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[Congressional Bills 106th Congress]
[From the U.S. Government Publishing Office]
[S. 458 Introduced in Senate (IS)]

106th CONGRESS
  1st Session
                                 S. 458

  To modernize and improve the Federal Home Loan Bank System, and for 
                            other purposes.

_______________________________________________________________________

                   IN THE SENATE OF THE UNITED STATES

                           February 24, 1999

Mr. Hagel (for himself, Mr. Bayh, Mr. Lott, Mr. Bennett, Mr. Grams, Mr. 
Kerrey, Mr. Johnson, Mr. DeWine, Mr. Conrad, Mr. Inhofe, Mr. Murkowski, 
 Mr. Brownback, Mr. Bryan, Mr. Roberts, and Mr. Burns) introduced the 
 following bill; which was read twice and referred to the Committee on 
                  Banking, Housing, and Urban Affairs

_______________________________________________________________________

                                 A BILL

 
  To modernize and improve the Federal Home Loan Bank System, and for 
                            other purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``Federal Home Loan 
Bank System Modernization Act of 1999''.
    (b) Table of Contents.--The table of contents for this Act is as 
follows:

Sec. 1. Short title; table of contents.
Sec. 2. Definitions.
Sec. 3. Federal Home Loan Banks.
Sec. 4. Savings association membership.
Sec. 5. Advances to members; collateral.
Sec. 6. Eligibility criteria.
Sec. 7. Qualified thrift lender status.
Sec. 8. Federal Home Loan Bank Finance Corporation.
Sec. 9. Management of Banks.
Sec. 10. Powers and duties of Banks.
Sec. 11. Mergers and consolidations of Federal Home Loan Banks.
Sec. 12. Other amendments relating to Bank operation and 
                            administration.
Sec. 13. Resolution Funding Corporation.
Sec. 14. Capital structure of Federal Home Loan Banks.

SEC. 2. DEFINITIONS.

    Section 2 of the Federal Home Loan Bank Act (12 U.S.C. 1422) is 
amended--
            (1) in paragraph (1), by striking ``term `Board' means'' 
        and inserting ``terms `Finance Board' and `Board' mean'';
            (2) by striking paragraph (3) and inserting the following:
            ``(3) State.--The term `State', in addition to the States 
        of the United States, includes the District of Columbia, Guam, 
        Puerto Rico, the United States Virgin Islands, American Samoa, 
        and the Commonwealth of the Northern Mariana Islands.''; and
            (3) by adding at the end the following new paragraph:
            ``(13) Community financial institution.--
                    ``(A) In general.--The term `community financial 
                institution' means a member--
                            ``(i) the deposits of which are insured 
                        under the Federal Deposit Insurance Act; and
                            ``(ii) that has, as of the date of the 
                        transaction at issue, less than $500,000,000 in 
                        average total assets, based on an average of 
                        total assets over the 3 years preceding that 
                        date.
                    ``(B) Adjustments.--The $500,000,000 limit referred 
                to in subparagraph (A)(ii) shall be adjusted annually 
                by the Finance Board, based on the annual percentage 
                increase, if any, in the Consumer Price Index for all 
                urban consumers, as published by the Department of 
                Labor.''.

SEC. 3. FEDERAL HOME LOAN BANKS.

    Section 3 of the Federal Home Loan Bank Act (12 U.S.C. 1423) is 
amended in the first sentence, by striking ``the continental United 
States'' and all that follows through ``eight'' and inserting ``the 
States into not fewer than 1''.

SEC. 4. SAVINGS ASSOCIATION MEMBERSHIP.

    Section 5(f) of the Home Owners' Loan Act (12 U.S.C. 1464(f)) is 
amended to read as follows:
    ``(f) Federal Home Loan Bank Membership.--On and after January 1, 
2000, a Federal savings association may become a member of the Federal 
Home Loan Bank System, and shall qualify for such membership in the 
manner provided by the Federal Home Loan Bank Act.''.

SEC. 5. ADVANCES TO MEMBERS; COLLATERAL.

    (a) In General.--Section 10(a) of the Federal Home Loan Bank Act 
(12 U.S.C. 1430(a)) is amended--
            (1) by redesignating paragraphs (1) through (4) as 
        subparagraphs (A) through (D), respectively, and indenting 
        appropriately;
            (2) by striking ``(a) Each'' and inserting the following:
    ``(a) In General.--
            ``(1) All advances.--Each'';
            (3) by striking the second sentence and inserting the 
        following:
            ``(2) Purposes of advances.--A long-term advance may only 
        be made for the purposes of--
                    ``(A) providing funds to any member for residential 
                housing finance; and
                    ``(B) providing funds to any community financial 
                institution for small businesses, agricultural, rural 
                development, or low-income community development 
                lending.'';
            (4) by striking ``A Bank'' and inserting the following:
            ``(3) Collateral.--A Bank'';
            (5) in paragraph (3) (as so designated by paragraph (4) of 
        this subsection)--
                    (A) in subparagraph (C) (as so redesignated by 
                paragraph (1) of this subsection) by striking 
                ``Deposits'' and inserting ``Cash or deposits'';
                    (B) in subparagraph (D) (as so redesignated by 
                paragraph (1) of this subsection), by striking the 
                second sentence; and
                    (C) by inserting after subparagraph (D) (as so 
                redesignated by paragraph (1) of this subsection) the 
                following new subparagraph:
                    ``(E) Secured loans for small business, 
                agriculture, rural development, or low-income community 
                development, or securities representing a whole 
                interest in such secured loans, in the case of any 
                community financial institution.'';
            (6) in paragraph (5)--
                    (A) in the second sentence, by striking ``and the 
                Board'';
                    (B) in the third sentence, by striking ``Board'' 
                and inserting ``Federal Home Loan Bank''; and
                    (C) by striking ``(5) Paragraphs (1) through (4)'' 
                and inserting the following:
            ``(4) Additional bank authority.--Subparagraphs (A) through 
        (E) of paragraph (3)''; and
            (7) by adding at the end the following:
            ``(5) Review of certain collateral standards.--The Board 
        may review the collateral standards applicable to each Federal 
        Home Loan Bank for the classes of collateral described in 
        paragraph (3)(E), and may, if necessary for safety and 
        soundness purposes, require an increase in the collateral 
        standards for any or all of those classes of collateral.
            ``(6) Definitions.--For purposes of this subsection--
                    ``(A) the terms `small business', `agriculture', 
                `rural development', and `low-income community 
                development' shall have the meanings given those terms 
                by rule or regulation of the Finance Board; and
                    ``(B) the term `loans for small business' may 
                include a loan guaranteed by the Small Business 
                Administration under section 7(a) of the Small Business 
                Act.''.
    (b) Clerical Amendment.--The section heading for section 10 of the 
Federal Home Loan Bank Act (12 U.S.C. 1430) is amended to read as 
follows:

``SEC. 10. ADVANCES TO MEMBERS.''.

SEC. 6. ELIGIBILITY CRITERIA.

    Section 4(a) of the Federal Home Loan Bank Act (12 U.S.C. 1424(a)) 
is amended--
            (1) in paragraph (2)(A), by inserting, ``(other than a 
        community financial institution)'' after ``institution''; and
            (2) by adding at the end the following new paragraph:
            ``(3) Limited exemption for community financial 
        institutions.--A community financial institution that otherwise 
        meets the requirements of paragraph (2) may become a member 
        without regard to the percentage of its total assets that is 
        represented by residential mortgage loans, as described in 
        subparagraph (A) of paragraph (2).''.

SEC. 7. QUALIFIED THRIFT LENDER STATUS.

    (a) Federal Home Loan Bank Act.--Section 10(e) of the Federal Home 
Loan Bank Act (12 U.S.C. 1430(e)), as added by section 105 of Public 
Law 100-86 and subsequently amended (relating to qualified thrift 
lender status) is amended--
            (1) by striking paragraphs (1) and (3);
            (2) in paragraph (2), by striking the first sentence;
            (3) in paragraph (4), by striking ``Paragraphs (1) and (2) 
        of this subsection do not'' and inserting ``Paragraph (1) does 
        not'';
            (4) in paragraph (5), by striking subparagraph (C); and
            (5) by redesignating paragraphs (2), (4), and (5) as 
        paragraphs (1), (2), and (3), respectively.
    (b) Home Owners' Loan Act.--Section 10(m)(3)(B) of the Home Owners' 
Loan Act (12 U.S.C. 1467a(m)(3)(B)) is amended--
            (1) in clause (i), by striking subclause (III) and by 
        redesignating subclause (IV) as subclause (III); and
            (2) by amending clause (ii) to read as follows:
                            ``(ii) Additional restrictions effective 
                        after three years.--Beginning 3 years after the 
                        date on which a savings association should have 
                        become or ceases to be a qualified thrift 
                        lender, the savings association shall not 
                        retain any investment (including an investment 
                        in any subsidiary) or engage, directly or 
                        indirectly, in any activity unless that 
                        investment or activity would be permissible for 
                        the savings association if it were a national 
                        bank, and is also permissible for the savings 
                        association as a savings association.''.

SEC. 8. FEDERAL HOME LOAN BANK FINANCE CORPORATION.

    (a) Establishment of Finance Corporation.--The Federal Home Loan 
Bank Act (12 U.S.C. 1421 et seq.) is amended by inserting after section 
4 the following new section:

``SEC. 5. THE FEDERAL HOME LOAN BANK FINANCE CORPORATION.

    ``(a) Establishment.--
            ``(1) In general.--There is established the Federal Home 
        Loan Bank Finance Corporation (hereafter in this section 
        referred to as the `Corporation'), which shall be a federally 
        chartered instrumentality of the United States.
            ``(2) Purposes.--The purposes of the Corporation shall be--
                    ``(A) to issue and service the notes, bonds, 
                debentures, and other debt obligations of the Federal 
                Home Loan Banks in accordance with this Act; and
                    ``(B) to perform or cause to be performed all other 
                necessary and proper functions in relation to the 
                issuance and servicing of obligations referred to in 
                subparagraph (A), as fiscal agent on behalf of the 
                Federal Home Loan Banks, and any functions performed by 
                the Office of Finance on behalf of the Financing 
                Corporation (established pursuant to section 21) and 
                the Resolution Funding Corporation (established 
                pursuant to section 21B) before the date of enactment 
                of the Federal Home Loan Bank System Modernization Act 
                of 1999.
    ``(b) Powers.--Subject to the other provisions of this Act and to 
such regulations as the Board may prescribe, the Corporation shall have 
the power--
            ``(1) to issue voting capital stock to the Federal Home 
        Loan Banks;
            ``(2) to issue and service Federal Home Loan Bank notes, 
        bonds, debentures, and other obligations pursuant to section 11 
        on behalf of the Federal Home Loan Banks;
            ``(3) to determine the amount, maturities, rate of 
        interest, terms, and other conditions of Federal Home Loan Bank 
        notes, bonds, debentures, and other obligations;
            ``(4) to adopt, alter, and use a corporate seal;
            ``(5) to make contracts;
            ``(6) to sue and be sued, by and through its own attorneys, 
        in the corporate capacity of the Corporation, and to complain 
        and defend in any action brought by or against the Corporation 
        in any court of competent jurisdiction;
            ``(7) to determine the terms and conditions under which the 
        Corporation shall indemnify its directors, officers, employees, 
        and agents; and
            ``(8) to exercise such incidental powers not inconsistent 
        with the provisions of this Act as are necessary or advisable 
        to carry out this Act.
    ``(c) Board of Directors.--
            ``(1) Establishment.--The management of the Corporation 
        shall be vested in a board of directors composed of directors 
        elected by the Federal Home Loan Banks in accordance with 
        paragraph (2).
            ``(2) Composition of board.--Each Bank shall annually elect 
        1 individual who, as of the time of the election, is an officer 
        or director of the Bank to serve as a member of the board of 
        directors of the Corporation.
            ``(3) Duties.--The board of directors shall administer the 
        affairs of the Corporation in accordance with this Act.
            ``(4) Terms.--
                    ``(A) In general.--Each member of the board of 
                directors of the Corporation shall be elected for a 
                term of 1 year, and shall serve at the pleasure of the 
                board of directors of the Federal Home Loan Bank that 
                elected that member.
                    ``(B) Interim appointments.--Any director elected 
                to fill a vacancy on the board of directors of the 
                Corporation occurring before the expiration of the term 
                for which the predecessor of that director was elected 
                shall be elected only for the remainder of the 
                unexpired term.
                    ``(C) Continuation of service.--Each director may 
                continue to serve after the expiration of the term to 
                which that director was elected until a successor has 
                been elected and qualified.
            ``(5) Powers.--The board of directors shall exercise such 
        powers as may be necessary and appropriate to carry out this 
        section, including the power--
                    ``(A) to review, adopt, and monitor the annual 
                budget of the Corporation;
                    ``(B) to set policies for the Corporation;
                    ``(C) to impose assessments on the Federal Home 
                Loan Banks to fund the expenditures of the Corporation; 
                and
                    ``(D) to appoint, establish the duties of, and 
                compensate the employees of the Corporation, and to 
                dismiss at will the employees of the Corporation.
            ``(6) Pay.--The members of the board of directors shall 
        serve without additional compensation, but shall be reimbursed 
        for reasonable expenses of travel, lodging, and subsistence 
        incurred in performing the business of the Corporation.
            ``(7) Quorum requirement.--No business may be conducted by 
        the board of directors unless a quorum of the members of the 
        board of directors is present in person or by telephone, or 
        through action taken by unanimous written consent executed by 
        the members of the board of directors.
            ``(8) Appointment of officers and adoptions of rules of 
        procedure.--The board of directors shall--
                    ``(A) select, from among the members of the board, 
                a Chairperson and a Vice Chairperson; and
                    ``(B) adopt bylaws and other rules of procedure for 
                actions before the board of directors, including the 
                establishment of 1 or more committees to take action on 
                behalf of the board of directors and the delegation of 
                powers of the board of directors to any such committee 
                or officer of the Corporation.
    ``(d) Stock.--
            ``(1) Issuance of equal amount to each bank.--The 
        Corporation shall issue to each Bank 100 shares of voting 
        capital stock, with a par value of $100 per share.
            ``(2) Restricted transferability.--Stock issued under 
        paragraph (1) may be owned and held only by the Federal Home 
        Loan Banks.
            ``(3) Merger.--Stock issued under paragraph (1) shall be 
        redeemable or transferable at par in the event of a merger or 
        consolidation pursuant to section 26.
            ``(4) Payment upon issuance.--Upon issuance of any share of 
        stock under this subsection to any Federal Home Loan Bank, the 
        Bank shall pay to the Corporation the total amount due for such 
        stock.
            ``(5) Distribution requirement.--The total amount of 
        outstanding stock of the Corporation shall, at all times, be 
        distributed equally among all of the Federal Home Loan Banks, 
        and the board of directors of the Corporation shall adopt 
        procedures from time to time to implement this paragraph.
    ``(e) Status.--Except to the extent that it would conflict with any 
provision of this section, or that the context of this Act otherwise 
requires, the Corporation shall be treated as a Federal Home Loan Bank 
for purposes of any law.
    ``(f) Jurisdiction; Removal Power.--
            ``(1) In general.--Notwithstanding any other provision of 
        law, any civil action or proceeding to which the Corporation is 
        a party shall be deemed to arise under the laws of the United 
        States.
            ``(2) Venue.--The United States District Court for the 
        District of Columbia shall have exclusive jurisdiction over any 
        action to which the Corporation is a party.
            ``(3) Removal.--The Corporation may, without bond or 
        security, remove any action or proceeding to which the 
        Corporation is or becomes a party from a State court to the 
        United States District Court for the District of Columbia.''.
    (b) Transfer of Functions.--The functions of the Office of Finance 
of the Federal Home Loan Banks (hereafter in this section referred to 
as the ``Office of Finance'') shall be transferred to the Federal Home 
Loan Bank Finance Corporation established under section 5 of the 
Federal Home Loan Bank Act, as added by this section, (hereafter in 
this section referred to as the ``Corporation'') before the end of the 
6-month period beginning on the date of enactment of this Act.
    (c) Savings Provision.--The transfer of functions from the Office 
of Finance to the Corporation in accordance with this section shall not 
affect the validity of any right, duty, contract, or obligation of the 
Office of Finance (with respect to any person or entity) that existed 
on the day before the effective date of the transfer of functions.
    (d) Technical Amendments.--The Federal Home Loan Bank Act (12 
U.S.C. 1421 et seq.) is amended--
            (1) in section 2B(a)(2), by striking ``or joint office'' 
        each place that term appears;
            (2) in section 2B(b)(1)--
                    (A) in paragraph (1), by striking ``employee,'' and 
                all that follows through ``11(b)'' and inserting 
                ``employee or administrative unit of any Bank of the 
                Federal Home Loan Bank System.'';
                    (B) by striking paragraph (2); and
                    (C) by striking ``(1) Board staff.--'';
            (3) in section 21(b)(1), by striking subparagraph (A) and 
        inserting the following:
                    ``(A) The Chairperson of the Federal Home Loan Bank 
                Finance Corporation established under section 5.''; and
            (4) in section 21B(c)(1), by striking subparagraph (A) and 
        inserting the following:
                    ``(A) The Chairperson of the Federal Home Loan Bank 
                Finance Corporation established under section 5.''.

SEC. 9. MANAGEMENT OF BANKS.

    (a) Board of Directors.--Section 7 of the Federal Home Loan Bank 
Act (12 U.S.C. 1427) is amended--
            (1) in subsection (a)--
                    (A) by striking ``(a) The management'' and 
                inserting the following:
    ``(a) Board of Directors.--
            ``(1) Number and classes of directors.--The management''; 
        and
                    (B) by adding at the end the following:
            ``(2) Approval of alternative structure.--Subject to the 
        approval of the Finance Board, a Federal Home Loan Bank may 
        include as part of its capital structure plan submitted under 
        section 6, or any modification thereto, provisions establishing 
        a structure for its elective and appointive directors other 
        than as provided for in this section.''; and
            (2) in subsection (d)--
                    (A) by striking ``(d) The term'' and inserting the 
                following:
    ``(d) Terms of Office.--The term''; and
                    (B) by striking ``shall be two years''.
    (b) Compensation.--Section 7(i) of the Federal Home Loan Bank Act 
(12 U.S.C. 1427(i)) is amended by striking ``, subject to the approval 
of the board''.
    (c) Obligations as Lawful Investments.--Section 15 of the Federal 
Home Loan Bank Act (12 U.S.C. 1435) is amended by striking ``with the 
approval of the Board''.

SEC. 10. POWERS AND DUTIES OF BANKS.

    (a) Bonds and Debentures.--Section 11(a) of the Federal Home Loan 
Bank Act (12 U.S.C. 1431(a)) is amended--
            (1) by inserting ``through the Federal Home Loan Bank 
        Finance Corporation'' after ``to issue''; and
            (2) by striking ``Board may approve'' and inserting ``board 
        of directors of the Bank may approve''.
    (b) Issuance of Consolidated Obligations.--Section 11(b) of the 
Federal Home Loan Bank Act (12 U.S.C. 1431(b)) is amended to read as 
follows:
    ``(b) Issuance of Federal Home Loan Bank Consolidated 
Obligations.--
            ``(1) In general.--The Federal Home Loan Bank Finance 
        Corporation may issue consolidated Federal Home Loan Bank bonds 
        and other consolidated obligations on behalf of the Banks.
            ``(2) Joint and several obligation; terms and conditions.--
        Consolidated obligations issued by the Federal Home Loan Bank 
        Finance Corporation under paragraph (1) shall--
                    ``(A) be the joint and several obligations of all 
                of the Federal Home Loan Banks; and
                    ``(B) shall be issued upon such terms and 
                conditions as shall be established by the Federal Home 
                Loan Bank Finance Corporation, subject to such rules 
                and regulations as the Finance Board may prescribe.''.
    (c) Rediscounting of Notes.--Section 11(f) of the Federal Home Loan 
Bank Act (12 U.S.C. 1431(f)) is amended by striking ``permit, to 
require,'' and inserting ``permit or to require''.
    (d) Treasury Purchase of Bank Obligations.--Section 11(i) of the 
Federal Home Loan Bank Act (12 U.S.C. 1431(i)) is amended by striking 
the second undesignated paragraph.
    (e) Conforming Amendments.--Section 11 of the Federal Home Loan 
Bank Act (12 U.S.C. 1431) is amended--
            (1) by striking subsection (c); and
            (2) by redesignating subsections (d) through (k) as 
        subsections (c) through (j), respectively.

SEC. 11. MERGERS AND CONSOLIDATIONS OF FEDERAL HOME LOAN BANKS.

    Section 26 of the Federal Home Loan Bank Act (12 U.S.C. 1446) is 
amended to read as follows:

``SEC. 26. MERGERS AND CONSOLIDATIONS.

    ``(a) In General.--
            ``(1) Finance board authority.--Whenever the Finance Board 
        determines it to be necessary to the discharge of its 
        obligations under section 2A(a)(3)(A), and in accordance with 
        such rules, regulations, and orders as the Finance Board may 
        prescribe, the Finance Board may order that a Federal Home Loan 
        Bank be liquidated or reorganized, and its stock paid off and 
        retired in whole or in part in connection therewith, after 
        paying or making provision for the payment of the liabilities 
        of the Federal Home Loan Bank.
            ``(2) Acquisition by other banks.--In the case of a 
        liquidation or reorganization under paragraph (1), any other 
        Federal Home Loan Bank may, with the approval of the Finance 
        Board, acquire the assets of any such liquidated or reorganized 
        Bank, and assume the liabilities thereof, in whole or in part.
    ``(b) Voluntary Mergers.--Nothing in this section shall preclude 
voluntary mergers, combinations, or consolidation by or among the 
Federal Home Loan Banks pursuant to such regulations as the Finance 
Board may prescribe.
    ``(c) Numbers of Directors of Resulting Bank.--
            ``(1) In general.--Notwithstanding section 7, any Bank 
        resulting from a merger, combination, or consolidation pursuant 
        to this section may have, with the approval of the Finance 
        Board, elected and appointed directors in a number that is 
        equal to or less than the total number of the directors of all 
        of the Banks that participated in the transaction (as 
        determined immediately before the transaction).
            ``(2) Fulfillment of unexpired terms.--Consistent with 
        paragraph (1), a director of any Bank involved in a transaction 
        referred to in paragraph (1) may continue to serve on the board 
        of directors of the resulting Bank during the unexpired portion 
        of that director's current term, if such continuation of 
        service is provided for under the terms of the merger, 
        combination, or consolidation transaction, and whether or not 
        that director remains qualified after the transaction to fill a 
        directorship.
    ``(d) Number of Appointed Directors of Resulting Bank.--The number 
of appointed directors on the board of directors of a Bank resulting 
from a merger, combination, or consolidation pursuant to this section 
shall not exceed three-fourths the number of elected directors on the 
board of directors of that Bank.
    ``(e) Adjustment of District Boundaries.--Not later than 30 days 
after consummation of any merger, combination, or consolidation of 2 or 
more Federal Home Loan Banks, the Finance Board shall adjust the 
districts established under section 3 to reflect such merger, 
combination, or consolidation.
    ``(f) Subsidiaries; Holding Companies.--
            ``(1) Authority to establish.--Any 1 or more Federal Home 
        Loan Banks may establish a subsidiary or holding company, 
        subject to the approval of the Finance Board.
            ``(2) Limitations.--Any subsidiary or holding company 
        established under this subsection--
                    ``(A) shall be subject to supervision by the 
                Finance Board;
                    ``(B) shall be restricted to engaging only in those 
                activities permitted for Federal Home Loan Banks under 
                this Act; and
                    ``(C) may only transact business with members of 
                the Federal Home Loan Banks that established the 
                subsidiary or holding company.
            ``(3) Purposes.--A Federal Home Loan Bank may use a 
        subsidiary or holding company established under this subsection 
        to perform administrative and operational functions.''.

SEC. 12. OTHER AMENDMENTS RELATING TO BANK OPERATION AND 
              ADMINISTRATION.

    (a) Repeal of Sections 22A and 27.--The Federal Home Loan Bank Act 
(12 U.S.C. 1421 et seq.) is amended by striking sections 22A (12 U.S.C. 
1442a) and 27 (12 U.S.C. 1447).
    (b) Section 12.--Section 12 of the Federal Home Loan Bank Act (12 
U.S.C. 1432) is amended--
            (1) in subsection (a)--
                    (A) by striking ``, but, except'' and all that 
                follows through ``ten years'';
                    (B) by striking ``, subject to the approval of the 
                Board'' each place that term appears;
                    (C) by striking ``and, by its Board of directors,'' 
                and all that follows through ``agent of such bank,'' 
                and inserting ``and, by the board of directors of the 
                Bank, to prescribe, amend, and repeal by-laws governing 
                the manner in which its affairs may be administered, 
                consistent with applicable laws and regulations, as 
                administered by the Finance Board. No officer, 
                employee, attorney, or agent of a Federal Home Loan 
                Bank''; and
                    (D) by striking ``Board of directors'' each place 
                that term appears and inserting ``board of directors''; 
                and
            (2) in subsection (b), by striking ``loans banks'' and 
        inserting ``loan banks''.
    (c) Powers and Duties of Federal Housing Finance Board.--
            (1) Issuance of notices of violations.--Section 2B(a) of 
        the Federal Home Loan Bank Act (12 U.S.C. 1422b(a)) is amended 
        by adding at the end the following new paragraph:
            ``(5) To issue and serve a notice of charges upon a Federal 
        Home Loan Bank or upon any executive officer or director of a 
        Federal Home Loan Bank if, in the determination of the Finance 
        Board, the Bank, executive officer, or director is engaging or 
        has engaged in, or the Finance Board has reasonable cause to 
        believe that the Bank, executive officer, or director is about 
        to engage in, any conduct that violates any provision of this 
        Act or any law, order, rule, or regulation or any condition 
        imposed in writing by the Finance Board in connection with the 
        granting of any application or other request by the Bank, or 
        any written agreement entered into by the Bank with the agency, 
        in accordance with the procedures provided in section 1371(c) 
        of the Federal Housing Enterprises Financial Safety and 
        Soundness Act of 1992. Such authority includes the same 
        authority to take affirmative action to correct conditions 
        resulting from violations or practices or to limit activities 
        of a Bank or any executive officer or director of a Bank as 
        appropriate Federal banking agencies have to take with respect 
        to insured depository institutions under paragraphs (6) and (7) 
        of section 8(b) of the Federal Deposit Insurance Act, and to 
        have all other powers, rights, and duties to enforce this Act 
        with respect to the Federal Home Loan Banks and their executive 
        officers and directors as the Office of Federal Housing 
        Enterprise Oversight has to enforce the Federal Housing 
        Enterprises Financial Safety and Soundness Act of 1992, the 
        Federal National Mortgage Association Charter Act, or the 
        Federal Home Loan Mortgage Corporation Act with respect to the 
        Federal housing enterprises under the Federal Housing 
        Enterprises Financial Safety and Soundness Act of 1992.
            ``(6) To sue and be sued, by and through its own 
        attorneys.''.
            (2) Technical amendment.--Section 111 of Public Law 93-495 
        (12 U.S.C. 250) is amended by inserting ``Federal Housing 
        Finance Board,'' after ``Director of the Office of Thrift 
        Supervision,''.
    (d) Eligibility To Secure Advances.--
            (1) Section 9.--Section 9 of the Federal Home Loan Bank Act 
        (12 U.S.C. 1429) is amended--
                    (A) in the second sentence, by striking ``with the 
                approval of the Board''; and
                    (B) in the third sentence, by striking ``, subject 
                to the approval of the Board,''.
            (2) Section 10.--Section 10 of the Federal Home Loan Bank 
        Act (12 U.S.C. 1430) is amended--
                    (A) in subsection (c)--
                            (i) in the first sentence, by striking 
                        ``Board'' and inserting ``Federal Home Loan 
                        Bank''; and
                            (ii) by striking the second sentence;
                    (B) in subsection (d)--
                            (i) in the first sentence, by striking 
                        ``and the approval of the Board''; and
                            (ii) by striking ``Subject to the approval 
                        of the Board, any'' and inserting ``Any''; and
                    (C) in subsection (j)--
                            (i) in paragraph (1)--
                                    (I) by striking ``to subsidize the 
                                interest rate on advances'' and 
                                inserting ``to provide subsidies, 
                                including subsidized interest rates on 
                                advances'';
                                    (II) by striking ``Pursuant'' and 
                                inserting the following:
                    ``(A) Establishment.--Pursuant''; and
                                    (III) by adding at the end the 
                                following new subparagraph:
                    ``(B) Nondelegation of approval authority.--Subject 
                to such regulations as the Finance Board may prescribe, 
                the board of directors of each Federal Home Loan Bank 
                may approve or disapprove requests from members for 
                Affordable Housing Program subsidies, and may not 
                delegate such authority.'';
                            (ii) in each of paragraphs (3), (4), 
                        (9)(B), (9)(C), (11), and (12), by striking 
                        ``advances'' each place that term appears and 
                        inserting ``subsidies'';
                            (iii) in each of paragraphs (2), (5), 
                        (9)(A), and (9)(F), by striking ``subsidized 
                        advances'' each place that term appears and 
                        inserting ``subsidies, including subsidized 
                        advances,'';
                            (iv) in paragraph (9)(F), by striking 
                        ``such advances'' and inserting ``such 
                        subsidies'';
                            (v) in the paragraph heading for paragraph 
                        (3), by striking ``advances'' and inserting 
                        ``subsidies'';
                            (vi) in paragraph (2), by striking 
                        subparagraph (B) and inserting the following:
                    ``(B) finance the purchase, construction, or 
                rehabilitation of rental housing if, for a period of 
                not less than 15 years, either--
                            ``(i) 20 percent or more of the units in 
                        such housing are occupied by and affordable for 
                        households whose income is 50 percent or less 
                        of area median income; or
                            ``(ii) 40 percent or more of the units in 
                        such housing are occupied by and affordable for 
                        households whose income is 60 percent or less 
                        of area median income.'';
                            (vii) by striking paragraph (5) and 
                        inserting the following:
            ``(5) Contribution to program.--Each Federal Home Loan Bank 
        shall annually contribute 10 percent of the net income of that 
Bank during the preceding year, or such prorated sums as may be 
required to assure that the aggregate contribution of the Banks shall 
not be less than $100,000,000 for each such year, to support subsidies, 
including subsidized advances, through the Affordable Housing 
Program.'';
                            (viii) in paragraph (11)--
                                    (I) by inserting ``agencies and'' 
                                after ``15 persons drawn from''; and
                                    (I) by inserting after the first 
                                sentence, the following: 
                                ``Representatives of no one group shall 
                                constitute an undue proportion of the 
                                membership of the Advisory Council.''; 
                                and
                            (ix) in paragraph (13)--
                                    (I) by striking ``subsection--'' 
                                and inserting ``subsection, the 
                                following definitions shall apply:''; 
                                and
                                    (II) by striking subparagraph (D) 
                                and inserting the following:
                    ``(D) Affordable.--For purposes of paragraph 
                (2)(B), the term `affordable' means that the rent with 
                respect to a unit does not exceed 30 percent of the 
                income limitation under paragraph (2)(B) applicable to 
                occupants of such unit.''.
    (e) Section 16.--Section 16(a) of the Federal Home Loan Bank Act 
(12 U.S.C. 1436(a)) is amended--
            (1) in the third sentence--
                    (A) by striking ``net earnings'' and inserting 
                ``previously retained earnings or current net 
                earnings''; and
                    (B) by striking ``, and then only with the approval 
                of the Federal Housing Finance Board''; and
            (2) by striking the fourth sentence.
    (f) Section 18.--Section 18(b) of the Federal Home Loan Bank Act 
(12 U.S.C. 1438(b)) is amended by striking paragraph (4).

SEC. 13. RESOLUTION FUNDING CORPORATION.

    (a) In General.--Section 21B(f)(2)(C) of the Federal Home Loan Bank 
Act (12 U.S.C. 1441b(f)(2)(C)) is amended to read as follows:
                    ``(C) Payments by federal home loan banks.--
                            ``(i) In general.--To the extent that the 
                        amounts available pursuant to subparagraphs (A) 
                        and (B) are insufficient to cover the amount of 
                        interest payments, each Federal Home Loan Bank 
                        shall pay to the Funding Corporation in each 
                        calendar year, 20.75 percent of the net 
                        earnings of that Bank (after deducting expenses 
                        relating to section 10(j) and operating 
                        expenses).
                            ``(ii) Annual determination.--The Board 
                        annually shall determine the extent to which 
                        the value of the aggregate amounts paid by the 
                        Federal Home Loan Banks exceeds or falls short 
                        of the value of an annuity of $300,000,000 per 
                        year that commences on the issuance date and 
                        ends on the final scheduled maturity date of 
                        the obligations, and shall select appropriate 
                        present value factors for making such 
                        determinations.
                            ``(iii) Payment term alterations.--The 
                        Board shall extend or shorten the term of the 
                        payment obligations of a Federal Home Loan Bank 
                        under this subparagraph as necessary to ensure 
                        that the value of all payments made by the 
                        Banks is equivalent to the value of an annuity 
                        referred to in clause (ii).
                            ``(iv) Term beyond maturity.--If the Board 
                        extends the term of payments beyond the final 
                        scheduled maturity date for the obligations, 
                        each Federal Home Loan Bank shall continue to 
                        pay 20.75 percent of its net earnings (after 
                        deducting expenses relating to section 10(j) 
                        and operating expenses) to the Treasury of the 
                        United States until the value of all such 
                        payments by the Federal Home Loan Banks is 
                        equivalent to the value of an annuity referred 
                        to in clause (ii). In the final year in which 
                        the Federal Home Loan Banks are required to 
                        make any payment to the Treasury under this 
                        subparagraph, if the dollar amount represented 
                        by 20.75 percent of the net earnings of the 
                        Federal Home Loan Banks exceeds the remaining 
                        obligation of the Banks to the Treasury, the 
                        Finance Board shall reduce the percentage pro 
                        rata to a level sufficient to pay the remaining 
                        obligation.''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
become effective on January 1, 2000. Payments made by a Federal Home 
Loan Bank before that effective date shall be counted toward the total 
obligation of that Bank under section 21B(f)(2)(C) of the Federal Home 
Loan Bank Act, as amended by this section.

SEC. 14. CAPITAL STRUCTURE OF FEDERAL HOME LOAN BANKS.

    Section 6 of the Federal Home Loan Bank Act (12 U.S.C. 1426) is 
amended to read as follows:

``SEC. 6. CAPITAL STRUCTURE OF FEDERAL HOME LOAN BANKS.

    ``(a) Regulations.--
            ``(1) Capital standards.--Not later than 1 year after the 
        date of enactment of the Federal Home Loan Bank System 
        Modernization Act of 1999, the Finance Board shall issue 
        regulations prescribing uniform capital standards applicable to 
        each Federal Home Loan Bank, which shall require each such Bank 
        to meet--
                    ``(A) the leverage limitation requirement specified 
                in paragraph (2); and
                    ``(B) the risk-based capital requirements, in 
                accordance with paragraph (3).
            ``(2) Minimum leverage limitation requirement.--Each 
        Federal Home Loan Bank shall maintain total capital in an 
        amount equal to not less than 2.5 percent of the total assets 
        of that Bank.
            ``(3) Risk-based capital standards.--
                    ``(A) In general.--Each Federal Home Loan Bank 
                shall maintain permanent capital in an amount that is 
                sufficient, as determined in accordance with the 
                regulations of the Finance Board, to meet--
                            ``(i) the credit risk to which the Federal 
                        Home Loan Bank is subject; and
                            ``(ii) the market risk, including interest 
                        rate risk, to which the Federal Home Loan Bank 
                        is subject, based on a stress test established 
                        by the Finance Board that rigorously tests for 
                        changes in market variables, including changes 
                        in interest rates, rate volatility, and changes 
                        in the shape of the yield curve.
                    ``(B) Treatment of certain obligations.--For 
                purposes of subparagraph (A), obligations issued or 
                guaranteed by the United States, obligations issued by 
                any agency or instrumentality of the United States and 
                for which the timely repayment of principal and 
                interest is explicitly guaranteed by the full faith and 
                credit of the United States, and advances made pursuant 
                to section 10 or 10b that are secured by eligible 
                collateral having a market value (in accordance with 
                the regulations adopted by the Finance Board) in excess 
                of the balance due on such advances shall be deemed to 
                present no credit risk.
                    ``(C) Consideration of other risk-based 
                standards.--In establishing the risk-based standard 
                under subparagraph (A)(ii), the Finance Board shall 
                take due consideration of any risk-based capital test 
                established pursuant to section 1361 of the Federal 
                Housing Enterprises Financial Safety and Soundness Act 
                of 1992 (12 U.S.C. 4611) for the enterprises (as 
                defined in that Act), with such modifications as the 
                Finance Board determines to be appropriate to reflect 
                differences in operations between the Federal Home Loan 
                Banks and those enterprises.
            ``(4) Other regulatory requirements.--The regulations 
        issued by the Finance Board under paragraph (1) shall--
                    ``(A) permit each Federal Home Loan Bank to issue, 
                with such rights, terms, and preferences, not 
                inconsistent with this Act and the regulations issued 
                hereunder, as the board of directors of that Bank may 
                approve, any 1 or more of--
                            ``(i) Class A stock, which shall be 
                        redeemable in cash and at par 6 months 
                        following submission by a member of a written 
                        notice of its intent to redeem such shares;
                            ``(ii) Class B stock, which shall be 
                        redeemable in cash and at par 5 years following 
                        submission by a member of a written notice of 
                        its intent to redeem such shares;
                            ``(iii) Class C stock, which shall be 
                        nonredeemable; and
                            ``(iv) any other class of stock authorized 
                        by the board of directors of the Federal Home 
                        Loan Bank and approved by the Finance Board, 
                        through such procedures as the Finance Board 
                        may prescribe, which, if nonredeemable, may be 
                        designated as permanent capital;
                    ``(B) provide that the stock of a Federal Home Loan 
                Bank may be issued to and held by only members of the 
                Bank, and that a Bank may not issue any stock other 
                than as provided in this section;
                    ``(C) prescribe the manner in which stock of a 
                Federal Home Loan Bank may be sold, transferred, 
                redeemed, or repurchased; and
                    ``(D) provide the manner of disposition of 
                outstanding stock held by, and the liquidation of any 
                claims of the Federal Home Loan Bank against, an 
                institution that ceases to be a member of the Bank, 
                through merger or otherwise, or that provides notice of 
                intention to withdraw from membership in the Bank. -
            ``(5) Definitions of capital.--For purposes of determining 
        compliance with the capital standards established under this 
        subsection--
                    ``(A) permanent capital of a Federal Home Loan Bank 
                shall include (as determined in accordance with 
                generally accepted accounting principles)--
                            ``(i) the amounts paid for the Class C 
                        stock and any other nonredeemable stock 
                        approved by the Finance Board;
                            ``(ii) the amounts paid for the Class B 
                        stock, in an amount not to exceed 1 percent of 
                        the total assets of the Bank; and
                            ``(iii) the retained earnings of the Bank; 
                        and
                    ``(B) total capital of a Federal Home Loan Bank 
                shall include--
                            ``(i) permanent capital;
                            ``(ii) the amounts paid for the Class A 
                        stock, Class B stock (excluding any amount 
                        treated as permanent capital under subparagraph 
                        (5)(A)(ii)), or any other class of redeemable 
                        stock approved by the Finance Board;
                            ``(iii) consistent with generally accepted 
                        accounting principles, and subject to the 
                        regulation of the Finance Board, a general 
                        allowance for losses, which may not include any 
                        reserves or allowances made or held against 
                        specific assets; and
                            ``(iv) any other amounts from sources 
                        available to absorb losses incurred by the Bank 
                        that the Finance Board determines by regulation 
                        to be appropriate to include in determining 
                        total capital.
                    ``(6) Transition period.--Notwithstanding any other 
                provisions of this Act, the requirements relating to 
                purchase and retention of capital stock of a Federal 
Home Loan Bank by any member thereof in effect on the day before the 
date of enactment of the Federal Home Loan Bank System Modernization 
Act of 1999, shall continue in effect with respect to each Federal Home 
Loan Bank until the regulations required by this subsection have taken 
effect and the capital structure plan required by subsection (b) has 
been approved by the Finance Board and implemented by such Bank.
    ``(b) Capital Structure Plan.--
            ``(1) Approval of plans.--Not later than 270 days after the 
        date of publication by the Finance Board of final regulations 
        in accordance with subsection (a), the board of directors of 
        each Federal Home Loan Bank shall submit for Finance Board 
        approval a plan establishing and implementing a capital 
        structure for such Bank that--
                    ``(A) the board of directors determines is best 
                suited for the condition and operation of the Bank and 
                the interests of the members of the Bank;
                    ``(B) meets the requirements of subsection (c); and
                    ``(C) meets the minimum capital standards and 
                requirements established under subsection (a) and other 
                regulations prescribed by the Finance Board.
            ``(2) Approval of modifications.--The board of directors of 
        a Federal Home Loan Bank shall submit to the Finance Board for 
        approval any modifications that the Bank proposes to make to an 
        approved capital structure plan.
    ``(c) Contents of Plan.--The capital structure plan of each Federal 
Home Loan Bank shall contain provisions addressing each of the 
following:
            ``(1) Minimum investment.--
                    ``(A) In general.--Each capital structure plan of a 
                Federal Home Loan Bank shall require each member of the 
                Bank to maintain a minimum investment in the stock of 
                the Bank, the amount of which shall be determined in a 
                manner to be prescribed by the board of directors of 
                each Bank and to be included as part of the plan.
                    ``(B) Investment alternatives.--
                            ``(i) In general.--In establishing the 
                        minimum investment required for each member 
                        under subparagraph (A), a Federal Home Loan 
                        Bank may, in its discretion, include any 1 or 
                        more of the requirements referred to in clause 
                        (ii), or any other provisions approved by the 
                        Finance Board.
                            ``(ii) Authorized requirements.--A 
                        requirement is referred to in this clause if it 
                        is a requirement for--
                                    ``(I) a stock purchase based on a 
                                percentage of the total assets of a 
                                member (not to exceed the lesser of 0.3 
                                percent of the total assets of the 
                                member or $300,000,000); or
                                    ``(II) a stock purchase based on a 
                                percentage of the outstanding advances 
                                from the Bank to the member (not to 
                                exceed 5 percent of the total 
                                outstanding advances of the member).
                    ``(C) Minimum amount.--Each capital structure plan 
                of a Federal Home Loan Bank shall require that the 
                minimum stock investment established for members shall 
                be set at a level that is sufficient for the Bank to 
                meet the minimum capital requirements established by 
                the Finance Board under subsection (a).
                    ``(D) Adjustments to minimum required investment.--
                The capital structure plan of each Federal Home Loan 
                Bank shall impose a continuing obligation on the board 
                of directors of the Bank to review and adjust the 
                minimum investment required of each member of that 
                Bank, as necessary to ensure that the Bank remains in 
                compliance with applicable minimum capital levels 
                established by the Finance Board, and shall require 
                each member to comply promptly with any adjustments to 
                the required minimum investment.
            ``(2) Transition rule.--
                    ``(A) In general.--The capital structure plan of 
                each Federal Home Loan Bank shall specify the date on 
                which it shall take effect, and may provide for a 
                transition period of not longer than 3 years to allow 
                the Bank to come into compliance with the capital 
                requirements prescribed under subsection (a), and to 
                allow any institution that was a member of the Bank on 
                the date of enactment of the Federal Home Loan Bank 
                System Modernization Act of 1999, to come into 
                compliance with the minimum investment required 
                pursuant to the plan.
                    ``(B) Interim purchase requirements.--The capital 
                structure plan of a Federal Home Loan Bank may allow 
                any member referred to in subparagraph (A) that would 
                be required by the terms of the capital structure plan 
                to increase its investment in the stock of the Bank to 
                do so in periodic installments during the transition 
                period.
            ``(3) Disposition of shares.--The capital structure plan of 
        a Federal Home Loan Bank shall provide for the manner of 
        disposition of any stock held by a member of that Bank that 
        terminates its membership or that provides notice of its 
        intention to withdraw from membership in that Bank.
            ``(4) Classes of stock.--
                    ``(A) In general.--The capital structure plan of a 
                Federal Home Loan Bank shall afford each member of that 
                Bank the option of maintaining its required investment 
                in the Bank through the purchase of any combination of 
                classes of stock authorized by the board of directors 
                of the Bank and approved by the Finance Board in 
                accordance with its regulations.
                    ``(B) Rights requirement.--A Federal Home Loan Bank 
                shall include in its capital structure plan provisions 
                establishing terms, rights, and preferences, including 
                minimum investment, dividends, voting, and liquidation 
                preferences of each class of stock issued by the Bank, 
                consistent with Finance Board regulations and market 
                requirements.
                    ``(C) Reduced minimum investment.--The capital 
                structure plan of a Federal Home Loan Bank may provide 
                for a reduced minimum stock investment for any member 
                of that Bank that elects to purchase Class B, Class C, 
                or any other class of nonredeemable stock, in a manner 
                that is consistent with meeting the minimum capital 
                requirements of the Bank, as established by the Finance 
                Board.
                    ``(D) Liquidation of claims.--The capital structure 
                plan of a Federal Home Loan Bank shall provide for the 
                liquidation in an orderly manner, as determined by the 
                Bank, of any claim of that Bank against a member, 
                including claims for any applicable prepayment fees or 
                penalties resulting from prepayment of advances prior 
                to stated maturity.
            ``(5) Limited transferability of stock.--The capital 
        structure plan of a Federal Home Loan Bank shall--
                    ``(A) provide that--
                            ``(i) any stock issued by that Bank shall 
                        be available only to, held only by, and 
                        tradable only among members of that Bank and 
                        between that Bank and its members; and
                            ``(ii) a Bank has no obligation to 
                        repurchase its outstanding Class C stock but 
                        may do so, provided it is consistent with 
                        Finance Board regulations and is at a price 
                        that is mutually agreeable to the Bank and the 
                        member; and
                    ``(B) establish standards, criteria, and 
                requirements for the issuance, purchase, transfer, 
                retirement, and redemption of stock issued by that 
                Bank.
            ``(6) Bank review of plan.--Before filing a capital 
        structure plan with the Finance Board, each Federal Home Loan 
        Bank shall conduct a review of the plan by--
                    ``(A) an independent certified public accountant, 
                to ensure, to the extent possible, that implementation 
                of the plan would not result in any write-down of the 
                redeemable Bank stock investment of its members; and
                    ``(B) at least 1 major credit rating agency, to 
                determine, to the extent possible, whether 
                implementation of the plan would have any material 
                effect on the credit ratings of the Bank.
    ``(d) Termination of Membership.--
            ``(1) Voluntary withdrawal.--Any member may withdraw from a 
        Federal Home Loan Bank by providing written notice to the Bank 
        of its intent to do so. The applicable stock redemption notice 
        periods shall commence upon receipt of the notice by the Bank. 
        Upon the expiration of the applicable notice period for each 
        class of redeemable stock, the member may surrender such stock 
        to the Bank, and shall be entitled to receive in cash the par 
        value of the stock. During the applicable notice periods, the 
        member shall be entitled to dividends and other membership 
        rights commensurate with continuing stock ownership.
            ``(2) Involuntary withdrawal.--
                    ``(A) In general.--The board of directors of a 
                Federal Home Loan Bank may terminate the membership of 
                any institution if, subject to Finance Board 
                regulations, it determines that--
                            ``(i) the member has failed to comply with 
                        a provision of this Act or any regulation 
                        prescribed under this Act; or
                            ``(ii) the member has been determined to be 
                        insolvent, or otherwise subject to the 
                        appointment of a conservator, receiver, or 
                        other legal custodian, by a State or Federal 
                        authority with regulatory and supervisory 
                        responsibility for the member.
                    ``(B) Stock disposition.--An institution, the 
                membership of which is terminated in accordance with 
                subparagraph (A)--
                            ``(i) shall surrender redeemable stock to 
                        the Federal Home Loan Bank, and shall receive 
                        in cash the par value of the stock, upon the 
                        expiration of the applicable notice period 
                        under subsection (a)(4)(A);
                            ``(ii) shall receive any dividends declared 
                        on its redeemable stock, during the applicable 
                        notice period under subsection (a)(4)(A); and
                            ``(iii) shall not be entitled to any other 
                        rights or privileges accorded to members after 
                        the date of the termination.
                    ``(C) Commencement of notice period.--With respect 
                to an institution, the membership of which is 
                terminated in accordance with subparagraph (A), the 
                applicable notice period under subsection (a)(4) for 
                each class of redeemable stock shall commence on the 
                earlier of--
                            ``(i) the date of such termination; or
                            ``(ii) the date on which the member has 
                        provided notice of its intent to redeem such 
                        stock.
            ``(3) Liquidation of indebtedness.--Upon the termination of 
        the membership of an institution for any reason, the 
        outstanding indebtedness of the member to the Bank shall be 
        liquidated in an orderly manner, as determined by the Bank and, 
        upon the extinguishment of all such indebtedness, the Bank 
        shall return to the member all collateral pledged to secure the 
        indebtedness.
    ``(e) Redemption of Excess Stock.--
            ``(1) In general.--A Federal Home Loan Bank, in its sole 
        discretion, may redeem or repurchase, as appropriate, any 
        shares of Class A or Class B stock issued by the Bank and held 
        by a member that are in excess of the minimum stock investment 
        required of that member.
            ``(2) Excess stock.--Shares of stock held by a member shall 
        not be deemed to be `excess stock' for purposes of this 
        subsection by virtue of a member's submission of a notice of 
        intent to withdraw from membership or termination of its 
        membership in any other manner.
            ``(3) Priority.--A Federal Home Loan Bank may not redeem 
        any excess Class B stock prior to the end of the 5-year notice 
        period, unless the member has no Class A stock outstanding that 
        could be redeemed as excess.
    ``(f) Impairment of Capital.--If the Finance Board or the board of 
directors of a Federal Home Loan Bank determines that the Bank has 
incurred or is likely to incur losses that result in or are expected to 
result in charges against the capital of the Bank, the Bank shall not 
redeem or repurchase any stock of the Bank without the prior approval 
of the Finance Board while such charges are continuing or are expected 
to continue. In no case may a Bank redeem or repurchase any applicable 
capital stock if, following the redemption, the Bank would fail to 
satisfy any minimum capital requirement.
    ``(g) Rejoining After Divestiture of All Shares.--
            ``(1) In general.--Except as provided in paragraph (2), and 
        notwithstanding any other provision of this Act, an institution 
        that divests all shares of stock in a Federal Home Loan Bank 
        may not, after such divestiture, acquire shares of any Federal 
        Home Loan Bank before the end of the 5-year period beginning on 
        the date of the completion of such divestiture, unless the 
        divestiture is a consequence of a transfer of membership on an 
        uninterrupted basis between Banks.
            ``(2) Exception for withdrawals from membership before 
        1998.--Any institution that withdrew from membership in any 
        Federal Home Loan Bank before December 31, 1997, may acquire 
        shares of a Federal Home Loan Bank at any time after that date, 
        subject to the approval of the Finance Board and the 
        requirements of this Act.
    ``(h) Treatment of Retained Earnings.--
            ``(1) In general.--The holders of the Class C stock of a 
        Federal Home Loan Bank, and any other classes of nonredeemable 
        stock approved by the Finance Board (to the extent provided in 
        the terms thereof), shall own the retained earnings, surplus, 
        undivided profits, and equity reserves, if any, of the Bank.
            ``(2) No nonredeemable classes of stock.--If a Federal Home 
        Loan Bank has no outstanding Class C or other such 
        nonredeemable stock, then the holders of any other classes of 
        stock of the Bank then outstanding shall have ownership in, and 
        a private property right in, the retained earnings, surplus, 
        undivided profits, and equity reserves, if any, of the Bank.
            ``(3) Exception.--Except as specifically provided in this 
        section or through the declaration of a dividend or a capital 
        distribution by a Federal Home Loan Bank, or in the event of 
        liquidation of the Bank, a member shall have no right to 
        withdraw or otherwise receive distribution of any portion of 
        the retained earnings of the Bank.
            ``(4) Limitation.--A Federal Home Loan Bank may not make 
        any distribution of its retained earnings unless, following 
        such distribution, the Bank would continue to meet all 
        applicable capital requirements.''.
                                 <all>
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