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therefore, that the intermediate credit banks will carry out this legislative purpose in so far as they can, consistent with the limitations imposed by law.

Coöperative marketing associations, in furtherance of the principles of orderly marketing, require loans and advances for periods varying from thirty days to one year. The cooperative marketing associations must look to agencies other than the intermediate credit banks for loans maturing within six months. The Federal intermediate credit banks will undertake to care for all loans which Congress declared eligible in this system.

The banks and the coöperative associations may have difficulty in determining in advance exactly the amount which should be paid within the six months' period. The banks should study the experience of the particular applicant and of other concerns dealing in the same commodity and endeavor in good faith to ascertain the amount of loans which will have a maturity of six months or more. Credit should be extended freely to these concerns for these longer maturities, provided, of course, the character of the organization and the security offered are such as to justify such credit.

Before making commitments for these loans the bank should require the coöperative associations to perfect arrangements with other credit agencies for their shorttime borrowing. Congress intended that certain types of loans should be handled through commercial banks just as clearly as it declared others to be eligible in the intermediate credit banks.

Speculative holding.-Ample funds will be available to facilitate orderly marketing but none to support speculative holding of farm products.

Required plan of organization.-Due to the diversity of laws for the organization of coöperative marketing associations, the board enjoins upon the banks exceptional care in ascertaining whether the coöperative marketing association, under the laws of the state in which it is organized, under its articles of incorporation and by-laws, and in its contract with the members, operates under a standard marketing agreement, where all the members pool their products, and where the association has the unquestioned right to pledge the commodities of each for the obligations of all. These elements are essential.

Amount of advances.—The act authorizes loans up to 75 per cent of the fair market value of the commodity represented by the warehouse receipts. The percentage of the actual value which will be loaned will be determined at the time application for loans and advances is made, and will be dependent upon production and marketing conditions, the strength of the particular coöperative marketing association, and all the other surrounding circumstances which bear upon the question of sound banking practices.

Commitment for loans.-As funds are procured from the marketing of debentures to meet bank commitments, it is expected that the associations will employ the funds in the amounts and upon the dates fixed. Should they not do so, the bank is authorized to charge the association the actual loss sustained thereby.

Prepayment of loans.-An intermediate credit bank is authorized to charge such a penalty upon payment of loans before maturity as will save it from loss on its outstanding debentures.

Rediscounts. An intermediate credit bank will not rediscount individual farmers' notes for cooperative marketing associations which have no capital stock. It may purchase such notes from capitalized coöperative marketing associations upon the same basis as from agricultural credit corporations.

MISCELLANEOUS

Examinations by Comptroller of the Currency.-Where, under the provisions of section 208, the Comptroller of the Currency is requested by a Federal intermediate credit bank to make, through his examiners, examinations of organizations through or for which the Federal intermediate credit bank has made or contemplates making

discounts or loans, an agreement should be procured from the institution to be examined that it will defray the expense of any such examination.

Appraisal and inspection expenses.-The Federal intermediate credit banks are authorized to collect the actual expenses incurred in the appraisal or inspection of the property offered as security for discounts or direct loans or advances. The bank or other agency which takes the note in the first instance is not authorized to make any inspection or appraisal charges without the approval of the Federal intermediate credit bank.

Franking privilege.-Under a ruling of the Post office Department intermediate credit banks are not allowed the franking privilege. This is available only for registrars.

INVESTMENT QUALITIES OF INTERMEDIATE CREDIT BANK DEBENTURES

1. All securities supporting debentures have been approved by the executive committees of intermediate credit banks and under rules and regulations prescribed by the Federal Farm Loan Board.

2. All notes discounted by the intermediate credit banks have been guaranteed by a national or state bank, or a loan company incorporated under the laws of some state.

3. All direct loans and advances to coöperative marketing associations are secured by warehouse receipts on commodities or chattel mortgages on livestock against which loans or advances have been made not exceeding 75 per cent of the market value of such security.

4. Any Federal reserve bank is authorized by the Agricultural Credits Act of 1923 to discount notes, drafts, and bills of exchange having a maturity not exceeding nine months, for any Federal intermediate credit bank.

5. The Secretary of the Treasury, on behalf of the United States, has subscribed for $60,000,000, the entire capital stock of the 12 Federal intermediate credit banks, of which amount $36,000,000, as of May 20, 1925, still remains in the Treasury and is callable on 30 days' notice.

6. The Federal intermediate credit banks, when designated for that purpose by the Secretary of the Treasury, shall act as fiscal agents of the United States Government and perform such duties as shall be prescribed by the Secretary of the Treasury.

7. Section 210 of the Agricultural Credits Act of 1923 provides: "The debentures issued under this title shall be deemed and held to be instrumentalities of the Government and shall enjoy the same tax exemptions as are accorded farm loan bonds''; that is, a complete exemption from national, state, and local taxes.

8. Section 207 provides that the 12 Federal intermediate credit banks are jointly and severally liable for the payment of the interest and principal of the debentures issued by each bank.

9. Any Federal intermediate credit bank may purchase these debentures in the open market.

APPENDIX IX

LAW PROVIDING FOR NATIONAL AGRICULTURAL CREDIT CORPORATIONS

FORMATION

42

Sec. 201. That corporations for the purpose of providing credit facilities for the agricultural and livestock industries of the United States, to be known as national agricultural credit corporations, may be formed by any number of natural persons not less in any case than five. Such persons shall enter into articles of association which shall specify the object for which the corporation is formed. Such articles of association shall be signed by the persons intending to participate in the organization of the corporation and be forwarded to the Comptroller of the Currency to be filed and preserved in his office.

REQUISITES OF ARTICLES AND CERTIFICATE

Sec. 202. (a) That persons signing such articles of association shall make an organization certificate which shall specifically state the name of the corporation to be organized, the place where its office is to be located, the State or States in which its operations are to be carried on, the amount of its capital stock, and the number of shares into which the same shall be divided, and that the certificate is made to enable the subscribers to avail themselves of the advantages of this title.

(b) The name of each corporation organized under this title shall include the words "National Agricultural Credit Corporation."

(c) The organization certificate and articles of association shall be acknowledged before some judge of a court of record or notary public and shall, together with the acknowledgment thereof duly authenticated by the seal of such court or notary, be transmitted to the Comptroller of the Currency, who shall file, record, and carefully preserve the same in his office.

(d) Upon making and filing the articles of association and organization certificate with the Comptroller of the Currency, and when the Comptroller of the Currency has approved the same and issued a written permit to begin business, the corporation shall be and become a body corporate, and shall have power

1. To adopt and use a corporate seal.

2. To have succession for a period of 50 years unless sooner dissolved by the act of shareholders owning two-thirds of its stock or by act of Congress or unless its charter shall be forfeited for violation of law.

3. To make contracts.

4. To sue and be sued, complain and defend in any court of law or equity, and for purposes of jurisdiction shall be deemed a citizen of the state where it is located. 5. To elect or appoint directors and by its board of directors to appoint such officers and employees as may be deemed proper; to define their authority and duties; to fix their salaries; in its discretion to require bonds of any of them and to fix the penalty thereof; and to dismiss at pleasure any of such officers or employees.

6. To prescribe by its board of directors by-laws not inconsistent with law or the regulations of the Comptroller of the Currency defining the manner in which its general business may be conducted, its shares of stock be transferred, its directors and officers be elected or appointed, its property transferred, and the privileges granted to it by law be exercised and enjoyed.

42 Comprising Title II of the Agricultural Credits Act of 1923.

7. To exercise by its board of directors or duly authorized officers or agents all powers specifically granted by the provisions of this title, and such incidental powers as shall be necessary to carry on the business for which it is incorporated, within the limitations prescribed by this title, but such corporation shall transact no business except such as is incidental and necessarily preliminary to its organization until authorized in writing by the Comptroller of the Currency to commence business under the provisions of this title.

8. The affairs of each national agricultural credit corporation shall be managed by not less than five directors, who shall be elected by the stockholders at a meeting to be held at any time before the corporation is authorized by the Comptroller of the Currency to commence business, and afterwards at meetings to be held on such day in January of each year as may be provided in the articles of association. The directors so elected shall hold office for one year, and until their successors are elected and have qualified. Every director and other officer of the corporation shall, before entering upon the duties of his office, take and subscribe an oath before a notary public or other official having a seal and authorized to administer oaths, conditioned for the faithful performance of the duties of his office. Such oath shall be in such form as may be prescribed by the Comptroller of the Currency, and shall be filed in the office of the Comptroller of the Currency. Any vacancy in the board shall be filled by appointment by the remaining directors, and any director so appointed shall hold his place until the next election.

Sec. 203. (a) That each national agricultural credit corporation shall have power, under such rules and regulation as the Comptroller of the Currency may prescribe

1. To make advances upon, to discount, rediscount, or purchase, and to sell or negotiate, with or without its indorsement or guaranty, notes, drafts, or bills of exchange, and to accept drafts or bills of exchange, which—

(A) Are issued or drawn for an agricultural purpose, or the proceeds of which have been or are to be used for an agricultural purpose;

(B) Have a maturity, at the time of discount, purchase, or acceptance, not exceeding nine months; and

(C) Are secured at the time of discount, purchase, or acceptance by warehouse receipts or other like documents conveying or securing title to nonperishable and readily marketable agricultural products, or by chattel mortgages or other like instruments conferring a first and paramount lien upon live stock which is being fattened for market.

2. To make advances upon or to discount, rediscount, or purchase, and to sell or negotiate with or without its indorsement or guaranty, notes secured by chattel mortgages conferring a first and paramount lien upon maturing or breeding live stock or dairy herds, and having a maturity at the time of discount, rediscount, or purchase not exceeding three years.

3. To subscribe for, acquire, own, buy, sell, and otherwise deal in Treasury certificates of indebtedness, bonds or other obligations of the United States to such extent as its board of directors may determine.

4. To act, when requested by the Secretary of the Treasury, as fiscal agent of the United States, and to perform such services as the Secretary of the Treasury may require in connection with the issue, sale, redemption or repurchase of bonds, notes, Treasury certificates of indebtedness, or other obligations of the United States.

5. To purchase, hold, acquire, and dispose of shares of the capital stock of any corporation organized under the provisions of section 207, of this title, in an amount not to exceed at any time 20 per cent of its paid in and unimpaired capital and surplus.

6. To purchase, hold, and convey real estate for the following purposes, and for no others:

(A) Such as shall be necessary for its accommodation in the transaction of its business.

(B) Such as shall be mortgaged to it in good faith by way of security for debts previously contracted.

(C) Such as shall be conveyed to it in satisfaction of loans or advances made or debts previously contracted in the course of its dealings.

(D) Such as it shall purchase at sales under judgments, decrees, or mortgages held by the corporation or shall purchase to secure debts due to it.

7. To act as custodian, trustee, or agent for holders of notes, drafts, or bills of exchange sold or negotiated under paragraphs 1 and 2 of subdivision (a) of this section or under section 207.

8. To issue, subject to such regulations as the Comptroller of the Currency may prescribe, collateral trust notes or debentures, with a maturity not exceeding three years, and to pledge as security for such notes or debentures any notes, drafts, bills of exchange, or other securities held by the corporation under the terms of this title. The regulations of the Comptroller of the Currency may prescribe the form of notes or debentures, and of notes, drafts, bills of exchange, warehouse receipts, chattel mortgages, or other instruments which may be pledged as security therefor, the provisions which may be made with regard to release, substitution, or exchange of such securities, and with regard to protection, supervision, inspection, and reinspection of the agricultural commodities or live stock pledged or mortgaged as security therefor.

(b) The United States Government shall assume no liability, direct or indirect, for any debentures or other obligations issued under this title, and all such debentures and other obligations shall contain conspicuous and appropriate language, to be prescribed in form and substance by the Comptroller of the Currency and approved by the Secretary of the Treasury, clearly indicating that no such liability is assumed.

(c) Any obligation referred to in paragraphs 1 or 2 of subdivision (a) of this section, which is secured by chattel mortgage upon live stock of an estimated market value at least equal to the face amount of such obligation, may be additionally secured by mortgage or deed of trust upon real estate or by other securities, under such regulations as may be made by the Comptroller of the Currency.

LIMITATIONS

Sec. 204. Except as hereinafter provided in section 207 of this title, no national agricultural credit corporation shall incur liabilities, whether direct or contingent, in excess of ten times its paid-in and unimpaired capital and surplus; nor shall any such corporation make advances to or hold notes or other direct obligations of any person or corporation, or have outstanding acceptances for any person or corporation, in an amount exceeding 20 per cent of the paid-in and unimpaired capital and surplus of such corporation, unless such advances, notes, acceptances, or other obligations are adequately secured by warehouse receipts representing readily marketable and nonperishable agricultural commodities, in which event the amount of such advances to, or notes or other direct obligations of, or acceptances for, such one person, association, or corporation shall not exceed 50 per cent of such paid-in and unimpaired capital and surplus. No such corporation shall purchase, own, or deal in any live stock except live stock taken in the course of liquidation of obligations held by it.

INTEREST RATES

Sec. 205. (a) Any national agricultural credit corporation may charge on any loan or discount made, or upon any note, bill of exchange, or other evidence of debt, interest at the rate allowed by the laws of the state in which such corporation is located.

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