Circular

by the Farm Credit Administration. (July 17, 1916, c. 245, § 29, 39 Stat. 381; Mar. 27, 1933, Ex. Or. 6084.)

For limitations on new business of joint stock land banks, and provisions for assisting in their orderly liquidation, see § 810 and § 823 (note), of this title.

12 U. S. C., § 966

F. F. L. Act, § 29 National farm loan associations; disposition of stock in Federal land bank upon voluntary liquidation; personal liability of members. Upon liquidation of any national farm loan association, the stock in the Federal land bank held by such association shall be canceled and the Federal land bank shall thereupon issue to the borrowers through such association an amount of stock in the Federal land bank equal to the amount of stock held by such borrowers in the liquidated association, such stock to be held by the bank as collateral to the loans of such borrowers and to be paid off and retired at par in the same manner as stock held by borrowers in farm loan associations, and the Federal land bank shall pay to the borrowers holding such stock the same dividends as are paid to national farm loan associations by such bank. The personal liability of the stockholders in such liquidated association to the association shall survive such liquidation and shall be vested in the bank in that district, which may enforce the same as fully as the association could if in existence. (July 17, 1916, c. 245, § 29, 39 Stat. 381; Mar. 4, 1923, c. 252, § 311, 42 Stat. 1478.)

12 U. S. C., § 967

F. F. L. Act, § 29

Conservator in lieu of receiver-(a) Appointment; compensation; expenses.-Upon receiving satisfactory evidence that any national farm loan association has failed to meet its outstanding obligations of any description, and that it will be to the best interests of its creditors and stockholders for the association to continue in business, the Farm Credit Administration may, in its discretion, in lieu of appointing a receiver as provided in sections 961-966 of this title, appoint a conservator for such association and require of him such bond and security as the Administration may deem proper. The person so appointed shall be a land bank appraiser appointed under the authority of sections 651-664 of this title: Provided, however, That the Farm Credit Administration may, in its discretion, appoint some other qualified person. Any land bank appraiser appointed as a conservator shall serve without any additional compensation. Any other person appointed as a conservator shall receive such compensation as the Farm Credit Administration may authorize. Such compensation and all necessary and proper expenses of any such conservatorship shall be paid out of the assets of such association and shall be a lien thereon which shall be prior to any other lien. (July 17, 1916, c. 245, § 29, 39 Stat. 381; Aug. 19, 1937, c. 704, § 25 (d), 50 Stat. 713.)

(b) Conservation of assets; preparation of report of association's financial condition. The conservator, under the direction of the Farm Credit Administration, may, when directed so to do, take possession of the books, records, and assets of every description of such association, and take such action as may be necessary to conserve such assets pending final determination of the financial condition of

the association and the conditions under which it may be permitted to continue in business. Such conservator shall at the earliest practicable date make such investigations as shall be necessary to enable him to prepare an accurate report on the financial condition of such association. In preparing such report he shall value the association's assets and determine its indebtedness: Provided, That in determining said indebtedness contingent liabilities incurred by the association under the provisions of this chapter on endorsed mortgages shall be estimated and included as a debt. On the basis of said evaluation of the association's assets and indebtedness, the conservator shall determine the fair book value of the outstanding stock of said association and the claims of any retired shareholders based on their previous stock ownership. Upon its completion said report shall be submitted to the Federal land bank of the district and said bank shall thereupon indicate its approval thereof or note any exceptions thereto and submit such report together with its exceptions, if any, to the Farm Credit Administration for consideration. (July 17, 1916, c. 245, § 29, 39 Stat. 381; Aug. 19, 1937, c. 704, § 25 (d), 50 Stat. 713.)

(c) Approval or disapproval of report; powers of Administration. If said report is approved, in whole or in part, by the Farm Credit Administration, upon recommendation of the Federal land bank of the district said Administration shall then decide whether such association shall be permitted to pay off and retire its capital stock at its fair book value, upon full payment of the mortgage loans in connection with which such stock was issued originally, and to settle on the same basis the claims of any of its stockholders who have previously paid their loans in full, but have not received credit for, or the proceeds of their stock in such association. At the same time the Farm Credit Administration shall also decide whether it will permit said association to admit new members pursuant to section 724 of this title. If the decision of said Administration is in the affirmative, it may terminate the conservatorship and turn the affairs of the association back to its board of directors. If said report is not approved or the decision of said Administration is in the negative, it may, in its discretion, terminate the conservatorship and permit such association to resume the transaction of its business subject to such terms, conditions, restrictions, and limitations as it may prescribe for the protection of the rights of creditors and stockholders, or said Administration may appoint a receiver for the association as provided in sections 961-966 of this title. (July 17, 1916, c. 245, § 29, 39 Stat. 381; Aug. 19, 1937, c. 704, § 25 (d), 50 Stat. 713.)

(d) Settlement with shareholders.-Any settlement made with a retiring or retired shareholder on the basis of the fair book value of the stock of the association pursuant to this section shall be made only on condition that said shareholder agrees to accept such settlement as payment in full. If any shareholder or former shareholder does not desire to settle on such basis, he may, in lieu thereof, be given a participation certificate which will entitle him to share pro rata, on the basis of the number of shares of stock which he owned in the association, in the distribution of any assets of the association which is made after all of its indebtedness to creditors has been satisfied. The Federal land bank of the district may pay to the association from

the proceeds of bank stock retired in connection with the payment in full of loans endorsed by such association an amount sufficient to permit the association to make the settlements provided for in this section and any balance of such proceeds shall be retained by the bank and applied as a credit on the indebtedness of the association to it. (July 17, 1916, c. 245, § 29, 39 Stat. 381; Aug. 19, 1937, c. 704, § 25 (d), 50 Stat. 713.)

(e) Readjustment of fair book value of under par stock.-After any determination by the Farm Credit Administration as provided in this section, that the fair book value of the stock of a national farm loan association is less than the par value thereof, periodically thereafter any increase in the fair book value of said stock resulting from earnings of the association and actual recoveries in excess of the valuations used by the Farm Credit Administration in determining the fair book value of the stock of such association, as provided in this section, shall, under rules and regulations of the Farm Credit Administration, be apportioned ratably on a per-share basis to all outstanding stock or participation certificates having a fair book value less than par until the fair book value of all such stock or participation certificates is equal to the par value thereof. (July 17, 1916, c. 245, § 29, 39 Stat. 381 Aug. 19, 1937, c. 704, § 25 (d), 50 Stat. 713.)

(f) Continued losses; appointment of another conservator or receiver. In the event that the indebtedness, as determined by the conservator, of an association which has been under conservatorship pursuant to this section increases in excess of the earnings of such association, the Farm Credit Administration may, in its discretion, again appoint a conservator for the association, or it may appoint a receiver as provided in sections 961-966 of this title. (July 17, 1916, c. 245, § 29, 39 Stat. 381; Aug. 19, 1937, c. 704, § 25 (d), 50 Stat. 713.)

STATE LEGISLATION IMPAIRING SECURITY OF FARM LOANS 12 U. S. C., § 971

F. F. L. Act, § 30

Examination to ascertain adequacy of safeguards to mortgagee. It shall be the duty of the Land Bank Commissioner to make examination of the laws of every State of the United States and to inform the Farm Credit Administration as rapidly as may be whether in his judgment the laws of each State relating to the conveying and recording of land titles, and the foreclosure of mortgages or other instruments securing loans, as well as providing homestead and other exemptions and granting the power to waive such exemptions as respects first mortgages, are such as to assure the holder thereof adequate safeguards against loss in the event of default on loans secured by any such mortgages. (July 17, 1916, c. 245, § 30, 39 Stat. 382; Mar. 27, 1933, Ex .Or. 6084; June 16, 1933, c. 98, § 80 (a), 48 Stat. 273.)

"Farm Credit Administration" mentioned in the text was substituted for "Federal Farm Loan Board" pursuant to the Executive Order cited thereto, which is set out in full at the beginning of this chapter.

12 U. S. C., § 972

F. F. L. Act, § 30

Effect of insufficient protection on mortgages covering land in

examination in the case of any State, the Farm Credit Administration may declare first mortgages on farm lands situated within such State ineligible as the basis for an issue of farm loan bonds; and if said examination shall show that the laws of any such State afford insufficient protection to the holder of first mortgages of the kinds provided in this subchapter, said Farm Credit Administration may declare said first mortgages on land situated in such State ineligible during the continuance of the laws in question. In making his examination of the laws of the several States and forming his conclusions thereon said Land Bank Commissioner may call upon the office of the Attorney General of the United States for any needed legal advice or assistance, or may employ special counsel in any State where he considers such action necessary. (July 17, 1916, c. 245, § 30, 39 Stat. 382; Mar. 27, 1933, Ex. Or. 6084; June 16, 1933, c. 98, § 80 (a), 48 Stat. 273.)

12 U.S. C., § 973

F. F. L. Act, § 30

Statement to State Executive.-At the request of the Executive of any State the Farm Credit Administration shall prepare a statement setting forth in what respects the requirements of said administration cannot be complied with under the existing laws of such State. (July 17, 1916, c. 245, § 30, 39 Stat. 382; Mar. 27, 1933, Ex. Or. 6084.)

"Farm Credit Administration" and "administration" mentioned in the text were substituted for "Federal Farm Loan Board" and "board," respectively, pursuant to the Executive Order cited thereto, which is set out in full at the beginning of this chapter.

GOVERNMENT DEPOSITS IN LAND BANKS

F. F. L. Act, § 32

12 U. S. C., § 991 Interest rate; security; maximum amount.~The Secretary of the Treasury is authorized, in his discretion, upon the request of the Farm Credit Administration, to make deposits for the temporary use of any Federal land bank, out of any money in the Treasury not otherwise appropriated. Such Federal land bank shall issue to the Secretary of the Treasury a certificate of indebtedness for any such deposit, bearing a rate of interest not to exceed the current rate charged for other Government deposits, to be secured by farm loan bonds or other collateral, to the satisfaction of the Secretary of the Treasury. Any such certificate shall be redeemed and paid by such land bank at the discretion of the Secretary of the Treasury. The aggregate of all sums so deposited by the Secretary of the Treasury shall not exceed the sum of $6,000,000 at any one time. (July 17, 1916, c. 245, § 32, 39 Stat. 384; Mar. 27, 1933, Ex. Or. 6084.)

Federal land banks as depositaries of public money, see § 701 of this title.

12 U.S. C., § 992

F. F. L. Act, § 32

pur

Government guaranty of interest on qualified Federal land bank bonds issued during limited period; use of proceeds of such bonds; limitation on aggregate amount of such bonds; payment of interest by Government upon inability of issuing bank; rights of Government after such payment.-Until such time as the Land Bank Commissioner determines that Federal farm loan bonds (other than those issued under this paragraph) are readily salable in the open market at a yield not in excess of 4 per centum per annum, but in no case more than two years after May 12, 1933, Federal land banks may issue farm loan bonds as authorized under this subchapter, for the pose of making new loans, or for purchasing mortgages or exchanging bonds for mortgages as provided in paragraph "Second" of section 781 of this title. The aggregate amount of the bonds issued under this paragraph shall not exceed $2,000,000,000, and such bonds shall be issued in such denominations as the Land Bank Commissioner shall prescribe, shall bear interest at a rate not in excess of 4 per centum per annum, and shall be fully and unconditionally guaranteed as to interest by the United States, and such guaranty shall be expressed on the face thereof. In the event that it shall appear to the Land Bank Commissioner that the issuing bank or banks will be unable to pay upon demand, when due, the interest on any such bonds, the Secretary of the Treasury shall, upon the request of the Commissioner, pay the amount thereof, which is authorized to be appropriated out of any money in the Treasury not otherwise appropriated. Upon the payment of such interest by the Secretary of the Treasury the amount so paid shall become an obligation to the United States of the issuing bank or banks and shall bear interest at the same rate as that borne by the bonds upon which the interest has been so paid. After the expiration of one year from May 12, 1933, if in the opinion of the Land Bank Commissioner any part of the proceeds of the bonds authorized to be issued under this paragraph is not required for the purpose of making new loans or for purchasing mortg tgages or exchanging bonds for mortgages as herein provided, such bonds may be issued within the maximum limit herein specified for the purpose of refinancing any outstanding issues of Federal farm loan bonds; but no such bonds shall be issued after two years from May 12, 1933, for the purpose of such refinancing. (July 17, 1916, c. 245, § 32, 39 Stat. 384; May 12, 1933, c. 25, § 21, 48 Stat. 41; June 16, 1933, c. 98, § 80 (a), 48 Stat. 273.)

Limitation on issuance of bonds under this section, see § 992a of this title.

12 U. S. C., § 992a

Limitation of section 992.-After ninety days after January 31, 1934, no Federal land bank shall issue any bonds under the provisions of section 992 of this title, subject to the guarantee of interest on such bonds by the United States except for the purpose of refinancing any bond which is or has been issued subject to such guarantee of interest. (Jan. 31, 1934, c. 7, § 5, 48 Stat. 346.)

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