Association, and any provisions creating defining, limiting, and regulating the powers of the association, the directors and the stockholders, or any class of stockholders; all such provisions to be subject to the approval of the Federal Home Loan Bank Board;

(4) the fact that the Articles are prepared to enable such persons to avail themselves of the advantages of this title.

SEC. 204. The articles of association shall be signed and sealed by each of the incorporators and shall be acknowledged before a judge of any court of record, or a notary public; and shall be, together with the acknowledgment thereof authenticated by the seal of such court or notary, transmitted to the Federal Home Loan Bank Board, which shall record and carefully preserve the same.

SEC. 205. If the Federal Home Loan Bank Board shall be of the opinion that the incorporators transmitting to it articles of association as herein before provided, are responsible persons and desire to create a national mortgage association for the purpose of doing business as heretofore provided, said Board shall issue or cause to be issued a certificate of approval; and the association shall become, as from the date of issuance of such certificate, a body corporate by the name set forth in its articles of association.

SEC. 206. No association shall transact any business except such as is incidental and necessarily preliminary to its organization until it has been authorized by the Federal Home Loan Bank Board to do so. The Federal Home Loan Bank Board shall not grant such an authorization to commence business until it is satisfied that capital stock of a par value of $5,000,000 has been subscribed for at not less than par and paid for in full in cash or Government securities, and until it is satisfied that all other conditions with respect to the organization of the association which it may impose have been met.

SEC. 207. The amount of bonds or debentures which any national mortgage association may have outstanding at any time shall not be in excess of either (a) fifteen times the aggregate par value of its outstanding capital stock, or (b) the current value of mortgages held by it and insured under the provisions of the National Housing Act, plus the amount of cash and its equivalent and bonds or obligations of the United States which it holds. No national mortgage association shall issue any bonds or debentures except subject to the regulations of, and with the approval of, the Federal Home Loan Bank Board. SEC. 208. Funds of any national mortgage association not invested in first real-estate liens shall be kept in cash or its equivalent or invested in bonds or other obligations of the United States or bonds or other obligations fully guaranteed as to principal and interest by the United States. National mortgage associations shall keep such reserves in cash or its equivalent as the Federal Home Loan Bank Board shall by regulation determine.

SEC. 209. Subject to such reasonable rules and regulations as the Federal Home Loan Bank Board shall from time to time declare, any national mortgage association shall have full power to, and may, manage properties purchased or turned over to it as the result of foreclosure proceedings. Such properties may be temporarily rented, rehabilitated, modernized, sold, or otherwise dealt in to assure a maximum financial return to the association.

SEC. 210. The Federal Home Loan Bank Board shall have full power to provide for the periodic examination of the affairs of every association organized under the provisions of this title, and shall have full power to terminate the existence of any such association and order its liquidation and the winding up of its affairs in the event that such Board finds the association to be violating any of the provisions of this title or any of the rules and regulations promulgated by such Board under authority granted to it by this title, or in the event such Board finds the association to be conducting its business in an unsafe and unbusinesslike manner. The Federal Home Loan Bank Board shall terminate the existence of any association organized under the provisions of this title and order the liquidation and winding up of its affairs in the event that such Board finds upon examination of the affairs of such association that the value of its assets is less than one-twentieth in excess of its outstanding liabilities and the amount of such deficiency has not been made up within thirty days after the Board has notified the association that such deficiency exists. Expenses of examination of any national mortgage association shall be assessed upon and paid for by the association being examined.

SEC. 211. The Federal Home Loan Bank Board shall have full power to provide by rules and regulations for the liquidation, reorganization, consolidation, or merger of national mortgage associations, including the power to appoint

a conservator or a receiver to take charge of the affairs of any such association, and to require an equitable readjustment of the capital structure of the same, and to release any such association from the control of a conservator or receiver appointed by it and to permit its further operation.

SEC. 212. Such associations, including their franchises, capital, reserves, and surplus, and their loans and income, shall be exempt from all taxation now or hereafter imposed by the United States, and all shares of such associations shall be exempt both as to their value and the income therefrom from all taxation (except surtaxes, estate, inheritance, and gift taxes) now or hereafter imposed by the United States; and no State or political subdivision thereof shall impose any tax on such associations or their franchise, capital, reserves, surplus. loans, or income greater than that imposed by such State on competing financial corporations, domestic or foreign. Nothing herein shall be construed to exempt the real property of associations from taxation in any State or in any subdivision thereof, to the same extent, according to its value, as other real property is taxed.

SEC. 213. Each national mortgage association, for the purpose of all actions by or against it, real, personal, or mixed, and all suits in equity, shall be deemed a citizen of the State in which its principal office is located.

SEC. 214. When designated for that purpose by the Secretary of the Treasury, any national mortgage association shall be a depositary of public money, except receipts from customs, under such reglations as may be prescribed by said Secretary; and it may also be employed as a financial agent of the Government; and it shall perform all such reasonable duties as a depositary of public money or financial agent of the Government as may be required of it. Any national mortgage association may act as agent for any other instrumentality of the United States when designated for that purpose by such instrumentality of the United States.

SEC. 215. No individual, association, partnership, or corporation, except associations organized under the provisions of this title, shall hereafter use the words "National Mortgage Association', or any combination of such words, as the name or a part thereof under which he or it shall do business. Every individual, partnership, association, or corporation violating this prohibition shall be guilty of a misdemeanor and shall be punished by a fine not exceeding $100 or imprisonment not exceeding thirty day, or both, for each day during which such violation is committed or repeated. The provisions of section 5243 of the Revised Statutes shall not apply to associations created under this title.

SEC. 216. The right to alter, amend, or repeal this title is hereby expressly reserved. If any clause, sentence, paragraph, or part of this title shall for any reason be adjudged by any court of competent jurisdiction to be invalid, such judgment shall not affect, impair, or invalidate the remainder of this title, but shall be confined in its operation to the clause, sentence, paragraph, or part thereof directly involved in the controversy in which such judgment shall have been rendered.

TITLE III-INSURANCE OF SAVINGS AND LOAN SAVINGS

SEC. 301. As used in this title

DEFINITIONS

(a) The term "Insurance Corporation" means the Federal Savings and Loan Insurance Corporation created under this title.

(b) The term "trustees" means the Board of Trustees of the Federal Savings and Loan Insurance Corporation as created under this title.

(c) The term "Board" means the Federal Home Loan Bank Board created under the Federal Home Loan Bank Act.

66

(d) The term Corporation means Home Owners' Loan Corporation created under the authority of Home Owners' Loan Act of 1933.

(e) The term "Insured Institution" means an institution which has insured its accounts as is provided in this title.

(f) The term "insured account" means a share, certificate, or deposit account of a type approved by the Insurance Corporation in an insured institution for an amount for which insurance is provided in this title.

(g) The term "insured member " means a person, firm, or corporation holding an insured account.

(h) The term "default" means an adjudication or other official determination of a court of competent jurisdiction or other public authority appointing a receiver or other legal custodian of any insured institution for the purpose of liquidation.

(i) The term "surplus" means the assets of an insured institution as shown by the adjusted statement of its condition over and above the total of the accounts of its insured members as shown by its books plus any other creditor obligations.

FEDERAL SAVINGS AND LOAN INSURANCE CORPORATION

SEC. 302. (a) There is hereby created the Federal Savings and Loan Insurance Corporation as a corporation under the laws of the United States to have succession until dissolved by Act of Congress, which shall be an instrumentality of the United States, which shall have authority to sue or to be sued in a court of competent jurisdiction, Federal or State, and which shall be under the direction of a Board of Trustees, as is herein provided, and which shall have full power and authority to do all things provided in this title and full power to do all things necessary or incident to the carrying out of the purposes of this title. (b) The management of the Insurance Corporation shall be vested in a Board of Trustees consisting of five members. The members of the Federal Home Loan Bank Board shall constitute the Board of Trustees of the Insurance Corporation and shall serve as such trustees without additional compensation. One of the members of said Board of Trustees shall be designated as the Chairman.

(c) The Insurance Corporation shall have a capital stock of $100,000,000, divided into shares of $100 each. Such stock shall be subscribed for by the Corporation and the Corporation is hereby authorized to subscribe for and pay for such stock. Said stock may be paid for in bonds of the Corporation. Said stock shall pay dividends which shall accrue if unpaid, at a rate equal to the interest rate on such bonds. The Insurance Corporation shall issue to the Corporation receipts for payments on said stock which shall serve as evidence of the ownership of the same.

(d) The Insurance Corporation shall have power to select, employ, and fix the compensation of such officers, employees, attorneys, or agents as shall be necessary for the performance of its duties under this title, without regard to the provisions of the other laws applicable to the employment or compensation of officers, employees, attorneys, or agents of the United States. No such officer, employee, attorney, or agent shall be paid compensation at a rate in excess of the rate provided by law in the case of the members of the board. The Insurance Corporation shall be entitled to the free use of the United States mails for its official business in the same manner as the executive departments of the Government, and shall determine its necessary expenditures under this title and the manner in which they shall be incurred, allowed, and paid, without regard to the provisions of any other law governing the expenditure of public funds. Nothing in this title or any other law shall be construed to prevent the Insurance Corporation from employment and compensating as its officer, attorney, or employee any officer, attorney, or employee of the board or the Corporation, subject to the approval of the board. The Insurance Corporation, with the consent of the board or of any board, commission, establishment, or executive department or instrumentality of the Government, including any field service thereof, may avail itself of the use of information, services, and facilities thereof in carrying out the provisions of this title, and any such information, services, or facilities are hereby authorized to be so made available.

INSURANCE OF ACCOUNTS

SEC. 303. In the event of a default by an insured institution, the Federal Savings and Loan Insurance Corporation shall be obligated to pay to each insured member the amount of his insured account, not exceeding 10 per centum in cash and 50 per centum of the remainder within one year and the balance within three years from the date of such default. Insured members are persons, firms, or corporations holding withdrawable or repurchasable shares, investment certificates or deposits in an insured institution. The amount of an insured account shall be its full withdrawable or repurchasable value: Provided, That no account shall be insured for more than $2,500. The Insurance Corporation shall promptly, after a default by an insured institution, determine the

insured members and the amount of their insured accounts and make available to them, after notice by mail at their last-known address as shown by the books of the insured institution upon surrender and transfer of the insured account, either a new insured account in an insured institution not in default in an amount equivalent to the insured account, or, at the option of the insured member, the cash herein provided and negotiable non-interest-bearing debentures of the Insurance Corporation for the remainder. The Insurance Corporation shall furnish to all insured institutions a certificate of the fact of such insurance, embodying this section.

ELIGIBLE INSTITUTIONS

SEC. 304. (a) Institutions eligible to insure their accounts under this title shall be confined to members of a Federal home-loan bank which are organized as:

(1) Federal savings and loan associations;

(2) Building and loan, savings and loan, homestead associations, and cooperative banks organized and operated according to the laws of the State, district, or territory in which they are chartered or organized.

(b) Applications to insure accounts as is provided in this title shall contain an agreement to pay the reasonable cost of any necessary examination; and if the insurance is accepted, the reasonable costs of reasonable examinations from time to time for the protection of the Insurance Corporation and other insured institutions, and an agreement to permit such examinations and to furnish any information at its disposal and an agreement for the Insurance Corporation to have access to any examination of such insured institution as made by any public regulatory authority or report of such examination; and if such insurance is accepted, an agreement to pay the insurance premiums fixed as is provided in this title, and such other provisions as may appear to the trustees to be appropriate.

APPLICATIONS FOR INSURANCE AND THE PREMIUM

SEC. 305. (a) Eligible members of Federal Home Loan Banks are authorized as an incident to membership in a Federal Home Loan Bank to apply to the Insurance Corporation for the insurance of their accounts and all Federal Savings and Loan Associations shall make such application, and upon receipt of such application the Insurance Corporation shall make such examinations and investigations as may, in its discretion, appear to be appropriate. The Insurance Corporation shall decline the application of any applicant if its capital is impaired or if its financial condition, its financial policies, or its management are unsafe. The Insurance Corporation may decline the application of any applicant if, in the judgment of the Trustees, the character of its management or its home financing policy is inconsistent with sound and economical home financing or with the purposes of this title.

(b) (1) The insurance premium, payable upon acceptance of insurance by an applicant and annually thereafter until a reserve shall have been built up in the Insurance Corporation to a total of 5 per centum of all insured accounts plus other creditor obligations of all insured institutions, shall be a sum equivalent to one half of 1 per centum of the total amount in all accounts of the insured members, plus any other creditor obligations of the insured institution, which sum may, under regulations made by the Insurance Corporation, be paid on a semiannual basis and at any time such reserve falls below said 5 per centum, such annual premium shall at the next premium payment date again be continued until the reserve is brought back to said amount. The amount in accounts of insured members and the amount of other creditor obligations may be determined from adjusted statements made within one year.

(2) In addition to the initial and annual premium provided in this subsection, the Insurance Corporation is authorized to assess each insured institution extra insurance premiums not exceeding in any one year a sum equivalent to one fourth of 1 per centum of the total amount in all accounts of the insured members, plus any other creditor obligations until the proceeds of such extra insurance premiums are equivalent to all losses and expenses theretofore ascertained.

(c) After examination, acceptable applicants shall be notified of their acceptance, and upon the payment of the initial insurance premium, and the issuance of a certificate by the Insurance Corporation, shall become insured

institutions and may so represent themselves. No institution not an insured institution shall represent itself as such in any respect whatsoever.

(d) The Insurance Corporation shall give full consideration to all factors entering into the financial condition of applicants and of insured institutions and shall have full power to make such adjustments in their financial statements as the facts may justify.

(e) Any member of any Federal home-loan bank shall have full power as an incident to such membership, upon a majority vote of the board of directors or other governing body, to make application for the insurance herein provided, and to pay the premiums herein provided and to take such other action as may be necessary to carry out the provisions of this title or regulations made thereunder.

(f) Any applicant for insurance, after the first year of the operation of the Insurance Corporation, shall pay an admission fee which, in the judgment of the trustees, is an appropriate contribution.

TERMINATION OF INSURANCE

SEC. 306. (a) Upon a majority vote of all those entitled to vote of the shareholders, stockholders, or other final controlling authority of an insured institution to withdraw from the classification as an insured institution, its relationship as such insured institution shall immediately cease and all rights of shareholders, certificate holders, or depositors under the insurance obligation shall terminate immediately, but the obligation to pay premiums as is provided in this title shall continue for three years.

(b) Upon the withdrawal of any member of a Federal Home Loan bank which is an insured institution, from such membership, its relationship as such insured institution shall cease immediately and all rights of shareholders, certificate holders, or depositors under the insurance obligation shall terminate immediately, but the obligation to pay premiums as is provided in this title shall continue for the next three annual premiums.

(c) The Insurance Corporation shall have power to terminate the insured status of any insured institution at any time for the continued violation of any provision of this title or any regulation made under this title after ninety days' notice in writing from the Insurance Corporation to such insured institution, and in the event of such termination of the insured status of an insured institution, it shall not thereafter advertise or represent itself as an insured institution, but insured accounts existing as of the date of such termination shall continue as insured accounts for a full period of five years, and such institution shall be obliged to continue the payment of the insurance premium herein provided for such period of five years. No insured institution shall: (1) make loans beyond fifty miles from its principal office; (2) issue securities after becoming an insured institution, the form of which has not been approved by the Insurance Corporation, and no form of security or contract shall be approved which guarantees a definite return or a definite maturity; (3) carry on any sales plan or practices or advertise in violation of regulations made by the Insurance Corporation; (4) fail to provide, before paying dividends or other forms of earnings to insured members, for adequate reserves in accordance with regulations made by the Insurance Corporation, which regulations shall require the building of reserves within a reasonable period, not exceeding ten years, up to 5 per centum of all insured accounts, and which regulations shall prohibit the payment of dividends from said reserves or the payment of any dividends, if any losses are chargeable to such reserve; or (5) violate any other reasonable regulation made by the Insurance Corporation for the sound and economic conduct of the business of such insured institution.

LIQUIDATION OF INSURED INSTITUTIONS

SEC. 307. (a) In order to facilitate the liquidation of insured institutions the Insurance Corporation may negotiate with and contract for an insured institution to issue new insured accounts to the insured members of any insured institution in default, or the Insurance Corporation may cause the organization and charter of a new Federal savings and loan association subject to the approval of the board to issue shares to the insured members of such insured institution in default.

(b) In the event a Federal savings and loan association is adjudicated by the board to be in default, the Insurance Corporation shall be appointed as