in lieu thereof the bank shall issue in the name of the association an equal amount of stock in said bank, which stock shall be held by said bank as collateral security as provided in sections 711-723 of this title with respect to other loans through national farm loan associations. Thereupon there shall be issued to each such member an amount of capital stock in the association equal to the amount which he previously held in said bank, which stock shall be held by said association as collateral security as provided in section 733 of this title. The board of directors of said association shall adopt a resolution authorizing and directing its secretary-treasurer on behalf of said association to endorse, and thereby become liable for the payment of, the mortgages taken from its charter members by the Federal land bank. When it shall appear to the satis

faction of the Land Bank Commissioner that all the foregoing conditions have been complied with, and upon the granting of the charter by the Land Bank Commissioner, the interest rate paid by each charter member of such association whose loan is in good standing shall, beginning with his next regular installment date, be reduced to the rate of interest paid by borrowers on new loans made through national farm loan associations in the same farm credit district at the time the said loan was made to such charter member.

(e) Charges to applicants and borrowers

Charges to be paid by applicants for direct loans from a Federal land bank shall not exceed amounts to be fixed by the Land Bank Commissioner and shall in no case exceed the charges which may be made to applicants for loans and borrowers through national farm loan associations under the provisions of sections 761 and 781 of this title.

(f) Option to make loan in bonds.

Direct loans made under subsections (a)-(e) of this section, may, at the option of the Federal land bank, be made in bonds of the Federal Farm Mortgage Corporation. (July 17, 1916, ch. 245, § 7, 39 Stat. 365; Mar. 4, 1933, ch. 270, § 1, 47 Stat. 1547; May 12, 1933, ch. 25, title II, § 26, 48 Stat. 44; June 16, 1933, ch. 98, title VIII, § 80 (a), 48 Stat. 273; Jan. 31, 1934, ch. 7, § 6, 48 Stat. 346; Aug. 19, 1937, ch. 704, §§ 5 (a), 22, 50 Stat. 704, 710; Oct. 29, 1949, ch. 786, § 1 (b), 63 Stat. 986.)

Abolishment of office of Land Bank Commissioner, see section 636f (a) of this

title.

12 U. S. C. § 724

F. C. Act 1937 § 25 (b)

Loans when association's stock is impaired

(a) Authorization; interest; admission

to membership of borrowers under section 723

Whenever it shall appear that the capital stock of a national farm loan association is impaired, the Farm Credit Administration may authorize the Federal land bank of the district in which such association is located to make loans to applicants through such association subject to the requirements and conditions specified for direct loans in section 723 of this title, except as otherwise specifically provided in this section, and may authorize such association to elect to membership borrowers having loans made pursuant to said section on lands situated within the chartered territory of the association. Borrowers admitted to membership in the association pursuant hereto shall be entitled to vote and hold office in the association and the rate of interest on their loans shall be one-fourth of 1 per centum per annum less than the rate of interest

provided at such time for direct loans. The association shall endorse all such mortgage loans but it shall not become liable therefor except as hereinafter provided.

(b) Effect of admission of ten borrowers

with loans in good standing aggregating $20,000

When there are ten or more borrowers admitted to membership in an association pursuant to this section whose loans are in good standing, as defined by the Farm Credit Administration, and aggregate not less than $20,000:

First. Liability of association and members.-The association shall become liable for the payment of said loans: Provided, however, That any other provisions of law to the contrary notwithstanding, the shareholders who have become members pursuant to this section shall not be held responsible, through the amount paid in and represented by their shares or otherwise, for any contracts, debts, or engagements of the association entered into before the date on which the first member was admitted to the association pursuant to this section and the shareholders of such association who were members prior to said date shall not be held responsible, through the amount paid in and represented by their shares or otherwise, for any mortgages endorsed by such association on or after said date, but this provision shall not be construed to relieve any other liability with respect to stock held by shareholders who were members prior to said date.

Second. Reduction of interest rate. The interest rate paid by each such borrower on each such loan shall, beginning with the next regular installment date, be reduced one-fourth of 1 per centum per annum.

Third. Exchange of Federal land bank stock for association stock.The stock in the Federal land bank held by each of said borrowers shall be exchanged for association stock in the manner provided for in section 723 (d) of this title.

Fourth. Admission of new members.-The association may thereafter admit new members, endorse their loans, and become liable for the payment of such loans as provided in paragraph "First" of this section.

Fifth. Election of loan committee.-At the next annual meeting of stockholders, and thereafter, the loan committee of such association may be elected by the members who become stockholders pursuant to this section and any loan committee so elected shall have the powers specified for loan committees elected as provided in section 747 of this title: Provided, however, That in the event such stockholders fail to elect the loan committee, new members shall be admitted to the association as otherwise provided in this chapter.

Sixth. Records and accounts; dividends.-In accordance with rules and regulations prescribed by the Farm Credit Administration, the as

sociation shall maintain separate capital-stock records; shall keep all capital losses or gains, reserves (including legal reserves), and dividends received from the Federal land bank on stock owned by the association in connection with loans for which it becomes liable as provided in this section separate and apart from capital losses or gains, reserves (including legal reserves), and dividends received from the Federal land bank on stock owned by the association in connection with other loans of the association; and shall segregate any undivided profits of the association resulting from its business operations in like manner when so required by rules and regulations of the Farm Credit Administration. Subject to the other provisions of this chapter with respect to the declaration of dividends, dividends may be declared exclusively on association stock owned by borrowers with loans for which the association becomes liable as provided in this section or exclusively on association stock owned by borrowers with other loans through the association.

(c) Same; effect of loan not in good standing

If the loan of any borrower who was admitted to membership pursuant to this section is not in good standing at the time when there are ten or more borrowers with loans aggregating not less than $20,000 which are in good standing, the provisions of paragraphs "First", "Second”, and “Third" of this section shall be applicable to his loan at such time as it shall be placed in good standing.

(d) Removal of impairment of stock

If and when all impairment is removed in the stock owned by shareholders with loans which were made prior to the date on which the first member was admitted to the association pursuant to this section, the holders of such stock and the holders of stock issued on and after said date may, pursuant to rules and regulations of the Farm Credit Administration and consistent with the provisions of this chapter, agree as to the rights, powers, privileges, duties, and liabilities which shall thenceforth attach to their respective shares of stock and otherwise agree as to the future applicability, if any, of the special provisions contained in this section. (Aug. 19, 1937, ch. 704, § 25 (b), 50 Stat. 711.)

Capital Stock of National Farm Loan Associations

12 U. S. C. § 731

Par value of shares

F. F. L. Act § 8

The shares in national farm loan associations shall be of the par