Public Law 809 - 84th Congress H. R. 10285 AN ACT All 70 Stat. 659. To merge production credit corporations in Federal intermediate credit banks; to provide for retirement of Government capital in Federal intermediate credit banks; to provide for supervision of production credit associations; and for other purposes. Be it enacted by the Senate and House of Representatives of the United States of America in ('ongress assembled, That this Act may Farm Credit be cited as the "Farm Credit Act of 1956". DECLARATION OF POLICY SEC. 2. It is declared to be the policy of the Congress to continue to provide agriculture with a sound, dependable, and effective source of credit; to promote the efficiency of the farm credit system by merging production credit corporations in Federal intermediate credit banks and to facilitate increased farmer participation in the management, control, and ownership of the merged banks and retirement of Government capital therein; to encourage and promote the continued growth and development of the production credit associations as self-supporting cooperative lending institutions operating on a sound credit basis with maximum local authority to determine credit needs and loan policies consistent with the maintenance of a national production credit system; and to continue to provide other financing institutions making loans to farmers and ranchers with the right to borrow from and rediscount with such merged banks on a basis comparable with the production credit associations regardless of the ownership of such banks. The provisions of this Act shall be construed in keeping with this declaration of policy. TITLE I-PRODUCTION CREDIT SYSTEM SEC. 101. MERGER OF PRODUCTION CREDIT CorporatiONS IN FEDERAL INTERMEDIATE CREDIT BANKS-(a) TRANSFER OF ASSETS.-The production credit corporation in each farm credit district is hereby merged in the Federal intermediate credit bank of the district and all assets, funds, contracts, property, and records belonging to such corporation, except stock in production credit associations, are hereby transferred to and vested in such bank. All obligations and liabilities of the production credit corporation shall be assumed by the Federal intermediate credit bank of the district. Stock held by each production credit corporation in production credit associations is transferred to the Governor of the Farm Credit Administration and the Governor shall cancel an equal par amount of stock of the corporation. (b) SERVICES TO AND SUPERVISION OF PRODUCTION CREDIT ASSOCIATIONS.-In order to carry out the declared policy of this Act with respect to the production credit associations, the Farm Credit Admin istration shall, by appropriate provisions in the charter and bylaws, or otherwise, provide for such organization and assignment of functions within the Federal intermediate credit banks as will assure proper supervision of and assistance to the production credit associations in a manner which will enable them to make sound credit available to farmers and ranchers. The income derived from the surplus transferred from the production credit corporation to the Federal intermediate credit bank of the district shall be used to pay expenses of the bank in providing such supervision and assistance, and expenses in excess of such income may be paid out of other resources of the bank. Aot of 1956. All 70 Stat. 660. 42 Stat. 1457. 12 USC 1061. 48 Stat. 348. 12 USC 11311. (c) OFFICERS AND EMPLOYEES.-Notwithstanding any other provision of law, the employment of the officers and employees of each Federal intermediate credit bank and each production credit corporation is terminated on the effective date of this Act and the board of directors of the Federal intermediate credit bank shall, not later than sixty days prior to the effective date of this Act, take all necessary action to reemploy as of such effective date such of the officers and employees so terminated in such capacities as the board determines they are qualified and needed to carry out the functions, powers, and duties of the Federal intermediate credit bank. Such reemployment shall be subject to the approval of the Farm Credit Administration. SEC. 102. Section 205 of the Federal Farm Loan Act, as amended, is amended to read as follows: "CAPITAL STOCK "SEC. 205. (a) CLASSES OF STOCK; OWNERSHIP; DIVIDENDS; AND RETIREMENT OF STOCK.-Each Federal intermediate credit bank is authorized to issue class A and class B stock as follows: "(1) Class A stock shall have a par value of $100 per share and shall be issued to and held by the Governor of the Farm Credit Administration on behalf of the United States. Stock of each Federal intermediate credit bank held by the Secretary of the Treasury shall be transferred to the Governor who shall exchange such stock for an equal amount of class A stock of such bank. The Governor is authorized thereupon to reallocate the investment of the United States in such banks in such manner as he determines necessary to meet the needs of the respective banks. Any transfers of capital funds required as a result of such reallocation shall be made in four equal installments, the first of which shall be made on January 1, 1957, and one of which shall be made on the first day of each of the next succeeding three calendar years. Upon each such transfer of capital funds the Governor shall require an appropriate adjustment in the class A stock of each such bank. Stock of each production credit corporation held by the Governor (less the amount canceled pursuant to section 101 of the Farm Credit Act of 1956) shall be exchanged for an equal par amount of class A stock of the Federal intermediate credit bank in which such corporation is merged pursuant to section 101 of such Act. No dividends shall be paid on class A stock. Annually at the end of its fiscal year each such bank shall determine the amount of its class A stock which shall be retired. Whenever the total of the capital stock, participation certificates, surplus, and reserves of the bank is more than one-sixth of the highest month-end balance of debentures and other obligations issued by or for the bank, outstanding during the immediately preceding five years, the minimum amount of class A stock to be retired shall be the total amount of class B stock and participation certificates issued for that year. All class A stock shall be retired at par. The proceeds of such class A stock retirements of each bank shall be paid into the Treasury as miscellaneous receipts until there is so paid a sum equal to $30,000,000 plus the amount of class A stock of the bank issued in exchange for stock of the production credit corporation. The proceeds of any further such stock retirements shall be paid into the revolving fund established by section 5 (e) of the Farm Credit Act of 1933, as amended. The Governor of the Farm Credit Administration is authorized to purchase from time to time class A stock in any bank in such amount as he determines is needed to meet the credit needs of the bank and such revolving fund shall continue to be available for such purchases as provided in said section 5 (e). The Governor may at any time require the bank to retire such All 70 Stat. 661. class A stock if, in his judgment, the bank has resources available therefor, and the proceeds of such retirements shall be returned to such revolving fund. "(2) Class B stock shall have a par value of $5 per share and may be issued only to production credit associations in series and amounts approved by the Farm Credit Administration. Such stock shall be issued only at par and may be transferred to another production credit association with the approval of the issuing bank. Whenever a bank has no class A stock outstanding it may pay like dividends on class B stock and participation certificates in an amount not to exceed 5 per centum in any year if declared by the board of directors. Dividends on class B stock and participation certificates shall not be cumulative. Within sixty days after the effective date of the Farm Credit Act of 1956, the production credit associations shall subscribe to class B stock in the banks in an aggregate amount equal to 15 per centum of the total amount of class A stock in all banks. Such required amount of subscriptions shall be allotted among the several districts in the proportion that the average amount of the bank's loans to and discounts for the production credit associations of the district, outstanding during the immediately preceding five fiscal years, is of the average of such loans and discounts of all banks outstanding during such five-year period. The amount so allotted to each district shall be further allotted to each production credit association on the basis of the proportion that its average indebtedness (loans and discounts) to the bank during the immediately preceding five fiscal years is of the average of such indebtedness of all production credit associations to the bank during such five-year period. Each production credit association shall subscribe to class B stock in the bank of the district in the amount so allotted to it. One-third of the purchase price of such stock subscription shall be paid at the time of such subscription, one-third shall be paid within one year after the effective date of said Act, and the balance shall be paid within two years after such effective date. Such class B stock shall be issued as payments therefor are made. Any production credit association chartered after the effective date of the Farm Credit Act of 1956 shall thereupon purchase class B stock in the bank in the amount of $5,000, and such amount shall be adjusted at the end of five years thereafter to an amount determined by applying to its average indebtedness to the bank during such fiveyear period the same percentage as the percentage which the initial subscriptions of other production credit associations was of their indebtedness, as provided in this subsection: Provided, That this provision shall not apply to any association owning stock in the bank in such required amount as a result of merger, consolidation, or reorganization of one or more associations. After all class A stock has been retired, the bank may retire class B stock at par and participation certificates at a face amount under policies established by the Farm Credit Administration. Class B stock and participation certificates shall be retired without preference and in such manner that the oldest outstanding stock or certificates at any given time will be retired first. In case of liquidation or dissolution of any production credit association or other financing institution, the stock or participation certificates of the bank owned by such association or institution may be retired by the bank at the fair book value thereof, not exceeding par or face amount, as the case may be. "(b) LIEN ON STOCK AND PARTICIPATION CERTIFICATES.-Each Federal intermediate credit bank shall have a first lien on all stock in the bank owned by each production credit association and on all participation certificates owned by other financing institutions as additional collateral for any indebtedness of the holders thereof to the bank: All 70 Stat. 662. 42 Stat. 1457. Provided, That the bank shall make no loan or advance on the security of its own stock or participation certificates. In any case where the debt of a production credit association or other financing institution is in default, the bank may retire and cancel all or a part of the stock of the bank held by the association or of the participation certificates held by the other financing institution at the fair book value thereof, not exceeding par or face amount, as the case may be, in total or partial liquidation of the debt." SEC. 103. Section 206 of the Federal Farm Loan Act, as amended, 12 USC 1062, 1072. is hereby amended to read as follows: "APPLICATION OF EARNINGS "SEC. 206. (a) ANNUAL APPLICATION.-At the end of its fiscal year, each Federal intermediate credit bank shall determine the amount of its net earnings after paying or providing for all operating expenses (including reasonable valuation reserves and losses in excess of any such applicable reserves) and shall apply such, net earnings as follows: (1) To the restoration of the amount of the impairment, if any, of capital stock and participation certificates, as determined by its board of directors; (2) to the restoration of the amount of the impairment, if any, of the surplus account established by this subsection, as determined by its board of directors; (3) 25 per centum of any remaining earnings shall be used to create and maintain a reserve account equal to 25 per centum of the outstanding capital stock and participation certificates of the bank; (4) if said bank shall have outstanding capital stock held by the United States during the whole or any part of its fiscal year, it shall next pay to the United States as a franchise tax, a sum equal to 25 per centum of its earnings then remaining, not exceeding, however, a rate of return on such Government capital calculated at a rate equal to the computed average annual rate of interest on all public issues of public debt obligations of the United States issued during the fiscal year of the United States Treasury ending next before such tax is due, as certified to the Farm Credit Administration by the Secretary of the Treasury; (5) dividends on class B stock and participation certificates may be declared as provided in section 205 (a) of this Act; and (6) any remaining net earnings shall be distributed as patronage refunds as provided in subsection (b) of this section. Notwithstanding the provisions of item (3) of this subsection, if at the end of any fiscal year the sum of the surplus and the reserve account of any bank is less than its outstanding capital stock and participation certificates, the bank shall continue to apply such 25 per centum of its net earnings to the reserve account until the sum of the surplus and the reserve account is equal to its outstanding capital stock and participation certificates. Each bank shall, on the effective date of the Farm Credit Act of 1956, establish a surplus account consisting of its earned surplus account, its reserve for contingencies, and the surplus of the production credit corporation transferred to the bank. No part of such surplus of any bank shall be distributed as patronage refunds or as dividends. In the event of a net loss in any fiscal year after providing for all operating expenses (including reasonable valuation reserves and losses in excess of any such applicable reserves), such loss shall be absorbed by: first, charges to the reserve account; second, charges to surplus other than that transferred from the production credit corporation of the district; third, charges to surplus transferred from the production credit corporation of the district; fourth, the impairment of class B stock and participation certificates; and fifth, the impairment of class A stock. All 70 Stat. 663. "(b) PATRONAGE REFUNDS.-Whenever at the end of its fiscal year a Federal intermediate credit bank has class A stock outstanding, patronage refunds declared for that year shall be paid in class B stock to production credit associations and in participation certificates to other financing institutions borrowing from or rediscounting with the bank during the fiscal year for which such refunds are declared. The recipients of such patronage refunds shall not be subject to Federal income taxes thereon. Whenever at the end of its fiscal year a Federal intermediate credit bank has no class A stock outstanding, patronage refunds declared for that year may be paid in such class B stock and participation certificates or in cash as determined by the bank. All patronage refunds shall be paid in the proportion that the amount of interest earned by the bank on its loans to and discounts for each production credit association or other financing institution bears to the total interest earned by the bank on all such loans and discounts outstanding during the fiscal year. Each participation certificate issued in payment of patronage refunds shall be in multiples of $5 and shall state on its face the rights, privileges, and conditions applicable thereto. Patronage refunds shall not be paid to any other Federal intermediate credit bank, or to any Federal land bank or bank for cooperatives. "(c) DISTRIBUTION OF ASSETS ON LIQUIDATION OR DISSOLUTION.-In the case of liquidation or dissolution of any Federal intermediate credit bank, after payment or retirement, as the case may be, first, of all liabilities; second, of all class A stock at par; third, of all class B stock at par and all participation certificates at face amount; any remaining assets of the bank shall be distributed as provided in this subsection. Any of the surplus established pursuant to subsection (a) of this section (excluding that transferred from the production credit corporation of the district) which the Farm Credit Administration determines was contributed by financing institutions, other than the production credit associations, rediscounting with or borrowing from the bank on the effective date of the Farm Credit Act of 1956 shall be paid to such institutions, or their successors in interest as determined by the Farm Credit Administration, and the remaining portion of such surplus (including that transferred from the production credit corporation of the district) shall be paid to the holders of class A and class B stock pro rata. The contribution of each such financing institution under the preceding sentence shall be computed on the basis of the ratio of its patronage to the total patronage of the bank from the date of organization of the bank to the effective date of the Farm Credit Act of 1956. Any assets of the bank then remaining shall be distributed to the holders of class B stock and the holders of participation certificates pro rata." SEC. 104. (a) Section 201 (b) of the Federal Farm Loan Act, as amended, is hereby amended by adding at the end thereof the following sentence: "The directors shall have power, subject to the approval of the Farm Credit Administration, to adopt such bylaws as may be necessary for the conduct of the business of the banks." (b) Section 202 (a) of the Federal Farm Loan Act, as amended, is hereby amended to read as follows: "SEC. 202. (a) The Federal intermediate credit banks, when chartered and established, shall have power, subject solely to the restrictions, limitations, and conditions contained in this Act or as may be prescribed by the Farm Credit Administration not inconsistent with the provisions of this Act "(1) to discount for, or purchase from, any production credit association organized under the Farm Credit Act of 1933, as amended, with its endorsement, any note, draft, or other such Fed. intermediate 42 Stat. 1454. 12 USC 1031. Powers. |