I

104TH CONGRESS

1ST SESSION H. R. 1657

To restructure and modernize the Federal Home Loan Bank System.

IN THE HOUSE OF REPRESENTATIVES

MAY 17, 1995

Mr. GONZALEZ (by request) introduced the following bill; which was referred

to the Committee on Banking and Financial Services

A BILL

To restructure 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 AND TABLE OF CONTENTS.

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

5 ‘‘Federal Home Loan Bank System Restructuring and

6 Modernization Act of 1995’’.

7 (b) TABLE OF CONTENTS.—The table of contents for

8 this Act is as follows:

Sec. 1. Short title; table of contents.

TITLE I—AMENDMENT OF FEDERAL HOME LOAN BANK ACT

Sec. 101. Statement of purpose.

Sec. 102. Definitions.
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Sec. 103. Federal Housing Finance Board.

Sec. 104. Powers and duties of the Federal Housing Finance Board.

Sec. 105. Continuing regulations and policies.

Sec. 106. Readjustment of Federal Home Loan Bank districts; names.

Sec. 107. Eligibility for membership.

Sec. 108. Capital stock.

Sec. 109. Transitional provisions concerning capital stock.

Sec. 110. Prompt corrective action.

Sec. 111. Federal Home Loan Bank directors.

Sec. 112. Eligibility to secure advances.

Sec. 113. Advances.

Sec. 114. Advances to nonmember mortgagees; terms and conditions.

Sec. 115. Powers and duties of banks.

Sec. 116. Incorporation of banks; corporate powers; housing project loans.

Sec. 117. Exemption from taxation; obligations acceptable as credit on debt of

home owner.

Sec. 118. Obligations as lawful investments; liability of United States for obligations issued by banks.

Sec. 119. Reserves and dividends.

Sec. 120. Financing Corporation.

Sec. 121. Obligations of Resolution Funding Corporation.

Sec. 122. Eligibility to membership in banks.

Sec. 123. Merger, liquidation or reorganization.

Sec. 124. General enforcement powers.

TITLE II—EMPLOYEE PROVISIONS

Sec. 201. Federal Housing Finance Board employees.

TITLE III—CONFORMING AMENDMENTS

Sec. 301. Amendments to the Federal Credit Union Act.

Sec. 302. Amendments to the Federal Deposit Insurance Act.

Sec. 303. Amendment to the Home Owners’ Loan Act.

Sec. 304. Amendment to the Housing and Urban-Rural Recovery Act of 1983.

Sec. 305. Amendments to the Right to Financial Privacy Act of 1978.

Sec. 306. Amendments to the Thrift Institutions Restructuring Act.

Sec. 307. Amendments to title 18, United States Code.

1 TITLE I—AMENDMENT OF FEDERAL HOME

2 LOAN BANK ACT

3 SEC. 101. STATEMENT OF PURPOSE.

4 The Federal Home Loan Bank Act is amended by

5 adding after section 1 (12 U.S.C. 1421) the following new

6 section:
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1 ‘‘SEC. 1A. STATEMENT OF PURPOSE.

2 ‘‘The Federal Home Loan Bank System is a profit3 making enterprise whose purpose is to support residential

4 mortgage lending (including mortgages on housing for

5 low- and moderate-income families), as well as community

6 development lending, throughout the Nation, safely and

7 soundly, primarily through a program of collateralized ad8 vances to System members. The System facilitates such

9 lending by increasing the liquidity and improving the dis10 tribution of investment capital available through its mem11 ber institutions.’’.

12 SEC. 102. DEFINITIONS.

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

14 U.S.C. 1422) is amended to read as follows:

15 ‘‘SEC. 2. DEFINITIONS.

16 ‘‘As used in this Act—

17 ‘‘(1) BANK.—The term ‘Federal Home Loan

18 Bank’ or ‘Bank’ means a bank established under the

19 authority of this Act.

20 ‘‘(2) BANK-AFFILIATED PARTY.—The term

21 ‘Bank-affiliated party’ means—

22 ‘‘(A) any director, officer, or employee of,

23 or agent for, a Federal Home Loan Bank;

24 ‘‘(B) any member, consultant, joint ven25 ture partner, and any other person as deter26 mined by the Board who participates in the
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1 conduct of the affairs of a Federal Home Loan

2 Bank; and

3 ‘‘(C) any independent contractor (including

4 any attorney, appraiser, or accountant) who

5 knowingly or recklessly participates in—

6 ‘‘(i) any violation of any law or regu7 lation;

8 ‘‘(ii) any breach of fiduciary duty; or

9 ‘‘(iii) any unsafe or unsound practice,

10 which caused or is likely to cause more than a

11 minimal financial loss to, or a significant ad12 verse effect on, the Federal Home Loan Bank.

13 ‘‘(3) BOARD.—The term ‘Board’ means the

14 Federal Housing Finance Board established under

15 section 2A.

16 ‘‘(4) FEDERAL HOME LOAN BANK SYSTEM AND

17 SYSTEM.—The term ‘Federal Home Loan Bank Sys18 tem’ or ‘System’ means the Federal Home Loan

19 Banks, including any central office established by

20 the Banks, under the supervision of the Board.

21 ‘‘(5) HOME MORTGAGE.—The term ‘home mort22 gage’ means a mortgage upon real estate, in fee sim23 ple, or on a leasehold—(A) under a lease for not less

24 than ninety-nine years which is renewable or (B)

25 under a lease having a period of not less than fifty
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1 years to run from the date the mortgage was exe2 cuted, upon which is located, or which comprises or

3 includes, one or more homes or other dwelling units,

4 all of which may be defined by the Board, and shall

5 include, in addition to first mortgages, such classes

6 of first liens as are commonly given to secure ad7 vances on real estate by institutions authorized

8 under this Act to become members, under the laws

9 of the State in which the real estate is located, to10 gether with the credit instruments, if any, secured

11 thereby.

12 ‘‘(6) HOME MORTGAGE LOAN.—The term ‘home

13 mortgage loan’ means a loan made by a member

14 upon the security of a home mortgage.

15 ‘‘(7) INSURED DEPOSITORY INSTITUTION.—The

16 term ‘insured depository institution’ means—

17 ‘‘(A) an insured depository institution (as

18 defined in section 3 of the Federal Deposit In19 surance Act), and

20 ‘‘(B) except as used in sections 21A and

21 21B, an insured credit union (as defined in sec22 tion 101 of the Federal Credit Union Act).

23 ‘‘(8) MEMBER.—The term ‘member’ means any

24 institution which has subscribed for the stock of a
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1 Federal Home Loan Bank and has not surrendered

2 all of that stock.

3 ‘‘(9) SAVINGS ASSOCIATION.—The term ‘savings

4 association’ has the meaning given to such term in

5 section 3 of the Federal Deposit Insurance Act.

6 ‘‘(10) STATE.—The term ‘State’ includes the

7 District of Columbia, Guam, Puerto Rico, and the

8 Virgin Islands of the United States.

9 ‘‘(11) TOTAL CAPITAL.—The term ‘total cap10 ital’ means—

11 ‘‘(A) except as provided in subparagraphs

12 (B) ad (C), total capital that is calculated at

13 least quarterly;

14 ‘‘(B) with respect to a Federal Home Loan

15 Bank, total capital that is calculated on the last

16 day of each month net of all stock to be re17 deemed under all pending notices of redemption

18 and withdrawal filed under section 6(e) with the

19 Bank and all stock pending retirement by the

20 Bank; and

21 ‘‘(C) with respect to the Federal Home

22 Loan Bank System, total capital that is cal23 culated on the last day of each month net of all

24 stock to be redeemed under all pending notices

25 of redemption and withdrawal filed under sec-
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1 tion 6(e) with any of the Federal Home Loan

2 Banks and all stock pending retirement by any

3 of the Banks.

4 ‘‘(12) UNPAID PRINCIPAL.—The term ‘unpaid

5 principal’, when used in respect of a loan secured by

6 a home mortgage means the principal thereof less

7 the sum of (A) payments made on such principal,

8 and (B) in cases where shares or stock are pledged

9 as security for the loan, the payments made on such

10 shares or stock plus earnings or dividends appor11 tioned or credited thereon.’’.

12 SEC. 103. FEDERAL HOUSING FINANCE BOARD.

13 (a) ESTABLISHMENT.—Section 2A(a) of the Federal

14 Home Loan Bank Act (12 U.S.C. 1422a(a)) is amended

15 by deleting paragraph (3).

16 (b) BOARD MEMBERS.—Section 2A(b) of the Federal

17 Home Loan Bank Act (12 U.S.C. 1422(b)) is amended

18 to read as follows:

19 ‘‘(b) BOARD MEMBERS.—

20 ‘‘(1) IN GENERAL.—The Board shall consist of

21 the following directors:

22 ‘‘(A) The Secretary of the Treasury (or the

23 Secretary of the Treasury’s designee), who shall

24 serve without additional compensation.
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1 ‘‘(B) The Secretary of the Department of

2 Housing and Urban Development (or the Sec3 retary of the Department of Housing and

4 Urban Development’s designee), who shall serve

5 without additional compensation.

6 ‘‘(C) 3 directors appointed by the Presi7 dent, by and with the advice and consent of the

8 Senate—

9 ‘‘(i) from among individuals who are

10 citizens of the United States; and

11 ‘‘(ii) from among individuals—

12 ‘‘(I) with extensive experience or

13 training in housing finance or finan14 cial institution safety and soundness

15 regulation, or

16 ‘‘(II) with a commitment to pro17 viding specialized housing credit.

18 ‘‘(2) APPOINTED DIRECTORS.—

19 ‘‘(A) FULL-TIME DIRECTOR.—

20 ‘‘(I) ONE DIRECTOR.—1 of the ap21 pointed directors shall serve full-time as a

22 director of the Board.

23 ‘‘(II) CHAIRPERSON.—The full-time

24 appointed director shall be designated to

25 serve as the Chairperson of the Board and
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1 the Chairperson shall be designated as the

2 chief executive officer, subject to the super3 vision of the Board.

4 ‘‘(III) ACTING CHAIRPERSON.—The

5 Chairperson shall designate another ap6 pointed director to serve as Acting Chair7 person during the absence or disability of

8 the Chairperson.

9 ‘‘(B) PART-TIME DIRECTORS.—2 of the ap10 pointed directors shall serve part-time as direc11 tors of the Board and at least 1 of the part12 time directors shall be chosen from an organiza13 tion with more than a 2-year history of rep14 resenting consumer or community interests on

15 banking services, credit needs, housing, or fi16 nancial consumer protections.

17 ‘‘(3) NOMINATIONS.—Nominations pursuant to

18 this subsection shall be referred in the Senate to the

19 Committee on Banking, Housing, and Urban Af20 fairs.’’.

21 (c) APPOINTED DIRECTORS’ TERMS.—Section 2A(c)

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

23 is amended to read as follows:

24 ‘‘(c) APPOINTED DIRECTORS’ TERMS.—
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1 ‘‘(1) IN GENERAL.—The appointed directors

2 shall each be appointed for a term of 6 years.

3 ‘‘(2) INITIAL TERM.—Notwithstanding para4 graph (1), of the directors first appointed after the

5 enactment of the Federal Home Loan Bank System

6 Restructuring and Modernization Act of 1995—

7 ‘‘(i) 1 shall be appointed for a term of 2

8 years;

9 ‘‘(ii) 1 shall be appointed for a term of 4

10 years; and

11 ‘‘(iii) 1 shall be appointed for a term of 6

12 years.’’.

13 (d) VACANCIES.—Section 2A(d) of the Federal Home

14 Loan Bank Act (12 U.S.C. 1422(d)) is amended to read

15 as follows:

16 ‘‘(d) VACANCIES.—

17 ‘‘(1) IN GENERAL.—Any vacancy on the Board

18 shall be filled in the same manner in which the origi19 nal appointment was made.

20 ‘‘(2) EXPIRATION OF TERM.—Any director ap21 pointed to fill a vacancy occurring before the expira22 tion of the term for which such director’s prede23 cessor was appointed shall be appointed only for the

24 remainder of such term.
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1 ‘‘(3) CONTINUATION OF SERVICE.—Each direc2 tor may continue to serve until a successor has been

3 appointed and qualified.

4 ‘‘(4) QUORUM.—

5 ‘‘(A) IN GENERAL.—3 directors shall con6 stitute a quorum of the board of directors of

7 the Federal Housing Finance Board.

8 ‘‘(B) EXCEPTION.—If there shall be on the

9 Board less than a quorum, all powers and func10 tions vested in, or exercisable by, the Board

11 shall vest in and be exercisable by the remain12 ing directors, until such time as there shall be

13 a quorum of the Board.’’.

14 (e) EMPLOYMENT AND OTHER RESTRICTIONS ON DI15 RECTORS; APPOINTED DIRECTORS COMPENSATION.—Sec16 tion 2A of the Federal Home Loan Bank Act (12 U.S.C.

17 1422a) is amended by adding after subsection (d) the fol18 lowing new subsections:

19 ‘‘(e) EMPLOYMENT AND OTHER RESTRICTIONS ON

20 DIRECTORS.—No director may—

21 ‘‘(1) serve as a director or officer of any Fed22 eral Home Loan Bank or any member of any Bank;

23 or
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1 ‘‘(2) hold shares of, or any other financial inter2 est in, any member of any Federal Home Loan

3 Bank.

4 ‘‘(f) APPOINTED DIRECTORS COMPENSATION.—The

5 Chairperson and the other appointed directors shall be

6 compensated as prescribed in sections 5314 and 5315 of

7 title 5, United States Code, respectively.’’.

8 (f) TRANSITIONAL PROVISION.—

9 (1) CONTINUED SERVICE OF FEDERAL HOUSING

10 FINANCE BOARD DIRECTORS.—Any Federal Housing

11 Finance Board director serving on the date of enact12 ment of the Federal Home Loan Bank Restructur13 ing and Modernization Act of 1995, whose term has

14 not expired prior to that date, shall remain a direc15 tor of the Board and shall be deemed to have been

16 appointed under subsection (b).

17 (2) TERMS OF APPOINTMENT.—The President

18 shall determine the length of the term of any direc19 tor described in paragraph (1), subject to subsection

20 (c)(2), and shall determine which director described

21 in paragraph (1) shall serve as the full-time director

22 and which shall serve part-time.
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1 SEC. 104. POWERS AND DUTIES OF THE FEDERAL HOUSING

2 FINANCE BOARD.

3 (a) POWERS AND DUTIES.—Section 2B(a) of the

4 Federal Home Loan Bank Act (12 U.S.C. 1422b(a)) is

5 amended to read as follows:

6 ‘‘(a) POWERS AND DUTIES.—

7 ‘‘(1) SAFETY AND SOUNDNESS.—The primary

8 duty of the Board shall be to ensure that the Fed9 eral Home Loan Banks operate in a safe and sound

10 manner.

11 ‘‘(2) ADDITIONAL POWERS AND DUTIES.—The

12 Board also shall have the following powers and

13 duties—

14 ‘‘(A) to supervise the Federal Home Loan

15 Banks and the Federal Home Loan Bank Sys16 tem and to promulgate and enforce such regula17 tions and orders as are necessary from time to

18 time to carry out the provisions of this Act;

19 ‘‘(B) to ensure that the Federal Home

20 Loan Banks carry out their housing finance

21 mission;

22 ‘‘(C) to ensure that the Federal Home

23 Loan Banks and the Federal Home Loan Bank

24 System remain appropriately capitalized and

25 able to raise funds in the capital markets;
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1 ‘‘(D) to determine necessary expenditures

2 of the Board under this Act and the manner in

3 which such expenditures shall be incurred, al4 lowed, and paid;

5 ‘‘(E) to use the United States mails in the

6 same manner and under the same conditions as

7 a department or agency of the United States;

8 and

9 ‘‘(F) utilizing the services of the Adminis10 trator of the General Services, to purchase,

11 lease, hold or dispose of such real estate for its

12 premises as may be necessary or convenient for

13 it to carry out the purposes of this Act.’’.

14 (b) AMENDMENTS CONCERNING STAFF.—Section

15 2B(b) of the Federal Home Loan Bank Act (12 U.S.C.

16 1422b(b)) is amended to read as follows:

17 ‘‘(b) STAFF.—

18 ‘‘(1) FEDERAL HOUSING FINANCE BOARD

19 STAFF.—Subject to title II of the Federal Home

20 Loan Bank System Restructuring and Moderniza21 tion Act of 1995, the Board may employ, direct, and

22 fix the compensation and number of employees, at23 torneys, and agents of the Board, except that in no

24 event shall the Board delegate any function to any

25 employee or administrative unit of any bank.
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1 ‘‘(2) COMPENSATION.—

2 ‘‘(a) EMPLOYEES, ATTORNEYS, AND

3 AGENTS.—In directing and fixing the com4 pensation of employees, attorneys, and agents,

5 the Board shall consult with and maintain com6 parability with the compensation at the Federal

7 bank regulatory agencies.

8 ‘‘(B) OTHER LAWS.—Except for the com9 pensation of the directors of the Board, com10 pensation under subparagraph (A) shall be paid

11 without regard to the provisions of other laws

12 applicable to officers or employees of the United

13 States.

14 ‘‘(3) ABOLITION OF THE OFFICE OF FI15 NANCE.—The Office of Finance is abolished on the

16 earlier of the date—

17 ‘‘(A) the central office described in section

18 11(k) is established, or

19 ‘‘(B) 6 months after the Federal Home

20 Loan Bank System Restructuring and Mod21 ernization Act of 1995 is enacted.’’.

22 SEC. 105. CONTINUING REGULATIONS AND POLICIES.

23 Not later than 270 days after the date of enactment

24 of this Act, the Federal Housing Finance Board shall—
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1 (a) identify the regulations and policies of the

2 Board that will continue in effect after the enact3 ment of this Act;

4 (b) identify the regulations and policies de5 scribed in subsection (a) that need to be amended to

6 comply with changes made to the Federal Home

7 Loan Bank Act by this Act; and

8 (c) publish the information required by sub9 sections (a) and (b) in the Federal Register.

10 SEC. 106. READJUSTMENT OF FEDERAL HOME LOAN BANK

11 DISTRICTS; NAMES.

12 Section 3 of the Federal Home Loan Bank Act (12

13 U.S.C. 1423) is amended to read as follows:

14 ‘‘SEC. 3. READJUSTMENT OF FEDERAL HOME LOAN BANK

15 DISTRICTS; NAMES.

16 ‘‘(a) READJUSTMENTS.—

17 ‘‘(1) AUTHORITY OF FEDERAL HOME LOAN

18 BANKS.—The Federal Home Loan Bank districts

19 and the Federal Home Loan Banks in existence on

20 the date of enactment of the Federal Home Loan

21 Bank System Restructuring and Modernization Act

22 of 1995 may be readjusted (through merger or oth23 erwise) by 2 or more Banks as long as—
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1 ‘‘(A) there are never fewer than 1 nor

2 more than 12 districts and Federal Home Loan

3 Banks; and

4 ‘‘(B) the requirements of paragraph (2)

5 are satisfied.

6 ‘‘(2) ADDITIONAL REQUIREMENTS.—Any read7 justment described in this subsection—

8 ‘‘(A) CONVENIENCE TEST.—shall be with

9 due regard to the convenience and customary

10 course of business of the current members and

11 institutions eligible to and likely to subscribe

12 for stock of a Federal Home Loan Bank, and

13 no Federal Home Loan Bank district shall con14 tain a fractional part of any State.

15 ‘‘(B) PRIOR APPROVALS.—Must be ap16 proved (taking into account, among other

17 things, the convenience test in subparagraph

18 (A)), by—

19 ‘‘(i) the Federal Housing Finance

20 Board;

21 ‘‘(ii) the majority of the board of di22 rectors of each participating Bank; and

23 ‘‘(iii) the majority of the votes that all

24 members of each participating Bank may

25 cast with respect to the readjustment.
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1 ‘‘(I) VOTES TO BE CAST.—Each

2 member may cast a number of votes

3 equal to the number of votes the

4 member may cast in an election under

5 section 7(b).

6 ‘‘(II) MEMBER DEFINED.—As

7 used in this subparagraph, ‘‘member’’

8 means a member of a Federal Home

9 Loan Bank that was a member of

10 such Bank at the end of the calendar

11 year next preceding the vote.

12 ‘‘(b) NAME.—

13 ‘‘(1) DISTRICTS.—All districts shall be known

14 as Federal Home Loan Bank districts and may be

15 designated by number.

16 ‘‘(2) CITY.—The title of each Federal Home

17 Loan Bank shall include the name of the city at

18 which it is established.’’.

19 SEC. 107. ELIGIBILITY FOR MEMBERSHIP.

20 (a) ELIGIBILITY CRITERIA.—Section 4(a) of the Fed21 eral Home Loan Bank Act (12 U.S.C. 1424(a)) is amend22 ed to read as follows:

23 ‘‘(a) CRITERIA FOR ELIGIBILITY.—

24 ‘‘(1) IN GENERAL.—Any building and loan as25 sociation, savings and loan association, cooperative
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1 bank, homestead association, insurance company,

2 savings bank, or any insured depository institution

3 (as defined in section 2), shall be eligible to be a

4 member of a Federal Home Loan Bank if—

5 ‘‘(A) it is duly organized under the laws of

6 any State or of the United States;

7 ‘‘(B) it is subject to inspection and regula8 tion under the banking laws, or under similar

9 laws, of any State or of the United States;

10 ‘‘(C) it makes long-term home mortgage

11 loans, as defined by the Board;

12 ‘‘(D) it maintains at least 10 percent of its

13 total assets in whole first mortgages on im14 proved residential property (based on an aver15 age in each calendar quarter);

16 ‘‘(E) its financial condition is such that ad17 vances may be safely made to such institution;

18 and

19 ‘‘(F) the character of its management and

20 its home-financing policy are consistent with

21 sound and economical home financing.

22 ‘‘(2) DEFINITION OF WHOLE MORTGAGE.—A

23 whole first mortgage on improved residential prop24 erty for purposes of this subsection does not include

25 either a partial interest in a residential mortgage
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1 loan or any security that represents an interest in a

2 residential mortgage loan.

3 ‘‘(3) TRANSITION PERIODS FOR NEW INSTITU4 TIONS AND EXISTING MEMBERS.—

5 ‘‘(A) NEW INSTITUTIONS.—An institution

6 commencing its initial business operations may

7 become a member of a Federal Home Loan

8 Bank prior to complying with paragraph (1)(D)

9 if it complies with paragraph (1)(D) within one

10 year after the commencement of its operations.

11 ‘‘(B) EXISTING MEMBERS.—Paragraph

12 (1)(D) does not apply to an institution that is

13 a member of a Federal Home Loan Bank on

14 the day before the date of enactment of the

15 Federal Home Loan Bank System Supervision

16 and Modernization Act of 1995 until 2 years

17 after the date of enactment of the Federal

18 Home Loan Bank System Restructuring and

19 Modernization Act of 1995.

20 ‘‘(C) REMOVAL.—A new institution or an

21 existing member that fails to comply with para22 graph (1)(D) within the time period provided by

23 subparagraph (A) or subparagraph (B), respec24 tively, shall be removed from membership by

25 the Board under section (6)(e).
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1 ‘‘(4) FAILURE TO MAINTAIN ASSET REQUIRE2 MENT.—Except as provided in paragraph (3), any

3 member that fails to maintain compliance with the

4 10 percent whole first mortgage asset requirement

5 described in paragraph (1)(D)—

6 ‘‘(A) ADVANCES.—For 2 consecutive quar7 ters shall not be eligible to obtain advances

8 from its Federal Home Loan Bank until the

9 member meets the 10 percent whole first mort10 gage asset requirement; and

11 ‘‘(B) REMOVAL OF MEMBER.—For 4 con12 secutive quarters shall be removed from mem13 bership by the Board under section 6(e).’’.

14 (b) MEMBERSHIP BASED ON CONVENIENCE; APPLI15 CATIONS.—Section 4(b) of the Federal Home Loan Bank

16 Act (12 U.S.C. 1424(b)) is amended to read as follows:

17 ‘‘(b) MEMBERSHIP BASED ON CONVENIENCE; APPLI18 CATIONS.—

19 ‘‘(1) MEMBERSHIP BASED ON CONVENIENCE.—

20 An institution eligible to become a member under

21 this section may become a member only of, and se22 cure advances only from—

23 ‘‘(A) the Federal Home Loan Bank of the

24 district in which the institution’s principal place

25 of business is located, or
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1 ‘‘(B) the Bank of a district adjoining the

2 district in which the institution’s principal place

3 of business is located if demanded by conven4 ience and then only if—

5 ‘‘(i) the application for membership is

6 approved by the Bank of the adjoining dis7 trict; and

8 ‘‘(ii) the Board does not disapprove

9 the application within 30 days after Bank

10 approval is granted under clause (i).

11 ‘‘(2) APPLICATIONS.—

12 ‘‘(A) SUBMISSION.—An institution eligible

13 to become a member may submit an application

14 for membership—

15 ‘‘(i) to the Bank in the district in

16 which the principal place of business of the

17 institution is located; or

18 ‘‘(ii) if the institution is seeking to be19 come a member of a Bank of a district ad20 joining the district in which the institu21 tion’s principal place of business is located,

22 to the Bank of the adjoining district and

23 to the Board.

24 ‘‘(B) APPROVAL.—Each Federal Home

25 Loan Bank is authorized to approve or dis-
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1 approve, subject to the requirements of this

2 Act, applications appropriately submitted to the

3 Bank.’’.

4 SEC. 108. CAPITAL STOCK.

5 (a) REQUIRED SUBSCRIPTIONS; RETIREMENT OF

6 OVERSUBSCRIPTIONS; LIMITATIONS; CANCELLATION OF

7 OVERSUBSCRIPTIONS; REPORTS AND INFORMATION.—

8 Section 6(b) of the Federal Home Loan Bank Act (12

9 U.S.C. 1426(b)) is amended to read as follows:

10 ‘‘(b) REQUIRED SUBSCRIPTIONS; RETIREMENT OF

11 OVERSUBSCRIPTIONS; LIMITATIONS; CANCELLATION OF

12 OVERSUBSCRIPTIONS; REPORTS AND INFORMATION.—

13 ‘‘(1) REQUIRED SUBSCRIPTIONS.—

14 ‘‘(A) IN GENERAL.—

15 ‘‘(i) PERCENTAGE OF TOTAL AS16 SETS.—The minimum stock subscription of

17 each institution that becomes a member

18 shall be an amount equal to a percentage

19 of the subscriber’s total assets.

20 ‘‘(ii) EACH BANK TO SET INDIVIDUAL

21 REQURIEMENTS.—The percentage of total

22 assets in clause (i), which shall apply to all

23 members of the same Bank, shall be estab24 lished individually by each Federal Home

25 Loan Bank based, at a minimum, on the
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1 capital standards set by the Board under

2 Section 6(A).

3 ‘‘(B) ADJUSTMENTS.—Each Federal Home

4 Loan Bank shall annually, as of the close of the

5 calendar year, adjust, at such time, and in such

6 manner and upon such terms and conditions as

7 the Board may by regulation or otherwise pre8 scribe, the amount of stock required to be held

9 by each member of the Bank so that such mem10 ber shall have invested in the stock of the Bank

11 at least an amount calculated in the manner

12 provided in subparagraph (A).

13 ‘‘(C) EXCESS STOCK.—

14 ‘‘(i) RETIREMENT.—If a Federal

15 Home Loan Bank finds that the invest16 ment of any member in stock of the Bank

17 is greater than that required under this

18 paragraph, it may, unless prohibited by the

19 Board or by the provisions of paragraph

20 (2), retire the stock of such member in ex21 cess of the amount so required.

22 ‘‘(ii) PAYMENT FOR RETIRED

23 STOCK.—The retirement of stock under

24 this subparagraph is subject to all of the

25 requirements imposed on the partial re-
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1 demption of stock under subsection (e), ex2 cept for the notice requirement contained

3 in subsection (e)(1).

4 ‘‘(D) ENTIRE SHARES.—The Board, in its

5 discretion, may, by regulation or otherwise, pro6 vide for adjustments in amounts of stock to be

7 issued or retired in order that stock may be is8 sued or retired only in entire shares.

9 ‘‘(2) LIMITATION ON RETIREMENT OF EXCESS

10 SHARES.—Notwithstanding any other provision of

11 this subsection, no action shall be taken by any

12 Bank with respect to any member pursuant to para13 graph (1) if the effect of the action would be to

14 cause the aggregate outstanding advances made by

15 the Bank to exceed 20 times the amounts paid in by

16 the member for outstanding capital stock, unless the

17 member has established a permissible compensating

18 balance to support the excess advance.

19 ‘‘(3) REPORTS AND INFORMATION.—The

20 Board, by regulations or otherwise, may require each

21 member to submit such reports and information as

22 the Board, in its discretion, may determine to be

23 necessary or appropriate for the purposes of this

24 subsection.’’.
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1 (b) PARTIAL STOCK REDEMPTION OR WITHDRAWAL;

2 REMOVAL OF MEMBERS; SURRENDER AND CANCELLA3 TION OF STOCK; STOCK REDEMPTIONS.—Section 6(e) of

4 the Federal Home Loan Bank (12 U.S.C. 1426(e)) is

5 amended to read as follows:

6 ‘‘(e) PARTIAL STOCK REDEMPTION OR WITH7 DRAWAL; REMOVAL OF MEMBERS; SURRENDER AND CAN8 CELLATION OF STOCK; STOCK REDEMPTIONS.—

9 ‘‘(1) PARTIAL STOCK REDEMPTION AND WITH10 DRAWAL OF MEMBERS.—

11 ‘‘(A) IN GENERAL.—

12 ‘‘(i) NOTICE OF WITHDRAWAL.—Any

13 member may withdraw from membership

14 in a Federal Home Loan Bank, subject to

15 the conditions of this Act, by filing with

16 the Board and the Bank a written notice

17 of intention to withdraw.

18 ‘‘(ii) NOTICE OF PARTIAL REDEMP19 TION.—

20 ‘‘(I) IN GENERAL.—Except as

21 provided in subclause (II), any mem22 ber may redeem stock in excess of the

23 amount of stock required to be owned

24 by the member under section 6(b)(1),
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1 by filing a written notice of a partial

2 redemption.

3 ‘‘(II) EXCEPTION.—Stock de4 scribed in subclause (I) may not be

5 redeemed if, following the redemption,

6 the aggregate outstanding advances to

7 the member would exceed 20 times

8 the amounts paid in by the member

9 for outstanding capital stock and the

10 member has not (or is not permitted

11 to) established a compensating bal12 ance to support the excess advances.

13 ‘‘(iii) DATE OF NOTICE.—Any notice

14 filed under this paragraph shall be deemed

15 to have been filed on the last day of the

16 month in which the notice is filed.

17 ‘‘(B) FEE FOR CANCELLATION OF NO18 TICE.—

19 ‘‘(i) FEE IMPOSED.—If a member

20 cancels a notice filed under subparagraph

21 (A), the member shall pay a fee in an

22 amount established by the Board.

23 ‘‘(ii) FEE AMOUNT.—The Board shall

24 set the cancellation fee at an amount de25 termined by the Board to be sufficient to
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1 discourage members from filing a notice

2 for the purpose of maintaining a partial re3 demption option or withdrawal option.

4 ‘‘(iii) CAPITAL ACCOUNT.—The fee

5 paid by a member under this subparagraph

6 shall be added to the Bank’s retained earn7 ings account or other capital reserve ac8 count.

9 ‘‘(C) PROCESS.—For purposes of this sub10 section, notices of partial redemption and with11 drawal shall be processed in the order received.

12 ‘‘(2) REMOVAL OF MEMBERS.—

13 ‘‘(A) FEDERAL HOUSING FINANCE BOARD

14 ACTION.—The Board may, after hearing, re15 move any member from membership if such

16 member—

17 ‘‘(i) in the opinion of the Board—

18 ‘‘(I) has failed to comply with

19 any provision of this Act or regulation

20 of the Board prescribed under this

21 Act, including a failure to maintain at

22 least 10 percent of its total assets in

23 whole first mortgages on improved

24 residential property as required under

25 section 4; or
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1 ‘‘(II) has a management or

2 home-financing policy of a character

3 inconsistent with sound and economi4 cal home financing or with the pur5 poses of this Act; or

6 ‘‘(ii) has been determined to be insol7 vent, or otherwise subject to the appoint8 ment of a conservator, receiving, or other

9 legal custodian, by a State or Federal au10 thority with regulatory and supervisory re11 sponsibility for the member.

12 ‘‘(B) FEDERAL HOME LOAN BANK REFER13 RAL.—

14 ‘‘(i) IN GENERAL.—A Federal Home

15 Loan Bank may refer a member to the

16 Board for removal if the Bank believes any

17 basis for removal set forth in subpara18 graph (A) is present.

19 ‘‘(ii) BOARD DECISION.—Within 30

20 days after receiving a referral described in

21 clause (i), the Board shall determine

22 whether to initiate a removal action under

23 subparagraph (A) and shall notify the re24 ferring Bank of its decision.

25 ‘‘(3) LIQUIDATION OF MEMBER’S DEBTS.—
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1 ‘‘(A) IN GENERAL.—When a member’s

2 membership in a Federal Home Loan Bank is

3 terminated by removal, or a member files a no4 tice of withdrawal, the indebtedness of the

5 member to the Federal Home Loan Bank shall

6 be liquidated in an orderly manner as deter7 mined by the Federal Home Loan Bank and

8 the liquidation shall be completed no later than

9 the date the member’s stock is to be surren10 dered and canceled under paragraph (4).

11 ‘‘(B) LIQUIDATION DEEMED PREPAYMENT

12 OF DEBT.—Any liquidation described in sub13 paragraph (A) shall be deemed a prepayment of

14 the indebtedness, and shall be subject to any

15 penalties or other fees applicable to such pre16 payment.

17 ‘‘(C) PROHIBITION ON NEW ADVANCES.—

18 New advances may not be made to a member

19 and outstanding advances to a member may not

20 be renewed—

21 ‘‘(i) if the member has filed a notice

22 of withdrawal, unless the notice is canceled

23 and the fee described in paragraph (1)(B)

24 has been paid; or
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1 ‘‘(ii) if the Board has determined,

2 after hearing, to remove the member.

3 ‘‘(D) RETURN OF COLLATERAL AND COM4 PENSATING BALANCES.—Upon the liquidation

5 of indebtedness described in subparagraph (A),

6 the member shall be entitled to the return of

7 any of its remaining collateral and compensat8 ing balance.

9 ‘‘(4) WITHDRAWALS AND REMOVALS.—All of

10 the stock in the Federal Home Loan Bank owned by

11 a member shall be surrendered and canceled—

12 ‘‘(i) in the case of withdrawal, 6

13 months after the date the member filed the

14 notice of withdrawal, unless the notice has

15 been canceled and the fee described in

16 paragraph (1)(B) has been paid; or

17 ‘‘(ii) in a removal case, upon the com18 pletion of the liquidation described in para19 graph (3).

20 ‘‘(B) PARTIAL REDEMPTION.—The amount

21 of stock in the Federal Home Loan Bank being

22 redeemed by a member in a partial redemption

23 shall be surrendered and canceled 6 months

24 after the date the member filed the notice of

25 partial redemption, unless the notice has been
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1 canceled and the fee described in paragraph

2 (1)(B) has been paid.

3 ‘‘(5) PAYMENT FOR STOCK REDEMPTIONS.—

4 ‘‘(A) CASH SUBSCRIPTIONS PAID IN TWO

5 INSTALLMENTS.—Except as provided in sub6 paragraphs (B) and (C), a member that has

7 surrendered all or part of its capital stock shall

8 receive from the Federal Home Loan Bank a

9 sum equal to the member’s cash paid subscrip10 tions for the capital stock surrendered to be

11 paid in two equal installments as follows—

12 ‘‘(i) upon the surrender and cancella13 tion of the member’s stock; and

14 ‘‘(ii) six months after receiving the

15 payment described in clause (i).

16 ‘‘(B) EXTENSION OF TIME FOR PAY17 MENT.—

18 ‘‘(i) IN GENERAL.—Except as pro19 vided in subparagraph (C), a member that

20 has surrendered all or part of its capital

21 stock shall receive from the Bank a sum

22 equal to the member’s cash subscription

23 for the capital stock surrendered to be paid

24 in three equal installments as set forth in

25 clause (ii) when—
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1 ‘‘(I) pending stock redemptions

2 in the Federal Home Loan Bank ex3 ceed 20 percent of the Bank’s current

4 capital, or

5 ‘‘(II) the Board makes a written

6 determination that, for reasons of

7 safety and soundness, the period for

8 payment on redemptions should be ex9 tended.

10 ‘‘(ii) THREE INSTALLMENTS.—The

11 three equal installment payments referred

12 to in clause (i) shall be made as follows—

13 ‘‘(I) upon the surrender and can14 cellation of the member’s capital

15 stock;

16 ‘‘(II) six months after receiving

17 the payment described in subclause

18 (I); and

19 ‘‘(III) six months after receiving

20 the payment described in subclause

21 (II).

22 ‘‘(iii) WAIVER REQUEST.—In response

23 to a request from the Federal Home Loan

24 Bank, the Board in its discretion may

25 waive an extension of the payment period
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1 imposed, or to be imposed, because pend2 ing capital redemptions exceed 20 percent

3 of the Bank’s current capital.

4 ‘‘(C) UNDERCAPITALIZATION.—If at any

5 time the Board finds that a Federal Home

6 Loan Bank is undercapitalized or is likely to

7 be undercapitalized for any reason including,

8 losses in or depreciation of the assets held or

9 capital stock redemptions, the Federal Home

10 Loan Bank shall on the order of the Board

11 withhold from the amount to be paid under this

12 paragraph a pro rata share of the amount equal

13 to the additional capital required for the Bank

14 to be adequately capitalized as determined by

15 the Board.’’.

16 (c) ACQUISITION OF MEMBERSHIP AFTER WITH17 DRAWAL OR REMOVAL.—Section 6(h) of the Federal

18 Home Loan Bank Act (12 U.S.C. 1426(h)) is amended

19 to read as follows:

20 ‘‘(h) ACQUISITION OF MEMBERSHIP AFTER WITH21 DRAWAL OR REMOVAL.—Notwithstanding any other provi22 sion of this Act, an institution which withdraws, or is re23 moved, from membership may acquire membership in any

24 Federal Home Loan Bank only after the expiration of a

25 period of 10 years thereafter, except where such with-
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1 drawal is a consequence of a transfer of membership on

2 a noninterrupted basis between Banks.’’.

3 SEC. 109. TRANSITIONAL PROVISIONS CONCERNING CAP4 ITAL STOCK.

5 (a) TRANSITION FOR WITHDRAWAL.—

6 (1) DELAYED EFFECTIVE DATE.—Section 6(e)

7 of the Federal Home Loan Bank Act, as amended

8 by this Act, shall become effective 90 days after the

9 date of enactment of this Act.

10 (2) WITHDRAWAL BY CURRENT MEMBERS.—

11 (A) NOTICE TO WITHDRAW UNDER OLD

12 SYSTEM.—Any institution, other than a Federal

13 savings association, that was a member of a

14 Federal Home Loan Bank on the day before

15 the date of enactment of this Act shall have 90

16 days after the date of enactment of this Act to

17 file a notice with the Board of its intention to

18 withdraw from membership in a Federal Home

19 Loan Bank under the terms and conditions for

20 withdrawal existing on the day before the date

21 of enactment of the Federal Home Loan Bank

22 System Restructuring and Modernization Act of

23 1995, including the prohibition on an institu24 tion that withdraws from membership acquiring
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1 membership in any Bank prior to the expiration

2 of a 10 year period.

3 (B) EXCEPTION CONCERNING TERMS AND

4 CONDITIONS OF WITHDRAWAL.—A member that

5 files a notice of withdrawal under subparagraph

6 (A) may not cancel the notice after the expira7 tion of the 90 day period described in subpara8 graph (A).

9 (C) NOTICES PENDING ON DATE OF EN10 ACTMENT.—The membership withdrawal by a

11 member that has a notice of withdrawal pend12 ing on the date of enactment of the Federal

13 Home Loan Bank System Restructuring and

14 Modernization Act of 1995 shall be subject to

15 the terms and conditions for withdrawal exist16 ing on the day before the date of enactment of

17 the Federal Home Loan Bank System Restruc18 turing and Modernization Act of 1995, except

19 the member shall not be permitted to cancel the

20 notice of withdrawal after the expiration of the

21 90 day period described in subparagraph (A).

22 (b) TRANSITION FOR STOCK SUBSCRIPTIONS.—

23 (1) REQUIRED STOCK SUBSCRIPTION.—

24 (A) BOARD REGULATIONS.—The Board

25 shall prescribe final regulations establishing the
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1 capital standards required under section 6A of

2 the Federal Home Loan Bank Act that become

3 effective no later than 1 year after the date of

4 enactment of this Act.

5 (B) BANKS REQUIRED TO ESTABLISH IN6 DIVIDUAL STOCK SUBSCRIPTIONS.—Within 30

7 days after the regulations described in subpara8 graph (A) become effective, each Federal Home

9 Loan Bank shall establish its stock subscription

10 requirements under section 6(b)(1) of the Fed11 eral Home Loan Bank Act and shall submit a

12 plan to the Federal Housing Finance Board

13 specifying how the Bank intends to implement

14 its stock subscription requirements.

15 (C) 2 YEAR TRANSITION PERIOD.—Begin16 ning 2 years after a Bank first establishes its

17 stock subscription requirement described in

18 subparagraph (B), each member of the Bank

19 shall comply with that requirement.

20 (2) EXISTING REQUIREMENTS CONTINUED.—

21 Until a Federal Home Loan Bank has established

22 the stock subscription requirements described in

23 paragraph (1)(B), the minimum amount of stock re24 quired to be held by a member and the aggregate

25 amount of advances that may be outstanding to a
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1 member shall continue to be determined under the

2 statutory provisions in effect on the day before the

3 date of enactment of this Act.

4 (c) TRANSITION FOR STOCK OR COMPENSATING BAL5 ANCE REQUIREMENT.—

6 (1) INITIAL DETERMINATION.—Prior to the

7 time a Bank first establishes its stock subscription

8 requirements under section 6(b)(1) of the Federal

9 Home Loan Bank Act, each Bank shall determine

10 whether members of the Bank wishing to obtain ad11 vances that exceed the standard leverage limit will

12 be—

13 (A) required to purchase additional stock;

14 (B) required to maintain a compensating

15 balance; or

16 (C) permitted to elect to purchase addi17 tional stock or maintain a compensating bal18 ance.

19 (2) SUBSEQUENT DETERMINATIONS.—Each

20 Bank may change its initial determination under

21 paragraph (1).

22 (3) MEMBERS THAT WILL MAINTAIN A COM23 PENSATING BALANCE.—

24 (A) 2 YEAR TRANSITION PERIOD.—
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1 (i) IN GENERAL.—Beginning 2 years

2 after its Bank first establishes stock sub3 scription requirements under section

4 6(b)(1) of the Federal Home Loan Bank

5 Act, a member described in clause (ii) shall

6 comply with the compensating balance re7 quirements or reduce the amount of its

8 outstanding advances to an amount that

9 does not exceed the standard leverage

10 limit.

11 (ii) REQUIREMENTS.—Clauses (i) ap12 plies to a member that—

13 (I) is required, or has made a

14 permissible election, to maintain a

15 compensating balance to support ad16 vances that exceed the standard lever17 age limit; and

18 (II) on the day the member’s

19 Bank first established its stock sub20 scription requirements under section

21 6(b)(1) of the Federal Home Loan

22 Bank Act, had outstanding advances

23 that exceeded the standard leverage

24 limit.
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1 (B) PROHIBITION ON RENEWING CERTAIN

2 ADVANCES.—

3 (i) During the 2-year period described

4 in subparagraph (A), an advance to a

5 member described in clause (ii) shall not

6 be renewed, unless the compensating bal7 ance required by section 10(c)(2) of the

8 Federal Home Loan Bank Act is estab9 lished.

10 (ii) MEMBERS SUBJECT TO PROHIBI11 TION.—Clause (i) applies when—

12 (I) a member is required, or has

13 made a permissible election, to main14 tain compensating balances to support

15 advances that exceed the standard le16 verage limit; and

17 (II) the aggregate outstanding

18 advances to the member following the

19 renewal would exceed the standard le20 verage limit.

21 (4) STANDARD LEVERAGE LIMIT.—For pur22 poses of this subsection, the term ‘‘standard leverage

23 limit’’ means 20 times the amounts paid in by the

24 member for outstanding stock required under section

25 6(b)(1) of the Federal Home Loan Bank.
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1 SEC. 110. PROMPT CORRECTIVE ACTION.

2 The Federal Home Loan Bank Act is amended by

3 adding after section 6 (12 U.S.C. 1426) the following new

4 section:

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

6 ‘‘(a) DEFINITIONS.—For purposes of this section—

7 ‘‘(1) CAPITAL CATEGORIES.—

8 ‘‘(A) ADEQUATELY CAPITALIZED.—A Fed9 eral Home Loan Bank is ‘adequately capital10 ized’ if it meets the required minimum level for

11 each relevant capital measure.

12 ‘‘(B) UNDERCAPITALIZED.—A Federal

13 Home Loan Bank is ‘undercapitalized’ if it fails

14 to meet the required minimum level for any rel15 evant capital measure.

16 ‘‘(C) SIGNIFICANTLY UNDERCAPITAL17 IZED.—A Federal Home Loan Bank is ‘signifi18 cantly undercapitalized’ if it is significantly

19 below the required minimum level for any rel20 evant capital measure.

21 ‘‘(D) CRITICALLY UNDERCAPITALIZED.—A

22 Federal Home Loan Bank is ‘critically

23 undercapitalized’ if it fails to meet any level

24 specified under subsection (b)(4)(A).

25 ‘‘(2) OTHER DEFINITIONS.—
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1 ‘‘(A) AVERAGE.—The ‘average’ of an ac2 counting item (such as total assets or tangible

3 equity) during a given period means the sum of

4 that item at the close of business on each busi5 ness day during that period divided by the total

6 number of business days in that period.

7 ‘‘(B) CAPITAL DISTRIBUTIONS.—The term

8 ‘capital distribution’ means—

9 ‘‘(i) a distribution of cash or other

10 property by a Federal Home Loan Bank to

11 its members made on account of that

12 membership but not including—

13 ‘‘(I) any dividend consisting only

14 of shares of the Bank or right to pur15 chase such shares; or

16 ‘‘(II) any amount paid on the de17 posits of a Bank that the Board de18 termines is not a distribution for pur19 poses of this section;

20 ‘‘(ii) a payment by a Bank to repur21 chase, redeem, retire, or otherwise acquire

22 any of its shares, including any extension

23 of credit to finance an acquisition of those

24 shares; or
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1 ‘‘(iii) a transaction that the Board de2 termines, by order or regulation, to be in

3 substance a distribution of capital to the

4 members of the Bank.

5 ‘‘(C) CAPITAL RESTORATION PLAN.—The

6 term ‘capital restoration plan’ means a plan

7 submitted under subsection (d)(2).

8 ‘‘(D) COMPENSATION.—The term ‘com9 pensation’ includes any payment of money or

10 provision of any other thing of value in consid11 eration of employment.

12 ‘‘(E) RELEVANT CAPITAL MEASURE.—The

13 term ‘relevant capital measure’ means the

14 measures described in subsection (b).

15 ‘‘(F) REQURIED MINIMUM LEVEL.—The

16 term ‘required minimum level’ means, with re17 spect to each relevant capital measure, the min18 imum acceptable capital level specified by the

19 Board.

20 ‘‘(G) SENIOR EXECUTIVE OFFICER.—The

21 term ‘senior executive officer’ means a person

22 who participates or has authority to participate

23 (other than in the capacity of a director) in

24 major policy functions of the Federal Home

25 Loan Bank, whether or not: the officer has an
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1 official title; the title designates the officer as

2 assistant; or the officer is serving without sal3 ary or other compensation.

4 ‘‘(b) CAPITAL STANDARDS.—

5 ‘‘(1) RELEVANT CAPITAL MEASURES.—

6 ‘‘(A) IN GENERAL.—The capital standard

7 prescribed by the Board shall include—

8 ‘‘(i) a leverage limit; and

9 ‘‘(ii) a risk-based capital requirement.

10 ‘‘(B) OTHER CAPITAL MEASURES.—The

11 Board may, by regulation establish any addi12 tional relevant capital measures to carry out the

13 purpose of this section.

14 ‘‘(2) RISK-BASED CAPITAL REQUIREMENT.—

15 ‘‘(A) IN GENERAL.—The risk-based capital

16 requirement under paragraph (1) shall be com17 posed of the following components.—

18 (i) capital for credit risk;

19 (ii) capital for interest rate risk; and

20 (iii) capital for a source of earnings.

21 ‘‘(B) CAPITAL COMPONENTS.—

22 ‘‘(i) CAPITAL FOR CREDIT RISK.—

23 Capital required for credit risk shall be no

24 less than the tier 1 risk-based capital re25 quired by regulation or guideline issued
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1 under section 38 of the Federal Deposit

2 Insurance Act for a well-capitalized in3 sured depository institution.

4 ‘‘(ii) INTEREST RATE RISK.—Capital

5 required for interest rate risk shall be

6 based on an interest rate risk stress test

7 that rigorously tests for changes in interest

8 rates, rate volatility, and changes in the

9 shape of the yield curve.

10 ‘‘(iii) CAPITAL FOR A SOURCE OF

11 EARNINGS.—

12 ‘‘(I) IN GENERAL.—Capital re13 quired to provide a source of earnings

14 for the System’s obligations to the

15 Funding Corporation and the Afford16 able Housing Program shall include

17 an amount at least equal to each

18 Bank’s proportionate share of the

19 System’s yearly obligation under sec20 tion 21B(f)(2)(C).

21 ‘‘(II) CALCULATION.—For pur22 poses of subclause (I), a Bank’s pro23 portionate share of the System’s year24 ly obligation under section

25 21B(f)(2)(C) shall be calculated based
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1 on the previous year’s actual payment

2 under that section.

3 ‘‘(3) CAPITAL CATEGORIES GENERALLY.—

4 ‘‘(A) IN GENERAL.—The Board shall, by

5 regulation, specify for each relevant capital

6 measure the levels at which a Federal Home

7 Loan Bank is adequately capitalized, under8 capitalized, and significantly undercapitalized.

9 ‘‘(B) MINIMUM LEVERAGE LIMIT FOR ADE10 QUATELY CAPITALIZED CATEGORY.—The level

11 specified by the Board for a Bank to be ade12 quately capitalized shall require total capital in

13 an amount not less than 4 percent of the

14 Bank’s total assets.

15 ‘‘(4) CRITICAL CAPITAL.—

16 ‘‘(A) FEDERAL HOUSING FINANCE BOARD

17 TO SPECIFY LEVEL.—

18 ‘‘(i) LEVERAGE LIMIT.—The board

19 shall, by regulation, specify the ratio of

20 total capital to total assets at which a Fed21 eral Home Loan Bank is critically

22 undercapitalized.

23 ‘‘(ii) OTHER RELEVANT CAPITAL

24 MEASURES.—The Board may, by regula25 tion, specify for one or more other relevant
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1 capital measures, the level at which a

2 Bank is critically undercapitalized.

3 ‘‘(B) LEVERAGE LIMIT RANGE.—The level

4 specified under subparagraph (A)(i) shall re5 quire tangible equity in an amount—

6 ‘‘(i) not less than 2 percent of total

7 assets; and

8 ‘‘(ii) except as provided in clause (i),

9 not more than 65 percent of the required

10 minimum level of capital under the lever11 age limit.

12 ‘‘(c) PROVISIONS APPLICABLE TO ALL FEDERAL

13 HOME LOAN BANKS.—

14 ‘‘(1) CAPITAL DISTRIBUTIONS RESTRICTED.—

15 Except as provided in paragraph (2), a Federal

16 Home Loan Bank shall make no capital distribution

17 if, after making the distribution, the Bank would be

18 undercapitalized.

19 ‘‘(2) EXCEPTIONS.—Notwithstanding para20 graph (1)—

21 ‘‘(A) A Federal Home Loan Bank may re22 deem a member’s stock under, and subject to

23 the conditions of, section 6(e); and

24 ‘‘(B) The board may permit a Federal

25 Home Loan Bank to repurchase, redeem, retire,
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1 or otherwise acquire its shares if the repur2 chase, redemption, retirement, or other acquisi3 tion—

4 ‘‘(i) is made in connection with the is5 suance of additional shares of the Bank in

6 at least an equivalent amount; and

7 ‘‘(ii) will reduce the Bank’s financial

8 obligations or otherwise improve the

9 Bank’s financial condition.

10 ‘‘(d) PROVISIONS APPLICABLE TO UNDERCAPI11 TALIZED FEDERAL HOME LOAN BANKS.—

12 ‘‘(1) MONITORING REQUIRED.—The Board

13 shall—

14 ‘‘(A) closely monitor the condition of any

15 undercapitalized Federal Home Loan Bank;

16 ‘‘(B) closely monitor compliance with cap17 ital restoration plans, restrictions, and require18 ments imposed under this section; and

19 ‘‘(C) periodically review the plan, restric20 tions, and requirements applicable to any

21 undercapitalized Bank to determine whether the

22 plan, restrictions, and requirements are achiev23 ing the purpose of this section.

24 ‘‘(2) CAPITAL RESTORATION PLAN RE25 QUIRED.—
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1 ‘‘(A) IN GENERAL.—Any undercapitalized

2 Bank shall submit an acceptable capital res3 toration plan to the Board within the time al4 lowed by the Board under subparagraph D.

5 ‘‘(B) CONTENTS OF PLAN.—The capital

6 restoration plan shall—

7 ‘‘(i) specify—

8 ‘‘(I) the steps the Bank will take

9 to become adequately capitalized;

10 ‘‘(II) the levels of capital to be

11 attained during each year in which

12 the plan will be in effect;

13 ‘‘(III) how the Bank will comply

14 with the restrictions or requirements

15 then in effect under this section; and

16 ‘‘(IV) the types and levels of ac17 tivities in which the Bank will engage;

18 and

19 ‘‘(ii) contain such other information

20 as the Board may require.

21 ‘‘(C) CRITERIA FOR ACCEPTING PLAN.—

22 The Board shall not accept a capital restoration

23 plan unless the Board determines that the

24 plan—

25 ‘‘(i) complies with subparagraph (B);
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1 ‘‘(ii) is based on realistic assumptions,

2 and is likely to succeed in restoring the

3 Bank’s capital; and

4 ‘‘(iii) would not appreciably increase

5 the risk (including credit risk, interest-rate

6 risk, and other type of risk) to which the

7 Bank is exposed.

8 ‘‘(D) DEADLINES FOR SUBMISSION AND

9 REVIEW OF PLANS.—The Board shall, by regu10 lation, establish deadlines that—

11 ‘‘(i) provide Federal Home Loan

12 Banks with reasonable time to submit cap13 ital restoration plans, and generally require

14 a Bank to submit a plan not later than 45

15 days after the Bank becomes

16 undercapitalized; and

17 ‘‘(ii) require the Board to act on cap18 ital restoration plans expeditiously, and

19 generally not later than 60 days after the

20 plan is submitted.

21 ‘‘(3) ASSET GROWTH RESTRICTED.—An

22 undercapitalized Federal Home Loan Bank shall not

23 permit its average total assets during any calendar

24 quarter to exceed its average total assets during the

25 preceding calendar quarter unless—
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1 ‘‘(A) the Board has accepted the Bank’s

2 capital restoration plan;

3 ‘‘(B) any increase in total assets is consist4 ent with the plan; and

5 ‘‘(C) the Bank’s ratio of total capital to as6 sets increases during the calendar quarter at a

7 rate sufficient to enable the Bank to become

8 adequately capitalized within a reasonable time.

9 ‘‘(4) PRIOR APPROVAL FOR NEW ACTIVITIES.—

10 An undercapitalized Federal Home Loan Bank shall

11 not engage in any new activity unless—

12 ‘‘(A) the Board has accepted the Bank’s

13 capital restoration plan, the Bank is implement14 ing the plan and Board determines that the

15 proposed action is consistent with and will fur16 ther the achievement of the plan; or

17 ‘‘(B) the Board determines that the pro18 posed action will further the purpose of this

19 section.

20 ‘‘(5) DISCRETIONARY SAFEGUARDS.—The

21 Board may, with respect to any undercapitalized

22 Federal Home Loan Bank, take action described in

23 any subparagraph of subsection (e)(2) if the Board

24 determines that those actions are necessary to carry

25 out the purpose of this section.
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1 ‘‘(e) PROVISIONS APPLICABLE TO SIGNIFICANTLY

2 UNDERCAPITALIZED FEDERAL HOME LOAN BANKS AND

3 UNDERCAPITALIZED BANKS THAT FAIL TO SUBMIT AND

4 IMPLEMENT CAPITAL RESTORATION PLANS.—

5 ‘‘(1) IN GENERAL.—This subsection shall apply

6 with respect to any Federal Home Loan Bank that

7 is—

8 ‘‘(A) significantly undercapitalized; or

9 ‘‘(B) undercapitalized and fails—

10 ‘‘(i) to submit an acceptable capital

11 restoration plan within the time allowed by

12 the Board under subsection (d)(2); or

13 ‘‘(ii) in any material respect to imple14 ment a plan accepted by the Board.

15 ‘‘(2) SPECIFIC ACTIONS AUTHORIZED.—The

16 Board shall carry out this section by taking one or

17 more of the following actions—

18 ‘‘(A) REQUIRED RECAPITALIZATION.—

19 Doing one or more of the following—

20 ‘‘(i) Requiring the Federal Home

21 Loan Bank to sell enough shares of the

22 Bank to its members or institutions eligible

23 to become members so that the Bank will

24 be adequately capitalized after the sale.
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1 ‘‘(ii) Requiring the Bank to be ac2 quired by, or combine with, one or more

3 Federal Home Loan Banks.

4 ‘‘(B) RESTRICTING INTEREST RATES

5 PAID.—

6 ‘‘(i) IN GENERAL.—Restricting the in7 terest rates that the Bank pays on deposits

8 to an amount determined by the Board.

9 ‘‘(ii) RETROACTIVE RESTRICTIONS

10 PROHIBITED.—This subparagraph does not

11 authorize the Board to restrict interest

12 rates paid on time deposits made before

13 (and not renewed or renegotiated after)

14 the Board acted under this subparagraph.

15 ‘‘(C) RESTRICTING ASSET GROWTH.—Re16 stricting the Bank’s asset growth more strin17 gently than subsection (d)(3), or requiring the

18 Bank to reduce its total assets.

19 ‘‘(D) RESTRICTING ACTIVITIES.—Requir20 ing the Bank to alter, reduce, or terminate any

21 activity that the Board determines poses exces22 sive risk to the Bank.

23 ‘‘(E) IMPROVING MANAGEMENT.—Doing

24 one or more of the following:
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1 ‘‘(i) NEW ELECTION OF DIRECTORS.—

2 Ordering a new election for the Bank’s

3 board of directors.

4 ‘‘(ii) DISMISSING DIRECTORS OR SEN5 IOR EXECUTIVE OFFICERS.—Requiring the

6 Bank to dismiss from office any elected di7 rector or senior executive officer who had

8 held office for more than 180 days imme9 diately before the Bank became

10 undercapitalized.

11 ‘‘(iii) DISMISSING APPOINTED DIREC12 TORS.—Dismissing from office any ap13 pointed director who had held office for

14 more than 180 days immediately before

15 the Bank became undercapitalized.

16 ‘‘(iv) CLARIFICATION OF DISMIS17 SALS.—Dismissal under clause (ii) or (iii)

18 shall not be construed to be a removal

19 under section 27A.

20 ‘‘(v) EMPLOYING QUALIFIED SENIOR

21 EXECUTIVE OFFICERS.—Requiring the

22 Bank to employ qualified senior executive

23 officers (who, if the Board so specifies,

24 shall be subject to approval by the Board).
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1 ‘‘(F) REQUIRING OTHER ACTION.—Requir2 ing the Bank to take any other action that the

3 Board determines will better carry out the pur4 pose of this section.

5 ‘‘(3) PRESUMPTION IN FAVOR OF CERTAIN AC6 TIONS.—In complying with paragraph (2), the

7 Board shall take the action described in clause (i) or

8 (ii) of paragraph (2)(A) (relating to requiring the

9 sale of shares or requiring the Federal Home Loan

10 Bank to be acquired by, or combine with, another

11 Federal Home Loan Bank).

12 ‘‘(4) SENIOR EXECUTIVE OFFICERS’ COMPENSA13 TION RESTRICTED.—

14 ‘‘(A) IN GENERAL.—The Federal Home

15 Loan Bank shall not do any of the following

16 without the prior written approval of the Board:

17 ‘‘(i) Pay any bonus to any senior exec18 utive officer.

19 ‘‘(ii) Provide compensation to any sen20 ior executive officer at a rate exceeding

21 that officer’s average rate of compensation

22 (excluding bonuses, and (profit-sharing))

23 during the 12 calendar months preceding

24 the calendar month in which the Bank be25 came undercapitalized.
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1 ‘‘(B) FAILURE TO SUBMIT PLAN.—The

2 Board shall not grant any approval under sub3 paragraph (A) with respect to a Bank that has

4 failed to submit an acceptable capital restora5 tion plan.

6 ‘‘(5) DISCRETION TO IMPOSE CERTAIN ADDI7 TIONAL RESTRICTIONS.—The Board may impose one

8 or more of the restrictions prescribed by regulation

9 under subsection (h) if the Board determines that

10 those restrictions are necessary to carry out the pur11 pose of this section.

12 ‘‘(f) MORE STRINGENT TREATMENT BASED ON

13 OTHER SUPERVISORY CRITERIA.—

14 ‘‘(1) IN GENERAL.—If the Board determines

15 (after notice and an opportunity for hearing) that a

16 Federal Home Loan Bank is in an unsafe or un17 sound condition or, pursuant to section 27A, deems

18 the Bank to be engaging in an unsafe or unsound

19 practice, the Board may—

20 ‘‘(A) if the Bank is adequately capitalized,

21 require the Bank to comply with one or more

22 provisions of subsections (c) and (d) as if the

23 Bank were undercapitalized; or

24 ‘‘(B) if the Bank is undercapitalized, take

25 any one or more actions authorized under sub-
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1 section (e)(2) as if the Bank were significantly

2 undercapitalized.

3 ‘‘(2) CONTENTS OF PLAN.—

4 ‘‘(A) IN GENERAL.—Any plan required

5 under paragraph (1) shall specify the steps that

6 the Bank will take to correct the unsafe or un7 sound condition or practice.

8 ‘‘(B) PLAN NOT REQUIRED.—Capital res9 toration plans shall not be required under para10 graph (1)(A).

11 ‘‘(g) PROVISIONS APPLICABLE TO CRITICALLY

12 UNDERCAPITALIZED FEDERAL HOME LOAN BANKS.—

13 ‘‘(1) ACTIVITIES RESTRICTED.—Any critically

14 undercapitalized Federal Home Loan Bank shall

15 comply with restrictions prescribed by the Board

16 under subsection (h).

17 ‘‘(2) MERGER, LIQUIDATION, REORGANIZATION

18 OR OTHER ACTION REQUIRED.—

19 ‘‘(A) IN GENERAL.—The Board shall, not

20 later than 90 days after a Federal Home Loan

21 Bank becomes critically undercapitalized—

22 ‘‘(i) combine (by merger or otherwise)

23 the Bank with another Federal Home

24 Loan Bank;
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1 ‘‘(ii) liquidate or reorganize the bank;

2 or

3 ‘‘(iii) take such other action as the

4 Board determines would better achieve the

5 purpose of this section, after documenting

6 why the action would better achieve that

7 purpose.

8 ‘‘(B) PERIODIC REDETERMINATION RE9 QUIRED.—Any determination by the Board

10 under subparagraph (A)(iii) to take any action

11 with respect to a Bank in lieu of combining the

12 Bank with another Federal Home Loan Bank

13 or reorganizing or liquidating the Bank shall

14 cease to be effective not later than the end of

15 the 90-day period beginning on the date that

16 the determination is made and the Bank shall

17 be combined, reorganized, or liquidated under

18 subparagraph (A) unless the Board makes a

19 new determination under subparagraph (A)(iii)

20 at the end of the effective period of the prior

21 determination.

22 ‘‘(h) RESTRICTING ACTIVITIES OF CRITICALLY

23 UNDERCAPITALIZED FEDERAL HOME LOAN BANKS.—To

24 carry out this section, the Board shall, by regulation or

25 order—
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1 ‘‘(1) restrict the activities of any critically

2 undercapitalized Federal Home Loan Bank; and

3 ‘‘(2) at a minimum, prohibit any critically

4 undercapitalized Bank from doing any of the follow5 ing without the Board’s prior written approval:

6 ‘‘(A) Entering into any material trans7 action other than in the usual course of busi8 ness, including any investment, expansion, ac9 quisition, sale of assets, or other similar action.

10 ‘‘(B) Amending the Bank’s bylaws, except

11 to the extent necessary to carry out any other

12 requirement of any law, regulation, or order.

13 ‘‘(C) Making any material change in ac14 counting methods.

15 ‘‘(D) Paying excessive compensation or bo16 nuses.

17 ‘‘(E) Paying interest on new or renewed li18 abilities at a rate that would increase the

19 bank’s weighted average cost of funds to a level

20 significantly exceeding the prevailing rates of

21 interest on insured deposits in the Bank’s nor22 mal market areas.

23 ‘‘(i) ADMINISTRATIVE REVIEW OF DISMISSAL OR24 DERS.—
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1 ‘‘(1) TIMELY PETITION REQURIED.—A director

2 or senior executive officer dismissed pursuant to an

3 order under subsection (e)(2)(E)(ii) may obtain re4 view of that order by filing a written petition for re5 instatement with the Board not later than 10 days

6 after receiving notice of the dismissal.

7 ‘‘(2) PROCEDURE.—

8 ‘‘(A) HEARING REQURIED.—The Board

9 shall give the petitioner an opportunity to—

10 ‘‘(i) submit written materials in sup11 port of the petition; and

12 ‘‘(ii) appear, personally or through

13 counsel, before 1 or more members of the

14 Board or designated employees of the

15 Board.

16 ‘‘(B) DEADLINE FOR HEARING.—The

17 Board shall—

18 ‘‘(i) schedule the hearing referred to

19 in subparagraph (A)(ii) promptly after the

20 petition is filed; and

21 ‘‘(ii) hold the hearing not later than

22 30 days after the petition is filed, unless

23 the petitioner requests that the hearing be

24 held at a later time.
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1 ‘‘(C) DEADLINE FOR DECISION.—Not later

2 than 60 days after the date of the hearing, the

3 Board shall—

4 ‘‘(i) by order, grant or deny the peti5 tion;

6 ‘‘(ii) if the order is adverse to the pe7 titioner, set forth the basis for the order;

8 and

9 ‘‘(iii) notify the petitioner of the

10 order.

11 ‘‘(3) STANDARD FOR REVIEW OF DISMISSAL OR12 DERS.—The petitioner shall bear the burden of prov13 ing that the petitioner’s continued employment

14 would materially strengthen the Federal Home Loan

15 Bank’s ability—

16 ‘‘(A) to become adequately capitalized, to

17 the extent that the order is based on the Bank’s

18 failure to submit or implement a capital res19 toration plan; and

20 ‘‘(B) to correct the unsafe or unsound con21 dition or unsafe or unsound practice, to the ex22 tent that the order is based on subsection

23 (f)(1).

24 ‘‘(j) SAFEGUARDING SYSTEMWIDE CAPITAL.—
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1 ‘‘(1) CAPITAL RESTORATION PLAN RE2 QUIRED.—

3 ‘‘(A) IN GENERAL.—If for any calendar

4 quarter the total capital of the Federal Home

5 Loan bank System is less than $7 billion, the

6 System shall submit an acceptable capital res7 toration plan to the Board within the time al8 lowed by regulations prescribed by the Board.

9 ‘‘(B) CONTENTS OF PLAN.—The capital

10 restoration plan shall—

11 ‘‘(i) take into account the different

12 levels of capital of each Bank;

13 ‘‘(ii) focusing first on each

14 undercapitalized Bank, specify—

15 ‘‘(I) the steps that will be taken

16 to increase the total capital of any

17 undercapitalized Bank and the Sys18 tem;

19 ‘‘(II) the amount of capital to be

20 raised during each year the plan will

21 be in effect; and

22 ‘‘(III) the types and levels of ac23 tivities in which any undercapitalized

24 bank and the system will engage; and
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1 ‘‘(iii) contain such other information

2 as the Board may require.

3 ‘‘(2) PROHIBITION ON DISTRIBUTING RE4 SERVES.—Except as provided in subparagraph

5 (3)(B), if for any calendar quarter the total capital

6 of the Federal Home Loan Bank System is less than

7 $6 billion, no Federal Home Loan bank may distrib8 ute any of its reserves.

9 ‘‘(3) CAPITAL DISTRIBUTIONS RESTRICTED.—

10 ‘‘(A) IN GENERAL.—If for any calendar

11 quarter the total capital of the Federal Home

12 Loan Bank System is less than $5 billion, each

13 Federal Home Loan Bank shall make no cap14 ital distribution.

15 ‘‘(B) EXCEPTION.—Notwithstanding sub16 paragraph (A)—

17 ‘‘(i) A Federal Home Loan Bank may

18 redeem a member’s stock under, and sub19 ject to the conditions of, section 6(e); and

20 ‘‘(ii) The Board may permit a Federal

21 Home Loan Bank to repurchase, redeem,

22 retire, or otherwise acquire its shares if the

23 repurchase, redemption, retirement, or

24 other acquisition—
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1 ‘‘(I) is made in connection with

2 the issuance of additional shares of

3 the Bank in at least an equivalent

4 amount; and

5 ‘‘(II) will reduce the Bank’s fi6 nancial obligations or otherwise im7 prove the Bank’s financial condition.

8 ‘‘(k) IMPLEMENTATION.—

9 ‘‘(1) REGULATIONS AND OTHER ACTIONS.—The

10 Board shall prescribe such regulations, issue such

11 orders, and take such other actions as are necessary

12 to carry out this section.

13 ‘‘(2) WRITTEN DETERMINATION REQUIRED.—

14 Any determination by the Board required under this

15 section shall be written.

16 ‘‘(l) OTHER AUTHORITY NOT AFFECTED.—This sec17 tion does not limit any authority of the Board to take ac18 tion in addition to (but not in derogation of) that required

19 under this section.

20 ‘‘(m) PURPOSE.—The purpose of this section is to en21 sure that the Federal Home Loan Banks remain appro22 priately capitalized and able to raise funds in the capital

23 markets and to meet their obligations under this Act.’’.
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1 SEC. 111. FEDERAL HOME LOAN BANK DIRECTORS.

2 (a) NUMBER; QUALIFICATIONS; CONFLICTS OF IN3 TEREST.—Section 7(a) of the Federal Home Loan Bank

4 Act (12 U.S.C. 1427(a)) is amended to read as follows:

5 ‘‘(a) NUMBER; QUALIFICATIONS; CONFLICTS OF IN6 TEREST.—

7 ‘‘(1) NUMBER.—

8 ‘‘(A) IN GENERAL.—Except as provided in

9 subparagraph (B), the management of each

10 Federal Home Loan Bank shall be vested in a

11 board of fourteen directors, eight of whom shall

12 be elected by the members as hereinafter pro13 vided in this section and six of whom shall be

14 appointed by the Board, all of whom shall be

15 citizens of the United States and bona fide resi16 dents of the district in which such Bank is lo17 cated.

18 ‘‘(B) INCREASE IN DIRECTORS.—

19 ‘‘(i) ELECTIVE DIRECTORS.—Each

20 Federal Home Loan Bank may increase

21 the number of the Bank’s elective directors

22 to a number set by the Bank as long as

23 the number of directors in the case of any

24 district is at least equal to the number of

25 States in such district.
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1 ‘‘(ii) INCREASE IN APPOINTED DIREC2 TORS.—If the number of elective directors

3 of a Bank is increased, the Board may in4 crease the number of appointed directors

5 of the Bank to a number not exceeding

6 three-fourths the number of elective direc7 tors.

8 ‘‘(2) QUALIFICATIONS.—At least 2 of the Fed9 eral Home Loan Bank directors who are appointed

10 by the Board shall be representatives chosen from

11 organizations with more than a 2-year history of

12 representing consumer or community interests on

13 banking services, credit needs, housing, or financial

14 consumer protection.

15 ‘‘(3) CONFLICTS OF INTEREST.—No Federal

16 Home Loan Bank director who is appointed pursu17 ant to this subsection may, during such Bank direc18 tor’s term of office, serve as an officer of any Fed19 eral Home Loan Bank or director or officer of any

20 member of a Bank, or hold shares, or any other fi21 nancial interest in, any member of a Bank.’’.

22 (b) TERMS.—Section 7(d) of the Federal Home Loan

23 Bank Act (12 U.S.C. 1427(d)) is revised to read as

24 follows:

25 ‘‘(d) TERMS.—
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1 ‘‘(1) IN GENERAL.—

2 ‘‘(A) ELECTED DIRECTORS.—The term of

3 each elective directorship that begins after the

4 date of enactment of the Federal Home Loan

5 Bank Restructuring and Modernization Act of

6 1995 shall be 4 years.

7 ‘‘(B) APPOINTED DIRECTORS.—The term

8 of each appointive directorship shall be 4 years.

9 ‘‘(2) TERM LIMITS.—If any person has been

10 elected to each of 2 consecutive full terms as an elec11 tive director of a Federal Home Loan Bank in any

12 elective directorship or elective directorships and has

13 served for all or part of each of said terms, such

14 person (and any person that is a director, officer or

15 employee of the same member as such person) shall

16 not be eligible for election to an elective directorship

17 of the Bank for a term which begins earlier than 2

18 years after the expiration of the last expiring of said

19 2 terms.’’.

20 (c) CHAIRPERSON AND VICE CHAIRPERSON.—Sec21 tion 7(g) of the Federal Home Loan Bank Act (12 U.S.C.

22 1427(g)) is amended to read as follows:

23 ‘‘(g) CHAIRPERSON AND VICE CHAIRPERSON.—
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1 ‘‘(1) DESIGNATION BY BANK DIRECTORS.—The

2 board of directors of each Federal Home Loan Bank

3 shall designate—

4 ‘‘(A) one of the directors of the Bank to be

5 chairperson of the Bank; and

6 ‘‘(B) one of the directors of the Bank to

7 be vice chairperson of the Bank.

8 ‘‘(2) REQUIREMENTS.—

9 ‘‘(A) APPOINTED DIRECTOR.—Either the

10 chairperson or the vice chairperson of the Bank

11 shall be an appointed director.

12 ‘‘(B) LIMITATION.—The President of a

13 Federal Home Loan Bank may not be des14 ignated as the chairperson or vice chairperson

15 of the Bank.’’.

16 (d) COMPENSATION AND EXPENSES OF DIREC17 TORS.—Section 7(i) of the Federal Home Loan Bank Act

18 (12 U.S.C. 1427(i)) is amended to read as follows:

19 ‘‘(i) COMPENSATION AND EXPENSES OF DIREC20 TORS.—Each Bank may pay its directors reasonable com21 pensation for the time required of them, and their nec22 essary expenses, in the performance of their duties, in ac23 cordance with the resolutions adopted by the directors of

24 the Bank.’’.
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1 (e) CONFORMING AMENDMENTS.—Section 7 of the

2 Federal Home Loan Bank Act (12 U.S.C. 1427) is

3 amended—

4 (1) in subsection (b), by—

5 (A) deleting ‘‘as determined pursuant to

6 regulation of the Board’’ and inserting ‘‘as de7 termined by the Bank’’;

8 (B) deleting ‘‘such bank’’ each place it ap9 pears and inserting ‘‘such Bank’’; and

10 (C) deleting ‘‘Federal home loan bank’’

11 and inserting ‘‘Federal Home Loan Bank’’;

12 (2) in subsection (c), by—

13 (A) deleting ‘‘as determined pursuant to

14 regulation of the Board’’ and inserting ‘‘as de15 termined by the Bank’’;

16 (B) deleting ‘‘bank’’ each place it appears

17 and inserting ‘‘Bank’’;

18 (C) deleting ‘‘Federal home loan bank’’

19 and inserting ‘‘Federal Home Loan Bank’’; and

20 (3) in subsection (h), by deleting ‘‘Federal

21 home loan bank’’ and inserting ‘‘Federal Home

22 Loan Bank’’.

23 SEC. 112. ELIGIBILITY TO SECURE ADVANCES.

24 Section 9 of the Federal Home Loan Bank Act (12

25 U.S.C. 1429) is amended to read as follows:
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1 ‘‘SEC. 9. ELIGIBILITY TO SECURE ADVANCES.

2 ‘‘(a) WRITTEN APPLICATION.—Any member of a

3 Federal Home Loan Bank shall be entitled to apply in

4 writing for advances and the application shall be in such

5 form as shall be required by the Federal Home Loan

6 Bank.

7 ‘‘(b) BANK RESPONSE TO APPLICATIONS.—A Fed8 eral Home Loan Bank may at its discretion deny any ap9 plication described in subsection (a) or, subject to the re10 quirements of this Act, grant it on such conditions as the

11 Bank may prescribe.’’.

12 SEC. 113. ADVANCES.

13 (a) NOTES OF BORROWING MEMBERS; INTEREST

14 RATE; LIEN ON STOCK; LIMITATIONS ON LOANS.—Sec15 tion 10(c) of the Federal Home Loan Bank Act (12

16 U.S.C. 1430(c)) is amended to read as follows:

17 ‘‘(c) NOTES OF BORROWING MEMBERS; INTEREST

18 RATE; LIEN ON STOCK; LIMITATIONS ON LOANS.—

19 ‘‘(1) NOTES OF BORROWING MEMBER.—Ad20 vances under subsection (a) shall be made upon the

21 note or obligation of the member secured as provided

22 in this section, bearing such rate of interest as the

23 Federal Home Loan Bank may approve or deter24 mine, and the Bank shall have a lien upon and shall

25 hold the stock of such member and any compensat-
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1 ing balances as further collateral security for all in2 debtedness of the member to the Bank.

3 ‘‘(2) LEVERAGE LIMITATION ON ADVANCES.—

4 At no time shall the aggregate outstanding advances

5 made by any Federal Home Loan Bank to any

6 member exceed 20 times the amounts paid in by

7 such member for outstanding capital stock required

8 to be owned by a member under section 6(b)(1),

9 unless—

10 ‘‘(A) in the case of a member that is re11 quired, or has made a permissible election, to

12 purchase additional stock to support advances,

13 the member purchases additional stock so that

14 the aggregate outstanding advances made to

15 the member do not exceed 20 times the

16 amounts paid in by the member for outstanding

17 stock; or

18 ‘‘(B) in the case of a member that is re19 quired, or has made a permissible election, to

20 maintain a compensating balance to support ad21 vances, the member makes and maintains a

22 compensating balance with the Bank with re23 spect to the amount of the advances that exceed

24 20 times the amounts paid in by the member
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1 for outstanding stock required to be owned by

2 the member under section 6(b)(1).

3 ‘‘(3) ADDITIONAL STOCK.—Stock purchased to

4 meet the requirements of paragraph (2)(A) is sub5 ject to the same terms and conditions applicable to

6 all stock in a Federal Home Loan Bank owned by

7 the member, including the conditions imposed under

8 section 6(e) on partial stock redemptions and with9 drawals.

10 ‘‘(4) COMPENSATING BALANCES.—

11 ‘‘(A) LEVERAGE LIMIT.—The amount of

12 the compensating balance required under para13 graph (2)(B) shall be established by the Bank

14 except, in no event may the amount of advances

15 made in reliance on a compensating balance ex16 ceed 20 times the compensating balance.

17 ‘‘(B) TERMS AND CONDITIONS.—Subject

18 to subparagraph (A), the terms and conditions

19 applicable to compensating balances under this

20 paragraph shall be established by each Bank.’’.

21 (b) OBLIGATIONS TO REPAY; ADDITIONAL SECU22 RITY: SALE OF ASSETS TO OTHER BANKS.—Section 10(d)

23 of the Federal Home Loan Bank Act (12 U.S.C. 1430(d))

24 is amended to read as follows:
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1 ‘‘(d) OBLIGATIONS TO REPAY; ADDITIONAL SECU2 RITY: SALE OF ADVANCES TO OTHER BANKS.—

3 ‘‘(1) REPAYMENT OBLIGATION.—The institu4 tion applying for an advance shall enter into a pri5 mary and unconditional obligation to pay off all ad6 vances, together with interest and any unpaid costs

7 and expenses in connection therewith according to

8 the terms under which they were made, in such form

9 as shall meet the requirements of the Federal Home

10 Loan Bank.

11 ‘‘(2) ADDITIONAL SECURITY.—The Bank shall

12 reserve the right to require at any time, when

13 deemed necessary for its protection, deposits of addi14 tional collateral security or substitutions of security

15 by the borrowing institution, and each borrowing in16 stitution shall assign additional or substituted secu17 rity when and as so required.

18 ‘‘(3) SALE OF ADVANCES.—Any Federal Home

19 Loan Bank shall have power to sell to any other

20 Federal Home Loan Bank, with or without recourse,

21 any advance made under the provisions of this Act,

22 or to allow such Bank a participation therein, and

23 any other Federal Home Loan Bank shall have

24 power to purchase such advance or to accept a par-
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1 ticipation therein, together with an appropriate as2 signment or security therefore.’’.

3 (c) COMMUNITY SUPPORT REQUIREMENT.—Section

4 10(g) of the Federal Home Loan Bank Act (12 U.S.C.

5 1430(g)) is amended to read as follows:

6 ‘‘(g) COMMUNITY SUPPORT REQUIREMENT.—

7 ‘‘(1) IN GENERAL.—Before the end of the 2-

8 year period beginning on August 9, 1989, the Board

9 shall adopt regulations establishing standards of

10 community investment or service for members of

11 Banks to maintain continued access to long-term ad12 vances.

13 ‘‘(2) FACTORS TO BE INCLUDED.—The regula14 tions promulgated pursuant to paragraph (1) shall

15 take into account factors such as member’s perform16 ance under the Community Reinvestment Act of

17 1977 and the member’s record of lending to first18 time homebuyers.

19 ‘‘(3) COMMUNITY REINVESTMENT ACT COMPLI20 ANCE.—

21 ‘‘(A) IN GENERAL.—In determining wheth22 er a member has satisfied the standards estab23 lished under this subsection, the Board shall

24 rely only on the assessment of a member’s com25 pliance with the Community Reinvestment Act
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1 of 1977 made by the member’s appropriate

2 Federal financial supervisory agency, unless the

3 Board is required under subparagraph (b) to

4 conduct an independent assessment.

5 ‘‘(B) INDEPENDENT ASSESSMENT RE6 QUIRED.—The board is required to independ7 ently assess whether a member has satisfied the

8 standards established under this subsection, in9 cluding the member’s record of lending to first10 time homebuyers, if—

11 ‘‘(i) the member is not subject to the

12 Community Reinvestment Act of 1977; or

13 ‘‘(ii) an assessment has not been pre14 pared by the member’s appropriate Federal

15 financial supervisory agency.

16 ‘‘(C) APPROPRIATE FEDERAL FINANCIAL

17 SUPERVISORY AGENCY.—The term ‘‘appropriate

18 Federal financial supervisory agency’’ has the

19 same meaning as in section 803 of the Commu20 nity Reinvestment Act of 1977.’’.

21 (d) AFFORDABLE HOUSING PROGRAM APPLICA22 TIONS.—Section 10(j)(1) of the Federal Home Loan Bank

23 Act (12 U.S.C. 1430(j)(1)) is amended to read as follows:

24 ‘‘(1) IN GENERAL.—
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1 ‘‘(A) EACH BANK MUST ESTABLISH PRO2 GRAM.—Pursuant to regulations promulgated

3 by the Board, each Bank shall establish an Af4 fordable Housing Program to provide subsidies,

5 including subsidized interest rates on advances,

6 to members to assist the members in financing

7 for low- and moderate-income, owner-occupied,

8 affordable rental housing.

9 ‘‘(B) APPLICATIONS.—Each Federal Home

10 Loan Bank is authorized to approve or dis11 approve, subject to the requirements of this

12 Act, applications by members of the Bank to

13 participate in the Bank’s Affordable Housing

14 Program.’’.

15 (e) AFFORDABLE HOUSING PROGRAM CONTRIBU16 TION.—Section 10(j)(5) of the Federal Home Loan Bank

17 Act (12 U.S.C. 1430(j)(5)) is amended to read as follows:

18 ‘‘(5) CONTRIBUTION TO PROGRAM.—Each Bank

19 shall annually contribute the percentage of its an20 nual net earnings prescribed in the following sub21 paragraphs to support subsidies, including sub22 sidized advances, through the Affordable Housing

23 Program:

24 ‘‘(A) Except as provided in subparagraph

25 (B), 10 percent of the preceding year’s net
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1 earnings, or such prorated sums as may be re2 quired to assure that the aggregate contribution

3 of the Banks shall not be less than

4 $100,000,000 for each such year.

5 ‘‘(B) If the total capital of the Federal

6 Home Loan Bank System for the preceding

7 year is less than $6 billion, 10 percent of the

8 preceding year’s net earnings.’’.

9 (f) BRANCHES FOR COMMUNITY INVESTMENT AND

10 AFFORDABLE HOUSING PROGRAMS; AND LIMITATIONS ON

11 ADVANCES.—Section 10 of the Federal Home Loan Bank

12 Act (12 U.S.C. 1430) is amended by adding after sub13 section (j) the following new subsections:

14 ‘‘(k) BRANCHES FOR COMMUNITY INVESTMENT AND

15 AFFORDABLE HOUSING PROGRAMS.—

16 ‘‘(1) IN GENERAL.—With the prior approval of

17 the Board each Federal Home Loan Bank is author18 ized to establish 1 or more branches within its Fed19 eral Home Loan Bank district for the exclusive pur20 pose of conducting activities related to the Bank’s

21 community investment and affordable housing pro22 grams.

23 ‘‘(2) LIMITATION ON ACTIVITIES.—Only activi24 ties relating to the programs described in sub-
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1 sections (h) and (i) may be conducted at a branch

2 established under paragraph (1).

3 ‘‘(l) LIMITATIONS ON ADVANCES.—

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

5 Except as provided in paragraph (2), no new ad6 vances to any undercapitalized depository institution

7 by any Federal Home Loan Bank under this section

8 may be outstanding for more than 60 days in any

9 120-day period.

10 ‘‘(2) VIABILITY EXCEPTION.—

11 ‘‘(A) IN GENERAL.—If the head of the ap12 propriate Federal banking agency certifies in

13 advance in writing to the Federal Home Loan

14 Bank that any depository institution is viable,

15 the limitation contained in paragraph (1) shall

16 not apply during the 60-day period beginning

17 on the date such certification is received.

18 ‘‘(B) EXTENSIONS OF PERIOD.—The 60-

19 day period may be extended for additional 60-

20 day periods upon receipt by the Federal Home

21 Loan Bank of additional written certifications

22 under subparagraph (A) with respect to each

23 such additional period.

24 ‘‘(C) AUTHORITY TO ISSUE A CERTIFICATE

25 OF VIABILITY MAY NOT BE DELEGATED.—The
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1 authority of the head of any agency to issue a

2 written certification of viability under this para3 graph may not be delegated to any other

4 person.

5 ‘‘(3) PROHIBITION ON ADVANCES TO CRITI6 CALLY UNDERCAPITALIZED DEPOSITORY INSTITU7 TIONS.—Notwithstanding any other provision of this

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

9 undercapitalized depository institution.

10 ‘‘(4) NO OBLIGATION TO MAKE ADVANCES.—A

11 Federal Home Loan Bank shall have no obligation

12 to make, increase, renew, or extend any advance or

13 discount under this Act to any member.

14 ‘‘(5) DEFINITIONS.—

15 ‘‘(A) APPROPRIATE FEDERAL BANKING

16 AGENCY.—The term ‘appropriate Federal bank17 ing agency’ has the same meaning as in section

18 3 of the Federal Deposit Insurance Act and

19 also includes the National Credit Union Admin20 istration.

21 ‘‘(B) CRITICALLY UNDERCAPITALIZED.—

22 The term ‘critically undercapitalized’ has the

23 same meaning as in section 38 of the Federal

24 Deposit Insurance Act.
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1 ‘‘(C) DEPOSITORY INSTITUTION.—The

2 term ‘depository institution’ has the same

3 meaning as the term ‘insured depository institu4 tion’ in section 2.

5 ‘‘(D) NEW ADVANCE.—The term ‘new ad6 vance’ includes a renewal or extension of, or an

7 increase in, an outstanding advance.

8 ‘‘(E) UNDERCAPITALIZED DEPOSITORY IN9 STITUTION.—The term ‘undercapitalized depos10 itory institution’ means any depository institu11 tion which—

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

13 section 38 of the Federal Deposit Insur14 ance Act; or

15 ‘‘(ii) has a composite CAMEL rating

16 of 5 under the Uniform Financial Institu17 tions Rating System (or an equivalent rat18 ing by any such agency under a com19 parable rating system) as of the most re20 cent examination of such institution.

21 ‘‘(F) VIABLE.—A depository institution is

22 ‘viable’ if the appropriate Federal banking

23 agency determines, giving due regard to the

24 economic conditions and circumstances in the
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1 market in which the institution operates, that

2 the institution—

3 ‘‘(i) is not critically undercapitalized;

4 ‘‘(ii) is not expected to become criti5 cally undercapitalized; and

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

7 conservatorship or receivership.’’.

8 (g) ADDITIONAL AMENDMENTS.—Section 10 of the

9 Federal Home Loan Bank Act (1430) is amended—

10 (1) DELETION OF QUALIFIED THRIFT LENDER

11 STATUS.—By deleting the first subparagraph (e) as

12 added by section 714(b) of the Financial Institutions

13 Reform, Recovery, and Enforcement Act of 1989

14 Public Law 101–73.

15 (2) REDESIGNATION.—By redesignating sub16 sections (g), (h), (i), (j), (k), and (l) as subsections

17 (f), (g), (h), (i), (j), and (k), respectively.

18 (3) AFFORDABLE HOUSING PROGRAM CON19 FORMING AMENDMENTS.—In subsection (j)—

20 (A) by deleting ‘‘subsidized advances’’ each

21 place it appears and inserting ‘‘subsidies, in22 cluding subsidized advances’’;

23 (B) in paragraph (9)(C), by deleting ‘‘ad24 vances made under this program’’ and inserting
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1 ‘‘subsidies, including subsidized advances pro2 vided under this program’’; and

3 (C) by deleting ‘‘advances’’ each place it

4 appears and inserting ‘‘subsidies’’.

5 (4) TECHNICAL AMENDMENT.—In subsection

6 (a), in the first sentence before paragraph (1), by

7 striking ‘‘or section 11(g) of this Act’’.

8 SEC. 114. ADVANCES TO NONMEMBER MORTGAGEES;

9 TERMS AND CONDITIONS.

10 Section 10B(a) of the Federal Home Loan Bank Act

11 (12 U.S.C. 1430b(a)) is amended to read as follows:

12 ‘‘(a) IN GENERAL.—

13 ‘‘(1) AUTHORITY.—Each Federal Home Loan

14 Bank is authorized to make advances to a

15 nonmember mortgagee described in paragraph (2).

16 ‘‘(2) PERMISSIBLE NONMEMBER MORTGAGEE.—

17 ‘‘(A) A State housing finance agency or an

18 Indian housing authority approved under title

19 II of the National Housing Act—

20 ‘‘(i) that is a chartered institution

21 having succession and subject to the in22 spection and supervision of some govern23 mental agency; and
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1 ‘‘(ii) whose principal activity in the

2 mortgage field must consist of lending its

3 own funds; or

4 ‘‘(B) a Community Development Financial

5 Institution—

6 ‘‘(i) that is not an insured depository

7 institution or a subsidiary of an insured

8 depository institution;

9 ‘‘(ii) that, at the time the advance is

10 made, has been certified within the last

11 year as a Community Development Finan12 cial Institution under the Community De13 velopment Banking and Financial Institu14 tions Act of 1994;

15 ‘‘(iii) that is a chartered institution

16 having succession; and

17 ‘‘(iv) whose principal activity in the

18 mortgage field must consist of lending its

19 own funds.

20 ‘‘(3) SECURITY.—Such advances shall not be

21 subject to the other provisions and restrictions of

22 this Act, but shall be made upon the security of

23 mortgages insured under title II of the National

24 Housing Act.
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1 ‘‘(4) TERMS AND CONDITIONS.—Advances made

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

3 of interest and upon such terms and conditions as

4 shall be determined by the Federal Home Loan

5 Bank, but no advance may be for an amount in ex6 cess of 90 percent of the unpaid principal of the

7 mortgage loan given as security.

8 ‘‘(5) DEFINITIONS OF COMMUNITY DEVELOP9 MENT FINANCIAL INSTITUTION.—The term ‘Commu10 nity Development Financial Institution’ has the

11 same meaning as in section 103 of the Community

12 Development Banking and Financial Institutions Act

13 of 1994.

14 ‘‘(b) EXCEPTION.—An advance made to a State

15 housing finance agency or an Indian housing authority for

16 the purpose of facilitating mortgage lending that benefits

17 individuals and families that meet the income require18 ments set forth in section 142(d) or 143(f) of title 26,

19 United States Code need not be collateralized by a mort20 gage insured under title II of the National Housing Act

21 or otherwise if—

22 ‘‘(1) such advance otherwise meets the require23 ments of this subsection; and

24 ‘‘(2) such advance meets the requirements of

25 section 10(a), and any real estate collateral for such
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1 loan comprises single family or multifamily residen2 tial mortgages.’’.

3 SEC. 115. POWERS AND DUTIES OF BANKS.

4 (a) BORROWING MONEY; GENERAL POWERS.—Sec5 tion 11(a) of the Federal Home Loan Bank (12 U.S.C.

6 1431(a)) is amended to read as follows:

7 ‘‘(a) BORROWING MONEY; GENERAL POWERS.—

8 Each Federal Home Loan Bank shall have power, subject

9 to rules and regulations prescribed by the Board to borrow

10 and give security therefor and to pay interest thereon

11 upon such terms and conditions as the Bank may deter12 mine and to do all things necessary for carrying out the

13 provisions of this Act and all things incident thereto.’’.

14 (b) ISSUANCE OF FEDERAL HOME LOAN BANK

15 BONDS.—Section 11(c) of the Federal Home Loan Bank

16 Act (12 U.S.C. 1431(c)) is amended to read as follows:

17 ‘‘(c) ISSUANCE OF FEDERAL HOME LOAN BANK

18 BONDS.—The Federal Home Loan Bank System, subject

19 to rules and regulations prescribed by the Board, may

20 issue consolidated Federal Home Loan Bank bonds which

21 shall be the joint and several obligations of all the Federal

22 Home Loan Banks, and shall be secured and be issued

23 upon such terms and conditions as the Banks may deter24 mine.’’.
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1 (c) DELAYED EFFECTIVE DATE.—The amendment

2 made by subsection (b) shall take effect on the earlier of

3 the date—

4 (1) the central office described in section 11(k)

5 of the Federal Home Loan Bank Act is established;

6 or

7 (2) 6 months after the enactment of this Act.

8 (d) ADDITIONAL OR SUBSTITUTED COLLATERAL ON

9 ADJUSTMENT OF EQUITIES.—Section 11(d) of the Fed10 eral Home Loan Bank Act (12 U.S.C. 1431(d)) is amend11 ed to read as follows:

12 ‘‘(d) ADDITIONAL OR SUBSTITUTED COLLATERAL ON

13 ADJUSTMENT OF EQUITIES.—The Board, for safety and

14 soundness reasons, may require any Federal Home Loan

15 Bank to deposit additional collateral or to make substi16 tutions of collateral or to adjust equities between the Fed17 eral Home Loan Bank.’’.

18 (e) ACCEPTANCE OF DEPOSITS; RESTRICTIONS ON

19 TRANSACTION OF BANKING BUSINESS; COLLECTION AND

20 SETTLEMENT OF CHECKS, DRAFTS, ETC.; CHARGES;

21 RULES AND REGULATIONS.—Section 11(e) of the Federal

22 Home Loan Bank Act (12 U.S.C. 1431(e)) is amended

23 to read as follows:

24 ‘‘(e) ACCEPTANCE OF DEPOSITS; RESTRICTIONS ON

25 TRANSACTION OF BANKING BUSINESS; COLLECTION AND
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1 SETTLEMENT OF CHECKS, DRAFTS, ETC.; CHARGES;

2 RULES AND REGULATIONS.—

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

4 rules and regulations prescribed by the Board, each

5 Federal Home Loan Bank shall have power to ac6 cept deposits made by members of such Bank or by

7 any other Federal Home Loan Bank or other instru8 mentality of the United States, upon such terms and

9 conditions as the Bank may determine, but no Fed10 eral Home Loan Bank shall transact any banking or

11 other business not incidental to activities authorized

12 by this Act.

13 ‘‘(2) COLLECTION AND SETTLEMENT OF

14 CHECKS.—

15 ‘‘(A) IN GENERAL.—Subject to rules and

16 regulations of the Board, the Federal Home

17 Loan Bank are authorized to be drawees of,

18 and to engage in, or be agents or intermediaries

19 for, or otherwise participate or assist in, the

20 collection and settlement of (including present21 ment, clearing, and payment of, and remitting

22 for), checks, drafts, or any other negotiable or

23 nonnegotiable items or instruments of payment

24 drawn on or issued by members of any Federal

25 Home Loan Bank or by institutions which are
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1 eligible to make application to become members

2 pursuant to section 4, and to have such inciden3 tal powers as the Board shall find necessary for

4 the exercise of any such authorization.

5 ‘‘(B) CHARGES.—A Federal Home Loan

6 Bank shall make charges, to be determined by

7 the Bank consistent with the principles set

8 forth in section 11A(c) of the Federal Reserve

9 Act, or utilize the services of, or act as agent

10 for, or be a member of, a Federal Reserve bank,

11 clearinghouse, or any other public or private fi12 nancial institution or other agency, in the exer13 cise of any powers or functions pursuant to this

14 paragraph.

15 ‘‘(C) RULES AND REGULATIONS.—

16 ‘‘(i) IN GENERAL.—(The Board) is

17 authorized, with respect to participation in

18 the collection and settlement of any items

19 by Federal Home Loan Banks, and with

20 respect to the collection and settlement (in21 cluding payment by the payor institution)

22 of items payable by members, to prescribe

23 rules and regulations regarding the rights,

24 powers, responsibilities, duties, and liabil25 ities, including standards relating thereto,
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1 of such Federal Home Loan Banks, asso2 ciations, or banks and other parties to any

3 such items or their collection and settle4 ment.

5 ‘‘(ii) APPLICATION OF BANKING

6 USAGE AND PRACTICE.—In prescribing

7 such rules and regulations, the Board may

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

9 banking usage and practices, and, in in10 stances or respects in which they would

11 otherwise not be applicable, Federal Re12 serve regulations and operating letters, the

13 Uniform Commercial Code, and clearing14 house rule.’’.

15 (f) REDISCOUNT OF NOTES HELD BY OTHER

16 BANKS; PURCHASE OF BONDS OF OTHER BANKS.—Sec17 tion 11(f) of the Federal Home Loan Bank Act (12 U.S.C.

18 1431(f)) is amended to read as follows:

19 ‘‘(f) REDISCOUNT OF NOTES HELD BY OTHER

20 BANKS; PURCHASE OF BONDS OF OTHER BANKS.—

21 ‘‘(1) IN GENERAL.—Each Federal Home Loan

22 Bank is authorized, upon the terms and conditions

23 determined by the Bank, to rediscount the dis24 counted notes of members held by other Federal

25 Home Loan Banks, or to make loans to, or make de-
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1 posits with, such other Federal Home Loan Banks,

2 or to purchase any bonds issued under this section.

3 ‘‘(2) BOARD AUTHORITY.—The Board is au4 thorized to require Federal Home Loan Banks, upon

5 such terms and conditions as the Board may pre6 scribe, to engage in any activity described in para7 graph (1).’’.

8 (g) AUDITS.—Section 11(j) of the Federal Home

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

10 as follows:

11 ‘‘(j) AUDITS.—

12 ‘‘(1) GOVERNMENT CAPITAL NOT REQUIRED.—

13 Notwithstanding the provisions of the first sentence

14 of section 202 of the Government Corporation Con15 trol Act, the audits of the financial transactions of

16 a Federal Home Loan Bank required by that section

17 shall not be limited to periods during which Govern18 ment capital has been invested therein.

19 ‘‘(2) EXCLUSIONS FROM GOVERNMENT COR20 PORATION CONTROL ACT.—The provisions of the

21 first sentence of subsection (d) of section 303 of the

22 Government Corporation Control Act shall not apply

23 to any Federal Home Loan Bank.

24 ‘‘(3) SELECTION OF EXTERNAL AUDITORS.—
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1 ‘‘(A) IN GENERAL.—The Federal Home

2 Loan Banks shall contract jointly for an annual

3 external audit.

4 ‘‘(B) ROLE OF THE BOARD.—Notwith5 standing any other provision of law, the Board

6 shall not participate in the audit contracting

7 process under this paragraph, except that the

8 Board may establish requirements for external

9 audit contracts and requirements to assure con10 sistency in financial report.’’.

11 (h) FISCAL AGENT OF FEDERAL HOME LOAN BANK

12 SYSTEM.—Section 11 of the Federal Home Loan Bank

13 Act (12 U.S.C. 1431) is amended by adding after sub14 section (k) the following new subsection:

15 ‘‘(l) FISCAL AGENT OF FEDERAL HOME LOAN BANK

16 SYSTEM.—

17 ‘‘(1) IN GENERAL.—The Federal Home Loan

18 Bank System shall establish, within 6 months after

19 the date of enactment of the Federal Home Loan

20 Bank System Restructuring and Modernization Act

21 of 1995, a central office that, on behalf of the Sys22 tem, will carry out the issuance of the systems’ con23 solidated obligations under this section.

24 ‘‘(2) DAY-TO-DAY OPERATIONS.—The System

25 may delegate other operational functions to the
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1 central office described in subparagraph (A), or to

2 other offices, as the System may agree.’’.

3 (i) DELETION AND REDESIGNATION.—Section 11 of

4 the Federal Home Loan Bank Act (12 U.S.C. 1431) is

5 amended by—

6 (1) CONSOLIDATED FEDERAL HOME LOAN

7 BANK DEBENTURES.—Deleting subsection (b); and

8 (2) REDESIGNATION.—Redesignating sub9 sections (c), (d), (e), (f), (g), (h), (i), (j), (k), and

10 (l) as (b), (c), (d), (e), (f), (g), (h), (i), (j), and (k).

11 SEC. 116. INCORPORATION OF BANKS; CORPORATE POW12 ERS; HOUSING PROJECT LOANS.

13 (a) INCORPORATION AND CORPORATE POWERS.—

14 Section 12(a) of the Federal Home Loan Bank Act (12

15 U.S.C. 1432(a)) is amended to read as follows:

16 ‘‘(a) INCORPORATION AND CORPORATE POWERS.—

17 ‘‘(1) ORGANIZATIONAL CERTIFICATE.—

18 ‘‘(A) IN GENERAL.—In the event that any

19 new Federal Home Loan Bank district and any

20 new Federal Home Loan Bank are created, the

21 directors of the new Federal Home Loan Bank

22 shall, in accordance with such rules and regula23 tions as the Board may prescribe, make and file

24 with the Board at the earliest practicable date

25 after the establishment of such Bank, an orga-
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1 nization certificate which shall contain such in2 formation as the Board may require.

3 ‘‘(B) FILING.—Upon the making and filing

4 of the organization certificate with the Board,

5 the Bank shall become as of the date of the

6 execution of its organization certificate, a body

7 corporate, and as such and in its name it shall

8 have the powers described in paragraph (2).

9 ‘‘(2) POWERS OF FEDERAL HOME LOAN

10 BANKS.—Each Federal Home Loan Bank shall have

11 the following powers—

12 ‘‘(A) to adopt, alter, and use a corporate

13 seal;

14 ‘‘(B) to make contracts;

15 ‘‘(C) to purchase or lease and hold or dis16 pose of such real estate as may be necessary or

17 convenient for the transaction of its business;

18 ‘‘(D) to sue and be sued, to complain, and

19 to defend, in any court of competent jurisdic20 tion, State or Federal;

21 ‘‘(E) to select, employ, and fix the com22 pensation of such officers, employees, attorneys,

23 and agents as shall be necessary for the trans24 action of its business;
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1 ‘‘(F) to define the duties of such officers,

2 employees, attorneys, and agents; require bonds

3 of them and fix the penalties thereof; and to

4 dismiss them at pleasure;

5 ‘‘(G) by its board of directors, to prescribe,

6 amend, and repeal by-laws, rules and regula7 tions governing the manner which its affairs

8 may be administered; and

9 ‘‘(H) to exercise the powers granted to it

10 by law.

11 ‘‘(3) OFFICERS AS DIRECTORS.—The president

12 of a Federal Home Loan Bank also may be a mem13 ber of the board of directors thereof, but no other

14 officer, employee, attorney, or agent of such Bank,

15 who receives compensation, may be a member of the

16 board of directors.

17 ‘‘(4) INCIDENTAL POWERS.—Each Federal

18 Home Loan Bank shall have all such incidental pow19 ers, but inconsistent with the provisions of this Act,

20 as are customary and usual in corporations gen21 erally.’’.

22 (b) TECHNICAL AMENDMENT.—Section 12(b) of the

23 Federal Home Loan Bank Act (12 U.S.C. 1432(b)) is

24 amended by deleting ‘‘Federal home loans banks’’ and in25 serting ‘‘Federal Home Loan Banks’’.
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1 SEC. 117. EXEMPTION FROM TAXATION; OBLIGATIONS AC2 CEPTABLE AS CREDIT ON DEBT OF HOME

3 OWNER.

4 Section 13 of the Federal Home Loan Bank Act (12

5 U.S.C. 1433) is amended—

6 (1) by striking ‘‘bank’’ each place it appears

7 and inserting ‘‘Federal Home Loan Bank’’; and

8 (2) by striking ‘‘except that in any real prop9 erty of the bank’’ and inserting ‘‘except that any

10 real property’’.

11 SEC. 118. OBLIGATIONS AS LAWFUL INVESTMENTS; LIABIL12 ITY OF UNITED STATES FOR OBLIGATIONS

13 ISSUED BY BANKS.

14 Section 15 of the Federal Home Loan Bank Act (12

15 U.S.C. 1435) is amended to read as follows:

16 ‘‘SEC. 15. OBLIGATIONS AS LAWFUL INVESTMENTS; LIABIL17 ITY OF UNITED STATES FOR OBLIGATIONS

18 ISSUED BY BANKS.

19 ‘‘(a) LAWFUL INVESTMENTS.—Obligations of the

20 Federal Home Loan Banks issued in compliance with this

21 Act shall be lawful investments, and may be accepted as

22 security, for all fiduciary, trust, and public funds the in23 vestment or deposit of which shall be under the authority

24 or control of the United States or any officer or officers

25 thereof.
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1 ‘‘(b) FEDERAL RESERVE BANKS AS FISCAL

2 AGENTS.—The Federal Reserve banks are authorized to

3 act as depositaries, custodians, and/or fiscal agents for

4 Federal Home Loan Banks in the general performance of

5 their powers under this Act.

6 ‘‘(c) DISCLOSURE REGARDING ABSENCE OF UNITED

7 STATES GUARANTEE.—All obligations of Federal Home

8 Loan Banks shall plainly state that such obligations are

9 not obligations of the United States and are not guaran10 teed by the United States.’’.

11 SEC. 119. RESERVES AND DIVIDENDS.

12 (a) RESERVE ACCOUNT; DIVIDENDS; INVESTMENT

13 OF RESERVES.—Section 16(a) of the Federal Home Loan

14 Bank Act (12 U.S.C. 1436(a)) is amended to read as

15 follows:

16 ‘‘(a) RESERVE ACCOUNT; DIVIDENDS; INVESTMENT

17 OF RESERVES.—

18 ‘‘(1) RESERVE ACCOUNT.—

19 ‘‘(A) REQUIRED RESERVES.—

20 ‘‘(i) IN GENERAL.—At the same time

21 it first establishes the capital standards re22 quired under section 6A, the Board shall

23 establish a reserve account requirement for

24 each Federal Home Loan Bank.
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1 ‘‘(ii) FACTORS CONSIDERED IN ES2 TABLISHING RESERVE REQUIREMENT.—In

3 establishing the reserve account required

4 by subparagraph (A), the Board shall take

5 into account that reserves are integral to a

6 Bank’s capital structure and its safety and

7 soundness, including the ability of a Bank

8 to satisfy its capital requirements, meet its

9 statutory obligations, and manage its busi10 ness operations.

11 ‘‘(iii) RESERVE COMPLIANCE PLAN.—

12 At the same time each Bank submits to

13 the Board its plan specifying how the

14 Bank intends to implement its stock sub15 scription requirements, each Bank shall

16 submit to the Board a plan for complying

17 with the reserve account requirement es18 tablished under clause (i).

19 ‘‘(B) ADDITIONAL RESERVES.—Each Fed20 eral Home Loan Bank may carry to a reserve

21 account from time to time such portion of its

22 net earnings as may be determined by its board

23 of directors.

24 ‘‘(2) DIVIDENDS.—No dividends shall be paid

25 except out of previously retained earnings or current
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1 net earnings remaining after reductions for all re2 serves, chargeoffs, purchases of capital certificates of

3 the Financing Corporation, and payments relating to

4 the Funding Corporation required under this Act

5 have been provided for, other than charge-offs or ex6 penses incurred by a Bank in connection with the

7 purchase of capital stock of the Financing Corpora8 tion under section 21 of this Act or payments relat9 ing to the Funding Corporation Principal Fund

10 under section 21B(e) of this Act.

11 ‘‘(3) INVESTMENT AUTHORITY.—The funds of

12 such Federal Home Loan Bank shall be invested,

13 subject to such regulations, restrictions, and limita14 tions as may be prescribed by the Board, in direct

15 obligations of the United States, in obligations, par16 ticipations, or other instruments of or issued by the

17 Federal National Mortgage Association or the Gov18 ernment National Mortgage Association, in mort19 gages, obligations, or other securities which are or

20 ever have been sold by the Federal Home Loan

21 Mortgage Corporation pursuant to section 305 or

22 section 306 of the Federal Home Loan Mortgage

23 Corporation Act, and in such securities as fiduciary

24 and trust funds may be invested in under the laws
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1 of the State in which the Federal Home Loan Bank

2 is located.’’.

3 (b) TECHNICAL AMENDMENTS.—Section 16(c) of the

4 Federal Home Loan Bank Act (12 U.S.C. 1436(c)) is

5 amended—

6 (1) by striking ‘‘bank’’ each place it appears

7 and inserting ‘‘Federal Home Loan Bank’’;

8 (2) by striking ‘‘bank’s’’ and inserting ‘‘Federal

9 Home Loan Bank’s’’; and

10 (3) in paragraph (1)(C), by striking ‘‘the first

11 2 sentences of subsection (a) of this section’’ and in12 serting ‘‘subsection (a)(1)’’.

13 SEC. 120. FINANCING CORPORATION.

14 Section 21(b) of the Federal Home Loan Bank Act

15 (12 U.S.C. 1441(b)) is amended by striking ‘‘Director of

16 the Office of Finance of Federal Home Loan Banks’’ and

17 inserting ‘‘director of the central office described in section

18 11(k)’’.

19 SEC. 121. OBLIGATIONS OF RESOLUTION FUNDING COR20 PORATION.

21 (a) PAYMENTS OF THE FEDERAL HOME LOAN BANK

22 SYSTEM.—Section 21B(f)(2)(C) of the Federal Home

23 Loan Bank Act (12 U.S.C. 1441b(f)(2)(C)) is amended

24 to read as follows:
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1 ‘‘(C) PAYMENTS BY THE FEDERAL HOME

2 LOAN BANK SYSTEM.—

3 ‘‘(i) AMOUNT TO BE PAID.—To the

4 extent the amounts available pursuant to

5 subparagraphs (A) and (B) are insufficient

6 to cover the amount of interest payments,

7 the Federal Home Loan Banks shall pay

8 to the Funding Corporation each calendar

9 year the aggregate amount of

10 $300,000,000.

11 ‘‘(ii) PRO RATA SHARE OF TOTAL SYS12 TEM CAPITAL.—Except as provided in

13 clause (iii), the amount to be paid by each

14 Federal Home Loan Bank under clause (i)

15 shall be determined by—

16 ‘‘(I) dividing the Bank’s required

17 capital by the total of all of the

18 Banks’ required capital; and

19 ‘‘(II) multiplying the percentage

20 obtained under subclause (I) by

21 $300,000,000.

22 ‘‘(iii) BANK ALLOCATION FORMULA.—

23 Notwithstanding clause (ii), the amount to

24 be paid by each Federal Home Loan Bank

25 under clause (i) shall be determined by a
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1 permanent formula established by the Fed2 eral Home Loan Banks if—

3 ‘‘(I) within 60 days after the en4 actment of the Federal Home Loan

5 Bank System Restructuring and Mod6 ernization Act of 1995, the formula

7 established by the Banks is approved

8 by three-fourths of the Banks and by

9 Banks with combined total assets at

10 least equal to three-fourths of the

11 total assets of the System; and

12 ‘‘(II) within 45 days after the

13 formula is approved as described in

14 subclause (I), the Federal Housing

15 Finance Board approves the formula

16 established by the Banks, specifically

17 finding that the formula—

18 ‘‘(aa) is reasonable and con19 sistent with the objectives of as20 suring payment of the System’s

21 obligation in clause (i);

22 ‘‘(bb) is equitable to the

23 Banks and members;

24 ‘‘(cc) does not create incen25 tives for the Banks or members
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1 to engage in conduct inconsistent

2 with the purpose of the System;

3 and

4 ‘‘(dd) is readily understood

5 and predictable in its impact.

6 ‘‘(iv) DEFINITIONS.—

7 ‘‘(I) REQUIRED CAPITAL.—For

8 purposes of clause (ii), ‘required cap9 ital’ means the greater of the leverage

10 capital requirement or risk-based cap11 ital requirement established by the

12 Board for each Bank.

13 ‘‘(II) TOTAL ASSETS.—For pur14 poses of clause (iii)(I), the ‘total as15 sets’ of each Bank and the System

16 shall be determined as of the date of

17 introduction of the Federal Home

18 Loan Bank System Restructuring and

19 Modernization Act of 1995.’’.

20 (b) DELAYED EFFECTIVE DATE.—The amendment

21 made by subsection (a) shall take effect beginning with

22 the calendar year following the year the Board prescribes

23 regulations establishing capital requirements under sec24 tion 6(b).
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1 (c) CONFORMING AMENDMENTS.—Section 21B(c)

2 (12 U.S.C. 1441b(c)) is amended by striking ‘‘director of

3 the Office of Finance of the Federal Home Loan Banks’’

4 and inserting ‘‘director of the central office described in

5 section 11(k)’’.

6 SEC. 122. ELIGIBILITY TO MEMBERSHIP IN BANKS.

7 Section 24 of the Federal Home Loan Bank Act (12

8 U.S.C. 1444) is repealed.

9 SEC. 123. MERGER, LIQUIDATION OR REORGANIZATION.

10 Section 26 of the Federal Home Loan Bank Act (12

11 U.S.C. 1446) is amended to read as follows:

12 ‘‘(a) IN GENERAL.—Whenever the Board finds that

13 the efficient and economical accomplishment of the pur14 poses of this Act will be aided by such action, and in ac15 cordance with such rules, regulation, and orders as the

16 Board may prescribe—

17 ‘‘(1) MERGERS.—Any Federal Home Loan

18 Bank may be required to merge with any other Fed19 eral Home Loan Bank; and

20 ‘‘(2) LIQUIDATION OR REORGANIZATION.—Any

21 Federal Home Loan Bank may be liquidated or re22 organized by the Board, and the Bank’s stock paid

23 off and retired in whole or in part in connection

24 therewith after paying or making provision for the

25 payment of its liabilities.
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1 ‘‘(b) ACQUISITION OF ASSETS AND ASSUMPTION OF

2 LIABILITIES.—In the case of any liquidation or reorga3 nization described in subsection (a), any other Federal

4 Home Loan Bank may, with the approval of the Board,

5 acquire assets of any such liquidated or reorganized bank

6 and assume liabilities thereof, in whole or in part.’’.

7 SEC. 124. GENERAL ENFORCEMENT POWERS.

8 The Federal Home Loan Bank Act is amended by

9 adding after section 27 (12 U.S.C. 1447) the following

10 new section:

11 ‘‘SEC. 27A. GENERAL ENFORCEMENT POWERS.

12 ‘‘(a) CEASE AND DESIST PROCEDURES.—

13 ‘‘(1) GROUNDS FOR ISSUANCE.—The Board

14 may issue and serve upon a Federal Home Loan

15 Bank or a Bank-affiliated party a notice of charges

16 if, in the opinion of the Board, the Bank or Bank17 affiliated party—

18 ‘‘(A) is engaging or has engaged, or the

19 Board has reasonable cause to believe that the

20 Bank or Bank-affiliated party is about to en21 gage, in an unsafe or unsound practice in con22 ducting the business of the Bank; or

23 ‘‘(B) is violating or has violated, or the

24 Board has reasonable cause to believe that the
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1 Bank or Bank-affiliated party is about to vio2 late—

3 ‘‘(i) a law, rule, or regulation;

4 ‘‘(ii) any condition imposed in writing

5 by the Board in connection with the grant6 ing of any application or other request by

7 the Bank; or

8 ‘‘(iii) any written agreement entered

9 into with the Board.

10 ‘‘(2) PROCEDURE.—

11 ‘‘(A) NOTICE OF CHARGES.—Any notice of

12 charges shall contain a statement of the facts

13 constituting the alleged violation or violations or

14 the unsafe or unsound practice or practices,

15 and shall fix a time and place at which a hear16 ing will be held to determine whether an order

17 to cease and desist therefrom should issue

18 against the Bank or Bank-affiliated party.

19 ‘‘(B) DATE OF HEARING.—Such hearing

20 shall be fixed for a date not earlier than 30

21 days nor later than 60 days after service of

22 such notice unless an earlier or a later date is

23 set by the Board at the request of any party

24 served.
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1 ‘‘(C) FAILURE TO APPEAR CONSTITUTES

2 CONSENT.—Unless the party or parties so

3 served appear at the hearing personally or by a

4 duly authorized representative, the party or

5 parties shall be deemed to have consented to

6 the issuance of the cease-and-desist order.

7 ‘‘(D) ISSUANCE OF ORDER.—In the event

8 of such consent, or if upon the record made at

9 any such hearing, the Board shall find that any

10 violation or unsafe or unsound practice speci11 fied in the notice of charges has been estab12 lished, the Board may issue and serve upon the

13 Bank or Bank-affiliated party an order requir14 ing the Bank or Bank-affiliated party to cease

15 and desist from any such violation or practice

16 and to take affirmative action to correct the

17 conditions resulting from any such violation or

18 practice.

19 ‘‘(3) AFFIRMATIVE ACTION TO CORRECT CONDI20 TIONS RESULTING FROM VIOLATIONS OR PRAC21 TICES.—The authority to issue an order under this

22 subsection and subsection (b) which requires a Fed23 eral Home Loan Bank or Bank-affiliated party to

24 take affirmative action to correct or remedy any con25 ditions resulting from any violation or practice with
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1 respect to which such order is issued includes the

2 authority to require such Bank or party to—

3 ‘‘(A) make restitution or provide reim4 bursement, indemnification, or guarantee

5 against loss if—

6 ‘‘(i) the Bank or Bank-affiliated party

7 was unjustly enriched in connection with

8 such violation or practice; or

9 ‘‘(ii) the violation or practice involved

10 a reckless disregard for the law or any ap11 plicable regulations or prior order of the

12 Board;

13 ‘‘(B) restrict the growth of the Bank;

14 ‘‘(C) dispose of any loan or asset involved;

15 ‘‘(D) rescind agreements or contracts;

16 ‘‘(E) employ qualified officers or employees

17 (who may be subject to approval by the Board

18 at the direction of the Board); and

19 ‘‘(F) take such other action as the Board

20 determines appropriate.

21 ‘‘(4) AUTHORITY TO LIMIT ACTIVITIES.—The

22 authority to issue an order under this subsection or

23 subsection (b) includes the authority to place limita24 tions on the activities or functions of a Bank or any

25 Bank-affiliated party.
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1 ‘‘(5) EFFECTIVE DATE.—A cease-and-desist

2 order shall become effective at the expiration of 30

3 days after the service of such order upon the Bank

4 or Bank-affiliated party concerned (except in the

5 case of a cease-and-desist order issued upon consent,

6 which shall become effective at the time specified

7 therein), and shall remain, effective and enforceable

8 as provided therein, except to such extent as it is

9 stayed, modified, terminated, or set aside by action

10 of the Board or reviewing court.

11 ‘‘(6) STANDARD FOR CERTAIN ORDERS.—No

12 authority under this subsection or subsection (b) to

13 prohibit any Bank-affiliated party from withdrawing,

14 transferring, removing, dissipating, or disposing of

15 any funds, assets, or other property may be exer16 cised unless the Board meets the standards of Rule

17 65 of the Federal rules of Civil Procedure, without

18 regard to the requirement of such rule that the ap19 plicant show that the injury, loss or damage is irrep20 arable and immediate.

21 ‘‘(b) TEMPORARY CEASE-AND-DESIST ORDERS.—

22 ‘‘(1) GROUNDS FOR ISSUANCE; SCOPE.—When23 ever the Board determines that any violation, threat24 ened violation, or unsafe or unsound practice, speci25 fied in the notice of charges served upon the Federal
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1 Home Loan Bank or Bank-affiliated party under

2 subsection (a)(1), or the continuation thereof, is

3 likely—

4 ‘‘(A) to cause insolvency or significant dis5 sipation of assets or earnings of the Bank, or

6 ‘‘(B) to weaken the condition of the Bank

7 prior to the completion of the proceedings con8 ducted under subsection (a)(2),

9 the Board may issue a temporary order requiring

10 the Bank, or any Bank-affiliated party, to cease and

11 desist from any such violation or practice and to

12 take affirmative action to prevent or remedy such in13 solvency, dissipation, or condition pending comple14 tion of such proceedings. Such order may include

15 any requirement authorized under subsection (a)(3).

16 ‘‘(2) EFFECTIVE DATE.—An order issued under

17 paragraph (1) shall become effective upon service

18 upon the Federal Home Loan Bank or Bank-affili19 ated party and, unless set aside, limited, or sus20 pended by a court in proceedings authorized by

21 paragraph (4), shall remain effective and enforceable

22 pending the completion of the administrative pro23 ceedings pursuant to such notice and shall remain

24 effective until such time as the Board dismisses the

25 charges specified in such notice or until superseded
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1 by a cease-and-desist order issued under subsection

2 (a).

3 ‘‘(3) INCOMPLETE OR INACCURATE RECORDS.—

4 ‘‘(A) TEMPORARY ORDER.—If a notice of

5 charges served under subsection (a)(1) specifies

6 that, on the basis of particular facts and cir7 cumstances, the Bank’s books and records are

8 so incomplete or inaccurate that the Board is

9 unable, through the normal supervisory process,

10 to determine the financial condition of that

11 Bank or the details or the purpose of any trans12 action or transactions that may have a material

13 effect on the financial condition of that Bank,

14 the Board may issue a temporary order requir15 ing—

16 ‘‘(i) the cessation of any activity or

17 practice which gave rise, whether in whole

18 or in part, to the incomplete or inaccurate

19 state of the books or records; or

20 ‘‘(ii) affirmative action to restore such

21 books or records to a complete and accu22 rate state, until the completion of the pro23 ceedings under subsection (a).

24 ‘‘(B) EFFECTIVE PERIOD.—Any temporary

25 order issued under subparagraph (A)—
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1 ‘‘(i) shall become effective upon serv2 ice; and

3 ‘‘(ii) unless set aside, limited, or sus4 pended by a court in proceedings under

5 paragraph (4), shall remain in effect and

6 enforceable until the earlier of—

7 ‘‘(I) the completion of the pro8 ceeding initiated under subsection (a)

9 in connection with the notice of

10 charges; or

11 ‘‘(II) the date the Board deter12 mines, by examination or otherwise,

13 that the Federal Home Loan Bank’s

14 books and records are accurate and

15 reflect the financial condition of the

16 Bank.

17 ‘‘(4) JUDICIAL REVIEW.—Within 10 days after

18 the Federal Home Loan Bank or Bank-affiliated

19 party has been served with a temporary cease-and20 desist order, the Bank or Bank-affiliated party may

21 apply to the United States district court for the ju22 dicial district in which the Bank is located, or the

23 United States District Court for the District of Co24 lumbia, for an injunction setting aside, limiting, or

25 suspending the enforcement, operation, or effective-
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1 ness of such order pending the completion of the ad2 ministrative proceedings pursuant to the notice of

3 charges served upon the Bank or Bank-affiliated

4 party under subsection (a)(1), and such court shall

5 have jurisdiction to issue such injunction.

6 ‘‘(5) ENFORCEMENT.—In the case of a violation

7 or threatened violation of, or failure to obey, a tem8 porary order issued under, the Board may apply to

9 the United States district court for the judicial dis10 trict in which the Federal Home Loan Bank is lo11 cated, or the United States District Court for the

12 District of Columbia for an injunction to enforce

13 such order, and, if the court finds any such viola14 tion, threatened violation, or failure to obey, it shall

15 issue such injunction.

16 ‘‘(c) REMOVAL AND PROHIBITION AUTHORITY.—

17 ‘‘(1) AUTHORITY TO ISSUE ORDER.—The Board

18 may serve upon any Bank-affiliated party a written

19 notice of the Board’s intention to remove such party

20 from office or to prohibit any further participation

21 by such party in any manner, in the conduct of the

22 affairs of the Bank whenever the Board determines

23 that—

24 ‘‘(A) such party has directly or indi25 rectly—
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1 ‘‘(i) violated—

2 ‘‘(I) any law or regulation;

3 ‘‘(II) any cease-and-desist order

4 which has become final;

5 ‘‘(III) any condition imposed in

6 writing by the Board in connection

7 with the grant of any application or

8 other request by the Bank; or

9 ‘‘(IV) any written agreement be10 tween the Bank and the Board;

11 ‘‘(ii) engaged or participated in any

12 unsafe or unsound practice in connection

13 with the Bank; or

14 ‘‘(iii) committed or engaged in any

15 act, omission, or practice which constitutes

16 a breach of such party’s fiduciary duty;

17 ‘‘(B) by reason of the violation, practice, or

18 breach described in any clause of subparagraph

19 (A)—

20 ‘‘(i) the Bank has suffered or will

21 probably suffer financial loss or other dam22 age; or

23 ‘‘(ii) such party has received financial

24 gain or other benefit by reason of such vio25 lation, practice, or breach; and
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1 ‘‘(C) such violation, practice, or breach—

2 ‘‘(i) involves personal dishonesty on

3 the part of such party; or

4 ‘‘(ii) demonstrates willful or continu5 ing disregard by such party for the safety

6 or soundness of the Bank.

7 ‘‘(2) SUSPENSION ORDER.—

8 ‘‘(A) SUSPENSION OR PROHIBITION AU9 THORIZED.—If the Board serves written notice

10 under paragraph (1) to any Bank affiliated11 party, the Board may suspend such party from

12 office or prohibit such party from further par13 ticipation in any manner in the conduct of the

14 affairs of the Federal Home Loan Bank, if the

15 Board—

16 ‘‘(i) determines that such action is

17 necessary for the protection of the Bank;

18 and

19 ‘‘(ii) serves upon such party written

20 notice of the suspension order.

21 ‘‘(B) EFFECTIVE PERIOD.—Any suspen22 sion order issued under subparagraph (A)—

23 ‘‘(i) shall become effective upon serv24 ice; and
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1 ‘‘(ii) unless a court issues a stay of

2 such order under paragraph (7), shall re3 main in effect and enforceable until—

4 ‘‘(I) the date the Board dismisses

5 the charges contained in the notice

6 served under paragraph (1) with re7 spect to such party; or

8 ‘‘(II) the effective date of an

9 order issued by the Board to such

10 party under paragraph (1).

11 ‘‘(C) COPY OF ORDER.—If the Board is12 sues a suspension order under subparagraph

13 (A) to any Bank-affiliated party, the Board

14 shall serve a copy of such order on any Federal

15 Home Loan Bank with which such party is as16 sociated at the time such order is issued.

17 ‘‘(3) PROCEDURE.—

18 ‘‘(A) NOTICE.—A notice of intention to re19 move a Bank-affiliated party from office or to

20 prohibit such party from participating in the

21 conduct of the affairs of a Federal Home Loan

22 Bank shall contain a statement of the facts con23 stituting grounds therefor, and shall fix a time

24 and place at which a hearing will be held there25 on.
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1 ‘‘(B) DATE OF HEARING.—Such hearing

2 shall be fixed for a date not earlier than 30

3 days nor later than 60 days after the date of

4 service of such notice, unless an earlier or a

5 later date is set by the Board at the request of

6 such party and for good cause shown or by the

7 Attorney General of United States.

8 ‘‘(C) FAILURE TO APPEAR DEEMED CON9 SENT.—Unless such party appears at the hear10 ing in person or by a duly authorized represent11 ative, such party shall be deemed to have con12 sented to the issuance of an order of such re13 moval or prohibition.

14 ‘‘(D) ISSUANCE OF ORDER.—In the event

15 of such consent, or if upon the record made at

16 any such hearing, the Board finds that any of

17 the grounds specified in such notice have been

18 established, the Board may issue such orders of

19 suspension or removal from office, or prohibi20 tion from participation in the conduct of the af21 fairs of the Federal Home Loan Bank, as the

22 Board may deem appropriate.

23 ‘‘(4) EFFECTIVE DATE.—Any such order shall

24 become effective at the expiration of 30 days after

25 service upon the Federal Home Loan Bank and
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1 Bank-affiliated party (except in the case of an order

2 issued upon consent, which shall become effective at

3 the time specified therein). Such order shall remain

4 effective and enforceable except to such extent as it

5 is stayed, modified, terminated, or set aside by ac6 tion of the Board or a reviewing court.

7 ‘‘(5) PROHIBITION OF CERTAIN SPECIFIC AC8 TIVITIES.—Any person subject to an order issued

9 under this subsection shall not—

10 ‘‘(A) participate in any manner in the con11 duct of the affairs of any institution or agency

12 specified in paragraph (6)(A);

13 ‘‘(B) solicit, procure, transfer, attempt to

14 transfer, vote, or attempt to vote any proxy,

15 consent, or authorization with respect to any

16 voting rights in any institution described in

17 subparagraph (A);

18 ‘‘(C) violate any voting agreement pre19 viously approved by the Board; or

20 ‘‘(D) vote for a director, or serve or act as

21 a Bank-affiliated party.

22 ‘‘(6) INDUSTRYWIDE PROHIBITION.—

23 ‘‘(A) IN GENERAL.—Except as provided in

24 paragraph (3), any person who, pursuant to an

25 order issued under this subsection, has been re-
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1 moved or suspended from office in a Federal

2 Home Loan Bank or prohibited from participat3 ing in the conduct of the affairs of a Federal

4 Home Loan Bank may not, while such order is

5 in effect, continue or commence to hold any of6 fice in, or participate in any manner in the con7 duct of the affairs of—

8 ‘‘(i) any insured depository institution

9 as defined in section 3(c)(2) of the Federal

10 Deposit Insurance Act (12 U.S.C.

11 1813(c)(2));

12 ‘‘(ii) any institution treated as an in13 sured bank under section 8(b)(3) or

14 8(b)(4) of the Federal Deposit Insurance

15 Act (12 U.S.C. 1818(b)(3), (b)(4)), or as

16 a savings association under section 8(b)(8)

17 of the Federal Deposit Insurance Act (12

18 U.S.C. 1818(b)(8));

19 ‘‘(iii) any insured credit union as de20 fined in section 101(7) of the Federal

21 Credit Union Act (12 U.S.C. 1752);

22 ‘‘(iv) any institution chartered under

23 the Farm Credit Act of 1971;

24 ‘‘(v) the Board any Federal Home

25 Loan Bank;
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1 ‘‘(vi) the Federal National Mortgage

2 Association;

3 ‘‘(vii) the Federal Home Loan Mort4 gage Corporation;

5 ‘‘(viii) the Student Loan Marketing

6 Association;

7 ‘‘(ix) the Government National Mort8 gage Association; and

9 ‘‘(x) any appropriate Federal deposi10 tory institutions regulatory agency as de11 fined in section 3(q) of the Federal De12 posit Insurance Act.

13 ‘‘(B) EXCEPTION IF AGENCY PROVIDES

14 WRITTEN CONSENT.—If, on or after the date an

15 order is issued under this subsection which re16 moves or suspends from office any Bank-affili17 ated party or prohibits such party from partici18 pating in the conduct of the affairs of a Federal

19 Home Loan Bank, such party receives the writ20 ten consent of—

21 ‘‘(i) the Federal Housing Finance

22 Board, and

23 ‘‘(ii) the appropriate Federal financial

24 institutions regulatory agency of the insti25 tution described in paragraph (6)(A) in
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1 which such party proposes to hold office or

2 in the conduct of whose affairs such party

3 proposes to participate,

4 subparagraph (A) shall, to the extent of such

5 consent, cease to apply to such party with re6 spect to the institution described in such writ7 ten consent. Any agency that grants such a

8 written consent shall report such action to the

9 Board and publicly disclose such consent.

10 ‘‘(C) VIOLATION OF PARAGRAPH TREATED

11 AS VIOLATION OF ORDER.—Any violation of

12 subparagraph (A) by any person who is subject

13 to an order described in such subparagraph

14 shall be treated as a violation of the order.

15 ‘‘(D) APPROPRIATE FEDERAL FINANCIAL

16 INSTITUTIONS REGULATORY AGENCY DE17 FINED.—For purposes of this paragraph, the

18 term ‘appropriate Federal financial institutions

19 regulatory agency’ means—

20 ‘‘(i) the Secretary of Housing and

21 Urban Development and the Office of Fed22 eral Housing Enterprise Oversight, in the

23 case of the Federal National Mortgage As24 sociation and the Federal Home Loan

25 Mortgage Corporation;
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1 ‘‘(ii) the Secretary of Housing and

2 Urban Development, in the case of the

3 Government National Mortgage Associa4 tion;

5 ‘‘(iii) the appropriate Federal banking

6 agency as defined in section 3(q) of the

7 Federal Deposit Insurance Act (12 U.S.C.

8 1813(q)), in the case of an insured deposi9 tory institution;

10 ‘‘(iv) the Secretary of the Treasury, in

11 the case of the Student Loan Marketing

12 Association;

13 ‘‘(v) the Farm Credit Administration,

14 in the case of an institution chartered

15 under the Farm Credit Act of 1971; and

16 ‘‘(vi) the National Credit Union Ad17 ministration Board, in the case of an in18 sured credit union (as defined in section

19 101(7) of the Federal Credit Union Act

20 (12 U.S.C. 1752(7)).

21 ‘‘(E) CONSULTATION BETWEEN AGEN22 CIES.—The agencies described in subparagraph

23 (B) shall consult with each other before provid24 ing any written consent authorized by subpara25 graph (B).
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1 ‘‘(F) APPLICABILITY.—This paragraph

2 shall only apply to a person which is an individ3 ual, unless the Board specifically finds that it

4 should apply to a corporation, firm, or other

5 business enterprise.

6 ‘‘(7) STAY OF SUSPENSION OR PROHIBITION.—

7 Within ten days after any Bank-affiliated party has

8 been suspended from office or prohibited from par9 ticipation in the conduct of the affairs of a Federal

10 Home Loan Bank under paragraph (2), such party

11 may apply to the United States district court for the

12 judicial district in which the Federal Home Loan

13 Bank is located, or the United States District Court

14 for the District of Columbia, for a stay of such sus15 pension or prohibition pending the completion of the

16 administrative proceedings pursuant to the notice

17 served upon such director or executive officer, under

18 paragraph (1), and such court shall have jurisdiction

19 to stay such suspension or prohibition.

20 ‘‘(d) SUSPENSION OR REMOVAL OF PARTIES

21 CHARGED WITH FELONY.—

22 ‘‘(1) SUSPENSION.—Whenever any Bank-affili23 ated party is charged in any information, indict24 ment, or complaint with the commission of, or par25 ticipation in—
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1 ‘‘(A) a crime involving dishonesty or

2 breach of trust which is punishable by impris3 onment for a term exceeding one year under

4 State or Federal law; or

5 ‘‘(B) a criminal violation of section 1956,

6 1957 or 1960 of title 18, United States Code,

7 or section 5322 of title 31, United States Code,

8 the Board may, if continued service or participation

9 by such party may threaten to impair public con10 fidence in the Federal Home Loan Bank, by written

11 notice served upon such party, suspend such party

12 from office or prohibit such party from further par13 ticipation in any manner in the conduct of the af14 fairs of the Bank.

15 ‘‘(2) PROVISIONS APPLICABLE TO NOTICE.—

16 ‘‘(A) COPY.—A copy of such notice shall

17 also be served upon the Bank.

18 ‘‘(B) EFFECTIVE PERIOD.—A suspension

19 or prohibition under paragraph (1) shall remain

20 in effect until the information, indictment, or

21 complaint is finally disposed of or until termi22 nated by the Board.

23 ‘‘(3) REMOVAL.—

24 ‘‘(A) IN GENERAL.—If a judgment of con25 viction or an agreement to enter a pre-trial di-
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1 version or other similar program is entered

2 against a Bank-affiliated party, in connection

3 with a crime described in paragraph (1)(A),

4 and at such time as such judgment is not sub5 ject to further appellate review, the Board may,

6 if continued service or participation by such

7 party may threaten to impair public confidence

8 in the Federal Home Loan Bank, issue and

9 serve upon such party an order removing such

10 party from office or prohibiting such party from

11 further participation in any manner in the con12 duct of the affairs of the Bank without the

13 prior written consent of the Board.

14 ‘‘(B) REMOVAL REQUIRED.—In the case of

15 a judgment or conviction or agreement against

16 a Bank-affiliated party in connection with a vio17 lation described in paragraph (1)(B), the Board

18 shall issue and serve upon such party an order

19 removing such party from office or prohibiting

20 such party from further participation in any

21 manner in the conduct of the affairs of the

22 Bank without the prior written consent of the

23 Board.

24 ‘‘(4) PROVISIONS APPLICABLE TO ORDER.—
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1 ‘‘(A) COPY.—A copy of any order under

2 paragraph (3) shall also be served upon the

3 Federal Home Loan Bank, whereupon the

4 Bank-affiliated party who is subject to the

5 order (if a director or an officer) shall cease to

6 be a director or officer of the Bank.

7 ‘‘(B) DISCRETIONARY REMOVAL NOT PRE8 CLUDED.—A finding of not guilty or other dis9 position of the charge shall not preclude the

10 Board from instituting proceedings to remove

11 such party from office or to prohibit further

12 participation in the affairs of the Bank pursu13 ant to subsection (e)(1) or (e)(3).

14 ‘‘(C) EFFECTIVE DATE.—Any notice of

15 suspension or order of removal issued under

16 this subsection shall remain effective until the

17 completion of any hearing or appeal authorized

18 under paragraph (5), unless earlier terminated

19 by the Board.

20 ‘‘(5) VACANCIES ON THE BOARD OF DIREC21 TORS.—

22 ‘‘(A) QUORUM.—If, at any time, because

23 of the suspension of one or more directors pur24 suant to this section, there shall be on the

25 board of directors of a Federal Home Loan
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1 Bank less than a quorum, all powers and func2 tions vested in, or exercisable by, such board

3 shall vest in and be exercisable by the remain4 ing director or directors, until such time as

5 there shall be a quorum of the board of direc6 tors.

7 ‘‘(B) ALL DIRECTORS SUSPENDED.—In the

8 event all of the directors of the Bank are sus9 pended pursuant to this section, the Board shall

10 appoint temporary directors pending the termi11 nation of such suspensions or until such time as

12 the terms of the suspended directors expire and

13 their successors take office.

14 ‘‘(6) HEARING.—

15 ‘‘(A) REQUEST FOR HEARING.—Within 30

16 days from service of any notice of suspension or

17 order of removal issued pursuant to paragraph

18 (1), the Bank-affiliated party concerned may

19 request in writing an opportunity to appear be20 fore the Board to show that the continued serv21 ice to or participation in the conduct of the af22 fairs of the Federal Home Loan Bank by such

23 party does not, or is not likely to, threaten to

24 impair public confidence in the Bank.
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1 ‘‘(B) TIME AND PLACE OF HEARING.—

2 Upon receipt of a request described in subpara3 graph (A), the Board shall fix a time (not more

4 than 30 days after receipt of such request, un5 less extended at the request of the Bank-affili6 ated party) and place at which such party may

7 appear, personally or through counsel, before

8 the Board or designated employees of the

9 Board to submit written materials (or, at the

10 discretion of the Board, oral testimony) and

11 oral argument.

12 ‘‘(C) DECISION OF THE FEDERAL HOUSING

13 FINANCE BOARD.—

14 ‘‘(i) IN GENERAL.—Within 60 days of

15 such hearing, the Board shall notify the

16 Bank-affiliated party whether the suspen17 sion or prohibition from participation in

18 any manner in the conduct of the affairs of

19 the Federal Home Loan Bank will be con20 tinued, terminated, or otherwise modified,

21 or whether the order removing such party

22 from office or prohibiting such party from

23 further participation in any manner in the

24 conduct of the affairs of the Bank will be

25 rescinded or otherwise modified.
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1 ‘‘(ii) STATEMENT OF REASONS.—Such

2 notification shall contain a statement of

3 the basis for the Board’s decision, if ad4 verse to such party.

5 ‘‘(7) RULEMAKING.—The Board is authorized

6 to prescribe such rules and regulations as may be

7 necessary to carry out the purposes of this sub8 section.

9 ‘‘(e) HEARING AND JUDICIAL REVIEW.—

10 ‘‘(1) IN GENERAL.—Any hearing provided for

11 in this section (other than the hearing provided for

12 in subsection (d))—

13 ‘‘(A) shall be held in the Federal judicial

14 district or in the territory in which the Federal

15 Home Loan Bank is located unless the party

16 afforded the hearing consents to another place;

17 and

18 ‘‘(B) shall be conducted in accordance with

19 the provisions of chapter 5 of title 5, United

20 States Code (5 U.S.C. 500 et seq.).

21 ‘‘(2) FEDERAL HOUSING FINANCIAL BOARD’S

22 DECISION AND ORDER.—

23 ‘‘(A) IN GENERAL.—After such hearing,

24 and within 90 days after the Board has notified

25 the parties that the case has been submitted to
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1 the Board for final decision, the Board shall

2 render its decision (which shall include findings

3 of fact upon which the decision is predicated)

4 and shall issue and serve upon each party to

5 the proceeding an order or orders consistent

6 with the provisions of this section.

7 ‘‘(B) REVIEW OF FEDERAL HOUSING FI8 NANCE BOARD’S ORDER.—Judicial review of

9 any such order shall be exclusively as provided

10 in paragraph (3). Unless a petition for review

11 is timely filed in a court of appeals of the

12 United States, as hereinafter provided in para13 graph (3), and thereafter until the record in the

14 proceeding has been filed as so provided, the

15 Board may at any time, upon such notice and

16 in such manner as it shall deem proper, modify,

17 terminate, or set aside any such order. Upon

18 such filing of the record, the Board may mod19 ify, terminate, or set aside any such order with

20 permission of the court.

21 ‘‘(3) JUDICIAL REVIEW.—

22 ‘‘(A) PETITION FOR REVIEW.—Any party

23 to any proceeding under paragraph (1) may ob24 tain a review of any order served pursuant to

25 paragraph (1) (other than an order issued with
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1 the consent of the Federal Home Loan Bank or

2 Bank-affiliated party concerned, or an order is3 sued under subsection (d)) by the filing in the

4 court of appeals of the United States for the

5 circuit in which the Federal Home Loan Bank

6 is located, or in the United States Court of Ap7 peals for the District of Columbia Circuit, with8 in 30 days after the date of service of such

9 order, a written petition praying that the order

10 of the Board be modified, terminated, or set

11 aside. A copy of such petition shall be forthwith

12 transmitted by the clerk of the court to the

13 Board.

14 ‘‘(B) FILING.—Upon receiving a copy of a

15 petition, the Board shall file in the court the

16 record in the proceeding, as provided in section

17 2112 of title 28, United States Code.

18 ‘‘(C) EXCLUSIVE JURISDICTION.—Upon

19 the filing of a petition, such court shall have ju20 risdiction, which upon the filing of the record

21 by the Board shall (except as provided in the

22 last sentence of paragraph (2)(B)) be exclusive,

23 to affirm, modify, terminate, or set aside, in

24 whole or in part, the order of the Board. Re-
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1 view of such proceedings shall be governed by

2 chapter 7 of title 5, United States Code.

3 ‘‘(4) SUPREME COURT REVIEW.—The judgment

4 and decree of the circuit court referred to in para5 graph (3) shall be final, except that the judgment

6 and decree shall be subject to review by the Supreme

7 Court upon certiorari, as provided in section 1254 of

8 title 28, United States Code.

9 ‘‘(5) NO AUTOMATIC STAY.—The commence10 ment of proceedings for judicial review under this

11 subsection shall not, unless specifically ordered by

12 the court, operate as a stay of any order issued by

13 the Board.

14 ‘‘(f) JURISDICTION AND ENFORCEMENT.—

15 ‘‘(1) APPLICATION FOR ENFORCEMENT.—The

16 Board may apply to the United States district court,

17 or the United States court of any territory, within

18 the jurisdiction of which the Federal Home Loan

19 Bank is located, for the enforcement of any effective

20 notice or order issued under this section or section

21 6A, and such court shall have jurisdiction and power

22 to order and require compliance herewith.

23 ‘‘(2) LIMITATION ON MODIFICATION.—Except

24 as otherwise provided in this section or section 6A

25 no court shall have jurisdiction to affect by injunc-
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1 tion or otherwise the issuance or enforcement of any

2 notice or order under this subsection, or to review,

3 modify, suspend, terminate, or set aside any such

4 notice or order.

5 ‘‘(g) CIVIL MONEY PENALTY.—

6 ‘‘(1) FIRST TIER.—A Federal Home Loan

7 Bank which, and any Bank-affiliated party who—

8 ‘‘(A) violates any law or regulation;

9 ‘‘(B) violates any final order or temporary

10 order issued pursuant to subsection (a), (b),

11 (c), or (d), or any final order under section 6A;

12 ‘‘(C) violates any condition imposed in

13 writing by the Board in connection with the

14 grant of any application or other request by a

15 Bank; or

16 ‘‘(D) violates any written agreement be17 tween a Bank and the Board,

18 shall be forfeit and pay a civil penalty of not more

19 than $5,000 for each day during which such viola20 tion continues.

21 ‘‘(2) SECOND TIER.—Notwithstanding para22 graph (1), a Federal Home Loan Bank which, and

23 any Bank-affiliated party who,—

24 ‘‘(A)(i) commits any violation described in

25 any subparagraph of paragraph (1);
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1 ‘‘(ii) recklessly engages in an unsafe or un2 sound practice in conducting the affairs of a

3 Bank; or

4 ‘‘(iii) breaches any fiduciary duty; and

5 ‘‘(B) which violation, practice, or breach—

6 ‘‘(i) is part of a pattern of mis7 conduct;

8 ‘‘(ii) causes or is likely to cause more

9 than a minimal loss to the Bank; or

10 ‘‘(C) results in pecuniary gain or other

11 benefit to such party,

12 shall forfeit and pay a civil penalty of not more than

13 $25,000 for each day during which such violation,

14 practice, or breach continues.

15 ‘‘(3) THIRD TIER.—Notwithstanding para16 graphs (1) and (2), a Federal Home Loan Bank

17 which, and any Bank-affiliated party who,—

18 ‘‘(A) knowingly—

19 ‘‘(i) commits any violation described

20 in paragraph (1);

21 ‘‘(ii) engages in any unsafe or un22 sound practice in conducting the affairs of

23 a Bank; or

24 ‘‘(iii) breaches any fiduciary duty; and
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1 ‘‘(B) knowingly or recklessly causes a sub2 stantial loss to the Bank or a substantial pecu3 niary gain or other benefit to such party by rea4 son of such violation, practice, or breach,

5 shall forfeit and pay a civil penalty in an amount not

6 to exceed the applicable maximum amount deter7 mined under paragraph (4) for each day during

8 which such violation, practice, or breach continues.

9 ‘‘(4) MAXIMUM AMOUNTS OF PENALTIES.—The

10 maximum daily amount of any civil penalty which

11 may be assessed pursuant to paragraph (3) for any

12 violation, practice, or breach described in such para13 graph is—

14 ‘‘(A) in the case of any person other than

15 a Federal Home Loan Bank, an amount not to

16 exceed $1,000,000; and

17 ‘‘(B) in the case of a Federal Home Loan

18 Bank, an amount not to exceed the lesser of—

19 ‘‘(i) $1,000,000, or

20 ‘‘(ii) 1 percent of the total assets of

21 such Bank.

22 ‘‘(5) ASSESSMENT.—

23 ‘‘(A) WRITTEN NOTICE.—Any penalty im24 posed under this subsection may be assessed

25 and collected by the Board by written notice.
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1 ‘‘(B) FINALITY OF ASSESSMENT.—If with

2 respect to any assessment under subparagraph

3 (A) a hearing is not timely requested pursuant

4 to paragraph (8), the penalty assessment con5 tained in a written notice shall constitute a

6 final and unappealable order.

7 ‘‘(6) AUTHORITY TO MODIFY OR REMIT PEN8 ALTY.—The Board may compromise, modify, or

9 remit any penalty which the Board may assess or

10 has already assessed under this subsection.

11 ‘‘(7) MITIGATING FACTORS.—In determining

12 the amount of any penalty imposed under this sub13 section, the Board shall take into account the appro14 priateness of the penalty with respect to—

15 ‘‘(A) the size of financial resources and

16 good faith of the Federal Home Loan Bank or

17 the other person charged;

18 ‘‘(B) the gravity of the violation;

19 ‘‘(C) the history of previous violations; and

20 ‘‘(D) such other matters as justice may

21 require.

22 ‘‘(8) HEARING.—The Federal Home Loan

23 Bank or Bank-affiliated party against whom any

24 penalty is assessed under this subsection shall be af25 forded a hearing if such Bank or person submits a
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1 request for such hearing within 20 days after the is2 suance of the notice of assessment. A transcript that

3 includes all testimony and other documentary evi4 dence shall be prepared for all hearings commenced

5 pursuant to this subsection.

6 ‘‘(9) COLLECTION.—

7 ‘‘(A) REFERRAL.—If any Federal Home

8 Loan Bank or Bank-affiliated party fails to pay

9 a penalty that has become final, the Board shall

10 recover the amount assessed by action in the

11 appropriate United States district court.

12 ‘‘(B) APPROPRIATENESS OF PENALTY NOT

13 REVIEWABLE.—In any civil action brought

14 under subparagraph (A), the validity and ap15 propriateness of the penalty shall not be subject

16 to review.

17 ‘‘(10) DISBURSEMENT.—All penalties collected

18 under authority of this subsection shall be deposited

19 into the General Fund of the Treasury.

20 ‘‘(11) REGULATIONS.—The Board shall pre21 scribe regulations establishing such procedures as

22 may be necessary to carry out this subsection.

23 ‘‘(h) NOTICE UNDER THIS SECTION AFTER SEPARA24 TION FROM SERVICE.—The resignation, termination of

25 employment or participation, or separation of a Bank-af-
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1 filiated party (including a separation caused by the closing

2 of a Federal Home Loan Bank) shall not affect the juris3 diction and authority of the Board to issue any notice and

4 proceed under this section against any such party, if such

5 notice is served before the end of the six-year period begin6 ning on the date such Bank-affiliated party ceased to be

7 such a party with respect to such Bank.

8 ‘‘(i) PREJUDGMENT ATTACHMENT.—

9 ‘‘(1) IN GENERAL.—In any action brought by

10 the Board pursuant to this section, or in actions

11 brought in aid of, or to enforce an order in, any ad12 ministrative or other civil action for money damages,

13 restitution, or civil money penalties brought by the

14 Board, the court may, upon application of the

15 Board, issue a restraining order that—

16 ‘‘(A) prohibits any person subject to the

17 proceeding from withdrawing, transferring, re18 moving, dissipating, or disposing of any funds,

19 assets or other property; and

20 ‘‘(B) appoints a temporary receiver to ad21 minister the restraining order.

22 ‘‘(2) STANDARD.—

23 ‘‘(A) SHOWING.—Rule 65 of the Federal

24 Rules of Civil Procedure shall apply with re25 spect to any proceeding under paragraph (1)
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1 without regard to the requirement of such rule

2 that the applicant show that the injury, loss, or

3 damage is irreparable and immediate.

4 ‘‘(B) STATE PROCEEDING.—If, in the case

5 of any proceeding in a State court, the court

6 determines that rules of civil procedure avail7 able under the laws of such State provide sub8 stantially similar protection to a party’s right to

9 due process as Rule 65 (as modified with re10 spect to such proceeding by subparagraph (B)),

11 the relief sought under paragraph (1) may be

12 requested under the laws of such State.

13 ‘‘(j) CRIMINAL PENALTY.—Whoever, being subject to

14 an order in effect under subsection (c) or (d), without the

15 prior written approval of the Board knowingly partici16 pates, directly or indirectly, in any manner (including by

17 engaging in an activity specifically prohibited in such an

18 order or in subsection (c)(5) in the conduct of the affairs

19 of any institution or agency specified in subsection (c)(6))

20 shall be fined not more than $1,000,000, imprisoned for

21 not more then 5 years, or both.

22 ‘‘(k) NOTICE OF SERVICE.—Any service required or

23 authorized to be made by the Board under this section

24 may be made by registered mail, or in such other manner
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1 reasonably calculated to give actual notice as the Board

2 may by regulation or otherwise provide.

3 ‘‘(l) SUBPOENA POWER, ETC.—

4 ‘‘(1) POWERS.—In the course of or in connec5 tion with any administrative proceeding under this

6 section or any examination or investigation under

7 section 8, the Board or any designated representa8 tive of the Board, including any person designated

9 to conduct any hearing under this section, shall have

10 the power—

11 ‘‘(A) to administer oaths and affirmations;

12 ‘‘(B) to take or cause to be taken deposi13 tions;

14 ‘‘(C) to issue subpoenas and subpoenas

15 duces tecum;

16 ‘‘(D) to revoke, quash, or modify subpoe17 nas and subpoenas duces tecum issued by the

18 Board; and

19 ‘‘(E) to make rules and regulations with

20 respect to any such proceedings, examinations

21 or investigations.

22 ‘‘(2) JURISDICTION.—The attendance of wit23 nesses and the production of documents provided for

24 in this subsection may be required from any place in

25 any State or in any territory or other place subject
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1 to the jurisdiction of the United States at any des2 ignated place where such proceeding is being con3 ducted.

4 ‘‘(3) ENFORCEMENT.—The Board or any party

5 to proceedings under this section may apply to the

6 United States District Court for the District of Co7 lumbia, or the United States district court for the

8 judicial district or the United States court in any

9 territory in which such proceeding is being con10 ducted, or where the witness resides or carries on

11 business, for enforcement of any subpoena or sub12 poena duces tecum issued pursuant to this sub13 section, and such courts shall have jurisdiction and

14 power to order and require compliance therewith.

15 ‘‘(4) FEES AND EXPENSES.—

16 ‘‘(A) WITNESS.—Witnesses subpoenaed

17 under this subsection shall be paid the same

18 fees and mileage that are paid witnesses in the

19 district courts of the United States.

20 ‘‘(B) EXPENSES AND ATTORNEY’S FEES.—

21 Any court having jurisdiction of any proceeding

22 instituted under this section by a Federal Home

23 Loan Bank or a director or officer thereof, may

24 allow to any such party such reasonable ex25 penses and attorneys’ fees as it deems just and
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1 proper; and such expenses and fees shall be

2 paid by the Bank or from its assets.

3 ‘‘(5) FAILURE TO OBEY SUBPOENA.—Any per4 son who willfully shall fail or refuse to attend and

5 testify or to answer any lawful inquiry or to produce

6 books, papers, correspondence, memoranda, con7 tracts, agreements, or other records, if in such per8 son’s power so to do, in obedience to the subpoena

9 of the Board, shall be guilty of a misdemeanor and,

10 upon conviction, shall be subject to a fine of not

11 more than $1,000 or to imprisonment for a term of

12 not more than one year or both.

13 ‘‘(m) PUBLIC DISCLOSURE OF FINAL ORDERS AND

14 AGREEMENTS.—

15 ‘‘(1) IN GENERAL.—The Board shall publish

16 and make available to the public on a semi-annual

17 basis—

18 ‘‘(A) any written agreement or other writ19 ten statement for which a violation may be en20 forced by the Board, unless the Board, in its

21 discretion, determines that publication would be

22 contrary to the public interests;

23 ‘‘(B) any final order issued with respect to

24 any administrative enforcement proceeding ini-
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1 tiated by the Board under this section or any

2 other provision of law; and

3 ‘‘(C) any modification to or termination of

4 any final order or agreement made public pur5 suant to this paragraph.

6 ‘‘(2) HEARINGS.—All hearings on the record

7 with respect to any notice of charges issued by the

8 Board shall be open to the public, unless the Board,

9 in its discretion, determines that holding an open

10 hearing would be contrary to the public interest.

11 ‘‘(3) REPORTS TO CONGRESS.—A written report

12 shall be made part of a determination not to hold a

13 public hearing pursuant to paragraph (2) or not to

14 publish a document pursuant to paragraph (1)(A).

15 All reports prepared under this paragraph, shall be

16 available to Congress on request.

17 ‘‘(4) TRANSCRIPTS OF HEARINGS.—A tran18 script of public hearings shall be made available to

19 the public pursuant to section 552 of title 5, United

20 States Code.

21 ‘‘(5) DELAY OF PUBLICATION UNDER EXCEP22 TIONAL CIRCUMSTANCES.—If the Board makes a de23 termination in writing that the publication of any

24 final order pursuant to paragraph (1)(B) would seri25 ously threaten the safety or soundness of the Fed-
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1 eral Home Loan Bank, the Board may delay the

2 publication of such order for a reasonable time.

3 ‘‘(6) DOCUMENTS FILED UNDER SEAL IN PUB4 LIC ENFORCEMENT HEARINGS.—The Board may file

5 any document or part thereof under seal in any ad6 ministrative enforcement hearing commenced by the

7 Board if disclosure thereof would be contrary to the

8 public interest. A written report shall be made part

9 of any determination to withhold any part of a docu10 ment from the transcript of the hearing required by

11 paragraph (2).

12 ‘‘(7) RETENTION OF DOCUMENTS.—The Board

13 shall keep and maintain a record, for a period of at

14 least 6 years, of all documents described in para15 graph (1) and all informal enforcement agreements

16 and other supervisory actions and supporting docu17 ments issued with respect to or in connection with

18 any administrative enforcement proceedings initiated

19 by the Board under this section or any other laws.

20 ‘‘(8) DISCLOSURES TO CONGRESS.—No provi21 sion of this subsection shall be construed to author22 ize the withholding, or to prohibit the disclosure, of

23 any information to the Congress or any committee

24 or subcommittee thereof.’’.
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1 TITLE II—EMPLOYEE PROVISIONS

2 SEC. 201. FEDERAL HOUSING FINANCE BOARD EMPLOYEES.

3 (a) REQUIRED ASSESSMENTS AND DETERMINA4 TIONS.—Not later than 270 days after the date of enact5 ment of this Act, the directors of the Federal Housing Fi6 nance Board shall—

7 (1) assess the functions, powers and duties of

8 the Federal Housing Finance Board, as provided for

9 in this Act;

10 (2) determine the number of employees that the

11 Federal Housing Finance Board needs to carry out

12 its functions, powers and duties.

13 (b) PERSONNEL ACTIONS BY THE FEDERAL HOUS14 ING FINANCE BOARD.—Not later than 1 year after the

15 enactment of this Act, the directors of the Federal Hous16 ing Finance Board shall have completed any personnel ac17 tion necessary to ensure that the Federal Housing Fi18 nance Board will be staffed appropriately in light of the

19 functions, powers and duties of the Federal Housing Fi20 nance Board.

21 TITLE III—CONFORMING AMENDMENTS

22 SEC. 301. AMENDMENTS TO THE FEDERAL CREDIT UNION

23 ACT.

24 Section 206(g)(7) of the Federal Credit Union Act

25 (12 U.S.C. 1786(g)(7)) is amended—
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1 (a) in subparagraph (A)(vi), by striking ‘‘any

2 Federal home loan bank’’ and inserting ‘‘any Fed3 eral Home Loan Bank’’; and

4 (b) in subparagraph (D)(iv), by striking ‘‘any

5 Federal home loan bank’’ and inserting ‘‘any Fed6 eral Home Loan Bank’’.

7 SEC. 302. AMENDMENTS TO THE FEDERAL DEPOSIT INSUR8 ANCE ACT.

9 (a) AMENDMENT TO SECTION 7.—Section 7(a)(2)(A)

10 of the Federal Deposit Insurance Act (12 U.S.C.

11 1817(a)(2)(A)) is amended by striking ‘‘any Federal home

12 loan bank’’ and inserting ‘‘any Federal Home Loan

13 Bank’’.

14 (b) AMENDMENTS TO SECTION 8.—Section 8(e)(7) of

15 the Federal Deposit Insurance Act (12 U.S.C. 1818(e)(7))

16 is amended—

17 (1) in subparagraph (A)(vi), by striking ‘‘any

18 Federal home loan bank’’ and inserting ‘‘any Fed19 eral Home Loan Bank’’; and

20 (2) in subparagraph (D)(iv), by striking ‘‘any

21 Federal home loan bank’’ and inserting ‘‘any Fed22 eral Home Loan Bank’’.
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1 SEC. 303. AMENDMENT TO THE HOME OWNERS’ LOAN ACT.

2 (a) AMENDMENT TO SECTION 5.—Section 5(f) of the

3 Home Owners’ Loan Act (12 U.S.C. 1464(f)) is hereby

4 repealed.

5 (b) AMENDMENT TO SECTION 10.—Section

6 10(m)(3)(B) of the Home Owners’ Loan Act (12 U.S.C.

7 1467a(m)(3)(B)) is amended—

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

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

10 (2) by amending clause (ii) to read as follows:

11 ‘‘(ii) ADDITIONAL RESTRICTION EF12 FECTIVE AFTER THREE YEARS.—Begin13 ning 3 years after the date on which the

14 savings association should have become or

15 ceases to be a qualified thrift lender, the

16 saving association shall not retain any in17 vestment (including an investment in any

18 subsidiary) or engage, directly or indi19 rectly, in any activity unless that invest20 ment or activity would be permissible for

21 the savings association if it were a national

22 bank, and is also permissible for the sav23 ings association as a savings association.’’.
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1 SEC. 304. AMENDMENT TO THE HOUSING AND URBAN2 RURAL RECOVERY ACT OF 1983.

3 Section 469 of the Housing and Urban-Rural Recov4 ery Act of 1983 (12 U.S.C. 1701p–1) is amended by strik5 ing ‘‘Federal Home Loan Bank Board’’ and inserting

6 ‘‘Federal Housing Finance Board’’.

7 SEC. 305. AMENDMENTS TO THE RIGHT TO FINANCIAL PRI8 VACY ACT OF 1978.

9 Section 1113 of the Right to Financial Privacy Act

10 of 1978 (12 U.S.C. 3413) is amended in subsection (o)

11 by striking ‘‘any of the Federal home loan banks’’ and

12 inserting ‘‘any of the Federal Home Loan Banks’’.

13 SEC. 306. AMENDMENTS TO THE THRIFT INSTITUTIONS RE14 STRUCTURING ACT.

15 Section 341 of the Thrift Institution Restructuring

16 Act (12 U.S.C. 1701J–3) is amended—

17 ‘‘(1) in subsection (e)(1), by striking ‘‘Federal

18 Home Loan Bank Board’’ and inserting ‘‘Federal

19 Housing Finance Board’’; and

20 ‘‘(2) in subsection (g), by striking ‘‘Federal

21 Home Loan Bank Board’’ and inserting ‘‘Federal

22 Housing Finance Board’’.

23 SEC. 307. AMENDMENTS TO TITLE 18, UNITED STATES

24 CODE.

25 (a) AMENDMENT TO SECTION 657.—Section 657 of

26 title 18, United States Code (18 U.S.C. 657) is amended
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1 by striking ‘‘Federal home loan bank’’ and inserting ‘‘Fed2 eral Home Loan Bank’’.

3 (b) AMENDMENT TO SECTION 1006.—Section 1006

4 of title 18, United States Code (18 U.S.C. 1006) is

5 amended by striking ‘‘Federal home loan bank’’ and in6 serting ‘‘Federal Home Loan Bank’’.

7 (c) AMENDMENT TO SECTION 1014.—Section 1014

8 of title 18, United States Code (18 U.S.C. 1014) is

9 amended by striking ‘‘Federal home loan bank’’ and in10 serting ‘‘Federal Home Loan Bank’’.

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