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U.S. Code as of:
01/19/04
Section 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.
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