12 U.S.C. § 2155: Liability of banks; United…

Summary

Banks must pay the debt they issue themselves and must pay interest on long-term debt issued by other banks in the same system. For joint or System-wide debt, each bank is mainly responsible for its own share and must cover extra amounts if another bank that is primarily responsible cannot pay, when the Farm Credit Administration (FCA) asks. The FCA will first call on banks that are not in default in proportion to each bank’s “available collateral” (the amount by which a bank’s collateral exceeds what it needs to support its outstanding obligations, measured at the close of the last calendar quarter ending before the call). If that is not enough, the FCA will call on nondefaulting banks in proportion to their remaining assets. A bank that pays for another gets the rights of the creditor against that other bank. When the FCA makes such a call, it will appoint a receiver to wind up the affairs of the unable bank. Each participating bank must pass a resolution agreeing to these responsibilities and authorize the execution of consolidated or System-wide notes, bonds, or similar obligations. The United States will not be liable for these obligations. Beginning 5 years after January 6, 1988, the FCA must use the Farm Credit Insurance Fund first and cannot call on System institutions for these liabilities until that Fund is exhausted, even if the Fund can only make a partial payment.

Title 12, §2155

Banks and Banking, Source: USLM XML via OLRC

(a)Joint and several liability of banks

(1)Each bank of the System shall be fully liable on notes, bonds, debentures, or other obligations issued by it individually, and shall be liable for the interest payments on long-term notes, bonds, debentures, or other obligations issued by other banks operating under the same subchapter of this chapter.

(2)(A)Each bank shall also be primarily liable for the portion of any issue of consolidated or System-wide obligations made on its behalf and be jointly and severally liable for the payment of any additional sums as called upon by the Farm Credit Administration in order to make payments of interest or principal which any bank primarily liable therefor shall be unable to make.

(B)Such calls first shall be made on all nondefaulting banks in proportion to each such bank’s proportionate share of the aggregate available collateral held by all such banks.

(C)For purposes of this paragraph, the term “available collateral” means the amount (determined at the close of the last calendar quarter ending before such call) by which a bank’s collateral as described in section 2154 of this title exceeds the collateral required to support the bank’s outstanding notes, bonds, debentures, and other similar obligations.

(D)If the Farm Credit Administration makes any such call and the available collateral of all such banks does not fully satisfy the liability necessitating such calls, such calls shall be made on all nondefaulting banks in proportion to each such bank’s remaining assets.

(E)Any System bank that, pursuant to a call by the Farm Credit Administration, makes a payment of principal or interest to the holder of any consolidated or System-wide obligation issued on behalf of another System bank shall be subrogated to all rights of the holder against such other bank to the extent of such payment.

(F)On making such a call with respect to obligations issued on behalf of a System bank, the Farm Credit Administration shall appoint a receiver for the bank, which shall expeditiously liquidate or otherwise wind up the affairs of the bank.

(b)Resolutions as to liability; execution of obligations

Each bank participating in an issue shall by appropriate resolution undertake such responsibility as provided in subsection (a), and in the case of consolidated or System-wide obligations shall authorize the execution of such long-term notes, bonds, debentures, or other obligations on its behalf. When a consolidated or System-wide issue is approved, the notes, bonds, debentures, or other obligations shall be executed and the banks shall be liable thereon as provided herein.

(c)United States liability

The United States shall not be liable or assume any liability directly or indirectly thereon.

(d)Insurance Fund called on before invoking joint and several liability

Beginning 5 years after January 6, 1988, the Farm Credit Administration shall not call on any System institution to satisfy the liability of the institution on any joint, consolidated, or System-wide obligation participated in by the institution or with respect to which the institution is primarily, or jointly and severally, liable, before the Farm Credit Insurance Fund is exhausted, even if the Fund is only able to make a partial payment because of insufficient amounts in the Fund.

Notes & Related Subsidiaries

Editorial Notes

Amendments

1988—Subsec. (a). Pub. L. 100–233, § 303(a), amended subsec. (a) generally. Prior to amendment, subsec. (a) read as follows: “Each bank of the System shall be fully liable on notes, bonds, debentures, or other obligations issued by it individually, and shall be liable for the interest payments on long-term notes, bonds, debentures, or other obligations issued by other banks operating under the same subchapter of this chapter. Each bank shall also be primarily liable for the portion of any issue of consolidated or System-wide obligations made on its behalf and be jointly and severally liable for the payment of any additional sums as called upon by the Farm Credit Administration in order to make payments of interest or principal which any bank primarily liable therefor shall be unable to make. Such calls shall be made first upon the other banks operating under the same subchapter of this chapter as the defaulting bank, and second upon banks operating under other subchapters of this chapter, taking into consideration the capital, surplus, bonds, debentures, or other obligations which each may have outstanding at the time of such assessment.” Subsec. (c). Pub. L. 100–233, § 207(c), redesignated subsec. (d) as (c), and struck out former subsec. (c) which provided that for purposes of this part, the term “bank” included the Capital Corporation. Subsec. (d). Pub. L. 100–399 redesignated subsec. (e) as (d). Pub. L. 100–233, § 207(c), redesignated subsec. (d) as (c). Subsec. (e). Pub. L. 100–399 redesignated subsec. (e) as (d). Pub. L. 100–233, § 303(b), added subsec. (e). 1985—Subsec. (b). Pub. L. 99–205, § 205(f)(2), substituted “execution of” for “Governor to execute” in first sentence and struck out “by the Governor” after “shall be executed” in second sentence. Subsecs. (c), (d). Pub. L. 99–205, § 101(4), added subsec. (c) and redesignated former subsec. (c) as (d).

Statutory Notes and Related Subsidiaries

Effective Date

of 1988 AmendmentAmendment by Pub. L. 100–399 effective as if enacted immediately after enactment of Pub. L. 100–233, which was approved Jan. 6, 1988, see section 1001(a) of Pub. L. 100–399, set out as a note under section 2002 of this title.

Effective Date

of 1985 AmendmentAmendment by Pub. L. 99–205 effective thirty days after Dec. 23, 1985, see section 401 of Pub. L. 99–205, set out as a note under section 2001 of this title.

§2155 Liability of Banks; United States Not Liable

Summary

Title 12, §2155

Notes & Related Subsidiaries

Editorial Notes

Amendments

Statutory Notes and Related Subsidiaries

Effective Date

Effective Date

Citations & Metadata