Each bond shall also contain a certificate in the face thereof, signed by the farm loan commissioner, to the effect that this bond has the approval in form and issue of the Federal Farm Loan Board and is legal and regular in all respects. It shall be signed by the president of the bank issuing the same and attested by its secretary.

Each land bank shall be held to be bound in all respects by the acts of its president in signing farm loan bonds, and by the acts of the Federal Farm Loan Board in authorizing their issue.

Said bonds shall state that they are authorized by the Federal Farm Loan Board under the provisions of this Act.

There shall appear in the face of each farm loan bond provided for in this Act the statement that such bond is not taxable by National, State, or municipal authority.

Every Federal land bank issuing farm loan bonds shall be primarily liable therefor, and shall also be liable, upon presentation of farm loan bond coupons, for interest payments due upon any farm loan bonds issued by other Federal land banks and remaining unpaid in consequence of the default of such other land banks; and every such bank shall likewise be liable for such portion of the principal of farm loan bonds so issued as shall not be paid after the assets of any such other land banks shall have been liquidated and distributed: Provided, That such losses, if any, either of interest or of principal, shall be assessed by the Federal Farm Loan Board against solvent land banks liable therefor in proportion to the amount of farm loan bonds which each may have outstanding at the time of such assessment.

Every Federal land bank shall by appropriate action of its board of directors, duly recorded in its minutes, obligate itself to become liable on farm loan bonds as provided in this section.

APPLICATION OF AMORTIZATION AND INTEREST PAYMENTS.

SEC. 26. That whenever any Federal land bank, or joint stock land bank, shall receive any interest, amortization or other payment upon any first mortgage pledged as collateral security for the issue of farm loan bonds, it shall forthwith notify the farm loan registrar of the items so received. Said registrar shall forthwith cause such payment to be duly credited upon the mortgage entitled to such credit. Whenever any such mortgage is paid in full, said registrar shall cause the same to be canceled and delivered to the proper land bank for transmission to the original maker thereof, or his heirs, administrators or assigns.

Upon written application by any Federal land bank, or joint stock land bank, to the farm loan registrar, it may be permitted, in the discretion of said registrar, to withdraw any mortgages or bonds pledged as collateral security under this Act, and to substitute therefor other mortgages or United States Government bonds not less in amount than the mortgages or bonds desired to be withdrawn, such substituted mortgages being qualified under section twelve or section seventeen of this Act.

Whenever any farm loan bonds, or coupons or interest payments of such bonds, are due under their terms, they shall be payable at the land bank by which they were issued, in gold or lawful money, and upon payment shall be duly canceled by said bank. At the discretion of the Federal Farm Loan Board, payment of any farm loan bond or coupon or interest payment may, however, be authorized to be made at any Federal land bank, any joint stock land bank, or any other bank, under rules and regulations to be prescribed by the Federal Farm Loan Board.

When any land bank shall surrender to the proper farm loan registrar any farm loan bonds of any series, canceled or uncanceled, said land bank shall be entitled to withdraw first mortgages and bonds pledged as collateral security for any of said series of farm loan bonds to an amount equal to the farm loan bonds so surrendered, and it shall be the duty of said registrar to permit and direct the delivery of such mortgages and bonds to such land bank.

Interest payments on hypothecated first mortgages shall be at the disposal of the land bank pledging the same, and shall be available for the payment of coupons and the interest of farm loan bonds as they become due.

Whenever any bond matures, or the interest on any registered bond is due, or the coupon on any coupon bond matures, and the same shall be presented for payment as provided in this Act, the full face value thereof shall be paid to the holder.

Amortization or other payments on the principal of first mortgages held as collateral security for the issue of farm loan bonds shall constitute a trust fund in the hands of the Federal land bank, or joint stock land bank, receiving the same, and shall be applied or employed as follows:

In the case of a Federal land bank

(a) To pay off farm loan bonds issued by said bank as they mature.

(b) To purchase farm loan bonds issued by said bank or by any Federal land bank.

(c) To loan on first mortgages on farm lands within the land bank district, qualified under this Act as collateral security for an issue of farm loan bonds.

(d) To purchase United States Government bonds.

(e) To convert said payments into gold or lawful money.

In the case of a joint stock land bank

(a) To pay off farm loan bonds issued by said bank as they mature.

(b) To purchase farm loan bonds.

(c) To loan on first mortgages on farm lands within the State in which it has its principal office.

(d) To purchase United States Government bonds.

(e) To convert said payments into gold or lawful money.

The farm loan bonds, first mortgages, Government bonds, or gold or lawful money, constituting the trust fund aforesaid, shall be forthwith deposited with the farm loan registrar as substituted collateral security in place of the sums paid on the principal of indorsed mortgages held by him in trust.

Federal land banks, in the order of their applications, shall have a preference over other subscribers in purchasing the whole or any part of an issue of farm loan bonds.

Every Federal land bank, or joint stock land bank, shall notify the farm loan registrar of the disposition of all payments made on the principal of mortgages held as collateral security for an issue of farm loan bonds, and said registrar is authorized, at his discretion, to order any of such payments, or the proceeds thereof, wherever deposited or however invested, to be immediately transferred to his account as trustee aforesaid.

RESERVE AND DIVIDENDS OF LAND BANKS.

SEC. 27. That every Federal land bank, and every joint stock land bank, shall, out of its net earnings, semiannually carry to reserve account twenty-five per centum thereof until said reserve account shall show a credit balance equal to twenty per centum of the outstanding capital stock of said land bank. Whenever said reserve shall have been impaired, said balance of twenty per centum shall be fully restored before any dividends are paid. After said reserve has reached the sum of twenty per centum of the outstanding capital stock, five per centum of the net earnings shall be annually added thereto. For the period of two years from the date when any default occurs in the payment of the interest, amortization installments or principal on any of said first mortgage, by both mortgagor and indorser, the amount so defaulted shall be carried to a suspense account, and at the end of the two-year period specified, unless collected, shall be debited to reserve account.

Whenever the net earnings of any Federal land bank, or joint stock land bank, after deducting the twenty-five per centum or the five per centum hereinbefore directed to be deducted for credit to reserve account, shall amount to two per centum upon the face value of the capital stock of such land bank then outstanding, said land bank may, at its discretion, declare a dividend to shareholders of the whole or any part of the balance of said net earnings.

RESERVE AND DIVIDENDS OF NATIONAL FARM LOAN ASSOCIATIONS.

SEC. 28. That every national farm loan association shall, out of its net earnings, semiannually carry to reserve account a sum not less than two per centum of its capital or than twenty-five per centum of such net earnings until said reserve account shall show a credit balance equal to twenty per centum of the outstanding capital stock of said association.

Whenever said reserve shall have been impaired, said credit balance of twenty per centum shall be fully restored before any dividends are paid. After said reserve has reached said sum of twenty per centum, five per centum of the net earnings shall be annualiy added thereto.

Whenever the net earnings of any farm loan association, after deducting the twenty-five per centum or the five per centum hereinbefore directed to be credited to reserve account, shall amount to two per centum upon the face value of the capital stock of such association then outstanding, said association may, at its discretion, declare a dividend to shareholders of the whole or any part of the balance of said net earnings.

The reserve of each farm loan association shall be invested in accordance with rules and regulations to be prescribed by the Federal Farm Loan Board. Whenever any farm loan association shall be voluntarily liquidated a sum equal to its reserve account as herein required shall be paid to and become the property of the Federal land bank in which such loan association may be a shareholder.

DEFAULTED LOANS.

SEC. 29. That if there shall be default under the terms of any indorsed first mortgage held by a Federal land bank under the provisions of this Act, the national farm loan association or agent through which said mortgage was received by said Federal land bank shall be notified of said default. Said association or agent shall thereupon be required, within thirty days after such notice, to make good said default, either by payment of the amount unpaid thereon in cash, or by the substitution of an equal amount of farm loan bonds with all unmatured coupons attached.

EXEMPTION FROM TAXATION.

SEC. 30. That every Federal land bank and every national farm loan association, including the capital stock and reserve or surplus therein and the income derived therefrom, shall be exempt from Federal, State, and local taxation, except taxes upon real estate held, purchased, or taken by said bank or association under the provisions of section eleven and section thirteen of this Act. First mortgages executed to Federal land banks, or to joint stock land banks, under the provisions of this Act, shall be deemed and held to be instrumentalities of the Government of the United States, and as such they and the income derived therefrom shall be exempt from Federal, State and local taxation.

Farm loan bonds issued under the provisions of this Act and the income derived therefrom shall be exempt from Federal, State and local taxation.

INVESTMENT IN FARM LOAN BONDS.

SEC. 31. That farm loan bonds issued under the provisions of this Act by Federal land banks or joint stock land banks shall be a lawful investment for all fiduciary and trust funds, and may be accepted as security for all public deposits. Any member bank of the Federal reserve system may buy or sell farm loan bonds issued under the authority of this Act.

STATE LEGISLATION.

SEC. 32. That it shall be the duty of the farm loan commissioner to make examination of the laws of every State of the United States and to inform the Federal Farm Loan Board as rapidly as may be whether in his judgment the laws of each State relating to the conveying and recording of land titles, and the foreclosure of mortgages or other instruments securing loans, as well as providing homestead and other exemptions and granting the power to waive such exemptions as respects first mortgages, are such as to assure the holder thereof adequate safeguards against loss in the event of default on loans secured by any such mortgages.

Pending the making of such examination in the case of any State, the Federal Farm Loan Board may declare first mortgages on farm lands situated within such State ineligible as the basis for an issue of farm loan bonds; and if said examination shall show that the laws of any such State afford insufficient protection to the holder of first mortgages of the kinds provided in this Act, the said Federal Farm Loan Board may declare said first mortgages on land situated in such State ineligible during the continuance of the laws in question. In making his examination of the laws of the several States and forming his conclusions thereon said farm loan commissioner may call upon the office of the Attorney General of the United States for any needed legal advice or assistance, or may employ special counsel in any State where he considers such action necessary.

At the request of the executive of any State the Federal Farm Loan Board shall prepare a statement setting forth in what respects the requirements of said board can not be complied with under the existing laws of such State.

EXAMINATIONS.

SEC. 33. That the Federal Farm Loan Board shall appoint as many land bank cxaminers as in its judgment may be required to make careful examinations of the banks and associations permitted to do business under this Act.

Said examiners shall be subject to the same requirements, responsibilities, and penalties as are applicable to national bank examiners under the national bank Act, the Federal reserve Act, and other provisions of law. Said examiners shall be required to examine the condition of every national farm loan assiciation and report the same to the farm loan commissioner at least once each year, and to examine and report the condition of every Federal land bank and joint stock land bank at least twice each year.

Said examiners shall receive salaries to be fixed by the Federal Farm Loan Board, which shall be paid by the Secretary of the Treasury out of any money in the Treasury not otherwise appropriated.

PENALTIES.

SEC. 34. That any applicant for a loan from a national farm loan association, Federal land bank, or joint stock land bank who shall knowingly make any false statement in his application for such loan, and any member of a loan committee or any appraiser provided for in this Act who shall willfully overvalue any land offered as security for loans under this Act, shall be deemed guilty of a misdemeanor and shall be imprisoned not exceeding one year or fined not more than $5,000, or both. Any examiner appointed under this Act who shall accept a loan or gratuity from any bank or association examined by him, or from any person connected with any such bank or association in any capacity, shall be deemed guilty of a misdemeanor, and shall be imprisoned not exceeding one year or fined not more than $5,000, or both, and may be fined a further sum equal to the money so loaned or gratuity given, and shall forever thereafter be disqualified from holding office as an examiner under the provisions of this Act. No examiner shall perform any other service for compensation while holding such office, for any bank or banking or loan association, or for any person connected therewith in any capacity.

Any person who shall falsely make, forge, or counterfeit, or cause or procure to be falsely made, forged, or counterfeited, or willingly aid or assist in falsely making, forging, or counterfeiting any bond, coupon, or paper in imitation of, or purporting to be in imitation of, the bonds or coupons issued by any bank or association, now or hereafter authorized and acting under the laws of the United States; or any person who shall pass, utter, or publish, or attempt to pass, utter, or publish any false, forged, or counterfeited bond, coupon, or paper purporting to be issued by any such bank or association, knowing the same to be falsely made, forged, or counterfeited; or whoever shall falsely alter, or cause or procure to be falsely altered, or shall willingly aid or assist in falsely altering any such bond, coupon, or paper, or shall pass, utter, or publish as true any falsely altered or spurious bond, coupon, or paper issued, or purporting to have been issued, by any such bank or association, knowing the same to be falsely altered or spurious, shall be deemed guilty of a misdemeanor and shall be fined not exceeding $5,000 or imprisoned not exceeding five years, or both. Other than the usual salary or director's fee paid to any officer, director, or employee of a national farm loan association, a Federal land bank or a joint stock land bank, and other than a reasonable fee paid by such association or bank to any officer, director, attorney, or employee for services rendered, no officer, director, attorney, or employee, of an association or bank organized under this Act shall be a beneficiary of or receive, directly or indirectly, any fee, commission, gift, or other consideration for or in connection with any transaction or business of such association or bank. No bank or association organized under this Act shall charge or receive any fee, commission, bonus, gift, or other consideration, not herein specifically authorized. No examiner, public or private, shall disclose the names of borrowers to other than the proper officers of a farm loan association or land bank without first having obtained express permission in writing from the farm loan commissioner or from the board of directors of such association or bank, except when

ordered to do so by a court of competent jurisdiction or by direction of the Congress of the United States, or of either House thereof, or any committee of Congress or of either House duly authorized. Any person violating any provision of this paragraph shall be punished by a fine of not exceeding $5,000 or by imprisonment not exceeding one year, or both.

Any person connected in any capacity with any farm loan association, Federal land bank, or joint stock land bank, who embezzles, abstracts, or willfully misapplies any moneys, funds, or credits, or who without authority from the directors draws any order, assigns any note, bond, draft, mortgage, judgment, or decree, or who makes any false entry in any book, report, or statement of such association or land bank with intent in either case to defraud such institution or any other company, body politic or corporate, or any individual person, or to deceive any officer of a farm loan association or land bank or any agent appointed to examine into the affairs of any such association or bank, and every person who with like intent aids or abets any officer, clerk, or agent in any violation of this section, shall be deemed guilty of a misdemeanor, and shall be fined not exceeding $5,000 or imprisoned not exceeding five years, or both.

Any person who shall deceive, defraud, or impose upon, or who shall attempt to deceive, defraud, or impose upon, any person, firm, or corporation by making any false pretense or representation regarding the character, issue, security, or terms of any farm loan bond, or coupon, issued under the terms of this Act; or by falsely pretending or representing that any farm loan bond, or coupon, issued under the terms of this Act by one class of land banks is a farm loan bond, or coupon, issued by another class of banks; or by falsely pretending or representing that any farm loan bond, or coupon, issued under the terms of this Act, or anything contained in said farm loan bond, or coupon, is anything other than, or different from, what it purports to be on the face of said bond, or coupon, shall be deemed guilty of a misdemeanor, and shall be fined not exceeding $5,000 or imprisoned not exceeding five years, or both.

DISSOLUTION AND APPOINTMENT OF RECEIVERS.

SEC. 35. That upon becoming satisfied that any national farm loan association has refused to make good defaulted mortgages, as required by section twentynine of this Act, or upon receiving satisfactory evidence that any such association has failed to meet its outstanding obligations of any description whatever when due, and is in default, the Federal Farm Loan Board may forthwith declare such association insolvent and appoint a receiver and require of him such bond and security as it deems proper. Such receiver under the direction of the Federal Farm Loan Board, shall take possession of the books, records, and assets of every description of such association, collect all debts, dues, and claims belonging to it, and, with the approval of the Federal Farm Loan Board, or upon the order of a court of record of competent jurisdiction, may sell or compound all bad or doubtful debts, and, on a like approval or order, may sell all the real and personal property of such association, on such terms as the Federal Farm Loan Board or said court shall direct. Such receiver shall pay over all money so collected to the Treasurer of the United States, subject to the order of the Federal Farm Loan Board, and also make report to said board of all his acts and proceedings. Upon default of any obligation, Federal land banks and joint stock land banks may be declared insolvent and placed in the hands of a receiver, to be appointed by the Federal Farm Loan Board, and proceedings shall thereupon be had in accordance with the provisions of this section regarding national farm loan associations.

If any national farm loan association shall be declared insolvent and a receiver shall be appointed therefor by the Federal Farm Loan Board, the stock held by it in the Federal land bank of its district shall be canceled without impairment of its liability; and all payments on such stock, with accrued dividends, if any, since the date of the last dividend, shall be first applied to all debts of the insolvent farm loan association to the Federal land bank and the balance, if any, shall be paid to the receiver of said farm loan association: Provided, That in estimating said debts contingent liabilities incurred by farm loan associations under the provisions of this Act on account of default of principal or interest of indorsed mortgages shall be estimated and included as a debt, and said contingent liabilities shall be determined by agreement between the receiver and the Federal land bank of the district, subject to the approval of the Federal Farm Loan Board, and if said receiver and said land bank can