in retirement of the stock a pro rata share of the amount of such impairment as determined by the board.

(j) A Federal Home Loan Bank may, with the approval of the board, permit the disposal of stock to another member.

(k) No dividends shall be paid on stock subscribed for by the United States, but all other stock of any Federal Home Loan Bank shall share in dividend distributions without preference.

MANAGEMENT OF BANKS

SEC. 6. (a) The management of each Federal Home Loan Bank shall be vested in a board of eleven directors, all of whom shall be citizens of the United States and bona fide residents of the district in which such bank is located.

(b) Two of such directors shall be appointed by the board. The terms of such directors shall expire one year and two years, respectively, from the end of the calendar year 1932, and their successors shall be appointed by the board for terms of three years.

(c) Nine of such directors, three of. whom shall be known as class A directors, three of whom shall be known as class B directors, and three of whom shall be known as class C directors, shall be first appointed by the board, and shall serve until the end of the calendar year 1932. Their successors shall be elected as provided in subsection (d), and of such successors first elected one of each such class shall serve for one, two, and three years, respectively. Thereafter all such directors shall serve for three years. Directors of classes A, B, and C. whether appointed or elected, shall be chosen from among persons connected with the home-financing business.

(d) The board shall divide the members of each Federal home loan bank into three groups which shall be designated as groups A, B, and C, which groups shall represent, respectively, and as fairly as may be, the large, mediumsized, and small members, the size of such members to be determined according to the net value of their holdings of home-loan mortgages. The board may revise the membership of such groups from time to time. Of the directors elected as hereinafter provided, each class A director shall be an officer or director of a member in group A, each class B director shall be an officer or director of a member in group B, and each class C director shall be an officer or director of a member in group C. Each member shall be entitled to nominate suitably qualified persons for election as directors of the class corresponding to the group to which such member belongs, and shall cast one vote for each director in its class. The directors of each class shall be nominated and elected in accordance with such rules and regulations as may be prescribed by the board.

(e) Any director appointed or elected as provided in this section to fill a vacancy shall hold office only until the expiration of the term of his prede

cessor.

(f) The board shall designate one of the directors of each bank to be chairman, and one to be vice chairman, of the board of directors of such bank.

(g) If at any time when nominations are required, members shall hold less than $1,000,000 of the capital stock of the Federal home loan bank, the board shall appoint a director or directors to fill the place or places for which such nominations are required until the expiration of the next calendar year or, in the case of a vacancy, until the expiration thereof, whichever period is the shorter.

(h) Each bank may pay its directors reasonable compensation for the time required of them, and their necessary expenses, in the performance of their duties, in accordance with the resolutions adopted by such directors, subject to the approval of the board.

(i) Such board of directors shall administer the affairs of the bank fairly and impartially and without discrimination in favor of or against any member, and shall, subject to the provisions hereof, extend to each subscriber applicant such advances as may be made safely and reasonably with due regard for the claims and demands of other members, with due regard to the maintenance of adequate credit standing for the Federal home loan bank and its obligations, and with due regard to the orderly provision of credit to aid in the conduct of home financing in the various communities within its district, and within the district as a whole.

(j) The board shall cause to be made from time to time examinations of the laws of the various States of the United States and the regulations and procedure thereunder governing conditions under which institutions of the kinds which may become subscribers of banks hereunder are permitted to be formed or to do business, or relating to the conveying or recording of land titles, or to homestead and other rights, or to the enforcement of the rights of holders of mortgages on lands securnig loans, or otherwise. If any such examination shall indicate, in the opinion of the board, that under the laws of any such State or the regulations or procedure thereunder there would be inadequate protection to a Federal home loan bank in making or collecting advances under this act, the board may withhold the establishment or prevent or limit the operation of any Federal home-loan bank in such State until satisfactory conditions of law, regulation, or procedure shall be established. In any State where State examination of members is deemed inadequate for the purposes of the Federal home loan banks, the board shall establish such inspection, all or part of the cost of which may be considered as part of the cost of making advances in such State. The banks and/or the board may make studies of trends of home and other property values methods of appraisals, and other subjects such as they may deem useful for the general guidance of their nolicies and operations and those of subscribers.

ELIGIBILITY TO SECURE ADVANCES

SEC. 7. Any member in a Federal home loan bank shall become eligible to apply for advances from such bank upon the granting of an application for permission to apply for such advances. Such application shall be in such form as shall be required by the Federal home loan bank with the approval of the board. Such Federal home loan bank may at its discretion deny any such application, or, subject to the approval of the board, may grant it on such conditions as the Federal home loan bank may prescribe.

ADVANCES TO MEMBERS

SEC. 8 (a) Each Federal home loan bank is authorized to make advances to members who have become eligible to apply therefor, as provided in section 7, upon the security of home mortgages, such advances to be made subject to such regulations, restrictions, and limitations as the board may prescribe. Any such advance shall be subject to the following limitations as to amount(1) If secured by a home mortgage given in respect of an amortized home mortgage loan which was for an original term of eight years or more, the advance may be for an amount not in excess of 60 per centum of the unpaid principal of the home mortgage loan;

(2) If secured by a home mortgage given in respect of any other home mortgage loan, the advance shall not be for an amount in excess of 50 per centum of the unpaid principal of the home mortgage loan;

(3) In no case shall the amount of the advance exceed 40 per centum of the appraised valuation of the real estate securing the home mortgage loan. (b) No home mortgage shall be accepted as collateral security for an advance by a Federal home loan bank if, at the time such advance is made (1) the home mortgage loan secured by it has more than twenty years to run to maturity; or (2) the principal sum of the home mortgage loan secured by it exceeds three-fourths of the appraised valuation of the real estate securing such loan if the loan is amortized, or exceeds 60 per centum of the appraised valuation of the real estate securing such loan if such loan is not amortized; or (3) the unpaid principal of such home-mortgage loan exceeds $15,000. For the purposes of this subsection and subsection (a) the appraised valuation of real estate shall be established by such certification by the borrowing member or such other evidence as the board may require. For the purposes of this section each Federal home loan bank shall have power to make, or to cause or require to be made, such appraisals and other investigations as it may deem necessary. No home mortgage otherwise eligible to be accepted as collateral security for an advance by a Federal home loan bank shall be accepted if any director, officer, employee, attorney, or agent of the Federal home loan bank or of the borrowing member is personally liable thereon, unless the board has specifically approved such acceptance.

(c) Such advances shall be made upon the note or obligation of the member secured as hereinafter provided, bearing such rate of interest as the board

may approve or determine, and the Federal home loan bank shall have a lien upon and shall hold the stock of such member as further collateral security for all indebtedness of the member to the Federal home loan bank. At no time shall the aggregate outstanding advances made by any Federal home loan bank to any member exceed twelve times the amounts paid in by such member for capital stock subscribed for by it.

(d) The applying subscriber shall enter into a primary and unconditional obligation to pay off all advances, together with interest and any unpaid costs and expenses in connection therewith according to the terms under which they were made, in such form as shall meet the requirements of the bank and the approval of the board. The bank shall reserve the right to require at any time, when deemed necessary for its protection, deposits of additional collateral security or substitutions of security by the member, and each member shall assign additional or substituted security when and as so required. Subject to the approval of the board, any Federal home loan bank shall have power to sell to any other Federal home loan bank, with or without recourse, any advance made under the provisions of this act, or to allow to such bank a participation therein, and any other Federal home loan bank shall have power to purchase such advance or to accept a participation therein, together with an appropriate assignment of security therefor, including a proportionate part of any proceeds of the retirement of capital stock of the selling bank subscribed for by the member to which such advances were made.

GENERAL POWERS AND DUTIES OF BANKS

SEC. 9. (a) Each Federal home loan bank shall have power, subject to the approval of the board, (1) to borrow money, to give security therefor, and to pay interest thereon, and (2) to issue bonds and debentures having such maturities as may be determined by the board, secured by the deposit of home mortgages.

(b) The board shall prescribe rules and regulations governing the assignment, deposit, custody, substitution, and release of home mortgages securing such bonds and debentures, the forms and terms of such bonds and debentures, and the conditions under which they may be issued and retired, including any option with respect to payment and retirement thereof in advance of maturity, and such regulations shall provide for the deposit in trust, under such terms and conditions as it may deem advisable, of the home mortgages securing such bonds and debentures.

(c) Such deposits in trust shall be so maintained that the aggregate unpaid principal of the home mortgage loans secured by the home mortgages deposited as security for any issue of bonds or debentures shall, as nearly as possible, be at all times not less than an amount equal to 190 per centum of the total outstanding amount of such issue. Cash deposited under authority of subsection (d) shall be included in the computation of the aggregate unpaid principal of home mortgage loans under this subsection.

(d) The board may at any time require any Federal home loan bank to deposit additional home mortgages or to make substitutions of home mortgages to secure such bonds and debentures, except that when in the opinion of the board home mortgages are not available for such purpose, it may permit, for such limited periods as it may deem advisable, the deposit of cash in lieu of the deposit of substitute or additional home loan mortgages.

(e) The board shall approve or determine the rates of interest to be paid by the Federal home loan banks upon the notes, debentures, or bonds which it may issue except that no bond or debenture issued within seven years after the enactment of this act shall bear a rate of interest in excess of 52 per centum per annum, and no bond or debenture issued thereafter shall bear a rate of interest in excess of 5 per centum per annum and shall provide such margins between interest rates received upon advances made to members and interest paid upon obligations which the Federal home loan bank may issue as will cover expenses of operation and reserves and, under such regulations as may be provided by the board, some part of such reserve may be devoted to retirement of the stock subscribed by the United States.

(f) The Federal Home Loan Banks shall be jointly and severally liable for the payment when due of all bonds and debentures, and of notes and other obligations issued by any Federal Home Loan Bank, and interest thereon, in accordance with their terms: Provided, That this shall not prevent any par

ticular Federal Home Loan Bank, when specifically so authorized by the board, from borrowing funds temporarily under the terms of obligations which shall expressly state in substance in such manner as shall be approved by the board that the liability therefor is confined to the issuing bank. The Federal Home Loan Banks shall from time to time in accordance with rules, regulations, and orders of the board make adequate agreements and arrangements among themselves for meeting the payment of the bonds, debentures, notes, or other obligations on which they are jointly and severally liable, and the interest thereon, but such agreements and arrangements shall not restrict in any respect the joint and several liability herein established.

(g) Each Federal Home Loan Bank shall have power to accept only such deposits as are made by members of such bank, or by other Federal Home Loan Banks. Such deposits shall not be subject to check, and no rate of interest in excess of 3 per centum per annum shall be paid thereon. No Federal Home Loan Bank shall transact any banking or other business not expressly authorized by this act.

(h) The board is authorized and empowered to permit, or, whenever in the judgment of at least four members of the board an emergency exists requiring such action, to require, Federal Home Loan Banks to rediscount the discounted notes of members held by other Federal Home Loan Banks, or to purchase the bonds issued by any other Federal Home Loan Bank, or to make deposits with other Federal Home Loan Banks. In any case in which the board requires the purchase of bonds, the board shall fix the price therefor, or requires the acceptance of a deposit, it shall fix the security therefor. The rediscount rates and the rates of interest to be paid upon deposits shall be fixed by the board.

(i) Each Federal Home Loan Bank shall at all times have an amount equal to the sums paid in on outstanding capital subscriptions of its members, plus an amount equal to the current deposits received from its members, invested in (1) United States Government securities, (2) interest-bearing deposits in banks or trust companies, and (3) advances with maturity not greater than one year made to members, upon such terms and conditions as the board may prescribe.

(j) Such part of the assets of each Federal Home Loan Bank (except reserves and except sums provided for in subsection (i)) as such bank may deem available therefor, may be invested otherwise than in advances to members. Such investments shall be made subject to such regulations, restrictions, and limitations as may be prescribed by the board.

INCORPORATIONS OF BANKS, AND CORPORATE POWERS

SEC. 10. The directors of each Federal Home Loan Bank shall, in accordance with such rules and regulations as the board may prescribe, make and file with the board at the earliest practicable date after the establishment of such bank an organization certificate which shall contain such information as the board may require. Upon the making and filing of such organization certificate with the board such bank shall become, as of the date of the execution of its organization certificate, a body corporate, and as such and in its name as designated by the board it shall have power to adopt, alter, and use a corporate seal; to make contracts; to purchase or lease and hold or dispose of such real estate as may be necessary or convenient for the transaction of its business; to sue and be sued, to complain, and to defend, in any court of competent jurisdiction, State or Federal; to select, employ, and fix the compensation of such officers, employees, attorneys, and agents as shall be necessary for the transaction of its business, subject to the approval of the board; to define their duties, require bonds of them and fix the penalties thereof, and to dismiss at pleasure such officers, employees, attorneys, and agents; and, by its board of directors, to prescribe, amend, and repeal by-laws, rules, and regulations governing the manner in which its affairs may be administered; and the powers granted to it by law may be exercised and enjoyed subject to the approval of the board. The president of a Federal home loan bank may also be a member of the board of directors thereof, but no other officer, employee, attorney, or agent of such bank, who receives compensation, may be a member of the board of directors. Each such bank shall have all such incidental powers, not inconsistent with the provisions of this act, as are customary and usual in corporations generally.

EXEMPTION FROM TAXATION

SEC. 11. Every Federal Home Loan Bank, including the capital and reserve or surplus therein and the income derived therefrom, shall be exempt from Federal, State, municipal, and local taxation, except taxes upon real estate held, purchased, or taken by said bank. The bonds and debentures issued by each Federal Home Loan Bank 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, municipal, and local taxation. SEC. 12. When designated for that purpose by the Secretary of the Treasury each Federal Home Loan Bank shall be a depositary of public money, except receipts from customs, under such regulations 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 depositary of public money and financial agent of the Government as may be required of it.

SEC. 13. Obligations of the Federal Home Loan Banks issued with the approval of the board under this act shall be lawful investments, and may be accepted as serurity for all fiduciary, trust, and public funds the investment or deposit of which shall be under the authority or control of the United States or any officer or officers thereof. The Federal reserve banks are authorized to act as depositaries, custodians, and/or fiscal agents for Federal Home Loan Banks in the general performance of their powers under this act.

RESERVES AND DIVIDENDS

SEC. 14. Each Federal Home Loan Bank shall carry to a reserve account semiannually 50 per centum of its net earnings until said reserve account shall show a credit balance equal to 100 per centum of the paid-in capital of such bank. After said reserve has reached 100 per centum of the paid-in capital of said bank, 25 per centum of its net earnings shall be added thereto semiannually. Whenever said reserve shall have been impaired below 100 per centum of the paid-in capital it shall be restored before any dividends are paid. Each Federal Home Loan Bank shall establish such additional reserves and/or make such charge-offs on account of depreciation or impairment of its assets as the board shall require from time to time. No dividends shall be paid except out of net earnings remaining after all reserves and charge-offs required under this act have been provided for, and then only with the approval of the board. The reserves of each Federal Home Loan Bank shall be invested subject to such regulations, restrictions, and limitations as may be prescribed by the board. If a Federal Home Loan Bank be dissolved or go into liquidation without transfer of its assets to another Federal Home Loan Bank, there shall be paid to the United States any reserves or surplus remaining after the payment of all debts, and after payments to members of any amounts paid in by them for stock of such dissolved or liquidated bank, not exceeding the par value thereof, and accrued dividends on such stock.

FEDERAL HOME LOAN BANK BOARD

SEC. 15. For the purposes of this act there shall be a board, to be known as the "Federal Home Loan Bank Board," which shall consist of five members appointed by the President of the United States, by and with the advice and consent of the Senate. Each member shall devote his time not otherwise required by the business of the United States principally to the business of the board. Before entering upon his duties each of the members shall take an oath faithfully to discharge the duties of his office. Nothing contained in this or in any other act shall be construed to prevent the appointment as a member of the board of any officer or employee under the United States. The President of the United States shall designate one of the members of the board to serve for a term of two years, one for three years, one for four years, one for five years, and one for six years from the date of the enactment hereof, and thereafter the term of each member shall be six years from the date of the expiration of the term for which his predecessor was appointed. Whenever a vacancy shall occur among the members the person appointed to fill such vacancy shall hold office for the unexpired portion of the term of the member whose place he is selected to fill. Each of the members of the board shall receive a salary at the rate of $12,000 per annum: Provided, That any member receiving from the United States any salary or compensation