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[104th Congress Public Law 105]
[From the U.S. Government Printing Office]

<DOC>
[DOCID: f:publ105.104]

                  FARM CREDIT SYSTEM REFORM ACT OF 1996

[[Page 110 STAT. 162]]

Public Law 104-105
104th Congress

                                 An Act

 
 To amend the Farm Credit Act of 1971 to provide regulatory relief, and 
       for other purposes. <<NOTE: Feb. 10, 1996 -  [H.R. 2029]>> 

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled, <<NOTE: Farm Credit 
System Reform Act of 1996. Loans.>> 

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

    (a) <<NOTE: 12 USC 2001 note.>>  Short Title.--This Act may be cited 
as the ``Farm Credit System Reform Act of 1996''.

    (b) Table of Contents.--The table of contents for this Act is as 
follows:

Sec. 1. Short title; table of contents.

             TITLE I--AGRICULTURAL MORTGAGE SECONDARY MARKET

Sec. 101. Definition of real estate.
Sec. 102. Definition of certified facility.
Sec. 103. Duties of Federal Agricultural Mortgage Corporation.
Sec. 104. Powers of the Corporation.
Sec. 105. Federal reserve banks as depositaries and fiscal agents.
Sec. 106. Certification of agricultural mortgage marketing facilities.
Sec. 107. Guarantee of qualified loans.
Sec. 108. Mandatory reserves and subordinated participation interests 
           eliminated.
Sec. 109. Standards requiring diversified pools.
Sec. 110. Small farms.
Sec. 111. Definition of an affiliate.
Sec. 112. State usury laws superseded.
Sec. 113. Extension of capital transition period.
Sec. 114. Minimum capital level.
Sec. 115. Critical capital level.
Sec. 116. Enforcement levels.
Sec. 117. Recapitalization of the Corporation.
Sec. 118. Liquidation of the Federal Agricultural Mortgage Corporation.

                       TITLE II--REGULATORY RELIEF

Sec. 201. Compensation of association personnel.
Sec. 202. Use of private mortgage insurance.
Sec. 203. Removal of certain borrower reporting requirement.
Sec. 204. Reform of regulatory limitations on dividend, member business, 
           and voting practices of eligible farmer-owned cooperatives.
Sec. 205. Removal of Federal Government certification requirement for 
           certain private sector financings.
Sec. 206. Borrower stock.
Sec. 207. Disclosure relating to adjustable rate loans.
Sec. 208. Borrowers' rights.
Sec. 209. Formation of administrative service entities.
Sec. 210. Joint management agreements.
Sec. 211. Dissemination of quarterly reports.
Sec. 212. Regulatory review.
Sec. 213. Examination of farm credit system institutions.
Sec. 214. Conservatorships and receiverships.
Sec. 215. Farm Credit Insurance Fund operations.
Sec. 216. Examinations by the Farm Credit System Insurance Corporation.
Sec. 217. Powers with respect to troubled insured System banks.

[[Page 110 STAT. 163]]

Sec. 218. Oversight and regulatory actions by the Farm Credit System 
           Insurance Corporation.
Sec. 219. Farm Credit System Insurance Corporation board of directors.
Sec. 220. Interest rate reduction program.
Sec. 221. Liability for making criminal referrals.

              TITLE III--IMPLEMENTATION AND EFFECTIVE DATE

Sec. 301. Implementation.
Sec. 302. Effective date.

             TITLE I--AGRICULTURAL MORTGAGE SECONDARY MARKET

SEC. 101. DEFINITION OF REAL ESTATE.

    Section 8.0(1)(B)(ii) of the Farm Credit Act of 1971 (12 U.S.C. 
2279aa(1)(B)(ii)) is amended by striking ``with a purchase price'' and 
inserting ``, excluding the land to which the dwelling is affixed, with 
a value''.

SEC. 102. DEFINITION OF CERTIFIED FACILITY.

    Section 8.0(3) of the Farm Credit Act of 1971 (12 U.S.C. 2279aa(3)) 
is amended--
            (1) in subparagraph (A), by striking ``a secondary marketing 
        agricultural loan'' and inserting ``an agricultural mortgage 
        marketing''; and
            (2) in subparagraph (B), by striking ``, but only'' and all 
        that follows through ``(9)(B)''.

SEC. 103. DUTIES OF FEDERAL AGRICULTURAL MORTGAGE CORPORATION.

    Section 8.1(b) of the Farm Credit Act of 1971 (12 U.S.C. 2279aa-
1(b)) is amended--
            (1) in paragraph (2), by striking ``and'' at the end;
            (2) in paragraph (3), by striking the period at the end and 
        inserting ``; and''; and
            (3) by adding at the end the following:
            ``(4) purchase qualified loans and issue securities 
        representing interests in, or obligations backed by, the 
        qualified loans, guaranteed for the timely repayment of 
        principal and interest.''.

SEC. 104. POWERS OF THE CORPORATION.

    Section 8.3(c) of the Farm Credit Act of 1971 (12 U.S.C. 2279aa-
3(c)) is amended--
            (1) by redesignating paragraphs (13) and (14) as paragraphs 
        (14) and (15), respectively; and
            (2) by inserting after paragraph (12) the following:
            ``(13) To purchase, hold, sell, or assign a qualified loan, 
        to issue a guaranteed security, representing an interest in, or 
        an obligation backed by, the qualified loan, and to perform all 
        the functions and responsibilities of an agricultural mortgage 
        marketing facility operating as a certified facility under this 
        title.''.

SEC. 105. FEDERAL RESERVE BANKS AS DEPOSITARIES AND FISCAL AGENTS.

    Section 8.3 of the Farm Credit Act of 1971 (12 U.S.C. 2279aa-3) is 
amended--
            (1) in subsection (d), by striking ``may act as depositories 
        for, or'' and inserting ``shall act as depositories for, and''; 
        and

[[Page 110 STAT. 164]]

            (2) in subsection (e), by striking ``Secretary of the 
        Treasury may authorize the Corporation to use'' and inserting 
        ``Corporation shall have access to''.

SEC. 106. CERTIFICATION OF AGRICULTURAL MORTGAGE MARKETING FACILITIES.

    Section 8.5 of the Farm Credit Act of 1971 (12 U.S.C. 2279aa-5) is 
amended--
            (1) in subsection (a)--
                    (A) in paragraph (1), by inserting ``(other than the 
                Corporation)'' after ``agricultural mortgage marketing 
                facilities''; and
                    (B) in paragraph (2), by inserting ``(other than the 
                Corporation)'' after ``agricultural mortgage marketing 
                facility''; and
            (2) in subsection (e)(1), by striking ``(other than the 
        Corporation)''.

SEC. 107. GUARANTEE OF QUALIFIED LOANS.

    Section 8.6 of the Farm Credit Act of 1971 (12 U.S.C. 2279aa-6) is 
amended--
            (1) in subsection (a)(1)--
                    (A) by striking ``Corporation shall guarantee'' and 
                inserting the following: ``Corporation--
                    ``(A) shall guarantee'';
                    (B) by striking the period at the end and inserting 
                ``; and''; and
                    (C) by adding at the end the following:
                    ``(B) may issue a security, guaranteed as to the 
                timely payment of principal and interest, that 
                represents an interest solely in, or an obligation fully 
                backed by, a pool consisting of qualified loans that--
                          ``(i) meet the standards established under 
                      section 8.8; and
                          ``(ii) have been purchased and held by the 
                      Corporation.'';
            (2) in subsection (d)--
                    (A) by striking paragraph (4); and
                    (B) by redesignating paragraphs (5), (6), and (7) as 
                paragraphs (4), (5), and (6), respectively; and
            (3) in subsection (g)(2), by striking ``section 8.0(9)(B))'' 
        and inserting ``section 8.0(9))''.

SEC. 108. MANDATORY RESERVES AND SUBORDINATED PARTICIPATION INTERESTS 
            ELIMINATED.

    (a) Guarantee of Qualified Loans.--Section 8.6 of the Farm Credit 
Act of 1971 (12 U.S.C. 2279aa-6) is amended by striking subsection (b).
    (b) Reserves and Subordinated Participation Interests.--Section 8.7 
of the Farm Credit Act of 1971 (12 U.S.C. 2279aa-7) is repealed.
    (c) Conforming Amendments.--
            (1) Section 8.0(9)(B)(i) of the Farm Credit Act of 1971 (12 
        U.S.C. 2279aa(9)(B)(i)) is amended by striking ``8.7, 8.8,'' and 
        inserting ``8.8''.
            (2) Section 8.6(a)(2) of the Farm Credit Act of 1971 (12 
        U.S.C. 2279aa-6(a)(2)) is amended by striking ``subject to the 
        provisions of subsection (b)''.

[[Page 110 STAT. 165]]

SEC. 109. STANDARDS REQUIRING DIVERSIFIED POOLS.

    (a) In General.--Section 8.6 of the Farm Credit Act of 1971 (12 
U.S.C. 2279aa-6) (as amended by section 108) is amended--
            (1) by striking subsection (c); and
            (2) by redesignating subsections (d) through (g) as 
        subsections (b) through (e), respectively.

    (b) Conforming Amendments.--
            (1) Section 8.0(9)(B)(i) of the Farm Credit Act of 1971 (12 
        U.S.C. 2279aa(9)(B)(i)) is amended by striking ``(f)'' and 
        inserting ``(d)''.
            (2) Section 8.13(a) of the Farm Credit Act of 1971 (12 
        U.S.C. 2279aa-13(a)) is amended by striking ``sections 8.6(b) 
        and'' in each place it appears and inserting ``section''.
            (3) Section 8.32(b)(1)(C) of the Farm Credit Act of 1971 (12 
        U.S.C. 2279bb-1(b)(1)(C)) is amended--
                    (A) by striking ``shall'' and inserting ``may''; and
                    (B) by inserting ``(as in effect before the date of 
                the enactment of the Farm Credit System Reform Act of 
                1996)'' before the semicolon.
            (4) Section 8.6(b) of the Farm Credit Act of 1971 (12 U.S.C. 
        2279aa-6(b)) (as redesignated by subsection (a)(2)) is 
        amended--
                    (A) by striking paragraph (4) (as redesignated by 
                section 107(2)(B)); and
                    (B) by redesignating paragraphs (5) and (6) (as 
                redesignated by section 107(2)(B)) as paragraphs (4) and 
                (5), respectively.

SEC. 110. SMALL FARMS.

    Section 8.8(e) of the Farm Credit Act of 1971 (12 U.S.C. 2279aa-
8(e)) is amended by adding at the end the following: ``The Board shall 
promote and encourage the inclusion of qualified loans for small farms 
and family farmers in the agricultural mortgage secondary market.''.

SEC. 111. DEFINITION OF AN AFFILIATE.

    Section 8.11(e) of the Farm Credit Act of 1971 (12 U.S.C. 2279aa-
11(e)) is amended--
            (1) by striking ``a certified facility or''; and
            (2) by striking ``paragraphs (3) and (7), respectively, of 
        section 8.0'' and inserting ``section 8.0(7)''.

SEC. 112. STATE USURY LAWS SUPERSEDED.

    Section 8.12 of the Farm Credit Act of 1971 (12 U.S.C. 2279aa-12) is 
amended by striking subsection (d) and inserting the following:
    ``(d) State Usury Laws Superseded.--A provision of the Constitution 
or law of any State shall not apply to an agricultural loan made by an 
originator or a certified facility in accordance with this title for 
sale to the Corporation or to a certified facility for inclusion in a 
pool for which the Corporation has provided, or has committed to 
provide, a guarantee, if the loan, not later than 180 days after the 
date the loan was made, is sold to the Corporation or included in a pool 
for which the Corporation has provided a guarantee, if the provision--
            ``(1) limits the rate or amount of interest, discount 
        points, finance charges, or other charges that may be charged, 
        taken,

[[Page 110 STAT. 166]]

        received, or reserved by an agricultural lender or a certified 
        facility; or
            ``(2) limits or prohibits a prepayment penalty (either fixed 
        or declining), yield maintenance, or make-whole payment that may 
        be charged, taken, or received by an agricultural lender or a 
        certified facility in connection with the full or partial 
        payment of the principal amount due on a loan by a borrower in 
        advance of the scheduled date for the payment under the terms of 
        the loan, otherwise known as a prepayment of the loan 
        principal.''.

SEC. 113. EXTENSION OF CAPITAL TRANSITION PERIOD.

    Section 8.32 of the Farm Credit Act of 1971 (12 U.S.C. 2279bb-1) is 
amended--
            (1) in the first sentence of subsection (a), by striking 
        ``Not later than the expiration of the 2-year period beginning 
        on December 13, 1991,'' and inserting ``Not sooner than the 
        expiration of the 3-year period beginning on the date of 
        enactment of the Farm Credit System Reform Act of 1996,'';
            (2) in the first sentence of subsection (b)(2), by striking 
        ``5-year'' and inserting ``8-year''; and
            (3) in subsection (d)--
                    (A) in the first sentence--
                          (i) by striking ``The regulations 
                      establishing'' and inserting the following:
            ``(1) In general.--The regulations establishing''; and
                          (ii) by striking ``shall contain'' and 
                      inserting the following: ``shall--
                    ``(A) be issued by the Director for public comment 
                in the form of a notice of proposed rulemaking, to be 
                first published after the expiration of the period 
                referred to in subsection (a); and
                    ``(B) contain''; and
                    (B) in the second sentence, by striking ``The 
                regulations shall'' and inserting the following:
            ``(2) Specificity.--The regulations referred to in paragraph 
        (1) shall''.

SEC. 114. MINIMUM CAPITAL LEVEL.

    Section 8.33 of the Farm Credit Act of 1971 (12 U.S.C. 2279bb-2) is 
amended to read as follows:

``SEC. 8.33. MINIMUM CAPITAL LEVEL.

    ``(a) In General.--Except as provided in subsection (b), for 
purposes of this subtitle, the minimum capital level for the Corporation 
shall be an amount of core capital equal to the sum of--
            ``(1) 2.75 percent of the aggregate on-balance sheet assets 
        of the Corporation, as determined in accordance with generally 
        accepted accounting principles; and
            ``(2) 0.75 percent of the aggregate off-balance sheet 
        obligations of the Corporation, which, for the purposes of this 
        subtitle, shall include--
                    ``(A) the unpaid principal balance of outstanding 
                securities that are guaranteed by the Corporation and 
                backed by pools of qualified loans;
                    ``(B) instruments that are issued or guaranteed by 
                the Corporation and are substantially equivalent to 
                instruments described in subparagraph (A); and

[[Page 110 STAT. 167]]

                    ``(C) other off-balance sheet obligations of the 
                Corporation.

    ``(b) Transition Period.--
            ``(1) In general.--For purposes of this subtitle, the 
        minimum capital level for the Corporation--
                    ``(A) prior to January 1, 1997, shall be the amount 
                of core capital equal to the sum of--
                          ``(i) 0.45 percent of aggregate off-balance 
                      sheet obligations of the Corporation;
                          ``(ii) 0.45 percent of designated on-balance 
                      sheet assets of the Corporation, as determined 
                      under paragraph (2); and
                          ``(iii) 2.50 percent of on-balance sheet 
                      assets of the Corporation other than assets 
                      designated under paragraph (2);
                    ``(B) during the 1-year period ending December 31, 
                1997, shall be the amount of core capital equal to the 
                sum of--
                          ``(i) 0.55 percent of aggregate off-balance 
                      sheet obligations of the Corporation;
                          ``(ii) 1.20 percent of designated on-balance 
                      sheet assets of the Corporation, as determined 
                      under paragraph (2); and
                          ``(iii) 2.55 percent of on-balance sheet 
                      assets of the Corporation other than assets 
                      designated under paragraph (2);
                    ``(C) during the 1-year period ending December 31, 
                1998, shall be the amount of core capital equal to--
                          ``(i) if the Corporation's core capital is not 
                      less than $25,000,000 on January 1, 1998, the sum 
                      of--
                                    ``(I) 0.65 percent of aggregate off-
                                balance sheet obligations of the 
                                Corporation;
                                    ``(II) 1.95 percent of designated 
                                on-balance sheet assets of the 
                                Corporation, as determined under 
                                paragraph (2); and
                                    ``(III) 2.65 percent of on-balance 
                                sheet assets of the Corporation other 
                                than assets designated under paragraph 
                                (2); or
                          ``(ii) if the Corporation's core capital is 
                      less than $25,000,000 on January 1, 1998, the 
                      amount determined under subsection (a); and
                    ``(D) on and after January 1, 1999, shall be the 
                amount determined under subsection (a).
            ``(2) Designated on-balance sheet assets.--For purposes of 
        this subsection, the designated on-balance sheet assets of the 
        Corporation shall be--
                    ``(A) the aggregate on-balance sheet assets of the 
                Corporation acquired under section 8.6(e); and
                    ``(B) the aggregate amount of qualified loans 
                purchased and held by the Corporation under section 
                8.3(c)(13).''.

SEC. 115. CRITICAL CAPITAL LEVEL.

    Section 8.34 of the Farm Credit Act of 1971 (12 U.S.C. 2279bb-3) is 
amended to read as follows:

``SEC. 8.34. CRITICAL CAPITAL LEVEL.

    ``For purposes of this subtitle, the critical capital level for the 
Corporation shall be an amount of core capital equal to 50

[[Page 110 STAT. 168]]

percent of the total minimum capital amount determined under section 
8.33.''.

SEC. 116. ENFORCEMENT LEVELS.

    Section 8.35(e) of the Farm Credit Act of 1971 (12 U.S.C. 2279bb-
4(e)) is amended by striking ``during the 30-month period beginning on 
the date of the enactment of this section,'' and inserting ``during the 
period beginning on December 13, 1991, and ending on the effective date 
of the risk based capital regulation issued by the Director under 
section 8.32,''.

SEC. 117. RECAPITALIZATION OF THE CORPORATION.

    Title VIII of the Farm Credit Act of 1971 (12 U.S.C. 2279aa et seq.) 
is amended by adding at the end the following:

``SEC. 8.38. <<NOTE: 12 USC 2279bb-7.>>  RECAPITALIZATION OF THE 
            CORPORATION.

    ``(a) Mandatory Recapitalization.--The Corporation shall increase 
the core capital of the Corporation to an amount equal to or greater 
than $25,000,000, not later than the earlier of--
            ``(1) the date that is 2 years after the date of enactment 
        of this section; or
            ``(2) the date that is 180 days after the end of the first 
        calendar quarter that the aggregate on-balance sheet assets of 
        the Corporation, plus the outstanding principal of the off-
        balance sheet obligations of the Corporation, equal or exceed 
        $2,000,000,000.

    ``(b) Raising Core Capital.--In carrying out this section, the 
Corporation may issue stock under section 8.4 and otherwise employ any 
recognized and legitimate means of raising core capital in the power of 
the Corporation under section 8.3.
    ``(c) Limitation on Growth of Total Assets.--During the 2-year 
period beginning on the date of enactment of this section, the aggregate 
on-balance sheet assets of the Corporation plus the outstanding 
principal of the off-balance sheet obligations of the Corporation may 
not exceed $3,000,000,000 if the core capital of the Corporation is less 
than $25,000,000.
    ``(d) Enforcement.--If the Corporation fails to carry out subsection 
(a) by the date required under paragraph (1) or (2) of subsection (a), 
the Corporation may not purchase a new qualified loan or issue or 
guarantee a new loan-backed security until the core capital of the 
Corporation is increased to an amount equal to or greater than 
$25,000,000.''.

SEC. 118. LIQUIDATION OF THE FEDERAL AGRICULTURAL MORTGAGE CORPORATION.

    Title VIII of the Farm Credit Act of 1971 (12 U.S.C. 2279aa et seq.) 
(as amended by section 117) is amended by adding at the end the 
following:

  ``Subtitle C--Receivership, Conservator-ship, and Liquidation of the 
                                Federal 
                    Agricultural Mortgage Corporation

``SEC. 8.41. <<NOTE: 12 USC 2279cc.>>  CONSERVATORSHIP; LIQUIDATION; 
            RECEIVERSHIP.

    ``(a) Voluntary Liquidation.--The Corporation may voluntarily 
liquidate only with the consent of, and in accordance with

[[Page 110 STAT. 169]]

a plan of liquidation approved by, the Farm Credit Administration Board.
    ``(b) Involuntary Liquidation.--
            ``(1) In general.--The Farm Credit Administration Board may 
        appoint a conservator or receiver for the Corporation under the 
        circumstances specified in section 4.12(b).
            ``(2) Application.--In applying section 4.12(b) to the 
        Corporation under paragraph (1)--
                    ``(A) the Corporation shall also be considered 
                insolvent if the Corporation is unable to pay its debts 
                as they fall due in the ordinary course of business;
                    ``(B) a conservator may also be appointed for the 
                Corporation if the authority of the Corporation to 
                purchase qualified loans or issue or guarantee loan-
                backed securities is suspended; and
                    ``(C) a receiver may also be appointed for the 
                Corporation if--
                          ``(i)(I) the authority of the Corporation to 
                      purchase qualified loans or issue or guarantee 
                      loan-backed securities is suspended; or
                          ``(II) the Corporation is classified under 
                      section 8.35 as within level III or IV and the 
                      alternative actions available under subtitle B are 
                      not satisfactory; and
                          ``(ii) the Farm Credit Administration 
                      determines that the appointment of a conservator 
                      would not be appropriate.
            ``(3) No effect on supervisory actions.--The grounds for 
        appointment of a conservator for the Corporation under this 
        subsection shall be in addition to those in section 8.37.

    ``(c) Appointment of Conservator or Receiver.--
            ``(1) Qualifications.--Notwithstanding section 4.12(b), if a 
        conservator or receiver is appointed for the Corporation, the 
        conservator or receiver shall be--
                    ``(A) the Farm Credit Administration or any other 
                governmental entity or employee, including the Farm 
                Credit System Insurance Corporation; or
                    ``(B) any person that--
                          ``(i) has no claim against, or financial 
                      interest in, the Corporation or other basis for a 
                      conflict of interest as the conservator or 
                      receiver; and
                          ``(ii) has the financial and management 
                      expertise necessary to direct the operations and 
                      affairs of the Corporation and, if necessary, to 
                      liquidate the Corporation.
            ``(2) Compensation.--
                    ``(A) In general.--A conservator or receiver for the 
                Corporation and professional personnel (other than a 
                Federal employee) employed to represent or assist the 
                conservator or receiver may be compensated for 
                activities conducted as, or for, a conservator or 
                receiver.
                    ``(B) Limit on compensation.--Compensation may not 
                be provided in amounts greater than the compensation 
                paid to employees of the Federal Government for similar 
                services, except that the Farm Credit Administration may 
                provide for compensation at higher rates that are not in 
                excess of rates prevailing in the private sector if the 
                Farm

[[Page 110 STAT. 170]]

                Credit Administration determines that compensation at 
                higher rates is necessary in order to recruit and retain 
                competent personnel.
                    ``(C) Contractual arrangements.--The conservator or 
                receiver may contract with any governmental entity, 
                including the Farm Credit System Insurance Corporation, 
                to make personnel, services, and facilities of the 
                entity available to the conservator or receiver on such 
                terms and compensation arrangements as shall be mutually 
                agreed, and each entity may provide the same to the 
                conservator or receiver.
            ``(3) <<NOTE: Claims.>>  Expenses.--A valid claim for 
        expenses of the conservatorship or receivership (including 
        compensation under paragraph (2)) and a valid claim with respect 
        to a loan made under subsection (f) shall--
                    ``(A) be paid by the conservator or receiver from 
                funds of the Corporation before any other valid claim 
                against the Corporation; and
                    ``(B) may be secured by a lien, on such property of 
                the Corporation as the conservator or receiver may 
                determine, that shall have priority over any other lien.
            ``(4) Liability.--If the conservator or receiver for the 
        Corporation is not a Federal entity, or an officer or employee 
        of the Federal Government, the conservator or receiver shall not 
        be personally liable for damages in tort or otherwise for an act 
        or omission performed pursuant to and in the course of the 
        conservatorship or receivership, unless the act or omission 
        constitutes gross negligence or any form of intentional tortious 
        conduct or criminal conduct.
            ``(5) Indemnification.--The Farm Credit Administration may 
        allow indemnification of the conservator or receiver from the 
        assets of the conservatorship or receivership on such terms as 
        the Farm Credit Administration considers appropriate.

    ``(d) Judicial Review of Appointment.--
            ``(1) In general.--Notwithstanding subsection (i)(1), not 
        later than 30 days after a conservator or receiver is appointed 
        under subsection (b), the Corporation may 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 conservator or receiver. The court shall, on the merits, 
        dismiss the action or direct the Farm Credit Administration 
        Board to remove the conservator or receiver.
            ``(2) Stay of other actions.--On the commencement of an 
        action under paragraph (1), any court having jurisdiction of any 
        other action or enforcement proceeding authorized under this Act 
        to which the Corporation is a party shall stay the action or 
        proceeding during the pendency of the action for removal of the 
        conservator or receiver.

    ``(e) General Powers of Conservator or Receiver.--The conservator or 
receiver for the Corporation shall have such powers to conduct the 
conservatorship or receivership as shall be provided pursuant to 
regulations adopted by the Farm Credit Administration Board. Such powers 
shall be comparable to the powers available to a conservator or receiver 
appointed pursuant to section 4.12(b).
    ``(f) Borrowings for Working Capital.--
            ``(1) In general.--If the conservator or receiver of the 
        Corporation determines that it is likely that there will be

[[Page 110 STAT. 171]]

        insufficient funds to pay the ongoing administrative expenses of 
        the conservatorship or receivership or that there will be 
        insufficient liquidity to fund maturing obligations of the 
        conservatorship or receivership, the conservator or receiver may 
        borrow funds in such amounts, from such sources, and at such 
        rates of interest as the conservator or receiver considers 
        necessary or appropriate to meet the administrative expenses or 
        liquidity needs of the conservatorship or receivership.
            ``(2) Working capital from farm credit banks.--A Farm Credit 
        bank may loan funds to the conservator or receiver for a loan 
        authorized under paragraph (1) or, in the event of receivership, 
        a Farm Credit bank may purchase assets of the Corporation.

    ``(g) Agreements Against Interests of Conservator or Receiver.--No 
agreement that tends to diminish or defeat the right, title, or interest 
of the conservator or receiver for the Corporation in any asset acquired 
by the conservator or receiver as conservator or receiver for the 
Corporation shall be valid against the conservator or receiver unless 
the agreement--
            ``(1) is in writing;
            ``(2) is executed by the Corporation and any person claiming 
        an adverse interest under the agreement, including the obligor, 
        contemporaneously with the acquisition of the asset by the 
        Corporation;
            ``(3) is approved by the Board or an appropriate committee 
        of the Board, which approval shall be reflected in the minutes 
        of the Board or committee; and
            ``(4) has been, continuously, from the time of the 
        agreement's execution, an official record of the Corporation.

    ``(h) Report to the Congress.--On a determination by the receiver 
for the Corporation 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, the Committee on 
Agriculture of the House of Representatives, and the Committee on 
Agriculture, Nutrition, and Forestry of the Senate a report on the 
financial condition of the receivership.
    ``(i) Termination of Authorities.--
            ``(1) Corporation.--The charter of the Corporation shall be 
        canceled, and the authority provided to the Corporation by this 
        title shall terminate, on such date as the Farm Credit 
        Administration Board determines is appropriate following the 
        placement of the Corporation in receivership, but not later than 
        the conclusion of the receivership and discharge of the 
        receiver.
            ``(2) <<NOTE: Government organization.>>  Oversight.--The 
        Office of Secondary Market Oversight established under section 
        8.11 shall be abolished, and section 8.11(a) and subtitle B 
        shall have no force or effect, on such date as the Farm Credit 
        Administration Board determines is appropriate following the 
        placement of the Corporation in receivership, but not later than 
        the conclusion of the receivership and discharge of the 
        receiver.''.

[[Page 110 STAT. 172]]

                       TITLE II--REGULATORY RELIEF

SEC. 201. COMPENSATION OF ASSOCIATION PERSONNEL.

    Section 1.5(13) of the Farm Credit Act of 1971 (12 U.S.C. 2013(13)) 
is amended by striking ``, and the appointment and compensation of the 
chief executive officer thereof,''.

SEC. 202. USE OF PRIVATE MORTGAGE INSURANCE.

    (a) In General.--Section 1.10(a)(1) of the Farm Credit Act of 1971 
(12 U.S.C. 2018(a)(1)) is amended by adding at the end the following:
                    ``(D) Private mortgage insurance.--A loan on which 
                private mortgage insurance is obtained may exceed 85 
                percent of the appraised value of the real estate 
                security to the extent that the loan amount in excess of 
                such 85 percent is covered by the insurance.''.

    (b) Conforming Amendment.--Section 1.10(a)(1)(A) of the Farm Credit 
Act of 1971 (12 U.S.C. 2018(a)(1)(A)) is amended by striking 
``paragraphs (2) and (3)'' and inserting ``subparagraphs (C) and (D)''.

SEC. 203. REMOVAL OF CERTAIN BORROWER REPORTING REQUIREMENT.

    Section 1.10(a) of the Farm Credit Act of 1971 (12 U.S.C. 2018(a)) 
is amended by striking paragraph (5).

SEC. 204. REFORM OF REGULATORY LIMITATIONS ON DIVIDEND, MEMBER BUSINESS, 
            AND VOTING PRACTICES OF ELIGIBLE FARMER-OWNED COOPERATIVES.

    (a) In General.--Section 3.8(a) of the Farm Credit Act of 1971 (12 
U.S.C. 2129(a)) is amended by adding at the end the following: ``Any 
such association that has received a loan from a bank for cooperatives 
shall, without regard to the requirements of paragraphs (1) through (4), 
continue to be eligible for so long as more than 50 percent (or such 
higher percentage as is established by the bank board) of the voting 
control of the association is held by farmers, producers or harvesters 
of aquatic products, or eligible cooperative associations.''.
    (b) Conforming Amendment.--Section 3.8(b)(1)(D) of the Farm Credit 
Act of 1971 (12 U.S.C. 2129(b)(1)(D)) is amended by striking ``and (4) 
of subsection (a)'' and inserting ``and (4), or under the last sentence, 
of subsection (a)''.

SEC. 205. REMOVAL OF FEDERAL GOVERNMENT CERTIFICATION REQUIREMENT FOR 
            CERTAIN PRIVATE SECTOR FINANCINGS.

    Section 3.8(b)(1)(A) of the Farm Credit Act of 1971 (12 U.S.C. 
2129(b)(1)(A)) is amended--
            (1) by striking ``have been certified by the Administrator 
        of the Rural Electrification Administration to be eligible for 
        such'' and inserting ``are eligible under the Rural 
        Electrification Act of 1936 (7 U.S.C. 901 et seq.) for''; and
            (2) by striking ``loan guarantee, and'' and inserting ``loan 
        guarantee from the Administration or the Bank (or a successor of 
        the Administration or the Bank), and''.

[[Page 110 STAT. 173]]

SEC. 206. BORROWER STOCK.

    Section 4.3A of the Farm Credit Act of 1971 (12 U.S.C. 2154a) is 
amended--
            (1) by redesignating subsections (f) and (g) as subsections 
        (g) and (h), respectively; and
            (2) by inserting after subsection (e) the following:

    ``(f) Loans Designated for Sale or Sold Into the Secondary Market.--
            ``(1) In general.--Subject to paragraph (2) and 
        notwithstanding any other provision of this section, the bylaws 
        adopted by a bank or association under subsection (b) may 
        provide--
                    ``(A) in the case of a loan made on or after the 
                date of enactment of this paragraph that is designated, 
                at the time the loan is made, for sale into a secondary 
                market, that no voting stock or participation 
                certificate purchase requirement shall apply to the 
                borrower for the loan; and
                    ``(B) in the case of a loan made before the date of 
                enactment of this paragraph that is sold into a 
                secondary market, that all outstanding voting stock or 
                participation certificates held by the borrower with 
                respect to the loan shall, subject to subsection (d)(1), 
                be retired.
            ``(2) Applicability.--Notwithstanding any other provision of 
        this section, in the case of a loan sold to a secondary market 
        under title VIII, paragraph (1) shall apply regardless of 
        whether the bank or association retains a subordinated 
        participation interest in a loan or pool of loans or contributes 
        to a cash reserve.
            ``(3) Exception.--
                    ``(A) In general.--Subject to subparagraph (B) and 
                notwithstanding any other provision of this section, if 
                a loan designated for sale under paragraph (1)(A) is not 
                sold into a secondary market during the 180-day period 
                that begins on the date of the designation, the voting 
                stock or participation certificate purchase requirement 
                that would otherwise apply to the loan in the absence of 
                a bylaw provision described in paragraph (1)(A) shall be 
                effective.
                    ``(B) Retirement.--The bylaws adopted by a bank or 
                association under subsection (b) may provide that if a 
                loan described in subparagraph (A) is sold into a 
                secondary market after the end of the 180-day period 
                described in the subparagraph, all outstanding voting 
                stock or participation certificates held by the borrower 
                with respect to the loan shall, subject to subsection 
                (d)(1), be retired.''.

SEC. 207. DISCLOSURE RELATING TO ADJUSTABLE RATE LOANS.

    Section 4.13(a)(4) of the Farm Credit Act of 1971 (12 U.S.C. 
2199(a)(4)) is amended by inserting before the semicolon at the end the 
following: ``, and notice to the borrower of a change in the interest 
rate applicable to the loan of the borrower may be made within a 
reasonable time after the effective date of an increase or decrease in 
the interest rate''.

SEC. 208. BORROWERS' RIGHTS.

    (a) Definition of Loan.--Section 4.14A(a)(5) of the Farm Credit Act 
of 1971 (12 U.S.C. 2202a(a)(5)) is amended--
            (1) by striking ``(5) Loan.--The'' and inserting the 
        following:

[[Page 110 STAT. 174]]

            ``(5) Loan.--
                    ``(A) In general.--Subject to subparagraph (B), 
                the''; and
            (2) by adding at the end the following:
                    ``(B) Exclusion for loans designated for sale into 
                secondary market.--
                          ``(i) In general.--Except as provided in 
                      clause (ii), the term `loan' does not include a 
                      loan made on or after the date of enactment of 
                      this subparagraph that is designated, at the time 
                      the loan is made, for sale into a secondary 
                      market.
                          ``(ii) Unsold loans.--
                                    ``(I) In general.--Except as 
                                provided in subclause (II), if a loan 
                                designated for sale under clause (i) is 
                                not sold into a secondary market during 
                                the 180-day period that begins on the 
                                date of the designation, the provisions 
                                of this section and sections 4.14, 
                                4.14B, 4.14C, 4.14D, and 4.36 that would 
                                otherwise apply to the loan in the 
                                absence of the exclusion described in 
                                clause (i) shall become effective with 
                                respect to the loan.
                                    ``(II) Later sale.--If a loan 
                                described in subclause (I) is sold into 
                                a secondary market after the end of the 
                                180-day period described in subclause 
                                (I), subclause (I) shall not apply with 
                                respect to the loan beginning on the 
                                date of the sale.''.

    (b) Borrowers' Rights for Pooled Loans.--The first sentence of 
section 8.9(b) of the Farm Credit Act of 1971 (12 U.S.C. 2279aa-9(b)) is 
amended by inserting ``(as defined in section 4.14A(a)(5))'' after 
``application for a loan''.

SEC. 209. FORMATION OF ADMINISTRATIVE SERVICE ENTITIES.

    Part E of title IV of the Farm Credit Act of 1971 is amended by 
inserting after section 4.28 (12 U.S.C. 2214) the following:

``SEC. 4.28A. <<NOTE: 12 USC 2214a.>> DEFINITION OF BANK.

    ``In this part, the term `bank' includes each association operating 
under title II.''.

SEC. 210. JOINT MANAGEMENT AGREEMENTS.

    The first sentence of section 5.17(a)(2)(A) of the Farm Credit Act 
of 1971 (12 U.S.C. 2252(a)(2)(A)) is amended by striking ``or management 
agreements''.

SEC. 211. DISSEMINATION OF QUARTERLY REPORTS.

    Section 5.17(a)(8) of the Farm Credit Act of 1971 (12 U.S.C. 
2252(a)(8)) is amended by inserting after ``except that'' the following: 
``the requirements of the Farm Credit Administration governing the 
dissemination to stockholders of quarterly reports of System 
institutions may not be more burdensome or costly than the requirements 
applicable to national banks, and''.

SEC. 212. <<NOTE: 12 USC 2252 note.>> REGULATORY REVIEW.

    (a) Findings.--Congress finds that--
            (1) the Farm Credit Administration, in the role of the 
        Administration as an arms-length safety and soundness regu

[[Page 110 STAT. 175]]

        lator, has made considerable progress in reducing the regulatory 
        burden on Farm Credit System institutions;
            (2) the efforts of the Farm Credit Administration described 
        in paragraph (1) have resulted in cost savings for Farm Credit 
        System institutions; and
            (3) the cost savings described in paragraph (2) ultimately 
        benefit the farmers, ranchers, agricultural cooperatives, and 
        rural residents of the United States.

    (b) Continuation of Regulatory Review.--The Farm Credit 
Administration shall continue the comprehensive review of regulations 
governing the Farm Credit System to identify and eliminate, consistent 
with law, safety, and soundness, all regulations that are unnecessary, 
unduly burdensome or costly, or not based on law.

SEC. 213. EXAMINATION OF FARM CREDIT SYSTEM INSTITUTIONS.

    The first sentence of section 5.19(a) of the Farm Credit Act of 1971 
(12 U.S.C. 2254(a)) is amended by striking ``each year'' and inserting 
``during each 18-month period''.

SEC. 214. CONSERVATORSHIPS AND RECEIVERSHIPS.

    (a) Definitions.--Section 5.51 of the Farm Credit Act of 1971 (12 
U.S.C. 2277a) is amended--
            (1) by striking paragraph (5); and
            (2) by redesignating paragraph (6) as paragraph (5).

    (b) General Corporate Powers.--Section 5.58 of the Farm Credit Act 
of 1971 (12 U.S.C. 2277a-7) is amended by striking paragraph (9) and 
inserting the following:
            ``(9) Conservator or receiver.--The Corporation may act as a 
        conservator or receiver.''.

SEC. 215. FARM CREDIT INSURANCE FUND OPERATIONS.

    (a) Adjustment of Premiums.--
            (1) In general.--Section 5.55(a) of the Farm Credit Act of 
        1971 (12 U.S.C. 2277a-4(a)) is amended--
                    (A) in paragraph (1), by striking ``Until the 
                aggregate of amounts in the Farm Credit Insurance Fund 
                exceeds the secure base amount, the annual premium due 
                from any insured System bank for any calendar year'' and 
                inserting the following: ``If at the end of any calendar 
                year the aggregate of amounts in the Farm Credit 
                Insurance Fund does not exceed the secure base amount, 
                subject to paragraph (2), the annual premium due from 
                any insured System bank for the calendar year'';
                    (B) by redesignating paragraph (2) as paragraph (3); 
                and
                    (C) by inserting after paragraph (1) the following:
            ``(2) Reduced premiums.--The Corporation, in the sole 
        discretion of the Corporation, may reduce by a percentage 
        uniformly applied to all insured System banks the annual premium 
        due from each insured System bank during any calendar year, as 
        determined under paragraph (1).''.
            (2) Conforming amendments.--
                    (A) Section 5.55(b) of the Farm Credit Act of 1971 
                (12 U.S.C. 2277a-4(b)) is amended--
                          (i) by striking ``Insurance Fund'' each place 
                      it appears and inserting ``Farm Credit Insurance 
                      Fund'';

[[Page 110 STAT. 176]]

                          (ii) by striking ``for the following calendar 
                      year''; and
                          (iii) by striking ``subsection (a)'' and 
                      inserting ``subsection (a)(1)''.
                    (B) Section 5.56(a) of the Farm Credit Act of 1971 
                (12 U.S.C. 2277a-5(a)) is amended by striking ``section 
                5.55(a)(2)'' each place it appears in paragraphs (2) and 
                (3) and inserting ``section 5.55(a)(3)''.
                    (C) Section 1.12(b) (12 U.S.C. 2020(b)) is amended--
                          (i) in paragraph (1), by inserting ``(as 
                      defined in section 5.55(a)(3))'' after 
                      ``government-guaranteed loans''; and
                          (ii) in paragraph (3), by inserting ``(as so 
                      defined)'' after ``government-guaranteed loans'' 
                      each place such term appears.

    (b) Allocation to Insured System Banks and Other System Institutions 
of Excess Amounts in the Farm Credit Insurance Fund.--Section 5.55 of 
the Farm Credit Act of 1971 (12 U.S.C. 2277a-4) is amended by adding at 
the end the following:
    ``(e) Allocation to System Institutions of Excess Reserves.--
            ``(1) Establishment of allocated insurance reserves 
        accounts.--There is hereby established in the Farm Credit 
        Insurance Fund an Allocated Insurance Reserves Account--
                    ``(A) for each insured System bank; and
                    ``(B) subject to paragraph (6)(C), for all holders, 
                in the aggregate, of Financial Assistance Corporation 
                stock.
            ``(2) Treatment.--Amounts in any Allocated Insurance 
        Reserves Account shall be considered to be part of the Farm 
        Credit Insurance Fund.
            ``(3) Annual allocations.--If, at the end of any calendar 
        year, the aggregate of the amounts in the Farm Credit Insurance 
        Fund exceeds the average secure base amount for the calendar 
        year (as calculated on an average daily balance basis), the 
        Corporation shall allocate to the Allocated Insurance Reserves 
        Accounts the excess amount less the amount that the Corporation, 
        in its sole discretion, determines to be the sum of the 
        estimated operating expenses and estimated insurance obligations 
        of the Corporation for the immediately succeeding calendar year.
            ``(4) Allocation formula.--From the total amount required to 
        be allocated at the end of a calendar year under paragraph (3)--
                    ``(A) 10 percent of the total amount shall be 
                credited to the Allocated Insurance Reserves Account 
                established under paragraph (1)(B), subject to paragraph 
                (6)(C); and
                    ``(B) there shall be credited to the Allocated 
                Insurance Reserves Account of each insured System bank 
                an amount that bears the same ratio to the total amount 
                (less any amount credited under subparagraph (A)) as the 
                average principal outstanding for the 3-year period 
                ending on the end of the calendar year on loans made by 
                the bank that are in accrual status bears to the average 
                principal outstanding for the 3-year period ending on 
                the end of the calendar year on loans made by all 
                insured System banks that are in accrual status 
                (excluding, in each case,

[[Page 110 STAT. 177]]

                the guaranteed portions of government-guaranteed loans 
                described in subsection (a)(1)(C)).
            ``(5) Use of funds in allocated insurance reserves 
        accounts.--To the extent that the sum of the operating expenses 
        of the Corporation and the insurance obligations of the 
        Corporation for a calendar year exceeds the sum of operating 
        expenses and insurance obligations determined under paragraph 
        (3) for the calendar year, the Corporation shall cover the 
        expenses and obligations by--
                    ``(A) reducing each Allocated Insurance Reserves 
                Account by the same proportion; and
                    ``(B) expending the amounts obtained under 
                subparagraph (A) before expending other amounts in the 
                Fund.
            ``(6) Other disposition of account funds.--
                    ``(A) In general.--As soon as practicable during 
                each calendar year beginning more than 8 years after the 
                date on which the aggregate of the amounts in the Farm 
                Credit Insurance Fund exceeds the secure base amount, 
                but not earlier than January 1, 2005, the Corporation 
                may--
                          ``(i) subject to subparagraphs (D) and (F), 
                      pay to each insured System bank, in a manner 
                      determined by the Corporation, an amount equal to 
                      the lesser of--
                                    ``(I) 20 percent of the balance in 
                                the insured System bank's Allocated 
                                Insurance Reserves Account as of the 
                                preceding December 31; or
                                    ``(II) 20 percent of the balance in 
                                the bank's Allocated Insurance Reserves 
                                Account on the date of the payment; and
                          ``(ii) subject to subparagraphs (C), (E), and 
                      (F), pay to each System bank and association 
                      holding Financial Assistance Corporation stock a 
                      proportionate share, determined by dividing the 
                      number of shares of Financial Assistance 
                      Corporation stock held by the institution by the 
                      total number of shares of Financial Assistance 
                      Corporation stock outstanding, of the lesser of--
                                    ``(I) 20 percent of the balance in 
                                the Allocated Insurance Reserves Account 
                                established under paragraph (1)(B) as of 
                                the preceding December 31; or
                                    ``(II) 20 percent of the balance in 
                                the Allocated Insurance Reserves Account 
                                established under paragraph (1)(B) on 
                                the date of the payment.
                    ``(B) Authority to eliminate or reduce payments.--
                The Corporation may eliminate or reduce payments during 
                a calendar year under subparagraph (A) if the 
                Corporation determines, in its sole discretion, that the 
                payments, or other circumstances that might require use 
                of the Farm Credit Insurance Fund, could cause the 
                amount in the Farm Credit Insurance Fund during the 
                calendar year to be less than the secure base amount.
                    ``(C) Reimbursement for financial assistance 
                corporation stock.--
                          ``(i) Sufficient funding.--Notwithstanding 
                      paragraph (4)(A), on provision by the Corporation 
                      for the accumulation in the Account established 
                      under para

[[Page 110 STAT. 178]]

                      graph (1)(B) of funds in an amount equal to 
                      $56,000,000 (in addition to the amounts described 
                      in subparagraph (F)(ii)), the Corporation shall 
                      not allocate any further funds to the Account 
                      except to replenish the Account if funds are 
                      diminished below $56,000,000 by the Corporation 
                      under paragraph (5).
                          ``(ii) Wind down and termination.--
                                    ``(I) Final disbursements.--On 
                                disbursement of $53,000,000 (in addition 
                                to the amounts described in subparagraph 
                                (F)(ii)) from the Allocated Insurance 
                                Reserves Account, the Corporation shall 
                                disburse the remaining amounts in the 
                                Account, as determined under 
                                subparagraph (A)(ii), without regard to 
                                the percentage limitations in subclauses 
                                (I) and (II) of subparagraph (A)(ii).
                                    ``(II) Termination of account.--On 
                                disbursement of $56,000,000 (in addition 
                                to the amounts described in subparagraph 
                                (F)(ii)) from the Allocated Insurance 
                                Reserves Account, the Corporation shall 
                                close the Account established under 
                                paragraph (1)(B) and transfer any 
                                remaining funds in the Account to the 
                                remaining Allocated Insurance Reserves 
                                Accounts in accordance with paragraph 
                                (4)(B) for the calendar year in which 
                                the transfer occurs.
                    ``(D) Distribution of payments received.--Not later 
                than 60 days after receipt of a payment made under 
                subparagraph (A)(i), each insured System bank, in 
                consultation with affiliated associations of the insured 
                System bank, and taking into account the direct or 
                indirect payment of insurance premiums by the 
                associations, shall develop and implement an equitable 
                plan to distribute payments received under subparagraph 
                (A)(i) among the bank and associations of the bank.
                    ``(E) Exception for previously reimbursed 
                associations.--For purposes of subparagraph (A)(ii), in 
                any Farm Credit district in which the funding bank has 
                reimbursed 1 or more affiliated associations of the bank 
                for the previously unreimbursed portion of the Financial 
                Assistance Corporation stock held by the associations, 
                the funding bank shall be deemed to be the holder of the 
                shares of Financial Assistance Corporation stock for 
                which the funding bank has provided the reimbursement.
                    ``(F) Initial payment.--Notwithstanding subparagraph 
                (A), the initial payment made to each payee under 
                subparagraph (A) shall be in such amount determined by 
                the Corporation to be equal to the sum of--
                          ``(i) the total of the amounts that would have 
                      been paid if payments under subparagraph (A) had 
                      been authorized to begin, under the same terms and 
                      conditions, in the first calendar year beginning 
                      more than 5 years after the date on which the 
                      aggregate of the amounts in the Farm Credit 
                      Insurance Fund exceeds the secure base amount, and 
                      to continue through the 2 immediately subsequent 
                      years;
                          ``(ii) interest earned on any amounts that 
                      would have been paid as described in clause (i) 
                      from the

[[Page 110 STAT. 179]]

                      date on which the payments would have been paid as 
                      described in clause (i); and
                          ``(iii) the payment to be made in the initial 
                      year described in subparagraph (A), based on the 
                      amount in each Account after subtracting the 
                      amounts to be paid under clauses (i) and (ii).''.

    (c) Technical Amendments.--Section 5.55(d) of the Farm Credit Act of 
1971 (12 U.S.C. 2277a-4(d)) is amended--
            (1) in the matter preceding paragraph (1)--
                    (A) by striking ``subsections (a) and (c)'' and 
                inserting ``subsections (a), (c), and (e)''; and
                    (B) by striking ``a Farm Credit Bank'' and inserting 
                ``an insured System bank''; and
            (2) in paragraphs (1), (2), and (3), by striking ``Farm 
        Credit Bank'' each place it appears and inserting ``insured 
        System bank''.

SEC. 216. EXAMINATIONS BY THE FARM CREDIT SYSTEM INSURANCE CORPORATION.

    Section 5.59(b)(1)(A) of the Farm Credit Act of 1971 (12 U.S.C. 
2277a-8(b)(1)(A)) is amended by adding at the end the following: 
``Notwithstanding any other provision of this Act, on cancellation of 
the charter of a System institution, the Corporation shall have 
authority to examine the system institution in receivership. An 
examination shall be performed at such intervals as the Corporation 
shall determine.''.

SEC. 217. POWERS WITH RESPECT TO TROUBLED INSURED SYSTEM BANKS.

    (a) Least-Cost Resolution.--Section 5.61(a)(3) of the Farm Credit 
Act of 1971 (12 U.S.C. 2277a-10(a)) is amended--
            (1) by redesignating subparagraph (B) as subparagraph (F); 
        and
            (2) by striking subparagraph (A) and inserting the 
        following:
                    ``(A) Least-cost resolution.--Assistance may not be 
                provided to an insured System bank under this subsection 
                unless the means of providing the assistance is the 
                least costly means of providing the assistance by the 
                Farm Credit Insurance Fund of all possible alternatives 
                available to the Corporation, including liquidation of 
                the bank (including paying the insured obligations 
                issued on behalf of the bank). Before making a least-
                cost determination under this subparagraph, the 
                Corporation shall accord such other insured System banks 
                as the Corporation determines to be appropriate the 
                opportunity to submit information relating to the 
                determination.
                    ``(B) Determining least costly approach.--In 
                determining the least costly alternative under 
                subparagraph (A), the Corporation shall--
                          ``(i) evaluate alternatives on a present-value 
                      basis, using a reasonable discount rate;
                          ``(ii) document the evaluation and the 
                      assumptions on which the evaluation is based; and
                          ``(iii) retain the documentation for not less 
                      than 5 years.
                    ``(C) Time of determination.--

[[Page 110 STAT. 180]]

                          ``(i) General rule.--For purposes of this 
                      subsection, the determination of the costs of 
                      providing any assistance under any provision of 
                      this section with respect to any insured System 
                      bank shall be made as of the date on which the 
                      Corporation makes the determination to provide the 
                      assistance to the institution under this section.
                          ``(ii) Rule for liquidations.--For purposes of 
                      this subsection, the determination of the costs of 
                      liquidation of any insured System bank shall be 
                      made as of the earliest of--
                                    ``(I) the date on which a 
                                conservator is appointed for the insured 
                                System bank;
                                    ``(II) the date on which a receiver 
                                is appointed for the insured System 
                                bank; or
                                    ``(III) the date on which the 
                                Corporation makes any determination to 
                                provide any assistance under this 
                                section with respect to the insured 
                                System bank.
                    ``(D) Rule for stand-alone assistance.--Before 
                providing any assistance under paragraph (1), the 
                Corporation shall evaluate the adequacy of managerial 
                resources of the insured System bank. The continued 
                service of any director or senior ranking officer who 
                serves in a policymaking role for the assisted insured 
                System bank, as determined by the Corporation, shall be 
                subject to approval by the Corporation as a condition of 
                assistance.
                    ``(E) Discretionary determinations.--Any 
                determination that the Corporation makes under this 
                paragraph shall be in the sole discretion of the 
                Corporation.''.

    (b) Conforming Amendments.--Section 5.61(a) of the Farm Credit Act 
of 1971 (12 U.S.C. 2277a-10(a)) is amended--
            (1) in paragraph (1) by striking ``In general.--'' and 
        inserting ``Stand-alone assistance.--''; and
            (2) in paragraph (2)--
                    (A) by striking ``Enumerated powers.--'' and 
                inserting ``Facilitation of mergers or consolidation.--
                ''; and
                    (B) in subparagraph (A) by striking ``Facilitation 
                of mergers or consolidation.--'' and inserting ``In 
                general.--''.

SEC. 218. OVERSIGHT AND REGULATORY ACTIONS BY THE FARM CREDIT SYSTEM 
            INSURANCE CORPORATION.

    The Farm Credit Act of 1971 is amended by inserting after section 
5.61 (12 U.S.C. 2279a-10) the following:

``SEC. 5.61A. <<NOTE: 12 USC 2277a-10a.>> OVERSIGHT ACTIONS BY THE 
            CORPORATION.

    ``(a) Definitions.--In this section, the term `institution' means--
            ``(1) an insured System bank; and
            ``(2) a production credit association or other association 
        making loans under section 7.6 with a direct loan payable to the 
        funding bank of the association that comprises 20 percent or 
        more of the funding bank's total loan volume net of nonaccrual 
        loans.

    ``(b) Consultation Regarding Participation of Undercapitalized Banks 
in Issuance of Insured Obligations.--The Farm Credit Administration 
shall consult with the Corporation

[[Page 110 STAT. 181]]

prior to approving an insured obligation that is to be issued by or on 
behalf of, or participated in by, any insured System bank that fails to 
meet the minimum level for any capital requirement established by the 
Farm Credit Administration for the bank.
    ``(c) Consultation Regarding Applications for Mergers and 
Restructurings.--
            ``(1) Corporation to receive copy of transaction 
        applications.--On receiving an application for a merger or 
        restructuring of an institution, the Farm Credit Administration 
        shall forward a copy of the application to the Corporation.
            ``(2) Consultation required.--If the proposed merger or 
        restructuring involves an institution that fails to meet the 
        minimum level for any capital requirement established by the 
        Farm Credit Administration applicable to the institution, the 
        Farm Credit Administration shall allow 30 days within which the 
        Corporation may submit the views and recommendations of the 
        Corporation, including any conditions for approval. In 
        determining whether to approve or disapprove any proposed merger 
        or restructuring, the Farm Credit Administration shall give due 
        consideration to the views and recommendations of the 
        Corporation.

``SEC. 5.61B. <<NOTE: 12 USC 2277a-10b.>> AUTHORITY TO REGULATE GOLDEN 
            PARACHUTE AND INDEMNIFICATION PAYMENTS.

    ``(a) Definitions.--In this section:
            ``(1) Golden parachute payment.--The term `golden parachute 
        payment'--
                    ``(A) means a payment (or any agreement to make a 
                payment) in the nature of compensation for the benefit 
                of any institution-related party under an obligation of 
                any Farm Credit System institution that--
                          ``(i) is contingent on the termination of the 
                      party's relationship with the institution; and
                          ``(ii) is received on or after the date on 
                      which--
                                    ``(I) the institution is insolvent;
                                    ``(II) a conservator or receiver is 
                                appointed for the institution;
                                    ``(III) the institution has been 
                                assigned by the Farm Credit 
                                Administration a composite CAMEL rating 
                                of 4 or 5 under the Farm Credit 
                                Administration Rating System, or an 
                                equivalent rating; or
                                    ``(IV) the Corporation otherwise 
                                determines that the institution is in a 
                                troubled condition (as defined in 
                                regulations issued by the Corporation); 
                                and
                    ``(B) includes a payment that would be a golden 
                parachute payment but for the fact that the payment was 
                made before the date referred to in subparagraph (A)(ii) 
                if the payment was made in contemplation of the 
                occurrence of an event described in any subclause of 
                subparagraph (A); but
                    ``(C) does not include--
                          ``(i) a payment made under a retirement plan 
                      that is qualified (or is intended to be qualified) 
                      under section 401 of the Internal Revenue Code of 
                      1986 or other nondiscriminatory benefit plan;

[[Page 110 STAT. 182]]

                          ``(ii) a payment made under a bona fide 
                      supplemental executive retirement plan, deferred 
                      compensation plan, or other arrangement that the 
                      Corporation determines, by regulation or order, to 
                      be permissible; or
                          ``(iii) a payment made by reason of the death 
                      or disability of an institution-related party.
            ``(2) Indemnification payment.--The term `indemnification 
        payment' means a payment (or any agreement to make a payment) by 
        any Farm Credit System institution for the benefit of any person 
        who is or was an institution-related party, to pay or reimburse 
        the person for any liability or legal expense with regard to any 
        administrative proceeding or civil action instituted by the Farm 
        Credit Administration that results in a final order under which 
        the person--
                    ``(A) is assessed a civil money penalty; or
                    ``(B) is removed or prohibited from participating in 
                the conduct of the affairs of the institution.
            ``(3) Institution-related party.--The term `institution-
        related party' means--
                    ``(A) a director, officer, employee, or agent for a 
                Farm Credit System institution or any conservator or 
                receiver of such an institution;
                    ``(B) a stockholder (other than another Farm Credit 
                System institution), consultant, joint venture partner, 
                or any other person determined by the Farm Credit 
                Administration to be a participant in the conduct of the 
                affairs of a Farm Credit System institution; and
                    ``(C) an independent contractor (including any 
                attorney, appraiser, or accountant) that knowingly or 
                recklessly participates in any violation of any law or 
                regulation, any breach of fiduciary duty, or any unsafe 
                or unsound practice that caused or is likely to cause 
                more than a minimal financial loss to, or a significant 
                adverse effect on, the Farm Credit System institution.
            ``(4) Liability or legal expense.--The term `liability or 
        legal expense' means--
                    ``(A) a legal or other professional expense incurred 
                in connection with any claim, proceeding, or action;
                    ``(B) the amount of, and any cost incurred in 
                connection with, any settlement of any claim, 
                proceeding, or action; and
                    ``(C) the amount of, and any cost incurred in 
                connection with, any judgment or penalty imposed with 
                respect to any claim, proceeding, or action.
            ``(5) Payment.--The term `payment' means--
                    ``(A) a direct or indirect transfer of any funds or 
                any asset; and
                    ``(B) any segregation of any funds or assets for the 
                purpose of making, or under an agreement to make, any 
                payment after the date on which the funds or assets are 
                segregated, without regard to whether the obligation to 
                make the payment is contingent on--
                          ``(i) the determination, after that date, of 
                      the liability for the payment of the amount; or
                          ``(ii) the liquidation, after that date, of 
                      the amount of the payment.

[[Page 110 STAT. 183]]

    ``(b) Prohibition.--The Corporation may prohibit or limit, by 
regulation or order, any golden parachute payment or indemnification 
payment by a Farm Credit System institution (including any conservator 
or receiver of the Federal Agricultural Mortgage Corporation) in 
troubled condition (as defined in regulations issued by the 
Corporation).
    ``(c) Factors To Be Taken into Account.--The Corporation shall 
prescribe, by regulation, the factors to be considered by the 
Corporation in taking any action under subsection (b). The factors may 
include--
            ``(1) whether there is a reasonable basis to believe that an 
        institution-related party has committed any fraudulent act or 
        omission, breach of trust or fiduciary duty, or insider abuse 
        with regard to the Farm Credit System institution involved that 
        has had a material effect on the financial condition of the 
        institution;
            ``(2) whether there is a reasonable basis to believe that 
        the institution-related party is substantially responsible for 
        the insolvency of the Farm Credit System institution, the 
        appointment of a conservator or receiver for the institution, or 
        the institution's troubled condition (as defined in regulations 
        prescribed by the Corporation);
            ``(3) whether there is a reasonable basis to believe that 
        the institution-related party has materially violated any 
        applicable law or regulation that has had a material effect on 
        the financial condition of the institution;
            ``(4) whether there is a reasonable basis to believe that 
        the institution-related party has violated or conspired to 
        violate--
                    ``(A) section 215, 657, 1006, 1014, or 1344 of title 
                18, United States Code; or
                    ``(B) section 1341 or 1343 of title 18, United 
                States Code, affecting a Farm Credit System institution;
            ``(5) whether the institution-related party was in a 
        position of managerial or fiduciary responsibility; and
            ``(6) the length of time that the party was related to the 
        Farm Credit System institution and the degree to which--
                    ``(A) the payment reasonably reflects compensation 
                earned over the period of employment; and
                    ``(B) the compensation represents a reasonable 
                payment for services rendered.

    ``(d) Certain Payments Prohibited.--No Farm Credit System 
institution may prepay the salary or any liability or legal expense of 
any institution-related party if the payment is made--
            ``(1) in contemplation of the insolvency of the institution 
        or after the commission of an act of insolvency; and
            ``(2) with a view to, or with the result of--
                    ``(A) preventing the proper application of the 
                assets of the institution to creditors; or
                    ``(B) preferring 1 creditor over another creditor.

    ``(e) Rule of Construction.--Nothing in this section--
            ``(1) prohibits any Farm Credit System institution from 
        purchasing any commercial insurance policy or fidelity bond, so 
        long as the insurance policy or bond does not cover any legal or 
        liability expense of an institution described in subsection 
        (a)(2); or

[[Page 110 STAT. 184]]

            ``(2) limits the powers, functions, or responsibilities of 
        the Farm Credit Administration.''.

SEC. 219. FARM CREDIT SYSTEM INSURANCE CORPORATION BOARD OF DIRECTORS.

    (a) In General.--Section 5.53 of the Farm Credit Act of 1971 (12 
U.S.C. 2277a-2) is amended to read as follows:

``SEC. 5.53. BOARD OF DIRECTORS.

    ``(a) Establishment.--The Corporation shall be managed by a Board of 
Directors that shall consist of the members of the Farm Credit 
Administration Board.
    ``(b) Chairman.--The Board of Directors shall be chaired by any 
Board member other than the Chairman of the Farm Credit Administration 
Board.''.
    (b) Conforming Amendments.--
            (1) Section 5314 of title 5, United States Code, is amended 
        by striking ``Chairperson, Board of Directors of the Farm Credit 
        System Insurance Corporation.''.
            (2) Section 5315 of title 5, United States Code, is amended 
        by striking ``Members, Board of Directors of the Farm Credit 
        System Insurance Corporation.''.

SEC. 220. INTEREST RATE REDUCTION PROGRAM.

    Section 351(a) of the Consolidated Farm and Rural Development Act (7 
U.S.C. 1999) is amended--
    (a) by striking ``Sec. 351. (a) The'' and inserting the following:

``SEC. 351. INTEREST RATE REDUCTION PROGRAM.

    ``(a) Establishment of Program.--
            ``(1) In general.--The''; and

    (b) by adding at the end the following:
            ``(2) Termination of authority.--The authority provided by 
        this subsection shall terminate on September 30, 2002.''.

SEC. 221. <<NOTE: 12 USC 2219e.>> LIABILITY FOR MAKING CRIMINAL 
            REFERRALS.

    (a) In General.--Any institution of the Farm Credit System, or any 
director, officer, employee, or agent of a Farm Credit System 
institution, that discloses to a Government authority information 
proffered in good faith that may be relevant to a possible violation of 
any law or regulation shall not be liable to any person under any law of 
the United States or any State--
            (1) for the disclosure; or
            (2) for any failure to notify the person involved in the 
        possible violation.

    (b) No Prohibition on Disclosure.--Any institution of the Farm 
Credit System, or any director, officer, employee, or agent of a Farm 
Credit System institution, may disclose information to a Government 
authority that may be relevant to a possible violation of any law or 
regulation.

[[Page 110 STAT. 185]]

              TITLE III--IMPLEMENTATION AND EFFECTIVE DATE

SEC. 301. <<NOTE: Regulations. 12 USC 2001 note.>> IMPLEMENTATION.

    The Secretary of Agriculture and the Farm Credit Administration 
shall promulgate regulations and take other required actions to 
implement the provisions of this Act not later than 90 days after the 
effective date of this Act.

SEC. 302. <<NOTE: 12 USC 2013 note.>> EFFECTIVE DATE.

    Except as otherwise provided in this Act, this Act and the 
amendments made by this Act shall become effective on the date of 
enactment.

    Approved February 10, 1996.

LEGISLATIVE HISTORY--H.R. 2029:
---------------------------------------------------------------------------

HOUSE REPORTS: No. 104-421 (Comm. on Agriculture).
CONGRESSIONAL RECORD:
                                                        Vol. 141 (1995):
                                    Dec. 19, considered and passed 
                                        House.
                                    Dec. 21, considered and passed 
                                        Senate, amended.
                                                        Vol. 142 (1996):
                                    Jan. 3, House concurred in Senate 
                                        amendment with an amendment.
                                    Jan. 26, Senate concurred in House 
                                        amendment.
WEEKLY COMPILATION OF PRESIDENTIAL DOCUMENTS, Vol. 32 (1996):
            Feb. 10, Presidential statement.

                                  <all>
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