I

104TH CONGRESS

2D SESSION H. R. 3167

To reform the Federal Home Loan Bank System, and for other purposes.

IN THE HOUSE OF REPRESENTATIVES

MARCH 27, 1996

Mr. BAKER of Louisiana (for himself, Mr. KANJORSKI, Mr. MCCOLLUM, Mr.

BACHUS, Mr. KING, Mr. HAYWORTH, Mr. CHRYSLER, Mr. CREMEANS,

Mr. FOX of Pennsylvania, Mr. METCALF, Mr. WELLER, Mr. LAFALCE,

Mr. ORTON, and Mr. BENTSEN) introduced the following bill; which was

referred to the Committee on Banking and Financial Services

A BILL

To reform the Federal Home Loan Bank System, and for

other purposes.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. SHORT TITLE; TABLE OF CONTENTS; FINDINGS.

4 (a) SHORT TITLE.—This Act may be cited as the

5 ‘‘Enterprise Resource Bank Act of 1996’’.

6 (b) TABLE OF CONTENTS.—The table of sections for

7 this Act is as follows:

Sec. 1. Short title; table of contents; findings.

Sec. 2. Redesignation of Federal home loan banks as enterprise resource banks.

Sec. 3. Provisions relating to banks and bank membership.

Sec. 4. Federal Housing Finance Board.

Sec. 5. The Office of Finance.
2

•HR 3167 IH

Sec. 6. Capital.

Sec. 7. Prompt corrective action.

Sec. 8. Management of banks.

Sec. 9. Sustainable economic development program.

Sec. 10. Enforcement authority to promote safety and soundness of enterprise

resource banks.

Sec. 11. Resolution Funding Corporation obligation.

Sec. 12. Powers and duties of banks; technical and conforming amendments.

Sec. 13. Incorporation of banks; corporate powers.

Sec. 14. Succession of enterprise resource banks.

Sec. 15. Definitions.

1 (c) FINDINGS.—The Congress finds the following:

2 (1) The Federal Home Loan Bank System was

3 established in 1932 primarily to provide a source of

4 intermediate- and long-term credit for State savings

5 institutions to finance long-term residential mort6 gages and to provide a source for liquidity loans for

7 such institutions, neither of which was readily avail8 able for such institutions at that time.

9 (2) Recently, the System’s membership has

10 been expanded to include other depository institu11 tions that are significant housing lenders.

12 (3) That portion of all savings associations and

13 other depository institutions which are specialized

14 mortgage lending has decreased, both with respect to

15 the volume of loans and as a percentage of market

16 share and may continue to decrease.

17 (4) The establishment of the Federal National

18 Mortgage Association, the Federal Home Loan

19 Mortgage Corporation, and the Government Na20 tional Mortgage Association and the subsequent de-
3

•HR 3167 IH

1 velopment of an extensive private secondary market

2 for residential mortgages has challenged the Federal

3 Home Loan Bank System as a source of

4 intermediate- and long-term credit to support pri5 mary residential mortgage lenders.

6 (5) For most depository institutions, residential

7 mortgage lending has been incorporated into a prod8 uct mix of community banking that typically pro9 vides a range of mortgage, consumer, and commer10 cial loans in their communities.

11 (6) Community banks have a difficult time

12 accessing capital markets and adequately funding

13 intermediate- and long-term assets held by the bank

14 for investment purposes, particularly community

15 banks located in rural areas where nonfarm busi16 nesses tend to rely heavily on community banks as

17 their primary lender.

18 (7) Since community banks in rural areas, like

19 savings associations in the 1930s, tend to draw most

20 of their funds from local deposits, credit for borrow21 ers in rural areas may be difficult to obtain and the

22 economy of rural America could benefit from in23 creased competition if community banks in rural

24 areas were provided with enhanced access to capital

25 markets.
4

•HR 3167 IH

1 (8) Access to liquidity through Federal home

2 loan banks greatly benefits well-managed, ade3 quately-capitalized community banks because—

4 (A) term advances reduce interest rate

5 risk; and

6 (B) the ability of a community bank to ob7 tain advances to offset deposit decreases or to

8 temporarily fund portfolios during an increase

9 in loan demands reduces the bank’s overall cost

10 of operation and allows the community bank to

11 better serve its market and community.

12 (9) Used prudently, the Federal Home Loan

13 Bank System is an integral tool to assist properly14 regulated, well-capitalized community banks, espe15 cially community banks in rural areas and under16 served neighborhoods, to obtain a more stable fund17 ing source for intermediate- and long-term assets.

18 SEC. 2. REDESIGNATION OF FEDERAL HOME LOAN BANKS

19 AS ENTERPRISE RESOURCE BANKS.

20 (a) IN GENERAL.—Each Federal home loan bank is

21 hereby redesignated as an enterprise resource bank.

22 (b) UNIVERSAL CONFORMING AMENDMENTS.—

23 (1) FEDERAL HOME LOAN BANK.—The Federal

24 Home Loan Bank Act (12 U.S.C. 1421 et seq.) is

25 amended by striking ‘‘Federal Home Loan Bank’’
5

•HR 3167 IH

1 and ‘‘Federal Home Loan Banks’’ each place such

2 terms appear in such Act (other than in connection

3 with a reference to the Federal Home Loan Bank

4 System) and inserting ‘‘enterprise resource bank’’

5 and ‘‘enterprise resource banks’’, respectively.

6 (2) FEDERAL HOME LOAN BANK SYSTEM.—The

7 Federal Home Loan Bank Act (12 U.S.C. 1421 et

8 seq.) is amended by striking ‘‘Federal Home Loan

9 Bank System’’ and inserting ‘‘enterprise resource

10 bank system’’.

11 (c) REDESIGNATION OF ACT.—

12 (1) IN GENERAL.—The Federal Home Loan

13 Bank Act (12 U.S.C. 1421 et seq.) is amended by

14 striking the clause that appears after the enacting

15 clause and before section 2 and inserting the follow16 ing new section:

17 ‘‘SECTION 1. SHORT TITLE.

18 ‘‘This Act may be cited as the ‘Enterprise Resource

19 Bank System Act’.’’.

20 (2) REFERENCES TO FEDERAL HOME LOAN

21 BANK ACT.—Any reference in this Act and any other

22 Federal law to the Federal Home Loan Bank Act

23 shall be deemed, as of the date of the enactment of

24 this Act, to be a reference to the Enterprise Re25 source Bank System Act.
6

•HR 3167 IH

1 (d) REFERENCES TO FEDERAL HOME LOAN

2 BANKS.—Any reference in a Federal law to any Federal

3 home loan bank shall be deemed, as of the date of the

4 enactment of this Act, to be a reference to an enterprise

5 resource bank.

6 SEC. 3. PROVISIONS RELATING TO BANKS AND BANK MEM7 BERSHIP.

8 The Federal Home Loan Bank Act (12 U.S.C. 1421)

9 is amended by inserting after section 4 the following new

10 section:

11 ‘‘SEC. 5. MISSION STATEMENT; ENTERPRISE RESOURCE

12 BANKS.

13 ‘‘(a) MISSION.—The enterprise resource banks are

14 established by the Congress as profitmaking financial in15 stitutions whose purposes are as follows:

16 ‘‘(1) To promote residential mortgage lending

17 (including mortgages on housing for low- and mod18 erate-income families).

19 ‘‘(2) To facilitate community and economic de20 velopment lending, including rural economic develop21 ment lending.

22 ‘‘(3) To assist such lending, safely and soundly,

23 through a program of collateralized advances and

24 other financial services that provide long-term fund25 ing, liquidity, operational, and interest rate risk
7

•HR 3167 IH

1 management to the bank’s shareholders and certain

2 mortgagees who are not shareholders of the bank.

3 ‘‘(b) DISTRICTS.—

4 ‘‘(1) IN GENERAL.—Subject to subsection (c),

5 there are 12 districts which shall be known as enter6 prise resource bank districts.

7 ‘‘(2) NAME OF DISTRICT.—Each district shall

8 bear a name descriptive of the geographic location of

9 the district.

10 ‘‘(3) DISTRICTS DESIGNATED.—Subject to sub11 section (c), the 12 districts shall be comprised as fol12 lows:

13 ‘‘(A) District 1 shall be composed of the

14 States of Connecticut, Maine, Massachusetts,

15 New Hampshire, Rhode Island, and Vermont.

16 ‘‘(B) District 2 shall be composed of the

17 States of New Jersey and New York, the Com18 monwealth of Puerto Rico, and the territory of

19 the Virgin Islands.

20 ‘‘(C) District 3 shall be composed of the

21 States of Delaware, Pennsylvania, and West

22 Virginia.

23 ‘‘(D) District 4 shall be composed of the

24 States of Alabama, Florida, Georgia, Maryland,
8

•HR 3167 IH

1 North Carolina, South Carolina, and Virginia,

2 and the District of Columbia.

3 ‘‘(E) District 5 shall be composed of the

4 States of Kentucky, Ohio, and Tennessee.

5 ‘‘(F) District 6 shall be composed of the

6 States of Indiana and Michigan.

7 ‘‘(G) District 7 shall be composed of the

8 States of Illinois and Wisconsin.

9 ‘‘(H) District 8 shall be composed of the

10 States of Iowa, Minnesota, Missouri, North Da11 kota, and South Dakota.

12 ‘‘(I) District 9 shall be composed of the

13 States of Arkansas, Louisiana, Mississippi, New

14 Mexico, and Texas.

15 ‘‘(J) District 10 shall be composed of the

16 States of Colorado, Kansas, Nebraska, and

17 Oklahoma.

18 ‘‘(K) District 11 shall be composed of the

19 States of Arizona, California, and Nevada.

20 ‘‘(L) District 12 shall be composed of the

21 States of Alaska, Hawaii, Idaho, Montana, Or22 egon, Utah, Washington, and Wyoming, and

23 the territories of Guam and the Pacific Islands.

24 ‘‘(4) SINGLE BANK IN EACH DISTRICT.—There

25 shall be 1 enterprise resource bank in each district.
9

•HR 3167 IH

1 ‘‘(5) NO ADDITIONAL BANKS AUTHORIZED.—No

2 additional enterprise resource banks may be char3 tered by the Finance Board after the date of the en4 actment of the Enterprise Resource Bank Act of

5 1996, except in connection with a transaction under

6 subsection (c).

7 ‘‘(c) MERGERS, CONSOLIDATIONS AND COMBINA8 TIONS OF BANKS.—

9 ‘‘(1) MERGER, CONSOLIDATION, AND COMBINA10 TION AUTHORITY.—In addition to the authority of

11 the Finance Board under section 6A and notwith12 standing subsection (b), 2 or more enterprise re13 source banks may merge or otherwise combine or

14 consolidate.

15 ‘‘(2) PREREQUISITES FOR TRANSACTION.—A

16 merger, combination, or consolidation of enterprise

17 banks may be consummated under this subsection

18 only if the transaction is approved by—

19 ‘‘(A) a majority of the board of directors

20 of each bank participating in the transaction;

21 and

22 ‘‘(B) the holders of a majority of the vot23 ing shares of capital stock of each such bank.

24 ‘‘(3) EFFECTIVE DATE OF TRANSACTION.—If

25 the requirements of paragraph (2) have been met, a
10

•HR 3167 IH

1 merger, combination, or consolidation of enterprise

2 resource banks shall be effective as of the date the

3 following conditions are met:

4 ‘‘(A) A certificate of merger, combination,

5 or consolidation (in such form as the Finance

6 Board shall prescribe) is—

7 ‘‘(i) executed by the banks participat8 ing in such transaction; and

9 ‘‘(ii) filed with the Finance Board in

10 accordance with section 12(a)(3).

11 ‘‘(B) The Finance Board has—

12 ‘‘(i) approved the transaction in ac13 cordance with paragraph (12)(A); or

14 ‘‘(ii) not disapproved the transaction

15 in accordance with paragraph (12)(B) be16 fore the end of the 120-day period begin17 ning on the date of the filing described in

18 subparagraph (A)(ii).

19 ‘‘(4) MERGER AGREEMENT.—

20 ‘‘(A) IN GENERAL.—Any merger, combina21 tion, or consolidation of enterprise resource

22 banks under this subsection shall be carried out

23 pursuant to an agreement entered into by all

24 the enterprise resource banks participating in

25 the transaction.
11

•HR 3167 IH

1 ‘‘(B) CONTENTS OF AGREEMENT.—Any

2 agreement referred to in subparagraph (A)

3 shall specify—

4 ‘‘(i) the terms and conditions of the

5 merger, combination, or consolidation;

6 ‘‘(ii) the amendments to the charter

7 documents of the resulting bank to be af8 fected by the transaction, if any;

9 ‘‘(iii) the location of the principal of10 fice of the resulting bank;

11 ‘‘(iv) the manner of converting the

12 shares of each of the banks participating

13 in the transaction into shares of the result14 ing bank; and

15 ‘‘(v) such other details or provisions

16 as are appropriate.

17 ‘‘(5) SUCCESSION IN INTEREST.—Upon the ef18 fective date of any merger, combination, or consoli19 dation of enterprise resource banks under this sub20 section—

21 ‘‘(A) the separate existence of any bank

22 participating in the transaction other than the

23 resulting bank shall cease to exist;

24 ‘‘(B) the resulting bank shall—
12

•HR 3167 IH

1 ‘‘(i) succeed to all the rights and

2 properties of each of the banks described

3 in subparagraph (A) without other trans4 fer; and

5 ‘‘(ii) be subject to all the debts and li6 abilities of each such bank in the same

7 manner as if the resulting bank had in8 curred such debts and liabilities.

9 ‘‘(6) EXISTING RIGHTS NOT AFFECTED.—This

10 subsection shall not affect any right of any creditor

11 of any enterprise resource bank which is participat12 ing in any merger, combination, or consolidation

13 under this subsection.

14 ‘‘(7) PRESERVATION OF LIENS.—All liens upon

15 the property of any enterprise resource bank which

16 is participating in any merger, combination, or con17 solidation under this subsection shall continue to be

18 effective after the consummation of the transaction

19 except that any lien upon property of any bank other

20 than the resulting bank shall be effective only with

21 respect to the property which was subject to the lien

22 immediately before consummation of the transaction.

23 ‘‘(8) CONTINUATION OF SUITS.—

24 ‘‘(A) IN GENERAL.—No action or other

25 proceeding commenced by or against any enter-
13

•HR 3167 IH

1 prise resource bank which is participating in

2 any merger, combination, or consolidation

3 under this subsection shall abate by reason of

4 the consummation of such transaction.

5 ‘‘(B) SUBSTITUTION OF RESULTING

6 BANK.—In any action or proceeding described

7 in subparagraph (A), the enterprise resource

8 bank resulting from the transaction referred to

9 in such subparagraph shall be substituted for

10 the enterprise resource bank involved in such

11 action or proceeding before the consummation

12 of the transaction.

13 ‘‘(C) APPLICABILITY TO RESULTING

14 BANK.—Any final judgment or other determina15 tion which becomes final in any action or pro16 ceeding described in subparagraph (A) shall be

17 binding on the bank resulting from the trans18 action referred to in such subparagraph.

19 ‘‘(9) NUMBER OF ELECTED DIRECTORS OF RE20 SULTING BANK.—Subject to section 7(a), any Bank

21 resulting from a merger, combination, or consolida22 tion pursuant to this section may have a number of

23 elected directors equal to or less than the total num24 ber of elected directors of all the banks which par-
14

•HR 3167 IH

1 ticipated in such transaction (as determined imme2 diately before such transaction).

3 ‘‘(10) NUMBER OF APPOINTED DIRECTORS OF

4 RESULTING BANK.—The number of appointed direc5 tors of any enterprise resource bank resulting from

6 a merger, combination, or consolidation pursuant to

this section shall be not less than 1 7 ⁄2 and not more

than 3 8 ⁄4 of the number of elected directors.

9 ‘‘(11) ADJUSTMENT OF DISTRICT BOUND10 ARIES.—After a merger, combination, or consolida11 tion of 2 or more enterprise resource banks under

12 this subsection is consummated, the Finance Board

13 shall adjust the districts established pursuant to

14 subsection (b) to reflect such merger, combination,

15 or consolidation.

16 ‘‘(12) FINANCE BOARD AUTHORITY.—Upon re17 ceipt of a certificate of merger, combination, or con18 solidation filed with the Finance Board in accord19 ance with section 12(a)(3), the Finance Board

20 may—

21 ‘‘(A) approve the transaction on the basis

22 of a determination that the transaction provides

23 for a resulting enterprise resource bank which

24 is safe and sound; or
15

•HR 3167 IH

1 ‘‘(B) disapprove the transaction on the

2 basis of a determination that the transaction

3 does not provide for a resulting enterprise re4 source bank which is safe and sound.

5 ‘‘(d) PROHIBITION ON JOINT OFFICES.—Except with

6 regard to the office of finance or to the extent specifically

7 provided in this Act, there shall be no joint or collective

8 offices of the enterprise resource banks.’’.

9 SEC. 4. FEDERAL HOUSING FINANCE BOARD.

10 (a) IN GENERAL.—Section 3 of the Federal Home

11 Loan Bank Act (12 U.S.C. 1423) is amended to read as

12 follows:

13 ‘‘SEC. 3. FEDERAL HOUSING FINANCE BOARD.

14 ‘‘(a) ESTABLISHMENT.—

15 ‘‘(1) IN GENERAL.—There shall be a Federal

16 Housing Finance Board in the executive branch

17 which shall be an independent agency to regulate the

18 safety and soundness of the enterprise resource

19 banks.

20 ‘‘(2) DUTIES.—The duties of the Finance

21 Board shall be the following:

22 ‘‘(A) To ensure that the enterprise re23 source banks—

24 ‘‘(i) operate in accordance with this

25 Act and in a safe and sound manner; and
16

•HR 3167 IH

1 ‘‘(ii) remain adequately capitalized.

2 ‘‘(B) To ensure that programs adminis3 tered by any enterprise resource bank are con4 sistent with, and contribute to the fulfillment

5 of, the mission of the bank.

6 ‘‘(C) To provide periodic reports to the

7 Congress regarding the safety and soundness

8 and the composition of the shareholders in the

9 enterprise resource banks and the extent to

10 which such banks are fulfilling their mission.

11 ‘‘(3) CLARIFICATION OF AUTHORITY OF FI12 NANCE BOARD.—The Finance Board shall have no

13 authority—

14 ‘‘(A) to manage the operations of any en15 terprise resource bank;

16 ‘‘(B) to manage the sustainable economic

17 development program of any enterprise resource

18 bank, including the community investment pro19 gram or the affordable housing program of any

20 such bank; or

21 ‘‘(C) to approve or disapprove funding by

22 any such bank for any program referred to in

23 subparagraph (B).

24 ‘‘(b) COMPOSITION OF FINANCE BOARD.—
17

•HR 3167 IH

1 ‘‘(1) IN GENERAL.—Subject to paragraph (9),

2 the Finance Board shall be composed of 5 directors

3 as follows:

4 ‘‘(A) The Secretary of the Department of

5 Housing and Urban Development, who shall

6 serve without additional compensation.

7 ‘‘(B) 3 directors appointed by the Presi8 dent, by and with the advice and consent of the

9 Senate, from among individuals who—

10 ‘‘(i) are citizens of the United States;

11 and

12 ‘‘(ii) have—

13 ‘‘(I) extensive experience or

14 training in housing finance, commu15 nity and economic development (in16 cluding rural economic development),

17 financial safety and soundness regula18 tion, or extensive experience with an

19 organization which represents

20 consumer or community interest in

21 banking services, credit needs, hous22 ing, financial consumer protection, or

23 small businesses; and
18

•HR 3167 IH

1 ‘‘(II) a commitment to provide

2 specialized housing, small business, or

3 rural credit.

4 ‘‘(C) 1 director appointed by the President,

5 by and with the advice and consent of the Sen6 ate, from among individuals who—

7 ‘‘(i) are citizens of the United States;

8 and

9 ‘‘(ii) have extensive experience or

10 training in financial safety and soundness

11 regulation.

12 ‘‘(2) TERMS.—

13 ‘‘(A) IN GENERAL.—Each director of the

14 Finance Board appointed under subparagraph

15 (B) or (C) of paragraph (1) shall be appointed

16 for a term of 7 years.

17 ‘‘(B) INTERIM APPOINTMENTS.—Any di18 rector appointed to fill a vacancy occurring be19 fore the expiration of the term for which such

20 director’s predecessor was appointed shall be

21 appointed only for the remainder of such term.

22 ‘‘(C) CONTINUATION OF SERVICE.—Each

23 director may continue to serve after the expira24 tion of the term to which such director was ap-
19

•HR 3167 IH

1 pointed until a successor has been appointed

2 and qualified.

3 ‘‘(3) CHAIRPERSON AND ACTING CHAIR4 PERSON.—

5 ‘‘(A) CHAIRPERSON.—The President shall

6 designate 1 of the directors appointed pursuant

7 to subparagraph (B) or (C) of paragraph (1) to

8 be the Chairperson of the Finance Board.

9 ‘‘(B) SERVICE AS CHIEF EXECUTIVE OFFI10 CER.—The Chairperson shall be the chief exec11 utive officer of the Finance Board.

12 ‘‘(C) ACTING CHAIRPERSON.—

13 ‘‘(i) IN GENERAL.—The Chairperson

14 shall designate another director to serve as

15 Acting Chairperson during the absence or

16 disability of the Chairperson.

17 ‘‘(ii) SELECTION BY DIRECTORS.—If a

18 designation by the Chairperson has not

19 been made pursuant to clause (i) and the

20 position of Chairperson becomes vacant,

21 the remaining directors shall elect a direc22 tor to serve as the Acting Chairperson

23 until a Chairperson has been appointed.

24 ‘‘(D) POWERS AND RESPONSIBILITY OF

25 CEO.—
20

•HR 3167 IH

1 ‘‘(i) IN GENERAL.—As the chief exec2 utive officer, the Chairperson shall be re3 sponsible for—

4 ‘‘(I) the overall management, or5 ganization, and functioning of the Fi6 nance Board in accordance with the

7 policies established and regulations

8 prescribed by the Finance Board;

9 ‘‘(II) directing the implementa10 tion of regulations prescribed and

11 policies established by the Finance

12 Board; and

13 ‘‘(III) appoint, remove, promote,

14 direct, and set rates of compensation

15 for employees, attorneys, and agents

16 of the Finance Board consistent with

17 the policies established by the Finance

18 Board pursuant to subsection (e)(1).

19 ‘‘(ii) MEETINGS.—The Chairperson

20 may call a meeting of the Finance Board.

21 ‘‘(iii) DELEGATION.—The Chairperson

22 may delegate any authority of the Chair23 person as the chief executive officer of the

24 Finance Board to any officer or employee
21

•HR 3167 IH

1 of the Finance Board, including another

2 director of the Finance Board.

3 ‘‘(iv) GOVERNING STANDARDS.—In

4 carrying out the duties of the chief execu5 tive officer, the Chairperson shall be sub6 ject to and governed by the policies adopt7 ed by the Finance Board and any regu8 latory decision, finding, or determination

9 made by the Finance Board.

10 ‘‘(4) REPRESENTATIONAL REQUIREMENTS.—

11 ‘‘(A) POLITICAL AFFILIATION.—Not more

12 than 2 directors may be members of the same

13 political party.

14 ‘‘(B) DISTRICT REPRESENTATION.—Not

15 more than 1 director may be appointed from

16 any single district of the enterprise resource

17 Bank System.

18 ‘‘(5) VACANCY.—Any vacancy on the Finance

19 Board shall be filled in the manner in which the

20 original appointment was made.

21 ‘‘(6) LIMITATIONS ON CONFLICTS OF INTER22 EST.—No director on the Finance Board may, while

23 serving as a director—
22

•HR 3167 IH

1 ‘‘(A) serve as a director, officer, employee,

2 counsel, or agent of any enterprise resource

3 bank; or

4 ‘‘(B) hold shares of, serve as a director, of5 ficer, employee, counsel, or agent of, or have

6 any other financial interest in any member of

7 any such bank.

8 ‘‘(7) FULL-TIME SERVICE.—No director other

9 than the Chairperson may serve on the Finance

10 Board on a full-time basis.

11 ‘‘(8) QUORUM.—3 directors shall constitute a

12 quorum.

13 ‘‘(9) DELEGATION BY SECRETARY.—The Sec14 retary of Housing and Urban Development may del15 egate such Secretary’s position on the Finance

16 Board to an officer of such Secretary’s agency who

17 has been appointed to such office by the President,

18 by and with the advice and consent of the Senate.

19 ‘‘(10) TRANSITIONAL PROVISION.—

20 ‘‘(A) CONTINUED SERVICE OF FEDERAL

21 HOUSING FINANCE BOARD DIRECTORS.—Any

22 director of the Federal Housing Finance Board

23 whose term has not expired before the date of

24 enactment of the Enterprise Resource Bank Act

25 of 1996 shall remain a director of the Finance
23

•HR 3167 IH

1 Board and shall be deemed to have been ap2 pointed under subparagraph (B) or (C) of para3 graph (1), as designated by the President.

4 ‘‘(B) TERMS OF APPOINTMENT.—Subject

5 to subparagraph (C), the President shall deter6 mine the length of the term of any director de7 scribed in subparagraph (A) and shall deter8 mine which director described in subparagraph

9 (A), if any, shall serve as the Chairperson of

10 the Finance Board.

11 ‘‘(C) STAGGERED TERMS.—In establishing

12 the terms of any director under subparagraph

13 (B), the President shall provide that 1 such di14 rector shall serve a 1-year term, 1 director shall

15 serve a 3-year term, and 1 director shall serve

16 a 5-year term.

17 ‘‘(c) GENERAL POWERS.—Subject to subsection

18 (a)(3), the Finance Board shall have the following powers:

19 ‘‘(1) To maintain such oversight of the enter20 prise resource banks and the office of finance as

21 may be necessary to ensure that such banks and the

22 office of finance operate in accordance with this Act

23 and in a financially safe and sound manner.

24 ‘‘(2) To prescribe or issue, and enforce, such

25 regulations and orders as the Finance Board deter-
24

•HR 3167 IH

1 mines to be necessary to carry out the provisions of

2 this Act.

3 ‘‘(3) To suspend or remove for cause a director,

4 officer, employee, or agent of any enterprise resource

5 bank or the office of finance.

6 ‘‘(4) To determine necessary expenditures of

7 the Finance Board under this Act and the manner

8 in which such expenditures shall be incurred, al9 lowed, and paid.

10 ‘‘(5) To use the United States mails in the

11 same manner and under the same conditions as a

12 department or agency of the United States.

13 ‘‘(6) To sue and be sued and to complain and

14 defend, by and through the Finance Board’s own at15 torneys, in any action brought by or against the Fi16 nance Board in any court of competent jurisdiction.

17 ‘‘(7) To make contracts.

18 ‘‘(8) To exercise incidental powers that are con19 sistent with this Act and are appropriate to carry

20 out the provisions of this Act.

21 ‘‘(d) RECEIPTS OF THE FINANCE BOARD.—

22 ‘‘(1) DEPOSIT IN TREASURY.—Receipts of the

23 Finance Board derived from assessments imposed on

24 the enterprise resource banks and from other
25

•HR 3167 IH

1 sources shall be deposited in an account of the Fi2 nance Board in the Treasury of the United States.

3 ‘‘(2) PAYMENT OF EXPENSES.—Salaries of the

4 directors and other employees of the Finance Board

5 and all other expenses of the Finance Board may be

6 paid from the receipts described in paragraph (1).

7 ‘‘(3) TREATMENT OF AMOUNTS RECEIVED.—

8 Notwithstanding any other provision of law—

9 ‘‘(A) no amount received by the Finance

10 Board pursuant to any assessment imposed on

11 any enterprise resource bank or any other in12 come of the Finance Board may be construed

13 to be Government funds or appropriated money;

14 ‘‘(B) no authority of the Finance Board to

15 spend or otherwise obligate any such amount

16 may be treated as budget authority, spending

17 authority, or credit authority or as authority to

18 obligate funds of the United States, notwith19 standing the fact that the receipts described in

20 paragraph (1) are deposited in the account of

21 the Finance Board in the Treasury; and

22 ‘‘(C) no such amount shall be subject to

23 apportionment for purposes of chapter 15 of

24 title 31, United States Code, or under any

25 other authority.
26

•HR 3167 IH

1 ‘‘(e) STAFF.—

2 ‘‘(1) IN GENERAL.—The Finance Board may

3 provide for the employment, direction, compensation,

4 and number of employees, attorneys, and agents of

5 the Finance Board.

6 ‘‘(2) PROHIBITION ON DELEGATION TO BANKS

7 OR THE OFFICE OF FINANCE.—The Finance Board

8 may not delegate, or provide for the delegation of,

9 any function of the Finance Board to any employee

10 or administrative unit of any bank or the office of

11 finance.

12 ‘‘(3) RESTATEMENT OF PRIOR LAW.—The com13 pensation of staff, attorneys, and agents shall be

14 paid without regard to the provisions of other laws

15 applicable to officers or employees of the United

16 States, except that the chairperson and the other ap17 pointed directors shall be compensated pursuant to

18 sections 5314 and 5315 of title 5, United States

19 Code, respectively.

20 ‘‘(f) ANNUAL REPORTS.—

21 ‘‘(1) BOARD REPORTS.—The Finance Board

22 shall make an annual report to the Congress regard23 ing—
27

•HR 3167 IH

1 ‘‘(A) the safety and soundness of the en2 terprise resource banks and the office of fi3 nance;

4 ‘‘(B) the fulfillment of the mission of the

5 banks under this Act; and

6 ‘‘(C) the composition of the shareholders in

7 the enterprise resource banks.

8 ‘‘(2) BANK REPORTS.—The enterprise resource

9 banks shall submit a collective annual report to the

10 Finance Board on the fulfillment of the mission of

11 the banks under this Act.

12 ‘‘(3) AFFORDABLE HOUSING ADVISORY COUN13 CILS.—The affordable housing advisory councils of

14 the enterprise resource banks shall each submit an

15 annual report to the Finance Board on the fulfill16 ment by such bank of its affordable housing mission

17 under section 10.

18 ‘‘(g) SUSPENSION OR REMOVAL OF BANK EMPLOY19 EES FOR CAUSE.—

20 ‘‘(1) WRITTEN NOTICE.—In exercising any au21 thority under subsection (c)(3) to suspend or remove

22 for cause a director, officer, employee, or agent of

23 any enterprise resource bank or the office of finance,

24 the Finance Board shall provide written notice of

25 such suspension or removal and the cause of the sus-
28

•HR 3167 IH

1 pension or removal to such director, officer, em2 ployee, or agent and to such bank or office.

3 ‘‘(2) HEARING.—The notice provided pursuant

4 to paragraph (1) shall establish the time and place

5 for a hearing on the suspension or removal in ac6 cordance with section 554 of title 5, United States

7 Code.’’.

8 (b) INDEPENDENCE OF FINANCE BOARD.—Section

9 111 of Public Law 93–495 (12 U.S.C. 250) is amended

10 by striking ‘‘the Federal Home Loan Bank Board,’’ and

11 inserting ‘‘the Director of the Office of Thrift Supervision,

12 the Federal Housing Finance Board,’’.

13 SEC. 5. THE OFFICE OF FINANCE.

14 Section 4 of the Federal Home Loan Bank Act (12

15 U.S.C. 1424) is amended to read as follows:

16 ‘‘SEC. 4. THE OFFICE OF FINANCE.

17 ‘‘(a) OPERATION.—The enterprise resource banks

18 shall operate jointly an office of finance (hereafter in this

19 section referred to as the ‘office’) to issue the notes, bonds,

20 and debentures of the enterprise resource banks in accord21 ance with this Act.

22 ‘‘(b) POWERS.—Subject to the other provisions of

23 this Act and such safety and soundness regulations as the

24 Finance Board may prescribe, the office shall be author25 ized by the enterprise resource banks to act as the agent
29

•HR 3167 IH

1 of such banks to issue enterprise resource bank notes,

2 bonds and debentures pursuant to section 11 of this Act

3 on behalf of the banks.

4 ‘‘(c) CENTRAL BOARD OF DIRECTORS.—

5 ‘‘(1) ESTABLISHMENT.—The enterprise re6 source banks shall establish a central board of direc7 tors of the office of finance to administer the affairs

8 of the office in accordance with the provisions of this

9 Act.

10 ‘‘(2) COMPOSITION OF BOARD.—Each enter11 prise resource bank shall annually select 1 individual

12 who, as of the time of the election, is an officer or

13 director of such bank to serve as a member of the

14 policy review board.

15 ‘‘(d) STATUS.—Except to the extent expressly pro16 vided in this Act, the office shall be treated as an enter17 prise resource bank for purposes of any law.

18 ‘‘(e) MONITORING INVESTMENT EXPOSURE.—

19 ‘‘(1) DAILY POSITION REPORTING REQUIRED.—

20 ‘‘(A) IN GENERAL.—Beginning 30 days

21 after the date of the enactment of the Enter22 prise Resource Bank Act of 1996, each enter23 prise resource bank shall regularly report the

24 bank’s closing position on all of the bank’s in25 vestments and qualified financial contracts (as
30

•HR 3167 IH

1 defined in section 11(e)(8)(D) of the Federal

2 Deposit Insurance Act) to the Finance Board.

3 ‘‘(B) FINANCE BOARD REQUIREMENTS.—

4 The Finance Board may specify the contents of

5 the reports required under subparagraph (A).

6 ‘‘(2) SYSTEM PROCEDURES.—In addition to the

7 reports required under paragraph (1), the Finance

8 Board, the enterprise resource banks, and the office

9 shall jointly establish procedures for monitoring the

10 investment exposure, including credit and interest

11 rate risk, of the banks’ individual and combined in12 vestment portfolios.’’.

13 SEC. 6. CAPITAL.

14 (a) IN GENERAL.—Section 6 of the Federal Home

15 Loan Bank Act (12 U.S.C. 1426) is amended by striking

16 all that precedes subsection (h) and inserting the follow17 ing:

18 ‘‘SEC. 6. CAPITAL STRUCTURE OF ENTERPRISE RESOURCE

19 BANKS.

20 ‘‘(a) CAPITAL STRUCTURE PLAN.—Before the end of

21 the 6-month period beginning on the date of the enact22 ment of the Enterprise Resource Bank Act of 1996, the

23 board of directors of each enterprise resource bank shall

24 complete a plan for establishing and implementing a cap25 ital structure for such bank which—
31

•HR 3167 IH

1 ‘‘(1) the board of directors determines is the

2 best suited for the condition and operation of the

3 bank and the interests of the stockholders of the

4 bank;

5 ‘‘(2) meets the requirements of subsection (b);

6 and

7 ‘‘(3) meets the minimum capital standards and

8 requirements established under subsection (c) and

9 any regulations prescribed by the Finance Board

10 pursuant to such subsection.

11 ‘‘(b) CONTENTS OF PLAN.—The capital structure of

12 each enterprise resource bank shall meet the following re13 quirements:

14 ‘‘(1) REDUCTION OF EQUITY INVESTMENTS.—

15 The plan shall include a timetable for reducing, by

16 such amount as the board of directors may deter17 mine to be appropriate, the amount of the equity in18 vestment of the shareholders of the bank as of the

19 date of the enactment of the Enterprise Resource

20 Bank Act of 1996.

21 ‘‘(2) UNIFORM STANDARDS FOR SHAREHOLD22 ERS.—The plan shall establish uniform standards,

23 criteria, and requirements for the issuance of shares

24 of any class of stock of the bank.
32

•HR 3167 IH

1 ‘‘(3) PROCEDURE FOR MEETING CORE CAPITAL

2 REQUIREMENT.—The plan shall establish the proc3 ess by which the bank may meet the core capital re4 quirement in subsection (c)(5) as soon as practicable

5 after the date of the enactment of the Enterprise

6 Resource Bank Act of 1996.

7 ‘‘(4) LIMITED TRANSFERABILITY OF STOCK.—

8 The plan shall provide that any equity securities is9 sued by the bank shall be available only to, held only

10 by, and tradable only among, shareholders of the

11 bank or institutions eligible to become stockholders

12 of the bank under subsection (d).

13 ‘‘(5) DESCRIPTION OF STOCK AND RIGHTS OF

14 STOCKHOLDERS.—The plan shall provide for and de15 scribe the terms, rights (voting, liquidation, and

16 other rights), and preferences (such as dividends) of

17 not more than 2 classes of stock and any class or

18 series of any other type of equity security issued or

19 to be issued by the bank.

20 ‘‘(6) ACQUISITION, TRANSFER, AND REDEMP21 TION OF STOCK.—The plan shall identify the man22 ner in which any equity securities to be issued by

23 the bank may be sold, transferred, or redeemed.

24 ‘‘(7) FINAL DISPOSITION OF OWNERSHIP IN25 TERESTS OF STOCKHOLDER.—The plan shall provide
33

•HR 3167 IH

1 for the manner of disposition of any outstanding eq2 uity securities held by, and the liquidation of any

3 claims of the bank against, a stockholder who pro4 vides notice of intention to dispose of all ownership

5 interest in the enterprise resource bank.

6 ‘‘(c) CAPITAL STANDARDS.—

7 ‘‘(1) IN GENERAL.—The Finance Board shall

8 prescribe, by regulation, uniform capital standards

9 applicable to each enterprise resource bank which

10 shall include—

11 ‘‘(A) a leverage limit;

12 ‘‘(B) a risk-based capital requirement; and

13 ‘‘(C) a core capital requirement.

14 ‘‘(2) RISK-BASED CAPITAL TEST.—The Finance

15 Board shall establish a risk-based capital test sub16 stantially similar to the risk-based capital test estab17 lished by the Director of the Office of Federal Hous18 ing Enterprise Oversight of the Department of

19 Housing and Urban Development pursuant to sec20 tion 1361 of the Federal Housing Enterprises Fi21 nancial Safety and Soundness Act of 1992, with

22 such modifications as the Finance Board determines

23 appropriate to reflect differences in operation be24 tween the enterprise resource bank system and the
34

•HR 3167 IH

1 enterprises (as defined in section 1303(6) of such

2 Act).

3 ‘‘(3) MINIMUM LEVERAGE LIMIT.—The leverage

4 limit established by the Finance Board shall require

5 each enterprise resource bank to maintain total cap6 ital in an amount not less than the applicable

7 amount in the following subparagraphs, as deter8 mined in accordance with generally accepted ac9 counting principles:

10 ‘‘(A) 5 percent of the total assets of the

11 bank, during any period in which—

12 ‘‘(i) the bank does not meet the re13 quirement of paragraph (5); and

14 ‘‘(ii) the amount of the capital of the

15 bank which is taken into account under

16 paragraph (5) is less than 0.5 percent of

17 such total assets.

18 ‘‘(B) 4.5 percent of the total assets of the

19 bank, during any period in which—

20 ‘‘(i) the bank does not meet the re21 quirement of paragraph (5); and

22 ‘‘(ii) the amount of the capital of the

23 bank which is taken into account under

24 paragraph (5) is 0.5 percent or more, and

25 less than 1 percent, of such total assets.
35

•HR 3167 IH

1 ‘‘(C) 4 percent of the bank’s total assets

2 during any period in which—

3 ‘‘(i) the amount of the capital of the

4 bank which is taken into account under

5 paragraph (5) is 1 percent or more of such

6 total assets; and

7 ‘‘(ii) the bank is obligated, under sec8 tion 21B(f)(2)(C), to provide funding to

9 cover interests payments on obligations is10 sued by the Resolution Funding Corpora11 tion.

12 ‘‘(D) 3 percent of the bank’s total assets

13 during any other period.

14 ‘‘(4) RISK-BASED CAPITAL STANDARD.—The

15 risk-based capital standard established by the Fi16 nance Board shall require each enterprise resource

17 bank to maintain total capital in an amount not less

18 than the greater of the following:

19 ‘‘(A) 10 percent of the risk-adjusted assets

20 of the bank, as determined using the risk

21 weighting established by the Bank for Inter22 national Settlements pursuant to the Basel Ac23 cord.

24 ‘‘(B) The amount which enables the bank

25 to maintain a positive equity account under the
36

•HR 3167 IH

1 application of the risk-based capital test estab2 lished by the Finance Board pursuant to para3 graph (2).

4 ‘‘(5) CORE UNREDEEMABLE CAPITAL REQUIRE5 MENT.—

6 ‘‘(A) IN GENERAL.—Subject to subpara7 graph (B), the Finance Board shall require

8 each enterprise resource bank to maintain, as

9 soon as practicable after the date of the enact10 ment of the Enterprise Resource Bank Act of

11 1996, such amount of total capital as the Fi12 nance Board may prescribe in any of the follow13 ing forms or combination of forms:

14 ‘‘(i) Retained earnings.

15 ‘‘(ii) A risk-insurance pool.

16 ‘‘(iii) Nonredeemable stock of the

17 bank.

18 ‘‘(iv) Stock of the bank as to which

19 any right to redeem is explicitly suspended

20 during any period in which the bank is

21 undercapitalized.

22 ‘‘(B) MINIMUM AMOUNT.—The amount

23 prescribed by the Finance Board under sub24 paragraph (A) may not be less than 1 percent

25 of the total assets of the bank.
37

•HR 3167 IH

1 ‘‘(d) CRITERIA FOR ELIGIBILITY FOR OWNERSHIP

2 INTEREST IN A BANK.—

3 ‘‘(1) IN GENERAL.—Any insured depository in4 stitution and insured credit union, and, except as

5 provided in paragraph (5), only such institutions

6 and credit unions, may acquire and retain shares of

7 stock of an enterprise resource bank.

8 ‘‘(2) RULES AND REQUIREMENTS.—Subject to

9 the requirements of this section, the board of direc10 tors of each enterprise resource bank shall promptly

11 prescribe regulations, consistent with this Act, gov12 erning the capital stock of such bank and other pro13 visions of this section.

14 ‘‘(3) WHOLE MORTGAGE TEST FOR LARGE DE15 POSITORY INSTITUTIONS.—

16 ‘‘(A) IN GENERAL.—Notwithstanding para17 graph (1), an institution which has total assets

18 of $500,000,000 or more at any time after

19 June 30, 1998, shall not be eligible to obtain

20 new long-term advances from an enterprise re21 source bank if the institution does not maintain

22 an investment in whole mortgage loans in ac23 cordance with the following table:

Not less than the following percent of the total assets of

the institution are invested

‘‘Annually— in whole mortgage loans—

During the 1-year period beginning on July 1, 1998 .............. 7%
38

•HR 3167 IH

Not less than the following percent of the total assets of

the institution are invested

‘‘Annually— in whole mortgage loans—

During the 1-year period beginning on July 1, 1999 .............. 8%

During the 1-year period beginning on July 1, 2000 .............. 9%

After June 30, 2001 ................................................................ 10%

1 ‘‘(B) WHOLE MORTGAGE LOAN DE2 FINED.—For purposes of this subsection, the

3 term ‘whole mortgage loan’ does not include—

4 ‘‘(i) a partial interest in a residential

5 mortgage on improved residential real

6 property; or

7 ‘‘(ii) a security that represents an in8 terest in a residential mortgage loan.

9 ‘‘(4) DESIGNATION OF BANK.—An institution

10 which is eligible to acquire and retain shares of an

11 enterprise resource bank under paragraph (1) may

12 only acquire the shares of, or secure advances

13 from—

14 ‘‘(A) the enterprise resource bank of the

15 district in which is located the institution’s

16 principal place of business; or

17 ‘‘(B) the bank of a district adjoining the

18 district described in subparagraph (A) if—

19 ‘‘(i) demanded by convenience; and

20 ‘‘(ii) an application by such institution

21 to the bank and the Finance Board for the

22 acquisition of shares of such bank is—
39

•HR 3167 IH

1 ‘‘(I) approved by the bank; and

2 ‘‘(II) not disapproved by the Fi3 nance Board before the end of the 30-

4 day period beginning on the date the

5 Finance Board receives the applica6 tion from such institution.

7 ‘‘(5) EXCEPTION FOR CERTAIN

8 NONDEPOSITORY INSTITUTIONS.—Any company

9 which, as of the day before the date of the enact10 ment of the Enterprise Resource Bank Act of 1996,

11 was a member of a Federal home loan bank may

12 continue, subject to this Act, to be a voting share13 holder of the bank after such date with all rights

14 and privileges as a voting shareholder.

15 ‘‘(e) CAPITAL STOCK.—

16 ‘‘(1) CLASSES OF STOCK.—

17 ‘‘(A) VOTING CAPITAL STOCK.—No enter18 prise resource bank may issue more than 1

19 class of voting capital stock.

20 ‘‘(B) PREFERRED STOCK.—

21 ‘‘(i) IN GENERAL.—The board of di22 rectors of any enterprise resource bank

23 may authorize the bank to issue a floating

24 rate preferred stock with cumulative divi25 dend which may be transferred at any time
40

•HR 3167 IH

1 to another stockholder of the bank but

2 may not be redeemed for at least 2 years

3 after the date of issuance.

4 ‘‘(ii) ELIGIBILITY FOR CORE CAPITAL

5 POOL.—Preferred stock issued under this

6 subparagraph may be taken into account

7 for purposes of the core capital require8 ment in subsection (c)(5).

9 ‘‘(iii) ISSUANCE TO VOTING SHARE10 HOLDERS.—Only voting shareholders may

11 acquire and retain preferred stock issued

12 by an enterprise resource bank under this

13 subparagraph.

14 ‘‘(2) MINIMUM AND MAXIMUM INVESTMENT RE15 QUIREMENTS AUTHORIZED.—

16 ‘‘(A) IN GENERAL.—The board of directors

17 of each enterprise resource bank may establish

18 any minimum investment requirement and any

19 maximum amount limit on the total amount of

20 voting capital stock which may be held directly

21 or indirectly by any stockholder as the board of

22 directors determines to be appropriate and con23 sistence with the mission of the bank.
41

•HR 3167 IH

1 ‘‘(B) BASIS FOR REQUIREMENT.—A mini2 mum investment requirement or maximum in3 vestment limit may be based on—

4 ‘‘(i) a fixed dollar amount;

5 ‘‘(ii) a percentage of the total assets

6 of the shareholder;

7 ‘‘(iii) a percentage of the total amount

8 of voting shares of the bank which are con9 trolled by the shareholder; or

10 ‘‘(iv) such other criteria as the board

11 of directors may, in the discretion of the

12 board, determine to be reasonable.

13 ‘‘(C) ADVANCES-RELATED REQUIRE14 MENT.—The minimum investment of each

15 shareholder of an enterprise resource bank in

16 the voting stock of such bank, as determined on

17 the basis of the amount of outstanding ad18 vances from such bank to the member, shall be

19 an amount which is equal to not less than 3.0

20 percent of such advances and not more than 6.0

21 percent of such advances, as determined by the

22 board of directors of the bank from time to

23 time.

24 ‘‘(3) DIVESTITURE.—The board of directors of

25 any enterprise resource bank may order, after a
42

•HR 3167 IH

1 hearing, the divestiture by any stockholder of all

2 ownership interests of such stockholder in the bank,

3 if—

4 ‘‘(A) in the opinion of the board of direc5 tors, such stockholder has failed to comply with

6 a provision of this Act, any regulation pre7 scribed under this Act, or any other applicable

8 law; or

9 ‘‘(B) the stockholder has been determined

10 to be insolvent, or otherwise subject to the ap11 pointment of a conservator, receiver, or other

12 legal custodian, by a state or Federal authority

13 with regulatory and supervisory responsibility

14 for such member.

15 ‘‘(4) RETIREMENT OF STOCK DISTRICT-WIDE.—

16 ‘‘(A) IN GENERAL.—Upon a determination

17 of the board of directors of an enterprise re18 source bank, a bank may retire all, or any por19 tion, of the outstanding stock of the bank in ex20 cess of the total of any applicable minimum in21 vestment amounts of all stockholders of the

22 bank, if the board of directors determines that

23 the bank is adequately capitalized, and would

24 remain adequately capitalized if all of the fol-
43

•HR 3167 IH

1 lowing stocks were deducted from the bank’s

2 capital:

3 ‘‘(i) Stock of the bank which the bank

4 proposes to retire under this subpara5 graph.

6 ‘‘(ii) Stock of the bank which is sub7 ject to pending applications for retirement,

8 and pending notices of intention to dispose

9 of all stock of the bank.

10 ‘‘(B) RETIREMENT REQUIRED TO BE MADE

11 ON A PRO RATA BASIS.—The determination of

12 the amount of shares held by each stockholder

13 of a bank which are subject to retirement pur14 suant to a determination by the board of direc15 tors of the bank in accordance with subpara16 graph (A) shall be made on a pro rata basis for

17 like stock.

18 ‘‘(C) RETIREMENT SUBJECT TO MINIMUM

19 INVESTMENT REQUIREMENTS.—No retirement

20 of shares held by a stockholder of a bank may

21 be made under this paragraph to the extent

22 such retirement of shares would cause the

23 amount of such stockholder’s remaining invest24 ment in the capital stock of the bank after such
44

•HR 3167 IH

1 retirement to fall below any applicable mini2 mum investment amount.

3 ‘‘(5) IMPAIRMENT OF CAPITAL.—If the Finance

4 Board or the board of directors of an enterprise re5 source bank determines that the paid-in capital of

6 the bank is likely to be impaired as a result of losses

7 in or depreciation of the assets of the bank, the en8 terprise resource bank shall withhold that portion of

9 the amount due any stockholder with respect to any

10 redemption or retirement of stock which bears the

11 same ratio to the total of such amount as the

12 amount of the impaired capital bears to the total

13 amount of capital.

14 ‘‘(6) POLICIES.—Subject to the requirements of

15 this section, the board of directors of each enterprise

16 resource bank shall promptly establish policies, con17 sistent with this Act, governing the capital stock of

18 such bank and other provisions of this section.’’.

19 (b) REDUCTION OF PERIOD REQUIRED BEFORE

20 FULLY DIVESTED STOCKHOLDER MAY REACQUIRE

21 SHARES OF A BANK.—Subsection (h) of section 6 of the

22 Federal Home Loan Bank Act (12 U.S.C. 1426) (as

23 amended by subsection (a)) is amended—

24 (1) by redesignating such subsection as sub25 section (f);
45

•HR 3167 IH

1 (2) by striking ‘‘10’’ and inserting ‘‘5’’; and

2 (3) by inserting before the period at the end ‘‘,

3 except that any institution that withdrew from mem4 bership in any such bank before December 31, 1995,

5 may acquire an ownership interest in a enterprise

6 resource bank at any time after such date subject to

7 the requirements of this Act.’’.

8 (c) ELIGIBILITY OF NON-QTL SAVINGS ASSOCIA9 TIONS TO OBTAIN NEW ADVANCES AND MAINTAIN AD10 VANCES.—Section 10(m)(3)(B) of the Home Owners’

11 Loan Act (12 U.S.C. 1467a(m)(3)(B)) is amended—

12 (1) in clause (i), by striking subclause (III) and

13 redesignating subclause (IV) as subclause (III); and

14 (2) in clause (ii), by striking subclause (II).

15 (d) VOLUNTARY MEMBERSHIP OF FEDERAL SAVINGS

16 ASSOCIATIONS.—Section 5(f) of the Home Owners’ Loan

17 Act (12 U.S.C. 1464(f)) is amended to read as follows:

18 ‘‘(f) VOLUNTARY MEMBERSHIP IN ENTERPRISE RE19 SOURCE BANK.—Each Federal savings association may be

20 eligible to acquire shares of stock in an enterprise resource

21 bank in the manner provided in the Enterprise Resource

22 Bank System Act.’’.
46

•HR 3167 IH

1 SEC. 7. PROMPT CORRECTIVE ACTION.

2 The Federal Home Loan Bank Act (12 U.S.C. 1421

3 et seq.) is amended by inserting after section 6 the follow4 ing new section:

5 ‘‘SEC. 6A. PROMPT CORRECTIVE ACTION.

6 ‘‘(a) PURPOSES.—The purposes of this section are to

7 ensure that the enterprise resource banks remain—

8 ‘‘(1) adequately capitalized;

9 ‘‘(2) able to raise funds in the capital markets;

10 and

11 ‘‘(3) able meet the obligations of such banks

12 under this Act.

13 ‘‘(b) CAPITAL CLASSIFICATIONS.—The Finance

14 Board shall classify the capital adequacy of enterprise re15 source banks in accordance with the following capital cat16 egories:

17 ‘‘(1) ADEQUATELY CAPITALIZED.—An enter18 prise resource bank shall be classified as adequately

19 capitalized if such bank meets the required mini20 mum level for each relevant capital measure.

21 ‘‘(2) UNDERCAPITALIZED.—An enterprise re22 source bank shall be classified as undercapitalized if

23 such bank fails to meet the minimum level for any

24 capital measure required by this Act, or any addi25 tional capital requirement that may be established

26 for such bank by the Finance Board.
47

•HR 3167 IH

1 ‘‘(3) CRITICALLY UNDERCAPITALIZED.—An en2 terprise resource bank shall be classified as critically

3 undercapitalized if the capital of such bank fails to

4 meet any level specified under section 6(c)(1).

5 ‘‘(4) CAPITAL CATEGORIES.—The Finance

6 Board shall, by regulation, specify for each relevant

7 capital measure the levels at which an enterprise re8 source bank is adequately capitalized, undercapital9 ized, and critically undercapitalized.

10 ‘‘(5) QUARTERLY EVALUATION OF CAPITAL

11 ADEQUACY.—

12 ‘‘(A) IN GENERAL.—The Finance Board

13 shall—

14 ‘‘(i) evaluate the capital adequacy of

15 each enterprise resource bank at least once

16 in each calendar quarter, and

17 ‘‘(ii) classify the capital adequacy of

18 the bank in accordance with the categories

19 established pursuant to paragraph (1).

20 ‘‘(B) JUDICIAL REVIEW.—For the purpose

21 of obtaining judicial review of—

22 ‘‘(i) any classification of the capital

23 adequacy of an enterprise resource bank

24 under subparagraph (A); or
48

•HR 3167 IH

1 ‘‘(ii) any action taken by the Finance

2 Board pursuant to such classification,

3 the classification, or the action taken pursuant

4 to a classification, shall be treated as a final

5 order of the Finance Board.

6 ‘‘(c) PROVISION APPLICABLE TO ALL ENTERPRISE

7 RESOURCE BANKS.—

8 ‘‘(1) CAPITAL DISTRIBUTIONS RESTRICTED.—

9 An enterprise resource bank shall make no capital

10 distribution if, after making the distribution, the

11 bank would be undercapitalized.

12 ‘‘(2) EXCEPTIONS.—Notwithstanding para13 graph (1)—

14 ‘‘(A) an enterprise resource bank may re15 deem a voting shareholder’s stock in accordance

16 with section 6(e)(3); and

17 ‘‘(B) the Finance Board may permit an

18 enterprise resource bank to repurchase, redeem,

19 retire, or otherwise acquire the shares of the

20 bank if the repurchase, redemption, retirement,

21 or other acquisition—

22 ‘‘(i) is made in connection with the is23 suance of additional shares of the bank in

24 at least an equivalent amount; and
49

•HR 3167 IH

1 ‘‘(ii) will reduce the bank’s financial

2 obligations or otherwise improve the bank’s

3 financial condition.

4 ‘‘(d) SUPERVISORY ACTIONS APPLICABLE TO

5 UNDERCAPITALIZED ENTERPRISE RESOURCE BANKS.—

6 ‘‘(1) MANDATORY ACTIONS.—

7 ‘‘(A) CAPITAL AND INCOME RESTORATION

8 PLANS.—Any undercapitalized enterprise re9 source bank shall file an acceptable capital and

10 income restoration plan with the Finance

11 Board, in accordance with subsection (f).

12 ‘‘(B) RECLASSIFICATION FROM UNDER13 CAPITALIZED TO CRITICALLY UNDERCAPI14 TALIZED.—The Finance Board shall reclassify

15 as critically undercapitalized any enterprise re16 source bank that is classified as under17 capitalized if—

18 ‘‘(i) the bank does not submit an ac19 ceptable capital and income restoration

20 plan within the time periods prescribed;

21 ‘‘(ii) if the Finance Board does not

22 approve the capital and income restoration

23 plan submitted; or

24 ‘‘(iii) the Finance Board determines

25 that the bank has failed to make, in good
50

•HR 3167 IH

1 faith, reasonable efforts to comply with an

2 accepted capital and income restoration

3 plan.

4 ‘‘(C) PRIOR APPROVAL FOR NEW ACTIVI5 TIES.—The Finance Board shall require an

6 undercapitalized enterprise resource bank to ob7 tain prior approval from the Finance Board be8 fore engaging in any new activities.

9 ‘‘(2) DISCRETIONARY ACTIONS.—The Finance

10 Board may, with respect to an undercapitalized en11 terprise resource bank, take such other actions as

12 the Finance Board determines are necessary or ap13 propriate to carry out the purpose of this section in14 cluding—

15 ‘‘(A) imposition of restrictions on growth

16 in assets;

17 ‘‘(B) limitations on increases in bank obli18 gations;

19 ‘‘(C) imposition of restrictions on activities

20 that the Finance Board determines create ex21 cessive risk to the bank; and

22 ‘‘(D) requiring changes in or any restric23 tion on the board of directors or management

24 of the bank.
51

•HR 3167 IH

1 ‘‘(e) SUPERVISORY ACTIONS APPLICABLE TO CRITI2 CALLY UNDERCAPITALIZED ENTERPRISE RESOURCE

3 BANKS.—

4 ‘‘(1) MERGER, LIQUIDATION, REORGANIZATION,

5 OR OTHER ACTION REQUIRED.—The Finance Board

6 shall—

7 ‘‘(A) combine, by merger or otherwise, any

8 critically undercapitalized enterprise resource

9 bank with another enterprise resource bank;

10 ‘‘(B) liquidate or reorganize any such criti11 cally under capitalized bank; or

12 ‘‘(C) take such other action in connection

13 with such bank as the Finance Board deter14 mines would better achieve the purpose of this

15 section.

16 ‘‘(2) PERIODIC REDETERMINATION RE17 QUIRED.—Any determination by the Finance Board

18 under paragraph (1) to take any action with respect

19 to a critically undercapitalized enterprise resource

20 bank other than combining, reorganizing, or liq21 uidating the bank shall cease to be effective not later

22 than the end of the 90-day period after the deter23 mination was made and the bank shall be combined,

24 reorganized or liquidated unless the Finance Board

25 makes a new determination.
52

•HR 3167 IH

1 ‘‘(3) ACTIVITIES RESTRICTIONS.—The Finance

2 Board shall restrict and closely monitor the activities

3 of a critically undercapitalized enterprise resource

4 bank, including taking any of the discretionary ac5 tions applicable to an undercapitalized bank.

6 ‘‘(f) CAPITAL AND INCOME RESTORATION PLANS.—

7 ‘‘(1) IN GENERAL.—The Finance Board shall

8 prescribe regulations which require any under- cap9 italized enterprise resource bank to file within the

10 prescribed periods and implement an acceptable cap11 ital and income restoration plan with the Finance

12 Board.

13 ‘‘(2) REQUIREMENTS RELATING TO PLAN.—

14 ‘‘(A) CONTENTS OF PLAN.—A capital and

15 income restoration plan shall—

16 ‘‘(i) specify the steps that the bank

17 will take to become adequately capitalized

18 and to increase earnings;

19 ‘‘(ii) specify the levels of capital to be

20 attained during each year in which the

21 plan will be in effect;

22 ‘‘(iii) describe how the bank will com23 ply with the restrictions or requirements in

24 effect under this section; and
53

•HR 3167 IH

1 ‘‘(iv) specify the types and levels of

2 activities in which the bank will engage

3 during the term of the plan.

4 ‘‘(B) DEADLINES FOR SUBMISSION.—

5 ‘‘(i) INITIAL PERIOD.—The Finance

6 Board shall, by regulation, establish a

7 deadline for submission of a capital and in8 come restoration plan which may not be

9 more than 45 days after the bank is noti10 fied that a plan is required.

11 ‘‘(ii) EXTENSION OF DEADLINE.—The

12 regulations shall provide that the Finance

13 Board may extend, in writing, the deadline

14 to a date certain if the Finance Board de15 termines such extension is appropriate.

16 ‘‘(C) APPROVAL.—

17 ‘‘(i) REVIEW PERIOD.—The Finance

18 Board shall review each capital and income

19 restoration plan submitted under this sec20 tion and, not later than 30 days after sub21 mission of the plan, approve or disapprove

22 the plan.

23 ‘‘(ii) EXTENSION OF REVIEW PE24 RIOD.—The Finance Board may extend, in

25 writing, the period for approval or dis-
54

•HR 3167 IH

1 approval for any plan for a single addi2 tional 30-day period if the Finance Board

3 determines such extension is appropriate.

4 ‘‘(D) NOTICE OF BOARD ACTION.—The Fi5 nance Board shall provide written notice to any

6 bank which submits a plan under this sub7 section of the approval or disapproval of the

8 plan and shall include the reasons for any dis9 approval of the plan.

10 ‘‘(E) RESUBMISSION.—If the Finance

11 Board disapproves the initial capital and in12 come restoration plan submitted by the bank,

13 the bank shall submit an amended plan accept14 able to the Finance Board within 30 days or

15 such longer period that the Finance Board de16 termines is in the public interest.

17 ‘‘(g) APPOINTMENT OF CONSERVATOR FOR CRITI18 CALLY UNDERCAPITALIZED ENTERPRISE RESOURCE

19 BANK.—

20 ‘‘(1) GROUNDS.—The Finance Board may ap21 point a conservator for a critically undercapitalized

22 enterprise resource bank under subsection (e)(2)

23 upon a written determination that alternative rem24 edies available to the Finance Board are not satis25 factory and that—
55

•HR 3167 IH

1 ‘‘(A) the bank is not likely to pay obliga2 tions of the bank in the normal course of busi3 ness;

4 ‘‘(B) the bank has incurred or is reason5 ably likely to incur losses, or has pending appli6 cations for stock redemptions, that would de7 plete substantially all of the capital of the bank

8 and it is unlikely that the bank will replenish

9 such capital within a reasonable period;

10 ‘‘(C) the bank has concealed or is conceal11 ing books, papers, records, or assets of the

12 bank that are material to the discharge of the

13 Finance Board’s responsibilities under this sub14 title, or has refused or is refusing to submit

15 such books, papers, records, or information re16 garding the affairs of the bank for inspection to

17 the Finance Board upon the demand of the Fi18 nance Board;

19 ‘‘(D) the bank has willfully violated, or is

20 willfully violating, a final cease-and-desist order;

21 or

22 ‘‘(E) the bank, by an affirmative vote of a

23 majority of the bank’s board of directors or an

24 affirmative vote of the shareholders of the bank,

25 consents to such appointment.
56

•HR 3167 IH

1 ‘‘(2) QUALIFICATIONS.—The Finance Board

2 may appoint—

3 ‘‘(A) itself as the conservator for any en4 terprise resource bank;

5 ‘‘(B) as conservator for any such bank,

6 any other Federal agency or department or

7 other person that the Finance Board deter8 mines has—

9 ‘‘(i) no claim against, or financial in10 terest in, the bank;

11 ‘‘(ii) no other basis for a conflict of

12 interest with respect to the bank; and

13 ‘‘(iii) the financial and management

14 expertise necessary to direct the operations

15 and affairs of the bank.

16 ‘‘(3) APPOINTMENT EX PARTE AND WITHOUT

17 NOTICE.—If, in the opinion of the Finance Board, a

18 ground for the appointment of a conservator for an

19 enterprise resource bank exists, the Finance Board

20 may appoint a conservator for the bank ex parte and

21 without notice.

22 ‘‘(4) JUDICIAL REVIEW.—

23 ‘‘(A) JURISDICTION.—Except as provided

24 in subparagraph (D), a bank for which a con25 servator is appointed may bring an action dur-
57

•HR 3167 IH

1 ing the 30-day period beginning upon the ap2 pointment of the conservator in the United

3 States District Court for the District of Colum4 bia for an order requiring the Finance Board to

5 terminate the appointment of the conservator.

6 ‘‘(B) STANDARD OF REVIEW.—A decision

7 of the Finance Board to appoint a conservator

8 may be set aside only if the court finds that the

9 decision was arbitrary, capricious, an abuse of

10 discretion, or otherwise not in accordance with

11 applicable laws.

12 ‘‘(C) LIMITATION ON JURISDICTION.—Ex13 cept as otherwise provided in this subsection, no

14 court may take any action regarding the re15 moval of a conservator or otherwise restrain or

16 affect the exercise of powers or functions of a

17 conservator.

18 ‘‘(D) CONSENSUAL APPOINTMENTS.—Ap19 pointment of a conservator pursuant to consent

20 of the bank shall not be subject to judicial re21 view under this subsection.

22 ‘‘(5) REPLACEMENT.—

23 ‘‘(A) IN GENERAL.—The Finance Board

24 may, without notice or hearing, replace a con-
58

•HR 3167 IH

1 servator for an enterprise resource bank with

2 another conservator.

3 ‘‘(B) NO EFFECT ON JUDICIAL REVIEW.—

4 The replacement of a conservator for an enter5 prise resource bank shall not affect the right of

6 the bank to obtain judicial review under para7 graph (4) of the Finance Board’s decision to

8 make the initial appointment of a conservator.

9 ‘‘(6) EXAMINATIONS.—The Finance Board may

10 examine and supervise any enterprise resource bank

11 for which a conservator has been appointed during

12 the period in which the bank continues to operate as

13 a going concern.

14 ‘‘(7) TERMINATION.—

15 ‘‘(A) IN GENERAL.—If, at any time, the

16 Finance Board determines that termination of

17 a conservatorship for an enterprise resource

18 bank is in the public interest and may safely be

19 accomplished, the Finance Board may termi20 nate the conservatorship and permit the bank

21 to resume the transaction of the business of the

22 bank subject to such terms, conditions, and lim23 itations as the Finance Board may prescribe.

24 ‘‘(B) ENFORCEMENT OF TERMS, CONDI25 TIONS, AND LIMITATIONS.—Any terms, condi-
59

•HR 3167 IH

1 tions, and limitations imposed by the Finance

2 Board in accordance with subparagraph (A)

3 upon termination of a conservatorship for an

4 enterprise resource bank shall be enforceable

5 and renewable to the same extent as any cease6 and-desist order issued by the Finance Board.

7 ‘‘(h) POWERS OF CONSERVATOR.—A conservator ap8 pointed for an enterprise resource bank shall have all the

9 powers of the stockholders, the directors, and the officers

10 of the bank and may operate the bank in the bank’s own

11 name or conserve the assets of the bank in the manner

12 and to the extent authorized by the Finance Board.

13 ‘‘(i) EXCEPTION.—Notwithstanding any other provi14 sion of this section, the Finance Board may permit an en15 terprise resource bank to redeem the stock of a member

16 of such bank, repurchase, retire, or otherwise acquire

17 shares of the bank if the repurchase, redemption, retire18 ment, or other acquisition—

19 ‘‘(1) is made in connection with the issuance of

20 additional shares of the bank in at least an equiva21 lent amount; and

22 ‘‘(2) will reduce the bank’s financial obligations

23 or otherwise improve the bank’s financial condi24 tion.’’.
60

•HR 3167 IH

1 SEC. 8. MANAGEMENT OF BANKS.

2 Section 7 of the Federal Home Loan Bank Act (12

3 U.S.C. 1427) is amended to read as follows:

4 ‘‘SEC. 7. MANAGEMENT OF BANKS.

5 ‘‘(a) BOARD OF DIRECTORS.—

6 ‘‘(1) COMPOSITION OF BOARD.—Except as oth7 erwise provided in this section, the management of

8 each enterprise resource bank shall be vested in a

9 board of directors consisting of 14 directors selected

10 as follows:

11 ‘‘(A) 8 shall be elected by the members of

12 the bank as provided in paragraph (6).

13 ‘‘(B) 6 shall be appointed by the Finance

14 Board.

15 ‘‘(2) QUALIFICATIONS.—

16 ‘‘(A) IN GENERAL.—Each director of an

17 enterprise resource bank shall be a citizen of

18 the United States and a bona fide resident of

19 the district in which such bank is located.

20 ‘‘(B) DISQUALIFICATION.—An individual

21 who is an officer or director of a depository in22 stitution that fails to meet any applicable cap23 ital requirement shall not be qualified to be a

24 director on the board of directors of an enter25 prise resource bank.

26 ‘‘(3) REPRESENTATIONAL CRITERIA.—
61

•HR 3167 IH

1 ‘‘(A) REPRESENTATION OF STATES.—Sub2 ject to subparagraph (B), the bylaws of each

3 enterprise resource bank shall provide for the

4 manner in which the representation of the

5 shareholders of the bank from the various

6 States within such bank’s district will be dis7 tributed among the positions of the elected di8 rectors of such bank.

9 ‘‘(B) TRANSITION PROVISION.—Notwith10 standing subparagraph (A), the composition of

11 the boards of directors of the 12 enterprise re12 source banks immediately after the effective

13 date of the Enterprise Resource Bank Act of

14 1996 shall be the same as the composition of

15 such boards of directors on January 1, 1996.

16 ‘‘(C) DISCRETIONARY INCREASE IN OVER17 ALL NUMBER OF DIRECTORS.—In order to en18 sure director representation on the board of di19 rectors of an enterprise resource bank consist20 ent with this paragraph, the board of directors

21 of the bank may—

22 ‘‘(i) increase the number of elected di23 rectors on the board of directors; and
62

•HR 3167 IH

1 ‘‘(ii) increase the number of appointed

directors to an amount not more than 3 2 ⁄4

3 of the number of elected directors.

4 ‘‘(D) INCREASE TO ACHIEVE MINIMUM

5 STATE REPRESENTATION.—If, at any time, the

6 number of elected directors of an enterprise re7 source bank is less than the number of States

8 in the district of such bank, the board of direc9 tors of the bank may increase the number of

10 elected directors on such board of directors to

11 a number at least equal to the number of

12 States in such district.

13 ‘‘(E) REPRESENTATIONAL COMPOSITION

14 OF BOARD OF DIRECTORS.—In establishing by15 laws for the election of directors, and in ap16 pointing directors, to the board of directors of

17 an enterprise resource bank, the board of direc18 tors and the Finance Board shall establish such

19 procedures as may be appropriate to achieve a

20 board of directors which reflects the geographi21 cal diversity of the district, the representation

22 of both large and small institutional stock23 holder, and the representation of the public in24 terest.

25 ‘‘(4) CHAIRPERSON AND VICE CHAIRPERSON.—
63

•HR 3167 IH

1 ‘‘(A) IN GENERAL.—The board of directors

2 of each enterprise resource bank shall elect—

3 ‘‘(i) 1 of the directors of the bank to

4 be the chairperson of the board of direc5 tors; and

6 ‘‘(ii) 1 of the directors of the bank to

7 be vice chairperson of the board of direc8 tors.

9 ‘‘(B) LIMITATION.—The president of an

10 enterprise resource bank may not be designated

11 under subparagraph (A) as the chairperson or

12 vice chairperson of the bank.

13 ‘‘(C) PUBLIC INTEREST REPRESENTA14 TION.—At least 1 of the members of the board

15 of directors of an enterprise resource bank who

16 were appointed pursuant to paragraph (5)(A)

17 shall be elected to be the chairperson or the vice

18 chairperson of the board of directors.

19 ‘‘(5) PROVISIONS APPLICABLE TO APPOINTED

20 DIRECTORS.—

21 ‘‘(A) REPRESENTATIONAL REQUIRE22 MENT.—At least 2 of the directors of each en23 terprise resource bank who are appointed by the

24 Finance Board shall be appointed from among

25 representatives of organizations with more than
64

•HR 3167 IH

1 a 2-year history of representing consumer or

2 community interests on banking services, credit

3 needs, housing, or financial consumer protec4 tions.

5 ‘‘(B) CONFLICT OF INTEREST PROVI6 SION.—No director on the board of directors of

7 an enterprise resource bank who is appointed

8 pursuant to this subsection may, during such

9 director’s term of office, serve as an officer of

10 any enterprise resource bank or as a director or

11 officer of any member of a bank.

12 ‘‘(6) PROVISIONS APPLICABLE TO ELECTED DI13 RECTORS.—

14 ‘‘(A) DESIGNATION OF STATE TO BE REP15 RESENTED.—Each position of elected director

16 on the board of directors of any enterprise re17 source bank shall be designated by the board of

18 directors as a position to be filled by a director

19 representing the voting shareholders of the

20 bank whose principal places of business are lo21 cated in a particular State.

22 ‘‘(B) SHAREHOLDERS LOCATED IN U.S.

23 TERRITORIES.—In the case of any voting share24 holder (of an enterprise resource bank) whose

25 principal place of business is not located in any
65

•HR 3167 IH

1 State, the enterprise resource bank shall des2 ignate the State in such bank’s district in which

3 such member shall be deemed to be located for

4 purposes of this subsection.

5 ‘‘(C) QUALIFICATION.—Only presidents,

6 chief executive officers, and other senior execu7 tive officers (as defined by the Finance Board)

8 of voting shareholders whose principal places of

9 business are located in a State shall be qualified

10 to serve as a director representing such State.

11 ‘‘(D) NOMINATION OF DIRECTORS.—All

12 voting shareholders (of an enterprise resource

13 bank) whose principal places of business are lo14 cated in any State may nominate any qualified

15 individual for election as a director representing

16 such State.

17 ‘‘(E) VOTING PROCEDURE.—In any elec18 tion of a director of an enterprise resource

19 bank, each voting shareholder of the bank

20 whose principal place of business is located in

21 the State which such director represents may

22 cast for such office a number of votes equal to

23 the lesser of—

24 ‘‘(i) the minimum number of voting

25 shares of the capital stock of such bank in
66

•HR 3167 IH

1 which such shareholder is required, under

2 section 6(b), to be invested as of the end

3 of the calendar year immediately preceding

4 the election, as determined by the board of

5 directors of the enterprise resource bank;

6 and

7 ‘‘(ii) the average of the minimum

8 number of voting shares of such stock in

9 which all voting shareholders whose prin10 cipal places of business are located in such

11 State are required, under section 6(b), to

12 be invested as of the end of the calendar

13 year immediately preceding the election, as

14 so determined.

15 ‘‘(F) PLURALITY DECISION.—Each posi16 tion of elected director of an enterprise resource

17 bank shall be filled by the nominee, for such po18 sition, who receives a larger number of the

19 votes cast in an election held for the purpose of

20 filling such position than any other nominee.

21 ‘‘(7) TERMS.—

22 ‘‘(A) IN GENERAL.—The term of each di23 rector who is elected or appointed to the board

24 of directors of an enterprise resource bank after
67

•HR 3167 IH

1 the date of the enactment of the Enterprise Re2 source Bank Act of 1996 shall be 4 years.

3 ‘‘(B) TERM LIMITS.—

4 ‘‘(i) APPOINTED DIRECTORS.—No in5 dividual may serve as an appointed direc6 tor on the board of directors of an enter7 prise resource bank for more than 2 full

8 consecutive 4-year terms.

9 ‘‘(ii) ELECTED DIRECTORS.—If, dur10 ing any 8-year period, the board of direc11 tors of any enterprise resource bank has

12 included, as an elected director, any officer

13 of a specific voting shareholder of the

14 bank, no officer of such shareholder shall

15 be eligible to serve as an elected member of

16 such board of directors during the subse17 quent 4-year period.

18 ‘‘(C) INTERIM APPOINTMENTS.—Any di19 rector appointed or elected to fill a vacancy oc20 curring before the expiration of the term for

21 which such director’s predecessor was appointed

22 or elected shall be appointed or elected only for

23 the remainder of such term.

24 ‘‘(D) CONTINUATION OF SERVICE.—Each

25 director of an enterprise resource bank may
68

•HR 3167 IH

1 continue to serve after the expiration of the

2 term to which such director was appointed or

3 elected until a successor has been qualified.

4 ‘‘(E) STAGGERED TERMS.—

5 ‘‘(i) IN GENERAL.—The bylaws of

6 each enterprise resource bank shall provide

7 for staggering the terms of the elected and

8 appointed directors so that the positions of

approximately 1 9 ⁄4 of the appointed directors and approximately 1 10 ⁄4 of the appointed

11 directors shall become vacant each year.

12 ‘‘(ii) DESIGNATION OF SHORTER

13 TERMS TO ACHIEVE STAGGERING.—When14 ever necessary to achieve staggered terms

15 for the directors of an enterprise resource

16 bank, the board of directors of such bank

17 may, by resolution (and in accordance with

18 the bylaws of the bank) and before the

19 election or appointment of a director, des20 ignate a shorter term for such position for

21 the next succeeding term.

22 ‘‘(8) VACANCIES.—

23 ‘‘(A) APPOINTED DIRECTOR.—Any vacancy

24 occurring in the position of appointed director

25 of an enterprise resource bank shall be filled in
69

•HR 3167 IH

1 the manner in which the original appointment

2 was made.

3 ‘‘(B) ELECTED DIRECTOR.—Any vacancy

4 occurring in the position of elected director of

5 an enterprise resource bank shall be filled by an

6 affirmative vote of a majority of the remaining

7 directors of such bank, without regard to

8 whether such remaining directors constitute a

9 quorum of the board of directors.

10 ‘‘(C) VACANCY AS A RESULT OF DISQUALI11 FICATION OF DIRECTOR.—

12 ‘‘(i) IN GENERAL.—If any director of

13 an enterprise resource bank ceases to meet

14 any qualification for such position—

15 ‘‘(I) the position shall imme16 diately become vacant by operation of

17 law; and

18 ‘‘(II) service by such director in

19 such position shall cease.

20 ‘‘(ii) CONTINUATION.—Notwithstand21 ing clause (i), an appointed director of an

22 enterprise resource bank whose position

23 became vacant pursuant to such clause

24 may continue to serve in such position

25 until a successor has been qualified.
70

•HR 3167 IH

1 ‘‘(9) INELIGIBILITY OF CERTAIN OFFICERS FOR

2 POSITION OF DIRECTOR.—No officer or employee of,

3 or any attorney or agent for, any enterprise resource

4 bank who receives compensation for such service,

5 other than the president of the bank, shall be eligible

6 to serve on the board of directors of such bank or

7 any other enterprise resource bank.

8 ‘‘(10) REGULATIONS GOVERNING NOMINATIONS

9 AND ELECTIONS.—The bylaws of each enterprise re10 source bank shall provide procedures for the nomina11 tion and election of directors on the board of direc12 tors of the bank.

13 ‘‘(11) DEFINITIONS.—For purposes of this sub14 section, the following definitions shall apply:

15 ‘‘(A) VOTING SHAREHOLDER.—The term

16 ‘voting shareholder’ means, with respect to any

17 year, any institution which holds voting shares

18 of an enterprise resource bank and held voting

19 shares of such bank at the end of the imme20 diately preceding calendar year.

21 ‘‘(B) STATE.—The term ‘State’ means any

22 State, the District of Columbia, and the Com23 monwealth of Puerto Rico.

24 ‘‘(12) APPLICABILITY.—This subsection shall

25 apply to elections and appointments of directors to
71

•HR 3167 IH

1 terms that begin after the date of enactment of the

2 Enterprise Resource Bank Act of 1996.

3 ‘‘(b) POWERS OF BOARDS OF DIRECTORS.—The

4 board of directors of each enterprise resource bank shall

5 have all power necessary to exercise the responsibility of

6 such board with respect to such bank, including the follow7 ing powers:

8 ‘‘(1) Establish financial and other performance

9 targets.

10 ‘‘(2) Conduct studies of trends of home or other

11 property values, methods of appraisals, state and

12 Federal laws, regulations, policies, and procedures

13 relevant to the operations of the bank and the mem14 bers of the bank, and such other subjects as the

15 board of directors may consider to be useful for the

16 general guidance of the policies and operations of

17 the bank and institutions authorized to secure ad18 vances from the bank.

19 ‘‘(3) Establish credit policy and policy for man20 agement of the bank’s investments.

21 ‘‘(4) Establish policy regarding the bank’s in22 terest rate risk.

23 ‘‘(5) Determine dividends.

24 ‘‘(6) Establish policy regarding the documenta25 tion required for advances.
72

•HR 3167 IH

1 ‘‘(7) Establish policy regarding item processing

2 pricing.

3 ‘‘(8) Establish policy regarding the sale and

4 purchase of, and participations in, advances.

5 ‘‘(9) Establish policy regarding lending to mem6 bers that are insolvent or not in compliance with ap7 plicable capital requirements.

8 ‘‘(10) Establish policy regarding—

9 ‘‘(A) lending to and borrowing from the

10 enterprise resource banks; and

11 ‘‘(B) making deposits in and accepting de12 posits from such banks.

13 ‘‘(11) Establish policy regarding the community

14 investment program and the affordable housing pro15 gram.

16 ‘‘(12) Establish policy regarding incentives for

17 community support by member institutions.

18 ‘‘(13) Establish policy regarding publication of

19 community support activities of member institutions.

20 ‘‘(14) Establish policy regarding the develop21 ment and implementation of the business plan of the

22 bank.

23 ‘‘(15) Approve the budget of the bank and

24 modifications to such budget.
73

•HR 3167 IH

1 ‘‘(16) Approve the bylaws of the bank and

2 modifications to such bylaws.

3 ‘‘(17) Establish the travel policy of the bank.

4 ‘‘(18) Determine the location of meetings of

5 boards of directors.

6 ‘‘(19) Determine the eligibility of individuals to

7 serve as directors and conduct elections of directors.

8 ‘‘(20) Establish policy regarding charitable do9 nations and membership in organizations.

10 ‘‘(21) Establish policy regarding mandatory re11 tirement of directors, officers and employees.

12 ‘‘(22) Establish policy regarding indemnifica13 tion of directors, officers, employees, and agents.

14 ‘‘(23) Establish policy regarding the disaster re15 covery plan of the bank.

16 ‘‘(24) Establish the records retention policy of

17 the bank.

18 ‘‘(25) Provide, in accordance with resolutions of

19 the board of directors and any regulations prescribed

20 by the Finance Board, for the payment of reason21 able rates of compensation to members of the board

22 of directors for such periods of time, including travel

23 time, during which the members are engaged in the

24 actual performance of duties vested in the board of
74

•HR 3167 IH

1 directors and travel expenses, including per diem in

2 lieu of subsistence.

3 ‘‘(26) Approve and disapprove membership ap4 plications.

5 ‘‘(27) Establish policies regarding the issuance

6 of letters of credit.

7 ‘‘(28) Establish policies regarding the safekeep8 ing of securities.

9 ‘‘(c) DUTIES OF BOARDS OF DIRECTORS.—The

10 board of directors of each enterprise resource bank shall—

11 ‘‘(1) administer the affairs of the bank fairly

12 and impartially and without discrimination in favor

13 of or against any voting shareholder or borrower;

14 and

15 ‘‘(2) subject to the provisions of this Act, ex16 tend to each institution authorized to secure ad17 vances such advances as may be made safely and

18 soundly with due regard for—

19 ‘‘(A) the claims and demands of other in20 stitutions; and

21 ‘‘(B) the maintenance of adequate credit

22 standing for the bank and the bank’s obliga23 tions.’’.
75

•HR 3167 IH

1 SEC. 9. SUSTAINABLE ECONOMIC DEVELOPMENT PRO2 GRAM.

3 (a) FINDINGS AND PURPOSE.—

4 (1) FINDINGS.—The Congress finds as follows:

5 (A) In exchange for Federal deposit insur6 ance, the Federal Government has placed regu7 lations on financial institutions to ensure safety

8 and soundness and to promote lending to un9 derserved communities.

10 (B) These regulations place a significant

11 cost on financial institutions.

12 (C) While there is a compelling need for

13 solutions to the country’s most difficult social

14 problems, including poverty and high unemploy15 ment, in economically distressed communities,

16 especially inner-cities and rural areas, the most

17 effective model for solutions to such problems is

18 through the development of a sustainable eco19 nomic base for these communities.

20 (D) To develop a sustainable economic

21 base the Government should encourage main22 stream private institutions to improve the envi23 ronment for growth and new business opportu24 nities in distressed neighborhoods by providing

25 incentives for such actions.
76

•HR 3167 IH

1 (E) The Congress recognizes the difficul2 ties facing community banks in attempting to

3 increase the availability of credit in economi4 cally distressed neighborhoods, including—

5 (i) the lack of a mutual understanding

6 between the lenders and the potential bor7 rowers;

8 (ii) the perception that loans to bor9 rowers in such neighborhoods are or would

10 be high-risk;

11 (iii) the frequent need for credit en12 hancement in connection with loans to bor13 rowers in such neighborhoods; and

14 (iv) the higher costs involved in lend15 ing in such neighborhoods due to the addi16 tional time and effort which is frequently

17 required in conducting adequate credit

18 analysis.

19 (F) Lending in economically distressed

20 neighborhoods is most effective if community

21 banks make rational credit decisions with re22 gard to—

23 (i) the profitability of lending in such

24 neighborhoods; and
77

•HR 3167 IH

1 (ii) the potential profits from the es2 tablishment of a market presence by com3 munity banks in such neighborhoods.

4 (G) While it may be desirable for the Gov5 ernment to encourage depository institutions to

6 provide banking services and extend credit in

7 economically distressed communities, such en8 couragement should come in the form of incen9 tives and not mandates.

10 (2) PURPOSE.—It is the purpose of this section

11 to enhance the efficiency of providing debt and eq12 uity capital and other financial services to under13 served communities by encouraging, and creating in14 centives for, communities to develop a sustainable

15 economic base in such communities.

16 (b) MISSION OF SUSTAINABLE ECONOMIC DEVELOP17 MENT.—The purpose of the community support require18 ments, the community investment program, and the af19 fordable housing program is to serve depository institu20 tions as an intermediary—

21 (1) to aid in the development of a sustainable

22 economic base in the banks’ communities;

23 (2) to promote access to credit throughout the

24 Nation (including rural areas and underserved

25 neighborhoods by increasing the liquidity of eco-
78

•HR 3167 IH

1 nomic development financing and improving the dis2 tribution of investment capital available for economic

3 development financing; and

4 (3) to assist with technical expertise for compli5 ance with the Community Reinvestment Act of

6 1977.

7 (c) COMMUNITY SUPPORT REQUIREMENTS.—Sub8 section (g) of section 10 of the Federal Home Loan Bank

9 Act (12 U.S.C. 1430(g)) is amended by adding at the end

10 the following new paragraph:

11 ‘‘(3) SAFE HARBOR FOR MEMBERS RECEIVING

12 CRA RATINGS OF SATISFACTORY OR BETTER.—Not13 withstanding paragraphs (1) and (2), any depository

14 institution which is a shareholder in an enterprise

15 resource bank and receives a rating of satisfactory

16 or outstanding pursuant to section 807 of the Com17 munity Reinvestment Act of 1977 in such member’s

18 most recent examination, if any, shall be treated as

19 having satisfied the requirements of such para20 graphs.’’.

21 (d) PROHIBITION ON DELEGATION OF CERTAIN

22 FUNDING DETERMINATIONS TO MANAGEMENT OF

23 BANK.—The board of directors of an enterprise resource

24 may not delegate, or provide for the delegation of, any

25 authority of the board of directors to approve or dis-
79

•HR 3167 IH

1 approve funding by such bank under the affordable hous2 ing program established pursuant to section 10(j) of the

3 Federal Home Loan Bank Act to any officer or employee

4 of the bank.

5 SEC. 10. ENFORCEMENT AUTHORITY TO PROMOTE SAFETY

6 AND SOUNDNESS OF ENTERPRISE RESOURCE

7 BANKS.

8 Section 3 of the Federal Home Loan Bank Act (as

9 amended by section 4 of this Act) is amended—

10 (1) by redesignating subsection (f) as sub11 section (g); and

12 (2) by inserting after subsection (e) the follow13 ing new subsection:

14 ‘‘(f) ENFORCEMENT POWERS.—The Finance Board

15 shall have the same powers, rights, and duties to enforce

16 this Act with regard to the enterprise resource banks as

17 the appropriate Federal banking agencies (as defined in

18 section 3(q) of the Federal Deposit Insurance Act) have

19 under section 8 of the Federal Deposit Insurance Act with

20 respect to insured depository institutions (as defined in

21 section 3(c) of such Act).’’.
80

•HR 3167 IH

1 SEC. 11. RESOLUTION FUNDING CORPORATION OBLIGA2 TION.

3 Effective on January 1, 1998, section

4 21B(f)(2)(C)(ii) of the Federal Home Loan Bank Act (12

5 U.S.C. 1441b(f)(2)(C)(ii)) is amended to read as follows:

6 ‘‘(C) PAYMENTS BY ENTERPRISE RE7 SOURCE BANKS.—To the extent the

8 amounts available pursuant to subpara9 graphs (A) and (B) are insufficient to

10 cover the amount of interest payments,

11 each enterprise resource bank shall pay to

12 the Funding Corporation each calendar

13 year an amount equal to 23.7 percent of

14 the bank’s net earnings for the year for

15 which such amount is required to be

16 paid.’’.

17 SEC. 12. POWERS AND DUTIES OF BANKS; TECHNICAL AND

18 CONFORMING AMENDMENTS.

19 (a) SECTION 9.—Section 9 of the Federal Home

20 Loan Bank Act (12 U.S.C. 1429) is amended—

21 (1) in the 2d sentence, by striking ‘‘with the

22 approval of the Board’’; and

23 (2) in the 3d sentence, by striking ‘‘, subject to

24 the approval of the Board,’’.

25 (b) SECTION 10.—
81

•HR 3167 IH

1 (1) Subsection (a) of section 10 of the Federal

2 Home Loan Bank Act (12 U.S.C. 1430(a)) is

3 amended—

4 (A) in that portion of the subsection which

5 precedes paragraph (1)—

6 (i) by inserting ‘‘and subject to regu7 lations prescribed by the Finance Board’’

8 after ‘‘in the judgment of the Bank’’; and

9 (ii) by striking the 2d sentence;

10 (B) in paragraph (1), by inserting ‘‘mort11 gages on improved residential property which

12 are insured or guaranteed by the United States

13 or any agency or department of the United

14 States,’’ after ‘‘90 days delinquent),’’;

15 (C) in paragraph (3), by striking ‘‘Depos16 its’’ and inserting ‘‘Cash or deposits’’;

17 (D) in paragraph (4)—

18 (i) by striking ‘‘Other real estate re19 lated collateral’’ and inserting ‘‘Other mis20 sion-related collateral (as defined by the

21 Finance Board’’; and

22 (ii) by striking ‘‘30 percent’’ and in23 serting ‘‘50 percent’’; and

24 (E) by striking paragraph (5) and insert25 ing the following new paragraphs:
82

•HR 3167 IH

1 ‘‘(5) Assets consisting of small business loans

2 the principal amounts of which are less than

3 $250,000.

4 ‘‘(6) Assets consisting of loans to municipalities

5 and other units for general local government for

6 maintenance and improvement of the infrastructure

7 (as defined by the Finance Board) the principal

8 amounts of which are less than $2,500,000.

9 ‘‘(7) Municipal securities rated by investment

10 grade by 1 or more nationwide statistical rating or11 ganizations.’’.

12 (2) Section 10(b) of the Federal Home Loan

13 Bank Act (12 U.S.C. 1430(b)) is amended—

14 (A) by striking ‘‘(b) For the purposes of

15 this section’’ and inserting ‘‘(b) PROTECTION

16 OF INTEREST IN COLLATERAL.—

17 ‘‘(1) INVESTIGATIONS.— For the purposes of

18 this section’’;

19 (B) by striking ‘‘Board’’ where such term

20 appears in the last sentence and inserting

21 ‘‘bank’’; and

22 (C) by adding at the end the following new

23 paragraphs:

24 ‘‘(2) ADEQUACY OF CONTROLS.—In order to

25 minimize the various risks borne by an enterprise re-
83

•HR 3167 IH

1 source bank with regard to advances to stockholders,

2 each enterprise resource bank shall ensure that—

3 ‘‘(A) adequate controls exist to manage

4 risk, including a strict policy of

5 overcollateralization;

6 ‘‘(B) ensure that the collateral has a read7 ily ascertainable market value;

8 ‘‘(C) a security interest in such collateral

9 can be perfected; and

10 ‘‘(D) the security interest of the bank has

11 priority over any other claim against the collat12 eral.

13 ‘‘(3) OTHER PROTECTIVE MEASURES.—

14 ‘‘(A) ADDITIONAL COLLATERAL.—An en15 terprise resource bank may take such steps as

16 the bank determines to be necessary to protect

17 the security position of the bank with respect to

18 outstanding advances, including requiring the

19 deposit of additional collateral security whether

20 or not such collateral would be eligible under

21 subsection (a) to be eligible to be used as collat22 eral for an advance at the time of origination.

23 ‘‘(B) REDUCTION IN OUTSTANDING AD24 VANCE.—If a stockholder of an enterprise re25 source bank has insufficient eligible collateral to
84

•HR 3167 IH

1 support an outstanding advance to such stock2 holder, the stockholder shall promptly and pru3 dently reduce the level of outstanding advances

4 in accordance with a schedule determined by

5 such bank.’’.

6 (3) Section 10(c) of the Federal Home Loan

7 Bank Act (12 U.S.C. 1430(c)) is amended—

8 (A) in the 1st sentence, by striking

9 ‘‘Board’’ and inserting ‘‘bank’’; and

10 (B) by striking the 2d sentence.

11 (4) Section 10(d) of the Federal Home Loan

12 Bank Act (12 U.S.C. 1430(d)) is amended—

13 (A) in the first sentence, by striking ‘‘and

14 the approval of the Board’’; and

15 (B) in the last sentence, by striking ‘‘Sub16 ject to the approval of the Board, any’’ and in17 serting ‘‘Any’’.

18 (5) Section 10 of the Federal Home Loan Bank

19 Act (12 U.S.C. 1430) is amended by striking the

20 first of the 2 subsections designated as subsection

21 (e) (relating to qualified thrift lender status).

22 (6) Section 10(j)(1) of the Federal Home Loan

23 Bank Act (12 U.S.C. 1430(j)(1)) is amended—

24 (A) by striking ‘‘IN GENERAL.—Pursuant

25 to’’ and inserting ‘‘ESTABLISHMENT.—
85

•HR 3167 IH

1 ‘‘(A) IN GENERAL.—Pursuant to’’; and

2 (B) by adding at the end the following new

3 subparagraph:

4 ‘‘(B) BANK APPROVAL AUTHORITY.—The

5 board of directors of each enterprise resource

6 bank may—

7 ‘‘(i) approve or disapprove a request

8 from a shareholder of the bank for a sub9 sidy under the affordable housing program

10 of the bank; and

11 ‘‘(ii) delegate such approval or dis12 approval authority to the president or any

13 other senior executive officer of the bank.’’.

14 (7) Section 10 of the Federal Home Loan Bank

15 Act (12 U.S.C. 1430) is amended by adding at the

16 end the following new subsection:

17 ‘‘(k) LIMITATIONS ON ADVANCES TO UNDERCAPI18 TALIZED INSTITUTIONS.—

19 ‘‘(1) LIMITATION ON EXTENDED PERIODS.—

20 Except as provided in paragraph (2), no new ad21 vances to any undercapitalized depository institution

22 by any enterprise resource bank under this section

23 may be outstanding for more than 60 days in any

24 120-day period.

25 ‘‘(2) VIABILITY EXCEPTION.—
86

•HR 3167 IH

1 ‘‘(A) IN GENERAL.—If the head of the ap2 propriate Federal banking agency certifies in

3 advance in writing to the enterprise resource

4 bank that any depository institution is viable,

5 the limitation contained in paragraph (1) shall

6 not apply during the 60-day period beginning

7 on the date such certification is received.

8 ‘‘(B) EXTENSIONS OF PERIOD.—The 60-

9 day period may be extended for additional 60-

10 day periods upon receipt by the enterprise re11 source bank of additional written certifications

12 under subparagraph (A) with respect to each

13 such additional period.

14 ‘‘(C) AUTHORITY TO ISSUE A CERTIFICATE

15 OF VIABILITY MAY NOT BE DELEGATED.—The

16 authority of the head of any agency to issue a

17 written certification of viability under this para18 graph may not be delegated to any other per19 son.

20 ‘‘(3) PROHIBITION ON ADVANCES TO CRITI21 CALLY UNDERCAPITALIZED DEPOSITORY INSTITU22 TIONS.—Notwithstanding any other provision of this

23 Act, no new advances may be made to a critically

24 undercapitalized depository institution.
87

•HR 3167 IH

1 ‘‘(4) NO OBLIGATION TO MAKE ADVANCES.—An

2 enterprise resource bank shall have no obligation to

3 make, increase, renew, or extend any advance or dis4 count under this Act to any member.

5 ‘‘(5) DEFINITIONS.—For purposes of this sub6 section, the following definitions shall apply:

7 ‘‘(A) APPROPRIATE FEDERAL BANKING

8 AGENCY.—The term ‘appropriate Federal bank9 ing agency’—

10 ‘‘(i) has the same meaning as in sec11 tion 3 of the Federal Deposit Insurance

12 Act; and

13 ‘‘(ii) includes the National Credit

14 Union Administration.

15 ‘‘(B) CRITICALLY UNDERCAPITALIZED.—

16 The term ‘critically undercapitalized’ has the

17 same meaning as in section 6A(b)(3).

18 ‘‘(C) NEW ADVANCE.—The term ‘new ad19 vance’ includes a renewal or extension of, or an

20 increase in, an outstanding advance.

21 ‘‘(D) UNDERCAPITALIZED DEPOSITORY IN22 STITUTION.—The term ‘undercapitalized depos23 itory institution’ means any depository institu24 tion which—
88

•HR 3167 IH

1 ‘‘(i) is undercapitalized, as defined in

2 section 38 of the Federal Deposit Insur3 ance Act (or as defined by the National

4 Credit Union Administration Board, in the

5 case of an insured credit union); or

6 ‘‘(ii) has a composite CAMEL rating

7 of 5 under the Uniform Financial Institu8 tions Rating System (or an equivalent rat9 ing by any such agency under a com10 parable rating system) as of the most re11 cent examination of such institution.

12 ‘‘(E) VIABLE.—The term ‘viable’ means,

13 with respect to a depository institution, a de14 pository institution which the appropriate Fed15 eral banking agency determines, giving due re16 gard to the economic conditions and cir17 cumstances in the market in which the institu18 tion operates—

19 ‘‘(i) is not critically undercapitalized;

20 ‘‘(ii) is not expected to become criti21 cally undercapitalized; and

22 ‘‘(iii) is not expected to be placed in

23 conservatorship or receivership.’’.

24 (c) SECTION 10b.—
89

•HR 3167 IH

1 (1) Subsection (a) of section 10b of the Federal

2 Home Loan Bank Act (12 U.S.C. 1430b) is amend3 ed to read as follows:

4 ‘‘(a) IN GENERAL.—

5 ‘‘(1) AUTHORITY.—Each enterprise resource

6 bank may make advances to a permissible

7 nonmember mortgagee.

8 ‘‘(2) PERMISSIBLE NONMEMBER MORTGAGEE.—

9 For purposes of paragraph (1), the term ‘permissible

10 nonmember mortgagee’ means—

11 ‘‘(A) any State housing finance agency or

12 Indian housing authority (including any sub13 sidiary of such agency or authority) approved

14 under title II of the National Housing Act—

15 ‘‘(i) which is a chartered institution

16 having succession and subject to the in17 spection and supervision of a governmental

18 agency; and

19 ‘‘(ii) whose principal activity in the

20 mortgage field must consist of lending the

21 institution’s own funds; or

22 ‘‘(B) any community development financial

23 institution—
90

•HR 3167 IH

1 ‘‘(i) which is not an insured deposi2 tory institution or a subsidiary of an in3 sured depository institution;

4 ‘‘(ii) which, at the time the advance is

5 made, has been certified within the last

6 year as a community development financial

7 institution under the Community Develop8 ment Banking and Financial Institutions

9 Act of 1994;

10 ‘‘(iii) which is a chartered institution

11 having succession; and

12 ‘‘(iv) whose principal activity in the

13 mortgage field must consist of lending the

14 institution’s own funds.

15 ‘‘(3) SECURITY.—Advances under paragraph

16 (1) shall not be subject to the other provisions and

17 restrictions of this Act, but shall be made upon the

18 security of mortgages insured under title II of the

19 National Housing Act.

20 ‘‘(4) TERMS AND CONDITIONS.—Advances made

21 under the terms of this section shall be at such rates

22 of interest and upon such terms and conditions as

23 shall be determined by the enterprise resource bank,

24 but no advance may be for an amount in excess of
91

•HR 3167 IH

1 90 percent of the unpaid principal of the mortgage

2 loan given as security.

3 ‘‘(5) DEFINITIONS OF COMMUNITY DEVELOP4 MENT FINANCIAL INSTITUTION.—The term ‘commu5 nity development financial institution’ has the same

6 meaning as in section 103 of the Community Devel7 opment Banking and Financial Institutions Act of

8 1994.’’.

9 (2) Subsection (b) of section 10b of the Federal

10 Home Loan Bank Act (12 U.S.C. 1430b(b)) is

11 amended by inserting ‘‘or Indian housing authority’’

12 after ‘‘State housing finance agency’’.

13 (d) SECTION 11.—

14 (1) Subsection (a) of section 11 of the Federal

15 Home Loan Bank Act (12 U.S.C. 1431(a)) is

16 amended—

17 (A) by striking ‘‘(a) Each Federal Home

18 Loan Bank’’ and inserting ‘‘(a) BORROWING

19 AUTHORITY.—

20 ‘‘(1) IN GENERAL.—Each enterprise resource

21 bank’’;

22 (B) by striking ‘‘, subject to rules and reg23 ulations prescribed by the Board’’;

24 (C) by striking ‘‘Board’’ and inserting

25 ‘‘board of directors of the bank’’; and
92

•HR 3167 IH

1 (D) by adding at the end the following new

2 paragraph:

3 ‘‘(2) BORROWING THROUGH THE OFFICE OF FI4 NANCE ONLY.—Notwithstanding paragraph (1), all

5 notes, bonds, and debentures issued by any enter6 prise resource bank shall be issued through the of7 fice of finance as agent for the banks.’’.

8 (2) Subsection (b) of section 11 of the Federal

9 Home Loan Bank Act (12 U.S.C. 1431(b)) is

10 amended to read as follows:

11 ‘‘(b) ISSUANCE OF ENTERPRISE RESOURCE BANK

12 BONDS.—

13 ‘‘(1) IN GENERAL.—The office of finance may

14 issue consolidated enterprise resource bank bonds

15 and other consolidated obligations on behalf of the

16 banks.

17 ‘‘(2) JOINT AND SEVERAL OBLIGATIONS.—Con18 solidated obligations issued by the office of finance

19 under paragraph (1) shall be the joint and several

20 obligations of all the enterprise resource banks.’’.

21 (3) Section 11 of the Federal Home Loan Bank

22 Act (12 U.S.C. 1431) is amended by striking sub23 section (c).
93

•HR 3167 IH

1 (4) Section 11(d) of the Federal Home Loan

2 Bank Act (12 U.S.C. 1431(d)) is amended to read

3 as follows:

4 ‘‘(d) ADDITIONAL OR SUBSTITUTED COLLATERAL.—

5 The Finance Board, for safety and soundness reasons,

6 may require any enterprise resource bank to deposit addi7 tional collateral or to make substitutions of collateral.’’.

8 (5) Section 11(e) of the Federal Home Loan

9 Bank Act (12 U.S.C. 1431(e)) is amended to read

10 as follows:

11 ‘‘(e) ACCEPTANCE OF DEPOSITS; REGULATIONS.—

12 ‘‘(1) ACCEPTANCE OF DEPOSITS.—Subject to

13 regulations prescribed by the Finance Board, each

14 enterprise resource bank may accept deposits made

15 by members of such bank or by any other enterprise

16 resource bank or other instrumentality of the United

17 States, upon such terms and conditions as the bank

18 may determine.

19 ‘‘(2) COLLECTION AND SETTLEMENT OF

20 CHECKS.—

21 ‘‘(A) IN GENERAL.—Subject to regulations

22 of the Finance Board, an enterprise resource

23 bank may be a drawee of, and engage in, or be

24 agents or intermediaries for, or otherwise par25 ticipate or assist in, the collection and settle-
94

•HR 3167 IH

1 ment of (including presentment, clearing, and

2 payment of, and remitting for), checks, drafts,

3 or any other negotiable or nonnegotiable items

4 or instruments of payment drawn on or issued

5 by members of any enterprise resource bank or

6 by institutions which are eligible to make appli7 cation to become members pursuant to section

8 4, and to have such incidental powers as the Fi9 nance Board shall find necessary for the exer10 cise of any such authorization.

11 ‘‘(B) CHARGES.—An enterprise resource

12 bank shall make charges, to be determined by

13 the bank consistent with the principles set forth

14 in section 11A(c) of the Federal Reserve Act, or

15 utilize the services of, or act as agent for, or be

16 a member of, a Federal reserve bank, clearing17 house, or any other public or private financial

18 institution or other agency, in the exercise of

19 any powers or functions pursuant to this para20 graph.

21 ‘‘(C) REGULATIONS.—

22 ‘‘(i) IN GENERAL.—The Finance

23 Board may, with respect to participation in

24 the collection and settlement of any items

25 by enterprise resource banks, and with re-
95

•HR 3167 IH

1 spect to the collection and settlement (in2 cluding payment by the payor institution)

3 of items payable by members, to prescribe

4 regulations regarding the rights, powers,

5 responsibilities, duties, and liabilities, in6 cluding standards relating to such rights,

7 powers, responsibilities, duties, and liabil8 ities, of such enterprise resource banks,

9 members, and other parties to any such

10 item or the collection and settlement of

11 any such item.

12 ‘‘(ii) APPLICATION OF BANKING

13 USAGE AND PRACTICE.—In prescribing

14 such regulations, the Finance Board may

15 adopt or apply, in whole or in part, general

16 banking usage and practices, and, in in17 stances or respects in which they would

18 otherwise not be applicable, regulations of

19 the Board of Governors of the Federal Re20 serve System and operating letters, the

21 Uniform Commercial Code, and clearing22 house rules.

23 ‘‘(3) PROHIBITION ON OTHER GENERAL BANK24 ING ACTIVITIES.—An enterprise resource bank may

25 not engage in any banking or other commercial ac-
96

•HR 3167 IH

1 tivities other than the activities specifically author2 ized under this Act and activities incidental to such

3 authorized activities.’’.

4 (6) Subsection (f) of section 11 of the Federal

5 Home Loan Bank Act is amended to read as follows:

6 ‘‘(f) REDISCOUNT OF NOTES HELD BY OTHER

7 BANKS; PURCHASE OF BONDS OF OTHER BANKS.—The

8 enterprise resource banks may—

9 ‘‘(1) rediscount the discounted notes of share10 holders of an enterprise resource bank which are

11 held by other enterprise resource banks;

12 ‘‘(2) make loans to, or make deposits with,

13 other enterprise resource banks; or

14 ‘‘(3) purchase any bonds or debentures issued

15 under this section.’’.

16 (7) Subsection (h) of section 11 of the Federal

17 Home Loan Bank Act is amended by striking ‘‘sec18 tion 301(d) of the Small Business Investment Act of

19 1958’’ and inserting ‘‘title III of the Small Business

20 Investment Act of 1958’’.

21 (8) Subsection (j) of section 11 of the Federal

22 Home Loan Bank Act is amended to read as follows:

23 ‘‘(j) AUDITS.—

24 ‘‘(1) AUDITS BY INSPECTOR GENERAL AND

25 GAO.—The financial transactions of each enterprise
97

•HR 3167 IH

1 resource bank and the office of finance shall be au2 dited in accordance with paragraph (1) of section

3 9105(a) of title 31, United States Code, and may be

4 audited in accordance with paragraph (4) of such

5 section.

6 ‘‘(2) EXCEPTION TO EXCLUSION FROM GOVERN7 MENT CORPORATION CONTROL ACT.—Section

8 9107(c)(2) of title 31, United States Code, shall not

9 apply to any enterprise resource bank or the office

10 of finance.

11 ‘‘(3) SELECTION OF EXTERNAL AUDITORS.—

12 ‘‘(A) IN GENERAL.—The enterprise re13 source banks and the office of finance shall con14 tract jointly for an annual external audit.

15 ‘‘(B) ROLE OF THE BOARD.—Notwith16 standing any other provision of law, the Fi17 nance Board shall not participate in the audit

18 contracting process under this paragraph except

19 that the Finance Board may establish require20 ments for external audit contracts and require21 ments to assure consistency in financial re22 port.’’.

23 (e) SECTION 16.—

24 (1) Section 16(a) of the Federal Home Loan

25 Bank Act (12 U.S.C. 1436(a)) is amended—
98

•HR 3167 IH

1 (A) in the 3d sentence, by striking ‘‘and

2 then only with the approval of the Federal

3 Housing Finance Board’’ and inserting ‘‘subject

4 to such regulations as may be prescribed by the

5 Finance Board’’; and

6 (B) by striking the 4th sentence and in7 serting the following new sentence: ‘‘No enter8 prise resource bank may make any dividend

9 payment pursuant to the preceding sentence

10 without the approval of the Finance Board un11 less the amount of retained earnings and re12 serves (other than loan loss reserves) of the

13 bank after the payment of such dividend would

14 equal or exceed the amount of capital required

15 in order for the bank to be treated as ade16 quately capitalized under all relevant capital

17 measures in effect pursuant to section 6A(c).’’.

18 (2) Section 16 of the Federal Home Loan Bank

19 Act (12 U.S.C. 1436) is amended by adding at the

20 end the following new subsection:

21 ‘‘(d) OWNERSHIP INTEREST IN RETAINED EARNINGS

22 RECOGNIZED.—Subject to any other provision of this Act,

23 each enterprise resource bank and, indirectly, the voting

24 shareholders of each bank, shall have an ownership inter-
99

•HR 3167 IH

1 est in, and a property right in, the retained earnings of

2 the bank.’’.

3 (f) REPEAL OF SECTIONS 2A, 2B, AND 24.—The

4 Federal Home Loan Bank Act (12 U.S.C. 1421 et seq.)

5 is amended by striking sections 2A, 2B, and 24.

6 SEC. 13. INCORPORATION OF BANKS; CORPORATE POWERS.

7 Section 12 of the Federal Home Loan Bank Act is

8 amended to read as follows:

9 ‘‘SEC. 12. INCORPORATION OF BANKS; CORPORATE POW10 ERS.

11 ‘‘(a) ORGANIZATIONAL CERTIFICATES.—

12 ‘‘(1) CUSTODIANSHIP.—The Finance Board

13 shall be the custodian of the organizational certifi14 cates of the enterprise resource banks previously

15 filed with the Federal Home Loan Bank Board (as

16 in existence before the end of the 60-day period be17 ginning on the date of the enactment of the Finan18 cial Institutions Reform, Recovery, and Enforcement

19 Act of 1989) or the Finance Board.

20 ‘‘(2) REPLACEMENT OF LOST OR DESTROYED

21 CERTIFICATE.—If the organizational certificate of an

22 enterprise resource bank is lost or destroyed, the

23 board of directors of the bank shall provide the Fi24 nance Board with a substitute certificate containing

25 such information as the Finance Board may require.
100

•HR 3167 IH

1 ‘‘(3) AMENDMENT IN CASE OF MERGER, COM2 BINATION, OR CONSOLIDATION.—If 2 or more enter3 prise resource banks merge, combine, or otherwise

4 consolidate, the resulting bank shall provide the Fi5 nance Board with an amended organizational certifi6 cate containing such information as the Finance

7 Board may require.

8 ‘‘(b) CORPORATE STATUS.—Each enterprise resource

9 bank shall be a corporation.

10 ‘‘(c) POWERS.—Each enterprise resource bank shall

11 have the following powers:

12 ‘‘(1) To adopt, alter, and use a corporate seal.

13 ‘‘(2) To make contracts.

14 ‘‘(3) To purchase or lease and hold or dispose

15 of such real estate as may be necessary or conven16 ient for the transaction of the business of the bank.

17 ‘‘(4) To sue and be sued, to complain, and to

18 defend, in any court of competent jurisdiction.

19 ‘‘(5) To select, employ, and fix the compensa20 tion of such officers, employees, attorneys, and

21 agents as the board of directors determines to be

22 necessary for the transaction of the business of the

23 bank.
101

•HR 3167 IH

1 ‘‘(6) To define the duties of, and require bonds

2 of, officers, employees, attorneys, and agents of the

3 bank and fix the penalties of any such bonds.

4 ‘‘(7) To dismiss at pleasure officers, employees,

5 attorneys, and agents of the bank.

6 ‘‘(8) By the board of directors, to prescribe,

7 amend, and repeal bylaws and policies governing the

8 manner in which the affairs of the bank may be ad9 ministered.

10 ‘‘(9) Such incidental powers as are not incon11 sistent with the provisions of this Act and are cus12 tomary and usual in corporations generally.

13 ‘‘(d) PROHIBITION ON EXCESSIVE COMPENSATION.—

14 ‘‘(1) IN GENERAL.—The Finance Board shall

15 prohibit the enterprise resource banks from provid16 ing compensation to any employee of the bank that

17 is not reasonable and comparable with compensation

18 for employment in other similar businesses (includ19 ing other financial institutions or major financial

20 services companies) involving similar duties and re21 sponsibilities.

22 ‘‘(2) LIMITATION ON FINANCE BOARD’S AU23 THORITY TO SET COMPENSATION.—In carrying out

24 paragraph (1), the Financial Board may not pre-
102

•HR 3167 IH

1 scribe or set a specific level or range of compensa2 tion.

3 ‘‘(e) STATUS OF BANK EMPLOYEES.—Notwithstand4 ing any other provision of this Act, no officer, employee,

5 or agent of an enterprise resource bank or the office of

6 finance of such banks shall be considered to be an officer

7 or employee of the United States for purposes of title 5,

8 United States Code.

9 ‘‘(f) GUARANTEED HOUSING PROJECT LOANS.—

10 Subject to such regulations as may be prescribed by the

11 Finance Board, an enterprise resource bank may acquire,

12 hold, or dispose of, in whole or in part, or facilitate the

13 acquisition, holding, or disposition by members of such

14 bank of, any housing project loan which has the benefit

15 of any guaranty under section 221, 222, or 224 of the

16 Foreign Assistance Act of 1961, any interest in any such

17 loan, or any commitment or agreement with respect to any

18 such loan or interest.’’.

19 SEC. 14. SUCCESSION OF ENTERPRISE RESOURCE BANKS.

20 Section 25 of the Federal Home Loan Bank Act (12

21 U.S.C. 1445) is amended by inserting ‘‘, operation of

22 law,’’ after ‘‘the Board under this Act’’.
103

•HR 3167 IH

1 SEC. 15. DEFINITIONS.

2 (a) FINANCE BOARD DEFINED.—Paragraph (1) of

3 section 2 of the Federal Home Loan Bank Act (12 U.S.C.

4 1422(1)) is amended to read as follows:

5 ‘‘(1) FINANCE BOARD.—The term ‘Finance

6 Board’ means the Federal Housing Finance Board

7 established under section 3.’’.

8 (b) HOME MORTGAGE LOAN DEFINED.—Section 2 of

9 the Federal Home Loan Bank Act (12 U.S.C. 1422) is

10 amended by striking paragraphs (5) and (6) and inserting

11 the following new paragraph:

12 ‘‘(5) HOME MORTGAGE LOAN.—

13 ‘‘(A) IN GENERAL.—The term ‘home mort14 gage loan’ means a loan made by a voting

15 shareholder or nonshareholder borrower upon

16 the security of—

17 ‘‘(i) a mortgage, deed of trust, or

18 other security arrangement upon qualified

19 real estate, in fee simple; or

20 ‘‘(ii) on a qualified leasehold—

21 ‘‘(I) under a lease which has a

22 period to maturity of not less than 99

23 years and is renewable; or

24 ‘‘(II) under a lease having a pe25 riod of not less than 50 years to run

26 from the date the mortgage, deed of
104

•HR 3167 IH

1 trust, or other security arrangement

2 was executed.

3 ‘‘(B) CERTAIN LOANS INCLUDED.—The

4 term ‘home mortgage loan’ includes—

5 ‘‘(i) such classes of first liens as are

6 commonly given to secure advances on real

7 estate, under the laws of the State in

8 which the real estate is located, by institu9 tions authorized under this Act to become

10 members of an enterprise resource bank;

11 and

12 ‘‘(ii) the credit instruments, if any, se13 cured by such liens.

14 ‘‘(C) QUALIFIED REAL ESTATE; QUALIFIED

15 LEASEHOLD.—The term ‘qualified real estate’

16 and ‘qualified leasehold’ mean real estate upon

17 which is located, or which comprises or in18 cludes, 1 or more homes or other dwelling

19 units.

20 ‘‘(D) DEFINITION OF FURTHER TERMS.—

21 The Finance Board may define any term used

22 in this paragraph.’’.

23 (c) RESIDENTIAL MORTGAGE ASSETS DEFINED.—

24 Section 2 of the Federal Home Loan Bank Act (12 U.S.C.

25 1422) is amended—
105

•HR 3167 IH

1 (1) by redesignating paragraphs (7), (8), (9),

2 (10), (11), and (12) as paragraphs (6), (7), (8), (9),

3 (10), and (11), respectively; and

4 (2) by adding at the end the following new

5 paragraph:

6 ‘‘(12) RESIDENTIAL MORTGAGE ASSETS.—The

7 term ‘residential mortgage asset’—

8 ‘‘(A) means a home mortgage, deed of

9 trust, or other security arrangement upon real

10 estate that is solely residential; and

11 ‘‘(B) includes any mortgage pass-through

12 security or mortgage debt security representing

13 an interest in, or which is collateralized by,

14 home mortgage loans.’’.

15 (d) REGULATED FINANCIAL INSTITUTION DE16 FINED.—Section 2 of the Federal Home Loan Bank Act

17 (12 U.S.C. 1422) is amended by adding after paragraph

18 (12) (as added by subsection (c) of this section) the follow19 ing new paragraph:

20 ‘‘(13) REGULATED FINANCIAL INSTITUTION.—

21 The term ‘regulated financial institution’ means—

22 ‘‘(A) any depository institution (as defined

23 in section 3(c) of the Federal Deposit Insurance

24 Act; and
106

•HR 3167 IH

1 ‘‘(B) any insured or noninsured credit

2 union (as such terms are defined in section

3 101(7) of the Federal Credit Union Act).’’.

4 (e) CAPITAL DISTRIBUTION DEFINED.—Section 2 of

5 the Federal Home Loan Bank Act (12 U.S.C. 1422) is

6 amended by adding after paragraph (13) (as added by

7 subsection (d) of this section) the following new para8 graph:

9 ‘‘(14) CAPITAL DISTRIBUTION.—The term ‘cap10 ital distribution’ means—

11 ‘‘(A) any dividend or other distribution in

12 cash or other property made with respect to any

13 shares of, or other ownership interest in, an en14 terprise resource bank, other than a dividend

15 consisting only of shares of any such bank;

16 ‘‘(B) any payment in cash or other prop17 erty made by an enterprise resource bank to re18 purchase, redeem, retire, or otherwise acquire

19 any of the shares of the bank, including any ex20 tension of credit made to finance an acquisition

21 by a bank of such shares; and

22 ‘‘(C) any transaction that the Finance

23 Board determines by regulation to be, in sub24 stance, a distribution of capital of an enterprise

25 resource bank.’’.
107

•HR 3167 IH

1 (f) BANK-AFFILIATED PARTY.—Section 2 of the

2 Federal Home Loan Bank Act (12 U.S.C. 1422) is

3 amended by adding after paragraph (14) (as added by

4 subsection (e) of this section) the following new para5 graph:

6 ‘‘(15) BANK-AFFILIATED PARTY.—The term

7 ‘bank-affiliated party’ means—

8 ‘‘(A) any director, officer, or employee of,

9 or agent for, an enterprise resource bank;

10 ‘‘(B) any voting shareholder, consultant,

11 joint venture partner, and any other person as

12 determined by the Finance Board who partici13 pates in the conduct of the affairs of an enter14 prise resource bank; and

15 ‘‘(C) any independent contractor (including

16 any attorney, appraiser, or accountant) who

17 knowingly or recklessly participates in—

18 ‘‘(i) any violation of any law or regu19 lation;

20 ‘‘(ii) any breach of fiduciary duty; or

21 ‘‘(iii) any unsafe or unsound practice,

22 which caused or is likely to cause more than a

23 minimal financial loss to, or a significant ad24 verse effect on, the enterprise resource bank.’’.
108

•HR 3167 IH

1 (g) VOTING SHAREHOLDER.—Section 2 of the Fed2 eral Home Loan Bank Act (12 U.S.C. 1422) is amended

3 by adding after paragraph (15) (as added by subsection

4 (f) of this section) the following new paragraph:

5 ‘‘(16) VOTING SHAREHOLDER.—The term ‘vot6 ing shareholder’ means any regulated financial insti7 tution or insurance company which holds any voting

8 stock of an enterprise resource bank.’’.

Æ