104TH CONGRESS

1ST SESSION H. R. 2029

AN ACT

To amend the Farm Credit Act of 1971 to provide

regulatory relief, and for other purposes.
104TH CONGRESS

1ST SESSION H. R. 2029

AN ACT

To amend the Farm Credit Act of 1971 to provide regulatory

relief, and for other purposes.

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

2 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.

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.

Sec. 15. Extension of interest rate reduction program for 5 years.

3 SEC. 2. REFERENCES.

4 Except as otherwise expressly provided, wherever in

5 this Act an amendment or repeal is expressed in terms

6 of an amendment to, or repeal of, a section or other provi7 sion, the reference shall be considered to be made to a

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

9 SEC. 3. REGULATORY REVIEW.

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

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

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

13 has made considerable progress in reducing the reg14 ulatory burden on Farm Credit System institutions;

15 (2) the efforts of the Farm Credit Administra16 tion in this regard have resulted in cost savings for

17 Farm Credit System institutions; and
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1 (3) such cost savings ultimately benefit the Na2 tion’s farmers, ranchers, agricultural cooperatives,

3 and rural residents.

4 (b) REQUIREMENT FOR CONTINUED REVIEW.—The

5 Farm Credit Administration shall continue its comprehen6 sive review of regulations governing the Farm Credit Sys7 tem in order to further identify and eliminate, consistent

8 with safety and soundness, all regulations that are unnec9 essary, unduly burdensome or costly, or not based on

10 statute.

11 SEC. 4. EXAMINATION OF FARM CREDIT SYSTEM INSTITU12 TIONS.

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

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

15 ‘‘every 18 months’’.

16 SEC. 5. FARM CREDIT INSURANCE FUND OPERATIONS.

17 (a) ADJUSTMENT OF PREMIUMS.—

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

19 2277a–4(a)) is amended—

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

21 the aggregate of amounts in the Farm Credit

22 Insurance Fund exceeds the secure base

23 amount, the annual premium due from any in24 sured System bank for any calendar year shall’’

25 and inserting ‘‘If, at the end of any calendar
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1 year, the aggregate of the amounts in the Farm

2 Credit Insurance Fund does not exceed the se3 cure base amount, the annual premium due

4 from any insured System bank for that cal5 endar year shall, subject to paragraph (2),’’;

6 and

7 (B) by redesignating paragraph (2) as

8 paragraph (3) and inserting after paragraph

9 (1) the following:

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

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

12 uniformly applied to all insured System banks, the

13 annual premium due from each insured System bank

14 during any calendar year, as determined under para15 graph (1).’’.

16 (2) CONFORMING AMENDMENTS.—

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

18 U.S.C. 2277a–4(b)) is amended—

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

20 place such term appears and inserting

21 ‘‘Farm Credit Insurance Fund’’;

22 (ii) by striking ‘‘for the following cal23 endar year’’; and

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

25 inserting ‘‘subsection (a)(1)’’.
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1 (B) SECTION 5.56(a).—Section 5.56(a) (12

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

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

4 5.55(a)(2)’’ and inserting ‘‘section 5.55(a)(3)’’.

5 (C) SECTION 1.12(b).—Section 1.12(b) (12

6 U.S.C. 2020(b)) is amended—

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

8 defined in section 5.55(a)(3))’’ after ‘‘gov9 ernment-guaranteed loans’’; and

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

11 ‘‘(as so defined)’’ after ‘‘government-guar12 anteed loans’’ each place such term ap13 pears.

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

15 U.S.C. 2277a–4(d)) is amended—

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

17 (A) by striking ‘‘and (c)’’ and inserting ‘‘,

18 (c), and (e)’’; and

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

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

21 (2) by striking ‘‘Farm Credit Bank’’ each sub22 sequent place such term appears and inserting ‘‘in23 sured System bank’’.

24 (c) ALLOCATION TO INSURED SYSTEM BANKS AND

25 OTHER SYSTEM INSTITUTIONS OF EXCESS AMOUNTS IN
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1 THE FARM CREDIT INSURANCE FUND.—Section 5.55 (12

2 U.S.C. 2277a–4) is amended by adding at the end the fol3 lowing:

4 ‘‘(e) ALLOCATION TO SYSTEM INSTITUTIONS OF EX5 CESS RESERVES.—

6 ‘‘(1) ESTABLISHMENT OF ALLOCATED INSUR7 ANCE RESERVES ACCOUNTS.—There is hereby estab8 lished within the Farm Credit Insurance Fund—

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

10 ‘‘(B) subject to paragraph (5)(C), for all

11 holders, in the aggregate, of Financial Assist12 ance Corporation stock,

13 an Allocated Insurance Reserves Account. Amounts

14 in any Allocated Insurance Reserves Account shall

15 be considered to be part of the Farm Credit Insur16 ance Fund.

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

18 any calendar year, the aggregate of the amounts in

19 the Farm Credit Insurance Fund exceeds the aver20 age secure base amount for the calendar year (as

21 calculated on an average daily balance basis), the

22 Corporation shall allocate to the Allocated Insurance

23 Reserves Accounts such excess amount less the

24 amount that the Corporation, in its sole discretion,

25 determines to be the sum of the estimated operating
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1 expenses and estimated insurance obligations of the

2 Corporation for the immediately succeeding calendar

3 year.

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

5 amount required to be allocated at the end of a cal6 endar year pursuant to paragraph (2)—

7 ‘‘(A) 10 percent of such total amount shall

8 be credited to the Allocated Insurance Reserves

9 Account established under paragraph (1)(B),

10 subject to paragraph (5)(C); and

11 ‘‘(B) there shall be credited to the Allo12 cated Insurance Reserves Account of each in13 sured System bank an amount that bears the

14 same ratio to such total amount (less any re15 duction under subparagraph (A)) as the aver16 age principal outstanding for the 3-year period

17 ending with the end of such calendar year on

18 loans made by the bank that are in accrual sta19 tus bears to the average principal outstanding

20 for such 3-year period on loans made by all in21 sured System banks that are in accrual status

22 (excluding, in each case, the guaranteed por23 tions of government-guaranteed loans described

24 in subsection (a)(1)(C)).
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1 ‘‘(4) USE OF FUNDS IN ALLOCATED INSURANCE

2 RESERVES ACCOUNTS.—To the extent that the sum

3 of the operating expenses of the Corporation and the

4 insurance obligations of the Corporation for a cal5 endar year exceeds the estimated sum described in

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

7 shall cover such expenses and obligations by reduc8 ing each Allocated Insurance Reserves Account by

9 the same proportion and expending the amounts so

10 obtained, before expending other monies in the

11 Fund.

12 ‘‘(5) OTHER DISPOSITION OF ACCOUNT

13 FUNDS.—

14 ‘‘(A) IN GENERAL.—Beginning in calendar

15 year 2003, if the aggregate of the amounts in

16 the Farm Credit Insurance Fund exceeds the

17 secure base amount, the Corporation may—

18 ‘‘(i) subject to subparagraph (D), pay

19 to each insured System bank, in a manner

20 determined by the Corporation, an amount

21 equal to the lesser of—

22 ‘‘(I) 20 percent of the balance in

23 the bank’s Allocated Insurance Re24 serves Account as of the preceding

25 December 31; or
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1 ‘‘(II) 20 percent of the balance in

2 the bank’s Allocated Insurance Re3 serves Account on the date of pay4 ment; and

5 ‘‘(ii) subject to subparagraphs (C)

6 and (E), pay to each System bank and as7 sociation holding Financial Assistance Cor8 poration stock its proportionate share, de9 termined by dividing the number of shares

10 of Financial Assistance Corporation stock

11 held by such institution by the total num12 ber of shares of Financial Assistance Cor13 poration stock outstanding, of the lesser

14 of—

15 ‘‘(I) 20 percent of the balance in

16 the Allocated Insurance Reserves Ac17 count established under paragraph

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

19 31; or

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

21 the Allocated Insurance Reserves Ac22 count established under paragraph

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

24 ‘‘(B) AUTHORITY TO ELIMINATE OR RE25 DUCE PAYMENTS.—The Corporation may elimi-
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1 nate or reduce payments under subparagraph

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

3 discretion, that such payments, or other cir4 cumstances that might require use of the Farm

5 Credit Insurance Fund, could cause the amount

6 in the Farm Credit Insurance Fund during that

7 calendar year to be less than the secure base

8 amount.

9 ‘‘(C) REIMBURSEMENT FOR FINANCIAL AS10 SISTANCE CORPORATION STOCK.—

11 ‘‘(i) SUFFICIENT FUNDING.—Notwith12 standing paragraph (3)(A), upon provision

13 by the Corporation for the accumulation in

14 the account established under paragraph

15 (1)(B) of funds in an amount equal to $56

16 million, the Corporation shall not allocate

17 any further funds to such account except

18 to replenish such account in the event that

19 funds are diminished below such amount

20 by the Corporation pursuant to paragraph

21 (4).

22 ‘‘(ii) WIND DOWN AND TERMI23 NATION.—

24 ‘‘(I) FINAL DISBURSEMENTS.—

25 Upon disbursement of a total of $53
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1 million from such Allocated Insurance

2 Reserves Account, the Corporation

3 shall disburse the remaining amounts

4 in such account, as determined under

5 paragraph (5)(A)(ii), without regard

6 to the percentage limitation in

7 subclauses (I) and (II) thereof.

8 ‘‘(II) TERMINATION OF AC9 COUNT.—Upon disbursement of a

10 total of $56 million from such Allo11 cated Insurance Reserves Account es12 tablished under paragraph (1)(B), the

13 Corporation shall close the Allocated

14 Insurance Reserves Account estab15 lished under paragraph (1)(B) and

16 transfer any remaining funds in such

17 Account to the remaining Allocated

18 Insurance Reserves Accounts in ac19 cordance with the formula in para20 graph (3)(B) for the calendar year in

21 which the transfer occurs.

22 ‘‘(D) DISTRIBUTION OF PAYMENTS RE23 CEIVED.—Within 60 days after receipt of a

24 payment made under subparagraph (5)(A)(i),

25 each insured System bank, in consultation with
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1 its affiliated associations, and taking into ac2 count the direct or indirect payment of insur3 ance premiums by such associations, shall de4 velop and implement an equitable plan to dis5 tribute payments received pursuant to subpara6 graph (5)(A)(i) among the bank and its associa7 tions.

8 ‘‘(E) EXCEPTION FOR PREVIOUSLY REIM9 BURSED ASSOCIATIONS.—For purposes of sub10 paragraph (5)(A)(ii), in any Farm Credit Dis11 trict in which the funding bank has reimbursed

12 one or more of its affiliated associations for the

13 previously unreimbursed portion of the Finan14 cial Assistance stock held by such associations,

15 the funding bank shall be deemed to be the

16 holder of the shares of Financial Assistance

17 Corporation stock for which it has provided

18 such reimbursement.’’.

19 SEC. 6. POWERS WITH RESPECT TO TROUBLED INSURED

20 SYSTEM BANKS.

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

22 (12 U.S.C. 2277a–10(a)(3)) is amended—

23 (1) by redesignating subparagraph (B) as sub24 paragraph (F); and
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1 (2) by striking subparagraph (A) and inserting

2 the following:

3 ‘‘(A) LEAST-COST RESOLUTION.—Assist4 ance may not be provided to an insured System

5 bank under this subsection unless the total

6 amount of such assistance is the least costly to

7 the Farm Credit Insurance Fund of all possible

8 alternatives available to the Corporation, includ9 ing liquidation of the bank (including paying

10 the insured obligations issued on behalf of the

11 bank). Before making a least-cost determina12 tion under this subparagraph, the Corporation

13 shall accord such other insured System banks

14 as the Corporation determines appropriate the

15 opportunity to submit information relating to

16 such determination.

17 ‘‘(B) PROCEDURAL RULES.—In determin18 ing the least costly alternative under subpara19 graph (A), the Corporation shall—

20 ‘‘(i) evaluate alternatives on a

21 present-value basis, using a reasonable dis22 count rate;

23 ‘‘(ii) document that evaluation and

24 the assumptions on which the evaluation is

25 based; and
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1 ‘‘(iii) retain the documentation for not

2 less than 5 years.

3 ‘‘(C) TIME OF DETERMINATION.—

4 ‘‘(i) COST OF ASSISTANCE.—For pur5 poses of this subsection, the determination

6 of the costs of providing any assistance

7 under any provision of this section with re8 spect to any insured System bank shall be

9 made as of the date on which the Corpora10 tion makes the determination to provide

11 such assistance to the institution under

12 this section.

13 ‘‘(ii) COST OF LIQUIDATION.—For

14 purposes of this subsection, the determina15 tion of the costs of liquidation of any in16 sured System bank shall be made as of the

17 earliest of—

18 ‘‘(I) the date on which a con19 servator is appointed for the bank;

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

21 is appointed for the bank; or

22 ‘‘(III) the date on which the Cor23 poration makes any determination to

24 provide any assistance under this sec25 tion with respect to the bank.
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1 ‘‘(D) EVALUATION OF MANAGEMENT.—Be2 fore providing any assistance under paragraph

3 (1), the Corporation shall evaluate the adequacy

4 of the managerial resources of the bank. The

5 continued service of any director or senior rank6 ing officer who serves in a policymaking role for

7 the assisted bank, as determined by the Cor8 poration, shall be subject to approval by the

9 Corporation as a condition of such assistance.

10 ‘‘(E) DISCRETIONARY DETERMINATION.—

11 Any determination that the Corporation makes

12 under this paragraph shall be in the sole discre13 tion of the Corporation.’’.

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

15 (12 U.S.C. 2277a–10(a)) is amended—

16 (1) in paragraph (1), by striking ‘‘IN GEN17 ERAL’’ and inserting ‘‘STAND-ALONE ASSISTANCE’’;

18 and

19 (2) in paragraph (2)—

20 (A) by striking ‘‘ENUMERATED POWERS’’

21 and inserting ‘‘FACILITATION OF MERGERS OR

22 CONSOLIDATION’’; and

23 (B) in subparagraph (A), by striking ‘‘FA24 CILITATION OF MERGERS OR CONSOLIDATION’’

25 and inserting ‘‘IN GENERAL’’.
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1 SEC. 7. FARM CREDIT SYSTEM INSURANCE CORPORATION

2 BOARD OF DIRECTORS.

3 Section 201 of the Farm Credit Banks and Associa4 tions Safety and Soundness Act of 1992 (106 Stat. 4104–

5 4105) is repealed.

6 SEC. 8. CONSERVATORSHIP AND RECEIVERSHIPS.

7 (a) INCLUSION AMONG GENERAL CORPORATE POW8 ERS.—Section 5.58(9) (12 U.S.C. 2277a–7(9)) is amend9 ed to read as follows:

10 ‘‘(9) CONSERVATOR OR RECEIVER.—The Cor11 poration may act as conservator or receiver.’’.

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

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

14 redesignating paragraph (6) as paragraph (5).

15 SEC. 9. OVERSIGHT AND REGULATORY ACTIONS BY THE

16 FARM CREDIT SYSTEM INSURANCE COR17 PORATION.

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

19 (12 U.S.C. 2277–2277a–14) is amended by inserting after

20 section 5.61 the following:

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

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

24 limit, by regulation or order, any golden parachute pay25 ment or indemnification payment by a Farm Credit Sys26 tem institution (including the Federal Agricultural Mort-
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1 gage Corporation and any conservator or receiver for the

2 Federal Agricultural Mortgage Corporation) in troubled

3 condition (as defined in regulations issued by the Corpora4 tion).

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

6 Corporation shall prescribe, by regulation, the factors to

7 be considered by the Corporation in taking any action

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

9 ‘‘(1) Whether there is a reasonable basis to be10 lieve that the institution-related party has committed

11 any fraudulent act or omission, breach of trust or fi12 duciary duty, or insider abuse with regard to the

13 Farm Credit System institution involved that has

14 had a material effect on the financial condition of

15 the institution.

16 ‘‘(2) Whether there is a reasonable basis to be17 lieve that the institution-related party is substan18 tially responsible for the insolvency of the Farm

19 Credit System institution, the appointment of a con20 servator or receiver for the institution, or the insti21 tution’s troubled condition (as defined in regulations

22 prescribed by the Corporation).

23 ‘‘(3) Whether there is a reasonable basis to be24 lieve that the institution-related party has materially

25 violated any applicable law or regulation that has
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1 had a material effect on the financial condition of

2 the institution.

3 ‘‘(4) Whether there is a reasonable basis to be4 lieve that the institution-related party has violated

5 or conspired to violate—

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

7 1344 of title 18, United States Code; or

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

9 United States Code, affecting a Farm Credit

10 System institution.

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

12 in a position of managerial or fiduciary responsibil13 ity.

14 ‘‘(6) The length of time that the party was re15 lated with the Farm Credit System institution and

16 the degree to which—

17 ‘‘(A) the payment reasonably reflects com18 pensation earned over the period of employ19 ment; and

20 ‘‘(B) the compensation involved represents

21 a reasonable payment for services rendered.

22 ‘‘(c) CERTAIN PAYMENTS PROHIBITED.—No Farm

23 Credit System institution may prepay the salary or any

24 liability or legal expense of any institution-related party

25 if such payment—
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1 ‘‘(1) is made in contemplation of the insolvency

2 of such institution or after the commission of an act

3 of insolvency; and

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

5 of—

6 ‘‘(A) preventing the proper application of

7 the assets of the institution to creditors; or

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

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

10 used in this section:

11 ‘‘(1) IN GENERAL.—The term ‘golden para12 chute payment’ means any payment (or any agree13 ment to make any payment) in the nature of com14 pensation by any Farm Credit System institution for

15 the benefit of any institution-related party under an

16 obligation of the institution that—

17 ‘‘(A) is contingent on the termination of

18 the party’s relationship with the institution; and

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

20 which—

21 ‘‘(i) the institution is insolvent;

22 ‘‘(ii) any conservator or receiver is ap23 pointed for the institution;

24 ‘‘(iii) the Farm Credit Administration

25 has assigned the institution a composite
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1 CAMEL rating of 4 or 5 under the Farm

2 Credit Administration Rating System, or

3 an equivalent rating; or

4 ‘‘(iv) the Corporation otherwise deter5 mines that the institution is in a troubled

6 condition (as defined in regulations issued

7 by the Corporation).

8 ‘‘(2) CERTAIN PAYMENTS IN CONTEMPLATION

9 OF AN EVENT.—Any payment that would be a gold10 en parachute payment but for the fact that the pay11 ment was made before the date referred to in para12 graph (1)(B) shall be treated as a golden parachute

13 payment if the payment was made in contemplation

14 of the occurrence of an event described in any clause

15 of such paragraph.

16 ‘‘(3) CERTAIN PAYMENTS NOT INCLUDED.—The

17 term ‘golden parachute payment’ shall not include—

18 ‘‘(A) any payment made under a retire19 ment plan that is qualified (or is intended to be

20 qualified) under section 401 of the Internal

21 Revenue Code of 1986 or other nondiscrim22 inatory benefit plan;

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

24 deferred compensation plan or arrangement
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1 that the Corporation determines, by regulation

2 or order, to be permissible; or

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

4 death or disability of an institution-related

5 party.

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

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

8 ‘indemnification payment’ means any payment (or

9 any agreement to make any payment) by any Farm

10 Credit System institution for the benefit of any per11 son who is or was an institution-related party, to

12 pay or reimburse the person for any liability or legal

13 expense with regard to any administrative proceed14 ing or civil action instituted by the Farm Credit Ad15 ministration that results in a final order under

16 which the person—

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

18 ‘‘(B) is removed or prohibited from partici19 pating in the conduct of the affairs of the insti20 tution.

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

22 term ‘liability or legal expense’ means—

23 ‘‘(A) any legal or other professional ex24 pense incurred in connection with any claim,

25 proceeding, or action;
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1 ‘‘(B) the amount of, and any cost incurred

2 in connection with, any settlement of any claim,

3 proceeding, or action; and

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

5 in connection with, any judgment or penalty im6 posed with respect to any claim, proceeding, or

7 action.

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

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

10 funds or any asset; and

11 ‘‘(B) any segregation of any funds or as12 sets for the purpose of making, or under an

13 agreement to make, any payment after the date

14 on which such funds or assets are segregated,

15 without regard to whether the obligation to

16 make such payment is contingent on—

17 ‘‘(i) the determination, after such

18 date, of the liability for the payment of

19 such amount; or

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

21 of the amount of such payment.

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

23 ‘institution-related party’ means—

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

25 agent for a Farm Credit System institution;
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1 ‘‘(B) any stockholder (other than another

2 Farm Credit System institution), consultant,

3 joint venture partner, or any other person de4 termined by the Farm Credit Administration to

5 be a participant in the conduct of the affairs of

6 a Farm Credit System institution;

7 ‘‘(C) any independent contractor (including

8 any attorney, appraiser, or accountant) who

9 knowingly or recklessly participates in any vio10 lation of any law or regulation, any breach of

11 fiduciary duty, or any unsafe or unsound prac12 tice that caused or is likely to cause more than

13 a minimal financial loss to, or a significant ad14 verse effect on, the Farm Credit System institu15 tion; or

16 ‘‘(D) any receiver or conservator of a

17 Farm Credit System institution.

18 ‘‘(f) SPECIAL RULE.—No provision of this section

19 may be construed as prohibiting any Farm Credit System

20 institution from purchasing any commercial insurance pol21 icy or fidelity bond, except that such insurance policy or

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

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

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

25 ADMINISTRATION.—No provision of this section may be
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1 construed as limiting the powers, functions, or responsibil2 ities of the Farm Credit Administration.’’.

3 SEC. 10. FORMATION OF ADMINISTRATIVE SERVICE ENTI4 TIES.

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

6 by adding at the end the following:

7 ‘‘SEC. 4.28A. DEFINITION OF BANK.

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

9 association operating under title II.’’.

10 SEC. 11. REQUIREMENTS FOR LOANS SOLD INTO THE SEC11 ONDARY MARKET.

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

13 2154a) is amended—

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

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

16 (2) by inserting after subsection (e) the follow17 ing:

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

19 THE SECONDARY MARKET.—Notwithstanding any other

20 provision of this section:

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

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

23 under subsection (b) may provide—

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

25 date of the enactment of this subsection that is
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1 designated, at the time the loan is made, for

2 sale into a secondary market under title VIII or

3 otherwise, that no voting stock or participation

4 certificate purchase requirement shall apply to

5 the borrower of the loan; and

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

7 the enactment of this subsection that is sold

8 into a secondary market under title VIII or oth9 erwise, that all outstanding voting stock or par10 ticipation certificates held by the borrower with

11 respect to the loan shall, subject to subsection

12 (d)(1), be retired.

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

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

15 secondary market within 180 days after the designa16 tion, the voting stock or participation certificate pur17 chase requirement that would otherwise apply to the

18 loan in the absence of bylaw provisions adopted

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

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

21 thereafter sold into a secondary market, all out22 standing voting stock or participation certificates

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

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

25 (b) BORROWER RIGHTS.—
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1 (1) IN GENERAL.—Section 4.14A(a)(5) (12

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

3 ‘‘(5) LOAN.—

4 ‘‘(A) IN GENERAL.—The term ‘loan’

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

6 producer or harvester of aquatic products, for

7 any agricultural or aquatic purpose and other

8 credit needs of the borrower, including financ9 ing for basic processing and marketing directly

10 related to the borrower’s operations and those

11 of other eligible farmers, ranchers, and produc12 ers or harvesters of aquatic products.

13 ‘‘(B) EXCLUSION OF LOANS DESIGNATED

14 FOR SALE INTO A SECONDARY MARKET.—The

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

16 after the date of enactment of this subpara17 graph that, at the time the loan is made, is des18 ignated for sale into a secondary market under

19 title VIII or otherwise, except as provided in

20 subparagraph (C).

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

22 for sale into a secondary market is not sold into

23 a secondary market within 180 days after such

24 designation, the provisions of sections 4.14,

25 4.14A, 4.14B, 4.14C, 4.14D, and 4.36 that
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1 would apply to the loan in the absence of sub2 paragraph (B) shall apply to the loan until the

3 loan is so sold.’’.

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

5 (12 U.S.C. 2279aa–9(b)) is amended by inserting

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

7 time of application for a loan’’.

8 SEC. 12. REMOVAL OF ANTIQUATED AND UNNECESSARY PA9 PERWORK REQUIREMENTS.

10 (a) DISCLOSURE ON ADJUSTABLE RATE LOANS.—

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

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

13 Administration implementing this paragraph shall include

14 a provision permitting notice to a borrower of a change

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

16 be made within a reasonable time after the effective date

17 of the change’’ before the semicolon.

18 (b) COMPENSATION OF ASSOCIATION PERSONNEL.—

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

20 striking ‘‘and the appointment and compensation of the

21 chief executive officer thereof,’’.

22 (c) JOINT MANAGEMENT AGREEMENTS.—Section

23 5.17(a)(2)(A) (12 U.S.C. 2252(a)(2)(A)) is amended in

24 the 1st sentence by striking ‘‘or management agree25 ments’’.
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1 (d) REMOVAL OF CERTAIN BORROWER REPORTING

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

3 amended by striking paragraph (5).

4 (e) USE OF PRIVATE MORTGAGE INSURANCE.—

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

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

7 the following:

8 ‘‘(D) PRIVATE MORTGAGE INSURANCE.—

9 Loans on which private mortgage insurance is

10 obtained may exceed 85 percent of the ap11 praised value of the real estate security to the

12 extent that the loan amount in excess of such

13 85 percent is covered by the insurance.’’.

14 (2) CONFORMING AMENDMENT.—Section

15 1.10(a)(1)(A) (12 U.S.C. 2018(a)(1)(A)) is amended

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

17 ‘‘subparagraphs (C) and (D)’’.

18 (f) DISSEMINATION OF QUARTERLY REPORTS.—Sec19 tion 5.17(a)(8) (12 U.S.C. 2252(a)(8)) is amended by in20 serting ‘‘the requirements of the Farm Credit Administra21 tion governing the dissemination to stockholders of quar22 terly reports of System institutions may not be more bur23 densome or costly than the requirements applicable to na24 tional banks, and’’ after ‘‘except that’’.
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1 SEC. 13. REMOVAL OF GOVERNMENT CERTIFICATION RE2 QUIREMENT FOR CERTAIN PRIVATE SECTOR

3 FINANCING.

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

5 amended—

6 (1) by striking ‘‘have been certified by the Ad7 ministrator of the Rural Electrification Administra8 tion to be eligible for such’’ and inserting ‘‘are eligi9 ble under the Rural Electrification Act of 1936 for’’;

10 and

11 (2) by striking ‘‘loan guarantee, and’’ and in12 serting ‘‘loan guarantee from such agencies (or their

13 successors), and’’.

14 SEC. 14. REFORM OF REGULATORY LIMITATIONS ON THE

15 DIVIDEND, MEMBER BUSINESS, AND VOTING

16 PRACTICES OF ELIGIBLE FARMER-OWNED

17 COOPERATIVES.

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

19 2129(a)) is amended by adding at the end the following:

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

21 bank for cooperatives shall, without regard to the require22 ments of the preceding sentence, continue to be so eligible

23 for so long as more than 50 percent (or such higher per24 centage as is established by the bank board) of the voting

25 control of the association is held by farmers, producers
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1 or harvesters of aquatic products, or eligible cooperative

2 associations.’’.

3 (b) CONFORMING AMENDMENT.—Section

4 3.8(b)(1)(D) (12 U.S.C. 2129(b)(1)(D)) is amended by in5 serting ‘‘, or under the last sentence,’’ after ‘‘(4)’’.

6 SEC. 15. EXTENSION OF INTEREST RATE REDUCTION PRO7 GRAM FOR 5 YEARS.

8 Section 1320 of the Food Security Act of 1985 (7

9 U.S.C. 1999 note) is amended by striking ‘‘1995’’ and in10 serting ‘‘2000’’.

Passed the House of Representatives December 19,

1995.

Attest:

Clerk.