all entities then eligible to borrow from such Bank and actually holding loans from the Rural Electrification Administration for the purpose of electing members of the Federal Electric Bank Board. Each such entity shall be entitled to notice of and shall have one noncumulative vote at said meeting and may vote by proxy. Five members of the Federal Electric Bank Board shall be elected for a two-year term, one each from among the directors, managers, and employees of entities entitled to vote which have their principal office in the following respective geographical areas.

Area 1. One member from an area encompassing the States of Maine, New Hampshire, Vermont, Connecticut, Rhode Island, Massachusetts, New York, New Jersey, Pennsylvania, Delaware, Maryland, Virginia, North Carolina, West Virginia, Ohio, Indiana, Michigan, and the District of Columbia.

Area 2. One member from an area encompassing the States of South Carolina, Georgia, Florida, Alabama, Tennessee, Kentucky, and Mississippi. Area 3. One member from an area encompassing the States of Iowa, Illinois, Wisconsin, North Dakota, South Dakota, and Minnesota.

Area 4. One member from an area encompassing the States of Alaska, Hawaii, Washington, Oregon, California, Idaho, Montana, Utah, Nevada, Wyoming, Nebraska, and Kansas.

Area 5. One member from an area encompassing the States of Texas, Arizona, New Mexico, Missouri, Louisiana, Oklahoma, and Arkansas. The above-mentioned five members of the Federal Electric Bank Board shall be elected by majority vote of the entities eligible to vote which have their principal office in the aforementioned respective areas and such entities may vote by proxy. "(d) Thereafter, in accordance with bylaws to be adopted by the Bank, five members of the Federal Electric Bank Board shall be elected one each by majority vote of the holders of class B and class C stock which have their principal office in each of the geographical areas established in section 404 (c) above.

"(e) Each member of the Federal Electric Bank Board elected pursuant to sections 404(b), 404 (c), and 404 (d) of this title shall have one-half vote except as provided for in section 411.

Any Federal Electric 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. Federal Electric Bank Board members 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 Federal Electric Bank Board may prescribe.

"(f) The Federal Electric Bank Board shall prescribe bylaws, not inconsistent with law, regulating the manner in which the Federal Electric 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.

"(g) The Federal Electric 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 of the Chairman or any group of directors having a total of at least four votes.

"SEC. 405. CAPITALIZATION.—(a) The Federal Electric Bank's capital shall consist of capital subscribed by the United States, by borrowers from the Federal Electric Bank by corporations and public bodies eligible to become borrowers from the Federal Electric Bank, and by electric consumers of said corporations and public bodies. Beginning on July 1, 1966, and thereafter, the United States shall furnish capital to the Electric Bank from the REA electrification loan account created under title III of this Act, in an amount equal to all net collection proceeds, until the total capital so furnished by the United States reaches $1,000,000,000. 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 sections 4 and 5 of this Act, less an amount representing interest payable to the Secretary of the Treasury on loans to the Administrator for electrification purposes pursuant to section 3(a) of this Act.

"(b) The capital stock of the Federal Electric Bank shall consist of four classes, class A, class B, class C, and class D, the rights, powers, privileges, and preferences of the separate classes to be specified, not inconsistent with law, in the bylaws of the Federal Electric Bank. No dividends shall be payable on class

A and class B stock. Class B and class C stock shall be voting stock, but no holder of said stock shall be entitled to more than one vote.

"(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 Electric Bank pursuant to subsection (a) of this section 405, and such class A stock shall be redeemed and retired by the Federal Electric Bank as soon as practicable, but only to the extent that the Federal Electric Bank Board determines that such retirement will not unduly impair the operations of the Federal Electric Bank.

"(d) Class B stock shall be issued to and held only by recipients of loans under section 410 of this Act. Borrowers receiving loan funds pursuant to section 410 shall be required to invest in class B stock 5 per centum of the amount of loan funds so provided, and all borrowers shall be entitled to patronage refunds in class B stock or in cash under terms and conditions to be specified in the bylaws of the Federal Electric Bank.

"(e) Class C stock shall be available for purchase and shall be held only by borrowers, or by corporations and public bodies eligible to borrow, under section 410 of this Act. The dividends on class C stock shall be specified by the Federal Electric Bank Board.

"(f) Class D stock shall be available for purchase by electric consumers of borrowers, or by corporations and public bodies eligible to borrow, under section 410 of this Act, and shall be entitled to dividends in the manner to be specified by the Federal Electric Bank Board.

"(g) If a firm, association, corporation or public body is not authorized under the laws of the State in which it is organized to acquire stock of the Federal Electric Bank, the Federal Electric Bank shall, in lieu thereof, permit such organization to pay into a special fund of the Federal Electric Bank a sum equivalent to the amount of stock to be purchased. Each reference in this title to capital stock, or to class B, class C, or class D stock, shall include also the special fund equivalents of such stock and to the extent permitted under the laws of the State in which such organization is organized, a holder of special fund equivalents of class B, class C, and class D stock shall have the same rights and status as a holder of class B, class C, and class D stock, respectively. The rights, obligations, and requirements of the Federal Electric Bank in respect of such special fund equivalents shall be identical to its rights, obligations, and requirements in respect of class B, class C, or class D stock, respectively.

"SEC. 406. BORROWING POWER.-(a) The Federal Electric Bank is directed to obtain sufficient funds to meet requests for loans and is authorized to obtain funds through the public or private sale of its bonds, debentures, notes, and other evidences of indebtedness (hereinafter collectively called 'electric debentures'). Electric debentures shall be issued at such times, bear interest at such rates, and contain such other terms and conditions as the Federal Electric Bank Board shall determine after consultation with the Secretary of the Treasury: Provided, however, That the amount of electric debentures which may be outstanding at any time pursuant to this subsection (a) shall not exceed ten times the paid-in capital and surplus of the Federal Electric Bank shall insert in all its debentures appropriate language indicating that such 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 Federal Electric Bank. Such 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. The issues of the Federal Electric Bank will be exempt from the requirements of the Securities Act.

"(b) If, as determined by the Federal Electric Bank, there are insufficient funds in the assets of the Federal Electric Bank available for the purpose to pay interest or principal on its electric debentures, the Federal Electric Bank shall 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, but not in excess of the minimum rate of interest payable on Federal Electric Bank loans pursuant to section 410 (b) (2) of this title, and shall have such maturities as the Federal Electric Bank Board may determine with the approval of the Secretary of the Treasury. The Secretary of the Treasury is authorized and directed to purchase any notes issued by the

Federal Electric 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. 407. USE OF DEPARTMENT OF AGRICULTURE FACILITIES AND EMPLOYEES.— In order to perform its responsibilities under this title, the Federal Electric 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 Federal Electric Bank, except to the extent that administrative expenses are recovered by the Federal Electric Bank under section 410(b)(2) of this title.

"SEC. 408. ANNUAL REPORTS; FISCAL AGENT.-(a) The Governor of the Federal Electric Bank shall make an annual report to Congress on the Administration of this title IV and any other matters relating to the effectuation of the policies of title IV, including recommendations for legislation.

"(b) The Federal Electric 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.

"(c) At least once each year and at such other times as the Federal Electric Bank Board deems necessary, the financial transactions of the Electric Bank shall be audited by auditors designated by the Board.

"SEC. 409. TAX EXEMPTIONS.-The Federal Electric Bank shall be deemed to be an instrumentality of the United States, and as such, its property, franchise, capital, reserves, surpluses, 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 except that any real property and any tangible personal property of the Federal Electric Bank shall be subject to Federal, State, Territorial, and local taxation to the same extent as other similar property is taxed.

"SEC. 410. LENDING POWER.-(a) The Governor of the Federal Electric Bank is authorized on behalf of the Federal Electric Bank to make loans, in conformance with policies established by him, to corporations or public bodies which have received a loan or loan commitment pursuant to section 4 of this Act, or which are owned or controlled by organizations which have received such a loan or commitment, (1) for the same purposes for which loans may be made under title I of this Act, and (2) for the purposes of financing, or refinancing, the construction, improvement, expansion, acquisition, and operation of electric generating plants and electric transmission and distribution lines or systems, and for other related purposes in order to improve the efficiency, effectiveness, or financial stability of electric systems of such corporations or public bodies financed under sections 4 and 410 of this Act.

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

"(1) No loan may be made hereunder for a period exceeding fifty years.

"(2) Intermediate interest rate loans shall bear interest at a rate equal to (i) the computed average interest rate on all interest bearing obligations of the United States, as reported by the United States Treasury at the end of the preceding fiscal year, or (ii) 3 per centum per annum, whichever is lower. Loans at the intermediate interest rate shall be made by the Governor of the Federal Electric Bank in accordance with criteria established by him. Such criteria shall reflect the purpose and objectives of the Federal rural electrification program. All other loans made hereunder shall bear interest at a rate to be determined by the Federal Electric Bank Board.

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

"(c) The Governor of the Federal Electric 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: Provided further, That loans made by the Federal Electric Bank will be secured on an equal basis with prior liens

of the United States under loans made pursuant to title I of the Rural Electrification Act.

"SEC. 411. CONVERSION OF FEDERAL ELECTRIC BANK TO PRIVATE OWNERSHIP CONTROL AND OPERATION.-(a) Whenever, after retirement of class A stock issued to the United States has begun pursuant to section 405 (c) of this Act, the total amount of class B and class C stock exceeds the amount of class A stock:

"(1) the voting strength of the elected members of the Board shall be increased from one-half to one vote each;

"(2) all powers and authority granted to the Administrator by this title IV, other than powers and authority arising from his membership on the Board pursuant to section 404 (a) (2) shall vest twelve months thereafter in the Federal Electric Bank, and shall be exercised and performed through the Governor and such other employees as the Board may designate; "(3) the authority of the Federal Electric Bank to utilize the facilities and the services of employees of the Rural Electrification Administration or of any other agency of the Department of Agriculture under section 407 shall terminate twelve months thereafter;

"(4) the Federal Electric Bank shall continue to be obligated to retire class A stock in accordance with the requirements of section 405(c): Provided, however, That class A stock may thereafter he retired from the proceeds of the sale of class B or class C stock as well as from earnings of the Federal Electric Bank available therefor.

"(b) Until all class A stock has been retired by the Federal Electric Bank, all sections of title IV, as modified by subsection (a), shall remain applicable to the Federal Electric Bank, its operations and its property. Whenever all class A stock issued to the United States has been retired pursuant to sections 405 (c) and 411 (a) (4) of this Act

"(1) the Federal Electric Bank shall cease to be an agency or instrumentality of the United States, but shall continue in existence in perpetuity as a banking corporation with borrowing and lending powers, operating under the control of its class B and class C stockholders;

"(2) the members of the Board who are employees of the United States shall cease to be members of the Board, and the number of its members shall be accordingly reduced;

"(3) the following sections of this title shall no longer apply to the Federal Electric Bank, its operations or its property: sections 401, 403, 404 (a) and (b), 407 and 409;

"(4) the following sections of this title, as modified by the provisions in this section 411, shall continue to apply to the Federal Electric Bank, its operations and its property: sections 402, 404 (a), (c), (d), (e), (f), (g), 405, 406, 408 and 410.

"SEC. 412. Borrowers from the Rural Electrification Administration which have received loans under this section that have not been repaid shall have their operations, generating plants, electric transmission and distribution lines or systems subject only to the jurisdiction of the Administrator, and of State authorities even though any of these facilities and operations are involved in interstate commerce.

"SEC. 413. CUMULATIVE NATURE OF TITLE IV; AMENDMENTS THERETO.-Notwithstanding anything in this Act, powers and authority provided for in this title IV 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 IV at any time is expressly reserved.

"TITLE V

"SEC. 501. REA TELEPHONE LOAN ACCOUNT.-There is hereby established in the Treasury of the United States an account, to be known as the REA telephone 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 section 201 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 telephone loan account;

"(2) undisbursed balances of telephone loans made under section 201, which, as of the effective date of this title, shall be transferred to and be assets to the REA telephone 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 II of this Act, which shall be paid into and be assets of the REA telephone loan account;

(4) all appropirations for telephone 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 telephone loans under section 201 of this Act, including any funds made available for telephone 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 telephone loan account; and

"(5) shares of the capital stock of the Federal Telephone Bank acquired by investment of the REA telephone loan account pursuant to section 502 (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 VI of this Act, which said shares and moneys shall be assets of the REA telephone loan account.

"SEC. 502. LIABILITIES AND USES OF LOAN ACCOUNT.-(a) The notes of the Administrator issued to the Secetary of the Treasury to obtain funds for loans under section 201 of this Act, and all other liabilities against the appropriations or assets in the REA telephone loan account in connection with telephone loan operations shall be liabilities of the REA telephone loan account, and all other obligations against such appropriations or assets arising out of telephone loan operations shall be obligations of the REA telephone loan account. "(b) The assets of the REA telephone loan account shall be available upon demand by the Administrator for the following purposes:

*(1) loans under section 201 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 telephone purposes pursuant to section 3(a) of this Act;

"(3) investment in the capital stock of the Federal Telephone Bank in accordance with section 605 (a) of this Act: Provided, That funds representing the proceeds from the purchase of such stock shall remain in the REA telephone loan account until demanded for actual disbursement in cash by the said Bank; and

"(4) payment of principal when due on loans to the Administrator from the Secretary of the Treasury for telephone 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 debentures under section 606(a), and the interest earned on the amount of intermediate loans made under section 610 (a) (2), from the proceeds of such sale.

"SEC. 503. DEPOSIT ON LOAN ACCOUNT MONEYS.-Moneys in the REA telephone 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 creedited against interest as it accrues on loans to the Administrator from the Secretary of the Treasury for telephone purposes pursuant to section 3 (a) of this Act.

"TITLE VI

"SEC. 601. ESTABLISHMENT AND GENERAL PURPOSES OF THE TELEPHONE BANK.— There is hereby established within the Department of Agriculture a body corporate to be known as the 'Federal Telephone Bank', subject to the general supervision and direction of the Secretary of Agriculture (hereinafter called the 'Secretary'). The general purposes of the Federal Telephone 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 610 of this title. The Federal Telephone Bank shall be an agency of the United States.

"SEC. 602. GENERAL POWERS.-The Federal Telephone Bank shall have power to adopt and use a corporate seal, to sue and be sued, to make contracts, to

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