I

104TH CONGRESS

1ST SESSION H. R. 1487

To reform and modernize the Federal Home Loan Bank System.

IN THE HOUSE OF REPRESENTATIVES

APRIL 7, 1995

Mr. BAKER of Louisiana (for himself and Mr. CHRYSLER) introduced the following bill; which was referred to the Committee on Banking and Financial Services

A BILL

To reform and modernize the Federal Home Loan Bank

System.

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.

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

5 ‘‘Federal Home Loan Bank System Modernization Act of

6 1995’’.

7 (b) TABLE OF CONTENTS.—

Sec. 1. Short title; table of contents.

Sec. 2. Mission of the Federal home loan banks.

Sec. 3. Federal Housing Finance Board.

Sec. 4. The Office of Finance Corporation.

Sec. 5. Capital stock of the Federal home loan banks.

Sec. 8. Modification of annual contribution to the resolution funding corporation.
2

•HR 1487 IH

Sec. 9. Community support requirements.

Sec. 10. Technical and conforming amendments.

Sec. 11. Incorporation of banks; corporate powers.

Sec. 12. Liquidation or reorganization.

Sec. 13. Definitions.

Sec. 14. Effective date.

1 SEC. 2. MISSION OF THE FEDERAL HOME LOAN BANKS.

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

3 is amended by inserting after section 4 the following new

4 section:

5 ‘‘SEC. 5. MISSION STATEMENT; FEDERAL HOME LOAN BANK

6 DISTRICTS AND MEMBERS.

7 ‘‘(a) MISSION STATEMENT.—The Federal Home

8 Loan Bank System shall—

9 ‘‘(1) be a profit-making enterprise whose pur10 pose is to support residential mortgage lending (in11 cluding mortgages on housing for low- and mod12 erate-income families), and related community and

13 economic development lending, throughout the na14 tion, safely and soundly, through a program of

15 collateralized advances and other financial services

16 to members; and

17 ‘‘(2) facilitate such lending by providing long18 term credit and liquidity and other financial services

19 to members of Federal home loan banks.

20 ‘‘(b) DISTRICTS ESTABLISHED.—
3

•HR 1487 IH

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

2 there shall be 12 districts known as Federal home

3 loan bank districts.

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

5 bear a name descriptive of the geographic location of

6 the district.

7 ‘‘(3) DISTRICTS DESIGNATED.—Subject to sub8 section (c), the 12 districts shall be comprised as fol9 lows:

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

11 states of Connecticut, Maine, Massachusetts,

12 New Hampshire, Rhode Island, and Vermont.

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

14 states of New Jersey and New York, the Com15 monwealth of Puerto Rico, and the territory of

16 the Virgin Islands.

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

18 states of Delaware, Pennsylvania, and West

19 Virginia.

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

21 states of Alabama, Florida, Georgia, Maryland,

22 North Carolina, South Carolina, and Virginia,

23 and the District of Columbia.

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

25 states of Kentucky, Ohio, and Tennessee.
4

•HR 1487 IH

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

2 states of Indiana and Michigan.

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

4 states of Illinois and Wisconsin.

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

6 states of Iowa, Minnesota, Missouri, North Da7 kota, and South Dakota.

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

9 states of Arkansas, Louisiana, Mississippi, New

10 Mexico, and Texas.

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

12 states of Colorado, Kansas, Nebraska, and

13 Oklahoma.

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

15 states of Arizona, California, and Nevada.

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

17 states of Alaska, Hawaii, Idaho, Montana, Or18 egon, Utah, Washington, and Wyoming, and

19 the territories of Guam and the Pacific Islands.

20 ‘‘(c) MERGERS, CONSOLIDATIONS AND COMBINA21 TIONS OF BANKS.—

22 ‘‘(1) IN GENERAL.—Notwithstanding subsection

23 (b), 2 or more Federal home loan banks may merge

24 or otherwise combine or consolidate.
5

•HR 1487 IH

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

2 merger, combination, or consolidation of Federal

3 home loan banks may be consummated under this

4 subsection only if the transaction is approved by—

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

6 of each bank participating in the transaction;

7 and

8 ‘‘(B) the holders of a majority of the

9 shares of capital stock of each such bank.

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

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

12 merger, combination, or consolidation of Federal

13 home loan banks shall be effective at such time as

14 a certificate of merger, combination, or consolidation

15 (in such form as the Finance Board shall prescribe)

16 is—

17 ‘‘(A) executed by the banks participating

18 in such transaction; and

19 ‘‘(B) filed with the Finance Board in ac20 cordance with section 12(a)(3).

21 ‘‘(4) MERGER AGREEMENT.—

22 ‘‘(A) IN GENERAL.—Any merger, combina23 tion, or consolidation of Federal home loan

24 banks under this subsection shall be carried out

25 pursuant to an agreement entered into by all
6

•HR 1487 IH

1 the Federal home loan banks participating in

2 the transaction.

3 ‘‘(B) CONTENTS OF AGREEMENT.—Any

4 agreement referred to in subparagraph (A)

5 shall specify—

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

7 merger, combination, or consolidation;

8 ‘‘(ii) the amendments to the chartered

9 documents of the resulting bank to be af10 fected by the transaction, if any;

11 ‘‘(iii) the principal offices of the re12 sulting bank;

13 ‘‘(iv) the manner of converting the

14 shares of each of the banks participating

15 in the transaction into shares of the result16 ing bank; and

17 ‘‘(v) such other details or provisions

18 as are appropriate.

19 ‘‘(5) SUCCESSION IN INTEREST.—Upon the ef20 fective date of any merger, combination, or consoli21 dation of Federal home loan banks under this sub22 section—

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

24 participating in the transaction other than the

25 resulting bank shall cease to exist;
7

•HR 1487 IH

1 ‘‘(B) the resulting bank shall—

2 ‘‘(i) succeed to all the rights and

3 properties of each of the banks described

4 in subparagraph (A) without other trans5 fer; and

6 ‘‘(ii) be subject to all the debts and li7 abilities of each such bank in the same

8 manner as if the resulting bank had in9 curred such debts and liabilities.

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

11 subsection shall not affect any right of any creditor

12 of any Federal home loan bank which is participat13 ing in any merger, combination, or consolidation

14 under this subsection.

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

16 the property of any Federal home loan bank which

17 is participating in any merger, combination, or con18 solidation under this subsection shall continue to be

19 effective after the consummation of the transaction

20 except that any lien upon property of any bank other

21 than the resulting bank shall be effective only with

22 respect to the property which was subject to the lien

23 immediately before consummation of the transaction.

24 ‘‘(8) CONTINUATION OF SUITS.—
8

•HR 1487 IH

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

2 proceeding commenced by or against any Fed3 eral home loan bank which is participating in

4 any merger, combination, or consolidation

5 under this subsection shall abate by reason of

6 the consummation of such transaction.

7 ‘‘(B) SUBSTITUTION OF RESULTING

8 BANK.—In any action or proceeding described

9 in subparagraph (A), the Federal home loan

10 bank resulting from the transaction referred to

11 in such subparagraph shall be substituted for

12 the Federal home loan bank involved in such

13 action or proceeding before the consummation

14 of the transaction.

15 ‘‘(C) APPLICABILITY TO RESULTING

16 BANK.—Any final judgment or other determina17 tion which becomes final in any action or pro18 ceeding described in subparagraph (A) shall be

19 binding on the bank resulting from the trans20 action referred to in such subparagraph.

21 ‘‘(9) NUMBER OF ELECTED DIRECTORS OF RE22 SULTING BANK.—Any Bank resulting from a merg23 er, combination, or consolidation pursuant to this

24 section may have a number of directors equal to or

25 less than the total number of elected directors of all
9

•HR 1487 IH

1 the banks which participated in such transaction (as

2 determined immediately before such transaction).

3 and

4 ‘‘(10) NUMBER OF APPOINTED DIRECTORS OF

5 RESULTING BANK.—The number of appointed direc6 tors of any Bank resulting from a merger, combina7 tion, or consolidation pursuant to this section shall

be not less than 1⁄2 and not more than 3 8 ⁄4 of the

9 number of elected directors.

10 ‘‘(11) ADJUSTMENT OF DISTRICT BOUND11 ARIES.—After a merger, combination, or consolida12 tion of 2 or more Federal home loan banks under

13 this subsection is consummated, the Finance Board

14 shall adjust the districts established in subsection

15 (b) to reflect such merger, combination, or consoli16 dation.

17 ‘‘(d) CRITERIA FOR ELIGIBILITY FOR MEMBERSHIP

18 IN A BANK.—

19 ‘‘(1) IN GENERAL.—Any insurance company or

20 regulated financial institution shall be eligible to be21 come and remain a member of a Federal home loan

22 bank if the institution meets and continues to meet

23 the following eligibility requirements:

24 ‘‘(A) The institution is subject to inspec25 tion and regulation under the banking laws, or
10

•HR 1487 IH

1 under similar laws, of the State in which the in2 stitution is organized or of the United States.

3 ‘‘(B) The institution maintains an invest4 ment in residential mortgage assets in an

5 amount not less than the amount which is equal

6 to 10 percent of the total assets of the institu7 tion.

8 ‘‘(2) APPLICABILITY OF MINIMUM RESIDENTIAL

9 MORTGAGE INVESTMENT REQUIREMENT TO NEW IN10 STITUTIONS.—

11 ‘‘(A) IN GENERAL.—In the case of an in12 stitution which is applying for membership in a

13 Federal home loan bank before or as of the

14 date on which the institution commences initial

15 business operations, paragraph (1)(B) shall not

16 apply with respect to such institution until the

17 end of the 1-year period beginning on such

18 date.

19 ‘‘(B) INTENTION TO INVEST IN RESIDEN20 TIAL MORTGAGE ASSETS.—A Federal home loan

21 bank may require an institution described in

22 subparagraph (A) to provide the bank with such

23 evidence of the institution’s intention to comply

24 with paragraph (1)(B) as the bank considers

25 appropriate.
11

•HR 1487 IH

1 ‘‘(3) BANK MEMBERSHIP.—An institution which

2 is eligible to become a member of a Federal home

3 loan bank under this section may only become a

4 member of, or secure advances from—

5 ‘‘(A) the Federal home loan bank of the

6 district in which is located the institution’s

7 principal place of business; or

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

9 district described in subparagraph (A) if—

10 ‘‘(i) demanded by convenience; and

11 ‘‘(ii) the Finance Board approves.

12 ‘‘(4) INSURANCE COMPANY SUBJECT TO IN13 SPECTION AND REGULATION.—Notwithstanding

14 paragraph (1)(A), any insurance company which

15 would be eligible to become a member of a Federal

16 home loan bank but for the fact that the institution

17 is not subject to inspection and regulation under the

18 banking laws or similar laws of the State in which

19 such company is organized shall be eligible to be20 come a member if the company agrees to be subject

21 to such inspection and regulation as the Finance

22 Board shall prescribe.

23 ‘‘(5) VOLUNTARY MEMBERSHIP.—Subject to

24 section 6(e), no insurance company or regulated fi25 nancial institution may be required to become or re-
12

•HR 1487 IH

1 main a member of a Federal home loan bank by any

2 State, or by any agency, department or independent

3 establishment of the United States or any State.’’.

4 SEC. 3. FEDERAL HOUSING FINANCE BOARD.

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

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

7 follows:

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

9 ‘‘(a) ESTABLISHMENT.

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

11 Housing Finance Board in the executive branch

12 which shall be an independent agency to regulate the

13 safety and soundness of the Federal Home Loan

14 Bank System.

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

16 Board shall be the following:

17 ‘‘(A) To ensure that the Federal home loan

18 banks—

19 ‘‘(i) operate in accordance with this

20 Act in a safe and sound manner; and

21 ‘‘(ii) remain adequately capitalized.

22 ‘‘(B) To provide periodic reports to the

23 Congress regarding the safety and soundness of

24 the Federal Home Loan Bank System.

25 ‘‘(b) COMPOSITION OF FINANCE BOARD.—
13

•HR 1487 IH

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

2 be composed of 3 directors appointed by the Presi3 dent, by and with the advice and consent of the Sen4 ate, from among individuals who—

5 ‘‘(A) are citizens of the United States; and

6 ‘‘(B) have—

7 ‘‘(i) extensive experience or training in

8 housing finance or the operation of regu9 lated financial institutions; or

10 ‘‘(ii) a commitment to provide special11 ized housing credit.

12 ‘‘(2) TERMS.—

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

14 Finance Board shall be appointed for a term of

15 7 years.

16 ‘‘(B) INTERIM APPOINTMENTS.—Any di17 rector appointed to fill a vacancy occurring be18 fore the expiration of the term for which such

19 director’s predecessor was appointed shall be

20 appointed only for the remainder of such term.

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

22 director may continue to serve after the expira23 tion of the term to which such director was ap24 pointed until a successor has been appointed

25 and qualified.
14

•HR 1487 IH

1 ‘‘(3) CHAIRPERSON AND ACTING CHAIR2 PERSON.—

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

4 designate 1 of the directors to be the Chair5 person of the Finance Board.

6 ‘‘(B) ACTING CHAIRPERSON.—

7 ‘‘(i) IN GENERAL.—The Chairperson

8 shall designate another director to serve as

9 Acting Chairperson during the absence or

10 disability of the Chairperson.

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

12 designation by the Chairperson has not

13 been made pursuant to clause (i) and the

14 position of Chairperson becomes vacant,

15 the remaining directors shall elect a direc16 tor to serve as the Acting Chairperson

17 until a Chairperson has been appointed.

18 ‘‘(4) REPRESENTATIONAL REQUIREMENTS.—

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

20 than 2 directors may be members of the same

21 political party.

22 ‘‘(B) DISTRICT REPRESENTATION.—Not

23 more than 1 director may be appointed from

24 any single district of the Federal Home Loan

25 Bank System.
15

•HR 1487 IH

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

2 Board shall be filled in the manner in which the

3 original appointment was made.

4 ‘‘(6) LIMITATIONS ON CONFLICTS OF INTER5 EST.—No director on the Finance Board may, while

6 serving as a director—

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

8 counsel, or agent of any Federal home loan

9 bank; or

10 ‘‘(B) hold shares of, serve as a director, of11 ficer, employee, counsel, or agent of, or have

12 any other financial interest in any member of

13 any such bank.

14 ‘‘(7) FULL-TIME SERVICE.—All directors shall

15 serve on a full-time basis.

16 ‘‘(8) QUORUM.—2 directors shall constitute a

17 quorum.

18 ‘‘(c) GENERAL POWERS.—The Finance Board shall

19 have the following powers:

20 ‘‘(1) To maintain such oversight of the Federal

21 home loan banks as may be necessary to ensure that

22 such banks operate in a financially safe and sound

23 manner.
16

•HR 1487 IH

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

2 regulations and orders as the Finance Board deter3 mines to be necessary to achieve such purpose.

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

5 officer, employee, or agent of any Federal home loan

6 bank or joint office of the Federal Home Loan Bank

7 System.

8 ‘‘(4) To determine necessary expenditures of

9 the Finance Board under this Act and the manner

10 in which such expenditures shall be incurred, al11 lowed, and paid.

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

13 same manner and under the same conditions as a

14 department or agency of the United States.

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

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

17 Finance Board derived from assessments imposed on

18 the Federal home loan banks and from other sources

19 shall be deposited in the Treasury of the United

20 States.

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

22 directors and other employees of the Finance Board

23 and all other expenses of the Finance Board may be

24 paid from the receipts described in paragraph (1).
17

•HR 1487 IH

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

2 Notwithstanding any other provision of law—

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

4 Board pursuant to any assessment imposed on

5 any Federal home loan bank or any other in6 come of the Finance Board may be construed

7 to be Government funds or appropriated money;

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

9 spend or otherwise obligate any such amount

10 may be treated as budget authority, spending

11 authority, or credit authority or as authority to

12 obligate funds of the United States; and

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

14 apportionment for purposes of chapter 15 of

15 title 31, United States Code, or under any

16 other authority.

17 ‘‘(e) STAFF.—

18 ‘‘(1) IN GENERAL.—Subject to title IV of the

19 Financial Institutions Reform, Recovery, and En20 forcement Act of 1989, the Finance Board may em21 ploy, direct, and fix the compensation and number

22 of employees, attorneys, and agents of the Finance

23 Board.

24 ‘‘(2) PROHIBITION ON DELEGATION TO BANKS

25 OR THE OFFICE OF FINANCE CORPORATION.—The
18

•HR 1487 IH

1 Finance Board may not delegate any function to any

2 employee or administrative unit of any bank or the

3 Office of Finance Corporation.

4 ‘‘(3) CONSULTATION.—In directing and fixing

5 the compensation of staff, attorneys, and agents, the

6 Finance Board shall consult with and maintain com7 parability with the compensation at the Federal

8 banking agencies (as defined in section 3(z) of the

9 Federal Deposit Insurance Act).

10 ‘‘(4) RESTATEMENT OF PRIOR LAW.—The com11 pensation of staff, attorneys, and agents shall be

12 paid without regard to the provisions of other laws

13 applicable to officers or employees of the United

14 States.

15 ‘‘(f) PROHIBITION ON JOINT OFFICES.—

16 ‘‘(1) IN GENERAL.—Except to the extent spe17 cifically provided in this Act, there shall be no joint

18 or collective offices of the Federal home loan banks

19 in the Federal Home Loan Bank System.

20 ‘‘(2) TRANSITION PROVISION.—

21 ‘‘(A) PRIOR JOINT OR COLLECTIVE OFFICE

22 ABOLISHED.—Effective at the end of the 6-

23 month period beginning on the effective date of

24 the Federal Home Loan Bank System Mod25 ernization Act of 1995, any entity which existed
19

•HR 1487 IH

1 as or was operated as a joint or collective office

2 of the Federal home loan banks on the day be3 fore the date of the enactment of such Act is

4 hereby abolished.

5 ‘‘(B) TRANSFER OF FUNCTIONS.—Any

6 function of any entity abolished under subpara7 graph (A) shall be transferred by the Finance

8 Board to the Office of Finance Corporation be9 fore the end of the 6-month period beginning on

10 the effective date of the Federal Home Loan

11 Bank System Modernization Act of 1995.

12 ‘‘(C) SAVINGS PROVISION.—The abolish13 ment of the Office of Finance pursuant to this

14 section shall not affect the validity of any right,

15 duty, or obligation of any person or entity per16 taining in any manner to the Office of Finance.

17 ‘‘(g) ANNUAL REPORTS.—

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

19 shall make an annual report to the Congress regard20 ing the safety and soundness of the Federal Home

21 Loan Bank System.

22 ‘‘(2) BANK REPORTS.—The Federal home loan

23 banks shall submit a collective annual report to the

24 Congress on the fulfillment of the mission of the

25 banks under this Act.
20

•HR 1487 IH

1 ‘‘(3) AFFORDABLE HOUSING ADVISORY COUN2 CILS.—The affordable housing advisory councils of

3 the Federal home loan banks shall submit a collec4 tive annual report to the Congress on the fulfillment

5 by the Bank System of the system’s affordable hous6 ing mission under section 10 of this Act.

7 ‘‘(h) STATUS OF BANK EMPLOYEES.—Notwithstand8 ing any other provision of this Act, no officer, employee,

9 or agent of a Federal home loan bank or any joint office

10 of such banks shall be considered to be an officer or em11 ployee of the United States for purposes of title 5, United

12 States Code.

13 ‘‘(i) SUSPENSION OR REMOVAL OF BANK EMPLOY14 EES FOR CAUSE.—

15 ‘‘(1) WRITTEN NOTICE.—In exercising any au16 thority under subsection (c)(2) to suspend or remove

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

18 any Federal home loan bank or joint office of the

19 Federal Home Loan Bank System, the Finance

20 Board shall provide written notice of such suspen21 sion or removal and the cause of the suspension or

22 removal to such director, officer, employee, or agent

23 and to such bank or joint office.

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

25 to paragraph (1) shall establish the time and place
21

•HR 1487 IH

1 for a hearing on the suspension or removal in ac2 cordance with section 554 of title 5, United States

3 Code.’’.

4 SEC. 4. THE OFFICE OF FINANCE CORPORATION.

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

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

7 ‘‘SEC. 4 THE OFFICE OF FINANCE CORPORATION.

8 ‘‘(a) ESTABLISHMENT.—

9 ‘‘(1) IN GENERAL.—There is hereby established

10 the Office of Finance Corporation (hereafter in this

11 section referred to as the ‘Corporation’) which shall

12 be a federally chartered instrumentality of the

13 United States.

14 ‘‘(2) PURPOSES.—The purpose of the Corpora15 tion shall be to issue the notes, bonds, and deben16 tures of the Federal home loan banks in accordance

17 with this Act.

18 ‘‘(3) TRANSFER OF FUNCTIONS.—The functions

19 of the Office of Finance of the Federal home loan

20 banks shall be transferred to the Corporation before

21 the end of the 6-month period beginning on the ef22 fective date of the Federal Home Loan Bank System

23 Modernization Act of 1995 in accordance with sec24 tion 3(f)(2).
22

•HR 1487 IH

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

2 this Act and such safety and soundness regulations as the

3 Finance Board may prescribe, the Corporation shall have

4 the following powers:

5 ‘‘(1) To issue voting capital stock to the Fed6 eral home loan banks.

7 ‘‘(2) To issue Federal home loan bank notes,

8 bonds and debentures pursuant to section 11 of this

9 Act on behalf of the banks.

10 ‘‘(3) To determine the amount, maturities, rate

11 of interest, terms, and other conditions of Federal

12 home loan bank notes, bonds and debentures.

13 ‘‘(4) To adopt, alter, and use a corporate seal.

14 ‘‘(5) To enter into contracts.

15 ‘‘(6) To sue and be sued in the corporate capac16 ity of the corporation, and to complain and defend

17 in any action brought by or against the Corporation

18 in any court of competent jurisdiction.

19 ‘‘(7) To exercise such incidental powers not in20 consistent with the provisions of this Act as are nec21 essary and appropriate to carry out the provisions of

22 this Act.

23 ‘‘(c) BOARD OF DIRECTORS.—

24 ‘‘(1) ESTABLISHMENT.—The management of

25 the Corporation shall be vested in a board of direc-
23

•HR 1487 IH

1 tors composed of directors elected by the Federal

2 home loan banks in accordance with paragraph (2).

3 ‘‘(2) COMPOSITION OF BOARD.—Each Federal

4 home loan bank shall annually elect 1 individual

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

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

7 board of directors of the Corporation.

8 ‘‘(3) DUTIES.—The board of directors shall ad9 minister the affairs of the Corporation in accordance

10 with the provisions of this Act.

11 ‘‘(4) TERMS.—

12 ‘‘(A) IN GENERAL.—Each member of the

13 board of directors shall be elected for a term of

14 1 year and shall serve at the pleasure of the

15 board of directors of the Federal home loan

16 bank which elected such member.

17 ‘‘(B) TERM LIMITATION.—No member of

18 the board of directors may serve more than 3

19 full consecutive terms.

20 ‘‘(C) INTERIM APPOINTMENTS.—Any di21 rector elected to fill a vacancy occurring before

22 the expiration of the term for which such direc23 tor’s predecessor was elected shall be elected

24 only for the remainder of such term.
24

•HR 1487 IH

1 ‘‘(D) CONTINUATION OF SERVICE.—Each

2 director may continue to serve after the expira3 tion of the term to which such director was

4 elected until a successor has been elected and

5 qualified.

6 ‘‘(5) POWERS.—The board of directors shall ex7 ercise such powers as may be necessary and appro8 priate to carry out the purposes of this section, in9 cluding the power—

10 ‘‘(A) to impose an assessment on the Fed11 eral home loan banks to cover the operating ex12 penses of the Corporation; and

13 ‘‘(B) to appoint, establish the duties of,

14 compensate, and dismiss at will the employees

15 of the Corporation.

16 ‘‘(6) PAY.—The members of the board of direc17 tors shall serve without additional compensation, but

18 shall be reimbursed for reasonable expenses of trav19 el, lodging, and subsistence incurred in attending

20 meetings and other activities of the Corporation.

21 ‘‘(7) QUORUM REQUIREMENT.—No business

22 may be conducted by the board of directors unless

23 a quorum of the members of such board of directors

24 is present.
25

•HR 1487 IH

1 ‘‘(8) VACANCIES.—Any vacancy on the board of

2 directors shall be filled in the same manner in which

3 the original appointment was made.

4 ‘‘(9) APPOINTMENT OF OFFICERS AND ADOP5 TIONS OF RULES OF PROCEDURE.—The board of di6 rectors shall—

7 ‘‘(A) select, from among the members of

8 such board, a Chairperson, a Vice Chairperson,

9 and a Secretary; and

10 ‘‘(B) adopt rules of procedure for actions

11 before the board of directors.

12 ‘‘(d) STOCK.—

13 ‘‘(1) ISSUANCE OF EQUAL AMOUNT TO EACH

14 BANK.—The Corporation shall issue 100 shares of

15 voting capital stock, with a par value of $100 per

16 share to each Federal home loan bank.

17 ‘‘(2) NONTRANSFERABILITY.—Stock issued

18 under paragraph (1) may be owned and held only by

19 the Federal home loan banks.

20 ‘‘(3) PAYMENT UPON ISSUANCE.—Upon issu21 ance of any share of stock under this subsection to

22 any Federal home loan bank, the bank shall pay to

23 the Corporation the total amount due for such stock.

24 ‘‘(4) DISTRIBUTION REQUIREMENT.—The total

25 amount of outstanding stock of the Corporation
26

•HR 1487 IH

1 shall, at all times, be distributed equally among all

2 the Federal home loan banks.

3 ‘‘(e) STATUS.—Except to the extent expressly pro4 vided in this Act, the Corporation shall be treated as a

5 Federal home loan bank for purposes of any law.

6 ‘‘(f) JURISDICTION, REMOVAL POWER.—

7 ‘‘(1) IN GENERAL.—Notwithstanding any other

8 provision of law, any civil action or proceeding to

9 which the Corporation is a party shall be deemed to

10 arise under the laws of the United States.

11 ‘‘(2) VENUE.—The United States District

12 Court for the District of Columbia shall have exclu13 sive jurisdiction over any action to which the Cor14 poration is a party.

15 ‘‘(3) REMOVAL.—The Corporation may, without

16 bond or security, remove any action or proceeding to

17 which the corporation is or becomes a party from a

18 State court to the United States District Court for

19 the District of Columbia.’’.

20 SEC. 5. CAPITAL STOCK OF THE FEDERAL HOME LOAN

21 BANKS.

22 (a) ISSUANCE OF CAPITAL STOCK.—Section 6(a) of

23 the Federal Home Loan Bank Act is amended—

24 (1) by striking ‘‘(a) The capital stock’’ and in25 serting ‘‘(a) ISSUANCE OF CAPITAL STOCK.—
27

•HR 1487 IH

1 ‘‘(1) IN GENERAL.—The capital stock’’;

2 (2) by striking the 2d and 3d sentences and in3 serting ‘‘The capital stock shall be issued at par.’’;

4 and

5 (3) by adding at the end the following new

6 paragraph:

7 ‘‘(2) RULES AND REQUIREMENTS.—The board

8 of directors of each Federal home loan bank shall

9 promptly prescribe rules and requirements, consist10 ent with this Act, governing the capital stock of such

11 bank and other provisions of this section.’’.

12 (b) SUBSCRIPTION AND RETIREMENT OF STOCK.—

13 Section 6(b) of the Federal Home Loan Bank Act is

14 amended to read as follows:

15 ‘‘(b) SUBSCRIPTION AND RETIREMENT OF STOCK.—

16 ‘‘(1) MINIMUM INVESTMENT REQUIREMENT.—

17 Subject to paragraphs (3) and (6), the minimum in18 vestment of each institution eligible to become a

19 member of a Federal home loan bank under section

20 5 in the stock of such bank shall be an amount not

21 less than the greater of—

22 ‘‘(A) the minimum amount required to

23 meet the asset-based investment requirement

24 established by the bank pursuant to paragraph

25 (2); or
28

•HR 1487 IH

1 ‘‘(B) the minimum amount required to

2 meet the advances-related investment require3 ment established by the bank pursuant to para4 graph (4).

5 ‘‘(2) ASSET-BASED REQUIREMENT.—

6 ‘‘(A) TRANSITION SCHEDULE.—During

7 calendar years 1996, 1997, and 1998, the mini8 mum investment of each member of a Federal

9 home loan bank in the stock of such bank, as

10 determined on the basis of the assets of such

11 member, shall be an amount not less than the

12 amount set forth in the following table, as de13 termined annually by the bank’s board of direc14 tors by April 30 of each year as of the close of

15 the preceding year:

‘‘During the year: The minimum amount of stock

shall be:

1996 ............................................... An amount equal to the lesser of 0.6

percent of member’s total assets or

1.0 percent of the member’s residential mortgage assets, but in any

case not less than the amount

equal to 0.3 percent of total assets

1997 ............................................... An amount equal to the lesser of 0.5

percent of a member’s total assets

or 1.0 percent of the member’s residential mortgage assets, but in

any case not less than the amount

equal to 0.35 percent of total assets

1998 ............................................... An amount equal to the lesser of 0.4

percent of a member’s total assets

or 1.0 percent of the member’s residential mortgage assets

16
29

•HR 1487 IH

1 ‘‘(B) AFTER 1998.—The minimum invest2 ment of each member of a Federal home loan

3 bank in the stock of such bank after 1998, as

4 determined on the basis of the assets of such

5 member, shall be an amount equal to not less

6 than 0.3 percent and not more than 0.6 percent

7 of the member’s total assets, as determined by

8 the bank’s board of directors from time to time.

9 ‘‘(3) DISCRETIONARY INCREASE IN AMOUNT OF

10 MINIMUM INVESTMENT AUTHORIZED.—Notwith11 standing paragraph (2)(A), the board of directors of

12 each Federal home loan bank may, in the discretion

13 of the board of directors, substitute—

14 ‘‘(A) ‘an amount determined by the board

15 of directors between 0.5 percent and 0.6 per16 cent of a member’s total assets’ for ‘0.5 percent

17 of a member’s total assets’ where such term ap18 pears in the table in paragraph (2)(A) in con19 nection with 1997; and

20 ‘‘(B) ‘an amount determined by the board

21 of directors between 0.4 percent and 0.6 per22 cent of a member’s total assets’ for ‘0.4 percent

23 of a member’s total assets’ where such term ap24 pears in the table in paragraph (2)(A) in con25 nection with 1998.
30

•HR 1487 IH

1 ‘‘(4) ADVANCES-RELATED REQUIREMENT.—The

2 minimum investment of each member of a Federal

3 home loan bank in the stock of such bank, as deter4 mined on the basis of the amount of outstanding ad5 vances from such bank to the member, shall be an

6 amount which is equal to not less than 3.0 percent

7 of such advances and not more than 6.0 percent of

8 such advances, as determined by the board of direc9 tors of the bank from time to time.

10 ‘‘(5) DE MINIMUS INVESTMENT REQUIREMENT

11 AUTHORIZED.—Notwithstanding the requirements of

12 this section, the board of directors of each Federal

13 home loan bank may establish a minimum capital

14 stock subscription of at least $1,000.

15 ‘‘(6) FINANCE BOARD AUTHORITY TO INCREASE

16 INVESTMENT REQUIREMENT TO MAINTAIN BANK

17 SAFETY AND SOUNDNESS OR SYSTEM LIQUIDITY.—

18 ‘‘(A) DISTRICT-WIDE APPLICATION.—If the

19 Finance Board determines that the safety and

20 soundness of a Federal home loan bank re21 quires an increase in the amount of capital of

22 such bank, the Finance Board may require each

23 member of such bank to maintain an invest24 ment in the capital stock of such bank in an

25 amount determined by the Finance Board
31

•HR 1487 IH

1 which shall not exceed, as applied with respect

2 to any member, the greater of—

3 ‘‘(i) an amount equal to 0.6 percent of

4 the total assets of the member; or

5 ‘‘(ii) an amount equal to 6.0 percent

6 of the total outstanding advances of the

7 member from such bank.

8 ‘‘(B) SYSTEM-WIDE APPLICATION.—If the

9 Finance Board determines that the ability of

10 the Federal Home Loan Bank System to meet

11 the collective financial obligations of the Fed12 eral home loan banks requires an increase in

13 the amount of capital of all such banks, the Fi14 nance Board may require all the members of all

15 the banks to maintain an investment in the cap16 ital stock of each such member’s bank in an

17 amount determined by the Finance Board

18 which shall not exceed the greater of the

19 amounts described in clauses (i) and (ii) of sub20 paragraph (A).

21 ‘‘(7) RETIREMENT OF STOCK UPON APPLICA22 TION OF MEMBER.—

23 ‘‘(A) IN GENERAL.—Upon application by a

24 member, a bank shall retire the amount of

25 stock sought to be retired by such member, no
32

•HR 1487 IH

1 later than 6 months after the date of the filing

2 of the application, if the board of directors of

3 the bank determines that the following addi4 tional conditions have been met:

5 ‘‘(i) The amount of such member’s in6 vestment in the capital stock of the bank

7 which would remain after the retirement of

8 the stock sought in the application is not

9 less than the minimum required invest10 ment amount applicable to such member.

11 ‘‘(ii) The bank is adequately capital12 ized, and would remain adequately capital13 ized, if the stock subject to all pending ap14 plications by members for retirement of

15 stock were immediately deducted from the

16 Bank’s capital.

17 ‘‘(iii) The member is not in breach of

18 any agreement with the bank.

19 ‘‘(B) PRO RATA BASIS.—If the retirement,

20 in any calendar quarter, of the total amount of

21 stock which is subject to pending applications

22 by members of a bank under subparagraph (A)

23 would cause the bank to cease to be adequately

24 capitalized, the bank may retire such pro rata

25 portion of the total amount of stock each such
33

•HR 1487 IH

1 member is seeking to retire as would allow the

2 Bank to remain adequately capitalized after

3 such retirement.

4 ‘‘(C) RETIREMENT OF EXCESS STOCK

5 GIVEN PRECEDENCE OVER WITHDRAWAL FROM

6 MEMBERSHIP NOTICES.—Except as provided in

7 subparagraph (D), a bank shall dispose of all

8 pending applications for retirement of stock

9 under subparagraph (A), and make all pay10 ments with respect to the retirement of such

11 stock, before taking any action to retire the

12 stock of any member of the bank which has

13 submitted a notice of withdrawal from member14 ship pursuant to subsection (e)(1).

15 ‘‘(D) TREATMENT OF NOTICE OF WITH16 DRAWAL AS APPLICATION TO RETIRE EXCESS

17 STOCK FOR PURPOSES OF ALLOWING PROMPT

18 PAYMENT.—Subject to such regulations as the

19 Finance Board may prescribe, a bank may

20 treat, for purposes of subparagraph (C), the

21 submission by a member of a notice of with22 drawal of membership under subsection (e)(1)

23 as an application by such member under sub24 paragraph (A) to retire that portion of such

25 member’s investment in the capital stock of the
34

•HR 1487 IH

1 bank as exceeds the minimum investment

2 amount applicable to such member.

3 ‘‘(8) RETIREMENT OF STOCK DISTRICT-WIDE.—

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

5 of the board of directors of a bank, a bank may

6 retire all, or any portion, of the outstanding

7 stock of the bank in excess of the total of the

8 minimum investment amounts of all the mem9 bers of the bank, if the board of directors deter10 mines that the bank is adequately capitalized,

11 and would remain adequately capitalized if all

12 the stock of the bank which—

13 ‘‘(i) the bank proposes to retire under

14 this subparagraph; and

15 ‘‘(ii) is subject to pending applications

16 for retirement, and pending notices of ter17 mination of or withdrawal from member18 ship,

19 were deducted from the bank’s capital.

20 ‘‘(B) RETIREMENT REQUIRED TO BE MADE

21 ON A PRO RATA BASIS.—The determination of

22 the amount of shares held by each member of

23 a bank which are subject to retirement pursu24 ant to a determination by the board of directors
35

•HR 1487 IH

1 of the bank in accordance with subparagraph

2 (A) shall be made on a pro rata basis.

3 ‘‘(C) RETIREMENT SUBJECT TO MINIMUM

4 INVESTMENT REQUIREMENTS.—No retirement

5 of shares held by a member of a bank may be

6 made under this section to the extent such re7 tirement of shares would cause the amount of

8 such member’s remaining investment in the

9 capital stock of the bank after such retirement

10 to fall below the minimum investment amount

11 applicable to such member.

12 ‘‘(9) PAYMENT AND CANCELLATION.—In the

13 case of any retirement of stock of a Federal home

14 loan bank in accordance with this subsection, the

15 bank shall—

16 ‘‘(A) at the election of the bank—

17 (i) pay the member an amount equal

18 to the product of the number of shares of

19 stock retired and the par value of such

20 stock; or

21 (ii) credit such amount, in whole or in

22 part, against any indebtedness of the mem23 ber to the bank, including any outstanding

24 prepayment fees; and

25 ‘‘(B) cancel the shares so retired.
36

•HR 1487 IH

1 ‘‘(10) ISSUANCE AND RETIREMENT OF WHOLE

2 SHARES.—The board of directors of each bank may

3 provide for such adjustments in amounts of any

4 stock to be issued or retired as may be appropriate

5 in order that stock may be issued or retired only in

6 entire shares.

7 ‘‘(11) MINIMUM INVESTMENT AMOUNT DE8 FINED.—For purposes of this subsection, the term

9 ‘minimum investment amount’ means, with respect

10 to any member of a Federal home loan bank, the

11 minimum amount required, under this subsection, to

12 be invested by such member in such bank.’’.

13 (c) TERMINATION OF MEMBERSHIP.—Section 6(e) of

14 the Federal Home Loan Bank Act (12 U.S.C. 1426(e))

15 is amended to read as follows:

16 ‘‘(e) TERMINATION OF MEMBERSHIP.—

17 ‘‘(1) VOLUNTARY WITHDRAWAL FROM MEMBER18 SHIP.—

19 ‘‘(A) IN GENERAL.—Any member of a

20 Federal home loan bank may withdraw from

21 membership in such bank by—

22 ‘‘(i) filing a written notice of the

23 member’s intention to withdraw with the

24 board of directors of the bank; and
37

•HR 1487 IH

1 ‘‘(ii) paying a fee equal to 0.1 percent

2 of the minimum investment amount appli3 cable to such member under subsection

4 (b).

5 ‘‘(B) RESCISSION OF NOTICE.—Any mem6 ber of a Federal home loan bank may rescind

7 any notice submitted to the board of directors

8 of the bank in accordance with subparagraph

9 (A) at any time before the member receives any

10 payment in connection with any retirement of

11 such member’s stock in the bank pursuant to

12 such notice (other than any payment made pur13 suant to a determination by the board of direc14 tors under subsection (b)(6)(D).

15 ‘‘(C) LIMITATION ON AUTHORITY TO VOTE

16 SHARES WHILE NOTICE IS PENDING.—No mem17 ber may vote the capital stock of a Federal

18 home loan bank on any matter while a notice

19 by such member of withdrawal from member20 ship of the bank is pending before the board of

21 directors of the bank.

22 ‘‘(2) REMOVAL FROM MEMBERSHIP.—The

23 board of directors of any Federal home loan bank

24 may remove any member from membership, if—
38

•HR 1487 IH

1 ‘‘(A) in the opinion of the board of direc2 tors, such member has failed to comply with a

3 provision of this Act or any other applicable

4 law; or

5 ‘‘(B) the member has been determined to

6 be insolvent, or otherwise subject to the ap7 pointment of a conservator, receiver, or other

8 legal custodian, by a state or Federal authority

9 with regulatory and supervisory responsibility

10 for such member.

11 ‘‘(2) LIQUIDATION OF DEBT.—

12 ‘‘(A) IN GENERAL.—If any member’s

13 membership in a Federal home loan bank is ter14 minated for any reason, the indebtedness of

15 such member to the Federal home loan bank

16 shall be liquidated in an orderly manner (as de17 termined by the bank).

18 ‘‘(B) TREATMENT AS PREPAYMENT.—Any

19 liquidation of indebtedness pursuant to sub20 paragraph (A) shall be treated as a prepayment

21 of any such indebtedness, and shall be subject

22 to any penalties or other fees applicable to such

23 prepayment.

24 ‘‘(C) RETURN OF COLLATERAL.—Upon the

25 liquidation of indebtedness of a member pursu-
39

•HR 1487 IH

1 ant to subparagraph (A), the member shall be

2 entitled to the return of any collateral relating

3 to the indebtedness.

4 ‘‘(3) SURRENDER AND CANCELLATION OF

5 STOCK.—If any member’s membership in a Federal

6 home loan bank is terminated for any reason, the

7 capital stock in the bank owned by such member

8 shall be surrendered and canceled after the liquida9 tion of any indebtedness (of the member to the

10 bank) is completed pursuant to paragraph (2).

11 ‘‘(4) PAYMENT ON CANCELED STOCK.—

12 ‘‘(A) IN GENERAL.—Upon the surrender

13 and cancellation of any capital stock of a mem14 ber in a Federal home loan bank in accordance

15 with paragraph (3), the member shall be paid

16 an amount equal to the product of the number

17 of shares of stock canceled and the par value of

18 such stock.

19 ‘‘(B) WITHHOLDING OF PAYMENT IN CASE

20 OF UNDERCAPITALIZED BANK.—If the Finance

21 Board finds that a Federal home loan bank is

22 less than adequately capitalized, or would be

23 less than adequately capitalized if all the shares

24 of stock in such bank which are the subject of

25 pending applications for stock retirement and
40

•HR 1487 IH

1 notices of withdrawal were immediately de2 ducted from the bank’s capital, the Finance

3 Board may order the bank to—

4 ‘‘(i) withhold the amount to be paid

5 required under subparagraph (A) with re6 spect to any stock for up to 12 months;

7 and

8 ‘‘(ii) in the case of a critically

9 undercapitalized bank (as defined by the

10 Finance Board in accordance with section

11 28), withhold a pro rata share of the

12 amount to be paid with respect to such

13 stock under subparagraph (A) equal to the

14 additional capital which members of the

15 bank are required to contribute to the

16 bank under a capital restoration plan im17 posed by the Finance Board in accordance

18 with section 28, until such capital restora19 tion plan has been terminated by the Fi20 nance Board.’’.

21 (d) REDUCTION OF PERIOD REQUIRED BEFORE

22 WITHDRAWN MEMBER MAY RESUME MEMBERSHIP.—

23 Section 6(h) of the Federal Home Loan Bank Act (12

24 U.S.C. 1426(h)) is amended—

25 (1) by striking ‘‘10’’ and inserting ‘‘5’’; and
41

•HR 1487 IH

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

2 except that any institution that withdrew from mem3 bership in any such bank before the date of the en4 actment of the Federal Home Loan Bank Mod5 ernization Act of 1995 may acquire membership in

6 a Federal Home Loan Bank at any time after such

7 date subject to the requirements of this Act.’’

8 (e) 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 (f) 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 FEDERAL HOME

19 LOAN BANK.—Each Federal savings association may

20 qualify for membership in a Federal home loan bank in

21 the manner provided in the Federal Home Loan Bank

22 Act.’’.

23 SEC. 6. CAPITAL REQUIREMENTS.

24 (a) ESTABLISHMENT OF CAPITAL REQUIREMENTS.—

25 The Federal Home Loan Bank Act (12 U.S.C. 1421 et
42

•HR 1487 IH

1 seq.) is amended by redesignating sections 28, 29, and 30

2 as sections 29, 30, and 31, respectively, and by inserting

3 after section 27 the following new section:

4 ‘‘SEC. 28. BANK CAPITAL REQUIREMENTS.

5 ‘‘(a) IN GENERAL.—

6 ‘‘(1) UNIFORM CAPITAL STANDARDS.—The Fi7 nance Board shall, by regulation, establish a uni8 form capital requirement for Federal home loan

9 banks which shall take into consideration interest

10 rate risk, credit risk, and all other risks and obliga11 tions associated with the operation of the banks.

12 ‘‘(2) MINIMUM TOTAL TANGIBLE CAPITAL RE13 QUIREMENT.—At a minimum, the regulations pre14 scribed by the Finance Board under paragraph (1)

15 shall require each Federal home loan bank to main16 tain total tangible capital in an amount which is

17 equal to or greater than the greater of—

18 ‘‘(A) the sum of—

19 ‘‘(i) 2.5 percent of the bank’s total as20 sets; and

21 ‘‘(ii) 0.45 percent of the bank’s net

22 off-balance sheet exposure; or

23 ‘‘(B) 10 percent of the bank’s risk-weight24 ed assets.
43

•HR 1487 IH

1 ‘‘(3) TOTAL TANGIBLE CAPITAL DEFINED.—

2 For purposes of this section, the term ‘total tangible

3 capital’ means capital stock and retained earnings.

4 ‘‘(b) CAPITAL CLASSIFICATIONS.—

5 ‘‘(1) IN GENERAL.—Before the end of the 120-

6 day period beginning on the date of the enactment

7 of the Federal Home Loan Bank System Moderniza8 tion Act of 1995, the Finance Board shall prescribe

9 standards for classifying the capital adequacy of

10 Federal home loan banks in accordance with the fol11 lowing capital categories:

12 ‘‘(A) Adequately capitalized.

13 ‘‘(B) Undercapitalized.

14 ‘‘(C) Significantly undercapitalized.

15 ‘‘(D) Critically undercapitalized.

16 ‘‘(2) MINIMUM REQUIREMENTS FOR ADE17 QUATELY CAPITALIZED CATEGORY.—Under the

18 standards established by the Finance Board under

19 paragraph (1) a bank may not be classified as ade20 quately capitalized unless the bank—

21 ‘‘(A) meets the minimum tangible capital

22 requirements referred to in subsection (a); and

23 ‘‘(B) maintains additional capital as may

24 be prescribed by the Finance Board to ensure

25 that the bank has sufficient capital to account
44

•HR 1487 IH

1 for the bank’s exposure to interest-rate risk,

2 credit risk, and all other risks and obligations

3 associated with operating the bank.

4 ‘‘(3) QUARTERLY EVALUATION OF CAPITAL

5 ADEQUACY.—

6 ‘‘(A) IN GENERAL.—The Finance Board

7 shall

8 ‘‘(i) evaluate the capital adequacy of

9 each Federal home loan bank at least once

10 in each calendar quarter; and

11 ‘‘(ii) classify the capital adequacy of

12 the bank in accordance with the categories

13 established pursuant to paragraph (1).

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

15 of obtaining judicial review of—

16 ‘‘(i) any classification of the capital

17 adequacy of a Federal home loan bank

18 under subparagraph (A); or

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

20 Board pursuant to such classification,

21 the classification, or the action taken pursuant

22 to a classification, shall be treated as a final

23 order of the Finance Board.

24 ‘‘(c) CAPITAL AND INCOME RESTORATION PLANS.—
45

•HR 1487 IH

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

2 prescribe regulations which require any Federal

3 home loan bank that is less than adequately capital4 ized to file an acceptable capital and income restora5 tion plan with the Finance Board.

6 ‘‘(2) CONTENTS OF PLAN.—A capital and in7 come restoration plan of a Federal home loan bank

8 shall demonstrate the actions the bank will take to

9 become adequately capitalized and to increase earn10 ings and the time frame within which such goals will

11 be achieved.

12 ‘‘(3) AUTHORITY TO PROHIBIT DISTRIBU13 TIONS.—In addition to any other actions which the

14 Finance Board may take against an undercapitalized

15 Federal home loan bank which—

16 ‘‘(A) does not submit an acceptable capital

17 restoration plan; or

18 ‘‘(B) does not substantially comply with a

19 capital restoration plan that has been accepted

20 by the Finance Board,

21 the Finance Board may prohibit such Bank from

22 making any capital distribution until the bank is

23 adequately capitalized.

24 ‘‘(d) OWNERSHIP INTEREST IN CAPITAL.—
46

•HR 1487 IH

1 ‘‘(1) IN GENERAL.—Notwithstanding any provi2 sion of this Act or any other provision of law, each

3 Federal home loan bank and the members of each

4 bank shall have an ownership interest in, and a

5 property right in, the paid-in-capital and retained

6 earnings of the bank.

7 ‘‘(2) DESCRIPTION OF INTEREST.—The owner8 ship interests and property rights of members re9 ferred to in paragraph (1) with respect to a Federal

10 home loan bank shall be the same in all respects as

11 the ownership interest in, and property right in, the

12 paid-in-capital and retained earnings of a private

13 for-profit business corporation organized under the

14 laws of the State in which such bank is located.

15 ‘‘(3) SHARES TREATED AS EVIDENCE OF OWN16 ERSHIP INTEREST.—The shares of a Federal home

17 loan bank which are held by a member shall be

18 treated as evidence of ownership interest and prop19 erty right of the member with respect to the paid20 in-capital and retained earnings of such bank.’’.

21 SEC. 7. MANAGEMENT OF BANKS.

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

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

24 ‘‘SEC. 7. MANAGEMENT OF BANKS.

25 ‘‘(a) BOARD OF DIRECTORS.—
47

•HR 1487 IH

1 ‘‘(1) COMPOSITION OF BOARD.—Except as oth2 erwise provided in this section, the management of

3 each Federal home loan bank shall be vested in a

4 board of directors consisting of 14 directors selected

5 as follows:

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

7 the bank as provided in paragraph (5).

8 ‘‘(B) 6 shall be appointed by the President

9 of the United States.

10 ‘‘(2) QUALIFICATIONS.—

11 ‘‘(A) IN GENERAL.—Each director of a

12 Federal home loan bank shall be a citizen of the

13 United States and a bona fide resident of the

14 district in which such bank is located.

15 ‘‘(B) DISQUALIFICATION.—An individual

16 who is an officer or director of a member that

17 fails to meet any applicable capital requirement

18 shall not be qualified to be a director on the

19 board of directors of a Federal home loan bank.

20 ‘‘(3) STATE REPRESENTATIONAL CRITERIA.—

21 ‘‘(A) IN GENERAL.—The number of elected

22 directors of a Federal home loan bank from

23 each State within the district of such bank shall

24 bear the same approximate relationship to the

25 total number of elected directors of such bank
48

•HR 1487 IH

1 as the total amount which the members of the

2 bank whose principal places of business are lo3 cated in such State are required to invest in

4 the stock of the bank under section 6(b) bears

5 to the total amount which all members of such

6 bank are required to invest in the bank under

7 such section.

8 ‘‘(B) TRANSITION PROVISION.—Notwith9 standing subparagraph (A), the composition of

10 the boards of directors of the 12 Federal home

11 loan banks immediately after the effective date

12 of the Federal Home Loan Bank System Mod13 ernization Act of 1995 shall be the same as the

14 composition of such boards of directors on Jan15 uary 1, 1995.

16 ‘‘(C) DISCRETIONARY INCREASE IN OVER17 ALL NUMBER OF DIRECTORS.—In order to en18 sure director representation on the board of di19 rectors of a Federal home loan bank consistent

20 with this paragraph, the board of directors of

21 the bank may—

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

24 ‘‘(ii) increase the number of appointed

25 directors to an amount not less than one-
49

•HR 1487 IH

1 half and not more than three-quarters of

2 the number of elected directors.

3 ‘‘(D) MANDATORY INCREASE TO ACHIEVE

4 MINIMUM STATE REPRESENTATION.—If, at any

5 time, the number of elected directors of a Fed6 eral home loan bank is less than the number of

7 States in the district of such bank, the board of

8 directors of the bank shall increase the number

9 of elected directors on such board of directors

10 to a number at least equal to the number of

11 States in such district.

12 ‘‘(E) MAXIMUM NUMBER FROM ANY

13 STATE.—Not more than 6 directors on the

14 board of directors of any Federal home loan

15 bank may be residents of the same State.

16 ‘‘(F) NO DECREASE IN STATE REPRESEN17 TATION.—The number of elected directors on

18 the board of directors of any Federal home loan

19 bank from any State may not decrease below

20 the number of elected directors on the board of

21 directors from such State as of January 1,

22 1995.

23 ‘‘(4) CHAIRPERSON AND VICE CHAIRPERSON.—

24 The board of directors of each Federal home loan

25 bank shall elect—
50

•HR 1487 IH

1 ‘‘(A) 1 of the directors of the bank to be

2 the chairperson of the board of directors; and

3 ‘‘(B) 1 of the directors of the bank to be

4 vice chairperson of the board of directors.

5 ‘‘(5) PROVISIONS APPLICABLE TO APPOINTED

6 DIRECTORS.—

7 ‘‘(A) REPRESENTATIONAL REQUIRE8 MENT.—At least 2 of the directors of each Fed9 eral home loan bank who are appointed by the

10 President shall be appointed from among rep11 resentatives of organizations with more than a

12 2-year history of representing consumer or com13 munity interests on banking services, credit

14 needs, housing, or financial consumer protec15 tions.

16 ‘‘(B) CONFLICT OF INTEREST PROVI17 SION.—No director on the board of directors of

18 a Federal home loan bank who is appointed

19 pursuant to this subsection may, during such

20 director’s term of office—

21 ‘‘(i) serve as an officer of any Federal

22 home loan bank or as a director or officer

23 of any member of a bank; or

24 ‘‘(ii) hold shares, or any other finan25 cial interest in, any member of a bank.
51

•HR 1487 IH

1 ‘‘(6) PROVISIONS APPLICABLE TO ELECTED DI2 RECTORS.—

3 ‘‘(A) DESIGNATION OF STATE TO BE REP4 RESENTED.—Each position of elected director

5 on the board of directors of any Federal home

6 loan bank shall be designated by the board of

7 directors as a position to be filled by a director

8 representing the members of the bank whose

9 principal places of business are located in a

10 particular State.

11 ‘‘(B) QUALIFICATION.—Only officers and

12 directors of members whose principal places of

13 business are located in a State shall be qualified

14 to serve as a director representing such State.

15 ‘‘(C) NOMINATION OF DIRECTORS.—All

16 members (of a Federal home loan bank) whose

17 principal places of business are located in any

18 State may nominate any qualified individual for

19 election as a director representing such State.

20 ‘‘(D) VOTING PROCEDURE.—In any elec21 tion of a director of a Federal home loan bank,

22 each member whose principal place of business

23 is located in the State which such director rep24 resents may cast for such office a number of

25 votes equal to the lesser of—
52

•HR 1487 IH

1 ‘‘(i) the minimum number of shares of

2 the capital stock of such bank in which

3 such member is required, under section

4 6(b), to be invested as of the end of the

5 calendar year immediately preceding the

6 election, as determined by the board of di7 rectors of the Federal home loan bank; and

8 ‘‘(ii) the average of the minimum

9 number of shares of such stock in which all

10 members whose principal places of business

11 are located in such State are required,

12 under section 6(b), to be invested as of the

13 end of the calendar year immediately pre14 ceding the election, as so determined.

15 ‘‘(E) PLURALITY DECISION.—Each posi16 tion of elected director of a Federal home loan

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 a Federal home loan bank after

25 the date of the enactment of the Federal Home
53

•HR 1487 IH

1 Loan Bank System Modernization Act of 1995

2 shall be 4 years.

3 ‘‘(B) TERM LIMIT.—No individual may

4 serve as a director on the board of directors of

5 a Federal home loan bank for more than 2 full

6 consecutive 4-year terms.

7 ‘‘(C) INTERIM APPOINTMENTS.—Any di8 rector appointed or elected to fill a vacancy oc9 curring before the expiration of the term for

10 which such director’s predecessor was appointed

11 or elected shall be appointed or elected only for

12 the remainder of such term.

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

14 director of a Federal home loan bank may con15 tinue to serve after the expiration of the term

16 to which such director was appointed or elected

17 until a successor has been qualified.

18 ‘‘(8) VACANCIES.—

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

20 occurring in the position of appointed director

21 of a Federal home loan bank shall be filled in

22 the manner in which the original appointment

23 was made.

24 ‘‘(B) ELECTED DIRECTOR.—Any vacancy

25 occurring in the position of elected director of
54

•HR 1487 IH

1 a Federal home loan bank shall be filled by an

2 affirmative vote of a majority of the remaining

3 directors of such bank, without regard to

4 whether such remaining directors constitute a

5 quorum of the board of directors.

6 ‘‘(C) VACANCY AS A RESULT OF DISQUALI7 FICATION OF DIRECTOR.—

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

9 a Federal home loan bank ceases to meet

10 any qualification for such position—

11 ‘‘(I) the position shall imme12 diately become vacant by operation of

13 law; and

14 ‘‘(II) service by such director in

15 such position shall cease.

16 ‘‘(ii) CONTINUATION.—Notwithstand17 ing clause (i), an appointed director of a

18 Federal home loan bank whose position be19 came vacant pursuant to such clause may

20 continue to serve in such position until a

21 successor has been qualified.

22 ‘‘(9) REGULATIONS GOVERNING NOMINATIONS

23 AND ELECTIONS.—The bylaws of each Federal home

24 loan bank shall provide procedures for the nomina-
55

•HR 1487 IH

1 tion and election of directors on the board of direc2 tors of the bank.

3 ‘‘(10) DEFINITIONS.—For purposes of this sub4 section, the following definitions shall apply:

5 ‘‘(A) MEMBER.—The term ‘member’

6 means, with respect to any year, any institution

7 which is a member of a Federal home loan bank

8 and was a member of such bank at the end of

9 the immediately preceding calendar year.

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

11 State, the District of Columbia, and the Com12 monwealth of Puerto Rico.

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

14 board of directors of each Federal home loan bank shall

15 have all power necessary to exercise the responsibility of

16 such board with respect to such bank, including the follow17 ing powers:

18 ‘‘(1) Establish financial and other performance

19 targets.

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

21 property values, methods of appraisals, state and

22 Federal laws, regulations, policies, and procedures

23 relevant to the operations of the bank and the mem24 bers of the bank, and such other subjects as the

25 board of directors may consider to be useful for the
56

•HR 1487 IH

1 general guidance of the policies and operations of

2 the bank and institutions authorized to secure ad3 vances from the bank.

4 ‘‘(3) Establish credit policy and policy for man5 agement of the bank’s investments.

6 ‘‘(4) Establish policy regarding the bank’s in7 terest rate risk.

8 ‘‘(5) Determine dividends.

9 ‘‘(6) Establish policy regarding the documenta10 tion required for advances.

11 ‘‘(7) Establish policy regarding item processing

12 pricing.

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

14 purchase of, and participations in, advances.

15 ‘‘(9) Establish policy regarding lending to mem16 bers that are insolvent or not in compliance with ap17 plicable capital requirements.

18 ‘‘(10) Establish policy regarding—

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

20 Federal home loan banks; and

21 ‘‘(B) making deposits in and accepting de22 posits from such banks.

23 ‘‘(11) Establish policy regarding the community

24 investment program.
57

•HR 1487 IH

1 ‘‘(12) Establish policy regarding incentives for

2 community support by member institutions.

3 ‘‘(13) Establish policy regarding publication of

4 community support activities of member institutions.

5 ‘‘(14) Establish policy regarding the develop6 ment and implementation of the business plan of the

7 bank.

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

9 modifications to such budget.

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

11 modifications to such bylaws.

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

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

14 boards of directors.

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

16 serve as directors and conduct elections of directors.

17 ‘‘(20) Establish policy regarding audit plans

18 and charters of the audit committee and audit direc19 tor of the bank and select independent accountants

20 to prepare the bank’s financial reports.

21 ‘‘(21) Establish policy regarding charitable do22 nations and membership in organizations.

23 ‘‘(22) Establish policy regarding mandatory re24 tirement of directors, officers and employees.
58

•HR 1487 IH

1 ‘‘(23) Establish policy regarding gold and gold2 related transactions.

3 ‘‘(24) Establish policy regarding indemnifica4 tion of directors, officers, employees, and agents.

5 ‘‘(25) Establish policy regarding the disaster re6 covery plan of the bank.

7 ‘‘(26) Establish the records retention policy of

8 the bank.

9 ‘‘(c) DUTIES OF DIRECTORS.—The board of directors

10 of each Federal home loan bank shall—

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

12 and impartially and without discrimination in favor

13 of or against any member borrower; and

14 ‘‘(2) subject to the provisions of this Act, ex15 tend to each institution authorized to secure ad16 vances such advances as may be made safely and

17 reasonably with due regard for—

18 ‘‘(A) the claims and demands of other in19 stitutions; and

20 ‘‘(B) the maintenance of adequate credit

21 standing for the bank and the bank’s obliga22 tions.’’.
59

•HR 1487 IH

1 SEC. 8. MODIFICATION OF ANNUAL CONTRIBUTION TO THE

2 RESOLUTION FUNDING CORPORATION.

3 (a) FUNDING OF INTEREST PAYMENTS BY THE RES4 OLUTION FUNDING CORPORATION.—Subsection

5 21B(f)(2)(C) of the Federal Home Loan Bank Act (12

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

7 ‘‘(C) PAYMENTS BY FEDERAL HOME LOAN

8 BANKS.—

9 ‘‘(i) IN GENERAL.—To the extent the

10 amounts available pursuant to subpara11 graphs (A) and (B) are insufficient to

12 cover the amount of interest payments, the

13 Federal home loan banks shall pay to the

14 Funding Corporation each calendar year

15 $300,000,000.

16 ‘‘(ii) INDIVIDUAL BANK SHARE.—

17 Each Federal home loan bank’s share of

18 the amount required to be paid under

19 clause (i) for any year shall be determined

20 by dividing—

21 ‘‘(I) the daily average minimum

22 level of tangible capital which such

23 bank was required to maintain in

24 order to comply with the bank’s mini25 mum capital requirement for the ade26 quately capitalized category estab-
60

•HR 1487 IH

1 lished pursuant to section 28(b)(2);

2 by

3 ‘‘(II) the sum of the daily aver4 age minimum levels of tangible capital

5 which all the banks were required to

6 maintain in order to comply with each

7 such bank’s minimum capital require8 ment for the adequately capitalized

9 category.’’

10 (b) BANK CONTRIBUTIONS TO THE BANK’S AFFORD11 ABLE HOUSING PROGRAM.—

12 ‘‘(1) 1995.—Subsection 10(j)(5)(C) of the Fed13 eral Home Loan Bank Act (12 U.S.C.

14 1430(j)(5)(C)) is amended to read as follows:

15 ‘‘(C) In 1995, the greater of—

16 ‘‘(i) 10 percent of the net income of

17 the bank in the preceding year; or

18 ‘‘(ii) such prorated sum as the Fi19 nance Board may determine to be nec20 essary to assure that the aggregate con21 tribution of all the Federal home loan

22 banks shall not be less than $100,000,000

23 for 1995.’’

24 (c) 1996 AND SUBSEQUENT YEARS.—Subsection

25 10(j)(5) of the Federal Home Loan Bank Act (12 U.S.C.
61

•HR 1487 IH

1 1430(j)(5)) is amended by adding at the end the following

2 new subparagraph:

3 ‘‘(D) In 1996 and subsequent years, 10

4 percent of the net income of the bank in the

5 preceding year, as determined after deducting

6 the payment made by each Federal home loan

7 bank to the Funding Corporation under section

8 21B(f)(2)(C).’’.

9 SEC. 9. COMMUNITY SUPPORT REQUIREMENTS.

10 Subsection (g) of section 10 of the Federal Home

11 Loan Bank Act (12 U.S.C. 1430(g)) is amended by adding

12 at the end the following new paragraph:

13 ‘‘(3) SAFE HARBOR FOR MEMBER’S RECEIVING

14 CRA RATINGS OF SATISFACTORY OR BETTER.—Not15 withstanding paragraphs (1) and (2), any member

16 which receives a rating of satisfactory or outstand17 ing pursuant to section 807 of the Community Rein18 vestment Act of 1977 in such member’s most recent

19 examination shall be treated as having satisfied the

20 requirements of such paragraphs.’’.

21 SEC. 10. TECHNICAL AND CONFORMING AMENDMENTS.

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

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

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

25 approval of the Board’’; and
62

•HR 1487 IH

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

2 the approval of the Board,’’.

3 (b) SECTION 10.—

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

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

6 amended—

7 (A) in the 1st sentence before paragraph

8 (1), by striking ‘‘or section 11(g) of this Act’’;

9 (B) in the 2d sentence before paragraph

10 (1), by striking ‘‘housing finance’’ and inserting

11 ‘‘mortgage assets’’;

12 (C) in the 2d sentence of paragraph (5),

13 by striking ‘‘and the Board’’; and

14 (D) in the last sentence of paragraph (5),

15 by striking ‘‘Board’’ and inserting ‘‘bank’’.

16 (2) The last sentence of section 10(b) of the

17 Federal Home Loan Bank Act (12 U.S.C. 1430(b))

18 is amended by striking ‘‘Board’’ and inserting

19 ‘‘bank’’.

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

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

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

23 ‘‘Board’’ and inserting ‘‘bank’’; and

24 (B) by striking the 2d sentence.
63

•HR 1487 IH

1 (4) The last sentence of section 10(d) of the

2 Federal Home Loan Bank Act (12 U.S.C. 1430(d))

3 is amended by striking ‘‘Subject to the approval of

4 the Board, any’’ and inserting ‘‘Any’’.

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

6 Act (12 U.S.C. 1430) is amended by striking the 1st

7 of the 2 subsections designated as subsection (e).

8 (c) SECTION 10b.—Subsection (a) of section 10b of

9 the Federal Home Loan Bank Act (12 U.S.C. 1430b) is

10 amended—

11 (1) by striking ‘‘Board’’ and inserting ‘‘bank’’;

12 and

13 (2) by inserting ‘‘home’’ before ‘‘mortgage

14 loan’’.

15 (d) SECTION 11.—

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

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

18 amended—

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

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

21 AUTHORITY.—

22 ‘‘(1) IN GENERAL.—Each Federal home loan

23 bank’’;

24 (B) by striking ‘‘, subject to rules and reg25 ulations prescribed by the Board’’;
64

•HR 1487 IH

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

2 ‘‘board of directors of the bank’’; and

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

4 paragraph:

5 ‘‘(2) BORROWING THROUGH THE OFFICE OF FI6 NANCE CORPORATION ONLY.—Notwithstanding

7 paragraph (1), all notes, bonds, and debentures is8 sued by any Federal home loan bank shall be issued

9 through the Office of Finance Corporation.’’

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

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

12 amended to read as follows:

13 ‘‘(b) ISSUANCE OF FEDERAL HOME LOAN BANK

14 BONDS.—

15 ‘‘(1) IN GENERAL.—Effective as of the date the

16 Finance Board transfers the functions of the Office

17 of Finance to the Office of Finance Corporation pur18 suant to section 4(a)(3), the Office of Finance Cor19 poration may issue consolidated Federal home loan

20 bank bonds and other consolidated obligations on be21 half of the banks.

22 ‘‘(2) JOINT AND SEVERAL OBLIGATION; TERMS

23 AND CONDITIONS.—Consolidated obligations issued

24 by the Office of Finance Corporation under para25 graph (1) shall—
65

•HR 1487 IH

1 ‘‘(A) be the joint and several obligations of

2 all the Federal home loan banks; and

3 ‘‘(B) shall be issued upon such terms and

4 conditions as shall be established by the Office

5 of Finance Corporation.’’.

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

7 Act (12 U.S.C. 1431) is amended by striking sub8 sections (c) and (d) and by redesignating subsections

9 (e), (f), (g), (h), (i), (j) and (k) as subsections (c),

10 (d), (e), (f), (g), (h) and (i), respectively.

11 (4) Subsection (d) of section 11 of the Federal

12 Home Loan Bank Act (as so redesignated by para13 graph (3)) is amended to read as follows:

14 ‘‘(d) REDISCOUNT OF NOTES HELD BY OTHER

15 BANKS; PURCHASE OF BONDS OF OTHER BANKS.—The

16 Federal home loan banks may—

17 ‘‘(1) rediscount the discounted notes of mem18 bers held by other Federal home loan banks;

19 ‘‘(2) make loans to, or make deposits with,

20 other Federal home loan banks; or

21 ‘‘(3) purchase any bonds or debentures issued

22 under this section.’’.

23 (e) REPEAL OF SECTIONS 2A AND 2B.—The Federal

24 Home Loan Bank Act (12 U.S.C. 1421 et seq.) is amend25 ed by striking sections 2A and 2B.
66

•HR 1487 IH

1 SEC. 11. INCORPORATION OF BANKS; CORPORATE POWERS.

2 Section 12 of the Federal Home Loan Bank Act is

3 amended to read as follows:

4 ‘‘SEC. 12. INCORPORATION OF BANKS; CORPORATE POW5 ERS.

6 ‘‘(a) ORGANIZATIONAL CERTIFICATES.—

7 ‘‘(1) CUSTODIANSHIP.—The Finance Board

8 shall be the custodian of the organizational certifi9 cates of the Federal home loan banks previously

10 filed with the Federal Home Loan Bank Board (as

11 in existence before the end of the 60-day period be12 ginning on the date of the enactment of the Finan13 cial Institutions Reform, Recovery, and Enforcement

14 Act of 1989) or the Finance Board.

15 ‘‘(2) REPLACEMENT OF LOST OR DESTROYED

16 CERTIFICATE.—If the organizational certificate of a

17 Federal home loan bank is lost or destroyed, the

18 board of directors of the bank shall provide the Fi19 nance Board with a substitute certificate containing

20 such information as the Finance Board may require.

21 ‘‘(3) AMENDMENT IN CASE OF MERGER, COM22 BINATION, OR CONSOLIDATION.—If 2 or more Fed23 eral home loan banks merge, combine, or otherwise

24 consolidate, the resulting bank shall provide the Fi25 nance Board with an amended organizational certifi-
67

•HR 1487 IH

1 cate containing such information as the Finance

2 Board may require.

3 ‘‘(b) CORPORATE STATUS.—Each Federal home loan

4 bank shall be a corporation.

5 ‘‘(c) POWERS.—Each Federal home loan bank shall

6 have the following powers:

7 ‘‘(1) To adopt, alter, and use a corporate seal.

8 ‘‘(2) To make contracts.

9 ‘‘(3) To purchase or lease and hold or dispose

10 of such real estate as may be necessary or conven11 ient for the transaction of the business of the bank.

12 ‘‘(4) To sue and be sued, to complain, and to

13 defend, in any court of competent jurisdiction.

14 ‘‘(5) To select, employ, and fix the compensa15 tion of such officers, employees, attorneys, and

16 agents as the board of directors determines to be

17 necessary for the transaction of the business of the

18 bank.

19 ‘‘(6) To define the duties of, and require bonds

20 of, officers, employees, attorneys, and agents of the

21 bank and fix the penalties of any such bonds.

22 ‘‘(7) To dismiss at pleasure officers, employees,

23 attorneys, and agents of the bank.

24 ‘‘(8) By the board of directors, to prescribe,

25 amend, and repeal bylaws and policies governing the
68

•HR 1487 IH

1 manner in which the affairs of the bank may be ad2 ministered.

3 ‘‘(9) Such incidental powers as are not incon4 sistent with the provisions of this Act and are cus5 tomary and usual in corporations generally.

6 ‘‘(d) PROHIBITION ON EXCESSIVE COMPENSATION.—

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

8 prohibit the Federal home loan banks from provid9 ing compensation to any employee of the bank that

10 is not reasonable and comparable with compensation

11 for employment in other similar businesses (includ12 ing other financial institutions or major financial

13 services companies) involving similar duties and re14 sponsibilities.

15 ‘‘(2) LIMITATION ON FINANCE BOARD’S AU16 THORITY TO SET COMPENSATION.—In carrying out

17 paragraph (1), the Finance Board may not prescribe

18 or set a specific level or range of compensation.’’.

19 SEC. 12. LIQUIDATION OR REORGANIZATION.

20 Section 25 of the Federal Home Loan Bank Act (12

21 U.S.C. 1445) is amended by striking ‘‘the Board under

22 this Act’’ and inserting ‘‘operation of law’’.
69

•HR 1487 IH

1 SEC. 13. 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

9 of the Federal Home Loan Bank Act (12 U.S.C. 1422)

10 is amended by striking paragraphs (5) and (6) and insert11 ing 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 member or

15 a nonmember borrower upon the security of—

16 ‘‘(i) a mortgage, deed of trust or other

17 security arrangement upon qualified real

18 estate, in fee simple; or

19 ‘‘(ii) on a qualified leasehold—

20 ‘‘(I) under a lease which has a

21 period to maturity of not less than 99

22 years and is renewable; or

23 ‘‘(II) under a lease having a pe24 riod of not less than 50 years to run

25 from the date the mortgage, deed of
70

•HR 1487 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 a Federal home loan bank;

11 and

12 ‘‘(ii) the credit instruments, if any, se13 cured by such liens.

14 ‘‘(C) QUALIFIED REAL ESTATE; QUALIFIED

15 LEASEHOLD.—The terms ‘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—
71

•HR 1487 IH

1 (1) by redesignating paragraphs (7), (8), (9),

2 (10), (11), and (12) as paragraphs (6), (7), (8), (9),

3 (10), (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, a

14 home mortgage loan.’’

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 insured depository institution;

23 and

24 ‘‘(B) any building and loan association,

25 saving and loan association, cooperative bank,
72

•HR 1487 IH

1 homestead association, or savings bank which is

2 duly organized under the laws of any state or

3 of the United States.’’.

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, a Fed14 eral home loan bank, other than a dividend con15 sisting only of shares of any such bank;

16 ‘‘(B) any payment in cash or other prop17 erty made by a Federal home loan 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 a Federal

25 home loan bank.’’.
73

•HR 1487 IH

1 SEC. 14. EFFECTIVE DATE.

2 Except as otherwise expressly provided in this Act,

3 this Act and the amendments made by this Act shall take

4 effect on the first January 1 which occurs after the date

5 of the enactment of this Act.

Æ

HR 1487 IH——2

HR 1487 IH——3

HR 1487 IH——4

HR 1487 IH——5

HR 1487 IH——6