§ 1436. — Reserves and dividends; emergency suspensions of requirements.
[Laws in effect as of January 24, 2002]
[Document not affected by Public Laws enacted between
January 24, 2002 and December 19, 2002]
[CITE: 12USC1436]
TITLE 12--BANKS AND BANKING
CHAPTER 11--FEDERAL HOME LOAN BANKS
Sec. 1436. Reserves and dividends; emergency suspensions of
requirements
(a) Accumulation and maintenance of reserves; payment of dividends
Each Federal Home Loan Bank may carry to a reserve account from
time-to-time such portion of its net earnings as may be determined by
its board of directors. Each Federal Home Loan Bank shall establish such
additional reserves and/or make such charge-offs on account of
depreciation or impairment of its assets as the Board shall require from
time to time. No dividends shall be paid except out of previously
retained earnings or current net earnings remaining after reductions for
all reserves, chargeoffs, purchases of capital certificates of the
Financing Corporation, and payments relating to the Funding Corporation
required under this chapter have been provided for, other than
chargeoffs or expenses incurred by a Bank in connection with the
purchase of capital stock of the Financing Corporation under section
1441 of this title or payments relating to the Funding Corporation
Principal Fund under section 1441b(e) of this title. The reserves of
each Federal Home Loan Bank shall be invested, subject to such
regulations, restrictions, and limitations as may be prescribed by the
Board, in direct 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, 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.
(b) Assistance to member institutions in event of severe financial
conditions
Notwithstanding subsection (a) of this section or any other
provision of this chapter, if the Board determines that severe financial
conditions exist threatening the stability of member institutions, the
Board may suspend temporarily the requirements of subsection (a) of this
section that a portion of net earnings be set aside semiannually by each
Federal Home Loan Bank to a reserve account and permit each Federal Home
Loan Bank to declare and pay dividends out of undivided profits.
(c) Exception in case of losses in connection with Financing Corporation
stock
(1) In general
Notwithstanding subsection (a) of this section, if--
(A) a Federal Home Loan Bank incurs a chargeoff or an
expense in connection with such bank's investment in the stock
of the Financing Corporation under section 1441 of this title;
(B) the Board determines there is an extraordinary need for
the member institutions of the bank to receive dividends; and
(C) the bank has reduced all reserves (other than the
reserve account required by the first 2 sentences of subsection
(a) of this section) to zero,
the Board may authorize such bank to declare and pay dividends out
of undivided profits (as such term is defined in section 1441(d)(7)
of this title) or the reserve account required by the first 2
sentences of subsection (a) of this section.
(2) Requirements of section 1441 of this title not affected
Notwithstanding any payment of dividends by any Federal Home
Loan Bank pursuant to an authorization by the Board under paragraph
(1), the applicable provisions of section 1441 of this title shall
continue to apply with respect to such bank, and to such bank's
investment in the Financing Corporation, in the same manner and to
the same extent as if such payment had not been made.
(July 22, 1932, ch. 522, Sec. 16, 47 Stat. 736; Aug. 2, 1954, ch. 649,
title II, Sec. 204(a), 68 Stat. 622; Pub. L. 88-560, title VII,
Sec. 701(d)(2), Sept. 2, 1964, 78 Stat. 800; Pub. L. 90-448, title VIII,
Sec. 807(l), Aug. 1, 1968, 82 Stat. 545; Pub. L. 93-383, title VIII,
Sec. 805(c)(3), Aug. 22, 1974, 88 Stat. 727; Pub. L. 97-320, title I,
Sec. 124, Oct. 15, 1982, 96 Stat. 1485; Pub. L. 100-86, title III,
Sec. 306(a), Aug. 10, 1987, 101 Stat. 600; Pub. L. 101-73, title VII,
Secs. 701(b)(1), (3)(A), 724(a), Aug. 9, 1989, 103 Stat. 412, 428; Pub.
L. 106-102, title VI, Sec. 606(g), Nov. 12, 1999, 113 Stat. 1455.)
Amendments
1999--Subsec. (a). Pub. L. 106-102, in third sentence substituted
``previously retained earnings or current net earnings'' for ``net
earnings'' and struck out ``, and then only with the approval of the
Federal Housing Finance Board'' after ``section 1441b(e) of this title''
and struck out fourth sentence which read as follows: ``Beginning on
January 1, 1992, the preceding sentence shall be applied by substituting
`previously retained earnings or current net earnings' for `net
earnings'.''
1989--Subsec. (a). Pub. L. 101-73, Sec. 724(a)(1), substituted
``Each Federal Home Loan Bank may carry to a reserve account from time-
to-time such portion of its net earnings as may be determined by its
board of directors.'' for ``Each Federal Home Loan Bank shall carry to a
reserve account semiannually 20 per centum of its net earnings until
said reserve account shall show a credit balance equal to 100 per centum
of the paid-in capital of such bank. After said reserve has reached 100
per centum of the paid-in capital of said bank, 5 per centum of its net
earnings shall be added thereto semiannually. Whenever said reserve
shall have been impaired below 100 per centum of the paid-in capital it
shall be restored before any dividends are paid.''
Pub. L. 101-73, Sec. 724(a)(2), substituted ``No dividends shall be
paid except out of net earnings remaining after reductions for all
reserves, chargeoffs, purchases of capital certificates of the Financing
Corporation, and payments relating to the Funding Corporation required
under this chapter have been provided for, other than chargeoffs or
expenses incurred by a Bank in connection with the purchase of capital
stock of the Financing Corporation under section 1441 of this title or
payments relating to the Funding Corporation Principal Fund under
section 1441b(e) of this title, and then only with the approval of the
Federal Housing Finance Board. Beginning on January 1, 1992, the
preceding sentence shall be applied by substituting `previously retained
earnings or current net earnings' for `net earnings'.'' for ``No
dividends shall be paid except out of net earnings remaining after all
reserves and charge-offs required under this chapter have been provided
for, and then only with the approval of the board.''
Pub. L. 101-73, Sec. 701(b)(1), (3)(A), substituted ``Board'' for
``board'' wherever appearing.
1987--Subsec. (c). Pub. L. 100-86 added subsec. (c).
1982--Pub. L. 97-320 designated existing provisions as subsec. (a)
and added subsec. (b).
1974--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 section 1455 of this title.
1968--Pub. L. 90-448 authorized investments in obligations,
participations, or other instruments issued by the Government National
Mortgage Association.
1964--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--Act Aug. 2, 1954, inserted reference to obligations of Federal
National Mortgage Association in last sentence.
Effective Date of 1989 Amendment
Section 724(b) of Pub. L. 101-73 provided that: ``The amendment made
by subsection (a)(1) [amending this section] shall take effect on
January 1, 1992.''
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 1430, 1438, 1441, 1441b of
this title.
