II

103D CONGRESS

2D SESSION S. 2298

To amend the Farm Credit Act of 1971 to enhance the ability of the

banks for cooperatives to finance agricultural exports, and for other purposes.

IN THE SENATE OF THE UNITED STATES

JULY 19 (legislative day, JULY 11), 1994

Mr. LEAHY (for himself and Mr. LUGAR) introduced the following bill; which

was read twice and referred to the Committee on Agriculture, Nutrition,

and Forestry

A BILL

To amend the Farm Credit Act of 1971 to enhance the

ability of the banks for cooperatives to finance agricultural exports, and for other purposes.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. SHORT TITLE.

4 This Act may be cited as the ‘‘Farm Credit System

5 Agricultural Export and Risk Management Act’’.

6 SEC. 2. REFERENCES TO FARM CREDIT ACT OF 1971.

7 Whenever in this Act an amendment or repeal is ex8 pressed in terms of an amendment to, or repeal of, a sec9 tion or other provision, the reference shall be considered
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1 to be made to a section or other provision of the Farm

2 Credit Act of 1971 (12 U.S.C. 2001 et seq.), except to

3 the extent otherwise specifically provided.

4 SEC. 3. PARTICIPATION DEFINED.

5 Section 3.1(11)(B) (12 U.S.C. 2122(11)(B)) is

6 amended by adding at the end the following new clause:

7 ‘‘(iv) As used in this subparagraph, the term ‘partici8 pate’ or ‘participation’ refers to multilender transactions,

9 including syndications, assignments, loan participations,

10 subparticipations, or other forms of the purchase, sale, or

11 transfer of interests in loans, other extensions of credit,

12 or other technical and financial assistance.’’.

13 SEC. 4. AGRICULTURAL EXPORT FINANCING.

14 Section 3.7(b) (12 U.S.C. 2128(b)) is amended—

15 (1) in paragraph (1)—

16 (A) by striking ‘‘assistance to (A)’’ and in17 serting ‘‘assistance to’’;

18 (B) by striking ‘‘the export or’’ and insert19 ing ‘‘the’’; and

20 (C) by striking ‘‘and (B)’’ and all that fol21 lows through ‘‘subparagraph (A): Provided,

22 That a’’ and inserting ‘‘if the’’; and

23 (2) by striking paragraph (2) and inserting the

24 following new paragraph:
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1 ‘‘(2)(A) A bank for cooperatives is authorized to

2 make or participate in loans and commitments to, and to

3 extend other technical and financial assistance to—

4 ‘‘(i) any domestic or foreign party for the ex5 port, including (where applicable) the cost of freight,

6 of agricultural commodities or products thereof,

7 farm supplies, or aquatic products from the United

8 States under policies and procedures established by

9 the bank for cooperatives to ensure that the com10 modities, products, or supplies are originally

11 sourced, where reasonably available, from 1 or more

12 eligible cooperative associations described in section

13 3.8(a) on a priority basis; and

14 ‘‘(ii) except as provided in subparagraph (B),

15 any domestic or foreign party in which an eligible

16 cooperative association described in section 3.8(a)

17 (including, for the purpose of facilitating its domes18 tic business operations only, a cooperative or other

19 entity described in section 3.8(b)(1)(A)) has an own20 ership interest, for the purpose of facilitating the do21 mestic or foreign business operations of the associa22 tion, except that if the ownership interest by an eli23 gible cooperative association, or associations, is less

24 than 50 percent, the financing shall be limited to the
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1 percentage held in the party by the association or

2 associations.

3 ‘‘(B) A bank for cooperatives shall not use the au4 thority provided in subparagraph (A)(ii) to provide finan5 cial assistance to a party for the purpose of financing the

6 relocation of a plant or facility from the United States

7 to another country.’’.

8 SEC. 5. CONFORMING AMENDMENT.

9 Section 3.8(b)(1) (12 U.S.C. 2129(b)(1)) is amend10 ed—

11 (1) by striking subparagraph (B);

12 (2) by redesignating subparagraphs (C), (D),

13 and (E) as subparagraphs (B), (C), and (D), respec14 tively; and

15 (3) by aligning the margin of subparagraph (D)

16 (as so redesignated) so as to align with the margin

17 of subparagraph (C) (as so redesignated).

18 SEC. 6. LOAN PARTICIPATION AUTHORITY FOR FARM

19 CREDIT BANKS AND DIRECT LENDER ASSO20 CIATIONS.

21 (a) IN GENERAL.—Title IV (12 U.S.C. 2151 et seq.)

22 is amended by inserting after section 4.18 (12 U.S.C.

23 2206) the following new section:
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1 ‘‘SEC. 4.18A. AUTHORITY OF FARM CREDIT BANKS AND DI2 RECT LENDER ASSOCIATIONS TO PARTICI3 PATE IN LOANS TO SIMILAR ENTITIES FOR

4 RISK MANAGEMENT PURPOSES.

5 ‘‘(a) DEFINITIONS.—As used in this section:

6 ‘‘(1) PARTICIPATE AND PARTICIPATION.—The

7 terms ‘participate’ and ‘participation’ have the

8 meaning provided in section 3.1(11)(B)(iv).

9 ‘‘(2) SIMILAR ENTITY.—The term ‘similar en10 tity’ means a person that—

11 ‘‘(A) is not eligible for a loan from the

12 Farm Credit Bank or association; and

13 ‘‘(B) has operations that are functionally

14 similar to a person that is eligible for a loan

15 from the Farm Credit Bank or association in

16 that the person derives a majority of the income

17 of the person from, or has a majority of the as18 sets of the person invested in, the conduct of

19 activities that are functionally similar to the ac20 tivities that are conducted by an eligible person.

21 ‘‘(b) LOAN PARTICIPATION AUTHORITY.—Notwith22 standing any other provision of this Act, any Farm Credit

23 Bank or direct lender association chartered under this Act

24 is authorized to participate in any loan of a type otherwise

25 authorized under title I or II made to a similar entity by

26 any person in the business of extending credit, except that
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1 a Farm Credit Bank or direct lender association may not

2 participate in a loan under this section if—

3 ‘‘(1) the participation would cause the total

4 amount of all participations by the Farm Credit

5 Bank or association under this section involving a

6 single credit risk to exceed 10 percent (or the appli7 cable higher lending limit authorized under regula8 tions issued by the Farm Credit Administration if

9 the stockholders of the respective Farm Credit Bank

10 or association so approve) of the total capital of the

11 Farm Credit Bank or association;

12 ‘‘(2) the participation by the Farm Credit Bank

13 or association would equal or exceed 50 percent of

14 the principal of the loan or, when taken together

15 with participations in the loan by other Farm Credit

16 System institutions, would cause the cumulative

17 amount of the participations by all Farm Credit Sys18 tem institutions in the loan to equal or exceed 50

19 percent of the principal of the loan;

20 ‘‘(3) the participation would cause the cumu21 lative amount of participations that the Farm Credit

22 Bank or association has outstanding under this sec23 tion to exceed 15 percent of the total assets of the

24 Farm Credit Bank or association; or
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1 ‘‘(4) the loan is of the type authorized under

2 section 1.11(b) or 2.4(a)(2).

3 ‘‘(c) PRIOR APPROVAL REQUIRED.—

4 ‘‘(1) IN GENERAL.—With respect to a similar

5 entity that is eligible to borrow from a bank for co6 operatives under title III, the authority of a Farm

7 Credit Bank or association to participate in a loan

8 to the entity under this section shall be subject to

9 the prior approval of the bank for cooperatives hav10 ing, at the time the loan is made, the greatest loan

11 volume in the State in which the headquarters office

12 of the similar entity is located.

13 ‘‘(2) TERMS AND CONDITIONS.—Approval

14 under paragraph (1) may be granted on an annual

15 basis and under such terms and conditions as may

16 be agreed on between the Farm Credit Bank or as17 sociation, as the case may be, and the bank for co18 operatives granting the approval.

19 ‘‘(3) APPROVAL BY SUPERVISING FARM CREDIT

20 BANK.—An association may not participate in a loan

21 to a similar entity under this section without the ap22 proval of the supervising Farm Credit Bank of the

23 association.’’.
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1 (b) CONFORMING AMENDMENTS.—Section

2 3.1(11)(B)(i)(I)(bb) (12 U.S.C. 2122(11)(B)(i)(I)(bb)) is

3 amended—

4 (1) by striking ‘‘the other banks for coopera5 tives under this subparagraph’’ and inserting ‘‘other

6 Farm Credit System institutions’’; and

7 (2) by striking ‘‘all banks for cooperatives’’ and

8 inserting ‘‘all Farm Credit System institutions’’.

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