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COMMITTEE ON BANKING AND CURRENCY
GEORGE P. MCLEAN, Connecticut, Chairman. CARROLL S. PAGE, Vermont.
ROBERT L. OWEN, Oklahoma. WILLIAM M. CALDER, New York.
GILBERT M. HITCHCOCK, Nebraska. TRUMAN H. NEWBERRY, Michigan.
ATLEE POMERENE, Ohio. OVINGTON E. WELLER, Maryland.
DUNCAN U. FLETCHER, Florida. PETER NORBECK, South Dakota.
JOHN B. KENDRICK, Wyoming. SAMUEL M. SHORTRIDGE, California. CARTER GLASS, Virginia. WALTER E. EDGE, New Jersey. GEORGE W. PEPPER, Pennsylvania.
W. H. SAULT, Clerk.
DISCOUNTS AND LOANS BY FEDERAL LAND BANKS FOR
FRIDAY, MARCH 10, 1922.
UNITED STATES SENATE,
Washington, D. C. The subcommittee met, pursuant to call, at 10 o'clock a. m., in room 303, Senate Office Building, Senator Samuel M. Shortridge (chairman) presiding.
Present: Senators Pepper, Newberry, Glass, and Pomerene.
The subcommittee had under consideration the bill, S. 3051, which is here printed in full, as follows:
Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That when used in this act, the term “Federal farm loan act” means the Federal farm loan act approved July 17, 1916, as amended. SEC. 2. That section 1 of the Federal farm loan act is amended to read as follows:
"SECTION 1. That this act may be cited as the 'Federal farm loan act.' Its administration shall be under the direction and control of the Federal Farm Loan Board hereinafter created."
Sec. 3. That the Federal farm loan act is amended by adding at the end threeof a new title, to read as follows:
“SEC. 201. That in addition to the powers granted by Title I, each Federal land bank shall have power
“(a) Subject solely to such restrictions, limitations, and conditions as may be imposed by the Federal Farm Loan Board, (1) to discount for any national bank, State bank, trust company, incorporated live stock loan company, or savings institution, with its indorsement, any note or other such obligation the proceeds of which have been advanced or used in the first instance for an agricultural purpose or for the raising, breeding, fattening, or marketing of live stock, and (2) to make loans direct to any cooperative association organized under the laws of any State and composed of persons engaged in producing staple agricultural products, if the notes or other such obligations representing such loans are secured by warehouse receipts covering such products. Such loans or discounts must have a maturity at the time they are made or discounted by the Federal land bank, of not less than six months, nor more than three vears. Any Federal land bank may in its discretion sell loans or discounts made under this subdivision, with or without its indorsement. Rates of interest or discount charged by the Federal land banks upon such loans and discounts shall be subject to the approval of the Federal Farm Loan Board.
“(b) Subject to the approval of the Federal Farm Loan Board, to issue and to sell debentures or other such obligations with a maturity at the time of issue of not more than three years, which shall be secured by a like face amount of cash, or notes or other such obligations discounted or representing loans made under subdivision (a). The provisions of Title I relating to the preparation and issue of farm loan bonds shall, so far as applicable, govern the preparation and issue of debentures or other such obligations issued under this subdivision; but the Federal Farm Loan Board shall prescribe rules and regulations governing the receipt, custody, and release of collateral securing such debentures or other obligations. Such collateral shall be held separate and distinct from the collateral securing farm loan bonds. Rates of interest upon debentures and other such obligations issued under this subdivision shall, subject to the approval of the Federal Farm Loan Board, be fixed by the Federal land bank making the issue. A Federal land bank may, subject to the approval of the Federal Farm Loan Board, buy in the open market upon its own account and retire at or before maturity any such debentures or obligations issued by it.
“Sec. 202. That for the purpose of exercising the powers conferred by this title, each Federal land bank shall establish a separate department to be designated as the farm credits department, for which $1,000,000 in capital shall be subscribed before any of the powers so conferred may be exercised. Capital stock of such amount shall be divided into shares of $5 each and shall be subscribed, held, and paid by the Government of the United States. It shall be the duty of the Secretary of the Treasury to subscribe to such capital stock on behalf of the United States, such subscription to be subject to call in whole or in part by the district directors of the Federal land bank upon thirty days' notice to the Secretary of the Treasury and with the approval of the Federal Farm Loan Board. The Secretary of the Treasury is authorized and directed to take out shares as called and to pay for the same out of any money in the Treasury not otherwise appropriated. Capital so allocated to a farm credits department shall be applied solely to meet obligations and losses, if any, incurred in the operation of that department; and the capital subscribed under Title I shall not be applied to meeting obligations or losses, if any, incurred in the operation of any farm credits department.
"Sec. 203. That the stock owned by the Government of the United States in any Federal land bank in accordance with section 202, shall receive no dividends. The Government of the United States shall be entitled to one vote for each share of such stock in deciding all questions at meetings of stockholders. Such stock shall be voted by the Farm Loan Commission as directed by the Federal Farm Loan Board.
“Sec. 204. That any Federal reserve bank may rediscount for a Federal land bank upon its indorsement, notes or other such obligations discounted or representing loans made under section 201; except that no Federal reserve bank shall rediscount for a Federal land bank any such note or obligation which has a maturity at the time of discount by the Federal reserve bank in excess of six months or which bears the indorsement of a nonmember State bank or trust company which is eligible for membership in the Federal reserve system in accordance with section 9 of the Federal reserve act, approved December 23, 1913, as amended. The rates of discount to be charged by any Federal reserve bank under this section, shall be fixed by the Federal reserve bank, subject to review and determination of the Federal Reserve Board.
“Sec. 205. That the farm credits department of any Federal land bank issuing debentures or other such obligations under section 201, shall be primarily liable therefor, and shall also be liable, upon presentation of the coupons for interest payments due upon any such debentures or obligations issued by the farm credits department of any other Federal land bank and remaining unpaid in consequence of the default of the farm credits department of such other Federal land banks. The farm credits department of any Federal land bank shall likewise be liable for such portion of the principal of debentures or obligations so issued as are not paid after the assets of the farm credits department of such other Federal land bank have been liquidated and distributed. Such losses, if any, either of interest or of principal, shall be assessed by the Federal Farm Loan Board against solvent farm credits departments of Federal land banks liable therefor in proportion to the amount of debentures or other such obligations which each may have outstanding at the time of such assessment. Every Federal land bank shall, by appropriate action of its board of directors, duly recorded in its minutes, obligate itself to become liable on debentures and other such obligations as provided in this section.
“SEC. 206. That any Federal reserve bank may buy and sell debentures and other such obligations issued by a Federal land bank under section 201, but only to the same extent as and subject to the same limitations as those upon which they may buy and sell loan bonds.
“SEC. 207. That the net earnings of the farm credits department shall be carried to reserve account to such extent and in such manner, and reserves so established shall be invested as the Federal Farm Loan Board shall by regulation prescribe.
“Sec. 208. That in order to enable each Federal land bank to carry out the purposes of this act, the Comptroller of the Currency is hereby authorized and directed, upon the request of any Federal land bank, (a) to furnish for the confidential use of such bank such reports, records, and other information as he may have available relating to financial condition of national banks through or for which the Federal land bank has made or contemplates making discounts, and (bi to make, through his examiners, for the confidential use of the Federal land bank examinations of State banks,