103D CONGRESS

2D SESSION H. R. 3474

AMENDMENT
In the Senate of the United States,

March 17 (legislative day, February 22), 1994.

Resolved, That the bill from the House of Representatives (H.R. 3474) entitled ‘‘An Act to reduce administrative

requirements for insured depository institutions to the extent

consistent with safe and sound banking practices, to facilitate

the establishment of community development financial institutions, and for other purposes’’, do pass with the following

AMENDMENT:

Strike out all after the enacting clause and insert:

1 SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

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

3 ‘‘Community Development, Credit Enhancement, and Reg4 ulatory Improvement Act of 1994’’.

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

6 this Act is as follows:

Sec. 1. Short title; table of contents.
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TITLE I—COMMUNITY DEVELOPMENT AND CONSUMER PROTECTION

Subtitle A—Community Development Banking and Financial Institutions Act

Sec. 101. Short title.

Sec. 102. Findings and purposes.

Sec. 103. Definitions.

Sec. 104. Establishment of national fund for community development banking.

Sec. 105. Applications for assistance.

Sec. 106. Community partnerships.

Sec. 107. Selection of institutions.

Sec. 108. Assistance provided by the Fund.

Sec. 109. Community development training.

Sec. 110. Encouragement of private entities.

Sec. 111. Clearinghouse function.

Sec. 112. Recordkeeping, reports, and audits.

Sec. 113. Investment of receipts and proceeds.

Sec. 114. Inspector General.

Sec. 115. Capitalization assistance to enhance liquidity.

Sec. 116. Community development revolving loan fund for credit unions.

Sec. 117. Regulations.

Sec. 118. Authorization of appropriations.

Subtitle B—Home Ownership and Equity Protection

Sec. 151. Consumer protections for high cost mortgages.

Sec. 152. Civil liability.

Sec. 153. Reverse mortgage disclosure.

Sec. 154. Regulations; effective date.

TITLE II—SMALL BUSINESS CAPITAL FORMATION

Subtitle A—Small Business Loan Securitization

Sec. 201. Short title.

Sec. 202. Small business related security.

Sec. 203. Applicability of margin requirements.

Sec. 204. Borrowing in the course of business.

Sec. 205. Small business related securities as collateral.

Sec. 206. Investment by depository institutions.

Sec. 207. Preemption of State law.

Sec. 208. Insured depository institution capital requirements for transfers of

small business obligations.

Sec. 209. Transactions in small business related securities by employee benefit

plans.

Sec. 210. Sense of the Senate on taxation of small business loan investment conduits.

Subtitle B—Small Business Capital Enhancement

Sec. 251. Findings and purposes.

Sec. 252. Definitions.

Sec. 253. Approving States for participation.

Sec. 254. Participation agreements.

Sec. 255. Terms of participation agreements.

Sec. 256. Reports.

Sec. 257. Reimbursement by the Secretary.
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Sec. 258. Reimbursement to the Secretary.

Sec. 259. Regulations.

Sec. 260. Authorization of appropriations.

TITLE III—PAPERWORK REDUCTION AND REGULATORY

IMPROVEMENT

Sec. 301. Incorporated definitions.

Sec. 302. Administrative consideration of burden with new regulations.

Sec. 303. Streamlining of regulatory requirements.

Sec. 304. Elimination of duplicative filings.

Sec. 305. Coordinated and unified examinations.

Sec. 306. Eighteen-month examination rule for certain small institutions.

Sec. 307. Call report simplification.

Sec. 308. Repeal of publication requirements.

Sec. 309. Regulatory appeals process.

Sec. 310. Electronic filing of currency transaction reports.

Sec. 311. Bank Secrecy Act publication requirements.

Sec. 312. Exemption of business loans from Real Estate Settlement Procedures

Act requirements.

Sec. 313. Flexibility in choosing boards of directors.

Sec. 314. Holding company audit requirements.

Sec. 315. State regulation of real estate appraisals.

Sec. 316. Acceleration of effective date for interaffiliate transactions.

Sec. 317. Collateralization of public deposits.

Sec. 318. Elimination of stock valuation provision.

Sec. 319. Expedited procedures for forming a bank holding company.

Sec. 320. Exemption of certain holding company formations from registration

under the Securities Act of 1933.

Sec. 321. Reduction of post-approval waiting period for bank holding company

acquisitions.

Sec. 322. Reduction of post-approval waiting period for bank mergers.

Sec. 323. Bankers’ banks.

Sec. 324. Bank Service Corporation Act amendment.

Sec. 325. Merger transaction reports.

Sec. 326. Credit card accounts receivable sales.

Sec. 327. Limiting potential liability on foreign accounts.

Sec. 328. Amendments to outdated dividend provisions.

Sec. 329. Elimination of duplicative disclosures for home equity loans.

Sec. 330. Report on capital standards and their impact on the economy.

Sec. 331. Studies on the impact of the payment of interest on reserves.

Sec. 332. Study and report on streamlined lending process for consumer benefit.

Sec. 333. Repeal of outdated charter requirement for national banks.

Sec. 334. Inclusion of Comptroller of the Currency; clarification of revised statutes.

Sec. 335. Commemoration of 1995 Special Olympic World Games.

Sec. 336. Exemption for business accounts.

Sec. 337. Board discretion regarding check-related fraud.

Sec. 338. Civil liability under truth in savings.

Sec. 339. Insider lending.

Sec. 340. Revisions of standards.

Sec. 341. Alternative rules for radio advertising of consumer leases.

Sec. 342. Deposit broker registration.

Sec. 343. Extension of management interlocks grandfather clause.

Sec. 344. Clarification of provision relating to administrative autonomy.
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Sec. 345. Consumer surveys and report.

Sec. 346. Simplified disclosure for existing depositors.

Sec. 347. Commercial mortgage related securities.

Sec. 348. Offset of costs of certain programs.

TITLE IV—MONEY LAUNDERING

Sec. 401. Short title.

Sec. 402. Reform of CTR exemption requirements to reduce number and size of

reports consistent with effective law enforcement.

Sec. 403. Single designee for reporting of suspicious transactions.

Sec. 404. Improvement of identification of money laundering schemes.

Sec. 405. Negotiable instruments drawn on foreign banks subject to recordkeeping

and reporting requirements.

Sec. 406. Imposition of civil money penalties by appropriate Federal banking

agencies.

Sec. 407. Uniform State licensing and regulation of check cashing, currency exchange, and money transmitting businesses.

Sec. 408. Registration of money transmitting businesses to promote effective law

enforcement.

Sec. 409. Criminal and civil penalty for structuring domestic and international

transactions.

Sec. 410. GAO study of chasiers’ checks.

TITLE V—FAIR TRADE IN FINANCIAL SERVICES

Sec. 501. Short title.

Sec. 502. Effectuating the principle of national treatment for banking organizations.

Sec. 503. Effectuating the principle of national treatment for securities organizations.

Sec. 504. Effectuating the principle of national treatment for insurers and reinsurers.

Sec. 505. Financial interdependence study.

Sec. 506. Federal Reserve report on the Foreign Bank Supervision Enhancement

Act of 1991.

Sec. 507. Conforming amendments.

TITLE VI—NATIONAL FLOOD INSURANCE REFORM

Sec. 601. Short title.

Sec. 602. Congressional findings.

Sec. 603. Definition.

SUBTITLE A—DEFINITIONS

Sec. 611. Flood Disaster Protection Act of 1973.

Sec. 612. National Flood Insurance Act of 1968.

SUBTITLE B—COMPLIANCE AND INCREASED PARTICIPATION

Sec. 621. Expanded flood insurance purchase requirements.

Sec. 622. Excrow of flood insurance payments.

Sec. 623. Notice requirements.

Sec. 624. Placement of flood insurance by regulated lending institution, Federal

agency lender, or servicer.

Sec. 625. Standard flood hazard determination forms.
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Sec. 626. Examination regarding compliance by regulated lending institutions.

Sec. 627. Penalties and corrective actions for failure to require flood insurance,

escrow, or notify.

Sec. 628. Financial institutions examination council.

Sec. 629. Conforming amendment.

SUBTITLE C—RATINGS AND INCENTIVES FOR COMMUNITY FLOODPLAIN

MANAGEMENT PROGRAMS

Sec. 631. Community rating system and incentives for community floodplain

management.

Sec. 632. Funding.

Sec. 633. Reasonable fees.

SUBTITLE D—MITIGATION OF FLOOD AND EROSION RISKS

Sec. 641. Mitigation assistance in Federal insurance administration.

Sec. 642. Authorization of national flood and erosion mitigation funds under section 1362.

Sec. 643. State and community mitigation assistance program.

Sec. 644. Repeal of program for purchase of certain insured properties.

Sec. 645. Termination of erosion threatened structures program.

Sec. 646. Congressional findings and declaration of purchase under the National

Flood Insurance Act of 1968.

SUBTITLE E—FLOOD INSURANCE TASK FORCE

Sec. 651. Flood insurance interagency task force.

SUBTITLE F—MISCELLANEOUS PROVISIONS

Sec. 661. Maximum flood insurance coverage amounts.

Sec. 662. Additional coverage for compliance with land use and control measures.

Sec. 663. Flood insurance program arrangements with private insurance entities.

Sec. 664. Updating of flood insurance rate maps.

Sec. 665. Evaluation of erosion hazards.

Sec. 666. Coordination of flood insurance rate map revisions and updates with

coastal zone management programs.

Sec. 667. Technical Mapping Advisory Council.

Sec. 668. Funding for increased administrative and operational responsibilities.

Sec. 669. Separate account for National Flood Insurance Fund.

Sec. 670. Nonwaiver of flood purchase requirement for recipients of Federal disaster assistance.

Sec. 671. Insurance waiting period.

Sec. 672. Agricultural structures.

Sec. 673. Implementation review by the director.

Sec. 674. Regulations.

Sec. 675. Prohibited flood disaster assistance.

TITLE VII—GENERAL PROVISIONS

Sec. 701. Study of effect of the Northern spotted owl on small business concerns.

Sec. 702. Negative information about consumer.

Sec. 703. United Nations resolutions concerning Jerusalem.

Sec. 704. Amendment to the Federal Reserve Act.

Sec. 705. Oversight hearings.

Sec. 706. Insurance transfer agreement.
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1 TITLE I—COMMUNITY DEVELOP2 MENT AND CONSUMER PRO3 TECTION

4 Subtitle A—Community Develop5 ment Banking and Financial In6 stitutions Act

7 SEC. 101. SHORT TITLE.

8 This subtitle may be cited as the ‘‘Community Devel9 opment Banking and Financial Institutions Act of 1994’’.

10 SEC. 102. FINDINGS AND PURPOSES.

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

12 (1) many of the Nation’s urban, rural, and Na13 tive American communities face critical social and

14 economic problems arising in part from the lack of

15 economic growth, people living in poverty, and the

16 lack of employment and other opportunities;

17 (2) the restoration and maintenance of the econo18 mies of these communities will require coordinated de19 velopment strategies, intensive supportive services,

20 and increased access to equity investments and loans

21 for development activities, including investment in

22 businesses, housing, commercial real estate, human

23 development, and other activities that promote the

24 long-term economic and social viability of the com25 munity; and
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1 (3) community development financial institu2 tions have proven their ability to identify and re3 spond to community needs for equity investments,

4 loans, and development services.

5 (b) PURPOSE.—The purpose of this subtitle is to create

6 a Community Development Financial Institutions Fund

7 that will promote economic revitalization and community

8 development through a program of investment in and as9 sistance to community development financial institutions,

10 including enhancing the liquidity of community develop11 ment financial institutions.

12 SEC. 103. DEFINITIONS.

13 For purposes of this subtitle, the following definitions

14 shall apply:

15 (1) APPROPRIATE FEDERAL BANKING AGENCY.—

16 The term ‘‘appropriate Federal banking agency’’ has

17 the same meaning as in section 3 of the Federal De18 posit Insurance Act, and also includes the National

19 Credit Union Administration Board with respect to

20 insured credit unions.

21 (2) AFFILIATE.—The term ‘‘affiliate’’ has the

22 same meaning as in section 2(k) of the Bank Holding

23 Company Act of 1956.
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1 (3) COMMUNITY DEVELOPMENT FINANCIAL INSTI2 TUTION.—

3 (A) IN GENERAL.—The term ‘‘community

4 development financial institution’’ means a per5 son (other than an individual) that—

6 (i) has a primary mission of promot7 ing community development;

8 (ii) serves an investment area or tar9 geted population;

10 (iii) directly, through an affiliate, or

11 through a community partnership, provides

12 development services and equity investments

13 or loans;

14 (iv) maintains, through representation

15 on its governing board or otherwise, ac16 countability to residents of its investment

17 area or targeted population; and

18 (v) is not an agency or instrumentality

19 of the United States, or of any State or po20 litical subdivision of a State.

21 (B) QUALIFICATION OF AFFILIATES.—A

22 subsidiary may only qualify as a community de23 velopment financial institution if its parent

24 company and the subsidiaries thereof (on a con-
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1 solidated basis) also qualify as community devel2 opment financial institutions.

3 (4) COMMUNITY PARTNER.—The term ‘‘commu4 nity partner’’ means a person (other than an individ5 ual) that provides loans, equity investments, or devel6 opment services, including a depository institution

7 holding company, an insured depository institution,

8 an insured credit union, a nonprofit organization, a

9 State or local government agency, a quasi-govern10 mental entity, and an investment company author11 ized to operate pursuant to the Small Business In12 vestment Act of 1958.

13 (5) COMMUNITY PARTNERSHIP.—The term ‘‘com14 munity partnership’’ means an agreement between a

15 community development financial institution and a

16 community partner to provide development services

17 and loans or equity investments to an investment

18 area or targeted population.

19 (6) DEPOSITORY INSTITUTION HOLDING COM20 PANY.—The term ‘‘depository institution holding com21 pany’’ has the same meaning as in section 3 of the

22 Federal Deposit Insurance Act.

23 (7) DEVELOPMENT SERVICES.—The term ‘‘devel24 opment services’’ means activities that promote com-
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1 munity development and are integral to lending or

2 investment activities, including—

3 (A) business planning;

4 (B) financial and credit counseling; and

5 (C) marketing and management assistance.

6 (8) INSURED COMMUNITY DEVELOPMENT FINAN7 CIAL INSTITUTION.—The term ‘‘insured community

8 development financial institution’’ means any com9 munity development financial institution that is an

10 insured depository institution or an insured credit

11 union.

12 (9) INSURED CREDIT UNION.—The term ‘‘insured

13 credit union’’ has the same meaning as in section

14 101(7) of the Federal Credit Union Act.

15 (10) INSURED DEPOSITORY INSTITUTION.—The

16 term ‘‘insured depository institution’’ has the same

17 meaning as in section 3 of the Federal Deposit Insur18 ance Act.

19 (11) INVESTMENT AREA.—The term ‘‘investment

20 area’’ means a geographic area that—

21 (A)(i) meets objective criteria of economic

22 distress developed by the Community Develop23 ment Financial Institutions Fund, which may

24 include the percentage of low-income families or

25 the extent of poverty, the rate of unemployment
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1 or underemployment, lag in population growth,

2 and extent of blight and disinvestment; and

3 (ii) has significant unmet needs for loans or

4 equity investments;

5 (B) is located in an empowerment zone or

6 enterprise community designated under section

7 1391 of the Internal Revenue Code of 1986;

8 (C) is located on an Indian reservation, as

9 defined in section 3(d) of the Indian Financing

10 Act of 1974 or section 4(10) of the Indian Child

11 Welfare Act of 1978; or

12 (D) is located in an area which is not a

13 metropolitan statistical area and which has ex14 perienced a decrease in population of not less

15 than 10 percent (as determined in the most re16 cent decennial census) between 1980 and 1990.

17 (12) LOW-INCOME.—The term ‘‘low-income’’

18 means having an income, adjusted for family size, of

19 not more than—

20 (A) for metropolitan areas, 80 percent of the

21 area median income; and

22 (B) for nonmetropolitan areas, the greater

23 of—

24 (i) 80 percent of the area median in25 come; or
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1 (ii) 80 percent of the statewide

2 nonmetropolitan area median income.

3 (13) PARENT COMPANY.—The term ‘‘parent com4 pany’’ means any company that directly or indirectly

5 controls another company.

6 (14) SUBSIDIARY.—The term ‘‘subsidiary’’ has

7 the same meaning as in section 3 of the Federal De8 posit Insurance Act, except that a community devel9 opment financial institution that is a corporation

10 shall not be considered to be a subsidiary of any in11 sured depository institution or depository institution

12 holding company that controls less than 25 percent of

13 any class of the voting shares of such corporation, and

14 does not otherwise control in any manner the election

15 of a majority of the directors of the corporation.

16 (15) TARGETED POPULATION.—The term ‘‘tar17 geted population’’ means low-income persons or per18 sons who otherwise lack adequate access to loans or

19 equity investments.

20 SEC. 104. ESTABLISHMENT OF NATIONAL FUND FOR COM21 MUNITY DEVELOPMENT BANKING.

22 (a) ESTABLISHMENT.—

23 (1) IN GENERAL.—There is established a cor24 poration to be known as the Community Development

25 Financial Institutions Fund (hereafter in this subtitle
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1 referred to as the ‘‘Fund’’) that shall have the duties

2 and responsibilities specified by this subtitle. The

3 Fund shall have succession until dissolved. The offices

4 of the Fund shall be in Washington, D.C. The Fund

5 shall not be affiliated with or be within any other

6 agency or department of the Federal Government.

7 (2) WHOLLY OWNED GOVERNMENT CORPORA8 TION.—The Fund shall be a wholly owned Govern9 ment corporation in the executive branch and shall be

10 treated in all respects as an agency of the United

11 States, except as otherwise provided in this subtitle.

12 (b) MANAGEMENT OF FUND.—

13 (1) APPOINTMENT OF ADMINISTRATOR AND DEP14 UTY ADMINISTRATOR.—The management of the Fund

15 shall be vested in an Administrator, who shall be ap16 pointed by the President, by and with the advice and

17 consent of the Senate. The Administrator shall not en18 gage in any other business or employment during

19 service as the Administrator. The President may ap20 point a Deputy Administrator by and with the advice

21 and consent of the Senate. The Deputy Administrator

22 shall serve as the acting Administrator of the Fund

23 during the absence or disability of the Administrator

24 or in the event of a vacancy in the office of the Ad25 ministrator.
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1 (2) CHIEF FINANCIAL OFFICER.—The Adminis2 trator shall appoint a chief financial officer who shall

3 oversee the financial management activities of the

4 Fund.

5 (3) OTHER OFFICERS.—The Administrator may

6 appoint such other officers and employees of the Fund

7 as the Administrator determines to be necessary or

8 appropriate.

9 (c) GENERAL POWERS.—In carrying out the functions

10 of the Fund, the Administrator—

11 (1) shall have all necessary and proper authority

12 to carry out this subtitle;

13 (2) shall have the power to adopt, alter, and use

14 a corporate seal for the Fund, which shall be judi15 cially noticed;

16 (3) may adopt, amend, and repeal bylaws, rules,

17 and regulations governing the manner in which busi18 ness of the Fund may be conducted and such rules

19 and regulations as may be necessary or appropriate

20 to implement this subtitle;

21 (4) may enter into, perform, and enforce such

22 agreements, contracts, and transactions as may be

23 deemed necessary or appropriate to the conduct of ac24 tivities authorized under this subtitle;
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1 (5) may determine the character of and necessity

2 for expenditures of the Fund and the manner in

3 which they shall be incurred, allowed, and paid;

4 (6) may utilize or employ the services of person5 nel of any agency or instrumentality of the United

6 States with the consent of the agency or instrumental7 ity concerned on a reimbursable or nonreimbursable

8 basis; and

9 (7) may execute all instruments necessary or ap10 propriate in the exercise of any of the functions of the

11 Fund under this subtitle and may delegate to the offi12 cers of the Fund such of the powers and responsibil13 ities of the Administrator as the Administrator deems

14 necessary or appropriate for the administration of the

15 Fund.

16 (d) ADVISORY BOARD.—

17 (1) ESTABLISHMENT.—The Administrator shall

18 establish an advisory board to be known as the Com19 munity Development Advisory Board (hereafter in

20 this subtitle referred to as the ‘‘Board’’) in accordance

21 with the provisions of the Federal Advisory Commit22 tee Act.

23 (2) MEMBERSHIP.—

24 (A) IN GENERAL.—The Board shall consist

25 of 5 private citizens who, collectively—
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1 (i) represent community groups whose

2 constituencies include targeted populations

3 or residents of investment areas;

4 (ii) represent local or regional govern5 ment interests;

6 (iii) have expertise in the operations

7 and activities of insured depository institu8 tions; and

9 (iv) have expertise in community de10 velopment and lending.

11 (B) REPRESENTATION.—Each of the cat12 egories described in clauses (i) through (iv) of

13 subparagraph (A) shall be represented by not less

14 than 1 member of the Board.

15 (3) BOARD FUNCTION.—It shall be the function

16 of the Board to advise the Administrator on the poli17 cies of the Fund. The Board shall not advise the Ad18 ministrator on the granting or denial of any particu19 lar application.

20 (4) TERMS OF MEMBERS.—

21 (A) IN GENERAL.—Each member of the

22 Board shall serve for a term of 4 years.

23 (B) VACANCIES.—Any member appointed to

24 fill a vacancy occurring prior to the expiration

25 of the term for which the previous member was
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1 appointed shall be appointed for the remainder

2 of such term. Members may continue to serve fol3 lowing the expiration of their terms until a suc4 cessor is appointed and qualified.

5 (5) CHAIRPERSON.—The Administrator shall ap6 point a chairperson from among the members of the

7 Board.

8 (6) MEETINGS.—The Board shall meet at least

9 annually and at such other times as requested by the

10 Administrator or the chairperson. A majority of the

11 members of the Board shall constitute a quorum.

12 (7) REIMBURSEMENT FOR EXPENSES.—The

13 members of the Board may receive reimbursement for

14 travel, per diem, and other necessary expenses in15 curred in the performance of their duties, in accord16 ance with the Federal Advisory Committee Act.

17 (8) COSTS AND EXPENSES.—The Fund shall pro18 vide to the Board all necessary staff and facilities.

19 (e) CONFORMING AMENDMENTS.—Section 9101(3) of

20 title 31, United States Code, is amended—

21 (1) by redesignating subparagraphs (B) through

22 (M) as subparagraphs (C) through (N), respectively;

23 and

24 (2) by inserting after subparagraph (A) the fol25 lowing new subparagraph:
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1 ‘‘(B) the Community Development Finan2 cial Institutions Fund;’’.

3 (f) GOVERNMENT CORPORATION CONTROL ACT EX4 EMPTION.—Section 9107(b) of title 31, United States Code,

5 shall not apply to deposits of the Fund made pursuant to

6 section 108.

7 (g) LIMITATION OF FUND AND FEDERAL LIABILITY.—

8 The liability of the Fund and the United States Government

9 arising out of any investment in a community development

10 financial institution in accordance with this subtitle shall

11 be limited to the amount of the investment. The Fund shall

12 be exempt from any assessments and other liabilities that

13 may be imposed on controlling or principal shareholders

14 by any Federal law or the law of any State, Territory, or

15 the District of Columbia.

16 (h) PROHIBITION ON ISSUANCE OF SECURITIES.—The

17 Fund may not issue stock, bonds, debentures, notes, or other

18 securities.

19 (i) COMPENSATION.—Title 5, United States Code, is

20 amended—

21 (1) in section 5314, by adding at the end the fol22 lowing:

23 ‘‘Administrator of the Community Development

24 Financial Institutions Fund.’’; and
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1 (2) in section 5315, by adding at the end the fol2 lowing:

3 ‘‘Deputy Administrator of the Community Devel4 opment Financial Institutions Fund.’’.

5 (j) ASSISTED INSTITUTIONS NOT UNITED STATES IN6 STRUMENTALITIES.—A community development financial

7 institution or other organization that receives assistance

8 pursuant to this subtitle shall not be deemed to be an agen9 cy, department, or instrumentality of the United States.

10 SEC. 105. APPLICATIONS FOR ASSISTANCE.

11 (a) FORM AND PROCEDURES.—An application for as12 sistance under this subtitle shall be submitted in such form

13 and in accordance with such procedures as the Fund shall

14 establish.

15 (b) MINIMUM REQUIREMENTS.—Except as provided in

16 sections 106 and 115, the Fund shall require an applica17 tion—

18 (1) to establish that the applicant is, or will be,

19 a community development financial institution;

20 (2) to include a comprehensive strategic plan for

21 the organization that contains—

22 (A) a business plan of not less than 5 years

23 in duration that demonstrates that the applicant

24 will be properly managed and will have the ca25 pacity to operate a community development fi-
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1 nancial institution that will not be dependent

2 upon assistance from the Fund for continued vi3 ability;

4 (B) an analysis of the needs of the invest5 ment area or targeted population and a strategy

6 for how the applicant will attempt to meet those

7 needs;

8 (C) a plan to coordinate use of assistance

9 from the Fund with existing Federal, State,

10 local, and tribal government assistance pro11 grams, and private sector financial services;

12 (D) an explanation of how the proposed ac13 tivities of the applicant are consistent with exist14 ing economic, community, and housing develop15 ment plans adopted by or applicable to an in16 vestment area; and

17 (E) a description of how the applicant will

18 coordinate with community organizations and

19 financial institutions which will provide equity

20 investments, loans, secondary markets, or other

21 services to investment areas or targeted popu22 lations;

23 (3) to include a detailed description of the appli24 cant’s plans and likely sources of funds to match the

25 amount of assistance requested from the Fund;
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1 (4) in the case of an applicant that has pre2 viously received assistance under this subtitle, to dem3 onstrate that the applicant—

4 (A) has substantially met its performance

5 goals and otherwise carried out its responsibil6 ities under this subtitle and the assistance agree7 ment; and

8 (B) will expand its operations into a new

9 investment area or to serve a new targeted popu10 lation, offer more services, or increase the volume

11 of its business;

12 (5) in the case of an applicant with a prior his13 tory of serving investment areas or targeted popu14 lations, to demonstrate that the applicant—

15 (A) has a record of success in serving in16 vestment areas or targeted populations;

17 (B) will expand its operations into a new

18 investment area or to serve a new targeted popu19 lation, offer more services, or increase the volume

20 of its current business; and

21 (6) to include such other information as the

22 Fund deems appropriate.

23 (c) EXCEPTION.—

24 (1) IN GENERAL.—Notwithstanding subsection

25 (b)(1), in the case of a State in which there is no ex-
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1 isting community development financial institution

2 in operation on the date of enactment of this Act, an

3 applicant may be an agency or instrumentality of a

4 State government if—

5 (A) such an entity has a primary mission

6 of promoting community development;

7 (B) any assistance received is used to estab8 lish a community development financial institu9 tion;

10 (C) there is no nongovernment entity within

11 the State that possesses the capacity to become a

12 community development financial institution;

13 (D) no other agency or instrumentality of

14 the same State has received assistance; and

15 (E) assistance received will not reduce the

16 amount of State funds that otherwise would be

17 appropriated to such an entity.

18 (2) MAJORITY OWNERSHIP.—An agency or in19 strumentality eligible to apply pursuant to para20 graph (1) may own a majority of the voting stock of

21 a community development financial institution if it

22 demonstrates that there is a lack of nonpublic sources

23 of capital available to establish a community develop24 ment financial institution.
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1 (3) AMOUNT OF ASSISTANCE.—No State agency

2 or instrumentality and a community development fi3 nancial institution, a majority of the shares of which

4 are owned by such an agency or instrumentality pur5 suant to this subsection, may cumulatively receive as6 sistance exceeding the amount set forth under section

7 108(d)(1).

8 (d) PREAPPLICATION OUTREACH PROGRAM.—The

9 Fund may operate an outreach program to identify and

10 provide information to potential applicants.

11 SEC. 106. COMMUNITY PARTNERSHIPS.

12 (a) APPLICATION.—An application for assistance may

13 be filed jointly by a community development financial in14 stitution and a community partner to carry out a commu15 nity partnership.

16 (b) APPLICATION REQUIREMENTS.—The Fund shall

17 require a community partnership application—

18 (1) to meet the minimum requirements estab19 lished for community development financial institu20 tions under section 105(b), except that the criteria

21 specified in paragraphs (1) and (2)(A) of section

22 105(b) shall not apply to the community partner;

23 (2) to describe how each coapplicant will partici24 pate in carrying out the community partnership and
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1 how the partnership will enhance activities serving

2 the investment area or targeted population; and

3 (3) to demonstrate that the community partner4 ship activities are consistent with the strategic plan

5 submitted by the community development financial

6 institution coapplicant.

7 (c) SELECTION CRITERIA.—The Fund shall consider a

8 community partnership application based on the selection

9 criteria set out in section 107.

10 (d) LIMITATION ON DISTRIBUTION OF ASSISTANCE.—

11 Assistance provided upon approval of an application under

12 this section shall be distributed only to the community de13 velopment financial institution coapplicant, and shall not

14 be used to fund any activities carried out directly by the

15 community partner or an affiliate thereof.

16 (e) OTHER REQUIREMENTS AND LIMITATIONS.—All

17 other requirements and limitations imposed by this subtitle

18 on a community development financial institution assisted

19 under this subtitle shall apply (in the manner that the

20 Fund determines to be appropriate) to assistance provided

21 to carry out community partnerships. The Fund may estab22 lish additional guidelines and restrictions on the use of Fed23 eral funds to carry out community partnerships.
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1 SEC. 107. SELECTION OF INSTITUTIONS.

2 (a) SELECTION CRITERIA.—Except as provided in sec3 tion 115, the Fund shall, in its sole discretion, select appli4 cants for assistance based on—

5 (1) the likelihood of success of the applicant in

6 meeting the goals of its comprehensive strategic plan;

7 (2) the experience and background of the pro8 posed management team;

9 (3) the extent of need for equity investments,

10 loans, and development services within the investment

11 areas or targeted populations;

12 (4) the extent of economic distress within the in13 vestment areas or the extent of need within the tar14 geted populations, as those factors are measured by

15 objective criteria;

16 (5) the extent to which the applicant will con17 centrate its activities on serving its investment areas

18 or targeted populations;

19 (6) the amount of firm commitments to meet or

20 exceed the matching requirements and the likely suc21 cess of the plan for raising the balance of the match;

22 (7) the extent to which the proposed activities

23 will expand economic opportunities within the invest24 ment areas or the targeted populations;
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1 (8) whether the applicant is, or will become, an

2 insured depository institution or an insured credit

3 union;

4 (9) whether the applicant is, or will be, lo5 cated—

6 (A) in an empowerment zone or enterprise

7 community designated under section 1391 of the

8 Internal Revenue Code of 1986;

9 (B) on an Indian reservation, as defined in

10 section 3(d) of the Indian Financing Act of 1974

11 or section 4(10) of the Indian Child Welfare Act

12 of 1978; or

13 (C) in a community that has experienced a

14 sudden and significant loss in total employment

15 since the 1990 census or a major dislocation in

16 its primary employment base.

17 (10) the extent to which the applicant will in18 crease its resources through coordination with other

19 institutions or participation in a secondary market;

20 (11) in the case of an applicant with a prior his21 tory of serving investment areas or targeted popu22 lations, the extent of success in serving them; and

23 (12) other factors (such as the extent to which the

24 applicant has strong ties to the community that it

25 will serve) deemed to be appropriate by the Fund.
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1 (b) GEOGRAPHIC DIVERSITY.—The Fund shall assist

2 a geographically diverse group of applicants, including an

3 appropriate mix of applicants from urban, rural, and Na4 tive American communities.

5 SEC. 108. ASSISTANCE PROVIDED BY THE FUND.

6 (a) FORMS OF ASSISTANCE.—

7 (1) IN GENERAL.—The Fund may provide—

8 (A) financial assistance through equity in9 vestments, deposits, credit union shares, loans,

10 and grants; and

11 (B) technical assistance—

12 (i) directly;

13 (ii) through grants; or

14 (iii) by contracting with organizations

15 that possess expertise in community devel16 opment, without regard to whether the orga17 nizations receive or are eligible to receive

18 assistance under this subtitle.

19 (2) EQUITY INVESTMENTS.—The Fund shall not

20 own more than 50 percent of the equity of a commu21 nity development financial institution and may not

22 control the operations of such institution. The Fund

23 may hold only transferable, nonvoting equity invest24 ments. Such equity investments may provide for con25 vertibility to voting stock upon transfer by the Fund.
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1 (3) DEPOSITS.—Deposits made pursuant to this

2 section in an insured community development finan3 cial institution shall not be subject to any require4 ment for collateral or security.

5 (4) LIMITATIONS ON OBLIGATIONS.—Direct loan

6 obligations may be incurred by the Fund only to the

7 extent that appropriations of budget authority to

8 cover their costs, as defined in section 502 of the Con9 gressional Budget Act of 1974, are made in advance.

10 (b) USES OF FINANCIAL ASSISTANCE.—

11 (1) IN GENERAL.—Financial assistance made

12 available under this subtitle may be used by assisted

13 institutions to serve investment areas or targeted pop14 ulations by developing or supporting—

15 (A) commercial facilities that promote revi16 talization, community stability, or job creation

17 or retention;

18 (B) businesses that—

19 (i) provide jobs for low-income people

20 or are owned by low-income people; or

21 (ii) enhance the availability of prod22 ucts and services to low-income people;

23 (C) community facilities;

24 (D) the provision of basic financial services;
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1 (E) housing that is principally affordable to

2 low-income people, except that assistance used to

3 facilitate homeownership opportunities shall only

4 be used for activities and lending products that

5 serve low-income people and are not provided by

6 other lenders in the area; and

7 (F) other businesses and activities deemed

8 appropriate by the Fund.

9 (2) LIMITATIONS.—No assistance made available

10 under this subtitle may be expended by a community

11 development financial institution (or an organization

12 receiving assistance under section 115) to pay any

13 person to influence or attempt to influence any agen14 cy, elected official, officer, or employee of a State or

15 local government in connection with the making,

16 award, extension, continuation, renewal, amendment,

17 or modification of any State or local government con18 tract, grant, loan, or cooperative agreement (as such

19 terms are defined in section 1352 of title 31, United

20 States Code).

21 (c) USES OF TECHNICAL ASSISTANCE.—Technical as22 sistance may be used for activities that enhance the capac23 ity of a community development financial institution, such

24 as training of management and other personnel and devel25 opment of programs and investment or loan products.
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1 (d) AMOUNT OF ASSISTANCE.—

2 (1) IN GENERAL.—The Fund may provide not

3 more than $5,000,000 of assistance, in the aggregate,

4 during any 3-year period to any 1 community devel5 opment financial institution and its affiliates.

6 (2) EXCEPTION.—Notwithstanding the limita7 tions in paragraph (1), in the case of an existing

8 community development financial institution that

9 proposes to serve an investment area or targeted pop10 ulation outside of any State and outside of any met11 ropolitan area presently served by the institution, the

12 Fund may provide not more than $7,500,000 of as13 sistance to a community development financial insti14 tution and its affiliates, in the aggregate, during any

15 3-year period, of which not less than $2,500,000 shall

16 be used to establish affiliates to serve the new invest17 ment area or targeted population.

18 (3) TIMING OF ASSISTANCE.—Assistance may be

19 provided as described in paragraphs (1) and (2) in

20 a lump sum or over a period of time, as determined

21 by the Fund.

22 (e) MATCHING REQUIREMENTS.—

23 (1) IN GENERAL.—Assistance other than tech24 nical assistance shall be matched with funds from

25 sources other than the Federal Government on the
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1 basis of not less than one dollar for each dollar pro2 vided by the Fund. Such matching funds shall be at

3 least comparable in form and value to assistance pro4 vided by the Fund. The Fund shall provide no assist5 ance (other than technical assistance) until a commu6 nity development financial institution has secured

7 firm commitments for the matching funds required.

8 (2) EXCEPTION.—In the case of an applicant

9 with severe constraints on available sources of match10 ing funds, the Fund may permit an applicant to

11 comply with the matching requirements of paragraph

12 (1) by—

13 (A) reducing such matching requirement by

14 50 percent;

15 (B) permitting such applicant to satisfy not

16 more than 60 percent of the matching require17 ment through use of assistance made available

18 pursuant to—

19 (i) section 106 of the Housing and

20 Community Development Act of 1974;

21 (ii) section 623(c)(1) of the Commu22 nity Economic Development Act of 1981; or

23 (iii) section 310B(c) of the Consoli24 dated Farm and Rural Development Act; or
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1 (C) permitting an applicant to provide

2 matching funds in a form to be determined at

3 the discretion of the Fund if such applicant—

4 (i) has total assets of less than

5 $100,000;

6 (ii) serves nonmetropolitan areas; and

7 (iii) is not requesting more than

8 $25,000 in assistance.

9 (3) LIMITATION.—Not more than 25 percent of

10 the total funds disbursed in any fiscal year by the

11 Fund may be matched as authorized under paragraph

12 (2).

13 (4) CONSTRUCTION OF ‘‘FEDERAL FUNDS’’.—For

14 purposes of this subsection, notwithstanding section

15 105(a)(9) of the Housing and Community Develop16 ment Act of 1974, funds provided pursuant to such

17 Act shall be considered to be Federal funds, except as

18 provided in paragraph (2)(B).

19 (f) TERMS AND CONDITIONS.—

20 (1) SOUNDNESS OF UNREGULATED INSTITU21 TIONS.—The Fund shall—

22 (A) ensure, to the maximum extent prac23 ticable, that each community development finan24 cial institution (other than an insured commu25 nity development financial institution or deposi-
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1 tory institution holding company) assisted under

2 this subtitle is financially and managerially

3 sound and maintains appropriate internal con4 trols; and

5 (B) require such institution to submit, not

6 less than once during each 18-month period, a

7 statement of financial condition audited by an

8 independent certified public accountant as part

9 of the report required by section 112(a)(4).

10 (2) CONSULTATION WITH THE APPROPRIATE

11 BANKING REGULATOR.—Prior to providing assistance

12 to an insured community development financial insti13 tution, the Fund shall consult with the appropriate

14 Federal banking agency.

15 (3) ASSISTANCE AGREEMENT.—

16 (A) IN GENERAL.—Before providing any as17 sistance under this subtitle, the Fund and each

18 community development financial institution to

19 be assisted shall enter into an agreement that re20 quires the institution to comply with perform21 ance goals and abide by other terms and condi22 tions pertinent to assistance received under this

23 subtitle.

24 (B) PERFORMANCE GOALS.—Performance

25 goals shall be negotiated between the Fund and
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1 each community development financial institu2 tion receiving assistance based upon the strategic

3 plan submitted pursuant to section 105(b)(2).

4 Such goals may be modified with the consent of

5 the parties, or as provided in subparagraph (C).

6 Performance goals for insured community devel7 opment financial institutions shall be determined

8 in consultation with the appropriate Federal

9 banking agency.

10 (C) SANCTIONS.—The agreement shall pro11 vide that, in the event of fraud, mismanagement,

12 noncompliance with this subtitle, or noncompli13 ance with the terms of the agreement, the Fund,

14 in its discretion, may—

15 (i) revoke approval of the application;

16 (ii) terminate or reduce future assist17 ance;

18 (iii) require repayment of assistance;

19 (iv) require changes to the performance

20 goals imposed pursuant to subparagraph

21 (B);

22 (v) bar an applicant from reapplying

23 for assistance from the Fund;
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1 (vi) require changes to the strategic

2 plan submitted pursuant to section

3 105(b)(2); and

4 (vii) take such other actions as the

5 Fund deems appropriate.

6 (D) INSURED COMMUNITY DEVELOPMENT

7 FINANCIAL INSTITUTIONS.—In the case of an in8 sured community development financial institu9 tion, the Fund shall notify the appropriate Fed10 eral banking agency not less than 15 days before

11 imposing sanctions pursuant to this paragraph

12 and shall not impose such sanctions if the agen13 cy disapproves, with an explanation in writing,

14 during that 15-day period.

15 (E) NATIVE AMERICAN INSTITUTIONS.—In

16 the case of a community development financial

17 institution which serves an investment area de18 scribed in paragraph (11)(C) of section 103, or

19 an Indian tribe, as defined in section 4 of the

20 Indian Self-Determination and Education As21 sistance Act, the Fund shall consult with the ap22 plicable tribal government in evaluating the in23 stitution’s compliance with the performance

24 goals established pursuant to subparagraph (B).
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1 (g) AUTHORITY TO SELL EQUITY INVESTMENTS AND

2 LOANS.—The Fund may, at any time, sell its equity invest3 ments and loans, but the Fund shall retain the power to

4 enforce limitations on assistance entered into in accordance

5 with the requirements of this subtitle until the performance

6 goals related to the investment or loan have been met.

7 (h) NO AUTHORITY TO LIMIT SUPERVISION AND REG8 ULATION.—Nothing in this subtitle shall affect any author9 ity of the appropriate Federal banking agency to supervise

10 and regulate any institution or company.

11 SEC. 109. COMMUNITY DEVELOPMENT TRAINING.

12 (a) IN GENERAL.—The Fund may operate a training

13 program to increase the capacity and expertise of commu14 nity development financial institutions and other members

15 of the financial services industry to undertake community

16 development activities (hereafter in this subtitle referred to

17 as the ‘‘training program’’).

18 (b) PROGRAM ACTIVITIES.—The training program

19 shall provide educational programs to assist community de20 velopment financial institutions and other members of the

21 financial services industry in developing lending and in22 vestment products, underwriting and servicing loans, man23 aging equity investments, and implementing development

24 services targeted to areas of economic distress, low-income
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1 persons, and persons who lack adequate access to loans and

2 equity investments.

3 (c) PARTICIPATION.—The training program shall be

4 made available to community development financial insti5 tutions and other members of the financial services industry

6 that serve or seek to serve areas of economic distress, low7 income persons, and persons who lack adequate access to

8 loans and equity investments.

9 (d) CONTRACTING.—The Fund may offer the training

10 described in this section directly or through a contract with

11 other organizations. The Fund may contract to provide the

12 training with organizations that possess special expertise

13 in community development, without regard to whether the

14 organizations receive or are eligible to receive assistance

15 under this subtitle.

16 (e) FEES.—The Fund, as it deems appropriate, may

17 charge fees for participation in training services to offset

18 the cost of providing the services.

19 SEC. 110. ENCOURAGEMENT OF PRIVATE ENTITIES.

20 The Fund may facilitate the organization of corpora21 tions in which the Federal Government has no ownership

22 interest that will complement the activities of the Fund in

23 carrying out the purpose of this subtitle. The purpose of

24 any such entity shall be to assist community development

25 financial institutions in a manner that is complementary
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1 to the activities of the Fund under this subtitle. Any such

2 entity shall be managed exclusively by persons not employed

3 by the Federal Government or any agency or instrumental4 ity thereof.

5 SEC. 111. CLEARINGHOUSE FUNCTION.

6 (a) ESTABLISHMENT.—The Fund may establish and

7 maintain an information clearinghouse in coordination

8 with other Federal departments or agencies and community

9 development financial institutions to—

10 (1) collect, compile, and analyze information

11 pertinent to community development financial insti12 tutions that will assist in creating, developing, ex13 panding, and preserving these institutions; and

14 (2) provide information on financial, technical,

15 and management assistance, data on the activities of

16 community development financial institutions, regu17 lations, and other information that may promote the

18 purposes of this subtitle.

19 (b) COSTS.—The cost of maintaining the clearinghouse

20 shall be shared equally by the Fund and each department

21 or agency involved in maintaining the clearinghouse.

22 SEC. 112. RECORDKEEPING, REPORTS, AND AUDITS.

23 (a) RECORDKEEPING.—

24 (1) IN GENERAL.—A community development fi25 nancial institution receiving assistance from the
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1 Fund shall keep such records, for such periods as may

2 be prescribed, as may be necessary to disclose the

3 manner in which any assistance under this subtitle is

4 used and to demonstrate compliance with the require5 ments of this subtitle.

6 (2) USER PROFILE INFORMATION.—The Fund

7 shall require each community development financial

8 institution receiving assistance under this subtitle to

9 compile and maintain data on the gender, race, eth10 nicity, national origin, and other pertinent informa11 tion concerning individuals that utilize the services of

12 the assisted institution to ensure that targeted popu13 lations and low-income residents of investment areas

14 are adequately served.

15 (3) ACCESS TO RECORDS.—The Fund shall have

16 access on demand, for the purpose of determining

17 compliance with this subtitle, to any records of a

18 community development financial institution that re19 ceives assistance from the Fund.

20 (4) REVIEW.—Not less than annually, the Fund

21 shall review the progress of each assisted community

22 development financial institution in carrying out its

23 strategic plan, meeting its performance goals, and

24 satisfying the terms and conditions of its assistance

25 agreement.
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1 (5) REPORTING.—

2 (A) ANNUAL REPORTS.—The Fund shall re3 quire each community development financial in4 stitution receiving assistance under this subtitle

5 to submit an annual report to the Fund on its

6 activities, its financial condition, and its success

7 in meeting performance goals, in satisfying the

8 terms and conditions of its assistance agreement,

9 and in complying with other requirements of this

10 subtitle in such form and manner as the Fund

11 shall specify.

12 (B) AVAILABILITY OF REPORTS.—The

13 Fund, after deleting or redacting any material,

14 as appropriate to protect privacy or proprietary

15 interests, shall make such reports available for

16 public inspection.

17 (b) ANNUAL REPORT BY THE FUND.—The Fund shall

18 conduct an annual evaluation of the activities carried out

19 by the Fund and the community development financial in20 stitutions assisted pursuant to this subtitle, and shall sub21 mit a report of its findings to the President and the Con22 gress not later than 120 days after the end of each fiscal

23 year of the Fund. The report shall include financial state24 ments audited in accordance with subsection (d).

25 (c) STUDIES.—
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1 (1) OPTIONAL STUDIES.—The Fund may con2 duct such studies as the Fund determines necessary to

3 further the purpose of this subtitle and to facilitate

4 investment in distressed communities. The findings of

5 any studies conducted pursuant to this paragraph

6 shall be included in the report required by subsection

7 (b).

8 (2) NATIVE AMERICAN LENDING STUDY.—

9 (A) STUDY.—The Fund shall conduct a

10 study on lending and investment practices on

11 Indian reservations and other land held in trust

12 by the United States Government. Such study

13 shall—

14 (i) identify barriers to private financ15 ing on such lands; and

16 (ii) identify the impact of such bar17 riers on access to capital and credit for Na18 tive American populations.

19 (B) CONSULTATION WITH PRIVATE SEC20 TOR.—In conducting the study under subpara21 graph (A), the Fund shall consult with tribal

22 governments, private citizens, and organizations

23 that possess expertise in lending and community

24 development issues confronted by Native Amer25 ican populations.
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1 (C) REPORT.—Not later than 18 months

2 after the date of enactment of this Act, the Fund

3 shall submit a report to the President and the

4 Congress that—

5 (i) contains the findings of the study

6 conducted under subparagraph (A);

7 (ii) recommends any necessary statu8 tory and regulatory changes to existing Fed9 eral programs; and

10 (iii) makes policy recommendations for

11 community development financial institu12 tions, insured depository institutions, sec13 ondary market institutions, and other pri14 vate sector capital institutions to better

15 serve such populations.

16 (3) INVESTMENT, GOVERNANCE, AND ROLE OF

17 FUND.—Thirty months after the appointment and

18 qualification of the Administrator, the Comptroller

19 General shall submit to the President and the Con20 gress a study evaluating the structure, governance,

21 and performance of the Fund.

22 (d) EXAMINATION AND AUDIT.—The financial state23 ments of the Fund shall be audited in accordance with sec24 tion 9105 of title 31, United States Code, except that audits
43

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1 required by section 9105(a) of such title shall be performed

2 annually.

3 SEC. 113. INVESTMENT OF RECEIPTS AND PROCEEDS.

4 (a) ESTABLISHMENT OF ACCOUNT.—Any dividends on

5 equity investments and proceeds from the disposition of in6 vestments, deposits, or credit union shares that are received

7 by the Fund as a result of assistance provided pursuant

8 to section 108, and any fees received pursuant to section

9 109(e) shall be deposited and accredited to an account of

10 the Fund in the United States Treasury (hereafter in this

11 section referred to as ‘‘the account’’) established to carry

12 out the purpose of this subtitle.

13 (b) INVESTMENTS.—Upon request of the Adminis14 trator, the Secretary of the Treasury shall invest amounts

15 deposited in the account in public debt securities with ma16 turities suitable to the needs of the Fund, as determined

17 by the Administrator, and bearing interest at rates deter18 mined by the Secretary of the Treasury, comparable to cur19 rent market yields on outstanding marketable obligations

20 of the United States of similar maturities.

21 (c) AVAILABILITY.—Amounts deposited into the ac22 count and interest earned on such amounts pursuant to this

23 section shall be available to the Fund until expended.
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1 SEC. 114. INSPECTOR GENERAL.

2 (a) ESTABLISHMENT.—Section 11 of the Inspector

3 General Act of 1978 (5 U.S.C. App. 11) is amended—

4 (1) in paragraph (1), by inserting ‘‘; the Admin5 istrator of the Community Development Financial In6 stitutions Fund;’’ before ‘‘and the chief’’; and

7 (2) in paragraph (2), by inserting ‘‘the Commu8 nity Development Financial Institutions Fund,’’ after

9 ‘‘the Agency for International Development,’’.

10 (b) AUTHORIZATION OF APPROPRIATIONS.—There are

11 authorized to be appropriated such sums as may be nec12 essary for the operation of the Office of Inspector General

13 established by the amendments made by subsection (a).

14 SEC. 115. CAPITALIZATION ASSISTANCE TO ENHANCE LI15 QUIDITY.

16 (a) ASSISTANCE.—

17 (1) IN GENERAL.—The Fund may provide assist18 ance for the purpose of providing capital to organiza19 tions that will purchase loans or otherwise enhance

20 the liquidity of community development financial in21 stitutions if—

22 (A) the primary purpose of such organiza23 tions is to promote community development; and

24 (B) any assistance received is matched with

25 funds—
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1 (i) from sources other than the Federal

2 Government;

3 (ii) on the basis of not less than $1 for

4 each dollar provided by the Fund; and

5 (iii) that are comparable in form and

6 value to the assistance provided by the

7 Fund.

8 (2) LIMITATION ON OTHER ASSISTANCE.—An or9 ganization that receives assistance under this section

10 may not receive other financial or technical assistance

11 under this subtitle.

12 (b) SELECTION.—The selection of organizations to re13 ceive assistance under this section shall be at the discretion

14 of the Fund and in accordance with criteria established by

15 the Fund. In establishing such criteria, the Fund shall take

16 into account the criteria contained in sections 105(b) and

17 107, as appropriate.

18 (c) AMOUNT OF ASSISTANCE.—The Fund may provide

19 a total of not more than $5,000,000 of assistance to an orga20 nization under this section during any 3-year period. As21 sistance may be provided in a lump sum or over a period

22 of time, as determined by the Fund.

23 (d) AUDIT AND REPORT REQUIREMENTS.—
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1 (1) IN GENERAL.—Organizations that receive as2 sistance from the Fund in accordance with this sec3 tion shall—

4 (A) submit to the Fund not less than once

5 in every 18-month period, financial statements

6 audited by an independent certified public ac7 countant;

8 (B) submit an annual report on its activi9 ties; and

10 (C) keep such records as may be necessary

11 to disclose the manner in which any assistance

12 under this section is used.

13 (2) ACCESS.—The Fund shall have access on de14 mand, for the purposes of determining compliance

15 with this section, to any records of such organiza16 tions.

17 (e) LIMITATIONS ON LIABILITY.—

18 (1) LIABILITY OF FUND.—The liability of the

19 Fund and the United States Government arising out

20 of the provision of assistance to any organization in

21 accordance with this section shall be limited to the

22 amount of such assistance. The Fund shall be exempt

23 from any assessments and any other liabilities that

24 may be imposed on controlling or principal share-
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1 holders by any Federal law or the law of any State,

2 territory, or the District of Columbia.

3 (2) LIABILITY OF GOVERNMENT.—This section

4 does not oblige the Federal Government, either di5 rectly or indirectly, to provide any funds to any orga6 nization assisted pursuant to this section, or to honor,

7 reimburse, or otherwise guarantee any obligation or

8 liability of such an organization. This section shall

9 not be construed to imply that any such organization

10 or any obligations or securities of any such organiza11 tion are backed by the full faith and credit of the

12 United States.

13 (f) USE OF PROCEEDS.—Any proceeds from the sale

14 of loans to an organization assisted under this section shall

15 be used by the seller for community development purposes.

16 SEC. 116. COMMUNITY DEVELOPMENT REVOLVING LOAN

17 FUND FOR CREDIT UNIONS.

18 (a) REPEAL.—Section 120 of the Federal Credit Union

19 Act (12 U.S.C. 1766) is amended by striking subsection (k).

20 (b) REVOLVING LOAN FUND.—The Federal Credit

21 Union Act (12 U.S.C. 1751 et seq.) is amended by inserting

22 after section 129 the following new section:
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1 ‘‘SEC. 130. COMMUNITY DEVELOPMENT REVOLVING LOAN

2 FUND FOR CREDIT UNIONS.

3 ‘‘(a) IN GENERAL.—The Board may exercise the au4 thority granted to it by the Community Development Credit

5 Union Revolving Loan Fund Transfer Act, including any

6 additional appropriation made or earnings accrued, subject

7 only to this section and to regulations prescribed by the

8 Board.

9 ‘‘(b) INVESTMENT.—The Board may invest any idle

10 Fund moneys in United States Treasury securities. Any in11 terest accrued on such securities shall become a part of the

12 Fund.

13 ‘‘(c) LOANS.—The Board may require that any loans

14 made from the Fund be matched by increased shares in the

15 borrower credit union.

16 ‘‘(d) INTEREST.—Interest earned by the Fund may be

17 allocated by the Board for technical assistance to commu18 nity development credit unions, subject to an appropria19 tions Act.

20 ‘‘(e) DEFINITION.—As used in this section, the term

21 ‘Fund’ means the Community Development Credit Union

22 Revolving Loan Fund.’’.

23 SEC. 117. REGULATIONS.

24 Not later than 180 days after the appointment and

25 qualification of the Administrator, the Fund shall issue
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1 such regulations as may be necessary to carry out this sub2 title.

3 SEC. 118. AUTHORIZATION OF APPROPRIATIONS.

4 (a) IN GENERAL.—To carry out this subtitle, there are

5 authorized to be appropriated to the Fund, to remain avail6 able until expended—

7 (1) $60,000,000 for fiscal year 1994;

8 (2) $104,000,000 for fiscal year 1995;

9 (3) $107,000,000 for fiscal year 1996; and

10 (4) $111,000,000 for fiscal year 1997.

11 (b) ADMINISTRATIVE EXPENSES.—Of amounts author12 ized to be appropriated to the Fund—

13 (1) not more than $5,500,000 may be used by the

14 Fund in each fiscal year to pay the administrative

15 costs and expenses of the Fund; and

16 (2) not more than $50,000 may be used by the

17 Fund in each fiscal year to provide for administra18 tive costs and expenses described in section 104(d)(8).

19 (c) COMMUNITY DEVELOPMENT CREDIT UNION RE20 VOLVING LOAN FUND.—There are authorized to be appro21 priated for the purposes of the Community Development

22 Credit Union Revolving Loan Fund—

23 (1) $2,000,000 for fiscal year 1994;

24 (2) $1,000,000 for fiscal year 1995;

25 (3) $1,000,000 for fiscal year 1996; and
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1 (4) $1,000,000 for fiscal year 1997.

2 (d) CAPITALIZATION ASSISTANCE.—Not more than 5

3 percent of the amounts authorized to be appropriated under

4 subsection (a) may be used as provided in section 115.

5 (e) BUDGETARY TREATMENT.—Amounts authorized to

6 be appropriated under this section shall be subject to discre7 tionary spending caps, as provided in section 601 of the

8 Congressional Budget Act of 1974, and therefore shall re9 duce by an equal amount funds made available for other

10 discretionary spending programs.

11 Subtitle B—Home Ownership and

12 Equity Protection

13 SEC. 151. CONSUMER PROTECTIONS FOR HIGH COST MORT14 GAGES.

15 (a) DEFINITION.—Section 103 of the Truth in Lending

16 Act (15 U.S.C. 1602) is amended by adding at the end the

17 following new subsection:

18 ‘‘(aa)(1) A mortgage referred to in this subsection

19 means a consumer credit transaction that is secured by the

20 consumer’s principal dwelling, other than a residential

21 mortgage transaction, a reverse mortgage transaction, or a

22 transaction under an open end credit plan, if—

23 ‘‘(A) the annual percentage rate at consumma24 tion of the transaction will exceed by more than 10

25 percentage points the rate of interest on Treasury se-
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1 curities having comparable periods of maturity on the

2 fifteenth day of the month immediately preceding the

3 month in which the loan is consummated; or

4 ‘‘(B) the total points and fees payable by the

5 consumer at or before closing will exceed the greater

6 of—

7 ‘‘(i) 8 percent of the total loan amount; or

8 ‘‘(ii) $400.

9 ‘‘(2) The amount specified in paragraph (1)(B)(ii)

10 shall be adjusted annually on January 1 by the annual per11 centage change in the Consumer Price Index, as reported

12 on June 1 of the year preceding such adjustment.

13 ‘‘(3) For purposes of paragraph (1)(B), points and fees

14 shall include—

15 ‘‘(A) all items included in the finance charge ex16 cept interest and the time-price differential;

17 ‘‘(B) all compensation paid to mortgage brokers;

18 ‘‘(C) each of the charges listed in section 106(e)

19 (except an escrow for future payment of taxes), un20 less—

21 ‘‘(i) the charge is reasonable;

22 ‘‘(ii) the creditor receives no direct or indi23 rect compensation; and

24 ‘‘(iii) the charge is paid to a third party

25 unaffiliated with the creditor; and
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1 ‘‘(D) such other charges as the Board determines

2 to be appropriate.’’.

3 (b) MATERIAL DISCLOSURES.—Section 103(u) of the

4 Truth in Lending Act (15 U.S.C. 1602(u)) is amended—

5 (1) by striking ‘‘and the due dates’’ and insert6 ing ‘‘the due dates’’; and

7 (2) by inserting before the period ‘‘, and the dis8 closures required by section 129(a)’’.

9 (c) DEFINITION OF CREDITOR CLARIFIED.—Section

10 103(f) of the Truth in Lending Act (15 U.S.C. 1602(f)) is

11 amended by adding at the end the following: ‘‘Any person

12 who originates 2 or more mortgages referred to in subsection

13 (aa) in any 12-month period or any person who originates

14 1 or more such mortgages through a mortgage broker shall

15 be considered to be a creditor for purposes of this title.’’.

16 (d) DISCLOSURES REQUIRED AND CERTAIN TERMS

17 PROHIBITED.—The Truth in Lending Act (15 U.S.C. 1601

18 et seq.) is amended by inserting after section 128 the follow19 ing new section:

20 ‘‘SEC. 129. REQUIREMENTS FOR CERTAIN MORTGAGES.

21 ‘‘(a) DISCLOSURES.—

22 ‘‘(1) SPECIFIC DISCLOSURES.—In addition to

23 other disclosures required under this title, for each

24 mortgage referred to in section 103(aa), the creditor
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1 shall provide the following disclosures in conspicuous

2 type size:

3 ‘‘(A) ‘You are not required to complete this

4 agreement merely because you have received these

5 disclosures or have signed a loan application.’

6 ‘‘(B) ‘If you obtain this loan, the lender will

7 have a mortgage on your home. You could lose

8 your home, and any money you have put into it,

9 if you do not meet your obligations under the

10 loan.’.

11 ‘‘(2) ANNUAL PERCENTAGE RATE.—In addition

12 to the disclosures required under paragraph (1), the

13 creditor shall disclose—

14 ‘‘(A) the annual percentage rate of the loan

15 and the amount of the regular monthly payment;

16 or

17 ‘‘(B) in the case of a variable rate loan, the

18 annual percentage rate of the loan, a statement

19 that the interest rate and monthly payment may

20 increase, and the amount of the maximum pos21 sible monthly payment.

22 ‘‘(b) TIME OF DISCLOSURES.—

23 ‘‘(1) IN GENERAL.—The disclosures required by

24 this section shall be given not less than 3 business

25 days prior to consummation of the transaction.
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1 ‘‘(2) NEW DISCLOSURES REQUIRED.—After pro2 viding the disclosures required by this section, a cred3 itor may not change the terms of the loan if such

4 changes make the disclosures inaccurate, unless new

5 disclosures are provided that meet the requirements of

6 this section.

7 ‘‘(3) MODIFICATIONS.—The Board may, if it

8 finds that such action is necessary to permit home9 owners to meet bona fide personal financial emer10 gencies, prescribe regulations authorizing the modi11 fication or waiver of rights created under this sub12 section, to the extent and under the circumstances set

13 forth in those regulations.

14 ‘‘(c) NO PREPAYMENT PENALTY.—

15 ‘‘(1) IN GENERAL.—Except as provided in para16 graph (4), a mortgage referred to in section 103(aa)

17 may not contain terms under which a consumer must

18 pay a prepayment penalty for paying all or part of

19 the principal of the loan prior to the date on which

20 such principal is due. If the date of maturity of a

21 mortgage referred to in section 103(aa) is accelerated

22 for any reason, and the consumer is entitled to a re23 bate of interest, computation of the rebate amount

24 shall comply with paragraph (2). No such mortgage

25 shall provide for a default interest rate that is higher
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1 than the interest rate provided by the note for the

2 loan prior to default.

3 ‘‘(2) REBATE COMPUTATION.—For purposes of

4 this subsection, any method of computing rebates of

5 interest that is less favorable to the consumer than the

6 actuarial method (as defined in section 933 of the

7 Housing and Community Development Act of 1992)

8 using simple interest is a prepayment penalty.

9 ‘‘(3) EXCEPTION.—A mortgage referred to in sec10 tion 103(aa) may include terms under which a

11 consumer is required to pay not more than 1 month’s

12 interest as a penalty if the consumer prepays the

13 principal of the loan within 1 year of origination.

14 ‘‘(d) NO BALLOON PAYMENTS.—A mortgage referred to

15 in section 103(aa) having a term of less than 5 years may

16 not include terms under which the aggregate amount of the

17 regular periodic payments would not fully amortize the out18 standing principal balance.

19 ‘‘(e) NO NEGATIVE AMORTIZATION.—A mortgage re20 ferred to in section 103(aa) may not include terms under

21 which the outstanding principal balance will increase at

22 any time over the course of the loan because the regular

23 periodic payments do not cover the full amount of interest

24 due.
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1 ‘‘(f) NO PREPAID PAYMENTS.—A mortgage referred to

2 in section 103(aa) may not include terms under which more

3 than 2 periodic payments required under the loan are con4 solidated and paid in advance from the loan proceeds pro5 vided to the consumer.

6 ‘‘(g) CONSEQUENCE OF FAILURE TO COMPLY.—Any

7 mortgage that contains a provision prohibited by this sec8 tion shall be deemed a failure to deliver the material disclo9 sures required under this title, for the purpose of section

10 125.

11 ‘‘(h) DEFINITION.—For purposes of this section, the

12 term ‘affiliate’ has the same meaning as in section 2(k) of

13 the Bank Holding Company Act of 1956.

14 ‘‘(i) DISCRETIONARY REGULATORY AUTHORITY OF

15 BOARD.—

16 ‘‘(1) EXEMPTIONS.—The Board may, by regula17 tion or order, exempt specific mortgage products or

18 categories of mortgages from any or all of the prohibi19 tions specified in subsections (c) through (f), if the

20 Board finds that the exemption—

21 ‘‘(A) is in the interest of the borrowing pub22 lic; and

23 ‘‘(B) will apply only to products that main24 tain and strengthen home ownership and equity

25 protection.
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1 ‘‘(2) PROHIBITIONS.—The Board, by regulation

2 or order, shall prohibit acts or practices in connection

3 with—

4 ‘‘(A) mortgage loans that the Board finds to

5 be unfair, deceptive, or designed to evade the

6 provisions of this section; and

7 ‘‘(B) refinancing of mortgage loans that the

8 Board finds to be associated with abusive lend9 ing practices, or that are otherwise not in the in10 terest of the borrower.’’.

11 (e) CONFORMING AMENDMENTS.—

12 (1) TABLE OF SECTIONS.—The table of sections

13 at the beginning of chapter 2 of the Truth in Lending

14 Act is amended by striking the item relating to sec15 tion 129 and inserting the following:

‘‘129. Requirements for certain mortgages.’’.

16 (2) TRUTH IN LENDING ACT.—Section 105(a) of

17 the Truth in Lending Act (15 U.S.C. 1604(a)) is

18 amended in the second sentence, by striking ‘‘These’’

19 and inserting ‘‘Except in the case of a mortgage re20 ferred to in section 103(aa), these’’.

21 SEC. 152. CIVIL LIABILITY.

22 (a) DAMAGES.—Section 130(a) of the Truth in Lend23 ing Act (15 U.S.C. 1640(a)) is amended—

24 (1) by striking ‘‘and’’ at the end of paragraph

25 (2)(B);
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1 (2) by striking the period at the end of para2 graph (3) and inserting ‘‘; and’’; and

3 (3) by inserting after paragraph (3) the follow4 ing new paragraph:

5 ‘‘(4) in the case of a failure to comply with any

6 requirement under section 129, an amount equal to

7 the sum of all finance charges and fees paid by the

8 consumer, unless the creditor demonstrates that the

9 failure to comply is not material.’’.

10 (b) STATE ATTORNEY GENERAL ENFORCEMENT.—Sec11 tion 130(e) of the Truth in Lending Act (15 U.S.C. 1640(e))

12 is amended by adding at the end the following: ‘‘An action

13 to enforce a violation of section 129 may also be brought

14 by the appropriate State attorney general in any appro15 priate United States district court, or any other court of

16 competent jurisdiction, not later than 3 years after the date

17 on which the violation occurs. The State attorney general

18 shall provide prior written notice of any such civil action

19 to the Federal agency responsible for enforcement under sec20 tion 108 and shall provide the agency with a copy of the

21 complaint. If prior notice is not feasible, the State attorney

22 general shall provide notice to such agency immediately

23 upon instituting the action. The Federal agency may—

24 ‘‘(1) intervene in the action;

25 ‘‘(2) upon intervening—
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1 ‘‘(A) remove the action to the appropriate

2 United States district court, if it was not origi3 nally brought there; and

4 ‘‘(B) be heard on all matters arising in the

5 action; and

6 ‘‘(3) file a petition for appeal.’’.

7 (c) ASSIGNEE LIABILITY.—Section 131 of the Truth in

8 Lending Act (15 U.S.C. 1641) is amended by adding at

9 the end the following new subsection:

10 ‘‘(d) RIGHTS UPON ASSIGNMENT OF CERTAIN MORT11 GAGES.—

12 ‘‘(1) IN GENERAL.—Any person who purchases

13 or is otherwise assigned a mortgage referred to in sec14 tion 103(aa) shall be subject to all claims and de15 fenses with respect to that mortgage that the consumer

16 could assert against the creditor of the mortgage, un17 less the purchaser or assignee demonstrates, by a pre18 ponderance of the evidence, that a reasonable person

19 exercising ordinary due diligence, could not deter20 mine, based on the loan documentation required by

21 this title, that the mortgage was in fact a mortgage

22 referred to in section 103(aa). The preceding sentence

23 does not affect a consumer’s rights under sections 125,

24 130, or any other provision of this title.
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1 ‘‘(2) LIMITATION ON DAMAGES.—Notwithstand2 ing any other provision of law, relief provided as a

3 result of any action made permissible by paragraph

4 (1) may not exceed—

5 ‘‘(A) with respect to actions based upon a

6 violation of this title, the amount specified in

7 section 130; and

8 ‘‘(B) with respect to all other causes of ac9 tion, the sum of—

10 ‘‘(i) the amount of all remaining in11 debtedness; and

12 ‘‘(ii) the total amount paid by the

13 consumer in connection with the trans14 action.

15 ‘‘(3) OFFSET.—The amount of damages that

16 may be awarded under paragraph (2)(B) shall be re17 duced by the amount of any damages awarded under

18 paragraph (2)(A).

19 ‘‘(4) NOTICE.—Any person who sells or otherwise

20 assigns a mortgage referred to in section 103(aa) shall

21 include a prominent notice of the potential liability

22 under this subsection as determined by the Board.’’.
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1 SEC. 153. REVERSE MORTGAGE DISCLOSURE.

2 (a) DEFINITION OF REVERSE MORTGAGE.—Section

3 103 of the Truth in Lending Act (15 U.S.C. 1602) is

4 amended by adding at the end the following new subsection:

5 ‘‘(bb) The term ‘reverse mortgage transaction’ means

6 a nonrecourse transaction in which a mortgage, deed of

7 trust, or equivalent consensual security interest is created

8 against the consumer’s principal dwelling—

9 ‘‘(1) securing one or more advances; and

10 ‘‘(2) with respect to which the payment of any

11 principal, interest, and shared appreciation is due

12 and payable (other than in the case of default) only

13 after—

14 ‘‘(A) the transfer of the dwelling;

15 ‘‘(B) the consumer ceases to occupy the

16 dwelling as a principal dwelling; or

17 ‘‘(C) the death of the consumer.’’.

18 (b) DISCLOSURE.—Chapter 2 of title I of the Truth

19 in Lending Act (15 U.S.C. 1631 et seq.) is amended by add20 ing at the end the following new section:

21 ‘‘SEC. 138. REVERSE MORTGAGES.

22 ‘‘(a) IN GENERAL.—In addition to the disclosures re23 quired under this title, for each reverse mortgage, the credi24 tor shall, not less than 3 days prior to consummation of

25 the transaction, disclose to the consumer in conspicuous

26 type a good faith estimate of the projected total cost of the
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1 mortgage to the consumer expressed as a table of annual

2 interest rates. Each annual interest rate shall be based on

3 a projected total future loan balance under a projected ap4 preciation rate for the dwelling and a term for the mort5 gage. The disclosure shall include—

6 ‘‘(1) statements of the annual interest rates for

7 not less than 3 projected appreciation rates and not

8 less than 3 loan periods, as determined by the Board,

9 including—

10 ‘‘(A) a short-term reverse mortgage;

11 ‘‘(B) a term equaling the actuarial life ex12 pectancy of the consumer; and

13 ‘‘(C) such longer term as the Board deems

14 appropriate; and

15 ‘‘(2) a statement that the consumer is not obli16 gated to complete the reverse mortgage transaction

17 merely because the consumer has received the disclo18 sure required under this section or has signed a loan

19 application.

20 ‘‘(b) PROJECTED TOTAL COST.—In determining the

21 projected total cost of the mortgage to be disclosed to the

22 consumer under subsection (a), the creditor shall take into

23 account—

24 ‘‘(1) any shared appreciation that the lender

25 will, by contract, be entitled to receive;
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1 ‘‘(2) all costs and charges to the consumer, in2 cluding the costs of any associated annuity that the

3 consumer elects or is required to purchase as part of

4 the reverse mortgage transaction;

5 ‘‘(3) all payments to and for the benefit of the

6 consumer, including, in the case in which an associ7 ated annuity is purchased (whether or not required

8 by the lender as a condition of making the reverse

9 mortgage), the annuity payments received by the

10 consumer and financed from the proceeds of the loan,

11 instead of the proceeds used to finance the annuity;

12 and

13 ‘‘(4) any limitation on the liability of the

14 consumer under reverse mortgage transactions (such

15 as nonrecourse limits and equity conservation agree16 ments).’’.

17 (c) TABLE OF SECTIONS.—The table of sections at the

18 beginning of chapter 2 of the Truth in Lending Act is

19 amended by inserting after the item relating to section 137

20 the following:

‘‘138. Reverse mortgages.’’.

21 SEC. 154. REGULATIONS; EFFECTIVE DATE.

22 (a) REGULATIONS.—Not later than 180 days after the

23 date of enactment of this Act, the Board of Governors of

24 the Federal Reserve System shall issue such regulations as

25 may be necessary to carry out this subtitle.
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1 (b) EFFECTIVE DATE.—This subtitle, and the amend2 ments made by this subtitle, shall apply to every mortgage

3 referred to in section 103(aa) of the Truth in Lending Act

4 (as added by section 151(a) of this Act) consummated on

5 or after the date which is 60 days after the promulgation

6 of final regulations under subsection (a).

7 TITLE II—SMALL BUSINESS

8 CAPITAL FORMATION

9 Subtitle A—Small Business Loan

10 Securitization

11 SEC. 201. SHORT TITLE.

12 This subtitle may be cited as the ‘‘Small Business

13 Loan Securitization and Secondary Market Enhancement

14 Act of 1994’’.

15 SEC. 202. SMALL BUSINESS RELATED SECURITY.

16 Section 3(a) of the Securities Exchange Act of 1934

17 (15 U.S.C. 78c(a)) is amended by adding at the end the

18 following new paragraph:

19 ‘‘(53)(A) The term ‘small business related secu20 rity’ means a security that is rated in 1 of the 4 high21 est rating categories by at least 1 nationally recog22 nized statistical rating organization, and either—

23 ‘‘(i) represents an interest in 1 or more

24 promissory notes or leases of personal property

25 evidencing the obligation of a small business con-
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1 cern and originated by an insured depository in2 stitution, insured credit union, insurance com3 pany, or similar institution which is supervised

4 and examined by a Federal or State authority,

5 or a finance company or leasing company; or

6 ‘‘(ii) is secured by an interest in 1 or more

7 promissory notes or leases of personal property

8 (with or without recourse to the issuer or lessee)

9 and provides for payments of principal in rela10 tion to payments, or reasonable projections of

11 payments, on notes or leases described in clause

12 (i).

13 ‘‘(B) For purposes of this paragraph—

14 ‘‘(i) an ‘interest in a promissory note or a

15 lease of personal property’ includes ownership

16 rights, certificates of interest or participation in

17 such notes or leases, and rights designed to as18 sure servicing of such notes or leases, or the re19 ceipt or timely receipt of amounts payable under

20 such notes or leases;

21 ‘‘(ii) the term ‘small business concern’ has

22 the same meaning as in section 3 of the Small

23 Business Act;
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1 ‘‘(iii) the term ‘insured depository institu2 tion’ has the same meaning as in section 3 of the

3 Federal Deposit Insurance Act; and

4 ‘‘(iv) the term ‘insured credit union’ has the

5 same meaning as in section 101 of the Federal

6 Credit Union Act.’’.

7 SEC. 203. APPLICABILITY OF MARGIN REQUIREMENTS.

8 Section 7(g) of the Securities Exchange Act of 1934

9 (15 U.S.C. 78g(g)) is amended by inserting ‘‘or a small

10 business related security’’ after ‘‘mortgage related security’’.

11 SEC. 204. BORROWING IN THE COURSE OF BUSINESS.

12 Section 8(a) of the Securities Exchange Act of 1934

13 (15 U.S.C. 78h(a)) is amended in the last sentence by in14 serting ‘‘or a small business related security’’ after ‘‘mort15 gage related security’’.

16 SEC. 205. SMALL BUSINESS RELATED SECURITIES AS COL17 LATERAL.

18 Clause (ii) of section 11(d)(1) of the Securities Ex19 change Act of 1934 (15 U.S.C. 78k(d)(1)) is amended by

20 inserting ‘‘or any small business related security’’ after

21 ‘‘mortgage related security’’.

22 SEC. 206. INVESTMENT BY DEPOSITORY INSTITUTIONS.

23 (a) HOME OWNERS’ LOAN ACT AMENDMENT.—Section

24 5(c)(1) of the Home Owners’ Loan Act (12 U.S.C.
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1 1464(c)(1)) is amended by adding at the end the following

2 new subparagraph:

3 ‘‘(S) SMALL BUSINESS RELATED SECURI4 TIES.—Investments in small business related se5 curities (as defined in section 3(a)(53) of the Se6 curities Exchange Act of 1934), subject to such

7 regulations as the Director may prescribe, in8 cluding regulations concerning the minimum

9 size of the issue (at the time of the initial dis10 tribution), the minimum aggregate sales price,

11 or both.’’.

12 (b) CREDIT UNIONS.—Section 107(15) of the Federal

13 Credit Union Act (12 U.S.C. 1757(15)) is amended—

14 (1) in subparagraph (A), by striking ‘‘or’’ at the

15 end;

16 (2) in subparagraph (B), by inserting ‘‘or’’ at

17 the end; and

18 (3) by adding at the end the following new sub19 paragraph:

20 ‘‘(C) are small business related securities

21 (as defined in section 3(a)(53) of the Securities

22 Exchange Act of 1934), subject to such regula23 tions as the Board may prescribe, including reg24 ulations prescribing the minimum size of the
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1 issue (at the time of the initial distribution), the

2 minimum aggregate sales price, or both;’’.

3 (c) NATIONAL BANKING ASSOCIATIONS.—Section 5136

4 of the Revised Statutes (12 U.S.C. 24) is amended in the

5 last sentence in the first full paragraph of paragraph Sev6 enth, by striking ‘‘or (B) are mortgage related securities’’

7 and inserting the following: ‘‘(B) are small business related

8 securities (as defined in section 3(a)(53) of the Securities

9 Exchange Act of 1934); or (C) are mortgage related securi10 ties’’.

11 SEC. 207. PREEMPTION OF STATE LAW.

12 (a) IN GENERAL.—Section 106(a)(1) of the Secondary

13 Mortgage Market Enhancement Act of 1984 (15 U.S.C. 77r–

14 1(a)(1)) is amended—

15 (1) by striking ‘‘or’’ at the end of subparagraph

16 (B);

17 (2) by redesignating subparagraph (C) as sub18 paragraph (D); and

19 (3) by inserting after subparagraph (B) the fol20 lowing new subparagraph:

21 ‘‘(C) small business related securities (as de22 fined in section 3(a)(53) of the Securities Ex23 change Act of 1934), or’’.
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1 (b) OBLIGATIONS OF THE UNITED STATES.—Section

2 106(a)(2) of the Secondary Mortgage Market Enhancement

3 Act of 1984 (15 U.S.C. 77r–1(a)(2)) is amended—

4 (1) by striking ‘‘or’’ at the end of subparagraph

5 (B);

6 (2) by redesignating subparagraph (C) as sub7 paragraph (D); and

8 (3) by inserting after subparagraph (B) the fol9 lowing new subparagraph:

10 ‘‘(C) small business related securities (as de11 fined in section 3(a)(53) of the Securities Ex12 change Act of 1934), or’’.

13 (c) PREEMPTION OF STATE LAWS.—Section 106(c) of

14 the Secondary Mortgage Market Enhancement Act of 1984

15 (15 U.S.C. 77r–1(c)) is amended—

16 (1) in the first sentence, by striking ‘‘or that’’

17 and inserting ‘‘, that’’; and

18 (2) by inserting ‘‘, or that are small business re19 lated securities (as defined in section 3(a)(53) of the

20 Securities Exchange Act of 1934)’’ before ‘‘shall be ex21 empt’’.

22 (d) IMPLEMENTATION.—Section 106 of the Secondary

23 Mortgage Market Enhancement Act of 1984 (15 U.S.C. 77r–

24 1) is amended by adding at the end the following new sub25 section:
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1 ‘‘(d) IMPLEMENTATION.—

2 ‘‘(1) LIMITATION.—The provisions of subsections

3 (a) and (b) concerning small business related securi4 ties shall not apply with respect to a particular per5 son, trust, corporation, partnership, association, busi6 ness trust, or business entity or class thereof in any

7 State that, prior to the expiration of 7 years after the

8 date of enactment of this subsection, enacts a statute

9 that specifically refers to this section and either pro10 hibits or provides for a more limited authority to

11 purchase, hold, or invest in such small business relat12 ed securities by any person, trust, corporation, part13 nership, association, business trust, or business entity

14 or class thereof than is provided in this section. The

15 enactment by any State of any statute of the type de16 scribed in the preceding sentence shall not affect the

17 validity of any contractual commitment to purchase,

18 hold, or invest that was made prior to such enact19 ment, and shall not require the sale or other disposi20 tion of any small business related securities acquired

21 prior to the date of such enactment.

22 ‘‘(2) STATE REGISTRATION OR QUALIFICATION

23 REQUIREMENTS.—Any State may, not later than 7

24 years after the date of enactment of this subsection,

25 enact a statute that specifically refers to this section
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1 and requires registration or qualification of any

2 small business related securities on terms that differ

3 from those applicable to any obligation issued by the

4 United States.’’.

5 SEC. 208. INSURED DEPOSITORY INSTITUTION CAPITAL RE6 QUIREMENTS FOR TRANSFERS OF SMALL

7 BUSINESS OBLIGATIONS.

8 (a) ACCOUNTING PRINCIPLES.—The accounting prin9 ciples applicable to the transfer of a small business loan

10 or a lease of personal property with recourse contained in

11 reports or statements required to be filed with Federal bank12 ing agencies by a qualified insured depository institution

13 shall be consistent with generally accepted accounting prin14 ciples.

15 (b) CAPITAL AND RESERVE REQUIREMENTS.—With

16 respect to the transfer of a small business loan or lease of

17 personal property with recourse that is a sale under gen18 erally accepted accounting principles, each qualified in19 sured depository institution shall—

20 (1) establish and maintain a reserve equal to an

21 amount sufficient to meet the reasonable estimated li22 ability of the institution under the recourse arrange23 ment; and

24 (2) include, for purposes of applicable capital

25 standards and other capital measures, only the
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1 amount of the retained recourse in the risk-weighted

2 assets of the institution.

3 (c) QUALIFIED INSTITUTIONS CRITERIA.—An insured

4 depository institution is a qualified insured depository in5 stitution for purposes of this section if, without regard to

6 the accounting principles or capital requirements referred

7 to in subsections (a) and (b), the institution is—

8 (1) well capitalized; or

9 (2) with the approval, by regulation or order, of

10 the appropriate Federal banking agency, adequately

11 capitalized.

12 (d) AGGREGATE AMOUNT OF RECOURSE.—The total

13 outstanding amount of recourse retained by a qualified in14 sured depository institution with respect to transfers of

15 small business loans and leases of personal property under

16 subsections (a) and (b) shall not exceed—

17 (1) 15 percent of the risk-based capital of the in18 stitution; or

19 (2) such greater amount, as established by the

20 appropriate Federal banking agency by regulation or

21 order.

22 (e) INSTITUTIONS THAT CEASE TO BE QUALIFIED OR

23 EXCEED AGGREGATE LIMITS.—If an insured depository in24 stitution ceases to be a qualified insured depository institu25 tion or exceeds the limits under subsection (d), this section
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1 shall remain applicable to any transfers of small business

2 loans or leases of personal property that occurred during

3 the time that the institution was qualified and did not ex4 ceed such limit.

5 (f) PROMPT CORRECTIVE ACTION NOT AFFECTED.—

6 The capital of an insured depository institution shall be

7 computed without regard to this section in determining

8 whether the institution is adequately capitalized,

9 undercapitalized, significantly undercapitalized, or criti10 cally undercapitalized under section 38 of the Federal De11 posit Insurance Act.

12 (g) REGULATIONS REQUIRED.—Not later than 180

13 days after the date of the enactment of this Act each appro14 priate Federal banking agency shall promulgate final regu15 lations implementing this section.

16 (h) ALTERNATIVE SYSTEM PERMITTED.—

17 (1) IN GENERAL.—At the discretion of the appro18 priate Federal banking agency, this section shall not

19 apply if the regulations of the agency provide that the

20 aggregate amount of capital and reserves required

21 with respect to the transfer of small business loans

22 and leases of personal property with recourse does not

23 exceed the aggregate amount of capital and reserves

24 that would be required under subsection (b).
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1 (2) EXISTING TRANSACTIONS NOT AFFECTED.—

2 Notwithstanding paragraph (1), this section shall re3 main in effect with respect to transfers of small busi4 ness loans and leases of personal property with re5 course by qualified insured depository institutions oc6 curring before the effective date of regulations referred

7 to in paragraph (1).

8 (i) DEFINITIONS.—For purposes of this section—

9 (1) the term ‘‘adequately capitalized’’ has the

10 same meaning as in section 38(b) of the Federal De11 posit Insurance Act;

12 (2) the term ‘‘appropriate Federal banking agen13 cy’’ has the same meaning as in section 3 of the Fed14 eral Deposit Insurance Act;

15 (3) the term ‘‘capital standards’’ has the same

16 meaning as in section 38(c) of the Federal Deposit

17 Insurance Act;

18 (4) the term ‘‘Federal banking agencies’’ has the

19 same meaning as in section 3 of the Federal Deposit

20 Insurance Act;

21 (5) the term ‘‘insured depository institution’’ has

22 the same meaning as in section 3 of the Federal De23 posit Insurance Act;
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1 (6) the term ‘‘other capital measures’’ has the

2 meaning as in section 38(c) of the Federal Deposit

3 Insurance Act;

4 (7) the term ‘‘recourse’’ has the meaning given to

5 such term under generally accepted accounting prin6 ciples;

7 (8) the term ‘‘small business’’ means a business

8 that meets the criteria for a small business concern es9 tablished by the Small Business Administration

10 under section 3(a) of the Small Business Act; and

11 (9) the term ‘‘well capitalized’’ has the same

12 meaning as in section 38(b) of the Federal Deposit

13 Insurance Act.

14 SEC. 209. TRANSACTIONS IN SMALL BUSINESS RELATED

15 SECURITIES BY EMPLOYEE BENEFIT PLANS.

16 (a) PROHIBITED TRANSACTION EXEMPTION.—The

17 Secretary of Labor, in consultation with the Secretary of

18 the Treasury, may exempt transactions involving small

19 business related securities (as defined in section 3(a)(53)

20 of the Securities Exchange Act of 1934, as added by section

21 202 of this Act) pursuant to section 408(a) of the Employee

22 Retirement Income Security Act of 1974 (29 U.S.C.

23 1108(a)) and section 4975(c)(2) of the Internal Revenue

24 Code of 1986.
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1 (b) CONSIDERATION OF EXEMPTION REQUESTS.—The

2 Secretary of Labor shall consider any request for exemption

3 under subsection (a) within a reasonable period of time

4 after receipt of such request.

5 SEC. 210. SENSE OF THE SENATE ON TAXATION OF SMALL

6 BUSINESS LOAN INVESTMENT CONDUITS.

7 (a) SENSE OF THE SENATE.—It is the sense of the Sen8 ate that the taxation of a small business loan investment

9 conduit and the holder of an interest therein should be simi10 lar to the taxation of a real estate mortgage investment con11 duit and the holder of an interest therein under the Internal

12 Revenue Code of 1986, taking into account, as appro13 priate—

14 (1) the purpose of facilitating the securitization

15 of small business loans and leases or personal prop16 erty through the use of small business loan investment

17 conduits and the development of a secondary market

18 in small business loans and leases of personal prop19 erty;

20 (2) differences in the nature of qualifying mort21 gages in a real estate mortgage investment conduit

22 and small business loans and leases of personal prop23 erty;

24 (3) differences in the practices of participants in

25 the securitization of real estate mortgages in a real es-
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1 tate mortgage investment conduit and the

2 securitization of other assets; and

3 (4) such other tax policies as may be warranted.

4 (b) SMALL BUSINESS LOAN INVESTMENT CONDUIT

5 DEFINED.—For purposes of this section, the term ‘‘small

6 business loan investment conduit’’ means an entity substan7 tially all of the assets of which consist of an interest in

8 one or more promissory notes as leases of personal property

9 evidencing obligations—

10 (1) of a business that meets the criteria of a

11 small business concern established under section 3(a)

12 of the Small Business Act; and

13 (2) that were originated by an insured deposi14 tory institution (as defined in section 3 of the Federal

15 Deposit Insurance Act), credit union, insurance com16 pany, or similar institution which is supervised and

17 examined by a Federal or State authority, or a fi18 nance company or leasing company.

19 Subtitle B—Small Business Capital

20 Enhancement

21 SEC. 251. FINDINGS AND PURPOSES.

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

23 (1) small business concerns are a vital part of

24 the economy, accounting for the majority of new jobs,
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1 new products, and new services created in the United

2 States;

3 (2) adequate access to debt capital is a critical

4 component for small business development, productiv5 ity, expansion, and success in the United States;

6 (3) commercial banks are the most important

7 suppliers of debt capital to small business concerns in

8 the United States;

9 (4) commercial banks and other depository insti10 tutions have various incentives to minimize their risk

11 in financing small business concerns;

12 (5) as a result of such incentives, many small

13 business concerns with economically sound financing

14 needs are unable to obtain access to needed debt cap15 ital;

16 (6) the small business capital access programs

17 implemented by certain States are a flexible and effi18 cient tool to assist financial institutions in providing

19 access to needed debt capital for many small business

20 concerns in a manner consistent with safety and

21 soundness regulations;

22 (7) a small business capital access program

23 would complement other programs which assist small

24 business concerns in obtaining access to capital; and
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1 (8) Federal policy can stimulate and accelerate

2 efforts by States to implement small business capital

3 access programs by providing an incentive to States,

4 while leaving the administration of such programs to

5 each participating State.

6 (b) PURPOSES.—By encouraging States to implement

7 administratively efficient capital access programs that en8 courage commercial banks and other depository institutions

9 to provide access to debt capital for a broad portfolio of

10 small business concerns, and thereby promote a more effi11 cient and effective debt market, the purposes of this subtitle

12 are—

13 (1) to promote economic opportunity and

14 growth;

15 (2) to create jobs;

16 (3) to promote economic efficiency;

17 (4) to enhance productivity; and

18 (5) to spur innovation.

19 SEC. 252. DEFINITIONS.

20 For purposes of this subtitle—

21 (1) the term ‘‘Secretary’’ means the Secretary of

22 Housing and Urban Development;

23 (2) the term ‘‘appropriate Federal banking agen24 cy’’—
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1 (A) has the same meaning as in section 3

2 of the Federal Deposit Insurance Act; and

3 (B) includes the National Credit Union Ad4 ministration Board in the case of any credit

5 union the deposits of which are insured in ac6 cordance with the Federal Credit Union Act;

7 (3) the term ‘‘early loan’’ means a loan enrolled

8 at a time when the aggregate covered amount of loans

9 previously enrolled under the Program by a particu10 lar participating financial institution is less than

11 $5,000,000;

12 (4) the term ‘‘enrolled loan’’ means a loan made

13 by a participating financial institution that is en14 rolled by a participating State in accordance with

15 this subtitle;

16 (5) the term ‘‘financial institution’’ means any

17 federally chartered or State-chartered commercial

18 bank, savings association, savings bank, or credit

19 union;

20 (6) the term ‘‘participating financial institu21 tion’’ means any financial institution that has en22 tered into a participation agreement with a partici23 pating State in accordance with section 254;
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1 (7) the term ‘‘participating State’’ means any

2 State that has been approved for participation in the

3 Program in accordance with section 253;

4 (8) the term ‘‘passive real estate ownership’’

5 means ownership of real estate for the purpose of de6 riving income from speculation, trade, or rental, ex7 cept that such term shall not include—

8 (A) the ownership of that portion of real es9 tate being used or intended to be used for the op10 eration of the business of the owner of the real

11 estate (other than the business of passive owner12 ship of real estate); or

13 (B) the ownership of real estate for the pur14 pose of construction or renovation, until the com15 pletion of the construction or renovation phase;

16 (9) the term ‘‘Program’’ means the Small Busi17 ness Capital Enhancement Program established under

18 this subtitle;

19 (10) the term ‘‘reserve fund’’ means a fund, es20 tablished by a participating State, earmarked for a

21 particular participating financial institution, for the

22 purposes of—

23 (A) depositing all required premium

24 charges paid by the participating financial in25 stitution and by each borrower receiving a loan
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1 under the Program from a participating finan2 cial institution;

3 (B) depositing contributions made by the

4 participating State; and

5 (C) covering losses on enrolled loans by dis6 bursing accumulated funds; and

7 (11) the term ‘‘State’’ means—

8 (A) a State of the United States;

9 (B) the District of Columbia;

10 (C) any political subdivision of a State of

11 the United States, which subdivision has a popu12 lation in excess of the population of the least

13 populated State of the United States; and

14 (D) any other political subdivision of a

15 State of the United States that the Secretary de16 termines has the capacity to participate in the

17 program.

18 SEC. 253. APPROVING STATES FOR PARTICIPATION.

19 (a) APPLICATION.—Any State may apply to the Sec20 retary for approval to be a participating State under the

21 Program and to be eligible for reimbursement by the

22 Secretary pursuant to section 257.

23 (b) APPROVAL CRITERIA.—The Secretary shall ap24 prove a State to be a participating State, if—
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1 (1) a specific department or agency of the State

2 has been designated to implement the Program;

3 (2) all legal actions necessary to enable such des4 ignated department or agency to implement the Pro5 gram have been accomplished;

6 (3) funds in the amount of at least $1 for every

7 2 people residing in the State (as of the last decennial

8 census for which data have been released) are avail9 able and have been legally committed to contributions

10 by the State to reserve funds, with such funds being

11 available without time limit and without requiring

12 additional legal action, except that such requirements

13 shall not be construed to limit the authority of the

14 State to take action at a later time that results in the

15 termination of its obligation to enroll loans and make

16 contributions to reserve funds;

17 (4) the State has prescribed a form of participa18 tion agreement to be entered into between it and each

19 participating financial institution that is consistent

20 with the requirements and purposes of this subtitle;

21 and

22 (5) the State and the Secretary have executed a

23 reimbursement agreement that conforms to the

24 requirements of this subtitle.

25 (c) EXISTING STATE PROGRAMS.—
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1 (1) IN GENERAL.—A State that is not a partici2 pating State, but that has its own capital access pro3 gram providing portfolio insurance for business loans

4 (based on a separate loss reserve fund for each finan5 cial institution), may apply at any time to the Sec6 retary to be approved to be a participating State. The

7 Secretary shall approve such State to be a participat8 ing State, and to be eligible for reimbursements by the

9 Secretary pursuant to section 257, if the State—

10 (A) satisfies the requirements of subsections

11 (a) and (b); and

12 (B) certifies that each affected financial in13 stitution has satisfied the requirements of section

14 254.

15 (2) APPLICABLE TERMS OF PARTICIPATION.—

16 (A) STATUS OF INSTITUTIONS.—If a State

17 is approved for participation under paragraph

18 (1), each financial institution with a participa19 tion agreement in effect with the participating

20 State shall immediately be considered a partici21 pating financial institution. Reimbursements

22 may be made under section 237 in connection

23 with all contributions made to the reserve fund

24 by the State in connection with lending that oc-
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1 curs on or after the date on which the Secretary

2 approves the State for participation.

3 (B) EFFECTIVE DATE OF PARTICIPATION.—

4 If an amended participation agreement that con5 forms with section 255 is required in order to se6 cure participation approval by the Secretary,

7 contributions subject to reimbursement under

8 section 257 shall include only those contributions

9 made to a reserve fund with respect to loans en10 rolled on or after the date that an amended par11 ticipation agreement between the participating

12 State and the participating financial institution

13 becomes effective.

14 (C) USE OF ACCUMULATED RESERVE

15 FUNDS.—A State that is approved for participa16 tion in accordance with this subsection may con17 tinue to implement the program utilizing the re18 serve funds accumulated under the State pro19 gram.

20 (d) PRIOR APPROPRIATIONS REQUIREMENT.—The

21 Secretary shall not approve a State for participation in

22 the Program until at least $50,000,000 has been appro23 priated to the Secretary (subject to an appropriations Act),

24 without fiscal year limitation, for the purpose of making

25 reimbursements pursuant to section 257.
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1 (e) AMENDMENTS TO AGREEMENTS.—If a State that

2 has been approved to be a participating State wishes to

3 amend its form of participation agreement and continue

4 to be a participating State, such State shall submit such

5 amendment for review by the Secretary in accordance with

6 subsection (b)(4). Any such amendment shall become effec7 tive only after it has been approved by the Secretary.

8 SEC. 254. PARTICIPATION AGREEMENTS.

9 (a) IN GENERAL.—A participating State may enter

10 into a participation agreement with any financial institu11 tion determined by the participating State, after consulta12 tion with the appropriate Federal banking agency, to have

13 sufficient commercial lending experience and financial and

14 managerial capacity to participate in the Program. The de15 termination by the State shall not be reviewable by the Sec16 retary.

17 (b) PARTICIPATING FINANCIAL INSTITUTIONS.—Upon

18 entering into the participation agreement with the partici19 pating State, the financial institution shall become a par20 ticipating financial institution eligible to enroll loans

21 under the Program.

22 SEC. 255. TERMS OF PARTICIPATION AGREEMENTS.

23 (a) IN GENERAL.—The participation agreement to be

24 entered into by a participating State and a participating

25 financial institution shall include all provisions required
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1 by this section, and shall not include any provisions incon2 sistent with the provisions of this section.

3 (b) ESTABLISHMENT OF SEPARATE RESERVE

4 FUNDS.—A separate reserve fund shall be established by the

5 participating State for each participating financial insti6 tution. All funds credited to a reserve fund shall be the ex7 clusive property of the participating State. Each reserve

8 fund shall be an administrative account for the purposes

9 of—

10 (1) receiving all required premium charges to be

11 paid by the borrower and participating financial in12 stitution and contributions by the participating

13 State; and

14 (2) disbursing funds, either to cover losses sus15 tained by the participating financial institution in

16 connection with loans made under the Program, or as

17 contemplated by subsections (d) and (r).

18 (c) INVESTMENT AUTHORITY.—Subject to applicable

19 State law, the participating State may invest, or cause to

20 be invested, funds held in a reserve fund by establishing

21 a deposit account at the participating financial institution

22 in the name of the participating State. In the event that

23 funds in the reserve fund are not deposited in such an ac24 count, such funds shall be invested in a form that the par25 ticipating State determines is safe and liquid.
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1 (d) EARNED INCOME AND INTEREST.—Interest or in2 come earned on the funds credited to a reserve fund shall

3 be deemed to be part of the reserve fund, except that a par4 ticipating State may, as further specified in the participa5 tion agreement, provide authority for the participating

6 State to withdraw some or all of such interest or income

7 earned.

8 (e) LOAN TERMS AND CONDITIONS.—

9 (1) IN GENERAL.—A loan to be filed for enroll10 ment under the Program may be made with such in11 terest rate, fees, and other terms and conditions as

12 agreed upon by the participating financial institu13 tion and the borrower, consistent with applicable law.

14 (2) LINES OF CREDIT.—If a loan to be filed for

15 enrollment is in the form of a line of credit, the

16 amount of the loan shall be considered to be the maxi17 mum amount that can be drawn by the borrower

18 against the line of credit.

19 (f) ENROLLMENT PROCESS.—

20 (1) FILING.—

21 (A) IN GENERAL.—A participating finan22 cial institution shall file each loan made under

23 the Program for enrollment by completing and

24 submitting to the participating State a form

25 prescribed by the participating State.
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1 (B) FORM.—The form referred to in sub2 paragraph (A) shall include a representation by

3 the participating financial institution that it

4 has complied with the participation agreement

5 in enrolling the loan with the State.

6 (C) PREMIUM CHARGES.—Accompanying

7 the completed form shall be the nonrefundable

8 premium charges paid by the borrower and the

9 participating financial institution, or evidence

10 that such premium charges have been deposited

11 into the deposit account containing the reserve

12 fund, if applicable.

13 (D) SUBMISSION.—The participation agree14 ment shall require that the items required by this

15 subsection shall be submitted to the participating

16 State by the participating financial institutions

17 not later than 10 calendar days after a loan is

18 made.

19 (2) ENROLLMENT BY STATE.—Upon receipt by

20 the participating State of the filing submitted in ac21 cordance with paragraph (1), the participating State

22 shall promptly enroll the loan and make a matching

23 contribution to the reserve fund in accordance with

24 subsection (j), unless the information submitted indi25 cates that the participating financial institution has
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1 not complied with the participation agreement in en2 rolling the loan.

3 (g) COVERAGE AMOUNT.—In filing a loan for enroll4 ment under the Program, the participating financial insti5 tution may specify an amount to be covered under the

6 Program that is less than the full amount of the loan.

7 (h) PREMIUM CHARGES.—

8 (1) MINIMUM AND MAXIMUM AMOUNTS.—The

9 premium charges payable to the reserve fund by the

10 borrower and the participating financial institution

11 shall be prescribed by the participating financial in12 stitution, within minimum and maximum limits set

13 forth in the participation agreement. The participa14 tion agreement shall establish minimum and maxi15 mum limits whereby the sum of the premium charges

16 paid in connection with a loan by the borrower and

17 the participating financial institution is not less than

18 3 percent nor more than 7 percent of the amount of

19 the loan covered under the Program.

20 (2) ALLOCATION OF PREMIUM CHARGES.—The

21 participation agreement shall specify terms for allo22 cating premium charges between the borrower and the

23 participating financial institution. However, if the

24 participating financial institution is required to pay

25 any of the premium charges, the participation agree-
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1 ment shall authorize the participating financial insti2 tution to recover from the borrower the cost of the

3 payment of the participating financial institution, in

4 any manner on which the participating financial

5 institution and the borrower agree.

6 (i) RESTRICTIONS.—

7 (1) ACTIONS PROHIBITED.—Except as provided

8 in subsection (h) and paragraph (2) of this sub9 section, the participating State may not—

10 (A) impose any restrictions or requirements,

11 relating to the interest rate, fees, collateral, or

12 other business terms and conditions of the loan;

13 or

14 (B) condition enrollment of a loan in the

15 Program on the review by the State of the risk

16 or creditworthiness of a loan.

17 (2) EFFECT ON OTHER LAW.—Nothing in this

18 subtitle shall affect the applicability of any other law

19 to the conduct by a participating financial institu20 tion of its business.

21 (j) STATE CONTRIBUTIONS.—In enrolling a loan

22 under the Program, the participating State shall contribute

23 to the reserve fund an amount, as provided for in the par24 ticipation agreement, which shall not be less than the sum
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1 of the amount of premium charges paid by the borrower

2 and the participating financial institution.

3 (k) ELEMENTS OF CLAIMS.—

4 (1) FILING.—If a participating financial insti5 tution charges off all or part of an enrolled loan, such

6 participating financial institution may file a claim

7 for reimbursement with the participating State by

8 submitting a form that—

9 (A) includes the representation by the par10 ticipating financial institution that it is filing

11 the claim in accordance with the terms of the ap12 plicable participation agreement; and

13 (B) contains such other information as may

14 be required by the participating State.

15 (2) TIMING.—Any claim filed under paragraph

16 (1) shall be filed contemporaneously with the action

17 of the participating financial institution to charge off

18 all or part of an enrolled loan. The participating fi19 nancial institution shall determine when and how

20 much to charge off on an enrolled loan, in a manner

21 consistent with its usual method for making such de22 terminations on business loans that are not enrolled

23 loans under this subtitle.

24 (l) ELEMENTS OF CLAIMS.—A claim filed by a partici25 pating financial institution may include the amount of
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1 principal charged off, not to exceed the covered amount of

2 the loan. Such claim may also include accrued interest and

3 out-of-pocket expenses, if and to the extent provided for

4 under the participation agreement.

5 (m) PAYMENT OF CLAIMS.—

6 (1) IN GENERAL.—Except as provided in sub7 section (n) and paragraph (2) of this subsection, upon

8 receipt of a claim filed in accordance with this section

9 and the participation agreement, the participating

10 State shall promptly pay to the participating finan11 cial institution, from funds in the reserve fund, the

12 full amount of the claim as submitted.

13 (2) INSUFFICIENT RESERVE FUNDS.—If there are

14 insufficient funds in the reserve fund to cover the en15 tire amount of a claim of a participating financial

16 institution, the participating State shall pay to the

17 participating financial institution an amount equal

18 to the current balance in the reserve fund. If the en19 rolled loan for which the claim has been filed—

20 (A) is not an early loan, such payment

21 shall be deemed fully to satisfy the claim, and

22 the participating financial institution shall have

23 no other or further right to receive any amount

24 from the reserve fund with respect to such claim;

25 or
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1 (B) is an early loan, such payment shall

2 not be deemed fully to satisfy the claim of the

3 participating financial institution, and at such

4 time as the remaining balance of the claim does

5 not exceed 75 percent of the balance in the re6 serve fund, the participating State shall, upon

7 the request of the participating financial institu8 tion, pay any remaining amount of the claim.

9 (n) DENIAL OF CLAIMS.—A participating State may

10 deny a claim if a representation or warranty made by the

11 participating financial institution to the participating

12 State at the time that the loan was filed for enrollment or

13 at the time that the claim was submitted was known by

14 the participating financial institution to be false.

15 (o) SUBSEQUENT RECOVERY OF CLAIM AMOUNT.—If,

16 subsequent to payment of a claim by the participating

17 State, a participating financial institution recovers from

18 a borrower any amount for which payment of the claim

19 was made, the participating financial institution shall

20 promptly pay to the participating State for deposit into

21 the reserve fund the amount recovered, less any expenses in22 curred by the institution in collection of such amount.

23 (p) PARTICIPATION AGREEMENT TERMS.—
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1 (1) IN GENERAL.—In connection with the filing

2 of a loan for enrollment in the Program, the partici3 pation agreement—

4 (A) shall require the participating financial

5 institution to obtain an assurance from each bor6 rower that—

7 (i) the proceeds of the loan will be used

8 for a business purpose;

9 (ii) the loan will not be used to finance

10 passive real estate ownership; and

11 (iii) the borrower is not—

12 (I) an executive officer, director,

13 or principal shareholder of the partici14 pating financial institution;

15 (II) a member of the immediate

16 family of an executive officer, director,

17 or principal shareholder of the partici18 pating financial institution; or

19 (III) a related interest of any

20 such executive officer, director, prin21 cipal shareholder, or member of the im22 mediate family;

23 (B) shall require the participating financial

24 institution to provide assurances to the partici25 pating State that the loan has not been made in
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1 order to place under the protection of the Pro2 gram prior debt that is not covered under the

3 Program and that is or was owed by the bor4 rower to the participating financial institution

5 or to an affiliate of the participating financial

6 institution;

7 (C) may provide that if—

8 (i) a participating financial institu9 tion makes a loan to a borrower that is a

10 refinancing of a loan previously made to

11 the borrower by the participating financial

12 institution or an affiliate of the participat13 ing financial institution;

14 (ii) such prior loan was not enrolled in

15 the Program; and

16 (iii) additional or new financing is ex17 tended by the participating financial insti18 tution as part of the refinancing,

19 the participating financial institution may file

20 the loan for enrollment, with the amount to be

21 covered under the Program not to exceed the

22 amount of any additional or new financing; and

23 (D) may include additional restrictions on

24 the eligibility of loans or borrowers that are not
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1 inconsistent with the provisions and purposes of

2 this subtitle.

3 (2) DEFINITIONS.—For purposes of this sub4 section, the terms ‘‘executive officer’’, ‘‘director’’,

5 ‘‘principal shareholder’’, ‘‘immediate family’’, and

6 ‘‘related interest’’ refer to the same relationship to a

7 participating financial institution as the relationship

8 described in part 215 of title 12 of the Code of Fed9 eral Regulations, or any successor to such part.

10 (q) TERMINATION CLAUSE.—In each participation

11 agreement, the participating State shall reserve for itself the

12 ability to terminate its obligation to enroll loans under the

13 Program. Any such termination shall be prospective only,

14 and shall not apply to amounts of loans enrolled under the

15 Program prior to such termination.

16 (r) ALLOWABLE WITHDRAWALS FROM FUND.—

17 The participation agreement may provide that,

18 if, for any consecutive period of not less than 24

19 months, the aggregate outstanding balance of all en20 rolled loans for a participating financial institution

21 is continually less than the outstanding balance in

22 the reserve fund for that participating financial insti23 tution, the participating State, in its discretion, may

24 withdraw an amount from the reserve fund to bring
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1 the balance in the reserve fund down to the outstand2 ing balance of all such enrolled loans.

3 (s) GRANDFATHERED PROVISION.—

4 (1) SPECIAL TREATMENT OF PREMIUM

5 CHARGES.—Notwithstanding subsection (b) or (d), the

6 participation agreement, if explicitly authorized by a

7 statute enacted by the State before the date of enact8 ment of this Act, may allow a participating financial

9 institution to treat the premium charges paid by the

10 participating financial institution and the borrower

11 into the reserve fund, and interest or income earned

12 on funds in the reserve fund that are deemed to be at13 tributable to such premium charges, as assets of the

14 participating financial institution for accounting

15 purposes, subject to withdrawal by the participating

16 financial institution only—

17 (A) for the payment of claims approved by

18 the participating State in accordance with this

19 section; and

20 (B) upon the participating financial insti21 tution’s withdrawal from authority to make new

22 loans under the Program.

23 (2) PAYMENT OF POST-WITHDRAWAL CLAIMS.—

24 After any withdrawal of assets from the reserve fund

25 pursuant to paragraph (1)(B), any future claims
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1 filed by the participating financial institution on

2 loans remaining in its capital access program port3 folio shall only be paid from funds remaining in the

4 reserve fund to the extent that, in the aggregate, such

5 claims exceed the sum of the amount of such with6 drawn assets, and interest on that amount, imputed

7 at the same rate as income would have accrued had

8 the amount not been withdrawn.

9 (3) CONDITIONS FOR TERMINATING SPECIAL AU10 THORITY.—If the Secretary determines that the inclu11 sion in a participation agreement of the provisions

12 authorized by this subsection is resulting in the en13 rollment of loans under the Program that are likely

14 to have been made without assistance provided under

15 this subtitle, the Secretary may notify the participat16 ing State that henceforth, the Secretary will only

17 make reimbursements to the State under section 257

18 with respect to a loan if the participation agreement

19 between the participating State and each participat20 ing financial institution has been amended to con21 form with this section, without exercise of the special

22 authority granted by this subsection.

23 SEC. 256. REPORTS.

24 (a) RESERVE FUNDS REPORT.—On or before the last

25 day of each calendar quarter, a participating State shall
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1 submit to the Secretary a report of contributions to reserve

2 funds made by the participating State during the previous

3 calendar quarter. If the participating State has made con4 tributions to one or more reserve funds during the previous

5 quarter, the report shall—

6 (1) indicate the total amount of such contribu7 tions;

8 (2) indicate the amount of contributions which is

9 subject to reimbursement, which shall be equal to the

10 total amount of contributions, unless one of the limi11 tations contained in section 257 is applicable;

12 (3) if one of the limitations in section 257 is ap13 plicable, provide documentation of the applicability of

14 such limitation for each loan for which the limitation

15 applies; and

16 (4) include a certification by the participating

17 State that—

18 (A) the information provided in accordance

19 with paragraphs (1), (2), and (3) is accurate;

20 (B) funds in an amount meeting the mini21 mum requirements of section 253(b)(3) continue

22 to be available and legally committed to con23 tributions by the State to reserve funds, less any

24 amount that has been contributed by the State to
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1 reserve funds subsequent to the State being ap2 proved for participation in the Program;

3 (C) there has been no unapproved amend4 ment to any participation agreement or the form

5 of participation agreements; and

6 (D) the participating State is otherwise im7 plementing the Program in accordance with this

8 subtitle and regulations issued pursuant to

9 section 259.

10 (b) ANNUAL DATA.—Not later than March 31 of each

11 year, each participating State shall submit to the Secretary

12 annual data indicating the number of borrowers financed

13 under the Program, the total amount of covered loans, and

14 breakdowns by industry type, loan size, annual sales, and

15 number of employees of the borrowers financed.

16 (c) FORM.—The reports and data filed pursuant to

17 subsections (a) and (b) shall be in such form as the Sec18 retary may require.

19 SEC. 257. REIMBURSEMENT BY THE SECRETARY.

20 (a) REIMBURSEMENTS.—Not later than 30 calendar

21 days after receiving a report filed in compliance with sec22 tion 256, the Secretary shall reimburse the participating

23 State in an amount equal to 50 percent of the amount of

24 contributions by the participating State to the reserve funds

25 that are subject to reimbursement by the Secretary pursuant
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1 to section 256 and this section. The Secretary shall reim2 burse participating States, as it receives reports pursuant

3 to section 256(a), until available funds are expended.

4 (b) SIZE OF ASSISTED BORROWER.—The Secretary

5 shall not provide any reimbursement to a participating

6 State with respect to an enrolled loan made to a borrower

7 that has 500 or more employees at the time that the loan

8 is enrolled in the Program.

9 (c) THREE-YEAR MAXIMUM.—The amount of reim10 bursement to be provided by the Secretary to a participat11 ing State over any 3-year period in connection with loans

12 made to any single borrower or any group of borrowers

13 among which a common enterprise exists shall not exceed

14 $75,000. For purposes of this subsection, ‘‘common enter15 prise’’ shall have the same meaning as in part 32 of title

16 12 of the Code of Federal Regulations, or any successor to

17 that part.

18 (d) LOANS TOTALING LESS THAN $2,000,000.—In

19 connection with a loan in which the covered amount of the

20 loan plus the covered amount of all previous loans enrolled

21 by a participating financial institution does not exceed

22 $2,000,000, the amount of reimbursement by the Secretary

23 to the participating State shall not exceed the lesser of—
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1 (1) 75 percent of the sum of the premium charges

2 paid to the reserve fund by the borrower and the par3 ticipating financial institution; or

4 (2) 5.25 percent of the covered amount of the

5 loan.

6 (e) LOANS TOTALING MORE THAN $2,000,000.—In

7 connection with a loan in which the sum of the covered

8 amounts of all previous loans enrolled by the participating

9 financial institution in the Program equals or exceeds

10 $2,000,000, the amount of reimbursement to be provided by

11 the Secretary to the participating State shall not exceed the

12 lesser of—

13 (1) 50 percent of the sum of the premium charges

14 paid by the borrower and the participating financial

15 institution; or

16 (2) 3.5 percent of the covered amount of the loan.

17 (f) OTHER AMOUNTS.—In connection with the enroll18 ment of a loan that will cause the aggregate covered amount

19 of all enrolled loans to exceed $2,000,000, the amount of

20 reimbursement by the Secretary to the participating State

21 shall be determined—

22 (1) by applying subsection (d) to the portion of

23 the loan, which when added to the aggregate covered

24 amount of all previously enrolled loans equals

25 $2,000,000; and
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1 (2) by applying subsection (e) to the balance of

2 the loan.

3 SEC. 258. REIMBURSEMENT TO THE SECRETARY.

4 (a) IN GENERAL.—If a participating State withdraws

5 funds from a reserve fund pursuant to terms of the partici6 pation agreement permitted by subsection (d) or (r) of sec7 tion 255, such participating State shall, not later than 15

8 calendar days after such withdrawal, submit to the Sec9 retary an amount computed by multiplying the amount

10 withdrawn by the appropriate factor, as determined under

11 subsection (b).

12 (b) FACTOR.—The appropriate factor shall be obtained

13 by dividing the total amount of contributions that have been

14 made by the participating State to all reserve funds which

15 were subject to reimbursement—

16 (1) by 2; and

17 (2) by the total amount of contributions made by

18 the participating State to all reserve funds, including

19 if applicable, contributions that have been made by

20 the State prior to becoming a participating State if

21 the State continued its own capital access program in

22 accordance with section 253(b).

23 (c) USE OF REIMBURSEMENTS.—The Secretary may

24 use funds reimbursed pursuant to this section to make reim25 bursements under section 257.
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1 SEC. 259. REGULATIONS.

2 The Secretary shall promulgate appropriate regula3 tions to implement this subtitle.

4 SEC. 260. AUTHORIZATION OF APPROPRIATIONS.

5 (a) AMOUNT.—There are authorized to be appro6 priated to the Secretary $50,000,000 to carry out this sub7 title.

8 (b) BUDGETARY TREATMENT.—The amount author9 ized to be appropriated under subsection (a) shall be subject

10 to discretionary spending caps, as provided in section 601

11 of the Congressional Budget Act of 1974, and therefore shall

12 reduce by an equal amount funds made available for other

13 discretionary spending programs.

14 TITLE III—PAPERWORK REDUC15 TION AND REGULATORY IM16 PROVEMENT

17 SEC. 301. INCORPORATED DEFINITIONS.

18 Unless otherwise specifically provided in this title, for

19 purposes of this title—

20 (1) the terms ‘‘appropriate Federal banking

21 agency’’, ‘‘Federal banking agencies’’, and ‘‘insured

22 depository institution’’ have the same meanings as in

23 section 3 of the Federal Deposit Insurance Act; and

24 (2) the term ‘‘insured credit union’’ has the same

25 meaning as in section 101 of the Federal Credit

26 Union Act.
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1 SEC. 302. ADMINISTRATIVE CONSIDERATION OF BURDEN

2 WITH NEW REGULATIONS.

3 In determining the effective date and administrative

4 compliance requirements for new regulations that impose

5 additional reporting, disclosure, or other requirements on

6 insured depository institutions, each Federal banking agen7 cy shall consider, consistent with the principles of safety

8 and soundness and the public interest—

9 (1) any administrative burdens that such regula10 tions would place on depository institutions, includ11 ing small depository institutions, and customers of

12 depository institutions; and

13 (2) the benefits of such regulations.

14 SEC. 303. STREAMLINING OF REGULATORY REQUIREMENTS.

15 (a) REVIEW OF REGULATIONS; REGULATORY UNI16 FORMITY.—During the 2-year period beginning on the date

17 of enactment of this Act, each Federal banking agency shall,

18 consistent with principles of safety and soundness and the

19 public interest—

20 (1) conduct a review of the regulations and writ21 ten policies of that agency—

22 (A) to streamline those regulations and

23 policies in order to improve efficiency, reduce

24 unnecessary costs, and eliminate unwarranted

25 constraints on credit availability; and
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1 (B) to remove inconsistencies and outmoded

2 and duplicative requirements; and

3 (2) work jointly with the other Federal banking

4 agencies to make uniform all regulations and guide5 lines implementing common statutory or supervisory

6 policies.

7 (b) REPORT TO CONGRESS.—The Federal banking

8 agencies shall submit a joint report to the Congress annu9 ally for 2 years following the date of enactment of this Act

10 detailing the progress of the agencies in carrying out the

11 requirements of subsection (a).

12 SEC. 304. ELIMINATION OF DUPLICATIVE FILINGS.

13 The Federal banking agencies shall work jointly—

14 (1) to eliminate, to the extent practicable, dupli15 cative or otherwise unnecessary requests for informa16 tion in connection with applications or notices to the

17 agencies; and

18 (2) to harmonize, to the extent practicable, any

19 inconsistent publication and public notice require20 ments.

21 SEC. 305. COORDINATED AND UNIFIED EXAMINATIONS.

22 Section 10(d) of the Federal Deposit Insurance Act (12

23 U.S.C. 1820(d)) is amended by adding at the end the follow24 ing new paragraph:
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1 ‘‘(6) COORDINATED EXAMINATIONS.—To mini2 mize the disruptive effects of examinations on the op3 erations of insured depository institutions—

4 ‘‘(A) each appropriate Federal banking

5 agency shall, to the extent practicable and con6 sistent with safety and soundness principles and

7 the public interest—

8 ‘‘(i) coordinate examinations to be con9 ducted by that agency at an insured deposi10 tory institution and its affiliates;

11 ‘‘(ii) coordinate with the other appro12 priate Federal banking agencies in the con13 duct of such examinations; and

14 ‘‘(iii) work to coordinate the conduct of

15 all examinations made pursuant to this

16 subsection with the appropriate State bank

17 supervisor; and

18 ‘‘(B) not later than 2 years after the date

19 of enactment of the Community Development,

20 Credit Enhancement, and Regulatory Improve21 ment Act of 1993, the Federal banking agencies

22 shall jointly establish and implement a system

23 for determining which one of the Federal bank24 ing agencies shall conduct a unified examination

25 of each insured depository institution and its af-
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1 filiates, as required by this subsection, on behalf

2 of all Federal banking agencies.’’.

3 SEC. 306. EIGHTEEN-MONTH EXAMINATION RULE FOR CER4 TAIN SMALL INSTITUTIONS.

5 Section 10(d)(4) of the Federal Deposit Insurance Act

6 (12 U.S.C. 1820(d)(4)) is amended—

7 (1) in subparagraph (A), by striking

8 ‘‘$100,000,000’’ and inserting ‘‘$250,000,000’’;

9 (2) in subparagraph (C), by striking ‘‘and its

10 composite condition was found to be outstanding;’’

11 and inserting ‘‘and its composite condition—

12 ‘‘(i) was found to be outstanding; or

13 ‘‘(ii) in the case of an insured deposi14 tory institution that has total assets of less

15 than $175,000,000, was found to be out16 standing or good;’’.

17 (3) by redesignating subparagraph (D) as sub18 paragraph (E); and

19 (4) by inserting after subparagraph (C) the fol20 lowing new subparagraph:

21 ‘‘(D) the insured institution is not currently

22 subject to a formal enforcement proceeding or

23 order by the Corporation or the appropriate Fed24 eral banking agency; and’’.
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1 SEC. 307. CALL REPORT SIMPLIFICATION.

2 (a) MODERNIZATION OF CALL REPORT FILING AND

3 DISCLOSURE SYSTEM.—In order to reduce the administra4 tive requirements pertaining to bank reports of condition,

5 savings association financial reports, and bank holding

6 company consolidated and parent-only financial state7 ments, and to improve the timeliness of such reports and

8 statements, the Federal banking agencies shall—

9 (1) work jointly to develop a system under

10 which—

11 (A) insured depository institutions and

12 their affiliates may file such reports and state13 ments electronically; and

14 (B) the Federal banking agencies may make

15 such reports and statements available to the pub16 lic electronically; and

17 (2) not later than 1 year after the date of enact18 ment of this Act, report to the Congress and make rec19 ommendations for legislation that would enhance effi20 ciency for filers and users of such reports and state21 ments.

22 (b) UNIFORM REPORTS AND SIMPLIFICATION OF IN23 STRUCTIONS.—The Federal banking agencies shall, consist24 ent with the principles of safety and soundness, work joint25 ly—
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1 (1) to adopt a single form for the filing of core

2 information required to be submitted under Federal

3 law to all such agencies in the reports and statements

4 referred to in subsection (a); and

5 (2) to simplify instructions accompanying such

6 reports and statements and to provide an index to the

7 instructions that is adequate to meet the needs of both

8 filers and users.

9 (c) REVIEW OF CALL REPORT SCHEDULE.—Each Fed10 eral banking agency shall—

11 (1) review the information required by schedules

12 supplementing the core information referred to in

13 subsection (b); and

14 (2) eliminate requirements that are not war15 ranted for reasons of safety and soundness or other

16 public purposes.

17 SEC. 308. REPEAL OF PUBLICATION REQUIREMENTS.

18 (a) REVISED STATUTES.—Section 5211 of the Revised

19 Statutes (12 U.S.C. 161) is amended—

20 (1) in the fifth sentence of subsection (a), by

21 striking ‘‘; and the statement of resources’’ and all

22 that follows through ‘‘as may be required by the

23 Comptroller’’; and

24 (2) in subsection (c), by striking the fourth sen25 tence.
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1 (b) FDIA.—Section 7(a)(1) of the Federal Deposit In2 surance Act (12 U.S.C. 1817(a)(1)) is amended by striking

3 the fourth sentence.

4 (c) FEDERAL RESERVE ACT.—Section 9 of the Federal

5 Reserve Act (12 U.S.C. 324) is amended in the last sentence

6 of the sixth undesignated paragraph, by striking ‘‘and shall

7 be published’’ and all that follows through the end of the

8 sentence and inserting a period.

9 SEC. 309. REGULATORY APPEALS PROCESS.

10 (a) IN GENERAL.—Not later than 180 days after the

11 date of enactment of this Act, each appropriate Federal

12 banking agency and the National Credit Union Adminis13 tration Board shall establish an independent intra-agency

14 appellate process. The process shall be available to review

15 material supervisory determinations made at insured de16 pository institutions or at insured credit unions that the

17 agency supervises.

18 (b) REVIEW PROCESS.—In establishing the independ19 ent appellate process under subsection (a), each agency shall

20 ensure—

21 (1) that any appeal of a material supervisory

22 determination by an insured depository institution or

23 credit union is heard and decided expeditiously; and
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1 (2) that appropriate safeguards exist for protect2 ing the appellant from retaliation by agency examin3 ers.

4 (c) COMMENT PERIOD.—Not later than 90 days after

5 the date of enactment of this Act, each appropriate Federal

6 banking agency and the National Credit Union Adminis7 tration shall provide public notice and opportunity for com8 ment on proposed guidelines for the establishment of an ap9 pellate process under this section.

10 (d) DEFINITIONS.—For purposes of this section—

11 (1) the term ‘‘material supervisory determina12 tions’’ includes determinations relating to—

13 (A) examination ratings;

14 (B) the adequacy of loan loss reserve provi15 sions; and

16 (C) loan classifications on loans that are

17 significant to the institution; and

18 (2) the term ‘‘independent appellate process’’

19 means a review by an agency official who does not di20 rectly or indirectly report to the agency official who

21 made the material supervisory determination under

22 review.

23 (e) EFFECT ON OTHER AUTHORITY.—Nothing in this

24 section shall affect the authority of an appropriate Federal

25 banking agency or the National Credit Union Association
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1 Board to take enforcement or supervisory action against an

2 institution.

3 SEC. 310. ELECTRONIC FILING OF CURRENCY TRANS4 ACTION REPORTS.

5 Section 123 of the Bank Secrecy Act (12 U.S.C. 1953)

6 is amended by adding at the end the following new sub7 section:

8 ‘‘(c) ACCEPTANCE OF AUTOMATED RECORDS.—The

9 Secretary shall permit an uninsured bank or financial in10 stitution to retain or maintain records referred to in sub11 section (a) in electronic or automated form, subject to terms

12 and conditions established by the Secretary.’’.

13 SEC. 311. BANK SECRECY ACT PUBLICATION REQUIRE14 MENTS.

15 Chapter 53 of title 31, United States Code, is amended

16 by adding at the end the following new section:

17 ‘‘SEC. 5329. STAFF COMMENTARIES.

18 ‘‘The Secretary shall—

19 ‘‘(1) publish all written rulings interpreting this

20 chapter; and

21 ‘‘(2) annually issue a staff commentary on the

22 regulations issued under this chapter.’’.
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1 SEC. 312. EXEMPTION OF BUSINESS LOANS FROM REAL ES2 TATE SETTLEMENT PROCEDURES ACT RE3 QUIREMENTS.

4 The Real Estate Settlement Procedures Act of 1974 (12

5 U.S.C. 2601 et seq.) is amended by inserting after section

6 6 the following new section:

7 ‘‘SEC. 7. EXEMPTED TRANSACTIONS.

8 ‘‘This Act does not apply to credit transactions involv9 ing extensions of credit—

10 ‘‘(1) primarily for business, commercial, or agri11 cultural purposes; or

12 ‘‘(2) to government or governmental agencies or

13 instrumentalities.’’.

14 SEC. 313. FLEXIBILITY IN CHOOSING BOARDS OF DIREC15 TORS.

16 Section 5146 of the Revised Statutes (12 U.S.C. 72)

17 is amended in the first sentence, by striking ‘‘two thirds’’

18 and inserting ‘‘a majority’’.

19 SEC. 314. HOLDING COMPANY AUDIT REQUIREMENTS.

20 Section 36(i) of the Federal Deposit Insurance Act (12

21 U.S.C. 1831m(i)) is amended by striking paragraph (2)

22 and inserting the following:

23 ‘‘(2) the institution—

24 ‘‘(A) has total assets, as of the beginning of

25 such fiscal year, of less than $5,000,000,000;

26 ‘‘(B) has—
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1 ‘‘(i) total assets, as of the beginning of

2 such fiscal year, of more than

3 $5,000,000,000 and less than

4 $9,000,000,000; and

5 ‘‘(ii) a CAMEL composite rating of 1

6 or 2 under the Uniform Financial Institu7 tions Rating System (or an equivalent rat8 ing by any such agency under a comparable

9 rating system) as of the most recent exam10 ination of such institution by the Corpora11 tion or the appropriate Federal banking

12 agency; or

13 ‘‘(C)(i) has total assets, as of the beginning

14 of such fiscal year, of more than $9,000,000,000;

15 and

16 ‘‘(ii) has a CAMEL composite rating of 1

17 or 2 under the Uniform Financial Institutions

18 Rating System (or an equivalent rating by any

19 such agency under a comparable rating system)

20 as of the most recent examination of such insti21 tution by the Corporation or the appropriate

22 Federal banking agency.

23 Notwithstanding paragraph (2)(C), in the case of an in24 sured depository institution that the Corporation deter25 mines to be a large institution, the audit committee of the
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1 holding company of such an institution shall not include

2 any large customers of the institution.

3 ‘‘(3) The appropriate Federal banking agency

4 may require an institution with total assets in excess

5 of $9,000,000,000 to comply with this section, not6 withstanding the exception provided by this sub7 section, if it determines that such exemption will cre8 ate a significant risk to the affected deposit insurance

9 fund if applied to that institution.’’.

10 SEC. 315. STATE REGULATION OF REAL ESTATE APPRAIS11 ALS.

12 Section 1122 of the Financial Institutions Reform, Re13 covery, and Enforcement Act of 1989 (12 U.S.C. 3351) is

14 amended—

15 (1) by redesignating subsections (b) through (e)

16 as subsections (c) through (f), respectively;

17 (2) by inserting after subsection (a) the following

18 new subsection:

19 ‘‘(b) RECIPROCITY.—The Appraisal Subcommittee

20 shall encourage the States to develop reciprocity agreements

21 that readily authorize appraisers who are licensed or cer22 tified in one State (and who are in good standing with their

23 State appraiser certifying or licensing agency) to perform

24 appraisals in other States.’’; and

25 (3) in subsection (a)—
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1 (A) by redesignating paragraphs (1)

2 through (3) as subparagraphs (A) through (C);

3 (B) by striking ‘‘A State’’ and inserting the

4 following:

5 ‘‘(1) IN GENERAL.—A State’’; and

6 (C) by adding at the end the following new

7 paragraph:

8 ‘‘(2) FEES FOR TEMPORARY PRACTICE.—A State

9 appraiser certifying or licensing agency shall not im10 pose excessive fees or burdensome requirements, as de11 termined by the Appraisal Subcommittee, for tem12 porary practice under this subsection.’’.

13 SEC. 316. ACCELERATION OF EFFECTIVE DATE FOR

14 INTERAFFILIATE TRANSACTIONS.

15 (a) HOME OWNERS’ LOAN ACT AMENDMENT.—Section

16 11(a)(2) of the Home Owners’ Loan Act (12 U.S.C.

17 1468(a)(2)) is amended by adding at the end the following

18 new subparagraph:

19 ‘‘(C) TRANSITION RULE FOR WELL CAPITAL20 IZED SAVINGS ASSOCIATIONS.—

21 ‘‘(i) IN GENERAL.—A savings associa22 tion that is well capitalized (as defined in

23 section 38 of the Federal Deposit Insurance

24 Act), as determined without including good25 will in calculating core capital, shall be
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1 treated as a bank for purposes of section

2 23A(d)(1) and section 23B of the Federal

3 Reserve Act.

4 ‘‘(ii) LIABILITY OF COMMONLY CON5 TROLLED DEPOSITORY INSTITUTIONS.—Any

6 savings association that engages under

7 clause (i) in a transaction that would not

8 otherwise be permissible under this sub9 section, and any affiliated insured bank

10 that is commonly controlled (as defined in

11 section 5(e)(9) of the Federal Deposit Insur12 ance Act), shall be subject to subsection (e)

13 of section 5 of the Federal Deposit Insur14 ance Act as if paragraph (6) of that sub15 section did not apply.’’.

16 (b) REPEAL PROVISION.—Effective on January 1,

17 1995, subparagraph (C) of section 11(a)(2) of the Home

18 Owners’ Loan Act (12 U.S.C. 1468(a)(2)) (as added by sub19 section (a) of this section) is repealed.

20 SEC. 317. COLLATERALIZATION OF PUBLIC DEPOSITS.

21 Section 13(e) of the Federal Deposit Insurance Act (12

22 U.S.C. 1823(e)) is amended—

23 (1) by redesignating paragraphs (1) through (4)

24 as subparagraphs (A) through (D), respectively;
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1 (2) by striking ‘‘No agreement’’ and inserting the

2 following:

3 ‘‘(1) IN GENERAL.—No agreement’’; and

4 (3) by adding at the end the following new para5 graph:

6 ‘‘(2) PUBLIC DEPOSITS.—An agreement to pro7 vide for the lawful collateralization of deposits of a

8 Federal, State, or local governmental entity or of any

9 depositor referred to in section 11(a)(2) shall not be

10 deemed to be invalid pursuant to paragraph (1)(B)

11 solely because such agreement was not executed con12 temporaneously with the acquisition of the collateral

13 or with any changes in the collateral made in accord14 ance with such agreement.’’.

15 SEC. 318. ELIMINATION OF STOCK VALUATION PROVISION.

16 (a) IN GENERAL.—Section 39(b) of the Federal De17 posit Insurance Act (12 U.S.C. 1831p–1(b)), as added by

18 section 132(a) of the Federal Deposit Insurance Corpora19 tion Improvements Act of 1991) is amended to read as fol20 lows:

21 ‘‘(b) ASSET QUALITY, EARNINGS, AND STOCK VALU22 ATION STANDARDS.—Each appropriate Federal banking

23 agency shall, for all insured depository institutions and de24 pository institution holding companies, prescribe standards
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1 relating to asset quality, earnings, and stock valuation that

2 the agency determines to be appropriate.’’.

3 (b) ESTABLISHING STANDARDS IN GUIDELINES.—Sec4 tion 39(d) of the Federal Deposit Insurance Act (12 U.S.C.

5 1831p–1(d)) is amended—

6 (1) in the subsection heading, by striking ‘‘BY

7 REGULATION’’; and

8 (2) in paragraph (1)—

9 (A) in the first sentence, by inserting ‘‘or

10 guideline’’ before the period; and

11 (B) in the second sentence, by inserting ‘‘or

12 guidelines’’ after ‘‘Such regulations’’.

13 (c) EFFECTIVE DATE.—The amendments made by sub14 sections (a) and (b) shall be construed to have the same ef15 fective date as section 39 of the Federal Deposit Insurance

16 Act, as provided in section 132(c) of the Federal Deposit

17 Insurance Corporation Improvements Act of 1991.

18 SEC. 319. EXPEDITED PROCEDURES FOR FORMING A BANK

19 HOLDING COMPANY.

20 Section 3(a) of the Bank Holding Company Act of

21 1956 (12 U.S.C. 1842(a)) is amended—

22 (1) in the second sentence, by striking ‘‘or (B)’’

23 and inserting ‘‘(B)’’; and

24 (2) in the second sentence, by inserting before the

25 period the following: ‘‘; or (C) with 30 days prior no-
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1 tification to the Board, the acquisition by a company

2 of control of a bank in a reorganization in which a

3 person or group of persons exchanges its shares of the

4 bank for shares of a newly formed bank holding com5 pany and receives, after the reorganization, substan6 tially the same proportional share interest in the

7 holding company as it held in the bank (except for

8 changes in shareholders’ interests resulting from the

9 exercise of dissenting shareholders’ rights under State

10 or Federal law) if, immediately following the acquisi11 tion, (i) the bank holding company meets the capital

12 and other financial standards prescribed by the

13 Board by regulation for such a bank holding com14 pany; (ii) the bank is adequately capitalized (as de15 fined in section 38 of the Federal Deposit Insurance

16 Act); and (iii) the holding company does not engage

17 in any activities other than those of banking or man18 aging and controlling banks’’.

19 SEC. 320. EXEMPTION OF CERTAIN HOLDING COMPANY

20 FORMATIONS FROM REGISTRATION UNDER

21 THE SECURITIES ACT OF 1933.

22 Section 4 of the Securities Act of 1933 (15 U.S.C. 77d)

23 is amended by adding at the end the following new para24 graph:
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1 ‘‘(7) transactions involving offers or sales of eq2 uity securities, in connection with the acquisition of

3 a bank by a company under section 3(a) of the Bank

4 Holding Company Act of 1956, if—

5 ‘‘(A) the acquisition occurs solely as part of

6 a reorganization in which a person or group of

7 persons exchanges its shares of a bank for shares

8 of a newly formed bank holding company with

9 no significant assets other than securities of the

10 bank and the existing subsidiaries of the bank;

11 ‘‘(B) the shareholders receive, after that re12 organization, substantially the same propor13 tional share interests in the bank holding com14 pany as they held in the bank, except for changes

15 in shareholders’ interests resulting from lawful

16 elimination of fractional interests and the exer17 cise of dissenting shareholders’ rights under State

18 or Federal law;

19 ‘‘(C) the rights and interests of security

20 holders in the bank holding company are sub21 stantially the same as those in the bank prior to

22 the transaction, other than as may be required

23 by law; and
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1 ‘‘(D) the bank holding company has sub2 stantially the same assets and liabilities as the

3 bank had prior to the transaction.’’.

4 SEC. 321. REDUCTION OF POST-APPROVAL WAITING PERIOD

5 FOR BANK HOLDING COMPANY ACQUISI6 TIONS.

7 Section 11(b)(1) of the Bank Holding Company Act

8 of 1956 (12 U.S.C. 1849(b)(1)) is amended by inserting be9 fore the period at the end of the fourth sentence the follow10 ing: ‘‘or, if the Board has not received any adverse comment

11 from the Attorney General of the United States relating to

12 competitive factors, such shorter period of time as may be

13 prescribed by the Board with the concurrence of the Attor14 ney General, but in no event less than 15 calendar days

15 after the date of approval’’.

16 SEC. 322. REDUCTION OF POST-APPROVAL WAITING PERIOD

17 FOR BANK MERGERS.

18 Section 18(c)(6) of the Federal Deposit Insurance Act

19 (12 U.S.C. 1828(c)(6)) is amended by inserting before the

20 period at the end of the last sentence the following: ‘‘or, if

21 the agency has not received any adverse comment from the

22 Attorney General of the United States relating to competi23 tive factors, such shorter period of time as may be pre24 scribed by the agency with the concurrence of the Attorney
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1 General, but in no event less than 15 calendar days after

2 the date of approval’’.

3 SEC. 323. BANKERS’ BANKS.

4 (a) OWNERSHIP BY BANKERS’ BANKS.—

5 (1) Paragraph Seventh of section 5136 of the Re6 vised Statutes (12 U.S.C. 24) is amended in the elev7 enth sentence—

8 (A) by inserting ‘‘or depository institution

9 holding companies (as defined in section 3 of the

10 Federal Deposit Insurance Act)’’ after ‘‘(except to

11 the extent directors’ qualifying shares are re12 quired by law) by depository institutions’’; and

13 (B) by striking ‘‘services for other deposi14 tory institutions and their officers, directors and

15 employees’’ and inserting the following: ‘‘services

16 to or for other depository institutions and the of17 ficers, directors, and employees of such institu18 tions, and in providing correspondent banking

19 services at the request of other depository institu20 tions (also referred to as a ‘banker’s bank’)’’.

21 (2) Section 5169(b)(1) of the Revised Statutes

22 (12 U.S.C. 27(b)(1)) is amended—

23 (A) by inserting ‘‘or depository institution

24 holding companies’’ after ‘‘(except to the extent
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1 directors’ qualifying shares are required by law)

2 by other depository institutions’’; and

3 (B) by striking ‘‘services for other deposi4 tory institutions and their officers, directors and

5 employees’’ and inserting the following: ‘‘services

6 to or for other depository institutions and the of7 ficers, directors, and employees of such institu8 tions, and in providing correspondent banking

9 services at the request of other depository institu10 tions (also referred to as a ‘banker’s bank’)’’.

11 (b) OWNERSHIP BY SAVINGS ASSOCIATIONS.—Section

12 5(c)(4) of the Home Owners’ Loan Act (12 U.S.C.

13 1464(c)(4)) is amended by adding at the end the following

14 new subparagraph:

15 ‘‘(E) BANKERS’ BANKS.—A Federal savings

16 association may purchase for its own account

17 shares of stock of a bankers’ bank, described in

18 Paragraph Seventh of section 5136 of the Revised

19 Statutes or in section 5169(b) of the Revised

20 Statutes, on the same terms and conditions as a

21 national bank may purchase such shares.’’.

22 (c) TECHNICAL AND CONFORMING AMENDMENTS.—

23 (1) BANK HOLDING COMPANY ACT.—Section 3(e)

24 of the Bank Holding Company Act of 1956 (12
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1 U.S.C. 1842(e)) is amended by striking the second

2 sentence.

3 (2) MANAGEMENT INTERLOCKS ACT.—Section

4 202(3)(D) of the Depository Institution Management

5 Interlocks Act (12 U.S.C. 3201(3)(D)) is amended by

6 striking ‘‘the voting securities’’ and all that follows

7 through the end of the subparagraph and inserting

8 ‘‘and is a bankers’ bank, described in Paragraph Sev9 enth of section 5136 of the Revised Statutes; or’’.

10 (d) LENDING LIMIT FOR LOANS SECURED BY SECURI11 TIES.—Section 11(m) of the Federal Reserve Act (12 U.S.C.

12 248(m)) is amended by striking ‘‘10 percentum’’ each place

13 such term appears and inserting ‘‘15 percent’’.

14 SEC. 324. BANK SERVICE CORPORATION ACT AMENDMENT.

15 Section 5 of the Bank Service Corporation Act (12

16 U.S.C. 1865) is amended—

17 (1) in subsection (a), by striking ‘‘the prior ap18 proval of’’ and inserting ‘‘prior notice, as determined

19 by’’; and

20 (2) in subsection (c), by inserting ‘‘or whether to

21 approve or disapprove any notice’’ after ‘‘approval’’.

22 SEC. 325. MERGER TRANSACTION REPORTS.

23 Section 18(c) of the Federal Deposit Insurance Act (12

24 U.S.C. 1828(c)) is amended—

25 (1) in paragraph (4)—
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1 (A) in the first sentence—

2 (i) by striking ‘‘General and the other

3 two’’ and inserting ‘‘General, who shall

4 promptly notify the other’’; and

5 (ii) by inserting before the period ‘‘of

6 any such proposed transaction that raises a

7 significant competitiveness issue’’; and

8 (B) in the second sentence, by striking ‘‘and

9 the other two banking agencies’’; and

10 (2) in paragraph (6), by striking ‘‘and the other

11 two banking agencies’’.

12 SEC. 326. CREDIT CARD ACCOUNTS RECEIVABLE SALES.

13 Section 11(e) of the Federal Deposit Insurance Act (12

14 U.S.C. 1821(e)) is amended by adding at the end the follow15 ing new paragraphs:

16 ‘‘(14) SELLING CREDIT CARD ACCOUNTS RECEIV17 ABLE.—

18 ‘‘(A) NOTIFICATION REQUIRED.—An

19 undercapitalized insured depository institution

20 (as defined in section 38) shall notify the Cor21 poration in writing before entering into an

22 agreement to sell credit card accounts receivable.

23 ‘‘(B) WAIVER BY CORPORATION.—The Cor24 poration may at any time, in its sole discretion

25 and upon such terms as it may prescribe, waive
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1 its right to repudiate an agreement to sell credit

2 card accounts receivable if the Corporation—

3 ‘‘(i) determines that the waiver is in

4 the best interests of the deposit insurance

5 fund; and

6 ‘‘(ii) provides a written waiver to the

7 selling institution.

8 ‘‘(C) EFFECT OF WAIVER ON SUCCES9 SORS.—

10 ‘‘(i) IN GENERAL.—If, under subpara11 graph (B), the Corporation has waived its

12 right to repudiate an agreement to sell cred13 it card accounts receivable—

14 ‘‘(I) any provision of the agree15 ment that restricts solicitation of a

16 credit card customer of the selling in17 stitution, or the use of a credit card

18 customer list of the institution, shall

19 bind any receiver or conservator of the

20 institution; and

21 ‘‘(II) the Corporation shall re22 quire any acquirer of the selling insti23 tution, or of substantially all of the

24 selling institution’s assets or liabilities,

25 to agree to be bound by a provision de-
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1 scribed in subclause (I) as if the

2 acquirer were the selling institution.

3 ‘‘(ii) EXCEPTION.—Clause (i)(II) does

4 not—

5 ‘‘(I) restrict the acquirer’s author6 ity to offer any product or service to

7 any person identified without using a

8 list of the selling institution’s cus9 tomers in violation of the agreement;

10 ‘‘(II) require the acquirer to re11 strict any preexisting relationship be12 tween the acquirer and a customer; or

13 ‘‘(III) apply to any transaction

14 in which the acquirer acquires only in15 sured deposits.

16 ‘‘(D) WAIVER NOT ACTIONABLE.—The Cor17 poration shall not, in any capacity, be liable to

18 any person for damages resulting from the waiv19 er of or failure to waive the Corporation’s right

20 under this section to repudiate any contract or

21 lease, including an agreement to sell credit card

22 accounts receivable. No court shall issue any

23 order affecting any such waiver or failure to

24 waive.
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1 ‘‘(E) OTHER AUTHORITY NOT AFFECTED.—

2 This paragraph does not limit any other author3 ity of the Corporation to waive the Corporation’s

4 right to repudiate an agreement or lease under

5 this section.

6 ‘‘(15) CERTAIN CREDIT CARD CUSTOMER LISTS

7 PROTECTED.—

8 ‘‘(A) IN GENERAL.—If any insured deposi9 tory institution sells credit card accounts receiv10 able under an agreement negotiated at arm’s

11 length that provides for the sale of the institu12 tion’s credit card customer list, the Corporation

13 shall prohibit any party to a transaction with

14 respect to the institution under this section or

15 section 13 from using the list except as permitted

16 under the agreement.

17 ‘‘(B) FRAUDULENT TRANSACTIONS EX18 CLUDED.—Subparagraph (A) does not limit the

19 Corporation’s authority to repudiate any agree20 ment entered into with the intent to hinder,

21 delay, or defraud the institution, the institution’s

22 creditors, or the Corporation.’’.
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1 SEC. 327. LIMITING POTENTIAL LIABILITY ON FOREIGN AC2 COUNTS.

3 (a) AMENDMENT TO THE FEDERAL RESERVE ACT.—

4 The Federal Reserve Act (12 U.S.C. 221 et seq.) is amended

5 by inserting after section 25B the following new section:

6 ‘‘SEC. 25C. POTENTIAL LIABILITY ON FOREIGN ACCOUNTS.

7 ‘‘A member bank shall not be required to repay any

8 deposit made at a foreign branch of the bank if the branch

9 cannot repay the deposit due to—

10 ‘‘(1) an act of war, insurrection or civil strife;

11 or

12 ‘‘(2) an action by a foreign government or in13 strumentality (whether de jure or de facto) in the

14 country in which the branch is located,

15 unless the member bank has expressly agreed in writing to

16 repay the deposit under those circumstances. The Board and

17 the Comptroller of the Currency may jointly prescribe such

18 regulations as they deem necessary to implement this sec19 tion.’’.

20 (b) CONFORMING AMENDMENTS TO THE FEDERAL DE21 POSIT INSURANCE ACT.—

22 (1) IN GENERAL.—Section 18 of the Federal De23 posit Insurance Act (12 U.S.C. 1828) is amended by

24 adding at the end the following new subsection:

25 ‘‘(q) SOVEREIGN RISK.—Section 25C of the Federal

26 Reserve Act shall apply to every nonmember insured bank
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1 in the same manner and to the same extent as if the

2 nonmember insured bank were a member bank.’’.

3 (2) CONFORMING AMENDMENT.—Subparagraph

4 (A) of section 3(l)(5) of the Federal Deposit Insurance

5 Act (12 U.S.C. 1813(l)(5)) is amended to read as fol6 lows:

7 ‘‘(A) any obligation of a depository institu8 tion which is carried on the books and records of

9 an office of such bank or savings association lo10 cated outside of any State, unless—

11 ‘‘(i) such obligation would be a deposit

12 if it were carried on the books and records

13 of the depository institution, and would be

14 payable at, an office located in any State;

15 and

16 ‘‘(ii) the contract evidencing the obliga17 tion provides by express terms, and not by

18 implication, for payment at an office of the

19 depository institution located in any State;

20 and’’.

21 (c) EXISTING CLAIMS NOT AFFECTED—Section 25C of

22 the Federal Reserve Act (as added by subsection (a)) shall

23 not be applied retroactively and shall not be construed to

24 affect or apply to any claim or cause of action addressed
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1 by that section arising from events or circumstances that

2 occurred before the date of enactment of this Act.

3 SEC. 328. AMENDMENTS TO OUTDATED DIVIDEND PROVI4 SIONS.

5 (a) WITHDRAWAL OF CAPITAL.—Section 5204 of the

6 Revised Statutes (12 U.S.C. 56) is amended—

7 (1) in the second sentence, by striking ‘‘net prof8 its then on hand, deducting therefrom its losses and

9 bad debts’’ and inserting ‘‘undivided profits, subject

10 to other applicable provisions of law’’; and

11 (2) by striking the third sentence.

12 (b) DECLARATION OF DIVIDENDS.—Section 5199 of the

13 Revised Statutes (12 U.S.C. 60) is amended—

14 (1) in the first sentence, by striking ‘‘net profits

15 of the association’’ and inserting ‘‘undivided profits

16 of the association, subject to the limitations in sub17 section (b),’’;

18 (2) by striking ‘‘net profits’’ each subsequent

19 place such term appears and inserting ‘‘net income’’;

20 and

21 (3) by striking subsection (c).

22 SEC. 329. ELIMINATION OF DUPLICATIVE DISCLOSURES

23 FOR HOME EQUITY LOANS.

24 Section 4(a) of the Real Estate Settlement Procedures

25 Act (12 U.S.C. 2603(a)) is amended by adding at the end
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1 the following: ‘‘In the case of a federally related mortgage

2 loan secured by a subordinate lien on residential property,

3 disclosures made under section 127A(a) of the Truth in

4 Lending Act may be used in lieu of the disclosures required

5 under this section if—

6 ‘‘(1) the disclosures made pursuant to such sec7 tion 127A(a) contain all of the information that is re8 quired under this section; and

9 ‘‘(2) the information is disclosed in a manner

10 that is no less conspicuous than is required under this

11 section.’’.

12 SEC. 330. REPORT ON CAPITAL STANDARDS AND THEIR IM13 PACT ON THE ECONOMY.

14 (a) IN GENERAL.—Not later than 1 year after the date

15 of enactment of this Act, the Secretary of the Treasury, after

16 consultation with the Federal banking agencies, shall report

17 to the Committee on Banking, Housing, and Urban Affairs

18 of the Senate and the Committee on Banking, Finance and

19 Urban Affairs of the House of Representatives on the effect

20 of the implementation of risk-based capital standards on—

21 (1) the safety and soundness of insured deposi22 tory institutions; and

23 (2) the availability of credit, particularly to con24 sumers and small business concerns.
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1 (b) RECOMMENDATIONS.—The report required by sub2 section (a) shall contain any recommendations that the Sec3 retary of the Treasury considers relevant.

4 SEC. 331. STUDIES ON THE IMPACT OF THE PAYMENT OF IN5 TEREST ON RESERVES.

6 (a) FEDERAL RESERVE STUDY.—Not later than 180

7 days after the date of enactment of this Act, the Board of

8 Governors of the Federal Reserve System, in consultation

9 with the Federal Deposit Insurance Corporation, shall con10 duct a study and report to Congress on—

11 (1) the necessity, for monetary policy purposes,

12 of continuing to require insured depository institu13 tions to maintain sterile reserves;

14 (2) the appropriateness of paying a market rate

15 of interest to insured depository institutions on sterile

16 reserves or, in the alternative, providing for payment

17 of such interest into the appropriate deposit insur18 ance fund;

19 (3) the monetary impact that the failure to pay

20 interest on sterile reserves has had on insured deposi21 tory institutions, including an estimate of the total

22 dollar amount of interest and the potential income

23 lost by insured depository institutions; and

24 (4) the impact that the failure to pay interest on

25 sterile reserves has had on the ability of the banking
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1 industry to compete with nonbanking providers of fi2 nancial services and with foreign banks.

3 (b) BUDGETARY IMPACT STUDY.—Not later than 180

4 days after the date of enactment of this Act, the Director

5 of the Office of Management and Budget and the Director

6 of the Congressional Budget Office, in consultation with the

7 Committees on the Budget of the Senate and the House of

8 Representatives, shall jointly conduct a study and report

9 to the Congress on the budgetary impact of—

10 (1) paying a market rate of interest to insured

11 depository institutions on sterile reserves; and

12 (2) paying such interest into the respective

13 deposit insurance funds.

14 SEC. 332. STUDY AND REPORT ON STREAMLINED LENDING

15 PROCESS FOR CONSUMER BENEFIT.

16 (a) STUDY.—During the 12-month period beginning

17 on the date of enactment of this Act, the Board of Governors

18 of the Federal Reserve System, the Comptroller of the Cur19 rency, and the Secretary of Housing and Urban Develop20 ment shall conduct a study of ways to improve the home

21 mortgage, small business, and consumer lending processes,

22 consistent with the principles of safety and soundness, so

23 as to—

24 (1) reduce consumer burdens, inconvenience, cost,

25 and delay; and
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1 (2) minimize cost and burdens on insured

2 depository institutions, credit unions, and other

3 lenders.

4 (b) COMMENTS.—In conducting the study under sub5 section (a), comments shall be solicited from consumer

6 groups, insured depository institutions, other lenders, and

7 any other interested parties.

8 (c) REPORT.—Not later than 12 months after the date

9 of enactment of this Act, the Board of Governors of the Fed10 eral Reserve System, the Comptroller of the Currency, and

11 the Secretary of Housing and Urban Development shall sub12 mit a joint report to the Congress indicating any legislative

13 changes necessary to improve the home mortgage, small

14 business, and consumer lending processes and including a

15 summary of comments received pursuant to subsection (b).

16 SEC. 333. REPEAL OF OUTDATED CHARTER REQUIREMENT

17 FOR NATIONAL BANKS.

18 Section 5170 of the Revised Statutes (12 U.S.C. 28)

19 is repealed.

20 SEC. 334. INCLUSION OF COMPTROLLER OF THE CUR21 RENCY; CLARIFICATION OF REVISED STAT22 UTES.

23 (a) PUBLIC LAW 93–425.—Section 111 of Public Law

24 93–495 (12 U.S.C. 250) is amended by inserting ‘‘the
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1 Comptroller of the Currency,’’ after ‘‘Federal Deposit Insur2 ance Corporation,’’.

3 (b) REVISED STATUTES.—

4 (1) SECTION 5240.—The third paragraph of sec5 tion 5240 of the Revised Statutes (12 U.S.C. 482) is

6 amended by inserting ‘‘or section 301(f)(1) of title 31,

7 United States Code,’’ after ‘‘provisions of this sec8 tion’’.

9 (2) SECTION 324.—Section 324 of the Revised

10 Statutes (12 U.S.C. 1) is amended by adding at the

11 end the following: ‘‘The Comptroller of the Currency

12 shall have the same authority over matters within the

13 jurisdiction of the Comptroller as the Director of the

14 Office of Thrift Supervision has over matters within

15 the Director’s jurisdiction under section 3(b)(3) of the

16 Home Owners’ Loan Act.’’.

17 (3) SECTION 5239.—Section 5239 of the Revised

18 Statutes (12 U.S.C. 93) is amended by inserting at

19 the end the following new subsection:

20 ‘‘(d) AUTHORITY.—The Comptroller of the Currency

21 may act in the Comptroller’s own name and through the

22 Comptroller’s own attorneys in enforcing any provision of

23 this title, regulations thereunder, or any other law or regu24 lation, or in any action, suit, or proceeding to which the

25 Comptroller of the Currency is a party.’’.
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1 SEC. 335. COMMEMORATION OF 1995 SPECIAL OLYMPIC

2 WORLD GAMES.

3 (a) COIN SPECIFICATIONS.—

4 (1) ONE DOLLAR SILVER COINS.—

5 (A) ISSUANCE.—The Secretary of the Treas6 ury (hereafter in this section referred to as the

7 ‘‘Secretary’’) shall issue not more than 800,000

8 $1 coins, which shall weigh 26.73 grams, have a

9 diameter of 1.500 inches, and shall contain 90

10 percent silver and 10 percent copper.

11 (B) DESIGN.—The design of the coins issued

12 under this section shall be emblematic of the

13 1995 Special Olympics World Games. On each

14 such coin there shall be a designation of the

15 value of the coin, an inscription of the year

16 ‘‘1995’’, and inscriptions of the words ‘‘Liberty’’,

17 ‘‘In God We Trust’’, ‘‘United States of America’’,

18 and ‘‘E Pluribus Unum’’.

19 (2) LEGAL TENDER.—The coins issued under

20 this section shall be legal tender as provided in sec21 tion 5103 of title 31, United States Code.

22 (3) NUMISMATIC ITEMS.—For purposes of section

23 5132(a)(1) of title 31, United States Code, all coins

24 minted under this section shall be considered to be

25 numismatic items.
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1 (b) SOURCES OF BULLION.—The Secretary shall ob2 tain silver for the coins minted under this section only from

3 stockpiles established under the Strategic and Critical Mate4 rials Stock Piling Act.

5 (c) SELECTION OF DESIGN.—The design for the coins

6 authorized by this section shall be selected by the Secretary

7 after consultation with the 1995 Special Olympics World

8 Games Organizing Committee, Inc. and the Commission of

9 Fine Arts. As required by section 5135 of title 31, United

10 States Code, the design shall also be reviewed by the Citizens

11 Commemorative Coin Advisory Committee.

12 (d) ISSUANCE OF THE COINS.—

13 (1) QUALITY OF COINS.—The coins authorized

14 under this section may be issued in uncirculated and

15 proof qualities.

16 (2) MINT FACILITY.—Not more than 1 facility of

17 the United States Mint may be used to strike any

18 particular quality of the coins minted under this sec19 tion.

20 (3) PERIOD FOR ISSUANCE.—The Secretary shall

21 issue coins minted under this Act during the period

22 beginning on January 15, 1995, and ending on De23 cember 31, 1995.

24 (e) SALE OF THE COINS.—
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1 (1) SALE PRICE.—The coins issued under this

2 section shall be sold by the Secretary at a price equal

3 to the sum of the face value of the coins, the surcharge

4 provided in paragraph (4) with respect to such coins,

5 and the cost of designing and issuing such coins (in6 cluding labor, materials, dies, use of machinery, over7 head expenses, marketing, and shipping).

8 (2) BULK SALES.—The Secretary shall make

9 bulk sales at a reasonable discount.

10 (3) PREPAID ORDERS.—The Secretary shall ac11 cept prepaid orders for the coins authorized under

12 this section prior to the issuance of such coins. Sales

13 under this subsection shall be at a reasonable dis14 count.

15 (4) SURCHARGE REQUIRED.—All sales shall in16 clude a surcharge of $10 per coin.

17 (f) GENERAL WAIVER OF PROCUREMENT REGULA18 TIONS.—No provision of law governing procurement or

19 public contracts shall be applicable to the procurement of

20 goods or services necessary for carrying out the provisions

21 of this section. Nothing in this subsection shall relieve any

22 person entering into a contract under the authority of this

23 section from complying with any law relating to equal em24 ployment opportunity.
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1 (g) DISTRIBUTION OF SURCHARGES.—The total sur2 charges collected by the Secretary from the sale of the coins

3 issued under this section shall be promptly paid by the Sec4 retary to the 1995 Special Olympics World Games Organiz5 ing Committee, Inc. Such amounts shall be used to—

6 (1) provide a world class sporting event for ath7 letes with mental retardation;

8 (2) demonstrate to a global audience the extraor9 dinary talents, dedication, and courage of persons

10 with mental retardation; and

11 (3) underwrite the cost of staging and promoting

12 the 1995 Special Olympics World Games.

13 (h) AUDITS.—The Comptroller General of the United

14 States shall have the right to examine such books, records,

15 documents, and other data of the 1995 Special Olympics

16 World Games Organizing Committee, Inc. as may be related

17 to the expenditure of amounts paid under subsection (g).

18 (i) FINANCIAL ASSURANCES.—

19 (1) NO NET COST TO THE GOVERNMENT.—The

20 Secretary shall take all actions necessary to ensure

21 that the issuance of the coins authorized by this sec22 tion shall result in no net cost to the United States

23 Government.
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1 (2) ADEQUATE SECURITY FOR PAYMENT RE2 QUIRED.—No coin shall be issued under this section

3 unless the Secretary has received—

4 (A) full payment therefore;

5 (B) security satisfactory to the Secretary to

6 indemnify the United States for full payment; or

7 (C) a guarantee of full payment satisfactory

8 to the Secretary from a depository institution

9 whose deposits are insured by the Federal De10 posit Insurance Corporation or the National

11 Credit Union Administration Board.

12 SEC. 336. EXEMPTION FOR BUSINESS ACCOUNTS.

13 Section 274(1) of the Truth in Savings Act (12 U.S.C.

14 4313(1)) is amended to read as follows:

15 ‘‘(1) ACCOUNT.—The term ‘account’ means any

16 account intended for use by and generally used by

17 consumers primarily for personal, family, or house18 hold purposes that is offered by a depository institu19 tion into which a consumer deposits funds, including

20 demand accounts, time accounts, negotiable order of

21 withdrawal accounts, and share draft accounts.’’.
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1 SEC. 337. BOARD DISCRETION REGARDING CHECK-RELATED

2 FRAUD.

3 Section 604(e) of the Expedited Funds Availability Act

4 (12 U.S.C. 4003(e)) is amended by adding at the end the

5 following new paragraph:

6 ‘‘(4) PREVENTION OF CHECK-RELATED

7 LOSSES.—

8 ‘‘(A) IN GENERAL.—The Board may, by

9 regulation or order, extend the 1-business-day pe10 riod specified in section 603(b)(1), regarding

11 availability of funds deposited by local checks, to

12 2 business days if the Board determines that—

13 ‘‘(i) there is a pattern of significant

14 increases in check-related losses at deposi15 tory institutions attributable to the provi16 sions of this title; and

17 ‘‘(ii) such action is necessary to dimin18 ish the volume of such check-related losses.

19 ‘‘(B) LIMITATION ON OTHER AUTHORITY.—

20 The authority of the Board under paragraph (1)

21 shall not apply to the applicability of section

22 603(b)(1) or the time period specified therein.’’.

23 SEC. 338. CIVIL LIABILITY UNDER TRUTH IN SAVINGS.

24 Section 271(a)(2)(A) of the Truth in Savings Act (12

25 U.S.C. 4310(a)(2)(A)) is amended by inserting ‘‘(other than
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1 an action based on a violation of section 263)’’ after ‘‘indi2 vidual action’’.

3 SEC. 339. INSIDER LENDING.

4 (a) LOANS TO EXECUTIVE OFFICERS BY MEMBER

5 BANKS.—Section 22(g)(2) of the Federal Reserve Act (12

6 U.S.C. 375a(g)(2)) is amended by striking ‘‘With the spe7 cific prior approval of its board of directors, a member’’

8 and inserting ‘‘A member’’.

9 (b) EXTENSIONS OF CREDIT TO EXECUTIVE OFFI10 CERS, DIRECTORS, AND PRINCIPAL SHAREHOLDERS OF

11 MEMBER BANKS.—Section 22(h)(8) of the Federal Reserve

12 Act (12 U.S.C. 375b(h)(8)) is amended—

13 (1) by striking ‘‘MEMBER BANK.—FOR’’ and in14 serting the following: ‘‘MEMBER BANK.—

15 ‘‘(A) IN GENERAL.—Except as provided in

16 subparagraph (B), for’’; and

17 (2) by adding at the end the following:

18 ‘‘(B) EXCEPTION.—The Board shall have

19 the authority by regulation to suspend the appli20 cability of any or all of this subsection, except

21 for the provisions of paragraph (2), with respect

22 to any individual who is a director or an execu23 tive officer of a subsidiary of the company that

24 controls the member bank, if the Board finds

25 that such individual does not actually partici-
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1 pate in major policymaking functions of the

2 member bank.’’.

3 SEC. 340. REVISIONS OF STANDARDS.

4 Section 305(b)(1) of the Federal Deposit Insurance

5 Corporation Improvement Act of 1991 (12 U.S.C. 1828

6 note) is amended—

7 (1) in subparagraph (A), by striking ‘‘and’’ at

8 the end;

9 (2) in subparagraph (B), by striking the period

10 at the end and inserting ‘‘; and’’; and

11 (3) by adding at the end the following new sub12 paragraph:

13 ‘‘(C) take into account the size and activi14 ties of the institutions and do not cause undue

15 reporting burdens.’’.

16 SEC. 341. ALTERNATIVE RULES FOR RADIO ADVERTISING

17 OF CONSUMER LEASES.

18 Section 184 of the Truth in Lending Act (15 U.S.C.

19 1667c) is amended—

20 (1) by redesignating subsection (b) as subsection

21 (c); and

22 (2) by inserting after subsection (a) the following

23 new subsection:

24 ‘‘(b) RADIO ADVERTISEMENTS.—
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1 ‘‘(1) IN GENERAL.—An advertisement by radio

2 broadcast to aid, promote, or assist, directly or indi3 rectly, any consumer lease shall be deemed to be in

4 compliance with the requirements of subsection (a) if

5 such advertisement clearly and conspicuously—

6 ‘‘(A) states the information required by

7 paragraphs (1) and (2) of subsection (a);

8 ‘‘(B) states the number, amounts, due dates,

9 or periods of scheduled payments, and the total

10 of such payments under the lease; and

11 ‘‘(C) includes—

12 ‘‘(i) a referral to—

13 ‘‘(I) a toll-free telephone number

14 established in accordance with para15 graph (2) that may be used by consum16 ers to obtain the information required

17 under subsection (a); or

18 ‘‘(II) a written advertisement

19 that—

20 ‘‘(aa) appears in a publica21 tion in general circulation in the

22 community served by the radio

23 station on which such advertise24 ment is broadcast during the pe25 riod beginning 3 days before any
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1 such broadcast and ending 10

2 days after such broadcast; and

3 ‘‘(bb) includes the informa4 tion required to be disclosed under

5 subsection (a); and

6 ‘‘(ii) the name and dates of any publi7 cation referred to in clause (i)(II); and

8 ‘‘(D) includes any other information which

9 the Board determines necessary to carry out this

10 chapter.

11 ‘‘(2) ESTABLISHMENT OF TOLL-FREE NUMBER.—

12 ‘‘(A) IN GENERAL.—In the case of a radio

13 broadcast advertisement described in paragraph

14 (1) that includes a referral to a toll-free tele15 phone number, the lessor who offers the consumer

16 lease shall—

17 ‘‘(i) establish such a toll-free telephone

18 number not later than the date on which the

19 advertisement including the referral is

20 broadcast;

21 ‘‘(ii) maintain such telephone number

22 for not less than 10 days, beginning on the

23 date of any such broadcast; and
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1 ‘‘(iii) provide the information required

2 under subsection (a) with respect to the

3 lease to any person who calls such number.

4 ‘‘(B) FORM OF INFORMATION.—The infor5 mation required to be provided under subpara6 graph (A)(iii) shall be provided orally or, if re7 quested by the consumer, in written form.

8 ‘‘(3) NO EFFECT ON OTHER LAW.—Nothing in

9 this subsection shall affect the requirements of Federal

10 law as such requirements apply to advertisement by

11 any other medium.’’.

12 SEC. 342. DEPOSIT BROKER REGISTRATION.

13 Section 29(g)(3) of the Federal Deposit Insurance Act

14 (12 U.S.C. 1831f(g)(3)) is amended—

15 (1) by inserting ‘‘that is not well capitalized’’

16 after ‘‘includes any insured depository institution’’;

17 (2) by striking ‘‘of any insured depository’’ and

18 inserting ‘‘of such’’;

19 (3) by striking ‘‘(with respect to such deposits)’’;

20 and

21 (4) by striking ‘‘having the same type of char22 ter’’.
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1 SEC. 343. EXTENSION OF MANAGEMENT INTERLOCKS

2 GRANDFATHER CLAUSE.

3 Subsections (a) and (b) of section 206 of the Depository

4 Institution Management Interlocks Act (12 U.S.C. 3205)

5 are each amended by striking ‘‘15 years’’ and inserting ‘‘20

6 years’’.

7 SEC. 344. CLARIFICATION OF PROVISION RELATING TO AD8 MINISTRATIVE AUTONOMY.

9 Section 3(b)(3) of the Home Owners’ Loan Act (12

10 U.S.C. 1462a) is amended by striking everything after ‘‘Di11 rector’’ and inserting in lieu thereof ‘‘(including agency

12 rulemaking proceedings and enforcement actions) unless

13 otherwise specifically provided by law.’’.

14 SEC. 345. CONSUMER SURVEYS AND REPORT.

15 (a) SURVEYS.—Not later than 6 months after the date

16 of enactment of this Act, the Federal banking agencies (as

17 defined in section 3 of the Federal Deposit Insurance Act)

18 and the Secretary of Housing and Urban Development shall

19 jointly conduct an objective and statistically valid survey

20 of financial services consumers to determine the general

21 public awareness of, perceived benefits to consumers of, and

22 effectiveness of the Federal banking laws under which the

23 Federal banking agencies and the Department of Housing

24 and Urban Development operate that are intended for the

25 protection of such consumers, including—

26 (1) the Expedited Funds Availability Act;
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1 (2) the Truth in Lending Act;

2 (3) the Truth in Savings Act;

3 (4) the Real Estate Settlement Procedures Act of

4 1974;

5 (5) the Home Mortgage Disclosure Act of 1975;

6 (6) the Equal Credit Opportunity Act;

7 (7) the Community Reinvestment Act of 1977;

8 (8) the Home Equity Loan Consumer Protection

9 Act;

10 (9) the Fair Credit and Charge Card Disclosure

11 Act; and

12 (10) the rules and regulations promulgated

13 under those banking laws.

14 (b) CONSULTATION.—In developing such a survey, the

15 Federal banking agencies and the Secretary of Housing and

16 Urban Development shall consult with consumer groups, in17 sured depository institutions, other lenders, and any other

18 interested parties.

19 (c) INFORMATION FOR SURVEYED CONSUMERS.—The

20 survey shall provide for distribution to participating con21 sumers a summary explanation of the Federal banking law

22 being surveyed and how each is currently being imple23 mented.

24 (d) REPORT.—Not later than 60 days after completion

25 of its survey under subsection (a), the Federal banking
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1 agencies and the Secretary of Housing and Urban Develop2 ment shall jointly submit a report of the results of their

3 survey to the Committee on Banking, Housing, and Urban

4 Affairs of the Senate and the Committee on Banking, Fi5 nance and Urban Affairs of the House of Representatives.

6 SEC. 346. SIMPLIFIED DISCLOSURE FOR EXISTING DEPOSI7 TORS.

8 (a) IN GENERAL.—Section 43(b)(3) of the Federal De9 posit Insurance Act (12 U.S.C. 1831t(b)(3)) is amended to

10 read as follows:

11 ‘‘(3) ACKNOWLEDGEMENT OF DISCLOSURE.—

12 ‘‘(A) NEW DEPOSITORS.—With respect to

13 any depositor who was not a depositor at the de14 pository institution before June 19, 1994, receive

15 any deposit for the account of such depositor

16 only if the depositor has signed a written ac17 knowledgement that—

18 ‘‘(i) the institution is not federally in19 sured; and

20 ‘‘(ii) if the institution fails, the Fed21 eral Government does not guarantee that the

22 depositor will get back the depositor’s

23 money.

24 ‘‘(B) CURRENT DEPOSITORS.—Receive any

25 deposit after the effective date of this paragraph
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1 for the account of any depositor who was a de2 positor before June 19, 1994, only if—

3 ‘‘(i) the depositor has signed a written

4 acknowledgement described in subparagraph

5 (A); or

6 ‘‘(ii) the institution has complied with

7 the provisions of subparagraph (C) which

8 are applicable as of the date of the deposit.

9 ‘‘(C) ALTERNATIVE PROVISION OF NOTICE

10 TO CURRENT DEPOSITORS.—

11 ‘‘(i) IN GENERAL.—Transmit to each

12 depositor who was a depositor before June

13 19, 1994, and has not signed a written ac14 knowledgement described in subparagraph

15 (A)—

16 ‘‘(I) a card containing the infor17 mation described in clauses (i) and (ii)

18 of subparagraph (A), and a line for the

19 signature of the depositor; and

20 ‘‘(II) accompanying materials re21 questing the depositor to sign the card,

22 and return the signed card to the insti23 tution.

24 ‘‘(ii) MANNER AND TIMING OF NO25 TICE.—
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1 ‘‘(I) FIRST NOTICE.—Make the

2 transmission described in clause (i) via

3 first class mail within 90 days after

4 June 19, 1994.

5 ‘‘(II) SECOND NOTICE.—Make a

6 2d transmission described in clause (i)

7 via first class mail not less than 30

8 days and not more than 45 days after

9 a transmission to the depositor in ac10 cordance with subclause (I), if the in11 stitution has not, by the date of such

12 mailing, received from the depositor a

13 card referred to in clause (i)(I) which

14 has been signed by the depositor.

15 ‘‘(III) THIRD NOTICE.—Make a

16 3d transmission described in clause (i)

17 via first class mail not less than 30

18 days and not more than 45 days after

19 a transmission to the depositor in ac20 cordance with subclause (II), if the in21 stitution has not, by the date of such

22 mailing, received from the depositor a

23 card referred to in clause (i)(I) which

24 has been signed by the depositor.’’.
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1 (b) EFFECTIVE DATE.—Section 43(b)(3) of the Federal

2 Deposit Insurance Act, as amended by subsection (a), shall

3 take effect in accordance with section 151(a)(2)(D) of the

4 Federal Deposit Insurance Corporation Improvement Act

5 of 1991.

6 SEC. 347. COMMERCIAL MORTGAGE RELATED SECURITIES.

7 (a) IN GENERAL.—Section 3(a)(41)(A)(i) of the Secu8 rities Exchange Act of 1934 (15 U.S.C. 78c(a)(41)(A)(i))

9 is amended —

10 (1) by striking ‘‘or on a residential’’ and insert11 ing ‘‘on a residential’’; and

12 (2) by inserting before the semicolon ‘‘, or on one

13 or more parcels of real estate upon which is located

14 one or more commercial structures’’.

15 (b) AMENDMENT TO THE REVISED STATUTES.—Para16 graph Seventh of section 5136 of the Revised Statutes (12

17 U.S.C. 24) is amended in the twelfth sentence, by striking

18 ‘‘(15 U.S.C. 78c(a)(41))), subject to such regulations’’ and

19 inserting ‘‘(15 U.S.C. 78c(a)(41)). The exception provided

20 for the securities described in subparagraphs (A), (B), and

21 (C) shall be subject to such regulations’’.

22 (c) REGULATIONS.—Not later than 1 year after the

23 date of enactment of this Act, the Comptroller of the Cur24 rency shall promulgate final regulations, in accordance

25 with the thirteenth sentence of Paragraph Seventh of section
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1 5136 of the Revised Statutes (as amended by subsection (b)),

2 to carry out the amendments made by this section.

3 (d) EFFECTIVE DATE.—The amendments made by this

4 section shall become effective upon the date of promulgation

5 of final regulations under subsection (c).

6 (e) STATE OPT OUT.—Notwithstanding the amend7 ments made by this section, a note that is directly secured

8 by a first lien on one or more parcels of real estate upon

9 which is located one or more commercial structures shall

10 not be considered to be a mortgage related security under

11 section 3(a)(41) of the Securities Exchange Act of 1934 in

12 any State that, prior to the expiration of 7 years after the

13 date of enactment of this Act, enacts a statute that specifi14 cally refers to this section and either prohibits or provides

15 for a more limited authority to purchase, hold, or invest

16 in such securities by any person, trust, corporation, part17 nership, association, business trust, or business entity or

18 class thereof than is provided by the amendments made by

19 this subsection. The enactment by any State of any statute

20 of the type described in the preceding sentence shall not af21 fect the validity of any contractual commitment to pur22 chase, hold, or invest that was made prior thereto, and shall

23 not require the sale or other disposition of any securities

24 acquired prior thereto.
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1 SEC. 348. OFFSET OF COSTS OF CERTAIN PROGRAMS.

2 (a) HUD MULTIFAMILY HOUSING DISPOSITION PROC3 ESS.—

4 (1) FINDINGS.—The Congress finds that—

5 (A) the portfolio of multifamily housing

6 project mortgages insured by the FHA is severely

7 troubled and at risk of default, requiring the Sec8 retary to increase loss reserves from

9 $5,500,000,000 in 1991 to $11,900,000,000 in

10 1992 to cover estimated future losses;

11 (B) the inventory of multifamily housing

12 projects owned by the Secretary has more than

13 tripled since 1989, and, by the end of 1993, may

14 exceed 75,000 units;

15 (C) the cost to the Federal Government of

16 owning and maintaining multifamily housing

17 projects escalated to approximately $250,000,000

18 in fiscal year 1992;

19 (D) the inventory of multifamily housing

20 projects subject to mortgages held by the Sec21 retary has increased dramatically, to more than

22 2,400 mortgages, and approximately half of these

23 mortgages, with over 230,000 units, are delin24 quent;

25 (E) the inventory of insured and formerly

26 insured multifamily housing projects is rapidly
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1 deteriorating, endangering tenants and neighbor2 hoods;

3 (F) over 5 million families today have a

4 critical need for housing that is affordable and

5 habitable; and

6 (G) the current statutory framework govern7 ing the disposition of multifamily housing

8 projects effectively impedes the Government’s

9 ability to dispose of properties, protect tenants,

10 and ensure that projects are maintained over

11 time.

12 (2) MANAGEMENT AND DISPOSITION OF MULTI13 FAMILY HOUSING PROJECTS.—Section 203 of the

14 Housing and Community Development Amendments

15 of 1978 (12 U.S.C. 1701z–11) is amended to read as

16 follows:

17 ‘‘SEC. 203. MANAGEMENT AND DISPOSITION OF MULTIFAM18 ILY HOUSING PROJECTS.

19 ‘‘(a) GOALS.—The Secretary of Housing and Urban

20 Development (in this section referred to as the ‘Secretary’)

21 shall manage or dispose of multifamily housing projects

22 that are owned by the Secretary or that are subject to a

23 mortgage held by the Secretary in a manner that—

24 ‘‘(1) is consistent with the National Housing Act

25 and this section;
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1 ‘‘(2) will protect the financial interests of the

2 Federal Government; and

3 ‘‘(3) will, in the least costly fashion among rea4 sonable available alternatives, further the goals of—

5 ‘‘(A) preserving housing so that it can re6 main available to and affordable by low-income

7 persons;

8 ‘‘(B) preserving and revitalizing residential

9 neighborhoods;

10 ‘‘(C) maintaining existing housing stock in

11 a decent, safe, and sanitary condition;

12 ‘‘(D) minimizing the involuntary displace13 ment of tenants;

14 ‘‘(E) maintaining housing for the purpose

15 of providing rental housing, cooperative housing,

16 and homeownership opportunities for low-income

17 persons; and

18 ‘‘(F) minimizing the need to demolish mul19 tifamily housing projects.

20 The Secretary, in determining the manner in which a

21 project is to be managed or disposed of, may balance com22 peting goals relating to individual projects in a manner

23 that will further the purposes of this section.

24 ‘‘(b) DEFINITIONS.—For purposes of this section, the

25 following definitions shall apply:
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1 ‘‘(1) MULTIFAMILY HOUSING PROJECT.—The

2 term ‘multifamily housing project’ means any multi3 family rental housing project which is, or prior to ac4 quisition by the Secretary was, assisted or insured

5 under the National Housing Act, or was subject to a

6 loan under section 202 of the Housing Act of 1959.

7 ‘‘(2) SUBSIDIZED PROJECT.—The term ‘sub8 sidized project’ means a multifamily housing project

9 receiving any of the following types of assistance im10 mediately prior to the assignment of the mortgage on

11 such project to, or the acquisition of such mortgage

12 by, the Secretary:

13 ‘‘(A) Below market interest rate mortgage

14 insurance under the proviso of section 221(d)(5)

15 of the National Housing Act.

16 ‘‘(B) Interest reduction payments made in

17 connection with mortgages insured under section

18 236 of the National Housing Act.

19 ‘‘(C) Direct loans made under section 202 of

20 the Housing Act of 1959.

21 ‘‘(D) Assistance in the form of—

22 ‘‘(i) rent supplement payments under

23 section 101 of the Housing and Urban De24 velopment Act of 1965;
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1 ‘‘(ii) housing assistance payments

2 made under section 23 of the United States

3 Housing Act of 1937 (as in effect before

4 January 1, 1975); or

5 ‘‘(iii) housing assistance payments

6 made under section 8 of the United States

7 Housing Act of 1937 (excluding payments

8 made for tenant-based assistance under sec9 tion 8),

10 if (except for purposes of section 183(c) of the

11 Housing and Community Development Act of

12 1987) such assistance payments are made to

13 more than 50 percent of the units in the project.

14 ‘‘(3) FORMERLY SUBSIDIZED PROJECT.—The

15 term ‘formerly subsidized project’ means a multifam16 ily housing project owned by the Secretary that was

17 a subsidized project immediately prior to its acquisi18 tion by the Secretary.

19 ‘‘(4) UNSUBSIDIZED PROJECT.—The term

20 ‘unsubsidized project’ means a multifamily housing

21 project owned by the Secretary that is not a sub22 sidized project or a formerly subsidized project.

23 ‘‘(c) MANAGEMENT OR DISPOSITION OF PROPERTY.—

24 ‘‘(1) DISPOSITION TO PURCHASERS.—The Sec25 retary is authorized, in carrying out this section, to
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1 dispose of a multifamily housing project owned by the

2 Secretary on a negotiated, competitive bid, or other

3 basis, on such terms as the Secretary deems appro4 priate considering the low-income character of the

5 project and the requirements of subsection (a), to a

6 purchaser determined by the Secretary to be capable

7 of—

8 ‘‘(A) satisfying the conditions of the disposi9 tion;

10 ‘‘(B) implementing a sound financial and

11 physical management program that is designed

12 to enable the project to meet anticipated operat13 ing and repair expenses to ensure that the

14 project will remain in decent, safe, and sanitary

15 condition;

16 ‘‘(C) responding to the needs of the tenants

17 and working cooperatively with tenant organiza18 tions;

19 ‘‘(D) providing adequate organizational

20 staff and financial resources to the project; and

21 ‘‘(E) meeting such other requirements as the

22 Secretary may determine.

23 ‘‘(2) CONTRACTING FOR MANAGEMENT SERV24 ICES.—The Secretary is authorized, in carrying out

25 this section—
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1 ‘‘(A) to contract for management services

2 for a multifamily housing project that is owned

3 by the Secretary (or for which the Secretary is

4 mortgagee in possession), on a negotiated, com5 petitive bid, or other basis at a price determined

6 by the Secretary to be reasonable, with a man7 ager the Secretary has determined is capable

8 of—

9 ‘‘(i) implementing a sound financial

10 and physical management program that is

11 designed to enable the project to meet an12 ticipated operating and maintenance ex13 penses to ensure that the project will remain

14 in decent, safe, and sanitary condition;

15 ‘‘(ii) responding to the needs of the ten16 ants and working cooperatively with tenant

17 organizations;

18 ‘‘(iii) providing adequate organiza19 tional, staff, and other resources to imple20 ment a management program determined

21 by the Secretary; and

22 ‘‘(iv) meeting such other requirements

23 as the Secretary may determine; and

24 ‘‘(B) to require the owner of a multifamily

25 housing project that is subject to a mortgage held
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1 by the Secretary to contract for management

2 services for the project in the manner described

3 in subparagraph (A).

4 ‘‘(d) MAINTENANCE OF HOUSING PROJECTS.—

5 ‘‘(1) HOUSING PROJECTS OWNED BY THE SEC6 RETARY.—In the case of multifamily housing projects

7 that are owned by the Secretary (or for which the Sec8 retary is mortgagee in possession), the Secretary

9 shall—

10 ‘‘(A) to the greatest extent possible, main11 tain all such occupied projects in a decent, safe,

12 and sanitary condition;

13 ‘‘(B) to the greatest extent possible, main14 tain full occupancy in all such projects; and

15 ‘‘(C) maintain all such projects for purposes

16 of providing rental or cooperative housing.

17 ‘‘(2) HOUSING PROJECTS SUBJECT TO A MORT18 GAGE HELD BY THE SECRETARY.—In the case of any

19 multifamily housing project that is subject to a mort20 gage held by the Secretary, the Secretary shall require

21 the owner of the project to carry out the requirements

22 of paragraph (1).

23 ‘‘(e) REQUIRED ASSISTANCE.—In carrying out the

24 goal specified in subsection (a)(3)(A), the Secretary shall

25 take not less than one of the following actions:
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1 ‘‘(1) CONTRACT WITH OWNER.—Enter into con2 tracts under section 8 of the United States Housing

3 Act of 1937, to the extent budget authority is avail4 able, with owners of multifamily housing projects that

5 are acquired by a purchaser other than the Secretary

6 at foreclosure or after sale by the Secretary.

7 ‘‘(A) SUBSIDIZED OR FORMERLY SUB8 SIDIZED PROJECTS RECEIVING CERTAIN ASSIST9 ANCE.—In the case of a subsidized or formerly

10 subsidized project referred to in subparagraphs

11 (A) through (C) of subsection (b)(2)—

12 ‘‘(i) the contract shall be sufficient to

13 assist at least all units covered by an assist14 ance contract under any of the authorities

15 referred to in subsection (b)(2)(D) before ac16 quisition, unless the Secretary acts pursu17 ant to the provisions of subparagraph (C);

18 ‘‘(ii) in the case of units requiring

19 project-based rental assistance pursuant to

20 this paragraph that are occupied by fami21 lies who are not eligible for assistance under

22 section 8, a contract under this subpara23 graph shall also provide that when a va24 cancy occurs, the owner shall lease the
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1 available unit to a family eligible for assist2 ance under section 8; and

3 ‘‘(iii) the Secretary shall take actions

4 to ensure the availability and affordability,

5 as defined in paragraph (3)(B), for the re6 maining useful life of the project, as defined

7 by the Secretary, of any unit located in any

8 project referred to in subparagraphs (A)

9 through (C) of subsection (b)(2) that does

10 not otherwise receive project-based assist11 ance under this subparagraph. To carry out

12 this clause, the Secretary may require pur13 chasers to establish use or rent restrictions

14 maintaining affordability, as defined in

15 paragraph (3)(B).

16 ‘‘(B) SUBSIDIZED OR FORMERLY SUB17 SIDIZED PROJECTS RECEIVING OTHER ASSIST18 ANCE.—In the case of a subsidized or formerly

19 subsidized project referred to in subsection

20 (b)(2)(D)—

21 ‘‘(i) the contract shall be sufficient to

22 assist at least all units in the project that

23 are covered, or were covered immediately be24 fore foreclosure on or acquisition of the

25 project by the Secretary, by an assistance
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1 contract under any of the authorities re2 ferred to in such subsection, unless the Sec3 retary acts pursuant to provisions of sub4 paragraph (C); and

5 ‘‘(ii) in the case of units requiring

6 project-based rental assistance pursuant to

7 this paragraph that are occupied by fami8 lies who are not eligible for assistance under

9 section 8, a contract under this paragraph

10 shall also provide that when a vacancy oc11 curs, the owner shall lease the available unit

12 to a family eligible for assistance under sec13 tion 8.

14 ‘‘(C) EXCEPTIONS TO SUBPARAGRAPHS (A)

15 AND (B).—In lieu of providing project-based as16 sistance under subparagraph (A) or (B), the Sec17 retary may require certain units in unsubsidized

18 projects to contain use restrictions providing

19 that such units will be available to and afford20 able by very low-income families for the remain21 ing useful life of the project, as defined by the

22 Secretary, if—

23 ‘‘(i) the Secretary matches any reduc24 tion in units otherwise required to be as25 sisted with project-based assistance under
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1 subparagraph (A) or (B) with at least an

2 equivalent increase in units made affordable

3 to very low-income persons within

4 unsubsidized projects;

5 ‘‘(ii) low-income tenants residing in

6 units otherwise requiring project-based as7 sistance under subparagraph (A) or (B)

8 upon disposition receive section 8 tenant9 based assistance; and

10 ‘‘(iii) the units described in clause (i)

11 are located within the same market area.

12 ‘‘(D) CONTRACT REQUIREMENTS FOR

13 UNSUBSIDIZED PROJECTS.—Notwithstanding ac14 tions taken pursuant to subparagraph (C), in

15 unsubsidized projects, the contract shall at least

16 be sufficient to provide—

17 ‘‘(i) project-based rental assistance for

18 all units that are covered or were covered

19 immediately before foreclosure or acquisi20 tion by an assistance contract under—

21 ‘‘(I) section 8(b)(2) of the United

22 States Housing Act of 1937 (as such

23 section existed before October 1, 1983)

24 (new construction and substantial re25 habilitation); section 8(b) of such Act
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1 (property disposition); section 8(d)(2)

2 of such Act (project-based certificates);

3 section 8(e)(2) of such Act (moderate

4 rehabilitation); section 23 of such Act

5 (as in effect before January 1, 1975);

6 or section 101 of the Housing and

7 Urban Development Act of 1965 (rent

8 supplements); or

9 ‘‘(II) section 8 of the United

10 States Housing Act of 1937, following

11 conversion from section 101 of the

12 Housing and Urban Development Act

13 of 1965; and

14 ‘‘(ii) tenant-based assistance under sec15 tion 8 of the United States Housing Act of

16 1937 for tenants currently residing in units

17 that were covered by an assistance contract

18 under the Loan Management Set-Aside pro19 gram under section 8(b) of the United

20 States Housing Act of 1937 immediately be21 fore foreclosure or acquisition of the project

22 by the Secretary.

23 ‘‘(2) ANNUAL CONTRIBUTION CONTRACTS.—In

24 the case of multifamily housing projects that are ac25 quired by a purchaser other than the Secretary at
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1 foreclosure or after sale by the Secretary, enter into

2 annual contribution contracts with public housing

3 agencies to provide tenant-based assistance under sec4 tion 8 of the United States Housing Act of 1937 to

5 all low-income families who are eligible for such as6 sistance on the date that the project is acquired by the

7 purchaser. The Secretary shall take action under this

8 paragraph only after making a determination that

9 there is available in the area an adequate supply of

10 habitable affordable housing for low-income families.

11 Actions taken pursuant to this paragraph may be

12 taken in connection with not more than 10 percent of

13 the aggregate number of units in subsidized or for14 merly subsidized projects disposed of by the Secretary

15 annually.

16 ‘‘(3) OTHER ASSISTANCE.—

17 ‘‘(A) IN GENERAL.—In accordance with the

18 authority provided under the National Housing

19 Act, reduce the selling price, apply use or rent

20 restrictions on certain units, or provide other fi21 nancial assistance to the owners of multifamily

22 housing projects that are acquired by a pur23 chaser other than the Secretary at foreclosure, or

24 after sale by the Secretary, on terms which will

25 ensure that—
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1 ‘‘(i) at least those units otherwise re2 quired to receive project-based section 8 as3 sistance pursuant to subparagraphs (A),

4 (B), or (D) of paragraph (1) are available

5 to and affordable by low-income persons;

6 and

7 ‘‘(ii) for the remaining useful life of

8 the project, as defined by the Secretary,

9 there shall be in force such use or rent re10 strictions as the Secretary may prescribe.

11 ‘‘(B) DEFINITION.—A unit shall be consid12 ered affordable under this paragraph if—

13 ‘‘(i) for very low-income tenants, the

14 rent for such unit does not exceed 30 per15 cent of 50 percent of the area median in16 come, as determined by the Secretary, with

17 adjustments for family size; and

18 ‘‘(ii) for low-income tenants other than

19 very low-income tenants, the rent for such

20 unit does not exceed 30 percent of 80 per21 cent of the area median income, as deter22 mined by the Secretary, with adjustments

23 for family size.

24 ‘‘(C) VERY LOW-INCOME TENANTS.—The

25 Secretary shall provide assistance under section
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1 8 of the United States Housing Act of 1937 to

2 any very low-income tenant currently residing

3 in a unit otherwise required to receive project4 based assistance under section 8, pursuant to

5 subparagraph (A), (B), or (D) of paragraph (1),

6 if the rents charged such tenants as a result of

7 actions taken pursuant to this paragraph exceed

8 the amount payable as rent under section 3(a) of

9 the United States Housing Act of 1937.

10 ‘‘(4) TRANSFER FOR USE UNDER OTHER PRO11 GRAMS OF THE SECRETARY.—

12 ‘‘(A) IN GENERAL.—Enter into an agree13 ment providing for the transfer of a multifamily

14 housing project—

15 ‘‘(i) to a public housing agency for use

16 of the project as public housing; or

17 ‘‘(ii) to an owner or another appro18 priate entity for use of the project under

19 section 202 of the Housing Act of 1959 or

20 under section 811 of the Cranston-Gonzalez

21 National Affordable Housing Act.

22 ‘‘(B) REQUIREMENTS FOR AGREEMENT.—

23 The agreement described in subparagraph (A)

24 shall—
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1 ‘‘(i) contain such terms, conditions,

2 and limitations as the Secretary determines

3 appropriate, including requirements to as4 sure use of the project under the public

5 housing, section 202, and section 811 pro6 grams; and

7 ‘‘(ii) ensure that no current tenant will

8 be displaced as a result of actions taken

9 under this paragraph.

10 ‘‘(f) OTHER ASSISTANCE.—In addition to the actions

11 authorized by subsection (e), the Secretary may take any

12 of the following actions:

13 ‘‘(1) SHORT-TERM LOANS.—Provide short-term

14 loans to facilitate the sale of multifamily housing

15 projects to nonprofit organizations or to public agen16 cies if—

17 ‘‘(A) authority for such loans is provided in

18 advance in an appropriations Act;

19 ‘‘(B) such loans are for a term of not more

20 than 5 years;

21 ‘‘(C) the Secretary is presented with satis22 factory documentation, evidencing a commitment

23 of permanent financing to replace such short24 term loan, from a lender who meets standards set

25 forth by the Secretary; and
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1 ‘‘(D) the terms of such loans are consistent

2 with prevailing practices in the marketplace or

3 the provision of such loans results in no cost to

4 the Government, as defined in section 502 of the

5 Congressional Budget Act.

6 ‘‘(2) TENANT-BASED ASSISTANCE.—In connec7 tion with projects referred to in subsection (e), make

8 available tenant-based assistance under section 8 of

9 the United States Housing Act of 1937 to very low10 income families (as defined in section 3(b)(2) of the

11 United States Housing Act of 1937) that do not other12 wise qualify for project-based assistance.

13 ‘‘(3) ALTERNATIVE USES.—

14 ‘‘(A) IN GENERAL.—Notwithstanding any

15 other provision of law, and subject to notice to

16 and comment from existing tenants, allow not

17 more than—

18 ‘‘(i) 5 percent of the total number of

19 units in multifamily housing projects that

20 are disposed of by the Secretary during any

21 1-year period to be made available for uses

22 other than rental or cooperative uses, in23 cluding low-income homeownership oppor24 tunities, or in any particular project, com25 munity space, office space for tenant or
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1 housing-related service providers or security

2 programs, or small business uses, if such

3 uses benefit the tenants of the project; and

4 ‘‘(ii) 5 percent of the total number of

5 units in multifamily housing projects that

6 are disposed of by the Secretary during any

7 1-year period to be used in any manner, if

8 the Secretary and the unit of general local

9 government or area-wide governing body de10 termine that such use will further fair hous11 ing, community development, or neighbor12 hood revitalization goals.

13 ‘‘(B) DISPLACEMENT PROTECTION.—The

14 Secretary shall make available tenant-based rent15 al assistance under section 8 of the United States

16 Housing Act of 1937 to any tenant displaced as

17 a result of actions taken by the Secretary pursu18 ant to subparagraph (A), and the Secretary shall

19 take such actions as the Secretary determines

20 necessary to ensure the successful use of any ten21 ant-based assistance.

22 ‘‘(g) AUTHORIZATION OF USE OR RENT RESTRICTIONS

23 IN UNSUBSIDIZED PROJECTS.—In carrying out the goals

24 specified in subsection (a), the Secretary may require cer25 tain units in unsubsidized projects to contain use or rent
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1 restrictions providing that such units will be available to

2 and affordable by very low-income persons for the remain3 ing useful life of the property, as defined by the Secretary.

4 ‘‘(h) CONTRACT REQUIREMENTS.—

5 ‘‘(1) CONTRACT TERM.—

6 ‘‘(A) IN GENERAL.—Contracts for project7 based rental assistance under section 8 of the

8 United States Housing Act of 1937 provided

9 pursuant to this section shall be for a term of not

10 more than 15 years; and

11 ‘‘(B) CONTRACT TERM OF LESS THAN 15

12 YEARS.—Notwithstanding subparagraph (A), to

13 the extent that units receive project-based assist14 ance for a contract term of less than 15 years,

15 the Secretary shall require that rents charged to

16 tenants for such units not exceed the amount

17 payable for rent under section 3(a) of the United

18 States Housing Act of 1937 for a period of at

19 least 15 years.

20 ‘‘(2) CONTRACT RENT.—

21 ‘‘(A) IN GENERAL.—The Secretary shall set

22 contract rents for section 8 project-based rental

23 contracts issued under this section at levels that,

24 in conjunction with other resources available to

25 the purchaser, provide for the necessary costs of
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1 rehabilitation of such project and do not exceed

2 the percentage of the existing housing fair mar3 ket rents for the area (as determined by the Sec4 retary under section 8(c) of the United States

5 Housing Act of 1937) as the Secretary may pre6 scribe.

7 ‘‘(B) UP-FRONT GRANTS AND LOANS.—If

8 such an approach is determined to be more cost9 effective, the Secretary may utilize the budget

10 authority provided for project-based section 8

11 contracts issued under this section to—

12 ‘‘(i) provide project-based section 8

13 rental assistance; and

14 ‘‘(ii)(I) provide up-front grants for the

15 necessary cost of rehabilitation; or

16 ‘‘(II) pay for any cost to the Govern17 ment, as defined in section 502 of the Con18 gressional Budget Act, for loans made pur19 suant to subsection (f)(1).

20 ‘‘(i) DISPOSITION PLAN.—

21 ‘‘(1) IN GENERAL.—Prior to the sale of a multi22 family housing project that is owned by the Secretary,

23 the Secretary shall develop a disposition plan for the

24 project that specifies the minimum terms and condi25 tions of the Secretary for disposition of the project,
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1 the initial sales price that is acceptable to the Sec2 retary, and the assistance that the Secretary plans to

3 make available to a prospective purchaser in accord4 ance with this section. The initial sales price shall re5 flect the intended use of the property after sale.

6 ‘‘(2) COMMUNITY AND TENANT INPUT INTO DIS7 POSITION PLANS AND SALES.—

8 ‘‘(A) IN GENERAL.—In carrying out this

9 section, the Secretary shall develop procedures to

10 obtain appropriate and timely input into dis11 position plans from officials of the unit of gen12 eral local government affected, the community in

13 which the project is situated, and the tenants of

14 the project.

15 ‘‘(B) TENANT ORGANIZATIONS.—The Sec16 retary shall develop procedures to facilitate,

17 where feasible and appropriate, the sale of multi18 family housing projects to existing tenant orga19 nizations with demonstrated capacity or to pub20 lic or nonprofit entities which represent or are

21 affiliated with existing tenant organizations.

22 ‘‘(C) TECHNICAL ASSISTANCE.—

23 ‘‘(i) USE OF FUNDS.—To carry out the

24 procedures developed under subparagraphs

25 (A) and (B), the Secretary is authorized to
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1 provide technical assistance, directly or in2 directly, and to use amounts appropriated

3 for technical assistance under the Emer4 gency Low Income Housing Preservation

5 Act of 1987, the Low-Income Housing Pres6 ervation and Resident Homeownership Act

7 of 1990, subtitle B of title IV of the Cran8 ston-Gonzalez National Affordable Housing

9 Act, or under this section for the provision

10 of technical assistance under this section.

11 ‘‘(ii) SOURCE OF FUNDS.—Recipients

12 of technical assistance funding under the

13 Emergency Low Income Housing Preserva14 tion Act of 1987, the Low-Income Housing

15 Preservation and Resident Homeownership

16 Act of 1990, subtitle B of title IV of the

17 Cranston-Gonzalez National Affordable

18 Housing Act, or under this section shall be

19 permitted to provide technical assistance to

20 the extent of such funding under any of

21 such programs or under this section, not22 withstanding the source of funding.

23 ‘‘(j) RIGHT OF FIRST REFUSAL.—

24 ‘‘(1) PROCEDURE.—
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1 ‘‘(A) NOTIFICATION BY SECRETARY OF THE

2 ACQUISITION OF TITLE.—Not later than 30 days

3 after acquiring title to a project, the Secretary

4 shall notify the unit of general local government

5 and the State agency or agencies designated by

6 the Governor of the acquisition of such title.

7 ‘‘(B) EXPRESSION OF INTEREST.—Not later

8 than 45 days after receiving notification from

9 the Secretary under subparagraph (A), the unit

10 of general local government or designated State

11 agency may submit to the Secretary a prelimi12 nary expression of interest in the project. The

13 Secretary may take such actions as may be nec14 essary to require the unit of general local govern15 ment or designated State agency to substantiate

16 such interest.

17 ‘‘(C) TIMELY EXPRESSION OF INTEREST.—

18 If the unit of general local government or des19 ignated State agency has expressed interest in

20 the project before the expiration of the 45-day pe21 riod referred to in subparagraph (B), and has

22 substantiated such interest if requested, the Sec23 retary, upon approval of a disposition plan for

24 a project, shall notify the unit of general local

25 government and designated State agency of the
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1 terms and conditions of the disposition plan and

2 give the unit of general local government or des3 ignated State agency not more than 90 days

4 after the date of such notification to make an

5 offer to purchase the project.

6 ‘‘(D) NO TIMELY EXPRESSION OF INTER7 EST.—If the unit of general local government or

8 designated State agency does not express interest

9 before the expiration of the 45-day period re10 ferred to in subparagraph (B), or does not sub11 stantiate an expressed interest if requested, the

12 Secretary, upon approval of a disposition plan,

13 may offer the project for sale to any interested

14 person or entity.

15 ‘‘(2) ACCEPTANCE OF OFFERS.—Where the Sec16 retary has given the unit of general local government

17 or designated State agency 90 days to make an offer

18 to purchase the project, the Secretary shall accept an

19 offer that complies with the terms and conditions of

20 the disposition plan. The Secretary may accept an

21 offer that does not comply with the terms and condi22 tions of the disposition plan if the Secretary deter23 mines that the offer will further the goals specified in

24 subsection (a) by actions that include extension of the

25 duration of low-income affordability restrictions or
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1 otherwise restructuring the transaction in a manner

2 that enhances the long-term affordability for low-in3 come persons. The Secretary shall, in particular, have

4 discretion to reduce the initial sales price in exchange

5 for the extension of low-income affordability restric6 tions beyond the period of assistance contemplated by

7 the attachment of assistance pursuant to subsection

8 (e). If the Secretary and the unit of general local gov9 ernment or designated State agency cannot reach

10 agreement within 90 days, the Secretary may offer

11 the project for sale to the general public.

12 ‘‘(3) PURCHASE BY UNIT OF GENERAL LOCAL

13 GOVERNMENT OR DESIGNATED STATE AGENCY.—Not14 withstanding any other provision of law, a unit of

15 general local government (including a public housing

16 agency) or designated State agency may purchase a

17 subsidized or formerly subsidized project in accord18 ance with this subsection.

19 ‘‘(4) APPLICABILITY.—This subsection shall

20 apply to projects that are acquired on or after the ef21 fective date of this subsection. With respect to projects

22 acquired before such effective date, the Secretary may

23 apply—

24 ‘‘(A) the requirements of paragraphs (2)

25 and (3) of section 203(e) as such paragraphs ex-
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1 isted immediately before the effective date of this

2 subsection; or

3 ‘‘(B) the requirements of paragraphs (1)

4 and (2) of this subsection, if the Secretary gives

5 the unit of general local government or des6 ignated State agency—

7 ‘‘(i) 45 days to express interest in the

8 project; and

9 ‘‘(ii) if the unit of general local govern10 ment or designated State agency expresses

11 interest in the project before the expiration

12 of the 45-day period, and substantiates such

13 interest if requested, 90 days from the date

14 of notification of the terms and conditions

15 of the disposition plan to make an offer to

16 purchase the project.

17 ‘‘(k) DISPLACEMENT OF TENANTS AND RELOCATION

18 ASSISTANCE.—

19 ‘‘(1) IN GENERAL.—Whenever tenants will be

20 displaced as a result of the disposition of, or repairs

21 to, a multifamily housing project that is owned by the

22 Secretary (or for which the Secretary is mortgagee in

23 possession), the Secretary shall identify tenants who

24 will be displaced, and shall notify all such tenants of

25 their pending displacement and of any relocation as-
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1 sistance which may be available. In the case of a mul2 tifamily housing project that is not owned by the Sec3 retary (and for which the Secretary is not mortgagee

4 in possession), the Secretary shall require the owner

5 of the project to carry out the requirements of this

6 paragraph.

7 ‘‘(2) RIGHTS OF DISPLACED TENANTS.—The Sec8 retary shall assure for any such tenant (who contin9 ues to meet applicable qualification standards) the

10 right—

11 ‘‘(A) to return, whenever possible, to a re12 paired unit;

13 ‘‘(B) to occupy a unit in another multifam14 ily housing project owned by the Secretary;

15 ‘‘(C) to obtain housing assistance under the

16 United States Housing Act of 1937; or

17 ‘‘(D) to receive any other available reloca18 tion assistance as the Secretary determines to be

19 appropriate.

20 ‘‘(l) MORTGAGE AND PROJECT SALES.—

21 ‘‘(1) IN GENERAL.—The Secretary may not ap22 prove the sale of any loan or mortgage held by the

23 Secretary (including any loan or mortgage owned by

24 the Government National Mortgage Association) on

25 any subsidized project or formerly subsidized project,
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1 unless such sale is made as part of a transaction that

2 will ensure that such project will continue to operate

3 at least until the maturity date of such loan or mort4 gage, in a manner that will provide rental housing on

5 terms at least as advantageous to existing and future

6 tenants as the terms required by the program under

7 which the loan or mortgage was made or insured

8 prior to the assignment of the loan or mortgage on

9 such project to the Secretary.

10 ‘‘(2) SALE OF CERTAIN PROJECTS.—The Sec11 retary may not approve the sale of any subsidized

12 project—

13 ‘‘(A) that is subject to a mortgage held by

14 the Secretary; or

15 ‘‘(B) if the sale transaction involves the pro16 vision of any additional subsidy funds by the

17 Secretary or a recasting of the mortgage, unless

18 such sale is made as part of a transaction that

19 will ensure that such project will continue to op20 erate at least until the maturity date of the loan

21 or mortgage, in a manner that will provide rent22 al housing on terms at least as advantageous to

23 existing and future tenants as the terms required

24 by the program under which the loan or mort-
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1 gage was made or insured prior to the proposed

2 sale of the project.

3 ‘‘(3) MORTGAGE SALES TO STATE AND LOCAL

4 GOVERNMENTS.—Notwithstanding any provision of

5 law that may require competitive sales or bidding, the

6 Secretary may carry out negotiated sales of subsidized

7 or formerly subsidized mortgages held by the Sec8 retary, without the competitive selection of purchasers

9 or intermediaries, to units of general local govern10 ment or State agencies, or groups of investors that in11 clude at least one such unit of general local govern12 ment or State agency, if the negotiations are con13 ducted with such agencies, except that—

14 ‘‘(A) the terms of any such sale shall in15 clude the agreement of the purchasing agency or

16 unit of local government or State agency to act

17 as mortgagee or owner of a beneficial interest in

18 such mortgages, in a manner consistent with

19 maintaining the projects that are subject to such

20 mortgages for occupancy by the general tenant

21 group intended to be served by the applicable

22 mortgage insurance program, including, to the

23 extent the Secretary determines appropriate, au24 thorizing such unit of local government or State

25 agency to enforce the provisions of any regu-
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1 latory agreement or other program requirements

2 applicable to the related projects; and

3 ‘‘(B) the sales prices for such mortgages

4 shall be, in the determination of the Secretary,

5 the best prices that may be obtained for such

6 mortgages from a unit of general local govern7 ment or State agency, consistent with the expec8 tation and intention that the projects financed

9 will be retained for use under the applicable

10 mortgage insurance program for the life of the

11 initial mortgage insurance contract.

12 ‘‘(4) SALE OF MORTGAGES COVERING

13 UNSUBSIDIZED PROJECTS.—Notwithstanding any

14 other provision of law, the Secretary may sell mort15 gages held on unsubsidized projects on such terms and

16 conditions as the Secretary may prescribe.

17 ‘‘(m) REPORT TO CONGRESS.—Not later than June 1

18 of each year, the Secretary shall submit to the Committee

19 on Banking, Housing, and Urban Affairs of the Senate and

20 the Committee on Banking, Finance and Urban Affairs of

21 the House of Representatives, a report describing the status

22 of multifamily housing projects owned by or subject to mort23 gages held by the Secretary, which report shall include—

24 ‘‘(1) the name, address, and size of each project;

25 ‘‘(2) the nature and date of assignment;
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1 ‘‘(3) the status of the mortgage;

2 ‘‘(4) the physical condition of the project;

3 ‘‘(5) an occupancy profile of the project, includ4 ing the income, family size, and race of current resi5 dents as well as the rents paid by such residents;

6 ‘‘(6) the proportion of units in a project that are

7 vacant;

8 ‘‘(7) the date on which the Secretary became

9 mortgagee in possession;

10 ‘‘(8) the date and conditions of any foreclosure

11 sale;

12 ‘‘(9) the date of acquisition by the Secretary;

13 ‘‘(10) the date and conditions of any property

14 disposition sale;

15 ‘‘(11) a description of actions undertaken pursu16 ant to this section, including—

17 ‘‘(A) a comparison of results between ac18 tions taken after enactment of the Housing and

19 Community Development Act of 1993 and ac20 tions taken in years prior to such enactment;

21 ‘‘(B) a description of any impediments to

22 the disposition or management of multifamily

23 housing projects, together with a recommenda24 tion of proposed legislative or regulatory changes

25 designed to ameliorate such impediments;
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1 ‘‘(C) a description of actions taken to re2 structure or commence foreclosure on delinquent

3 multifamily mortgages held by the Department;

4 and

5 ‘‘(D) a description of actions taken to mon6 itor and prevent the default of multifamily hous7 ing mortgages held by the Federal Housing Ad8 ministration;

9 ‘‘(12) a description of any of the functions per10 formed in connection with this section that are con11 tracted out to public or private entities or to States,

12 including—

13 ‘‘(A) the costs associated with such delega14 tion;

15 ‘‘(B) the implications of contracting out or

16 delegating such functions for current Department

17 field or regional personnel, including anticipated

18 personnel or work load reductions;

19 ‘‘(C) necessary oversight required by De20 partment personnel, including anticipated per21 sonnel hours devoted to such oversight;

22 ‘‘(D) a description of any authority granted

23 to such public or private entities or States in

24 conjunction with the functions that have been

25 delegated or contracted out or that are not other-
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1 wise available for use by Department personnel;

2 and

3 ‘‘(E) the extent to which such public or pri4 vate entities or States include tenants of multi5 family housing projects in the disposition plan6 ning for such projects;

7 ‘‘(13) a description of the activities carried out

8 under subsection (j) during the preceding year; and

9 ‘‘(14) a description and assessment of the rules,

10 guidelines, and practices governing the Department’s

11 management of multifamily housing projects that are

12 owned by the Secretary (or for which the Secretary is

13 mortgagee in possession) as well as the steps that the

14 Secretary has taken or plans to take to improve the

15 management performance of the Department.’’.

16 (3) EFFECTIVE DATE.—The Secretary shall, by

17 notice published in the Federal Register, which shall

18 take effect upon publication, establish such require19 ments as may be necessary to implement the amend20 ments made by this subsection. The notice shall invite

21 public comments, and the Secretary shall issue final

22 regulations based on the initial notice, taking into ac23 count any public comments received.
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1 (b) REPEAL OF THE NATIONAL SMALL BUSINESS

2 TREE PLANTING PROGRAM.—Section 24 of the Small Busi3 ness Act (15 U.S.C. 651) is repealed.

4 TITLE IV—MONEY LAUNDERING

5 SEC. 401. SHORT TITLE.

6 This title may be cited as the ‘‘Money Laundering

7 Suppression Act of 1994’’.

8 SEC. 402. REFORM OF CTR EXEMPTION REQUIREMENTS TO

9 REDUCE NUMBER AND SIZE OF REPORTS

10 CONSISTENT WITH EFFECTIVE LAW EN11 FORCEMENT.

12 (a) IN GENERAL.—Section 5313 of title 31, United

13 States Code, is amended by adding at the end the following

14 new subsections:

15 ‘‘(d) MANDATORY EXEMPTIONS FROM REPORTING RE16 QUIREMENTS.—

17 ‘‘(1) IN GENERAL.—The Secretary of the Treas18 ury shall exempt, pursuant to section 5318(a)(5), a

19 depository institution from the reporting require20 ments of subsection (a) (and regulations prescribed

21 under such subsection) with respect to transactions

22 between the depository institution and the following

23 categories of entities:

24 ‘‘(A) Another depository institution.
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1 ‘‘(B) A department or agency of the United

2 States, any State, or any political subdivision of

3 any State, including any entity established

4 under the laws of the United States, any State,

5 or any political subdivision of any State, or

6 under an interstate compact between 2 or more

7 States, which exercises governmental authority

8 on behalf of the United States, the State, or the

9 political subdivision.

10 ‘‘(C) Any business or category of business

11 the reports on which have little or no value for

12 law enforcement purposes.

13 ‘‘(2) NOTICE OF EXEMPTION.—The Secretary of

14 the Treasury shall publish in the Federal Register at

15 such times as the Secretary determines to be appro16 priate (but not less frequently than once during each

17 year) a list of all the entities whose transactions with

18 a depository institution are exempt under this sub19 section from the reporting requirements of subsection

20 (a) (and regulations prescribed under such sub21 section).

22 ‘‘(e) DISCRETIONARY EXEMPTIONS FROM REPORTING

23 REQUIREMENTS.—

24 ‘‘(1) IN GENERAL.—The Secretary of the Treas25 ury may exempt, pursuant to section 5318(a)(5), a
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1 depository institution from the reporting require2 ments of subsection (a) (and regulations prescribed

3 under such subsection) with respect to transactions

4 between the depository institution and a qualified

5 business customer of the institution on the basis of in6 formation submitted to the Secretary by the institu7 tion in accordance with procedures which the Sec8 retary shall establish.

9 ‘‘(2) QUALIFIED BUSINESS CUSTOMER DE10 FINED.—For purposes of this subsection, the term

11 ‘qualified business customer’ means a business

12 which—

13 ‘‘(A) maintains a transaction account (as

14 defined in section 19(b)(1)(C) of the Federal Re15 serve Act) at the depository institution;

16 ‘‘(B) frequently engages in transactions

17 with the depository institution which are subject

18 to the reporting requirements of subsection (a)

19 (and regulations prescribed under such sub20 section); and

21 ‘‘(C) meets criteria which the Secretary de22 termines are sufficient to ensure that the pur23 poses of this subchapter are carried out without

24 requiring a report with respect to such trans25 actions.
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1 ‘‘(3) CRITERIA FOR EXEMPTION.—The Secretary

2 of the Treasury shall establish, by regulation, the cri3 teria for granting and maintaining an exemption

4 under paragraph (1).

5 ‘‘(4) GUIDELINES.—

6 ‘‘(A) IN GENERAL.—The Secretary of the

7 Treasury shall establish guidelines for depository

8 institutions to follow in selecting customers for

9 an exemption under this subsection.

10 ‘‘(B) CONTENTS.—The guidelines may in11 clude a description of the types of businesses or

12 an itemization of specific businesses for which no

13 exemption will be granted under this subsection

14 to any depository institution.

15 ‘‘(5) ANNUAL REVIEW.—The Secretary of the

16 Treasury shall prescribe regulations requiring each

17 depository institution to—

18 ‘‘(A) review, at least once during each year,

19 the qualified business customers of such institu20 tion with respect to whom an exemption has been

21 granted under this subsection; and

22 ‘‘(B) upon the completion of such review, re23 submit information about such customers, with

24 such modifications as the institution determines
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1 to be appropriate, to the Secretary for the Sec2 retary’s approval.

3 ‘‘(6) 2-YEAR PHASE-IN PROVISION.—During the

4 2-year period beginning on the date of enactment of

5 the Money Laundering Suppression Act of 1994, this

6 subsection shall be applied by the Secretary on the

7 basis of such criteria as the Secretary determines to

8 be appropriate to achieve an orderly implementation

9 of the requirements of this subsection.

10 ‘‘(f) PROVISIONS APPLICABLE TO MANDATORY AND

11 DISCRETIONARY EXEMPTIONS.—

12 ‘‘(1) LIMITATION ON LIABILITY OF DEPOSITORY

13 INSTITUTIONS.—No depository institution shall be

14 subject to any penalty which may be imposed under

15 this subchapter for the failure of the institution to file

16 a report with respect to a transaction with a cus17 tomer for whom an exemption has been granted under

18 subsection (d) or (e), unless the institution—

19 ‘‘(A) knowingly files false or incomplete in20 formation to the Secretary with respect to the

21 transaction or the customer engaging in the

22 transaction; or

23 ‘‘(B) has reason to believe at the time the

24 exemption is granted or the transaction is en25 tered into that the customer or the transaction
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1 does not meet the criteria established for grant2 ing such exemption.

3 ‘‘(2) COORDINATION WITH OTHER PROVISIONS.—

4 Any exemption granted by the Secretary of the Treas5 ury under section 5318(a) in accordance with this

6 section, and any transaction which is subject to such

7 exemption, shall be subject to any other provision of

8 law applicable to such exemption, including—

9 ‘‘(A) the authority of the Secretary, under

10 section 5318(a)(5), to revoke such exemption at

11 any time; and

12 ‘‘(B) any requirement to report, or any au13 thority to require a report on, any possible viola14 tion of any law or regulation or any suspected

15 criminal activity.

16 ‘‘(g) DEPOSITORY INSTITUTION DEFINED.—For pur17 poses of this section, the term ‘depository institution’ has

18 the meaning given to such term in section 19(b)(1)(A) of

19 the Federal Reserve Act.’’.

20 (b) REPORT REDUCTION GOAL; REPORTS.—

21 (1) IN GENERAL.—In implementing the amend22 ment made by subsection (a), the Secretary of the

23 Treasury shall seek to reduce, within a reasonable pe24 riod of time, the number of reports required to be filed

25 in the aggregate by depository institutions pursuant
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1 to section 5313(a) of title 31, United States Code, by

2 not less than 30 percent of the number filed during

3 the year preceding the date of enactment of this Act.

4 (2) INTERIM REPORT.—The Secretary of the

5 Treasury shall submit a report to the Congress not

6 later than the end of the 180-day period beginning on

7 the date of enactment of this Act on the progress made

8 by the Secretary in implementing the amendment

9 made by subsection (a).

10 (3) ANNUAL REPORT.—The Secretary of the

11 Treasury shall submit an annual report to the Con12 gress after the end of each of the first 5 calendar years

13 which begin after the date of enactment of this Act on

14 the extent to which the Secretary has reduced the

15 overall number of currency transaction reports re16 quired to be filed with the Secretary pursuant to sec17 tion 5313(a) of title 31, United States Code, consist18 ently with the purposes of such section and effective

19 law enforcement.

20 (c) STREAMLINED CURRENCY TRANSACTION RE21 PORTS.—The Secretary of the Treasury shall take such ac22 tion as may be appropriate to redesign the format of reports

23 required to be filed by any financial institution (as defined

24 in section 5312(a)(2) of title 31, United States Code) under

25 section 5313(a) of title 31, United States Code, to eliminate
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1 the need to report information which has little or no value

2 for law enforcement purposes and reduce the time and effort

3 required to prepare such report for filing by any such fi4 nancial institution under such section.

5 SEC. 403. SINGLE DESIGNEE FOR REPORTING OF SUS6 PICIOUS TRANSACTIONS.

7 (a) IN GENERAL.—Section 5318(g) of title 31, United

8 States Code, is amended by adding at the end the following

9 new paragraph:

10 ‘‘(4) SINGLE DESIGNEE FOR REPORTING SUS11 PICIOUS TRANSACTIONS.—

12 ‘‘(A) IN GENERAL.—In requiring reports

13 under paragraph (1) of suspicious transactions,

14 the Secretary of the Treasury shall designate, to

15 the extent practicable and appropriate, a single

16 officer or agency of the United States to whom

17 such reports shall be made.

18 ‘‘(B) DUTY OF DESIGNEE.—The officer or

19 agency of the United States designated by the

20 Secretary of the Treasury pursuant to subpara21 graph (A) shall refer any report of a suspicious

22 transaction to the appropriate law enforcement

23 or supervisory agency.

24 ‘‘(C) COORDINATION WITH OTHER REPORT25 ING REQUIREMENTS.—Subparagraph (A) shall
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1 not be construed as precluding any supervisory

2 agency for any financial institution from requir3 ing the financial institution to submit any infor4 mation or report to the agency or another agency

5 pursuant to any provision of law other than this

6 subsection.

7 ‘‘(D) REPORTS.—

8 ‘‘(i) REPORTS REQUIRED.—The Sec9 retary of the Treasury shall submit an an10 nual report to the Congress at the times re11 quired under clause (ii) on the number of

12 suspicious transactions reported to the offi13 cer or agency designated under subpara14 graph (A) during the period covered by the

15 report and the disposition of such reports.

16 ‘‘(ii) TIME FOR SUBMITTING RE17 PORTS.—The first report required under

18 clause (i) shall be filed before the end of the

19 1-year period beginning on the date of en20 actment of the Money Laundering Suppres21 sion Act of 1994, and each subsequent re22 port shall be filed, not later than 90 days

23 after the end of each of the 5 calendar years

24 which begin after such date of enactment.’’.
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1 (b) DESIGNATION REQUIRED TO BE MADE EXPEDI2 TIOUSLY.—The initial designation of an officer or agency

3 of the United States pursuant to the amendment made by

4 subsection (a) shall be made before the end of the 180-day

5 period beginning on the date of enactment of this Act.

6 SEC. 404. IMPROVEMENT OF IDENTIFICATION OF MONEY

7 LAUNDERING SCHEMES.

8 (a) ENHANCED TRAINING, EXAMINATIONS, AND RE9 FERRALS BY BANKING AGENCIES.—Before the end of the 6-

10 month period beginning on the date of enactment of this

11 Act, each appropriate Federal banking agency shall, in con12 sultation with the Secretary of the Treasury and other ap13 propriate law enforcement agencies—

14 (1) review and enhance training and examina15 tion procedures to improve the identification of

16 money laundering schemes involving depository insti17 tutions; and

18 (2) review and enhance procedures for referring

19 cases to any other appropriate law enforcement agen20 cy.

21 (b) IMPROVED REPORTING OF CRIMINAL SCHEMES BY

22 LAW ENFORCEMENT AGENCIES.—The Secretary of the

23 Treasury and each appropriate law enforcement agency

24 shall, on a regular basis, provide information regarding

25 money laundering schemes and activities involving deposi-
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1 tory institutions to each appropriate Federal banking agen2 cy to enhance the agency’s ability to examine for and iden3 tify money laundering.

4 (c) REPORT TO CONGRESS.—Not later than 1 year

5 after the date of enactment of this Act, the Federal banking

6 agencies shall jointly submit a report to the Congress on

7 the progress made in carrying out subsection (a) and the

8 usefulness of information received pursuant to subsection

9 (b).

10 (d) DEFINITIONS.—The terms ‘‘appropriate Federal

11 banking agency’’ and ‘‘Federal banking agencies’’ have the

12 same meanings as in section 3 of the Federal Deposit Insur13 ance Act.

14 SEC. 405. NEGOTIABLE INSTRUMENTS DRAWN ON FOREIGN

15 BANKS SUBJECT TO RECORDKEEPING AND

16 REPORTING REQUIREMENTS.

17 Section 5312(a)(3) of title 31, United States Code, is

18 amended—

19 (1) by striking ‘‘and’’ at the end of subpara20 graph (A);

21 (2) by striking the period at the end of subpara22 graph (B) and inserting ‘‘; and’’; and

23 (3) by adding at the end the following new sub24 paragraph:
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1 ‘‘(C) as the Secretary of the Treasury shall

2 provide by regulation for purposes of section

3 5316, checks, drafts, notes, money orders, and

4 other similar instruments which are drawn on or

5 by a foreign financial institution and are not in

6 bearer form.’’.

7 SEC. 406. IMPOSITION OF CIVIL MONEY PENALTIES BY AP8 PROPRIATE FEDERAL BANKING AGENCIES.

9 Section 5321 of title 31, United States Code, is amend10 ed by adding at the end the following new subsection:

11 ‘‘(e) DELEGATION OF ASSESSMENT AUTHORITY TO

12 BANKING AGENCIES.—

13 ‘‘(1) IN GENERAL.—The Secretary of the Treas14 ury shall delegate, in accordance with section

15 5318(a)(1), and subject to such terms and conditions

16 as the Secretary may impose in accordance with

17 paragraph (3), any authority of the Secretary to as18 sess a civil money penalty under this section on de19 pository institutions to the appropriate Federal bank20 ing agencies.

21 ‘‘(2) AUTHORITY OF AGENCIES.—Subject to any

22 term or condition imposed by the Secretary of the

23 Treasury under paragraph (3), the provisions of this

24 section shall apply to an appropriate Federal banking

25 agency to which is delegated any authority of the Sec-
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1 retary under this section in the same manner such

2 provisions apply to the Secretary.

3 ‘‘(3) TERMS AND CONDITIONS.—

4 ‘‘(A) IN GENERAL.—The Secretary of the

5 Treasury shall prescribe by regulation the terms

6 and conditions which shall apply to any delega7 tion under paragraph (1).

8 ‘‘(B) MAXIMUM DOLLAR AMOUNT.—The

9 terms and conditions authorized under subpara10 graph (A) may include, in the Secretary’s sole

11 discretion, a limitation on the amount of any

12 civil penalty which may be assessed by an ap13 propriate Federal banking agency pursuant to a

14 delegation under paragraph (1).

15 ‘‘(4) DEFINITIONS.—For purposes of this sub16 section, the terms ‘depository institution’ and ‘Federal

17 banking agencies’ have the same meanings as in sec18 tion 3 of the Federal Deposit Insurance Act.’’.

19 SEC. 407. UNIFORM STATE LICENSING AND REGULATION OF

20 CHECK CASHING, CURRENCY EXCHANGE, AND

21 MONEY TRANSMITTING BUSINESSES.

22 (a) UNIFORM LAWS AND ENFORCEMENT.—For pur23 poses of preventing money laundering and protecting the

24 payment system from fraud and abuse, it is the sense of

25 the Congress that the several States should—
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1 (1) establish uniform laws for licensing and reg2 ulating businesses which—

3 (A) provide check cashing, currency ex4 change, or money transmitting or remittance

5 services, or issue or redeem money orders, travel6 ers’ checks, and other similar instruments; and

7 (B) are not depository institutions (as de8 fined in section 19(b)(1)(A) of the Federal Re9 serve Act); and

10 (2) provide sufficient resources to the appro11 priate State agency to enforce such laws and regula12 tions prescribed pursuant to such laws.

13 (b) MODEL STATUTE.—It is the sense of the Congress

14 that the several States should develop, through the auspices

15 of the National Conference of Commissioners on Uniform

16 State Laws, the American Law Institute, or such other

17 forum as the States may determine to be appropriate, a

18 model statute to carry out the goals described in subsection

19 (a) which would include the following:

20 (1) LICENSING REQUIREMENTS.—A requirement

21 that any business described in subsection (a)(1) be li22 censed and regulated by an appropriate State agency

23 in order to engage in any such activity within the

24 State.
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1 (2) LICENSING STANDARDS.—A requirement

2 that—

3 (A) in order for any business described in

4 subsection (a)(1) to be licensed in the State, the

5 appropriate State agency shall review and ap6 prove—

7 (i) the business record and the capital

8 adequacy of the business seeking the license;

9 and

10 (ii) the competence, experience, integ11 rity, and financial ability of any individ12 ual who—

13 (I) is a director, officer, or super14 visory employee of such business; or

15 (II) owns or controls such busi16 ness; and

17 (B) any record, on the part of any business

18 seeking the license or any person referred to in

19 subparagraph (A)(ii), of—

20 (i) any criminal activity;

21 (ii) any fraud or other act of personal

22 dishonesty;

23 (iii) any act, omission, or practice

24 which constitutes a breach of a fiduciary

25 duty; or
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1 (iv) any suspension or removal, by any

2 agency or department of the United States

3 or any State, from participation in the con4 duct of any federally or State licensed or

5 regulated business;

6 may be grounds for the denial of any such li7 cense by the appropriate State agency.

8 (3) PROCEDURES TO ENSURE COMPLIANCE WITH

9 FEDERAL CASH TRANSACTION REPORTING REQUIRE10 MENTS.—A civil or criminal penalty for operating

11 any business referred to in paragraph (1) without es12 tablishing and complying with appropriate proce13 dures to ensure compliance with subchapter II of

14 chapter 53 of title 31, United States Code (relating to

15 records and reports on monetary instruments trans16 actions).

17 (4) CRIMINAL PENALTIES FOR OPERATION OF

18 BUSINESS WITHOUT A LICENSE.—A criminal penalty

19 for operating any business referred to in paragraph

20 (1) without a license within the State after the end

21 of an appropriate transition period beginning on the

22 date of enactment of such model statute by the State.

23 (c) STUDY REQUIRED.—The Secretary of the Treasury

24 shall conduct a study of—
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1 (1) the progress made by the several States in de2 veloping and enacting a model statute which—

3 (A) meets the requirements of subsection (b);

4 and

5 (B) furthers the goals of—

6 (i) preventing money laundering by

7 businesses which are required to be licensed

8 under any such model statute; and

9 (ii) protecting the payment system, in10 cluding the receipt, payment, collection, and

11 clearing of checks, from fraud and abuse by

12 such businesses; and

13 (2) the adequacy of—

14 (A) the activity of the several States in en15 forcing the requirements of such statute; and

16 (B) the resources made available to the ap17 propriate State agencies for such enforcement ac18 tivity.

19 (d) REPORT REQUIRED.—Before the end of the 3-year

20 period beginning on the date of enactment of this Act and

21 by the end of each of the first two 1-year periods beginning

22 after the end of such 3-year period, the Secretary of the

23 Treasury shall submit a report to the Congress containing

24 the findings and recommendations of the Secretary in con25 nection with the study under subsection (c), together with
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1 such recommendations for legislative and administrative

2 action as the Secretary may determine to be appropriate.

3 (e) RECOMMENDATIONS IN CASES OF INADEQUATE

4 REGULATION AND ENFORCEMENT BY STATES.—If the Sec5 retary of the Treasury determines that any State has been

6 unable—

7 (1) to enact a statute which meets the require8 ments described in subsection (b);

9 (2) to undertake adequate activity to enforce

10 such statute; or

11 (3) to make adequate resources available to the

12 appropriate State agency for such enforcement activ13 ity;

14 the report submitted pursuant to subsection (d) shall con15 tain recommendations designed to facilitate enactment and

16 enforcement of such a statute.

17 (f) FEDERAL FUNDING STUDY.—

18 (1) STUDY REQUIRED.—The Secretary of the

19 Treasury shall conduct a study to identify possible

20 available sources of Federal funding to cover costs to

21 the States to implement this section.

22 (2) REPORT.—The Secretary of the Treasury

23 shall submit a report to the Congress on the study

24 conducted pursuant to paragraph (1) before the end
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1 of the 18-month period beginning on the date of en2 actment of this Act.

3 SEC. 408. REGISTRATION OF MONEY TRANSMITTING BUSI4 NESSES TO PROMOTE EFFECTIVE LAW EN5 FORCEMENT.

6 (a) FINDINGS AND PURPOSES.—

7 (1) FINDINGS.—The Congress finds the following:

8 (A) Money transmitting businesses are sub9 ject to the recordkeeping and reporting require10 ments of subchapter II of chapter 53 of title 31,

11 United States Code.

12 (B) Money transmitting businesses are

13 largely unregulated businesses and are frequently

14 used in sophisticated schemes to—

15 (i) transfer large amounts of money

16 which are the proceeds of unlawful enter17 prises; and

18 (ii) evade the requirements of sub19 chapter II of chapter 53 of title 31, United

20 States Code, the Internal Revenue Code of

21 1986, and other laws of the United States.

22 (C) Information on the identity of money

23 transmitting businesses and the names of the

24 persons who own or control, or are officers or

25 employees of, a money transmitting business
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1 would have a high degree of usefulness in crimi2 nal, tax, or regulatory investigations and pro3 ceedings.

4 (2) PURPOSE.—It is the purpose of this section

5 to establish a registration requirement for businesses

6 engaged in providing check cashing, currency ex7 change, or money transmitting or remittance services,

8 or issuing or redeeming money orders, travelers’

9 checks, and other similar instruments to assist the

10 Secretary of the Treasury, the Attorney General, and

11 other supervisory and law enforcement agencies to ef12 fectively enforce the criminal, tax, and regulatory

13 laws and prevent such money transmitting businesses

14 from engaging in illegal activities.

15 (b) IN GENERAL.—Subchapter II of chapter 53 of title

16 31, United States Code, is amended by adding at the end

17 the following new section:

18 ‘‘§ 5329. Registration of money transmitting businesses

19 ‘‘(a) REGISTRATION WITH SECRETARY OF THE TREAS20 URY REQUIRED.—

21 ‘‘(1) IN GENERAL.—Any person who owns or

22 controls a money transmitting business which is not

23 a depository institution (as defined in section

24 19(b)(1)(A) of the Federal Reserve Act) shall register

25 the business (whether or not the business is licensed
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1 as a money transmitting business in any State) with

2 the Secretary of the Treasury before the end of the

3 180-day period beginning on the later of—

4 ‘‘(A) the date of enactment of this section;

5 or

6 ‘‘(B) the date the business is established.

7 ‘‘(2) FORM AND MANNER OF REGISTRATION.—

8 Subject to the requirements of subsection (b), the Sec9 retary of the Treasury shall prescribe, in regulations,

10 the form and manner for registering a money trans11 mitting business pursuant to paragraph (1).

12 ‘‘(3) BUSINESSES REMAIN SUBJECT TO STATE

13 LAW.—This section shall not be construed as supersed14 ing any requirement of State law relating to money

15 transmitting businesses operating in such State.

16 ‘‘(4) FALSE AND INCOMPLETE INFORMATION.—

17 The filing of false or materially incomplete informa18 tion in connection with the registration of a money

19 transmitting business shall be considered as a failure

20 to comply with the requirements of this subsection.

21 ‘‘(b) CONTENTS OF REGISTRATION.—The registration

22 of a money transmitting business under subsection (a) shall

23 include the following information:

24 ‘‘(1) The name and location of the business.
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1 ‘‘(2) The name and address of each person

2 who—

3 ‘‘(A) owns or controls the business;

4 ‘‘(B) is a director or officer of the business;

5 or

6 ‘‘(C) otherwise participates in the conduct

7 of the affairs of the business.

8 ‘‘(3) The name and address of any depository in9 stitution at which the business maintains a trans10 action account (as defined in section 19(b)(1)(C) of

11 the Federal Reserve Act).

12 ‘‘(4) An estimate of the volume of business to be

13 reported annually.

14 ‘‘(5) Such other information as the Secretary of

15 the Treasury may require.

16 ‘‘(c) AGENTS OF MONEY TRANSMITTING BUSI17 NESSES.—

18 ‘‘(1) MAINTENANCE OF LISTS OF AGENTS OF

19 MONEY TRANSMITTING BUSINESSES.—Pursuant to

20 regulations which the Secretary of the Treasury shall

21 prescribe, each money transmitting business shall—

22 ‘‘(A) maintain a list containing the names

23 and addresses of all persons authorized to act as

24 an agent for such business in connection with ac25 tivities described in subsection (d)(1)(A) and
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1 such other information about such agents as the

2 Secretary may require; and

3 ‘‘(B) make the list and other information

4 available on request to any appropriate law en5 forcement agency.

6 ‘‘(2) TREATMENT OF AGENT AS MONEY TRANS7 MITTING BUSINESS.—The Secretary of the Treasury

8 shall prescribe regulations establishing, on the basis of

9 such criteria as the Secretary determines to be appro10 priate, a threshold point for treating an agent of a

11 money transmitting business as a money transmit12 ting business for purposes of this section.

13 ‘‘(d) DEFINITIONS.—For purposes of this section—

14 ‘‘(1) MONEY TRANSMITTING BUSINESS.—The

15 term ‘money transmitting business’ means any busi16 ness other than the United States Postal Service

17 which—

18 ‘‘(A) provides check cashing, currency ex19 change, or money transmitting or remittance

20 services, or issues or redeems money orders, trav21 elers’ checks, and other similar instruments;

22 ‘‘(B) is required to file reports under section

23 5313; and
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1 ‘‘(C) is not a depository institution (as de2 fined in section 19(b)(1)(A) of the Federal Re3 serve Act).

4 ‘‘(2) MONEY TRANSMITTING SERVICE.—The term

5 ‘money transmitting service’ includes accepting cur6 rency or funds denominated in the currency of any

7 country and transmitting the currency or funds, or

8 the value of the currency or funds, by any means

9 through a financial agency or institution, a Federal

10 reserve bank or other facility of the Board of Gov11 ernors of the Federal Reserve System, or an electronic

12 funds transfer network.

13 ‘‘(e) CIVIL PENALTY FOR FAILURE TO COMPLY WITH

14 REGISTRATION REQUIREMENTS.—

15 ‘‘(1) IN GENERAL.—Any person who fails to

16 comply with the money transmitting business reg17 istration requirements under subsection (a) or regula18 tions prescribed under such subsection shall be liable

19 to the United States for a civil penalty of $5,000 for

20 each such violation.

21 ‘‘(2) CONTINUING VIOLATION.—Each day a vio22 lation described in paragraph (1) continues shall con23 stitute a separate violation for purposes of such para24 graph.
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1 ‘‘(3) ASSESSMENTS.—Any penalty imposed

2 under this subsection shall be assessed and collected by

3 the Secretary of the Treasury in the manner provided

4 in section 5321 and any such assessment shall be sub5 ject to the provisions of such section.’’.

6 (c) CRIMINAL PENALTY FOR FAILURE TO COMPLY

7 WITH REGISTRATION REQUIREMENTS.—Section 1960(b)(1)

8 of title 18, United States Code, is amended to read as fol9 lows:

10 ‘‘(1) the term ‘illegal money transmitting busi11 ness’ means a money transmitting business which af12 fects interstate or foreign commerce in any manner or

13 degree and—

14 ‘‘(A) is intentionally operated without an

15 appropriate money transmitting license in a

16 State where such operation is punishable as a

17 misdemeanor or a felony under State law; or

18 ‘‘(B) fails to comply with the money trans19 mitting business registration requirements under

20 section 5329 of title 31, United States Code, or

21 regulations prescribed under such section;’’.

22 (d) CIVIL FORFEITURE.—Section 981(a)(1)(A) of title

23 18, United States Code, is amended by striking ‘‘or of sec24 tion 1956 or 1957 of this title,’’ and inserting ‘‘, of section

25 1956, 1957, or 1960 of this title,’’.
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1 (e) CLERICAL AMENDMENT.—The table of sections for

2 chapter 53 of title 31, United States Code, is amended by

3 inserting after the item relating to section 5328 the follow4 ing new item:

‘‘5329. Registration of money transmitting businesses.’’.

5 SEC. 409. CRIMINAL AND CIVIL PENALTY FOR STRUCTUR6 ING DOMESTIC AND INTERNATIONAL TRANS7 ACTIONS.

8 (a) CRIMINAL PENALTY.—Section 5324 of title 31,

9 United States Code, is amended by adding at the end the

10 following new subsection:

11 ‘‘(c) CRIMINAL PENALTY.—

12 ‘‘(1) IN GENERAL.—Whoever violates this section

13 shall be fined in accordance with title 18, United

14 States Code, imprisoned for not more than 5 years,

15 or both.

16 ‘‘(2) ENHANCED PENALTY FOR AGGRAVATED

17 CASES.—Whoever violates this section while violating

18 another law of the United States or as part of a pat19 tern of any illegal activity involving more than

20 $100,000 in a 12-month period shall be fined twice

21 the amount provided in subsection (b)(3) or (c)(3) (as

22 the case may be) of section 3571 of title 18, United

23 States Code, imprisoned for not more than 10 years,

24 or both.’’.
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1 (b) AMENDMENT RELATING TO CIVIL PENALTY.—Sec2 tion 5321(a)(4)(A) of title 31, United States Code, is

3 amended by striking ‘‘willfully’’.

4 (c) TECHNICAL AND CONFORMING AMENDMENT.—Sub5 sections (a) and (b) of section 5322 of title 31, United States

6 Code, are amended by inserting ‘‘or 5324’’ after ‘‘section

7 5315’’ each place such term appears.

8 SEC. 410. GAO STUDY OF CASHIERS’ CHECKS.

9 (a) STUDY REQUIRED.—The Comptroller General of

10 the United States shall conduct a study to determine—

11 (1) the extent to which the practice of issuing of

12 cashiers’ checks by financial institutions is vulnerable

13 to money laundering schemes;

14 (2) the extent to which additional recordkeeping

15 requirements should be imposed on financial institu16 tions which issue cashiers’ checks; and

17 (3) such other factors relating to the use and reg18 ulation of cashiers’ checks as the Comptroller General

19 determines to be appropriate.

20 (b) REPORT REQUIRED.—Before the end of the 180-

21 day period beginning on the date of enactment of this Act,

22 the Comptroller General shall submit a report to the Con23 gress containing—
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1 (1) the findings and conclusions in connection

2 with the study conducted pursuant to subsection (a);

3 and

4 (2) such recommendations for legislative and ad5 ministrative action as the Comptroller General may

6 determine to be appropriate.

7 TITLE V—FAIR TRADE IN

8 FINANCIAL SERVICES

9 SEC. 501. SHORT TITLE.

10 This title may be cited as the ‘‘Fair Trade in Finan11 cial Services Act of 1994’’.

12 SEC. 502. EFFECTUATING THE PRINCIPLE OF NATIONAL

13 TREATMENT FOR BANKING ORGANIZATIONS.

14 The International Banking Act of 1978 (12 U.S.C.

15 3101 et seq.) is amended by adding at the end the following

16 new section:

17 ‘‘SEC. 18. NATIONAL TREATMENT.

18 ‘‘(a) PURPOSE.—The purpose of this section is to en19 courage foreign countries to accord national treatment to

20 United States banking organizations that operate or seek

21 to operate in those countries.

22 ‘‘(b) IDENTIFYING COUNTRIES THAT DENY NATIONAL

23 TREATMENT TO UNITED STATES BANKS OR BANK HOLD24 ING COMPANIES.—The Secretary shall identify the extent
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1 to which foreign countries deny national treatment to Unit2 ed States banking organizations—

3 ‘‘(1) according to the most recent report under

4 section 3602 of the Omnibus Trade and Competitive5 ness Act of 1988 (or update thereof); or

6 ‘‘(2) based on more recent information that the

7 Secretary deems appropriate.

8 ‘‘(c) DETERMINING WHETHER DENIAL OF NATIONAL

9 TREATMENT HAS SIGNIFICANT ADVERSE EFFECT.—

10 ‘‘(1) IN GENERAL.—The Secretary shall deter11 mine whether the denial of national treatment to

12 United States banking organizations by a foreign

13 country identified under subsection (b) has a signifi14 cant adverse effect on such organizations.

15 ‘‘(2) FACTORS TO BE CONSIDERED.—In deter16 mining whether and to what extent a foreign country

17 denies national treatment to United States banking

18 organizations, and in determining the effect of any

19 such denial on such banking organizations, the Sec20 retary shall consider appropriate factors, including—

21 ‘‘(A) the size of the foreign country’s mar22 kets for the financial services involved, and the

23 extent to which United States banking organiza24 tions operate or seek to operate in those markets;
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1 ‘‘(B) the extent to which United States

2 banking organizations may participate in devel3 oping regulations, guidelines, or other policies

4 regarding new products, services, and markets in

5 the foreign country;

6 ‘‘(C) the extent to which the foreign country

7 issues written regulations, guidelines, or other

8 policies applicable to United States banking or9 ganizations operating or seeking to operate in

10 the foreign country that are—

11 ‘‘(i) prescribed after adequate notice

12 and opportunity for comment;

13 ‘‘(ii) readily available to the public;

14 and

15 ‘‘(iii) prescribed in accordance with

16 objective standards that effectively prevent

17 arbitrary and capricious determinations;

18 ‘‘(D) the extent to which United States

19 banking organizations may offer foreign ex20 change services in the foreign country; and

21 ‘‘(E) the effects of the regulatory policies of

22 the foreign country on—

23 ‘‘(i) the lending policies of the central

24 bank of that country;
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1 ‘‘(ii) capital requirements applicable

2 in that country;

3 ‘‘(iii) the regulation of deposit interest

4 rates by that country;

5 ‘‘(iv) restrictions on the operation and

6 establishment of branches in that country;

7 and

8 ‘‘(v) restrictions on access to automated

9 teller machine networks in that country.

10 ‘‘(d) PUBLICATION OF DETERMINATION.—

11 ‘‘(1) IN GENERAL.—If the Secretary determines

12 under subsection (c) that the denial of national treat13 ment to United States banking organizations by a

14 foreign country has a significant adverse effect on

15 such organizations, the Secretary—

16 ‘‘(A) may, after initiating negotiations in

17 accordance with subsection (g), and after con18 sultation in accordance with subsection (i), pub19 lish that determination in the Federal Register;

20 ‘‘(B) shall, not less frequently than annu21 ally, in consultation with any department or

22 agency that the Secretary deems appropriate, re23 view each such determination to determine

24 whether it should be rescinded; and
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1 ‘‘(C) shall inform State bank supervisors of

2 the publication of that determination.

3 ‘‘(2) EXCEPTION FOR COUNTRIES THAT ARE PAR4 TIES TO CERTAIN AGREEMENTS GOVERNING FINAN5 CIAL SERVICES.—Paragraph (1) shall not apply to a

6 foreign country to the extent that any authority

7 under that paragraph would permit action to be

8 taken that would be inconsistent with a bilateral or

9 multilateral agreement (including any dispute resolu10 tion procedures contained in such agreement) that

11 governs financial services that—

12 (A) the President entered into with that

13 country; and

14 (B) the Senate and House of Representa15 tives approved;

16 before the date of enactment of this section.

17 ‘‘(e) SANCTIONS.—

18 ‘‘(1) ACTION BY SECRETARY OF TREASURY.—

19 ‘‘(A) IN GENERAL.—The Secretary may,

20 after consultation in accordance with subsection

21 (i), recommend to the appropriate Federal bank22 ing agency that such agency deny or suspend

23 consideration of a request for authorization filed

24 after the date of publication of a determination

25 under subsection (d)(1) by a person of a foreign
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1 country listed in such publication if the Sec2 retary determines that—

3 ‘‘(i) such action would assist the Unit4 ed States in negotiations to eliminate dis5 crimination against United States banking

6 organizations;

7 ‘‘(ii) negotiations undertaken pursuant

8 to subsection (g) are not likely to result in

9 an agreement that eliminates the denial of

10 national treatment; or

11 ‘‘(iii) the country has not adequately

12 adhered to an agreement reached as a result

13 of negotiations undertaken pursuant to sub14 section (g).

15 ‘‘(B) EXERCISE OF AUTHORITY.—The au16 thority of subparagraph (A) shall be exercised

17 according to the specific direction (if any) of the

18 President.

19 ‘‘(C) COMPLIANCE EXCEPTIONS.—The ap20 propriate Federal banking agency shall comply

21 with the recommendation of the Secretary made

22 under subparagraph (A), unless the agency deter23 mines, in writing, and transmits such deter24 mination to the Secretary and to the Congress,

25 that such recommendation—
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1 ‘‘(i) would likely result in a serious

2 impairment to the safe and sound operation

3 of the United States banking system; or

4 ‘‘(ii) would compromise the ability of a

5 Federal banking agency to resolve a failing

6 or failed financial institution because a for7 eign banking institution otherwise barred

8 by an action under subparagraph (A) rep9 resents the only bona fide reasonable offer

10 available to the Federal banking agency.

11 ‘‘(2) NO AFFECT ON CERTAIN AGREEMENTS.—

12 The exercise of authority under this subsection does

13 not affect any obligation of the United States to pur14 sue dispute resolution procedures pursuant to any

15 international agreement governing financial services,

16 approved by the House of Representatives and the

17 Senate, with respect to a dispute arising out of any

18 obligation under that agreement.

19 ‘‘(f) EXEMPTIONS FROM SANCTIONS.—

20 ‘‘(1) IN GENERAL.—Subsection (e) does not

21 apply to the subsidiaries in the United States of a

22 person of a foreign country if the Secretary deter23 mines that the banking laws and regulations of the

24 foreign country, as actually applied, meet or exceed—
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1 ‘‘(A) the standards for treatment of subsidi2 aries of United States banking organizations

3 contained in the Second Banking Directive, and

4 in any amendment to the Second Banking Direc5 tive, if the Secretary determines that such

6 amendment—

7 ‘‘(i) does not restrict any operation,

8 activity, or authority to expand any oper9 ation or activity, permitted under those

10 standards, of any subsidiary in the foreign

11 country of any such bank or bank holding

12 company; or

13 ‘‘(ii) is in accordance with national

14 treatment of subsidiaries of such banking

15 organizations; or

16 ‘‘(B) any set of standards that, taken as a

17 whole, is no less favorable to United States bank18 ing organizations than the standards referred to

19 in subparagraph (A).

20 ‘‘(2) STANDARDS FOR EXERCISE OF DISCRE21 TION.—In exercising any discretion under this sub22 section, the Secretary shall consider, with respect to

23 a bank, foreign bank, branch, agency, commercial

24 lending company, or other affiliated entity that is a
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1 person of a foreign country and that is operating in

2 the United States—

3 ‘‘(A) the extent to which the foreign country

4 is progressing toward according national treat5 ment to United States banking organizations;

6 and

7 ‘‘(B) whether the foreign country permits

8 United States banking organizations to expand

9 their activities in that country, even if that

10 country determined that the United States did

11 not accord national treatment to the banking or12 ganizations of that country.

13 ‘‘(g) NEGOTIATIONS.—

14 ‘‘(1) IN GENERAL.—The Secretary—

15 ‘‘(A) shall initiate negotiations with any

16 foreign country with respect to which a deter17 mination made under subsection (c)(1) is in

18 effect; and

19 ‘‘(B) may initiate negotiations with any

20 foreign country which denies national treatment

21 to United States banking organizations to ensure

22 that the foreign country accords national treat23 ment to such organizations.
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1 ‘‘(2) EXCEPTIONS.—Paragraph (1) does not re2 quire the Secretary to initiate negotiations with a for3 eign country if the Secretary—

4 ‘‘(A) determines that the negotiations—

5 ‘‘(i) would be so unlikely to result in

6 progress toward according national treat7 ment to United States banking organiza8 tions as to be a waste of effort; or

9 ‘‘(ii) would impair the economic inter10 ests of the United States; and

11 ‘‘(B) gives written notice of that determina12 tion to the chairperson and the ranking minority

13 member of the Committee on Banking, Housing,

14 and Urban Affairs of the Senate and of the Com15 mittee on Banking, Finance and Urban Affairs

16 of the House of Representatives.

17 ‘‘(h) REPORT.—

18 ‘‘(1) CONTENTS OF REPORT.—Not later than De19 cember 1, 1994, and biennially thereafter, the Sec20 retary shall submit to the Congress a report that—

21 ‘‘(A) specifies the foreign countries identi22 fied under subsection (b);

23 ‘‘(B) if a determination is published under

24 subsection (d)(1) with respect to the foreign

25 country, provides the reasons therefor;
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1 ‘‘(C) if the Secretary has not made or has

2 rescinded such a determination with respect to

3 the foreign country, provides the reasons therefor;

4 ‘‘(D) describes the results of any negotia5 tions conducted under subsection (g)(1) with the

6 foreign country; and

7 ‘‘(E) discusses the effectiveness of this sec8 tion in achieving the purpose of this section.

9 ‘‘(2) SUBMISSION OF REPORT.—The report re10 quired by paragraph (1) may be submitted as part of

11 a report or update submitted under section 3602 of

12 the Omnibus Trade and Competitiveness Act of 1988.

13 ‘‘(i) CONSULTATION.—Consultation in accordance

14 with this subsection means consultation with the Secretary

15 of State, the Secretary of Commerce, the United States

16 Trade Representative, and the appropriate Federal banking

17 agency.

18 ‘‘(j) DEFINITIONS.—For purposes of this section, the

19 following definitions shall apply:

20 ‘‘(1) APPROPRIATE FEDERAL BANKING AGEN21 CY.—The term ‘appropriate Federal banking agen22 cy’—

23 ‘‘(A) in the case of a noninsured State bank

24 or branch and a representative office of a foreign
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1 bank, means the Board of Governors of the Fed2 eral Reserve System; and

3 ‘‘(B) in any other case, has the same mean4 ing as in section 3 of the Federal Deposit Insur5 ance Act.

6 ‘‘(2) BANKING ORGANIZATION.—The term ‘bank7 ing organization’ means—

8 ‘‘(A) a depository institution, as defined in

9 section 3 of the Federal Deposit Insurance Act,

10 including a branch or subsidiary thereof;

11 ‘‘(B) a bank holding company, as defined in

12 section 2 of the Bank Holding Company Act of

13 1956;

14 ‘‘(C) any company required to file informa15 tion pursuant to section 4(f)(6) of the Bank

16 Holding Company Act of 1956;

17 ‘‘(D) a savings and loan holding company,

18 as defined in section 10(a)(1)(D) of the Home

19 Owners’ Loan Act; and

20 ‘‘(E) any nonbank financial entity, the pri21 mary purpose of which is to provide credit or fi22 nancing, regardless of whether such entity ac23 cepts deposits.

24 ‘‘(3) NATIONAL TREATMENT.—A foreign country

25 accords ‘national treatment’ to United States banking
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1 organizations if it offers them the same competitive

2 opportunities (including effective market access) as

3 are available to its domestic banking organizations in

4 like circumstances.

5 ‘‘(4) PERSON OF A FOREIGN COUNTRY.—The

6 term ‘person of a foreign country’ means—

7 ‘‘(A) a person organized under the laws of

8 the foreign country;

9 ‘‘(B) a person that has its principal place

10 of business in the foreign country;

11 ‘‘(C) an individual who is—

12 ‘‘(i) a citizen of the foreign country, or

13 ‘‘(ii) domiciled in the foreign country;

14 and

15 ‘‘(D) a person that is directly or indirectly

16 controlled by a person or persons described in

17 subparagraph (A) or (B), or by an individual or

18 individuals described in subparagraph (C).

19 ‘‘(5) REQUEST FOR AUTHORIZATION.—The term

20 ‘request for authorization’—

21 ‘‘(A) means an application, registration,

22 notice, or other request to commence a financial

23 service or establish a financial services office that

24 is required under title LXII of the Revised Stat25 utes, the International Banking Act of 1978, the
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1 Federal Reserve Act, the Home Owners’ Loan

2 Act, or the Bank Holding Company Act of 1956;

3 and

4 ‘‘(B) does not include any such request by

5 a company described in section 2(h)(2) of the

6 Bank Holding Company Act of 1956.

7 ‘‘(6) SECOND BANKING DIRECTIVE.—The term

8 ‘Second Banking Directive’ means the Second Council

9 Directive of December 15, 1989, on the Coordination

10 of Laws, Regulations, and Administrative Provisions

11 Relating to the Taking Up and Pursuit of the Busi12 ness of Credit Institutions and Amending Directive

13 77/780/EEC (89/646/EEC).

14 ‘‘(7) SECRETARY.—The term ‘Secretary’ means

15 the Secretary of the Treasury.’’.

16 SEC. 503. EFFECTUATING THE PRINCIPLE OF NATIONAL

17 TREATMENT FOR SECURITIES ORGANIZA18 TIONS.

19 (a) PURPOSE.—The purpose of this section is to en20 courage foreign countries to accord national treatment to

21 United States securities organizations that operate or seek

22 to operate in those countries.

23 (b) IDENTIFYING COUNTRIES THAT DENY NATIONAL

24 TREATMENT TO UNITED STATES SECURITIES ORGANIZA25 TIONS.—The Secretary shall identify whether and to what
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1 extent foreign countries deny national treatment to United

2 States securities organizations—

3 (1) according to the most recent report under sec4 tion 3602 of the Omnibus Trade and Competitiveness

5 Act of 1988 (or update thereof); or

6 (2) based upon more recent information that the

7 Secretary deems appropriate.

8 (c) DETERMINING WHETHER DENIAL OF NATIONAL

9 TREATMENT HAS SIGNIFICANT ADVERSE EFFECT.—The

10 Secretary shall determine whether the denial of national

11 treatment to United States securities organizations by a

12 foreign country identified under subsection (b) has a sig13 nificant adverse effect on such organizations.

14 (d) PUBLICATION OF DETERMINATION.—

15 (1) IN GENERAL.—If the Secretary determines

16 under subsection (c) that the denial of national treat17 ment to United States securities organizations by a

18 foreign country has a significant adverse effect on

19 such organizations, the Secretary—

20 (A) may, after initiating negotiations in

21 accordance with subsection (f), and after con22 sultation in accordance with subsection (h), pub23 lish that determination in the Federal Register;

24 and
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1 (B) shall, not less frequently than annually,

2 in consultation with any department or agency

3 that the Secretary deems appropriate, review

4 each such determination to determine whether it

5 should be rescinded.

6 (2) EXCEPTION FOR COUNTRIES THAT ARE PAR7 TIES TO CERTAIN AGREEMENTS GOVERNING FINAN8 CIAL SERVICES.—Paragraph (1) shall not apply to a

9 foreign country to the extent that any authority

10 under that paragraph would permit action to be

11 taken that would be inconsistent with a bilateral or

12 multilateral agreement (including any dispute resolu13 tion procedures contained in such agreement) that

14 governs financial services that—

15 (A) the President entered into with that country;

16 and

17 (B) the Senate and House of Representatives ap18 proved;

19 before the date of enactment of this section.

20 (e) SANCTIONS.—

21 (1) ACTION BY SECRETARY OF TREASURY.—

22 (A) IN GENERAL.—The Secretary may, after

23 consultation in accordance with subsection (h),

24 recommend to the Commission that the Commis25 sion deny or suspend consideration of a request
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1 for authorization filed after the date of publica2 tion of a determination under subsection (d)(1)

3 by a person of a foreign country listed in such

4 publication if the Secretary determines that—

5 (i) such action would assist the United

6 States in negotiations to eliminate dis7 crimination against United States securi8 ties organizations;

9 (ii) negotiations undertaken pursuant

10 to subsection (f) are not likely to result in

11 an agreement that eliminates the denial of

12 national treatment; or

13 (iii) the country has not adequately

14 adhered to an agreement reached as a result

15 of negotiations undertaken pursuant to sub16 section (f).

17 (B) EXERCISE OF AUTHORITY.—The au18 thority of subparagraph (A) shall be exercised

19 according to the specific direction (if any) of the

20 President.

21 (C) COMMISSION ACTION.—The Commission

22 shall deny or suspend consideration of a request

23 for authorization in accordance with the rec24 ommendation of the Secretary made under sub25 paragraph (A), unless such recommendation
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1 would likely result in a serious adverse impact

2 on—

3 (i) the maintenance of fair and orderly

4 securities markets; or

5 (ii) the protection of investors.

6 (D) AUTHORITY UPON DENIAL OF AUTHOR7 IZATION.—

8 (i) IN GENERAL.—In connection with

9 the denial of a request for authorization

10 under subparagraph (A), the Commission

11 may order—

12 (I) disposition of any controlling

13 interest referred to in subsection

14 (i)(9)(B)(i);

15 (II) closure of any office referred

16 to in subsection (i)(9)(B)(ii); or

17 (III) termination of any advisory

18 relationship referred to in subpara19 graphs (C) and (D) of subsection

20 (i)(9).

21 (ii) PENALTY FOR NONCOMPLIANCE.—

22 The Commission may revoke the underlying

23 registration under Federal securities laws of

24 any person who fails to comply with an

25 order issued under clause (i).
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1 (2) NOTICE REQUIRED TO FILE REQUESTS FOR

2 AUTHORIZATION.—

3 (A) IN GENERAL.—If a determination is

4 published under subsection (d)(1) with respect to

5 a foreign country, no person of that foreign

6 country may file a request for authorization un7 less such person files notice of such request si8 multaneously with the Commission and the Sec9 retary, not less than 90 days in advance of the

10 action that is the subject of the request, in such

11 form and containing such information as the

12 Commission may prescribe by rule.

13 (B) NOTIFYING SECRETARY.—The Commis14 sion shall promptly notify the Secretary of any

15 notice received under subparagraph (A).

16 (C) EXTENDING 90-DAY PERIOD.—The Com17 mission may, by order, extend for an additional

18 180 days the period during which the Commis19 sion may consider a notice received under sub20 paragraph (A).

21 (3) STANDARDS FOR EXERCISE OF DISCRE22 TION.—In exercising any discretion under this sub23 section, the Secretary shall consider, with respect to

24 a securities organization that is controlled, directly or

25 indirectly, by a person of a foreign country—
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1 (A) the extent to which the foreign country

2 is progressing toward according national treat3 ment to United States securities organizations;

4 and

5 (B) whether the foreign country permits

6 United States securities organizations to expand

7 their activities in that country, even if that

8 country determined that the United States did

9 not accord national treatment to securities orga10 nizations of that country.

11 (f) NEGOTIATIONS.—

12 (1) IN GENERAL.—The Secretary—

13 (A) shall initiate negotiations with any for14 eign country with respect to which a determina15 tion under subsection (c)(1) is in effect; and

16 (B) may initiate negotiations with any for17 eign country which denies national treatment to

18 United States securities organizations to ensure

19 that the foreign country accords national treat20 ment to such organizations.

21 (2) EXCEPTIONS.—Paragraph (1) does not re22 quire the Secretary to initiate negotiations with a for23 eign country if the Secretary—

24 (A) determines that the negotiations—
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1 (i) would be so unlikely to result in

2 progress toward according national treat3 ment to United States securities organiza4 tions as to be a waste of effort; or

5 (ii) would impair the economic inter6 ests of the United States; and

7 (B) gives written notice of that determina8 tion to the chairperson and the ranking minority

9 member of the Committee on Banking, Housing,

10 and Urban Affairs of the Senate and of the Com11 mittee of Energy and Commerce of the House of

12 Representatives.

13 (g) REPORT.—

14 (1) CONTENTS OF REPORT.—Not later than De15 cember 1, 1994, and biennially thereafter, the Sec16 retary shall submit to the Congress a report that—

17 (A) specifies the foreign countries identified

18 under subsection (b);

19 (B) if a determination is published under

20 subsection (d)(1) with respect to the foreign

21 country, provides the reasons therefor;

22 (C) if the Secretary has not made, or has

23 rescinded, a determination under subsection

24 (d)(1) with respect to the foreign country, pro25 vides the reasons therefor;
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1 (D) describes the results of any negotiations

2 conducted under subsection (f)(1) with the for3 eign country; and

4 (E) discusses the effectiveness of this section

5 in achieving the purpose of this section.

6 (2) SUBMISSION OF REPORT.—The report re7 quired by paragraph (1) may be submitted as part of

8 a report or update submitted under section 3602 of

9 the Omnibus Trade and Competitiveness Act of 1988.

10 (h) CONSULTATION.—Consultation in accordance with

11 this subsection means consultation with the Secretary of

12 State, the Secretary of Commerce, the United States Trade

13 Representative, and the Commission.

14 (i) DEFINITIONS.—For purposes of this section, the fol15 lowing definitions shall apply:

16 (1) BROKER.—The term ‘‘broker’’ has the same

17 meaning as in section 3(a)(4) of the Securities Ex18 change Act of 1934.

19 (2) COMMISSION.—The term ‘‘Commission’’

20 means the Securities and Exchange Commission.

21 (3) CONTROL.—The terms ‘‘directly or indirectly

22 controlled by’’ and ‘‘controlled, directly or indirectly’’

23 shall have the meanings given to such terms in rules

24 or regulations issued by the Secretary of the Treasury,
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1 not later than 6 months after the date of enactment

2 of this Act, after consultation with the Commission.

3 (4) DEALER.—The term ‘‘dealer’’ has the same

4 meaning as in section 3(a)(5) of the Securities Ex5 change Act of 1934.

6 (5) INVESTMENT ADVISER.—The term ‘‘invest7 ment adviser’’ has the same meaning as in section

8 202(a)(11) of the Investment Advisers Act of 1940.

9 (6) INVESTMENT COMPANY.—The term ‘‘invest10 ment company’’ has the same meaning as in section

11 3 of the Investment Company Act of 1940.

12 (7) NATIONAL TREATMENT.—A foreign country

13 accords ‘‘national treatment’’ to United States securi14 ties organizations if it offers them the same competi15 tive opportunities (including effective market access)

16 as are available to its domestic securities organiza17 tions in like circumstances.

18 (8) PERSON OF A FOREIGN COUNTRY.—The term

19 ‘‘person of a foreign country’’ means—

20 (A) a person organized under the laws of

21 the foreign country;

22 (B) a person that has its principal place of

23 business in the foreign country;

24 (C) an individual who is—

25 (i) a citizen of the foreign country; or
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HR 3474 EAS

1 (ii) domiciled in the foreign country;

2 (D) a person that is directly or indirectly

3 controlled by one or more persons described in

4 subparagraph (A), (B), or (C); and

5 (E) an investment company, an investment

6 adviser of which is a person described in any of

7 subparagraphs (A) through (D).

8 (9) REQUEST FOR AUTHORIZATION.—The term

9 ‘‘request for authorization’’ means—

10 (A) an application to register under section

11 15(b), 15B, or 15C of the Securities Exchange

12 Act of 1934, or section 203(c) of the Investment

13 Advisers Act of 1940, including an application

14 to succeed to the business of a registered entity;

15 (B) an amendment to a registration state16 ment referred to in subparagraph (A) that re17 flects—

18 (i) the acquisition of control of the reg19 istered entity; or

20 (ii) the addition of a United States of21 fice by the registered entity;

22 (C) a registration statement filed by an in23 vestment company under section 8(b) of the In24 vestment Company Act of 1940, if a person of a
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1 foreign country will serve as an investment ad2 viser to the investment company; and

3 (D) an amendment to an investment com4 pany registration statement filed under section

5 8(b) of the Investment Company Act of 1940 that

6 reflects the retention of a person of a foreign

7 country as an investment adviser.

8 (10) SECRETARY.—The term ‘‘Secretary’’ means

9 the Secretary of the Treasury.

10 (11) SECURITIES ORGANIZATION.—The term ‘‘se11 curities organization’’ means a broker, a dealer, an

12 investment company, or an investment adviser.

13 SEC. 504. EFFECTUATING THE PRINCIPLE OF NATIONAL

14 TREATMENT FOR INSURERS AND REINSUR15 ERS.

16 (a) PURPOSE.—The purpose of this section is to en17 courage foreign countries to accord national treatment to

18 United States insurers and reinsurers that operate or seek

19 to operate in those countries.

20 (b) IDENTIFYING COUNTRIES THAT DENY NATIONAL

21 TREATMENT TO UNITED STATES INSURERS OR REINSUR22 ERS.—The President or the President’s designee shall iden23 tify whether and to what extent foreign countries deny na24 tional treatment to United States insurers or reinsurers—
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1 (1) according to the most recent report under sec2 tion 3602 of the Omnibus Trade and Competitiveness

3 Act of 1988 (or update thereof); or

4 (2) based on more recent information that the

5 President deems appropriate.

6 (c) DETERMINING WHETHER DENIAL OF NATIONAL

7 TREATMENT HAS SIGNIFICANT ADVERSE EFFECT.—

8 (1) IN GENERAL.—The President shall determine

9 whether the denial of national treatment to United

10 States insurers or reinsurers by a foreign country

11 identified under subsection (b) has a significant ad12 verse effect on such organizations.

13 (2) FACTORS TO BE CONSIDERED.—In deter14 mining whether and to what extent a foreign country

15 denies national treatment to United States insurers

16 or reinsurers, and in determining the effect of any

17 such denial on such insurers or reinsurers, the Presi18 dent shall consider appropriate factors, including—

19 (A) the size of the foreign country’s markets

20 for the financial services involved, and the extent

21 to which United States insurers or reinsurers op22 erate or seek to operate in those markets;

23 (B) the extent to which United States insur24 ers or reinsurers may participate in developing

25 regulations, guidelines, or other policies regard-
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1 ing new products, services, and markets in the

2 foreign country;

3 (C) the extent to which the foreign country

4 issues written regulations, guidelines, or other

5 policies applicable to United States insurers or

6 reinsurers operating or seeking to operate in the

7 foreign country that are—

8 (i) prescribed after adequate notice and

9 opportunity for comment;

10 (ii) readily available to the public; and

11 (iii) prescribed in accordance with ob12 jective standards that effectively prevent ar13 bitrary and capricious determinations;

14 (D) the effects of the regulatory policies of

15 the foreign country on—

16 (i) the licensing policies of the insur17 ance regulator of that country;

18 (ii) capital requirements applicable in

19 that country;

20 (iii) restrictions on acquisitions or

21 joint ventures and operations thereof by in22 surers or reinsurers in that country; and

23 (iv) restrictions on the operation and

24 establishment of branches in that country.

25 (d) PUBLICATION OF DETERMINATION.—
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1 (1) IN GENERAL.—If the President determines

2 under subsection (c) that the denial of national treat3 ment to United States insurers or reinsurers by a for4 eign country has a significant adverse effect on such

5 organizations, the President—

6 (A) may, after initiating negotiations in

7 accordance with subsection (f) publish that deter8 mination in the Federal Register;

9 (B) shall, not less frequently than annually,

10 in consultation with any department or agency

11 that the President deems appropriate, review

12 each such determination to determine whether it

13 should be rescinded; and

14 (C) shall inform State insurance commis15 sioners of the publication of that determination.

16 (2) EXCEPTION FOR COUNTRIES THAT ARE PAR17 TIES TO CERTAIN AGREEMENTS GOVERNING FINAN18 CIAL SERVICES.—Paragraph (1) shall not apply to a

19 foreign country to the extent that any authority

20 under that paragraph would permit action to be

21 taken that would be inconsistent with a bilateral or

22 multilateral agreement including any dispute resolu23 tion procedures contained in such agreement that gov24 erns financial services, including insurance, that—
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1 (A) the President entered into with that

2 country; and

3 (B) the Senate and the House of Represent4 atives approved;

5 before the date of enactment of this section.

6 (e) SANCTIONS.—

7 (1) ACTIONS BY THE PRESIDENT.—

8 (A) IN GENERAL.—The President may rec9 ommend to the State insurance commissioners

10 that they deny a foreign insurer’s or reinsurer’s

11 request for authorization which is filed after the

12 date of publication of a determination under

13 subsection (d)(1) by a person of a foreign coun14 try listed in such publication if the President de15 termines that—

16 (i) such action would assist the United

17 States in negotiations to eliminate dis18 crimination against United States insurers

19 or reinsurers;

20 (ii) negotiations undertaken pursuant

21 to subsection (f) are not likely to result in

22 an agreement that eliminates the denial of

23 national treatment; or

24 (iii) the country has not adequately

25 adhered to an agreement reached as a result
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1 of negotiations undertaken pursuant to sub2 section (f).

3 (B) EXERCISE OF AUTHORITY.—If the

4 President delegates his authority under section

5 504(b), the designee’s authority under subpara6 graph (A) shall be exercised according to the spe7 cific direction (if any) of the President.

8 (C) COMPLIANCE EXCEPTIONS.—If the

9 State insurance commissioners do not act within

10 90 days on the President’s recommendations in

11 subsection (A), or if the President determines

12 that the procedure outlined in subsection (A) is

13 either inappropriate or impractical to achieve

14 the purpose of this section, the President may

15 take such action as he or she considers necessary

16 and appropriate to encourage foreign countries

17 to accord national treatment to United States

18 insurers and reinsurers that operate or seek to

19 operate in those countries.

20 (2) STANDARDS FOR EXERCISE OF DISCRE21 TION.—In exercising any discretion under subsection

22 (e), the President shall consider, with respect to an

23 insurer or reinsurer, branch, or other affiliated entity

24 that is a person of a foreign country and is operating

25 in the United States—
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HR 3474 EAS

1 (A) the extent to which the foreign country

2 is progressing toward according national treat3 ment to United States insurers or reinsurers;

4 and

5 (B) whether the foreign country permits

6 United States insurers or reinsurers to expand

7 their activities in that country, even if that

8 country determined that the United States did

9 not accord national treatment to the insurers or

10 reinsurers of that country.

11 (f) NEGOTIATIONS.—

12 (1) IN GENERAL.—The President—

13 (A) shall initiate negotiations with any for14 eign country with respect to which a determina15 tion made under subsection (c)(1) is in effect;

16 and

17 (B) may initiate negotiations with any for18 eign country which denies national treatment to

19 United States insurers or reinsurers to ensure

20 that the foreign country accords national treat21 ment to such insurers or reinsurers.

22 (2) EXCEPTIONS.—Paragraph (1) does not re23 quire the President to initiate negotiations with a for24 eign country if the President—

25 (A) determines that the negotiations—
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HR 3474 EAS

1 (i) would be so unlikely to result in

2 progress toward according national treat3 ment to United States insurers or reinsurers

4 as to be a waste of effort; or

5 (ii) would impair the economic inter6 ests of the United States; and

7 (B) gives written notice of that determina8 tion to the chairperson and the ranking minority

9 member of the appropriate Senate and House

10 committees.

11 (g) REPORT.—

12 (1) CONTENTS OF REPORT.—Not later than De13 cember 1, 1994, and biennially thereafter, the Presi14 dent shall submit to the Congress a report that—

15 (A) specifies the foreign countries identified

16 under subsection (b);

17 (B) if a determination is published under

18 subsection (d)(1) with respect to the foreign

19 country, provides the reasons therefor;

20 (C) if the President has not made or has re21 scinded such a determination with respect to the

22 foreign country, provides the reasons therefor;

23 (D) describes the results of any negotiations

24 conducted under subsection (g)(1) with the for25 eign country; and
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HR 3474 EAS

1 (E) discusses the effectiveness of this section

2 in achieving the purpose of this section.

3 (2) SUBMISSION OF REPORT.—The report re4 quired by paragraph (1) may be submitted as part of

5 a report or update submitted under section 3602 of

6 the Omnibus Trade and Competitiveness Act of 1988.

7 (h) DEFINITIONS.—For purposes of this section, the

8 following definitions shall apply:

9 (1) INSURER.—The term ‘‘insurer’’ means a

10 party to a contract of insurance who assumes the risk

11 and undertakes to indemnify the insured, or pay a

12 certain sum on the happening of a specified contin13 gency.

14 (2) NATIONAL TREATMENT.—A foreign country

15 accords ‘‘national treatment’’ to United States insur16 ers and reinsurers if it offers them the same competi17 tive opportunities (including effective market access)

18 as are available to its domestic insurers or reinsurers.

19 (3) PERSON OF A FOREIGN COUNTRY.—The term

20 ‘‘person of a foreign country’’ means—

21 (A) a person organized under the laws of

22 the foreign country;

23 (B) a person that has its principal place of

24 business in the foreign country;

25 (C) an individual who is—
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HR 3474 EAS

1 (i) a citizen of the foreign country, or

2 (ii) domiciled in the foreign country;

3 and

4 (D) a person that is directly or indirectly

5 controlled by a person or persons described in

6 subparagraph (A) or (B), or by an individual or

7 individuals described in subparagraph (C).

8 (4) PRESIDENT.—The term ‘‘President’’ means

9 the President of the United States or the President’s

10 designee.

11 (5) REINSURER.—The term ‘‘reinsurer’’ means

12 an insurer which contracts to indemnify a ceding in13 surer for all or part of a risk originally undertaken

14 by the ceding insurer.

15 (6) REQUEST FOR AUTHORIZATION.—The term

16 ‘‘request for authorization’’ means—

17 (A) an application, registration, notice, or

18 other request to commence engaging in the busi19 ness of insurance in a State; or

20 (B) an application, registration, notice, or

21 other request for renewal of authorization to en22 gage in the business of insurance in a State.
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1 SEC. 505. FINANCIAL INTERDEPENDENCE STUDY.

2 Subtitle G of title III of the Omnibus Trade and Com3 petitiveness Act of 1988 (22 U.S.C. 5351 et seq.) is amended

4 by adding at the end the following new section:

5 ‘‘SEC. 3605. FINANCIAL INTERDEPENDENCE STUDY.

6 ‘‘(a) INVESTIGATION REQUIRED.—The Secretary, in

7 consultation and coordination with the Securities and Ex8 change Commission, the Federal banking agencies, and any

9 other appropriate Federal department or agency designated

10 by the Secretary, shall conduct an investigation to deter11 mine—

12 ‘‘(1) the extent of the interdependence of the fi13 nancial services sectors of the United States and for14 eign countries—

15 ‘‘(A) whose financial services institutions

16 provide financial services in the United States;

17 or

18 ‘‘(B) whose persons have substantial owner19 ship interests in United States financial services

20 institutions; and

21 ‘‘(2) the economic, strategic, and other con22 sequences of that interdependence for the United

23 States.

24 ‘‘(b) REPORT.—

25 ‘‘(1) REPORT REQUIRED.—Not later than 3

26 years after the date of enactment of this section, the
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1 Secretary shall submit a report on the results of the

2 investigation under subsection (a) to the President,

3 the Congress, the Securities and Exchange Commis4 sion, the Federal banking agencies, and any other ap5 propriate Federal agency or department, as des6 ignated by the Secretary.

7 ‘‘(2) CONTENTS OF REPORT.—The report re8 quired under paragraph (1) shall—

9 ‘‘(A) describe the activities and estimate the

10 scope of financial services activities conducted by

11 United States financial services institutions in

12 foreign markets (differentiated according to

13 major foreign markets);

14 ‘‘(B) describe the activities and estimate the

15 scope of financial services activities conducted by

16 foreign financial services institutions in the

17 United States (differentiated according to the

18 most significant home countries or groups of

19 home countries);

20 ‘‘(C) estimate the number of jobs created in

21 the United States by financial services activities

22 conducted by foreign financial services institu23 tions and the number of jobs created in foreign

24 countries by financial service activities con-
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HR 3474 EAS

1 ducted by United States financial services insti2 tutions;

3 ‘‘(D) estimate the additional jobs and reve4 nues (both foreign and domestic) that would be

5 created by the activities of United States finan6 cial services institutions in foreign countries if

7 those countries offered such institutions the same

8 competitive opportunities (including effective

9 market access) as are available to the domestic

10 financial services institutions of those countries;

11 ‘‘(E) describe the extent to which foreign fi12 nancial services institutions discriminate

13 against United States persons in procurement,

14 employment, the provision of credit or other fi15 nancial services, or otherwise;

16 ‘‘(F) describe the extent to which foreign fi17 nancial services institutions and other persons

18 from foreign countries purchase or otherwise fa19 cilitate the marketing from the United States of

20 government and private debt instruments and

21 private equity instruments;

22 ‘‘(G) describe how the interdependence of the

23 financial services sectors of the United States

24 and foreign countries affects the autonomy and

25 effectiveness of United States monetary policy;
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HR 3474 EAS

1 ‘‘(H) describe the extent to which United

2 States companies rely on financing by or

3 through foreign financial services institutions

4 and the consequences of such reliance (including

5 disclosure of proprietary information) for the in6 dustrial competitiveness and national security of

7 the United States;

8 ‘‘(I) describe the extent to which foreign fi9 nancial services institutions, in purchasing high

10 technology products such as computers and tele11 communications equipment, favor manufacturers

12 from their home countries over United States

13 manufacturers; and

14 ‘‘(J) contain other appropriate information

15 relating to the results of the investigation re16 quired by subsection (a).

17 ‘‘(c) DEFINITIONS.—For purposes of this section the

18 following definitions shall apply:

19 ‘‘(1) DEPOSITORY INSTITUTION AND DEPOSITORY

20 INSTITUTION HOLDING COMPANY.—The terms ‘deposi21 tory institution’ and ‘depository institution holding

22 company’ have the same meanings as in section 3 of

23 the Federal Deposit Insurance Act.
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1 ‘‘(2) FEDERAL BANKING AGENCIES.—The term

2 ‘Federal banking agencies’ has the same meaning as

3 in section 3 of the Federal Deposit Insurance Act.

4 ‘‘(3) FINANCIAL SERVICES INSTITUTION.—The

5 term ‘financial services institution’ means—

6 ‘‘(A) a broker, dealer, underwriter, clearing

7 agency, transfer agent, or information processor

8 with respect to securities, including government

9 and municipal securities;

10 ‘‘(B) an investment company, investment

11 manager, investment adviser, indenture trustee,

12 or any depository institution, insurance com13 pany, or other organization operating as a fidu14 ciary, trustee, underwriter, or other financial

15 services provider;

16 ‘‘(C) any depository institution or deposi17 tory institution holding company; and

18 ‘‘(D) any other entity providing financial

19 services.

20 ‘‘(4) SECRETARY.—The term ‘Secretary’ means

21 the Secretary of the Treasury.’’.
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1 SEC. 506. FEDERAL RESERVE REPORT ON THE FOREIGN

2 BANK SUPERVISION ENHANCEMENT ACT OF

3 1991.

4 The Federal Reserve shall submit to the House and

5 Senate Banking Committees within 60 days of enactment

6 of this legislation a report on the Foreign Bank Supervision

7 Enhancement Act of 1991 including:

8 (a) the number of applicants received and from

9 what countries;

10 (b) the number of applications approved and

11 from what countries;

12 (c) the amount of time taken on each application

13 between receipt and approval or rejection of the ap14 plication;

15 (d) other agencies involved in the approval proc16 ess, how much time is taken by those agencies, and

17 any problems encountered with these agencies;

18 (e) coordination of processing applications and

19 length of time for processing between the regional

20 bank’s and the Federal Reserve Board’s staffs;

21 (f) efforts to define consolidated home country su22 pervision on an international basis, and

23 (g) suggestions for streamlining the process.

24 SEC. 507. CONFORMING AMENDMENTS.

25 (a) REPORTS ON FOREIGN TREATMENT OF UNITED

26 STATES FINANCIAL INSTITUTIONS.—Section 3602 of the
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1 Omnibus Trade and Competitiveness Act of 1988 (22

2 U.S.C. 5352) is amended—

3 (1) in the first sentence, by inserting ‘‘with up4 dates on significant developments every 2 years fol5 lowing submission of the 1994 report,’’ before ‘‘the

6 Secretary of the Treasury’’; and

7 (2) by adding at the end the following: ‘‘For pur8 poses of this section, a foreign country denies national

9 treatment to United States entities unless the foreign

10 country offers such entities the same competitive op11 portunities (including effective market access) as are

12 available to the domestic entities of the foreign coun13 try.’’.

14 (b) NEGOTIATIONS TO PROMOTE FAIR TRADE IN FI15 NANCIAL SERVICES.—Section 3603(a)(1) of the Omnibus

16 Trade and Competitiveness Act of 1988 (22 U.S.C.

17 5353(a)(1)) is amended by inserting ‘‘effective’’ before ‘‘ac18 cess’’.

19 (c) PRIMARY DEALERS IN GOVERNMENT DEBT IN20 STRUMENTS.—Section 3502(b)(1) of the Omnibus Trade

21 and Competitiveness Act of 1988 (22 U.S.C. 5342(b)(1)) is

22 amended—

23 (1) by striking ‘‘does not accord to’’ and insert24 ing ‘‘does not offer’’; and
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1 (2) by striking ‘‘as such country accords to’’ and

2 inserting ‘‘(including effective market access) as are

3 available to’’.

4 (d) CONFORMING AMENDMENTS TO THE SECURITIES

5 EXCHANGE ACT OF 1934.—

6 (1) SECTION 15.—Section 15(b)(1) of the Securi7 ties Exchange Act of 1934 (15 U.S.C. 78o(b)(1)) is

8 amended by adding at the end the following: ‘‘The

9 Commission may suspend consideration, deny reg10 istration, issue an order, or revoke registration, as

11 provided in section 403(e)(1) of the Fair Trade in Fi12 nancial Services Act of 1994.’’.

13 (2) SECTION 15B.—Section 15B(a)(2) of the Se14 curities Exchange Act of 1934 (15 U.S.C. 78o–

15 4(a)(2)) is amended by adding at the end the follow16 ing: ‘‘The Commission may suspend consideration,

17 deny registration, issue an order, or revoke registra18 tion, as provided in section 403(e)(1) of the Fair

19 Trade in Financial Services Act of 1994.’’.

20 (3) SECTION 15C.—Section 15C(a)(2) of the Se21 curities Exchange Act of 1934 (15 U.S.C. 78o–

22 5(a)(2)) is amended by adding at the end the follow23 ing: ‘‘The Commission may suspend consideration,

24 deny registration, issue an order, or revoke registra-
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1 tion, as provided in section 403(e)(1) of the Fair

2 Trade in Financial Services Act of 1994.’’.

3 (e) CONFORMING AMENDMENT TO THE INVESTMENT

4 COMPANY ACT OF 1940.—Section 8 of the Investment Com5 pany Act of 1940 (15 U.S.C. 80a–8) is amended by adding

6 at the end the following new subsection:

7 ‘‘(g) The Commission may suspend consideration,

8 deny registration, issue an order, or revoke registration, as

9 provided in section 403(e)(1) of the Fair Trade in Finan10 cial Services Act of 1994.’’.

11 (f) CONFORMING AMENDMENT TO THE INVESTMENT

12 ADVISERS ACT OF 1940.—Section 203(c)(2) of the Invest13 ment Advisers Act of 1940 (15 U.S.C. (c)(2)) is amended

14 by adding at the end the following: ‘‘The Commission may

15 suspend consideration, deny registration, issue an order, or

16 revoke registration, as provided in section 403(e)(1) of the

17 Fair Trade in Financial Services Act of 1994.’’.

18 TITLE VI—NATIONAL FLOOD

19 INSURANCE REFORM

20 SEC. 601. SHORT TITLE.

21 This title may be cited as the ‘‘National Flood Insur22 ance Reform Act of 1994’’.

23 SEC. 602. CONGRESSIONAL FINDINGS.

24 The Congress finds that—
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1 (1) the 4 principal objectives of the National

2 Flood Insurance Program are to limit increasing

3 flood control and disaster relief expenditures, to pro4 vide a prefunded mechanism to more fully indemnify

5 victims of flood-related disasters, to limit unwise de6 velopment in floodplains, and to provide affordable

7 Federal flood insurance for structures located in areas

8 of special flood hazards;

9 (2) since 1968, the National Flood Insurance

10 Program has reduced the need for taxpayer funded

11 disaster assistance and has been a factor in motivat12 ing local government mitigation efforts.

13 (3) repetitively damaged properties represent a

14 substantial problem for the National Flood Insurance

15 Program, with over 40 percent of all flood insurance

16 claims made on properties that have been damaged

17 more than once;

18 (4) the problem of erosion warrants greater anal19 ysis;

20 (5) reforms in the National Flood Insurance Pro21 gram are essential to increase participation in the

22 Program, make the Program more actuarially sound,

23 decrease the risk of losses to the United States Treas24 ury, and address the problem of properties repet25 itively damaged by floods;
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1 (6) a Federal flood insurance program that com2 bines predisaster mitigation efforts together with an

3 insurance and compliance program will reduce the

4 physical and economic effects of flood-related damage

5 on the Federal Government, State and local govern6 ments, and individuals;

7 (7) requiring regulated lending institutions, gov8 ernment agencies, and government-sponsored enter9 prises to make sure that flood insurance coverage is

10 purchased on all properties in areas of special flood

11 hazards in participating communities will increase

12 compliance with the program, and increase the pool

13 of funds, thereby decreasing the impact on the Na14 tional Flood Insurance Fund of individual flood

15 events;

16 (8) incentives in the form of reduced premium

17 rates for flood insurance under the National Flood In18 surance Program should be provided in communities

19 that have adopted and enforced exemplary or particu20 larly effective measures for comprehensive floodplain

21 management; and

22 (9) these community-based, individual mitiga23 tion, and loss prevention methods and incentives

24 should be incorporated into the National Flood Insur25 ance Program.
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1 SEC. 603. DEFINITION.

2 As used in this title, the term ‘‘Director’’ means the

3 Director of the Federal Emergency Management Agency.

4 Subtitle A—Definitions

5 SEC. 611. FLOOD DISASTER PROTECTION ACT OF 1973.

6 (a) IN GENERAL.—Section 3(a) of the Flood Disaster

7 Protection Act of 1973 (42 U.S.C. 4003(a)) is amended—

8 (1) by striking paragraph (5) and inserting the

9 following new paragraph:

10 ‘‘(5) ‘Federal entity for lending regulation’

11 means the Board of Governors of the Federal Reserve

12 System, the Federal Deposit Insurance Corporation,

13 the Comptroller of the Currency, the Office of Thrift

14 Supervision, the National Credit Union Administra15 tion Board, and the Farm Credit Administration,

16 and with respect to a particular regulated lending in17 stitution means the entity primarily responsible for

18 the supervision of the institution;’’;

19 (2) in paragraph (6), by striking the period at

20 the end and inserting a semicolon; and

21 (3) by inserting after paragraph (6) the follow22 ing new paragraphs:

23 ‘‘(7) ‘regulated lending institution’ means a

24 bank, savings association, credit union, farm credit

25 bank, Federal land bank association, production cred-
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1 it association, or similar institution subject to the su2 pervision of a Federal entity for lending regulation;

3 ‘‘(8) ‘Federal agency lender’ means the Federal

4 Housing Administration, the Farmers Home Admin5 istration, the Small Business Administration, and the

6 Veterans’ Administration, when such agency makes

7 loans secured by improved real estate or a manufac8 tured home; and

9 ‘‘(9) ‘servicer’ means a person who receives any

10 scheduled periodic payments from a borrower pursu11 ant to the terms of any loan secured by a lien on real

12 property, and who makes the payments of principal

13 and interest and such other payments with respect to

14 the amounts received from the borrower as may be re15 quired.’’.

16 (b) CONFORMING AMENDMENTS.—

17 (1) REQUIREMENTS TO PURCHASE FLOOD INSUR18 ANCE.—Section 102(b) of the Flood Disaster Protec19 tion Act of 1973 (42 U.S.C. 4012a(b)) is amended by

20 striking ‘‘(b) Each Federal instrumentality respon21 sible for the supervision, approval, regulation, or in22 suring of banks, savings and loan associations, or

23 similar institutions shall by regulation direct such in24 stitutions’’ and inserting the following:
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1 ‘‘(b) FLOOD INSURANCE PURCHASE REQUIRE2 MENTS.—Each Federal entity for lending regulation shall

3 by regulation direct regulated lending institutions’’.

4 (2) EFFECT OF NONPARTICIPATION IN FLOOD IN5 SURANCE PROGRAM.—Section 202(b) of the Flood

6 Disaster Protection Act of 1973 (42 U.S.C. 4106(b))

7 is amended by striking ‘‘Federal instrumentality de8 scribed in such section shall by regulation require the

9 institutions’’ and inserting ‘‘Federal entity for lend10 ing regulation (with respect to regulated lending in11 stitutions)’’.

12 SEC. 612. NATIONAL FLOOD INSURANCE ACT OF 1968.

13 (a) IN GENERAL.—Section 1370(a) of the National

14 Flood Insurance Act of 1968 (42 U.S.C. 4121(a)) is amend15 ed—

16 (1) in paragraph (5), by striking ‘‘and’’ at the

17 end;

18 (2) in paragraph (6), by striking the period at

19 the end and inserting a semicolon; and

20 (3) by adding at the end the following new para21 graphs:

22 ‘‘(7) the term ‘Federal entity for lending regula23 tion’ means the Board of Governors of the Federal Re24 serve System, the Federal Deposit Insurance Corpora25 tion, the Comptroller of the Currency, the Office of
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1 Thrift Supervision, and the National Credit Union

2 Administration Board, and with respect to a particu3 lar regulated lending institution, means the entity

4 primarily responsible for the supervision of the insti5 tution;

6 ‘‘(8) the term ‘regulated lending institution’

7 means a bank, savings association, credit union, farm

8 credit bank, Federal land bank association, produc9 tion credit association, or similar institution subject

10 to the supervision of a Federal entity for lending reg11 ulation;

12 ‘‘(9) the term ‘Federal agency lender’ means the

13 Federal Housing Administration, the Farmers Home

14 Administration, the Small Business Administration,

15 and the Veterans’ Administration, when such agency

16 makes loans secured by improved real estate or a

17 manufactured home;

18 ‘‘(10) the term ‘natural and beneficial floodplain

19 functions’ means—

20 ‘‘(A) the functions associated with the natu21 ral or relatively undisturbed floodplain that

22 moderate flooding, retain flood waters, reduce

23 erosion and sedimentation, mitigate the effects of

24 waves and storm surge from storms; and
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1 ‘‘(B) ancillary beneficial functions, includ2 ing maintenance of water quality, and recharge

3 of ground water

4 that reduce flood related damage;

5 ‘‘(11) the term ‘erosion control measures’ means

6 a community’s efforts to control erosion through non7 structural and structural projects;

8 ‘‘(12) the term ‘repetitive loss structure’ means

9 an insured property that has incurred flood-related

10 damage on 2 occasions during a 10-year period end11 ing on the date of the event for which a second claim

12 is made, in which the cost of repair, on the average,

13 equaled or exceeded 25 percent of the value of the

14 structure at the time of each flood event;

15 ‘‘(13) the term ‘cost of compliance with land use

16 and control measures’ means—

17 ‘‘(A) the cost of elevating or floodproofing a

18 structure so that the structure is in compliance

19 with the minimum performance standards

20 adopted by the State or community pursuant to

21 section 1315 of the National Flood Insurance Act

22 of 1968, or

23 ‘‘(B) the cost of relocation or demolition of

24 the structure if the Director demonstrates that

25 the structure will collapse or subside as a result
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1 of erosion within 30 years based on State erosion

2 data;

3 ‘‘(14) the term ‘servicer’ means any person who

4 receives any scheduled periodic payments from a bor5 rower pursuant to the terms of any loan secured by

6 a lien on real property, and who makes the payments

7 of principal and interest and such other payments

8 with respect to the amounts received from the bor9 rower as may be required.’’.

10 (b) CONFORMING AMENDMENT.—Section 1322(d) of

11 the National Flood Insurance Act of 1968 (42 U.S.C.

12 4029(d)) is amended by striking ‘‘federally supervised, ap13 proved, regulated or insured financial institution’’ and in14 serting ‘‘regulated lending institution’’.

15 Subtitle B—Compliance and

16 Increased Participation

17 SEC. 621. EXPANDED FLOOD INSURANCE PURCHASE RE18 QUIREMENTS.

19 (a) IN GENERAL.—Section 102(b) of the Flood Disas20 ter Protection Act of 1973 (42 U.S.C. 4012a(b)), as amend21 ed by section 611(b)(1), is amended—

22 (1) by striking ‘‘Each Federal entity’’ and in23 serting the following:

24 ‘‘(1) IN GENERAL.—Each Federal entity’’;
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1 (2) by inserting before ‘‘shall by regulation’’ the

2 following: ‘‘(after consultation and coordination with

3 the Federal Financial Institutions Examination

4 Council established under the Federal Financial In5 stitutions Examination Council Act of 1974)’’; and

6 (3) by adding at the end the following new para7 graphs:

8 ‘‘(2) PROCEDURES IMPLEMENTED BY FNMA,

9 FHLMC, AND FAMC.—The Federal National Mortgage

10 Association, the Federal Home Loan Mortgage Cor11 poration, and the Federal Agricultural Mortgage Cor12 poration shall implement procedures reasonably de13 signed to assure that each loan that is—

14 ‘‘(A) secured by improved real estate or a

15 manufactured home located in an area that has

16 been identified at the time of the origination of

17 the loan by the Director as an area of special

18 flood hazards and in which flood insurance is

19 available under the National Flood Insurance

20 Act of 1968; and

21 ‘‘(B) purchased by any such entity;

22 is covered for the term of the loan by flood insurance

23 in the amount provided in paragraph (1).

24 ‘‘(3) PROCEDURES IMPLEMENTED BY FEDERAL

25 AGENCY LENDERS.—Each Federal agency lender shall
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1 implement procedures reasonably designed to assure

2 that all property—

3 ‘‘(A) that secures loans that the Federal

4 agency lender makes, increases, extends, or re5 news; and

6 ‘‘(B) that is improved by real estate or a

7 manufactured home located in an area that has

8 been identified at the time of the origination of

9 the loan by the Director as an area of special

10 flood hazards and in which flood insurance is

11 available under the National Flood Insurance

12 Act of 1968;

13 is covered for the term of the loan by flood insurance

14 in the amount provided in paragraph (1).

15 ‘‘(4) DEFINITION.—For purposes of this section

16 property improved by real estate means insurable im17 provements on that property.’’.

18 (b) EFFECTIVE DATE.—The provisions of this section

19 shall apply to all transactions occurring after the expira20 tion of the 1-year period beginning on the date of enactment

21 of this title.

22 SEC. 622. ESCROW OF FLOOD INSURANCE PAYMENTS.

23 (a) IN GENERAL.—Section 102 of the Flood Disaster

24 Protection Act of 1973 (42 U.S.C. 4012a) is amended by

25 adding at the end the following new subsection:
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1 ‘‘(d) ESCROW OF FLOOD INSURANCE PAYMENTS.—

2 ‘‘(1) BY REGULATED LENDING INSTITUTIONS.—

3 Each Federal entity for lending regulation, after con4 sultation and coordination with the Federal Finan5 cial Institutions Examination Council, shall by regu6 lation require that, if a regulated lending institution

7 requires the escrowing of taxes, insurance premiums,

8 fees, or any other charges for a loan secured by resi9 dential real estate or manufactured homes, all charges

10 for flood insurance under this title for the property

11 shall be paid by the borrower to the institution for the

12 duration of the period during which the regulated

13 lending institution maintains an escrow account.

14 Upon receipt of a notice from the Director or the pro15 vider of the insurance that insurance premiums, fees,

16 or other charges are due, the institution shall pay

17 from the escrow account to the provider of the insur18 ance the amount of insurance premiums, fees, or other

19 charges owed.

20 ‘‘(2) BY FEDERAL AGENCY LENDERS.—If a Fed21 eral agency lender requires the escrowing of taxes, in22 surance premiums, fees, or any other charges, then

23 any charges for flood insurance under this title for the

24 residential real estate or the manufactured home shall

25 be paid by the borrower to the Federal agency lender
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1 for the duration of the period during which the Fed2 eral agency lender maintains an escrow account.

3 Upon receipt of a notice from the Director or the pro4 vider of the insurance that insurance premiums, fees,

5 or other charges are due, the Federal agency lender

6 shall pay from the escrow account to the provider of

7 the insurance the amount of insurance premiums, fees

8 or other charges owed.

9 ‘‘(3) APPLICABILITY OF REAL ESTATE SETTLE10 MENT PROCEDURES ACT.—Escrow accounts used to

11 collect flood insurance premiums, fees, or other

12 charges under this subsection shall be subject to the

13 provisions of section 10 of the Real Estate Settlement

14 Procedures Act of 1974.’’.

15 (b) APPLICABILITY.—Section 102(d) of the Flood Dis16 aster Protection Act of 1973, as added by subsection (a),

17 shall apply with respect to any loan made, increased, ex18 tended, or renewed after the expiration of the 1-year period

19 beginning on the date of enactment of this title.

20 SEC. 623. NOTICE REQUIREMENTS.

21 Section 1364 of the National Flood Insurance Act of

22 1968 (42 U.S.C. 4104a) is amended to read as follows:

23 ‘‘SEC. 1364. NOTICE REQUIREMENTS.

24 ‘‘(a) LENDING INSTITUTIONS.—Each Federal entity

25 for lending regulation, after consultation and coordination
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1 with the Federal Financial Institutions Examination

2 Council, shall by regulation require that before a regulated

3 lending institution makes, increases, extends, or renews a

4 loan secured by improved real estate or a manufactured

5 home located in an area that has been identified by the Di6 rector as an area of special flood hazards, the institution

7 shall notify the borrower of the special flood hazards and

8 of the need to purchase and maintain flood insurance.

9 ‘‘(b) FEDERAL AGENCY LENDERS.—Before a Federal

10 agency lender makes, increases, extends, or renews a loan

11 secured by improved real estate or a manufactured home

12 located in an area that has been identified by the Director

13 as an area of special flood hazards, the Federal agency lend14 er shall notify the borrower of the special flood hazards and

15 of the need to purchase and maintain flood insurance.

16 ‘‘(c) PARTICIPATING COMMUNITIES.—The Director

17 shall by regulation require each participating community,

18 upon receiving the semiannual list prepared by the Director

19 of all revisions to and updates of flood insurance rate maps

20 made during the preceding 6 months, to determine whether

21 any properties in their community have been affected, and

22 to provide annual notice by mail, notice by publication,

23 notice on tax assessments, or notice by other reasonable

24 method, to regulated lending institutions that are known

25 to lend in the community, and to the owners of all prop-
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1 erties newly determined to be, or no longer to be, in an

2 area of special flood hazards, of the flood insurance pur3 chase requirements under section 102(b).

4 ‘‘(d) CONTENTS OF NOTICE.—Notification required by

5 this section shall include a warning, in a form to be estab6 lished by the Director, stating that the real estate or manu7 factured home securing the loan is located in an area of

8 special flood hazards, a description of the flood insurance

9 purchase requirements under section 102(b), a statement

10 that flood insurance coverage may be purchased under the

11 National Flood Insurance Program and may also be avail12 able from private insurers, and any other information that

13 the Director considers necessary to carry out the purposes

14 of the National Flood Insurance Program.’’.

15 SEC. 624. PLACEMENT OF FLOOD INSURANCE BY REGU16 LATED LENDING INSTITUTION, FEDERAL

17 AGENCY LENDER, OR SERVICER.

18 (a) REQUIRED ACTIONS BY LENDER.—Section 102 of

19 the Flood Disaster Protection Act of 1973 (42 U.S.C.

20 4012a), as amended by section 622(a), is amended by add21 ing at the end the following new subsection:

22 ‘‘(e) REQUIRED ACTIONS BY LENDER.—

23 ‘‘(1) NOTIFICATION TO BORROWER OF LACK OF

24 COVERAGE.—If, at the time of origination or at any

25 other time during the term of a loan secured by im-
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1 proved real estate or by a manufactured home located

2 in an area that has been identified by the Director

3 as an area of special flood hazards and in which flood

4 insurance is available under this title, a regulated

5 lending institution, Federal agency lender, or servicer

6 determines that the building or manufactured home

7 and any personal property securing the loan held or

8 serviced by the regulated lending institution, Federal

9 agency lender, or servicer is not covered by flood in10 surance, in an amount not less than the amount re11 quired by subsection (b)(1), the regulated lending in12 stitution, Federal agency lender, or servicer shall no13 tify the borrower, in a form to be established by the

14 Director, that the borrower should obtain, at the bor15 rower’s expense, an amount of flood insurance that is

16 not less than the amount required by subsection

17 (b)(1), for the term of the loan. If, not later than 45

18 days after receiving such notification, the borrower

19 fails to purchase such flood insurance, the regulated

20 lending institution, Federal agency lender, or servicer

21 shall purchase the insurance on behalf of the borrower

22 and may charge the borrower for the cost of premiums

23 and fees incurred by the regulated lending institution,

24 Federal agency lender, or servicer in purchasing the

25 insurance.
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1 ‘‘(2) REVIEW.—

2 ‘‘(A) BY THE DIRECTOR.—A borrower may

3 request, based upon the submission of supporting

4 technical data, that the Director review a deter5 mination that the improved real estate or manu6 factured home securing the loan is located in an

7 area of special flood hazards. Not later than 45

8 days after the Director receives the request, the

9 Director shall review the determination and pro10 vide the borrower with a letter stating whether or

11 not the property is in an area of special flood

12 hazards. The determination of the Director shall

13 be final. If the Director fails to respond to a re14 quest within 45 days, the property shall be

15 deemed not to be located in an area having spe16 cial flood hazards.

17 ‘‘(B) INSURANCE NOT REQUIRED.—If a per18 son is provided by the borrower with a letter is19 sued by the Director pursuant to subparagraph

20 (A) during the preceding 1-year period, stating

21 that the property is not in an area of special

22 flood hazards, such person shall have no obliga23 tion under this title to require the purchase of

24 flood insurance on the property.’’.

25 (b) APPLICABILITY.—
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1 (1) IN GENERAL.—Except as provided in para2 graph (2), section 102(e) of the Flood Disaster Protec3 tion Act of 1973, as added by subsection (a), shall

4 apply to all loans outstanding on or after the date of

5 enactment of this title.

6 (2) LOANS REGULATED BY THE FARM CREDIT

7 ADMINISTRATION.—With respect to loans held by in8 stitutions regulated by the Farm Credit Administra9 tion, section 102(e) of the Flood Disaster Protection

10 Act of 1973, as added by subsection (a), shall apply

11 only to loans originating on or after the date of enact12 ment of this title.

13 SEC. 625. STANDARD FLOOD HAZARD DETERMINATION

14 FORMS.

15 (a) IN GENERAL.—Chapter III of the National Flood

16 Insurance Act of 1968 (42 U.S.C. 4101 et seq.) is amended

17 by adding at the end the following new section:

18 ‘‘SEC. 1365. STANDARD FLOOD HAZARD DETERMINATION

19 FORMS.

20 ‘‘(a) DEVELOPMENT.—The Director, in consultation

21 with the Federal entities for lending regulation, and after

22 notice and comment, shall develop a standard flood hazard

23 determination form (hereafter in this section referred to as

24 the ‘determination form’) for use in connection with loans

25 secured by improved real estate or a manufactured home
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1 located in an area of special flood hazards and in which

2 flood insurance is available under this title. The determina3 tion form may be maintained in a printed, computerized,

4 or electronic manner.

5 ‘‘(b) DESIGN AND CONTENTS.—The determination

6 form shall state whether the property is in an area of spe7 cial flood hazards, the risk premium rate classification es8 tablished for the special flood hazard area in which the

9 property is located, the complete map and panel numbers

10 for the property, and the date of the map used for the deter11 mination. If the complete map and panel numbers for the

12 property are not available because the property is not lo13 cated in a community that is participating in the National

14 Flood Insurance Program or because no map exists for the

15 relevant area, the determination form shall so state.

16 ‘‘(c) REQUIRED USE.—Each Federal entity for lending

17 regulation shall by regulation require the use of the deter18 mination form by regulated lending institutions. Each Fed19 eral agency lender shall by regulation provide for the use

20 of the determination form. The Federal National Mortgage

21 Association, the Federal Home Loan Mortgage Corporation,

22 and the Federal Agricultural Mortgage Corporation shall

23 require use of the determination form by any person from

24 whom they purchase loans.
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1 ‘‘(d) GUARANTEES REGARDING INFORMATION.—In re2 cording information on a determination form, a person

3 may rely on information provided by a third party to the

4 extent that the third party guarantees the accuracy of the

5 information.

6 ‘‘(e) RELIANCE ON PREVIOUS DETERMINATION.—A

7 person or institution increasing, extending, renewing, or

8 purchasing a loan may rely on a previous determination

9 as to whether property is in a special flood hazard area,

10 if the previous determination was made not more than 5

11 years before the date of the transaction, and the basis for

12 the previous determination has been set forth on a deter13 mination form.’’.

14 (b) APPLICABILITY.—Section 1365 of the National

15 Flood Insurance Act of 1968, as added by subsection (a),

16 shall apply to all loans originated on or after the expiration

17 of the 6-month period beginning on the date the standard

18 flood hazard determination form is finalized by the Direc19 tor.

20 SEC. 626. EXAMINATIONS REGARDING COMPLIANCE BY

21 REGULATED LENDING INSTITUTIONS.

22 (a) AMENDMENT TO FEDERAL DEPOSIT INSURANCE

23 ACT.—Section 10 of the Federal Deposit Insurance Act (12

24 U.S.C. 1820) is amended by adding at the end the following

25 new subsection:
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1 ‘‘(h) FLOOD HAZARD INSURANCE COMPLIANCE BY IN2 SURED DEPOSITORY INSTITUTIONS REQUIRED.—

3 ‘‘(1) EXAMINATIONS.—The appropriate Federal

4 banking agency shall, during each scheduled on-site

5 examination required by this section, determine

6 whether the insured depository institution is comply7 ing with the requirements of the National Flood In8 surance Program.

9 ‘‘(2) REPORT.—Not later than 1 year after the

10 date of enactment of the National Flood Insurance

11 Reform Act of 1994, and biannually thereafter for the

12 next 4 years, each appropriate Federal banking agen13 cy shall submit a report to Congress on compliance

14 by insured depository institutions with the require15 ments of the National Flood Insurance Program. The

16 report shall include a description of the methods used

17 to determine compliance, the number of institutions

18 examined during the reporting year, a listing and

19 total number of institutions found to be in non20 compliance, actions taken to correct incidents of non21 compliance, and an analysis of compliance, including

22 a discussion of any trends, patterns, and problems,

23 and recommendations regarding reasonable actions to

24 improve the efficiency of the examinations processes.’’.
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1 (b) AMENDMENT TO THE FEDERAL CREDIT UNION

2 ACT.—Section 204 of the Federal Credit Union Act (12

3 U.S.C. 1784) is amended by adding at the end the following

4 new subsection:

5 ‘‘(e) FLOOD HAZARD INSURANCE COMPLIANCE BY IN6 SURED CREDIT UNIONS REQUIRED.—

7 ‘‘(1) EXAMINATION.—The Board shall, during

8 each examination conducted under this section, deter9 mine whether the insured credit union is complying

10 with the requirements of the National Flood Insur11 ance Program.

12 ‘‘(2) REPORT.—Not later than 1 year after the

13 date of enactment of the National Flood Insurance

14 Reform Act of 1994, and biannually thereafter for the

15 next 4 years, the Board shall submit a report to Con16 gress on compliance by insured credit unions with the

17 requirements of the National Flood Insurance Pro18 gram. The report shall include a description of the

19 methods used to determine compliance, the number of

20 insured credit unions examined during the reporting

21 year, a listing and total number of insured credit

22 unions found to be in noncompliance, actions taken

23 to correct incidents of noncompliance, and an analy24 sis of compliance, including a discussion of any

25 trends, patterns, and problems, and recommendations
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1 regarding reasonable actions to improve the efficiency

2 of the examinations processes.’’.

3 SEC. 627. PENALTIES AND CORRECTIVE ACTIONS FOR FAIL4 URE TO REQUIRE FLOOD INSURANCE, ES5 CROW, OR NOTIFY.

6 Section 102 of the Flood Disaster Protection Act of

7 1973 (42 U.S.C. 4012a), as amended by sections 622 and

8 624, is amended by adding at the end the following new

9 subsections:

10 ‘‘(f) CIVIL PENALTIES.—

11 ‘‘(1) IN GENERAL.—A regulated lending institu12 tion that is found to have a pattern or practice of vio13 lating this section may be assessed a civil penalty by

14 the appropriate Federal entity for lending regulation

15 of not more than $350 for each such violation. A pen16 alty under this subsection may be issued only after

17 notice and an opportunity for a hearing on the

18 record.

19 ‘‘(2) TOTAL AMOUNT.—The total amount of pen20 alties assessed under this subsection against a single

21 regulated lending institution for any calendar year

22 may not exceed $100,000.

23 ‘‘(3) SALES OR TRANSFERS.—The subsequent

24 sale or other transfer of a loan by a regulated lending

25 institution that has committed a violation of this sec-
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1 tion shall not affect the liability of the transferring

2 institution with respect to any penalty under this

3 subsection. An institution shall not be liable for a vio4 lation relating to a loan committed by another insti5 tution that previously held the loan.

6 ‘‘(4) 3-YEAR LIMIT.—No penalty may be imposed

7 under this subsection after the expiration of the 3-

8 year period beginning on the date of the occurrence

9 of the violation.

10 ‘‘(g) ADDITIONAL ACTIONS.—If a Federal entity for

11 lending regulation determines—

12 ‘‘(1) that a regulated lending institution has

13 demonstrated a pattern and practice of noncompli14 ance in violation of the regulations issued pursuant

15 to subsection (b) or subsection (d) or the notice re16 quirements under section 1364 of the National Flood

17 Insurance Act of 1968; and

18 ‘‘(2) that the regulated lending institution has

19 not demonstrated measurable improvement in compli20 ance despite the issuance of penalties under subsection

21 (f);

22 the agency may require the regulated lending institution

23 to take such remedial actions as are necessary to ensure

24 that the regulated lending institution is in satisfactory com-
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1 pliance with the requirements of the National Flood Insur2 ance Program.’’.

3 SEC. 628. FINANCIAL INSTITUTIONS EXAMINATION COUN4 CIL.

5 Section 1006 of the Federal Financial Institutions Ex6 amination Council Act of 1978 (12 U.S.C. 3305) is amend7 ed by adding at the end the following new subsection:

8 ‘‘(g) FLOOD INSURANCE.—The Council shall consult

9 with and assist the Federal entities for lending regulation,

10 as such term is defined in section 1370(a)(7) of the National

11 Flood Insurance Act of 1968, in developing and coordinat12 ing uniform standards and requirements for use by regu13 lated lending institutions under the National Flood Insur14 ance Program.’’.

15 SEC. 629. CONFORMING AMENDMENT.

16 The section heading for section 102 of the Flood Disas17 ter Protection Act of 1973 (42 U.S.C. 4012a) is amended

18 to read as follows:
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1 ‘‘FLOOD INSURANCE PURCHASE AND COMPLIANCE

2 REQUIREMENTS AND ESCROW ACCOUNTS’’.

3 Subtitle C—Ratings and Incentives

4 for Community Floodplain Man5 agement Programs

6 SEC. 631. COMMUNITY RATING SYSTEM AND INCENTIVES

7 FOR COMMUNITY FLOODPLAIN MANAGE8 MENT.

9 (a) REQUIREMENT FOR PARTICIPATION IN FLOOD IN10 SURANCE PROGRAM.—Section 1315 of the National Flood

11 Insurance Act of 1968 (42 U.S.C. 4022) is amended—

12 (1) by striking the section heading and inserting

13 the following:

14 ‘‘SEC. 1315. STATE AND LOCAL LAND USE CONTROLS.’’;

15 (2) by striking ‘‘After December’’ and inserting

16 the following:

17 ‘‘(a) REQUIREMENT FOR PARTICIPATION IN FLOOD IN18 SURANCE PROGRAM.—After December’’; and

19 (3) by adding at the end the following new sub20 section:

21 ‘‘(b) COMMUNITY RATING SYSTEM AND INCENTIVES

22 FOR COMMUNITY FLOODPLAIN MANAGEMENT.—

23 ‘‘(1) AUTHORITY AND GOALS.—The Director

24 shall carry out a community rating system program

25 to evaluate the measures adopted by communities vol-
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1 untarily participating in the community rating sys2 tem, to provide incentives for measures to reduce the

3 risk of flood or erosion damage that exceed the criteria

4 set forth in section 1361, to encourage adoption of

5 more effective measures to protect natural and bene6 ficial floodplain functions, floodplain and erosion

7 management, and to promote the reduction of Federal

8 flood insurance losses.

9 ‘‘(2) INCENTIVES.—The program shall provide

10 incentives in the form of credits on premium rates for

11 flood insurance coverage in communities that the Di12 rector determines have adopted and enforced measures

13 to reduce the risk of flood and erosion damage that

14 exceed the criteria set forth in section 1361. In pro15 viding incentives under this paragraph, the Director

16 may provide for credits to flood insurance premium

17 rates in communities that the Director determines

18 have—

19 ‘‘(A) implemented measures to protect natu20 ral and beneficial floodplain functions; and

21 ‘‘(B) adopted erosion control measures.

22 ‘‘(3) CREDITS.—The credits on premium rates

23 for flood insurance coverage shall be based on the esti24 mated reduction in flood and erosion damage risks re25 sulting from the measures adopted by the community
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1 under this program. If a community has received

2 mitigation assistance under section 1366, the credits

3 shall be phased-in as determined by the Director.’’.

4 (b) REPORTS.—Two years after the date of enactment

5 of this title and biannually thereafter, the Director shall

6 submit a report to the Congress regarding the program

7 under section 1315(a) of the National Flood Insurance Act

8 of 1968. Each report shall include an analysis of the cost9 effectiveness and other accomplishments and shortcomings

10 of the program and any recommendations of the Director

11 for legislation regarding the program.

12 SEC. 632. FUNDING.

13 Section 1310(a) of the National Flood Insurance Act

14 of 1968 (42 U.S.C. 4017(a)) is amended—

15 (1) in paragraph (4), by striking ‘‘and’’ at the

16 end;

17 (2) in paragraph (5), by striking the period at

18 the end and inserting a semicolon; and

19 (3) by adding after paragraph (5) the following

20 new paragraph:

21 ‘‘(6) for carrying out the program under section

22 1315(b);’’.

23 SEC. 633. REASONABLE FEES.

24 A lender may charge a borrower a reasonable fee for

25 making a flood insurance determination.
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1 Subtitle D—Mitigation of Flood and

2 Erosion Risks

3 SEC. 641. MITIGATION ASSISTANCE IN FEDERAL INSUR4 ANCE ADMINISTRATION.

5 Section 1105(a) of the Housing and Urban Develop6 ment Act of 1968 (42 U.S.C. 4129) is amended—

7 (1) by striking ‘‘(a) There is hereby’’ and insert8 ing the following:

9 ‘‘(a) ESTABLISHMENT.—There is hereby’’; and

10 (2) by striking subsection (b) and inserting the

11 following:

12 ‘‘(b) COORDINATION OF MITIGATION ACTIVITIES.—The

13 Director shall coordinate all mitigation activities, includ14 ing the administration of the program for mitigation assist15 ance under section 1367. These activities shall include the

16 development and implementation of various mitigation ac17 tivities and techniques, the provision of advice and assist18 ance regarding mitigation to States, communities, and in19 dividuals, including planning assistance under section

20 1367(d), coordination with other Federal flood and erosion

21 mitigation efforts, and coordination with State and local

22 governments and public and private agencies and organiza23 tions for collection and dissemination of information re24 garding erosion.’’.
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1 SEC. 642. AUTHORIZATION OF NATIONAL FLOOD AND ERO2 SION MITIGATION FUNDS UNDER SECTION

3 1362.

4 Chapter III of the National Flood Insurance Act of

5 1968 (42 U.S.C. 4101 et seq.), as amended by section 625,

6 is amended by adding at the end the following new section:

7 ‘‘SEC. 1366. NATIONAL FLOOD AND EROSION MITIGATION

8 PROGRAM.

9 ‘‘(a) EXPENDITURES.—For flood and erosion mitiga10 tion activities authorized under section 1367, the Director

11 may expend from the National Flood Insurance Fund—

12 ‘‘(1) up to $10,000,000 in the fiscal year ending

13 September 30, 1994;

14 ‘‘(2) up to $15,000,000 in the fiscal year ending

15 September 30, 1995;

16 ‘‘(3) up to $20,000,000 in the fiscal year ending

17 September 30, 1996;

18 ‘‘(4) up to $20,000,000 in each fiscal year there19 after; and

20 ‘‘(5) any amounts recaptured under section

21 1367(i).

22 ‘‘(b) REPORT.—Not later than 1 year after the date

23 of enactment of the National Flood Insurance Reform Act

24 of 1994 and biannually thereafter, the Director shall submit

25 a report to the Congress describing the status of flood and
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1 erosion mitigation activities carried out with funds author2 ized under this section.’’.

3 SEC. 643. STATE AND COMMUNITY MITIGATION ASSISTANCE

4 PROGRAM.

5 (a) IN GENERAL.—Chapter III of the National Flood

6 Insurance Act of 1968 (42 U.S.C. 4101 et seq.), as amended

7 by sections 625 and 642, is amended by adding at the end

8 the following new section:

9 ‘‘SEC. 1367. STATE AND COMMUNITY MITIGATION ASSIST10 ANCE.

11 ‘‘(a) AUTHORITY.—The Director shall develop and im12 plement a financial assistance program with amounts made

13 available under section 1366 to States and communities for

14 planning and activities designed to reduce the risk of flood

15 and erosion damage to insured structures and to protect

16 natural and beneficial floodplain functions.

17 ‘‘(b) MITIGATION PLAN REQUIREMENT.—To be eligible

18 to receive financial mitigation assistance, a State or com19 munity shall develop, and have approved by the Director,

20 a flood and erosion risk mitigation plan (hereafter in this

21 section referred to as a ‘mitigation plan’), that is consistent

22 with the criteria established by the Director under section

23 1361. The mitigation plan shall include a comprehensive

24 strategy for mitigation activities adopted by the State or

25 community following a public hearing.
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1 ‘‘(c) NOTIFICATION OF APPROVAL.—Not later than 120

2 days after the submission of a mitigation plan, the Director

3 shall notify the State or community submitting the plan

4 of the Director’s approval or disapproval of the plan. If the

5 Director does not approve a plan, the Director shall notify

6 the State or community in writing of the reasons for such

7 disapproval.

8 ‘‘(d) PLANNING ASSISTANCE.—

9 ‘‘(1) IN GENERAL.—The Director shall make

10 planning assistance available to States and commu11 nities for developing mitigation plans.

12 ‘‘(2) FUNDING.—From any amounts made avail13 able for use under section 1366 of the National Flood

14 Insurance Act of 1968 in any fiscal year, the Director

15 may use not more than $1,500,000 to provide plan16 ning assistance grants to States or communities to de17 velop mitigation plans under this subsection.

18 ‘‘(3) LIMITATIONS.—

19 ‘‘(A) TIMING.—A grant for planning assist20 ance may be awarded to a State or community

21 once every 5 years and each grant may cover a

22 period of 1 to 3 years.

23 ‘‘(B) AMOUNT.—A grant for planning as24 sistance may not exceed—

25 ‘‘(i) $150,000, to any State; or
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1 ‘‘(ii) $50,000, to any community.

2 ‘‘(C) GEOGRAPHIC.—Not more than

3 $300,000 may be awarded to any 1 State and all

4 communities located in that State for planning

5 assistance in each fiscal year.

6 ‘‘(e) ELIGIBLE MITIGATION ACTIVITIES.—The Director

7 shall determine eligibility for assistance under this section

8 for mitigation activities that shall be technically feasible

9 and cost-effective. These activities may include—

10 ‘‘(1) elevation, relocation, demolition, or

11 floodproofing of structures;

12 ‘‘(2) the construction, repair, or restoration of

13 levees, seawalls, and other structures that reduce the

14 risk of flood damage;

15 ‘‘(3) erosion control measures including beach

16 nourishment;

17 ‘‘(4) acquisition by States and communities of

18 property substantially damaged by flood for public

19 use as the Director determines is consistent with

20 sound land management and use in such area; and

21 ‘‘(5) the provision of technical assistance by

22 States to communities and individuals to conduct eli23 gible mitigation activities.

24 ‘‘(f) LIMITATIONS ON MITIGATION ASSISTANCE.—
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1 ‘‘(1) AMOUNT.—The amount of mitigation assist2 ance provided under subsection (e) may not exceed in

3 any 5-year period—

4 ‘‘(A) $10,000,000, to any State; or

5 ‘‘(B) $3,300,000, to any community.

6 ‘‘(2) GEOGRAPHIC.—Not more than $20,000,000

7 may be awarded to any 1 State and all communities

8 located in that State for mitigation assistance in any

9 5-year period.

10 ‘‘(g) MATCHING REQUIREMENT.—The Director may

11 provide mitigation assistance to a State or community in

12 an amount not to exceed 3 times the amount that the State

13 or community certifies, as the Director shall require, that

14 the State or community will contribute from other funds

15 to carry out mitigation planning under subsection (d) and

16 eligible activities under subsection (e).

17 ‘‘(h) OVERSIGHT OF MITIGATION PLANS.—The Direc18 tor shall conduct oversight of recipients of mitigation assist19 ance to ensure that the mitigation assistance is used in com20 pliance with approved plans.

21 ‘‘(i) RECAPTURE.—If the Director determines that a

22 State or community that has received mitigation assistance

23 has not carried out the mitigation activities as set forth

24 in the mitigation plan, the Director shall recapture any un25 expended amounts and deposit the amounts in the Fund.
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1 ‘‘(j) DEFINITION OF COMMUNITY.—For purposes of

2 this section, the term ‘community’ means a political sub3 division that has zoning and building code jurisdiction over

4 a particular area of special flood hazards, and that is par5 ticipating in the National Flood Insurance Program.

6 ‘‘(k) PREFERENCES FOR MITIGATION GRANTS TO COM7 MUNITIES.—

8 ‘‘(1) COST-BENEFIFICIAL PLANS.—In providing

9 mitigation grants to communities under this section,

10 the Director shall give preference to communities with

11 mitigation plans that are the most cost-beneficial to

12 the Flood Insurance Fund.

13 ‘‘(2) ADDITIONAL CRITERIA.—Subject to para14 graph (1), the Director will also give preference to

15 communities that—

16 ‘‘(A) have the highest rates of participation

17 by property owners in the Federal flood insur18 ance program;

19 ‘‘(B) have qualified for credits on premium

20 rates under section 1315(b); and

21 ‘‘(C) have experienced repetitive losses that

22 have been most costly to the Fund.’’.

23 (b) REGULATIONS.—Not later than 6 months after date

24 of enactment of this title, the Director shall issue regulations
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1 implementing section 1367 of the National Flood Insurance

2 Act of 1968, as added by subsection (a).

3 SEC. 644. REPEAL OF PROGRAM FOR PURCHASE OF CER4 TAIN INSURED PROPERTIES.

5 (a) REPEAL.—Section 1362 of the National Flood In6 surance Act of 1968 (42 U.S.C. 4103) is repealed.

7 (b) TRANSITION.—Notwithstanding the repeal under

8 subsection (a), the Director may continue to purchase prop9 erty under subsections (a) and (b) of section 1362 of the

10 National Flood Insurance Act of 1968, as such section ex11 isted immediately before the date of enactment of this title,

12 for a period of 1 year beginning on the date of enactment

13 of this title.

14 SEC. 645. TERMINATION OF EROSION THREATENED STRUC15 TURES PROGRAM.

16 (a) IN GENERAL.—Section 1306 of the National Flood

17 Insurance Act of 1968 (42 U.S.C. 4013) is amended by

18 striking subsection (c).

19 (b) TRANSITION.—The Director may pay amounts

20 under flood insurance contracts for demolition or relocation

21 of structures as provided in section 1306(c) of the National

22 Flood Insurance Act of 1968 (as in effect immediately before

23 the date of enactment of this title) only during the 1-year

24 period beginning on the date of enactment of this title.
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1 SEC. 646. CONGRESSIONAL FINDINGS AND DECLARATION

2 OF PURPOSE UNDER THE NATIONAL FLOOD

3 INSURANCE ACT OF 1968.

4 Section 1302 of the National Flood Insurance Act of

5 1968 (42 U.S.C. 4001) is amended by striking subsection

6 (g).

7 Subtitle E—Flood Insurance Task

8 Force

9 SEC. 651. FLOOD INSURANCE INTERAGENCY TASK FORCE.

10 (a) ESTABLISHMENT.—There is established an inter11 agency task force to be known as the Flood Insurance Task

12 Force (hereafter in this title referred to as the ‘‘Task

13 Force’’).

14 (b) MEMBERSHIP.—

15 (1) IN GENERAL.—The Task Force shall consist

16 of 13 members, who shall be the designees of—

17 (A) the Director;

18 (B) the Federal Housing Commissioner;

19 (C) the Secretary of Veterans Affairs;

20 (D) the Administrator of the Farmers Home

21 Administration;

22 (E) the Administrator of the Small Busi23 ness Administration;

24 (F) each member of the Federal Financial

25 Institutions Examination Council;
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1 (G) the chairman of the Board of Directors

2 of the Federal Home Loan Mortgage Corpora3 tion;

4 (H) the chairman of the Board of Directors

5 of the Federal National Mortgage Association;

6 and

7 (I) the chairman of the Federal Agricultural

8 Mortgage Corporation.

9 (2) QUALIFICATIONS.—Members of the Task

10 Force shall be designated for membership on the Task

11 Force by reason of demonstrated knowledge and com12 petence regarding the National Flood Insurance Pro13 gram.

14 (c) DUTIES.—The Task Force shall—

15 (1) make recommendations to the head of each

16 Federal agency and corporation referred to under sub17 section (b)(1) regarding the establishment or adoption

18 of standardized enforcement procedures among such

19 agencies and corporations responsible for enforcing

20 compliance with the requirements under the National

21 Flood Insurance Program to ensure the fullest possible

22 compliance with such requirements;

23 (2) study the extent to which Federal agencies

24 and the secondary mortgage market can provide as-
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1 sistance in ensuring compliance with the require2 ments under the National Flood Insurance Program;

3 (3) study the extent to which existing programs

4 of Federal agencies and corporations for compliance

5 with the requirements under the National Flood In6 surance Program can serve as a model for other Fed7 eral agencies responsible for enforcing compliance,

8 and submit to the Congress a report describing the

9 study and any conclusions;

10 (4) study—

11 (A) the extent to which the flood insurance

12 premium rate structure could be revised to—

13 (i) minimize existing premium rate

14 subsidies;

15 (ii) reduce or eliminate disaster assist16 ance payments in high-risk erosion areas;

17 (iii) incorporate premium rate adjust18 ments for erosion hazards; and

19 (iv) account for catastrophic loss

20 events; and

21 (B) how changes in the premium rate struc22 ture could potentially impact other Federal dis23 aster assistance programs;

24 (5) propose strategies to establish an actuarial25 based premium structure to account for all insurable
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1 risks identified under the National Flood Insurance

2 Act of 1968, as amended by this title; and

3 (6) develop guidelines regarding enforcement and

4 compliance procedures, based on the studies and find5 ings of the Task Force and publishing the guidelines

6 in a usable format.

7 (d) REPORTS.—Not later than 2 years after the date

8 of enactment of this title, the Task Force shall transmit to

9 the Congress a report describing its studies and any conclu10 sions.

11 (e) COMPENSATION.—Members of the Task Force shall

12 receive no additional compensation by reason of their serv13 ice on the Task Force.

14 (f) CHAIRPERSON.—The Director shall select 1 member

15 to serve as the chairperson of the Task Force (hereafter in

16 this section referred to as the ‘‘Chairperson’’).

17 (g) MEETINGS AND ACTION.—The Task Force shall

18 meet at the call of the Chairperson or a majority of the

19 members of the Task Force and may take action by a vote

20 of the majority of the members. The Federal Insurance Ad21 ministrator shall coordinate and call the initial meeting of

22 the Task Force.

23 (h) OFFICERS.—The Chairperson may appoint officers

24 to carry out the duties of the Task Force under subsection

25 (c).
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1 (i) STAFF OF FEDERAL AGENCIES.—Upon the request

2 of the Chairperson, the head of any of the Federal agencies

3 and corporations referred to in subsection (b)(1) may detail,

4 on a nonreimbursable basis, any of the personnel of the

5 agency to the Task Force to assist the Task Force in carry6 ing out its duties under this title.

7 (j) POWERS.—In carrying out this section, the Task

8 Force may hold hearings, sit and act at times and places,

9 take testimony, receive evidence and assistance, provide in10 formation, and conduct research as the Task Force considers

11 appropriate.

12 (k) TERMINATION.—The Task Force shall terminate 2

13 years after the date on which all members of the Task Force

14 have been designated under subsection (b)(1).

15 Subtitle F—Miscellaneous

16 Provisions

17 SEC. 661. MAXIMUM FLOOD INSURANCE COVERAGE

18 AMOUNTS.

19 (a) IN GENERAL.—Section 1306(b) of the National

20 Flood Insurance Act of 1968 (42 U.S.C. 4013(b)) is amend21 ed—

22 (1) in paragraph (1)(A)—

23 (A) by inserting ‘‘and’’ at the end of clause

24 (i); and

25 (B) by striking clause (iii);
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1 (2) by striking subparagraph (B) of paragraph

2 (1) and inserting the following new subparagraph:

3 ‘‘(B) in the case of any nonresidential prop4 erty, including churches—

5 ‘‘(i) $100,000 aggregate liability for

6 each structure; and

7 ‘‘(ii) $100,000 aggregate liability for

8 any contents related to each structure;’’;

9 (3) by striking subparagraph (C) of paragraph

10 (1);

11 (4) in paragraph (2), by striking ‘‘so as to en12 able’’ and all that follows through the end of the para13 graph and inserting ‘‘up to an amount, including the

14 limits specified in clause (i) of paragraph (1)(A), of

15 $250,000 multiplied by the number of dwelling units

16 in the building;’’;

17 (5) in paragraph (3), by striking ‘‘so as to en18 able’’ and all that follows through the end of the para19 graph and inserting ‘‘up to an amount of $90,000 for

20 any single-family dwelling and $240,000 for any resi21 dential structure containing more than one dwelling

22 unit;’’; and

23 (6) by striking paragraph (4) and inserting the

24 following new paragraph:
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1 ‘‘(4) in the case of any nonresidential property,

2 including churches, additional flood insurance in ex3 cess of the limits specified in clauses (i) and (ii) of

4 paragraph (1)(B) shall be made available to every in5 sured upon renewal and every applicant for insur6 ance up to an amount of $2,400,000 for each struc7 ture and $2,400,000 for any contents related to each

8 structure; and’’.

9 (b) ACTUARIAL RISK PREMIUMS ON REPETITIVE LOSS

10 STRUCTURES.—Section 1306(b) of the National Flood In11 surance Act of 1968 (42 U.S.C. 4013(b)) is amended—

12 (1) in paragraph (5), by striking ‘‘and’’ at the

13 end; and

14 (2) by striking paragraph (6) and inserting the

15 following new paragraph:

16 ‘‘(6) upon determining that a property is a re17 petitive loss structure, and after making a payment

18 to the insured under section 1304(e), the Director

19 shall charge the applicable risk premium rate for

20 flood insurance based on consideration of the risk in21 volved and accepted actuarial principles under sec22 tion 1307(a)(1), except that the Director may not in23 crease the premium rate above the level authorized in

24 paragraph (7); and’’.
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1 (c) ANNUAL 10-PERCENT PREMIUM RATE INCREASE

2 CAP.—Section 1306(b) of the National Flood Insurance Act

3 of 1968 (42 U.S.C. 4013(b)) is amended by adding at the

4 end the following:

5 ‘‘(7) the Director may not increase the premium

6 rate applied to a structure in any 12-month period

7 by more than 10 percent over the rate previously ap8 plied to that structure during the preceding 12-month

9 period.’’.

10 (d) CONFORMING AMENDMENTS.—Section 1306(b)(5)

11 of the National Flood Insurance Act of 1968 (42 U.S.C.

12 4013(b)(5)) is amended—

13 (1) by striking ‘‘(A), (B), or (C)’’ and inserting

14 ‘‘(A) or (B)’’; and

15 (2) by striking ‘‘(1)(C),’’.

16 SEC. 662. ADDITIONAL COVERAGE FOR COMPLIANCE WITH

17 LAND USE AND CONTROL MEASURES.–

18 (a) IN GENERAL.—Section 1304 of the National Flood

19 Insurance Act of 1968 (42 U.S.C. 4011) is amended—

20 (1) by redesignating subsection (b) as subsection

21 (c); and

22 (2) by inserting after subsection (a) the following

23 new subsection:

24 ‘‘(b) The national flood insurance program established

25 pursuant to subsection (a) shall enable the purchase of in-
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1 surance to cover the cost of compliance with land use and

2 control measures for—

3 ‘‘(1) properties that are repetitive loss structures;

4 ‘‘(2) properties that have flood damage in which

5 the cost of repairs equals or exceeds 50 percent of the

6 value of the structure at the time of the flood event;

7 and

8 ‘‘(3) properties that have sustained flood damage

9 on multiple occasions, if the Director determines that

10 it is cost-effective and in the best interests of the Na11 tional Flood Insurance Fund to require compliance

12 with the land use and control measures.

13 The Director shall impose a surcharge on each insured of

14 not more than $50 per policy to provide cost of compliance

15 coverage in accordance with the provisions of this sub16 section.’’.

17 (b) APPLICABILITY.—The provisions of subsection (a)

18 shall apply only to structures that sustain flood-related

19 damage after the date of enactment of this title.

20 SEC. 663. FLOOD INSURANCE PROGRAM ARRANGEMENTS

21 WITH PRIVATE INSURANCE ENTITIES.

22 Section 1345(b) of the National Flood Insurance Act

23 of 1968 (42 U.S.C. 4081(b)) is amended by striking the pe24 riod at the end and inserting the following: ‘‘and without
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1 regard to the provisions of the Federal Advisory Committee

2 Act.’’.

3 SEC. 664. UPDATING OF FLOOD INSURANCE RATE MAPS.

4 Section 1360 of the National Flood Insurance Act of

5 1968 (42 U.S.C. 4101) is amended by adding at the end

6 the following new subsections:

7 ‘‘(e) ASSESSMENT OF NEED TO UPDATE AREAS.—

8 ‘‘(1) PERIODIC ASSESSMENTS.—Not less than

9 once during each 5-year period (the first such period

10 beginning on the date of enactment of the National

11 Flood Insurance Reform Act of 1994), or more often

12 as the Director determines necessary, the Director

13 shall assess the need to revise and update each flood

14 insurance rate map, based on an analysis of all natu15 ral hazards affecting flood risks.

16 ‘‘(2) UPON REQUEST.—Upon the request of a

17 State or community stating that a flood insurance

18 rate map needs revision or updating, the Director

19 shall review and update the flood insurance rate map

20 for the State or community. The Director may require

21 the State or community to pay a portion of the cost

22 of updating the map.

23 ‘‘(f) AVAILABILITY.—To promote compliance with the

24 requirements of this title, the Director shall make flood in25 surance rate maps and related information available free
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1 of charge to Federal agencies and to State agencies directly

2 responsible for coordinating the National Flood Insurance

3 Program and to appropriate representatives of communities

4 participating in the National Flood Insurance Program,

5 and at a reasonable cost to all other persons pursuant to

6 section 1310.

7 ‘‘(g) NOTIFICATION.—The Director shall publish in the

8 Federal Register or by other comparable method, notice of

9 each revision to or update of a flood insurance rate map,

10 issued in the form of a Letter of Map Amendment or Letter

11 of Map Revision. Each map revision or update shall become

12 effective upon publication. Such comparable methods shall

13 include all pertinent information, provide for regular and

14 frequent distribution, and be at least as accessible to map

15 users as the Federal Register. Notices published in the Fed16 eral Register, or otherwise, shall also include information

17 on how to obtain copies of the revisions or updates.

18 ‘‘(h) AVAILABILITY.—On March 1 and October 1 of

19 each year, the Director shall publish separately and make

20 available in their entirety within a compendium, all revi21 sions to and updates of flood insurance rate maps and all

22 Letters of Map Amendment and Letters of Map Revision

23 that were published in the Federal Register or distributed

24 through other comparable methods during the preceding 6

25 months, free of charge, to Federal agencies, States, and com-
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1 munities participating in the National Flood Insurance

2 Program pursuant to section 1310 and at cost to all other

3 persons.’’.

4 SEC. 665. EVALUATION OF EROSION HAZARDS.

5 (a) IN GENERAL.—As soon as practicable and not

6 later than 2 years after the date of enactment of this Act,

7 the Director shall submit to Congress a report—

8 (1) listing all communities that are likely to be

9 identified as having an erosion hazard areas;

10 (2) estimating the amount of flood insurance

11 claims attributable to erosion;

12 (3) assessing the full economic impact of erosion

13 on the National Flood Insurance Fund;

14 (4) measuring the costs and benefits of expendi15 tures necessary from the National Flood Insurance

16 Fund to complete mapping of erosion hazard areas.

17 (b) AUTHORIZATION TO MAP EROSION HAZARD

18 AREAS.—In developing an estimate of the amount of flood

19 insurance claims attributable to erosion pursuant to sub20 section (a), the Director is authorized to map a statistically

21 valid and representative number of communities with ero22 sion hazard areas throughout the United States, including

23 coastal, Great Lakes and riverine areas.

24 (c) ECONOMIC IMPACT STUDY.—The report required

25 under subsection (a)—
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1 (1) shall assess the economic impact of—

2 (A) erosion on communities likely to be

3 identified as having erosion hazard areas; and

4 (B) the denial of flood insurance and the es5 tablishment of actuarial rates in communities

6 likely to be identified as having erosion hazard

7 areas;

8 (2) shall be prepared by an independent private

9 sector firm;

10 (3) provide for consultation with a statistically

11 valid and representative number of communities like12 ly to be identified as having erosion hazard areas;

13 and

14 (4) address all significant economic factors, in15 cluding the impact on—

16 (A) the value of residential and commercial

17 properties in communities with erosion hazards;

18 (B) community tax revenues due to poten19 tial changes in property values or commercial

20 activity;

21 (C) employment, including the potential

22 loss or gain of existing and new jobs in the com23 munity;

24 (D) existing businesses and future economic

25 development; and
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1 (E) the estimated cost of Federal and State

2 disaster assistance to flood victims.

3 (d) COST AND BENEFITS OF MAPPING.—The report re4 quired under subsection (a), shall—

5 (1) measure the costs and benefits of mapping

6 erosion hazard areas based upon the Director’s esti7 mate of the actual and prospective amount of flood

8 insurance claims attributable to erosion. If the Direc9 tor determines that the savings to the National Flood

10 Insurance Fund will exceed the cost of mapping ero11 sion hazard areas, the Director shall assess whether

12 the expenditures to map erosion hazard areas is the

13 most cost-beneficial use of flood insurance premiums

14 in light of alternative uses of those funds, including—

15 (A) funding the mitigation assistance pro16 gram under section 1367 of the National Flood

17 Insurance Act of 1968 (as added by section 643

18 of this Act);

19 (B) funding additional coverage for compli20 ance with land use and control measures under

21 section 1304(b) of the National Flood Insurance

22 Act of 1968 (as added by section 662 of this Act);

23 and

24 (C) revising and updating flood insurance

25 rate maps under section 1360(e) of the National
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1 Flood Insurance Act of 1968 (as added by section

2 664 of this Act).

3 (2) measure the costs and benefits of mapping

4 erosion, other than those directly related to the finan5 cial condition of the National Flood Insurance Pro6 gram, and the cost of not mapping erosion.

7 (e) DEFINITION.—For purposes of this section the term

8 ‘‘erosion hazard area’’ means, based on erosion rate infor9 mation and other historical data available, an area where

10 erosion or avulsion is likely to result in damage to or loss

11 of buildings and infrasturcture within a 60-year period.

12 (f) AUTHORIZATION OF APPROPRIATION.—There are

13 authorized to be appropriated to the Director $5,000,000

14 to carry out this section.

15 SEC. 666. COORDINATION OF FLOOD INSURANCE RATE MAP

16 REVISIONS AND UPDATES WITH COASTAL

17 ZONE MANAGEMENT PROGRAMS.

18 IN GENERAL.—In the implementation of revisions to

19 and updates of flood insurance rate maps, the Director shall

20 consult and share information with the Under Secretary of

21 Commerce for Oceans and Atmosphere and representatives

22 from State coastal zone management programs.
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1 SEC. 667. TECHNICAL MAPPING ADVISORY COUNCIL.

2 (a) ESTABLISHMENT.—There is established a council

3 to be known as the Technical Mapping Advisory Council

4 (hereafter in this section referred to as the ‘‘Council’’).

5 (b) MEMBERSHIP.—

6 (1) IN GENERAL.—The Council shall consist of

7 the Director, or the Director’s designee, and 12 addi8 tional members to be appointed by the Director or his

9 designee, and shall include—

10 (A) the Under Secretary of Commerce for

11 Oceans and Atmosphere (or his or her designee);

12 (B) a member of recognized surveying and

13 mapping professional associations and organiza14 tions;

15 (C) a member of recognized professional en16 gineering associations and organizations;

17 (D) a member of recognized professional as18 sociations or organizations representing flood

19 hazard determination firms;

20 (E) a representative of the United States

21 Geologic Survey;

22 (F) a representative of State geologic survey

23 programs;

24 (G) a representative of State national flood

25 insurance coordination offices;
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1 (H) a representative of the Federal National

2 Mortgage Association and the Federal Home

3 Loan Mortgage Corporation; and

4 (I) a representative of a regulated lending

5 institution.

6 (2) QUALIFICATIONS.—Members of the Council

7 shall be appointed based on their demonstrated knowl8 edge and competence regarding surveying, cartog9 raphy, remote sensing, geographic information sys10 tems, or the technical aspects of preparing and using

11 flood insurance rate maps.

12 (c) DUTIES.—The Council shall—

13 (1) make recommendations to the Director on

14 how to improve in a cost-effective manner the accu15 racy, general quality, ease of use, and distribution

16 and dissemination of flood insurance rate maps;

17 (2) recommend to the Director mapping stand18 ards and guidelines for flood insurance rate maps;

19 and

20 (3) transmit an annual report to the Director

21 describing—

22 (A) the activities of the Council;

23 (B) an evaluation of the status and per24 formance of flood insurance rate maps and map25 ping activities to revise and update flood insur-
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1 ance rate maps, as established by the amend2 ments made under section 664; and

3 (C) a summary of recommendations made

4 by the Council to the Director.

5 (d) CHAIRPERSON.—The members of the Council shall

6 elect 1 member to serve as the chairperson of the Council

7 (hereafter in this section referred to as the ‘‘Chairperson’’).

8 (e) COORDINATION.—To ensure that the Council’s rec9 ommendations are consistent to the maximum extent prac10 ticable with national digital spatial data collection and

11 management standards, the Chairperson shall consult with

12 the Chairperson of the Federal Geographic Data Committee

13 (established pursuant to OMB Circular A–16).

14 (f) COMPENSATION.—Members of the Council shall re15 ceive no additional compensation by reason of their service

16 on the Council.

17 (g) MEETINGS AND ACTIONS.—

18 (1) IN GENERAL.—The Council shall meet not

19 less than twice each year at the request of the Chair20 person or a majority of its members and may take ac21 tion by a vote of the majority of the members.

22 (2) INITIAL MEETING.—The Director, or a person

23 designated by the Director, shall request and coordi24 nate the initial meeting of the Council.
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1 (h) OFFICERS.—The Chairperson may appoint officers

2 to assist in carrying out the duties of the Council under

3 subsection (c).

4 (i) STAFF OF THE FEDERAL EMERGENCY MANAGE5 MENT AGENCY.—Upon the request of the Chairperson, the

6 Director may detail, on a nonreimbursable basis, personnel

7 of the Federal Emergency Management Agency to assist the

8 Council in carrying out its duties.

9 (j) POWERS.—In carrying out this section, the Council

10 may hold hearings, receive evidence and assistance, provide

11 information, and conduct research as it considers appro12 priate.

13 (k) TERMINATION.—The Council shall terminate 5

14 years after the date on which all members of the Council

15 have been appointed under subsection (b)(1).

16 SEC. 668. FUNDING FOR INCREASED ADMINISTRATIVE AND

17 OPERATIONAL RESPONSIBILITIES.

18 (a) AVAILABILITY OF FUND.—Section 1310(a) of the

19 National Flood Insurance Act of 1968 (42 U.S.C. 4017(a)),

20 as amended by section 632, is amended in the matter pre21 ceding paragraph (1), by inserting ‘‘(except as otherwise

22 provided)’’ after ‘‘without fiscal year limitation’’.

23 (b) CREDITS OF FUND.—Section 1310(b) of the Na24 tional Flood Insurance Act of 1968 (42 U.S.C. 4017(b)) is

25 amended—
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1 (1) in paragraph (5), by striking ‘‘and’’ at the

2 end;

3 (2) by redesignating paragraph (6) as para4 graph (7); and

5 (3) by inserting after paragraph (5) the follow6 ing new paragraph:

7 ‘‘(6) any penalties collected under section 102(f)

8 of the Flood Disaster Protection Act of 1973; and’’.

9 SEC. 669. SEPARATE ACCOUNT FOR NATIONAL FLOOD IN10 SURANCE FUND.

11 Section 1310(a) of the National Flood Insurance Act

12 (42 U.S.C. 4017(a)) is amended by inserting before ‘‘which

13 shall be available’’ the following: ‘‘which shall be main14 tained in the Treasury as an account separate from any

15 other funds available to the Director, and’’.

16 SEC. 670. NONWAIVER OF FLOOD PURCHASE REQUIREMENT

17 FOR RECIPIENTS OF FEDERAL DISASTER AS18 SISTANCE.

19 Section 311(b) of the Robert T. Stafford Disaster Relief

20 and Emergency Assistance Act (42 U.S.C. 5154(b)) is

21 amended by adding at the end the following: ‘‘The require22 ments of this subsection may not be waived under section

23 301.’’.
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1 SEC. 671. INSURANCE WAITING PERIOD.

2 Section 1308 of the National Flood Insurance Act of

3 1968 (42 U.S.C. 4014) is amended by adding at the end

4 the following new subsection:

5 ‘‘(e)(1) The Director shall establish a waiting period

6 of not less than 10 days from the presentment of payment

7 of a premium for the initial purchase of flood insurance

8 under this title. Flood insurance coverage shall not be avail9 able with respect to any claim for damage incurred during

10 such waiting period.

11 ‘‘(2) This subsection shall not apply to the initial pur12 chase of flood insurance under this title when the purchase

13 of insurance is in connection with the making, increasing,

14 extension, or renewal of a loan.’’.

15 SEC. 672. AGRICULTURAL STRUCTURES.

16 Section 1361 of the National Flood Insurance Act of

17 1968 (42 U.S.C. 4102) is amended by adding at the end

18 the following new subsection:

19 ‘‘(d) AGRICULTURAL STRUCTURES.—

20 ‘‘(1) EXEMPTION FROM FLOODWAY ACTIVITY RE21 STRICTIONS.—Notwithstanding any other provision of

22 law, the adequate land use and control measures

23 adopted in an area (or subdivision thereof) pursuant

24 to section 1315(a) may provide, at the discretion of

25 the appropriate State or local authority, for the re-
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1 pair and restoration to pre-damaged conditions of an

2 agricultural structure that—

3 ‘‘(A) is a repetitive loss structure; or

4 ‘‘(B) has incurred flood-related damage to

5 the extent that the cost of restoring the structure

6 to its pre-damaged condition would equal or ex7 ceed 50 percent of the market value of the struc8 ture before the damage occurred.

9 ‘‘(2) DEFINITIONS.—For purposes of this sub10 section—

11 ‘‘(A) the term ‘agricultural structure’ means

12 any structure used exclusively in connection with

13 the production, harvesting, storage, raising, or

14 drying of agricultural commodities; and

15 ‘‘(B) the term ‘agricultural commodities’

16 means agricultural commodities and livestock.’’.

17 SEC. 673. IMPLEMENTATION REVIEW BY THE DIRECTOR.

18 Section 1320 of the National Flood Insurance Act of

19 1968 (42 U.S.C. 4027) is amended—

20 (1) by striking ‘‘The Director’’ and inserting

21 ‘‘(a) IN GENERAL.—The Director’’; and

22 (2) by adding at the end the following new sub23 section:

24 ‘‘(b) EFFECTS OF FLOOD INSURANCE PROGRAM.—The

25 Director shall include, as part of the biennial report sub-
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1 mitted under subsection (a), a chapter reporting on the ef2 fects on the flood insurance program observed through im3 plementation of requirements under the National Flood In4 surance Reform Act of 1994.’’.

5 SEC. 674. REGULATIONS.

6 The Director and the head of any appropriate Federal

7 agency may each issue any regulations necessary to carry

8 out the applicable provisions of this title and the applicable

9 amendments made by this title.

10 SEC. 675. PROHIBITED FLOOD DISASTER ASSISTANCE.

11 (a) GENERAL PROHIBITION.—Notwithstanding any

12 other provision of law, no Federal disaster relief assistance

13 made available in a flood disaster area may be used to make

14 a payment (including any loan assistance payment) to a

15 person for repair, replacement, or restoration for damage

16 to any personal, residential, or commercial property if that

17 person at any time has received flood disaster assistance

18 that was conditional on the person first having obtained

19 flood insurance under applicable Federal law and subse20 quently having failed to obtain and maintain flood insur21 ance as required under applicable Federal law on such

22 property.

23 (b) AMENDMENT TO THE FLOOD DISASTER PROTEC24 TION ACT OF 1973.—Section 102(a) of the Flood Disaster

25 Protection Act of 1973 (42 U.S.C. 4012a(a)) is amended—
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1 (1) by striking ‘‘, during the anticipated eco2 nomic or useful life of the project,’’; and

3 (2) by adding at the end the following: ‘‘The re4 quirement of maintaining flood insurance shall apply

5 during the life of the property, regardless of transfer

6 of ownership of such property.’’.

7 (c) DEFINITION.—For purposes of this section, the

8 term ‘‘flood disaster area’’ means an area with respect to

9 which—

10 (1) the Secretary of Agriculture finds, or has

11 found, to have been substantially affected by a natu12 ral disaster in the United States pursuant to section

13 321(a) of the Consolidated Farm and Rural Develop14 ment Act (7 U.S.C. 1961(a)); or

15 (2) the President declares, or has declared, the

16 existence of a major disaster or emergency pursuant

17 to the Robert T. Stafford Disaster Relief and Emer18 gency Assistance Act (42 U.S.C. 5121 et seq.), as a

19 result of flood conditions existing in or affecting that

20 area.

21 (d) EFFECTIVE DATE.—The amendments made by this

22 section shall apply to disasters declared after the date of

23 enactment of the National Flood Insurance Reform Act of

24 1994.
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1 TITLE VII—GENERAL

2 PROVISIONS

3 SEC. 701. STUDY OF EFFECT OF THE NORTHERN SPOTTED

4 OWL ON SMALL BUSINESS CONCERNS.

5 (a) DEFINITIONS.—For purposes of this section—

6 (1) the term ‘‘Administrator’’ means the Admin7 istrator of the Small Business Administration; and

8 (2) the term ‘‘small business concerns’’ has the

9 same meaning as in section 3 of the Small Business

10 Act.

11 (b) BUSINESS STUDY.—The Administrator in con12 sultation with the Secretary of the Interior shall conduct

13 a study that analyzes—

14 (1) the nature and extent of economic losses to

15 small business concerns in the forest products indus16 try that have occurred as a result of the designation

17 of the Northern spotted owl as a threatened species

18 pursuant to section 4 of the Endangered Species Act

19 of 1973, or that are reasonably likely to occur in the

20 future;

21 (2) the ability of small business concerns to re22 coup the fair market value of equipment and other

23 property employed in the harvest and processing of

24 timber prior to the listing of the Northern spotted owl

25 as a threatened species; and
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1 (3) the ability of small business concerns in the

2 affected area to offer alternative products or services

3 for which there is a ready or likely suitable market.

4 (c) REPORT.—

5 (1) IN GENERAL.—Not later than 6 months after

6 the date of enactment of this section, the Adminis7 trator and the Secretary of the Interior shall submit

8 a report of the results of the study conducted under

9 subsection (c) to the President and to the relevant

10 committees of the Senate and the House of Represent11 atives.

12 (2) OPTIONS.—The report shall include options

13 for Congress and the President for compensating

14 small business concerns for economic losses and for

15 promoting business transition and diversification.

16 (3) CONSULTATION.—In preparing the report,

17 the Administrator and the Secretary of the Interior

18 shall consult with small business concerns in the for19 est products industry, and shall solicit comments

20 from the public.

21 SEC. 702. NEGATIVE INFORMATION ABOUT CONSUMER.

22 Section 609(a) of the Fair Credit Reporting Act (15

23 U.S.C. 1681g(a)) is amended by adding after paragraph

24 (3) the following:
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1 ‘‘(4) The dates, original payees, and amounts of

2 any checks upon which is based any negative infor3 mation about the consumer included in the file at the

4 time of the disclosure.’’.

5 SEC. 703. UNITED NATIONS RESOLUTIONS CONCERNING

6 JERUSALEM.

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

8 (1) for three thousand years Jerusalem has been

9 the focal point of jewish religious devotion;

10 (2) Jerusalem is also considered a holy city by

11 the members of other religious faiths;

12 (3) the once thriving Jewish community of the

13 historic Old City of Jerusalem was driven out by

14 force during the 1948 Arab-Israeli War;

15 (4) from 1948 to 1967, Jerusalem was a divided

16 city and Israeli citizens of all faiths as well as Jewish

17 citizens of all states were denied access to holy sites

18 in the area controlled by Jordan;

19 (5) in 1967, Jerusalem was reunited during the

20 conflict known as the Six Day War;

21 (6) since 1967, Jerusalem has been a united city

22 administered by Israel and persons of all religious

23 faiths have been guaranteed full access to holy sites

24 within the city;
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1 (7) in 1990, the United States Senate and House

2 of Representatives overwhelmingly adopted Senate

3 Concurrent Resolution 106 and House Concurrent

4 Resolution 290 declaring that Jerusalem, the capital

5 of Israel, ‘‘must remain an undivided city’’;

6 (8) the Vice President has stated the Administra7 tion’s intention not to ‘‘forget the meaning of Jerusa8 lem’’;

9 (9) the Secretary of State recently reiterated

10 United States opposition to attempts in the United

11 Nations to refer to Jerusalem as ‘‘occupied territory’’;

12 (10) it is reported that the United Nations Secu13 rity Council may consider a resolution condemning

14 the Hebron massacre but which also refers to Jerusa15 lem as ‘‘occupied’’ territory.

16 (b) SENSE OF CONGRESS.—Therefore, it is the sense

17 of the Congress that—

18 (1) the Administration should be commended for

19 its efforts not to ‘‘forget the meaning of Jerusalem’’

20 and to oppose attempts in the United Nations to refer

21 to Jerusalem as ‘‘occupied’’ territory;

22 (2) sacrificing core principles for short term ob23 jectives will ultimately retard, not advance, the peace

24 process;
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1 (3) the United States should exercise its veto in

2 the United Nations Security Council on any Security

3 Council resolution that states or implies that Jerusa4 lem is ‘‘occupied’’ territory.

5 SEC. 704. AMENDMENT TO THE FEDERAL RESERVE ACT.

6 SECTION 11.—Section 11 of the Federal Reserve Act

7 (12 U.S.C. 248) is amended by inserting at the end thereof

8 the following new subsection:

9 ‘‘(p) AUTHORITY.—The Board of Governors of the Fed10 eral Reserve System and the Federal Open Market Commit11 tee may each act in the Board’s or the Committee’s own

12 name and through the Board’s or the Committee’s own at13 torneys in enforcing any provision of this title, regulations

14 thereunder, or any other law or regulation, or in any ac15 tion, suit, or proceeding to which the Board of Governors

16 of the Federal Reserve System or the Federal Open Market

17 Committee is a party.’’.

18 SEC. 705. OVERSIGHT HEARINGS.

19 It is the sense of the Senate that—

20 (a) Congress has a constitutional obligation to

21 conduct oversight of matters relating to the operations

22 of the Government, including matters related to any

23 governmental investigations which may, from time to

24 time, be undertaken.
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1 (b) the Majority Leader and the Republican

2 Leader should meet and determine the appropriate

3 timetable, procedures, and forum for appropriate

4 Congressional oversight, including hearings on all

5 matters related to ‘‘Madison Guaranty Savings and

6 Loan Association (‘MGS&L’), Whitewater Develop7 ment Corporation and Capital Management Services

8 Inc. (‘CMS’).’’.

9 (c) no witness called to testify at these hearings

10 shall be granted immunity under sections 6002 and

11 6005 of title 18, United States Code, over the objec12 tion of Special Counsel Robert B. Fiske, Jr.

13 (d) the hearings should be structured and

14 sequenced in such a manner that in the judgment of

15 the Leaders they would not interfere with the ongoing

16 investigation of Special Counsel Robert B. Fiske, Jr.

17 SEC. 706. INSURANCE TRANSFER AGREEMENT.

18 (a) SENSE OF SENATE.—It is the sense of the Senate

19 that no insurer shall enter into a transfer agreement or

20 transfer a contract of insurance pursuant to a transfer

21 agreement unless the transferring insurer has first provided

22 or caused to be provided to each policyholder of the insurer

23 affected by the agreement a notice of the intent of the in24 surer to transfer the contract of insurance held by such pol25 icyholder.
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1 (b) FORM OF NOTICE.—The notice shall be sent by

2 first-class mail, addressed to the last known address of the

3 policyholder or to the address to which premium notices or

4 other policy documents are sent or, with respect to home

5 service business, by personal delivery with acknowledged re6 ceipt. A notice of intent to transfer shall also be sent to

7 the transferring insurer’s agent or broker of record on the

8 affected policy.

9 (c) CONTENT OF NOTICE.—The notice required by sub10 section (a) shall state or provide—

11 (1) the date the intended transfer and novation

12 of the contract of insurance of the policyholder is pro13 posed to take place and become effective;

14 (2) the name, address, and telephone number of

15 the transferring insurer and the assuming insurer

16 under the proposed transfer agreement;

17 (3) that the transfer and novation of the insur18 ance contract of the policyholder cannot take effect

19 without the written consent of the policyholder, except

20 as provided in section 5 of this Act;

21 (4) the procedures and any time limitation for

22 consenting to the transfer and novation;

23 (5) a summary informing the policyholder re24 garding any adverse effect that the policyholder might
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1 experience as a result of consenting to the transfer

2 and novation;

3 (6) a statement that, without the written consent

4 of the policyholder, the transferring insurer will re5 main as the insurance company of the policyholder or

6 beneficiary, except as provided in section 5 of this

7 Act;

8 (7) a statement that the assuming insurer is li9 censed to write the type of business being transferred

10 in the State where the policyholder resides, or is oth11 erwise authorized, under applicable law, to assume

12 such business;

13 (8) the name, address, and telephone number of

14 the person designated by the transferring insurer as

15 the person for receiving the written consent of the pol16 icyholder affected by the proposed transfer and nova17 tion;

18 (9) the address and telephone number of the chief

19 insurance regulatory official of the State in which the

20 policyholder resides;

21 (10) financial data for the transferring insurer

22 and the assuming insurer involved in the proposed

23 transfer agreement, including—

24 (A)(i) the ratings, together with enough in25 formation to understand where the ratings fall
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1 within the range of rating categories of each rat2 ing agency, for the last 5 years, if available, or

3 if not available for 5 years, for such lesser period

4 as is available, from each nationally recognized

5 insurance company rating organization that has

6 rated the insurer, including an explanation of

7 the meaning of each rating category of each rat8 ing organization;

9 (ii) if ratings are unavailable for any year

10 of the 5-year period, a disclosure of this fact; and

11 (iii) a statement that any or all of the

12 above insurance company rating organization

13 reports may be obtained at no cost by writing or

14 calling an address or phone number listed in the

15 statement;

16 (B) a balance sheet as of December 31 for

17 each of the 3 years immediately preceding the

18 notice, if available, or for such lesser period as

19 is available, and as of the date of the most recent

20 quarterly statement;

21 (C) a copy of the Management’s Discussion

22 and Analysis that was filed as a supplement to

23 the annual statement of the preceding year; and

24 (D) an explanation of the reason for the

25 proposed transfer signed by the highest executive
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1 official of the transferring insurer and the as2 suming insurer;

3 (11) a statement setting forth the financial con4 dition of the transferring insurer and of the assuming

5 insurer under the proposed transfer agreement, and

6 the effect the transaction will have on the financial

7 condition of each such insurer;

8 (12) an opinion by a disinterested third-party

9 expert, such as an actuary, finding that the transfer

10 is fair and in the best interests of the policyholders

11 affected by the transfer, and a statement that the re12 port on which the opinion is based is available at no

13 cost by writing or calling an address and phone num14 ber listed in the statement.

Attest:

Secretary.
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