(d) Maximum individual notes eligible for discount. The maximum amount of any person's obligations which may be discounted for (or accepted as collateral for loans to) a financing institution shall not, except with the consent of the Intermediate Credit Commissioner, exceed the following limitations: (1) 20 percent of the paid-in and unimpaired capital and surplus of the financing institution, in the case of crop production and general agricultural paper; or (2) 50 percent of the paid-in and unimpaired capital and surplus of such institution, if the notes or other obligations are adequately secured by warehouse receipts representing readily marketable and nonperishable staple agricultural commodities, or by chattel mortgages on livestock; and shall be subject to such further limitations as may be imposed by the laws governing the operations of the financing institution concerned.

A Federal intermediate credit bank may not, except with the approval of the Intermediate Credit Commissioner, discount or make loans upon the security of any part of the obligations of a person whose indebtedness to the financing institution offering such paper to the bank exceeds the limitations prescribed herein, since undue concentration of credit in large lines involves special hazards which may impair the ability of the financing institution to meet its liabilities to the bank.

The term "obligations", as used in this section, includes all paper upon which one person is liable, whether as borrower, co-maker, indorser, or guarantor; Provided, however, That a Federal intermediate credit bank may, with the approval of the Intermediate Credit Commissioner, fix a different maximum amount of paper acceptable to it and bearing the indorsement for security only of a person having no direct interest in the farming operations being financed with the proceeds of such notes.t (Secs. 209, 202 (a), (b), as added by sec. 2, 42 Stat. 1459, 1455; 12 U.S.C. 1101, 1031, 1032, and Sup.)

43.507 Insolvent financing institutions. In any case where a financing institution becomes insolvent, or is in process of liquidation, particularly if it will not properly service its paper, and where supervision and orderly liquidation will be facilitated by direct handling of the obligations of the borrowers, a Federal intermediate credit bank may, with the consent of the Intermediate Credit Commissioner, take over such paper and at maturity accept renewals thereof made payable directly to the bank. Notes or other obligations pledged with an intermediate credit bank by a financing institution, either as collateral for a direct loan or as additional security for any and all indebtedness of the corporation to the bank, also may be taken over by the bank and handled directly with the makers after title has been acquired by the bank in accordance with the provisions of applicable State laws and the terms of the pledge agreements executed by the financing institution.

It is the policy of the Farm Credit Administration, in so far as is possible without jeopardizing the interests of the Federal inter

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For source citation, see note to § 43.501.

mediate credit banks, and within the limitations of the law governing their operations, to avoid the enforced liquidation of privately capitalized financing institutions as well as their borrowers whose paper may be held by the intermediate credit banks. Therefore, direct liquidation of paper carried for a financing institution should be resorted to only in cases where other measures have failed and it is apparent that direct liquidation is the only practicable means available to the bank for the protection of its interests. When it is determined by a bank that the affairs of a financing institution are to be closed out through the foregoing procedure, a complete statement of the facts shall be submitted to the Intermediate Credit Commissioner before definite action is taken by the bank.

Paper handled for insolvent financing institutions under the foregoing procedure will not be assigned to the farm loan registrar as collateral for debentures.† (Sec. 209, as added by sec. 2, 42 Stat. 1459; 12 U.S.C. 1101)

Loans by Farm Security Administration to community and cooperative associations: See Part 304.

Loans to Indian corporations and cooperative associations: See Indians, 25 CFR Parts 21-24, 27, 28.

Section 44.701 Eligibility requirements. Only bona fide cooperative associations, composed of persons who are engaged in producing and marketing staple agricultural products or livestock, are eligible for loans from a Federal intermediate credit bank. Any properly organized cooperative association which complies with the provisions of section 12 of the Farm Credit Act of 1935, (49 Stat. 317; 12 U.S.C., Sup., 1141j) and meets the foregoing requirements shall be deemed to be eligible for credit from a Federal intermediate credit bank.

Loans may be made to farmers' cooperative associations engaged in purchasing, testing, grading, processing, distributing, and/or furnishing farm supplies and/or farm business services as well as to associations engaged in processing, handling, and/or marketing farm products for their members. Loans to cooperative marketing associations will be made only to permit such associations to carry out an orderly marketing program, as distinguished from a speculative holding venture. (Secs. 209, 202 (a) as added by sec. 2, 42 Stat. 1459, 1455; 12 U.S.C. 1101, 1031, and Sup.)

††In 88 44.701 to 44.710, 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.

CROSS REFERENCE: For wool and mohair loan requirements from Commodity Credit Corporation to cooperative marketing associations, see § 202.4.

For source citation, see note to § 43.501.

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44.704 Collateral other than approved agricultural products. In view of the variety of collateral which might be tendered by a cooperative association, no definite rulings with respect to what would constitute approved additional collateral are prescribed, except that under certain conditions an assignment of a hedge contract covering a staple agricultural product will be considered as "other collateral" within the meaning of that term as used in section 202 of the Act, as amended (42 Stat. 1455; 12 U.S.C. 1031 (3) and Sup.) Favorable consideration will be given to a request by a Federal intermediate credit bank that the Governor approve collateral in this form, under the following conditions:

(a) That such hedge contract is, in effect, a sale of the commodity in the futures market at a price not less than its current market value plus carrying charges to the date of its sale, as provided in the contract;

(b) That the commodity will be hedged continuously during the entire time the bank's loan is outstanding; and

(c) That the hedge contract is made with a reputable and financially responsible broker through a recognized commodity exchange.t (Secs. 209, 202 (a), as added by sec. 2, 42 Stat. 1459, 1455; 12 U.S.C. 1101, 1031, and Sup.)

44.706 Commodities acquired from or handled for nonmembers. Commodities acquired by a marketing association from nonmembers, for the purpose of supplementing the products received from its members, may be accepted as collateral for loans to cooperative associations, provided the value of the products so purchased from or handled for nonmembers does not exceed the value of those received from or handled for members.† (Sec. 209, as added by sec. 2, 42 Stat. 1459, sec. 12, 49 Stat. 317; 12 U.S.C. 1101, 12 U.S.C., Sup., 1141j)

44.710 Charge for non-use of funds. As funds for lending purposes are procured principally through sales of debentures, a Federal intermediate credit bank is authorized to charge any cooperative association, in addition to interest on the indebtedness of the association to the bank, such sums as will protect the bank against pecuniary loss on its outstanding debentures in the event, and to the extent, that the association

(a) Fails to employ the funds made available for its use in the amounts and on the dates agreed upon; or

(b) Makes prepayment of a loan or any part thereof. (Sec. 209, as added by sec. 2, 42 Stat. 1459; 12 U.S.C. 1101)

PART 45-COLLATERAL TRUST DEBENTURES

Section 45.804 Lost, stolen, destroyed, mutilated, or defaced debentures-(a) Authorization for relief. Whenever a debenture issued by an individual Federal intermediate credit bank, or a consolidated debenture, is lost, stolen, destroyed, or so mutilated or de

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†For source citation, see note to § 44.701.

faced as to impair its value to the owner, the Intermediate Credit Commissioner may authorize the issuance of a new debenture in lieu thereof upon the owner's compliance with the following require

ments:

(b) Application. In the event of the loss, theft, destruction, mutilation, or defacement of a debenture, issued by a Federal intermediate credit bank, or a consolidated debenture, the owner or his authorized representative, to protect his interest, should immediately file an application with the Intermediate Credit Commissioner for the issuance of another debenture in lieu thereof. Such application must be filed within a reasonable time after the loss, theft, destruction, mutilation, or defacement is discovered.

(c) Affidavit of loss. The owner of the debenture which has been lost, stolen, mutilated, or destroyed, or his authorized representative, shall furnish to the Intermediate Credit Commissioner his affidavit, duly acknowledged before a notary public or other officer authorized by law to administer oaths, setting forth:

(1) That he is the lawful owner (or authorized representative of the owner) of such debenture, and that he is legally entitled to its possession;

(2) A complete identification of such debenture, including serial number, date of issue, face amount, date of maturity, and interest rate;

(3) A detailed statement of the circumstances surrounding the loss, theft, destruction, mutilation, or defacement of such debenture;

(4) A statement that the affidavit is made for the purpose of obtaining a new debenture, and an undertaking that, should the original debenture come into possession or control of the deponent, he will immediately surrender it to the Farm Credit Administration.

(d) Bond of indemnity. (1) The owner of a lost, stolen, or destroyed debenture or his authorized representative, shall also furnish to the Intermediate Credit Commissioner a bond of indemnity in a penal amount equal to the sum of the principal and interest to maturity of the said debenture, plus 10 percent, with corporate surety satisfactory to the Intermediate Credit Commissioner, with conditions to indemnify and save harmless the Farm Credit Administration and any and all Federal intermediate credit banks and officers, employees, and representatives thereof, of and from all liability, loss, claims, or demands, arising in any manner by reason or on account of the debenture for which the issuance of another is requested.

(2) The owner of a mutilated or defaced debenture, or his authorized representative, shall, before another debenture is issued in lieu thereof, surrender such debenture or as much thereof as remains, to the Intermediate Credit Commissioner, and shall, if required by him, also furnish him a bond of indemnity in a penal sum satisfactory to the Intermediate Credit Commissioner, with corporate surety and conditions as above stated.

(3) A bond of indemnity which is otherwise satisfactory will be accepted if the corporation which is surety thereon holds a certifi

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cate from the Secretary of the Treasury as being acceptable on surety bonds. A list of such corporations (Section of Surety Bonds Form 356) may be obtained from the United States Treasury.

CROSS REFERENCE: For listing of corporations by Form 356 as being acceptable on surety bonds, see 31 CFR Part 226.

(e) Additional evidence of loss. The owner of a lost, stolen, mutilated, or destroyed debenture, or his authorized representative, shall also furnish such other and further evidence relating to the loss, theft, destruction, mutilation, or defacement of the debenture for which a new debenture is requested, as may be required by the Intermediate Credit Commissioner in any specific case.

(f) Recovery of debenture reported lost, stolen, or destroyed. If a debenture reported lost, stolen, or destroyed is recovered by the owner, or his authorized representative, prior to the issuance of a new debenture in lieu thereof, the Intermediate Credit Commissioner should be notified immediately, whereupon the application for the issuance of the new debenture will be canceled, and any bond and affidavits relative thereto will be returned to the owner, or his authorized representative. If the original debenture is recovered by the owner, or his authorized representative, after a new debenture in lieu thereof has been issued, the said original shall be returned to the Intermediate Credit Commissioner for cancellation.

(g) Immaterial mutilation or defacement. Where a mutilation or defacement of a debenture is so slight that the debenture may be identified fully, and the missing fragments could not by any possibility form the basis of a claim against the Farm Credit Administration or any Federal intermediate credit bank, the Intermediate Credit Commissioner, upon application therefor, and the surrender of the defaced or mutilated debenture, may authorize the issuance of a new debenture in lieu thereof without requiring an affidavit or indemnity bond, or such debenture may be accepted and paid, at maturity, as if no mutilation or defacement had occurred. (Sec. 209, as added by sec. 2, 42 Stat. 1459; 12 U.S.C. 1101) [Manual FICB, Sept. 1, 1937]

Subchapter E-Production Credit Division

PART 50-RULES AND REGULATIONS FOR PRODUCTION CREDIT ASSOCIATIONS PROMULGATED BY FARM CREDIT ADMINISTRATION