```

[Congressional Bills 104th Congress]
[From the U.S. Government Publishing Office]
[H.R. 1487 Introduced in House (IH)]

104th CONGRESS
  1st Session
                                H. R. 1487

       To reform and modernize the Federal Home Loan Bank System.

_______________________________________________________________________

                    IN THE HOUSE OF REPRESENTATIVES

                             April 7, 1995

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

_______________________________________________________________________

                                 A BILL

 
       To reform and modernize the Federal Home Loan Bank System.

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

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``Federal Home Loan 
Bank System Modernization Act of 1995''.
    (b) Table of Contents.--

Sec. 1. Short title; table of contents.
Sec. 2. Mission of the Federal home loan banks.
Sec. 3. Federal Housing Finance Board.
Sec. 4. The Office of Finance Corporation.
Sec. 5. Capital stock of the Federal home loan banks.
Sec. 8. Modification of annual contribution to the resolution funding 
                            corporation.
Sec. 9. Community support requirements.
Sec. 10. Technical and conforming amendments.
Sec. 11. Incorporation of banks; corporate powers.
Sec. 12. Liquidation or reorganization.
Sec. 13. Definitions.
Sec. 14. Effective date.

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

    The Federal Home Loan Bank Act (12 U.S.C. 1421) is amended by 
inserting after section 4 the following new section:

``SEC. 5. MISSION STATEMENT; FEDERAL HOME LOAN BANK DISTRICTS AND 
              MEMBERS.

    ``(a) Mission Statement.--The Federal Home Loan Bank System shall--
            ``(1) be a profit-making enterprise whose purpose is to 
        support residential mortgage lending (including mortgages on 
        housing for low- and moderate-income families), and related 
        community and economic development lending, throughout the 
        nation, safely and soundly, through a program of collateralized 
        advances and other financial services to members; and
            ``(2) facilitate such lending by providing long-term credit 
        and liquidity and other financial services to members of 
        Federal home loan banks.
    ``(b) Districts Established.--
            ``(1) In general.--Subject to subsection (c), there shall 
        be 12 districts known as Federal home loan bank districts.
            ``(2) Name of district.--Each district shall bear a name 
        descriptive of the geographic location of the district.
            ``(3) Districts designated.--Subject to subsection (c), the 
        12 districts shall be comprised as follows:
                    ``(A) District 1 shall be composed of the states of 
                Connecticut, Maine, Massachusetts, New Hampshire, Rhode 
                Island, and Vermont.
                    ``(B) District 2 shall be composed of the states of 
                New Jersey and New York, the Commonwealth of Puerto 
                Rico, and the territory of the Virgin Islands.
                    ``(C) District 3 shall be composed of the states of 
                Delaware, Pennsylvania, and West Virginia.
                    ``(D) District 4 shall be composed of the states of 
                Alabama, Florida, Georgia, Maryland, North Carolina, 
                South Carolina, and Virginia, and the District of 
                Columbia.
                    ``(E) District 5 shall be composed of the states of 
                Kentucky, Ohio, and Tennessee.
                    ``(F) District 6 shall be composed of the states of 
                Indiana and Michigan.
                    ``(G) District 7 shall be composed of the states of 
                Illinois and Wisconsin.
                    ``(H) District 8 shall be composed of the states of 
                Iowa, Minnesota, Missouri, North Dakota, and South 
                Dakota.
                    ``(I) District 9 shall be composed of the states of 
                Arkansas, Louisiana, Mississippi, New Mexico, and 
                Texas.
                    ``(J) District 10 shall be composed of the states 
                of Colorado, Kansas, Nebraska, and Oklahoma.
                    ``(K) District 11 shall be composed of the states 
                of Arizona, California, and Nevada.
                    ``(L) District 12 shall be composed of the states 
                of Alaska, Hawaii, Idaho, Montana, Oregon, Utah, 
                Washington, and Wyoming, and the territories of Guam 
                and the Pacific Islands.
    ``(c) Mergers, Consolidations and Combinations of Banks.--
            ``(1) In general.--Notwithstanding subsection (b), 2 or 
        more Federal home loan banks may merge or otherwise combine or 
        consolidate.
            ``(2) Prerequisites for transaction.--A merger, 
        combination, or consolidation of Federal home loan banks may be 
        consummated under this subsection only if the transaction is 
        approved by--
                    ``(A) a majority of the board of directors of each 
                bank participating in the transaction; and
                    ``(B) the holders of a majority of the shares of 
                capital stock of each such bank.
            ``(3) Effective date of transaction.--If the requirements 
        of paragraph (2) have been met, a merger, combination, or 
        consolidation of Federal home loan banks shall be effective at 
        such time as a certificate of merger, combination, or 
        consolidation (in such form as the Finance Board shall 
        prescribe) is--
                    ``(A) executed by the banks participating in such 
                transaction; and
                    ``(B) filed with the Finance Board in accordance 
                with section 12(a)(3).
            ``(4) Merger agreement.--
                    ``(A) In general.--Any merger, combination, or 
                consolidation of Federal home loan banks under this 
                subsection shall be carried out pursuant to an 
                agreement entered into by all the Federal home loan 
                banks participating in the transaction.
                    ``(B) Contents of agreement.--Any agreement 
                referred to in subparagraph (A) shall specify--
                            ``(i) the terms and conditions of the 
                        merger, combination, or consolidation;
                            ``(ii) the amendments to the chartered 
                        documents of the resulting bank to be affected 
                        by the transaction, if any;
                            ``(iii) the principal offices of the 
                        resulting bank;
                            ``(iv) the manner of converting the shares 
                        of each of the banks participating in the 
                        transaction into shares of the resulting bank; 
                        and
                            ``(v) such other details or provisions as 
                        are appropriate.
            ``(5) Succession in interest.--Upon the effective date of 
        any merger, combination, or consolidation of Federal home loan 
        banks under this subsection--
                    ``(A) the separate existence of any bank 
                participating in the transaction other than the 
                resulting bank shall cease to exist;
                    ``(B) the resulting bank shall--
                            ``(i) succeed to all the rights and 
                        properties of each of the banks described in 
                        subparagraph (A) without other transfer; and
                            ``(ii) be subject to all the debts and 
                        liabilities of each such bank in the same 
                        manner as if the resulting bank had incurred 
                        such debts and liabilities.
            ``(6) Existing rights not affected.--This subsection shall 
        not affect any right of any creditor of any Federal home loan 
        bank which is participating in any merger, combination, or 
        consolidation under this subsection.
            ``(7) Preservation of liens.--All liens upon the property 
        of any Federal home loan bank which is participating in any 
        merger, combination, or consolidation under this subsection 
        shall continue to be effective after the consummation of the 
        transaction except that any lien upon property of any bank 
        other than the resulting bank shall be effective only with 
        respect to the property which was subject to the lien 
        immediately before consummation of the transaction.
            ``(8) Continuation of suits.--
                    ``(A) In general.--No action or other proceeding 
                commenced by or against any Federal home loan bank 
                which is participating in any merger, combination, or 
                consolidation under this subsection shall abate by 
                reason of the consummation of such transaction.
                    ``(B) Substitution of resulting bank.--In any 
                action or proceeding described in subparagraph (A), the 
                Federal home loan bank resulting from the transaction 
                referred to in such subparagraph shall be substituted 
                for the Federal home loan bank involved in such action 
                or proceeding before the consummation of the 
                transaction.
                    ``(C) Applicability to resulting bank.--Any final 
                judgment or other determination which becomes final in 
                any action or proceeding described in subparagraph (A) 
                shall be binding on the bank resulting from the 
                transaction referred to in such subparagraph.
            ``(9) Number of elected directors of resulting bank.--Any 
        Bank resulting from a merger, combination, or consolidation 
        pursuant to this section may have a number of directors equal 
        to or less than the total number of elected directors of all 
        the banks which participated in such transaction (as determined 
        immediately before such transaction). and
            ``(10) Number of appointed directors of resulting bank.--
        The number of appointed directors of any Bank resulting from a 
        merger, combination, or consolidation pursuant to this section 
        shall be not less than \1/2\ and not more than \3/4\ of the 
        number of elected directors.
            ``(11) Adjustment of district boundaries.--After a merger, 
        combination, or consolidation of 2 or more Federal home loan 
        banks under this subsection is consummated, the Finance Board 
        shall adjust the districts established in subsection (b) to 
        reflect such merger, combination, or consolidation.
    ``(d) Criteria For Eligibility for Membership in a Bank.--
            ``(1) In general.--Any insurance company or regulated 
        financial institution shall be eligible to become and remain a 
        member of a Federal home loan bank if the institution meets and 
        continues to meet the following eligibility requirements:
                    ``(A) The institution is subject to inspection and 
                regulation under the banking laws, or under similar 
                laws, of the State in which the institution is 
                organized or of the United States.
                    ``(B) The institution maintains an investment in 
                residential mortgage assets in an amount not less than 
                the amount which is equal to 10 percent of the total 
                assets of the institution.
            ``(2) Applicability of minimum residential mortgage 
        investment requirement to new institutions.--
                    ``(A) In general.--In the case of an institution 
                which is applying for membership in a Federal home loan 
                bank before or as of the date on which the institution 
                commences initial business operations, paragraph (1)(B) 
                shall not apply with respect to such institution until 
                the end of the 1-year period beginning on such date.
                    ``(B) Intention to invest in residential mortgage 
                assets.--A Federal home loan bank may require an 
                institution described in subparagraph (A) to provide 
                the bank with such evidence of the institution's 
                intention to comply with paragraph (1)(B) as the bank 
                considers appropriate.
            ``(3) Bank membership.--An institution which is eligible to 
        become a member of a Federal home loan bank under this section 
        may only become a member of, or secure advances from--
                    ``(A) the Federal home loan bank of the district in 
                which is located the institution's principal place of 
                business; or
                    ``(B) the bank of a district adjoining the district 
                described in subparagraph (A) if--
                            ``(i) demanded by convenience; and
                            ``(ii) the Finance Board approves.
            ``(4) Insurance company subject to inspection and 
        regulation.--Notwithstanding paragraph (1)(A), any insurance 
        company which would be eligible to become a member of a Federal 
        home loan bank but for the fact that the institution is not 
        subject to inspection and regulation under the banking laws or 
        similar laws of the State in which such company is organized 
        shall be eligible to become a member if the company agrees to 
        be subject to such inspection and regulation as the Finance 
        Board shall prescribe.
            ``(5) Voluntary membership.--Subject to section 6(e), no 
        insurance company or regulated financial institution may be 
        required to become or remain a member of a Federal home loan 
        bank by any State, or by any agency, department or independent 
        establishment of the United States or any State.''.

SEC. 3. FEDERAL HOUSING FINANCE BOARD.

    (a) In General.--Section 3 of the Federal Home Loan Bank Act (12 
U.S.C. 1423) is amended to read as follows:

``SEC. 3. FEDERAL HOUSING FINANCE BOARD.

    ``(a) Establishment.
            ``(1) In general.--There shall be a Federal Housing Finance 
        Board in the executive branch which shall be an independent 
        agency to regulate the safety and soundness of the Federal Home 
        Loan Bank System.
            ``(2) Duties.--The duties of the Finance Board shall be the 
        following:
                    ``(A) To ensure that the Federal home loan banks--
                            ``(i) operate in accordance with this Act 
                        in a safe and sound manner; and
                            ``(ii) remain adequately capitalized.
                    ``(B) To provide periodic reports to the Congress 
                regarding the safety and soundness of the Federal Home 
                Loan Bank System.
    ``(b) Composition of Finance Board.--
            ``(1) In general.--The Finance Board shall be composed of 3 
        directors appointed by the President, by and with the advice 
        and consent of the Senate, from among individuals who--
                    ``(A) are citizens of the United States; and
                    ``(B) have--
                            ``(i) extensive experience or training in 
                        housing finance or the operation of regulated 
                        financial institutions; or
                            ``(ii) a commitment to provide specialized 
                        housing credit.
            ``(2) Terms.--
                    ``(A) In general.--Each director of the Finance 
                Board shall be appointed for a term of 7 years.
                    ``(B) Interim appointments.--Any director appointed 
                to fill a vacancy occurring before the expiration of 
                the term for which such director's predecessor was 
                appointed shall be appointed only for the remainder of 
                such term.
                    ``(C) Continuation of service.--Each director may 
                continue to serve after the expiration of the term to 
                which such director was appointed until a successor has 
                been appointed and qualified.
            ``(3) Chairperson and acting chairperson.--
                    ``(A) Chairperson.--The President shall designate 1 
                of the directors to be the Chairperson of the Finance 
                Board.
                    ``(B) Acting chairperson.--
                            ``(i) In general.--The Chairperson shall 
                        designate another director to serve as Acting 
                        Chairperson during the absence or disability of 
                        the Chairperson.
                            ``(ii) Selection by directors.--If a 
                        designation by the Chairperson has not been 
                        made pursuant to clause (i) and the position of 
                        Chairperson becomes vacant, the remaining 
                        directors shall elect a director to serve as 
                        the Acting Chairperson until a Chairperson has 
                        been appointed.
            ``(4) Representational requirements.--
                    ``(A) Political affiliation.--Not more than 2 
                directors may be members of the same political party.
                    ``(B) District representation.--Not more than 1 
                director may be appointed from any single district of 
                the Federal Home Loan Bank System.
            ``(5) Vacancy.--Any vacancy on the Finance Board shall be 
        filled in the manner in which the original appointment was 
        made.
            ``(6) Limitations on conflicts of interest.--No director on 
        the Finance Board may, while serving as a director--
                    ``(A) serve as a director, officer, employee, 
                counsel, or agent of any Federal home loan bank; or
                    ``(B) hold shares of, serve as a director, officer, 
                employee, counsel, or agent of, or have any other 
                financial interest in any member of any such bank.
            ``(7) Full-time service.--All directors shall serve on a 
        full-time basis.
            ``(8) Quorum.--2 directors shall constitute a quorum.
    ``(c) General Powers.--The Finance Board shall have the following 
powers:
            ``(1) To maintain such oversight of the Federal home loan 
        banks as may be necessary to ensure that such banks operate in 
        a financially safe and sound manner.
            ``(2) To prescribe or issue, and enforce, such regulations 
        and orders as the Finance Board determines to be necessary to 
        achieve such purpose.
            ``(3) To suspend or remove for cause a director, officer, 
        employee, or agent of any Federal home loan bank or joint 
        office of the Federal Home Loan Bank System.
            ``(4) To determine necessary expenditures of the Finance 
        Board under this Act and the manner in which such expenditures 
        shall be incurred, allowed, and paid.
            ``(5) To use the United States mails in the same manner and 
        under the same conditions as a department or agency of the 
        United States.
    ``(d) Receipts of the Finance Board.--
            ``(1) Deposit in treasury.--Receipts of the Finance Board 
        derived from assessments imposed on the Federal home loan banks 
        and from other sources shall be deposited in the Treasury of 
        the United States.
            ``(2) Payment of expenses.--Salaries of the directors and 
        other employees of the Finance Board and all other expenses of 
        the Finance Board may be paid from the receipts described in 
        paragraph (1).
            ``(3) Treatment of amounts received.--Notwithstanding any 
        other provision of law--
                    ``(A) no amount received by the Finance Board 
                pursuant to any assessment imposed on any Federal home 
                loan bank or any other income of the Finance Board may 
                be construed to be Government funds or appropriated 
                money;
                    ``(B) no authority of the Finance Board to spend or 
                otherwise obligate any such amount may be treated as 
                budget authority, spending authority, or credit 
                authority or as authority to obligate funds of the 
                United States; and
                    ``(C) no such amount shall be subject to 
                apportionment for purposes of chapter 15 of title 31, 
                United States Code, or under any other authority.
    ``(e) Staff.--
            ``(1) In general.--Subject to title IV of the Financial 
        Institutions Reform, Recovery, and Enforcement Act of 1989, the 
        Finance Board may employ, direct, and fix the compensation and 
        number of employees, attorneys, and agents of the Finance 
        Board.
            ``(2) Prohibition on delegation to banks or the office of 
        finance corporation.--The Finance Board may not delegate any 
        function to any employee or administrative unit of any bank or 
        the Office of Finance Corporation.
            ``(3) Consultation.--In directing and fixing the 
        compensation of staff, attorneys, and agents, the Finance Board 
        shall consult with and maintain comparability with the 
        compensation at the Federal banking agencies (as defined in 
        section 3(z) of the Federal Deposit Insurance Act).
            ``(4) Restatement of prior law.--The compensation of staff, 
        attorneys, and agents shall be paid without regard to the 
        provisions of other laws applicable to officers or employees of 
        the United States.
    ``(f) Prohibition on Joint Offices.--
            ``(1) In general.--Except to the extent specifically 
        provided in this Act, there shall be no joint or collective 
        offices of the Federal home loan banks in the Federal Home Loan 
        Bank System.
            ``(2) Transition provision.--
                    ``(A) Prior joint or collective office abolished.--
                Effective at the end of the 6-month period beginning on 
                the effective date of the Federal Home Loan Bank System 
                Modernization Act of 1995, any entity which existed as 
                or was operated as a joint or collective office of the 
                Federal home loan banks on the day before the date of 
                the enactment of such Act is hereby abolished.
                    ``(B) Transfer of functions.--Any function of any 
                entity abolished under subparagraph (A) shall be 
                transferred by the Finance Board to the Office of 
                Finance Corporation before the end of the 6-month 
                period beginning on the effective date of the Federal 
                Home Loan Bank System Modernization Act of 1995.
                    ``(C) Savings provision.--The abolishment of the 
                Office of Finance pursuant to this section shall not 
                affect the validity of any right, duty, or obligation 
                of any person or entity pertaining in any manner to the 
                Office of Finance.
    ``(g) Annual Reports.--
            ``(1) Board reports.--The Finance Board shall make an 
        annual report to the Congress regarding the safety and 
        soundness of the Federal Home Loan Bank System.
            ``(2) Bank reports.--The Federal home loan banks shall 
        submit a collective annual report to the Congress on the 
        fulfillment of the mission of the banks under this Act.
            ``(3) Affordable housing advisory councils.--The affordable 
        housing advisory councils of the Federal home loan banks shall 
        submit a collective annual report to the Congress on the 
        fulfillment by the Bank System of the system's affordable 
        housing mission under section 10 of this Act.
    ``(h) Status of Bank Employees.--Notwithstanding any other 
provision of this Act, no officer, employee, or agent of a Federal home 
loan bank or any joint office of such banks shall be considered to be 
an officer or employee of the United States for purposes of title 5, 
United States Code.
    ``(i) Suspension or Removal of Bank Employees for Cause.--
            ``(1) Written notice.--In exercising any authority under 
        subsection (c)(2) to suspend or remove for cause a director, 
        officer, employee, or agent of any Federal home loan bank or 
        joint office of the Federal Home Loan Bank System, the Finance 
        Board shall provide written notice of such suspension or 
        removal and the cause of the suspension or removal to such 
        director, officer, employee, or agent and to such bank or joint 
        office.
            ``(2) Hearing.--The notice provided pursuant to paragraph 
        (1) shall establish the time and place for a hearing on the 
        suspension or removal in accordance with section 554 of title 
        5, United States Code.''.

SEC. 4. THE OFFICE OF FINANCE CORPORATION.

    Section 4 of the Federal Home Loan Bank Act (12 U.S.C. 1424) is 
amended to read as follows:

``SEC. 4 THE OFFICE OF FINANCE CORPORATION.

    ``(a) Establishment.--
            ``(1) In general.--There is hereby established the Office 
        of Finance Corporation (hereafter in this section referred to 
        as the `Corporation') which shall be a federally chartered 
        instrumentality of the United States.
            ``(2) Purposes.--The purpose of the Corporation shall be to 
        issue the notes, bonds, and debentures of the Federal home loan 
        banks in accordance with this Act.
            ``(3) Transfer of functions.--The functions of the Office 
        of Finance of the Federal home loan banks shall be transferred 
        to the Corporation before the end of the 6-month period 
        beginning on the effective date of the Federal Home Loan Bank 
        System Modernization Act of 1995 in accordance with section 
        3(f)(2).
    ``(b) Powers.--Subject to the other provisions of this Act and such 
safety and soundness regulations as the Finance Board may prescribe, 
the Corporation shall have the following powers:
            ``(1) To issue voting capital stock to the Federal home 
        loan banks.
            ``(2) To issue Federal home loan bank notes, bonds and 
        debentures pursuant to section 11 of this Act on behalf of the 
        banks.
            ``(3) To determine the amount, maturities, rate of 
        interest, terms, and other conditions of Federal home loan bank 
        notes, bonds and debentures.
            ``(4) To adopt, alter, and use a corporate seal.
            ``(5) To enter into contracts.
            ``(6) To sue and be sued in the corporate capacity of the 
        corporation, and to complain and defend in any action brought 
        by or against the Corporation in any court of competent 
        jurisdiction.
            ``(7) To exercise such incidental powers not inconsistent 
        with the provisions of this Act as are necessary and 
        appropriate to carry out the provisions of this Act.
    ``(c) Board of Directors.--
            ``(1) Establishment.--The management of the Corporation 
        shall be vested in a board of directors composed of directors 
        elected by the Federal home loan banks in accordance with 
        paragraph (2).
            ``(2) Composition of board.--Each Federal home loan bank 
        shall annually elect 1 individual who, as of the time of the 
        election, is an officer or director of such bank to serve as a 
        member of the board of directors of the Corporation.
            ``(3) Duties.--The board of directors shall administer the 
        affairs of the Corporation in accordance with the provisions of 
        this Act.
            ``(4) Terms.--
                    ``(A) In general.--Each member of the board of 
                directors shall be elected for a term of 1 year and 
                shall serve at the pleasure of the board of directors 
                of the Federal home loan bank which elected such 
                member.
                    ``(B) Term limitation.--No member of the board of 
                directors may serve more than 3 full consecutive terms.
                    ``(C) Interim appointments.--Any director elected 
                to fill a vacancy occurring before the expiration of 
                the term for which such director's predecessor was 
                elected shall be elected only for the remainder of such 
                term.
                    ``(D) Continuation of service.--Each director may 
                continue to serve after the expiration of the term to 
                which such director was elected until a successor has 
                been elected and qualified.
            ``(5) Powers.--The board of directors shall exercise such 
        powers as may be necessary and appropriate to carry out the 
        purposes of this section, including the power--
                    ``(A) to impose an assessment on the Federal home 
                loan banks to cover the operating expenses of the 
                Corporation; and
                    ``(B) to appoint, establish the duties of, 
                compensate, and dismiss at will the employees of the 
                Corporation.
            ``(6) Pay.--The members of the board of directors shall 
        serve without additional compensation, but shall be reimbursed 
        for reasonable expenses of travel, lodging, and subsistence 
        incurred in attending meetings and other activities of the 
        Corporation.
            ``(7) Quorum requirement.--No business may be conducted by 
        the board of directors unless a quorum of the members of such 
        board of directors is present.
            ``(8) Vacancies.--Any vacancy on the board of directors 
        shall be filled in the same manner in which the original 
        appointment was made.
            ``(9) Appointment of officers and adoptions of rules of 
        procedure.--The board of directors shall--
                    ``(A) select, from among the members of such board, 
                a Chairperson, a Vice Chairperson, and a Secretary; and
                    ``(B) adopt rules of procedure for actions before 
                the board of directors.
    ``(d) Stock.--
            ``(1) Issuance of equal amount to each bank.--The 
        Corporation shall issue 100 shares of voting capital stock, 
        with a par value of $100 per share to each Federal home loan 
        bank.
            ``(2) Nontransferability.--Stock issued under paragraph (1) 
        may be owned and held only by the Federal home loan banks.
            ``(3) Payment upon issuance.--Upon issuance of any share of 
        stock under this subsection to any Federal home loan bank, the 
        bank shall pay to the Corporation the total amount due for such 
        stock.
            ``(4) Distribution requirement.--The total amount of 
        outstanding stock of the Corporation shall, at all times, be 
        distributed equally among all the Federal home loan banks.
    ``(e) Status.--Except to the extent expressly provided in this Act, 
the Corporation shall be treated as a Federal home loan bank for 
purposes of any law.
    ``(f) Jurisdiction, Removal Power.--
            ``(1) In general.--Notwithstanding any other provision of 
        law, any civil action or proceeding to which the Corporation is 
        a party shall be deemed to arise under the laws of the United 
        States.
            ``(2) Venue.--The United States District Court for the 
        District of Columbia shall have exclusive jurisdiction over any 
        action to which the Corporation is a party.
            ``(3) Removal.--The Corporation may, without bond or 
        security, remove any action or proceeding to which the 
        corporation is or becomes a party from a State court to the 
        United States District Court for the District of Columbia.''.

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

    (a) Issuance of Capital Stock.--Section 6(a) of the Federal Home 
Loan Bank Act is amended--
            (1) by striking ``(a) The capital stock'' and inserting 
        ``(a) Issuance of Capital Stock.--
            ``(1) In general.--The capital stock'';
            (2) by striking the 2d and 3d sentences and inserting ``The 
        capital stock shall be issued at par.''; and
            (3) by adding at the end the following new paragraph:
            ``(2) Rules and requirements.--The board of directors of 
        each Federal home loan bank shall promptly prescribe rules and 
        requirements, consistent with this Act, governing the capital 
        stock of such bank and other provisions of this section.''.
    (b) Subscription and Retirement of Stock.--Section 6(b) of the 
Federal Home Loan Bank Act is amended to read as follows:
    ``(b) Subscription and Retirement of Stock.--
            ``(1) Minimum investment requirement.--Subject to 
        paragraphs (3) and (6), the minimum investment of each 
        institution eligible to become a member of a Federal home loan 
        bank under section 5 in the stock of such bank shall be an 
        amount not less than the greater of--
                    ``(A) the minimum amount required to meet the 
                asset-based investment requirement established by the 
                bank pursuant to paragraph (2); or
                    ``(B) the minimum amount required to meet the 
                advances-related investment requirement established by 
                the bank pursuant to paragraph (4).
            ``(2) Asset-based requirement.--
                    ``(A) Transition schedule.--During calendar years 
                1996, 1997, and 1998, the minimum investment of each 
                member of a Federal home loan bank in the stock of such 
                bank, as determined on the basis of the assets of such 
                member, shall be an amount not less than the amount set 
                forth in the following table, as determined annually by 
                the bank's board of directors by April 30 of each year 
                as of the close of the preceding year:

``During the year:                  The minimum amount of stock shall 
                                            be:
    1996...........................
                                        An amount equal to the lesser 
                                                of 0.6 percent of 
                                                member's total assets 
                                                or 1.0 percent of the 
                                                member's residential 
                                                mortgage assets, but in 
                                                any case not less than 
                                                the amount equal to 0.3 
                                                percent of total assets
    1997...........................
                                        An amount equal to the lesser 
                                                of 0.5 percent of a 
                                                member's total assets 
                                                or 1.0 percent of the 
                                                member's residential 
                                                mortgage assets, but in 
                                                any case not less than 
                                                the amount equal to 
                                                0.35 percent of total 
                                                assets
    1998...........................
                                        An amount equal to the lesser 
                                                of 0.4 percent of a 
                                                member's total assets 
                                                or 1.0 percent of the 
                                                member's residential 
                                                mortgage assets
            
                    ``(B) After 1998.--The minimum investment of each 
                member of a Federal home loan bank in the stock of such 
                bank after 1998, as determined on the basis of the 
                assets of such member, shall be an amount equal to not 
                less than 0.3 percent and not more than 0.6 percent of 
                the member's total assets, as determined by the bank's 
                board of directors from time to time.
            ``(3) Discretionary increase in amount of minimum 
        investment authorized.--Notwithstanding paragraph (2)(A), the 
        board of directors of each Federal home loan bank may, in the 
        discretion of the board of directors, substitute--
                    ``(A) `an amount determined by the board of 
                directors between 0.5 percent and 0.6 percent of a 
                member's total assets' for `0.5 percent of a member's 
                total assets' where such term appears in the table in 
                paragraph (2)(A) in connection with 1997; and
                    ``(B) `an amount determined by the board of 
                directors between 0.4 percent and 0.6 percent of a 
                member's total assets' for `0.4 percent of a member's 
                total assets' where such term appears in the table in 
                paragraph (2)(A) in connection with 1998.
            ``(4) Advances-related requirement.--The minimum investment 
        of each member of a Federal home loan bank in the stock of such 
        bank, as determined on the basis of the amount of outstanding 
        advances from such bank to the member, shall be an amount which 
        is equal to not less than 3.0 percent of such advances and not 
        more than 6.0 percent of such advances, as determined by the 
        board of directors of the bank from time to time.
            ``(5) De minimus investment requirement authorized.--
        Notwithstanding the requirements of this section, the board of 
        directors of each Federal home loan bank may establish a 
        minimum capital stock subscription of at least $1,000.
            ``(6) Finance board authority to increase investment 
        requirement to maintain bank safety and soundness or system 
        liquidity.--
                    ``(A) District-wide application.--If the Finance 
                Board determines that the safety and soundness of a 
                Federal home loan bank requires an increase in the 
                amount of capital of such bank, the Finance Board may 
                require each member of such bank to maintain an 
                investment in the capital stock of such bank in an 
                amount determined by the Finance Board which shall not 
                exceed, as applied with respect to any member, the 
                greater of--
                            ``(i) an amount equal to 0.6 percent of the 
                        total assets of the member; or
                            ``(ii) an amount equal to 6.0 percent of 
                        the total outstanding advances of the member 
                        from such bank.
                    ``(B) System-wide application.--If the Finance 
                Board determines that the ability of the Federal Home 
                Loan Bank System to meet the collective financial 
                obligations of the Federal home loan banks requires an 
                increase in the amount of capital of all such banks, 
                the Finance Board may require all the members of all 
                the banks to maintain an investment in the capital 
                stock of each such member's bank in an amount 
                determined by the Finance Board which shall not exceed 
                the greater of the amounts described in clauses (i) and 
                (ii) of subparagraph (A).
            ``(7) Retirement of stock upon application of member.--
                    ``(A) In general.--Upon application by a member, a 
                bank shall retire the amount of stock sought to be 
                retired by such member, no later than 6 months after 
                the date of the filing of the application, if the board 
                of directors of the bank determines that the following 
                additional conditions have been met:
                            ``(i) The amount of such member's 
                        investment in the capital stock of the bank 
                        which would remain after the retirement of the 
                        stock sought in the application is not less 
                        than the minimum required investment amount 
                        applicable to such member.
                            ``(ii) The bank is adequately capitalized, 
                        and would remain adequately capitalized, if the 
                        stock subject to all pending applications by 
                        members for retirement of stock were 
                        immediately deducted from the Bank's capital.
                            ``(iii) The member is not in breach of any 
                        agreement with the bank.
                    ``(B) Pro rata basis.--If the retirement, in any 
                calendar quarter, of the total amount of stock which is 
                subject to pending applications by members of a bank 
                under subparagraph (A) would cause the bank to cease to 
                be adequately capitalized, the bank may retire such pro 
                rata portion of the total amount of stock each 
such member is seeking to retire as would allow the Bank to remain 
adequately capitalized after such retirement.
                    ``(C) Retirement of excess stock given precedence 
                over withdrawal from membership notices.--Except as 
                provided in subparagraph (D), a bank shall dispose of 
                all pending applications for retirement of stock under 
                subparagraph (A), and make all payments with respect to 
                the retirement of such stock, before taking any action 
                to retire the stock of any member of the bank which has 
                submitted a notice of withdrawal from membership 
                pursuant to subsection (e)(1).
                    ``(D) Treatment of notice of withdrawal as 
                application to retire excess stock for purposes of 
                allowing prompt payment.--Subject to such regulations 
                as the Finance Board may prescribe, a bank may treat, 
                for purposes of subparagraph (C), the submission by a 
                member of a notice of withdrawal of membership under 
                subsection (e)(1) as an application by such member 
                under subparagraph (A) to retire that portion of such 
                member's investment in the capital stock of the bank as 
                exceeds the minimum investment amount applicable to 
                such member.
            ``(8) Retirement of stock district-wide.--
                    ``(A) In general.--Upon a determination of the 
                board of directors of a bank, a bank may retire all, or 
                any portion, of the outstanding stock of the bank in 
                excess of the total of the minimum investment amounts 
                of all the members of the bank, if the board of 
                directors determines that the bank is adequately 
                capitalized, and would remain adequately capitalized if 
                all the stock of the bank which--
                            ``(i) the bank proposes to retire under 
                        this subparagraph; and
                            ``(ii) is subject to pending applications 
                        for retirement, and pending notices of 
                        termination of or withdrawal from membership,
                were deducted from the bank's capital.
                    ``(B) Retirement required to be made on a pro rata 
                basis.--The determination of the amount of shares held 
                by each member of a bank which are subject to 
                retirement pursuant to a determination by the board of 
                directors of the bank in accordance with subparagraph 
                (A) shall be made on a pro rata basis.
                    ``(C) Retirement subject to minimum investment 
                requirements.--No retirement of shares held by a member 
                of a bank may be made under this section to the extent 
                such retirement of shares would cause the amount of 
                such member's remaining investment in the capital stock 
                of the bank after such retirement to fall below the 
                minimum investment amount applicable to such member.
            ``(9) Payment and cancellation.--In the case of any 
        retirement of stock of a Federal home loan bank in accordance 
        with this subsection, the bank shall--
                    ``(A) at the election of the bank--
                            (i) pay the member an amount equal to the 
                        product of the number of shares of stock 
                        retired and the par value of such stock; or
                            (ii) credit such amount, in whole or in 
                        part, against any indebtedness of the member to 
                        the bank, including any outstanding prepayment 
                        fees; and
                    ``(B) cancel the shares so retired.
            ``(10) Issuance and retirement of whole shares.--The board 
        of directors of each bank may provide for such adjustments in 
        amounts of any stock to be issued or retired as may be 
        appropriate in order that stock may be issued or retired only 
        in entire shares.
            ``(11) Minimum investment amount defined.--For purposes of 
        this subsection, the term `minimum investment amount' means, 
        with respect to any member of a Federal home loan bank, the 
        minimum amount required, under this subsection, to be invested 
        by such member in such bank.''.
    (c) Termination of Membership.--Section 6(e) of the Federal Home 
Loan Bank Act (12 U.S.C. 1426(e)) is amended to read as follows:
    ``(e) Termination of Membership.--
            ``(1) Voluntary withdrawal from membership.--
                    ``(A) In general.--Any member of a Federal home 
                loan bank may withdraw from membership in such bank 
                by--
                            ``(i) filing a written notice of the 
                        member's intention to withdraw with the board 
                        of directors of the bank; and
                            ``(ii) paying a fee equal to 0.1 percent of 
                        the minimum investment amount applicable to 
                        such member under subsection (b).
                    ``(B) Rescission of notice.--Any member of a 
                Federal home loan bank may rescind any notice submitted 
                to the board of directors of the bank in accordance 
                with subparagraph (A) at any time before the member 
                receives any payment in connection with any retirement 
                of such member's stock in the bank pursuant to such 
                notice (other than any payment made pursuant to a 
                determination by the board of directors under 
                subsection (b)(6)(D).
                    ``(C) Limitation on authority to vote shares while 
                notice is pending.--No member may vote the capital 
                stock of a Federal home loan bank on any matter while a 
                notice by such member of withdrawal from membership of 
                the bank is pending before the board of directors of 
                the bank.
            ``(2) Removal from membership.--The board of directors of 
        any Federal home loan bank may remove any member from 
        membership, if--
                    ``(A) in the opinion of the board of directors, 
                such member has failed to comply with a provision of 
                this Act or any other applicable law; or
                    ``(B) the member has been determined to be 
                insolvent, or otherwise subject to the appointment of a 
                conservator, receiver, or other legal custodian, by a 
                state or Federal authority with regulatory and 
                supervisory responsibility for such member.
            ``(2) Liquidation of debt.--
                    ``(A) In general.--If any member's membership in a 
                Federal home loan bank is terminated for any reason, 
                the indebtedness of such member to the Federal home 
                loan bank shall be liquidated in an orderly manner (as 
                determined by the bank).
                    ``(B) Treatment as prepayment.--Any liquidation of 
                indebtedness pursuant to subparagraph (A) shall be 
                treated as a prepayment of any such indebtedness, and 
                shall be subject to any penalties or other fees 
                applicable to such prepayment.
                    ``(C) Return of collateral.--Upon the liquidation 
                of indebtedness of a member pursuant to subparagraph 
                (A), the member shall be entitled to the return of any 
                collateral relating to the indebtedness.
            ``(3) Surrender and cancellation of stock.--If any member's 
        membership in a Federal home loan bank is terminated for any 
        reason, the capital stock in the bank owned by such member 
        shall be surrendered and canceled after the liquidation of any 
        indebtedness (of the member to the bank) is completed pursuant 
        to paragraph (2).
            ``(4) Payment on canceled stock.--
                    ``(A) In general.--Upon the surrender and 
                cancellation of any capital stock of a member in a 
                Federal home loan bank in accordance with paragraph 
                (3), the member shall be paid an amount equal to the 
                product of the number of shares of stock canceled and 
                the par value of such stock.
                    ``(B) Withholding of payment in case of 
                undercapitalized bank.--If the Finance Board finds that 
                a Federal home loan bank is less than adequately 
                capitalized, or would be less than adequately 
                capitalized if all the shares of stock in such bank 
                which are the subject of pending applications for stock 
                retirement and notices of withdrawal were immediately 
                deducted from the bank's capital, the Finance Board may 
                order the bank to--
                            ``(i) withhold the amount to be paid 
                        required under subparagraph (A) with respect to 
                        any stock for up to 12 months; and
                            ``(ii) in the case of a critically 
                        undercapitalized bank (as defined by the 
                        Finance Board in accordance with section 28), 
                        withhold a pro rata share of the amount to be 
                        paid with respect to such stock under 
                        subparagraph (A) equal to the additional 
                        capital which members of the bank are required 
                        to contribute to the bank under a capital 
                        restoration plan imposed by the Finance Board 
                        in accordance with section 28, until such 
                        capital restoration plan has been terminated by 
                        the Finance Board.''.
    (d) Reduction of Period Required Before Withdrawn Member May Resume 
Membership.--Section 6(h) of the Federal Home Loan Bank Act (12 U.S.C. 
1426(h)) is amended--
            (1) by striking ``10'' and inserting ``5''; and
            (2) by inserting before the period at the end ``, except 
        that any institution that withdrew from membership in any such 
        bank before the date of the enactment of the Federal Home Loan 
        Bank Modernization Act of 1995 may acquire membership in a 
        Federal Home Loan Bank at any time after such date subject to 
        the requirements of this Act.''
    (e) Eligibility of Non-QTL Savings Associations to Obtain New 
Advances and Maintain Advances.--Section 10(m)(3)(B) of the Home 
Owners' Loan Act (12 U.S.C. 1467a(m)(3)(B)) is amended--
            (1) in clause (i), by striking subclause (III) and 
        redesignating subclause (IV) as subclause (III); and
            (2) in clause (ii), by striking subclause (II).
    (f) Voluntary Membership of Federal Savings Associations.--Section 
5(f) of the Home Owners' Loan Act (12 U.S.C. 1464(f)) is amended to 
read as follows:
    ``(f) Voluntary Membership in Federal Home Loan Bank.--Each Federal 
savings association may qualify for membership in a Federal home loan 
bank in the manner provided in the Federal Home Loan Bank Act.''.

SEC. 6. CAPITAL REQUIREMENTS.

    (a) Establishment of Capital Requirements.--The Federal Home Loan 
Bank Act (12 U.S.C. 1421 et seq.) is amended by redesignating sections 
28, 29, and 30 as sections 29, 30, and 31, respectively, and by 
inserting after section 27 the following new section:

``SEC. 28. BANK CAPITAL REQUIREMENTS.

    ``(a) In General.--
            ``(1) Uniform capital standards.--The Finance Board shall, 
        by regulation, establish a uniform capital requirement for 
        Federal home loan banks which shall take into consideration 
        interest rate risk, credit risk, and all other risks and 
        obligations associated with the operation of the banks.
            ``(2) Minimum total tangible capital requirement.--At a 
        minimum, the regulations prescribed by the Finance Board under 
        paragraph (1) shall require each Federal home loan bank to 
        maintain total tangible capital in an amount which is equal to 
        or greater than the greater of--
                    ``(A) the sum of--
                            ``(i) 2.5 percent of the bank's total 
                        assets; and
                            ``(ii) 0.45 percent of the bank's net off-
                        balance sheet exposure; or
                    ``(B) 10 percent of the bank's risk-weighted 
                assets.
            ``(3) Total tangible capital defined.--For purposes of this 
        section, the term `total tangible capital' means capital stock 
        and retained earnings.
    ``(b) Capital Classifications.--
            ``(1) In general.--Before the end of the 120-day period 
        beginning on the date of the enactment of the Federal Home Loan 
        Bank System Modernization Act of 1995, the Finance Board shall 
        prescribe standards for classifying the capital adequacy of 
        Federal home loan banks in accordance with the following 
        capital categories:
                    ``(A) Adequately capitalized.
                    ``(B) Undercapitalized.
                    ``(C) Significantly undercapitalized.
                    ``(D) Critically undercapitalized.
            ``(2) Minimum requirements for adequately capitalized 
        category.--Under the standards established by the Finance Board 
        under paragraph (1) a bank may not be classified as adequately 
        capitalized unless the bank--
                    ``(A) meets the minimum tangible capital 
                requirements referred to in subsection (a); and
                    ``(B) maintains additional capital as may be 
                prescribed by the Finance Board to ensure that the bank 
                has sufficient capital to account for the bank's 
                exposure to interest-rate risk, credit risk, and all 
                other risks and obligations associated with operating 
                the bank.
            ``(3) Quarterly evaluation of capital adequacy.--
                    ``(A) In general.--The Finance Board shall
                            ``(i) evaluate the capital adequacy of each 
                        Federal home loan bank at least once in each 
                        calendar quarter; and
                            ``(ii) classify the capital adequacy of the 
                        bank in accordance with the categories 
                        established pursuant to paragraph (1).
                    ``(B) Judicial review.--For the purpose of 
                obtaining judicial review of--
                            ``(i) any classification of the capital 
                        adequacy of a Federal home loan bank under 
                        subparagraph (A); or
                            ``(ii) any action taken by the Finance 
                        Board pursuant to such classification,
                the classification, or the action taken pursuant to a 
                classification, shall be treated as a final order of 
                the Finance Board.
    ``(c) Capital and Income Restoration Plans.--
            ``(1) In general.--The Finance Board shall prescribe 
        regulations which require any Federal home loan bank that is 
        less than adequately capitalized to file an acceptable capital 
        and income restoration plan with the Finance Board.
            ``(2) Contents of plan.--A capital and income restoration 
        plan of a Federal home loan bank shall demonstrate the actions 
        the bank will take to become adequately capitalized and to 
        increase earnings and the time frame within which such goals 
        will be achieved.
            ``(3) Authority to prohibit distributions.--In addition to 
        any other actions which the Finance Board may take against an 
        undercapitalized Federal home loan bank which--
                    ``(A) does not submit an acceptable capital 
                restoration plan; or
                    ``(B) does not substantially comply with a capital 
                restoration plan that has been accepted by the Finance 
                Board,
        the Finance Board may prohibit such Bank from making any 
        capital distribution until the bank is adequately capitalized.
    ``(d) Ownership Interest in Capital.--
            ``(1) In general.--Notwithstanding any provision of this 
        Act or any other provision of law, each Federal home loan bank 
        and the members of each bank shall have an ownership interest 
        in, and a property right in, the paid-in-capital and retained 
        earnings of the bank.
            ``(2) Description of interest.--The ownership interests and 
        property rights of members referred to in paragraph (1) with 
        respect to a Federal home loan bank shall be the same in all 
        respects as the ownership interest in, and property right in, 
        the paid-in-capital and retained earnings of a private for-
        profit business corporation organized under the laws of the 
        State in which such bank is located.
            ``(3) Shares treated as evidence of ownership interest.--
        The shares of a Federal home loan bank which are held by a 
        member shall be treated as evidence of ownership interest and 
        property right of the member with respect to the paid-in-
        capital and retained earnings of such bank.''.

SEC. 7. MANAGEMENT OF BANKS.

    Section 7 of the Federal Home Loan Bank Act (12 U.S.C. 1427) is 
amended to read as follows:

``SEC. 7. MANAGEMENT OF BANKS.

    ``(a) Board of Directors.--
            ``(1) Composition of board.--Except as otherwise provided 
        in this section, the management of each Federal home loan bank 
        shall be vested in a board of directors consisting of 14 
        directors selected as follows:
                    ``(A) 8 shall be elected by the members of the bank 
                as provided in paragraph (5).
                    ``(B) 6 shall be appointed by the President of the 
                United States.
            ``(2) Qualifications.--
                    ``(A) In general.--Each director of a Federal home 
                loan bank shall be a citizen of the United States and a 
                bona fide resident of the district in which such bank 
                is located.
                    ``(B) Disqualification.--An individual who is an 
                officer or director of a member that fails to meet any 
                applicable capital requirement shall not be qualified 
                to be a director on the board of directors of a Federal 
                home loan bank.
            ``(3) State representational criteria.--
                    ``(A) In general.--The number of elected directors 
                of a Federal home loan bank from each State within the 
                district of such bank shall bear the same approximate 
                relationship to the total number of elected directors 
                of such bank as the total amount which the members of 
the bank whose principal places of business are located in such State 
are required to invest in the stock of the bank under section 6(b) 
bears to the total amount which all members of such bank are required 
to invest in the bank under such section.
                    ``(B) Transition provision.--Notwithstanding 
                subparagraph (A), the composition of the boards of 
                directors of the 12 Federal home loan banks immediately 
                after the effective date of the Federal Home Loan Bank 
                System Modernization Act of 1995 shall be the same as 
                the composition of such boards of directors on January 
                1, 1995.
                    ``(C) Discretionary increase in overall number of 
                directors.--In order to ensure director representation 
                on the board of directors of a Federal home loan bank 
                consistent with this paragraph, the board of directors 
                of the bank may--
                            ``(i) increase the number of elected 
                        directors on the board of directors; and
                            ``(ii) increase the number of appointed 
                        directors to an amount not less than one-half 
                        and not more than three-quarters of the number 
                        of elected directors.
                    ``(D) Mandatory increase to achieve minimum state 
                representation.--If, at any time, the number of elected 
                directors of a Federal home loan bank is less than the 
                number of States in the district of such bank, the 
                board of directors of the bank shall increase the 
                number of elected directors on such board of directors 
                to a number at least equal to the number of States in 
                such district.
                    ``(E) Maximum number from any state.--Not more than 
                6 directors on the board of directors of any Federal 
                home loan bank may be residents of the same State.
                    ``(F) No decrease in state representation.--The 
                number of elected directors on the board of directors 
                of any Federal home loan bank from any State may not 
                decrease below the number of elected directors on the 
                board of directors from such State as of January 1, 
                1995.
            ``(4) Chairperson and vice chairperson.--The board of 
        directors of each Federal home loan bank shall elect--
                    ``(A) 1 of the directors of the bank to be the 
                chairperson of the board of directors; and
                    ``(B) 1 of the directors of the bank to be vice 
                chairperson of the board of directors.
            ``(5) Provisions applicable to appointed directors.--
                    ``(A) Representational requirement.--At least 2 of 
                the directors of each Federal home loan bank who are 
                appointed by the President shall be appointed from 
                among representatives of organizations with more than a 
                2-year history of representing consumer or community 
                interests on banking services, credit needs, housing, 
                or financial consumer protections.
                    ``(B) Conflict of interest provision.--No director 
                on the board of directors of a Federal home loan bank 
                who is appointed pursuant to this subsection may, 
                during such director's term of office--
                            ``(i) serve as an officer of any Federal 
                        home loan bank or as a director or officer of 
                        any member of a bank; or
                            ``(ii) hold shares, or any other financial 
                        interest in, any member of a bank.
            ``(6) Provisions applicable to elected directors.--
                    ``(A) Designation of state to be represented.--Each 
                position of elected director on the board of directors 
                of any Federal home loan bank shall be designated by 
                the board of directors as a position to be filled by a 
                director representing the members of the bank whose 
                principal places of business are located in a 
                particular State.
                    ``(B) Qualification.--Only officers and directors 
                of members whose principal places of business are 
                located in a State shall be qualified to serve as a 
                director representing such State.
                    ``(C) Nomination of directors.--All members (of a 
                Federal home loan bank) whose principal places of 
                business are located in any State may nominate any 
                qualified individual for election as a director 
                representing such State.
                    ``(D) Voting procedure.--In any election of a 
                director of a Federal home loan bank, each member whose 
                principal place of business is located in the State 
                which such director represents may cast for such office 
                a number of votes equal to the lesser of--
                            ``(i) the minimum number of shares of the 
                        capital stock of such bank in which such member 
                        is required, under section 6(b), to be invested 
                        as of the end of the calendar year immediately 
                        preceding the election, as determined by the 
                        board of directors of the Federal home loan 
                        bank; and
                            ``(ii) the average of the minimum number of 
                        shares of such stock in which all members whose 
                        principal places of business are located in 
                        such State are required, under section 6(b), to 
                        be invested as of the end of the calendar year 
                        immediately preceding the election, as so 
                        determined.
                    ``(E) Plurality decision.--Each position of elected 
                director of a Federal home loan bank shall be filled by 
                the nominee, for such position, who receives a larger 
                number of the votes cast in an election held for the 
                purpose of filling such position than any other 
                nominee.
            ``(7) Terms.--
                    ``(A) In general.--The term of each director who is 
                elected or appointed to the board of directors of a 
                Federal home loan bank after the date of the enactment 
                of the Federal Home Loan Bank System Modernization Act 
                of 1995 shall be 4 years.
                    ``(B) Term limit.--No individual may serve as a 
                director on the board of directors of a Federal home 
                loan bank for more than 2 full consecutive 4-year 
                terms.
                    ``(C) Interim appointments.--Any director appointed 
                or elected to fill a vacancy occurring before the 
                expiration of the term for which such director's 
                predecessor was appointed or elected shall be appointed 
                or elected only for the remainder of such term.
                    ``(D) Continuation of service.--Each director of a 
                Federal home loan bank may continue to serve after the 
                expiration of the term to which such director was 
                appointed or elected until a successor has been 
                qualified.
            ``(8) Vacancies.--
                    ``(A) Appointed director.--Any vacancy occurring in 
                the position of appointed director of a Federal home 
                loan bank shall be filled in the manner in which the 
                original appointment was made.
                    ``(B) Elected director.--Any vacancy occurring in 
                the position of elected director of a Federal home loan 
bank shall be filled by an affirmative vote of a majority of the 
remaining directors of such bank, without regard to whether such 
remaining directors constitute a quorum of the board of directors.
                    ``(C) Vacancy as a result of disqualification of 
                director.--
                            ``(i) In general.--If any director of a 
                        Federal home loan bank ceases to meet any 
                        qualification for such position--
                                    ``(I) the position shall 
                                immediately become vacant by operation 
                                of law; and
                                    ``(II) service by such director in 
                                such position shall cease.
                            ``(ii) Continuation.--Notwithstanding 
                        clause (i), an appointed director of a Federal 
                        home loan bank whose position became vacant 
                        pursuant to such clause may continue to serve 
                        in such position until a successor has been 
                        qualified.
            ``(9) Regulations governing nominations and elections.--The 
        bylaws of each Federal home loan bank shall provide procedures 
        for the nomination and election of directors on the board of 
        directors of the bank.
            ``(10) Definitions.--For purposes of this subsection, the 
        following definitions shall apply:
                    ``(A) Member.--The term `member' means, with 
                respect to any year, any institution which is a member 
                of a Federal home loan bank and was a member of such 
                bank at the end of the immediately preceding calendar 
                year.
                    ``(B) State.--The term `State' means any State, the 
                District of Columbia, and the Commonwealth of Puerto 
                Rico.
    ``(b) Powers of Boards of Directors.--The board of directors of 
each Federal home loan bank shall have all power necessary to exercise 
the responsibility of such board with respect to such bank, including 
the following powers:
            ``(1) Establish financial and other performance targets.
            ``(2) Conduct studies of trends of home or other property 
        values, methods of appraisals, state and Federal laws, 
        regulations, policies, and procedures relevant to the 
        operations of the bank and the members of the bank, and such 
        other subjects as the board of directors may consider to be 
        useful for the general guidance of the policies and operations 
        of the bank and institutions authorized to secure advances from 
        the bank.
            ``(3) Establish credit policy and policy for management of 
        the bank's investments.
            ``(4) Establish policy regarding the bank's interest rate 
        risk.
            ``(5) Determine dividends.
            ``(6) Establish policy regarding the documentation required 
        for advances.
            ``(7) Establish policy regarding item processing pricing.
            ``(8) Establish policy regarding the sale and purchase of, 
        and participations in, advances.
            ``(9) Establish policy regarding lending to members that 
        are insolvent or not in compliance with applicable capital 
        requirements.
            ``(10) Establish policy regarding--
                    ``(A) lending to and borrowing from the Federal 
                home loan banks; and
                    ``(B) making deposits in and accepting deposits 
                from such banks.
            ``(11) Establish policy regarding the community investment 
        program.
            ``(12) Establish policy regarding incentives for community 
        support by member institutions.
            ``(13) Establish policy regarding publication of community 
        support activities of member institutions.
            ``(14) Establish policy regarding the development and 
        implementation of the business plan of the bank.
            ``(15) Approve the budget of the bank and modifications to 
        such budget.
            ``(16) Approve the bylaws of the bank and modifications to 
        such bylaws.
            ``(17) Establish the travel policy of the bank.
            ``(18) Determine the location of meetings of boards of 
        directors.
            ``(19) Determine the eligibility of individuals to serve as 
        directors and conduct elections of directors.
            ``(20) Establish policy regarding audit plans and charters 
        of the audit committee and audit director of the bank and 
        select independent accountants to prepare the bank's financial 
        reports.
            ``(21) Establish policy regarding charitable donations and 
        membership in organizations.
            ``(22) Establish policy regarding mandatory retirement of 
        directors, officers and employees.
            ``(23) Establish policy regarding gold and gold-related 
        transactions.
            ``(24) Establish policy regarding indemnification of 
        directors, officers, employees, and agents.
            ``(25) Establish policy regarding the disaster recovery 
        plan of the bank.
            ``(26) Establish the records retention policy of the bank.
    ``(c) Duties of Directors.--The board of directors of each Federal 
home loan bank shall--
            ``(1) administer the affairs of the bank fairly and 
        impartially and without discrimination in favor of or against 
        any member borrower; and
            ``(2) subject to the provisions of this Act, extend to each 
        institution authorized to secure advances such advances as may 
        be made safely and reasonably with due regard for--
                    ``(A) the claims and demands of other institutions; 
                and
                    ``(B) the maintenance of adequate credit standing 
                for the bank and the bank's obligations.''.

SEC. 8. MODIFICATION OF ANNUAL CONTRIBUTION TO THE RESOLUTION FUNDING 
              CORPORATION.

    (a) Funding of Interest Payments by the Resolution Funding 
Corporation.--Subsection 21B(f)(2)(C) of the Federal Home Loan Bank Act 
(12 U.S.C. 1441b(f)(2)(C)) is amended to read as follows:
                    ``(C) Payments by federal home loan banks.--
                            ``(i) In general.--To the extent the 
                        amounts available pursuant to subparagraphs (A) 
                        and (B) are insufficient to cover the amount of 
                        interest payments, the Federal home loan banks 
                        shall pay to the Funding Corporation each 
                        calendar year $300,000,000.
                            ``(ii) Individual bank share.--Each Federal 
                        home loan bank's share of the amount required 
                        to be paid under clause (i) for any year shall 
                        be determined by dividing--
                                    ``(I) the daily average minimum 
                                level of tangible capital which such 
                                bank was required to maintain in order 
                                to comply with the bank's minimum 
                                capital requirement for the adequately 
                                capitalized category established 
                                pursuant to section 28(b)(2); by
                                    ``(II) the sum of the daily average 
                                minimum levels of tangible capital 
                                which all the banks were required to 
                                maintain in order to comply with each 
                                such bank's minimum capital requirement 
                                for the adequately capitalized 
                                category.''
    (b) Bank Contributions to the Bank's Affordable Housing Program.--
            ``(1) 1995.--Subsection 10(j)(5)(C) of the Federal Home 
        Loan Bank Act (12 U.S.C. 1430(j)(5)(C)) is amended to read as 
        follows:
                    ``(C) In 1995, the greater of--
                            ``(i) 10 percent of the net income of the 
                        bank in the preceding year; or
                            ``(ii) such prorated sum as the Finance 
                        Board may determine to be necessary to assure 
                        that the aggregate contribution of all the 
                        Federal home loan banks shall not be less than 
                        $100,000,000 for 1995.''
    (c) 1996 and Subsequent Years.--Subsection 10(j)(5) of the Federal 
Home Loan Bank Act (12 U.S.C. 1430(j)(5)) is amended by adding at the 
end the following new subparagraph:
                    ``(D) In 1996 and subsequent years, 10 percent of 
                the net income of the bank in the preceding year, as 
                determined after deducting the payment made by each 
                Federal home loan bank to the Funding Corporation under 
                section 21B(f)(2)(C).''.

SEC. 9. COMMUNITY SUPPORT REQUIREMENTS.

    Subsection (g) of section 10 of the Federal Home Loan Bank Act (12 
U.S.C. 1430(g)) is amended by adding at the end the following new 
paragraph:
            ``(3) Safe harbor for member's receiving cra ratings of 
        satisfactory or better.--Notwithstanding paragraphs (1) and 
        (2), any member which receives a rating of satisfactory or 
        outstanding pursuant to section 807 of the Community 
        Reinvestment Act of 1977 in such member's most recent 
        examination shall be treated as having satisfied the 
        requirements of such paragraphs.''.

SEC. 10. TECHNICAL AND CONFORMING AMENDMENTS.

    (a) Section 9.--Section 9 of the Federal Home Loan Bank Act (12 
U.S.C. 1429) is amended--
            (1) in the 2d sentence, by striking ``with the approval of 
        the Board''; and
            (2) in the 3d sentence, by striking ``, subject to the 
        approval of the Board,''.
    (b) Section 10.--
            (1) Subsection (a) of section 10 of the Federal Home Loan 
        Bank Act (12 U.S.C. 1430(a)) is amended--
                    (A) in the 1st sentence before paragraph (1), by 
                striking ``or section 11(g) of this Act'';
                    (B) in the 2d sentence before paragraph (1), by 
                striking ``housing finance'' and inserting ``mortgage 
                assets'';
                    (C) in the 2d sentence of paragraph (5), by 
                striking ``and the Board''; and
                    (D) in the last sentence of paragraph (5), by 
                striking ``Board'' and inserting ``bank''.
            (2) The last sentence of section 10(b) of the Federal Home 
        Loan Bank Act (12 U.S.C. 1430(b)) is amended by striking 
        ``Board'' and inserting ``bank''.
            (3) Section 10(c) of the Federal Home Loan Bank Act (12 
        U.S.C. 1430(c) is amended--
                    (A) in the 1st sentence, by striking ``Board'' and 
                inserting ``bank''; and
                    (B) by striking the 2d sentence.
            (4) The last sentence of section 10(d) of the Federal Home 
        Loan Bank Act (12 U.S.C. 1430(d)) is amended by striking 
        ``Subject to the approval of the Board, any'' and inserting 
        ``Any''.
            (5) Section 10 of the Federal Home Loan Bank Act (12 U.S.C. 
        1430) is amended by striking the 1st of the 2 subsections 
        designated as subsection (e).
    (c) Section 10b.--Subsection (a) of section 10b of the Federal Home 
Loan Bank Act (12 U.S.C. 1430b) is amended--
            (1) by striking ``Board'' and inserting ``bank''; and
            (2) by inserting ``home'' before ``mortgage loan''.
    (d) Section 11.--
            (1) Subsection (a) of section 11 of the Federal Home Loan 
        Bank Act (12 U.S.C. 1431(a)) is amended--
                    (A) by striking ``(a) Each Federal Home Loan Bank'' 
                and inserting ``(a) Borrowing Authority.--
            ``(1) In general.--Each Federal home loan bank'';
                    (B) by striking ``, subject to rules and 
                regulations prescribed by the Board'';
                    (C) by striking ``Board'' and inserting ``board of 
                directors of the bank''; and
                    (D) by adding at the end the following new 
                paragraph:
            ``(2) Borrowing through the office of finance corporation 
        only.--Notwithstanding paragraph (1), all notes, bonds, and 
        debentures issued by any Federal home loan bank shall be issued 
        through the Office of Finance Corporation.''
            (2) Subsection (b) of section 11 of the Federal Home Loan 
        Bank Act (12 U.S.C. 1431(b)) is amended to read as follows:
    ``(b) Issuance of Federal Home Loan Bank Bonds.--
            ``(1) In general.--Effective as of the date the Finance 
        Board transfers the functions of the Office of Finance to the 
        Office of Finance Corporation pursuant to section 4(a)(3), the 
        Office of Finance Corporation may issue consolidated Federal 
        home loan bank bonds and other consolidated obligations on 
        behalf of the banks.
            ``(2) Joint and several obligation; terms and conditions.--
        Consolidated obligations issued by the Office of Finance 
        Corporation under paragraph (1) shall--
                    ``(A) be the joint and several obligations of all 
                the Federal home loan banks; and
                    ``(B) shall be issued upon such terms and 
                conditions as shall be established by the Office of 
                Finance Corporation.''.
            (3) Section 11 of the Federal Home Loan Bank Act (12 U.S.C. 
        1431) is amended by striking subsections (c) and (d) and by 
        redesignating subsections (e), (f), (g), (h), (i), (j) and (k) 
        as subsections (c), (d), (e), (f), (g), (h) and (i), 
        respectively.
            (4) Subsection (d) of section 11 of the Federal Home Loan 
        Bank Act (as so redesignated by paragraph (3)) is amended to 
        read as follows:
    ``(d) Rediscount of Notes Held by Other Banks; Purchase of Bonds of 
Other Banks.--The Federal home loan banks may--
            ``(1) rediscount the discounted notes of members held by 
        other Federal home loan banks;
            ``(2) make loans to, or make deposits with, other Federal 
        home loan banks; or
            ``(3) purchase any bonds or debentures issued under this 
        section.''.
    (e) Repeal of Sections 2A and 2B.--The Federal Home Loan Bank Act 
(12 U.S.C. 1421 et seq.) is amended by striking sections 2A and 2B.

SEC. 11. INCORPORATION OF BANKS; CORPORATE POWERS.

    Section 12 of the Federal Home Loan Bank Act is amended to read as 
follows:

``SEC. 12. INCORPORATION OF BANKS; CORPORATE POWERS.

    ``(a) Organizational Certificates.--
            ``(1) Custodianship.--The Finance Board shall be the 
        custodian of the organizational certificates of the Federal 
        home loan banks previously filed with the Federal Home Loan 
        Bank Board (as in existence before the end of the 60-day period 
        beginning on the date of the enactment of the Financial 
        Institutions Reform, Recovery, and Enforcement Act of 1989) or 
        the Finance Board.
            ``(2) Replacement of lost or destroyed certificate.--If the 
        organizational certificate of a Federal home loan bank is lost 
        or destroyed, the board of directors of the bank shall provide 
        the Finance Board with a substitute certificate containing such 
        information as the Finance Board may require.
            ``(3) Amendment in case of merger, combination, or 
        consolidation.--If 2 or more Federal home loan banks merge, 
        combine, or otherwise consolidate, the resulting bank shall 
        provide the Finance Board with an amended organizational 
        certificate containing such information as the Finance Board 
        may require.
    ``(b) Corporate Status.--Each Federal home loan bank shall be a 
corporation.
    ``(c) Powers.--Each Federal home loan bank shall have the following 
powers:
            ``(1) To adopt, alter, and use a corporate seal.
            ``(2) To make contracts.
            ``(3) To purchase or lease and hold or dispose of such real 
        estate as may be necessary or convenient for the transaction of 
        the business of the bank.
            ``(4) To sue and be sued, to complain, and to defend, in 
        any court of competent jurisdiction.
            ``(5) To select, employ, and fix the compensation of such 
        officers, employees, attorneys, and agents as the board of 
        directors determines to be necessary for the transaction of the 
        business of the bank.
            ``(6) To define the duties of, and require bonds of, 
        officers, employees, attorneys, and agents of the bank and fix 
        the penalties of any such bonds.
            ``(7) To dismiss at pleasure officers, employees, 
        attorneys, and agents of the bank.
            ``(8) By the board of directors, to prescribe, amend, and 
        repeal bylaws and policies governing the manner in which the 
        affairs of the bank may be administered.
            ``(9) Such incidental powers as are not inconsistent with 
        the provisions of this Act and are customary and usual in 
        corporations generally.
    ``(d) Prohibition on Excessive Compensation.--
            ``(1) In general.--The Finance Board shall prohibit the 
        Federal home loan banks from providing compensation to any 
        employee of the bank that is not reasonable and comparable with 
        compensation for employment in other similar businesses 
        (including other financial institutions or major financial 
        services companies) involving similar duties and 
        responsibilities.
            ``(2) Limitation on Finance Board's Authority to Set 
        Compensation.--In carrying out paragraph (1), the Finance Board 
        may not prescribe or set a specific level or range of 
        compensation.''.

SEC. 12. LIQUIDATION OR REORGANIZATION.

    Section 25 of the Federal Home Loan Bank Act (12 U.S.C. 1445) is 
amended by striking ``the Board under this Act'' and inserting 
``operation of law''.

SEC. 13. DEFINITIONS.

    (a) Finance Board Defined.--Paragraph (1) of section 2 of the 
Federal Home Loan Bank Act (12 U.S.C. 1422(1)) is amended to read as 
follows:
            ``(1) Finance board.--The term `Finance Board' means the 
        Federal Housing Finance Board established under section 3.''
    ``(b) Home Mortgage Loan Defined.--Section 2 of the Federal Home 
Loan Bank Act (12 U.S.C. 1422) is amended by striking paragraphs (5) 
and (6) and inserting the following new paragraph:
            ``(5) Home mortgage loan.--
                    ``(A) In general.--The term `home mortgage loan' 
                means a loan made by a member or a nonmember borrower 
                upon the security of--
                            ``(i) a mortgage, deed of trust or other 
                        security arrangement upon qualified real 
                        estate, in fee simple; or
                            ``(ii) on a qualified leasehold--
                                    ``(I) under a lease which has a 
                                period to maturity of not less than 99 
                                years and is renewable; or
                                    ``(II) under a lease having a 
                                period of not less than 50 years to run 
                                from the date the mortgage, deed of 
                                trust, or other security arrangement 
                                was executed.
                    ``(B) Certain loans included.--The term `home 
                mortgage loan' includes--
                            ``(i) such classes of first liens as are 
                        commonly given to secure advances on real 
                        estate, under the laws of the State in which 
                        the real estate is located, by institutions 
                        authorized under this Act to become members of 
                        a Federal home loan bank; and
                            ``(ii) the credit instruments, if any, 
                        secured by such liens.
                    ``(C) Qualified real estate; qualified leasehold.--
                The terms `qualified real estate' and `qualified 
                leasehold' mean real estate upon which is located, or 
                which comprises or includes, 1 or more homes or other 
                dwelling units.
                    ``(D) Definition of further terms.--The Finance 
                Board may define any term used in this paragraph.''.
    (c) Residential Mortgage Assets Defined.--Section 2 of the Federal 
Home Loan Bank Act (12 U.S.C. 1422) is amended--
            (1) by redesignating paragraphs (7), (8), (9), (10), (11), 
        and (12) as paragraphs (6), (7), (8), (9), (10), (11), 
        respectively; and
            (2) by adding at the end the following new paragraph:
            ``(12) Residential mortgage assets.--The term `residential 
        mortgage asset'--
                    ``(A) means a home mortgage, deed of trust, or 
                other security arrangement upon real estate that is 
                solely residential; and
                    ``(B) includes any mortgage pass-through security 
                or mortgage debt security representing an interest in, 
                or which is collateralized by, a home mortgage loan.''
    (d) Regulated Financial Institution Defined.--Section 2 of the 
Federal Home Loan Bank Act (12 U.S.C. 1422) is amended by adding after 
paragraph (12) (as added by subsection (c) of this section) the 
following new paragraph:
            ``(13) Regulated financial institution.--The term 
        `regulated financial institution' means--
                    ``(A) any insured depository institution; and
                    ``(B) any building and loan association, saving and 
                loan association, cooperative bank, homestead 
                association, or savings bank which is duly organized 
                under the laws of any state or of the United States.''.
    (e) Capital Distribution Defined.--Section 2 of the Federal Home 
Loan Bank Act (12 U.S.C. 1422) is amended by adding after paragraph 
(13) (as added by subsection (d) of this section) the following new 
paragraph:
            ``(14) Capital distribution.--The term `capital 
        distribution' means--
                    ``(A) any dividend or other distribution in cash or 
                other property made with respect to any shares of, or 
                other ownership interest in, a Federal home loan bank, 
                other than a dividend consisting only of shares of any 
                such bank;
                    ``(B) any payment in cash or other property made by 
                a Federal home loan bank to repurchase, redeem, retire, 
                or otherwise acquire any of the shares of the bank, 
                including any extension of credit made to finance an 
                acquisition by a bank of such shares; and
                    ``(C) any transaction that the Finance Board 
                determines by regulation to be, in substance, a 
                distribution of capital of a Federal home loan bank.''.

SEC. 14. EFFECTIVE DATE.

    Except as otherwise expressly provided in this Act, this Act and 
the amendments made by this Act shall take effect on the first January 
1 which occurs after the date of the enactment of this Act.
                                 <all>
HR 1487 IH----2
HR 1487 IH----3
HR 1487 IH----4
HR 1487 IH----5
HR 1487 IH----6
```