104TH CONGRESS

2ND SESSION H. R. 2029

HOUSE AMENDMENT

TO SENATE

AMENDMENT
In the House of Representatives, U.S.,

January 3, 1996.

Resolved, That the House agree to the amendments of

the Senate to the bill (H.R. 2029) entitled ‘‘An Act to amend

the Farm Credit Act of 1971 to provide regulatory relief, and

for other purposes’’, with the following

HOUSE AMENDMENT TO

SENATE AMENDMENT:

In lieu of the matter proposed to be inserted by the Senate amendment to the text of the bill, insert:
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1 SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

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

3 ‘‘Farm Credit System Reform Act of 1996’’.

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

5 this Act is as follows:

Sec. 1. Short title; table of contents.

TITLE I—AGRICULTURAL MORTGAGE SECONDARY MARKET

Sec. 101. Definition of real estate.

Sec. 102. Definition of certified facility.

Sec. 103. Duties of Federal Agricultural Mortgage Corporation.

Sec. 104. Powers of the Corporation.

Sec. 105. Federal reserve banks as depositaries and fiscal agents.

Sec. 106. Certification of agricultural mortgage marketing facilities.

Sec. 107. Guarantee of qualified loans.

Sec. 108. Mandatory reserves and subordinated participation interests eliminated.

Sec. 109. Standards requiring diversified pools.

Sec. 110. Small farms.

Sec. 111. Definition of an affiliate.

Sec. 112. State usury laws superseded.

Sec. 113. Extension of capital transition period.

Sec. 114. Minimum capital level.

Sec. 115. Critical capital level.

Sec. 116. Enforcement levels.

Sec. 117. Recapitalization of the Corporation.

Sec. 118. Liquidation of the Federal Agricultural Mortgage Corporation.

TITLE II—REGULATORY RELIEF

Sec. 201. Compensation of association personnel.

Sec. 202. Use of private mortgage insurance.

Sec. 203. Removal of certain borrower reporting requirement.

Sec. 204. Reform of regulatory limitations on dividend, member business, and

voting practices of eligible farmer-owned cooperatives.

Sec. 205. Removal of Federal Government certification requirement for certain

private sector financings.

Sec. 206. Borrower stock.

Sec. 207. Disclosure relating to adjustable rate loans.

Sec. 208. Borrowers’ rights.

Sec. 209. Formation of administrative service entities.

Sec. 210. Joint management agreements.

Sec. 211. Dissemination of quarterly reports.

Sec. 212. Regulatory review.

Sec. 213. Examination of farm credit system institutions.

Sec. 214. Conservatorships and receiverships.

Sec. 215. Farm Credit Insurance Fund operations.

Sec. 216. Examinations by the Farm Credit System Insurance Corporation.

Sec. 217. Powers with respect to troubled insured System banks.
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Sec. 218. Oversight and regulatory actions by the Farm Credit System Insurance

Corporation.

Sec. 219. Farm Credit System Insurance Corporation board of directors.

Sec. 220. Interest rate reduction program.

Sec. 221. Liability for making criminal referrals.

TITLE III—IMPLEMENTATION AND EFFECTIVE DATE

Sec. 301. Implementation.

Sec. 302. Effective date.

1 TITLE I—AGRICULTURAL MORT2 GAGE SECONDARY MARKET

3 SEC. 101. DEFINITION OF REAL ESTATE.

4 Section 8.0(1)(B)(ii) of the Farm Credit Act of 1971

5 (12 U.S.C. 2279aa(1)(B)(ii)) is amended by striking ‘‘with

6 a purchase price’’ and inserting ‘‘, excluding the land to

7 which the dwelling is affixed, with a value’’.

8 SEC. 102. DEFINITION OF CERTIFIED FACILITY.

9 Section 8.0(3) of the Farm Credit Act of 1971 (12

10 U.S.C. 2279aa(3)) is amended—

11 (1) in subparagraph (A), by striking ‘‘a second12 ary marketing agricultural loan’’ and inserting ‘‘an

13 agricultural mortgage marketing’’; and

14 (2) in subparagraph (B), by striking ‘‘, but

15 only’’ and all that follows through ‘‘(9)(B)’’.

16 SEC. 103. DUTIES OF FEDERAL AGRICULTURAL MORTGAGE

17 CORPORATION.

18 Section 8.1(b) of the Farm Credit Act of 1971 (12

19 U.S.C. 2279aa–1(b)) is amended—

20 (1) in paragraph (2), by striking ‘‘and’’ at the

21 end;
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1 (2) in paragraph (3), by striking the period at

2 the end and inserting ‘‘; and’’; and

3 (3) by adding at the end the following:

4 ‘‘(4) purchase qualified loans and issue securities

5 representing interests in, or obligations backed by, the

6 qualified loans, guaranteed for the timely repayment

7 of principal and interest.’’.

8 SEC. 104. POWERS OF THE CORPORATION.

9 Section 8.3(c) of the Farm Credit Act of 1971 (12

10 U.S.C. 2279aa–3(c)) is amended—

11 (1) by redesignating paragraphs (13) and (14)

12 as paragraphs (14) and (15), respectively; and

13 (2) by inserting after paragraph (12) the follow14 ing:

15 ‘‘(13) To purchase, hold, sell, or assign a quali16 fied loan, to issue a guaranteed security, representing

17 an interest in, or an obligation backed by, the quali18 fied loan, and to perform all the functions and re19 sponsibilities of an agricultural mortgage marketing

20 facility operating as a certified facility under this

21 title.’’.

22 SEC. 105. FEDERAL RESERVE BANKS AS DEPOSITARIES AND

23 FISCAL AGENTS.

24 Section 8.3 of the Farm Credit Act of 1971 (12 U.S.C.

25 2279aa–3) is amended—
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1 (1) in subsection (d), by striking ‘‘may act as de2 positories for, or’’ and inserting ‘‘shall act as deposi3 tories for, and’’; and

4 (2) in subsection (e), by striking ‘‘Secretary of

5 the Treasury may authorize the Corporation to use’’

6 and inserting ‘‘Corporation shall have access to’’.

7 SEC. 106. CERTIFICATION OF AGRICULTURAL MORTGAGE

8 MARKETING FACILITIES.

9 Section 8.5 of the Farm Credit Act of 1971 (12 U.S.C.

10 2279aa–5) is amended—

11 (1) in subsection (a)—

12 (A) in paragraph (1), by inserting ‘‘(other

13 than the Corporation)’’ after ‘‘agricultural mort14 gage marketing facilities’’; and

15 (B) in paragraph (2), by inserting ‘‘(other

16 than the Corporation)’’ after ‘‘agricultural mort17 gage marketing facility’’; and

18 (2) in subsection (e)(1), by striking ‘‘(other than

19 the Corporation)’’.

20 SEC. 107. GUARANTEE OF QUALIFIED LOANS.

21 Section 8.6 of the Farm Credit Act of 1971 (12 U.S.C.

22 2279aa–6) is amended—

23 (1) in subsection (a)(1)—

24 (A) by striking ‘‘Corporation shall guaran25 tee’’ and inserting the following: ‘‘Corporation—
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1 ‘‘(A) shall guarantee’’;

2 (B) by striking the period at the end and

3 inserting ‘‘; and’’; and

4 (C) by adding at the end the following:

5 ‘‘(B) may issue a security, guaranteed as to

6 the timely payment of principal and interest,

7 that represents an interest solely in, or an obli8 gation fully backed by, a pool consisting of

9 qualified loans that—

10 ‘‘(i) meet the standards established

11 under section 8.8; and

12 ‘‘(ii) have been purchased and held by

13 the Corporation.’’;

14 (2) in subsection (d)—

15 (A) by striking paragraph (4); and

16 (B) by redesignating paragraphs (5), (6),

17 and (7) as paragraphs (4), (5), and (6), respec18 tively; and

19 (3) in subsection (g)(2), by striking ‘‘section

20 8.0(9)(B))’’ and inserting ‘‘section 8.0(9))’’.

21 SEC. 108. MANDATORY RESERVES AND SUBORDINATED

22 PARTICIPATION INTERESTS ELIMINATED.

23 (a) GUARANTEE OF QUALIFIED LOANS.—Section 8.6

24 of the Farm Credit Act of 1971 (12 U.S.C. 2279aa–6) is

25 amended by striking subsection (b).
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1 (b) RESERVES AND SUBORDINATED PARTICIPATION

2 INTERESTS.—Section 8.7 of the Farm Credit Act of 1971

3 (12 U.S.C. 2279aa–7) is repealed.

4 (c) CONFORMING AMENDMENTS.—

5 (1) Section 8.0(9)(B)(i) of the Farm Credit Act

6 of 1971 (12 U.S.C. 2279aa(9)(B)(i)) is amended by

7 striking ‘‘8.7, 8.8,’’ and inserting ‘‘8.8’’.

8 (2) Section 8.6(a)(2) of the Farm Credit Act of

9 1971 (12 U.S.C. 2279aa–6(a)(2)) is amended by

10 striking ‘‘subject to the provisions of subsection (b)’’.

11 SEC. 109. STANDARDS REQUIRING DIVERSIFIED POOLS.

12 (a) IN GENERAL.—Section 8.6 of the Farm Credit Act

13 of 1971 (12 U.S.C. 2279aa–6) (as amended by section 108)

14 is amended—

15 (1) by striking subsection (c); and

16 (2) by redesignating subsections (d) through (g)

17 as subsections (b) through (e), respectively.

18 (b) CONFORMING AMENDMENTS.—

19 (1) Section 8.0(9)(B)(i) of the Farm Credit Act

20 of 1971 (12 U.S.C. 2279aa(9)(B)(i)) is amended by

21 striking ‘‘(f)’’ and inserting ‘‘(d)’’.

22 (2) Section 8.13(a) of the Farm Credit Act of

23 1971 (12 U.S.C. 2279aa–13(a)) is amended by strik24 ing ‘‘sections 8.6(b) and’’ in each place it appears

25 and inserting ‘‘section’’.
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1 (3) Section 8.32(b)(1)(C) of the Farm Credit Act

2 of 1971 (12 U.S.C. 2279bb–1(b)(1)(C)) is amended—

3 (A) by striking ‘‘shall’’ and inserting

4 ‘‘may’’; and

5 (B) by inserting ‘‘(as in effect before the

6 date of the enactment of the Farm Credit System

7 Reform Act of 1996)’’ before the semicolon.

8 (4) Section 8.6(b) of the Farm Credit Act of

9 1971 (12 U.S.C. 2279aa–6(b)) (as redesignated by

10 subsection (a)(2)) is amended—

11 (A) by striking paragraph (4) (as redesig12 nated by section 107(2)(B)); and

13 (B) by redesignating paragraphs (5) and

14 (6) (as redesignated by section 107(2)(B)) as

15 paragraphs (4) and (5), respectively.

16 SEC. 110. SMALL FARMS.

17 Section 8.8(e) of the Farm Credit Act of 1971 (12

18 U.S.C. 2279aa–8(e)) is amended by adding at the end the

19 following: ‘‘The Board shall promote and encourage the in20 clusion of qualified loans for small farms and family farm21 ers in the agricultural mortgage secondary market.’’.

22 SEC. 111. DEFINITION OF AN AFFILIATE.

23 Section 8.11(e) of the Farm Credit Act of 1971 (21

24 U.S.C. 2279aa–11(e)) is amended—

25 (1) by striking ‘‘a certified facility or’’; and
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1 (2) by striking ‘‘paragraphs (3) and (7), respec2 tively, of section 8.0’’ and inserting ‘‘section 8.0(7)’’.

3 SEC. 112. STATE USURY LAWS SUPERSEDED.

4 Section 8.12 of the Farm Credit Act of 1971 (12 U.S.C.

5 2279aa–12) is amended by striking subsection (d) and in6 serting the following:

7 ‘‘(d) STATE USURY LAWS SUPERSEDED.—A provision

8 of the Constitution or law of any State shall not apply to

9 an agricultural loan made by an originator or a certified

10 facility in accordance with this title for sale to the Corpora11 tion or to a certified facility for inclusion in a pool for

12 which the Corporation has provided, or has committed to

13 provide, a guarantee, if the loan, not later than 180 days

14 after the date the loan was made, is sold to the Corporation

15 or included in a pool for which the Corporation has pro16 vided a guarantee, if the provision—

17 ‘‘(1) limits the rate or amount of interest, dis18 count points, finance charges, or other charges that

19 may be charged, taken, received, or reserved by an ag20 ricultural lender or a certified facility; or

21 ‘‘(2) limits or prohibits a prepayment penalty

22 (either fixed or declining), yield maintenance, or

23 make-whole payment that may be charged, taken, or

24 received by an agricultural lender or a certified facil25 ity in connection with the full or partial payment of
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1 the principal amount due on a loan by a borrower in

2 advance of the scheduled date for the payment under

3 the terms of the loan, otherwise known as a prepay4 ment of the loan principal.’’.

5 SEC. 113. EXTENSION OF CAPITAL TRANSITION PERIOD.

6 Section 8.32 of the Farm Credit Act of 1971 (12 U.S.C.

7 2279bb–1) is amended—

8 (1) in the first sentence of subsection (a), by

9 striking ‘‘Not later than the expiration of the 2-year

10 period beginning on December 13, 1991,’’ and insert11 ing ‘‘Not sooner than the expiration of the 3-year pe12 riod beginning on the date of enactment of the Farm

13 Credit System Reform Act of 1996,’’;

14 (2) in the first sentence of subsection (b)(2), by

15 striking ‘‘5-year’’ and inserting ‘‘8-year’’; and

16 (3) in subsection (d)—

17 (A) in the first sentence—

18 (i) by striking ‘‘The regulations estab19 lishing’’ and inserting the following:

20 ‘‘(1) IN GENERAL.—The regulations establish21 ing’’; and

22 (ii) by striking ‘‘shall contain’’ and in23 serting the following: ‘‘shall—

24 ‘‘(A) be issued by the Director for public

25 comment in the form of a notice of proposed
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1 rulemaking, to be first published after the expi2 ration of the period referred to in subsection (a);

3 and

4 ‘‘(B) contain’’; and

5 (B) in the second sentence, by striking ‘‘The

6 regulations shall’’ and inserting the following:

7 ‘‘(2) SPECIFICITY.—The regulations referred to

8 in paragraph (1) shall’’.

9 SEC. 114. MINIMUM CAPITAL LEVEL.

10 Section 8.33 of the Farm Credit Act of 1971 (12 U.S.C.

11 2279bb–2) is amended to read as follows:

12 ‘‘SEC. 8.33. MINIMUM CAPITAL LEVEL.

13 ‘‘(a) IN GENERAL.—Except as provided in subsection

14 (b), for purposes of this subtitle, the minimum capital level

15 for the Corporation shall be an amount of core capital equal

16 to the sum of—

17 ‘‘(1) 2.75 percent of the aggregate on-balance

18 sheet assets of the Corporation, as determined in ac19 cordance with generally accepted accounting prin20 ciples; and

21 ‘‘(2) 0.75 percent of the aggregate off-balance

22 sheet obligations of the Corporation, which, for the

23 purposes of this subtitle, shall include—

24 ‘‘(A) the unpaid principal balance of out25 standing securities that are guaranteed by the
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1 Corporation and backed by pools of qualified

2 loans;

3 ‘‘(B) instruments that are issued or guaran4 teed by the Corporation and are substantially

5 equivalent to instruments described in subpara6 graph (A); and

7 ‘‘(C) other off-balance sheet obligations of

8 the Corporation.

9 ‘‘(b) TRANSITION PERIOD.—

10 ‘‘(1) IN GENERAL.—For purposes of this subtitle,

11 the minimum capital level for the Corporation—

12 ‘‘(A) prior to January 1, 1997, shall be the

13 amount of core capital equal to the sum of—

14 ‘‘(i) 0.45 percent of aggregate off-bal15 ance sheet obligations of the Corporation;

16 ‘‘(ii) 0.45 percent of designated on-bal17 ance sheet assets of the Corporation, as de18 termined under paragraph (2); and

19 ‘‘(iii) 2.50 percent of on-balance sheet

20 assets of the Corporation other than assets

21 designated under paragraph (2);

22 ‘‘(B) during the 1-year period ending De23 cember 31, 1997, shall be the amount of core cap24 ital equal to the sum of—
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1 ‘‘(i) 0.55 percent of aggregate off-bal2 ance sheet obligations of the Corporation;

3 ‘‘(ii) 1.20 percent of designated on-bal4 ance sheet assets of the Corporation, as de5 termined under paragraph (2); and

6 ‘‘(iii) 2.55 percent of on-balance sheet

7 assets of the Corporation other than assets

8 designated under paragraph (2);

9 ‘‘(C) during the 1-year period ending De10 cember 31, 1998, shall be the amount of core cap11 ital equal to—

12 ‘‘(i) if the Corporation’s core capital is

13 not less than $25,000,000 on January 1,

14 1998, the sum of—

15 ‘‘(I) 0.65 percent of aggregate off16 balance sheet obligations of the Cor17 poration;

18 ‘‘(II) 1.95 percent of designated

19 on-balance sheet assets of the Corpora20 tion, as determined under paragraph

21 (2); and

22 ‘‘(III) 2.65 percent of on-balance

23 sheet assets of the Corporation other

24 than assets designated under para25 graph (2); or
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1 ‘‘(ii) if the Corporation’s core capital

2 is less than $25,000,000 on January 1,

3 1998, the amount determined under sub4 section (a); and

5 ‘‘(D) on and after January 1, 1999, shall be

6 the amount determined under subsection (a).

7 ‘‘(2) DESIGNATED ON-BALANCE SHEET AS8 SETS.—For purposes of this subsection, the designated

9 on-balance sheet assets of the Corporation shall be—

10 ‘‘(A) the aggregate on-balance sheet assets of

11 the Corporation acquired under section 8.6(e);

12 and

13 ‘‘(B) the aggregate amount of qualified

14 loans purchased and held by the Corporation

15 under section 8.3(c)(13).’’.

16 SEC. 115. CRITICAL CAPITAL LEVEL.

17 Section 8.34 of the Farm Credit Act of 1971 (12 U.S.C.

18 2279bb–3) is amended to read as follows:

19 ‘‘SEC. 8.34. CRITICAL CAPITAL LEVEL.

20 ‘‘For purposes of this subtitle, the critical capital level

21 for the Corporation shall be an amount of core capital equal

22 to 50 percent of the total minimum capital amount deter23 mined under section 8.33.’’.
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1 SEC. 116. ENFORCEMENT LEVELS.

2 Section 8.35(e) of the Farm Credit Act of 1971 (12

3 U.S.C. 2279bb–4(e)) is amended by striking ‘‘during the 30-

4 month period beginning on the date of the enactment of this

5 section,’’ and inserting ‘‘during the period beginning on De6 cember 13, 1991, and ending on the effective date of the

7 risk based capital regulation issued by the Director under

8 section 8.32,’’.

9 SEC. 117. RECAPITALIZATION OF THE CORPORATION.

10 Title VIII of the Farm Credit Act of 1971 (12 U.S.C.

11 2279aa et seq.) is amended by adding at the end the follow12 ing:

13 ‘‘SEC. 8.38. RECAPITALIZATION OF THE CORPORATION.

14 ‘‘(a) MANDATORY RECAPITALIZATION.—The Corpora15 tion shall increase the core capital of the Corporation to

16 an amount equal to or greater than $25,000,000, not later

17 than the earlier of—

18 ‘‘(1) the date that is 2 years after the date of en19 actment of this section; or

20 ‘‘(2) the date that is 180 days after the end of

21 the first calendar quarter that the aggregate on-bal22 ance sheet assets of the Corporation, plus the out23 standing principal of the off-balance sheet obligations

24 of the Corporation, equal or exceed $2,000,000,000.

25 ‘‘(b) RAISING CORE CAPITAL.—In carrying out this

26 section, the Corporation may issue stock under section 8.4
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1 and otherwise employ any recognized and legitimate means

2 of raising core capital in the power of the Corporation

3 under section 8.3.

4 ‘‘(c) LIMITATION ON GROWTH OF TOTAL ASSETS.—

5 During the 2-year period beginning on the date of enact6 ment of this section, the aggregate on-balance sheet assets

7 of the Corporation plus the outstanding principal of the off8 balance sheet obligations of the Corporation may not exceed

9 $3,000,000,000 if the core capital of the Corporation is less

10 than $25,000,000.

11 ‘‘(d) ENFORCEMENT.—If the Corporation fails to carry

12 out subsection (a) by the date required under paragraph

13 (1) or (2) of subsection (a), the Corporation may not pur14 chase a new qualified loan or issue or guarantee a new

15 loan-backed security until the core capital of the Corpora16 tion is increased to an amount equal to or greater than

17 $25,000,000.’’.

18 SEC. 118. LIQUIDATION OF THE FEDERAL AGRICULTURAL

19 MORTGAGE CORPORATION.

20 Title VIII of the Farm Credit Act of 1971 (12 U.S.C.

21 2279aa et seq.) (as amended by section 117) is amended

22 by adding at the end the following:
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1 ‘‘Subtitle C—Receivership, Con2 servatorship, and Liquidation of

3 the Federal Agricultural Mort4 gage Corporation

5 ‘‘SEC. 8.41. CONSERVATORSHIP; LIQUIDATION; RECEIVER6 SHIP.

7 ‘‘(a) VOLUNTARY LIQUIDATION.—The Corporation

8 may voluntarily liquidate only with the consent of, and in

9 accordance with a plan of liquidation approved by, the

10 Farm Credit Administration Board.

11 ‘‘(b) INVOLUNTARY LIQUIDATION.—

12 ‘‘(1) IN GENERAL.—The Farm Credit Adminis13 tration Board may appoint a conservator or receiver

14 for the Corporation under the circumstances specified

15 in section 4.12(b).

16 ‘‘(2) APPLICATION.—In applying section 4.12(b)

17 to the Corporation under paragraph (1)—

18 ‘‘(A) the Corporation shall also be consid19 ered insolvent if the Corporation is unable to

20 pay its debts as they fall due in the ordinary

21 course of business;

22 ‘‘(B) a conservator may also be appointed

23 for the Corporation if the authority of the Cor24 poration to purchase qualified loans or issue or
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1 guarantee loan-backed securities is suspended;

2 and

3 ‘‘(C) a receiver may also be appointed for

4 the Corporation if—

5 ‘‘(i)(I) the authority of the Corporation

6 to purchase qualified loans or issue or guar7 antee loan-backed securities is suspended; or

8 ‘‘(II) the Corporation is classified

9 under section 8.35 as within level III or IV

10 and the alternative actions available under

11 subtitle B are not satisfactory; and

12 ‘‘(ii) the Farm Credit Administration

13 determines that the appointment of a con14 servator would not be appropriate.

15 ‘‘(3) NO EFFECT ON SUPERVISORY ACTIONS.—

16 The grounds for appointment of a conservator for the

17 Corporation under this subsection shall be in addition

18 to those in section 8.37.

19 ‘‘(c) APPOINTMENT OF CONSERVATOR OR RECEIVER.—

20 ‘‘(1) QUALIFICATIONS.—Notwithstanding section

21 4.12(b), if a conservator or receiver is appointed for

22 the Corporation, the conservator or receiver shall be—

23 ‘‘(A) the Farm Credit Administration or

24 any other governmental entity or employee, in-
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1 cluding the Farm Credit System Insurance Cor2 poration; or

3 ‘‘(B) any person that—

4 ‘‘(i) has no claim against, or financial

5 interest in, the Corporation or other basis

6 for a conflict of interest as the conservator

7 or receiver; and

8 ‘‘(ii) has the financial and manage9 ment expertise necessary to direct the oper10 ations and affairs of the Corporation and,

11 if necessary, to liquidate the Corporation.

12 ‘‘(2) COMPENSATION.—

13 ‘‘(A) IN GENERAL.—A conservator or re14 ceiver for the Corporation and professional per15 sonnel (other than a Federal employee) employed

16 to represent or assist the conservator or receiver

17 may be compensated for activities conducted as,

18 or for, a conservator or receiver.

19 ‘‘(B) LIMIT ON COMPENSATION.—Com20 pensation may not be provided in amounts

21 greater than the compensation paid to employees

22 of the Federal Government for similar services,

23 except that the Farm Credit Administration may

24 provide for compensation at higher rates that are

25 not in excess of rates prevailing in the private
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1 sector if the Farm Credit Administration deter2 mines that compensation at higher rates is nec3 essary in order to recruit and retain competent

4 personnel.

5 ‘‘(C) CONTRACTUAL ARRANGEMENTS.—The

6 conservator or receiver may contract with any

7 governmental entity, including the Farm Credit

8 System Insurance Corporation, to make person9 nel, services, and facilities of the entity available

10 to the conservator or receiver on such terms and

11 compensation arrangements as shall be mutually

12 agreed, and each entity may provide the same to

13 the conservator or receiver.

14 ‘‘(3) EXPENSES.—A valid claim for expenses of

15 the conservatorship or receivership (including com16 pensation under paragraph (2)) and a valid claim

17 with respect to a loan made under subsection (f)

18 shall—

19 ‘‘(A) be paid by the conservator or receiver

20 from funds of the Corporation before any other

21 valid claim against the Corporation; and

22 ‘‘(B) may be secured by a lien, on such

23 property of the Corporation as the conservator or

24 receiver may determine, that shall have priority

25 over any other lien.
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1 ‘‘(4) LIABILITY.—If the conservator or receiver

2 for the Corporation is not a Federal entity, or an offi3 cer or employee of the Federal Government, the con4 servator or receiver shall not be personally liable for

5 damages in tort or otherwise for an act or omission

6 performed pursuant to and in the course of the

7 conservatorship or receivership, unless the act or

8 omission constitutes gross negligence or any form of

9 intentional tortious conduct or criminal conduct.

10 ‘‘(5) INDEMNIFICATION.—The Farm Credit Ad11 ministration may allow indemnification of the con12 servator or receiver from the assets of the

13 conservatorship or receivership on such terms as the

14 Farm Credit Administration considers appropriate.

15 ‘‘(d) JUDICIAL REVIEW OF APPOINTMENT.—

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

17 (i)(1), not later than 30 days after a conservator or

18 receiver is appointed under subsection (b), the Cor19 poration may bring an action in the United States

20 District Court for the District of Columbia for an

21 order requiring the Farm Credit Administration

22 Board to remove the conservator or receiver. The court

23 shall, on the merits, dismiss the action or direct the

24 Farm Credit Administration Board to remove the

25 conservator or receiver.
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1 ‘‘(2) STAY OF OTHER ACTIONS.—On the com2 mencement of an action under paragraph (1), any

3 court having jurisdiction of any other action or en4 forcement proceeding authorized under this Act to

5 which the Corporation is a party shall stay the action

6 or proceeding during the pendency of the action for

7 removal of the conservator or receiver.

8 ‘‘(e) GENERAL POWERS OF CONSERVATOR OR RE9 CEIVER.—The conservator or receiver for the Corporation

10 shall have such powers to conduct the conservatorship or

11 receivership as shall be provided pursuant to regulations

12 adopted by the Farm Credit Administration Board. Such

13 powers shall be comparable to the powers available to a con14 servator or receiver appointed pursuant to section 4.12(b).

15 ‘‘(f) BORROWINGS FOR WORKING CAPITAL.—

16 ‘‘(1) IN GENERAL.—If the conservator or receiver

17 of the Corporation determines that it is likely that

18 there will be insufficient funds to pay the ongoing ad19 ministrative expenses of the conservatorship or receiv20 ership or that there will be insufficient liquidity to

21 fund maturing obligations of the conservatorship or

22 receivership, the conservator or receiver may borrow

23 funds in such amounts, from such sources, and at

24 such rates of interest as the conservator or receiver

25 considers necessary or appropriate to meet the admin-
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1 istrative expenses or liquidity needs of the

2 conservatorship or receivership.

3 ‘‘(2) WORKING CAPITAL FROM FARM CREDIT

4 BANKS.—A Farm Credit bank may loan funds to the

5 conservator or receiver for a loan authorized under

6 paragraph (1) or, in the event of receivership, a Farm

7 Credit bank may purchase assets of the Corporation.

8 ‘‘(g) AGREEMENTS AGAINST INTERESTS OF CON9 SERVATOR OR RECEIVER.—No agreement that tends to di10 minish or defeat the right, title, or interest of the conserva11 tor or receiver for the Corporation in any asset acquired

12 by the conservator or receiver as conservator or receiver for

13 the Corporation shall be valid against the conservator or

14 receiver unless the agreement—

15 ‘‘(1) is in writing;

16 ‘‘(2) is executed by the Corporation and any per17 son claiming an adverse interest under the agreement,

18 including the obligor, contemporaneously with the ac19 quisition of the asset by the Corporation;

20 ‘‘(3) is approved by the Board or an appropriate

21 committee of the Board, which approval shall be re22 flected in the minutes of the Board or committee; and

23 ‘‘(4) has been, continuously, from the time of the

24 agreement’s execution, an official record of the Cor25 poration.
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1 ‘‘(h) REPORT TO THE CONGRESS.—On a determina2 tion by the receiver for the Corporation that there are insuf3 ficient assets of the receivership to pay all valid claims

4 against the receivership, the receiver shall submit to the Sec5 retary of the Treasury, the Committee on Agriculture of the

6 House of Representatives, and the Committee on Agri7 culture, Nutrition, and Forestry of the Senate a report on

8 the financial condition of the receivership.

9 ‘‘(i) TERMINATION OF AUTHORITIES.—

10 ‘‘(1) CORPORATION.—The charter of the Corpora11 tion shall be canceled, and the authority provided to

12 the Corporation by this title shall terminate, on such

13 date as the Farm Credit Administration Board deter14 mines is appropriate following the placement of the

15 Corporation in receivership, but not later than the

16 conclusion of the receivership and discharge of the re17 ceiver.

18 ‘‘(2) OVERSIGHT.—The Office of Secondary Mar19 ket Oversight established under section 8.11 shall be

20 abolished, and section 8.11(a) and subtitle B shall

21 have no force or effect, on such date as the Farm

22 Credit Administration Board determines is appro23 priate following the placement of the Corporation in

24 receivership, but not later than the conclusion of the

25 receivership and discharge of the receiver.’’.
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1 TITLE II—REGULATORY RELIEF

2 SEC. 201. COMPENSATION OF ASSOCIATION PERSONNEL.

3 Section 1.5(13) of the Farm Credit Act of 1971 (12

4 U.S.C. 2013(13)) is amended by striking ‘‘, and the ap5 pointment and compensation of the chief executive officer

6 thereof,’’.

7 SEC. 202. USE OF PRIVATE MORTGAGE INSURANCE.

8 (a) IN GENERAL.—Section 1.10(a)(1) of the Farm

9 Credit Act of 1971 (12 U.S.C. 2018(a)(1)) is amended by

10 adding at the end the following:

11 ‘‘(D) PRIVATE MORTGAGE INSURANCE.—A

12 loan on which private mortgage insurance is ob13 tained may exceed 85 percent of the appraised

14 value of the real estate security to the extent that

15 the loan amount in excess of such 85 percent is

16 covered by the insurance.’’.

17 (b) CONFORMING AMENDMENT.—Section 1.10(a)(1)(A)

18 of the Farm Credit Act of 1971 (12 U.S.C. 2018(a)(1)(A))

19 is amended by striking ‘‘paragraphs (2) and (3)’’ and in20 serting ‘‘subparagraphs (C) and (D)’’.

21 SEC. 203. REMOVAL OF CERTAIN BORROWER REPORTING

22 REQUIREMENT.

23 Section 1.10(a) of the Farm Credit Act of 1971 (12

24 U.S.C. 2018(a)) is amended by striking paragraph (5).
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1 SEC. 204. REFORM OF REGULATORY LIMITATIONS ON DIVI2 DEND, MEMBER BUSINESS, AND VOTING

3 PRACTICES OF ELIGIBLE FARMER-OWNED CO4 OPERATIVES.

5 (a) IN GENERAL.—Section 3.8(a) of the Farm Credit

6 Act of 1971 (12 U.S.C. 2129(a)) is amended by adding at

7 the end the following: ‘‘Any such association that has re8 ceived a loan from a bank for cooperatives shall, without

9 regard to the requirements of paragraphs (1) through (4),

10 continue to be eligible for so long as more than 50 percent

11 (or such higher percentage as is established by the bank

12 board) of the voting control of the association is held by

13 farmers, producers or harvesters of aquatic products, or eli14 gible cooperative associations.’’.

15 (b) CONFORMING AMENDMENT.—Section 3.8(b)(1)(D)

16 of the Farm Credit Act of 1971 (12 U.S.C. 2129(b)(1)(D))

17 is amended by striking ‘‘and (4) of subsection (a)’’ and in18 serting ‘‘and (4), or under the last sentence, of subsection

19 (a)’’.

20 SEC. 205. REMOVAL OF FEDERAL GOVERNMENT CERTIFI21 CATION REQUIREMENT FOR CERTAIN PRI22 VATE SECTOR FINANCINGS.

23 Section 3.8(b)(1)(A) of the Farm Credit Act of 1971

24 (12 U.S.C. 2129(b)(1)(A)) is amended—

25 (1) by striking ‘‘have been certified by the Ad26 ministrator of the Rural Electrification Administra-
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1 tion to be eligible for such’’ and inserting ‘‘are eligible

2 under the Rural Electrification Act of 1936 (7 U.S.C.

3 901 et seq.) for’’; and

4 (2) by striking ‘‘loan guarantee, and’’ and in5 serting ‘‘loan guarantee from the Administration or

6 the Bank (or a successor of the Administration or the

7 Bank), and’’.

8 SEC. 206. BORROWER STOCK.

9 Section 4.3A of the Farm Credit Act of 1971 (12

10 U.S.C. 2154a) is amended—

11 (1) by redesignating subsections (f) and (g) as

12 subsections (g) and (h), respectively; and

13 (2) by inserting after subsection (e) the following:

14 ‘‘(f) LOANS DESIGNATED FOR SALE OR SOLD INTO

15 THE SECONDARY MARKET.—

16 ‘‘(1) IN GENERAL.—Subject to paragraph (2)

17 and notwithstanding any other provision of this sec18 tion, the bylaws adopted by a bank or association

19 under subsection (b) may provide—

20 ‘‘(A) in the case of a loan made on or after

21 the date of enactment of this paragraph that is

22 designated, at the time the loan is made, for sale

23 into a secondary market, that no voting stock or

24 participation certificate purchase requirement

25 shall apply to the borrower for the loan; and
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1 ‘‘(B) in the case of a loan made before the

2 date of enactment of this paragraph that is sold

3 into a secondary market, that all outstanding

4 voting stock or participation certificates held by

5 the borrower with respect to the loan shall, sub6 ject to subsection (d)(1), be retired.

7 ‘‘(2) APPLICABILITY.—Notwithstanding any

8 other provision of this section, in the case of a loan

9 sold to a secondary market under title VIII, para10 graph (1) shall apply regardless of whether the bank

11 or association retains a subordinated participation

12 interest in a loan or pool of loans or contributes to

13 a cash reserve.

14 ‘‘(3) EXCEPTION.—

15 ‘‘(A) IN GENERAL.—Subject to subpara16 graph (B) and notwithstanding any other provi17 sion of this section, if a loan designated for sale

18 under paragraph (1)(A) is not sold into a sec19 ondary market during the 180-day period that

20 begins on the date of the designation, the voting

21 stock or participation certificate purchase re22 quirement that would otherwise apply to the

23 loan in the absence of a bylaw provision de24 scribed in paragraph (1)(A) shall be effective.
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1 ‘‘(B) RETIREMENT.—The bylaws adopted by

2 a bank or association under subsection (b) may

3 provide that if a loan described in subparagraph

4 (A) is sold into a secondary market after the end

5 of the 180-day period described in the subpara6 graph, all outstanding voting stock or participa7 tion certificates held by the borrower with respect

8 to the loan shall, subject to subsection (d)(1), be

9 retired.’’.

10 SEC. 207. DISCLOSURE RELATING TO ADJUSTABLE RATE

11 LOANS.

12 Section 4.13(a)(4) of the Farm Credit Act of 1971 (12

13 U.S.C. 2199(a)(4)) is amended by inserting before the semi14 colon at the end the following: ‘‘, and notice to the borrower

15 of a change in the interest rate applicable to the loan of

16 the borrower may be made within a reasonable time after

17 the effective date of an increase or decrease in the interest

18 rate’’.

19 SEC. 208. BORROWERS’ RIGHTS.

20 (a) DEFINITION OF LOAN.—Section 4.14A(a)(5) of the

21 Farm Credit Act of 1971 (12 U.S.C. 2202a(a)(5)) is amend22 ed—

23 (1) by striking ‘‘(5) LOAN.—The’’ and inserting

24 the following:

25 ‘‘(5) LOAN.—
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1 ‘‘(A) IN GENERAL.—Subject to subpara2 graph (B), the’’; and

3 (2) by adding at the end the following:

4 ‘‘(B) EXCLUSION FOR LOANS DESIGNATED

5 FOR SALE INTO SECONDARY MARKET.—

6 ‘‘(i) IN GENERAL.—Except as provided

7 in clause (ii), the term ‘loan’ does not in8 clude a loan made on or after the date of

9 enactment of this subparagraph that is des10 ignated, at the time the loan is made, for

11 sale into a secondary market.

12 ‘‘(ii) UNSOLD LOANS.—

13 ‘‘(I) IN GENERAL.—Except as pro14 vided in subclause (II), if a loan des15 ignated for sale under clause (i) is not

16 sold into a secondary market during

17 the 180-day period that begins on the

18 date of the designation, the provisions

19 of this section and sections 4.14, 4.14B,

20 4.14C, 4.14D, and 4.36 that would oth21 erwise apply to the loan in the absence

22 of the exclusion described in clause (i)

23 shall become effective with respect to

24 the loan.
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1 ‘‘(II) LATER SALE.—If a loan de2 scribed in subclause (I) is sold into a

3 secondary market after the end of the

4 180-day period described in subclause

5 (I), subclause (I) shall not apply with

6 respect to the loan beginning on the

7 date of the sale.’’.

8 (b) BORROWERS’ RIGHTS FOR POOLED LOANS.—The

9 first sentence of section 8.9(b) of the Farm Credit Act of

10 1971 (12 U.S.C. 2279aa–9(b)) is amended by inserting ‘‘(as

11 defined in section 4.14A(a)(5))’’ after ‘‘application for a

12 loan’’.

13 SEC. 209. FORMATION OF ADMINISTRATIVE SERVICE ENTI14 TIES.

15 Part E of title IV of the Farm Credit Act of 1971 is

16 amended by inserting after section 4.28 (12 U.S.C. 2214)

17 the following:

18 ‘‘SEC. 4.28A. DEFINITION OF BANK.

19 ‘‘In this part, the term ‘bank’ includes each association

20 operating under title II.’’.

21 SEC. 210. JOINT MANAGEMENT AGREEMENTS.

22 The first sentence of section 5.17(a)(2)(A) of the Farm

23 Credit Act of 1971 (12 U.S.C. 2252(a)(2)(A)) is amended

24 by striking ‘‘or management agreements’’.
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1 SEC. 211. DISSEMINATION OF QUARTERLY REPORTS.

2 Section 5.17(a)(8) of the Farm Credit Act of 1971 (12

3 U.S.C. 2252(a)(8)) is amended by inserting after ‘‘except

4 that’’ the following: ‘‘the requirements of the Farm Credit

5 Administration governing the dissemination to stockholders

6 of quarterly reports of System institutions may not be more

7 burdensome or costly than the requirements applicable to

8 national banks, and’’.

9 SEC. 212. REGULATORY REVIEW.

10 (a) FINDINGS.—Congress finds that—

11 (1) the Farm Credit Administration, in the role

12 of the Administration as an arms-length safety and

13 soundness regulator, has made considerable progress

14 in reducing the regulatory burden on Farm Credit

15 System institutions;

16 (2) the efforts of the Farm Credit Administration

17 described in paragraph (1) have resulted in cost sav18 ings for Farm Credit System institutions; and

19 (3) the cost savings described in paragraph (2)

20 ultimately benefit the farmers, ranchers, agricultural

21 cooperatives, and rural residents of the United States.

22 (b) CONTINUATION OF REGULATORY REVIEW.—The

23 Farm Credit Administration shall continue the comprehen24 sive review of regulations governing the Farm Credit Sys25 tem to identify and eliminate, consistent with law, safety,
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1 and soundness, all regulations that are unnecessary, unduly

2 burdensome or costly, or not based on law.

3 SEC. 213. EXAMINATION OF FARM CREDIT SYSTEM INSTITU4 TIONS.

5 The first sentence of section 5.19(a) of the Farm Credit

6 Act of 1971 (12 U.S.C. 2254(a)) is amended by striking

7 ‘‘each year’’ and inserting ‘‘during each 18-month period’’.

8 SEC. 214. CONSERVATORSHIPS AND RECEIVERSHIPS.

9 (a) DEFINITIONS.—Section 5.51 of the Farm Credit

10 Act of 1971 (12 U.S.C. 2277a) is amended—

11 (1) by striking paragraph (5); and

12 (2) by redesignating paragraph (6) as para13 graph (5).

14 (b) GENERAL CORPORATE POWERS.—Section 5.58 of

15 the Farm Credit Act of 1971 (12 U.S.C. 2277a–7) is amend16 ed by striking paragraph (9) and inserting the following:

17 ‘‘(9) CONSERVATOR OR RECEIVER.—The Cor18 poration may act as a conservator or receiver.’’.

19 SEC. 215. FARM CREDIT INSURANCE FUND OPERATIONS.

20 (a) ADJUSTMENT OF PREMIUMS.—

21 (1) IN GENERAL.—Section 5.55(a) of the Farm

22 Credit Act of 1971 (12 U.S.C. 2277a–4(a)) is amend23 ed—

24 (A) in paragraph (1), by striking ‘‘Until

25 the aggregate of amounts in the Farm Credit In-
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1 surance Fund exceeds the secure base amount,

2 the annual premium due from any insured Sys3 tem bank for any calendar year’’ and inserting

4 the following: ‘‘If at the end of any calendar year

5 the aggregate of amounts in the Farm Credit In6 surance Fund does not exceed the secure base

7 amount, subject to paragraph (2), the annual

8 premium due from any insured System bank for

9 the calendar year’’;

10 (B) by redesignating paragraph (2) as

11 paragraph (3); and

12 (C) by inserting after paragraph (1) the fol13 lowing:

14 ‘‘(2) REDUCED PREMIUMS.—The Corporation, in

15 the sole discretion of the Corporation, may reduce by

16 a percentage uniformly applied to all insured System

17 banks the annual premium due from each insured

18 System bank during any calendar year, as deter19 mined under paragraph (1).’’.

20 (2) CONFORMING AMENDMENTS.—

21 (A) Section 5.55(b) of the Farm Credit Act

22 of 1971 (12 U.S.C. 2277a–4(b)) is amended—

23 (i) by striking ‘‘Insurance Fund’’ each

24 place it appears and inserting ‘‘Farm Cred25 it Insurance Fund’’;
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1 (ii) by striking ‘‘for the following cal2 endar year’’; and

3 (iii) by striking ‘‘subsection (a)’’ and

4 inserting ‘‘subsection (a)(1)’’.

5 (B) Section 5.56(a) of the Farm Credit Act

6 of 1971 (12 U.S.C. 2277a–5(a)) is amended by

7 striking ‘‘section 5.55(a)(2)’’ each place it ap8 pears in paragraphs (2) and (3) and inserting

9 ‘‘section 5.55(a)(3)’’.

10 (C) Section 1.12(b) (12 U.S.C. 2020(b)) is

11 amended—

12 (i) in paragraph (1), by inserting ‘‘(as

13 defined in section 5.55(a)(3))’’ after ‘‘gov14 ernment-guaranteed loans’’; and

15 (ii) in paragraph (3), by inserting

16 ‘‘(as so defined)’’ after ‘‘government-guaran17 teed loans’’ each place such term appears.

18 (b) ALLOCATION TO INSURED SYSTEM BANKS AND

19 OTHER SYSTEM INSTITUTIONS OF EXCESS AMOUNTS IN

20 THE FARM CREDIT INSURANCE FUND.—Section 5.55 of the

21 Farm Credit Act of 1971 (12 U.S.C. 2277a–4) is amended

22 by adding at the end the following:

23 ‘‘(e) ALLOCATION TO SYSTEM INSTITUTIONS OF EX24 CESS RESERVES.—
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1 ‘‘(1) ESTABLISHMENT OF ALLOCATED INSURANCE

2 RESERVES ACCOUNTS.—There is hereby established in

3 the Farm Credit Insurance Fund an Allocated Insur4 ance Reserves Account—

5 ‘‘(A) for each insured System bank; and

6 ‘‘(B) subject to paragraph (6)(C), for all

7 holders, in the aggregate, of Financial Assistance

8 Corporation stock.

9 ‘‘(2) TREATMENT.—Amounts in any Allocated

10 Insurance Reserves Account shall be considered to be

11 part of the Farm Credit Insurance Fund.

12 ‘‘(3) ANNUAL ALLOCATIONS.—If, at the end of

13 any calendar year, the aggregate of the amounts in

14 the Farm Credit Insurance Fund exceeds the average

15 secure base amount for the calendar year (as cal16 culated on an average daily balance basis), the Cor17 poration shall allocate to the Allocated Insurance Re18 serves Accounts the excess amount less the amount

19 that the Corporation, in its sole discretion, determines

20 to be the sum of the estimated operating expenses and

21 estimated insurance obligations of the Corporation for

22 the immediately succeeding calendar year.

23 ‘‘(4) ALLOCATION FORMULA.—From the total

24 amount required to be allocated at the end of a cal25 endar year under paragraph (3)—
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1 ‘‘(A) 10 percent of the total amount shall be

2 credited to the Allocated Insurance Reserves Ac3 count established under paragraph (1)(B), sub4 ject to paragraph (6)(C); and

5 ‘‘(B) there shall be credited to the Allocated

6 Insurance Reserves Account of each insured Sys7 tem bank an amount that bears the same ratio

8 to the total amount (less any amount credited

9 under subparagraph (A)) as the average prin10 cipal outstanding for the 3-year period ending

11 on the end of the calendar year on loans made

12 by the bank that are in accrual status bears to

13 the average principal outstanding for the 3-year

14 period ending on the end of the calendar year on

15 loans made by all insured System banks that are

16 in accrual status (excluding, in each case, the

17 guaranteed portions of government-guaranteed

18 loans described in subsection (a)(1)(C)).

19 ‘‘(5) USE OF FUNDS IN ALLOCATED INSURANCE

20 RESERVES ACCOUNTS.—To the extent that the sum of

21 the operating expenses of the Corporation and the in22 surance obligations of the Corporation for a calendar

23 year exceeds the sum of operating expenses and insur24 ance obligations determined under paragraph (3) for
38

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1 the calendar year, the Corporation shall cover the ex2 penses and obligations by—

3 ‘‘(A) reducing each Allocated Insurance Re4 serves Account by the same proportion; and

5 ‘‘(B) expending the amounts obtained under

6 subparagraph (A) before expending other

7 amounts in the Fund.

8 ‘‘(6) OTHER DISPOSITION OF ACCOUNT FUNDS.—

9 ‘‘(A) IN GENERAL.—As soon as practicable

10 during each calendar year beginning more than

11 8 years after the date on which the aggregate of

12 the amounts in the Farm Credit Insurance Fund

13 exceeds the secure base amount, but not earlier

14 than January 1, 2005, the Corporation may—

15 ‘‘(i) subject to subparagraphs (D) and

16 (F), pay to each insured System bank, in a

17 manner determined by the Corporation, an

18 amount equal to the lesser of—

19 ‘‘(I) 20 percent of the balance in

20 the insured System bank’s Allocated

21 Insurance Reserves Account as of the

22 preceding December 31; or

23 ‘‘(II) 20 percent of the balance in

24 the bank’s Allocated Insurance Reserves
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1 Account on the date of the payment;

2 and

3 ‘‘(ii) subject to subparagraphs (C), (E),

4 and (F), pay to each System bank and asso5 ciation holding Financial Assistance Cor6 poration stock a proportionate share, deter7 mined by dividing the number of shares of

8 Financial Assistance Corporation stock held

9 by the institution by the total number of

10 shares of Financial Assistance Corporation

11 stock outstanding, of the lesser of—

12 ‘‘(I) 20 percent of the balance in

13 the Allocated Insurance Reserves Ac14 count established under paragraph

15 (1)(B) as of the preceding December

16 31; or

17 ‘‘(II) 20 percent of the balance in

18 the Allocated Insurance Reserves Ac19 count established under paragraph

20 (1)(B) on the date of the payment.

21 ‘‘(B) AUTHORITY TO ELIMINATE OR REDUCE

22 PAYMENTS.—The Corporation may eliminate or

23 reduce payments during a calendar year under

24 subparagraph (A) if the Corporation determines,

25 in its sole discretion, that the payments, or other
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1 circumstances that might require use of the

2 Farm Credit Insurance Fund, could cause the

3 amount in the Farm Credit Insurance Fund

4 during the calendar year to be less than the se5 cure base amount.

6 ‘‘(C) REIMBURSEMENT FOR FINANCIAL AS7 SISTANCE CORPORATION STOCK.—

8 ‘‘(i) SUFFICIENT FUNDING.—Notwith9 standing paragraph (4)(A), on provision by

10 the Corporation for the accumulation in the

11 Account established under paragraph (1)(B)

12 of funds in an amount equal to $56,000,000

13 (in addition to the amounts described in

14 subparagraph (F)(ii)), the Corporation

15 shall not allocate any further funds to the

16 Account except to replenish the Account if

17 funds are diminished below $56,000,000 by

18 the Corporation under paragraph (5).

19 ‘‘(ii) WIND DOWN AND TERMINATION.—

20 ‘‘(I) FINAL DISBURSEMENTS.—On

21 disbursement of $53,000,000 (in addi22 tion to the amounts described in sub23 paragraph (F)(ii)) from the Allocated

24 Insurance Reserves Account, the Cor25 poration shall disburse the remaining
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1 amounts in the Account, as determined

2 under subparagraph (A)(ii), without

3 regard to the percentage limitations in

4 subclauses (I) and (II) of subpara5 graph (A)(ii).

6 ‘‘(II) TERMINATION OF AC7 COUNT.—On disbursement of

8 $56,000,000 (in addition to the

9 amounts described in subparagraph

10 (F)(ii)) from the Allocated Insurance

11 Reserves Account, the Corporation shall

12 close the Account established under

13 paragraph (1)(B) and transfer any re14 maining funds in the Account to the

15 remaining Allocated Insurance Re16 serves Accounts in accordance with

17 paragraph (4)(B) for the calendar year

18 in which the transfer occurs.

19 ‘‘(D) DISTRIBUTION OF PAYMENTS RE20 CEIVED.—Not later than 60 days after receipt of

21 a payment made under subparagraph (A)(i),

22 each insured System bank, in consultation with

23 affiliated associations of the insured System

24 bank, and taking into account the direct or indi25 rect payment of insurance premiums by the asso-
42

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1 ciations, shall develop and implement an equi2 table plan to distribute payments received under

3 subparagraph (A)(i) among the bank and asso4 ciations of the bank.

5 ‘‘(E) EXCEPTION FOR PREVIOUSLY REIM6 BURSED ASSOCIATIONS.—For purposes of sub7 paragraph (A)(ii), in any Farm Credit district

8 in which the funding bank has reimbursed 1 or

9 more affiliated associations of the bank for the

10 previously unreimbursed portion of the Finan11 cial Assistance Corporation stock held by the as12 sociations, the funding bank shall be deemed to

13 be the holder of the shares of Financial Assist14 ance Corporation stock for which the funding

15 bank has provided the reimbursement.

16 ‘‘(F) INITIAL PAYMENT.—Notwithstanding

17 subparagraph (A), the initial payment made to

18 each payee under subparagraph (A) shall be in

19 such amount determined by the Corporation to

20 be equal to the sum of—

21 ‘‘(i) the total of the amounts that

22 would have been paid if payments under

23 subparagraph (A) had been authorized to

24 begin, under the same terms and conditions,

25 in the first calendar year beginning more
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1 than 5 years after the date on which the ag2 gregate of the amounts in the Farm Credit

3 Insurance Fund exceeds the secure base

4 amount, and to continue through the 2 im5 mediately subsequent years;

6 ‘‘(ii) interest earned on any amounts

7 that would have been paid as described in

8 clause (i) from the date on which the pay9 ments would have been paid as described in

10 clause (i); and

11 ‘‘(iii) the payment to be made in the

12 initial year described in subparagraph (A),

13 based on the amount in each Account after

14 subtracting the amounts to be paid under

15 clauses (i) and (ii).’’

16 (c) TECHNICAL AMENDMENTS.—Section 5.55(d) of the

17 Farm Credit Act of 1971 (12 U.S.C. 2277a–4(d)) is amend18 ed—

19 (1) in the matter preceding paragraph (1)—

20 (A) by striking ‘‘subsections (a) and (c)’’

21 and inserting ‘‘subsections (a), (c), and (e)’’; and

22 (B) by striking ‘‘a Farm Credit Bank’’ and

23 inserting ‘‘an insured System bank’’; and
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1 (2) in paragraphs (1), (2), and (3), by striking

2 ‘‘Farm Credit Bank’’ each place it appears and in3 serting ‘‘insured System bank’’.

4 SEC. 216. EXAMINATIONS BY THE FARM CREDIT SYSTEM IN5 SURANCE CORPORATION.

6 Section 5.59(b)(1)(A) of the Farm Credit Act of 1971

7 (12 U.S.C. 2277a–8(b)(1)(A)) is amended by adding at the

8 end the following: ‘‘Notwithstanding any other provision of

9 this Act, on cancellation of the charter of a System institu10 tion, the Corporation shall have authority to examine the

11 system institution in receivership. An examination shall be

12 performed at such intervals as the Corporation shall deter13 mine.’’.

14 SEC. 217. POWERS WITH RESPECT TO TROUBLED INSURED

15 SYSTEM BANKS.

16 (a) LEAST-COST RESOLUTION.—Section 5.61(a)(3) of

17 the Farm Credit Act of 1971 (12 U.S.C. 2277a–10(a)) is

18 amended—

19 (1) by redesignating subparagraph (B) as sub20 paragraph (F); and

21 (2) by striking subparagraph (A) and inserting

22 the following:

23 ‘‘(A) LEAST-COST RESOLUTION.—Assistance

24 may not be provided to an insured System bank

25 under this subsection unless the means of provid-
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1 ing the assistance is the least costly means of

2 providing the assistance by the Farm Credit In3 surance Fund of all possible alternatives avail4 able to the Corporation, including liquidation of

5 the bank (including paying the insured obliga6 tions issued on behalf of the bank). Before mak7 ing a least-cost determination under this sub8 paragraph, the Corporation shall accord such

9 other insured System banks as the Corporation

10 determines to be appropriate the opportunity to

11 submit information relating to the determina12 tion.

13 ‘‘(B) DETERMINING LEAST COSTLY AP14 PROACH.—In determining the least costly alter15 native under subparagraph (A), the Corporation

16 shall—

17 ‘‘(i) evaluate alternatives on a present18 value basis, using a reasonable discount

19 rate;

20 ‘‘(ii) document the evaluation and the

21 assumptions on which the evaluation is

22 based; and

23 ‘‘(iii) retain the documentation for not

24 less than 5 years.

25 ‘‘(C) TIME OF DETERMINATION.—
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1 ‘‘(i) GENERAL RULE.—For purposes of

2 this subsection, the determination of the

3 costs of providing any assistance under any

4 provision of this section with respect to any

5 insured System bank shall be made as of the

6 date on which the Corporation makes the

7 determination to provide the assistance to

8 the institution under this section.

9 ‘‘(ii) RULE FOR LIQUIDATIONS.—For

10 purposes of this subsection, the determina11 tion of the costs of liquidation of any in12 sured System bank shall be made as of the

13 earliest of—

14 ‘‘(I) the date on which a conserva15 tor is appointed for the insured System

16 bank;

17 ‘‘(II) the date on which a receiver

18 is appointed for the insured System

19 bank; or

20 ‘‘(III) the date on which the Cor21 poration makes any determination to

22 provide any assistance under this sec23 tion with respect to the insured System

24 bank.
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1 ‘‘(D) RULE FOR STAND-ALONE ASSIST2 ANCE.—Before providing any assistance under

3 paragraph (1), the Corporation shall evaluate

4 the adequacy of managerial resources of the in5 sured System bank. The continued service of any

6 director or senior ranking officer who serves in

7 a policymaking role for the assisted insured Sys8 tem bank, as determined by the Corporation,

9 shall be subject to approval by the Corporation

10 as a condition of assistance.

11 ‘‘(E) DISCRETIONARY DETERMINATIONS.—

12 Any determination that the Corporation makes

13 under this paragraph shall be in the sole discre14 tion of the Corporation.’’.

15 (b) CONFORMING AMENDMENTS.—Section 5.61(a) of

16 the Farm Credit Act of 1971 (12 U.S.C. 2277a–10(a)) is

17 amended—

18 (1) in paragraph (1) by striking ‘‘IN GEN19 ERAL.—’’ and inserting ‘‘STAND-ALONE ASSIST20 ANCE.—’’; and

21 (2) in paragraph (2)—

22 (A) by striking ‘‘ENUMERATED POWERS.—’’

23 and inserting ‘‘FACILITATION OF MERGERS OR

24 CONSOLIDATION.—’’; and
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1 (B) in subparagraph (A) by striking ‘‘FA2 CILITATION OF MERGERS OR CONSOLIDATION.—’’

3 and inserting ‘‘IN GENERAL.—’’.

4 SEC. 218. OVERSIGHT AND REGULATORY ACTIONS BY THE

5 FARM CREDIT SYSTEM INSURANCE CORPORA6 TION.

7 The Farm Credit Act of 1971 is amended by inserting

8 after section 5.61 (12 U.S.C. 2279a–10) the following:

9 ‘‘SEC. 5.61A. OVERSIGHT ACTIONS BY THE CORPORATION.

10 ‘‘(a) DEFINITIONS.—In this section, the term ‘institu11 tion’ means—

12 ‘‘(1) an insured System bank; and

13 ‘‘(2) a production credit association or other as14 sociation making loans under section 7.6 with a di15 rect loan payable to the funding bank of the associa16 tion that comprises 20 percent or more of the funding

17 bank’s total loan volume net of nonaccrual loans.

18 ‘‘(b) CONSULTATION REGARDING PARTICIPATION OF

19 UNDERCAPITALIZED BANKS IN ISSUANCE OF INSURED OB20 LIGATIONS.—The Farm Credit Administration shall consult

21 with the Corporation prior to approving an insured obliga22 tion that is to be issued by or on behalf of, or participated

23 in by, any insured System bank that fails to meet the mini24 mum level for any capital requirement established by the

25 Farm Credit Administration for the bank.
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1 ‘‘(c) CONSULTATION REGARDING APPLICATIONS FOR

2 MERGERS AND RESTRUCTURINGS.—

3 ‘‘(1) CORPORATION TO RECEIVE COPY OF TRANS4 ACTION APPLICATIONS.—On receiving an application

5 for a merger or restructuring of an institution, the

6 Farm Credit Administration shall forward a copy of

7 the application to the Corporation.

8 ‘‘(2) CONSULTATION REQUIRED.—If the proposed

9 merger or restructuring involves an institution that

10 fails to meet the minimum level for any capital re11 quirement established by the Farm Credit Adminis12 tration applicable to the institution, the Farm Credit

13 Administration shall allow 30 days within which the

14 Corporation may submit the views and recommenda15 tions of the Corporation, including any conditions for

16 approval. In determining whether to approve or dis17 approve any proposed merger or restructuring, the

18 Farm Credit Administration shall give due consider19 ation to the views and recommendations of the Cor20 poration.

21 ‘‘SEC. 5.61B. AUTHORITY TO REGULATE GOLDEN PARA22 CHUTE AND INDEMNIFICATION PAYMENTS.

23 ‘‘(a) DEFINITIONS.—In this section:

24 ‘‘(1) GOLDEN PARACHUTE PAYMENT.—The term

25 ‘golden parachute payment’—
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1 ‘‘(A) means a payment (or any agreement

2 to make a payment) in the nature of compensa3 tion for the benefit of any institution-related

4 party under an obligation of any Farm Credit

5 System institution that—

6 ‘‘(i) is contingent on the termination of

7 the party’s relationship with the institution;

8 and

9 ‘‘(ii) is received on or after the date on

10 which—

11 ‘‘(I) the institution is insolvent;

12 ‘‘(II) a conservator or receiver is

13 appointed for the institution;

14 ‘‘(III) the institution has been as15 signed by the Farm Credit Adminis16 tration a composite CAMEL rating of

17 4 or 5 under the Farm Credit Admin18 istration Rating System, or an equiva19 lent rating; or

20 ‘‘(IV) the Corporation otherwise

21 determines that the institution is in a

22 troubled condition (as defined in regu23 lations issued by the Corporation); and

24 ‘‘(B) includes a payment that would be a

25 golden parachute payment but for the fact that
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1 the payment was made before the date referred to

2 in subparagraph (A)(ii) if the payment was

3 made in contemplation of the occurrence of an

4 event described in any subclause of subparagraph

5 (A); but

6 ‘‘(C) does not include—

7 ‘‘(i) a payment made under a retire8 ment plan that is qualified (or is intended

9 to be qualified) under section 401 of the In10 ternal Revenue Code of 1986 or other non11 discriminatory benefit plan;

12 ‘‘(ii) a payment made under a bona

13 fide supplemental executive retirement plan,

14 deferred compensation plan, or other ar15 rangement that the Corporation determines,

16 by regulation or order, to be permissible; or

17 ‘‘(iii) a payment made by reason of the

18 death or disability of an institution-related

19 party.

20 ‘‘(2) INDEMNIFICATION PAYMENT.—The term ‘in21 demnification payment’ means a payment (or any

22 agreement to make a payment) by any Farm Credit

23 System institution for the benefit of any person who

24 is or was an institution-related party, to pay or re25 imburse the person for any liability or legal expense
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1 with regard to any administrative proceeding or civil

2 action instituted by the Farm Credit Administration

3 that results in a final order under which the person—

4 ‘‘(A) is assessed a civil money penalty; or

5 ‘‘(B) is removed or prohibited from partici6 pating in the conduct of the affairs of the insti7 tution.

8 ‘‘(3) INSTITUTION-RELATED PARTY.—The term

9 ‘institution-related party’ means—

10 ‘‘(A) a director, officer, employee, or agent

11 for a Farm Credit System institution or any

12 conservator or receiver of such an institution;

13 ‘‘(B) a stockholder (other than another

14 Farm Credit System institution), consultant,

15 joint venture partner, or any other person deter16 mined by the Farm Credit Administration to be

17 a participant in the conduct of the affairs of a

18 Farm Credit System institution; and

19 ‘‘(C) an independent contractor (including

20 any attorney, appraiser, or accountant) that

21 knowingly or recklessly participates in any vio22 lation of any law or regulation, any breach of fi23 duciary duty, or any unsafe or unsound practice

24 that caused or is likely to cause more than a

25 minimal financial loss to, or a significant ad-
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1 verse effect on, the Farm Credit System institu2 tion.

3 ‘‘(4) LIABILITY OR LEGAL EXPENSE.—The term

4 ‘liability or legal expense’ means—

5 ‘‘(A) a legal or other professional expense

6 incurred in connection with any claim, proceed7 ing, or action;

8 ‘‘(B) the amount of, and any cost incurred

9 in connection with, any settlement of any claim,

10 proceeding, or action; and

11 ‘‘(C) the amount of, and any cost incurred

12 in connection with, any judgment or penalty im13 posed with respect to any claim, proceeding, or

14 action.

15 ‘‘(5) PAYMENT.—The term ‘payment’ means—

16 ‘‘(A) a direct or indirect transfer of any

17 funds or any asset; and

18 ‘‘(B) any segregation of any funds or assets

19 for the purpose of making, or under an agree20 ment to make, any payment after the date on

21 which the funds or assets are segregated, without

22 regard to whether the obligation to make the

23 payment is contingent on—
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1 ‘‘(i) the determination, after that date,

2 of the liability for the payment of the

3 amount; or

4 ‘‘(ii) the liquidation, after that date, of

5 the amount of the payment.

6 ‘‘(b) PROHIBITION.—The Corporation may prohibit or

7 limit, by regulation or order, any golden parachute pay8 ment or indemnification payment by a Farm Credit Sys9 tem institution (including any conservator or receiver of

10 the Federal Agricultural Mortgage Corporation) in troubled

11 condition (as defined in regulations issued by the Corpora12 tion).

13 ‘‘(c) FACTORS TO BE TAKEN INTO ACCOUNT.—The

14 Corporation shall prescribe, by regulation, the factors to be

15 considered by the Corporation in taking any action under

16 subsection (b). The factors may include—

17 ‘‘(1) whether there is a reasonable basis to believe

18 that an institution-related party has committed any

19 fraudulent act or omission, breach of trust or fidu20 ciary duty, or insider abuse with regard to the Farm

21 Credit System institution involved that has had a

22 material effect on the financial condition of the insti23 tution;

24 ‘‘(2) whether there is a reasonable basis to believe

25 that the institution-related party is substantially re-
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1 sponsible for the insolvency of the Farm Credit Sys2 tem institution, the appointment of a conservator or

3 receiver for the institution, or the institution’s trou4 bled condition (as defined in regulations prescribed by

5 the Corporation);

6 ‘‘(3) whether there is a reasonable basis to believe

7 that the institution-related party has materially vio8 lated any applicable law or regulation that has had

9 a material effect on the financial condition of the in10 stitution;

11 ‘‘(4) whether there is a reasonable basis to believe

12 that the institution-related party has violated or con13 spired to violate—

14 ‘‘(A) section 215, 657, 1006, 1014, or 1344

15 of title 18, United States Code; or

16 ‘‘(B) section 1341 or 1343 of title 18, Unit17 ed States Code, affecting a Farm Credit System

18 institution;

19 ‘‘(5) whether the institution-related party was in

20 a position of managerial or fiduciary responsibility;

21 and

22 ‘‘(6) the length of time that the party was related

23 to the Farm Credit System institution and the degree

24 to which—
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1 ‘‘(A) the payment reasonably reflects com2 pensation earned over the period of employment;

3 and

4 ‘‘(B) the compensation represents a reason5 able payment for services rendered.

6 ‘‘(d) CERTAIN PAYMENTS PROHIBITED.—No Farm

7 Credit System institution may prepay the salary or any

8 liability or legal expense of any institution-related party

9 if the payment is made—

10 ‘‘(1) in contemplation of the insolvency of the in11 stitution or after the commission of an act of insol12 vency; and

13 ‘‘(2) with a view to, or with the result of—

14 ‘‘(A) preventing the proper application of

15 the assets of the institution to creditors; or

16 ‘‘(B) preferring 1 creditor over another

17 creditor.

18 ‘‘(e) RULE OF CONSTRUCTION.—Nothing in this sec19 tion—

20 ‘‘(1) prohibits any Farm Credit System institu21 tion from purchasing any commercial insurance pol22 icy or fidelity bond, so long as the insurance policy

23 or bond does not cover any legal or liability expense

24 of an institution described in subsection (a)(2); or
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1 ‘‘(2) limits the powers, functions, or responsibil2 ities of the Farm Credit Administration.’’.

3 SEC. 219. FARM CREDIT SYSTEM INSURANCE CORPORATION

4 BOARD OF DIRECTORS.

5 (a) IN GENERAL.—Section 5.53 of the Farm Credit

6 Act of 1971 (12 U.S.C. 2277a–2) is amended to read as

7 follows:

8 ‘‘SEC. 5.53. BOARD OF DIRECTORS.

9 ‘‘(a) ESTABLISHMENT.—The Corporation shall be

10 managed by a Board of Directors that shall consist of the

11 members of the Farm Credit Administration Board.

12 ‘‘(b) CHAIRMAN.—The Board of Directors shall be

13 chaired by any Board member other than the Chairman

14 of the Farm Credit Administration Board.’’.

15 (b) CONFORMING AMENDMENTS.—

16 (1) Section 5314 of title 5, United States Code,

17 is amended by striking ‘‘Chairperson, Board of Direc18 tors of the Farm Credit System Insurance Corpora19 tion.’’.

20 (2) Section 5315 of title 5, United States Code,

21 is amended by striking ‘‘Members, Board of Directors

22 of the Farm Credit System Insurance Corporation.’’.

23 SEC. 220. INTEREST RATE REDUCTION PROGRAM.

24 Section 351(a) of the Consolidated Farm and Rural

25 Development Act (7 U.S.C. 1999) is amended—
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1 (A) by striking ‘‘SEC. 351. (a) The’’ and in2 serting the following:

3 ‘‘SEC. 351. INTEREST RATE REDUCTION PROGRAM.

4 ‘‘(a) ESTABLISHMENT OF PROGRAM.—

5 ‘‘(1) IN GENERAL.—The’’; and

6 (B) by adding at the end the following:

7 ‘‘(2) TERMINATION OF AUTHORITY.—The author8 ity provided by this subsection shall terminate on

9 September 30, 2002.’’.

10 SEC. 221. LIABILITY FOR MAKING CRIMINAL REFERRALS.

11 (a) IN GENERAL.—Any institution of the Farm Credit

12 System, or any director, officer, employee, or agent of a

13 Farm Credit System institution, that discloses to a Govern14 ment authority information proffered in good faith that

15 may be relevant to a possible violation of any law or regula16 tion shall not be liable to any person under any law of

17 the United States or any State—

18 (1) for the disclosure; or

19 (2) for any failure to notify the person involved

20 in the possible violation.

21 (b) NO PROHIBITION ON DISCLOSURE.—Any institu22 tion of the Farm Credit System, or any director, officer,

23 employee, or agent of a Farm Credit System institution,

24 may disclose information to a Government authority that
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1 may be relevant to a possible violation of any law or regula2 tion.

3 TITLE III—IMPLEMENTATION

4 AND EFFECTIVE DATE

5 SEC. 301. IMPLEMENTATION.

6 The Secretary of Agriculture and the Farm Credit Ad7 ministration shall promulgate regulations and take other

8 required actions to implement the provisions of this Act not

9 later than 90 days after the effective date of this Act.

10 SEC. 302. EFFECTIVE DATE.

11 Except as otherwise provided in this Act, this Act and

12 the amendments made by this Act shall become effective on

13 the date of enactment.

Attest:

Clerk.