I

104TH CONGRESS

1ST SESSION H. R. 2029

To amend the Farm Credit Act of 1971 to provide regulatory relief.

IN THE HOUSE OF REPRESENTATIVES

JULY 13, 1995

Mr. ALLARD (for himself, Mr. JOHNSON of South Dakota, and Mr. RAHALL),

introduced the following bill; which was referred to the Committee on

Agriculture

A BILL

To amend the Farm Credit Act of 1971 to provide regulatory

relief.

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

3 SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

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

5 ‘‘Farm Credit System Regulatory Relief Act of 1995’’.

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

7 this Act is as follows:

Sec. 1. Short title; table of contents.

Sec. 2. References.

Sec. 3. Regulatory review.

Sec. 4. Examination of Farm Credit System institutions.

Sec. 5. Farm Credit Insurance Fund operations.

Sec. 6. Powers with respect to troubled insured System banks.

Sec. 7. Farm Credit System Insurance Corporation board of directors.
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Sec. 8. Conservatorship and receiverships.

Sec. 9. Oversight and regulatory actions by the Farm Credit System Insurance

Corporation.

Sec. 10. Formation of administrative service entities.

Sec. 11. Requirements for loans sold into the secondary market.

Sec. 12. Removal of antiquated and unnecessary paperwork requirements.

Sec. 13. Removal of government certification requirement for certain private

sector financing.

Sec. 14. Reform of regulatory limitations on the dividend, member business,

and voting practices of eligible farmer-owned cooperatives.

1 SEC. 2. REFERENCES.

2 Except as otherwise expressly provided, wherever in

3 this Act an amendment or repeal is expressed in terms

4 of an amendment to, or repeal of, a section or other provi5 sion, the reference shall be considered to be made to a

6 section or other provision of the Farm Credit Act of 1971.

7 SEC. 3. REGULATORY REVIEW.

8 (a) FINDINGS.—The Congress finds that—

9 (1) the Farm Credit Administration, in its role

10 as an arms-length, safety and soundness regulator,

11 has made considerable progress in reducing the reg12 ulatory burden on Farm Credit System institutions;

13 (2) the efforts of the Farm Credit Administra14 tion in this regard have resulted in cost savings for

15 Farm Credit System institutions; and

16 (3) such cost savings ultimately benefit the Na17 tion’s farmers, ranchers, agricultural cooperatives,

18 and rural residents.

19 (b) REQUIREMENT FOR CONTINUED REVIEW.—The

20 Farm Credit Administration shall continue its comprehen-
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1 sive review of regulations governing the Farm Credit Sys2 tem in order to further identify and eliminate, consistent

3 with safety and soundness, all regulations that are unnec4 essary, unduly burdensome or costly, or not based on

5 statute.

6 SEC. 4. EXAMINATION OF FARM CREDIT SYSTEM INSTITU7 TIONS.

8 Section 5.19(a) (12 U.S.C. 2254(a)) is amended by

9 striking ‘‘each year’’ in the first sentence and inserting

10 ‘‘every 18 months’’.

11 SEC. 5. FARM CREDIT INSURANCE FUND OPERATIONS.

12 (a) ADJUSTMENT OF PREMIUMS.—

13 (1) IN GENERAL.—Section 5.55(a) (12 U.S.C.

14 2277a–4(a)) is amended—

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

16 the aggregate of amounts in the Farm Credit

17 Insurance Fund exceeds the secure base

18 amount, the annual premium due from any in19 sured System bank for any calendar year shall’’

20 and inserting ‘‘If, at the end of any calendar

21 year, the aggregate of the amounts in the Farm

22 Credit Insurance Fund does not exceed the se23 cure base amount, the annual premium due

24 from any insured System bank for that cal-
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1 endar year shall, subject to paragraph (2),’’;

2 and

3 (B) by redesignating paragraph (2) as

4 paragraph (3) and inserting after paragraph

5 (1) the following:

6 ‘‘(2) REDUCED PREMIUMS.—The Corporation,

7 in its sole discretion, may reduce, by a percentage

8 uniformly applied to all insured System banks, the

9 annual premium due from each insured System bank

10 during any calendar year, as determined under para11 graph (1).’’.

12 (2) CONFORMING AMENDMENTS.—

13 (A) SECTION 5.55(b).—Section 5.55(b) (12

14 U.S.C. 2277a–4(b)) is amended—

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

16 place such term appears and inserting

17 ‘‘Farm Credit Insurance Fund’’;

18 (ii) by striking ‘‘for the following cal19 endar year’’; and

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

21 inserting ‘‘subsection (a)(1)’’.

22 (B) SECTION 5.56(a).—Section 5.56(a) (12

23 U.S.C. 2277a–5(a)) is amended in each of

24 paragraphs (2) and (3) by striking ‘‘section

25 5.55(a)(2)’’ and inserting ‘‘section 5.55(a)(3)’’.
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1 (C) SECTION 1.12(b).—Section 1.12(b) (12

2 U.S.C. 2020(b)) is amended—

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

4 defined in section 5.55(a)(3))’’ after ‘‘gov5 ernment-guaranteed loans’’; and

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

7 ‘‘(as so defined)’’ after ‘‘government-guar8 anteed loans’’ each place such term ap9 pears.

10 (b) TECHNICAL AMENDMENT.—Section 5.55(d) (12

11 U.S.C. 2277a–4(d)) is amended—

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

13 (A) by striking ‘‘and (c)’’ and inserting

14 ‘‘, (c), and (e)’’; and

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

16 inserting ‘‘an insured System bank’’; and

17 (2) by striking ‘‘Farm Credit Bank’’ each sub18 sequent place such term appears and inserting ‘‘in19 sured System bank’’.

20 (c) ALLOCATION TO INSURED SYSTEM BANKS OF

21 EXCESS AMOUNTS IN THE FARM CREDIT INSURANCE

22 FUND.—Section 5.55 (12 U.S.C. 2277a–4) is amended by

23 adding at the end the following:

24 ‘‘(e) ALLOCATION TO INSURED SYSTEM BANKS OF

25 EXCESS RESERVES.—
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1 ‘‘(1) ESTABLISHMENT OF ALLOCATED INSUR2 ANCE RESERVES ACCOUNTS.—There is hereby estab3 lished within the Farm Credit Insurance Fund for

4 each insured System bank an Allocated Insurance

5 Reserves Account. Amounts in any Allocated Insur6 ance Reserves Account shall be considered to be part

7 of the Farm Credit Insurance Fund.

8 ‘‘(2) ANNUAL ALLOCATIONS.—If, at the end of

9 any calendar year, the aggregate of the amounts in

10 the Farm Credit Insurance Fund exceeds the aver11 age secure base amount for the calendar year (as

12 calculated on an average daily balance basis), the

13 Corporation shall allocate to the insured System

14 banks’ Allocated Insurance Reserves Accounts such

15 excess amount less the amount that the Corporation,

16 in its sole discretion, determines to be the sum of

17 the estimated operating expenses and estimated in18 surance obligations of the Corporation for the imme19 diately succeeding calendar year.

20 ‘‘(3) ALLOCATION FORMULA.—From the total

21 amount required to be allocated at the end of a cal22 endar year pursuant to paragraph (2), there shall be

23 credited to the Allocated Insurance Reserves Ac24 count of each insured System bank an amount that

25 bears the same ratio to such total amount as the av-
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1 erage principal outstanding for the 3-year period

2 ending with the end of such calendar year on loans

3 made by the bank that are in accrual status bears

4 to the average principal outstanding for such 3-year

5 period on loans made by all insured System banks

6 that are in accrual status (excluding, in each case,

7 the guaranteed portions of government-guaranteed

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

9 ‘‘(4) USE OF FUNDS IN ALLOCATED INSURANCE

10 RESERVES ACCOUNTS.—To the extent that the sum

11 of the operating expenses of the Corporation and the

12 insurance obligations of the Corporation for a cal13 endar year exceeds the estimated sum described in

14 paragraph (2) for the calendar year, the Corporation

15 shall cover such expenses and obligations by reduc16 ing the Allocated Insurance Reserves Account of

17 each insured System bank by the same proportion

18 and expending the amounts so obtained, before ex19 pending other monies in the Fund.

20 ‘‘(5) OTHER DISPOSITION OF ACCOUNT

21 FUNDS.—

22 ‘‘(A) IN GENERAL.—Annually, as soon as

23 is practicable during each calendar year begin24 ning more than 5 years after the date on which

25 the aggregate of the amounts in the Farm
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1 Credit Insurance Fund exceeds the secure base

2 amount, the Corporation shall pay to each in3 sured System bank, in a manner determined by

4 the Corporation, an amount equal to the lesser

5 of—

6 ‘‘(i) 20 percent of the balance in the

7 bank’s Allocated Insurance Reserves Ac8 count as of the preceding December 31; or

9 ‘‘(ii) 20 percent of the balance in the

10 bank’s Allocated Insurance Reserves Ac11 count on the date of payment.

12 ‘‘(B) AUTHORITY TO ELIMINATE OR RE13 DUCE PAYMENTS.—The Corporation may elimi14 nate or reduce payments under subparagraph

15 (A) if the Corporation determines, in its sole

16 discretion, that such payments, or other cir17 cumstances that might require use of the Farm

18 Credit Insurance Fund, could cause the amount

19 in the Farm Credit Insurance Fund during that

20 calendar year to be less than the secure base

21 amount.’’.

22 SEC. 6. POWERS WITH RESPECT TO TROUBLED INSURED

23 SYSTEM BANKS.

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

25 (12 U.S.C. 2277a–10(a)(3)) is amended—
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1 (1) by redesignating subparagraph (B) as sub2 paragraph (F); and

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

4 the following:

5 ‘‘(A) LEAST-COST RESOLUTION.—Assist6 ance may not be provided to an insured System

7 bank under this subsection unless the total

8 amount of such assistance is the least costly to

9 the Farm Credit Insurance Fund of all possible

10 alternatives available to the Corporation, includ11 ing liquidation of the bank (including paying

12 the insured obligations issued on behalf of the

13 bank). Before making a least-cost determina14 tion under this subparagraph, the Corporation

15 shall accord such other insured System banks

16 as the Corporation determines appropriate the

17 opportunity to submit information relating to

18 such determination.

19 ‘‘(B) PROCEDURAL RULES.—In determin20 ing the least costly alternative under subpara21 graph (A), the Corporation shall—

22 ‘‘(i) evaluate alternatives on a

23 present-value basis, using a reasonable dis24 count rate;
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1 ‘‘(ii) document that evaluation and

2 the assumptions on which the evaluation is

3 based; and

4 ‘‘(iii) retain the documentation for not

5 less than 5 years.

6 ‘‘(C) TIME OF DETERMINATION.—

7 ‘‘(i) COST OF ASSISTANCE.—For pur8 poses of this subsection, the determination

9 of the costs of providing any assistance

10 under any provision of this section with re11 spect to any insured System bank shall be

12 made as of the date on which the Corpora13 tion makes the determination to provide

14 such assistance to the institution under

15 this section.

16 ‘‘(ii) COST OF LIQUIDATION.—For

17 purposes of this subsection, the determina18 tion of the costs of liquidation of any in19 sured System bank shall be made as of the

20 earliest of—

21 ‘‘(I) the date on which a con22 servator is appointed for the bank;

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

24 is appointed for the bank; or
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1 ‘‘(III) the date on which the Cor2 poration makes any determination to

3 provide any assistance under this sec4 tion with respect to the bank.

5 ‘‘(D) EVALUATION OF MANAGEMENT.—Be6 fore providing any assistance under paragraph

7 (1), the Corporation shall evaluate the adequacy

8 of the managerial resources of the bank. The

9 continued service of any director or senior rank10 ing officer who serves in a policymaking role for

11 the assisted bank, as determined by the Cor12 poration, shall be subject to approval by the

13 Corporation as a condition of such assistance.

14 ‘‘(E) DISCRETIONARY DETERMINATION.—

15 Any determination that the Corporation makes

16 under this paragraph shall be in the sole discre17 tion of the Corporation.’’.

18 (b) CONFORMING AMENDMENTS.—Section 5.61(a)

19 (12 U.S.C. 2277a–10(a)) is amended—

20 (1) in paragraph (1), by striking ‘‘IN GEN21 ERAL’’ and inserting ‘‘STAND-ALONE ASSISTANCE’’;

22 and

23 (2) in paragraph (2)—
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1 (A) by striking ‘‘ENUMERATED POWERS’’

2 and inserting ‘‘FACILITATION OF MERGERS OR

3 CONSOLIDATION’’; and

4 (B) in subparagraph (A), by striking ‘‘FA5 CILITATION OF MERGERS OR CONSOLIDATION’’

6 and inserting ‘‘IN GENERAL’’.

7 SEC. 7. FARM CREDIT SYSTEM INSURANCE CORPORATION

8 BOARD OF DIRECTORS.

9 Section 201 of the Farm Credit Banks and Associa10 tions Safety and Soundness Act of 1992 (106 Stat. 4104–

11 4105) is repealed.

12 SEC. 8. CONSERVATORSHIP AND RECEIVERSHIPS.

13 (a) INCLUSION AMONG GENERAL CORPORATE POW14 ERS.—Section 5.58(9) (12 U.S.C. 2277a–7(9)) is amend15 ed to read as follows:

16 ‘‘(9) CONSERVATOR OR RECEIVER.—The Cor17 poration may act as conservator or receiver.’’.

18 (b) CONFORMING AMENDMENTS.—Section 5.51 (12

19 U.S.C. 2277a) is amended by striking paragraph (5) and

20 redesignating paragraph (6) as paragraph (5).
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1 SEC. 9. OVERSIGHT AND REGULATORY ACTIONS BY THE

2 FARM CREDIT SYSTEM INSURANCE COR3 PORATION.

4 Part E of title V of the Farm Credit Act of 1971

5 (12 U.S.C. 2277–2277a–14) is amended by inserting after

6 section 5.61 the following:

7 ‘‘SEC. 5.61A. AUTHORITY TO REGULATE GOLDEN PARA8 CHUTE AND INDEMNIFICATION PAYMENTS.

9 ‘‘(a) IN GENERAL.—The Corporation may prohibit or

10 limit, by regulation or order, any golden parachute pay11 ment or indemnification payment by a Farm Credit Sys12 tem institution in troubled condition (as defined in regula13 tions issued by the Corporation).

14 ‘‘(b) FACTORS TO BE TAKEN INTO ACCOUNT.—The

15 Corporation shall prescribe, by regulation, the factors to

16 be considered by the Corporation in taking any action

17 under subsection (a), which may include the following:

18 ‘‘(1) Whether there is a reasonable basis to be19 lieve that the institution-related party has committed

20 any fraudulent act or omission, breach of trust or fi21 duciary duty, or insider abuse with regard to the

22 Farm Credit System institution involved that has

23 had a material effect on the financial condition of

24 the institution.

25 ‘‘(2) Whether there is a reasonable basis to be26 lieve that the institution-related party is substan-
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1 tially responsible for the insolvency of the Farm

2 Credit System institution, the appointment of a con3 servator or receiver for the institution, or the insti4 tution’s troubled condition (as defined in regulations

5 prescribed by the Corporation).

6 ‘‘(3) Whether there is a reasonable basis to be7 lieve that the institution-related party has materially

8 violated any applicable law or regulation that has

9 had a material effect on the financial condition of

10 the institution.

11 ‘‘(4) Whether there is a reasonable basis to be12 lieve that the institution-related party has violated

13 or conspired to violate—

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

15 1344 of title 18, United States Code; or

16 ‘‘(B) section 1341 or 1343 of title 18,

17 United States Code, affecting a Farm Credit

18 System institution.

19 ‘‘(5) Whether the institution-related party was

20 in a position of managerial or fiduciary responsibil21 ity.

22 ‘‘(6) The length of time that the party was re23 lated with the Farm Credit System institution and

24 the degree to which—
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1 ‘‘(A) the payment reasonably reflects com2 pensation earned over the period of employ3 ment; and

4 ‘‘(B) the compensation involved represents

5 a reasonable payment for services rendered.

6 ‘‘(c) 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 such payment—

10 ‘‘(1) is made in contemplation of the insolvency

11 of such institution or after the commission of an act

12 of insolvency; and

13 ‘‘(2) is made with a view to, or has the result

14 of—

15 ‘‘(A) preventing the proper application of

16 the assets of the institution to creditors; or

17 ‘‘(B) preferring one creditor over another.

18 ‘‘(d) GOLDEN PARACHUTE PAYMENT DEFINED.—As

19 used in this section:

20 ‘‘(1) IN GENERAL.—The term ‘golden para21 chute payment’ means any payment (or any agree22 ment to make any payment) in the nature of com23 pensation by any Farm Credit System institution for

24 the benefit of any institution-related party under an

25 obligation of the institution that—
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1 ‘‘(A) is contingent on the termination of

2 the party’s relationship with the institution; and

3 ‘‘(B) is received on or after the date on

4 which—

5 ‘‘(i) the institution is insolvent;

6 ‘‘(ii) any conservator or receiver is ap7 pointed for the institution;

8 ‘‘(iii) the Farm Credit Administration

9 has assigned the institution a composite

10 CAMEL rating of 4 or 5 under the Farm

11 Credit Administration Rating System, or

12 an equivalent rating; or

13 ‘‘(iv) the Corporation otherwise deter14 mines that the institution is in a troubled

15 condition (as defined in regulations issued

16 by the Corporation).

17 ‘‘(2) CERTAIN PAYMENTS IN CONTEMPLATION

18 OF AN EVENT.—Any payment that would be a gold19 en parachute payment but for the fact that the pay20 ment was made before the date referred to in para21 graph (1)(B) shall be treated as a golden parachute

22 payment if the payment was made in contemplation

23 of the occurrence of an event described in any clause

24 of such paragraph.
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1 ‘‘(3) CERTAIN PAYMENTS NOT INCLUDED.—The

2 term ‘golden parachute payment’ shall not include—

3 ‘‘(A) any payment made under a retire4 ment plan that is qualified (or is intended to be

5 qualified) under section 401 of the Internal

6 Revenue Code of 1986 or other nondiscrim7 inatory benefit plan;

8 ‘‘(B) any payment made under a bona fide

9 deferred compensation plan or arrangement

10 that the Corporation determines, by regulation

11 or order, to be permissible; or

12 ‘‘(C) any payment made by reason of the

13 death or disability of an institution-related

14 party.

15 ‘‘(e) OTHER DEFINITIONS.—As used in this section:

16 ‘‘(1) INDEMNIFICATION PAYMENT.—The term

17 ‘indemnification payment’ means any payment (or

18 any agreement to make any payment) by any Farm

19 Credit System institution for the benefit of any per20 son who is or was an institution-related party, to

21 pay or reimburse the person for any liability or legal

22 expense with regard to any administrative proceed23 ing or civil action instituted by the Farm Credit Ad24 ministration that results in a final order under

25 which the person—
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1 ‘‘(A) is assessed a civil money penalty; or

2 ‘‘(B) is removed or prohibited from partici3 pating in the conduct of the affairs of the insti4 tution.

5 ‘‘(2) LIABILITY OR LEGAL EXPENSE.—The

6 term ‘liability or legal expense’ means—

7 ‘‘(A) any legal or other professional ex8 pense incurred in connection with any claim,

9 proceeding, or action;

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

11 in connection with, any settlement of any claim,

12 proceeding, or action; and

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

14 in connection with, any judgment or penalty im15 posed with respect to any claim, proceeding, or

16 action.

17 ‘‘(3) PAYMENT.—The term ‘payment’ means—

18 ‘‘(A) any direct or indirect transfer of any

19 funds or any asset; and

20 ‘‘(B) any segregation of any funds or as21 sets for the purpose of making, or under an

22 agreement to make, any payment after the date

23 on which such funds or assets are segregated,

24 without regard to whether the obligation to

25 make such payment is contingent on—
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1 ‘‘(i) the determination, after such

2 date, of the liability for the payment of

3 such amount; or

4 ‘‘(ii) the liquidation, after such date,

5 of the amount of such payment.

6 ‘‘(4) INSTITUTION-RELATED PARTY.—The term

7 ‘institution-related party’ means—

8 ‘‘(A) any director, officer, employee, or

9 agent for a Farm Credit System institution;

10 ‘‘(B) any stockholder (other than another

11 Farm Credit System institution), consultant,

12 joint venture partner, or any other person de13 termined by the Farm Credit Administration to

14 be a participant in the conduct of the affairs of

15 a Farm Credit System institution; or

16 ‘‘(C) any independent contractor (including

17 any attorney, appraiser, or accountant) who

18 knowingly or recklessly participates in any vio19 lation of any law or regulation, any breach of

20 fiduciary duty, or any unsafe or unsound prac21 tice that caused or is likely to cause more than

22 a minimal financial loss to, or a significant ad23 verse effect on, the Farm Credit System institu24 tion.
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1 ‘‘(f) SPECIAL RULE.—No provision of this section

2 may be construed as prohibiting any Farm Credit System

3 institution from purchasing any commercial insurance pol4 icy or fidelity bond, except that such insurance policy or

5 bond shall not cover any legal or liability expense of the

6 institution that is described in subsection (e)(1).

7 ‘‘(g) SPECIAL RULE REGARDING THE FARM CREDIT

8 ADMINISTRATION.—No provision of this section may be

9 construed as limiting the powers, functions, or responsibil10 ities of the Farm Credit Administration.’’.

11 SEC. 10. FORMATION OF ADMINISTRATIVE SERVICE ENTI12 TIES.

13 Part E of title IV (12 U.S.C. 2211–2214) is amended

14 by adding at the end the following:

15 ‘‘SEC. 4.28A. DEFINITION OF BANK.

16 ‘‘As used in this part, the term ‘bank’ includes each

17 association operating under title II.’’.

18 SEC. 11. REQUIREMENTS FOR LOANS SOLD INTO THE SEC19 ONDARY MARKET.

20 (a) BORROWER STOCK.—Section 4.3A (12 U.S.C.

21 2154a) is amended—

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

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

24 (2) by inserting after subsection (e) the follow25 ing:
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1 ‘‘(f) LOANS DESIGNATED FOR SALE OR SOLD INTO

2 THE SECONDARY MARKET.—Notwithstanding any other

3 provision of this section:

4 ‘‘(1) GENERAL RULE.—Subject to paragraph

5 (2), the bylaws adopted by any bank or association

6 under subsection (b) may provide—

7 ‘‘(A) for any loan made on or after the

8 date of the enactment of this subsection that is

9 designated, at the time the loan is made, for

10 sale into a secondary market under title VIII or

11 otherwise, that no voting stock or participation

12 certificate purchase requirement shall apply to

13 the borrower of the loan; and

14 ‘‘(B) for any loan made before the date of

15 the enactment of this subsection that is sold

16 into a secondary market under title VIII or oth17 erwise, that all outstanding voting stock or par18 ticipation certificates held by the borrower with

19 respect to the loan shall, subject to subsection

20 (d)(1), be retired.

21 ‘‘(2) EXCEPTION.—If a loan designated for sale

22 as described in paragraph (1)(A) is not sold into a

23 secondary market within 1 year after the designa24 tion, the voting stock or participation certificate pur25 chase requirement that would otherwise apply to the
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1 loan in the absence of bylaw provisions adopted

2 under paragraph (1)(A) shall be effective, except

3 that the bylaws may provide that if such a loan is

4 thereafter sold into a secondary market, all out5 standing voting stock or participation certificates

6 held by the borrower with respect to such loan shall,

7 subject to subsection (d)(1), be retired.’’.

8 (b) BORROWER RIGHTS.—

9 (1) IN GENERAL.—Section 4.14A(a)(5) (12

10 U.S.C. 2202a(a)(5)) is amended to read as follows:

11 ‘‘(5) LOAN.—

12 ‘‘(A) IN GENERAL.—The term ‘loan’

13 means a loan made to a farmer, rancher, or

14 producer or harvester of aquatic products, for

15 any agricultural or aquatic purpose and other

16 credit needs of the borrower, including financ17 ing for basic processing and marketing directly

18 related to the borrower’s operations and those

19 of other eligible farmers, ranchers, and produc20 ers or harvesters of aquatic products.

21 ‘‘(B) EXCLUSION OF LOANS DESIGNATED

22 FOR SALE INTO A SECONDARY MARKET.—The

23 term ‘loan’ does not include a loan made on or

24 after the date of enactment of this subpara25 graph that, at the time the loan is made, is des-
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1 ignated for sale into a secondary market under

2 title VIII or otherwise, except as provided in

3 subparagraph (C).

4 ‘‘(C) SPECIAL RULE.—If a loan designated

5 for sale into a secondary market is not sold into

6 a secondary market within 1 year after such

7 designation, the provisions of sections 4.14,

8 4.14A, 4.14B, 4.14C, 4.14D, and 4.36 that

9 would apply to the loan in the absence of sub10 paragraph (B) shall apply to the loan until the

11 loan is so sold.’’.

12 (2) CONFORMING AMENDMENT.—Section 8.9(b)

13 (12 U.S.C. 2279aa–9(b)) is amended by inserting

14 ‘‘(as defined in section 4.14A(a)(5))’’ after ‘‘At the

15 time of application for a loan’’.

16 SEC. 12. REMOVAL OF ANTIQUATED AND UNNECESSARY PA17 PERWORK REQUIREMENTS.

18 (a) DISCLOSURE ON ADJUSTABLE RATE LOANS.—

19 Section 4.13(a)(4) (12 U.S.C. 2199(a)(4)) is amended by

20 inserting ‘‘, except that any regulation of the Farm Credit

21 Administration implementing this paragraph shall include

22 a provision permitting notice to a borrower of a change

23 in the interest rate applicable to the borrower’s loan to

24 be made within a reasonable time after the effective date

25 of the change’’ before the semicolon.
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1 (b) COMPENSATION OF ASSOCIATION PERSONNEL.—

2 Section 1.5(13) (12 U.S.C. 2013(13)) is amended by

3 striking ‘‘and the appointment and compensation of the

4 chief executive officer thereof,’’.

5 (c) JOINT MANAGEMENT AGREEMENTS.—Section

6 5.17(a)(2)(A) (12 U.S.C. 2252(a)(2)(A)) is amended in

7 the 1st sentence by striking ‘‘or management agree8 ments’’.

9 (d) REMOVAL OF CERTAIN BORROWER REPORTING

10 REQUIREMENTS.—Section 1.10(a) (12 U.S.C. 2018(a)) is

11 amended by striking paragraph (5).

12 (e) USE OF PRIVATE MORTGAGE INSURANCE.—

13 (1) IN GENERAL.—Section 1.10(a)(1) (12

14 U.S.C. 2018(a)(1)) is amended by adding at the end

15 the following:

16 ‘‘(D) PRIVATE MORTGAGE INSURANCE.—

17 Loans on which private mortgage insurance is

18 obtained may exceed 85 percent of the ap19 praised value of the real estate security to the

20 extent that the loan amount in excess of such

21 85 percent is covered by the insurance.’’.

22 (2) CONFORMING AMENDMENT.—Section

23 1.10(a)(1)(A) (12 U.S.C. 2018(a)(1)(A)) is amended

24 by striking ‘‘paragraphs (2) and (3)’’ and inserting

25 ‘‘subparagraphs (C) and (D)’’.
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1 (f) DISSEMINATION OF QUARTERLY REPORTS.—Sec2 tion 5.17(a)(8) (12 U.S.C. 2252(a)(8)) is amended by in3 serting ‘‘the requirements of the Farm Credit Administra4 tion governing the dissemination to stockholders of quar5 terly reports of System institutions may not be more bur6 densome or costly than the requirements applicable to na7 tional banks, and’’ after ‘‘except that’’.

8 SEC. 13. REMOVAL OF GOVERNMENT CERTIFICATION RE9 QUIREMENT FOR CERTAIN PRIVATE SECTOR

10 FINANCING.

11 Section 3.8(b)(1)(A) (12 U.S.C. 2129(b)(1)(A)) is

12 amended—

13 (1) by striking ‘‘have been certified by the Ad14 ministrator of the Rural Electrification Administra15 tion to be eligible for such’’ and inserting ‘‘are eligi16 ble under the Rural Electrification Act of 1936 for’’;

17 and

18 (2) by striking ‘‘loan guarantee, and’’ and in19 serting ‘‘loan guarantee from such agencies (or their

20 successors), and’’.
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•HR 2029 IH

1 SEC. 14. REFORM OF REGULATORY LIMITATIONS ON THE

2 DIVIDEND, MEMBER BUSINESS, AND VOTING

3 PRACTICES OF ELIGIBLE FARMER-OWNED

4 COOPERATIVES.

5 (a) IN GENERAL.—Section 3.8(a) (12 U.S.C.

6 2129(a)) is amended by adding at the end the following:

7 ‘‘Any such association that has received a loan from a

8 bank for cooperatives shall, without regard to the require9 ments of the preceding sentence, continue to be so eligible

10 for so long as more than 50 percent (or such higher per11 centage as is established by the bank board) of the voting

12 control of the association is held by farmers, producers

13 or harvesters of aquatic products, or eligible cooperative

14 associations.’’.

15 (b) CONFORMING AMENDMENT.—Section

16 3.8(b)(1)(D) (12 U.S.C. 2129(b)(1)(D)) is amended by in17 serting ‘‘, or under the last sentence,’’ after ‘‘(4)’’.

Æ

HR 2029 IH——2