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TO GUARANTEE BONDS OF HOME OWNERS' LOAN

CORPORATION-H.R. 8403

WEDNESDAY, MARCH 7, 1934

HOUSE OF REPRESENTATIVES,
COMMITTEE ON BANKING AND CURRENCY,

Washington, D.C. The committee met at 10:30 a.m., Hon. Henry B. Stegall (chairman) presiding.

Present: Messrs. Steagall (chairman), Prall, Reilly, Disney, Spence, Sisson, Meeks, Kopplemann, Brown, Luce, Simpson, and Fish.

(The committee had under consideration H.R, 8403, which is as follows:)

[H.R. 8103, 73d Cong., 2d sess.]

TIILI. To guarantee the bonds of Home Owners' Loan Corporation, to amend Home

Owners' Loan Act of 1933, and for other purposes

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That Home Owners' Loan Act of 1933 be amended by inserting at the end of section 4 thereof paragraphs as follows:

(L) All bonds issued by the Corporation shall be in such forms and denominations, shall mature within such periods of not more than eighteen years from the date of their issue, shall bear such rates of interest not exceeding 4 per centum annually, shall be subject to such terms and conditions, and shall be issued in such manner and sold at such prices as may be prescribed by the Corporation, with the approval of the Secretary of the Treasury. Such bonds shall be fully and unconditionally guaranteed, both as to interest and principal, by the United States, and such guaranty shall be expressed on the face thereof; and such bonds shall be lawful investments, and may be accepted as security, 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. In the event that the Corporation shall be unable to pay upon demand, when due, the principal of, or interest on, such bonds, the Secretary of the Treasury shall pay to the holder the amount thereof which is hereby authorized to be appropriated, out of any money in the Treasury not otherwise appropriated, and thereupon to the extent of the amount so paid the Secretary of the Treasury shall succeed to all the rights of the holders of such bonds. The Secretary of the Treasury, in his discretion, is authorized to purchase any bonds of the Corporation issued under this subsection, and for such purpose the Secretary of the Treasury is authorized to use as a public-debt transaction the proceeds from the sale of any securities hereafter issued under the Second Liberty Bond Act, as amended, and the purposes for which securities may be issued under such Act, as amended, are extended to include any purchases of the Corporation's bonds hereunder. The Secretary of the Treasury may, at any time, sell any of the bonds of the Corporation acquired by him under this subsection. All redemptions, purchases, and sales by the Secretary of the Treasury of the bonds of the Corporation shall be treated as public-debt transactions of the United States. No such bonds shall be issued in excess of the assets of the Corporation, including the assets to be obtained from the proceeds of such bonds, but a failure to comply with this provision shall not invalidate the bonds or the guaranty of the same. The provisions of this subsection, except the preceding sentence, shall not apply to any bonds of the Corporation issued prior to the date of enactment of this subsection or to any bonds thereafter issued in compliance with commitments outstanding on such date.

“ (M) The provisions of the second, third, and fourth sentences of subsection (c) hereof shall, after the date of enactment of this subsection, apply only to bonds issued prior to such date and to those thereafter issued in compliance with commitments outstanding on such date. Such bonds may, upon application of the holders thereof within six months from such date, be exchanged for a like face amount of bonds issued for such purpose pursuant to the provisions of subsection (L) hereof, bearing interest at such rate as shall be prescribed by the Corporation with the approval of the Secretary of the Treasury; but such rate shall not be less than that first fixed after the date of enactment of this subsection on bonds offered in exchange for home mortgages, other obligations, and liens upon homes, and the Corporation is authorized to increase its total bond issue in an amount equal to the bonds so exchanged.

“ (N) In the event Home Owners' Loan Corporation calls in for refunding any of its bonds outstanding at the date this subsection takes effect, or issued in compliance with commitments outstanding on such date, it is hereby authorized to increase its total bond issue in an equal amount. The Corporation shall have power to purchase any of the bonds issued by it in the open market at any time and at any price. Any such bonds so purchased may, with the approval of the Secretary of the Treasury, be sold or resold at any time and at any price.

“ (0) The loans made or refunded by the Corporation shall be confined to applicants whose indebtedness against their homes was in default prior to the date Home Owners' Loan Act of 1933 took effect: Provided, That relief may be extended to applicants whose defaults occurred since that Act took effect is specifically shown to be due to unemployment or economic conditions or misfortune beyond the control of the applicant: And provided further, That home mortgages and other obligations and liens against homes held by institutions in liquidation may be refunded, whether in default or not.

“ (P) In all cases where the Corporation is authorized to advance cash to provide for necessary maintenance and to make necessary repairs, it is thereby authorized to advance cash or exchange bonds for the rehabilitation, modernization, rebuilding, and enlargement of the homes financed and in all cases where the Corporation has a home mortgage it is authorized to advance cash or exchange bonds to provide for the maintenance, repair, rehabilitation, modernization, rebuilding, and enlargement of the homes financed and to take an additional lien, mortgage, or conveyance to secure such additional advance or to take a new home mortgage for the whole indebtedness, but the total amount advanced shall in no case exceed the respective amounts or percentages of value of the real estate as is provided in Home Owners' Loan Act of 1933. Not exceeding $200,000,000 of the bonds referred to in subsection (L) hereof may be sold, the proceeds of which may be used for the purposes of this subsection and for advances to provide for necessary maintenance and necessary repairs.”

SEC. 2. Home Owners' Loan Act of 1933 is amended by striking out the comma and words as follows: ", and no payment of any installment of principal shall be required during the period of three years from the date this Act takes effect if the home owner shall not be in default with respect to any other condition or covenant of his mortgage", as the same appears in section 4, paragraph (d), thereof.

SEC. 3. Home Owners' Loan Act of 1933 is further amended by striking out the word “two" from section 4, paragraph (g), and inserting the word “ three” in lieu thereof, and the words “such exchange or advance" at the end of section 4, paragraph (g), thereof, and inserting in lieu thereof the words “the filing of any application with the Corporation to accomplish such redemption or recovery.'

SEC. 4. Home Owners' Loan Act of 1933 is amended by inserting at the end of section 5 thereof new paragraphs as follows:

“(J) In addition to the authority to subscribe for preferred shares in Federal savings and loan associations, the Secretary of the Treasury is authorized on behalf of the United States to subscribe for any amount of full-paid income shares in such associations, and it shall be the duty of the Secretary of the Treasury to subscribe for such full-paid income shares upon the request of the Federal Home Loan Bank Board. Payment on such shares may be called from time to time by the association, subject to the approval of said Board and the Secretary of the Treasury, and such payments shall be made from the funds authorized to be appropriated by section 5, paragraph (g), of Home Owners' Loan Act of 1933, and any funds appropriated pursuant to said authorization; but the amount paid in or held by the Secretary of the Treasury, including the amount paid in on preferred shares held under the provisions of section 5, paragraph (g), hereof, and the amount paid in and held under this section, shall at no time exceed 75 per centum of the total investment in the shares of such association, by the Secretary of the Treasury and other shareholders. Each such association shall issue receipts for such payments by the Secretary of the Treasury in such form as may be approved by said Board, and such receipts shall be evidence of the interest of the United States in such full-paid income shares to the extent of the amount so paid. No demand for the repurchase and retirement of such full-paid income shares so purchased shall be made for a period of five years from the date of the purchase of the same, and thereafter requests for the repurchase of such shares by such associations shall be made at the discretion of the Federal Home Loan Bank Board, but such requests for the repurchase shall not be made in any one year upon any such association in excess of 10 per centum of the total amount of such investment in its shares. Such association shall repurchase such shares upon such request according to rules and regulations of Federal savings and loan associations established by the Federal Home Loan Bank Board.

(K) When designated for that purpose by the Secretary of the Treasury, any Federal savings and loan association may be employed as fiscal agent of the Government under such regulations as may be prescribed by said Secretary and shall perform all such reasonable duties as fiscal agent of the Government as may be required of it. Any Federal savings and loan 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. 5. (a) The first sentence of the eighth paragraph of section 13 of the Federal Reserve Act, as amended, is further amended by inserting before the semicolon, after the words “ Federal Farm Mortgage Corporation Act”, a comma and the following: or by the deposit or pledge of Home Owners' Loan Corporation bonds issued under the provisions of subsections (L) or (M) of section 4 of the Home Owners' Loan Act of 1933, as amended.”

(b) Paragraph (b) of section 14 of the Federal Reserve Act, as amended, is further amended by inserting after the words “bonds of the Federal Farm Mortgage Corporation having maturities from date of purchase of not exceeding six months”, a comma and the following: “bonds issued under the provisions of subsections (L) or (M) of section 4 of Home Owners' Loan Act of 1933, as amended, and having maturities from date of purchase of not exceeding six months.”

SEC. 6. The Federal Reserve Banks are authorized, with the approval of the Secretary of the Treasury, to act as depositaries, custodians, and fiscal agents for Home Owners' Loan Corporation.

SEC. 7. Home Owners' Loan Corporation is authorized to buy bonds or debentures of Federal Home Loan Banks upon such terms as may be agreed upon or to loan money to Federal Home Loan Banks upon such terms as may be agreed upon.

SEC. 8. The Federal Home Loan Bank Act is amended by inserting at the end of section 17 thereof the following: “ The Secretary of the Treasury or the Under Secretary of the Treasury, when designated by the Secretary, shall be ex officio a member of the Board in addition to the five appointed members of the Board and shall as such have the right to vote as a member of the Board, but three members of the Board shall constitute a quorum for the transaction of business.”

SEÇ. 9. To enable the Federal Home Loan Bank Board to encourage local thrift and local home financing, and to promote, organize, and develop Federal Savings and Loan Associations and similar associations organized under local laws, there is hereby allocated and di'ected to be transferred from the funds authorized to be appropriated by the provisions of section 5, paragraph (g), of Home Owners' Loan Act of 1933, and any funds appropriated pursuant to said authorization, the sum of $500,000, to be immediately available and to remain available until expended subject to the call of said Board, which sum, or as much thereof as may be necessary, said Board is authorized to use at its discretion for the accomplishment of the purposes of this section

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