An Act to promote private financing of credit needs and to provide for an efficient and orderly method of liquidating financial assets held by Federal credit agencies, and for other purposes.
PL 89-429 (S.3283), enacted 05/24/1966

164 
PUBLIC LAW 89.429-MAY 24, 1966 
[80 STAT. 
79 Stat. 121. 
(d) Section 101(b) (6) of Public Law 89-82 is amended by striking 
therefrom the figui-e "$2,000,000'" for project 66-6-c, land acquisition, 
Brookhaveu National Laboratory, New York, and substituting there-
for the figure "$2,500,000". 
SEC. 107. RESC^ISSIOX.—Section lOB of Public Law 89-82, except for 
funds heretofore obligated, is rescinded. 
Approved May 21, 1966. 
Public Law 89-429 
May 24, 1966 
A N A C T 
rS 32831 
: 
To promote private financing of credit needs and to provide for an eflBcient and 
ordei'ly metliod of liquidating financial assets held by Federal credit agencies, 
and for other purposes. 
Be it enacted hy the Senate and House of Representatives 
of the 
saTe^rA*t'^V°i966 ^'^^'^^^ States of Amevica in Congress assembled, That this Act may 
• be cited as the "Participation Sales Act of 1966''. 
SEC. 2. (a) Section 302(c) of the Federal National Mortgage Asso-
1
2 us^c f
y n 
'-'i'ltion Charter Act is amended— 
(1) by inserting "(1)'' immediately following"(c)"; 
(2) by inserting after "undertakings and activities" a comma 
and "hereinafter in this subsection called 'trusts',"; 
(3) by striking "obligations offered to it by the Housing and 
Home Finance Agency or its Administrator, or by such Agency's 
constituent units or agencies or the heads thereof, or any first 
mortgages in which the United States or any agency or instrumen-
tality thereof" in the first sentence thereof and inserting 
"mortgages or other types of obligations in which any department 
or agency of the United States listed in paragraph (2) of this 
subsection"; 
(4) by striking out the third sentence thereof and substituting 
therefor the following: "Participations or other instruments 
issued by the Association pursuant to this subsection shall to the 
same extent as securities which are direct obligations of or obliga-
tions guaranteed as to principal or interest by the United States 
be deemed to be exempt securities within the meaning of laws 
administered by the Securities and Exchange Commission."; and 
(5) by striking out the fourth sentence thereof, 
(b) Section 302(c) of such Act is further amended by adding the 
following: 
of^rust's'^'^"'^"* 
"^^) Subject to the limitations provided in paragraph (4) of this 
subsection, one or more trusts may be established as provided in this 
subsection by each of the following departments or agencies: 
"(A) The Farmers Home Administration of the Department 
of Agriculture, but only with respect to operating loans, direct 
farm ownership loans, direct housing loans, and direct soil and 
water loans. 
Such trusts may not be established with respect to 
loans for housing for the elderly under sections 502 and 515(a) 
of the Housing Act of 1949, nor with respect to loans for nonfarm 
42 use 1472, 
recreational development. 
1485. 
"(B) The Office of Education of the Department of Health, 
Education, and Welfare, but only with respect to loans for con-
struction of academic facilities. 
"(C) The Department of Housing and Urban Development, 
except that such authority may not be used with respect to sec-
ondary market operations of the Federal National Mortgage 
Association. 
Post, p. 1236. 
63 Stat. 433; 
76 Stat. 67 1 
80 STAT. ] 
PUBLIC LAW 89-429-MAY 24, 1966 
165 
"(D) The Veterans'Administration. 
"(E) The Export-Import Bank. 
"(F) Tlie Small Business Administration. 
The head of each such department or agency, hereinafter in this sub-
section called the 'trustor', is authorized to set aside a part or all of any 
obligations held by him and subject them to a trust or trusts anci, 
incident thereto, shall guarantee to the trustee timely payment thereof. 
The trust instrument may provide for the issuance and sale of bene-
ficial interests or participations, by the trustee, in such obligations or 
in the right to receive interest and principal collections therefrom; 
and may provide for the substitution or withdrawal of such obliga-
tions, or for the substitution of cash for obligations. The trust or 
trusts shall be exempt from all taxation. 
The trust instrument may 
silso contain other appropriate provisions in keeping with the purposes 
of this subsection. 
The Association shall be named and shall act as 
trustee of any such trusts and, for the purposes thereof, the title to 
such obligations shall be deemed to have passed to the Association in 
trust. 
The trust instrument shall provide that custody, control, and 
administration of the obligations shall remain in the trustor subjecting 
the obligations to the trust, subject to transfer to the trustee in event 
of default or probable default, as determined by the trustee, in the 
payment of principal and interest of the beneficial interests or partici-
pations. 
Collections from obligations subject to the trust shall be 
dealt with as provided in the instrument creating the trust. 
The trust 
instrument shall provide that the trustee will promptly pay to the 
trustor the full net proceeds of any sale of beneficial interests or par-
ticipations to the extent they are based upon such obligations or col-
lections. Such proceeds shall be dealt with as otherwise provided by 
law for sales or repayment of such obligations. 
The effect of both past 
and future sales of any issue of beneficial interests or participations 
shall be the same, to the extent of the principal of such issue, as the 
direct sale with recourse of the obligations subject to the trust. 
Any 
trustor creating a trust or trusts hereunder is authorized to purchase, 
through the facilities of the trustee, outstanding beneficial interests 
or participations to the extent of the amount of his responsibility to 
the trustee on beneficial interests or participations outstanding, and 
to pay his proper share of the costs and expenses incurred by the Fed-
eral National Mortgage Association as trustee pursuant to the trust 
instrument. 
"(3) When any trustor guarantees to the trustee the timely pay-
ment of obligations he subjects to a trust pursuant to this subsection, 
and it becomes necessary for such trustor to meet his responsibilities 
under such guaranty, he is authorized to fulfill such guaranty. 
"(4) Beneficial interests or participations shall not be issued for 
the account of any trustor in an aggregate principal amount greater 
than is authorized with respect to such trustor in an appropriation 
Act. Any such authorization shall remain available only for the fiscal 
year for which it is granted and for the succeeding fiscal year. 
"(5) The Association, as trustee, is authorized to issue and sell 
beneficial interests or participations under this subsection, notwith-
standing that there may be an insufficiency in aggregate receipts from 
obligations subject to the related trust to provide for the payment by 
the trustee (on a timely basis out of current receipts or otherwise) 
of all interest or principal on such interests or participations (after 
provision for all costs and expenses incurred by the trustee, fairly 
prorated among trustors). 
There are authorized to be appropriated 
Appropriation, 
without fiscal year limitation such sums as may be necessary to enable 
any trustor to pay the trustee such insufficiency as the trustee may 
require on account of outstanding beneficial interests or participations 
166 
PUBLIC LAW 89-429-MAY 24, 1966 
[80 STAT. 
authorized to be issued pursuant to paragraph (4) of this subsection. 
Such trustor shall make timely payments to the trustee from such 
appropriations, subject to and in accord with the trust instrument." 
SEC. 3. (a) Section 305(c) of the Federal National Mortgage Asso-
//stSr^iga!^' 
ciation Charter Act is amended by deleting "by>$450,000,000 on July 1, 
12 u s e 1720. 
196'6,". 
7/st!r'48? ^'' 
^^^ Section 401 (d) of the Housing Act of 1950 is amended by delet-
1
2 use 1749 
ing "1968:" immediately preceding the first proviso and by substituting 
therefor "1965, and 1967 and 1968:". 
SEC. 4. (a) Section 303(c) of title I I I of the Higher Education 
Facilities Act of 1963 is amended by striking out the first nine words 
in the second sentence and substituting therefor the following: "For 
the purpose of making payments into the fund established under 
section 305". 
(b) Title I I I of the Higher Education Facilities Act of 1963 is fur-
ther amended by adding after section 304 the following new section: 
77 Stat. 372, 
20 u s e 743. 
59 Stat. 598. 
U 
REVOLVING LOAN FUND 
"SEC. 305. (a) There is hereby created within the Treasury a sepa-
rate fund for higher education academic facilities loans (hereafter 
in this section called 'the fund') which shall be available to the Com-
missioner without fiscal year limitation as a revolving fund for the 
purposes of this title. The total of any loans made from the fund in 
.any fiscal year shall not exceed limitations specified in appropriation 
Acts. A business-type budget for the fund shall be prepared, trans-
mitted to the Congress, considered, and enacted in the manner pre-
scribed by law (sections 102,103, and 104 of the Government Corpora-
tion Control Act (31 U.S.C. 847-849) for wholly owned Government 
corporations. 
"(b) (1) The Commissioner, when authorized by an appropriation 
Act, may transfer to the fund available appropriations provided under 
section 303(c) to provide capital for the fund. 
All amounts received 
by the Commissioner as interest payments or repayments of principal 
on loans, and any other moneys, property, or assets derived by him 
from his operations in connection with this title, including any moneys 
derived directly or indirectly from the sale of assets, or beneficial 
interests or participations in assets, of the fund, shall be deposited in 
the fund. 
"(2) All loans, expenses, and payments pursuant to operations of 
the Commissioner under this title shall be paid from the fund, includ-
ing (but not limited to) expenses and payments of the Commissioner 
in connection with sale, under section 302(c) of the Federal National 
Ante, p
„ 164. 
Mortgage Association Charter Act, of participations in obligations 
acquired under this title. From time to time, and at least at the close 
of each fiscal year, the Commissioner shall pay from the fund into the 
Treasury as miscellaneous receipts interest on the cumulative amount 
of appropriations paid out for loans under this title or available as 
capital to the fund, less the average undisbursed cash balance in the 
fund during the year. 
The rate of such interest shall be determined 
by the Secretary of the Treasury, taking into consideration the average 
market yield during the month preceding each fiscal year on outstand-
ing Treasury obligations of maturity comparable to the average 
maturity of loans made from the fund. 
Interest payments may be 
deferred with the approval of the Secretary of the Treasury, but any 
75 Stat. 317. 
7 u s e 1988. 
80 STAT. ] 
PUBLIC LAW 89-429-MAY 24, 1966 
167 
interest payments so deferred shall themselves bear interest. 
If at any 
time the Commissioner determines that moneys in the fund exceed the 
present and any reasonably prospective future requirements of the 
fund, such excess may be transferred to the general fund of the 
Treasury." 
SEC. 5. Section 338(c) of the Consolidated Farmers Home Admin-
istration Act of 1961 is amended by striking in the second sentence 
"and (8)" and inserting in lieu thereof " (8) section 8 of the Watershed 
Protection and Flood Prevention Act, as amended (16 U.S.C. 1006a); 
^^ ^^^^- io9o. 
(9) section 32'(e) of the Bankhead-Jones Farm Tenant Act, as 
amended (7 U.S.C. 1011); and (10)"; and by inserting in the fifth ^^ ^'^'- 6°'-
sentence after "title," the following: "section 8 of the Watershed 
Protection and Flood Prevention Act, as amended, and section 32(e) 
of the Bankhead-Jones Farm Tenant Act, as amended,". 
SEC. 6. (a) Nothing in this Act shall be construed to repeal or 
modify the provisions of section 1820(e) of title 38, United States 
Code, respecting the authority of the Administrator of Veterans' 
^^ ^
*
^
*
- 8o°-
Affairs. 
(b) After June 30, 1966, no department or agency listed in section 
302(c) (2) of the Federal National Mortgage Association Charter 
Act may sell any obligation held by it except as provided in section 
^"'^' P- ^^''• 
302(c) of that Act, or as approved by the Secretary of the Treasury, 
except that this prohibition shall not apply to secondary market oper-
ations carried on by the Federal National Mortgage Association. 
SEC. 7. Paragraph (7) of section 8 of the Federal Credit Union 
Act (12 U.S.C. 1757) is amended to read: 
^3 stat. 63o. 
"(7) to invest its funds (A) in loans exclusively to members; 
(B) in obligations of the United States of America, or securities 
fully guaranteed as to principal and interest thereby; (C) in 
accordance with rules and regulations prescribed by the Director, 
in loans to other credit unions in the total amount not exceeding 
25 per centum of its paid-in and unimpaired capital and surplus; 
(D) in shares or accounts of savings and loan associations, the 
accounts of which are insured by the Federal Savings and Loan 
Insurance Corporation; (E) in obligations issued by banks for 
cooperatives. Federal land banks. Federal intermediate credit 
banks, Federal home loan banks, the Federal Home Loan Bank 
Board, or any corporation designated in section 101 of the Gov-
ernment Corporation Control Act as a wholly owned Government 
corporation; or in obligations, participations, or other instru-
ments of or issued by, or fully guaranteed as to principal and 
interest by, the Federal National Mortgage Association; or (F) 
in participation certificates evidencing beneficial interests in obli-
gations, or in the right to receive interest and principal collections 
therefrom, which obligations have been subjected by one or more 
Government agencies to a trust or trusts for which any executive 
department, agency, or instrumentality of the United States (or 
the head thereof) has been named to act as trustee;". 
SEC. 8. The Secretary of the Treasury, in consultation with heads of 
Report to con-
agencies of the United States carrying on direct loan programs, shall ^
"
^
^
^
^
^ 
conduct a study, in such manner as he shall determine, on the feasibility, 
advantages, and disadvantages of direct loan programs compared to 
guaranteed or insured loan programs and shall report his findings 
together with specific legislative proposals to the Congress not later 
than six months after the effective date of this Act. 
There are 
Appropriation. 
authorized to be appropriated such sums as necessary for the purpose 
of this section. 
168 
PUBLIC LAW 89.430-MAY 26, 1966 
[80 STAT. 
SEC. 1). The Federal National Mortgage Association is authorized 
during the fiscal year 1966 to sell— 
(1) additional participations in the Government Mortgage 
Liquidation Trust, and 
(2) participations in a trust to be established by the Small 
Business Administration, 
each witliout regard to the provisions of paragraph (4) of section 
302(c) of the Federal National Mortgage Association Charter Act. 
Approved May 24, 1966. 
Ante, p. 165. 
cars 
Public Law 89-430 
May 26, 1966 
-^N ACT 
[^- ^0^^] 
To amend section 1 (14) (a) of the Interstate Commerce Act to insure the adequacy 
of the national railroad freight car supply, and for other purposes. 
Be it enacted hy the Senate and House of Representatives 
of the 
Railroad freight Jj^ited Sttttes of America in Congress assembled^ That section 1(14) 
54 Stat. 901. 
(a) of the Interstate Commerce Act is amended by adding at the end 
49 use 1. 
thereof the following: "In fixing such compensation to be paid for the 
use of any type of freight car, the Commission shall give consideration 
to the national level of ownership of such type of freight car and to 
other factors affecting the adequacy of the national freight car supply, 
and shall, on the basis of such consideration, determine whether com-
pensation should be computed solely on the basis of elements of owner-
ship expense involved in owning and maintaining such type of freight 
car, including a fair return on value, or whether such compensation 
should be increased by such incentive element or elements of compen-
sation as in the (Commission's judgment will provide just and reason-
able compensation to freight car owners, contribute to sound car 
service practices (including efficient utilization and distribution of 
cars), and encourage the acquisition and maintenance of a car supply 
adequate to meet the needs of commerce and the national defense. 
The 
Commission shall not make any incentive element applicable to any 
type of freight car the supply of which the Commission finds to be 
adequate and may exempt from the compensation to be paid by any 
group of carriers such incentive element or elements if the Commission 
finds it to be in the national interest." 
Effective date. 
gj^ g. Auy compcusatiou fixed pursuant to the amendment made 
to the Interstate Commerce Act by the first section of this Act shall not 
take effect before September 1, 1966. 
Approved May 26, 1966. 
Public Law 89-431 
May 26, 1966 
^^ 
ACT 
[H. R. 8376] 
rpQ amend title I of the Tariff Act of 1 9 ^ to make i>erinanent the existing 
duty-free treatment for certain corkboard insulation. 
Be it enacted hy the Semite and House of Representatioes 
of the 
Corkboard in- 
United Statcs of America 
in (^ongress assembled. That (a) item 
Free°"entry. 
220.80 of title I of the Tariff Act of 1980 (Tariff Schedules of the 
Ignited States; 28 Fed. Reg., part II, page 98, Aug. 17,1968; 77A Stat. 
98; 19 U.S.C., sec. 1202) is amended by striking out "2.5^ per board ft." 
each place it appears and inserting in lieu thereof "Free". 
Repeal. 
(b) Itcm 904.40 (77A Stat. 482) of such title I is repealed.