[Federal Register Volume 62, Number 158 (Friday, August 15, 1997)]
[Rules and Regulations]
[Pages 43633-43639]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-21671]


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FARM CREDIT ADMINISTRATION

12 CFR Part 650

RIN 3052-AB72


Federal Agricultural Mortgage Corporation; Receivers and 
Conservators

AGENCY: Farm Credit Administration.

ACTION: Final rule.

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SUMMARY: The Farm Credit Administration (FCA or Agency), through the 
FCA Board (Board), issues a final rule amending its regulations that 
apply to the Federal Agricultural Mortgage Corporation (Farmer Mac or 
Corporation) by adding a subpart to govern a receivership or 
conservatorship. The final rule implements the receivership/
conservatorship authorities granted to the FCA by the Farm Credit 
System Reform Act of 1996 (1996 Reform Act), Pub. L. 104-105 (Feb. 10, 
1996) and by previous law.

DATES: This regulation shall become effective 30 days after publication 
in the Federal Register during which either or both houses of Congress 
are in session. Notice of the effective date will be published in the 
Federal Register.

FOR FURTHER INFORMATION CONTACT: Larry W. Edwards, Director, Office of 
Secondary Market Oversight, Farm Credit Administration, McLean, VA 
22102-5090, (703) 883-4051, TDD (703) 883-4444.

SUPPLEMENTARY INFORMATION: The FCA proposed amendments to its 
regulations governing Farmer Mac on February 24, 1997 (62 FR 8190). The 
1996 Reform Act added section 8.41 to the Farm Credit Act of 1971, as 
amended (Act), which grants the FCA the authority to place the 
Corporation into receivership and expands the FCA's existing authority 
to place the Corporation into conservatorship. This final rule 
implements these statutory provisions.

Public Comments Received

    The 30-day comment period expired on March 26, 1997. The FCA 
received three comments, one from the Corporation, one from the Farm 
Credit Council (FCC) on behalf of its member Farm Credit System (FCS) 
institutions, and one from the United States Department of the Treasury 
(Treasury). The following is a discussion of the comments and FCA's 
responses.

A. Comments of the Farm Credit Council

    Several of the FCC's comments were related to the slightly 
different language used in the proposed regulation compared to FCA's 
receivership and conservatorship regulations in part 627 of this 
chapter, which was the model for the proposed rule. The FCC indicated 
that for the most part, the differences were called to FCA's attention 
to make sure that they were intentional. Proposed Sec. 650.56(b)(1) 
provides that a receiver of Farmer Mac may exercise all powers as are 
conferred upon the officers and directors of the Corporation under law 
and the articles and bylaws of the Corporation, while 
Sec. 627.2725(b)(1) refers to powers as conferred under law and the 
``charter,'' articles, and bylaws of the institution. Although the FCA 
may cancel the charter of the Corporation upon the appointment of a 
receiver, it may also leave the charter in existence until the 
conclusion of the receivership. In light of this, the FCA has included 
the word ``charter'' in the final regulation. Another difference 
between proposed part 650 and existing part 627 of this chapter noted 
by the FCC is that proposed Sec. 650.59(b) begins with a reference to 
the ``stock and other equities of the Corporation'' and concludes with 
a reference to payment of a liquidating dividend to Farmer Mac's 
``stockholders.'' Section 627.2735(b)(2) begins with a similar 
reference to ``the stock and other equities'' of a liquidating 
institution, but concludes with a reference to payment of a liquidating 
dividend to the ``owners of such equities.'' The FCC believes that the 
reference to owners of equities is broader than the simple reference to 
stockholders in proposed Sec. 650.59(b). The FCA agrees, but notes 
that, with respect to the Corporation, all equity owners are 
stockholders. Therefore, the FCA makes no change to Sec. 650.59.
    The FCC also indicated that the phrase ``or applied against any 
indebtedness of the owners of such equities,'' which appears in the 
first sentence of paragraph (b) of proposed Sec. 650.58, is not found 
in paragraph (a) of that section although the same phrase appears in 
both paragraphs (a) and (b) of Sec. 627.2730. The phrase was 
intentionally omitted from proposed Sec. 650.58(a) because, unlike the 
equity holders of Farm Credit institutions who in most cases are also 
borrowers of the institutions, the equity holders of the Corporation 
will most likely not be indebted to the Corporation. Also, the 
restriction against retirement of equities in Sec. 650.58(b) is broad 
enough to include applying stock against the indebtedness of the owner 
of the stock should any stockholders be indebted to the Corporation. As 
a result, the FCA omitted the phrase ``or applied against any 
indebtedness of the owners of such equities'' from Sec. 650.58(b) of 
the final regulation. The final comparison to part 627 of this chapter 
that the FCC pointed out is that proposed Sec. 650.65(d), like its 
counterpart Sec. 627.2775(c), provides that, upon the issuance of an 
order placing the Corporation in conservatorship, all rights, 
privileges, and powers of the ``members,'' board of directors, 
officers, and employees of the Corporation are vested exclusively in 
the conservator, and questioned whether the reference to ``members'' is 
appropriate and relevant in the case of the Corporation. The FCA agrees 
that the term ``members'' is not appropriate with reference to the 
Corporation and removed that term in the final regulation.
    The FCC commented that the word ``reasonable'' should be inserted 
in proposed Sec. 650.56(b)(15) immediately before the phrase ``expenses 
of the receivership.'' The FCC noted in this regard that proposed 
Sec. 650.61(b), concerning priority of claims, expressly limits the 
administrative expenses of the Corporation that may be afforded a 
second priority to ``reasonable'' expenses incurred for services 
actually provided by accountants, attorneys, appraisers, examiners, or 
management companies, or ``reasonable'' expenses incurred by employees 
that were authorized and reimbursable under a preexisting expense 
reimbursement policy. In response, the FCA notes that the expenses 
covered by Sec. 650.61(b) are expenses of the Corporation incurred 
prior to the appointment of a receiver. All such expenses may not 
necessarily be paid, as payment is limited to the receiver's judgment 
that the services underlying the claims are of benefit to the 
receivership. In contrast, Secs. 650.56(b)(15) and 650.61(a) relate 
only to the authority of the receiver to pay the administrative 
expenses of the receivership and all costs associated with carrying out 
the powers and duties of a receiver. Furthermore, pursuant to 
Sec. 650.56(a)(3), the receiver serves as the trustee of the 
receivership estate and is required to conduct all of its operations, 
whether incurring and paying administrative expenses or exercising any 
other power conferred by the regulations, for the benefit of the 
creditors and stockholders of the Corporation. Therefore, the FCA

[[Page 43634]]

believes that addition of the term ``reasonable'' to Sec. 650.56(b)(15) 
is neither necessary nor appropriate and adopts Sec. 650.56(b)(15) as 
proposed.
    The FCC made two comments with regard to the preamble accompanying 
the proposed and final regulations. The FCC asserted that during the 
early drafting stages of what became section 8.41 of the Act, 
consideration was given to authorizing a receiver of the Corporation to 
borrow from the Farm Credit System Insurance Fund (Insurance Fund) to 
meet the ongoing administrative expenses and liquidity needs of a 
Corporation receivership. The authorization to borrow from the 
Insurance Fund for such purposes was opposed by the FCS. The FCC states 
that, although express borrowing authority was not adopted in section 
8.41, FCS institutions would take comfort from FCA's insertion, into 
the preamble to the final regulation, of a statement expressly 
acknowledging that neither section 8.41 nor the final implementing 
regulations authorize the Farm Credit System Insurance Corporation 
(FCSIC) to loan moneys from the Insurance Fund to a Corporation 
receiver or conservator for any reason whatsoever. In response, the FCA 
acknowledges the comment and notes that FCSIC's authority to make use 
of the Insurance Fund is governed by title V, part E of the Act, not 
FCA regulations.
    The other comment regarding the preamble to the proposed regulation 
points out that the preamble states that the Corporation will be 
required to comply with the applicable provisions of the Securities Act 
of 1933 and the Securities Exchange Act of 1934, but proposed 
Sec. 650.67(c), while expressly referring to the requirements of 
Sec. 620.40 and part 621 of this chapter, makes no reference to the 
securities acts. The FCC questioned whether the omission was 
intentional or inadvertent. The FCA notes that Sec. 620.40 and part 621 
of this chapter require the Corporation to comply with the securities 
acts, and the statement in the preamble was merely a reference to the 
requirement. Therefore, the FCA makes no change to Sec. 650.67.

B. Federal Agricultural Mortgage Corporation Comments

    The Corporation commented on Sec. 650.50 of the proposed 
regulation, which provides the grounds for which a receiver may be 
appointed for the Corporation, and requested that the FCA amend 
Sec. 650.50(a)(1) to clarify the definition of insolvency. Under the 
proposed regulation, the Corporation would be considered insolvent if 
its assets are less than its obligations to its creditors and others or 
if the Corporation is unable to pay its debts in the ordinary course of 
business. In relation to the first criterion, the Corporation 
guarantees mortgage-backed securities that are sold to third-party 
entities or individuals and then classified for accounting purposes as 
``off-balance-sheet'' contingent liabilities of the guarantor. Because 
there is no definition of the word ``obligations'' in the Act, in the 
proposed regulations, or in the regulations contained in part 627 of 
this chapter, the Corporation questions whether obligations would 
include contingent liabilities, particularly guarantees. The 
Corporation asserts that if obligations are interpreted to include the 
contingent liabilities of the Corporation as a guarantor of securities 
pursuant to its authorities under the Act, it could be deemed to be 
insolvent today, which would not be a result intended by Congress or 
reflective of the Corporation's true financial condition. The amendment 
to Sec. 650.50 suggested by the Corporation would expressly exclude 
contingent liabilities under guarantees issued by the Corporation. 
Alternatively, the Corporation commented that if the FCA intended to 
include contingent liabilities as obligations for the purposes of 
determining insolvency, the value of the liabilities should be adjusted 
based upon an assessment of the probability that the contingency of 
default will occur and that the Corporation will be called upon to pay 
under its guarantee and should be net of the reserves for losses of the 
Corporation. Further, the assets of the Corporation should include the 
value of any rights that the Corporation would have against any other 
parties in the event that it is called upon to pay on a guarantee, 
including, but not limited to, rights of subrogation or reimbursement 
from a primary obligor. The Corporation provided suggested regulatory 
language to implement the two alternatives.
    The FCA does not believe that contingent liabilities of the 
Corporation as a guarantor of securities pursuant to its authorities 
under the Act would ordinarily be considered as obligations for 
purposes of determining the Corporation's solvency under 
Sec. 650.50(a)(1)(i). A loss contingency related to such guarantees 
would affect the determination of solvency (and would likely be 
recorded in the Corporation's financial statements) if a loss were 
probable and could be reasonably estimated. Moreover, if a loss 
contingency were both probable and could be reasonably estimated, the 
amount of such contingency that would be included in the determination 
of solvency would be based on an analysis of the circumstances and 
would not necessarily be the amount of the guarantee itself. The 
treatment of contingent liabilities for the purposes of 
Sec. 650.50(a)(1)(i) is consistent with the treatment of contingent 
liabilities under Generally Accepted Accounting Principles, 
specifically, Statement of Financial Accounting Standards No. 5, 
Accounting for Contingencies (SFAS No. 5). SFAS No. 5 requires that an 
estimated loss from a loss contingency be recorded in the financial 
statements if it is both probable that a liability has been incurred at 
the date of the financial statements and the amount of the loss can be 
reasonably estimated. If a loss contingency is not recorded in the 
financial statements because one or both of the above criteria are not 
met, disclosure of the loss contingency may or may not be required 
depending on the likelihood that a loss will be incurred. Disclosure of 
contingencies in such circumstances, however, is made in management's 
discussion and analysis and the contingencies are not recorded as 
liabilities in the financial statements.
    Because the FCA generally would not consider the Corporation's 
contingent guarantee obligations to be included in the calculation of 
insolvency unless a liability related to such guarantees was probable 
and could be reasonably estimated, the FCA has not amended 
Sec. 650.50(a)(1)(i) in the manner suggested by the commenter. A 
blanket exclusion of such obligations would not be appropriate because 
it could serve to confuse rather than clarify the requirements of the 
regulation. Further, the FCA believes that it is unlikely that 
investors would mistakenly conclude that all of the Corporation's 
contingent guarantee obligations would be included in the FCA's 
calculation of insolvency because the treatment of contingent 
liabilities is a generally widespread and well-known concept. As a 
final note, although the FCA generally would not include the amount of 
the contingent guarantee obligations in the calculation of insolvency 
for the purpose of these regulations, the Corporation's general ability 
to meet its contingent guarantee obligations are considered by the FCA 
when making any determination concerning the safety and soundness of 
the Corporation.
    The Corporation also commented regarding Sec. 650.60(b) of the 
proposed regulation, which authorizes a receiver of the Corporation to 
allow any claim that is timely received and proved to the receiver's 
satisfaction. The receiver also has the power to disallow claims in

[[Page 43635]]

whole or in part if not proved to the receiver's satisfaction. The 
disallowance is final unless, within 30 days, a claimant files a 
written request for payment regardless of the disallowance. Any such 
request is reconsidered by the receiver, who may approve or disapprove 
the claim in whole or in part. The Corporation requested that the FCA 
amend Sec. 650.60 to provide that the FCA (through an official of the 
FCA who did not participate in the initial disallowance of the claim) 
would reconsider a disallowed claim upon the request of a claimant in 
order to ensure that a disallowed claim would be reviewed by an entity 
other than the person who initially disallowed the claim. In addition, 
the Corporation asserts that such an amendment would ultimately make 
decisions regarding the allowance of claims reviewable under the 
provisions of the Administrative Procedure Act (APA), 5 U.S.C. 500 et 
seq., with all of its procedural safeguards, including the availability 
of judicial review. The Corporation contends that it is important for 
investors and others who do business with it to know that, in the 
unlikely event that a receiver were to be appointed, procedures 
regarding the recognition of their claims would be fair, and any 
disallowance of their claims would be subject to review by the FCA.
    The FCA does not believe it is appropriate for it to review claims 
disallowed by the receiver and has not amended Sec. 650.60. Unless the 
FCA, pursuant to section 8.41(c) of the Act, is the receiver of the 
Corporation, the FCA will ordinarily leave administrative decisions to 
the judgment of the receiver. FCA's regulations under part 627 of this 
chapter do not provide for the Agency's review of claim denial 
decisions, and the FCA does not believe it is appropriate to afford 
different treatment to the creditors of the Corporation. Further, these 
regulations do not preclude any other avenues of review that may be 
available to a claim holder.

C. Treasury Comments

    In the preamble discussion accompanying proposed Sec. 650.56(b), 
the FCA noted that generally, a receiver or conservator of the 
Corporation would have all of the rights and powers that the 
Corporation had prior to the appointment of the receiver and requested 
comment on whether there should be any limits imposed on these powers. 
The Treasury commented that because the purpose of a receivership would 
be to wind up the Corporation's affairs, the receiver should not be 
conducting new business, such as issuing guarantees, or expanding the 
Corporation's debt obligations. The power of a receiver to exercise all 
powers that are conferred upon the Corporation is not intended to allow 
the receiver to search out or engage in new business opportunities. The 
power of the receiver to issue guarantees, debt obligations, or any 
other authority of the Corporation is designed to enable the receiver 
to conclude any transactions that were in progress when the receiver 
was appointed or take other similar actions if such actions are in the 
best interest of the receivership. Restricting the receiver's powers to 
less than those of the Corporation may preclude the receiver from 
acting in the best interest of the receivership. Therefore, the FCA is 
making no change as a result of this comment.

D. Section 650.61--Priority of Claims

    The Corporation, the FCC, and the Treasury commented with regard to 
Sec. 650.61, which establishes the priority for payment of claims 
against the Corporation in receivership. The Corporation commented that 
proposed Sec. 650.61 did not explicitly provide a priority for claims 
of holders of securities guaranteed by the Corporation (guaranteed 
securities). Further, the Corporation asserts that because investors in 
guaranteed securities rely in part on the right of Farmer Mac to sell 
obligations to the Secretary of the Treasury (12 U.S.C. 2279aa-13), any 
inference in the regulations that the claims of holders would not take 
precedence over the claims of general creditors could create 
uncertainty with respect to the Corporation's guarantee and adversely 
affect the market for, and pricing of, its guaranteed securities. The 
Corporation recommended that the FCA amend Sec. 650.61 to provide for 
payment of claims of holders of guaranteed securities prior to the 
payment of general, unsecured creditors.
    The FCA has not adopted this suggestion because the Act does not 
provide a priority in liquidation for holders of guaranteed securities 
over other creditors of the Corporation. In addition, holders of 
guaranteed securities already have significant protection. They have 
direct access to the assets of the specific pool securing their 
securities as well as the guarantee of the Corporation should the 
assets backing the pool not be sufficient. Further, the Corporation has 
borrowing authority from Treasury to help enable it to fulfill 
guarantees.
    In the preamble to the proposed regulation, the FCA stated that it 
was considering whether to provide a priority over other creditors for 
obligations issued to the Treasury and requested comment on the issue. 
The FCC commented that the obligations issued to the Treasury should 
have a priority over other creditors only if one is provided by 
statute. The Corporation commented that because the statute does not 
provide a priority for obligations issued to the Treasury, no such 
priority should be provided by regulation. Further, the Corporation 
asserted that giving a priority position for the Treasury over other 
unsecured general creditors of the Corporation could adversely affect 
its dealings with vendors who would be general creditors in the 
unlikely event of a receivership. The Treasury requested that the 
regulations provide a priority over unsecured general creditors for any 
unsecured Farmer Mac obligations issued to the Treasury.
    The FCA believes that any priority afforded to the Corporation's 
obligations should be determined by statute and the terms of the 
obligations. The FCA notes that other statutes may provide some 
protection to the Treasury, but the Act does not provide a priority in 
liquidation for obligations issued to the Treasury. Therefore, the FCA 
has not included such a priority in Sec. 650.61. Obligations issued to 
the Secretary of the Treasury will be paid in the class of secured or 
unsecured creditors, depending on the nature of the obligations.
    Other than the changes previously noted to Secs. 650.56, 650.58, 
and 650.65, and minor editorial changes, the FCA adopts the amendments 
to part 650 as proposed.

List of Subjects in 12 CFR Part 650

    Agriculture, Banks, banking, Conflicts of interests, Rural areas.

    For the reasons stated in the preamble, part 650 of chapter VI, 
title 12 of the Code of Federal Regulations is amended to read as 
follows:

PART 650--FEDERAL AGRICULTURAL MORTGAGE CORPORATION

    1. The authority citation for part 650 is revised to read as 
follows:

    Authority: Secs. 4.12, 5.9, 5.17, 8.11, 8.37, 8.41 of the Farm 
Credit Act (12 U.S.C. 2183, 2243, 2252, 2279aa-11, 2279bb-6, 
2279cc); sec. 514 of Pub. L. 102-552, 106 Stat. 4102; sec. 118 of 
Pub. L. 104-105, 110 Stat. 168.

    2. Part 650 is amended by adding a new subpart C to read as 
follows:

[[Page 43636]]

Subpart C--Receiver and Conservator

Sec.
650.50  Grounds for appointment of a receiver or conservator.
650.51  Action for removal of receiver or conservator.
650.52  Voluntary liquidation.
650.55  Appointment of a receiver.
650.56  Powers and duties of the receiver.
650.57  Report to Congress.
650.58  Preservation of equity.
650.59  Notice to stockholders.
650.60  Creditor claims.
650.61  Priority of claims.
650.62  Payment of claims.
650.63  Inventory, audit, and reports.
650.64  Final discharge and release of the receiver.
650.65  Appointment of a conservator.
650.66  Powers and duties of the conservator.
650.67  Inventory, examination, and reports to stockholders.
650.68  Final discharge and release of the conservator.

Subpart C--Receiver and Conservator


Sec. 650.50  Grounds for appointment of a receiver or conservator.

    (a) The grounds for the appointment of a receiver or conservator 
for the Corporation are:
    (1) The Corporation is insolvent. For purposes of this paragraph, 
insolvent means:
    (i) The assets of the Corporation are less than its obligations to 
its creditors and others; or
    (ii) The Corporation is unable to pay its debts as they fall due in 
the ordinary course of business;
    (2) There has been a substantial dissipation of the assets or 
earnings of the Corporation due to the violation of any law, rule, or 
regulation, or the conduct of an unsafe or unsound practice;
    (3) The Corporation is in an unsafe or unsound condition to 
transact business;
    (4) The Corporation has committed a willful violation of a final 
cease-and-desist order issued by the Farm Credit Administration Board;
    (5) The Corporation is concealing its books, papers, records, or 
assets, or is refusing to submit its books, papers, records, assets, or 
other material relating to the affairs of the Corporation for 
inspection to any examiner or any lawful agent of the Farm Credit 
Administration Board.
    (b) In addition to the grounds set forth in paragraph (a) of this 
section, a receiver can be appointed for the Corporation if the Farm 
Credit Administration Board determines that the appointment of a 
conservator would not be appropriate when one of the following 
conditions exists:
    (1) The authority of the Corporation to purchase qualified loans or 
issue or guarantee loan-backed securities is suspended; or
    (2) The Corporation is classified under section 8.35 of the Act as 
within enforcement level III or IV and the alternative actions 
available under subtitle B of title VIII of the Act are not 
satisfactory.
    (c) In addition to the grounds set forth in paragraph (a) of this 
section, a conservator can be appointed for the Corporation if:
    (1) The Corporation is classified under section 8.35 of the Act as 
within enforcement level III or IV; or
    (2) The authority of the Corporation to purchase qualified loans or 
issue or guarantee loan-backed securities is suspended.


Sec. 650.51  Action for removal of receiver or conservator.

    Upon the appointment of a receiver or conservator for the 
Corporation by the Farm Credit Administration Board pursuant to 
Sec. 650.50 of this subpart, the Corporation may, within 30 days of 
such appointment, bring an action in the United States District Court 
for the District of Columbia, for an order requiring the Farm Credit 
Administration Board to remove the receiver or conservator and, if the 
charter has been canceled, to rescind the cancellation of the charter. 
Notwithstanding any other provision of this part, the Corporation's 
board of directors is empowered to meet subsequent to such appointment 
and authorize the filing of an action for removal. An action for 
removal may be authorized only by the Corporation's board of directors.


Sec. 650.52  Voluntary liquidation.

    (a) The Corporation may voluntarily liquidate by a resolution of 
its board of directors, but only with the consent of, and in accordance 
with a plan of liquidation approved by, the Farm Credit Administration 
Board. Upon adoption of such resolution, the Corporation shall submit 
the resolution and proposed voluntary liquidation plan to the Farm 
Credit Administration Board for preliminary approval. The Farm Credit 
Administration Board, in its discretion, may appoint a receiver as part 
of an approved liquidation plan. If a receiver is appointed for the 
Corporation as part of a voluntary liquidation, the receivership shall 
be conducted pursuant to the regulations of this part, except to the 
extent that an approved plan of liquidation provides otherwise.
    (b) If the Farm Credit Administration Board gives preliminary 
approval to the liquidation plan, the board of directors of the 
Corporation shall submit the resolution to liquidate to the 
stockholders for a vote in accordance with the bylaws of the 
Corporation.
    (c) The Farm Credit Administration Board will consider final 
approval of the resolution to voluntarily liquidate and the liquidation 
plan after an affirmative stockholder vote on the resolution.


Sec. 650.55  Appointment of a receiver.

    (a) The Farm Credit Administration Board may in its discretion 
appoint, ex parte and without prior notice, a receiver for the 
Corporation provided that one or more of the grounds for appointment as 
set forth in Sec. 650.50 of this subpart exist.
    (b) Upon the appointment of the receiver, the Chairman of the Farm 
Credit Administration Board shall immediately notify the Corporation 
and shall publish a notice of the appointment in the Federal Register.
    (c) Upon the issuance of the order placing the Corporation into 
liquidation and appointing the receiver, all rights, privileges, and 
powers of the board of directors, officers, and employees of the 
Corporation shall be vested exclusively in the receiver. The Farm 
Credit Administration Board may cancel the charter of the Corporation 
on such date as the Farm Credit Administration Board determines is 
appropriate, but not later than the conclusion of the receivership and 
discharge of the receiver.


Sec. 650.56  Powers and duties of the receiver.

    (a) General. (1) Upon appointment as receiver, the receiver shall 
take possession of the Corporation in order to wind up the business 
operations of the Corporation, collect the debts owed to the 
Corporation, liquidate its property and assets, pay its creditors, and 
distribute the remaining proceeds to stockholders. The receiver is 
authorized to exercise all powers necessary to the efficient 
termination of the Corporation's operation as provided for in this 
part.
    (2) Upon its appointment as receiver, the receiver automatically 
succeeds to:
    (i) All rights, titles, powers, and privileges of the Corporation 
and of any stockholder, officer, or director of the Corporation with 
respect to the Corporation and the assets of the Corporation; and
    (ii) Title to the books, records, and assets of the Corporation in 
the possession of any other legal custodian of the Corporation.
    (3) The receiver of the Corporation serves as the trustee of the 
receivership estate and conducts its operations for

[[Page 43637]]

the benefit of the creditors and stockholders of the Corporation.
    (b) Specific powers. The receiver may:
    (1) Exercise all powers as are conferred upon the officers and 
directors of the Corporation under law and the charter, articles, and 
bylaws of the Corporation.
    (2) Take any action the receiver considers appropriate or expedient 
to carry on the business of the Corporation during the process of 
liquidating its assets and winding up its affairs.
    (3) Borrow funds in accordance with section 8.41(f) of the Act to 
meet the ongoing administrative expenses or other liquidity needs of 
the receivership.
    (4) Pay any sum the receiver deems necessary or advisable to 
preserve, conserve, or protect the Corporation's assets or property or 
rehabilitate or improve such property and assets.
    (5) Pay any sum the receiver deems necessary or advisable to 
preserve, conserve, or protect any asset or property on which the 
Corporation has a lien or in which the Corporation has a financial or 
property interest, and pay off and discharge any liens, claims, or 
charges of any nature against such property.
    (6) Investigate any matter related to the conduct of the business 
of the Corporation, including, but not limited to, any claim of the 
Corporation against any individual or entity, and institute appropriate 
legal or other proceedings to prosecute such claims.
    (7) Institute, prosecute, maintain, defend, intervene, and 
otherwise participate in any legal proceeding by or against the 
Corporation or in which the Corporation or its creditors or 
stockholders have any interest, and represent in every way the 
Corporation, its stockholders and creditors.
    (8) Employ attorneys, accountants, appraisers, and other 
professionals to give advice and assistance to the receivership 
generally or on particular matters, and pay their retainers, 
compensation, and expenses, including litigation costs.
    (9) Hire any agents or employees necessary for proper 
administration of the receivership.
    (10) Execute, acknowledge, and deliver, in person or through a 
general or specific delegation, any instrument necessary for any 
authorized purpose, and any instrument executed under this paragraph 
shall be valid and effective as if it had been executed by the 
Corporation's officers by authority of its board of directors.
    (11) Sell for cash or otherwise any mortgage, deed of trust, chose 
in action, note, contract, judgment or decree, stock, or debt owed to 
the Corporation, or any property (real or personal, tangible or 
intangible).
    (12) Purchase or lease office space, automobiles, furniture, 
equipment, and supplies, and purchase insurance, professional, and 
technical services necessary for the conduct of the receivership.
    (13) Release any assets or property of any nature, regardless of 
whether the subject of pending litigation, and repudiate, with cause, 
any lease or executory contract the receiver considers burdensome.
    (14) Settle, release, or obtain release of, for cash or other 
consideration, claims and demands against or in favor of the 
Corporation or receiver.
    (15) Pay, out of the assets of the Corporation, all expenses of the 
receivership (including compensation to personnel employed to represent 
or assist the receiver) and all costs of carrying out or exercising the 
rights, powers, privileges, and duties as receiver.
    (16) Pay, out of the assets of the Corporation, all approved claims 
of indebtedness in accordance with the priorities established in this 
part.
    (17) Take all actions and have such rights, powers, and privileges 
as are necessary and incident to the exercise of any specific power.
    (18) Take such actions, and have such additional rights, powers, 
privileges, immunities, and duties as the Farm Credit Administration 
Board authorizes by order or by amendment of any order or by 
regulation.


Sec. 650.57  Report to Congress.

    On a determination by the receiver that there are insufficient 
assets of the receivership to pay all valid claims against the 
receivership, the receiver shall submit to the Secretary of the 
Treasury and Congress a report on the financial condition of the 
receivership.


Sec. 650.58  Preservation of equity.

    (a) Except as provided for upon final distribution of the assets of 
the Corporation pursuant to Sec. 650.62 of this subpart, no capital 
stock, equity reserves, or other allocated equities of the Corporation 
in receivership shall be issued, allocated, retired, sold, distributed, 
transferred, or assigned.
    (b) Immediately upon the adoption of a resolution by its board of 
directors to voluntarily liquidate the Corporation, the capital stock, 
equity reserves, and allocated equities of the Corporation shall not be 
issued, allocated, retired, sold, distributed, transferred, or 
assigned. Such activities could resume if the stockholders of the 
Corporation or the Farm Credit Administration Board disapprove the 
resolution. In the event the resolution is approved by the stockholders 
of the Corporation and the Farm Credit Administration Board, the 
liquidation plan shall govern disposition of the equities of the 
Corporation as provided in Sec. 650.52 of this subpart.


Sec. 650.59  Notice to stockholders.

    As soon as practicable after a receiver takes possession of the 
Corporation, the receiver shall notify, by first class mail, each 
holder of stock of the following matters:
    (a) The number of shares such holder owns;
    (b) That the stock and other equities of the Corporation may not be 
retired or transferred until the liquidation is completed, whereupon 
the receiver will distribute a liquidating dividend, if any, to the 
stockholders; and
    (c) Such other matters as the receiver or the Farm Credit 
Administration Board deems necessary.


Sec. 650.60  Creditor claims.

    (a) Upon appointment, the receiver shall promptly publish a notice 
to creditors to present their claims against the Corporation, with 
proof thereof, to the receiver by a date specified in the notice, which 
shall be not less than 90 calendar days after the first publication. 
The notice shall be republished approximately 30 days and 60 days after 
the first publication. The receiver shall promptly send, by first class 
mail, a similar notice to any creditor shown on the Corporation's books 
at the creditor's last address appearing thereon. Claims filed after 
the specified date shall be disallowed except as the receiver may 
approve them for full or partial payment from the Corporation's assets 
remaining undistributed at the time of approval.
    (b) The receiver shall allow any claim that is timely received and 
proved to the receiver's satisfaction. The receiver may disallow in 
whole or in part any creditor's claim or claim of security, preference, 
or priority that is not proved to the receiver's satisfaction or is not 
timely received and shall notify the claimant of the disallowance and 
reason therefor. Sending the notice of disallowance by first class mail 
to the claimant's address appearing on the proof of claim shall be 
sufficient notice. The disallowance shall be final unless, within 30 
days after the notice of disallowance is mailed, the claimant files a 
written request for payment regardless of the disallowance. The 
receiver shall reconsider any claim upon the timely request of the 
claimant

[[Page 43638]]

and may approve or disapprove such claim in whole or in part.
    (c) Creditors' claims that are allowed shall be paid by the 
receiver from time to time, to the extent funds are available therefor 
and in accordance with the priorities established in this part and in 
such manner and amounts as the receiver deems appropriate. In the event 
the Corporation has a claim against a creditor of the Corporation, the 
receiver shall offset the amount of such claim against the claim 
asserted by such creditor.


Sec. 650.61  Priority of claims.

    The following priority of claims shall apply to the distribution of 
the assets of the Corporation in liquidation:
    (a) All costs, expenses, and debts incurred by the receiver in 
connection with the administration of the receivership, all Farm Credit 
Administration assessments for the costs of supervising and examining 
the Corporation, and any amounts borrowed pursuant to 
Sec. 650.56(b)(3).
    (b) Administrative expenses of the Corporation, provided that such 
expenses were incurred within 60 days prior to the receiver's taking 
possession, and that such expenses shall be limited to reasonable 
expenses incurred for services actually provided by accountants, 
attorneys, appraisers, examiners, or management companies, or 
reasonable expenses incurred by employees that were authorized and 
reimbursable under a preexisting expense reimbursement policy and that, 
in the opinion of the receiver, are of benefit to the receivership, and 
shall not include wages or salaries of employees of the Corporation.
    (c) If authorized by the receiver, claims for wages and salaries, 
including vacation pay, earned prior to the appointment of the receiver 
by an employee of the Corporation whom the receiver determines it is in 
the best interest of the receivership to engage or retain for a 
reasonable period of time.
    (d) If authorized by the receiver, claims for wages and salaries, 
including vacation pay, earned prior to the appointment of the 
receiver, up to a maximum of three thousand dollars ($3,000) per person 
as adjusted for inflation, by an employee of the Corporation not 
engaged or retained by the receiver. The adjustment for inflation shall 
be the percentage by which the Consumer Price Index (as prepared by the 
Department of Labor) for the calendar year preceding the appointment of 
the receiver exceeds the Consumer Price Index for the calendar year 
1992.
    (e) All claims for taxes.
    (f) All claims of creditors which are secured by specific assets of 
the Corporation, with priority of conflicting claims of creditors 
within this same class to be determined in accordance with priorities 
of applicable Federal or State law.
    (g) All claims of general creditors.


Sec. 650.62  Payment of claims.

    (a) All claims of each class described in Sec. 650.61 of this 
subpart shall be paid in full or provisions shall be made for such 
payment prior to the payment of any claim of a lesser priority. If 
there are insufficient funds to pay all claims in a class in full, 
distribution to that class will be on a pro rata basis.
    (b) Following the payment of all claims, the receiver shall 
distribute the remainder of the assets of the Corporation, if any, to 
the owners of stock and other equities in accordance with the 
priorities for impairment set forth in section 8.4(e)(3) of the Act and 
the bylaws of the Corporation.


Sec. 650.63  Inventory, audit, and reports.

    (a) As soon as practicable after taking possession of the 
Corporation, the receiver shall take an inventory of the assets and 
liabilities as of the date possession was taken.
    (b) The receivership shall be audited on an annual basis by a 
certified public accountant selected by the receiver.
    (c) The receiver shall make an annual accounting or report, as 
appropriate, available for review upon request to any stockholder of 
the Corporation or any member of the public, with a copy provided to 
the Farm Credit Administration.
    (d) As soon as practicable after final distribution, the receiver 
shall send to each stockholder of record a report summarizing the 
disposition of the assets of the receivership and claims against the 
receivership.


Sec. 650.64  Final discharge and release of the receiver.

    After the receiver has made a final distribution of the assets of 
the receivership, the receivership shall be terminated, the charter 
shall be canceled by the Farm Credit Administration Board if such 
cancellation has not previously occurred, and the receiver shall be 
finally discharged and released.


Sec. 650.65  Appointment of a conservator.

    (a) The Farm Credit Administration Board may in its discretion 
appoint, ex parte and without prior notice, a conservator for the 
Corporation provided that one or more of the grounds for appointment as 
set forth in Sec. 650.50 of this subpart exist;
    (b) Upon the appointment of a conservator, the Chairman of the Farm 
Credit Administration shall immediately notify the Corporation and 
shall publish a notice of the appointment in the Federal Register.
    (c) As soon as practicable after the conservator takes possession 
of the Corporation, the conservator shall notify, by first class mail, 
each holder of stock in the Corporation of the establishment of the 
conservatorship and shall describe the effect of the conservatorship on 
the Corporation's operations and equity holdings.
    (d) Upon the issuance of the order placing the Corporation in 
conservatorship, all rights, privileges, and powers of the board of 
directors, officers, and employees of the Corporation are vested 
exclusively in the conservator.
    (e) The Farm Credit Administration Board may, at any time, 
terminate the conservatorship and direct the conservator to turn over 
the Corporation's operations to such management as the Farm Credit 
Administration Board may designate, in which event the provisions of 
this subpart shall no longer apply.


Sec. 650.66  Powers and duties of the conservator.

    (a) The conservator shall direct the Corporation's further 
operation until the Farm Credit Administration Board decides that the 
Corporation can operate without the conservatorship or places the 
Corporation into receivership. Upon correction or resolution of the 
problem or condition that provided the basis for the appointment, the 
Farm Credit Administration Board may turn the Corporation over to such 
management as the Farm Credit Administration Board may direct.
    (b) The conservator shall exercise all powers necessary to continue 
the ongoing operations of the Corporation, to conserve and preserve the 
Corporation's assets and property, and otherwise protect the interests 
of the Corporation, its stockholders, and creditors as provided in this 
subpart.
    (c) The conservator serves as the trustee of the Corporation and 
conducts its operations for the benefit of the creditors and 
stockholders of the Corporation.
    (d) The conservator may exercise the powers that a receiver of the 
Corporation may exercise under any of the provisions of Sec. 650.56(b) 
of this subpart, except paragraphs (b)(2) and (b)(16). In interpreting 
the applicable paragraphs for purposes of this section, the terms 
``conservator'' and

[[Page 43639]]

``conservatorship'' shall be read for ``receiver'' and 
``receivership''.
    (e) The conservator may also take any other action the conservator 
considers appropriate or expedient to the continuing operation of the 
Corporation.


Sec. 650.67  Inventory, examination, and reports to stockholders.

    (a) As soon as practicable after taking possession of the 
Corporation, the conservator shall take an inventory of the assets and 
liabilities of the Corporation as of the date possession was taken. One 
copy of the inventory shall be filed with the Farm Credit 
Administration.
    (b) The conservatorship shall be examined by the Farm Credit 
Administration in accordance with section 8.11 of the Act.
    (c) The conservatorship shall prepare and file financial reports 
and other documents in accordance with the requirements of Sec. 620.40 
and part 621 of this chapter. The conservator of the Corporation shall 
provide the certification required in Sec. 621.14 of this chapter.


Sec. 650.68  Final discharge and release of the conservator.

    At such time as the conservator shall be relieved of its 
conservatorship duties, the conservator shall file a report on the 
conservator's activities with the Farm Credit Administration. The 
conservator shall thereupon be completely and finally released.

    Dated: August 7, 1997.
 Floyd Fithian,
Secretary, Farm Credit Administration Board.
[FR Doc. 97-21671 Filed 8-14-97; 8:45 am]
BILLING CODE 6705-01-P