said funds in the making of loans under section 608 of this title, and to conduct its operations to the extent practicable on a self-sustaining basis. (c) The telephone bank shall be deemed to be an instrumentality of the United States, and shall, for the purposes of jurisdiction and venue, be deemed a citizen and resident of the District of Columbia. Its property, franchise, capital, reserves, surpluses, security holdings, and other funds, and its income shall be exempt from all taxation now or hereafter imposed by the United States or by any State, territorial, or local taxing authority: Provided, That the telephone bank is authorized to make payments to State, territorial, and local governments in lieu of property taxes upon real property and tangible personal property which was subject to State, territorial, and local taxation before acquisition by the telephone bank. Such payment may be in the amounts, at the times, and upon such terms as the telephone bank deems appropriate, but the telephone bank shall be guided by the policy of making payments not in excess of the taxes which would have been payable upon such property in the condition in which it was acquired.

"SEC. 602. GENERAL POWERS.-To carry out the specific powers herein authorized, the telephone bank shall have power to (a) adopt, alter, and use a corporate seal; (b) sue and be sued in its corporate name; (c) make contracts, leases, and cooperative agreements, or enter into other transactions as may be necessary in the conduct of its business, and on such terms as it may deem appropriate; (d) acquire, in any lawful manner, hold, maintain, use, and dispose of property; (e) accept gifts or donations of services, or of property in aid of any of the purposes herein authorized; (f) appoint such officers, attorneys, agents, and employees, vest them with such powers and duties, fix and pay such compensation to them for their services as the telephone bank may determine; (g) determine the character of and the necessity for its obligations and expenditures, and the manner in which they shall be incurred, allowed, and paid; (h) execute, in accordance with its bylaws, all instruments necessary or appropriate in the exercise of any of its powers; (i) collect or compromise all obligations assigned to or held by it and all legal or equitable rights accruing to it in connection with the payment of such obligations until such time as such obligation may be referred to the Attorney General for suit or collection; and (j) exercise all such other powers as shall be necessary or incidental to carrying out its functions under this title: Provided, That the telephone bank shall undertake no new types of activities not included in the annual budget program.

"SEC. 603. SPECIAL PROVISIONS GOVERNING TELEPHONE BANK AS AN AGENCY OF THE UNITED STATES UNTIL CONVERSION OF OWNERSHIP, CONTROL AND OPERATION. Until the ownership, control and operation of the telephone bank is converted as provided in section 610(a) of this title and not thereafter—

"(a) the telephone bank shall be an agency of the United States and shall be subject to the supervision and direction of the Secretary of Agriculture (hereinafter called the Secretary);

"(b) in order to perform its responsibilities under this title, the telephone bank may utilize the facilities and the services of employees of the Rural Electrification Administration or of any other agency of the Department of Agriculture, without cost to the telephone bank, except to the extent that administrative expenses are recovered by the telephone bank under section 608(b) (2) of this title;

"(c) notwithstanding the provisions of the second sentence of subsection (d) of section 303 of the Government Corporation Control Act, as amended (31 U.S.C. 868), all debentures issued by the telephone bank shall be issued at such times, bear interest at such rates, and contain such other terms and conditions as have been or may be approved by the Secretary of the Treasury; "(d) the telephone bank when designated for that purpose by the Secretary of the Treasury shall act as fiscal or other agent of the United States and when acting as such shall perform such duties as shall be prescribed by the Secretary of the Treasury;

"(e) the telephone bank shall have power to obtain services as authorized by section 15 of the Act of August 2, 1946 (5 U.S.C. 55a); to use the United States mails in the same manner and under the same conditions as the executive departments of the Federal Government; and shall have, in the payment of debts out of bankrupt, insolvent, and decedents' estates, the priority of the United States, except where such priority is waived by the telephone bank; and

“(f) the telephone bank shall be subject to the provisions of sections 507(b) and 2679 of title 28, United States Code, and section 367 of the Revised Statutes (5 U.S.C. 316).

"SEC. 604. GOVERNOR.-Subject to the provisions of section 610, the Administrator of the Rural Electrification Administration shall serve as the chief executive officer of the telephone bank (herein called the Governor of the telephone bank). Except as to matters specifically reserved to the Telephone Bank Board in this title, the Governor of the telephone bank shall exercise and perform all functions, powers, and duties of the telephone bank.

"SEC. 605. BOARD OF DIRECTORS. (a) The management of the telephone bank, within the limitations prescribed by law, shall be vested in a board of directors (hereinafter called the Telephone Bank Board consisting of thirteen members.

"(b) The Administrator of the Rural Electrification Administration shall be a member of the Telephone Bank Board. Six other members of the Telephone Bank Board shall be designated by the President, three of whom shall be officers or employees of the Department of Agriculture but not officers or employees of the Rural Electrification Administration, and three of whom shall be from the general public and not officers or employees of the Federal Government. The Administrator and other officers and employees of the Department of Agriculture shall serve as members without additional compensation.

"(c) As soon as practicable after enactment of this title, the President of the United States shall appoint six additional members of the initial Telephone Bank Board to be selected from the directors, managers, and employees of any entities eligible to borrow from the telephone bank and of organizations controlled by such entities, with due regard to fair representation of the rural telephone systems of the Nation. The six members thus appointed shall serve until their successors shall have been duly elected in accordance with subsection (d).

"(d) Within twelve months following the appointment of the six members of the initial Board as provided in subsection (c), the Governor of the telephone bank shall call a meeting of all entities then eligible to borrow from the telephone bank and organizations controlled by such entities for the purpose of electing members of the Telephone Bank Board. Each such entity and organization shall be entitled to notice of and shall have one noncumulative vote at said meeting. Six members of the Telephone Bank Board shall be elected for a two-year term, three from among the directors, managers, and employees of cooperative-type entities eligible to vote and organizations controlled by such entities, and three from among the managers, directors, and employees of commercial-type entities eligible to vote and organizations controlled by such entities. These six members shall be elected by majority vote of the entities and organizations eligible to vote and such entities and organizations may vote by proxy.

"(e) Thereafter, in accordance with the bylaws of the telephone bank, the six members of the Telephone Bank Board shall be elected by holders of Class B and Class C stock, three from among the directors, managers, and employees of cooperative-type entities and organizations controlled by such entities holding Class B or Class C stock, and three from among the directors, managers, and employees of commercial-type entities and organizations controlled by such entities holding Class B or Class Ĉ stock. These six members shall be elected by majority vote of the entities and organizations eligible to vote and such entities and organizations may vote by proxy.

(f) Any Telephone Bank Board member may continue to serve after the expiration of the term for which he is elected until his successor has been elected and has qualified. Telephone Bank Board members appointed or elected pursuant to subsections (c), (d), and (e), shall receive $100 for each day or part thereof, not to exceed one hundred days per year, spent in the performance of official duties, and shall be reimbursed for travel and other expenses in such manner and subject to such limitations as the Telephone Bank Board may prescribe.

"(g) The Telephone Bank Board shall prescribe bylaws, not inconsistent with law, regulating the manner in which the telephone bank's business shall be conducted, its directors and officers elected, its stock issued, held, and disposed of, its property transferred, its bylaws amended, and the powers and privileges granted to it by law exercised and enjoyed.

"(h) The Telephone Bank Board shall meet at such times and places as it may fix and determine, but shall hold at least four regularly scheduled meetings a year, and special meetings may be held on call in the manner specified in the bylaws of the telephone bank.

"(i) The Telephone Bank Board shall make an annual report to the Secretary for transmittal to the Congress on the administration of this title VI and any other matters relating to the effectuation of the policies of title VI, including recommendations for legislation.

"SEC. 606. CAPITALIZATION. (a) The telephone bank's capital shall consist of capital subscribed by the United States, by borrowers from the telephone bank, and by corporations eligible to become borrowers from the telephone bank. Beginning on July 1, 1966, and ending fifteen years thereafter, the United States shall furnish capital to the telephone bank, in the amount of $20,000,000 in any fiscal year, from net collection periods in the rural telephone account created under title V of this Act, unless an appropriation Act shall specify another amount, and it shall be in order for appropriation Acts to contain such provisions but not in amounts exceeding $20,000,000 in any fiscal year: Provided, That on or before July 1, 1971, the Secretary shall make a report to the President for transmittal to the Congress on the status of capitalization of the telephone bank by the United States with appropriate recommendations. As used in this section, the term 'net collection proceeds' shall be deemed to mean payments from and after July 1, 1966, of principal and interest on loans heretofore or hereafter made under section 201 of this Act, less an amount representing interest payable to the Secretary of the Treasury on loans to the Administrator for telephone purposes pursuant to section 3(a) of this Act.

"(b) The capital stock of the telephone bank shall consist of three classes, Class A, Class B, and Class C, the rights, powers, privileges, and preferences of the separate classes to be as specified, not inconsistent with law, in the bylaws of the telephone bank. Class B and Class C stock shall be voting stock, but no holder of said stock shall be entitled to more than one vote, nor shall Class B and Class C stochholders, regardless of their number, which are owned or controlled by the same person, group of persons, firm, association or corporation, be entitled in any event to more than ten votes.

"(c) Class A stock shall be issued only to the Administrator of the Rural Electrification Administration on behalf of the United States in exchange for capital furnished to the telephone bank pursuant to subsection (a), and such Class A stock shall be redeemed and retired by the telephone bank as soon as practicable after June 30, 1981, but not to the extent that the Telephone Bank Board determines that such retirement will impair the operations of the telephone bank: Provided, That the minimum amount of Class A stock that shall be retired each year after said date and after the amount of Class A and Class B stock issued totals $400,000,000, shall equal 5 per centum of the amount of loans made by the telephone bank during such year.

"(d) Class B stock shall be held only by recipients of loans under section 608 of this Act. Borrowers receiving loan funds pursuant to section 608(a) (1) or (2) shall be required to invest in Class B stock 5 per centum of the amount of loan funds so provided. No dividends shall be payable on Class B stock. All borrowers shall be entitled to patronage refunds in Class B stock under terms and conditions to be specified in the bylaws of the telephone bank.

"(e) Class C stock shall be available for purchase and shall be held only by borrowers, or by corporations eligible to borrow under section 608 of this Act, or by organizations controlled by such borrowers and corporations, and shall be entitled to dividends in the manner specified in the bylaws of the telephone bank. Such dividends shall be payable only from income and, until all Class A stock is retired, shall not exceed the current average rate payable on its telephone debentures. "(f) After payment of all operating expenses of the telephone bank, including interest, and dividends on Class C stock, setting aside appropriate funds for reserves, and making payments in lieu of taxes, the Telephone Bank Board shall annually set aside the remaining earnings of the telephone bank for the payment of dividends on Class A stock and patronage refunds. Such remaining earnings shall be divided at the time they are set aside in proportion to the total amount of outstanding Class A and Class B stock at such time. The proportion available for the payment of patronage refunds shall be distributed in accordance with the bylaws of the telephone bank. At the time of such distribution, the proportion available for the payment of dividends on Class A stock shall be paid into the Rural Telephone Account.

"SEC. 607. BORROWING POWER.-(a) The telephone bank is authorized to obtain funds through the public or private sale of its bonds, debentures, notes and other evidences of indebtedness (herein collectively called 'telephone debentures'). Telephone debentures shall be issued at such times, bear interest at such rates, and contain such other terms and conditions as the Telephone Bank Board shall determine: Provided, however, That the amount of telephone debentures which may be outstanding at any one time pursuant to this subsection (a) shall not exceed eight times the paid in capital and retained earnings of the telephone bank. The telephone bank shall insert in all its telephone debentures

69-675-66

appropriate language indicating that such telephone debentures, together with interest thereon, are not guaranteed by the United States and do not constitute a debt or obligation of the United States or of any agency or instrumentality thereof other than the telephone bank. Telephone debentures shall not be exempt, either as to principal or interest, from any taxation now or hereafter imposed by the United States, by any territory, dependency, or possession thereof, or by any State or local taxing authority. Telephone debentures shall be lawful investments and may be accepted as security for all fiduciary, trust and public funds, the investment or deposit of which shall be under the authority and control of the United States or any officer or officers thereof.

"(b) If there are insufficient funds in the assets of the telephone bank available for the purpose to pay interest or principal on its telephone debentures, the telephone bank may obtain funds for this purpose by making and issuing notes to the Secretary of the Treasury. Such notes shall bear interest at a rate determined by the Secretary of the Treasury, taking into consideration the current average market yield, during the month preceding the issuance of the notes, on outstanding marketable obligations of the United States having comparable maturities. Such notes may be redeemable before maturity in such manner as may be stipulated in the notes. Interest payments on such notes may be deferred with approval of the Secretary of the Treasury, but any interest payments so deferred shall themselves bear interest. The Secretary of the Treasury is authorized and directed to purchase any notes issued by the telephone bank pursuant to this subsection (b) and for such purchases may use as a public debt transaction the proceeds from the sale of any securities issued under the Second Liberty Bond Act, as amended, and the purposes for which such securities may be issued under such Act, as amended, are hereby extended to include any such purchases.

"SEC. 608. LENDING POWER. (a) The Governor of the telephone bank is authorized on behalf of the telephone bank to make loans, in conformance with policies approved by the Telephone Bank Board, to corporations which have received a loan or loan commitment pursuant to section 201 of this Act, (1) for the same purposes for which loans may be made under section 201 of this Act, (2) for the purposes of financing, or refinancing, the construction, improvement, expansion, acquisition, and operation of telephone lines, facilities, or systems, in order to improve the efficiency, effectiveness, or financial stability of corporations financed under sections 201 and 608 of this Act, and (3) for the purchase of Class B stock required to be purchased under section 606(d) of this Act but not for the purchase of Class C stock, subject, as to the purposes set forth in (2) hereof, to the following provisos: That in the case of any such loan for the acquisition of telephone lines, facilities, or systems, the acquisition shall be approved by the Secretary, the location and character thereof shall be such as to improve the efficiency, effectiveness, or financial stability of the telephone system of the borrower, and in respect of exchange facilities for local services, the size of each acquisition shall be not greater than the borrower's existing system at the time it receives its first loan from the telephone bank, taking into account the number of subscribers served, miles of line, and plant investment.

"(b) Loans under this section shall be on such terms and conditions as the Governor of the telephone bank shall determine, subject, however, to the following restrictions:

"(1) No loan may be made hereunder for a period exceeding fifty years. "(2) Intermediate loans shall bear interest at a rate equal to (i) a rate determined by the Secretary of the Treasury, taking into consideration the current average market yield, during the month of May preceding the fiscal year in which the loans are made, on outstanding marketable obligations of the United States with remaining periods to maturity comparable to the average maturities of such loans, or (ii) 4 per centum per annum, whichever is lower. All other loans made hereunder shall bear interest at a rate which reflects the current average rate payable by the telephone bank on its telephone debentures, and administrative expenses and estimated losses of the telephone bank in respect of such other loans, all as determined by the Governor of the telephone bank. Intermediate loans shall not be made to a borrower which is determined by the Governor of the telephone bank, under standards to be established by the Secretary, to be capable of both paying the interest rate applicable hereunder to loans other than intermediate loans and achieving the objectives of the Federal rural telephone loan program. The authority to make intermediate loans hereunder shall terminate on June 30, 1981, or such earlier date as conversion takes place under section 610(a): Provided, That on or before July 1, 1971, the Secretary shall make a report to

the President for transmittal to the Congress on the status of the intermediate loan program with recommendations concerning its continuation thereafter.

"(3) Loans shall not be made unless the Governor of the telephone bank finds and certifies that in his judgment the security therefor is reasonably adequate and such loan will be repaid within the time agreed.

"(4) No loan shall be made in any State which now has or may hereafter have a State regulatory body having authority to regulate telephone service and to require certificates of convenience and necessity to the applicant unless such certificate from such agency is first obtained. In a State in which there is no such agency or regulatory body legally authorized to issue such certificates to the applicant, no loan shall be made under this section unless the Governor of the telephone bank shall determine (and set forth his reasons therefor in writing) that no duplication of lines, facilities, or systems, providing reasonably adequate services will result therefrom.

"(5) As used in this section, the term 'telephone service' shall have the meaning prescribed for this term in section 203 (a) of this Act, and the term 'telephone lines, facilities, or systems' shall mean lines, facilities, or systems used in the rendition of such telephone service.

"(c) The Governor of the telephone bank is authorized to adjust the schedule of payments of interest or principal of loans made under this section upon his determination that with such readjustment there is reasonable assurance of repayment: Provided, however, That no adjustment shall extend the period of such loans beyond fifty years.

"SEC. 609. TELEPHONE BANK RECEIPTS.—Any receipts from the activities of the telephone bank shall be available for all obligations and expenditures of the telephone bank.

"SEC. 610. CONVERSION OF OWNERSHIP, CONTROL, AND OPERATION OF TELEPHONE BANK.-(a) Whenever after retirement of Class A stock issued to the United States has begun pursuant to section 606(c) of this title, the total amount in stated value of Class B and Class C stock outstanding equals two-thirds of the total amount in stated value of Class A, Class B, and Class C stock outstanding, as determined by the Secretary, and if there shall then be no outstanding indebtedness of the telephone bank to the Secretary of the Treasury on notes issued pursuant to section 607 (b)—

"(1) the powers and authority of the Governor of the telephone bank granted to the Administrator of the Rural Electrification Administration by this title VI shall vest in the Telephone Bank Board, and may be exercised and performed through the Governor of the telephone bank, to be selected by the Telephone Bank Board, and through such other employees as the Telephone Bank Board shall designate:

"(2) the six members of the Telephone Bank Board designated by the President pursuant to section 605(b) shall cease to be members, and the number of Board members shall be accordingly reduced to seven unless other provision is thereafter made in the bylaws of the telephone bank;

"(3) the telephone bank shall cease to be an agency of the United States, but shall continue in existence in perpetuity as an instrumentality of the United States and as a banking corporation with all of the powers and limitations conferred or imposed by this title VI except such as shall have lapsed pursuant to the provisions of this title; and

"(4) the authority of the telephone bank to borrow funds from the Secretary of the Treasury to enable it to pay interest or principal on its telephone debentures, as provided in section 607(b) of this title, shall terminate as to all telephone debentures issued thereafter.

"(b) When all class A stock has been fully redeemed and retired, loans made by the telephone bank shall not be subject to the restrictions prescribed in the provisos to section 608(a) (2).

"SEC. 611. CUMULATIVE NATURE OF TITLE VI; AMENDMENTS THERETO.-Notwithstanding anything in this Act, powers and authority provided for in this title VI shall be cumulative, and nothing herein shall be deemed to limit powers and authority provided for in any other title of this Act. The right to repeal, alter, or amend this title VI at any time is expressly reserved."

SEC. 3. (a) Subsection (f) of section 3 of the Rural Electrification Act of 1936, as amended, is repealed.

(b) Section 201 of the Rural Electrification Act of 1936, as amended, is amended by inserting", to public bodies now providing telephone service in rural areas", immediately after the word "areas" in the first sentence and also immediately after the word "areas" in the first proviso of the second sentence.