cumulative, but no bank shall distribute in any year any of its net savings as patronage refunds as provided in section 1134/ (a) of this title unless for that year a dividend of at least 2 per centum is declared and paid upon outstanding class B stock of the bank. Each series of class B stock shall be issued only with the approval of the Farm Credit Administration and shall carry on the face of each certificate a statement of the maximum dividend which may be declared and paid thereon and of the minimum dividend which shall be declared and paid thereon before the bank may distribute any of its net savings as patronage refunds: Provided, That such maximum and minimum dividends may be the same amount. After all class A stock has been retired, class B stock may be called for retirement at par with the approval of the Farm Credit Administration and shall be called in such manner that the oldest outstanding stock at any given time will be retired first. Any holder of class B stock whose stock has been called for retirement may elect, with the approval of the issuing bank, to leave his stock in the bank subject to its being included in the next call for retirement.

(3) Class C stock, except as approved by the Farm Credit Administration and consented to by the issuing bank, may be issued only to banks for cooperatives and farmers' cooperative associations as defined in section 1141j (a) of this title. Such stock may be issued in fractional shares, shall be issued at its fair book value not exceeding par, as determined by the bank, and no dividends shall be paid on it. Each holder of one or more shares of class C stock which is eligible to borrow from a bank for cooperatives shall be entitled to one vote only: Provided, That any such holder which within the period of two years next preceding a date, fixed by the Farm Credit Administration, prior to commencement of the voting has not been a borrower from a bank of which it holds class C stock shall not be entitled to vote. From time to time each bank for cooperatives shall obtain information concerning its class C stockholders to determine whether they continue to be eligible to borrow from the bank and to vote. Any class C stockholder found by the bank to be ineligible to borrow shall not be entitled to vote until its eligibility is reestablished to the satisfaction of the bank. Whenever in sections 640a-640k and 636c (a) of this title, provision is made for a nomination or election by cooperatives which are stockholders or subscribers to the guaranty fund of any bank for cooperatives the term "cooperatives which are stockholders or subscribers to the guaranty fund" or the equivalent of that term, shall mean such cooperatives which are eligible to vote. Each borrower from a bank for cooperatives shall be required to own at the time the loan is made at least one share of class C stock. The purchase price of such stock may be retained out of the loan. In addition, each borrower as defined by the Farm Credit Administration for purposes of this sentence, shall be required to invest

.

quarterly in class C stock an amount equal to not less than 10 nor more than 25 per centum, as prescribed by the board of directors of the bank with the approval of the Farm Credit Administration, of the amount of interest payable by it to the bank during the calendar quarter. Payments for such stock shall be made quarterly or when the regular interest payments of the borrower are payable, but the stock shall be issued to the borrower as of the end of each fiscal year in the amount of the payments for stock made by it during the year. Each regional bank shall purchase at least one share of class C stock of the central bank. In addition, the regional bank shall be required to invest quarterly in class C stock of the central bank an amount equal to not less than 10 nor more than 25 per centum, as prescribed by the board of directors of the central bank with the approval of the Farm Credit Administration, of the amount of interest payable by the regional bank to the central bank during the calendar quarter by reason of any interest purchased by the central bank in a loan made by the regional bank. Payments for such stock shall be made to the central bank and the stock shall be issued to the regional bank in the same manner, insofar as practicable, as is provided in this section for payments for and issuance of stock on account of loans by the regional bank in which the central bank does not purchase any interest. Subject to rules prescribed by the board of directors of the lending bank with the approval of the Farm Credit Administration a borrower may convert class B stock into class C stock for the purpose of making the investment in class C stock required by this paragraph. After retirement of all class A stock, class C stock also may be retired at par by calling the oldest outstanding class C stock, but class C stock that was issued for a fiscal year period shall not be called for retirement until all class B stock that was issued during or prior to that fiscal year has been called for retire

ment.

(b) Guaranty fund subscriptions in lieu of stock

If a cooperative association is not authorized under the laws of the State in which it is organized to take stock in the bank, the bank shall, in lieu thereof, require the association to pay into or have on deposit in a guaranty fund of the bank, or the bank may retain out of the amount of the loan and credit to the guaranty fund, a sum equal to the amount of class C stock which the association would otherwise be required by subsection (a) (3) of this section to own at the time the loan is made and to purchase thereafter. Any such association may make additional payments into the guaranty fund from time to time in lieu of the purchase of class B stock, and shall receive credits to such fund in lieu of patronage refunds payable in class C stock. Each reference in this Act to capital stock or class B or class C stock shall include also the guaranty

fund equivalents of such stock, and, to the extent permitted under the laws of a State in which a cooperative association is organized, a holder of guaranty fund equivalents of either class B or class C stock shall have the same rights and status as a holder of class B or class C stock, respectively. The rights and obligations of the bank as respects such guaranty fund equivalents shall be identical to its rights and obligations as respects class B or class C stock, respectively.

(c) Lien on stock

Except as hereinafter provided in the case of an association which is a direct borrower from the central bank, each bank for cooperatives shall have a first lien on all stock in the bank owned by each cooperative association as additional collateral for any indebtedness of such association to the bank. In the case of an association which is a direct borrower from the central bank, the central bank shall have a first lien on any amount of class C stock which the borrowing association owns in any regional bank on account of direct loans of such association from the central bank; and the regional bank shall have a lien on such stock junior only to the lien of the central bank. In any case where the debt of a borrower is in default, the bank may, in accordance with regulations of the Farm Credit Administration, retire and cancel all or a part of the stock of the defaulting borrower at the fair book value thereof, not exceeding par, in total or partial liquidation of the debt, as the case may be, and, to the extent required, corresponding shares held by a regional bank in the central bank shall be retired.

(d) Calculation of proportionate interests in banks

For the purpose of determining pursuant to section 640d of this title, the amount of the capital stock and subscriptions to the guaranty fund of a regional bank for cooperatives held by cooperatives the term “capital stock and subscriptions to the guaranty fund held by cooperatives" or the equivalent of that term shall also mean all outstanding class B and class C stock and the guaranty fund equivalents thereof. (June 16, 1933, ch. 98, title IV, § 42, 48 Stat. 264; Aug. 6, 1953, ch. 335, § 13, 67 Stat. 396; Aug. 11, 1955, ch. 785, title I, § 101, 69 Stat. 655.)

Act Aug. 11, 1955, ch. 785, title I, which amended this section and sections 636f, 665, 1134c, 1134g, 1134h, 1134i, 1134j, 1134k, 11347, 1138e, and 1141f (a), repealed section 1138f, and enacted section 103 (b) of this Act, set out as a note under section 11341 of this title, and section 111 of this Act, set out as a note under this section, provided by section 112 of said Act that said amendments should take effect on the first day of the month next following one hundred and twenty days after Aug. 11, 1955, or Jan. 1, 1956.

Section 111 of act Aug. 11, 1955, provided that: "This title shall be applicable to loans made before its effective date from the date on which they may be changed by agreement to conform hereto, otherwise, except as provided in this title, such loans shall be treated as though this title had not been enacted. Any cooperative association owning capital stock or guaranty fund credits in any bank for cooperatives

issued before the effective date of this title which is eligible to vote shall, as long as such eligibility continues, be entitled to vote to the same extent as a holder of class C stock which is eligible to vote; any cooperative association owning such stock or guaranty fund credits shall be entitled to have such stock or credits retired as though this title had not been enacted; and any such association may with the consent of the bank have such stock or credits, if it is found eligible to own class B or class C stock, converted in whole or in part into class B or class C stock or equivalent guaranty fund credits: Provided, That any bank for cooperatives with the approval of the Farm Credit Administration may retire at any time capital stock or guaranty fund credits issued before the effective date of this title held by any cooperative association and may hold the proceeds of such retired stock or guaranty fund credits as security for any indebtedness of the association to the bank."

12 U. S. C. § 1134e

Retirement of stock held by Government

F. C. Act 1933 § 43

The governor may at any time require any such bank to retire and cancel stock held by the governor in such bank, if, in the judgment of the governor, the bank has resources available therefor, and amounts received by the governor in any such case shall be credited to the revolving fund created under section 1141d of this title. (June 16, 1933, ch. 98, title IV, § 43, 48 Stat. 265.)

Central Bank

12 U. S. C. § 1134f

F. C. Act 1933 § 30

Establishment; location

The governor is authorized and directed to organize and charter a corporation to be known as the "Central Bank for Cooperatives" with its principal office in the District of Columbia and such other offices as in the opinion of the governor may be necessary. (June 16, 1933, ch. 98, title III, § 30, 48 Stat. 261.)

12 U. S. C. § 1134g

Board of directors

F. C. Act 1933 § 31

The Central Bank for Cooperatives shall have seven directors. Of this number four shall be appointed by the Governor of the Farm Credit Administration, by and with the advice and consent of the Federal Farm Credit Board, and three shall be elected by the regional banks for cooperatives and cooperative associations: Provided, That the terms of office of directors established prior to the effective date of title I of the Farm Credit Act of 1955 shall continue through the thirty-first day of December next following the effective date of said title I and shall expire at the end of that day. Three of the directors appointed by the Farm Credit Administration shall be appointed for terms of one year, two years, and three years, respectively, as designated at the time of appointment and the fourth appointed director shall be appointed for a term

of three years and thereafter each appointed director shall be appointed for a term of three years. Any appointed director may be removed at pleasure at any time by the Farm Credit Administration. The Farm Credit Administration shall prescribe rules and regulations for the nominations and elections required by this section. Sufficiently in advance of the first day of January next following the effective date of title I of the Farm Credit Act of 1955, and at any time subsequent to the enactment thereof, the Farm Credit Administration shall take all action necessary in order to permit the elections hereby provided and shall group the several farm credit districts into three areas, each of which shall be comprised of four contiguous farm credit districts, and a director shall be elected from nominees from each of such areas by regional banks for cooperatives of the area and cooperative associations of the area eligible to vote. The three elected directors shall be elected for terms of one year, two years, and three years, respectively, as shall be designated by the Farm Credit Administration and thereafter elected directors shall be elected for terms of three years: Provided, That whenever, as determined by the Farm Credit Administration, the sum of the capital stock and subscriptions to the guaranty fund of the central bank held by persons other than the Governor of the Farm Credit Administration on behalf of the United States and surplus and reserve accounts of said bank shall equal or exceed 663 per centum of the total capital stock, subscriptions to the guaranty fund and surplus and reserve accounts of said bank as of the date six months before the expiration of the term of office of any appointed director, except the fourth appointed director, whose term next expires, the successor to such director shall be elected from nominees for a term of three years by regional banks for cooperatives of the area and cooperative associations of the area eligible to vote on a basis of areas comprised of two contiguous farm credit districts as designated by the Farm Credit Administration. Appointed directors except the fourth appointed director shall continue to be replaced by elected directors in accordance with the foregoing provisions until the total number of elected directors shall be six, elected one from each of six such areas comprised of two contiguous farm credit districts. Whenever, as determined by the Farm Credit Administration, the sum of the capital stock and subscriptions to the guaranty fund of the central bank held by persons other than the Governor of the Farm Credit Administration on behalf of the United States and surplus and reserve accounts of said bank shall not equal or exceed 66% per centum of the total capital stock, subscriptions to the guaranty fund and surplus and reserve accounts of the banks as of the date six months before the expiration of the term of office of any elected director whose term next expires, the successor to such elected director shall, if the number of elected directors then exceeds three, be appointed by the Governor of the Farm Credit