tion of such provisions, less the amount by which interest payable by such bank during the quarter has been reduced "by reason of the refinancing of bonds under section 32" of the Federal Farm Loan Act, as amended by section 21 of the Emergency Farm Mortgage Act of 1933. That section provided, in substance, for a Government guaranty of the interest on $2,000,000,000 of Federal farm loan. bonds which could be used, after May 12, 1934, and subject to certain limitations for the purpose of refinancing any outstanding issues of Federal farm loan bonds. Since the Federal Farm Mortgage Corporation Act terminated the authority of the Federal land banks to issue such bonds, there cannot be any savings of interest payable which will operate under the present law to reduce the amounts reimbursable to the Federal land banks by the Secretary of the Treasury. However, with the cooperation of the Secretary of the Treasury, the Federal land banks were enabled to refund on July 1, 1934, at a lower rate of interest, certain of their outstanding bonds; and it is contemplated that further refinancing may be possible, resulting in savings in interest payable which should operate to reduce the amounts payable by the Secretary of the Treasury. Section 3 of the bill amends the "twelfth" paragraph of section 12 of the Federal Farm Loan Act in such manner as to reduce the amount of such reimbursement payments for each quarter after December 31, 1934, by the amount of savings in interest payable by the bank for such quarter, resulting through the refunding of outstanding bonds accomplished subsequent to June 30, 1934.

SECTION 4

The national farm loan association program is designed to build up surpluses in the associations from which they can meet operating expenses and losses during periods of depressed farm prices. Many of the associations are accumulating substantial surpluses as a result of the recent abnormal volume of farm-mortgage business. The supervisory power vested in the Farm Credit Administration does not now permit the Land Bank Commissioner to control by regulation. the declaration of dividends by national farm loan associations. Section 4 of the bill, by amending the fourth sentence of section 24 of the Federal Farm Loan Act, subjects the declaration and payment of such dividends to the approval of the Land Bank Commissioner.

SECTION 5

Subsection (a) amends paragraph (1) of subsection (a) of section 202 of the Federal Farm Loan Act, as amended, to authorize Federal intermediate credit banks to discount paper for banks for cooperatives, and/or to make loans to such banks. It is believed that the proposed arrangement will prove mutually beneficial to the banks for cooperatives and to the Federal intermediate credit banks, in that it will enable them to develop a larger volume of cooperative business, thus utilizing more fully their potential lending capacities.

Subsection (b) amends paragraph (3) of subsection (a) of said section 202, to authorize Federal intermediate credit banks to charge commissions for accepting drafts and bills of exchange drawn upon the banks by cooperative associations. Since Congress empowered

the banks to accept drafts. and bills of exchange for cooperative associations, it must have intended the banks to charge the usual commission rates; but the act is silent on this point. The amendment is designed to permit such charges to be made, at rates approved by the Governor.

Subsection (c) repeals subsection (d) of said section 202, since the provisions in respect to interest and discount rates to be charged by Federal intermediate credit banks are consolidated and clarified in section 7 of the bill.

SECTION 6

General lack of knowledge, on the part of the investing public, in regard to the ultimate joint liability of all Federal intermediate credit banks for the debentures issued by any such bank, results in customer preference and a disinclination on the part of some investors to purchase debentures issued by certain banks; and the same lack of knowledge also tends to prevent the public sale of the debentures at the most favorable rates. Section 6 of the bill amends section 203 of the Federal Farm Loan Act, as amended, to authorize the issuance of consolidated debentures by Federal intermediate credit banks, following substantially the same procedure as that followed by the Federal land banks in the issue of their consolidated bonds; and to provide that Federal intermediate credit-bank debentures shall be legally acceptable as lawful investments, and security for all fiduciary, trust, and public funds held under the authority or control of officers of the United States, thus broadening the field of investors to whom debentures may be sold. This provision is comparable to existing provisions with respect to farm-loan bonds and bonds of the Federal Farm Mortgage Corporation.

SECTION 7

This section amends subsection (a) of section 204 of the Federal Farm Loan Act, as amended, to provide that rates of discount and interest charged by any Federal intermediate credit bank shall be subject to approval by the Intermediate Credit Commissioner; and that, except with the approval of the Governor, they shall not exceed by more than 1 percent per annum the rate borne by the last preceding issue of debentures which the bank issued or in which it participated. This amendment is designed to clarify the method of fixing interest and discount rates, and to authorize the Governor, in his discretion, to permit a bank to charge interest or discount at a rate more than 1 percent in excess of the rate borne by the last preceding issue of debentures when, in his opinion, it is proper to do so. Conditions in the money market may change rapidly, so that the 1 percent spread between rates paid on debentures and rates of interest and discount charged by the banks may not be adequate for the most effective operation of the banks.

SECTION 8

This section will add a new subsection to section 208 of the Federal Farm Loan Act to authorize various Government departments, boards, commissions, independent establishments, the Reconstruction Finance Corporation, the Federal Reserve Board, and the Federal

Reserve banks, upon request of the Governor, to furnish any Federal intermediate credit bank, in confidence, any information they may have relating to the condition of any institution with which the bank has, or contemplates having, financial relations. This is comparable to the privilege which the Reconstruction Finance Corporation now enjoys.

SECTION 9

Under existing legislation, the Governor of the Farm Credit Administration and the banks for cooperatives are authorized to make physical facility loans only to cooperative marketing associations. This section, by amending paragraph (2) of subsection (a) of section 7 of the Agricultural Marketing Act, will broaden the present authority to include the making of loans for physical facilities for all cooperative business purposes.

SECTION 10

At the present time, the amount which may be loaned by the Governor or by any bank for cooperatives for the construction or acquisition of physical facilities may not exceed 60 percent of the value of the facilities which are to be constructed or acquired with the proceeds of the loan. Section 10 of the bill, by amending paragraph (1) of subsection (c) of section 7 of the Agricultural Marketing Act, will permit any physical facility loan to be made for an amount not exceeding 60 percent of the appraised value of the security therefor.

SECTION 11

This section amends subsection (a) of section 8 of the Agricultural Marketing Act to provide, in substance: (1) that the maximum interest rate to be charged on any loan to a cooperative association shall be 6 percent; (2) that the rate to be charged on a loan for the construction or acquisition of physical facilities shall conform, as nearly as practicable, to the prevailing rate on mortgage loans made to members of national farm loan associations; (3) that the rates of interest on commodity loans shall be prescribed by the Governor; and (4) that the rate of interest on any other type of loan made to a cooperative association shall conform, as nearly as practicable, to a rate 1 percent in excess of the prevailing interest rate charged production credit associations by the Federal Intermediate Credit Bank of the district in which the cooperative association is located.

SECTION 12

This amendment to subsection (a) of section 15 of the Agricultural Marketing Act will attain two results: (1) The definition of cooperative associations eligible to borrow from the Governor of the Farm Credit Administration and from the banks for cooperatives will be clarified, and will be broadened to include cooperative associations in which farmers act together in furnishing farm business servicesat the present time, farmers' cooperative property insurance associations and associations engaged in supplying certain other farm business services are ineligible to borrow; and (2) the addition of a new sentence to the last paragraph of subsection (a) will enable the Government and governmental agencies to use the facilities of large co

operative purchasing and marketing associations without jeopardizing the status of such associations under the Capper-Volstead Act and the Agricultural Marketing Act.

SECTIONS 13 AND 14

These sections affect amendments to sections 34 and 41 of the Farm Credit Act of 1933 which will authorize the banks for cooperatives to borrow from, and to buy, sell, or discount paper with, the Federal intermediate credit banks, a power which they do not have under existing legislation. These amendments are correlative to subsection (a) of section 5 of the bill.

SECTION 15

Section 15 is designed to accomplish three purposes: Subsection (a), by amending the first sentence of subsection (a) of section 35 of the Farm Credit Act of 1933, will authorize the Governor to except borrowers whose loans are secured by commodities from the present requirements that each borrower from a bank for cooperatives must own stock in the bank in an amount equal in fair book value to $100 per $2,000, or fraction thereof, of the amount of the loan. Subsection (b) will authorize a bank for cooperatives to permit the retention of stock in the bank by borrowers who have discharged their loans, a privilege which they do not now have. Subsection (c), by adding a new subsection to section 35 of the Farm Credit Act of 1933, will give each bank for cooperatives the authority to realize, in partial or total liquidation of indebtedness, upon the stock of such bank held by defaulting borrowers.

SECTION 16

Section 16, by amending section 66 of the Farm Credit Act of 1933, will make the present limitation ($10,000) on the salary which any officer or employee of a production credit corporation or bank for cooperatives may receive applicable only to the salaries paid to such officer or employee by that institution, and will have the effect of permitting any such institution to participate in the payment of a salary in excess of $10,000 to the general agent, who serves as a coordinating officer, and is the joint employee of the four major district institutions. It is essential that each production credit corporation and bank for cooperatives be permitted to participate with the Federal land bank and Federal intermediate credit bank of the district in paying, for the position of general agent, a salary which will enable them to secure and retain the best available talent.

SECTIONS 17 AND 18

These sections of the bill extend for an additional period of 2 years the present authority of the Land Bank Commissioner, under section. 30 of the Emergency Farm Mortgage Act of 1933, to make loans to joint-stock land banks in order to further their orderly liquidation, continuing in effect those provisions which require, as a condition of any such loan, that the borrowing bank grant a reduction to 5 percent in the rate of interest paid by borrowers from such bank and agree to defer for a comparable period the foreclosure of mort

gages, except under certain stated circumstances; and also extend likewise the authority of the Commissioner, under section 31 of the same act, to make loans to such banks for the purpose of securing the forbearance of the foreclosure of first mortgages for default in principal or interest payments or delinquencies in tax payments, retaining the present requirement for a reduction in interest charges paid by borrowers.

SECTION 19

This section is a committee amendment which limits the incurring of obligations by the Federal Farm Mortgage Corporation to those coming within estimates submitted to and approved by the Director of the Budget.

SECTIONS 20, 21, 22, AND 23

These sections are committee amendments which amend various provisions of the Federal Farm Loan Act, as amended, to permit the Federal land banks to make loans to farming corporations, under certain limitations. These provisions are comparable to those contained in the bill (S. 55) introduced by Senator Carey.

SECTION 24

This section is a committee amendment intended to give express recognition to the principle that in appraising fee-owned lands used for livestock raising, due consideration should be given to the extent to which the earning power of such fee-owned land is increased through the availability of public lands for use in connection with such feeowned lands, where the right to use the public lands is sufficiently permanent to protect the loan.

SECTION 25

This section is a committee amendment which will disqualify for service as a director or officer of a Federal land bank any person who has been finally adjudged guilty of a felony, or civilly liable in damages for fraud, in proceedings in any Federal or State court.

SECTION 26

This section contains the usual constitutional saving clause; and expressly reserves to Congress the right to alter, amend, or repeal the act.