Union Calendar No. 207

104TH CONGRESS

1ST SESSION H. R. 2029

[Report No. 104–421]

A BILL

To amend the Farm Credit Act of 1971 to provide

regulatory relief.

DECEMBER 18 (legislative day, DECEMBER 15), 1995

Reported with amendments, committed to the Committee

dered to be printedof the Whole House on the State of the Union, and or-
IB

Union Calendar No. 207

104TH CONGRESS

1ST SESSION H. R. 2029

[Report No. 104–421]

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

DECEMBER 18 (legislative day, DECEMBER 15), 1995

Additional sponsors: Mr. HOLDEN, Mr. BALDACCI, Mrs. CHENOWETH, Mr.

POMEROY, Mr. EWING, Mr. MINGE, Mr. COOLEY, Mr. LAHOOD, Mr. BLILEY, Mr. STENHOLM, Mr. LUCAS, Mr. CRAPO, Mr. LEWIS of Kentucky,

Mr. WHITFIELD, Mr. MCHUGH, Mr. BONIOR, Ms. MCKINNEY, Mr.

CHAMBLISS, Mr. TAYLOR of North Carolina, Mr. BOEHLERT, Mr.

CONDIT, Mr. KINGSTON, Mr. SPRATT, Mr. POMBO, Mr. WALSH, Mr.

NEAL of Massachusetts, Mr. HINCHEY, Mr. HERGER, and Mr. OLVER

DECEMBER 18 (legislative day, DECEMBER 15), 1995

Reported with amendments, committed to the Committee of the Whole House

on the State of the Union, and ordered to be printed

[Strike out all after the enacting clause and insert the part printed in italic]

[For text of introduced bill, see copy of bill as introduced on July 13, 1995]

A BILL

To amend the Farm Credit Act of 1971 to provide regulatory

relief.
2

•HR 2029 RH

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 this

7 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.

8 SEC. 2. REFERENCES.

9 Except as otherwise expressly provided, wherever in

10 this Act an amendment or repeal is expressed in terms of

11 an amendment to, or repeal of, a section or other provision,

12 the reference shall be considered to be made to a section or

13 other provision of the Farm Credit Act of 1971.

14 SEC. 3. REGULATORY REVIEW.

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

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

17 as an arms-length, safety and soundness regulator,
3

•HR 2029 RH

1 has made considerable progress in reducing the regu2 latory burden on Farm Credit System institutions;

3 (2) the efforts of the Farm Credit Administration

4 in this regard have resulted in cost savings for Farm

5 Credit System institutions; and

6 (3) such cost savings ultimately benefit the Na7 tion’s farmers, ranchers, agricultural cooperatives,

8 and rural residents.

9 (b) REQUIREMENT FOR CONTINUED REVIEW.—The

10 Farm Credit Administration shall continue its comprehen11 sive review of regulations governing the Farm Credit Sys12 tem in order to further identify and eliminate, consistent

13 with safety and soundness, all regulations that are unneces14 sary, unduly burdensome or costly, or not based on statute.

15 SEC. 4. EXAMINATION OF FARM CREDIT SYSTEM INSTITU16 TIONS.

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

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

19 ‘‘every 18 months’’.

20 SEC. 5. FARM CREDIT INSURANCE FUND OPERATIONS.

21 (a) ADJUSTMENT OF PREMIUMS.—

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

23 2277a–4(a)) is amended—

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

25 the aggregate of amounts in the Farm Credit In-
4

•HR 2029 RH

1 surance Fund exceeds the secure base amount,

2 the annual premium due from any insured Sys3 tem bank for any calendar year shall’’ and in4 serting ‘‘If, at the end of any calendar year, the

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

7 amount, the annual premium due from any in8 sured System bank for that calendar year shall,

9 subject to paragraph (2),’’; and

10 (B) by redesignating paragraph (2) as

11 paragraph (3) and inserting after paragraph (1)

12 the following:

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

14 its sole discretion, may reduce, by a percentage uni15 formly applied to all insured System banks, the an16 nual premium due from each insured System bank

17 during any calendar year, as determined under para18 graph (1).’’.

19 (2) CONFORMING AMENDMENTS.—

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

21 U.S.C. 2277a–4(b)) is amended—

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

23 place such term appears and inserting

24 ‘‘Farm Credit Insurance Fund’’;
5

•HR 2029 RH

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).—Section 5.56(a) (12

6 U.S.C. 2277a–5(a)) is amended in each of para7 graphs (2) and (3) by striking ‘‘section

8 5.55(a)(2)’’ and inserting ‘‘section 5.55(a)(3)’’.

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

10 U.S.C. 2020(b)) is amended—

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

12 defined in section 5.55(a)(3))’’ after ‘‘gov13 ernment-guaranteed loans’’; and

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

15 ‘‘(as so defined)’’ after ‘‘government-guaran16 teed loans’’ each place such term appears.

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

18 U.S.C. 2277a–4(d)) is amended—

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

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

21 (c), and (e)’’; and

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

23 inserting ‘‘an insured System bank’’; and
6

•HR 2029 RH

1 (2) by striking ‘‘Farm Credit Bank’’ each subse2 quent place such term appears and inserting ‘‘insured

3 System bank’’.

4 (c) ALLOCATION TO INSURED SYSTEM BANKS AND

5 OTHER SYSTEM INSTITUTIONS OF EXCESS AMOUNTS IN

6 THE FARM CREDIT INSURANCE FUND.—Section 5.55 (12

7 U.S.C. 2277a–4) is amended by adding at the end the fol8 lowing:

9 ‘‘(e) ALLOCATION TO SYSTEM INSTITUTIONS OF EX10 CESS RESERVES.—

11 ‘‘(1) ESTABLISHMENT OF ALLOCATED INSURANCE

12 RESERVES ACCOUNTS.—There is hereby established

13 within the Farm Credit Insurance Fund—

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

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

16 holders, in the aggregate, of Financial Assistance

17 Corporation stock,

18 an Allocated Insurance Reserves Account. Amounts in

19 any Allocated Insurance Reserves Account shall be

20 considered to be part of the Farm Credit Insurance

21 Fund.

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

23 any calendar year, the aggregate of the amounts in

24 the Farm Credit Insurance Fund exceeds the average

25 secure base amount for the calendar year (as cal-
7

•HR 2029 RH

1 culated on an average daily balance basis), the Cor2 poration shall allocate to the Allocated Insurance Re3 serves Accounts such excess amount less the amount

4 that the Corporation, in its sole discretion, determines

5 to be the sum of the estimated operating expenses and

6 estimated insurance obligations of the Corporation for

7 the immediately succeeding calendar year.

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

9 amount required to be allocated at the end of a cal10 endar year pursuant to paragraph (2)—

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

12 be credited to the Allocated Insurance Reserves

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

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

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

16 Insurance Reserves Account of each insured Sys17 tem bank an amount that bears the same ratio

18 to such total amount (less any reduction under

19 subparagraph (A)) as the average principal out20 standing for the 3-year period ending with the

21 end of such calendar year on loans made by the

22 bank that are in accrual status bears to the aver23 age principal outstanding for such 3-year period

24 on loans made by all insured System banks that

25 are in accrual status (excluding, in each case,
8

•HR 2029 RH

1 the guaranteed portions of government-guaran2 teed loans described in subsection (a)(1)(C)).

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

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

5 the operating expenses of the Corporation and the in6 surance obligations of the Corporation for a calendar

7 year exceeds the estimated sum described in para8 graph (2) for the calendar year, the Corporation shall

9 cover such expenses and obligations by reducing each

10 Allocated Insurance Reserves Account by the same

11 proportion and expending the amounts so obtained,

12 before expending other monies in the Fund.

13 ‘‘(5) OTHER DISPOSITION OF ACCOUNT FUNDS.—

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

15 year 2003, if the aggregate of the amounts in the

16 Farm Credit Insurance Fund exceeds the secure

17 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 Reserves

24 Account as of the preceding December

25 31; or
9

•HR 2029 RH

1 ‘‘(II) 20 percent of the balance in

2 the bank’s Allocated Insurance Reserves

3 Account on the date of payment; and

4 ‘‘(ii) subject to subparagraphs (C) and

5 (E), pay to each System bank and associa6 tion holding Financial Assistance Corpora7 tion stock its proportionate share, deter8 mined by dividing the number of shares of

9 Financial Assistance Corporation stock held

10 by such institution by the total number of

11 shares of Financial Assistance Corporation

12 stock outstanding, of the lesser of—

13 ‘‘(I) 20 percent of the balance in

14 the Allocated Insurance Reserves Ac15 count established under paragraph

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

17 31; or

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

19 the Allocated Insurance Reserves Ac20 count established under paragraph

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

22 ‘‘(B) AUTHORITY TO ELIMINATE OR REDUCE

23 PAYMENTS.—The Corporation may eliminate or

24 reduce payments under subparagraph (A) if the

25 Corporation determines, in its sole discretion,
10

•HR 2029 RH

1 that such payments, or other circumstances that

2 might require use of the Farm Credit Insurance

3 Fund, could cause the amount in the Farm Cred4 it Insurance Fund during that calendar year to

5 be less than the secure base amount.

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

8 ‘‘(i) SUFFICIENT FUNDING.—Notwith9 standing paragraph (3)(A), upon provision

10 by the Corporation for the accumulation in

11 the account established under paragraph

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

13 million, the Corporation shall not allocate

14 any further funds to such account except to

15 replenish such account in the event that

16 funds are diminished below such amount by

17 the Corporation pursuant to paragraph (4).

18 ‘‘(ii) WIND DOWN AND TERMINATION.—

19 ‘‘(I) FINAL DISBURSEMENTS.—

20 Upon disbursement of a total of $53

21 million from such Allocated Insurance

22 Reserves Account, the Corporation shall

23 disburse the remaining amounts in

24 such account, as determined under

25 paragraph (5)(A)(ii), without regard
11

•HR 2029 RH

1 to the percentage limitation in

2 subclauses (I) and (II) thereof.

3 ‘‘(II) TERMINATION OF AC4 COUNT.—Upon disbursement of a total

5 of $56 million from such Allocated In6 surance Reserves Account established

7 under paragraph (1)(B), the Corpora8 tion shall close the Allocated Insurance

9 Reserves Account established under

10 paragraph (1)(B) and transfer any re11 maining funds in such Account to the

12 remaining Allocated Insurance Re13 serves Accounts in accordance with the

14 formula in paragraph (3)(B) for the

15 calendar year in which the transfer oc16 curs.

17 ‘‘(D) DISTRIBUTION OF PAYMENTS RE18 CEIVED.—Within 60 days after receipt of a pay19 ment made under subparagraph (5)(A)(i), each

20 insured System bank, in consultation with its af21 filiated associations, and taking into account the

22 direct or indirect payment of insurance pre23 miums by such associations, shall develop and

24 implement an equitable plan to distribute pay-
12

•HR 2029 RH

1 ments received pursuant to subparagraph

2 (5)(A)(i) among the bank and its associations.

3 ‘‘(E) EXCEPTION FOR PREVIOUSLY REIM4 BURSED ASSOCIATIONS.—For purposes of sub5 paragraph (5)(A)(ii), in any Farm Credit Dis6 trict in which the funding bank has reimbursed

7 one or more of its affiliated associations for the

8 previously unreimbursed portion of the Finan9 cial Assistance stock held by such associations,

10 the funding bank shall be deemed to be the holder

11 of the shares of Financial Assistance Corporation

12 stock for which it has provided such reimburse13 ment.’’.

14 SEC. 6. POWERS WITH RESPECT TO TROUBLED INSURED

15 SYSTEM BANKS.

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

17 (12 U.S.C. 2277a–10(a)(3)) is amended—

18 (1) by redesignating subparagraph (B) as sub19 paragraph (F); and

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

21 the following:

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

23 may not be provided to an insured System bank

24 under this subsection unless the total amount of

25 such assistance is the least costly to the Farm
13

•HR 2029 RH

1 Credit Insurance Fund of all possible alter2 natives available to the Corporation, including

3 liquidation of the bank (including paying the in4 sured obligations issued on behalf of the bank).

5 Before making a least-cost determination under

6 this subparagraph, the Corporation shall accord

7 such other insured System banks as the Corpora8 tion determines appropriate the opportunity to

9 submit information relating to such determina10 tion.

11 ‘‘(B) PROCEDURAL RULES.—In determining

12 the least costly alternative under subparagraph

13 (A), the Corporation shall—

14 ‘‘(i) evaluate alternatives on a present15 value basis, using a reasonable discount

16 rate;

17 ‘‘(ii) document that evaluation and the

18 assumptions on which the evaluation is

19 based; and

20 ‘‘(iii) retain the documentation for not

21 less than 5 years.

22 ‘‘(C) TIME OF DETERMINATION.—

23 ‘‘(i) COST OF ASSISTANCE.—For pur24 poses of this subsection, the determination of

25 the costs of providing any assistance under
14

•HR 2029 RH

1 any provision of this section with respect to

2 any insured System bank shall be made as

3 of the date on which the Corporation makes

4 the determination to provide such assistance

5 to the institution under this section.

6 ‘‘(ii) COST OF LIQUIDATION.—For pur7 poses of this subsection, the determination of

8 the costs of liquidation of any insured Sys9 tem bank shall be made as of the earliest

10 of—

11 ‘‘(I) the date on which a conserva12 tor is appointed for the bank;

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

14 is appointed for the bank; or

15 ‘‘(III) the date on which the Cor16 poration makes any determination to

17 provide any assistance under this sec18 tion with respect to the bank.

19 ‘‘(D) EVALUATION OF MANAGEMENT.—Be20 fore providing any assistance under paragraph

21 (1), the Corporation shall evaluate the adequacy

22 of the managerial resources of the bank. The con23 tinued service of any director or senior ranking

24 officer who serves in a policymaking role for the

25 assisted bank, as determined by the Corporation,
15

•HR 2029 RH

1 shall be subject to approval by the Corporation

2 as a condition of such assistance.

3 ‘‘(E) DISCRETIONARY DETERMINATION.—

4 Any determination that the Corporation makes

5 under this paragraph shall be in the sole discre6 tion of the Corporation.’’.

7 (b) CONFORMING AMENDMENTS.—Section 5.61(a) (12

8 U.S.C. 2277a–10(a)) is amended—

9 (1) in paragraph (1), by striking ‘‘IN GENERAL’’

10 and inserting ‘‘STAND-ALONE ASSISTANCE’’; and

11 (2) in paragraph (2)—

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

13 and inserting ‘‘FACILITATION OF MERGERS OR

14 CONSOLIDATION’’; and

15 (B) in subparagraph (A), by striking ‘‘FA16 CILITATION OF MERGERS OR CONSOLIDATION’’

17 and inserting ‘‘IN GENERAL’’.

18 SEC. 7. FARM CREDIT SYSTEM INSURANCE CORPORATION

19 BOARD OF DIRECTORS.

20 Section 201 of the Farm Credit Banks and Associa21 tions Safety and Soundness Act of 1992 (106 Stat. 4104–

22 4105) is repealed.
16

•HR 2029 RH

1 SEC. 8. CONSERVATORSHIP AND RECEIVERSHIPS.

2 (a) INCLUSION AMONG GENERAL CORPORATE POW3 ERS.—Section 5.58(9) (12 U.S.C. 2277a–7(9)) is amended

4 to read as follows:

5 ‘‘(9) CONSERVATOR OR RECEIVER.—The Cor6 poration may act as conservator or receiver.’’.

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

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

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

10 SEC. 9. OVERSIGHT AND REGULATORY ACTIONS BY THE

11 FARM CREDIT SYSTEM INSURANCE CORPORA12 TION.

13 Part E of title V of the Farm Credit Act of 1971 (12

14 U.S.C. 2277–2277a–14) is amended by inserting after sec15 tion 5.61 the following:

16 ‘‘SEC. 5.61A. AUTHORITY TO REGULATE GOLDEN PARA17 CHUTE AND INDEMNIFICATION PAYMENTS.

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

19 limit, by regulation or order, any golden parachute pay20 ment or indemnification payment by a Farm Credit Sys21 tem institution (including the Federal Agricultural Mort22 gage Corporation and any conservator or receiver for the

23 Federal Agricultural Mortgage Corporation) in troubled

24 condition (as defined in regulations issued by the Corpora25 tion).
17

•HR 2029 RH

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

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

3 considered by the Corporation in taking any action under

4 subsection (a), which may include the following:

5 ‘‘(1) Whether there is a reasonable basis to be6 lieve that the institution-related party has committed

7 any fraudulent act or omission, breach of trust or fi8 duciary duty, or insider abuse with regard to the

9 Farm Credit System institution involved that has

10 had a material effect on the financial condition of the

11 institution.

12 ‘‘(2) Whether there is a reasonable basis to be13 lieve that the institution-related party is substantially

14 responsible for the insolvency of the Farm Credit Sys15 tem institution, the appointment of a conservator or

16 receiver for the institution, or the institution’s trou17 bled condition (as defined in regulations prescribed by

18 the Corporation).

19 ‘‘(3) Whether there is a reasonable basis to be20 lieve that the institution-related party has materially

21 violated any applicable law or regulation that has

22 had a material effect on the financial condition of the

23 institution.
18

•HR 2029 RH

1 ‘‘(4) Whether there is a reasonable basis to be2 lieve that the institution-related party has violated or

3 conspired to violate—

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

5 of title 18, United States Code; or

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

7 United States Code, affecting a Farm Credit

8 System institution.

9 ‘‘(5) Whether the institution-related party was in

10 a position of managerial or fiduciary responsibility.

11 ‘‘(6) The length of time that the party was relat12 ed with the Farm Credit System institution and the

13 degree to which—

14 ‘‘(A) the payment reasonably reflects com15 pensation earned over the period of employment;

16 and

17 ‘‘(B) the compensation involved represents a

18 reasonable payment for services rendered.

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

20 Credit System institution may prepay the salary or any

21 liability or legal expense of any institution-related party

22 if such payment—

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

24 of such institution or after the commission of an act

25 of insolvency; and
19

•HR 2029 RH

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

2 of—

3 ‘‘(A) preventing the proper application of

4 the assets of the institution to creditors; or

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

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

7 used in this section:

8 ‘‘(1) IN GENERAL.—The term ‘golden parachute

9 payment’ means any payment (or any agreement to

10 make any payment) in the nature of compensation by

11 any Farm Credit System institution for the benefit

12 of any institution-related party under an obligation

13 of the institution that—

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

15 party’s relationship with the institution; and

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

17 which—

18 ‘‘(i) the institution is insolvent;

19 ‘‘(ii) any conservator or receiver is ap20 pointed for the institution;

21 ‘‘(iii) the Farm Credit Administration

22 has assigned the institution a composite

23 CAMEL rating of 4 or 5 under the Farm

24 Credit Administration Rating System, or

25 an equivalent rating; or
20

•HR 2029 RH

1 ‘‘(iv) the Corporation otherwise deter2 mines that the institution is in a troubled

3 condition (as defined in regulations issued

4 by the Corporation).

5 ‘‘(2) CERTAIN PAYMENTS IN CONTEMPLATION OF

6 AN EVENT.—Any payment that would be a golden

7 parachute payment but for the fact that the payment

8 was made before the date referred to in paragraph

9 (1)(B) shall be treated as a golden parachute payment

10 if the payment was made in contemplation of the oc11 currence of an event described in any clause of such

12 paragraph.

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

14 term ‘golden parachute payment’ shall not include—

15 ‘‘(A) any payment made under a retirement

16 plan that is qualified (or is intended to be quali17 fied) under section 401 of the Internal Revenue

18 Code of 1986 or other nondiscriminatory benefit

19 plan;

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

21 deferred compensation plan or arrangement that

22 the Corporation determines, by regulation or

23 order, to be permissible; or
21

•HR 2029 RH

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

2 death or disability of an institution-related

3 party.

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

5 ‘‘(1) INDEMNIFICATION PAYMENT.—The term ‘in6 demnification payment’ means any payment (or any

7 agreement to make any payment) by any Farm Cred8 it System institution for the benefit of any person

9 who is or was an institution-related party, to pay or

10 reimburse the person for any liability or legal expense

11 with regard to any administrative proceeding or civil

12 action instituted by the Farm Credit Administration

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

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

15 ‘‘(B) is removed or prohibited from partici16 pating in the conduct of the affairs of the insti17 tution.

18 ‘‘(2) LIABILITY OR LEGAL EXPENSE.—The term

19 ‘liability or legal expense’ means—

20 ‘‘(A) any legal or other professional expense

21 incurred in connection with any claim, proceed22 ing, or action;

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

24 in connection with, any settlement of any claim,

25 proceeding, or action; and
22

•HR 2029 RH

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

2 in connection with, any judgment or penalty im3 posed with respect to any claim, proceeding, or

4 action.

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

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

7 funds or any asset; and

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

9 for the purpose of making, or under an agree10 ment to make, any payment after the date on

11 which such funds or assets are segregated, with12 out regard to whether the obligation to make

13 such payment is contingent on—

14 ‘‘(i) the determination, after such date,

15 of the liability for the payment of such

16 amount; or

17 ‘‘(ii) the liquidation, after such date, of

18 the amount of such payment.

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

20 ‘institution-related party’ means—

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

22 agent for a Farm Credit System institution;

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

24 Farm Credit System institution), consultant,

25 joint venture partner, or any other person deter-
23

•HR 2029 RH

1 mined by the Farm Credit Administration to be

2 a participant in the conduct of the affairs of a

3 Farm Credit System institution;

4 ‘‘(C) any independent contractor (including

5 any attorney, appraiser, or accountant) who

6 knowingly or recklessly participates in any vio7 lation of any law or regulation, any breach of fi8 duciary duty, or any unsafe or unsound practice

9 that caused or is likely to cause more than a

10 minimal financial loss to, or a significant ad11 verse effect on, the Farm Credit System institu12 tion; or

13 ‘‘(D) any receiver or conservator of a Farm

14 Credit System institution.

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

16 be construed as prohibiting any Farm Credit System insti17 tution from purchasing any commercial insurance policy

18 or fidelity bond, except that such insurance policy or bond

19 shall not cover any legal or liability expense of the institu20 tion that is described in subsection (e)(1).

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

22 ADMINISTRATION.—No provision of this section may be con23 strued as limiting the powers, functions, or responsibilities

24 of the Farm Credit Administration.’’.
24

•HR 2029 RH

1 SEC. 10. FORMATION OF ADMINISTRATIVE SERVICE ENTI2 TIES.

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

4 by adding at the end the following:

5 ‘‘SEC. 4.28A. DEFINITION OF BANK.

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

7 association operating under title II.’’.

8 SEC. 11. REQUIREMENTS FOR LOANS SOLD INTO THE SEC9 ONDARY MARKET.

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

11 2154a) is amended—

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

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

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

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

16 THE SECONDARY MARKET.—Notwithstanding any other

17 provision of this section:

18 ‘‘(1) GENERAL RULE.—Subject to paragraph (2),

19 the bylaws adopted by any bank or association under

20 subsection (b) may provide—

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

22 of the enactment of this subsection that is des23 ignated, at the time the loan is made, for sale

24 into a secondary market under title VIII or oth25 erwise, that no voting stock or participation cer-
25

•HR 2029 RH

1 tificate purchase requirement shall apply to the

2 borrower of the loan; and

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

4 the enactment of this subsection that is sold into

5 a secondary market under title VIII or otherwise,

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

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

12 secondary market within 180 days after the designa13 tion, the voting stock or participation certificate pur14 chase requirement that would otherwise apply to the

15 loan in the absence of bylaw provisions adopted under

16 paragraph (1)(A) shall be effective, except that the by17 laws may provide that if such a loan is thereafter sold

18 into a secondary market, all outstanding voting stock

19 or participation certificates held by the borrower with

20 respect to such loan shall, subject to subsection (d)(1),

21 be retired.’’.

22 (b) BORROWER RIGHTS.—

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

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

25 ‘‘(5) LOAN.—
26

•HR 2029 RH

1 ‘‘(A) IN GENERAL.—The term ‘loan’ means

2 a loan made to a farmer, rancher, or producer

3 or harvester of aquatic products, for any agricul4 tural or aquatic purpose and other credit needs

5 of the borrower, including financing for basic

6 processing and marketing directly related to the

7 borrower’s operations and those of other eligible

8 farmers, ranchers, and producers or harvesters of

9 aquatic products.

10 ‘‘(B) EXCLUSION OF LOANS DESIGNATED

11 FOR SALE INTO A SECONDARY MARKET.—The

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

13 after the date of enactment of this subparagraph

14 that, at the time the loan is made, is designated

15 for sale into a secondary market under title VIII

16 or otherwise, except as provided in subparagraph

17 (C).

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

19 for sale into a secondary market is not sold into

20 a secondary market within 180 days after such

21 designation, the provisions of sections 4.14,

22 4.14A, 4.14B, 4.14C, 4.14D, and 4.36 that would

23 apply to the loan in the absence of subparagraph

24 (B) shall apply to the loan until the loan is so

25 sold.’’.
27

•HR 2029 RH

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

2 (12 U.S.C. 2279aa–9(b)) is amended by inserting

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

4 time of application for a loan’’.

5 SEC. 12. REMOVAL OF ANTIQUATED AND UNNECESSARY PA6 PERWORK REQUIREMENTS.

7 (a) DISCLOSURE ON ADJUSTABLE RATE LOANS.—Sec8 tion 4.13(a)(4) (12 U.S.C. 2199(a)(4)) is amended by in9 serting ‘‘, except that any regulation of the Farm Credit

10 Administration implementing this paragraph shall include

11 a provision permitting notice to a borrower of a change

12 in the interest rate applicable to the borrower’s loan to be

13 made within a reasonable time after the effective date of

14 the change’’ before the semicolon.

15 (b) COMPENSATION OF ASSOCIATION PERSONNEL.—

16 Section 1.5(13) (12 U.S.C. 2013(13)) is amended by strik17 ing ‘‘and the appointment and compensation of the chief

18 executive officer thereof,’’.

19 (c) JOINT MANAGEMENT AGREEMENTS.—Section

20 5.17(a)(2)(A) (12 U.S.C. 2252(a)(2)(A)) is amended in the

21 1st sentence by striking ‘‘or management agreements’’.

22 (d) REMOVAL OF CERTAIN BORROWER REPORTING

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

24 amended by striking paragraph (5).

25 (e) USE OF PRIVATE MORTGAGE INSURANCE.—
28

•HR 2029 RH

1 (1) IN GENERAL.—Section 1.10(a)(1) (12 U.S.C.

2 2018(a)(1)) is amended by adding at the end the fol3 lowing:

4 ‘‘(D) PRIVATE MORTGAGE INSURANCE.—

5 Loans on which private mortgage insurance is

6 obtained may exceed 85 percent of the appraised

7 value of the real estate security to the extent that

8 the loan amount in excess of such 85 percent is

9 covered by the insurance.’’.

10 (2) CONFORMING AMENDMENT.—Section

11 1.10(a)(1)(A) (12 U.S.C. 2018(a)(1)(A)) is amended

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

13 ‘‘subparagraphs (C) and (D)’’.

14 (f) DISSEMINATION OF QUARTERLY REPORTS.—Sec15 tion 5.17(a)(8) (12 U.S.C. 2252(a)(8)) is amended by in16 serting ‘‘the requirements of the Farm Credit Administra17 tion governing the dissemination to stockholders of quar18 terly reports of System institutions may not be more bur19 densome or costly than the requirements applicable to na20 tional banks, and’’ after ‘‘except that’’.

21 SEC. 13. REMOVAL OF GOVERNMENT CERTIFICATION RE22 QUIREMENT FOR CERTAIN PRIVATE SECTOR

23 FINANCING.

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

25 amended—
29

•HR 2029 RH

1 (1) by striking ‘‘have been certified by the Ad2 ministrator of the Rural Electrification Administra3 tion to be eligible for such’’ and inserting ‘‘are eligible

4 under the Rural Electrification Act of 1936 for’’; and

5 (2) by striking ‘‘loan guarantee, and’’ and in6 serting ‘‘loan guarantee from such agencies (or their

7 successors), and’’.

8 SEC. 14. REFORM OF REGULATORY LIMITATIONS ON THE

9 DIVIDEND, MEMBER BUSINESS, AND VOTING

10 PRACTICES OF ELIGIBLE FARMER-OWNED CO11 OPERATIVES.

12 (a) IN GENERAL.—Section 3.8(a) (12 U.S.C. 2129(a))

13 is amended by adding at the end the following: ‘‘Any such

14 association that has received a loan from a bank for co15 operatives shall, without regard to the requirements of the

16 preceding sentence, continue to be so eligible for so long as

17 more than 50 percent (or such higher percentage as is estab18 lished by the bank board) of the voting control of the asso19 ciation is held by farmers, producers or harvesters of aquat20 ic products, or eligible cooperative associations.’’.

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

22 (12 U.S.C. 2129(b)(1)(D)) is amended by inserting ‘‘, or

23 under the last sentence,’’ after ‘‘(4)’’.
30

•HR 2029 RH

1 SEC. 15. EXTENSION OF INTEREST RATE REDUCTION PRO2 GRAM FOR 5 YEARS.

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

4 U.S.C. 1999 note) is amended by striking ‘‘1995’’ and in5 serting ‘‘2000’’.

Amend the title so as to read: ‘‘A bill to amend the

Farm Credit Act of 1971 to provide regulatory relief, and

for other purposes.’’.

HR 2029 RH——2

HR 2029 RH——3