85 STAT. ] PUBLIC LAW 92-181-DEC. 10, 1971 583 

Public Law 92-181 

A N AC T December 10,197 1 

To further provide for the farmer-owned cooperative system of making credit [S. 1483] 

available to farmers and ranchers and their cooperatives, for rural residences, 

and to associations and other entities upon which farming operations are 

dependent, to provide for an adequate and flexible flow of money into rural 

areas, and to modernize and consolidate existing farm credit law to meet 

current and future rural credit needs, and for other purposes. 

Be it enacted by the Senate and Houae of RepresentatloeH of the 

United States of America in Congress assembled^ That this Act may 

be cited as the "Farm Credit Act of 1971'', 

POLICY AND OBJECTIVI-:jS 

SEC. 1.1 (a) It is declared to be the policy of the Congress, recognizing that a prosperous, productive agriculture is essential to a free 

nation and recognizing the growing need for credit in rural areas, that 

the farmer-owned cooperative Farm Credit System be designed to 

accomplish the objective of improving the income and well-being of 

American farmers and ranchers by furnishing sound, adequate, and 

constructive credit and closely related services to them, their cooperatives, and to selected farm-related businesses necessary for efficient 

farm operations. 

(b) It is the objective of this Act to continue to encourage farmerand i-ancher-boi-rowers participation in the management, control, and 

ownership of a permanent system of credit for agriculture which w411 

be responsive to the credit needs of all types of agricultural producers 

having a basis for credit, and to modernize and improve the authorizations and means for furnishing such credit and credit for housing in 

rural areas made available through the institutions constituting the 

Farm Oedit System as herein provided. 

SEC. 1.2. TH E FARM CREDIT SYSTEM.—The Farm Oedit System 

shall include the Federal land banks, the Federal land bank associations, the Federal intermediate credit banks, the production credit 

associations, the banks for cooperatives, and such other institutions as 

may be made a part of the System, all of which shall be chartered by 

and subject to the supervision of the Farm Credit Administration. 

TITLE I—FEDERAL LAND BANKS AND ASSOCIATIONS 

PART A—FEDERAL LAND BANKS 

SEC, 1.3, ESTABLISHMENT; TITLE; BRANCHES.—The Federal land 

banks established pursuant to section 4 of the Federal Farm Loan Act, 

as amended, shall continue as federally chartered instrumentalities of 

the Ignited States. Their chaiters or organization certificates may be 

modified from time to time by the Farm Ci'edit Administration, not 

inconsistent with the provisions of this title, as may be necessary or 

expedient to implement this Act. Unless an existing Federal land bank 

is merged with one or more other such banks under section 4.10 of this 

Act, there shall be a Federal land bank in each farm credit district. 

It may include in its title the name of the city in which it is located 

or other geographical designation. When authorized by the Farm 

Credit Administration, it may establish such branches or other offices 

as may be appropriate for the effective operation of its business. 

Farm Credit 

Act of 1971. 

Post, p . 624. 
584 PUBLIC LAW 92-181-DEC. 10, 1971 [85 STAT. 

SEC. 1.4. CoKPOKATE EXISTENCE ; GENERAL COKPOKATE POWERS.— 

Each Federal land bank shall be a body corporate and, subject to 

supervision by the Farai Credit Administration, shall have power to— 

(1) Adopt and use a corporate seal. 

(2) Have succession until dissolved under the provisions of this 

Act or other Act of C ongress. 

(3) Make contracts. 

(4) Sue and be sued. 

(5) Acquire, hold, dispose, and otherwise exercise all the usual incidents of ownership of real and personal property necessary or con-

\ enient to its business. 

(6) Make loans and commitments for credit, accept advance payments, and provide services and other assistance as authorized in this 

Act, and charge fees therefor. 

(7) Operate under the direction of its board of directors. 

(8) Elect by its board of directors a president, any vice president, 

a secretary, a treasurer, and provide for such other officers, employees, 

and agents as may be necessary, including joint employees as proN'ided in this Act, define their duties, and require surety bonds or make 

other provision against losses occasioned by employees. 

(9) Prescribe by its board of directors its bylaws not inconsistent 

with law providing for the classes of its stock and the manner in which 

its stock shall be issued, transferred, and retired; its officers, employees, 

and agents are elected or provided for; its property acquired, held, and 

transferred; its loans and appraisals made; its general business conducted; and the privileges granted it by law exercised and enjoyed. 

(10) Borrow money and issue notes, bonds, debentures, or other 

obligations individually, or in concert with one or more other banks 

of the System, of such cliaracte: terms, conditions, and rates of interest 

as may be determined. 

(11) Accept deposits of securities or of current funds from its Federal land bank associations and pay interest on such funds. 

(12) Participate with one or more other Federal land banks in loans 

under this title on such terms as may be agreed upon among such 

banks. 

(13) Approve the salary scale of the officers and employees of the 

Federal land bank associations and the appointment and compensation of the chief executive officer thereof and supervise the exercise by 

such associations of the functions vested in or delegated to them. 

(14) Deposit its securities and its current funds with any member 

bank of the Federal Reserve System and pay fees therefor and receive 

interest thereon as may be agreed. When designated for that purpose 

by the Secretary of the Treasury, it shall be a depository of public 

money, except receipts from customs, under such regulations as may 

l)e prescribed by the Secretary; may be employed as a fiscal agent of 

the Government, and shall perform all such reasonable duties as a 

depository of public money or financial agent of the Government as 

Prohibition. jj^a^y ]jQ required of it. No Government funds deposited under the provisions of this subsection shall be invested in loans or bonds or other 

obligations of the bank. 

(15) Buy and sell obligations of or insured by the United States or 

of any agency thereof, or securities backed by the full faith and credit 

of any such agency, and make such other investments as may be 

authorized by the Farm Credit Administration. 

(16) Conduct studies and make and adopt standards for lending. 

(17) Delegate to Federal land bank associations such functions 

vested in or delegated to the bank as it may determine. 

(18) Amend and modify loan contracts, documents, and payment 

schedules, and release, subordinate, or substitute security for any of 

them. 
85 STAT. ] PUBLIC LAW 92-181-DEC. 10, 1971 585 

(19) Perform any function delegated to it by the Farm Credit 

Administration. 

(20) Require Federal land bank associations to endorse notes and 

other obligations of its members to the bank. 

(21) Exercise by its board of directors or authorized officers, 

employees, or agents all such incidental powers as may be necessary or 

expedient to carry on the business of the bank. 

SEC. 1.5. LAND BANK STOCK ; VALUE ; SHARES ; VOTING ; DIVIDEND.— 

(a) The capital stock of each Federal land bank shall be divided 

into shares of par value of $5 each, and may be of such classes as its 

board of directors may determine with the approval of the Farm 

Credit xVdministration. 

(b) Voting stock of each bank shall be held only by the Federal 

land bank associations and direct borrowers and borrowers through 

agents who are farmers or ranchers, which stock shall not be transferred, pledged, or hypotheticated except as authorized pursuant to 

this Act. 

(c) The board of each bank shall from time to time authorize the 

issue or increase of its capital stock necessary to permit the issuance 

of additional shares to the Federal land bank associations so that 

members of such associations purchasing stock or participation certificates therein may be eligible for loans from the banK. 

(d) Nonvoting stock may be issued to the Governor of the Farm 

Credit Administration, and may also be issued to Federal land bank 

associations in amounts which will permit the bank to extend financial 

assistance to eligible persons other than farmers or ranchers. Participation certificates with a face value of $5 each may be issued in lieu 

of nonvoting stock when the bylaws of the bank so provide. 

(e) Dividends shall not be payable on any stock held by the Governor of the Farm Credit Administration. Non-cumulative dividends 

may be payable on other stock and participation certificates of the 

bank. The rate of dividends may be different between different classes 

and issues of stock and participation certificates on the basis of the 

comparative contributions of the holders thereof to the capital or 

earnmgs of the bank by such classes and issues, but otherwise dividends shall be without preference. 

SEC. 1.6. REAL ESTATE MORTGAGE LOANS.—^^The Federal land banks 

are authorized to make long-term real estate mortgage loans in rural 

areas, as defined by the Farm Credit Administration, and continuing 

commitments to make such loans under specified circumstances, or 

extend other financial assistance of a similar nature to eligible borrowers, for a term of not less than five nor more than forty years. 

SEC. 1.7. INTEREST RATES AND OTHER CHARGES.—Loans made by 

a Federal land bank shall bear interest at a rate or rates, and on such 

terms and conditions, as may be determined by the board of directors 

of the bank from time to time, with the approval of the Farm Credit 

Administration. In setting rates and charges, it shall be the objective 

to provide the types of credit needed by eligible borrowers at the lowest reasonable costs on a sound business basis taking into account the 

cost of money to the bank, necessary reserve and expenses of the banks 

and Federal land bank associations, and providing services to stockholders and members. The loan documents may provide for the interest rate or rates to vary from time to time during the repayment 

period of the loan, in accordance with the rate or rates currently being 

charged by the bank. 
586 PUBLIC LAW 92-181-DEC. 10, 1971 [85 STAT. 

SEC. 1.8. ELIGIBILITY.^—The services authorized in this title may be 

made available to persons who are or become stockholders or members 

in the Federal land bank associations and are (1) bona fide farmers 

and ranchers, (2) persons furnishing to farmers and ranchers farmrelated services directly related to their on-farm operating needs, or 

(3) owners of rural homes. 

SEC. 1.9. SECURITY.—Loans shall not exceed 85 per centum of the 

appraised value of the real estate security, and shall be secured by first 

liens on interest in real estate of such classes as may be approved by 

the Farm Credit Administration. The value of security shall be determined by appraisal under appraisal standards prescribed by the bank 

and approved by the Farm Credit Administration, to adequately 

secure the loan. However, additional security may be required to supplement real estate security, and credit factors other than the ratio 

between the amount of the loan and the security value shall be given 

due consideration. 

SEC. 1.10. PURPOSES.—Loans made by the Federal land banks to 

farmers and ranchers may be for any agricultural purpose and other 

credit needs of the applicant. Loans may also be made to rural residents for rural housing financing under regulations of the Farm Credit 

Administration. Rural housing financed under this title shall be for 

single-family, moderate-priced dwellings and their appurtenances not 

inconsistent w^ith the general quality and standards of housing existing 

in, planned or recommended for the rural area w^here it is located: 

Provided, hoioever^ That a Federal land bank may not at any one time 

have a total of loans outstanding for such rural housing to persons 

other tlian farmers or ranchers in amounts exceeding 15 per centum 

of the total of all loans outstanding in such bank: Provided further^ 

"Rural areas." xha t for ruTal houslug purposes under this section the term "rural 

areas" shall not be defined to include any city or village having a 

population in excess of 2,500 inhabitants. Loans to persons furnishing 

farm-related services to farmers and ranchers directly related to their 

on-farm operating needs may be made for the necessary capital structures and equipment and initial working capital for such services. The 

banks may own and lease, or lease with option to purchase, to persons 

eligible for assistance under this title, facilities needed in the operations of such persons. 

SEC. 1.11. SERVICES RELATED TO BORROWERS' OPERATIONS.—The Federal land banks may provide technical assistance to borrowers, members, and applicants and may make available to them at their option 

such financial related services appropriate to their on-farm operations 

as determined to be feasible by the board of directors of each district 

bank, under regulations of the Farm Credit Administration. 

SEC. 1.12. LOANS THROUGH ASSOCIATIONS OR AGENTS.—(a) The Federal land banks shall, except as otherwise herein provided, make loans 

through a Federal land bank association serving the territory in 

w^hich the real estate offered by the applicant is located. If there is 

no active association chartered for the territory where the real estate 

is located, or if the association has been declared insolvent, the bank 

may make the loan through another such association, directly, or 

through such bank or trust company or savings or other financial institution as it may designate. When the loan is not made through a 

Federal land bank association, the applicant shall purchase stock in 

the bank in an amount not less than $5 nor more than $10 for each 

$100 of the loan and the loan shall be made on such terms and conditions as the bank shall prescribe. 
85 STAT. ] PUBUC LAW 92-181-DEC. 10, 1971 587 

PART B—FEDERAL LAXD BAXK ASSOCIATIONS 

SEC. 1.13. ORGAXIZATTOXS; ARTICLES; CHARTERS; POWERS OF THE 

GOVERNOR.—Each Federal land bank association chartered under section 7 of the Federal Farm Loan Act, as amended, shall continue as a 

federally chartered instrumentality of the United States. A Federal 

land bank association may be organized by any group of ten or more 

persons desiring to borrow money from a Federal land bank, including 

persons to whom the Federal land bank has made a loan directly or 

through an agent and has taken as security real estate located in the 

territory proposed to be served by the association. The articles of 

association shall describe the territory within which the association 

proposes to carry on its operations. Proposed articles shall be forwarded to the Federal land bank for the district, accompanied by an 

agreement to subscribe on behalf of the association for stock of the 

land bank equal to not less than $5 nor more than $10 per $100 of the 

amount of the aggregate loans desired or held by the association members. Such stock may be paid for by surrendering for cancellation stock 

in the bank held by a borrower and the issuance of an equivalent 

amount of stock to such borrower in the association. The articles shall 

be accompanied by a statement signed by each of the members of the 

proposed association establishing his eligibility for, and that he has 

or desires a Federal land bank loan; that the real estate with respect 

to which he desires a loan is not being served by another Federal land 

bank association; and that he is or will become a stockholder in the 

proposed association. xA. copy of the articles of association shall be forwarded to the Governor of the Farm Credit Administration with the 

recommendations of the bank concerning the need for the proposed 

association in order to adequately ser\'e the credit needs of eligible persons in the proj^osed territory and a statement as to whether or not the 

territory includes any territory described in the charter of another 

Federal land bank association. The Governor for good cause shown 

may deny the charter applied for. Upon the approval of the proposed 

articles by the Governor and the issuance of such charter, the association shall become as of such date a federally chartered body corporate 

and an instrumentality of the L^nited States. The Governor shall have 

power, in the terms of the charter, under rules and regulations prescribed by him or by approving bylaws of the association, to provide 

for the organization of the association, the initial amount of stock of 

such association, the territory within which its operations may be carried on and to direct at any time changes in the charter of such association as he finds necessary in accomplishing the purposes of this Act. 

SEC. 1.14. BOARD OF DIRECTORS.—Each Federal land bank association shall elect from its voting shareholders a board of directors of 

such number, for such terms, in such manner, and with such qualifications as may be required by its bylaws. 

SEC. 1.15. GENERAL CORPORATE POWERS.—Each Federal land bank 

association shall be a body corporate and, subject to supervision of the 

Federal land bank for the district and of the Farm Credit Administration, shall have the power to— 

(1) Adopt and use a corporate seal. 

(2) Have succession until dissolved under the provisions of this 

Act or other Act of Congress. 

(3) Make contracts. 

(4) Sue and be sued. 

(5) Acquire, hold, dispose, and otherwise exercise all of the usual 

incidents of ownership of real estate and personal property necessary 

or convenient to its business. 

Post, p. 624. 
588 PUBLIC LAW 92-181-DEC. 10, 1971 [85 STAT. 

(6) Operate under the direction of its board of directors in accordance with this Act. 

(7) Elect by its board of directors a manager or other chief executive officer, and provide for such other officers or employees as may be 

necessary, including joint employees as provided in this Act; define 

their duties; and require surety bonds or make other provision against 

losses occasioned by employees. No director shall, within one year 

after the date when he ceases to be a member of the board, be elected 

or designated a salaried employee of the association on the board of 

which he served. 

(8) Prescribe by its board of directors, its bylaws, not inconsistent 

with law, providing for the classes of its stock and the manner in 

which its stock shall be issued, transferred, and retired; its officers and 

employees elected or provided for; its property acquired, held, and 

transferred; its general business conducted; and privileges granted it 

by law exercised and enj oyed. 

(9) Accept applications for Federal land bank loans and receive 

from such bank and disburse to the borrowers the proceeds of such 

loans. 

(10) Subscribe to stock of the Federal land bank of the district. 

(11) Elect by its board of directors a loan committee with power 

to elect applicants for membership in the association and recommend 

loans to the Federal land bank, or with the approval of the Federal 

land bank, delegate the election of applicants for membership and the 

approval of loans within specified limits to other committees or to 

authorized employees of the association. 

(12) Upon agreement with the bank, take such additional actions 

with respect to applications and loans and perform such functions as 

are vested by law in or delegated to the Federal land banks as may be 

agreed to or delegated to the association. 

(13) Endorse and shall become liable to the bank on loans it makes 

to association members. 

(14) Receive such compensation and deduct such sums from loan 

proceeds with respect to each loan as may be agreed between the association and the bank and may make such other .charges for services as 

may be approved by the bank. 

(15) Provide technical assistance to members, borrowers, applicants, 

and other eligible persons and make available to them, at their option, 

such financial related services appropriate to their operations as it 

determines, with Federal land bank approval, are feasible, under regulations of the Farm Credit Administration. 

(16) Borrow money from the bank and, with the approval of such 

bank, borrow from and issue its notes or other obligations to any commercial bank or other financial institutions. 

(17) Buy and sell obligations of or insured by the United States or 

any agency thereof or of any banks of the Farm Credit System. 

(18) Invest its funds in such obligations as may be authorized in 

regulations of the Farm Credit Administration and approved by the 

bank and deposit its securities and current funds with any member 

bank of the Federal Reserve System, with the Federal land bank, or 

with any bank insured by the Federal Deposit Insurance Corporation, 

and pay fees therefor and receive interest thereon as may be agreed. 

(19) Perform such other function delegated it by the Federal land 

bank of the district. 

(20) Exercise by its board of directors or authorized officers or 

agents all such incidental powers as may be necessary or expedient in 

the conduct of its business. 
85 STAT. ] PUBLIC LAW 92-181-DEC. 10, 1971 589 

SEC. 1.16. ASSOCIATIOX STOCK; VALUE or SHAKES; VariNG.—(a) 

The shares of stock in each Federal land bank association shall have 

a par value of $5 each. No person but borrowers from the bank shall 

become members and stockholders of the association. If an application 

for membership is approved and if the applied-for loan is granted, the 

member of the association shall subscribe to stock in the association in 

an amount not less than 5 per centum nor more than 10 per centum of 

the face amount of the loan as determined by the bank. Stock shall be 

paid for in cash by the time the loan is closed. The association shall 

then purchase a similar amount of stock in the land bank. Stock shall 

be retired and paid at fair book value not to exceed par, as determined 

by the association, upon the full repayment of the loan and if the loan 

is in default may be canceled for application on the loan, or under 

other circumstances, for other disposition, when approved by the bank. 

The aggregate capital stock of each association shall be increased from 

time to time as necessary to permit the securing of requested loans 

from the bank for the association's members. 

(b) The stock issued by an association may be voting stock or nonvoting stock of such classes as the association determines with the 

approval of the bank under regulations prescribed by the Farm Credit 

Administration. Each holder of voting stock shall be entitled to only 

one vote, and no more, in the election of directors and in deciding 

questions at meetings of stockholders. Participation certificates may 

be issued in lieu of noiiA'oting stock when the bylaAvs of the association 

so provide. 

PART C—PROVISIONS Arri.iCABLE TO FEDERAL LAND BANKS AND 

FEDERAL LAND BANK ASSOCLVTIONS 

S E C 1.17. LAND BANK RESERVES; DIVIDENDS.—(a) Each Federal 

land bank shall, at the end of each fiscal year, carry to reserve account 

a sum of not less than 50 i^er centum of its net earnings for the year 

until said reserve account shall be equal at the end of such year, after 

restoring any impairment thereof, to the outstanding capital stock 

and participation certificates of the bank. Thereafter, a sum equal to 

10 per centum of the year's net earnings shall be added to the reserve 

account until the account shall be equal to 150 per centum of the outstanding capital stock and participation certificates of the bank. Any 

amounts added to the reserve account in exess of 150 per centum of 

the outstanding capital stock and j^articipation certificates may be 

withdrawn from such reserves with the approval of the Farm Credit 

Administration. 

(b) Any bank may declare a dividend or dividends out of the whole 

or any part of net earnings Avhicli remain after (1) the maintenance 

of the reserve as required in subsection (a) hereof, (2) the payment of 

the franchise tax as required by section 4.0 for any year in which any 

stock in the bank is held by the Governor of the Farm Credit Administration, and (3) with approval of the Farm Credit Administration. 

SEC. 1.18. ASSOCIATION RESERVES; DIVIDENDS.—(a) Each Federal 

land bank association shall, out of its net earnings at the end of each 

fiscal year, carry to reserve account a sum not less than 10 per centum 

of such earning until the reserve account shall equal 25 per centum 

of the outstanding capital stock and participation certificates of such 

association after restoring any impairment thereof. Thereafter, 5 per 

centum of the net earnings for the year shall be added to such 

reserve account until it shall equal 50 per centum of the outstanding 

capital stock and participation certificates of the association. Any 

amounts in the. reserve account in excess of 50 per centum of the outstanding capital stock and participation certificates may be withdrawn 

with the approval of the Federal land bank. 
590 PUBLIC LAW 92-181-DEC. 10, 1971 [85 STAT. 

(b) Any association may declare a dividend or dividends out of the 

whole or any part of its net earnings which remain after (1) maintenance of the reserve required in subsection (a) hereof and (2) bank 

approval. 

(c) Whenever any association is liquidated, a sum equal to its 

reserve account as required in this Act shall be paid and become the 

property of the bank in which such association is a shareholder. 

SEC. 1.19. AGREEMENTS FOR SHARING GAINS OR LOSSES.—Each 

Federal land bank may enter into agreements with Federal land bank 

associations in its district for sharing the gain or losses on loans or on 

security held therefor or acquired in liquidation thereof, and associations are authorized to enter into any such agreements and also, subject to bank approval, agreements with other associations in the 

district for sharing the risk of loss on loans endorsed by each such 

association. 

SEX-. 1.20. LIENS ON STOCK.—Each Federal land bank and each 

Federal land bank association shall have a first lien on the stock and 

participation certificates it isiues, except on stock held by the Governor of the Farm Credit Administration, for the payment of any 

liability of the stockholder to the association or to the bank, or to 

both of them. 

SEC. 1.21. TAXATION.—Every Federal land bank and every Federal 

land bank association and the capital, reserves, and surplus thereof, 

and the income derived therefrom shall be exempt from Federal, 

State, municipal, and local taxation, except taxes on real estate held 

by a Federal land bank or a Federal land bank association to the same 

extent, according to its value, as other similar property held by other 

persons is taxed. The mortgages held by the Federal land banks and 

the notes, bonds, debentures, and other obligations issued by the banks 

or associations shall be deemed and held to be instrumentalities of the 

(xovemment of the ITnited States and, as such, they and the income 

therefrom shall be exempt from all Federal, State, municipal, and 

local taxation, other than Federal income tax liability of the holder 

56 Stat. 190. thereof under the Public Debt Act of 1941 (31 U.S.C. 742(a)). 

31 us e 742a. ^ ^ ' ' 

TITLE II—FEDERAL INTERMEDIATE CREDIT BANKS 

AND PRODUCTION CREDIT ASSOCIATIONS 

PART A—FEDERAL INTERMEDIATE CREDIT' BANKS 

SEC. 2.0. ESTABLISHMENT; BRANCHES.—The Federal intermediate 

credit banks established pursuant to section 201(a) of the Federal 

Post, p. 624. Farm Loan Act, as amended, shall continue as federally chartered 

instrumentalities of the LTnited States. Their charters or organization 

certificates may be modified from time to time by the Farm Credit 

Administration not inconsistent with the provisions of this title as 

may be necessary or expedient to implement this Act. Unless an existing Federal intermediate credit bank is merged with one or more 

other such banks under section 4.10 of this Act, there shall be a 

Federal intermediate credit bank in each farm credit district. It 

may include in its title the name of the city in which it is located or 

other geographical designation. When authorized by the Farm Credit 

Administration, it may establish such branches or other offices as 

may be appropriate for the effective operation of its business. 
85 STAT. ] PUBLIC LAW 92-181-DEC. 10, 1971 591 

SEC. 2.1. CORPORATE EXISTENCE; GENERAL CORPORATE POWERS.— 

Each Federal intermediate credit bank shall be a body corporate and, 

subject to supervision of the Farm Credit Administration, shall have 

power to— 

(1) Adopt and use a corporate seal. 

(2) Have succession until dissolved under the provisions of this Act 

or other Act of Congress. 

(3) Make contracts. 

(4) Sue and be sued. 

(5) Acquire, hold, dispose, and otherwise exercise all of the incidents 

of ownership of real and personal property necessary or convenient to 

its business. 

(6) Make and discount loans and commitments for credit, and provide services and other assistance as authorized in this Act, and charge 

fees therefor. 

(7) Operate under the direction of its board of directors. 

(8) Elect by its board of directors a president, any vice president, 

a secretary, and a treasurer, and provide for such other officers, employees, and agents as may be necessary, including joint employees as provided in this Act; define their duties and require surety bonds or make 

other provision against losses occasioned by employees. 

(9) Prescribe by its board of directors its bylaws not inconsistent 

with law providing for the classes of its stock and the manner in which 

its stock shall be issued, transferred, and retired; its officers, employees, and agents elected or provided for; its property acquired, held, 

and transferred; its loans and discounts made; its general business 

conducted; and the privileges granted it by law exercised and enjoyed. 

(10) Borrow money and issue notes, bonds, debentures, or other 

obligations individually, or in concert with one or more other banks 

of the System, of such character, and such terms, conditions, and rates 

of interest as may be determined. 

(11) Purchase nonvoting stock in or pay in surplus to, and accept 

deposits of securities or of current funds from production credit associations holding its shares and pay interest upon such funds. 

(12) Deposit its securities and its current funds with any member 

bank of the Federal Keserve System, and pay fees therefor and receive 

interest thereon as may be agreed. When designated for that purpose 

by the Secretary of the Treasury, it shall be a depository of public 

money, except receipts from customs, under such regulations as may be 

prescribed by the Secretary; may be employed as a fiscal agent of the 

Government, and shall perform all such reasonable duties as a depository of public money or financial agent of the Government as may be 

required of it. No Government funds deposited under the provisions of Prohibition. 

this subsection shall be invested in loans or bonds or other obligations 

of the bank. 

(13) Buy and sell obligations of or insured by the United States or 

any agency thereof, or securities backed by the full faith and credit of 

any such agency and make such other investments as may be authorized by the Farm Credit Administration. 

(14) Delegate to the production credit associations such functions 

vested in or delegated to the intermediate credit bank as it may 

determine. 

(15) Approve the salary scale of the officers and employees of the 

association and the appointment and compensation of the chief executive officer thereof and supervise the exercise by the production credit 

associations of the functions vested in or delegated to them. 
592 PUBLIC LAW 92-181-DEC. 10, 1971 [85 STAT. 

(16) Amend and modify loan contracts, documents, payment schedules, and release, subordinate, or substitute security for any of them. 

(IT) Conduct studies and make and adopt standards for lending. 

(18) Enter into loss sharing agreements with other Federal intermediate credit banks and production credit associations. 

(19) Exercise by its board of directors or authorized officers, 

employees, or agents all such incidental powers as may be necessary or 

expedient to carry on the business of the bank. 

(20) Participate with one or more other Federal intermediate credit 

banks or production credit associations in the district, in loans under 

this title on such terms as may be agreed upon among such banks 

and associations. 

(21) Perform any function delegated to it by the Farm Credit 

Administration. 

SEC. 2.2. FEDERAL, INTERMEDIATE CREDIT BANK STOCK ; VALUE ; DIVIDEND; ADDITIONAL STOCK; RETIREMENT.— (a) The capital stock of 

each Federal intermediate credit bank shall be divided into shares of 

par value of $5 each and may be of such classes as its board of directors 

may determine with the approval of the Farm Credit Administration. 

(b) Voting stock of each bank shall be held only by the production 

credit associations which stock shall not be transferred, pledged, or 

hypothecated except as provided in this title or as authorized under 

regulations of the Farm Credit Administration. 

(c) The board of each bank shall from time to time increase its capital stock to permit the issuance of additional shares to production 

credit associations in such amounts as shall be determined by the 

board. 

(d) Nonvoting stock may be issued to the Governor of the Farm 

Credit Administration. Nonvoting stock may also be issued to production credit associations in such amounts as will permit the association 

to extend financial assistance to eligible persons other than farmers, 

ranchers, and producers or harvesters of aquatic products. Participation certificates, with a face value of $5, may be issued in lieu of such 

nonvoting stock when the bylaws of the bank so provide. 

(e) Participation certificates also may be issued by a bank to financing institutions other than production credit associations which are 

eligible to borrow from or discount eligible paper with the bank. 

(f) Dividends shall not be payable on any stock held by the Governor of the Farm Credit Administration other than the tax imposed 

by section 4.0(c) but noncumulative dividends may be payable on 

other capital and participation certificates in an amount not to 

exceed a per centum permitted under regulations of the Farm Credit 

Administration, in any year as determined by the board of directors. 

Such dividends may be in the form of stock and participation certificates or, when the Governor of the Farm Credit Administration holds 

no stock in the bank, in cash. The rate of dividends may be different 

between different classes and issues of stock and ;participation certificates on the basis of the comparative contributions of the holders 

thereof to the capital or earnings of the bank by such classes and issues, 

but otherwise dividends shall be without preference. 

(g) Each Federal intermediate credit bank, with the approval of 

the Farm Credit Administration, may determine the amount of the 

initial or additional stock in the bank to be subscribed for by the production credit associations in the farm credit district served by the 

bank in order to provide capital to meet the credit needs of the bank. 

The amount so determined shall be allotted among the associations in 

the district upon such basis that, as nearly as may be practicable, the 

sum of the stock already owned and the additional amount to be sub-
85 STAT. ] PUBLIC LAW 92-181-DEC. 10, 1971 593 

scribed for by each association will be in the same propoi-tion to the 

total amount of stock already owned and to be subscribed for by all of 

the associations in the district that the average indebtedness (loans 

and discounts) of each association to the bank during the immediately 

preceding three fiscal years is of the average of sucli indebtedness of 

all associations to the bank during such three-year period. Each association shall subscribe for stock in the bank in the amount so allotted 

to it. Such subscriptions shall be subject to call and payment therefor 

shall be made at such times and in such amounts as may be determined 

by the bank. 

Whenever the relative amounts of stock in a bank owned by the 

associations differ substantially from the proportion indicated in the 

preceding paragraph, and additional subscriptions to stock through 

which such proportion could be reestablished are not contemplated, 

the bank, with approval of the Farm Credit Administration, may 

direct either separately or in combination such transfers, retirements, 

and reissuance of outstanding stock among the associations as will 

reestablish the aforesaid proportion as nearly as may be practicable. 

Outstanding stock which is retired for this purpose, except as otherwise approved by the Farm Credit Administration, shall be the oldest 

stock held by the association and the bank shall pay the association 

therefor at the fair book value thereof not exceeding par. 

The banks may issue further amounts of participation certificates 

with the same rights, privileges, and conditions, for purchase by institutions other than production credit associations which are entitled 

to receive participation certificates from the bank as patronage refunds. 

Participation certificates held by other financing institutions may be 

transferred to other such institutions upon request of, or with the 

approval of the bank. 

After all stock held by the Governor of the Farm Credit Administration has been retired, the bank may retire other stock at par and 

participation certificates at face amount under regulations of the 

Farm Credit Administration. Such other stock and participation certificates shall be retired without preference and in such manner that, 

unless otherwise approved by Farm Credit Administration, 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. 

(h) Except with regard to stock held by the Governor, each Federal intermediate credit bank shall have a first lien on all stock and 

participation certificates it issues and on all allocated reserves and 

other equities for any indebtedness of the holder of such capital 

investments to the bank. 

(i) In any case where the debt of a production credit association or 

other financing institution is in default, the bank may retire all or part 

of the capital investments in the bank held bj' such debtor 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. 2.3. LOANS; DISCOUNTS; PARTIGIPATIOX; LEASING.—(a) The 

Federal intermediate credit banks are authorized to make loans and 

extend other similar financial assistance to and discount for, or purchase from, any production credit association with its endorsement or 

guaranty, any note, draft, or other obligation presented by such association, and to participate with such association and one or more 
594 PUBLIC LAW 92-181-DEC. 10, 1971 [85 STAT. 

intermediate credit banks in the making of loans to eligible borrowers, 

all the foregoing to be secured by such collateral, if any, as may be 

required in regulations of the Farm Credit Administration. The banks 

may own and lease or lease with option to purchase, to persons eligible 

for assistance under this title, equipment needed in the operations of 

such persons. 

(b) The Federal intermediate credit banks are authorized 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 or guaranty, any note, draft, or other 

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 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. 

Limitations. (Q) ]^O paper shall be purchased from or discounted for any national 

bank. State bank, trust company or savings institution under subsection (b) if the amount of such paper added to the aggregate liabilities 

of such natioilal bank, State bank, trust company or savings institution, 

whether direct or contingent (other than bona fide deposit liabilities), 

exceeds the lower of the amount of such liabilities permitted under 

the laws of the jurisdiction creating the same, or twice the paid-in 

and unimpaired capital and surplus of such national bank, State bank, 

trust company, or savings institution. No paper shall under this section be purchased from or discounted for any other corporation 

engaged in making loans for agricultural purposes including the raising, breeding, fattening, or marketing of livestock, if the amount of 

such paper added to the aggregate liabilities of such corporation 

exceeds the lower of the amount of such liabilities permitted under the 

law^s of the jurisdiction creating the same, or ten times the paid-in and 

unimpaired capital and surplus of such corporation. It shall be unlawful for any national bank which is indebted to any Federal intermediate 

credit bank, upon paper discounted or purchased under subsection 

(b), to incur any additional indebtedness, if by virtue of such additional indebtedness its aggregate liabilities direct or contingent, will 

exceed the limitations herein contained. 

SEC. 2.4. TERMS.—Loans, advances, or discounts made under section 

2.3 shall be repayable in not more than seven years from the time they 

are made or discounted by the Federal intermediate credit bank, and 

shall bear such rate or 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. In setting 

the rates and charges, it shall be the objective to provide the types of 

credit needed by eligible borrowers, at the lowest reasonable costs on a 

sound business basis taking into account the cost of money to the 

bank, necessary reserves and expenses of the bank and production 

credit associations, and providing services to borrowers from the 

bank and associations. The loan documents may provide for the 

interest rate or rates to vary from time to time during the repayment 
85 STAT. ] PUBLIC LAW 92-181-DEC. 10, 1971 595 

period of the loan, in accordance with the rate or rates currently being 

charged by the bank. No obligation tendered for discount by a financing institution, without the approval of the Farm Credit Administration, shall be eligible for discount upon which the original borrower 

has been charged a rate of interest exceeding by more than li^ per 

centum per annum the discount rate of the bank. 

SEC. 2.5. SERVICES BELATED TO BORROWERS' OPERATIONS.—The Federal intermediate credit banks may provide technical assistance to 

borrowers, members, and applicants from the banks and production 

credit associations, including persons obligated on paper discounted 

by the bank, and may make available to them at their option such 

financial related services appropriate to their on-farm operations as 

determined to be feasible by the board of directors of each district 

bank, under regulations of the Farm Credit Administration. 

SEC. 2.6. NET EARNINGS—DETERMINATION ; ANNUAL APPLICATION ; 

SURPLUS ACCOUNT; ABSORPTION OF NET LOSS.— (a) If, at the end of a 

fiscal year a Federal intermediate credit bank shall have stock outstanding held by the Governor of the Farm Credit Administration, 

such 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 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 or allocated reserve account established by this subsection, as determined by 

its board of directors; (3) 25 per centum of any remaining net earnings shall be used to create and maintain an allocated reserve account; 

(4) a franchise tax shall be paid to the United States, as provided in 

section 4.0 of this Act; (5) reasonable unallocated contingency reserve 

account may be established and maintained; (6) dividends on stock 

held by production credit associations and on participation certificates 

may be declared as provided in section 2.2(f) of this title; and (7) any 

remaining net earnings shall be distributed as patronage refunds as 

provided in subsection (b) of this section. 

Amounts applied to reserve account as provided in (3) above, either 

heretofore or hereafter, shall be allocated on the same patronage basis 

and have the same tax treatment as is provided in subsection (b) of 

this section for patronage refunds. At the end of any fiscal year that 

the allocated reserve account of any bank exceeds 25 per centum of its 

outstanding stock and participation certificates, such excess may be 

distributed, oldest allocations first, in stock to production credit associations and participation certificates issued as of the date of the 

allocations. 

If and when the relative amounts of stock in a Federal intermediate ^ 

credit bank owned by the production credit associations are adjusted 

to reestablish the proportion of such stock owned by each association, 

as provided in the first or second paragraphs of section 2.2 (g) of this 

title, amounts in the reserve account that are allocated to production 

credit associations may be adjusted in the same manner, so far as practicable, to reestablish the holdings of the production credit associations in the allocated legal reserve accounts into substantially the same 

proportion as are their holdings of stock. 

No part of the surplus account established by a Federal intermediate 

credit bank on January 1, 1957, consisting of its earned surplus 

account, its reserve for contingencies, and the surplus of the production credit corporation transferred to the bank, shall be distributed as 

patronage refunds or as dividends. In the event of a net loss in any fis75-432 O - 72 - 40 
596 PUBLIC LAW 92-181-DEC. 10, 1971 [85 STAT. 

cal 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 unallocated reserve account; second, impairment of the allocated reserve 

account; third, impairment of the surplus other than that transferred 

from the production credit corporation of the district; fourth, impairment of surplus transferred from the production credit corporation of 

the district; fifth, impairment of stock and participation certificates 

held by production credit associations and participation certificates 

held by other financing institutions; and sixth, impairment of 

nonvoting stock, 

ef^d""^^^ (b) If at the end of a fiscal year a Federal intermediate credit bank 

shall have outstanding capital stock held by the Governor of the Farm 

Credit Administration, patronage refunds declared for that year shall 

be paid in stock to production credit associations and in participation 

certificates to other financing institutions borrowing from or discounting 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. 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) If, at the end of a fiscal year a Federal intermediate credit bank 

shall have no outstanding capital stock held by the Governor of the 

Farm Credit Administration, the net earnings of such bank shall, 

under regulations prescribed by the Farm Credit Administration, continue to be distributed on a cooperative basis with an obligation to distribute patronage dividends and with provision for sound, adequate 

capitalization to meet changing financing needs of production credit 

associations, other financial institutions eligible to discount paper with 

the bank, and other eligible borrowers, and prudent corporate fiscal 

management, to the end that the current year's patrons carry their fair 

share of the capitalization, ultimate expenses, and reserves. Such regulations may provide for the application of less than 25 per centum of 

net earnings after payment of operating expenses to the restoration or 

maintenance of the allocated reserve account, additions to unallocated 

contingency reserve account of not to exceed such per centum of net 

earnings as may be approved by the Farm Credit Administration, and 

provide for allocations to patrons not qualified under the Internal 

Revenue Code, and the payment of patronage in stock, participation 

certificates, or in cash, as the board may determine. If during the fiscal 

year but not at the end thereof a bank shall have had outstanding capital stock held by the Governor of the Farm Credit Administration, 

provision will be made for the payment of the franchise tax required 

in section 4.0. 

(d) Such allocations of reserve account shall be subject to a first 

lien as additional collateral for any indebtedness of the holders thereof 

to the bank and in any case where such indebtedness is in default may, 

but shall not be required to, be retired and canceled for application 

on such indebtedness, and, in case of liquidation or dissolution of a 

holder thereof, such reserve account allocations may be retired, all as 

is provided for stock and participation certificates in section 2.2(g) 

of this title. 
85 STAT. ] PUBLIC LAW 92-181-DEC. 10, 1971 597 

SEC. 2.7. DISTRIBUTION OF ASSETS ON LIQUIDATION.—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 stock held by the Governor of the Farm Credit Administration at par; third, of all stock owned by production credit associations 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 section 2.6 

(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 discounting with or borrowing from the bank on 

January 1, 1957, shall be paid to such institutions, or their successors 

in interest as determined by 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 voting and nonvoting 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 January 1, 

1957. The allocated reserve established pursuant to section 2.6 shall 

be paid to the production credit associations and other financing institutions to which such reserve is allocated on the books of the bank. 

Any assets of the bank then remaining shall be distributed to the production credit associations and the holders of participation certificates 

pro rata. 

SEC. 2.8. TAXATION.—Every Federal intermediate credit bank and 

the capital, reserves, and surplus thereof and the income derived therefrom shall be exempt from Federal, State, municipal, and local taxation except taxes on real estate held by a Federal intermediate credit 

bank to the same extent, according to its value, as other similar property held by other persons is taxed. The obligations held by the Federal 

intermediate credit banks and the notes, bonds, debentures, and other 

obligations issued by the banks shall be deemed to be instrumentalities 

of the Government of the LTnited States, and, as such, they and the 

income therefrom shall be exempt from all Federal, State, municipal, 

and local taxation, other than Federal income tax liability of the 

holder thereof under the Public Debt Act of 1941 (31 U.S.C. 742 (a)). ^e stat. i9o. 

SEC. 2.9. [Vacant.] 3i use 742a. 

PART B—PRODUCTION CREDIT ASSOCIATIONS 

SEC. 2.10. ORGANIZATION AND CHARTERS.—Each production credit 

association chartered under section 20 of the Farm Credit Act of 

1933, as amended, shall continue as a federally chartered instrumen- ^°®'' P* ^2'*' 

tality of the United States, Production credit associations may be 

organized by ten or more farmers or ranchers or producers or harvesters 

of aquatic products desiring to borrow money under the provisions of 

this title. The proposed articles of association shall be forwarded to 

the Federal intermediate credit bank for the district accompanied by 

an agreement to subscribe on behalf of the association for stock in the 

bank in such amounts as may be required by the bank. The articles 

shall specify in general terms the objects for which the association is 

formed, the powers to be exercised by it in carrying out the functions 

authorized by this part, and the territory it proposes to serve. The 

articles shall be signed by persons desiring to form such an association 

and shall be accompanied by a statement signed by each such person 

establishing eligibility to borrow from the association in which he will 
598 PUBLIC LAW 92-181-DEC. 10, 1971 [85 STAT. 

become a stockholder. A copy of the articles of association shall be 

forwarded to the Governor of the Farm Credit Administration with 

the recommendations of the bank concerning the need for such an 

association in order to adequately serve the credit needs of eligible 

persons in the proposed territory and whether that territory includes 

any area described in the charter of another production credit association. The Governor for good cause shown may deny the charter. 

Upon approval of the proposed articles by the Governor and the 

issuance of a charter, the association shall become as of such date a 

federally chartered body corporate and an instrumentality of the 

United States. The Governor shall have the power, under rules and 

regulations prescribed by him or by prescribing in the terms of the 

charter or by approval of bylaws of the association, to provide for the 

organization of the association, the initial amount of stock of the 

association, the territory within which its operations may be carried on, 

and to direct at any time such changes in the charter as he finds necessary for the accomplishment of the purposes of this Act. 

SEC. 2.11. BOARD OF DIRECTORS.—Each production credit association shall elect from its voting members a board of directors of such 

number, for such terms, with such qualifications, and in such manner 

as may be required by its bylaws. 

SEC. 2.12. GENERAL CORPORATE POWERS.—Each producticm credit 

association shall be a body corporate and, subject to supervision by the 

Federal intermediate credit bank for the district and the Farm Credit 

Administration, shall have power to— 

(1) Have succession until tei-minated in accordance with this Act or 

nny other Act of Congress. 

(2) Adopt and use a corporate seal. 

(3) Make contracts. 

(4) Sue and be sued. 

(5) Acquire, hold, dispose, and otherwise exercise all of the usual 

incidents of ownership of real and personal property necessary or convenient to its business. 

(6) Operate under the direction of its boaid of directors in accordance with this Act. 

(7) Subscribe to stock of the bank. 

(8) Purchase stock of the bank held by other production credit 

associations and stock of other production credit associations. 

(9) Contribute to the capital of the bank or other production credit 

associations. 

(10) Invest its funds as may be approved by the Federal intermediate credit bank under regulations of the Farm Credit Administration 

and deposit its current funds and securities with the Federal intermediate credit bank, a member bank of the Federal Reserve System, 

or any bank insured under the Federal Deposit Insurance Corporation, and may pay fees therefor and receive interest thereon as may be 

agreed. 

(11) Buy and sell obligations of or insured by the LTnited States or 

of any agency thereof or of any banks of the Farm Credit System. 

(12) Borrow money from the Federal intermediate credit bank, 

and with the approval of such bank, borrow from and issue its notes or 

other obligations to any commercial bank or other financial institution. 

(13) Make and participate in loans, accept advance payments, and 

|:)rovide services and other assistance as authorized in this title and 

charge fees therefor. 

(14) Endorse and become liable on loans discounted or pledged to 

the Federal intermediate credit bank. 

(15) Enter into loss sharing agreements with the Federal intermediate credit bank and other production credit associations. 
85 STAT.] PUBLIC LAW 92-181-DEC. 10, 1971 599 

(16) Prescribe by its board of directors its bylaws not inconsistent 

witli law providing for the classes of its stock and the manner in which 

it^ stock shall be issued, transferred, iuid retired, its officers and 

employees elected or provided for, its property acquired, held, and 

transferred, its general business conducted, and the privileges granted 

it by law exercised and enjoyed. 

(17) Elect by its board of directors a manager or other chief executive officer, and provide for such other officers or employees as may be 

necessary, including joint employees as provided in this Act, define 

their duties, and require surety bonds or make other provisions against 

losses occasioned by employees. No director shall, within one year 

after the date when he ceases to be a member of the board, be elected 

t)r designated a salaried employee of the association on the board 

of which he served. 

(18) Elect by its board of directors a loan committee with power 

to approve applications for membership in the association and loans 

or participations or, with the approval of the bank, delegate the 

approval of applications for membership and loans or participations 

within specified limits to other committees or to authorized officers and 

employees of the association. 

(19) Perform any functions delegated to it by the bank or the Farm 

Credit Administration. 

(20) Exercise b;^ its board of directoi'S or authorized officers or 

employees, all such incidental powers as may be necessary or expedient 

to carry on the business of the association. 

SEC. 2.13. CAPITAL STOCK; CLASSES OF STOCK; TRANSFERS; 

EXCHANGE; AND DIVIDENDS.— (a) A production credit association may 

issue voting stock, nonvoting stock, preferred stock, participation certificates, and provide for an equity leserve. Holders of stock, participation certificates, and equity reserve shall have such rights, not 

inconsistent with the provisions of this section, as are set forth in the 

bylaws of the association. Stock shall be divided into shares of $5 par 

value each, and participation certificates shall have a face value of 

$5 each. 

(b) Voting stock may be purchased only by fannei-s and ranchers, 

or producers or harvesters of aquatic products, who are eligible to borrow from the association. Each holder of voting stock shall be entitled 

to no more than one vote except as otherwise provided in subsection 

(d) hereof. No voting stock or any interest therein or right to receive 

dividends thereon shall be transferred by act of the parties or by 

operation of law, except to another person eligible to hold voting stock, 

and then only as provided in the bylaws. 

(c) Nonvoting stock may be issued to the Governor of the Farm 

Credit Administration and to other investors. 

(d) Preferred stock, which shall be nonvoting, may be issued to the 

Governor and to other investors w^hen authoriz^ by a majority vote 

of the outstanding shares of voting stock, by a majority vote of the 

outstanding shares of the nonvoting stock, and by a majority vote of 

the outstanding shares of preferred stock, except that all stock held 

by the Governor shall be excluded from voting hereunder. For the 

purpose of this subsection only, the holders of such stock shall be 

entitled to one vote, in person or by written proxy, for each share of 

stock held. The authorization to issue p^referred stock shall state the 

privileges, restrictions, limitations, dividend rights (either cumulative or noncumulative) redemption rights, preferences, and other 

qualifications affecting said stock, and the total amount of the authorized issue to which it belongs. 
600 PUBLIC LAW 92-181-DEC. 10, 1971 [85 STAT. 

Participation (g^ Participation cei-tificates may be issued to persons eligible to 

ertificates. borrow from the association to whom voting stock is not to be issued. 

(f) Each borrower from the association shall be required to own at 

the time the loan is made voting stock or participation certificates as 

provided in the bylaws of the association, m an amount equal in fair 

book value (not exceeding par or face amount, as the case may be), 

as determined by the association, to $5 per $100 or fraction thereof 

of the amount of the loan. Such stock and participation certificates 

shall not be canceled or retired upon payment of the loan or otherwise 

except as may be provided in the bylaws. Notwithstanding any other 

provision of this section, for a loan in which an association participates with a commercial bank or other financial institution other than 

a Federal intermediate credit bank or another production credit 

association, the requirement that the borrower own stock or participation certificates shall apply only to the portion of the loan which is 

retained by the association. 

(g) Voting stock shall, within two years after the holder ceases 

to be a borrower, be converted into nonvoting stock at the fair book 

value thereof, not exceeding par. Consistent with the provisions of 

this part, and as provided in the bylaws of the association, each class 

of stock and participation certificates shall be convertible into any 

other class of stock (except preferred stock) and into participation 

certificates. 

(h) As a further means of providing capital, an association may, as 

provided in its bylaws, and with the approval of the bank, require 

borrowers to purchase stock or participation certificates in addition to 

that required in subsection (f) hereof, or invest in the equity reserve, 

in an aggregate amount not exceeding $5 per $100 or fraction thereof 

of the amount of the loan. Any portion of the amounts invested under 

this subsection which is no longer required for the purposes of the 

association may be returned to the owners thereof by revolving or 

retirement in accordance with its bylaws. 

(i) Dividends shall be paid on preferred stock in accordance with 

the authorization of the stockholders to issue each stock. Dividends on 

stock, other than preferred stock, and on participation certificates may 

be paid by an association as provided in its bylaws at such rate or 

rates as are approved by the Federal intermediate credit bank in 

accordance with regulations of the Farm Credit Administration, and 

may be paid, upon such approval, even though the amount in the surplus accounts is less than the minimum aggregate amount prescribed 

by the bank as provided in section 2.14. 

(j) Except with regard to stock held by the Governor, each production credit association shall have a first lien on stock and participation 

certificates it issues, allocated surplus, and on investments in equity 

reserve, for any indebtedness of the holder of such capital investments 

and, in the case of equity reserve, for charges for association losses in 

excess of reserves and surplus. 

(k) In any case where the debt of a borrower is in default, the 

association may retire all or part of the capital investments in the 

association held by such debtor 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. 2.14. APPLICATION" or EARNINGS; RESTORATION OF CAPITAL 

IMPAIRMENT; AND SURPLUS ACCOUNT.— (a) Each production credit 

association at the end of each fiscal year shall apply the amount of its 

earnings for such year in excess of its operating expenses (including provision for valuation reserves against loan assets in an amount 

equal to one-half of 1 per centum of the loans outstanding at the end 

of the fiscal year to the extent that earnings in such year in excess of 
85 STAT. ] PUBLIC LAW 92-181-DEC. 10, 1971 601 

other operating expenses permit, until such reserves equal or exceed 

31/^ per centum of the loans outstanding at the end of the fiscal year, 

beyond which 3i/^ per centum further additions to such reserves are 

not required but may be made) first to the restoration of the impairment, if any, of capital; and second, to the establishment and maintenance of the surplus accounts, the minimum aggregate amount of 

which shall be prescribed by the Federal intermediate credit bank. 

(b) When the bylaws of an association so provide, available net 

earnings at tlie end of any fiscal year may be distributed on a patronage basis in stock, participation certificates, or in cash, except that when 

the Governor holds any stock in an association the cash distribution 

shall be such percentage of the patronage refund as shall be determined under regulations of the Farm Credit Administration. Any 

part of tlie earnings of the fiscal year in excess of the operating 

expenses for such year held in the surplus account may be allocated 

to patrons on a patronage basis. 

SEC. 2.15. SHORT- AND INTERMEDIATE-TERM LOANS ; PARTICIPATION ; 

OTHER FINANCIX^.L ASSISTANCE ; TERMS ; CONDITIONS ; INTEREST, SECURITY.— (a) Each production credit association, under rules and regulations prescribed by the board of directors of the Federal intermediate 

credit bank of the district and approved by the Farm Credit Administration, may make, guarantee, or participate with other lenders 

in short- and intermediate-term loans and other similar financial 

assistance to (1) bona fide farmers and ranchers and the producers or 

harvesters of aquatic products, for agricultural purposes and other 

requirements of such borrowers, (2) rural residents for housing financing in rural areas, under regulations of Farm Credit Administration, and (3) persons furnishing to farmers and ranchers fai'm-related 

services directly related to their on-farm operating needs. Rural housing financed imder this title shall be for single-family, moderate-priced 

dwellings and their appurtenances not inconsistent with the general 

quality and standards of housing existing in, planned or recommended 

for the rural area Avhere it is located. The aggregate of such housing 

loans in an association to pei-sons other than farmers or ranchers shall 

not exceed 15 per centum of the outstanding loans at the end of its 

preceding fiscal year exce)>t upon prior approval by the Federal intermediate credit bank of the district. The aggregate of such housing 

loans in any farm credit district shall not exceed 15 per centum of the 

outstanding loans of all associations in the district at the end of the 

preceding fiscal year. For rural housing purposes under this section "Rural areas." 

the term "rural areas" shall not be defined to include any city or village 

having a population in excess of 2,500 inhabitants. Each association 

may own and lease, or lease with option to purchase, to stockholders of 

the association equipment needed in the operations of the stockholder. 

(b) Loans authorized in subsection (a) hereof shall bear such rate 

or rates of interest as are determined under regulations prescribed by 

the board of the bank with the approval of the Farm Credit Administration, and shall be made upon such terms, conditions, and upon such 

security, if any, as shall be authorized in such regulations. In settingrates and charges, it shall be the objective to provide the types of credit 

needed by eligible borrowers, at the lowest reasonable cost on a sound 

business basis, taking into account the cost of money to the association, 

necessary i-esei'ves and expenses of the association, and services provided to boiTOwers and members. The loan documents may provide for 

the interest rate or rates to vary from time to time during the repayment period of the loan in accordance with the rate or rates currently 

being charged by the association. Such regulations may require prior 

approval of the bank or of Farm Credit Administration on certain 

classes of loans; and may authorize a continuing commitment to a 

borrower of a line of credit. 
602 PUBLIC LAW 92-181-DEC. 10, 1971 [85 STAT. 

SEC. 2.16. OTHER SERVICES.—Each production credit association 

may provide technical assistance to borrowers, applicants, and members and may make available to them at their option such financial 

related services appropriate to their on-f arm operations as is determined feasible by the board of directors of each district bank, under 

regulations prescribed by the Farm Credit Administration. 

SEC. 2.17. TAXATION.—Each production credit association and its 

obligations are instrumentalities of the United States and as such any 

and all notes, debentures, and other obligations issued by such associations shall be exempt, both as to principal and interest from all taxation (except surtaxes, estate, inheritance, and gift taxes) now or 

hereafter imposed by the United States or any State, territorial, or 

local taxing authority. Such associations, their property, their franchises, capital, reserves, surplus, and other funds, and their income 

shall h& exempt from all taxation now or hereafter imposed by the 

United States or by any State, territorial, or local taxing authority; 

except that interest on the obligations of such associations shall be subject only to Federal income taxation in the hands of the holder thereof 

Ti use 742a. pursuaut to the Public Debt Act of 1941 (31 U.S.C. 742 (a)) and except 

that any real and tangible personal property of such associations shall 

be subject to Federal, State, territorial, and local taxation to the same 

extent as similar property is taxed. The exemption provided in the 

preceding sentence shall apply only for any year or part thereof in 

which stock in the production credit associations is held by the Governor of the Farm Credit Administration. 

TITLE III—BANKS FOR COOPERATIVES 

Post, p . 624, 

SEC. 3.0. ESTABLISHMENT; TITLES; BRANCHES.—The banks for 

cooperatives established pursuant to sections 2 and 30 of the Farm 

Credit Act of 1933, as amended, shall continue as federally chartered 

instrumentalities of the United States. Their charters or organization 

certificates may be modified from time to time by the Farm Credit 

Administration, not inconsistent with the provisions of this title, as 

may be necessary or expedient to implement this Act. Unless an existing bank for cooperatives is merged with one or more other such banks 

under section 4.10 of this Act, there shall be a bank for cooperatives in 

each farm credit district and a Central Bank for Cooperatives. A bank 

for cooperatives may include in its title the name of the city in which 

it is located or other geographical designation. The Central Bank for 

Cooperatives may be located in such place as its board of directors may 

determine with the approval of the Farm Credit Administration. 

When authorized by the Farm Credit Administration each bank for 

cooperatives may establish such branches or other offices as may be 

appropriate for the effective operation of its business. 

SEC. 3.1. CORPORATE EXISTENCE ; GENERAL CORPORATE POWERS.—Each 

bank for cooperatives shall be a body corporate and, subject to supervision by the Farm Credit Administration, shall have power to— 

(1) Adopt and use a corporate seal. 

(2) Have succession until dissolved under the provisions of this Act 

or other Act of Congress. 

(3) Make contracts. 

(4) Sue and be sued. 

(5) Acquire, hold, dispose, and otherwise exercise all of the usual 

incidents of ownership of real and personal property necessary or 

convenient to its business. 

(6) Make loans and commitments for credit, provide services and 

other assistance as authorized in this Act, and charge fees therefor. 

(7) Operate under the direction of its board of directors. 
85 STAT. ] PUBLIC LAW 92-181-DEC. 10, 1971 603 

(8) Elect by its board of directors a president, any vice presidents, 

a secretary, a treasurer, and provide for such other officers, employees, 

and agents as may be necessary, including joint employees as provided 

in this Act, define their duties and require surety bonds or make other 

provisions against losses occasioned by employees. 

(9) Prescribe by its board of directors its bylaws not inconsistent 

with law providing for the classes of its stock and the manner in which 

its stock shall be issued, transferred, and retired; its officers, employees, or agents elected or provided for; its property acquired, held, and 

transferred; its loans made; its general business conducted; and the 

privileges granted it by law exercised and enjoyed. 

(10) Borrow money and issue notes, bonds, debentures, or other 

obligations individually or in concert with one or more other banks of 

the System, of such character, and such terms, conditions, and rates of 

interest as may be determined. 

(11) Participate in loans under this title with one or more other 

banks for cooperatives and with commercial banks and other financial 

institutions upon such terms as may be agreed among them. 

(12) Deposit its securities and its current funds with any member 

bank of the Federal Eeserve System, and pay fees therefor and 

receive interest thereon as may be agreed. When designated for that 

purpose by the Secretary of the Treasury, it shall be a depository of 

public money, except receipts from customs, under such regulations as 

may be prescribed by the Secretary; may be employed as a fiscal agent 

of the Government, and shall perform all such reasonable duties as a 

depository of public money or financial agent of the Government as 

may be required of it. No Government funds deposited under the provisions of this subsection shall be invested in loans or bonds or other 

obligations of the bank. 

(13) Buy and sell obligations of or insured by the United States 

or of any agency thereof, or securities backed by the full faith and 

credit of any such agency and make such other investments as may be 

authorized by the Farm Credit Administration. 

(14) Conduct studies and adopt standards for lending. 

(15) Amend and modify loan contracts, documents, and payment 

schedules, and release, subordinate, or substitute security for any of 

them. 

(16) Perform any function delegated to it by the Farm Credit 

Administration. 

(17) Exercise by its board of directors or authorized officers, 

employees, or agents all such incidental powers as may be necessary or 

expedient to carry on the business of the bank. 

SEC. 3.2. BOARD OF DIRECTORS.—(a) In the case of a district bank 

for cooperatives, the board of directors shall be the farm credit district 

board and in the case of the Central Bank for Cooperatives shall be a 

separate board of not more than thirteen members, one from each farm 

credit district and one at large. One district director of the Central 

Bank Board shall be elected by each district farm credit board and the 

member at large shall be appointed by the Governor with the advice 

and consent of the Federal Farm Credit Board. 

(b) For the purposes of this section the provisions of sections 5.1 

(b) and (c), 5.4, 5.5, and 5.6 shall apply to and shall be the authority 

of the Central Bank for Cooperatives the same as though it were a 

district bank. 

SEC. 3.3. BANK FOR COOPERATIVES STOCK ; VALUE ; CLASSES OF STOCK ; 

VOTING; EXCHANGE.—(a) The capital stock of each bank for 

cooperatives shall be in such amount as its board determines, with the 

approval of Farm Credit Administration, is required for the purpose 
604 PUBLIC LAW 92-181-DEC. 10, 1971 [85 STAT. 

of providing adequate capital to permit the bank to meet the credit 

needs of borrowers from the bank and such amounts may be increased 

or decreased from time to time in accordance with such needs. 

(b) The capital stock of each bank shall be divided into shares of 

par value of $100 each and may be of such classes as the board may 

determine with the approval of the Farm Credit Administration. Such 

stock may be issued in fractional shares. 

(c) Voting stock may be issued or transferred to and held only by 

(i) cooperative associations eligible to borrow from the banks and 

(ii) other banks for cooperatives, and shall not be otherwise transferred, pledged, or hypothecated except as consented to by the issuing 

bank under regulations of the Farm Credit Administration. 

(d) Each holder of one or more shares of voting stock which is 

eligible to borrow from a bank for cooperatives shall be entitled only 

to one vote and only in the affairs of the bank in the district in which 

its principal office is located unless otherwise authorized by the Farm 

Credit Administration, except that if such holder has not been a borrower from the bank in which it holds such stock within a period of 

two years next preceding the date fixed by the Farm Credit Administration prior to the commencement of voting, it shall not be entitled 

to vote. 

(e) Nonvoting investment stock may be issued in such series and in 

such amounts as may be determined by the board and approved by 

the Farm Credit Administration and, except for stock held by the 

Governor, may be exchanged for voting stock or sold or transferred 

to any person subject to the approval of the issuing bank. 

SEC. 3.4. DIVIDENDS.—Dividends may be payable only on nonvoting 

investment stock, other than stock held by the Governor of the 

Farm Credit Administration, if declared by the board of directors of 

the bank. 

SEC. 3.5. RETIREMENT OF STOCK.—Any nonvoting stock held by the 

Governor of the Farm Credit Administration shall be retired to the 

extent required by section 4.0(b) before any other outstanding voting 

or nonvoting stock shall be retired except as may be otlierwise authorized by Farm Credit Administration. When those requirements have 

been satisfied, nonvoting investment stock may be called for retirement at par. With the approval of the issuing bank, the holder may 

elect not to have the called stock retired in response to a call, reserving 

the right to have such stock included in the next call for retirement. 

When the requirements of section 4.0(b) have been met, voting stock 

may also be retired at fair book value not exceeding par, on call or on 

such revolving basis as the board may determine with approval of the 

Farm Credit Administration with due regard for its total capital 

needs: Provided^ however^ That all equities in the district banks issued 

or allocated with respect to the year of the enactment of this Act and 

prior years shall be retired on a revolving basis according to the year of 

issue with the oldest outstanding equities being first retired. Equities 

issued for subsequent years shall not be called or retired until equities 

described in the preceding sentence of this proviso have been retired. 

SEC. 3.6. GUARANTY FUND SUBSCRIPTIONS IN LIEU OF STOCK.—If 

any cooperative association is not authorized under the laws of the 

State in which it is organized to take and hold stock in a bank for 

cooperatives, the bank shall, in lieu of any requirement for stock pur-. 

chase, require the association to pay into or have on deposit in a guaranty fund, or the bank may i-etain out of the amount of the loan and 

credit to the guaranty fund account of the borrower, a sum equal to 

the amount of stock which the association would otherwise be required 

to own. Each reference to stock of the banks for cooperatives in this 
85 STAT. ] PUBLIC LAW 92-181-DEC. 10, 1971 605 

Act shall include such guaranty fund equivalents. The holder of the 

guaranty fund equivalent and the bank shall each be entitled to the 

same i-ights and obligations with i-espect thereto as the rights and obligations associated with the class or classes of stock involved. 

SEC. 3.7. LENDING POWER.—The banks for cooperatives are authorized to make loans and commitments to eligible cooperative associations and to extend to them other technical and financial assistance, 

including but not limited to discounting notes and other obligations, 

guarantees, collateral custody, or particijiation with other banks for 

cooperatives and commercial banks or other financial institutions in 

loans to eligible cooperatives, under such terms and conditions as may 

be determined to be feasible by the board of directors of each bank for 

cooperatives under regulations of the Farm Credit Administration. 

Such regulations may include provisions for avoiding duplication 

between the Central Bank and district banks for cooperatives. Each 

bank may own and lease, or lease with option to purchase, to stockholders eligible to borrow from the bank equipment needed in the 

operations of the stockholder. 

SEC. 3.8. ELIGIBILITY.—Any association of farmers, producers, or 

harvesters of aquatic products, or any federation of such associations, 

which is operated on a cooperative basis, and has the powers for processing, preparing for market, handling, or marketing farm or aquatic 

products; or for purchasing, testing, grading, processing, distributing, 

or furnishing farm or aquatic supplies or furnishing farm business 

services or services to eligible cooperatives and conforms to either of 

the two following requirements: 

(a) no member of the association is allowed more than one 

vote because of the amount of stock or membership capital he 

may own therein; or 

(b) does not pay dividends on stock or membership capital in 

excess of such per centum per annum as may be approved under 

regulations of the Farm Credit Administration; and in any case 

(c) does not deal in farm products or aquatic products, or products processed therefrom, farm or aquatic supplies, or farm business services with or for nonmembers in an amount greater in 

^^alue than the total amount of such business transacted by it with 

or for members, excluding from the total of member and nonmember business transactions with the United States or any 

agency or instrumentality thereof or services or supplies furnished as a public utility; and 

(d) a percentage of the voting control of the association not 

less than 80 per centum, or such higher percentage as established 

by the district board is held by farmers, producers or harvesters 

of aquatic products, or eligible cooperative associations as defined 

herein ; 

shall be eligible to borrow from a bank for cooperatives. 

SEC. 3.9. OWNERSHIP OE STOCK BY BORROWERS.—(a) Each borrower 

at the time a loan is made by a bank for cooperatives shall own at 

least one share of voting stock and shall be required by the bank with 

the approval of the Farm Credit Administration to invest in additional 

voting stock or nonvoting investment stock at that time, or from time 

to time, as the lending bank may determine, but the requirement for 

investment in stock at the time the loan is closed shall not exceed an 

amount equal to 10 per centum of the face amount of the loan. Such 

additional ownership requirements may be based on the face amount 

of the loan, the outstanding loan balance or on a percentage of the 

interest payable by the borrower during any year or during any quarter thereof, or upon such other basis as the bank, with the approval of 
606 PUBLIC LAW 92-181-DEC. 10, 1971 [85 STAT. 

tlie Farm Credit Administration, determines will provide adequate 

capital for the operation of the bank and equitable ownership thereof 

among borrowers. I n the case of a direct loan by the Central Bank, 

the borrower shall be required to own or invest in the necessary stock 

in a district bank or banks as may be approved by the Farm Credit 

Administration and such district bank shall be required to own a 

corresponding amount of stock in the Central Bank, but voting stock 

shall be in the one district bank designated by the Farm Credit 

Administration. 

(b) Notwithstanding the provisions of subsection (a) of this section, the purchase of stock need not be required with respect to that 

part of any loan made by a bank for cooperatives which it sells to or 

makes in participation with financial institutions other than any of 

the banks for cooperatives. In such cases the distribution of earnings 

of the bank for cooperatives shall be on the basis of the interest in the 

loan retained by such bank. 

SEC. 3.10. IxTKREST RATES; SECURITY: LIEN ; CANCELLATION; AND 

APPLICATION ON INDEBTEDNESS.— (a) Loans made by a bank for 

cooperatives shall bear interest at a rate or rates determined by the 

board of directors of the bank from time to time, with the approval of 

the Farm Credit Administration. I n setting rates and charges, it shall 

be the objective to provide the types of credit needed by eligible borrowers at the lowest reasonable cost on a sound business basis, taking 

into account the net cost of money to the bank, necessary reserves and 

expenses of the bank, and services provided. The loan documents may 

provide for the interest rate or rates to vary from time to time during 

the repayment period of the loan, in accordance with the rate or rates 

currently being charged by the bank. 

(b) Loans shall be made upon such terms, conditions, and security, 

if any, as may be determined by the bank in accordance with regulations of the Farm Credit Administration. 

(c) Each bank for cooperatives shall have a first lien on all stock 

or other equities in the bank as collateral for the payment of any 

indebtedness of the owner thereof to the bank. In the case of a direct 

loan to an eligible cooperative by the Central Bank, the Central Bank 

shall have a first lien on the stock and equities of the borrower in the 

district bank and the district bank shall have a lien thereon junior only 

to the lien of the Central Bank. 

(d) I n any case where the debt of a borrower is in default, or in 

any case of liquidation or dissolution of a present or former borrower 

from a bank for cooperatives, the bank may, but shall not be required 

to, retire and cancel all or a part of the stock, allocated surplus or contingency reserves, or any other equity in the bank owned by or allocated to such borrower, at the fair book value thereof not exceeding 

par, and, to the extent required in such, cases, corresponding shares and 

allocations and other equity interests held by a district bank in another 

district bank on account of such indebtedness, shall be retired or equitably adjusted. 

SEC. 3.11. EARNINGS AND RESERVES; APPLICATION or SAVINGS.—(a) 

Each bank for cooperatives, at the end of each fiscal year when said 

bank shall have stock outstanding held by the Governor of the 

Farm Credit Administration, shall determine the amount of its net 

savings 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 savings as follows: (1) To 

the restoration of the amount of the impairment, if any, of capital 

stock, as determined by its board of directors; (2) 25 per centum of 

any remaining net savings shall be used to create and maintain a 
85 STAT. ] PUBLIC LAW 92-181-DEC. 10, 1971 607 

surplus account; (3) it shall next pay to the United States a franchise 

tax as provided in section 4.0 of this Act; (4) reasonable contingency 

reserves may be established; (5) dividends on investment stock may 

be declared as provided in this title; and (6) any remaining net 

savings shall be distributed as patronage refunds as provided in 

subsection (c) or (d) of this section: Provided^ That any patronage 

refunds received by a district bank from any other bank for 

cooperatives shall be excluded from net savings of the district bank 

for the purpose of computing such franchise tax. Amounts applied as 

provided in (2) above after January 1, 1956, shall be allocated on 

a patronage basis approved by the Farm Credit Administration. At 

the end of any fiscal year any portion of the reserve established under 

(4) above which is no longer deemed necessary shall be transferred 

to the surplus account and, if the surplus account of any such bank 

for cooperatives exceeds 25 per centum of the sum of all its outstanding capital stock, the bank may distribute in the same manner as a 

patronage refund any part or all of such excess which has been 

allocated: Provided^ That any surplus and contingency reserve shown 

on the books of the banks as of January 1, 1956, shall not be distributed as patronage refunds. In making such distributions except as 

otherwise provided in section 3.5 and distributions by the Central 

Bank, the oldest outstanding allocations shall be distributed first. 

Whenever used in this title, the words "surplus account" as applied 

to any bank for cooperatives shall mean any surpluses and contingency reserves shown on the books of the bank as of January 1, 1956, 

and any amounts accumulated as allocated or unallocated surplus 

after said date. Said surplus account shall be divided to show the 

amounts thereof subject to allocation as provided in this subsection 

and may be further subdivided as prescribed by the Farm Credit 

Administration. 

(b) Whenever at the end of any fiscal year a bank for cooperatives 

shall have no outstanding capital stock held by the Governor of the 

Farm Credit Administration, the net savings shall, under regulations 

prescribed by the Farm Credit Administration, continue to be applied 

on a cooperative basis with provision for sound, adequate capitalization to meet the changing financing needs of eligible cooperative borrowers and prudent corporate fiscal management, to the end that 

current year's patrons carry their fair share of the capitalization, ultimate expenses, and reserves related to the year's operations and the 

remaining net savings shall be distributed as patronage refunds as provided in subsections (c) and (d) of this section. Such regulations may 

provide for application of less than 25 per centum of net savings to the 

restoration or maintenance of an allocated surplus account, reasonable 

additions to unallocated surplus, or to unallocated reserves of not to 

exceed such per centum of net savings after payment of operating expenses as may be approved by the Farm Credit Administration, and 

provide for allocations to patrons not qualified under the Internal 

Kevenue Code, or payment of such per centum of patronage refunds in 

cash, as the board may determine. If during the fiscal year but not at 

the end thereof a bank shall have had outstanding capital stock held by 

the United States, provision will be made for payment of franchise 

taxes required in section 4.0. 

(c) The net savings of each district bank for cooperatives, after the 

earnings for the fiscal year have been applied in accordance with subsections (a) or (b) of this section whichever is applicable, shall be 

l^aid in stock or in cash, or both, as determined by the board, as patronage refunds to borrowers of the fiscal year for which such patronage 

refunds are distributed. Except as provided in subsection (d) below, 

"Surplus 

account. " 

68A Stat. 3 . 

26 us e 1 et 

Patronage 

refunds. 
608 PUBLIC LAW 92-181-DEC. 10, 1971 [85 STAT. 

all patronage refunds shall be paid in proportion that the amount of 

interest and service fees on the loans to each borrower during the year 

bears to the interest and service fees on the loans of all borrowers during the year or on such other proportionate patronage basis as the 

Farm Credit Administration may approve. 

(d) The net savings of the Central Bank for Cooperatives after the 

earnings for the fiscal year have been applied in accordance with subsections (a) or (b) whichever is applicable, shall be paid in stock or 

cash, or both, as determined by the board, as patronage refunds to the 

district banks on the basis of interests held by the Central Bank in 

loans made by the district banks and upon any direct loans made by the 

Central Bank to cooperative associations, or on such other proportionate patronage basis as the Farm Credit Administration may approve. 

In cases of direct loans, such refund shall be paid to the district 

bank or banks which issued their stock to the borrower incident to such 

loans, and the district bank or banks shall issue a like amount of 

patronage refunds to the borrower. 

(e) 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 applicable reserves), such loss may be carried 

forward or carried back, if appropriate, or otherwise shall be 

absorbed by charges to unallocated reserve or surplus accounts established after the date of enactment of this Act; charges to allocated 

contingency reserve account; charges to allocated surplus accounts; 

charges to other contingency reserve and surplus accounts; the 

impairment of voting stock; or the impairment of all other stock. 

(f) Notwithstanding any other provisions of this section any costs 

or expenses attributable to a prior year or years but not recognized 

in determining the net savings for such year or years may be charged 

to reserves or surplus of the bank or to patronage allocations for such 

years, as may be determined by the board of directors. 

(g) For any year that a bank for cooperatives is subject to Federal 

income tax, it may pay in cash such portion of its patronage refunds 

as will permit its taxable income to be determined without taking 

into account savings applied as allocated surplus, allocated contingency reserves, and patronage refunds under subsection (a) or 

(b) of this section. 

SEC. 3.12. DISTRIBUTIOX OF ASSETS AND LIQUIDATION OR DIS -

SOLUTION.—In the case of liquidation or dissolution of any bank for 

cooperatives, after payment or retirement, first, of all liabilities; second, of all capital stock issued before January 1, 1956, at par, any 

stock held by the Governor of the Farm Credit Administration at par, 

and all nonvoting stock at par; and third, all voting stock at par; any 

surplus and reserves existing on January 1, 1956, shall be paid to the 

holders of stock issued before that date, stock held by the Governor 

of the Farm Credit Administration, and voting stock pro rata; and 

any remaining allocated surplus and reserves shall be distributed to 

those entities to which they are allocated on the books of the bank, and 

any other remaining surplus shall be paid to the holders of outstanding voting stock. If it should become necessary to use any surplus or 

reserves to pay any liabilities or to retire any capital stock, unallocated 

reserves or surplus, allocated reserves and surplus shall be exhausted 

in accordance with rules prescribed by Farm Credit Administration. 

SEC. 3.13. TAXATION.—Each bank for cooperatives and its obligations are instrumentalities of the United States and as such any and all 

notes, debentures, and other obligations issued by such bank shall be 

exempt, both as to principal and interest from all taxation (except 

surtaxes, estate, inheritance, and gift taxes) now or hereafter imposed 
85 STAT. ] PUBLIC LAW 92-181-DEC. 10, 1971 609 

by the United States or any State, territorial, or local taxing authority. Such banks, their property, their franchises, capital, reserves, 

surplus, and other funds, and their income shall be exempt from all 

taxation now or hereafter imposed by the United States or by any 

State, territorial, or local taxing authority; except that interest on the 

obligations of such banks shall be subject only to Federal income taxation in the hands of the holder thereof pursuant to the Public Debt 

Act of 1941 (31 U.S.C. 742(a)) and except that any real and tangible |J ^'^^' /^9°;. 

personal property of such banks shall be subject to Federal, State, 

territorial, and local taxation to the same extent as similar property 

is taxed. The exemption provided in the preceding sentence shall apply 

only for any year or part thereof in which stock m the bank for cooperatives is held by the Governor of the Farm Credit Administration. 

TITLE IV—PROVISIONS APPLICABLE TO TWO OR MORE 

CLASSES O F INSTITUTIONS OF TH E SYSTEM 

PART A—FUNDING 

SEC. 4.0. STOCK PURCHASED BY GOVERNOR; RETIREIVIENT; FRANCHISE TAX; REVOLVING FUND.— (a) The Federal land banks, the 

Federal intermediate credit banks, the banks for cooperatives, and, subject to section 2.13(d), the production credit associations may issue 

stock which may be purchased by the Governor of the Farm Credit 

Administration on behalf of the United States as a temporary investment in the stock of the institution to help one or several of the banks 

or associations to meet emergency credit needs of borrowei-s. The 

ownership of such stock shall be deemed to not change the status of 

ownership of the banks or associations, but, during the time such stock 

is outstanding, the pertinent provisions of the Government Corporation Control Act shall be applicable. 

(b) The Grovemor shall require the retirement of such stock at such 

time as in his opinion the bank or association has resources available 

therefor and the need for such temporary investment is reduced or 

no longer exists. If the Governor determines that a production credit 

association does not have resources available to retire stock held by 

him, but in his judgment, the Federal intermediate credit bank of the 

district has resources available to do so, the Governor may require 

such bank to invest in an eq^uivalent amount of nonvoting stock of 

said association and the association then shall retire the stock held by 

the Governor. 

(c) For any year or part thereof in which the Governor holds any 

stock in a bank of the System, such institution after complying with 

sections 1.17, 2.6, 2.14, 3.11, respectively, shall pay to the United 

States as a franchise tax a sum equal to the lower of 25 per centum 

of its net earnings for the year before establishing any contingency 

reserves or declaring any dividends or patronage distribution, not 

exceeding a rate of return on such temporary investment calculated 

at a rate determined by the Secretary of the Treasury equal to the 

average annual rate of interest on all public issues of debt obligations of the United States issued during the fiscal year ending next 

before such tax is due, multiplied by the percentage that the number 

of days such stock is outstanding is of three hundred and sixty-five 

days. Such payments shall be deposited in the miscellaneous receipts 

in the Treasury. 

SEC. 4.1. REVOLVING FUNDS AND GOVERNMENT DEPOSITS.—(a) The 

revolving fund established by Public Law 87-343, 75 Stat. 758, as 

amended, shall be available at the request of the Governor of the 12 use 113 a. 

59 Stat. 597. 

31 Stat. 841 

note . 
610 PUBLIC LAW 92-181-DEC. 10, 1971 [85 STAT. 

Farm Credit Administration for his temporary investment in the 

stock of any Federal intermediate credit banks or production credit 

associations as provided in section 4.0 and for any other purpose 

authorized by said Act. Funds received from the partial or the full 

retirement of such investments shall be deposited in this revolving 

fund. 

(b) The revolving fund established by Public Law 87-494, 76 Stat. 

12 use 114Id. 109, as amended, shall be available at the request of the Governor 

of the Farm Credit Administration for his temporary investment 

in the stock of any bank for cooperatives as provided in section 4.0 

of this Act. Funds received from the partial or full retirement of 

such investments shall be deposited in this revolving fund. 

(c) 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 

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 smn of $6,000,000 at any one time. 

SEC. 4.2. POWER To BORROW; ISSUE NOTES, BOXDS, DEBENTURES, 

AND OTHER OBLIGATIONS.—Each of the banks of the System, in order to 

obtain funds for its authorized purposes, shall have power, subject to 

supervision of the Farm Credit Administration, and subject to the 

limitations of paragraph (e) of this section, to— 

(a) Borrow money from or loan to any other institution of the 

System, borrow from any commercial bank or other lending institution, issue its notes or other evidence of debt on its own individual 

responsibility and full faith and credit, and invest its excess funds in 

such sums, at such times, and on such terms and conditions as it may 

determine. 

(b) Issue its own notes, bonds, debentures, or other similar obligations, fully collateralized as provided in section 4.3(b) by the notes, 

mortgages, and security instruments it holds in the performance of 

its functions under this Act in such sums, maturities, rates of interest, and terms and conditions of each issue as it may determine with 

approval of the Governor. 

(c) Join with any or all banks organized and operating under the 

same title of this Act in borrowing or in issuance of consolidated notes, 

bonds, debentures, or other obligations as may be agreed with approval 

of the Governor. 

(d) Join with other banks of the System in issuance of Systemwide notes, bonds, debentures, and other obligations in the manner, 

form, amounts, and on such terms and conditions as may be agreed 

upon with approval of the Governor. Such System-wide issue by the 

participating banks and such participations by each bank shall not 

exceed the limits to which each such bank is subject in the issuance of 

its individual or consolidated obligations and each such issue shall be 

subject to approval of the Governor: Provided, hoioever, There shall 

be no issues of System-wide obligations without the concurrence of the 

boards of directors of each of the 12 districts and the Central Bank 

for Cooperatives and the approval of the Governor for such issues 

shall be conditioned on and be evidence of the compliance with this 

provision. 
85 STAT. ] PUBLIC LAW 92-181-DEC. 10, 1971 611 

(e) No bank or banks shall issue notes, bonds, debentures, or other 

obligations individually or in concert with one or more banks of the 

System other than through their fiscal agent under any provision of 

this Act except under subsection (a) of this section: Provided, That 

any bank or banks may issue investment bonds or like obligations 

other than through the fiscal agent if the interest rate is not in excess of 

the interest allowable on savings deposits of commercial banks of comparable amounts and maturities under Federal Reserve regulation on 

its member banks. 

SEC. 4.3. AGGREGATE or OBLIGATIONS; COLLATERAL.—(a) No issue 

of long-term notes, bonds, debentures, or other similar obligations by 

a bank or banks shall be approved in an amount which, together with 

the amount of other bonds, debentures, long-term notes, or other 

similar obligations issued and outstanding, exceeds twenty times the 

capital and surplus of all the banks which will be primarily liable on 

the proposed issue, or such lesser amount as the Farm Credit Administration shall establish by regulation. 

(b) Each bank shall have on hand at the time of issuance of any 

long-term notes, bonds, debentures, or other similar obligations and 

at all times thereafter maintain, free from any lien or other pledge, 

notes and other obligations representing loans made under the authority of this Act, obligations of the United States or any agency thereof 

direct or fully guaranteed, other readily marketable securities 

approved by the Farm Credit Administration, or cash, in an aggregate value equal to the total amount of long-term notes, bonds, debentures, or other similar obligations outstanding for which the bank is 

primarily liable. 

SEC. 4.4. LIABILITY OF BANKS; UNITED STATES NOT LIABLE.—(a) 

Each bank of the System shall be fully liable on notes, bonds, debentures, or other obligations issued by it individually, and shall be liable 

for the interest payments on long-term notes, bonds, debentures, or 

other obligations issued by other banks operating under the same title 

of this Act. Each bank shall also be primarily liable for the portion 

of any issue of consolidated or System-wide obligations made on its 

behalf and be jointly and severally liable for the payment of any 

additional sums as called upon by the Farm Credit Administration 

in order to make payments of interest or principal which any bank 

primarily liable therefor shall be unable to make. Such calls shall 

be made first upon the other banks operating under the same title of 

this Act as the defaulting bank, and second upon banks operating 

under other titles of this Act, taking into consideration the capital, 

surplus, bonds, debentures, or other obligations which each may have 

outstanding at the time of such assessment. 

(b) Each bank participating in an issue shall by appropriate resolution undertake such responsibility as provided in subsection (a), 

and in the case of consolidated or System-wide obligations shall 

authorize the Governor to execute such long-term notes, bonds, debentures, or other obligations on its behalf. When a consolidated or System-wide issue is approved, the notes, bonds, debentures, or other 

obligations shall be executed by the Governor and the banks shall be 

liable thereon as provided herein. 

(c) The United States shall not be liable or assume any liability 

directly or indirectly thereon. 

SEC. 4.5. FINANCE COMMITTEE.—There shall be established a finance 

committee for the banks organized and operated under titles I, II, and 

III, respectively, of this Act, composed of the presidents of each bank. 

Each such committee may have such officers and such subcommittees 

for such terms and such representation as may be agreed upon between 

75-432 O - 72 - 41 
612 PUBLIC LAW 92-181-DEC. 10, 1971 [85 STAT. 

the banks. When appropriate to the performance of their function, the 

subcommittee's or representatives thereof, of the various banks shall 

constitute such subcommittees in connection with System-wide issues 

of obligations. The finance committees and subcommittees acting for 

the banks of the System shall, subject to approval of the Governor, 

determine the amount, maturities, rates of interest, and participation 

by the several banks in each issue of joint, consolidated, or Systemwide obligations. 

SEO. 4.6. BONDS AS INVESTMENTS.—The bonds, debentures, and other 

similar obligations issued under the authority of this Act shall be 

lawful investments for all fiduciary and trust funds and may be 

accepted as security for all public deposits. 

SEC. 4.7. PURCHASE AND SALE BY FEDERAL RESERVE SYSTEM.—^Any 

member of the Federal Reserve System may buy and sell bonds, debentures, or other similar obligations issued under the authority of this 

Act and any Federal Reserve bank may buy and sell such obligations 

to the same extent and subject to the same limitations placed upon the 

jjurchase and sale by said banks of State, county, district, and munic38 s^tat. 264; ^p^} bouds uudcT scctiou 355 of title 12, United States Code. 

SEC. 4.8. PURCHASE AND SALE or OBLIGATIONS.—Each bank of the 

System may purchase its own obligations and the obligations of other 

banks of the System and may provide for the sale of obligations issued 

by it, consolidated obligations, or System-wide obligations through a 

fiscal agent or agents, by negotiation, offer, bid, syndicate sale, and to 

deliver such obligations by book entry, wire transfer, or such other 

means as may be appropriate. 

SEC. 4.9. FISCAL AGENCY.—A fiscal agency shall be established by 

the banks for such of their functions relating to the issuance, marketing, and handling of their obligations, and interbank or intersystem 

flow of funds as may from time to time be required. 

PART B—DISSOLUTION AND MERGER 

SEC. 4.10. MERGER OF SIMILAR BANKS.—Banks organized or operating under titles I, II, or III, respectively, may upon majority vote cast 

by their voting stockholders and contributors to their guaranty funds 

in accordance with the voting strength provisions of section 5.2(c) of 

this Act relating to elections of directors of the district boards, and 

with the approval of the Farm Credit Administration, merge with 

banks in other districts operating under the name title of this Act. 

SEC. 4.11. BOARD OF DIRECTORS FOR MERGED BANK.—I n the event 

of merger of two or more banks to serve borrowers in more than one 

farm credit district, a separate board of directors shall be created for 

the resulting merged bank. The board thus created shall be composed 

of two directors elected by each of the district boards involved, at least 

one of which from each district shall have been elected by the eligible 

stockholders of or subscribers to the guaranty fund of the merging 

banks, and one director appointed by the Governor with the advice and 

consent of the Federal Farm Credit Board. Notwithstanding the 

foregoing, the bylaws of the merged bank may, with the approval of 

the Farm Credit Administration, provide for a different number of 

directors selected in a different manner. The board so constituted shall 

have such separate and distinct powers, functions, and duties as are 

normally exercised by a district board related to the operations and 

policies of the banks which were merged. 

SEC. 4.12. DISSOLUTION ; VOLUNTARY LIQUIDATION ; MERGERS ; RECEIVERSHIPS; AND CONSERVATORS.— (a) No institution of the System shall 

go into voluntary liquidation without the consent of the Farm Credit 
85 STAT. ] PUBLIC LAW 92-181-DEC. 10, 1971 "613 

Administration and with such consent may liquidate only in accordance with regulations prescribed by the Farm Credit Administration. 

Associations may voluntarily merge with other like associations upon 

the vote of a majority of each of their stockholders present and voting 

or voting by written proxy at duly authorized meetings, and with the 

approval of the supervising bank and the Farm Credit Administration. The Federal Farm Credit Board may require such merger whenever it determines, with the concurrence of the district board, that an 

association has failed to meet its outstanding obligations or failed to 

conduct its operations in accordance with this Act. 

(b) Upon default of any obligation by any institution of the System, such institution may be declared insolvent and placed in the hands 

of a conservator or a receiver appointed by the Governor and the proceedings thereon shall be in accordance with regulations of the Farm 

Credit Administration regarding such insolvencies. 

PART C—RIGHTS OF APPLICANTS 

SEC. 4.13. NOTICE OF ACTION ON APPLICATION.—Every applicant for 

a loan from an institution of the System shall be entitled to prompt 

notice of action on his application, and, if the loan applied for is 

reduced or denied, the reason for such action. 

SEC. 4.14. RECONSIDERATION.—Any applicant who has reason to 

believe that the action on his application by an association failed to 

take into account facts pertinent to his application, or has misinterpreted or failed to properly apply the applicable law or rules and 

regulations governing his application, may, if he so requests in writing within thirty days of the date of that notice, request an informal 

hearing on his application and the action of the association in reduction 

or denial thereof, or the reason for such action, in person before the 

loan committee or officer or employee thereof authorized to act on 

applications under section 1,15(11) or 2.12(18). Promptly after such 

a hearing, he shall be notified of the decision upon reconsideration and 

the reasons therefor. 

SEC. 4.15. NOMINATION OF ASSOCIATION DIRECTORS; REPRESENTAITVE SELECTION OF NOMINEES.—Each production credit association and 

each Federal land bank association shall elect a nominating committee by vote of the stockholders at the annual meeting to serve for the 

following year. Each nominating committee shall review lists of 

farmers from the association territory, determine their willingness to 

serve, and submit for election a slate of eligible candidates which shall 

include at least two nominees for each elective office to be filled. In 

doing so, the committee shall endeavor to assure representation to all 

sections of the association territory and as nearly as possible to all 

types of agriculture practiced within the area. Employees of the association shall not be eligible to be nominated, elected, or serve as a member of the board. Nominations shall also be accepted from the floor. 

Members of the board are not eligible to serve on the nominating committee. Regulations of the Farm Credit Administration governing 

the election of district directors shall similarly assure a choice of two 

nominees for each elective office to be filled and that the district board 

represent as nearly as possible all types of agriculture in the district. 

SEC. 4.16. PROHIBITION AGAINST TAX-EXEMPT GUARANTEES.— 

Notwithstanding any other provision of this Act, no guarantee shall 

be made on any instrument of indebtedness the income from which is 

exempt in whole or in part from Federal taxation. 
614 PUBLIC LAW 92-181-DEC. 10, 1971 [85 STAT. 

TITLE V—DISTRICT AND FARM CREDIT 

ADIVONISTRATION ORGANIZATION 

PART A—DISTRICT ORGANIZATION 

SKC. .").(). (CREATION OF DISTRICTS.—There shall be not more than 

twelve farm credit districts in the United States, which may be designated by number, one of which districts shall include the Commonwealth of Puerto Rico. The boundaries of the twelve farm credit 

<listricts existing on the date of enactment of this Act may be 

readjusted from time to time by the Federal Farm Credit Board, with 

tlie concurrence of the district boards involved. Two or more districts 

may be merged as provided in section 5.18(2). 

SEC. 5.1. DISTRICT BOARDS OF DIRECTORS; MEMBERSHII'; ELIGIBILITY ; TERMS.— (a) There shall be in each farm credit district a farm 

<-redit board of directors composed of seven members. Each farm 

<;redit district board may include in its title the name of the city in 

which the banks of the System for the district are located or other 

geographical designation. 

(b) To be eligible for membership on a farm credit district board 

a person must be a citizen of the United States for at least ten years, 

and a resident of the district for at least two years. 

A person shall not be eligible who— 

(1) is or has, within one year next preceding the date of election 

or appointment, been a salaried officer or employee of the Farm 

('redit Administration or of any institution of the System; 

(2) has been convicted of a felony or adjudged liable in damages for fraud; or 

(3) if there is at the time of his election another resident of the 

same State who was elected to the district board by the same electorate, except where a district embraces only one State. 

No director of a district board shall be eligible to continue to serve in 

that capacity and his office shall become vacant if after his election or 

appointment as a member of a district board, he continues or becomes 

a salaried officer or employee of the Farm Credit Administration, of 

any institution of the System, or a member of the Federal Farm Credit 

Board, or if he becomes legally incompetent or is finally convicted of 

a felony or held liable in damages for fraud. In any event, no director 

shall, within one year after the date when he ceases to be a member of 

the board, be elected or designated to serve as a salaried employee of 

any bank or joint employee of the district for which he served as 

director. 

(c) The terms of district directors shall be for three years, except 

that the terms of appointed directors may be for a shorter or longer 

term to permit the staggering of such appointments over a three-year 

period but in no event shall such appointed director be eligible to serve 

for more than two full terms. 

SEC. 5.2. SAME; NOMINATION; ELECTION; APPOINTMENT.—(a) Two 

of the district directors shall be elected by the Federal land bank associations, two by the production credit associations, and two by the borrowers from or subscribers to the guaranty fund of the bank for 

cooperatives. The seventh member shall be appointed by the Governor 

with the advice and consent of the Federal Farm Credit Board. 

(b) At least two months before an election of an elected director the 

Farm Credit Administration shall cause notice in writing to be sent 

to those entitled to nominate candidates for such elected director. In 

the case of an election of a director by Federal land bank associations 

and borrowers through agencies, such notice shall be sent to all Fed-
85 STAT. ] PUBLIC LAW 92-181-DEC. 10, 1971 615 

eral land bank associations and borrowers througli agencies in the district; in the case of an election by production credit associations, such 

notice shall be sent to all production credit associations in the district; 

and in the case of an election by cooperatives which are voting stockholders or subscribers to the guaranty fund of the bank for cooperatives of the district, such notice shall be sent to all cooperatives which 

are eligible, voting stockholders or subscribers to the guaranty fund 

at the time of sending the notice. The notice in the case of associations 

shall state the number of votes the board of each association is entitled 

to cast for nomination and election based on the voting stockholders of 

the association as determined by the Farm Credit Administration as 

near as practicable to the date of the notice. After receipt of such 

notice those entitled to nominate a director shall forward nominations 

to the Farm Credit Administration. The Farm Credit Administration 

shall, from the nominations received w^ithin sixty days after it sends 

such notice, prepare a list of candidates for sudh elected director, consisting of the three nominees receiving the highest number of votes, 

except that for elections to fill vacancies the Farm Credit Administration may specify a shorter period than sixty days but not less than 

thirty days. 

(c) At least one month before the election of an elected director, 

the Farm Credit Administration shall mail to each person or organization entitled to elect the elected director a list of the three candidates receiving the highest number of votes from those nominated in 

accordance with subsection (b). In the case of an election of a director 

by the Federal land bank associations, the directors of each land bank 

association shall cast the vote of such association for one of the candidates on the list. Each association shall be entitled to cast the number 

of votes specified in the notice prior to the nomination poll as determined by the Farm Credit Administration to be the numlber of voting 

stockholders of each association, and each direct borrower and borrower through agent shall be entitled to cast one vote. Each production credit association shall be entitled to cast the number of votes 

specified in the notice of nomination poll as determined by the Farm 

Credit Administration to be equal to the number of voting stockholders of such association. Each cooperative which is the holder of voting 

stock in or a subscriber to the guaranty fund of the bank for cooperatives shall be entitled to cast one vote except as provided in subsection 

3.3(d). The votes shall be forwarded to the Farm Credit Administration and no vote shall be counted unless received by it within sixty 

days after the sending of such list of candidates, except that for elections to fill vacancies the Farm Credit Administration may specify a 

shorter period than sixty days but not less than thirty days. In the 

case of a tie another runoff election between those tying shall be held. 

(d) Any vacancies in the board of directors shall be filled for the 

unexpired term in the manner provided in sections 5.1 and 5.2 for the 

selection of such directors. 

SEC. 5.3. DISTRICT DIRECTORS CONSTITUTE BOARDS OF DIRECTORS FOR 

FEDERAL LAND BANKS, FEDERAL INTERMEDIATE CREDIT BANKS, AND 

DISTRICT BANKS FOR COOPERATIVES.—The members of each farm credit 

district board of directors shall be and shall have all the functions, 

powers, and duties of directors for the Federal land banks, the Federal interniediate credit banks, and the district banks for cooperatives in their respective districts. 

SEC. 5.4. DISTRICT BOARD OFFICERS.—Each farm credit district board 

shall elect from its members a chairman and a vice chairman and 

shall appoint a secretary from within or without its membership as 

it may see fit. The chairman, vice chairman, and secretary shall hold 

office for a term of one year and until their successors are selected and 

take office. 

Vacancies. 
616 PUBLIC LA\V 92-181-DEC. 10, 1971 [85 STAT. 

SEC. 5.5. COMPENSATION OF DISTRICT BOARD.—Members of eacli farm 

credit district board shall receive compensation, including reasonable 

allowances for necessary expenses, in attending meetings of the board 

as district board and as directors of the district banks including travel 

time. The compensation shall not be in excess of the level set by the 

Farm Credit Administration. In addition to attending said meetings, 

a director may not receive compensation and allowances for any services rendered in his capacity as director or otherwise for more than 

thirty days or parts of days in any one calendar year without the 

approval of the Farm Credit Administration. 

SEC. 5.6. POWERS or THE DISTRICT FARM CREDIT BOARD.— (a) Each 

farm credit district board shall have power to— 

(1) Act as the board of directors for the district and of the several 

banks of the System in the district. 

(2) Provide rules and regulations, governing the banks and associations in the district, not inconsistent with law. 

(3) Elect or provide for joint officers and employees for the banks 

in its district which are institutions of the System or, upon agreement 

with banks in other districts, joint officers and employees of institutions in more than one district. The salary or other compensation of 

all such joint officers and employees and the allocation thereof between 

the banks shall be fixed by the district farm credit board. Officers and 

employees elected or provided for by the district farm credit board, 

whe;ther separate officers and employees of the institutions or joint 

officers and employees, shall be officers and employees of the district 

institutions served by them. Employment, compensation, leave, retirement, except as provided in subsection (b) of this section, hours of 

duty, and all other conditions of employment of such joint officers and 

employees and of the separate officers and employees of the institutions 

in the district provided for by the board of directors shall be without 

fa^^^ ^°^ ^' regard to the provisions of title 5 of the United States Code relating 

to such matters, but all such determinations shall be consistent with 

the law under which the banks are organized and operate. Appointments, promotions, and separations so made shall be based on merit and 

efficiency and no political test or qualification shall be permitted or 

given consideration. The limitations against political activity and conflict of interest of such officers and employees shall be in accordance with rules and regulations prescribed by the Farm Credit 

Administration. 

(4) Authorize the acquisition and disposal of such property, real or 

personal, as may be necessary or convenient for the transaction of the 

business of the banks of the System located in its district, upon such 

terms and conditions as it shall fix, and to prorate among such banks 

the cost of purchases, rentals, construction, repairs, alterations, maintenance, and operation in such amounts and in such manner as it shall 

determine. Any lease, or any contract for the purchase or sale of 

property, or any deed or conveyance of property, or any contract for 

the construction, repair, or alteration of buildings, authorized by a 

district farm credit board under this subsection shall be executed by 

the officers of the bank or banks concerned pursuant to the direction 

of such board. No provision of law relative to the acquisition or disposal of property, real or personal, by or for the United States, or relative to the making of contracts or leases by or for the United States, 

sJ*°-^^i*\jsc°s^et including the provisions set out in titles 40 and 41, and including provisions applicable to corporations wholly owned by the United States, 

shall be deemed or held applicable to any lease, purchase, sale, deed, 

conveyance, or contract authorized or made by a district farm credit 

board or the banks of the System under this subsection. 

seq. 

seq 
85 STAT. ] PUBLIC LAW 92-181-DEC. 10, 1971 617 

(5) Authorize agreements for the provision of joint services 

between institutions in the System and between districts for those 

banks' and associations' functions and for those services to borrowers 

which can most effectively be performed by the joint undertakings of 

the district or districts, all of such activities to be subject to the same 

supervision of the Farm Credit Administration as is applicable to 

such institutions under this Act. 

(6) Formulate broad policy considerations concerning the funding 

operations of the banks in the district and, in concert with the other 

district boards, furnish unified long-range policy guidance for the 

funding of the System. 

(b) The provisions of subsection (a) of this section are qualified 

as follows: 

(1) Each officer and employe© of the banks of the System who, on 

December 31,1959, was within the purview of the Civil Service Retirement Act, as amended, shall continue so during his continuance as an 

officer or employee of any such banks or of the Farm Credit Administration without break in continuity of service. Any other officer or 

employee of such banks and any other person entering upon employment with any such banks after December 31, 1959, shall not be 

covered under the civil service retirement system by reason of such 

employment, except that (1) a person who, on December 31, 1959, was 

within the purview of the Civil Service Retirement Act, as amended, 

and thereafter becomes an officer or employee of any such banks 

without break in continuity of service shall continue under the civil 

service retirement system during his continuance as an officer or 

employee of any such banks without break in continuity of service and 

(2) a person who has been within the purview of said Act as an officer 

or employee of such banks and, after a break in such employment, 

again becomes an officer or employee of any of such banks may elect 

to continue under the civil service retirement system during his continuance as such officer or employee by so notifying the Civil Service 

Commission in writing within thirty days after such reemployment. 

(2) Each of the banks of the System shall contribute to the civil 

service retirement and disability fund, for each fiscal year after June 

30,1960, a sum as provided by section 4(a) of the Civil Service Retirement Act, as amended, except that such sum shall be determined by 

applying to the total basic salaries (as defined in that Act) paid to the 

employees of said banks who are covered by that Act, the per centum 

rate determined annually by the L^nited States Civil Service Commission to be the excess of the total normal cost per centum rate of the 

civil service retirement system over the employee deduction rate specified in such section 4(a). Each bank shall also pay into the Treasury 

as miscellaneous receipts such portion of the cost of administration of 

the fund as is determined by the United States Civil Service Commission to be attributable to its employees. 

PART B—FARM CREDIT ADMIXISTRATIOX ORGAXIZATION 

SEC. 5.7. TH E FARM CREDIT ADMINISTRATIOX.—The Farm Credit 

Administration shall be an independent agency in the executive branch 

of the (xovernment. It shall be composed of the Federal Farm Credit 

Board, the Governor of the Farm Credit Administration, and such 

other personnel as are employed in carrying out the functions, powers, 

and duties vested in the Farm Credit Administration by this Act. 

SEC. 5.8. TH E FEDERAL FARM CREDIT BOARD; NOMIXATION AXD 

APPOIXTMEXT OF MEMBERS; ORGAXIZATIOX AXD COMPEXSATIOX.— (a) 

There is establislied in the Farm Credit Administration a Federal 

Farm Credit Board. The Board shall consist of not more than thirRetirement. 

70 Stat. 743. 

5 us e 8 331 ef 

seq. 

83 Stat. 136. 

5 us e 8334 and 

note . 
618 PUBLIC LAW 92-181-DEC. 10, 1971 [85 STAT. 

teen members, one of whom shall be designated by the Secretary of 

Agriculture. The remainder of the Board shall be appointed by the 

President, with the advice and consent of the Senate, one from each 

farm credit district, to be known as the appointed members. 

(b) I n making appointments to the Board, the President ^hall have 

due regard to a fair representation of the public interest, the welfare 

of all farmers, and the types of institutions constituting the Farm 

Credit System, with special consideration to persons who are experienced in cooperative agricultural credit, taking into consideration the 

lists of nommees proposed by the Farm Credit System as hereinafter 

provided. 

(c) Each appointed member of the Board shall have been a citizen 

of the United States and shall have been a resident of the district from 

which he was appointed for not less than ten years next preceding his 

appointment, and the removal of residence from the district shall 

operate to terminate his membership on the Board. No person shall 

be eligible for nomination or appointment if within one year next 

preceding the commencement of his term he has been a salaried officer 

or employee of the Farm Credit Administration or a salaried officer 

or employee of any institution of the Farm Credit System. Any person 

who is a member of a district farm credit board when appointed as a 

member of the Federal Farm Credit Board shall resign as a member 

of the district board before assuming his duties as a member of the 

Board. No person who becomes an appointed member of the Board 

shall be eligible to continue to serve in such capacity if such person is 

or becomes a member of a district farm credit board, or an officer or 

employee of the Farm Credit Administration, or director, officer, or 

employee of any institution of the Farm Credit System. No director 

shall, within one year after the date when he ceases to be a member of 

the Board, be elected or designated to serve as a salaried officer or 

employee of any bank, joint officer or employee, or officer or employee 

of the Farm Credit Administration. 

(d) The Secretary of Agriculture shall designate one member of the 

Board to serve at the pleasure of the Secretary. He shall be known as 

the Secretary's representative on the Board. He shall be a citizen of 

the United States and shall have been a resident of the United States 

for not less than ten years preceding his designation on the Board. No 

person shall be designated by the Secretary if such person is a member 

of a farm credit district board, an officer or employee of the Farm 

Credit Administration, or an officer or employee of any institution 

operating under the supervision of the Farm Credit Administration. 

The Secretary's representative shall not be eligible to serve as Chairman, Vice Chairman, or Secretary of the Board but shall otherwise 

possess all the rights and privileges of membership on the Board. 

(e) The term of office of the appointed members of the Board shall 

be six years and such members shall serve until their successors are 

duly appointed and qualified. No appointed member of the Board shall 

be eligible to serve more than one full term of six years and, in addition, if he is appointed to fill the unexpired portion of one term expiring before his appointment to a full term, he may be eligible thereafter 

for appointment to fill a full term of six years. 

All vacancies for the offices of appointed members shall be filled for 

the unexpired portion of the term upon like nominations and like appointments: Provided, however, That the district board of directors 

may select a representative to meet with the Board, without the right 

of vote, prior to the filling of a vacancy occasioned by death, resignation, disability, or declination in the office of member from that district, 

under rules and regulations prescribed by the Board. 

Term, 

VacancieSa 
85 STAT. ] PUBLIC LAW 92-181-DEC. 10, 1971 619 

(f) A list of nominees for appointment as an appointed member of 

the Board shall be presented to the President for consideration in the 

filling of any office of Board member. The list shall be composed of 

one selected by each voting ^roup in the district in which the member's 

term is about to expire or m which a vacancy occurs, determined in 

accordance with the procedure prescribed in section 5.2 of this title 

for the nomination and election of members of a district farm credit 

board, except that the list of candidates for the Board for final election 

in the district shall be the two nominees of each A oting group receiving 

the highest number of votes. 

(g) The members of the Board shall meet and subscribe the oath of 

office and annually o!-ganize by the election of a Chairman and Vice 

Chairman. The Board shall appoint a Secretary from within or without the membership. Such officers of the Board shall serve for one year 

and until their successors are selected and take office. The Board may 

function notwithstanding vacancies exist, provided a quorum is present. 

A quorum shall consist of a majority of all the members of the Board, 

for the transaction of business. The Board shall hold at least four 

i-egularly scheduled meetings a year and such additional meetings at 

such times and places as it may fix and determine. Such meetings may 

be held on the call of the Chairman or any three Board members. 

(h) Each of the Board members shall receive the sum of $100 a day compensation. 

for each day or part thereof in the performance of his official duties at 

regular and special meetings of the Board and regular and special 

meetings of district boards. In addition to attending said meetings, 

members may receive compensation for services rendered as member 

for not more than thirty days or parts of days in any calendar year, 

and shall be reimbursed for necessary travel, subsistence, and other 

expenses in the discharge of their official duties without regard to 

other laws with respect to allowance for travel and subsistence of 

officers and employees of the United States. The Secretary's representative if he is a full-time officer or employee of the United States shall 

r-eceive no additional compensation for his official duties on the Board,, 

but may receive travel and subsistence and other expenses. 

(i) The Board shall adopt such rules as it may see fit for the trans- Recordkeeping, 

action of its business, and shall keep permanent records and minutes 

of its acts and proceedings. 

SEC. 5.9. POWERS or THE BOARD,—The Federal Farm Credit Board 

shall establish the general policy for the guidance of the Farm Credit 

Adrninistration and approve the necessary rules and regulations for 

the implementation of this Act not inconsistent with its provisions; 

may require such reports as it deems necessary from the institutions 

of the Farm Credit System; provide for the examination of the condition of and general supervision over the performance of the powers, 

functions, and duties vested in each such institution, and for the performance of all the powers and duties vested in the Farm Credit 

Administration or in the Governor which, in the judgment of the 

Board, relate to mattei*s of broad and general supervisory, advisory, 

or policy nature. The Board shall function as a unit without delegating 

any of its functions to individual members, but may appoint committees and subcommittees for studies and reports for consideration 

by the Board. It shall not operate in an administrative capacity. 

SEC. 5.10. GOVERNOR: APPOINTMENTT; RESPONSIBILITIES.—The Governor of the Farm Credit Administration shall be appointed by and 

serve at the pleasure of the Federal Farm Credit Board. He shall be 

responsible, subject to the general supervision and direction of the 

Board as to matters of a broad and general supervisory, advisory, or 

policy nature, for the execution of all of the administrative functions 
620 PUBLIC LAW 92-181-DEC. 10, 1971 [85 STAT. 

and duties of the Farm Credit Administration. During any period in 

which the Governor holds any stock in any of the institutions subject 

to supervision of the Farm Credit Administration, the appointment 

of the Governor shall be subject to approval by the President and 

during any such period the President shall have the power to remove 

the Governor. 

SEC. 5.11. COMPENSATION ; SALARY AND EXPENSE ALLOWANCE.—The 

compensation of the Governor of the Farm Credit Administration 

5 use 5311. shall be at the rate fixed in the Executive Pay Schedule. The Board 

shall fix the allowance for his necessary travel and subsistence 

expenses or per diem in lieu thereof. 

SEC. 5.12. COMPLIANCE WIT H BOARD ORDERS.—It shall be the duty 

of the Governor of the Farm Credit Administration to comply with 

all orders and directions which he receives from the Federal Farm 

Credit Board and, as to third persons, all acts of the Governor shall 

be conclusively presumed to be in compliance with the orders and 

directions of the Board. 

SEC. 5.13. FARM CREDIT ORGANIZATION.—The Governor of the Farm 

Credit Administration is authorized, in carrying out the powers and 

duties now or hereafter vested in him by this Act and acts supplementary thereto, to establish and to fix the powers and the duties of 

such divisions and instrumentalities as he may deem necessary to the 

efficient functioning of the Farm Credit Administration and the successful execution of the powers and duties so vested in the Governor 

and the Farm Credit Administration. The Governor shall appoint 

such other personnel as may be necessary to carry out the functions of 

the Farm Credit Administration: Provided^ That the salary of positions of Deputy Governors shall not exceed the maximum scheduled 

rate of the general schedule of the Classification Act of 1949, as 

5JJSC 5332 amended. The powers of the Governor may be exercised and performed by him through such other officers and employees of the Farm 

Credit Administration as he shall designate. 

SEC. 5.14. SEAL.—The Farm Credit Administration shall have a seal, 

as adopted by the Governor, which shall be judicially noted. 

SEC. 5.15. ADMINISTRATIVE EXPENSES.—The Farm Credit Administration may, within the limits of funds available therefor, make necessary expenditures for personnel services and rent at the seat of 

Government and elsewhere; contract stenographic reporting services; 

purchase and exchange lawbooks, books of reference, periodicals, newspapers, expenses of attendance at meetings and conferences; purchase, 

operation, and maintenance at the seat of Government and elsewhere of 

motor-propelled passenger-carrying vehicles and other vehicles; printing and binding; and for such other facilities and services, including 

temporary employment by contract or otherwise, as it may from time 

to time find necessary for the proper administration of this Act. 

SEC. 5.16. ALLOCATION OF EXPENSES FOR ADMINISTRATIVE SERVICES 

BY THE FARM CREDIT ADMINISTRATION; DISPOSITION OF MONEY.— 

(a) The Farm Credit Administration shall prior to the first day of 

each fiscal year estimate the cost of administrative expenses for the 

ensuing fiscal year in administering this Act, including official functions, and shall apportion the amount so determined among the institutions of the System on such equitable basis as the Farm Credit Administration shall determine, and shall assess against and collect in 

advance the amounts so apportioned from the institutions among 

which the apportionment is made. 

(b) The amounts collected pursuant to subsection (a) of this section shall be covered into the Treasury, and credited to a special fund 

and, without regard to other law, shall be available to said Adminisnote . 
85 STAT. ] PUBLIC LAW 92-181-DEC. 10, 1971 621 

tration for expenditure during each fiscal year for salaries and 

expenses of said Administration. As soon as practicable after the end 

of each such fiscal year, the Administration shall determine, on a fair 

and reasonable basis, the cost of operation of the Farm Credit Administration and the part thereof which fairly and equitably should be 

allocated to each bank and association as its share of the cost during 

the fiscal year of such Administration. If the amount so allocated is 

greater than the amount collected from the bank or other institutions, 

the difference shall be collected from such bank or other institutions, 

and, if less, shall be refunded from the special fund to the bank or 

other institutions entitled thereto or credited in the special fund to 

such bank or other institutions for use for the same purposes in future 

fiscal years. 

SEC. 5.17. QUARTERS AND FACILITIES FOR THE FARM CREDIT ADMINISTRATION.—AS an alternate to the rental of quarters under section 5.15, 

and without regard to any other provision of law, the banks of the 

System, with the concurrence of two-thirds of the district boards, are 

hereby authorized— 

(1) To lease or acquire real property in the District of Columbia 

or elsewhere for quarters of the Farm Credit Administration. 

(2) To construct, develop, furnish, and equip such building thereon 

and such facilities appurtenant thereto as m their judgment may be 

appropriate to provide, to the extent the Federal Farm Credit Board 

may deem advisable, suitable, and adequate quarters and facilities 

for the Farm Credit Administration. 

(3) To enlarge, remodel, or reconstruct the same. 

(4) To make or enter into contracts for any of the foregoing. 

The Board may require of the respective banks of the System, and they 

shall make to the Farm Credit Administration, such advances of funds 

for the purposes set out in this section as in the sole judgment of the 

Board may from time to time be advisable for the purposes of this 

section. Such advances shall be in addition to and kept in a separate 

fund from the assessments authorized in section 5.16 and shall be 

apportioned by the Board among the banks in proportion to the total 

assets of the respective banks, and determined in such manner and at 

such times as the Board may prescribe. The powers of the banks of 

the System and purposes for which obligations may be issued by such 

banks are hereby enlarged to include the purpose of obtaining funds 

to permit the making of advances required by this section. The plans 

and decisions for such building and facilities and for the enlargement, 

remodeling, or reconstruction thereof shall be such as is approved in 

the sole discretion of the Board. 

SEC. 5.18. ENUMERATED POWERS.—The Farm Credit Administration shall have the following powers, functions, and responsibilities in 

connection with the institutions of the Farm Credit System and the 

administration of this Act: 

(1) Modify the boundaries of farm credit districts, with due regard 

for the farm credit needs of the country, as approved by the Federal 

Farm Credit Board, with the concurrence of the district boards 

involved. 

(2) Where necessary or appropriate to carry out the policy and 

objectives of this Act, issue and amend or modify Federal charters or 

the bylaws of institutions of the System; approve change in names of 

banks operating under this Act; approve the merger of districts when 

agreed to by the boards of the districts involved and by a majority 

vote of the voting stockholders and contributors to the guaranty funds 

of each bank for each of such districts, voting in the same manner as 

is provided in section 4.10 of this Act; approve mergers of banks 
gre s s 

622 PUBLIC LAW 92-181-DEC. 10, 1971 [85 STAT. 

operating under the same title of this Act, merger of Federal land bank 

associations, merger of production credit associations and the consolidation or division of the territories which they serve; and approve 

consolidations of boards of directors or management agreements. Such 

mergers shall be encouraged where such action will improve service to 

borrowers and the financial stability, effect economies of operation, or 

permit desirable joint management, or consolidation of territories and 

office quarters, 

f^f'^'^ *° ^''"" (^) Make annual reports directly to the Congress on the condition 

of the System and its institutions and on the manner and extent to 

which the purposes and objectives of this Act are being carried out 

and, from time to time, recommend directly legislative changes. 

(4) Except for associations, approve the salary scale for employees 

of the institutions of the System, and approve the compensation of 

the chief executive officer of such institutions. 

(5) Coordinate the activities of the banks in making studies of lending standards, including appraisal and credit standards; approve 

national and district standards, procedures, and appraisal forms; prescribe price and cost levels to be used in such standards, appraisals, and 

lending; supplement the work of the district under the foregoing 

where necessary to accomplish the purposes of this Act. 

(6) Prescribe loan security requirements and the types, classes, or 

number of loans which may be made only with prior approval. 

(7) Conduct loan and collateral security review. 

(8) Approve the issuance of obligations of the institutions of the 

System and execute on behalf of the banks consolidated and Systemwide obligations for the purpose of funding the authorized operations 

of the institutions of the System, and prescribe collateral therefor. 

(9) Approve interest rates paid by institutions of the System on 

their bonds, debentures, and similar obligations, the terms and conditions thereof, and interest or other charges made by such institutions 

to borrowers. 

(10) Make investments in stock of the institutions of the System as 

provided in section 4.0 out of the revolving fund, and require the 

retirement of such stock. 

(11) Regulate the borrowing, repayment, and transfer of funds 

and equities between institutions of the System. 

(12) Coordinate and assist in providing services necessary for the 

convenient, efficient, and effective management of the institutions of 

the System. 

(13) Undertake research into the rural credit needs of the country 

and ways and means of meeting them and of the funding of the operations of the System in relation to changing farming and economic 

conditions. 

Public informa- ^^^^ Prepare and disseminate information to the general public on 

use, organization, and functions of the System and to investors on 

merits of its securities. 

(15) Require surety bonds or other provision for protection of the 

assets of the institutions of the System against losses occasioned by 

employees. 

^"/aHon"'^ (16) Prescribe rules and regulations necessary or appropriate for 

carrying out the provisions of this Act. 

(17) Exercise such incidental powers as may be necessary or appropriate to fulfill its duties and carry out the purposes of this Act. 

SEC. 5.19. DELEGATION OF DUTIES AND POWERS TO INSTITUTIONS 

OF THE SYSTEM.—The Farm Credit Administration is authorized and 

directed, by order or rules and regulations, to delegate to a Federal 

land bank such of the duties, powers, and authority of the Farm Credit 

tion. 

regulations. 
85 STAT. ] PUBLIC LAW 92-181-DEC. 10, 1971 623 

Administration with respect to and over a Federal land bank or Federal land bank associations, their officers and employees, in the farm 

credit district wherein such Federal land bank is located, as may be 

determined to be in the interest of effective administration; and, in 

like manner, to delegate to a Federal intermediate credit bank such of 

the duties, powders, and authority of the Farm Credit Administration 

with respect to and over a Federal intermediate credit bank or production credit associations, their officers and employees, in the farm credit 

district wherein such Federal intermediate credit bank is located, as 

may be determined to be in the interest of effective administration; to 

authorize the redelegation thereof; and, in either case the duties, 

powers, and authority so delegated or redelegated shall be performed 

and exercised under such conditions and requirements and upon such 

terms as the Farm Credit Administration may specify. Any Federal 

land bank or Federal intermediate credit bank to which any such 

duties, powers, or authority may be delegated or any association to 

which any power may be redelegated, is authorized and empowered 

to accept, perform, and exercise such duties, powers, and authority as 

may be so delegated to it. 

SEC. 5.20. EXAMINATIONS AND REPORTS.—Except as provided 

herein, each institution of the System, and each of their agents, at such 

times as the Governor of the Farm Credit Administration may determine, shall be examined and audited by farm credit examiners under 

the direction of an independent chief Farm Credit Administration 

examiner, but each bank and each production credit association shall 

be examined and audited not less frequently than once each year. Such 

examinations shall include objective appraisals of the effectiveness of 

management and application of policies in carrying out the provisions 

of this Act and in servicing all eligible borrowers. If the Governor 

determines it to be necessary or appropriate, the required examinations 

and audits may be made by independent certified public accountants, 

certified by a regulatory authority of a State, and in accordance with 

generally accepted auditing standards. Upon request of the Governor 

or any bank of the System, farm credit examiners shall also make 

examinations and Avritten reports of the condition of any organization, 

other than national banks, to which, or with which, any institution 

of the System contemplates making a loan or discounting paper of 

such organization. For the purposes of this Act, examiners of the Farm 

Credit Administration shall be subject to the same requirements, 

responsibilities, and penalties as are applicable to examiners under the 

National Bank Act, the Federal Eeserve Act, the Federal Deposit ] | |J^J* ^^'j 

Insurance Act, and other provisions of law and shall have the same 12 usVas and 

powers and privileges as are vested in such examiners by law. "°t«» 226 and 

SEC. 5.21. CONDITIONS OF OTHER BANKS AND LENDING INSTITU- "°64*stat. 373. 

TiONS.—The Comptroller of the Currency is authorized and directed, 12 use is 11 

upon request of the Farm Credit Administration to furnish for confi- "°*^* 

dential use of an institution of the System such reports, records, and 

other information as he may have available relating to the financial 

condition of national banks through, for, or with which such institution of the System has made or contemplates making discounts or loans 

and to make such further examination, as may be agreed, of organizations through, for, or with which such institution of the Farm Credit 

System has made or contemplates making discounts or loans. 

SEC. 5.22. CONSENT TO THE AVAILABILITY OF REPORTS AND TO 

EXAMINATIONS.—Any organization other than State banks, trust 

companies, and savings associations shall, as a condition precedent to 

securing discount privileges with a bank of the Farm Credit System, 

file with such bank its written consent to examination by farm credit 
624 PUBLIC LAW 92-181-DEC. 10, 1971 [85 STAT. 

12 us e 641 and 

note, 

12 us e 672a. 

12 us e 665, 

639 note. 

12 us e 810, 

636. 

12 us e 1131g-2, 

12 us e 773a. 

12 us e 640a640^, 656a, 724, 

1040, 

12 us e 832, 

833, 

examiners as may be directed by the Farm Credit Administration; and 

State banks, trust companies, and savings associations may be required 

in like manner to file a written consent that reports of their examination by constituted State authorities may be furnished by such authorities upon the request of the Farm Credit Administration. 

SEC. 5.23. REPORTS ON CONDITIONS OF INSTITUTIONS RECEIVING LOANS 

OR DEPOSITS.—The executive departments, boards, commissions, and 

independent establishments of the Government of the United States, 

the Federal Deposit Insurance Corporation, the Comptroller of the 

Currency, the Board of Governors of the Federal Reserve System, 

and the Federal Reserve banks are severally authorized under such 

conditions as they may prescribe, upon request of the Farm Credit 

Administration, to make available to it or to any institution of the 

System in confidence all reports, records, or other information relating 

to the condition of any organization to which such institution of the 

System has made or contemplates making loan or for which it has or 

contemplates discounting paper^ or which it is using or contemplates 

using as a custodian of securities or other credit instruments, or a 

depository. The Federal Reserve banks in their capacity as depositories, agents, and custodians for bonds, debentures, and other obligations issued by the banks of the System or book entries thereof are also 

authorized and directed, upon request of the Farm Credit Administration, to make available for audit by farm credit examiners all 

appropriate books, accounts, financial records, files, and other papers. 

SEC. 5.24. JURISDICTION.—Each institution of the System shall for 

the purposes of jurisdiction be deemed to be a citizen of the State, 

commonwealth, or District of Columbia in which its principal office 

is located. Xo district court of the United States shall have jurisdiction 

of any action or suit by or against any production credit association 

upon the ground that it was incorporated under this Act or prior Federal law, or that the United States owns any stock thereof,,nor shall 

any district court of the LTnited States have jurisdiction, by removal 

or otherwise, of any suit by or against such association except in cases 

by or against the United States or by or against any officer of the 

United States or against any person over whom the courts of the State 

have no jurisdiction, and except in cases by or against any receiver or 

conservator of any such association appointed in accordance with the 

provisions of this Act. 

SEC. 5.25. STATE LEGISLATION.—Whenever it is determined by the 

Farm Credit Administration, or by judicial decision, that a State law 

is applicable to the obligations and securities authorized to be held by 

the institutions of the System under this Act, which law would provide 

insufficient protection or inadequate safeguards against loss in the 

event of default, the Farm Credit Administration may declare such 

obligations or securities to be ineligible as collateral for the issuance 

of new notes, bonds, debentures, and other obligations under this Act, 

SEC. 5.26. REPEAL.— (a) The Federal Farm Loan Act, as amended; 

section 2 of the Act of March 10, 1924 (Public Numbered 35, Sixtyeighth Congress, 43 Stat. IT), as amended; section 6 of the Act of 

January 23, 1932 (Public Numbered 3, Seventy-second Congress, 47 

Stat. 14), as amended; the Farm Credit Act of 1933, as amended; sections 29 and 40 of the Emergency Farm Mortgage Act of 1933; Act 

of June 18, 1934 (Public Numbered 381, Seventy-third Congress, 48 

Stat. 983); Act of June 4,1936 (Public Numbered 644, Seventy-fourth 

Congress, 49 Stat. 1461), as amended; sections 5, 6, 20, 25(b) and 39 

of tne Farm Credit Act of 1937, as amended; sections 601 and 602 of 

the Act of September 21, 1944 (Public Law 425, Seventy-eighth Congress, 58 Stat. 740, 741), as amended; sections 1, 2, 3, 4, 5, 6, 7, 8, 16, 
85 STAT. ] PUBLIC LAW 92-182-DEC. 15, 1971 625 

and 17(b) of the Farm Credit Act of 1953, as amended; sections 2,101, egg^.^iTafel^i!" 

and 201(b) of the Farm Credit Act of 1956 are hereby repealed. All 12 use 10*27 

references in other legislation, State or Federal, rules and regulations ^"'i "°te, 10235. 

of any agency, stock, contracts, deeds, security instruments, bonds, 

debentures, notes, mortgages and other documents of the institutions 

of the System, to the Acts repealed hereby shall be deemed to refer to 

comparable provisions of this Act. 

(b) All regulations of the Farm Credit Administration or the in- ^^^^^'""^^ ^^°'''' 

stitutions of the System and all charters, bylaws, resolutions, stock 

classifications, and policy directives issued or approved by the Farm 

Credit Administration, and all elections held and appointments made 

under the Acts repealed by subsection (a) of this section shall be continuing and remain valid until superseded, modified, or replaced under 

the authority of this Act. All stock, notes, bonds, debentures, and other 

obligations issued under the repealed acts shall be valid and enforceable upon the terms and conditions under which they were issued, 

including the pledge of collateral against which they were issued, and 

all loans made and security or collateral therefor held by, and all contracts entered into by, institutions of the System shall remain enforceable according to their terms unless and until modified in accordance 

with the provisions of this Act; it being the purpose of this subsection 

to avoid disruption in the effective operation of the System by reason 

of said repeals. 

SEC. 5.27. AMENDMENTS TO OTHER LAWS.— (a) The Executive 

Schedule of basic pay (80 Stat. 458, 5 U.S.C. 5311-5317), as amended, *^ ^'^'' ^^^' 

is further amended by striking from positions at level IV the "Governor of the Farm Credit Administration." (5 U.S.C. 5315 (51)) and 

inserting in positions at level II I the additional position "(58) Governor of the Farm Credit Administration." (5 U.S.C. 5314). 

(b) The third paragraph of section 15 of the Federal Reserve Act 

(12 U.S.C. 393) is amended to read as follows: 42 stat. MSO. 

"The Federal Reserve banks are authorized to act as depositaries 

for and fiscal agents of any Federal land bank. Federal intermediate 

credit bank, bank for cooperatives, or other institutions of the Farm 

Credit System." 

SEC. 5.28. SEPARABILITY.—If any provision of this Act, or the 

application thereof to any persons or in any circumstances, is held 

invalid, the remainder of this Act and the application of such provision 

to other persons or in other circumstances shall not be affected thereby. 

SEC. 5.29. RESERVE RIGHT To AMEND OR REPEAL.—The right to 

alter, amend, or repeal any provision or all of this Act is expressly 

reserA'ed. 

Approved December 10, 1971. 

Public Law 92-182 

A N AC T December 15,.1'571 

To authorize the sale of certain lands on the Kalispel Indian Reservation, and [H. R. 8381] 

for other purposes. 

Kalispel Indian 

Reservation, 

Be It enacted hy the Senate and House of Representatives of the 

United States of America in Congress assembled. That for the purpose of effecting consolidations of land situated within the Kalispel wash! 

Indian Reservation in the State of Washington into the ownership of ^ J"^"^* lands, 

the Kalispel Indian Community and its individual members and for 

the purpose of attaining and preserving an economic land base for 

Indian use, alleviating problems of Indian heirship, and assisting in