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Letter 44: Investment in the Common Stock of the Federal Agricultural Mortgage Corporation; Purchase of Securities Guaranteed by the Federal Agricultural Mortgage Corporation

The Agricultural Credit Act of 1987 provides for the creation of the Federal Agricultural Mortgage Corporation (Farmer Mac). The Federal Agricultural Mortgage Corporation will be a federally chartered instrumentality of the United States and an institution of the farm Credit System.

The purpose of the Federal Agricultural Mortgage Corporation is to provide a secondary marketing arrangement for agricultural real estate mortgages.

Section 8.4 of the Act provides that the Corporation may require each originator and each certified facility to make or commit to make nonrefundable capital contributions to the Corporation. The originator or certified facility will receive voting common stock for its capital contribution. Wisconsin state chartered banks may invest in the common stock of the Federal Agricultural Mortgage Corporation to the extent required to qualify for participation in the program.

Section 8.12 of the Act provides that securities representing an interest or obligations backed by pools of qualified loans with respect to which the Corporation has provided a guarantee shall be authorized investments to the same extent as obligations issued or guaranteed as to principal and interest by the United States. Section 221.29(1)(d), Wis. Stats., provides that banks may invest in obligations of the United States fully and unconditionally guaranteed by the United States without limit. Wisconsin state chartered banks may purchase securities guaranteed by the Corporation without limit.

Bkg. Ltr. #44, June 9, 1988, Commissioner Galecki