§ 1431. — Powers and duties of banks.
[Laws in effect as of January 24, 2002]
[Document not affected by Public Laws enacted between
January 24, 2002 and December 19, 2002]
[CITE: 12USC1431]
TITLE 12--BANKS AND BANKING
CHAPTER 11--FEDERAL HOME LOAN BANKS
Sec. 1431. Powers and duties of banks
(a) Borrowing money; issuing bonds and debentures; general powers
Each Federal Home Loan Bank shall have power, subject to rules and
regulations prescribed by the Board, to borrow and give security
therefor and to pay interest thereon, to issue debentures, bonds, or
other obligations upon such terms and conditions as the Board may
approve, and to do all things necessary for carrying out the provisions
of this chapter and all things incident thereto.
(b) Issuance of consolidated Federal Home Loan Bank debentures;
restrictions
The Board may issue consolidated Federal Home Loan Bank debentures
which shall be the joint and several obligations of all Federal Home
Loan Banks organized and existing under this chapter, in order to
provide funds for any such bank or banks, and such debentures shall be
issued upon such terms and conditions as the Board may prescribe. No
such debentures shall be issued at any time if any of the assets of any
Federal Home Loan Bank are pledged to secure any debts or subject to any
lien, and neither the Board nor any Federal Home Loan Bank shall have
power to pledge any of the assets of any Federal Home Loan Bank, or
voluntarily to permit any lien to attach to the same while any of such
debentures so issued are outstanding. The debentures issued under this
section and outstanding shall at no time exceed five times the total
paid-in capital of all the Federal Home Loan Banks as of the time of the
issue of such debentures. It shall be the duty of the Board not to issue
debentures under this section in excess of the notes or obligations of
member institutions held and secured under section 1430(a) of this title
by all the Federal Home Loan Banks.
(c) Issuance of Federal Home Loan Bank bonds
At any time that no debentures are outstanding under this chapter,
or in order to refund all outstanding consolidated debentures issued
under this section, the Board may issue consolidated Federal Home Loan
Bank bonds which shall be the joint and several obligations of all the
Federal Home Loan Banks, and shall be secured and be issued upon such
terms and conditions as the Board may prescribe.
(d) Additional or substituted collateral on adjustment of equities
The Board shall have full power to require any Federal Home Loan
Bank to deposit additional collateral or to make substitutions of
collateral or to adjust equities between the Federal Home Loan Banks.
(e) Acceptance of deposits; restrictions on transaction of banking
business; collection and settlement of checks, drafts, etc.;
charges; rules and regulations
(1) Each Federal Home Loan Bank shall have power to accept deposits
made by members of such bank or by any other Federal Home Loan Bank or
other instrumentality of the United States, upon such terms and
conditions as the Board may prescribe, but no Federal Home Loan Bank
shall transact any banking or other business not incidental to
activities authorized by this chapter.
(2)(A) The Board may, subject to such rules and regulations,
including definitions of terms used in this paragraph, as the Board
shall from time to time prescribe, authorize Federal Home Loan Banks to
be drawees of, and to engage in, or be agents or intermediaries for, or
otherwise participate or assist in, the collection and settlement of
(including presentment, clearing, and payment of, and remitting for),
checks, drafts, or any other negotiable or nonnegotiable items or
instruments of payment drawn on or issued by members of any Federal Home
Loan Bank or by institutions which are eligible to make application to
become members pursuant to section 1424 of this title, and to have such
incidental powers as the Board shall find necessary for the exercise of
any such authorization.
(B) A Federal Home Loan Bank shall make charges, to be determined
and regulated by the Board consistent with the principles set forth in
section 248a(c) of this title, or utilize the services of, or act as
agent for, or be a member of, a Federal Reserve bank, clearinghouse, or
any other public or private financial institution or other agency, in
the exercise of any powers or functions pursuant to this paragraph.
(C) The Board is authorized, with respect to participation in the
collection and settlement of any items by Federal Home Loan Banks, and
with respect to the collection and settlement (including payment by the
payor institution) of items payable by Federal savings and loan
associations and Federal mutual savings banks, to prescribe rules and
regulations regarding the rights, powers, responsibilities, duties, and
liabilities, including standards relating thereto, of such Federal Home
Loan Banks, associations, or banks and other parties to any such items
or their collection and settlement. In prescribing such rules and
regulations, the Board may adopt or apply, in whole or in part, general
banking usage and practices, and, in instances or respects in which they
would otherwise not be applicable, Federal Reserve regulations and
operating letters, the Uniform Commercial Code, and clearinghouse rules.
(f) Rediscount of notes held by other banks; purchase of bonds of other
banks
The Board is authorized and empowered to permit,,\1\ to require,\1\
Federal Home Loan Banks, upon such terms and conditions as the Board may
prescribe, to rediscount the discounted notes of members held by other
Federal Home Loan Banks, or to make loans to, or make deposits with,
such other Federal Home Loan Banks, or to purchase any bonds or
debentures issued under this section.
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\1\ So in original. See 1989 Amendment note below.
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(g) Reserves
Each Federal Home Loan Bank shall at all times have at least an
amount equal to the current deposits received from its members invested
in (1) obligations of the United States, (2) deposits in banks or trust
companies, (3) advances with a maturity of not to exceed five years
which are made to members, upon such terms and conditions as the Board
may prescribe, and (4) advances with a maturity of not to exceed five
years which are made to members whose creditor liabilities (not
including advances from the Federal home loan bank) do not exceed 5 per
centum of their net assets, and which may be made without the security
of home mortgages or other security, upon such terms and conditions as
the Board may prescribe.
(h) Investment of surplus funds
Such part of the assets of each Federal Home Loan Bank (except
reserves and amounts provided for in subsection (g) of this section) as
are not required for advances to members, may be invested, to such
extent as the bank may deem desirable and subject to such regulations,
restrictions, and limitations as may be prescribed by the Board, in
obligations of the United States, in obligations, participations, or
other instruments of or issued by the Federal National Mortgage
Association or the Government National Mortgage Association, in
mortgages, obligations, or other securities which are or ever have been
sold by the Federal Home Loan Mortgage Corporation pursuant to section
1454 or section 1455 of this title, in the stock of the Federal National
Mortgage Association, in stock, obligations, or other securities of any
small business investment company formed pursuant to section 681 of
title 15, for the purpose of aiding members of the Federal Home Loan
Bank System, and in such securities as fiduciary and trust funds may be
invested in under the laws of the State in which the Federal Home Loan
Bank is located.
(i) Treasury purchase of banks' obligations; exercise of authority
The Secretary of the Treasury is authorized in his discretion to
purchase any obligations issued pursuant to this section, as heretofore,
now, or hereafter in force and for such purpose the Secretary of the
Treasury is authorized to use as a public-debt transaction the proceeds
of the sale of any securities hereafter issued under chapter 31 of title
31, as now or hereafter in force, and the purposes for which securities
may be issued under chapter 31 of title 31, as now or hereafter in
force, are extended to include such purchases. The Secretary of the
Treasury may, at any time, sell, upon such terms and conditions and at
such price or prices as he shall determine, any of the obligations
acquired by him under this subsection. All redemptions, purchases, and
sales by the Secretary of the Treasury of such obligations under this
subsection shall be treated as public-debt transactions of the United
States. The Secretary of the Treasury shall not at any time purchase any
obligations under this paragraph if such purchase would increase the
aggregate principal amount of his then outstanding holdings of such
obligations under this paragraph to an amount greater than
$4,000,000,000. Each purchase of obligations by the Secretary of the
Treasury under this subsection shall be upon terms and conditions as
shall be determined by the Secretary of the Treasury and shall bear such
rate of interest as may be determined by the Secretary of the Treasury
taking into consideration the current average market yield for the month
preceding the month of such purchase on outstanding marketable
obligations of the United States.
In addition to obligations authorized to be purchased by the
preceding paragraph, the Secretary of the Treasury is authorized to
purchase any obligations issued pursuant to this section in amounts not
to exceed $2,000,000,000. The authority provided in this paragraph shall
expire August 10, 1975.
Notwithstanding the foregoing, the authority provided in this
subsection may be exercised during any calendar quarter beginning after
October 28, 1974, only if the Secretary of the Treasury and the
Chairperson of the Board certify to the Congress that (1) alternative
means cannot be effectively employed to permit members of the Federal
Home Loan Bank System to continue to supply reasonable amounts of funds
to the mortgage market, and (2) the ability to supply such funds is
substantially impaired because of monetary stringency and a high level
of interest rates. Any funds borrowed under this subsection shall be
repaid by the Home Loan Banks at the earliest practicable date.
(j) Audits
Notwithstanding the provisions of section 9105(a)(1)(B) \2\ of title
31, audits by the General Accounting Office of the financial
transactions of a Federal Home Loan Bank shall not be limited to periods
during which Government capital has been invested therein. The
provisions of sections 9107(c)(2) and 9108(d)(1) of title 31 shall not
apply to any Federal Home Loan Bank.
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\2\ See References in Text note below.
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(k) Bank loans to SAIF
(1) Loans authorized
Subject to paragraph (3), the Federal Home Loan Banks may, upon
the request of the Federal Deposit Insurance Corporation, make loans
to such Corporation for the use of the Savings Association Insurance
Fund.
(2) Liability of the Fund
Any loan by a Federal Home Loan Bank pursuant to paragraph (1)
shall be a direct liability of the Savings Association Insurance
Fund.
(3) Interest on and security for such loans
Any loan by a Federal Home Loan Bank pursuant to paragraph (1)
shall--
(A) bear a rate of interest not less than such Bank's
current marginal cost of funds, taking into account the
maturities involved; and
(B) be adequately secured.
(July 22, 1932, ch. 522, Sec. 11, 47 Stat. 733; June 27, 1934, ch. 847,
Sec. 503, 48 Stat. 1261; June 27, 1950, ch. 369, Secs. 3, 4, 64 Stat.
257; Aug. 2, 1954, ch. 649, title II, Sec. 204(a), 68 Stat. 622; Pub. L.
88-560, title VII, Sec. 701(d)(1), Sept. 2, 1964, 78 Stat. 800; Pub. L.
90-448, title VIII, Sec. 807(k), Aug. 1, 1968, 82 Stat. 545; Pub. L. 91-
151, title I, Sec. 3, Dec. 23, 1969, 83 Stat. 374; Pub. L. 91-609, title
IX, Sec. 914, Dec. 31, 1970, 84 Stat. 1815; Pub. L. 93-383, title VIII,
Sec. 805(c)(2), Aug. 22, 1974, 88 Stat. 727; Pub. L. 93-495, title I,
Sec. 112, Oct. 28, 1974, 88 Stat. 1506; Pub. L. 96-153, title III,
Sec. 324, Dec. 21, 1979, 93 Stat. 1121; Pub. L. 96-221, title III,
Sec. 311, Mar. 31, 1980, 94 Stat. 149; Pub. L. 97-320, title I,
Sec. 125(c), Oct. 15, 1982, 96 Stat. 1485; Pub. L. 101-73, title VII,
Secs. 701(b)(1)-(3)(A), (c), 709, 710(b)(6), Aug. 9, 1989, 103 Stat.
412, 418; Pub. L. 104-208, div. A, title II, Sec. 2704(d)(11)(A), div.
D, title II, Sec. 208(h)(2), Sept. 30, 1996, 110 Stat. 3009-489, 3009-
747.)
References in Text
Section 9105 of title 31, referred to in subsec. (j), was amended
generally by Pub. L. 101-576, title III, Sec. 305, Nov. 15, 1990, 104
Stat. 2853, and, as so amended, subsec. (a) does not contain a par.
(1)(B). Prior to the general amendment, subsec. (a)(1)(B) related to
audits of mixed-ownership Government corporations during periods in
which capital of the United States Government was invested therein.
Codification
In subsecs. (i) (first par.) and (j), ``chapter 31 of title 31''
substituted for ``the Second Liberty Bond Act'', and ``section
9105(a)(1)(B) of title 31'' and ``sections 9107(c)(2) and 9108(d)(1) of
title 31'' substituted for ``the first sentence of section 202 of the
Government Corporation Control Act [31 U.S.C. 857]'' and ``the first
sentence of subsection (d) of section 303 of the Government Corporation
Control Act [31 U.S.C. 868(d)]'', respectively, on authority of Pub. L.
97-258, Sec. 4(b), Sept. 13, 1982, 96 Stat. 1067, the first section of
which enacted Title 31, Money and Finance.
Amendments
1996--Subsec. (h). Pub. L. 104-208, Sec. 208(h)(2), substituted
``section 681 of title 15'' for ``section 681(d) of title 15''.
Subsec. (k). Pub. L. 104-208, Sec. 2704(d)(11)(A), which directed
the amendment of subsec. (k) by substituting ``the Deposit Insurance
Fund'' for ``SAIF'' in heading and ``Deposit Insurance Fund'' for
``Savings Association Insurance Fund'' in pars. (1) and (2), was not
executed. See Effective Date of 1996 Amendment note below.
1989--Subsecs. (a) to (d). Pub. L. 101-73, Sec. 701(b)(1), (3)(A),
substituted ``Board'' for ``board'' wherever appearing.
Subsec. (e)(1). Pub. L. 101-73, Sec. 709(1), inserted ``incidental
to activities'' after ``other business not''.
Pub. L. 101-73, Sec. 701(b)(1), (3)(A), substituted ``Board'' for
``board''.
Subsec. (e)(2)(C). Pub. L. 101-73, Sec. 701(c)(1), which directed
insertion of ``Federal Home Loan'' before ``Banks,'' was executed the
second time that term appeared, because ``Federal Home Loan'' already
preceded the term ``Banks,'' the first place it appeared.
Subsec. (f). Pub. L. 101-73, Sec. 709(2), which directed amendment
of subsec. (f) by striking out ``or whenever in the judgment of at least
4 members of the board an emergency exists requiring such action'' after
``empowered to permit,'', was executed by striking out ``or whenever in
the judgment of at least four members of the board an emergency exists
requiring such action'', as the probable intent of Congress. The
amendment probably should also have struck out the comma after
``empowered to permit'' and the words ``, to require,'' after ``such
action''.
Pub. L. 101-73, Sec. 701(b)(1), (3)(A), substituted ``Board'' for
``board'' wherever appearing.
Subsec. (g). Pub. L. 101-73, Sec. 710(b)(6), struck out ``or
nonmember borrowers'' after ``made to members'' wherever appearing.
Subsec. (h). Pub. L. 101-73, Sec. 710(b)(6), struck out ``or
nonmember borrowers'' after ``advances to members''.
Pub. L. 101-73, Sec. 701(b)(1), (3)(A), substituted ``Board'' for
``board''.
Subsec. (i). Pub. L. 101-73, Sec. 701(c)(2), inserted ``Federal''
before ``Home Loan Bank System''.
Pub. L. 101-73, Sec. 701(b)(1), (2), substituted ``Chairperson of
the Board'' for ``Chairman of the Federal Home Loan Bank Board''.
Subsec. (k). Pub. L. 101-73, Sec. 709(3), amended subsec. (k)
generally. Prior to amendment, subsec. (k) read as follows: ``The
Federal Home Loan Banks are hereby authorized, as directed by the Board,
to make loans to the Federal Savings and Loan Insurance Corporation. All
such loans shall be made in accordance with the provisions of section
1725(d) of this title.''
1982--Subsec. (k). Pub. L. 97-320 added subsec. (k).
1980--Subsec. (e). Pub. L. 96-221 designated existing provisions as
par. (1) and added par. (2).
1979--Subsec. (h). Pub. L. 96-153 inserted provisions relating to
stock, obligations, or other securities of any small business investment
company formed pursuant to section 681(d) of title 15, for the purpose
of aiding members of the Federal Home Loan Bank System.
1974--Subsec. (h). Pub. L. 93-383 inserted reference to mortgages,
obligations, or other securities sold by the Federal Home Loan Mortgage
Corporation pursuant to section 1454 or 1455 of this title.
Subsec. (i). Pub. L. 93-495 substituted ``obligations under this
paragraph'' for ``obligations under this subsection'' wherever appearing
in fourth sentence of initial par., in second par. substituted
provisions authorizing purchase of obligations issued pursuant to this
section in amounts not to exceed $2,000,000,000, for provisions relating
to exercise of authority of this subsection by the Secretary of the
Treasury, and added third par.
1970--Subsec. (g). Pub. L. 91-609 substituted ``five years'' for
``one year'' in items (3) and (4).
1969--Subsec. (i). Pub. L. 91-151 increased the borrowing limit to
$4,000,000,000 and made it a requirement that the rate charged on such
borrowing be set at the current market yield on Treasury obligations and
added a new paragraph which allows the Secretary to permit members of
the Home Loan Bank System to continue to supply funds to the mortgage
market during tight market conditions.
1968--Subsec. (h). Pub. L. 90-448 inserted ``or the Government
National Mortgage Association, in the stock of the Federal National
Mortgage Association''.
1964--Subsec. (h). Pub. L. 88-560 substituted ``in obligations,
participations, or other instruments of or issued by the Federal
National Mortgage Association'' for ``in obligations of the Federal
National Mortgage Association''.
1954--Subsec. (h). Act Aug. 2, 1954, inserted reference to
obligations of the Federal National Mortgage Association.
1950--Subsec. (g). Act June 27, 1950, Sec. 3, struck out requirement
that sums paid in on outstanding capital subscriptions of members from
the base for determining the amount of money which the Federal Home Loan
Banks shall at all times have invested.
Subsecs. (i), (j). Act June 27, 1950, Sec. 4, added subsecs. (i) and
(j).
1934--Subsecs. (i), (j). Act June 27, 1934, among other changes,
struck out subsecs. (i) and (j).
Effective Date of 1996 Amendment
Amendment by section 2704(d)(11)(A) of Pub. L. 104-208 effective
Jan. 1, 1999, if no insured depository institution is a savings
association on that date, see section 2704(c) of Pub. L. 104-208, set
out as a note under section 1821 of this title.
Effective Date of 1968 Amendment
For effective date of amendment by title VIII of Pub. L. 90-448, see
section 808 of Pub. L. 90-448, set out as an Effective Date note under
section 1716b of this title.
Section Referred to in Other Sections
This section is referred to in sections 1422b, 1430, 1438, 2705 of
this title.
