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by the Government but are secured principally by notes and other obligations representing loans made and paper discounted by the banks, it is essential that they pursue sound credit policies and practices in order to assure an ample supply of funds at favorable interest rates.† (Sec. 209, as added by sec. 2, 42 Stat. 1459; 12 U.S.C. 1101)

†In §§ 40.101 to 40.104, inclusive, the numbers to the right of the decimal point correspond with the respective section numbers in the Manual for Federal Intermediate Credit Banks issued as of September 1, 1937.

40.102 Supervision. The powers and functions of the Federal Farm Loan Board with respect to the supervision of Federal intermediate credit banks have been vested in the Intermediate Credit Commissioner, subject to the jurisdiction and control of the Farm Credit Administration.

The Intermediate Credit Commissioner is a public officer, appointed by the President of the United States, by and with the advice and consent of the Senate.† (Sec. 209, as added by sec. 2, 42 Stat. 1459; 12 U.S.C. 1101)

40.103 Debtor and creditor relationship with borrowing institutions. Cooperative associations and other institutions obtaining credit from a Federal intermediate credit bank are not subsidiaries or agents of such bank. The relationship of an intermediate credit bank to such concerns is that of a creditor, or the holder for value of paper discounted or purchased with the indorsement of such borrowing institution. Each intermediate credit bank will conduct its dealings with borrowing institutions in such manner as to preclude any inference, through correspondence or otherwise, of any relationship between them other than as stated.

Any concern which places upon its letterheads, stationery, advertising matter, etc., any inscription or statement referring in any manner to dealings with the Federal intermediate credit bank, should be advised promptly to discontinue the use of such representations as a condition to the continuance of its rediscounting or borrowing privilege.† (Sec. 209, as added by sec. 2, 42 Stat. 1459; 12 U.S.C. 1101)

40.104 Definitions-(a) Financing institution. As used herein, the term "financing institution" shall be held to mean any incorporated organization for which a Federal intermediate credit bank may discount agricultural paper, or to which it may make loans, under the Federal Farm Loan Act, as amended (48 Stat. 271, 272; 12 U.S.C. 1031 and Sup.). Such institutions include production credit associations organized under the Farm Credit Act of 1933 (48 Stat. 257), State and national banks, savings institutions, cooperative banks, credit unions, trust companies, agricultural credit corporations, livestock loan companies, and similar corporations.

(b) Agricultural credit corporation or livestock loan company. The terms "agricultural credit corporation" and "livestock loan company" shall be held to mean any privately capitalized financing institution (other than a bank) organized under the laws of any State or of the United States for the primary purpose of lending money for agricultural purposes, as herein defined, and/or for the

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For source citation, see note to § 40.101.

raising, breeding, fattening, or marketing of livestock, regardless of the corporate name of the concern.

(c) Person. The word "person" shall, unless the context otherwise requires, be construed to mean an individual, a partnership, an association, a corporation, or two or more persons having a joint or common interest.

(d) Agricultural purpose and agricultural paper. The term "agricultural purpose", as used herein, shall be held to mean the purpose of carrying on agricultural production, including the raising, breeding, fattening, or marketing of livestock, defraying expenses incident thereto, or paying an indebtedness arising therefrom. The term "agricultural paper" shall be held to mean notes or other obligations of farmers and stockmen, the proceeds of which have been advanced or used in the first instance for an agricultural purpose as herein defined, and the credit instruments executed in connection therewith.

(e) Staple agricultural product. The term "staple agricultural product" shall be held to mean a product of agriculture having, in the opinion of the Farm Credit Administration, such uses as to make it the subject of constant dealings in ready markets with such frequent quotations of prices as to make (1) the price easily and definitely ascertainable and (2) the product itself easy to realize upon by sale at any time. To be regarded as a staple product a commodity should be of such character and keeping quality that it may be warehoused safely for such period as may be necessary to permit orderly marketing.

(f) Discounts; purchases. Unless otherwise stated, or indicated by its context, the term "discounts" as used herein and in the accounting terminology prescribed for the Federal intermediate credit banks, will be understood to cover both discounts and purchases, or obligations so discounted or purchased, regardless of whether interest is deducted at the time of acquirement or is accrued and collected at maturity or at stated intervals.t (Sec. 209 as added by sec. 2, 42 Stat. 1459; 12 U.S.C. 1101)

Sec.

PART 41-ORGANIZATION AND INTERNAL AFFAIRS

41.204 Interest and discount rates.

(a) Limitations and application
of interest and discount rates.
(b) Discounting (deducting in-
terest, or collecting in ad-
vance).

(c) Interest after maturity.
(d) Interest on notes receivable
(financing institutions in liq-
uidation).

Sec.

41.207 Credit information.

(a) Credit information strictly confidential.

(b) Refusal of information; exceptions.

41.210 Candidates for office of director.

Section 41.204 Interest and discount rates-(a) Limitations and application of interest and discount rates. Interest and discount rates of each Federal intermediate credit bank which, except with the approval of the Governor of the Farm Credit Administra

For source citation, see note to § 40.101.

Page 99

tion, shall not exceed by more than 1 per centum per anum the rate borne by the last preceding issue of debentures which it issued or in which it participated, will be applied in the following manner:

(1) Interest, or discount, is to be charged on each original note (or upon such amounts as may be advanced thereon) at the rate in effect at the time the funds are advanced by the bank.

(2) On any renewal note the bank will charge its established rate in effect at the date such renewal is taken into its accounts.

(3) Extension notes, which mature in not to exceed 90 days from the date the original obligation matured, may be carried at the same rate as that charged on the note which has matured or, in the discretion of the bank, at its loan and discount rate prevailing at the time of extension.

(b) Discounting (deducting interest, or collecting in advance). Federal intermediate credit banks will not collect interest (deduct discount) in advance, except when paper offered to them bears interest after maturity only. All financing institutions dealing with a Federal intermediate credit bank should be urged, when taking paper to be offered to the bank, to draw the notes to bear interest from date. (c) Interest after maturity. Should a note purchased or discounted by a Federal intermediate credit bank be not paid promptly at maturity the bank may, in its discretion, collect the full rate of interest called for by the note for such time as the indorsing financing institution permits such note to remain with the bank as past due and unpaid.

(d) Interest on notes receivable (financing institutions in liquidation). On paper which a Federal intermediate credit bank is obliged to take over from a financing institution for liquidation, interest will be collected at the rate specified in the notes. Renewals of such notes, when taken payable directly to the bank, should bear interest at a rate not to exceed the maximum rate that may be charged by financing institutions on paper eligible for discount by the bank, under regulations prescribed by the Farm Credit Administration. In no event may such rate exceed the maximum interest rate permitted by applicable State laws. (Sec. 209, as added by sec. 2, 42 Stat. 1459, sec. 7, 49 Stat. 316; 12 U.S.Č. 1101, 12 U.S.C., Sup., 1051)

†In §§ 41.204 to 41.210, inclusive, the numbers to the right of the decimal point correspond with the respective section numbers in the Manual for Federal Intermediate Credit Banks issued as of September 1, 1937.

41.207 Credit information-(a) Credit information strictly confidential. No credit information shall be furnished concerning individual borrowers or applicants except upon specific request therefor by a reliable institution (e. g., a bank, insurance company, credit company, finance company, or credit department of a mercantile house) desiring such information in connection with a contemplated extension of credit to the person concerning whom the information is requested; and then only in strict confidence and with an express negation of any responsibility on the part of the unit or agency furnishing such information, or of any director, officer, agent, or employee thereof, for the accuracy or truth of such information.

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No credit information shall be furnished concerning any cooperative association or other institutional borrower except with its specific written consent and subject to the foregoing conditions.

(b) Refusal of information; exceptions. All information obtained by officers, agents, and employees of the Farm Credit Administration and/or corporations operating under its supervision, in connection with applicants for loans and their property, shall be received and held in strict confidence; and, except with the specific approval of the Governor of the Farm Credit Administration, access to and/or copies of the following listed documents are to be denied any person, firm, or corporation other than the Farm Credit Administration (its duly accredited officers, agents, or employees) and corporations operating under the supervision of the Farm Credit Administration; loan applications, supplementary statements by applicants, reports of appraisers and/or inspectors, letters and/or statements relative to the character and credit standing of applicants, recommendations of loan committees or other groups authorized to consider and/or act upon loan applications, etc. Nothing herein shall be deemed to prohibit access to information in the possession of the Farm Credit Administration or of a corporation under its supervision, where such access is officially requested by some department or independent office of the Government of the United States, for use in connection with the execution of the official duties of such department or office.t (Sec. 209, as added by sec. 2, 42 Stat. 1459; 12 U.S.C. 1101)

41.210 Candidates for office of director. No officer or employee of a Federal intermediate credit bank should undertake any activity furthering the interest of any candidate for director of the district units (Federal land bank, Federal intermediate credit bank, production credit corporation, and bank for cooperatives) or take any action that might be construed as using an official position to influence any votes in such election.

Official stationery should not be used by a director for correspondence in the interest of his own or another's candidacy.t (Sec. 209, as added by sec. 2, 42 Stat. 1459; 12 U.S.C. 1101)

Sec.

PART 42-LOANS AND DISCOUNTS

42.301 Applications.

42.302 Examinations

and reports of borrowing and rediscounting organizations.

42.303 Character of paper.

42.304 Maturities.

(a) Notes from financing insti-
tutions.

(b) Notes of dairymen.

Sec.

42.306 Notes of farming corporations. (a) Eligibility.

(b) Indorsements of stockholders.

42.308 Rates of interest or discount

charged note makers by financing institutions. 42.309 Fees and other charges.

Section 42.301 Applications. Federal intermediate credit banks shall require, as a condition precedent to making loans to or discounting paper for any eligible organization, an application for such priv

For source citation, see note to § 41.204.

Page 10

ilege duly executed by the applicant institution in form prescribed by the bank and approved by the Intermediate Credit Commissioner.† (Secs. 209, 202 (a), as added by sec. 2, 42 Stat. 1459, 1455; 12 U.S.C. 1101, 1031, and Sup.)

In $$ 42.301 to 42.309, inclusive, the numbers to the right of the decimal point correspond with the respective section numbers in the Manual for Federal Intermediate Credit Banks issued as of September 1, 1937.

42.302 Examinations and reports of borrowing and rediscounting organizations. Federal intermediate credit banks shall require, as a condition precedent to making loans to or discounting paper for any eligible organization (other than a production credit association or bank for cooperatives, organized under the Farm Credit Act of 1933, 48 Stat. 257) its agreement to furnish to the bank and/or the Farm Credit Administration and/or any land bank examiner at any time upon call, a detailed statement of its financial condition in such form as may be prescribed; and its agreement to submit, at its own expense, to periodic examinations by examiners for the Federal intermediate credit bank, by national bank examiners and/or by land bank examiners; provided, however, that any bank, trust company, or savings institution operating under the supervision of State or national banking authorities, in lieu of such agreement, may submit its authorization to such supervising authority, in writing, to furnish the Federal intermediate credit bank and/or the Farm Credit Administration upon request any report of condition or examination, or other confidential information in the possession of such supervising authority.† (Secs. 209, 208 (a) as added by sec. 2, 42 Stat. 1459, 1458; 12 U.S.C. 1101, 1091)

42.303 Character of paper. To be acceptable to a Federal intermediate credit bank, paper offered by a financing institution for discount or as collateral security for a loan shall be of such character as to assure liquidation of the obligation within a reasonable time, consistent with sound banking and agricultural practices. In any case where the collateral offered is the principal factor in determining the acceptability of a note, a margin of security adequate to protect the bank during the full term of the obligation will be required. (Secs. 209, 202 (a), as added by sec. 2, 42 Stat. 1459, 1455; 12 U.S.C. 1101, 1031, and Sup.)

42.304 Maturities-(a) Notes from financing institutions. Maturities of notes or other obligations discounted by a Federal intermediate credit bank or accepted as collateral for loans to financing institutions should coincide, as nearly as may be practicable, with the usual time for marketing the crops or livestock from which liquidation is expected. Except as hereinafter provided, maturities of such notes will not exceed one growing and/or marketing season, usually not more than twelve months.

(b) Notes of dairymen. A Federal intermediate credit bank may discount, or accept as collateral, notes of dairymen secured by chattel mortgages on dairy cattle and maturing not more than two and onehalf years from the date of discount or pledge, except that in the event the dairy cattle are subjected to intensive feeding and milk pro

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For source citation, see note to § 42.301.

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