§ 932. Liabilities and uses of Rural Electrification and Telephone Revolving Fund

Footnotes

1. 1 See References in Text note below.

Legislative history

Reconstructed from this section’s Code source credit and amendment notes, resolved against the local Statutes at Large. Editorial notes are evidence, not the law that made the change.

1. 1936

   Pub. L. 92–12 § 2 · 85 Stat. 29

   Enacted · 7 U.S.C. § 932

   May 20, 1936, ch. 432, title III, § 302, as added Pub. L. 92–12, § 2, May 7, 1971, 85 Stat. 30

   Source evidence

   Code source credit
   May 20, 1936, ch. 432, title III, § 302, as added Pub. L. 92–12, § 2, May 7, 1971, 85 Stat. 30

   Enacted provision · exact public law section
   Sec. 2. The Rural Electrification Act of 1936, as amended, is amended by adding the following two new titles: “TITLE III “Sec. 301. Rural Telephone Account.— There is hereby established in the Treasury of the United States an account, to be known as the rural telephone account, consisting of so much of the net collec-tion proceeds (as defined in section 406(a) of this Act) as may be necessary to provide for investment in the capital stock of the Rural Telephone Bank in accordance with such section 406(a): Provided, That such investment shall be deemed paid in capital of the said bank notwithstanding that funds representing the proceeds from the sale of such stock shall remain in the rural telephone account until required for actual disbursement in cash by the said bank. “Sec. 302. Deposit of Account Moneys.— Moneys in the rural telephone account shall remain on deposit in the Treasury of the United States until disbursed. “TITLE IV “Sec. 401. Establishment, General Purposes, and Status of the Telephone Bank.— (a) There is hereby established a body corporate to be known as the Rural Telephone Bank (hereinafter called the telephone bank). “(b) The general purposes of the telephone bank shall be to obtain an adequate supply of supplemental funds to the extent feasible from non-Federal sources, to utilize said funds in the making of loans under section 408 of this title, and to conduct its operations to the extent practicable on a self-sustaining basis. “(c) The telephone bank shall be deemed to be an instrumentality of the United States, and shall, for the purposes of jurisdiction and venue, be deemed a citizen and resident of the District of Columbia. The telephone bank is authorized to make payments to State, territorial, and local governments in lieu of property taxes upon real property and tangible personal property which was subject to State, territorial, and local taxation before acquisition by the telephone bank. Such payment may be in the amounts, at the times, and upon such terms as the telephone bank deems appropriate but the telephone bank shall be guided by the policy of making payments not in excess of the taxes which would have been payable upon such property in the condition in which it was acquired. “Sec. 402. General Powers.— To carry out the specific powers herein authorized, the telephone bank shall have power to (a) adopt, alter, and use a corporate seal; (b) sue and be sued in its corporate name; (c) make contracts, leases, and cooperative agreements, or enter into other transactions as may be necessary in the conduct of its business, and on such terms as it may deem appropriate; (d) acquire, in any lawful manner, hold, maintain, use, and dispose of property: Provided,That the telephone bank may only acquire property needed in the conduct of its banking operations or pledged or mortgaged to secure loans made hereunder or in temporary operation or maintenance thereof: Provided further, That any such pledged or mortgaged property so acquired shall be disposed of as promptly as is consistent with prudent liquidation practices, but in no event later than five years after such acquisition; (e) accept gifts or donations of services or of property in aid of any of the purposes herein authorized; (f) appoint such officers, attorneys, agents, and employees, vest them with such powers and duties, fix and pay such compensation to them for their services as the telephone bank may determine; (g) determine the character of and the necessity for its obligations and expenditures, and the manner in which they shall be incurred, allowed, and paid; (h) execute, in accordance with its bylaws, all instruments necessary or appropriate in the exercise of any of its powers; (i) collect or compromise all obligations assigned to or held by it and all legal or equitable rights accruing to it in connection with the payment of such obligations until such time as such obligations may be referred to the Attorney General for suit or collection; and (j) exercise all such other powers as shall be necessary or incidental to carrying out its functions under this title. “Sec. 403. Special Provisions Governing Telephone Bank as an Agency of the United States Until Conversion of Ownership, Control, and Operation.— Until the ownership, control, and operation of the telephone bank is converted as provided in section 410(a) of this title and not thereafter— “(a) the telephone bank shall be an agency of the United States and shall be subject to the supervision and direction of the Secretary of Agriculture (hereinafter called the Secretary) : Provided, however, That the telephone bank shall at no time be entitled to transmission of its mail free of postage, nor shall it have the priority of the United States in the payment of debts out of bankrupt, insolvent, and decedents’ estates; “(b) in order to perform its responsibilities under this title, the telephone bank may partially or jointly utilize the facilities and the services of employees of the Rural Electrification Administration or of any other agency of the Department of Agriculture, without cost to the telephone bank; “(c) the telephone bank shall be subject to the provisions of the Government Corporation Control Act, as amended (31 U.S.C. 841, 59 Stat. 597. et seq.), in the same manner and to the same extent as if it were included in the definition of ‘wholly owned Government corporation’ as set forth in section 101 of said Act (31 U.S.C. 846); “(d) the telephone bank may without regard to the civil service classification laws appoint and fix the compensation of such officers and employees of the telephone bank as it may deem necessary; “(e) the telephone bank shall be subject to the provisions of sections 517, 519, and 2679 of title 28, United States Code. 80 Stat. 613, 614. 62 Stat. 984; 75 Stat. 539. “Sec. 404. Governor.— Subject to the provisions of section 410, the Administrator of the Rural Electrification Administration shall serve as the chief executive officer of the telephone bank (herein called the Governor of the telephone bank). Except as to matters specifically reserved to the Telephone Bank Board in this title, the Governor of the telephone bank shall exercise and perform all functions, powers, and duties of the telephone bank. “Sec. 405. Board of Directors.— (a) The management of the telephone bank, within the limitations prescribed by law, shall be vested in a board of directors (herein called the Telephone Bank Board) consisting of thirteen members. “(b) The Administrator of the Rural Electrification Administration and the Governor of the Farm Credit Administration shall be members of the Telephone Bank Board. Five other members of the Telephone Bank Board shall be designated by the President to serve at his pleasure, three of whom shall be officers or employees of the Department of Agriculture but not officers or employees of the Rural Electrification Administration, and two of whom shall be from the general public and not officers or employees of the Federal Government. The Administrator and other officers and employees of the Department of Agriculture and the Governor of the Farm Credit Administration shall serve as members without additional compensation. “(c) As soon as practicable after enactment of this title, the President of the United States shall appoint six additional members of the initial Telephone Bank Board to be selected from the directors, managers, and employees of any entities eligible to borrow from the telephone bank and of organizations controlled by such entities, with due regard to fair representation of the rural telephone systems of the Nation. The six members thus appointed shall serve until their successors shall have been duly elected in accordance with subsection (d). “(d) Within twelve months following the appointment of the six members of the initial Board as provided in subsection (c), the Governor of the telephone bank shall call a meeting of all entities then eligible to borrow from the telephone bank and organizations controlled by such entities for the purpose of electing members of the Telephone Bank Board. Each such entity and organization shall be entitled to Term. notice of and shall have one noncumulative vote at said meeting. Six members of the Telephone Bank Board shall be elected for a two-year term, three from among the directors, managers, and employees of cooperative-type entities eligible to vote and organizations controlled by such entities, and three from among the managers, directors, and employees of commercial-type entities eligible to vote and organizations controlled by such entities. These six members shall be elected by majority vote of the entities and organizations eligible to vote and such entities and organizations may vote by proxy. “(e) Thereafter, in accordance with the bylaws of the telephone bank, the six members of the Telephone Bank Board shall be elected by holders of class B and class C stock, three from among the directors, managers, and employees of cooperative-type entities and organizations controlled by such entities holding class B or class C stock, and three from among the directors, managers, and employees of commercial-type entities and organizations controlled by such entities holding class B or class C stock. These six members shall be elected by majority vote of the entities and organizations eligible to vote and such entities and organizations may vote by proxy. “(f) Any Telephone Bank Board member may continue to serve after the expiration of the term for which he is elected until his Compensation. successor has been elected and has qualified. Telephone Bank Board members designated from the general public, pursuant to subsection (b), or appointed or elected pursuant to subsections (c), (d), and (e), shall receive $100 for each day or part thereof, not to exceed one hundred days per year for the first three years after enactment of this title and not to exceed fifty days per year thereafter, spent in the performance of official duties, and shall be reimbursed for travel and other expenses in such manner and subject to such limitations as the Telephone Bank Board may prescribe. “(g) The Telephone Bank Board shall prescribe bylaws, not inconsistent Bylaws. with law, regulating the manner in which the telephone bank’s business shall be conducted, its directors and officers elected, its stock issued, held, and disposed of, its property transferred, its bylaws amended, and the powers and privileges granted to it by law exercised and enjoyed. “(h) The Telephone Bank Board shall meet at such tunes and Meetings. places as it may fix and determine, but shall hold at least four regularly scheduled meetings a year, and special meetings may be held on call in the manner specified in the bylaws of the telephone bank. “(i) The Telephone Bank Board shall make an annual report to Annual report, transmittal to Congress. the Secretary for transmittal to the Congress on the administration of this title IV and any other matters relating to the effectuation of the policies of title IV, including recommendations for legislation. “Sec. 406. Capitalization.— (a) The telephone bank’s capital shall consist of capital subscribed by the United States, by borrowers from the telephone bank, by corporations and public bodies eligible to become borrowers from the telephone bank, and by organizations controlled by such borrowers, corporations, and public bodies. Beginning with the fiscal year 1971 and for each fiscal year thereafter, the United States shall furnish capital for the purchase of class A stock and there are hereby authorized to be appropriated from net collection proceeds in the rural telephone account created under title III of this Act such Ante, p. 29 amounts, not to exceed $30,000,000 annually, for such purchases until such class A stock shall equal $300,000,000: Provided, That on or before Report to Present, transmittal to Congress. July 1, 1975, the Secretary shall make a report to the President for transmittal to the Congress on the status of capitalization of the telephone bank by the United States with appropriate recommendations. As used in this section and section 301, the term ‘net collection proceeds’ “Net collection proceeds.” shall be deemed to mean payments from and after July 1, 1969, of principal and interest on loans heretofore or hereafter made under section 201 of this Act, less an amount representing interest payable to 63 Stat. 948. 7 USC 922. the Secretary of the Treasury on loans to the Administrator tor telephone purposes pursuant to section 3(a) of this Act. 61 Stat. 546. 7 USC 903. Stock classification. “(b) The capital stock of the telephone bank shall consist of three classes, class A, class B, and class C, the rights, powers, privileges, and preferences of the separate classes to be as specified, not inconsistent with law, in the bylaws of the telephone bank. Class B and class C stock shall be voting stock, but no holder of said stock shall be entitled to more than one vote, nor shall class B and class C stockholders, regardless of their number, which are owned or controlled by the same person, group of persons, firm, association, or corporation, be entitled m any event to more than one vote. “(c) Class A stock shall be issued only to the Administrator of the Rural Electrification Administration on behalf of the United States in exchange for capital furnished to the telephone bank pursuant to subsection (a), and such class A stock shall be redeemed and retired by the telephone bank as soon as practicable after June 30, 1985, but not to the extent that the Telephone Bank Board determines that such retirement will impair the operations of the telephone bank: Provided, That the minimum amount of class A stock that shall be retired each year after said date and after the amount of class A and class B stock issued totals $400,000,000, shall equal the amount of class B stock sold by the telephone bank during such year. Class A stock shall be entitled to a return, payable from income, at the rate of 2 per centum per annum on the amounts of said class A stock actually paid into the telephone bank. Such return shall be cumulative and shall be payable annually into miscellaneous receipts of the Treasury. “(d) Class B stock shall be held only by recipients of loans under section 408 of this Act. Borrowers receiving loan funds pursuant to section 408(a) (1) or (2) shall be required to invest in class B stock 5 per centum of the amount of loan funds so provided. No dividends shall be payable on class B stock. All holders of class B stock shall be entitled to patronage refunds in class B stock under terms and conditions to be specified in the bylaws of the telephone bank. “(e) Class C stock shall be available for purchase and shall be held only by borrowers, or by corporations and public bodies eligible to borrow under section 408 of this Act, or by organizations controlled by such borrowers, corporations and public bodies, and shall be entitled to dividends in the manner specified in the bylaws of the telephone bank. Such dividends shall be payable only from income and, until all class A stock is retired, shall not exceed the current average rate payable on its telephone debentures. “(f) If a firm, association, corporation, or public body is not authorized under the laws of the jurisdiction in which it is organized to acquire stock of the telephone bank, the telephone bank shall, in lieu thereof, permit such organization to pay into a special fund of the telephone bank a sum equivalent to the amount of stock to be purchased. Each reference in this title to capital stock, or to class B, or class C stock, shall include also the special fund equivalents of such stock, and to the extent permitted under the laws of the jurisdiction in which such organization is organized, a holder of special fund equivalents of 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 telephone bank in respect of such special fund equivalent shall be identical to its rights and obligations in respect of class B or class C stock, respectively. “(g) After payment of all operating expenses of the telephone bank, including interest on its telephone debentures, setting aside appropriate funds for reserves for losses, and making payments in lieu of taxes, and returns on class A stock as provided in section 406(c), and on class C stock, the Telephone Bank Board shall annually set aside the remaining earnings of the telephone bank for patronage refunds in accordance with the bylaws of the telephone bank. “Sec. 407. Borrowing Power.— The telephone bank is authorized to obtain funds through the public or private sale of its bonds, debentures, notes, and other evidences of indebtedness (herein collectively called telephone debentures). Telephone debentures shall be issued at such times, bear interest at such rates, and contain such other terms and conditions as the Telephone Bank Board shall determine: Provided, however, That the amount of the telephone debentures which may be outstanding at any one time pursuant to this section shall not exceed eight times the paid-in capital and retained earnings of the telephone bank. The telephone bank shall insert in all its telephone debentures appropriate language indicating that such telephone debentures, together with interest thereon, are not guaranteed by the United States and do not constitute a debt or obligation of the United States or of any agency or instrumentality thereof other than the telephone bank. Telephone debentures shall not be exempt, either as to principal or interest, from any taxation now or hereafter imposed by the United States, by any territory, dependency, or possession thereof, or by any State or local taxing authority. Telephone debentures 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 and control of the United States or any officer or officers thereof. “Sec. 408. Lending Power.— (a) The Governor of the telephone bank is authorized on behalf of the telephone bank to make loans, in conformance with policies approved by the Telephone Bank Board, to corporations and public bodies which have received a loan or loan commitment pursuant to section 201 of this Act, (1) for the same 63 Stat. 948. 7 USC 922. purposes and under the same limitations for which loans may be made under section 201 of this Act, (2) for the purposes of financing, or refinancing, the construction, improvement, expansion, acquisition, and operation of telephone lines, facilities, or systems, in order to improve the efficiency, effectiveness, or financial stability of borrowers financed under sections 201 and 408 of this Act, and (3) for the purchase of class B stock required to be purchased under section 406(d) of this Act but not for the purchase of class C stock, subject, as to the purposes set forth in (2) hereof, to the following provisos: That in the case of any such loan for the acquisition of telephone lines, facilities, or systems, the acquisition shall be approved by the Secretary, the location and character thereof shall be such as to improve the efficiency, effectiveness, or financial stability of the telephone system of the borrower, and in respect of exchange facilities for local services, the size of each acquisition shall not he greater than the borrowers existing system at the time it receives its first loan from the telephone bank, taking into account the number of subscribers served, miles of line, and plant investment. “(b) Loans under this section shall be on such terms and conditions Restrictions. as the Governor of the telephone bank shall determine, subject, however, to the following restrictions: “(1) All loans made under this section shall be. fully amortized over a period not to exceed fifty years. “(2) Funds to be loaned under this Act to any borrower shall be loaned under this section in preference to section 201 if the borrower is eligible for such a loan and funds are available therefor. Notwithstanding the foregoing or any other provision of law, all loans made pursuant to this Act for facilities for telephone systems with an average subscriber density of three or fewer per mile shall be made under section 201 of this Act; but this provision shall not preclude the making of such loans from the telephone bank at the election of the borrower. “(3) Loans under this section shall, to the extent practicable, Interest rate. bear interest at the highest rate which meets the requirements set forth in paragraph (4), consistent with the borrower’s ability to pay such interest rate and with achievement of the objectives of this Act; but not less than 4 per centum per annum. “(4) Loans shall not be made under this section unless the Governor of the telephone bank finds and certifies that in his judgment (i) the security therefor is reasonably adequate and such loan will be repaid within the time agreed, and (ii) the borrower has the capability of producing net income or margins before interest at least equal to 150 per centum of the interest requirements on all of its outstanding and proposed loans, or such higher per centum as may be fixed from time to time by the Telephone Bank Board in order to allocate available funds equitably among borrowers or to improve the marketability of the telephone debentures: Provided., however, That the Governor of the telephone bank may waive the Waiver. requirement of (ii) above in any case if he shall determine (and set forth his reasons therefor in writing) that this requirement would prevent emergency restoration of the borrower’s system or otherwise result in severe hardship to the borrower. “(5) No loan shall be made in any State which now has or may hereafter have a State regulatory body having authority to regulate teiphone service and to require certificates of convenience and necessity to the applicant unless such certificate from such agency is first obtained. In a State in which there is no such agency or regulatory body legally authorized to issue such certificates to the applicant, no loan shall be made under this section unless the Governor of the telephone bank shall determine (and set forth his reasons therefor in writing) that no duplication of lines, facilities, or systems, providing reasonably adequate services will result therefrom. “(6) As used in this section, the term telephone service shall have the meaning prescribed for this term in section 203(a) of this Act, 76 Stat. 1140. 7 USC 924. and the term telephone lines, facilities, or systems snail mean lines, facilities, or systems used in the rendition of such telephone service. “(7) No borrower of funds under section 408 of this Act shall, without approval of the Governor of the telephone bank under rules established by the Telephone Bank Board, sell or dispose of its property, rights, or franchises, acquired under the provisions of this Act, until any loan obtained from the telephone bank, including all interest and charges, shall have been repaid. “(c) The Governor of the telephone bank is authorized under rules established by the Telephone Bank Board to adjust, on an amortized basis, the schedule of payments of interest or principal of loans made under this section upon his determination that with such readjustment there is reasonable assurance of repayment: Provided, however, That no adjustment shall extend the period of such loans beyond fifty years. “Sec. 409. Telephone Bank Receipts.— Any receipts from the activities of the telephone bank shall be available for all obligations and expenditures of the telephone bank. “Sec. 410. Conversion of Ownership, Control and Operation of Telephone Bank.— (a) Whenever fifty-one per centum of the maximum amount of class A stock issued to the United States and outstanding at any time after June 30, 1985, has been fully redeemed and retired pursuant to section 406(c) of this title— “(1) the powers and authority of the Governor of the telephone bank granted to the Administrator of the Rural Electrification Administration by this title IV shall vest in the Telephone Bank Board, and may be exercised and performed through the Governor of the telephone bank, to be selected by the Telephone Bank Board, and through such other employees as the Telephone Bank Board shall designate; “(2) the five members of the Telephone Bank Board designated by the President pursuant to section 405(b) shall cease to be members, and the number of Board members shall be accordingly reduced to eight unless other provision is thereafter made in the bylaws of the telephone bank: “(3) the telephone bank shall cease to be an agency of the United States, but shall continue in existence in perpetuity as an instrumentality of the United States and as a banking corporation with all of the powers and limitations conferred or imposed by this title IV except such as shall have lapsed pursuant to the provisions of this title. “(b) When all class A stock has been fully redeemed and retired, loans made by the telephone bank shall not continue to be subject to the restrictions prescribed in the provisos to section 408(a) (2). “(c) Congress reserves the right to review the continued operations of the telephone bank after all class A stock has been fully redeemed and retired. “Sec. 411. Liquidation or Dissolution of the Telephone Bank.— In the case of liquidation or dissolution of the telephone bank, after the payment or retirement, as the case may be, first, of all liabilities; second, of all class A stock at par; third, of all class B stock at par; fourth, of all class C stock at par; then any surpluses and contingency reserves existing on the effective date of liquidation or dissolution of the telephone bank shall be paid to the holders of class A and class B stock issued and outstanding before the effective date of such liquidation or dissolution, pro rata. “Sec. 412. Borrower Net Worth.— Except as provided in subsection (b) (2) of section 408, notwithstanding any other provision of law, a loan shall not be made under section 201 of this Act to any 63 Stat. 948. 7 USC 922. borrower which during the immediately preceding year had a net worth in excess of 20 per centum of its assets unless the Administrator finds that the borrower cannot obtain such a loan from the telephone bank or from other reliable sources at reasonable rates of interest and terms and conditions.”

2. 1973

   Pub. L. 93–32 § 2 · 87 Stat. 65

   Substituted · 7 U.S.C. § 932

   Pub. L. 93–32 substituted provisions setting out the liabilities of the Rural Electrification and Telephone Revolving Fund and the allowable purposes for which fund assets shall be available, for provisions, that the monies in the rural telephone account should remain on deposit in the Treasury of the United States until disbursed

   Source evidence

   Code amendment note
   Pub. L. 93–32 substituted provisions setting out the liabilities of the Rural Electrification and Telephone Revolving Fund and the allowable purposes for which fund assets shall be available, for provisions, that the monies in the rural telephone account should remain on deposit in the Treasury of the United States until disbursed.

   Enacted provision · exact public law section
   Sec. 2. Title III of the Rural Electrification Act of 1936, as amended, is amended by striking out all of sections 301 and 302 and inserting in lieu thereof the following new sections: “Sec. 301. Rural Electrification and Telephone Revolving Fund.— (a) There is hereby established in the Treasury of the United States a fund, to be known as the Rural Electrification and Telephone Revolving Fund (hereinafter referred to as the ‘fund’), consisting of: “(1) all notes, bonds, obligations, liens, mortgages, and property delivered or assigned to the Administrator pursuant to loans heretofore or hereafter made, under sections 4. 5, and 201 of this 49 Stat. 1365. 63 Stat. 948. 7 USC 904, 905, 922. Act and under this title, as of the effective date of this title, as revised herein, and all proceeds from the sales hereunder of such notes, bonds, obligations, liens, mortgages, and property, which shall be transferred to and be assets of the fund; “(2) undisbursed balances of electric and telephone, loans made under sections 4, 5, and 201, which as of the effective date of this title, as revised herein, shall be transferred to and be assets of the fund; “(3) notwithstanding section 3(a) of title I. all collections of principal and interest received on and after July 1, 1972, on notes, bonds, judgments, or other obligations made or held under titles I 49 Stat. 1363; 63 Stat. 948. 7 USC 901, 921. and II of this Act and under this title, except for net collection proceeds previously appropriated for the purchase of class A stock in the Rural Telephone Bank, which shall be paid into and be assets of the fund; “(4) all appropriations for interest subsidies and losses required under this title which may hereafter be made by the Congress; “(5) moneys borrowed from the. Secretary of the Treasury pursuant to section 304(a); and “(6) shares of the capital stock of the Rural Telephone Bank 85 Stat. 33. 7 USC 946. purchased by the United States pursuant to section 406(a) of this Act and moneys received from said bank upon retirement of said shares of stock in accordance with the provisions of title IV 7 USC 941. of this Act, which said shares and moneys shall be assets of the fund. “Sec. 302. Liabilities and Uses of Fund.— (a) The notes of the Administrator to the Secretary of the Treasury to obtain funds for loans under sections 4, 5, and 201 of this Act, and all other liabilities against the appropriations or assets in the fund in connection with electrification and telephone loan operations shall be liabilities of the fund, and all other obligations against such appropriations or assets in the fund arising out of electrification and telephone loan operations shall be obligations of the fund. “(b) The assets of the fund shall be available only for the following purposes: “(1) loans which could be insured under this title, and for advances in connection with such loans and loans previously made, as of the effective date of this title, as revised herein, under sections 4, 5, and 201 of this Act; 63 Stat. 948. 85 Stat. 37. 7 USC 904, 905, 932. “(2) payment of principal when due (without interest) on outstanding loans to the Administrator from the Secretary of the Treasury for electrification and telephone purposes pursuant to section 3(a) of this Act and payment of principal and interest 61 Stat. 546. 7 USC 903. when due on loans to the Administrator from the Secretary of the Treasury pursuant to section 304(a) of this title; Infra. “(3) payment of amounts to which the holder of notes is entitled on insured loans: Provided, That payments other than final payments need not be remitted to the holder until due or until the next agreed annual, semiannual, or quarterly remittance date; “(4) payment to the holder of insured notes of any defaulted installment or, upon assignment of the note to the Administrator at his request, the entire balance due on the note; “(5) purchase of notes in accordance with contracts of insurance entered into by the Administrator; “(6) payment in compliance with contracts of guarantee: “(7) payment of taxes, insurance, prior liens, expenses necessary to make fiscal adjustments in connection with the application, and transmittal of collections or necessary to obtain credit reports on applicants or borrowers, expenses for necessary services, including construction inspections, commercial appraisals, loan servicing, consulting business advisory or other commercial and technical services, and other program services, and other expenses and advances authorized in section 7 of this Act in connection with 49 Stat. 1365. 7 USC 907. insured loans. Such items may be paid in connection with guaranteed loans after or in connection with the acquisition of such loans or security thereof after default, to the extent determined to be necessary to protect the interest of the Government, or in connection with any other activity authorized in this Act; “(8) payment of the purchase price and any costs and expenses incurred in connection with the purchase, acquisition, or operation of property pursuant to section 7 of this Act. “Sec. 303. Deposit of Fund Moneys.— Moneys in the fund shall remain on deposit in the Treasury of the United States until disbursed. “Sec. 304. Financial Transactions of the Fund.— (a) The Interim note issuance. Administrator is authorized to make and issue interim notes to the Secretary of the Treasury for the purpose of obtaining funds necessary for discharging obligations of the fund and for making loans, advances and authorized expenditures out of the fund. Such notes shall be in such form and denominations and have such maturities and be subject to such terms and conditions as may be agreed upon by the Interest raie determination. Administrator and the Secretary of the Treasury. Such notes shall bear interest at a rate fixed by the Secretary of the Treasury, taking into consideration the current average market yield of outstanding marketable obligations of the United States having maturities comparable to the notes issued by the Administrator under this section. The Secretary of the Treasury is authorized and directed to purchase any notes of the Administrator issued hereunder, and for that purpose, the Secretary’ of the Treasury is authorized to use as a public debt transaction the proceeds from the sale of any securities issued 40 Stat. 288. 31 USC 774. under the Second Liberty Bond Act, as amended, and the purposes for which such securities may be issued under such Act, as amended, are extended to include the purchase of notes issued by the Administrator. All redemptions purchases, and sales by the Secretary of the Treasury of such notes shall be treated as public debt transactions of the United U.S. budget totals, exclusion. States: Provided, however, That such interim notes to the Secretary of the Treasury shall not be included in the totals of the budget of the United States Government and shall be exempt from any general limitation imposed by statute on expenditures and net lending (budget outlays) of the United States. “(b) The Secretary of the Treasury is authorized and directed to purchase for resale obligations insured through the fund when offered by the Administrator. Such resales shall he upon such terms and conditions U.S. budget totals, exclusion. as the Secretary of the Treasury shall determine. Purchases and resales by the Secretary of the Treasury hereunder shall not be included in the totals of the budget of the United States Government and shall be exempt from any general limitation imposed by statute on expenditures and net lending (budget outlays) of the United States. “(c) The Administrator may on an insured basis or otherwise, sell and assign any notes in the fund or sell certificates of beneficial ownership therein to the Secretary of the Treasury or in the private market. Any sale by the Administrator of notes individually or in blocks shall be treated as a sale of assets for the purposes of the Budget and 42 Stat. 20. 31 USC 1. Accounting Act, 1921, notwithstanding the fact that the Administrator, under an agreement with the purchaser or purchasers, holds the debt instruments evidencing the loans and holds or reinvests payments thereon as trustee and custodian for the purchaser or purchasers of the individual note or of the certificate of beneficial ownership in a number Liens. of such notes. Security instruments taken by the Administrator in connection with any notes in the fund may constitute liens running to the United States notwithstanding the fact that such notes may be thereafter held by purchasers thereof. “Sec. 305. Insured Loans; Interest Rates and Lending Levels.— (a) The Administrator is authorized to make insured loans under this title and at the interest rates hereinafter provided to the full extent of the assets available in the fund, subject only to limitations as to amounts authorized for loans and advances as may be from time to time imposed by the Congress of the United States for loans to be made in any one year, which amounts shall remain available until Transfer of funds. expended: Provided, That the Congress in the annual appropriation Act may also authorize the transfer of any excess cash in the fund for deposit into the Treasury as miscellaneous receipts: And provided further, U.S. budget totals, exclusion. That any such loans and advances shall not be included in the totals of the budget of the United States Government and shall be exempt from any general limitation imposed by statute on expenditures and net lending (budget outlays) of the United States. “(b) Insured loans made under this title shall bear interest at either 2 per centum per annum (hereinafter called the ‘special rate’), or 5 “Special rate.” “Standard rate.” per centum per annum (hereinafter called the ‘standard rate’). Loans bearing the special rate shall be available only for an electric or telephone borrower which meets either of the following conditions: “(1) has an average consumer or subscriber density of two or fewer per mile, or “(2) has an average gross revenue per mile which is at least $450 below the average gross revenue per mile of REA-financed electric systems, in the case of elective borrowers, or at least $300 below the average gross revenue per mile of REA-financed telephone systems, in the ease of telephone borrowers: Provided, however, That the Administrator may, in his sole discretion, make a loan at the special rate if he finds that the borrower: “(A) has experienced extenuating circumstances or extreme hardship; or “(B) cannot, in accordance with generally accepted management and accounting principles, produce net income or margins before interest at least equal to 150 per centum of its total interest requirements on all outstanding and proposed loans with an interest rate greater than 2 nor centum per annum on the entire current loan, and still meet the objectives of the Act, or “(C) cannot, in accordance with generally accepted management and accounting principles and without an excessive increase in the rates charged by such borrowers to their consumers or subscribers, provide service consistent with the objectives of the Act. “(c) Loans made under this section shall be insured by the Administrator when purchased by a lender. As used in this Act, an insured loan is one which is made, held, and serviced by the Administrator, and sold and insured by the Administrator hereunder; such loans shall be sold and insured by the Administrator without undue delay. “Sec. 306. Guaranteed Loans: Accommodation and Subordination of Liens.— The Administrator may provide financial assistance to borrowers for purposes provided in the Rural Electrification Act of 1936, as amended, by guaranteeing loans, in the full amount thereof, made 49 Stat. 1363; 85 Stat. 29. 7 USC 901. by the Rural Telephone Bank, National Rural Utilities Cooperative Finance Corporation, and any other legally organized lending agency, or by accommodating or subordinating liens or mortgages in the fund held by the Administrator as owner or as trustee or custodian for purchases of notes from the. fund, or by any combination of such guarantee, accommodation, or subordination. No fees or charges shall be assessed for any such guarantee, accommodation, or subordination. Guaranteed loans shall bear interest, at the rate agreed upon by the borrower and the lender. Guaranteed loans, and accommodation and subordination of liens or mortgages, may be made concurrently with a loan insured at the standard rate. The amount of guaranteed loans shall be subject only to such limitations as to amounts as may be authorized from time to time by the Congress of the United States: Provided, That any am omits guaranteed hereunder shall not be U.S. budget totals, exclusion included in the total’s of the budget of the United States Government and shall be exempt from any general limitation imposed by statute on expenditures and net lending (budget outlays) of the United States. As used in this title a guaranteed loan is one which is made, held, and Definition. serviced by a legally organized lending agency and which is guaranteed by the Administrator hereunder. “Sec. 307. Other Financing.— When it appears to the Administrator that the loan applicant is able to obtain a loan for part of his credit needs from a responsible cooperative or other credit source at reasonable rates and terms consistent with the loan applicant’s ability to pay and the achievement of the Act’s objectives, he may request, the loan applicant to apply for and accept such a loan concurrently with a loan insured at the standard rate, subject, however, to full use being made by the Administrator of the funds made available hereunder for such insured loans under this title. “Sec. 308. Fuel Faith and Credit of the United States.— Any contract of insurance or guarantee, executed by the Administrator under this title shall be an obligation supported by the full faith and credit of the United States and incontestable except for fraud or misrepresentation of which the holder has actual knowledge. “Sec. 309. Loan Terms and Conditions.— Loans made from or insured through the fund shall be for the same purposes and on the same terms and conditions as are provided for loans in titles 1 and II 49 Stat. 1363; 63 Stat. 948. 7 USC 901, 921. Ante, p. 67. of this Act except as otherwise provided in sections 303 to 308 inclusive. “Sec. 310. Refinancing of Rural Development Act Loans.— At the request of the borrower, the Administrator is authorized and directed to refinance with loans which will lie insured under this Act Ante, p. 68. at the interest rates provided in section 305 any loans made for rural electric and telephone facilities muter any provision of the Consolidated 86 Stat. 657. 7 USC 1921 note. Repeal. 7 USC 903. 85 Stat. 32. 7 USC 945. Farm and Rural Development Act.”

   Effective date note
   Amendment by Pub. L. 93–32 effective May 11, 1973, see section 12 of Pub. L. 93–32, set out as an Effective Date note under section 930 of this title.

3. 1990

   Rural Telecommunications Improvements Act of 1990

   Pub. L. 101–624 title XXIII § 2359 · 104 Stat. 3359

   Added · 7 U.S.C. § 932(c)

   Pub. L. 101–624 added subsec. (c)

   Source evidence

   Code amendment note
   Subsec. (c). Pub. L. 101–624 added subsec. (c).

   Enacted provision · exact public law section
   SEC. 2359. CREATION OF SEPARATE ELECTRIC AND TELEPHONE ACCOUNTS WITHIN RURAL ELECTRIC AND TELEPHONE REVOLVING FUND. Section 302 (7 U.S.C. 932) is amended by adding at the end the following new subsection: “(c) (1) The Administrator shall maintain two separate accounts within the fund, which shall be known as the electric account and the telephone account, respectively. “(2) (A) The Administrator shall account for the assets, liabilities, income, expenses, and equity of the fund attributable to electrification loan operations in the electric account. “(B) The Administrator shall account for the assets, liabilities, income, expenses, and equity of the fund attributable to telephone loan operations in the telephone account. “(3) (A) The assets accounted for in the electric account shall be Loan programs. available solely for electrification loan operations under this Act. “(B) The assets accounted for in the telephone account shall be available solely for telephone loan operations under this Act (other than under title IV).”.

4. 1994

   Department of Agriculture Reorganization Act of 1994

   Pub. L. 103–354 title II § 235(a)(13) · 108 Stat. 3178

   Substituted · 7 U.S.C. § 932(a); 7 U.S.C. § 932(b)(2); 7 U.S.C. § 932(4); 7 U.S.C. § 932(5); 7 U.S.C. § 932(c)(1); 7 U.S.C. § 932(2)

   Pub. L. 103–354 substituted “Secretary” for “Administrator” wherever appearing

   Source evidence

   Code amendment note
   Subsecs. (a), (b)(2), (4), (5), (c)(1), (2). Pub. L. 103–354 substituted “Secretary” for “Administrator” wherever appearing.

   Enacted provision · exact public law section
   (13) except as otherwise provided in this subsection, by striking “Administrator” each place it appears in such Act and inserting “Secretary”.

5. 1996

   Federal Agriculture Improvement and Reform Act of 1996

   Pub. L. 104–127 title VII § 772(b)(2) · 110 Stat. 888

   Struck · 7 U.S.C. § 932(b)(2)

   Pub. L. 104–127 struck out “pursuant to section 903(a) of this title” after “purposes”

   Source evidence

   Code amendment note
   Subsec. (b)(2). Pub. L. 104–127 struck out “pursuant to section 903(a) of this title” after “purposes”.

   Enacted provision · exact public law section
   (2) Section 302(b)(2) of the Rural Electrification Act of 1936 (7 U.S.C. 932(b)(2)) is amended by striking “pursuant to section 3(a) of this Act”.

5 of 5 references resolved to an enrolled provision