capital furnished to the telephone bank pursuant to subsection (a) of this section 605, 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.

"(d) Class B stock shall be held only by recipients of loans under section 610 of this Act. Borrowers receiving loan funds pursuant to section 610 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 610 of this Act, 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 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 for losses, 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 Board. At the time of such distribution, the proportion available for the payment of dividends on class A stock shall be paid into miscellaneous receipts of the Treasury.

"SEC. 606. 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 with the approval of the Secretary of the Treasury: Provided, however, That the amount of telephone debentures which may be outstanding at any one time pursuant to this subsection (a) shall not exceed ten times the paid in capital and retained earnings of the telephone bank, unless an appropriation act shall specify another amount, and it shall be in order for appropriation acts to contain such provisions subject to the aforesaid limitations. The telephone bank shall insert in all its telephone debentures 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 tele phone 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. 607. USE OF DEPARTMENT OF AGRICULTURE FACILITIES AND EMPLOYEES.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 610(b) (2) of this title.

"SEC. 608. ANNUAL REPORTS; FISCAL AGENT. (a) The Governor of the telephone bank 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.

"(b) 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.

"SEC. 609. TAX EXEMPTIONS.-The telephone bank shall be deemed to be an instrumentality of the United States, and as such, 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. 610. LENDING POWER.-(a) The Governor of the telephone bank is authorized on behalf of the telephone bank to make loans, in conformance with policies established by him, 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, and (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, of financial stability of corporations financed under sections 201 and 610 of this Act, 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: 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: Provided, however, That the terms 'telephone service' and 'telephone lines, facilities, or systems' shall, for the purposes of this section, be deemed also to include all types of community antenna television system services or facilities.

"(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. 611. 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. 612. CONVERSION OF TELEPHONE BANK TO PRIVATE OWNERSHIP, CONTROL, AND OPERATION.-As promptly as practicable after all class A stock issued to the United States has been retired pursuant to section 605 (c) of this title, the Secretary shall transmit to the President for submission to the Congress recommendations for such legislation as may be necessary or desirable to make appropriate provisions for the transfer to class B and class C stockholders of the ownerhip and control of the telephone bank in order that its operations may thereafter be carried on as a privately owned, operated, and financed banking corporation. Such legislation shall provide for the termination of the authority to borrow from the Secretary of the Treasury under section 606 (b) in respect of telephone debentures thereafter issued, and for the termination of the provisions for tax exemption provided under section 609.

"SEC. 613. 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. Subsection (f) of section 3 of the Rural Electrification Act of 1936, as amended, is repealed.

SEC. 4. Section 101 of the Government Corporation Control Act, as amended (31 U.S.C. 846), is amended by striking "and" immediately before "Tennessee Valley Associated Cooperatives, Incorporated" and by inserting "; Federal Bank for Rural Electric Systems; and Federal Bank for Rural Telephone Systems" immediately before the period at the end.

SEC. 5. This Act shall take effect July 1, 1966.

(H.R. 14000, introduced by Mr. Poage, and which is similar to H.R. 14048 introduced by Mr. Mills, and H.R. 15162 introduced by Mr. Schisler, follows:)

[H.R. 14000, 89th Cong., 2d sess.]

A BILL To amend the Rural Electrification Act of 1936, as amended, to establish REA electrification and telephone loan accounts and Federal banks for rural electric and rural telephone systems to provide supplemental financing for, the rural electrification and rural telephone programs, and for other purposes

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That the Congress finds rural electric and telephone systems require ever-increasing amounts of capital to keep pace with the

needs of their consumer members and users, therefore it is declared to be the policy of the Congress and the purpose of this Act that the supplemental capital requirements of the rural electric and telephone systems shall be met by the establishment of a Federal Electric Bank and a Federal Telephone Bank, which banks shall utilize both non-Federal and Federal funds, and, in time, shall become entirely privately owned, operated, and financed corporations. In order to effectuate this policy, the Rural Electrification Act of 1936, as amended (7 U.S.C. 901-924), is amended as hereinafter provided.

SEC. 2. Subsection (f) of section 3 of the Rural Electrification Act of 1936, as amended, is repealed.

SEC. 3. The Rural Electrification Act of 1936, as amended, is further amended by adding the following four new titles:

"TITLE III

"SEC. 301. REA ELECTRIFICATION LOAN ACCOUNT.-There is hereby established in the Treasury of the United States an account, to be known as the REA electrification loan account, consisting of—

"(1) all notes, bonds, obligations, and property delivered or assigned to the Administrator pursuant to loans heretofore or hereafter made under sections 4 and 5 of this Act, including notes, bonds, obligations, and property held in trust by him on behalf of the Secretary of the Treasury, as of the effective date of this title, which shall be transferred to and be assets of the REA electrification loan account;

*(2) undisbursed balances of electrification loans made under sections 4 and 5, which, of of the effective date of this title, shall be transferred to and be assets of the REA electrification loan account;

“(3) all collections of principal and interest received on and after July 1, 1965, on notes, bonds, judgments, or other obligations made or held under title I of this Act, which shall be paid into and be assets of the REA electrification loan account;

“(4) all appropriations for electrification loans made under the authority of section 3 of this Act and funds obtained in accordance therewith and the unexpended balances of any funds available on the effective date of this title for electrification loans under sections 4 and 5 of this Act, including any funds made available for electrification loans under the item 'Rural Electrification Administration', in the Department of Agriculture appropriation Acts current on the date of enactment of this title, and said appropriations and funds shall be assets of the REA electrification loan account; and

“(5) shares of the capital stock of the Federal Electric Bank acquired by investment of the REA electrification loan account pursuant to section 302(b)(3) of this title, and moneys received from said Bank upon retirement of said shares of stock in accordance with the provisions of title IV of this Act, which said shares and moneys shall be assets of the REA electrification loan account.

"SEC. 302. LIABILITIES AND USES OF LOAN ACCOUNT.-(a) The notes of the Administrator issued to the Secretary of the Treasury to obtain funds for loans under sections 4 and 5 of this Act, and all other liabilities against the appropriations or assets in the REA electrification loan account in connection with electrification loan operations shall be liabilities of the REA electrification loan account, and all other obligations against such appropriations or assets arising out of electrification loan operations shall be obligations of the REA electrification loan account.

"(b) The assets of the REA electrification loan account shall be available upon demand by the Administrator for the following purposes:

"(1) loans under sections 4 and 5 of this Act and for advances in connection therewith, except that no such loans shall be made in any year in excess of the amounts previously authorized therefor in appropriation Acts for such year or available pursuant to section 3 of this Act; the amounts so authorized for loans and advances shall remain available until expended; "(2) payment of interest as it accrues on loans to the Administrator from the Secretary of the Treasury for electrification purposes pursuant to section 3(a) of this Act;

"(3) investment in the capital stock of the Federal Electric Bank in accordance with section 405 (a) of this Act: Provided That funds representing the proceeds from the purchase of such stock shall remain in the REA elec

trification loan account until demanded for actual disbursement in cash by the said Bank;

"(4) payment of principal when due on loans to the Administrator from the Secretary of the Treasury for electrification purposes pursuant to section 3(a) of this Act; and

“(5) payment of any difference in the cost of funds borrowed by the Bank through the public or private sale of its electric debentures, under section 406 (a), and the interest earned on the amount of ‘intermediate' loans made under section 410(b) (2), from the proceeds of such sale.

"SEC. 303. DEPOSIT OF LOAN ACCOUNT MONEYS.-Moneys in the REA electrification loan account shall remain on deposit in the Treasury of the United States until disbursed and shall earn interest while so deposited at the rate of 2 per centum per annum, which shall be credited against interest as it accrues on loans to the Administrator from the Secretary of the Treasury for electrification purposes pursuant to section 3 (a) of this Act.

"TITLE IV

"SEC. 401. ESTABLISHMENT AND GENERAL PURPOSES OF THE ELECTIC BANK.— There is hereby established within the Department of Agriculture a body corporate to be known as the 'Federal Electric Bank', subject to the general supervision and direction of the Secretary of Agriculture (hereinafter called the 'Secretary'). The general purposes of the Federal Electric Bank shall be to obtain an adequate supply of supplemental funds from non-Federal as well as Federal sources, and to utilize said funds in the making of loans under section 410 of this title. The Federal Electric Bank shall be an agency of the United States.

“Sec. 402. GENERAL Powers.—The Federal Electric Bank shall have power to adopt and use a corporate seal, to sue and be sued, to make contracts, to acquire, hold, and dispose of property and obligations of the United States and its instrumentalities and the securities of public and private corporations, and to exercise all such other powers as shall be necessary or incidental to carrying out its functions under this title.

"SEC. 403. GOVERNOR.-The chief executive officer of the Bank shall be the Governor. As long as the majority of the stock of such Bank is owned by the United States, the Governor shall be the Administrator of the Rural Electrification Administration. Whenever a majority of the stock of such Bank shall cease to be owned by the United States, and thereafter, the Governor shall be chosen by majority vote of the Board.

"SEC. 404. BOARD OF DIRECTORS. (a) The management of the Federal Electric Bank, within the limitations prescribed by law, shall be vested in a board of directors (hereinafter called the 'Federal Electric Bank Board') consisting of ten members, including the following who shall be voting members of the Federal Electric Bank Board, and shall serve without compensation as such: (1) the Assistant Secretary for Rural Development and Conservation of the Department of Agriculture who shall serve as Chairman of the Federal Electric Bank Board; (2) the REA Administrator, who shall serve as Deputy Chairman of the Federal Electric Bank Board; (3) the Assistant Administrator-Electric, of the Rural Electrification Administration; (4) the Assistant Administrator— Borrower Development of the Rural Electrification Administration; and (5) any employee of the Department of Agriculture who may be designated by the Secretary of Agriculture. If any of the foregoing offices shall be determined, the successor member of the Federal Electric Bank Board shall be designated by the Secretary of Agriculture. Each such member of the Federal Electric Bank Board shall have one vote.

"(b) As soon as practicable after enactment of this title, the President of the United States shall appoint five additional members of the initial Federal Electric Bank Board to be selected from the directors, managers, and employees of any entities which at the time of appointment are actual borrowers from either the Federal Electric Bank or from the Rural Electrification Administration. The five members thus appointed shall serve until their successors shall have been elected in accordance with section 404 (c).

"(c) Within twelve months following the appointment of the five members of the initial board as provided in section 404 (b), the Governor shall call a meeting of all entities then actually holding loans from the Federal Electric Bank and