The Farm Credit Act

and other statutes governing 

the Farm Credit System and the Farm Credit Administration
i 

Contents

Farm Credit Act of 1971, as amended.............................................................................................................................. 1

Introduction.................................................................................................................................................................. 2

Title I—Farm Credit Banks ......................................................................................................................................... 3

Sec. 1.1. Policy and Objectives.— .................................................................................................................... 3

Sec. 1.2. The Farm Credit System.— ............................................................................................................... 3

Sec. 1.3. Establishment, Charters, Titles, Branches.......................................................................................... 4

Sec. 1.4. Board of Directors.............................................................................................................................. 4

Sec. 1.5. General Corporate Powers. ................................................................................................................ 4

Sec. 1.6. Farm Credit Bank Capitalization........................................................................................................ 6

Sec. 1.7. Lending Authority.............................................................................................................................. 6

Sec. 1.8. Interest rates and Other Charges. ....................................................................................................... 8

Sec. 1.9. Eligibility.9

Sec. 1.10. Security; Terms. ............................................................................................................................... 9

Sec. 1.11. Purposes for Extensions of Credit.................................................................................................. 10

Sec. 1.12. Related Services.............................................................................................................................11

Sec. 1.13. Loans through Associations or Agents...........................................................................................11

Sec. 1.14. Liens on Stock................................................................................................................................11

Sec. 1.15. Taxation.11

Title II—Farm Credit Associations............................................................................................................................12

Subtitle A—Production Credit Associations ..........................................................................................................12

Sec. 2.0. Organization and Charters................................................................................................................12

Sec. 2.1. Board of Directors............................................................................................................................13

Sec. 2.2. General Corporate Powers. ..............................................................................................................13

Sec. 2.3. Production Credit Association Capitalization. .................................................................................15

Sec. 2.4. Short- and Intermediate-Term Loans; Participation; Other Financial Assistance; Terms; 

Conditions; Interest; Security..........................................................................................................................15

Sec. 2.5. Other Services. ................................................................................................................................. 17

Sec. 2.6. Liens on Stock.................................................................................................................................. 17

Sec. 2.7. Taxation.17

Subtitle B—Federal Land Bank Associations.........................................................................................................17

Sec. 2.10. Organizations; Articles; Charters; Powers of the Farm Credit Administration..............................17

Sec. 2.11. Board of Directors..........................................................................................................................18

Sec. 2.12. General Corporate Powers..............................................................................................................18

Sec. 2.13. Federal Land Bank Association Capitalization. .............................................................................20

Sec. 2.14. Agreements for Sharing Gains or Losses. ......................................................................................20

Sec. 2.15. Liens on Stock................................................................................................................................21

Sec. 2.16. Taxation.21

Title III—Banks for Cooperatives .............................................................................................................................22
ii

Part A—Banks for Cooperatives.............................................................................................................................22

Sec. 3.0. Establishment; Titles; Branches. ......................................................................................................22

Sec. 3.1. Corporate Existence; General Corporate Powers. ............................................................................22

Sec. 3.2. Board of Directors............................................................................................................................25

Sec. 3.3. Bank for Coopertives Stock; Value; Classes of Stock; Voting; Exchange.......................................25

Sec. 3.4. Dividends.26

Sec. 3.5. Retirement of Stock..........................................................................................................................26

Sec. 3.6. Guaranty Fund Subscriptions In Lieu of Stock. ...............................................................................26

Sec. 3.7. Lending Power. ................................................................................................................................26

Sec. 3.8. Eligibility.29

Sec. 3.9. Ownership of Stock by Borrowers. ..................................................................................................31

Sec. 3.10. Interest Rates; Security; Lien; Cancellation; and Application on Indebtedness.............................31

Sec. 3.11. Earnings and Reserves; Application of Savings.............................................................................32

Sec. 3.12. Distribution of Assets on Liquidation or Dissolution.....................................................................32

Sec. 3.13. Taxation.33

Part B—National Banks for Cooperatives..............................................................................................................33

Sec. 3.20. Charter, Powers, and Operation. ....................................................................................................33

Sec. 3.21. [Repealed]......................................................................................................................................33

Sec. 3.22. Credit Delivery Office....................................................................................................................33

Sec. 3.23. Consolidation of Functions. ...........................................................................................................34

Sec. 3.24. Exchange of Ownership Interests...................................................................................................34

Sec. 3.25. Capitalization. ................................................................................................................................34

Sec. 3.26. Patronage Pools..............................................................................................................................34

Sec. 3.27. Transactions to Accomplish Merger. .............................................................................................34

Sec. 3.28. Lending Limits...............................................................................................................................34

Sec. 3.29. [Repealed]......................................................................................................................................35

Title IV—Provisions Applicable to Two or More Classes of Institutions of the System ..........................................36

Introduction.............................................................................................................................................................36

Part A. Funding.......................................................................................................................................................36

Sec. 4.1. [Repealed]36

Sec. 4.2. Power to Borrow; Issuance of Notes, Bonds, Debentures, and Other Obligations. .........................36

Sec. 4.3. Capital Adequacy of Banks and Associations..................................................................................37

Sec. 4.3A. Capitalization of System Institutions.............................................................................................38

Sec. 4.4. Liability of Banks; United States Not Liable. ..................................................................................41

Sec. 4.5. [Repealed]42

Sec. 4.6. Bonds as Investments.......................................................................................................................42

Sec. 4.7. Purchase and Sale by Federal Reserve System. ...............................................................................42

Sec. 4.8. Purchase and Sale of Obligations.....................................................................................................42

Sec. 4.9. Federal Farm Credit Banks Funding Corporation. ...........................................................................42
iii

Sec. 4.9A. Protection of Borrower Stock........................................................................................................44

Part B—Dissolution................................................................................................................................................46

Sec. 4.12. Dissolution; Voluntary or Involuntary Liquidation; Mergers; Receiverships or Conservators......46

Sec. 4.12A. Communications with Stockholders............................................................................................47

Part C—Rights of Borrowers; Loan Restructuring................................................................................................. 47

Sec. 4.13. Disclosure.......................................................................................................................................47

Sec. 4.13A. Access to Documents and Information........................................................................................48

Sec. 4.13B. Notice of Action on Application.................................................................................................. 48

Sec. 4.14. Reconsideration of Actions. ...........................................................................................................49

Sec. 4.14A. Restructuring Distressed Loans...................................................................................................50

Sec. 4.14B. Effect of Restructuring on Borrower Stock. ................................................................................54

Sec. 4.14C. [Repealed]....................................................................................................................................55

Repealed by section 5411(23) of the Agriculture Improvement Act of 2018. ................................................55

Sec. 4.14D. Protection of Borrowers who Meet All Loan Obligations...........................................................55

Sec. 4.14E. Waiver of Mediation Rights by Borrowers..................................................................................55

Part D—Activities of Institutions of the System.....................................................................................................56

Sec. 4.15. Nomination of Association Directors; Representative Selection of Nominees..............................56

Sec. 4.16. [Repealed]......................................................................................................................................56

Sec. 4.17. Interest Rates.................................................................................................................................. 56

Sec. 4.18. Participation Loans.........................................................................................................................56

Sec. 4.18A. Authority of Farm Credit Banks and Direct Lender Associations to Participate in Loans to 

Similar Entities for Risk Management Purposes.............................................................................................57

Sec. 4.19. Young, Beginning, and Small Farmers and Ranchers....................................................................57

Sec. 4.20. Prohibition Against Use of Signed Ballots.....................................................................................58

Sec. 4.21. Compensation of Bank Directors. ..................................................................................................58

Part E—Service Organizations...............................................................................................................................58

Sec. 4.25. Establishment. ................................................................................................................................58

Sec. 4.26. Powers of the Farm Credit Administration. ...................................................................................59

Sec. 4.27. Regulation and Examination. .........................................................................................................59

Sec. 4.28. State Laws. .....................................................................................................................................59

Sec. 4.28A. Definition of Bank.......................................................................................................................59

Part F—Sale of Insurance .......................................................................................................................................59

Sec. 4.29. Lines of Insurance..........................................................................................................................59

Part G—Miscellaneous...........................................................................................................................................61

Sec. 4.35. Limitation on Separate Sale. ..........................................................................................................61

Sec. 4.36. Right of First Refusal. ....................................................................................................................61

Sec. 4.37. Application of Uninsured Accounts...............................................................................................64

Sec. 4.38. Affirmative Action. ........................................................................................................................64

Sec. 4.39. Encouragement of Conservation Practices.....................................................................................64

Title V—Farm Credit Administration Organization ..................................................................................................65
iv

Part B—Farm Credit Administration Organization ................................................................................................65

Sec. 5.7. The Farm Credit Administration. .....................................................................................................65

Sec. 5.8. The Farm Credit Administration Board; Appointment; Terms of Office; Organization and 

Compensation.65

Sec. 5.9. Powers of the Board. ........................................................................................................................66

Sec. 5.10. Chairman; Responsibilities; Governing Standards.........................................................................66

Sec. 5.11. Organization of the Farm Credit Administration. ..........................................................................67

Sec. 5.12. Advisory Committees.....................................................................................................................68

Sec. 5.13. Seal.68

Sec. 5.14. Administrative Expenses................................................................................................................68

Sec. 5.15. Farm Credit Administration Operating Expenses Fund. ................................................................69

Sec. 5.16. Quarters and Facilities for the Farm Credit Administration...........................................................70

Sec. 5.17. Enumerated Powers........................................................................................................................71

Sec. 5.18. [Repealed]......................................................................................................................................75

Sec. 5.19. Examinations.................................................................................................................................. 75

Sec. 5.20. Conditions of Other Banks and Lending Institutions. ....................................................................76

Sec 5.21. Consent to the Availability of Reports and to Examinations. ......................................................... 77

Sec. 5.22. Reports on Conditions of Institutions Receiving Loans or Deposits..............................................77

Sec. 5.22A. Uniform Financial Reporting Instructions...................................................................................77

Sec. 5.23. Jurisdiction. ....................................................................................................................................78

Sec. 5.24. State Legislation.............................................................................................................................78

Part C—Enforcement Powers of Farm Credit Administration ...............................................................................78

Sec. 5.25. Cease and Desist Proceedings. .......................................................................................................78

Sec. 5.26. Temporary Cease and Desist Orders..............................................................................................79

Sec. 5.27. Enforcement of Temporary Cease and Desist Orders. ...................................................................80

Sec. 5.28. Suspension or Removal of Director or Officer...............................................................................80

Sec. 5.29. Suspension or Removal of Director or Officer Charged with Felony. ...........................................82

Sec. 5.29A. Removal and Prohibition Authority; Industrywide Prohibition...................................................83

Sec. 5.30. Hearings and Judicial Review. .......................................................................................................84

Sec. 5.31. Jurisdiction and Enforcement.........................................................................................................85

Sec. 5.31A. Jurisdiction Over Institution -Affiliated Parties. .........................................................................86

Sec. 5.32. Penalty.86

Sec. 5.33. Further Penalties.............................................................................................................................87

Sec. 5.34. Replacement of Suspended or Removed Directors. .......................................................................88

Sec. 5.35. Definitions......................................................................................................................................88

Sec. 5.36. Notice of Service............................................................................................................................89

Sec. 5.37. Ancillary Provisions; Subpena Power, etc. ....................................................................................89

Sec. 5.38. Power to Remove Directors and Officers.......................................................................................90

Part D—Miscellaneous...........................................................................................................................................90

Sec. 5.40. Repeal.90
v 

Sec. 5.41. Amendments to Other Laws...........................................................................................................91

Sec. 5.42. Separability.91

Sec. 5.43. Reserve Right to Amend or Repeal................................................................................................91

Sec. 5.44. [Repealed]......................................................................................................................................91

Sec. 5.45. Transition Rules Relating to Amendment of Certain FCA Approval Authorities..........................91

Part E—Farm Credit System Insurance Corporation..............................................................................................92

Sec. 5.51. Definitions.92

Sec. 5.52. Establishment of Farm Credit System Insurance Corporation. ......................................................92

Sec. 5.53. Board of Directors..........................................................................................................................92

Sec. 5.54. Commencement of Insurance.........................................................................................................92

Sec. 5.55. Premiums.93

Sec. 5.56. Certification of Premiums. .............................................................................................................97

Sec. 5.57. Overpayment and Underpayment of Premiums; Remedies............................................................98

Sec. 5.58. General Corporate Powers..............................................................................................................99

Sec. 5.59. Conduct of Corporate Affairs; Examination of System Institutions.............................................101

Sec. 5.60. Insurance Fund.............................................................................................................................102

Sec. 5.61. Powers of Corporation with Respect to Troubled Insured System Banks....................................102

Sec. 5.61A. Oversight Actions by the Corporation.......................................................................................105

Sec. 5.61B. Authority to Regulate Golden Parachute and Indemnification Payments.................................. 106

Sec. 5.61C. Corporation as Conservator or Receiver; Certain Other Powers. ..............................................109

Sec. 5.62. Investment of Funds.....................................................................................................................148

Sec. 5.63. Exemption from Taxation. ...........................................................................................................148

Sec. 5.64. Reports.149

Sec. 5.65. Prohibitions.149

Title VI—Assistance to Farm Credit System...........................................................................................................151

Title VII—Restructuring of System Institutions......................................................................................................151

Subtitle A—Merger of Banks Within a District ...................................................................................................151

Sec. 7.0. Power to Merge..............................................................................................................................151

Sec. 7.1. Board of Directors..........................................................................................................................151

Sec. 7.2. Powers of Merged Banks. ..............................................................................................................151

Sec. 7.3. Capitalization.151

Subtitle B—Mergers, Transfers of Assets, and Powers of Associations Within a District...................................152

Chapter 1—Transfers by Federal Land Banks to Federal Land Bank Associations.....................................152

Sec. 7.6. Transfer of Lending Authority. ......................................................................................................152

Sec. 7.7. Equalization of Loan-Making Powers of Certain District Associations.........................................152

Chapter 2—Merger of Like and Unlike Associations...................................................................................153

Sec. 7.8. Merger of Associations. .................................................................................................................153

Chapter 3—Reconsideration .........................................................................................................................154

Sec. 7.9. Reconsideration..............................................................................................................................154
vi 

Chapter 4—Termination and Dissolution of Institutions..............................................................................155

Sec. 7.10. Termination of System Institution Status.....................................................................................155

Subtitle C—Approval of Disclosure Information and Issuance of Charters by the FCA Board...........................156

Sec. 7.11. Approval of Disclosure Information and Issuance of Charters. ...................................................156

Subtitle D—Mergers of Like Entities...................................................................................................................157

Sec. 7.12. Merger of Similar Banks. .............................................................................................................157

Sec. 7.13. Merger of Similar Associations....................................................................................................158

Subtitle E—Taxation of Merger Transactions......................................................................................................158

Sec. 7.14. Transactions to Accomplish Mergers Exempt from Certain State Taxes.....................................158

Title VIII—Agricultural Mortgage Secondary Market............................................................................................159

Sec. 8.0. Definitions.159

Subtitle A—Establishment and Activities of Federal Agricultural Mortgage Corporation ..................................160

Sec. 8.1. Federal Agricultural Mortgage Corporation...................................................................................160

Sec. 8.2. Board of Directors..........................................................................................................................161

Sec. 8.3. Powers and Duties of Corporation and Board................................................................................163

Sec. 8.4. Stock Issuance.164

Sec. 8.5. Certification of Agricultural Mortgage Marketing Facilities. ........................................................167

Sec. 8.6. Guarantee of Qualified Loans. .......................................................................................................168

Sec. 8.7. [Repealed]170

Sec. 8.8. Standards for Qualified Loans........................................................................................................170

Sec. 8.9. Exemption from Restructuring and Borrowers Rights Provisions for Pooled Loans.....................172

Sec. 8.10. Funding for Guarantee; Reserves of Corporation.........................................................................172

Sec. 8.11. Supervision, Examination, and Report of Condition....................................................................173

Sec. 8.12. Securities in Credit Enhanced Pools. ...........................................................................................174

Sec. 8.13. Authority to Issue Obligations to Cover Guarantee Losses of Corporation. ................................176

Sec. 8.14. Federal Jurisdiction. .....................................................................................................................177

Subtitle B—Regulation of Financial Safety and Soundness of Federal Agricultural Mortgage Corporation.......178

Sec. 8.31. Definitions.178

Sec. 8.32. Risk-Based Capital Levels. ..........................................................................................................179

Sec. 8.33. Minimum Capital Level. ..............................................................................................................181

Sec. 8.34. Critical Capital Level. ..................................................................................................................182

Sec. 8.35. Enforcement Levels......................................................................................................................182

Sec. 8.36. Mandatory Actions Applicable to Level II...................................................................................184

Sec. 8.37. Supervisory Actions Applicable to Level III................................................................................184

Sec. 8.38. [Repealed}....................................................................................................................................185

Subtitle C—Receivership, Conservatorship, and Liquidation of the Farmer Mac................................................ 185

Sec. 8.41. Conservatorship; Liquidation; Receivership. ...............................................................................185

Title 12—United States Code.......................................................................................................................................190

Banks and Banking ..................................................................................................................................................190
vii 

Sec. 1786. Termination of Insured Credit Union Status; Cease and Desist Orders; Removal or Suspension 

from Office; Procedure. ................................................................................................................................190

Sec. 1818. Termination of Status as Insured Bank. ......................................................................................192

Sec. 1821. Insurance Funds. .........................................................................................................................193

Sec. 2276. Access to and Examination by Comptroller General of Books, Documents, etc. of Farm Credit 

System Banks and Institutions. .....................................................................................................................194

Sec. 3025. Examination and Audit................................................................................................................194

Public Law 101-220 .....................................................................................................................................................196

Sec. 7. Purchases of Financial Assistance Corporation Stock by Farm Credit System Institutions..............196

Terrorism Risk Insurance Program Reauthorization Act of 2015 ................................................................................198

Title III—Business Risk Mitigation and Price Stabilization....................................................................................198

Sec. 301. Short Title......................................................................................................................................198

Sec. 302. Margin Requirements....................................................................................................................198

Sec. 303. Implementation. ............................................................................................................................198

Agricultural Act of 2014 ..............................................................................................................................................200

Title V—Credit ........................................................................................................................................................200

Subtitle E—Miscellaneous....................................................................................................................................200

Sec. 5404. Compensation Disclosure by Farm Credit System Institutions...................................................200

Dodd-Frank Wall Street Reform and Consumer Protection Act ..................................................................................201

Part I.........................................................................................................................................................................201

Title I—Financial Stability ...................................................................................................................................201

Sec. 102. Definitions.....................................................................................................................................201

Title II—Orderly Liquidation Authority...............................................................................................................201

Sec. 201. Definitions.....................................................................................................................................201

Title VI—Improvements to Regulation of Bank and Savings Association Holding Companies and Depository 

Institutions ............................................................................................................................................................202

Sec. 619. Prohibitions on Proprietary Trading and Certain Relationships with Hedge Funds and Private 

Equity Funds.202

Part II—Regulation of Swap Markets......................................................................................................................203

Title VII—Wall Street Transparency and Accountability ....................................................................................203

Sec. 721. Definitions.....................................................................................................................................203

Sec. 723. Clearing.........................................................................................................................................203

Sec. 731. Registration and Regulation of Swap Dealers and Major Swap Participants................................204

Sec. 742. Retail Commodity Transactions....................................................................................................206

Sec. 761. Definitions Under the Securities Exchange Act of 1934...............................................................209

Sec. 763. Amendments to the Securities Exchange Act of 1934. ................................................................. 209

Sec. 764. Registration and Regulation of Security-Based Swap Dealers and Major Security-Based Swap 

Participants....................................................................................................................................................210

Title IX—Investor Protections and Improvements to the Regulation of Securities..............................................213

Sec. 901. Short Title......................................................................................................................................213

Sec. 939A. Review of Reliance on Ratings. ................................................................................................. 213
viii

Sec. 941. Regulation of Credit Risk Retention. ............................................................................................214

Sec. 951. Shareholder Vote on Executive Compensation Disclosures. ........................................................216

Sec. 953. Executive Compensation Disclosures. ..........................................................................................217

Sec. 954. Recovery of Erroneously Awarded Compensation. ......................................................................218

Title X—Bureau of Consumer Financial Protection.............................................................................................219

Sec. 1001. Short Title.219

Sec. 1024. Supervision of Nondepository Covered Persons.........................................................................219

Sec. 1027. Limitations on Authorities of the Bureau; Preservation of Authorities.......................................219

Sec. 1100. Amendments to the Secure and Fair Enforcement for Mortgage Licensing Act of 2008............220

Sec. 1100A. Amendments to the Truth in Lending Act................................................................................221

Food, Conservation, and Energy Act of 2008 ..............................................................................................................222

Title V—Credit ........................................................................................................................................................222

Subtitle E—Farm Credit .......................................................................................................................................222

Sec. 5407. Equalization of Loan-Making Powers of Certain District Associations......................................222

Housing and Economic Recovery Act of 2008 ............................................................................................................223

Title V—S.A.F.E. Mortgage Licensing Act.............................................................................................................223

Sec. 1501. Short Title.223

Sec. 1502. Purposes and Methods for Establishing a Mortgage Licensing System and Registry.................223

Sec. 1503. Definitions...................................................................................................................................223

Sec. 1504. License or Registration Required................................................................................................226

Sec. 1507. System of Registration Administration by Federal Agencies......................................................227

Sec. 1510. Fees.228

Farm Security and Rural Investment Act of 2002........................................................................................................229

Title VI—Rural Development..................................................................................................................................229

Sec. 384J. Financial Institution Investments.................................................................................................229

Omnibus Consolidated Appropriations Act, 1997........................................................................................................230

Title II—Economic Growth and Regulatory Paperwork Reduction ........................................................................230

Subtitle F—Miscellaneous....................................................................................................................................230

Sec. 2615. Prohibitions on Certain Depository Institution Associations with Government-Sponsored 

Enterprises. ...................................................................................................................................................230

(e) PROHIBITION ON CERTAIN ASSOCIATIONS.— ..........................................................................230

(s) PROHIBITION ON CERTAIN AFFILIATIONS.— .............................................................................230

Farm Credit System Reform Act of 1996.....................................................................................................................232

Title II—Regulatory Relief......................................................................................................................................232

Sec. 219. Farm Credit System Insurance Corporation Board of Directors. ..................................................232

Sec. 221. Liability for Making Criminal Referrals. ......................................................................................232

Sec. 212. Regulatory Review........................................................................................................................232

Farm Credit Banks and Associations Safety and Soundness Act of 1992....................................................................234

Title II—Farm Credit System Insurance Corporation..............................................................................................234
ix

Sec. 204. GAO Reports on Risk-Based Insurance Premiums, Access to Association Capital, Supplemental 

Premiums, and Consolidation. ......................................................................................................................234

Title IV—Clarification of Certain Authorities.........................................................................................................235

Sec. 401. Clarification of the Status and Powers of Certain Institutions of the Farm Credit System. ..........235

Title V—Miscellaneous...........................................................................................................................................236

Sec. 514. Financial Disclosure and Conflict of Interest Reporting by Directors, Officers, and Employees of 

Farm Credit System Institutions. ..................................................................................................................236

Food, Agriculture, Conservation, and Trade Act of 1990 ............................................................................................238

Title XVIII—Credit .................................................................................................................................................238

Subtitle B—Farm Credit System ..........................................................................................................................238

Sec. 1838. Termination of System Institution Status of California Livestock Production Credit Assoc......238

Sec. 1842. GAO Study of Rural Credit Cost and Availability......................................................................238

Omnibus Budget Reconciliation Act of 1990...............................................................................................................240

Title XIII—Budget Enforcement .............................................................................................................................240

PART II—Related Amendments..........................................................................................................................240

Subtitle E—Government-Sponsored Enterprises..........................................................................................240

Sec. 13501. Financial Safety and Soundness of Government-Sponsored Enterprises.................................. 240

Financial Institutions Reform, Recovery, and Enforcement Act of 1989.....................................................................242

Title X—Studies of Federal Deposit Insurance, Banking Services, and the Safety and Soundness of GovernmentSponsored Enterprises..............................................................................................................................................242

Sec. 1004. Study Regarding Capital Requirements for Government-Sponsored Enterprises.......................242

Title XIV—Tax Provisions......................................................................................................................................244

12 U.S.C. 1811 note Sec. 1404. Studies of Relationship Between Public Debt and Activities of 

Government-Sponsored Enterprises. ............................................................................................................244

Agricultural Credit Act of 1987 ...................................................................................................................................246

No Title ....................................................................................................................................................................246

Sec. 102. Restructuring Distressed Loans.....................................................................................................246

Sec. 206. Financial Report.— .......................................................................................................................246

Title III—Capitalization of System Institutions.......................................................................................................246

Sec. 301. Capitalization of System Institutions.............................................................................................246

Title IV—Restructuring of the Farm Credit System................................................................................................247

Subtitle B—Merger of System Institutions...........................................................................................................247

Sec. 410. Mandatory Merger.........................................................................................................................247

Sec. 411. Merger of Production Credit Associations and Federal Land Bank Associations.........................261

Sec. 412. Consolidation of District Farm Credit Banks...............................................................................261

Sec. 413. Voluntary Merger of the Banks for Cooperatives. ........................................................................262

Sec. 414. Bank for Cooperatives Board of Directors....................................................................................265

Sec. 422. Sales of Insurance by System Institutions.....................................................................................265

Sec. 424. Limitation on FCA Authority to Require Disclosure of Information............................................265

Sec. 433. Reassignment of Associations to Adjoining Districts. ..................................................................266
x 

Title V—State Mediation Programs.........................................................................................................................266

Sec. 503. Participation of Federal Agencies. ................................................................................................266

Sec. 504. Regulations....................................................................................................................................267

Title VII—Agricultural Mortgage Secondary Markets............................................................................................267

Subtitle A—The Federal Agricultural Mortgage Corporation..............................................................................267

Sec. 701. Statement of Purpose.....................................................................................................................267

Sec. 703. GAO Audit of Federal Agricultural Mortgage Corporation..........................................................267

Sec. 704. GAO Studies.268

Consolidated Appropriation Act, 2016.........................................................................................................................269

Division O................................................................................................................................................................269

Title VII—Financial Services...............................................................................................................................269

Sec. 705. Treatment of Affiliate Transactions. .............................................................................................269

Agriculture, Rural Development, Food and Drug Administration, and Related Agencies Appropriations Act, 2015 . 273

Title VI—Related Agencies and Food and Drug Administration ............................................................................273

Independent Agencies...........................................................................................................................................273

Farm Credit Administration Limitation on Administrative Expenses...........................................................273

Consolidated Appropriations Act, 2014 .......................................................................................................................274

Title IV – Related Agencies and Food and Drug Administration ............................................................................274

Farm Credit Administration Limitation on Administrative Expenses...........................................................274

Agriculture, Rural Development, Food and Drug Administration, and Related Agencies Appropriations Act, 2013 . 275

Title VI—Related Agencies and Food and Drug Administration ............................................................................275

Independent Agencies...........................................................................................................................................275

Farm Credit Administration Limitation on Administrative Expenses...........................................................275

Agriculture, Rural Development, FDA, and Related Agencies Appropriations Act, 2012 ..........................................276

Title VI—Related Agencies and Food and Drug Administration ............................................................................276

Independent Agencies...........................................................................................................................................276

Farm Credit Administration Limitation on Administrative Expenses...........................................................276

Agriculture, Rural Development, Food and Drug Administration, and Related Agencies Appropriations Act, 2011 . 277

Title VI—Related Agencies and Food and Drug Administration ............................................................................277

Independent Agencies...........................................................................................................................................277

Farm Credit Administration Limitation on Administrative Expenses ..........................................................277

Agriculture, Rural Development, Food and Drug Administration, and Related Agencies Appropriations Act, 1996 . 278

Title VI—Related Agencies and Food and Drug Administration ............................................................................278

Independent Agencies...........................................................................................................................................278

Farm Credit Administration Administrative Provision .................................................................................278
1

Farm Credit Act of 1971, as amended

Public Law 92–181, 85 Stat. 583

92d Congress, S. 1483, December 10, 1971

amended by

Public Law 94–184, 89 Stat. 1060

94th Congress, H.R. 7862, December 31, 1975

Public Law 95–443, 92 Stat. 1066

95th Congress, S. 3045, October 10, 1978

Public Law 96–592, 94 Stat. 3437

96th Congress, S. 1465, December 24, 1980

Public Law 99–190, 99 Stat. 1185

99th Congress, H.J. Res. 465, December 19, 1985

Public Law 99–198, 99 Stat. 1354

99th Congress, H.R. 2100, December 23, 1985

Public Law 99–205, 99 Stat. 1678

99th Congress, S. 1884, December 23, 1985

Public Law 99–509, 100 Stat. 1874

99th Congress, H.R. 5300, October 21, 1986

Public Law 100–233, 101 Stat. 1568

100th Congress, H.R. 3030, January 6, 1988

Public Law 100–399, 102 Stat. 989

100th Congress, H.R. 3980, August 17, 1988

Public Law 100–460, 102 Stat. 2229

100th Congress, H.R. 4784, October 1, 1988

Public Law 101–73, 103 Stat. 183

101st Congress, H.R. 1278, August 9, 1989

Public Law 101–220, 103 Stat. 1876

101st Congress, S. 1793, December 12, 1989

Public Law 101–624, 104 Stat. 3359

101st Congress, S. 2830, November 28, 1990

Public Law 102–237, 105 Stat. 1818

102d Congress, H.R. 3029, December 13, 1991

Public Law 102–552, 106 Stat. 4102

102d Congress, H.R. 6125, October 28, 1992
2

Public Law 103–376, 108 Stat. 3497

103d Congress, H.R. 4379, October 19, 1994

Public Law 104–105, 110 Stat. 162

104th Congress, H.R. 2029, February 10, 1996

Public Law 104-316, 110 Stat. 3831

104th Congress, H.R. 3864, October 19, 1996

Public Law 107-171, 116 Stat. 134

107th Congress, H.R. 2646, May 13, 2002

Public Law 110-246, 122 Stat. 1651

110th Congress, H.R. 6124, June 18, 2008

Public Law 115-334, 132 Stat. 4490

115th Congress, H.R. 2, December 20, 2018

Introduction

AN ACT

To further provide for the farmer-owned cooperative system of making credit available to farmers 

and ranchers and their cooperatives, for rural residences, and to associations and other entities upon 

which farming operations are dependent, to provide for an adequate and flexible flow of money into 

rural areas, and to modernize and consolidate existing farm credit law to meet current and future 

rural credit needs, and for other purposes.

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

Congress assembled, That this Act may be cited as the "Farm Credit Act of 1971."
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Title I—Farm Credit Banks

12 U.S.C. 2001 Sec. 1.1. Policy and Objectives.—

(a) It is declared to be the policy of the Congress, recognizing that a 

prosperous, productive agriculture is essential to a free nation and recognizing 

the growing need for credit in rural areas, that the farmer-owned cooperative 

Farm Credit System be designed to accomplish the objective of improving the 

income and well-being of American farmers and ranchers by furnishing 

sound, adequate, and constructive credit and closely related services to them, 

their cooperatives, and to selected farm-related businesses necessary for 

efficient farm operations.

(b) It is the objective of this Act to continue to encourage farmer- and 

rancher-borrowers participation in the management, control, and ownership of 

a permanent system of credit for agriculture which will be responsive to the 

credit needs of all types of agricultural producers having a basis for credit, and 

to modernize and improve the authorizations and means for furnishing such 

credit and credit for housing in rural areas made available through the 

institutions constituting the Farm Credit System as herein provided.

(c) It is declared to be the policy of Congress that the credit needs of 

farmers, ranchers, and their cooperatives are best served if the institutions of 

the Farm Credit System provide equitable and competitive interest rates to 

eligible borrowers, taking into consideration the creditworthiness and access 

to alternative sources of credit for borrowers, the cost of funds, the operating 

costs of the institution, including the costs of any loan loss amortization under 

section 5.19(b), the cost of servicing loans, the need to retain earnings to 

protect borrowers' stock, and the volume of net new borrowing. Further, it is 

declared to be the policy of Congress that Farm Credit System institutions 

take action in accordance with the Farm Credit Act Amendments of 1986 in 

such manner that borrowers from the institutions derive the greatest benefit 

practicable from that Act: Provided, That in no case is any borrower to be 

charged a rate of interest that is below competitive market rates for similar 

loans made by private lenders to borrowers of equivalent creditworthiness and 

access to alternative credit.

12 U.S.C. 2002 Sec. 1.2. The Farm Credit System.—

(a) COMPOSITION.—The Farm Credit System shall include the 

Farm Credit Banks, the bank for cooperatives, Agricultural Credit Banks, the 

Federal Land Bank Associations, the Federal Land Credit Associations, the 

Production Credit Associations, the agricultural credit associations, the 

Federal Farm Credit Banks Funding Corporation, the Federal Agricultural 

Mortgage Corporation, service corporations established pursuant to section 

4.25, and such other institutions as may be made a part of the Farm Credit 

System, all of which shall be chartered by and subject to regulation by the 

Farm Credit Administration.

(b) FARM CREDIT DISTRICTS.—There shall be not more than 

twelve farm credit districts in the United States, which may be designated by 

number, one of which districts shall include the Commonwealth of Puerto 

Rico and one of which districts may, if authorized by the Farm Credit 
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Administration, include the Virgin Islands of the United States: Provided, 

That the extension of credit and other services authorized by this Act in the 

Virgin Islands of the United States shall be undertaken only if determined to 

be feasible under regulations of the Farm Credit Administration. The 

boundaries of the twelve farm credit districts existing on the date of enactment 

of this Act may be readjusted from time to time by the Farm Credit 

Administration, with the concurrence of the boards of the banks in each 

district involved. Two or more districts may be merged as provided in section 

5.17(a)(2).

12 U.S.C. 2011 Sec. 1.3. Establishment, Charters, Titles, Branches.

(a) ESTABLISHMENT. The banks established pursuant to the 

merger of each District Federal Intermediate Credit Bank and Federal Land 

Bank (hereinafter referred to in this title as "Farm Credit Banks"), as provided 

in section 410 of the Agricultural Credit Act of 1987, shall be Federally 

chartered instrumentalities of the United States.

(b) CHARTERS. The Farm Credit Administration shall, consistent 

with this Act, issue charters for, and approve amendments to charters of, the 

Farm Credit Banks.

(c) TITLE. Each Farm Credit Bank may include in its title the name 

of the city in which it is located or other geographical designation.

(d) BRANCHES. Each Farm Credit Bank may establish such 

branches or other offices as may be appropriate for the effective operation of 

its business.

12 U.S.C. 2012 Sec. 1.4. Board of Directors.

Each Farm Credit Bank shall elect a board of directors of such number, 

for such term, in such manner, and with such qualifications, as may be 

required in its bylaws, except that, at least one member shall be elected by the 

other directors, which member shall not be a director, officer, employee, or 

stockholder of a System institution.

12 U.S.C. 2013 Sec. 1.5. General Corporate Powers.

Each Farm Credit Bank shall be a body corporate and, subject to 

regulation by the Farm Credit Administration, shall have power to—

(1) adopt and use a corporate seal;

(2) have succession until dissolved under the provisions of this 

Act or other Act of Congress;

(3) make contracts;

(4) sue and be sued;

(5) acquire, hold, dispose, and otherwise exercise all the usual 

incidents of ownership of real and personal property necessary or 

convenient to its business;

(6) make, participate in, and discount loans, make commitments 

for credit, accept advance payments, and provide services as authorized 

in this Act, and charge fees for such;

(7) operate under the direction of its board of directors;
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(8) provide by its board of directors for a president, one or more 

vice presidents, a secretary, a treasurer, and provide for such other 

officers, employees, and agents as may be necessary, as provided in this 

Act, define their duties, and require surety bonds or make other 

provision against losses occasioned by employees;

(9) prescribe, by its board of directors, its bylaws that shall be 

consistent with law, and that shall provide for—

(A) the classes of its stock and the manner in which such 

stock shall be issued, transferred and retired; and 

(B) the manner in which it is to—

(i) select officers, employees, and agents;

(ii) acquire, hold, and transfer property;

(iii) make loans and discounts;

(iv) conduct general business; and

(v) exercise and enjoy the privileges granted to it by 

law;

(10) borrow money and issue notes, bonds, debentures, or other 

obligations individually, or in concert with one or more other banks of 

the System, of such character, terms, conditions, and rates of interest as 

may be determined as provided for in this Act;

(11) purchase nonvoting stock in, or pay in surplus to, and accept 

deposits of securities or funds from associations in its district, and pay 

interest on such funds;

(12) participate with—

(A) one or more other Farm Credit Banks in loans under 

this title on such terms as may be agreed on among such banks;

(B) one or more other Farm Credit System institutions in 

loans made under this title or other titles on the basis prescribed in 

section 4.18; and

(C) lenders that are not Farm Credit System institutions in 

loans that the bank is authorized to make under this title;

(13) approve the salary scale of the officers and employees of the 

associations in its district and supervise the exercise by such associations 

of the functions vested in or delegated to them;

(14) deposit the securities and current funds of the bank with any 

member bank of the Federal Reserve System or any insured State 

nonmember bank (within the meaning of section 3 of the Federal 

Deposit Insurance Act (12 U.S.C. 1813)) and pay fees and receive 

interest on such as may be agreed, and when designated for that purpose 

by the Secretary of the Treasury, such bank—

(A) shall be a depository of public money, except receipts 

from customs, under such regulations as may be prescribed by the 

Secretary;

(B) may be employed as a fiscal agent of the Government; 

and
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(C) shall perform all such reasonable duties as a depository 

of public money or financial agent of the Government as may be 

required of such bank;

except that no Government funds deposited under the provisions of this 

paragraph shall be invested in loans or bonds or other obligations of the bank;

(15) buy and sell obligations of, or insured by, the United States 

or any agency thereof, or securities backed by the full faith and credit of 

any such agency, and make other investments as may be authorized 

under regulations issued by the Farm Credit Administration;

(16) sell to lenders that are not Farm Credit System institutions 

interests in loans, and buy from and sell to Farm Credit System 

institutions interests in loans and other extensions of credit, and 

nonvoting stock as may be authorized under regulations issued by the 

Farm Credit Administration;

(17) conduct studies and make and adopt standards for lending;

(18) delegate to associations such functions as the bank 

determines appropriate;

(19) amend and modify loan contracts, documents, and payment 

schedules, and release, subordinate, or substitute security for any of such 

items;

(20) for loans made by the bank, require associations to endorse 

notes and other obligations of borrowers from the bank;

(21) exercise through the board of directors or authorized officers, 

employees, or agents of the bank, all such incidental powers as may be 

necessary or expedient to carry on the business of the bank;

(22) accept contributions to the capital of the bank from 

associations and account for such in accordance with generally accepted 

accounting principles, except as may be authorized by the Farm Credit 

Administration;

(23) as may be authorized by the board of directors of the bank, 

agree with other Farm Credit System institutions to share loan and other 

losses, whether to protect against capital impairment or for any other 

purpose; and

(24) operate as an originator and become certified as a certified 

facility under title VIII.

12 U.S.C. 2014 Sec. 1.6. Farm Credit Bank Capitalization.

In accordance with section 4.3A, the Farm Credit Banks shall provide, 

through bylaws and subject to Farm Credit Administration regulations, for the 

capitalization of the bank and the manner in which bank stock shall be issued, 

held, transferred, and retired and bank earnings distributed.

12 U.S.C. 2015 Sec. 1.7. Lending Authority.

(a) REAL ESTATE LOANS AND RELATED ASSISTANCE.

(1) REAL ESTATE LOANS. The Farm Credit Banks may make 

or participate with other lenders in long-term real estate mortgage loans 

in rural areas, as defined by the Farm Credit Administration, or to 
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producers or harvesters of aquatic products, and make continuing 

commitments to make such loans under specified circumstances, for a 

term of not less than 5 nor more than 40 years.

(2) FINANCIAL ASSISTANCE. The Farm Credit Banks may 

provide and extend financial assistance to, and discount for, or purchase 

from, a Federal land bank association any note, draft, or other obligation 

with the endorsement or guarantee of the association, the proceeds of 

which have been advanced to persons eligible and for purposes of 

financing by the association, as authorized under section 7.6(a).

(b) INTERMEDIATE CREDIT.

(1) IN GENERAL. The Farm Credit Banks are authorized to 

make loans and extend other similar financial assistance to and to 

discount for or purchase from—

(A) any production credit association, or

(B) any national bank, State bank, trust company, 

agricultural credit corporation, incorporated livestock loan 

company, savings institution, credit union, or any association of 

agricultural producers engaged in the making of loans to farmers 

and ranchers, and any corporation engaged in the making of loans 

to producers or harvesters of aquatic products,

any note, draft, or other obligation with the institution's 

endorsement or guarantee, the proceeds of which note, draft, or 

other obligation have been advanced to persons and for purposes 

eligible for financing by production credit associations as 

authorized by this Act.

(2) PARTICIPATION WITH OTHER ENTITIES. The Farm 

Credit Banks may participate with one or more production credit 

associations or other Farm Credit Banks in the making of loans to 

eligible borrowers and may participate with one or more other Farm 

Credit System institutions in loans made under this title or other titles of 

this Act on the basis prescribed in section 4.18 of this Act. 

(3) LIMITATIONS ON EXTENSION OF FINANCIAL 

SERVICES. 

(A) GENERAL RULE. No paper shall be purchased from 

or discounted for, and no loans shall be made or other similar 

financial assistance extended by a Farm Credit Bank to any entity 

identified in paragraph (1)(B) of this subsection if the amount of 

such paper added to the aggregate liabilities of such entity, whether 

direct or contingent (other than bona fide deposit liabilities), 

exceeds ten times the paid-in and unimpaired capital and surplus of 

such entity or the amount of such liabilities permitted under the 

laws of the jurisdiction creating such institution, whichever is the 

lesser.

(B) LIMITATION ON NATIONAL BANK. It shall be 

unlawful for any national bank which is indebted to any Farm 

Credit Bank, on paper discounted or purchased under paragraph 

(1), to incur any additional indebtedness, if by virtue of such 

additional indebtedness its aggregate liabilities direct or 
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contingent, will exceed the limitation described in subparagraph 

(A).

(4) FCA REGULATIONS.

(A) IN GENERAL. All of the loans, financial assistance, 

discounts and purchases authorized by this subsection shall be 

subject to regulations of the Farm Credit Administration and shall 

be secured by collateral, if any, as may be required in such 

regulations.

(B) REQUIREMENT OF REGULATIONS. The 

regulations shall assure that such loans, financial assistance, 

discounts, and purchases are available on a reasonable basis to any 

financing institution authorized to receive such services under 

paragraph (1)(B) of this subsection, and that—

(i) is significantly involved in lending for agricultural 

or aquatic purposes;

(ii) demonstrates a continuing need for supplementary 

sources of funds to meet the credit requirements of its 

agricultural or aquatic borrowers;

(iii) has limited access to national or regional capital 

markets; and

(iv) does not use such services to expand its financing 

activities to persons and for purposes other than those 

authorized under title II.

(C) FEES. The regulations may authorize a Farm Credit 

Bank to charge reasonable fees for any commitment to extend 

service under this section to such a financing institution.

(D) SUBSIDIARIES AND AFFILIATES. For purposes of 

this subsection, a financing institution together with the 

subsidiaries and affiliates of such may be considered as one, but 

such determination to consider such institution together with the 

subsidiaries and affiliates of such as one shall be made in the first 

instance by the bank and in the event of a denial by the bank of its 

services to a financial institution, then by the Farm Credit 

Administration on a case-by-case basis with due regard to the total 

relationship of the financing institution, its subsidiaries, and 

affiliates.

(5) EFFECTIVE DATE. Nothing in this section shall require 

termination of discount relationships in existence on the effective date of 

the Farm Credit Act Amendments of 1980.

12 U.S.C. 2016 Sec. 1.8. Interest rates and Other Charges.

(a) IN GENERAL. Loans and discounts made by a Farm Credit Bank 

shall bear such rate or rates of interest or discount, and be on such terms and 

conditions, as may be determined by the board of directors of the bank from 

time to time.

(b) SETTING RATES AND CHARGES. In setting rates and charges, 

it shall be the objective to provide the types of credit needed by eligible 

borrowers at the lowest reasonable costs on a sound business basis taking into 
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consideration the cost of money to the bank, necessary reserve and expenses 

of the bank and associations, and providing services to members. The loan 

documents or discounting and financing agreements, may provide for the

interest rate or rates to vary from time to time during the repayment period of 

the loan or agreement.

12 U.S.C. 2017 Sec. 1.9. Eligibility.

The credit and financial services authorized in this title may be made 

available to persons who are or become stockholders or members of the bank 

or associations in the district, and who are—

(1) bona fide farmers, ranchers, or producers or harvesters of 

aquatic products;

(2) persons furnishing to farmers and ranchers farm-related 

services directly related to their on-farm operating needs; or

(3) owners of rural homes.

12 U.S.C. 2018 Sec. 1.10. Security; Terms.

(a) REAL ESTATE LOANS.

(1) MAXIMUM LEVEL OF LOANS.

(A) IN GENERAL. Real estate mortgage loans originated 

by a Farm Credit Bank, or in which a Farm Credit Bank 

participates in with a lender that is not a System institution, shall 

not exceed 85 percent of the appraised value of the real estate 

security, except as provided for in subparagraphs (C) and (D).

(B) REGULATION. The Farm Credit Administration may, 

by regulation, require that loans not exceed 75 percent of the 

appraised value of the real estate security.

(C) GUARANTEED LOANS. If the loan is guaranteed by 

Federal, State, or other governmental agencies, the loan may not 

exceed 97 percent of the appraised value of the real estate security, 

as may be authorized under regulations of the Farm Credit 

Administration.

(D) PRIVATE MORTGAGE INSURANCE. A loan on 

which private mortgage insurance is obtained may exceed 85 

percent of the appraised value of the real estate security to the 

extent that the loan amount in excess of such 85 percent is covered 

by the insurance.

(2) SECURITY. All loans originated or participated in by a 

bank under this section shall be secured by first liens on interests in real 

estate of such classes as may be prescribed by regulations of the Farm 

Credit Administration.

(3) VALUE OF SECURITY. To adequately secure the loan, the 

value of security shall be determined by appraisal under standards 

prescribed by the bank in accordance with regulations of the Farm 

Credit Administration.

(4) ADDITIONAL SECURITY. Additional security for any 

loan may be required by the bank to supplement real estate security. 
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Credit factors, other than the ratio between the amount of the loan and 

the security value, shall be given due consideration.

(b) INTERMEDIATE CREDIT. Loans, other than real estate loans, 

and discounts made under the provisions of this title shall be repayable in not 

more than 7 years (15 years if made to producers or harvesters of aquatic 

products) from the time that such are made or discounted by the Farm Credit 

Bank, except that the Board of Directors, under regulations of the Farm Credit 

Administration, may approve policies permitting loans, advances, or discounts 

(other than those made to producers or harvesters of aquatic products) to be 

repayable in not more than 10 years from the time that such are made or 

discounted by such bank.

12 U.S.C. 2019 Sec. 1.11. Purposes for Extensions of Credit.

(a) AGRICULTURAL OR AQUATIC PURPOSES.

(1) IN GENERAL. Loans made by a Farm Credit Bank to 

farmers, ranchers, and producers or harvesters of aquatic products may 

be for any agricultural or aquatic purpose and other credit needs of the 

applicant, including financing for basic processing and marketing 

directly related to the applicant's operations and those of other eligible 

farmers, ranchers, and producers or harvesters of aquatic products, 

except that the operations of the applicant shall supply some portion of 

the total processing or marketing for which financing is extended.

(2) LIMITATION ON LOANS FOR BASIC PROCESSING 

AND MARKETING OPERATIONS. The aggregate of the financing 

provided by any Farm Credit Bank for basic processing and marketing 

directly related to the operations of farmers, ranchers, and producers or 

harvesters of aquatic products, if the operations of the applicant supply 

less than 20 percent of the total processing or marketing for which 

financing is extended, shall not exceed 15 percent of the total of all 

outstanding loans of such bank.

(b) RURAL HOUSING FINANCING.

(1) IN GENERAL. Loans and discounts may be made to rural 

residents for rural housing financing under regulations of the Farm 

Credit Administration.

(2) LIMITATIONS. Rural housing financed under this title shall 

be for single-family, moderate-priced dwellings and their appurtenances 

not inconsistent with the general quality and standards of housing 

existing in, or planned or recommended for, the rural area where it is 

located, except that a Farm Credit Bank may not at any one time have a 

total amount of loans outstanding for such rural housing to persons other 

than farmers or ranchers in amounts exceeding 15 percent of the total of 

all loans outstanding in such bank.

(3) RURAL AREAS. For rural housing purposes under this 

section the term "rural areas" shall not be defined to include any city or 

village having a population in excess of 2,500 inhabitants.

(c) FARM-RELATED SERVICES.

(1) IN GENERAL. Loans to persons furnishing farm-related 

services to farmers and ranchers directly related to their on-farm 
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operating needs may be made for the necessary capital structures and 

equipment and initial working capital for such services.

(2) FACILITIES. The banks may own and lease, or lease with 

option to purchase, to persons eligible for credit under this title or title 

II, equipment or facilities needed in the operations of such persons.

12 U.S.C. 2020 Sec. 1.12. Related Services.

(a) IN GENERAL. The Farm Credit Banks may provide technical 

assistance to borrowers, members, and applicants from the bank and 

associations in the district, including persons obligated on paper discounted by 

the bank, and may make available to them at their option such financial 

related services appropriate to their on-farm and aquatic operations as 

determined to be feasible by the board of directors of the bank, under 

regulations of the Farm Credit Administration.

(b) AUTHORITY TO PASS ALONG COST OF INSURANCE 

PREMIUMS. 

(1) IN GENERAL.—Each Farm Credit Bank may assess each 

production credit association, other association making direct loans 

under the authority provided under section 7.6, and other financing 

institution described in section 1.7(b)(1)(B) in the district in which the 

bank is located to cover the costs of making premium payments under 

part E of title V. 

(2) COMPUTATION.—The assessment on any association or 

other financing institution described in paragraph (1) for any period shall 

be computed in an equitable manner, as determined by the Corporation.

12 U.S.C. 2021 Sec. 1.13. Loans through Associations or Agents.

(a) IN GENERAL. The Farm Credit Banks shall, except as otherwise 

herein provided, make loans of the type authorized under section 1.7(a) 

through a Federal land bank association chartered to serve the territory in 

which the real estate of the borrower is located.

(b) NO ACTIVE ASSOCIATION. If there is no active association 

chartered to serve territory where the real estate is located, the bank may make 

the loan directly or through such bank or trust company or savings or other 

financial institution as such bank may designate.

(c) PURCHASE OF STOCK REQUIRED. When the loan is not 

made through a Federal land bank association, the applicant shall purchase 

stock in the bank in accordance with the capitalization requirements provided 

for in the bylaws of the bank.

12 U.S.C. 2022 Sec. 1.14. Liens on Stock.

The Farm Credit Banks shall have a first lien on the stock or 

participation certificates it issues for the payment of any liability of the 

stockholders to the bank.

12 U.S.C. 2023 Sec. 1.15. Taxation.

The Farm Credit Banks and the capital, reserves, and surplus thereof, 

and the income derived therefrom, shall be exempt from Federal, State, 
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municipal, and local taxation, except taxes on real estate held by a Farm 

Credit Bank to the same extent, according to its value, as other similar 

property held by other persons is taxed. The mortgages held by the Farm 

Credit Banks and the notes, bonds, debentures, and other obligations issued by 

the banks shall be considered and held to be instrumentalities of the United 

States and, as such, they and the income therefrom shall be exempt from all 

Federal, State, municipal, and local taxation, other than Federal income tax 

liability of the holder thereof under the Public Debt Act of 1941 (31 U.S.C. 

3124).

Title II—Farm Credit Associations

Subtitle A—Production Credit Associations

12 U.S.C. 2071 Sec. 2.0. Organization and Charters.

(a) CHARTER. Each production credit association shall continue as a 

Federally chartered instrumentality of the United States.

(b) ORGANIZATION.

(1) IN GENERAL. Production credit associations may be 

organized by 10 or more farmers or ranchers or producers or harvesters 

of aquatic products desiring to borrow money under the provisions of 

this subtitle.

(2) ARTICLES OF ASSOCIATION. The proposed articles of 

association shall be forwarded to the Farm Credit Bank for the district 

accompanied by an agreement to subscribe on behalf of the association 

for stock in the bank in such amounts as may be required by the bank.

(3) CONTENTS OF ARTICLES. The articles shall specify in 

general terms the—

(A) objects for which the association is formed;

(B) powers to be exercised by the association in carrying 

out the functions authorized by this subtitle; and

(C) territory the association proposes to serve.

(4) SIGNATURES. The articles shall be signed by persons 

desiring to form such an association and shall be accompanied by a 

statement signed by each such person establishing eligibility to borrow 

from the association in which such person will become a stockholder.

(5) COPY TO FCA. A copy of the articles of association shall 

be forwarded to the Farm Credit Administration with the 

recommendations of the bank concerning the need for such an 

association in order to adequately serve the credit needs of eligible 

persons in the proposed territory and whether that territory includes any 

area described in the charter of another production credit association.

(6) DENIAL OF CHARTER. The Farm Credit Administration 

for good cause shown may deny the charter.

(7) APPROVAL OF ARTICLES. On approval of the proposed 

articles by the Farm Credit Administration, and on the issuance of a 
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charter, the association shall become as of such date a federally 

chartered body corporate and an instrumentality of the United States.

(8) POWERS OF FCA. The Farm Credit Administration shall 

have the power, under rules and regulations prescribed by the Farm 

Credit Administration or by prescribing in the terms of the charter, to—

(A) provide for the organization of the association;

(B) provide for the initial amount of stock of the 

association;

(C) provide for the territory within which the association's 

operations may be carried on; and

(D) approve amendments to the charter of the association.

12 U.S.C. 2072 Sec. 2.1. Board of Directors.

Each production credit association shall elect from the voting members 

of such association, a board of directors of such number, for such terms, with 

such qualifications, and in such manner as may be required by the bylaws of 

the association, except that at least one member shall be elected by the other 

directors, which member shall not be a director, officer, employee, 

stockholder, or agent of a System institution.

12 U.S.C. 2073 Sec. 2.2. General Corporate Powers.

Each production credit association shall be a body corporate and, subject 

to supervision by the Farm Credit Bank for the district and regulation by the 

Farm Credit Administration, shall have the power to—

(1) have succession until terminated in accordance with this Act 

or any other Act of Congress;

(2) adopt and use a corporate seal;

(3) make contracts;

(4) sue and be sued;

(5) acquire, hold, dispose, and otherwise exercise all of the usual 

incidents of ownership of real and personal property necessary or 

convenient to the business of the association;

(6) operate under the direction of the board of directors of the 

association in accordance with the provisions of this Act;

(7) subscribe to stock of the bank;

(8) purchase stock of the bank held by other production credit 

associations and stock of other production credit associations;

(9) contribute to the capital of the bank or other production credit 

associations;

(10) invest funds of the association as may be approved by the 

Farm Credit Bank under regulations of the Farm Credit Administration 

and deposit the current funds and securities of such with the Farm Credit 

Bank, a member bank of the Federal Reserve System, or any bank 

insured under the Federal Deposit Insurance Corporation, and may pay 

fees therefor and receive interest thereon as may be agreed;
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(11) buy and sell obligations of or insured by the United States or 

of any agency thereof or of any banks of the Farm Credit System and 

buy from and sell to such banks, interests in loans and in other financial 

assistance extended and nonvoting stock, as may be authorized by the 

Farm Credit Bank in accordance with regulations of the Farm Credit 

Administration;

(12) borrow money from the Farm Credit Bank, and with the 

approval of such bank, borrow from and issue notes or other obligations 

to any commercial bank or other financial institution;

(13) make and participate in loans, accept advance payments, and 

provide services and other assistance as authorized in this subtitle and 

charge fees therefor, and when authorized by the bank participate with 

one or more other Farm Credit System institutions in loans made under 

this title or other titles of this Act on the basis prescribed in section 4.18 

of this Act;

(14) endorse and become liable on loans discounted or pledged to 

the Farm Credit Bank;

(15) as may be authorized by the Farm Credit Bank in accordance 

with regulations of the Farm Credit Administration, agree with other 

Farm Credit System institutions to share loan or other losses, whether to 

protect against capital impairment or for any other purpose;

(16) prescribe, by its board of directors, its bylaws that shall be 

consistent with law, and that shall provide for—

(A) the classes of its stock and the manner in which such 

stock shall be issued, transferred, and retired; and

(B) the manner in which it is to—

(i) select officers and employees;

(ii) acquire, hold, and transfer property;

(iii) conduct general business; and

(iv) exercise and enjoy the privileges granted to it by 

law;

(17) provide by its board of directors for a manager or other chief 

executive officer, and provide for such other officers or employees as 

may be necessary, including joint employees as provided in this Act, 

define their duties, and require surety bonds or make other provisions 

against losses occasioned by employees, but no director shall, within one 

year after the date when such director ceases to be a member of the 

board, serve as a salaried employee of the association on the board of 

which he served;

(18) elect by the board of directors of the association a loan 

committee with power to approve applications for membership in the 

association and loans or participations or, with the approval of the bank, 

delegate the approval of applications for membership and loans or 

participations within specified limits to other committees or to 

authorized officers and employees of the association;

(19) perform any functions delegated to the association by the 

bank;
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(20) exercise by the board of directors or authorized officers or 

employees of the association, all such incidental powers as may be 

necessary or expedient to carry on the business of the association; and

(21) operate as an originator and become certified as a certified 

facility under title VIII.

12 U.S.C. 2074 Sec. 2.3. Production Credit Association Capitalization.

(a) IN GENERAL. In accordance with section 4.3A, each production 

credit association shall provide, through its bylaws and subject to Farm Credit 

Administration regulations, for its capitalization and the manner in which its 

stock shall be issued, held, transferred, and retired and, except as provided in 

subsection (b), its earnings distributed.

(b) APPLICATION OF EARNINGS. At the end of each fiscal year, 

each production credit association shall apply the amount of the earnings of 

the association for the fiscal year in excess of the operating expenses of the 

association (including provision for valuation reserves against loan assets in 

accordance with generally accepted accounting principles)—

(1) first, to the restoration of the impairment (if any) of capital;

and

(2) second, to the establishment and maintenance of the surplus 

accounts, the minimum aggregate amount of which shall be prescribed 

by the Farm Credit Bank.

(c) PATRONAGE. When the bylaws of an association so provide and 

subject to the general directions of the Farm Credit Administration, available 

net earnings at the end of any fiscal year may be distributed on a patronage 

basis in stock, participation certificates, or in cash. Any part of the earnings 

of the fiscal year in excess of the operating expenses for such year held in the 

surplus account may be allocated to patrons on a patronage basis.

12 U.S.C. 2075 Sec. 2.4. Short- and Intermediate-Term Loans; Participation; 

Other Financial Assistance; Terms; Conditions; Interest; Security.

(a) SHORT- AND INTERMEDIATE-TERM LOANS. Each 

production credit association, under standards prescribed by the board of 

directors of the Farm Credit Bank of the district, may make, guarantee, or 

participate with other lenders in short- and intermediate-term loans and other 

similar financial assistance to—

(1) bona fide farmers and ranchers and the producers or 

harvesters of aquatic products, for agricultural or aquatic purposes and 

other requirements of such borrowers, including financing for basic 

processing and marketing directly related to the operations of the 

borrower and those of other eligible farmers, ranchers, and producers or 

harvesters of aquatic products, except that the operations of the borrower 

shall supply some portion of the total processing or marketing for which 

financing is extended, except that the aggregate of the financing 

provided by any association for basic processing and marketing directly 

related to the operations of farmers, ranchers, and producers or 

harvesters of aquatic products, if the operations of the applicant supply 

less than 20 percent of the total processing or marketing for which 
16

financing is extended, shall not exceed 15 percent of the total of all 

outstanding loans of all associations in the district at the end of its 

preceding fiscal year;

(2) rural residents for housing financing in rural areas, under 

regulations of the Farm Credit Administration; and

(3) persons furnishing to farmers and ranchers farm-related 

services directly related to their on-farm operating needs.

(b) RURAL HOUSING.

(1) IN GENERAL. Rural housing financed under this subtitle 

shall be for single-family, moderate-priced dwellings and the 

appurtenances of such not inconsistent with the general quality and 

standards of housing existing in, or planned or recommended for, the 

rural area where it is located.

(2) LIMITATION. The aggregate of such housing loans in an 

association to persons other than farmers or ranchers shall not exceed 15 

percent of the outstanding loans at the end of its preceding fiscal year 

except on prior approval by the Farm Credit Bank of the district. The 

aggregate of such housing loans in any farm credit district shall not 

exceed 15 percent of the outstanding loans of all associations in the 

district at the end of the preceding fiscal year.

(3) RURAL AREAS. For rural housing purposes under this 

section the term "rural areas" shall not be defined to include any city or 

village having a population in excess of 2,500 inhabitants.

(4) EQUIPMENT. Each association may own and lease, or lease 

with option to purchase, to stockholders of the association equipment 

needed in the operations of the stockholder.

(c) INTEREST RATES AND CHARGES.

(1) IN GENERAL. Loans authorized in subsection (a) hereof 

shall bear such rate or rates of interest as are determined under standards 

prescribed by the board of the bank subject to the provisions of section 

4.17 of this Act, and shall be made upon such terms, conditions, and 

upon such security, if any, as shall be authorized in such standards.

(2) SETTING OF RATES. In setting rates and charges, it shall 

be the objective to provide the types of credit needed by eligible 

borrowers, at the lowest reasonable cost on a sound business basis, 

taking into account the cost of money to the association, necessary 

reserves and expenses of the association, and services provided to 

borrowers and members.

(3) VARYING RATES. The loan documents may provide for 

the interest rate or rates to vary from time to time during the repayment 

period of the loan in accordance with the rate or rates currently being 

charged by the association.

(4) PRIOR APPROVAL. Such standards may require prior 

approval of the bank on certain classes of loans, and may authorize a 

continuing commitment to a borrower of a line of credit.
17

12 U.S.C. 2076 Sec. 2.5. Other Services.

Each production credit association may provide technical assistance to 

borrowers, applicants, and members and may make available to them at their 

option such financial related services appropriate to their on-farm and aquatic 

operations as is determined feasible by the board of directors of each Farm 

Credit Bank, under regulations prescribed by the Farm Credit Administration.

12 U.S.C. 2076a Sec. 2.6. Liens on Stock.

Except with regard to stock or participation certificates held by other 

Farm Credit System institutions, each production credit association shall have 

a first lien on stock and participation certificates the association issues, on 

allocated surplus, and on investments in equity reserve, for any indebtedness 

of the holder of the capital investments and, in the case of equity reserves, for 

charges for association losses in excess of reserves and surpluses.

12 U.S.C. 2077 Sec. 2.7. Taxation.

Each production credit association and its obligations are 

instrumentalities of the United States and as such any and all notes, 

debentures, and other obligations issued by such associations shall be exempt, 

both as to principal and interest, from all taxation (except surtaxes, estate, 

inheritance, and gift taxes) now or hereafter imposed by the United States or 

any State, territorial, or local taxing authority, except that interest on such 

obligations shall be subject to Federal income taxation in the hands of the 

holder.

Subtitle B—Federal Land Bank Associations

12 U.S.C. 2091 Sec. 2.10. Organizations; Articles; Charters; Powers of the Farm 

Credit Administration.

(a) CHARTER. Each Federal land bank association shall continue as 

a federally chartered instrumentality of the United States.

(b) ORGANIZATION.

(1) IN GENERAL. A Federal land bank association may be 

organized by any group of 10 or more persons desiring to borrow money 

from a Farm Credit Bank under section 1.7(a), including persons to 

whom the Farm Credit Bank has made a loan directly or through an 

agent and has taken as security real estate located in the territory 

proposed to be served by the association.

(2) ARTICLES OF ASSOCIATION.

(A) DESCRIPTION OF TERRITORY. The articles of 

association shall describe the territory within which the association 

proposes to carry on its operations.

(B) SUBMISSION TO FCB. Proposed articles shall be 

forwarded to the Farm Credit Bank for the district, accompanied 

by an agreement to subscribe on behalf of the association for stock 

in accordance with the bylaws of the Farm Credit Bank. 
18

(C) STOCK PURCHASE. Association stock may be paid 

for by surrendering for cancellation stock in the bank held by a 

borrower and the issuance of an equivalent amount of stock to such 

borrower in the association.

(D) STATEMENT. The articles shall be accompanied by a 

statement signed by each of the members of the proposed 

association establishing—

(i) the individual's eligibility and request for a Farm 

Credit Bank loan;

(ii) that the real estate with respect to which the 

individual desires the loan for is not being served by another 

Federal land bank association; and

(iii) that the individual is or will become a stockholder 

in the proposed association.

(E) SUBMISSION TO FCA. A copy of the articles of 

association shall be forwarded to the Farm Credit Administration 

with the recommendations of the bank concerning the need for the 

proposed association in order to adequately serve the credit needs 

of eligible persons in the proposed territory and a statement as to 

whether or not the territory includes any territory described in the 

charter of another Federal land bank association.

(3) DENIALS OF CHARTERS. The Farm Credit 

Administration for good cause shown may deny the charter applied for.

(4) APPROVAL OF ARTICLES. On the approval of the 

proposed articles by the Farm Credit Administration and the issuance of 

such charter, the association shall become as of such date a federally 

chartered body corporate and an instrumentality of the United States.

(c) FCA AUTHORITY ON ORGANIZATION. The Farm Credit 

Administration shall have power, in the terms of the charter, under rules and 

regulations prescribed by the Farm Credit Administration—

(1) to provide for the organization of the association;

(2) to provide for the initial amount of stock of the association;

(3) to provide for the territory within which the association may 

carry on its operations; and

(4) to approve amendments to the charter of such association.

12 U.S.C. 2092 Sec. 2.11. Board of Directors.

Each Federal land bank association shall elect from its voting 

shareholders a board of directors of such number, for such terms, in such 

manner, and with such qualifications as may be required by its bylaws except 

that, at least one member shall be elected by the other directors, which 

member shall not be a director, officer, employee, stockholder, or agent of a 

System institution.

12 U.S.C. 2093 Sec. 2.12. General Corporate Powers.

Each Federal land bank association shall be a body corporate and, 

subject to supervision of the Farm Credit Bank for the district and the 

regulation of the Farm Credit Administration, shall have the power to—
19

(1) adopt and use a corporate seal;

(2) have succession until dissolved under the provisions of this 

Act or other Act of Congress;

(3) make contracts;

(4) sue and be sued;

(5) acquire, hold, dispose, and otherwise exercise all of the usual 

incidents of ownership of real estate and personal property necessary or 

convenient to the business of the association;

(6) operate under the direction of the board of directors of the 

association in accordance with this Act;

(7) provide by its board of directors for a manager or other chief 

executive officer, and provide for such other officers or employees as 

may be necessary, including joint employees as provided in this Act, 

define the duties of such, and require surety bonds or make other 

provision against losses occasioned by employees, except that no 

director shall, within one year after the date when such director ceases to 

be a member of the board, serve as a salaried employee of the 

association on the board of which such director served;

(8) prescribe, by its board of directors, its bylaws that shall be 

consistent with law, and that shall provide for—

(A) the classes of its stock and the manner in which such 

stock shall be issued, transferred, and retired; and 

(B) the manner in which it is to—

(i) select officers and employees;

(ii) acquire, hold, and transfer property;

(iii) conduct general business; and

(iv) exercise and enjoy the privileges granted to it by 

law;

(9) accept applications for Farm Credit Bank loans and receive 

from such bank and disburse to the borrowers the proceeds of such 

loans;

(10) subscribe to stock of the Farm Credit Bank of the district;

(11) elect by its board of directors a loan committee with power to 

elect applicants for membership in the association and recommend loans 

to the Farm Credit Bank, or with the approval of the Farm Credit Bank, 

delegate the election of applicants for membership and the approval of 

loans within specified limits to other committees or to authorized 

employees of the association;

(12) on agreement with the bank, take such additional actions with 

respect to applications and loans and perform such functions as are 

vested by law in the Farm Credit Banks as may be agreed to by the 

association;

(13) endorse and become liable to the bank on loans it makes to 

association members;

(14) receive such compensation and deduct such sums from loan 

proceeds with respect to each loan as may be agreed between the 
20

association and the bank and make such other charges for services as 

may be approved by the bank;

(15) provide technical assistance to members, borrowers 

applicants, and other eligible persons and make available to them, at 

their option, such financial related services appropriate to their 

operations as it determines, with Farm Credit Bank approval, are 

feasible, under regulations of the Farm Credit Administration;

(16) borrow money from the bank and, with the approval of such 

bank, borrow from and issue association notes or other obligations to 

any commercial bank or other financial institution;

(17) buy and sell obligations of or insured by the United States or 

any agency thereof or any banks of the Farm Credit System;

(18) invest association funds in such obligations as may be 

authorized in regulations of the Farm Credit Administration and 

approved by the bank and deposit securities and current funds of the 

association with any member bank of the Federal Reserve System, with 

the Farm Credit Bank, or with any bank insured by the Federal Deposit 

Insurance Corporation, and pay fees therefor and receive interest thereon 

as may be agreed;

(19) perform such other function delegated to the association by 

the Farm Credit Bank of the district;

(20) exercise by its board of directors or authorized officers or 

agents all such incidental powers as may be necessary or expedient in 

the conduct of its business; 

(21) contribute to the capital of the bank; and

(22) operate as an originator and become certified as a certified 

facility under title VIII.

12 U.S.C. 2094 Sec. 2.13. Federal Land Bank Association Capitalization.

In accordance with section 4.3A, the Federal land bank association shall 

provide, through its bylaws and subject to Farm Credit Administration 

regulations, for its capitalization and the manner in which its stock shall be 

issued, held, transferred, and retired and its earnings distributed.

12 U.S.C. 2096 Sec. 2.14. Agreements for Sharing Gains or Losses.

Each Farm Credit Bank may enter into agreements with Federal land 

bank associations in its district for sharing the gain or losses on loans or on 

security held therefor or acquired in liquidation thereof, and associations are 

authorized to enter into any such agreements and also, subject to bank 

approval, agreements with other associations in the district for sharing the risk 

of loss on loans endorsed by each such association. As may be authorized by 

the bank in accordance with regulations of the Farm Credit Administration, 

associations also may enter into agreements with other Farm Credit System 

institutions to share loan and other losses, whether to protect against capital 

impairment or for any other purpose.
21

12 U.S.C. 2097 Sec. 2.15. Liens on Stock.

Each Federal land bank association shall have a first lien on the stock 

and participation certificates it issues, except on stock or participation 

certificates held by other Farm Credit System institutions, for the payment of 

any liability of the stockholder to the association or to the bank, or to both of 

them.

12 U.S.C. 2098 Sec. 2.16. Taxation.

Each Federal land bank association and the capital, reserves, and surplus 

thereof, and the income derived therefrom, shall be exempt from Federal, 

State, municipal, and local taxation, except taxes on real estate held by a 

Federal land bank association to the same extent, according to its value, as 

other similar property held by other persons is taxed. The mortgages held by 

the Federal land bank associations and the notes, bonds, debentures, and other 

obligations issued by the associations shall be considered and held to be 

instrumentalities of the United States and, as such, they and the income 

therefrom shall be exempt from all Federal, State, municipal, and local 

taxation, other than Federal income tax liability of the holder thereof under the 

Public Debt Act of 1941 (31 U.S.C. 3124).
22

Title III—Banks for Cooperatives

Part A—Banks for Cooperatives

12 U.S.C. 2121 Sec. 3.0. Establishment; Titles; Branches.

The banks for cooperatives established pursuant to sections 2 and 30 of 

the Farm Credit Act of 1933, as amended, shall continue as federally chartered 

instrumentalities of the United States. The Farm Credit Administration shall 

approve amendments consistent with this Act to charters and organizational 

certificates of banks for cooperatives. Unless an existing bank for 

cooperatives is merged with another bank, there shall be a bank for 

cooperatives in each farm credit district. A bank for cooperatives may include 

in its title the name of the city in which it is located or other geographical 

designation. When authorized by the Farm Credit Administration each bank 

for cooperatives may establish such branches or other offices as may be 

appropriate for the effective operation of its business.

12 U.S.C. 2122 Sec. 3.1. Corporate Existence; General Corporate Powers.

Each bank for cooperatives shall be a body corporate and, subject to 

regulation by the Farm Credit Administration, shall have power to—

(1) Adopt and use a corporate seal.

(2) Have succession until dissolved under the provisions of this 

Act or other Act of Congress.

(3) Make contracts.

(4) Sue and be sued.

(5) Acquire, hold, dispose, and otherwise exercise all of the 

usual incidents of ownership of real and personal property necessary or 

convenient to its business.

(6) Make loans and commitments for credit, provide services and 

other assistance as authorized in this Act, and charge fees therefor.

(7) Operate under the direction of its board of directors.

(8) Elect by its board of directors a president, any vice 

presidents, a secretary, a treasurer, and provide for such other officers, 

employees, and agents as may be necessary, including joint employees 

as provided in this Act, define their duties and require surety bonds or 

make other provisions against losses occasioned by employees.

(9) Prescribe by its board of directors its bylaws not inconsistent 

with law providing for the classes of its stock and the manner in which 

its stock shall be issued, transferred, and retired; its officers, employees, 

or agents elected or provided for; its property acquired, held, and 

transferred; its loans made; its general business conducted; and the 

privileges granted it by law exercised and enjoyed.

(10) Borrow money and issue notes, bonds, debentures, or other 

obligations individually or in concert with one or more other banks of 

the System, of such character, and such terms, conditions, and rates of 

interest as may be determined.
23

(11)(A) Participate in loans under this title with one or more other 

banks for cooperatives and with commercial banks and other financial 

institutions upon such terms as may be agreed among them and 

participate with one or more other Farm Credit System institutions in 

loans made under this title or other titles of this Act on the basis 

prescribed in section 4.18 of this Act.

(B)(i) Participate in any loan of a type otherwise authorized 

under this title that is made to a similar entity by any institution in 

the business of extending credit, including purchases of 

participations in loans to finance international trade transactions 

involving the sale of agricultural commodities or the products 

thereof, except that—

(I)a bank for cooperatives may not participate in a 

loan—

(aa) if the participation would cause 

the total amount of all loan participations by the 

bank under this subparagraph involving a single 

credit risk to exceed 10 percent of the bank's total 

capital; or

(bb) if the participation by the bank 

will itself equal or exceed 50 percent of the 

principal of the loan or, when taken together with 

participations in the loan by other Farm Credit 

System institutions, will cause the cumulative 

amount of the participations by all Farm Credit 

System institutions in the loan to equal or exceed 

50 percent of the principal of the loan;

(II) a bank for cooperatives may not 

participate in a loan to a similar entity under this 

subparagraph if the similar entity has a loan or loan 

commitment outstanding with a Farm Credit Bank or an 

association chartered under this Act, unless agreed to 

by the Bank or association; and

(III) the cumulative amount of participations 

that a bank for cooperatives may have outstanding 

under this subparagraph at any time may not exceed 15 

percent of the bank's total assets.

(ii) As used in this subparagraph, the term "similar 

entity" means an entity that, while not eligible for a loan 

under section 3.8, is functionally similar to an entity eligible 

for a loan under section 3.8 in that it derives a majority of its 

income from, or has a majority of its assets invested in, the 

conduct of activities functionally similar to those conducted 

by the entity.

(iii) As used in this subparagraph, the term 

"participate" or "participation" refers to multilender 

transactions, including syndications, assignments, loan 

participations, subparticipations, or other forms of the 

purchase, sale, or transfer of interests in loans, other 
24

extensions of credit, or other technical and financial 

assistance.

(12) Deposit its securities and its current funds with any member 

bank of the Federal Reserve System or any insured State nonmember 

bank (within the meaning of section 3 of the Federal Deposit Insurance 

Act (12 U.S.C. 1813)) or, to the extent necessary to facilitate 

transactions which may be financed under section 3.7(b) of this Act, any 

other financial organization, domestic or foreign, as may be authorized 

by its board of directors, and pay fees therefor and receive interest 

thereon as may be agreed. When designated for that purpose by the 

Secretary of the Treasury, it shall be a depository of public money, 

except receipts from customs, under such regulations as may be 

prescribed by the Secretary; may be employed as a fiscal agent of the 

Government, and shall perform all such reasonable duties as a 

depository of public money or financial agent of the Government as may 

be required of it. No Government funds deposited under the provisions 

of this subsection shall be invested in loans or bonds or other obligations 

of the bank.

(13)(A) Buy and sell obligations of or insured by the United States 

or of any agency thereof, or securities backed by the full faith and credit 

of any such agency and make such other investments as may be 

authorized under regulations issued by the Farm Credit Administration.

(B) As may be authorized by its board of directors, buy 

from and sell to Farm Credit System institutions interests in loans 

and in other financial assistance extended and nonvoting stock.

(C) As may be authorized by its board of directors, and 

solely for the purposes of obtaining credit information and other 

services needed to facilitate transactions which may be financed 

under section 3.7(b) of this Act, invest in ownership interests in 

foreign business entities that are principally engaged in providing 

credit information to and performing such servicing functions for 

their members in connection with the members’ international 

activities.

(14) Conduct studies and adopt standards for lending.

(15) Amend and modify loan contracts, documents, and payment 

schedules, and release, subordinate, or substitute security for any of 

them.

(16) Exercise by its board of directors or authorized officers, 

employees, or agents all such incidental powers as may be necessary or 

expedient to carry on the business of the bank.

(17) As may be authorized by the board of directors, maintain 

credit balances and pay or receive fees or interest thereon, for the 

purpose of assisting in the transfer of funds to or from parties to 

transactions that may be financed under section 3.7(b) of this Act: 

Provided, however, That nothing herein shall authorize the banks for 

cooperatives to engage in the business of accepting domestic deposits.
25

(18) As may be authorized by its board of directors, agree with 

other Farm Credit System institutions to share loan or other losses, 

whether to protect against capital impairment or for any other purpose.

12 U.S.C. 2123 Sec. 3.2. Board of Directors.

(a) In General.- Each bank for cooperatives shall elect a board of 

directors of such number, for such term, in such manner, and with such 

qualifications as may be required in its bylaws, except that at least one 

member shall be elected by the other directors, which member shall not be a 

director, officer, employee, or stockholder of a System institution.

(b) Nomination and Election.-

(1) In General.- If approved by the stockholders through a bylaw 

amendment, the nomination and election of one member from a bank for 

cooperatives shall be carried out with each voting stockholder of a bank 

for cooperatives having one vote, plus a number of votes (or fractional 

part thereof) equal to—

(A) the number of stockholders eligible to vote; multiplied 

by—

(B) the percentage (or fractional part thereof) of the total 

equity interest (including allocated, but not unallocated, surplus 

and reserves) in the bank of all stockholders held by the individual 

voting stockholder at the close of the immediately preceding fiscal 

year of the bank.

(2) Number of Votes.-The total number of votes under this 

subsection shall be the number of voting stockholders of a bank for 

cooperatives multiplied by two.

12 U.S.C. 2124Sec. 3.3. Bank for Coopertives Stock; Value; Classes of Stock; Voting; 

Exchange.

(a) The capital stock of each bank for cooperatives shall be in such 

amount as its board determines is required for the purpose of providing 

adequate capital to permit the bank to meet the credit needs of borrowers from 

the bank and such amounts may be increased or decreased from time to time 

in accordance with such needs.

(b) The capital stock of each bank shall be divided into shares of par 

value of $100 each and may be of such classes as the board may determine. 

Such stock may be issued in fractional shares.

(c) Voting stock may be issued or transferred to and held only by (i)

cooperative associations eligible to borrow from the banks (ii) other categories 

of persons and entities described in sections 3.7 and 3.8 eligible to borrow 

from the bank, as determined by the bank's board of directors; and (iii) other 

banks for cooperatives, and shall not be otherwise transferred, pledged, or 

hypothecated except as consented to by the issuing bank under regulations of 

the Farm Credit Administration.

(d) Each holder of one or more shares of voting stock which is eligible 

to borrow from a bank for cooperatives shall be entitled only to one vote and 

only in the affairs of the bank in the district in which its principal office is 

located unless otherwise authorized under regulations issued by the Farm 
26

Credit Administration, except that if such holder has not been a borrower from 

the bank in which it holds such stock within a period of two years next 

preceding the date fixed by the Farm Credit Administration prior to the 

commencement of voting, it shall not be entitled to vote.

(e) Nonvoting investment stock may be issued in such series and in 

such amounts as may be determined by the board and may be exchanged for 

voting stock or sold or transferred to any person subject to the approval of the 

issuing bank.

(f) Participation certificates may be issued to parties to whom voting 

stock may not be issued.

12 U.S.C. 2125 Sec. 3.4. Dividends.

Dividends may be payable only on nonvoting investment stock, if 

declared by the board of directors of the bank, subject to the general direction 

of the Farm Credit Administration.

12 U.S.C. 2126 Sec. 3.5. Retirement of Stock.

Nonvoting investment stock and participation certificates may be called 

for retirement at par. With the approval of the issuing bank, the holder may 

elect not to have the called stock or participation certificates retired in 

response to a call, reserving the right to have such stock or participation 

certificates included in the next call for retirement. Voting stock may also be 

retired at par, on call or on such revolving basis as the board may determine 

with due regard for its total capital needs: Provided, however, That all 

equities in the banks issued or allocated with respect to the year of the 

enactment of this Act and prior years shall be retired on a revolving basis 

according to the year of issue with the oldest outstanding equities being first 

retired. Equities issued for subsequent years shall not be called or retired until 

equities described in the preceding sentence of this proviso have been retired.

12 U.S.C. 2127 Sec. 3.6. Guaranty Fund Subscriptions In Lieu of Stock.

If any cooperative association is not authorized under the laws of the 

State in which it is organized to take and hold stock in a bank for 

cooperatives, the bank shall, in lieu of any requirement for stock purchase, 

require the association to pay into or have on deposit in a guaranty fund, or the 

bank may retain out of the amount of the loan and credit to the guaranty fund 

account of the borrower, a sum equal to the amount of stock which the 

association would otherwise be required to own. Each reference to stock of 

the banks for cooperatives in this Act shall include such guaranty fund 

equivalents. The holder of the guaranty fund equivalent and the bank shall 

each be entitled to the same rights and obligations with respect thereto as the 

rights and obligations associated with the class or classes of stock involved.

12 U.S.C. 2128 Sec. 3.7. Lending Power.

(a) The banks for cooperatives are authorized to make loans and 

commitments to eligible cooperative associations and to extend to them other 

technical and financial assistance at any time (whether or not they have a loan 

from the bank outstanding), including but not limited to discounting notes and 

other obligations, guarantees, currency exchange necessary to service 
27

individual transactions that may be financed under subsection (b) of this 

section, collateral custody, or participation with other banks for cooperatives 

and commercial banks or other financial institutions in loans to eligible 

cooperatives, under such terms and conditions as may be determined to be 

feasible by the board of directors of each bank for cooperatives under 

regulations of the Farm Credit Administration. Each bank may own and lease, 

or lease with option to purchase, to stockholders eligible to borrow from the 

bank equipment needed in the operations of the stockholder and may make or 

participate in loans or commitments and extend other technical and financial 

assistance to other domestic parties for the acquisition of equipment and 

facilities to be leased to such stockholders for use in their operations in the 

United States.

(b)(1) A bank for cooperatives is authorized to make or participate in 

loans and commitments to, and to extend other technical and financial 

assistance to a domestic or foreign party with respect to its transactions with 

an association that is a voting stockholder of the bank for the import of 

agricultural commodities or products thereof, agricultural supplies, or aquatic 

products through purchases, sales or exchanges, if the bank for cooperatives 

determines, under regulations of the Farm Credit Administration, that the 

voting stockholder will benefit substantially as a result of such loan, 

commitment, or assistance.

(2)(A) A bank for cooperatives may make or participate in loans and 

commitments to, and extend other technical and financial assistance to—

(i) any domestic or foreign party for the export, 

including (where applicable) the cost of freight, of 

agricultural commodities or products thereof, agricultural 

supplies, or aquatic products from the United States under 

policies and procedures established by the bank to ensure that 

the commodities, products, or supplies are originally sourced, 

where reasonably available, from one or more eligible 

cooperative associations described in section 3.8(a) on a 

priority basis, except that if the total amount of the balances 

outstanding on loans made by a bank under this clause that—

(I)are made to finance the export of commodities, 

products, or supplies that are not originally sourced 

from a cooperative, and

(II) are not guaranteed or insured, in an 

amount equal to at least 95 percent of the amount 

loaned, by a department, agency, bureau, board, 

commission, or establishment of the United States or a 

corporation wholly-owned directly or indirectly by the 

United States, exceeds an amount that is equal to 50 

percent of the bank’s capital, then a sufficient interest in 

the loans shall be sold by the bank for cooperatives to 

commercial banks and other non-System lenders to 

reduce the total amount of such outstanding balances to 

an amount not greater than an amount equal to 50 

percent of the bank’s capital; and

(ii) except as provided in subparagraph (B), any 

domestic or foreign party in which an eligible cooperative 
28

association described in section 3.8(a) (including, for the 

purpose of facilitating its domestic business operations only, 

a cooperative or other entity described in section 

3.8(b)(1)(A)) has an ownership interest, for the purpose of 

facilitating the domestic or foreign business operations of the 

association, except that if the ownership interest by an 

eligible cooperative association, or associations, is less than 

50 percent, the financing shall be limited to the percentage 

held in the party by the association or associations.

(B) A bank for cooperatives shall not use the authority 

provided in subparagraph (A)(ii) to provide financial assistance to 

a party for the purpose of financing the relocation of a plant or 

facility from the United States to another country.

(3) A bank for cooperatives is authorized to provide such 

services as may be customary and normal in maintaining relationships 

with domestic or foreign entities to facilitate the activities specified in 

paragraphs (1) and (2), consistent with this Act.

(4) DEFINITION OF AGRICULTURAL SUPPLY.—In this 

subsection, the term "agricultural supply" includes—

(A) a farm supply; and

(B)(i) agriculture-related processing equipment;

(ii) agriculture-related machinery; and

(iii) other capital goods related to the storage or 

handling of agricultural commodities or products.

(c) Loans, commitments, and assistance authorized by subsection (b) 

of this section shall be extended in accordance with policies adopted by the 

board of directors of the bank under regulations of the Farm Credit 

Administration.

(d) The regulations of the Farm Credit Administration implementing 

subsection (b) of this section and the other provisions of this title relating to 

the authority under subsection (b) of this section may not confer upon the 

banks for cooperatives powers and authorities greater than those specified in 

this title. The Farm Credit Administration shall, during the formulation of 

such regulations, closely consult on a continuing basis with the Board of 

Governors of the Federal Reserve System to ensure that such regulations 

conform to national banking policies, objectives, and limitations.

(e) Notwithstanding any other provision of this title, the banks for 

cooperatives shall not make or participate in loans or commitments for the 

purpose of financing speculative futures transactions by eligible borrowers in 

foreign currencies.

(f) The banks for cooperatives may, for the purpose of installing, 

maintaining, expanding, improving, or operating water and waste disposal 

facilities in rural areas, make and participate in loans and commitments and 

extending other technical and financial assistance to—

(1) cooperatives formed specifically for the purpose of 

establishing or operating such facilities; and
29

(2) public and quasi-public agencies and bodies, and other public 

and private entities that, under authority of State or local law, establish 

or operate such facilities.

For purposes of this subsection, the term "rural area" means all territory 

of a State that is not within the outer boundary of any city or town having a 

population of more than 20,000 based on the latest decennial census of the 

United States.

12 U.S.C. 2129 Sec. 3.8. Eligibility.

(a) Any association of farmers, producers or harvesters of aquatic 

products, or any federation of such associations, which is operated on a 

cooperative basis, and has the powers for processing, preparing for market, 

handling, or marketing farm or aquatic products; or for purchasing, testing, 

grading, processing, distributing, or furnishing farm or aquatic supplies or 

furnishing farm or aquatic business services or services to eligible 

cooperatives and conforms to either of the two following requirements:

(1) no member of the association is allowed more than one vote 

because of the amount of stock or membership capital he may own 

therein; or

(2) does not pay dividends on stock or membership capital in 

excess of such per centum per annum as may be approved under 

regulations of the Farm Credit Administration; and in any case

(3) does not deal in farm products or aquatic products, or 

products processed therefrom, farm or aquatic supplies, farm or aquatic 

business services, or services to eligible cooperatives with or for 

nonmembers in an amount greater in value than the total amount of such 

business transacted by it with or for members, excluding from the total 

of member and nonmember business transactions with the United States 

or any agency or instrumentality thereof or services or supplies 

furnished as a public utility; and

(4) a percentage of the voting control of the association not less 

than 80 per centum (60 per centum (A) in the case of rural electric, 

telephone, public utility, and service cooperatives; (B) in the case of 

local farm supply cooperatives that have historically served needs of the 

community that would not adequately be served by other suppliers and 

have experienced a reduction in the percentage of farmer membership 

due to changed circumstances beyond their control such as, but not 

limited to, urbanization of the community; and (C) in the case of local 

farm supply cooperatives that provide or will provide needed services to 

a community and that are or will be in competition with a cooperative 

specified in paragraph (B)) or, with respect to any type of association or 

cooperative, such higher percentage as established by the bank board, is 

held by farmers, producers or harvesters of aquatic products, or eligible 

cooperative associations as defined herein; shall be eligible to borrow 

from a bank for cooperatives. Any such association that has received a 

loan from a bank for cooperatives shall, without regard to the 

requirements of paragraphs (1) through (4), continue to be eligible for so 

long as more than 50 percent (or such higher percentage as is established 

by the bank board) of the voting control of the association is held by 
30

farmers, producers or harvesters of aquatic products, or eligible 

cooperative associations.

(b) Notwithstanding any other provision of this section:

(1) The following entities shall also be eligible to borrow from a 

bank for cooperatives:

(A) Cooperatives and other entities that have received a 

loan, loan commitment, or loan guarantee from the Rural 

Electrification Administration (or successor agency), or that are 

eligible under the Rural Electrification Act of 1936 (7 U.S.C. 901 

et seq.) for a loan, loan commitment, or loan guarantee from the 

Administration or the Bank (or a successor of the Administration 

or the Bank), and subsidiaries of such cooperatives or other 

entities.

(B) Any legal entity that (i) holds more than 50 percent of 

the voting control of an association or other entity that is eligible to 

borrow from a bank for cooperatives under subsection (a) or 

subparagraph (A) of this paragraph, and (ii) borrows for the 

purpose of making funds available to that association or entity, and 

makes funds available to that association or entity under the same 

terms and conditions that the funds are borrowed from a bank for 

cooperatives.

(C) Any cooperative or other entity described in subsection 

(b) or (f) of section 3.7.

(D) Any creditworthy private entity that satisfies the 

requirements for a service cooperative under paragraphs (1), (2), 

and (4), or under the last sentence, of subsection (a) and 

subsidiaries of the entity, if the entity is organized to benefit 

agriculture in furtherance of the welfare of its farmer-members and 

is operated on a not-for-profit basis.

(2) Notwithstanding the provisions of section 3.9, the board of 

directors of a bank for cooperatives may determine that, with respect to 

a loan to any borrower eligible to borrow from a bank under paragraph 

(1)(A) that is fully guaranteed by the United States, no stock purchase 

requirement shall apply, other than the requirement that a borrower 

eligible to own voting stock shall purchase one share of such stock.

(3) Each association and other entity eligible to borrow from a 

bank for cooperatives under this subsection, for purposes of section 

3.7(a), shall be treated as an eligible cooperative association and a 

stockholder eligible to borrow from the bank.

(4) Nothing in this subsection shall be construed to adversely 

affect the eligibility as it existed on the date of the enactment of this 

subsection, of cooperatives and other entities for any other credit 

assistance under Federal law.

NOTE: This subsection was enacted on January 6, 1988, by 

section 421 of the Agricultural Credit Act of 1987.
31

12 U.S.C. 2130 Sec. 3.9. Ownership of Stock by Borrowers.

(a) Each borrower entitled to hold voting stock shall, at the time a loan 

is made by a bank for cooperatives, own at least one share of voting stock and 

shall be required by the bank to invest in additional voting stock or nonvoting 

investment stock at that time, or from time to time, as the lending bank may 

determine, but the requirement for investment in stock at the time the loan is 

closed shall not exceed an amount equal to 10 per centum of the face amount 

of the loan. Such additional ownership requirements may be based on the face 

amount of the loan, the outstanding loan balance or on a percentage of the 

interest payable by the borrower during any year or during any quarter 

thereof, or upon such other basis as the bank determines will provide adequate 

capital for the operation of the bank and equitable ownership thereof among 

borrowers. 

(b) Notwithstanding the provisions of subsection (a) of this section, 

the purchase of stock need not be required with respect to that part of any loan 

made by a bank for cooperatives which it sells to or makes in participation 

with financial institutions other than any of the banks for cooperatives. In 

such cases the distribution of earnings of the bank for cooperatives shall be on 

the basis of the interest in the loan retained by such bank.

12 U.S.C. 2131 Sec. 3.10. Interest Rates; Security; Lien; Cancellation; and

Application on Indebtedness.

(a) Loans made by a bank for cooperatives shall bear interest at a rate 

or rates determined by the board of directors of the bank from time to time. In 

setting rates and charges, it shall be the objective to provide the types of credit 

needed by eligible borrowers at the lowest reasonable cost on a sound 

business basis, taking into account the net cost of money to the bank, 

necessary reserves and expenses of the bank, and services provided. The loan 

documents may provide for the interest rate or rates to vary from time to time 

during the repayment period of the loan, in accordance with the rate or rates 

currently being charged by the bank.

(b) Loans shall be made upon such terms, conditions, and security, if 

any, as may be determined by the bank in accordance with regulations of the 

Farm Credit Administration.

(c) Each bank for cooperatives shall have a first lien on all stock or 

other equities in the bank as collateral for the payment of any indebtedness of 

the owner thereof to the bank. 

(d) In any case where the debt of a borrower is in default, or in any 

case of liquidation or dissolution of a present or former borrower from a bank 

for cooperatives, the bank may, but shall not be required to, retire and cancel 

all or part of the stock, allocated surplus or contingency reserves, or any other 

equity in the bank owned by or allocated to such borrower, at the fair market 

value thereof not exceeding par, and, to the extent required in such cases, 

corresponding shares and allocations and other equity interests held by a bank 

in another bank for cooperatives (or any successor bank) on account of such 

indebtedness, shall be retired or equitably adjusted. In no event shall the 

banks equities be retired or canceled if the retirement or cancellation would 
32

adversely affect the banks capital structure, as determined by the Farm Credit 

Administration.

12 U.S.C. 2132 Sec. 3.11. Earnings and Reserves; Application of Savings.

(a) At the end of each fiscal year, the net savings shall, under 

regulations prescribed by the Farm Credit Administration, continue to be 

applied on a cooperative basis with provision for sound, adequate 

capitalization to meet the changing financing needs of eligible cooperative 

borrowers and prudent corporate fiscal management, to the end that current 

year's patrons carry their fair share of the capitalization, ultimate expenses, 

and reserves related to the year's operations and the remaining net savings 

shall be distributed as patronage refunds as provided in subsection (b). Such 

regulations may provide for application of net savings to the restoration or 

maintenance of an allocated surplus account, reasonable additions to 

unallocated surplus, or to unallocated reserves after payment of operating 

expenses, and provide for allocations to patrons not qualified under the 

Internal Revenue Code, or payment of such per centum of patronage refunds 

in cash, as the board may determine. 

(b) The net savings of each bank for cooperatives, after the earnings 

for the fiscal year have been applied in accordance with subsection (a) of this 

section shall be paid in stock, participation certificates, or cash, or in any of 

them, as determined by its board, as patronage refunds to borrowers to whom 

such refunds are payable who are borrowers of the fiscal year for which such 

patronage refunds are distributed. All patronage refunds shall be paid in 

proportion that the amount of interest and service fees on the loans to each 

borrower during the year bears to the interest and service fees on the loans of 

all borrowers during the year or on such other proportionate patronage basis as 

may be approved by the board of directors.

(c) In the event of a net loss in any fiscal year after providing for all 

operating expenses (including reasonable valuation reserves and losses in 

excess of any applicable reserves), such loss may be carried forward or carried 

back, if appropriate, or otherwise shall be absorbed by charges to unallocated 

reserve or surplus accounts established after the date of enactment of this Act; 

charges to allocated contingency reserve account; charges to allocated surplus 

accounts; charges to other contingency reserve and surplus accounts; the 

impairment of voting stock; or the impairment of all other stock.

(d) Notwithstanding any other provisions of this section any costs or 

expenses attributable to a prior year or years but not recognized in 

determining the net savings for such year or years may be charged to reserves 

or surplus of the bank or to patronage allocations for such years, as may be 

determined by the board of directors.

(e) A bank for cooperatives may pay in cash such portion of its 

patronage refunds as will permit its taxable income to be determined without 

taking into account savings applied as allocated surplus, allocated contingency 

reserves, and patronage refunds under subsection (a) of this section.

12 U.S.C. 2133 Sec. 3.12. Distribution of Assets on Liquidation or Dissolution.

In the case of liquidation or dissolution of any bank for cooperatives, 

after payment or retirement, first, of all liabilities; second, of all capital stock 
33

issued before January 1, 1956, at par, and all nonvoting stock at par; and third, 

all voting stock at par; any surplus and reserves existing on January 1, 1956, 

shall be paid to the holders of stock issued before that date, and voting stock 

pro rata; and any remaining allocated surplus and reserves shall be distributed 

to those entities to which they are allocated on the books of the bank, and any 

other remaining surplus shall be paid to the holders of outstanding voting 

stock. If it should become necessary to use any surplus or reserves to pay any 

liabilities or to retire any capital stock, unallocated reserves or surplus, 

allocated reserves and surplus shall be exhausted in accordance with rules 

prescribed by the Farm Credit Administration.

12 U.S.C. 2134 Sec. 3.13. Taxation.

Each bank for cooperatives and its obligations are instrumentalities of 

the United States and as such any and all notes, debentures, and other 

obligations issued by such bank shall be exempt, both as to principal and 

interest from all taxation (except surtaxes, estate, inheritance, and gift taxes) 

now or hereafter imposed by the United States or any State, territorial, or local 

taxing authority, except that interest on such obligations shall be subject to 

Federal income taxation in the hands of the holder.

Part B—National Banks for Cooperatives

12 U.S.C. 2141 Sec. 3.20. Charter, Powers, and Operation.

(a) CHARTER. The National Bank for Cooperatives (hereinafter in this 

part referred to as the "consolidated bank"), established under section 413 of 

the Agricultural Credit Act of 1987, shall be a federally chartered 

instrumentality of the United States and an institution of the Farm Credit 

System.

(b) POWERS. The consolidated bank and the board of directors of such 

bank shall have all of the powers, rights, responsibilities, and obligations of 

the constituent banks described in section 413(b) of the Agricultural Credit 

Act of 1987 (12 U.S.C. 2121 note; Public Law 100-233) and the boards of 

directors of such banks except as otherwise provided for in this Act.

(c) OPERATION. The consolidated bank shall be organized and 

operated on a cooperative basis.

Sec. 3.21. [Repealed]

Repealed in section 5411(14) of the Agriculture Improvement Act of 2018

12 U.S.C. 2143 Sec. 3.22. Credit Delivery Office.

On a determination by the board of directors of the consolidated bank 

that the bank’s loan portfolio is concentrated in any one district or districts 

(according to the district boundaries in effect immediately prior to the 

effective date of the establishment of the bank under section 413 of the 

Agricultural Credit Act of 1987), the bank may consider the creation of 

regional service centers to accommodate such loan concentrations.
34

12 U.S.C. 2144 Sec. 3.23. Consolidation of Functions.

Subject to section 3.22, to the greatest extent practicable, the functions 

of the consolidated bank shall be consolidated in the central office of the bank.

12 U.S.C. 2145 Sec. 3.24. Exchange of Ownership Interests.

On the establishment of the consolidated bank, ownership interests of 

the stockholders and subscribers to the guaranty funds of the constituent 

district banks for cooperatives (including stock, participation certificates, and 

allocated equities) shall be exchanged for like ownership interests in the 

consolidated bank on a book value basis.

12 U.S.C. 2146 Sec. 3.25. Capitalization.

In accordance with section 4.3A, each consolidated bank shall provide, 

through bylaws and subject to Farm Credit Administration regulations, for the 

capitalization of the bank and the manner in which bank stock shall be issued, 

held, transferred, and retired and bank earnings distributed.

12 U.S.C. 2147 Sec. 3.26. Patronage Pools.

Under such terms and conditions as may be determined by its board of 

directors, the consolidated bank may—

(1) for a period of at least 3 years following the date of the 

enactment of this section, establish separate patronage pools consisting 

of loans to eligible borrowers located in each constituent farm credit 

district (as such district existed on the date of the enactment of this 

section); and

(2) allocate revenues, expenses, and net savings among such 

pools on an equitable basis.

12 U.S.C. 2148 Sec. 3.27. Transactions to Accomplish Merger.

The receipt of assets or assumption of liabilities by the consolidated 

bank, the exchange of stock, equities, or other ownership interests, and any 

other transaction carried out in accomplishing the merger of the banks for 

cooperatives shall not be treated as a taxable event under the laws of the 

United States or of any State or political subdivision thereof. The preceding 

sentence shall also apply to the receipt of assets and liabilities by a 

cooperative to the extent that the net amount of the distribution is immediately 

reinvested in stock of a consolidated bank (and in such case the basis of such 

stock shall be appropriately reduced by the amount of gain not recognized by 

reason of this sentence).

12 U.S.C. 2149 Sec. 3.28. Lending Limits.

The Farm Credit Administration may not establish lending limits for the 

consolidated bank with respect to any loans or borrowers that are more 

restrictive than the combined lending limits that were previously established 

by the Farm Credit Administration for the constituent banks described in 

section 413(b) of the Agricultural Credit Act of 1987 (12 U.S.C. 2121 note; 

Public Law 100-233) with respect to such loans or borrowers.
35

Sec. 3.29. [Repealed]

Repealed by section 5411(16) of the Agriculture Improvement Act of 

2018.
36

Title IV—Provisions Applicable to Two or More Classes of Institutions 

of the System

Introduction

Repealed by section 5411(17) of the Agriculture Improvement Act of 2018

Part A. Funding

12 U.S.C. 2152 Sec. 4.1. [Repealed]

12 U.S.C. 2153 Sec. 4.2. Power to Borrow; Issuance of Notes, Bonds, 

Debentures, and Other Obligations.

Each of the banks of the System, in order to obtain funds for its 

authorized purposes, shall have power, subject to regulation by the Farm 

Credit Administration, and subject to the limitations of paragraph (e) of this 

section, to:

(a) Borrow money from or loan to any other institution of the System, 

borrow from any commercial bank or other lending institution, issue its notes 

or other evidence of debt on its own individual responsibility and full faith 

and credit, and invest its excess funds in such sums, at such times, and on such 

terms and conditions as it may determine.

(b) Issue its own notes, bonds, debentures, or other similar obligations 

fully collateralized as provided in section 4.3(c) by the notes, mortgages, and 

security instruments it holds in the performance of its functions under this Act 

in such sums, maturities, rates of interest, and terms and conditions of each 

issue as it may determine with approval of the Farm Credit Administration.

(c) Join with any or all banks organized and operating under the same 

title of this Act in borrowing or in issuance of consolidated notes, bonds, 

debentures, or other obligations as may be agreed with approval of the Farm 

Credit Administration.

(d) Join with other banks of the System in issuance of Systemwide 

notes, bonds, debentures, and other obligations in the manner, form, amounts, 

and on such terms and conditions as may be agreed upon with approval of the 

Farm Credit Administration. Such System-wide issue by the participating 

banks and such participations by each bank shall not exceed the limits to 

which each such bank is subject in the issuance of its individual or 

consolidated obligations and each such issue shall be subject to approval of 

the Farm Credit Administration: Provided, however, There shall be no issues 

of System-wide obligations without the concurrence of the boards of directors 

of each bank and the approval of the Farm Credit Administration for such 

issues shall be conditioned on and be evidence of the compliance with this 

provision.

(e) No bank or banks shall issue notes, bonds, debentures, or other 

obligations individually or in concert with one or more banks of the System 

other than through the Federal Farm Credit Banks Funding Corporation under 
37

any provision of this Act except under subsection (a) of this section: 

Provided, That any bank or banks may issue investment bonds or like 

obligations other than through the Federal Farm Credit Banks Funding 

Corporation if the interest rate is not in excess of the interest allowable on 

savings deposits of commercial banks of comparable amounts and maturities 

under Federal Reserve regulation on its member banks.

12 U.S.C. 2154 Sec. 4.3. Capital Adequacy of Banks and Associations.

(a) The Farm Credit Administration shall cause System institutions to 

achieve and maintain adequate capital by establishing minimum levels of 

capital for such System institutions and by using such other methods as the 

Farm Credit Administration deems appropriate. The Farm Credit 

Administration may establish such minimum level of capital for a System 

institution as the Farm Credit Administration, in its discretion, deems to be 

necessary or appropriate in light of the particular circumstances of the System 

institution.

(b)(1) Failure of a System institution to maintain capital at or above its 

minimum level as established under subsection (a) may be deemed by the 

Farm Credit Administration, in its discretion, to constitute an unsafe and 

unsound practice within the meaning of this Act.

(2) In addition to, or in lieu of, any other action authorized by 

law, including paragraph (1), the Farm Credit Administration may issue 

a directive to a System institution that fails to maintain capital at or 

above its required level as established under subsection (a). Such 

directive may require the System institution to submit and adhere to a 

plan acceptable to the Farm Credit Administration describing the means 

and timing by which the System institution shall achieve its required

capital level, but may not require merger or consolidation without a 

majority vote of the voting stockholders or the contributors to the 

guaranty fund of the institution.

(3) The Farm Credit Administration may consider such System 

institution’s progress in adhering to any plan required under paragraph 

(2) whenever such System institution, or an affiliate thereof, seeks the 

requisite approval of the Farm Credit Administration for any proposal 

that would divert earnings, diminish capital, or otherwise impede such 

System institution’s progress in achieving its minimum capital level. 

The Farm Credit Administration may deny such approval where it 

determines that such proposal would adversely affect the ability of the 

System institution to comply with such plan.

(c) Each bank shall have on hand at the time of issuance of any note, 

bond, debenture, or other similar obligation and at all times thereafter 

maintain, free from any lien or other pledge, notes and other obligations 

representing loans made under this Act or real or personal property acquired 

in connection with loans made under this Act, obligations of the United States 

or any agency thereof direct or fully guaranteed, other bank assets (including 

marketable securities) approved by the Farm Credit Administration, or cash, 

in an aggregate value equal to the total amount of notes, bonds, debentures, or 

other similar obligations outstanding for which the bank is primarily liable.
38

12 U.S.C. 2154a Sec. 4.3A. Capitalization of System Institutions.

(a) DEFINITIONS. As used in this section:

(1) PERMANENT CAPITAL. The term "permanent capital" 

means—

(A) current year retained earnings;

(B) allocated and unallocated earnings (which, in the case 

of earnings allocated in any form by a System bank to any 

association or other recipient and retained by the bank, shall be 

considered, in whole or in part, permanent capital of the bank or of 

any such association or other recipient as provided under an 

agreement between the bank and each such association or other 

recipient);

(C) all surplus (less allowances for losses);

(D) stock issued by a System institution, except—

(i) stock that may be retired by the holder of the 

stock on repayment of the holder's loan, or otherwise at the 

option or request of the holder; or

(ii) stock that is protected under section 4.9A or is 

otherwise not at risk; and 

(E) any other debt or equity instruments or other accounts 

that the Farm Credit Administration determines appropriate to be 

considered permanent capital.

(2) STOCK. The term "stock" means voting and nonvoting 

stock (including preferred stock), equivalent contributions to a guaranty 

fund, participation certificates, allocated equities, and other forms and 

types of equities.

(b) ADOPTION OF BYLAWS. Subject to approval by shareholders 

under subsection (c)(2), each bank and association shall adopt bylaws, 

developed by its board of directors, that provide for the capitalization of the 

institution in accordance with subsection (c)(1).

(c) REQUIREMENTS OF BYLAWS.

(1) IN GENERAL. Notwithstanding any other provision of this 

Act, the bylaws adopted under subsection (b)—

(A) shall provide for such classes, par value, and amounts 

of the stock of the institution, the manner in which such stock shall 

be issued, transferred, and retired, and the payment of dividends 

and patronage refunds, as determined appropriate by the Board of 

Directors, subject to this section;

(B) may provide for the charging of loan origination fees as 

determined appropriate by the Board of Directors;

(C) shall enable the institution to meet the capital adequacy 

standards established under the regulations issued under section 

4.3(a);

(D) shall provide for the issuance of voting stock, which 

may only be held by—

(i) borrowers who are farmers, ranchers, or producers 

or harvesters of aquatic products, and cooperative 
39

associations eligible to borrow from System institutions 

under this Act;

(ii) persons and entities eligible to borrow from the 

banks for cooperatives, as described in section 3.3(c)(ii); 

(iii) in the case of a Central Bank for Cooperatives, 

other banks for cooperatives; and

(iv) in the case of banks other than banks for 

cooperatives, System associations;

(E) shall require that—

(i) as a condition of borrowing from or through the 

institution, any borrower who is entitled to hold voting stock 

or participation certificates shall, at the time a loan is made, 

acquire voting stock or participation certificates in an amount 

not less than $1,000 or 2 percent of the amount of the loan, 

whichever is less; and

(ii) within 2 years after the loan of a borrower is 

repaid in full, any voting stock held by the borrower be 

converted to nonvoting stock;

(F) may provide that persons who are not borrowers from 

the institution may hold nonvoting stock of the institution;

(G) shall require that any holder of voting stock issued 

before the adoption of bylaws under this section exchange a 

portion of such stock for new voting stock;

(H) do not need to provide for maximum or minimum 

standards of borrower stock ownership based on a percentage of 

the loan of the borrower, except as otherwise provided in this 

section;

(I) shall permit the retirement of stock at the discretion of 

the institution if the institution meets the capital adequacy 

standards established under section 4.3(a); and

(J) shall permit stock to be transferable.

(2) EFFECTIVE DATE. The bylaws adopted by the board of 

directors of a System institution under subsection (b) shall take effect 

only on approval of a majority of the stockholders of such institution 

present and voting, or voting by written proxy, at a duly authorized 

stockholders’ meeting.

(d) REDUCTION OF CAPITAL.

(1) GENERAL RULE. Except as provided in paragraph (2), the 

board of directors of a System institution may not reduce the permanent 

capital of the institution through the payment of patronage refunds or 

dividends, or the retirement of stock if, after or due to such action, the 

permanent capital of the institution would thereafter fail to meet the 

minimum capital adequacy standards established under section 4.3(a).

(2) EXCEPTIONS. Paragraph (1) shall not apply to the payment 

of noncash patronage refunds by any institution exempt from Federal 

income tax if the entire refund paid qualifies as permanent capital. 

Notwithstanding paragraph (1), any System institution subject to Federal 

income tax may pay patronage refunds partially in cash as long as the 
40

cash portion of the refund is the minimum amount required to qualify 

the refund as a deductible patronage distribution for Federal income tax 

purposes and the remaining portion of the refund paid qualifies as 

permanent capital.

(e) COMPLIANCE. The Farm Credit Administration may issue a 

directive that requires compliance with subsection (d), to the board of 

directors of any System institution that fails to comply therewith.

(f) LOANS DESIGNATED FOR SALE OR SOLD INTO THE 

SECONDARY MARKET.

(1) IN GENERAL. Subject to paragraph (2) and 

notwithstanding any other provision of this section, the bylaws adopted 

by a bank or association under subsection (b) may provide—

(A) in the case of a loan made on or after the date of 

enactment of this paragraph that is designated, at the time the loan 

is made, for sale into a secondary market, that no voting stock or 

participation certificate purchase requirement shall apply to the 

borrower for the loan; and

(B) in the case of a loan made before the date of enactment 

of this paragraph that is sold into a secondary market, that all 

outstanding voting stock or participation certificates held by the 

borrower with respect to the loan shall, subject to subsection 

(d)(1), be retired.

(2) APPLICABILITY. Notwithstanding any other provision of 

this section, in the case of a loan sold to a secondary market under title 

VIII, paragraph (1) shall apply regardless of whether the bank or 

association retains a subordinated participation interest in a loan or pool 

of loans or contributes to a cash reserve.

(3) EXCEPTION.

(A) IN GENERAL. Subject to subparagraph (B) and 

notwithstanding any other provision of this section, if a loan 

designated for sale under paragraph (1)(A) is not sold into a 

secondary market during the 180-day period that begins on the date 

of the designation, the voting stock or participation certificate 

purchase requirement that would otherwise apply to the loan in the 

absence of a bylaw provision described in paragraph (1)(A) shall 

be effective.

(B) RETIREMENT. The bylaws adopted by a bank or 

association under subsection (b) may provide that if a loan 

described in subparagraph (A) is sold into a secondary market after 

the end of the 180-day period described in the subparagraph, all 

outstanding voting stock or participation certificates held by the 

borrower with respect to the loan shall, subject to subsection 

(d)(1), be retired.

(g) CONSTRUCTION. This section shall not be construed to affect 

the provisions of this Act that confer on System institutions a lien on borrower 

stock or other equities and the privilege to retire or cancel such stock or other 

equities for application against the indebtedness on a defaulted or restructured 

loan.
41

(h) CONTROLLING AUTHORITY. To the extent that any provision 

of this section is inconsistent with any other provision of this Act (other than 

section 4.9A), the provision of this section shall control.

12 U.S.C. 2155 Sec. 4.4. Liability of Banks; United States Not Liable.

(a)(1) Each bank of the System shall be fully liable on notes, bonds, 

debentures, or other obligations issued by it individually, and shall be liable 

for the interest payments on long-term notes, bonds, debentures, or other 

obligations issued by other banks operating under the same title of this Act.

(2)(A) Each bank shall also be primarily liable for the portion of 

any issue of consolidated or System-wide obligations made on its behalf 

and be jointly and severally liable for the payment of any additional 

sums as called upon by the Farm Credit Administration in order to make 

payments of interest or principal which any bank primarily liable 

therefor shall be unable to make.

(B) Such calls first shall be made on all nondefaulting 

banks in proportion to each such bank’s proportionate share of the 

aggregate available collateral held by all such banks.

(C) For purposes of this paragraph, the term "available 

collateral" means the amount (determined at the close of the last 

calendar quarter ending before such call) by which a bank's 

collateral as described in section 4.3 exceeds the collateral required 

to support the bank's outstanding notes, bonds, debentures, and 

other similar obligations.

(D) If the Farm Credit Administration makes any such call 

and the available collateral of all such banks does not fully satisfy 

the liability necessitating such calls, such calls shall be made on all 

nondefaulting banks in proportion to each such bank’s remaining 

assets.

(E) Any System bank that, pursuant to a call by the Farm 

Credit Administration, makes a payment of principal or interest to 

the holder of any consolidated or System-wide obligation issued on 

behalf of another System bank shall be subrogated to all rights of 

the holder against such other bank to the extent of such payment.

(F) On making such a call with respect to obligations 

issued on behalf of a System bank, the Farm Credit Administration 

shall appoint a receiver for the bank, which shall expeditiously 

liquidate or otherwise wind up the affairs of the bank.

(b) Each bank participating in an issue shall by appropriate resolution 

undertake such responsibility as provided in subsection (a), and in the case of 

consolidated or System-wide obligations shall authorize the execution of such 

long-term notes, bonds, debentures, or other obligations on its behalf. When a 

consolidated or System-wide issue is approved, the notes, bonds, debentures, 

or other obligations shall be executed and the banks shall be liable thereon as 

provided herein.

(c) The United States shall not be liable or assume any liability 

directly or indirectly thereon.
42

(d) Beginning 5 years after the date of the enactment of this 

subsection, the Farm Credit Administration shall not call on any System 

institution to satisfy the liability of the institution on any joint, consolidated, 

or System-wide obligation participated in by the institution or with respect to 

which the institution is primarily, or jointly and severally, liable, before the 

Farm Credit Insurance Fund is exhausted, even if the Fund is only able to 

make a partial payment because of insufficient amounts in the Fund.

12 U.S.C. 2156 Sec. 4.5. [Repealed]

12 U.S.C. 2157 Sec. 4.6. Bonds as Investments.

The bonds, debentures, and other similar obligations issued under the 

authority of this Act shall be lawful investments for all fiduciary and trust 

funds and may be accepted as security for all public deposits.

12 U.S.C. 2158 Sec. 4.7. Purchase and Sale by Federal Reserve System.

Any member of the Federal Reserve System may buy and sell bonds, 

debentures, or other similar obligations issued under the authority of this Act 

and any Federal Reserve bank may buy and sell such obligations to the same 

extent and subject to the same limitations placed upon the purchase and sale 

by said banks of State, county, district, and municipal bonds under section 355 

of title 12, United States Code.

12 U.S.C. 2159 Sec. 4.8. Purchase and Sale of Obligations.

Each bank of the System may purchase its own obligations and the 

obligations of other banks of the System and may provide for the sale of 

obligations issued by it, consolidated obligations, or System-wide obligations 

through a fiscal agent or agents, by negotiation, offer, bid, syndicate sale, and 

to deliver such obligations by book entry, wire transfer, or such other means 

as may be appropriate.

12 U.S.C. 2160 Sec. 4.9. Federal Farm Credit Banks Funding Corporation.

(a) ESTABLISHMENT. There is hereby established the Federal Farm 

Credit Banks Funding Corporation (hereinafter in this section referred to as 

the "Corporation"), which shall be an institution of the Farm Credit System.

(b) DUTIES. The Corporation—

(1) shall issue, market, and handle the obligations of the banks of 

the Farm Credit System, and interbank or intersystem flow of funds as 

may from time to time be required;

(2) acting for the banks of the Farm Credit System, subject to 

approval of the Farm Credit Administration, shall determine the amount, 

maturities, rates of interest, terms, and conditions of participation by the 

several banks in each issue of joint, consolidated, or System-wide 

obligations; and

(3) shall exercise such other powers as were provided to the 

predecessor Federal Farm Credit Banks Funding Corporation in 

accordance with its charter issued under section 4.25, in effect 
43

immediately before the date of the enactment of the Agricultural Credit 

Act of 1987.

(c) OFFICERS AND COMMITTEES.

(1) DESIGNATION. The board of directors may designate such 

officers and committees for such terms and such purposes as may be 

agreed on by the board.

(2) ISSUANCE OF OBLIGATIONS. When appropriate to the 

board’s functions under this section, a committee of the board of 

directors of the Corporation, or representatives thereof, may act on 

behalf of the board in connection with the issuance of joint, 

consolidated, and System-wide obligations.

(d) BOARD OF DIRECTORS.

(1) COMPOSITION. The board of directors shall be composed 

of nine voting members and one nonvoting member, as follows:

(A) Four voting members shall be current or former 

directors of the System banks elected by the shareholders of the 

Corporation.

(B) Three voting members shall be chief executive officers 

or presidents of System banks elected by the shareholders of the 

Corporation.

(C) Two voting members shall be appointed by the 

members elected under subparagraphs (A) and (B) after the elected 

members have received recommendations for such appointments 

from, and consulted with, the Secretary of the Treasury and the 

Chairman of the Board of Governors of the Federal Reserve 

System. The appointed members shall be selected from United 

States citizens—

(i) who are not borrowers from, shareholders in, or 

employees or agents of any System institution, who are not 

affiliated with the Farm Credit Administration, and who are 

not actively engaged with a bank or investment organization 

that is a member of the Corporation’s selling group for 

System-wide securities; and

(ii) who are experienced or knowledgeable in 

corporate and public finance, agricultural economics, and 

financial reporting and disclosure.

(D) The president of the Corporation shall serve as a 

nonvoting member of the board.

(2) CONSIDERATIONS. In selecting candidates under 

subparagraphs (A) and (B) of paragraph (1), due consideration shall be 

given to choosing individuals knowledgeable in agricultural economics, 

public and corporate finance, and financial reporting and disclosure.

(3) REPRESENTATION OF BOARD. The Farm Credit System 

Insurance Corporation shall not have representation on the board of 

directors of the Corporation.

(e) SUCCESSION.
44

(1) ASSETS AND LIABILITIES. The Corporation shall, by 

operation of law and without any further action by the Farm Credit 

Administration, the predecessor Federal Farm Credit Banks Funding 

Corporation (hereinafter referred to in this subsection as "the 

predecessor corporation") chartered under this Act, or any court, succeed 

to the assets of and assume all debts, obligations, contracts, and other 

liabilities of the predecessor corporation, matured or unmatured, 

accrued, absolute, contingent or otherwise, and whether or not reflected 

or reserved against on balance sheets, books of account, or records of the 

predecessor corporation.

(2) CONTRACTS. The existing contractual obligations, security 

instruments, and title instruments of the predecessor corporation shall, 

by operation of law and without any further action by the Farm Credit 

Administration, the predecessor corporation, or any court, become and 

be converted into obligations, entitlements, and instruments of the 

Corporation.

(3) STOCK. The stock of the predecessor corporation issued 

before the date of the enactment of this section shall, by operation of law 

and without any further action by the Farm Credit Administration, the 

predecessor corporation, or any court, become and be converted into 

stock of the Corporation established by this section.

(4) TAXATION. The succession to assets, assumption of 

liabilities, conversion of obligations, instruments, and stock, and 

effectuation of any other transaction by the Corporation to carry out this 

subsection shall not be treated as a taxable event under the laws of any 

State or political subdivision thereof.

12 U.S.C. 2162 Sec. 4.9A. Protection of Borrower Stock.

(a) RETIREMENT OF STOCK. Notwithstanding any other section of 

this Act, each institution of the Farm Credit System, when retiring eligible 

borrower stock in accordance with this Act, shall retire such stock at par 

value. 

(b) CERTAIN POWERS NOT AFFECTED. This section does not 

affect the authority of any institution of the Farm Credit System—

(1) to retire or cancel borrower stock at par value for 

application against a loan in default;

(2) to cancel borrower stock at par value under section 

4.14B; or

(3) to apply, against any outstanding indebtedness to a 

System association arising out of or in connection with a 

liquidation referred to in subsection (d)(2), the par value of 

borrower stock frozen in such liquidation.

(c) INABILITY TO RETIRE STOCK AT PAR VALUE. 

(1) IN GENERAL. -If an institution is unable to retire eligible 

borrower stock at par value due to the liquidation of the institution, the 

Farm Credit System Insurance Corporation, acting as receiver, shall 

retire such stock at par value as would have been retired in the ordinary 

course of business of the institution.
45

(2) FUNDING.-The Farm Credit System Insurance Corporation 

shall use such funds from the Farm Credit Insurance Fund as are 

sufficient to carry out this section.

(d) DEFINITIONS. For purposes of this section:

(1) BORROWER STOCK. The term "borrower stock" means 

voting and nonvoting stock, equivalent contributions to a guaranty fund, 

participation certificates, allocated equities, and other similar equities 

that are subject to retirement under a revolving cycle issued by any 

System institution and held by any person other than any System 

institution.

(2) ELIGIBLE BORROWER STOCK. The term "eligible 

borrower stock" means borrower stock that—

(A) is outstanding on the date of the enactment of this 

section;

(B) is issued or allocated after the date of the enactment of 

this section, but prior to the earlier of—

(i) in the case of each bank and association, the date 

of approval, by the stockholders of such bank or association, 

of the capitalization requirements of the institution in 

accordance with section 4.3A; or

(ii) the date that is 9 months after the date of the 

enactment of this section; 

(C) was, after January 1, 1983, but before the date of the 

enactment of this section, frozen by an institution that was placed 

in liquidation; or

(D) was retired at less than par value by an institution that 

was placed in liquidation after January 1, 1983, but before the date 

of the enactment of this section.

(3) INSTITUTION. The term "institution" means a bank or 

association chartered under this Act.

(4) PAR VALUE. The term "par value" means—

(A) in the case of stock, par value;

(B) in the case of participation certificates and other 

equities and interests not described in subparagraph (C), face or 

equivalent value; or

(C) in the case of participation certificates and allocated 

equities subject to retirement under a revolving cycle but that a 

System institution elects to retire out of order for application 

against a loan in default or otherwise as provided in this Act, par or 

face value discounted, at a rate determined by the institution, to 

reflect the present value of the equity or interest as of the date of 

such retirement.
46

Part B—Dissolution

12 U.S.C. 2183 Sec. 4.12. Dissolution; Voluntary or Involuntary Liquidation; 

Mergers; Receiverships or Conservators.

(a) No institution of the System shall go into voluntary liquidation 

without the consent of the Farm Credit Administration and with such consent 

may liquidate only in accordance with regulations prescribed by the Farm 

Credit Administration. In the case of a voluntary liquidation of an association, 

such regulations, among other things, shall direct the supervising bank to 

institute such measures as it deems appropriate to minimize the adverse effect 

of the liquidation on those borrowers whose loans are purchased by or 

otherwise transferred to another System institution. The Farm Credit 

Administration Board may require an association to merge with another 

association whenever it determines, with the concurrence of the board of the 

supervising bank, that an association has failed to meet its outstanding 

obligations or failed to conduct its operations in accordance with this Act.

(b) The Farm Credit Administration Board may appoint a conservator 

or receiver for any System institution on the determination by the Farm Credit 

Administration Board that one or more of the following exists, or is occurring, 

with respect to the institution: (1) insolvency, in that the assets of the 

institution are less than its obligations to its creditors and others, including its 

members; (2) substantial dissipation of assets or earnings due to any violation 

of law, rules, or regulations, or to any unsafe or unsound practice; (3) an 

unsafe or unsound condition to transact business; (4) willful violation of a 

cease and desist order that has become final; (5) concealment of books, 

papers, records, or assets of the institution or refusal to submit books, papers, 

records, or other material relating to the affairs of the institution for inspection 

to any examiner or to any lawful agent of the Farm Credit Administration; (6) 

the institution is unable to timely pay principal or interest on any insured 

obligation (as defined in section 5.51(3)) issued by the institution. The Farm 

Credit Administration Board shall have exclusive power and jurisdiction to 

appoint a conservator or receiver, and such receiver or conservator, after the 

5-year period beginning on the date of the enactment of the Agricultural 

Credit Act of 1987, shall be the Farm Credit System Insurance Corporation. 

If the Farm Credit Administration Board determines that a ground for the 

appointment of a conservator or receiver as herein provided exists, the Farm 

Credit Administration Board may appoint ex parte and without notice a 

conservator or receiver for the institution. In the event of such appointment, 

the institution, within thirty days thereafter, may bring an action in the United 

States district court for the judicial district in which the home office of such 

institution is located, or in the United States District Court for the District of 

Columbia, for an order requiring the Farm Credit Administration Board to 

remove such conservator or receiver, and the court shall, on the merits, 

dismiss such action or direct the Farm Credit Administration Board to remove 

such conservator or receiver. On the commencement of such an action, the 

court having jurisdiction of any other action or enforcement proceeding 

authorized under this Act to which the institution is a party shall stay such 

action or proceeding during the pendency of the action for removal of the 

conservator or receiver. 
47

(c) In the case of an involuntary liquidation of an association, 

regulations of the Farm Credit Administration, among other things, shall 

direct the supervising bank to institute such measures as it deems appropriate 

to minimize the adverse effect of the liquidation on those borrowers whose 

loans are purchased by or otherwise transferred to another System institution.

12 U.S.C. 2184 Sec. 4.12A. Communications with Stockholders.

(a) PROVISION OF STOCKHOLDER LISTS.

(1) IN GENERAL. A Farm Credit System bank or association 

shall provide to a stockholder of the bank or association a current list of 

stockholders of the bank or association not later than 7 calendar days 

after the date on which the bank or association receives a written request 

for the stockholder list from the stockholder. 

(2) CONDITIONS. As a condition of providing a stockholder 

list under paragraph (1), the bank or association may require that the 

stockholder agree and certify in writing that the stockholder will—

(A) use the list exclusively for communicating with 

stockholders for permissible purposes; and

(B) not make the list available to any person, other than the 

stockholder's attorney or accountant, without first obtaining the 

written consent of the institution.

(b) ALTERNATIVE COMMUNICATIONS.

(1) REQUEST TO ISSUE. As an alternative to receiving a list 

of stockholders, a stockholder may request the institution to mail or 

otherwise furnish to each stockholder a communication for a permissible 

purpose on behalf of the requesting stockholder.

(2) WHEN PERMISSIBLE. Alternative communications may 

be used, at the discretion of the requesting stockholder, if the requester 

agrees to defray the reasonable costs of the communication. If the 

requester decides to exercise this option, the institution shall provide the 

requester with a written estimate of the costs of handling and mailing the 

communication as soon as is practicable after receipt of the 

stockholder’s request to furnish the communication.

Part C—Rights of Borrowers; Loan Restructuring

12 U.S.C. 2199 Sec. 4.13. Disclosure.

(a) IN GENERAL. In accordance with regulations of the Farm Credit 

Administration, qualified lenders shall provide to borrowers, for all loans that 

are not subject to the Truth in Lending Act (15 U.S.C. 1601 et seq.), 

meaningful and timely disclosure not later than the time of the loan closing, 

of—

(1) the current rate of interest on the loan;

(2) in the case of an adjustable or variable rate loan, the amount 

and frequency by which the interest rate can be increased during the 

term of the loan or, if there are no such limitations, a statement to that 

effect, and the factors (including the cost of funds, operating expenses, 
48

and provision for loan losses) that will be taken into account by the 

qualified lender in determining adjustments to the interest rate;

(3) the effect, as shown by a representative example or examples, 

of any loan origination charges or purchases of stock or participation 

certificates on the effective rate of interest;

(4) any change in the interest rate applicable to the borrower's 

loan, and notice to the borrower of a change in the interest rate 

applicable to the loan of the borrower may be made within a reasonable 

time after the effective date of an increase or decrease in the interest 

rate;

(5) except with respect to stock guaranteed under section 4.9A, a 

statement indicating that stock that is purchased is at risk; and

(6) a statement indicating the various types of loan options 

available to borrowers, with an explanation of the terms and borrowers' 

rights that apply to each type of loan.

(b) DIFFERENTIAL INTEREST RATES. A qualified lender offering 

more than one rate of interest to borrowers shall, at the request of a borrower 

of a loan—

(1) provide a review of the loan to determine if the proper 

interest rate has been established;

(2) explain to the borrower in writing the basis for the interest 

rate charged; and

(3) explain to the borrower in writing how the credit status of the 

borrower may be improved to receive a lower interest rate on the loan.

12 U.S.C. 2200 Sec. 4.13A. Access to Documents and Information.

In accordance with regulations of the Farm Credit Administration, 

qualified lenders shall provide their borrowers, at the time of execution of 

loans, copies of all documents signed by the borrower and at any time 

thereafter, on a borrower's request, copies of all documents signed or 

delivered by the borrower and at any time, on request, a copy of the 

institution's articles of incorporation or charter and bylaws and copies of each 

appraisal of the borrower's assets made or used by the qualified lender.

12 U.S.C. 2201 Sec. 4.13B. Notice of Action on Application.

(a) LOAN APPLICATIONS. Each qualified lender to which a person 

has applied for a loan shall provide the person with prompt written notice of—

(1) the action on the application;

(2) if the loan applied for is reduced or denied, the reasons for 

such action; and

(3) the applicant's right to review under section 4.14.

(b) DISTRESSED LOANS. Each qualified lender that has a 

distressed loan outstanding that is subject to restructuring requirements under 

this Act shall provide, in accordance with regulations prescribed by the Farm 

Credit Administration, the borrower with prompt written notice of—

(1) any action taken with respect to restructuring the loan under 

section 4.14A;
49

(2) if restructuring is denied, the reasons for such action; and

(3) the borrower's right to review under section 4.14.

12 U.S.C. 2202 Sec. 4.14. Reconsideration of Actions.

(a) CREDIT REVIEW COMMITTEES.

(1) IN GENERAL. The board of directors of each qualified 

lender shall establish one or more credit review committees, which shall 

include farmer board representation.

(2) MEMBERSHIP. In no case shall a loan officer involved in 

the initial decision on a loan serve on the credit review committee when 

the committee reviews such loan.

(b) REVIEW OF DECISIONS.

(1) DENIALS OR REDUCTIONS. Any applicant for a loan 

from a qualified lender that has received a written notice issued under 

section 4.13B of a decision to deny or reduce the loan applied for may 

submit a written request, not later than 30 days after receiving a notice 

denying or reducing the amount of the loan application, to obtain a 

review of the decision before the credit review committee.

(2) DENIALS OF RESTRUCTURING. A borrower of a loan 

from a qualified lender that has received notice, under section 4.13B, of 

a decision to deny loan restructuring with respect to a loan made to the 

borrower, if the borrower so requests in writing within 7 days after 

receiving such notice, may obtain a review of such decision in person 

before the credit review committee.

(c) PERSONAL APPEARANCE. An applicant for a loan or for 

restructuring, who is entitled to and has requested a review under this section, 

may appear in person before the credit review committee, and may be 

accompanied by counsel or by any other representative of such person's 

choice, to seek a reversal of the decision on the application under review.

(d) INDEPENDENT APPRAISAL.

(1) IN GENERAL. An appeal filed with a credit review 

committee under this section may include, as a part of the request for a 

review of the decision filed under subsection (b)(1) or (2), a request for 

an independent appraisal, by an accredited appraiser, of any interests in 

property securing the loan (other than the stock or participation 

certificates of the qualified lender held by the borrower).

(2) ARRANGEMENT AND COST. Within 30 days after a 

request for an appraisal under paragraph (1), the credit review 

committee shall present the borrower with a list of three appraisers 

approved by the appropriate qualified lender from which the borrower 

shall select an appraiser to conduct the appraisal the cost of which shall 

be borne by the borrower, and shall consider the results of such appraisal 

in any final determination with respect to the loan.

(3) COPY TO BORROWER. A copy of any appraisal made 

under this subsection shall be provided to the borrower.
50

(4) ADDITIONAL COLLATERAL. An independent appraisal 

shall be permitted if additional collateral for a loan is demanded by the 

qualified lender when determining whether to restructure the loan.

(e) NOTIFICATION OF APPLICANT. Promptly after a review by 

the credit review committee, the committee shall notify the applicant or 

borrower, as the case may be, in writing of the decision of the committee and 

the reasons for the decision.

12 U.S.C. 2202a Sec. 4.14A. Restructuring Distressed Loans.

(a) DEFINITIONS. As used in this part and section 4.36:

(1) APPLICATION FOR RESTRUCTURING. The term 

"application for restructuring" means a written request—

(A) from a borrower for the restructuring of a distressed 

loan in accordance with a preliminary restructuring plan proposed 

by the borrower as a part of the application;

(B) submitted on the appropriate forms prescribed by the 

qualified lender; and

(C) accompanied by sufficient financial information and 

repayment projections, where appropriate, as required by the 

qualified lender to support a sound credit decision.

(2) COST OF FORECLOSURE. The term "cost of foreclosure" 

includes—

(A) the difference between the outstanding balance due on a 

loan made by a qualified lender and the liquidation value of the 

loan, taking into consideration the borrower's repayment capacity 

and the liquidation value of the collateral used to secure the loan;

(B) the estimated cost of maintaining a loan as a 

nonperforming asset;

(C) the estimated cost of administrative and legal actions 

necessary to foreclose a loan and dispose of property acquired as 

the result of the foreclosure, including attorneys' fees and court 

costs;

(D) the estimated cost of changes in the value of collateral 

used to secure a loan during the period beginning on the date of the 

initiation of an action to foreclose or liquidate the loan and ending 

on the date of the disposition of the collateral; and 

(E) all other costs incurred as the result of the foreclosure 

or liquidation of a loan.

(3) DISTRESSED LOAN. The term "distressed loan" 

means a loan that the borrower does not have the financial capacity 

to pay according to its terms and that exhibits one or more of the 

following characteristics:

(A) The borrower is demonstrating adverse financial and 

repayment trends.

(B) The loan is delinquent or past due under the terms of 

the loan contract.
51

(C) One or both of the factors listed in subparagraphs (A) 

and (B), together with inadequate collateralization, present a high 

probability of loss to the lender.

(4) FORECLOSURE PROCEEDING. The term "foreclosure 

proceeding" means—

(A) a foreclosure or similar legal proceeding to enforce a 

lien on property, whether real or personal, that secures a 

nonaccrual or distressed loan; or

(B) the seizing of and realizing on nonreal property 

collateral, other than collateral subject to a statutory lien arising 

under title I or II, to effect collection of a nonaccrual or distressed 

loan.

(5) LOAN.

(A) IN GENERAL. Subject to subparagraph (B), the term 

"loan" means a loan made to a farmer, rancher, or producer or 

harvester of aquatic products, for any agricultural or aquatic 

purpose and other credit needs of the borrower, including financing 

for basic processing and marketing directly related to the 

borrower's operations and those of other eligible farmers, ranchers, 

and producers or harvesters of aquatic products.

(B) EXCLUSION FOR LOANS DESIGNATED FOR 

SALE INTO SECONDARY MARKET.

(i) IN GENERAL. Except as provided in clause (ii), 

the term "loan" does not include a loan made on or after the 

date of enactment of this subparagraph that is designated, at 

the time the loan is made, for sale into a secondary market.

(ii) UNSOLD LOANS.

(I)IN GENERAL. Except as provided in 

subclause (II), if a loan designated for sale under clause 

(i) is not sold into a secondary market during the 180-

day period that begins on the date of the designation, 

the provisions of this section and sections 4.14, 4.14B, 

4.14D, and 4.36 that would otherwise apply to the loan 

in the absence of the exclusion described in clause (i)

shall become effective with respect to the loan.

(II) LATER SALE. If a loan described in 

subclause (I) is sold into a secondary market after the 

end of the 180-day period described in subclause (I), 

subclause (I) shall not apply with respect to the loan 

beginning on the date of the sale.

(6) QUALIFIED LENDER. The term "qualified lender" 

means—

(A) a System institution that makes loans (as defined in 

paragraph (5)) except a bank for cooperatives; and

(B) each bank, institution, corporation, company, union, 

and association described in section 1.7(b)(1)(B) but only with 

respect to loans discounted or pledged under section 1.7(b)(1).
52

(7) RESTRUCTURE AND RESTRUCTURING. The terms 

"restructure" and "restructuring" include rescheduling, reamortization, 

renewal, deferral of principal or interest, monetary concessions, and the 

taking of any other action to modify the terms of, or forbear on, a loan in 

any way that will make it probable that the operations of the borrower 

will become financially viable.

(b) NOTICE.

(1) IN GENERAL. On a determination by a qualified lender that 

a loan made by the lender is or has become a distressed loan, the lender 

shall provide written notice to the borrower that the loan may be suitable 

for restructuring, and include with such notice—

(A) a copy of the policy of the lender established under 

subsection (g) that governs the treatment of distressed loans; and

(B) all materials necessary to enable the borrower to submit 

an application for restructuring on the loan.

(2) NOTICE BEFORE FORECLOSURE. Not later than 45 days 

before any qualified lender begins foreclosure proceedings with respect 

to a loan outstanding to any borrower, the lender shall notify the 

borrower that the loan may be suitable for restructuring and that the 

lender will review any such suitable loan for restructuring, and shall 

include with such notice a copy of the policy and the materials described 

in paragraph (1).

(3) LIMITATION ON FORECLOSURE. No qualified lender 

may foreclose or continue any foreclosure proceeding with respect to 

any distressed loan before the lender has completed any pending 

consideration of the loan for restructuring under this section.

(c) MEETINGS. On determination by a qualified lender that a loan 

made by the lender is or has become a distressed loan, the lender shall provide 

a reasonable opportunity for the borrower thereof to personally meet with a 

representative of the lender—

(1) to review the status of the loan, the financial condition of the 

borrower, and the suitability of the loan for restructuring; and

(2) with respect to a loan that is in nonaccrual status, to develop 

a plan for restructuring the loan if the loan is suitable for restructuring.

(d) CONSIDERATION OF APPLICATIONS.

(1) IN GENERAL. When a qualified lender receives an 

application for restructuring from a borrower, the qualified lender shall 

determine whether or not to restructure the loan, taking into 

consideration:

(A) whether the cost to the lender of restructuring the loan 

is equal to or less than the cost of foreclosure;

(B) whether the borrower is applying all income over and 

above necessary and reasonable living and operating expenses to 

the payment of primary obligations;

(C) whether the borrower has the financial capacity and the 

management skills to protect the collateral from diversion, 

dissipation, or deterioration;
53

(D) whether the borrower is capable of working out existing 

financial difficulties, reestablishing a viable operation, and 

repaying the loan on a rescheduled basis; and

(E) in the case of a distressed loan that is not delinquent, 

whether restructuring consistent with sound lending practices may 

be taken to reasonably ensure that the loan will not become a loan 

that it is necessary to place in nonaccrual status.

(2) APPLICATIONS NOT REQUIRED FOR 

RESTRUCTURING PLANS. This section shall not prevent a qualified 

lender from proposing a restructuring plan for an individual borrower in 

the absence of an application for restructuring from the borrower.

(e) RESTRUCTURING.

(1) IN GENERAL. If a qualified lender determines that the 

potential cost to such qualified lender of restructuring the loan in 

accordance with a proposed restructuring plan is less than or equal to the 

potential cost of foreclosure, the qualified lender shall restructure the 

loan in accordance with the plan.

(2) COMPUTATION OF COST OF RESTRUCTURING. In 

determining whether the potential cost to the qualified lender of 

restructuring a distressed loan is less than or equal to the potential cost 

of foreclosure, a qualified lender shall consider all relevant factors, 

including-

(A) the present value of interest income and principal 

forgone by the lender in carrying out the restructuring plan;

(B) reasonable and necessary administrative expenses 

involved in working with the borrower to finalize and implement 

the restructuring plan;

(C) whether the borrower has presented a preliminary 

restructuring plan and cash-flow analysis taking into account 

income from all sources to be applied to the debt and all assets to 

be pledged, showing a reasonable probability that orderly debt 

retirement will occur as a result of the proposed restructuring; and

(D) whether the borrower has furnished or is willing to 

furnish complete and current financial statements in a form 

acceptable to the institution.

(f) LEAST COST ALTERNATIVE. If two or more restructuring 

alternatives are available to a qualified lender under this section with respect 

to a distressed loan, the lender shall restructure the loan in conformity with the 

alternative that results in the least cost to the lender.

(g) RESTRUCTURING POLICY.

(1) ESTABLISHMENT. Each bank board of directors shall 

develop a policy within 60 days after the date of the enactment of this 

section, that is consistent with this section, to govern the restructuring of 

distressed loans. Such policy shall constitute the restructuring policy of 

each qualified lender within the district.

(2) CONTENTS OF POLICY. The policy established under 

paragraph (1) shall include an explanation of—
54

(A) the procedure for submitting an application for 

restructuring; and

(B) the right of borrowers with distressed loans to seek 

review by a credit review committee in accordance with section 

4.14 of a denial of an application for restructuring.

(3) SUBMISSION OF POLICY TO FCA. Each bank board 

shall submit the policy of the district governing the treatment of 

distressed loans under this section to the Farm Credit Administration. 

Notwithstanding the duty imposed by the preceding sentence, the other 

duties imposed by this section shall take effect on the date of the 

enactment of this section.

(h) COMPLIANCE. The Farm Credit Administration may issue a 

directive requiring compliance with any provision of this section to any 

qualified lender that fails to comply with such provision.

(i) PERMITTED FORECLOSURES. This section shall not be 

construed to prevent any qualified lender from enforcing any contractual 

provision that allows the lender to foreclose a loan or from taking such other 

lawful action as the lender deems appropriate, if the lender has reasonable 

grounds to believe that the loan collateral will be destroyed, dissipated, 

consumed, concealed, or permanently removed from the State in which the 

collateral is located.

(j) APPLICATION OF SECTION. The time limitation prescribed in 

subsection (b)(2), and the requirements of subsection (c), shall not apply to a 

loan that became a distressed loan before the date of the enactment of this 

section, if the borrower and lender of the loan are in the process of negotiating 

loan restructuring with respect to the loan. 

(k) ASSISTANCE IN RESTRUCTURING. Each Farm Credit Bank, 

on request of any association, may assist the association in restructuring loans 

under this section.

12 U.S.C. 2202b Sec. 4.14B. Effect of Restructuring on Borrower Stock.

(a) FARM CREDIT BANK. If a Farm Credit Bank forgives and 

writes off, under section 4.14A, any of the principal outstanding on a loan 

made to any borrower, the Federal land bank association of which the 

borrower is a member and stockholder shall cancel the same dollar amount of 

borrower stock held by the borrower in respect of the loan, up to the total 

amount of such stock, and, to the extent provided for in the bylaws of the bank 

relating to its capitalization, the bank shall retire an equal amount of stock 

owned by the Federal land bank association. 

(b) PRODUCTION CREDIT ASSOCIATION. If a production credit 

association forgives and writes off, under section 4.14A, any of the principal 

outstanding on a loan made to any borrower, the association shall cancel the 

same dollar amount of borrower stock held by the borrower in respect of the 

loan, up to the total amount of such stock.

(c) RETENTION OF STOCK. Notwithstanding subsections (a) and 

(b), the borrower shall be entitled to retain at least one share of stock to 

maintain the borrower’s membership and voting interest in the association.
55

Sec. 4.14C. [Repealed]

Repealed by section 5411(23) of the Agriculture Improvement Act of 

2018.

12 U.S.C. 2202d Sec. 4.14D. Protection of Borrowers who Meet All Loan 

Obligations.

(a) FORECLOSURE PROHIBITED. A qualified lender may not 

foreclose on any loan because of the failure of the borrower thereof to post 

additional collateral, if the borrower has made all accrued payments of 

principal, interest, and penalties with respect to the loan.

(b) PROHIBITION AGAINST REQUIRED PRINCIPAL 

REDUCTION. A qualified lender may not require any borrower to reduce the 

outstanding principal balance of any loan made to the borrower by any 

amount that exceeds the regularly scheduled principal installment payment 

(when due and payable), unless—

(1) the borrower sells or otherwise disposes of part or all of the 

collateral; or

(2) the parties agree otherwise in a written agreement entered 

into by the parties.

(c) NONENFORCEMENT. After a borrower has made all accrued 

payments of principal, interest, and penalties with respect to a loan made by a 

qualified lender, the lender shall not enforce acceleration of the borrower's 

repayment schedule due to the borrower having not timely made one or more 

principal or interest payments.

(d) PLACING LOANS IN NONACCRUAL STATUS.

(1) NOTIFICATION. If a qualified lender places any loan in 

nonaccrual status, the lender shall document such change of status and 

promptly notify the borrower thereof in writing of such action and the 

reasons therefor.

(2) REVIEW OF DENIAL. If the borrower was not delinquent 

in any principal or interest payment under the loan at the time of such 

action and the borrower’s request to have the loan placed back into 

accrual status is denied, the borrower may obtain a review of such denial 

before the appropriate credit review committee under section 4.14.

(3) APPLICATION. This subsection shall only apply if a loan 

being placed in nonaccrual status results in an adverse action being 

taken against the borrower.

12 U.S.C. 2202e Sec. 4.14E. Waiver of Mediation Rights by Borrowers.

No System institution may make a loan secured by a mortgage or lien on 

agricultural property to a borrower on the condition that the borrower waive 

any right under the mediation program of any State.
56

Part D—Activities of Institutions of the System

12 U.S.C. 2203 Sec. 4.15. Nomination of Association Directors; Representative 

Selection of Nominees.

Each production credit association and each Federal land bank 

association shall elect a nominating committee by vote of the stockholders at 

the annual meeting to serve for the following year. Each nominating 

committee shall review lists of farmers from the association territory, 

determine their willingness to serve, and submit for election a slate of eligible 

candidates which shall include at least two nominees for each elective office 

to be filled. In doing so, the committee shall endeavor to assure 

representation to all sections of the association territory and as nearly as 

possible to all types of agriculture practiced within the area. Employees of the 

association shall not be eligible to be nominated, elected, or serve as a 

member of the board. Nominations shall also be accepted from the floor. 

Members of the board are not eligible to serve on the nominating committee. 

Regulations of the Farm Credit Administration governing the election of bank 

directors shall similarly assure a choice of two nominees for each elective 

office to be filled and that the bank board represent as nearly as possible all 

types of agriculture in the district.

12 U.S.C. 2204 Sec. 4.16. [Repealed]

12 U.S.C. 2205 Sec. 4.17. Interest Rates.

Interest rates on loans from institutions of the Farm Credit System shall 

not be subject to any interest rate limitation imposed by any State constitution 

or statute or other laws. Such limitation is preempted for purposes of this Act. 

Interest rates on loans made by agricultural credit corporations organized in 

conjunction with cooperative associations for the purpose of financing the 

ordinary crop operations of the members of such associations or other 

producers and eligible to discount with the Farm Credit Banks shall be exempt 

from any interest rate limitation imposed by any State constitution or statute 

or other laws which are hereby preempted for purposes of this Act.

12 U.S.C. 2206 Sec. 4.18. Participation Loans.

Notwithstanding any other provisions of this Act, the terms of any loan 

participated in by two or more Farm Credit System institutions operating 

under different titles of this Act, including provisions for capitalization of the 

portion of the loan participated in by each institution, shall be as may be 

agreed upon among such institutions and authorized under regulations issued 

by the Farm Credit Administration, except that for purposes of determining 

borrower eligibility, membership, term, amount, loan security, and purchase 

of stock or participation certificates by the borrower, the provisions of law 

applicable to the loan shall be the provisions in the title under which the 

institution that originates the loan operates.
57

12 U.S.C. 2206a Sec. 4.18A. Authority of Farm Credit Banks and Direct Lender 

Associations to Participate in Loans to Similar Entities for Risk

Management Purposes.

(a) DEFINITIONS. As used in this section:

(1) PARTICIPATE AND PARTICIPATION. The terms 

"participate" and "participation" shall have the meaning provided in 

section 3.1(11)(B)(iii).

(2) SIMILAR ENTITY. The term "similar entity" means a 

person that—

(A) is not eligible for a loan from the Farm Credit Bank or 

association; and

(B) has operations that are functionally similar to a person 

that is eligible for a loan from the Farm Credit Bank or association 

in that the person derives a majority of the income of the person 

from, or has a majority of the assets of the person invested in, the 

conduct of activities that are functionally similar to the activities 

that are conducted by an eligible person.

(b) LOAN PARTICIPATION AUTHORITY. Notwithstanding any 

other provision of this Act, any Farm Credit Bank or direct lender association 

chartered under this Act may participate in any loan of a type otherwise 

authorized under title I or II made to a similar entity by any person in the 

business of extending credit, except that a Farm Credit Bank or direct lender 

association may not participate in a loan under this section if—

(1) the participation would cause the total amount of all 

participations by the Farm Credit Bank or association under this section 

involving a single credit risk to exceed 10 percent (or the applicable 

higher lending limit authorized under regulations issued by the Farm 

Credit Administration if the stockholders of the respective Farm Credit 

Bank or association so approve) of the total capital of the Farm Credit 

Bank or association;

(2) the participation by the Farm Credit Bank or association 

would equal or exceed 50 percent of the principal of the loan or, when 

taken together with participations in the loan by other Farm Credit 

System institutions, would cause the cumulative amount of the 

participations by all Farm Credit System institutions in the loan to equal 

or exceed 50 percent of the principal of the loan;

(3) the participation would cause the cumulative amount of 

participations that the Farm Credit Bank or association has outstanding 

under this section to exceed 15 percent of the total assets of the Farm 

Credit Bank or association; or

(4) the loan is of the type authorized under section 1.11(b) or 

2.4(a)(2).

12 U.S.C. 2207 Sec. 4.19. Young, Beginning, and Small Farmers and Ranchers.

(a) Under policies of the Farm Credit Bank board, each association 

shall prepare a program for furnishing sound and constructive credit and 

related services to young, beginning, and small farmers and ranchers. Such 
58

programs shall assure that such credit and services are available in 

coordination with other institutions of the Farm Credit System serving the 

territory and with other governmental and private sources of credit. Each 

program shall be subject to review and approval by the supervising bank.

(b) The Farm Credit Bank for each district shall annually obtain from 

associations under its supervision reports of activities under programs 

developed pursuant to subsection (a) and progress toward program objectives. 

On the basis of such reports, the bank shall provide to the Farm Credit 

Administration an annual report summarizing the operations and 

achievements in its district under such programs.

12 U.S.C. 2208 Sec. 4.20. Prohibition Against Use of Signed Ballots.

In any election or merger vote, or other proceeding subject to a vote of 

the stockholders (or subscribers to the guaranty fund of a bank for 

cooperatives), conducted by a lending institution of the Farm Credit System, 

the institution—

(1) may not use signed ballots; and

(2) shall implement measures to safeguard the voting process for 

the protection of the right of stockholders (or subscribers) to a secret 

ballot.

12 U.S.C. 2209 Sec. 4.21. Compensation of Bank Directors.

This section was repealed by section 5403 of the Agriculture 

Improvement Act of 2018 (2018 Act).

Part E—Service Organizations

12 U.S.C. 2211 Sec. 4.25. Establishment.

Any bank of the Farm Credit System, or two or more of such banks 

acting together, may organize a corporation or corporations for the purpose of 

performing functions and services for or on behalf of the organizing bank or 

banks that the bank or banks may perform pursuant to this Act: Provided, 

That a corporation so organized shall have no authority either to extend credit 

or provide insurance services for borrowers from Farm Credit System 

institutions, nor shall it have any greater authority with respect to functions 

and services than the organizing bank or banks possess under this Act. The 

organizing bank or banks shall apply for a Federal charter for the corporation 

by forwarding to the Farm Credit Administration a statement of the need for 

the corporation and proposed articles specifying in general terms the 

objectives for which the corporation is formed, the powers to be exercised by 

it in carrying out the functions and services, and the territory it is to serve. 

The Farm Credit Administration for good cause may deny the charter applied 

for. Upon the approval of articles by the Farm Credit Administration and the 

issuance of a charter, the corporation shall become as of such date a federally 

chartered body corporate and an instrumentality of the United States.
59

12 U.S.C. 2212 Sec. 4.26. Powers of the Farm Credit Administration.

The Farm Credit Administration shall have power, under rules and 

regulations prescribed by the Farm Credit Administration, to provide for the 

organization of any corporation chartered under this part and the territory 

within which its operations may be carried on, and to approve amendments 

consistent with this Act to charters or articles of service corporations.

12 U.S.C. 2213 Sec. 4.27. Regulation and Examination.

The corporations organized under this part shall be institutions of the 

Farm Credit System and shall be subject to the same regulation and 

examination by the Farm Credit Administration as are the organizing bank or 

banks under this Act.

12 U.S.C. 2214 Sec. 4.28. State Laws.

State and other laws shall apply to corporations organized pursuant to 

this part to the same extent such laws would apply to the organizing banks 

engaged in the same activity in the same jurisdiction: Provided, however, 

That to the extent that sections 1.15, 2.16, and 3.13 of this Act may exempt 

banks or associations of the Farm Credit System from taxation, such 

exemptions, other than with respect to franchise taxes, shall not extend to 

corporations organized pursuant to this part.

12 U.S.C. 2214a Sec. 4.28A. Definition of Bank.

In this part, the term "bank" includes each association operating under 

title II.

Part F—Sale of Insurance

12 U.S.C. 2218 Sec. 4.29. Lines of Insurance.

(a)(1) The regulations of the Farm Credit Administration governing 

financially related services that the banks and associations of the Farm Credit 

System may provide under titles I and II may authorize the sale to any 

member of or borrower from any such bank or association, on an optional 

basis, of credit or term life and credit disability insurance appropriate to 

protect the loan commitment in the event of death or disability of the debtors 

and other insurance necessary to protect the member's farm or aquatic unit, 

but limited to, hail and multiple-peril crop insurance, title insurance, and 

insurance to protect the facilities and equipment of aquatic borrowers. A 

member or borrower shall have the option, without coercion from the bank or 

association of such member or borrower, to accept or reject such insurance.

(2) In making insurance available through private insurers, the 

banks shall approve the programs of more than two insurers for each 

type of insurance offered in the district, if more than two insurers for 

each type of insurance have proposed programs to a bank that will, in all 

likelihood, have long-term viability and meet the requirements of 

subsection (b)(2)(D). The banks may provide comparative information 

relating to costs and quality of approved programs and the financial 

conditions of approved companies. Associations shall offer at least two 
60

insurers for each program from among those approved by the Farm 

Credit Banks, if at least two insurers have been approved in accordance 

with this paragraph.

(b) Such regulations shall provide that—

(1) in any case in which insurance is required as a condition for a 

loan or other financial assistance from a bank or association, notice be 

given that it is not necessary to purchase the insurance from the bank or 

association and that the borrower has the option of obtaining the 

insurance elsewhere;

(2) such insurance services may be offered only if—

(A) the bank or association has the capacity to render 

insurance service under this Act in an effective and efficient 

manner;

(B) there exists the probability that any insurance program 

under this Act will generate sufficient revenue to cover all costs;

(C) rendering insurance service will not have an adverse 

effect on the bank's or association's credit or other operations;

(D) the insurance program has been approved by the bank 

or association from among specific programs made available to it 

by insurers—

(i) meeting reasonable financial and quality of 

service standards; and 

(ii) licensed under State law to do business in the 

State; and

(E) in making insurance available through approved 

insurers, the board of directors of the association or bank selects 

and offers at least two approved insurers for each type of insurance 

made available to the members and borrowers, if at least two 

insurers have been approved in accordance with subsection (a)(2); 

and

(3) no bank or association shall directly or indirectly 

discriminate in any manner against any agent, broker, or insurer that is 

not affiliated with such bank or association, or against any party who 

purchases insurance through any such nonaffiliated insurance agent, 

broker, or insurer.

(c) Notwithstanding any provision of this section to the contrary, any 

bank or association that on the date of enactment of the Farm Credit Act 

Amendments of 1980, is offering insurance coverages not authorized by this 

section may continue to sell such coverages for a period of not more than one 

year from such date of enactment and may continue to service such coverages 

until their expiration.

Note: See section 422(b) of the Agricultural Credit Act of 1987 for a 

provision relating to insurance programs in effect prior to the date of 

enactment of such act.
61

Part G—Miscellaneous

12 U.S.C. 2219 Sec. 4.35. Limitation on Separate Sale.

If real property is acquired by any institution of the Farm Credit System 

through foreclosure, no institution of the Farm Credit System shall sell the 

surface rights to that real property to any person unless the institution also 

sells all mineral rights to that real property to that person.

12 U.S.C. 2219a Sec. 4.36. Right of First Refusal.

(a) GENERAL RULE. Agricultural real estate that is acquired by an 

institution of the System as a result of a loan foreclosure or a voluntary 

conveyance by a borrower (hereinafter in this section referred to as the 

"previous owner") who, as determined by the institution, does not have the 

financial resources to avoid foreclosure (hereinafter in this section referred to 

as "acquired real estate") shall be subject to the right of first refusal of the 

previous owner to repurchase or lease the property, as provided in this section.

(b) APPLICATION OF RIGHT OF FIRST REFUSAL TO SALE OF 

PROPERTY. 

(1) ELECTION TO SELL AND NOTIFICATION. Within 15 

days after an institution of the System first elects to sell acquired real 

estate, or any portion of such real estate, the institution shall notify the 

previous owner by certified mail of the owner's right—

(A) to purchase the property at the appraised fair market 

value of the property, as established by an accredited appraiser; or

(B) to offer to purchase the property at a price less than the 

appraised value.

(2) ELIGIBILITY TO PURCHASE. To be eligible to purchase 

the property under paragraph (1), the previous owner must, within 30 

days after receiving the notice required by such paragraph, submit an 

offer to purchase the property.

(3) MANDATORY SALE. An institution of the System 

receiving an offer from the previous owner to purchase the property at 

the appraised value shall, within 15 days after the receipt of such offer, 

accept such offer and sell the property to the previous owner.

(4) PERMISSIVE SALE. An institution of the System receiving 

an offer from the previous owner to purchase the property at a price less 

than the appraised value may accept such offer and sell the property to 

the previous owner. Notice shall be provided to the previous owner of 

the acceptance or rejection of such offer within 15 days after the receipt 

of such offer.

(5) REJECTION OF OFFER OF PREVIOUS OWNER.

(A) DUTIES OF INSTITUTION. An institution of the 

System that rejects an offer from the previous owner to purchase 

the property at a price less than the appraised value may not sell 

the property to any other person—

(i) at a price equal to, or less than, that offered by the 

previous owner; or
62

(ii) on different terms and conditions than those that 

were extended to the previous owner, without first affording 

the previous owner an opportunity to purchase the property at 

such price or under such terms and conditions.

(B) NOTICE. Notice of the opportunity in subparagraph 

(A) shall be provided to the previous owner by certified mail, and 

the previous owner shall have 15 days in which to submit an offer 

to purchase the property at such price or under such terms and 

conditions.

(c) APPLICATION OF RIGHT OF FIRST REFUSAL TO LEASING 

OF PROPERTY.

(1) ELECTION TO LEASE AND NOTIFICATION. Within 15 

days after an institution of the System first elects to lease acquired real 

estate, or any portion of such real estate, the institution shall notify the 

previous owner by certified mail of the owner's right—

(A) to lease the property at a rate equivalent to the 

appraised rental value of the property, as established by an 

accredited appraiser; or

(B) to offer to lease the property at a rate that is less than 

the appraised rental value of the property.

(2) ELIGIBILITY TO LEASE. To be eligible to lease the 

property under paragraph (1), the previous owner must, within 15 days 

after receiving the notice required by such paragraph, submit an offer to 

lease the property.

(3) MANDATORY LEASE. An institution of the System 

receiving an offer from the previous owner to lease the property at a rate 

equivalent to the appraised rental value of the property shall, within 15 

days after the receipt of such offer, accept such offer and lease the 

property to the previous owner unless the institution determines that the 

previous owner—

(A) does not have the resources available to conduct a 

successful farming or ranching operation; or

(B) cannot meet all of the payments, terms, and conditions 

of such lease.

(4) PERMISSIVE LEASE. An institution of the System 

receiving an offer from the previous owner to lease the property at a rate 

that is less than the appraised rental value of the property may accept 

such offer and lease the property to the previous owner.

(5) NOTICE TO PREVIOUS OWNER. An institution of the 

System receiving an offer from the previous owner to lease the property 

at a rate less than the appraised rental value of the property shall notify 

the previous owner of its acceptance or rejection of the offer within 15 

days after the receipt of such offer.

(6) REJECTION OF OFFER OF PREVIOUS OWNER.

(A) DUTIES OF INSTITUTION. An institution of the 

System rejecting an offer from the previous owner to lease the 
63

property at a rate less than the appraised rental value of the 

property may not lease the property to any other person—

(i) at a rate equal to or less than that offered by the 

previous owner; or

(ii) on different terms and conditions than those that 

were extended to the previous owner, without first affording 

the previous owner an opportunity to lease the property at 

such rate or under such terms and conditions.

(B) NOTICE. Notice of the opportunity described in 

subparagraph (A) shall be given to the previous owner by certified 

mail, and the previous owner shall have 15 days after the receipt of 

such notice in which to agree to lease the property at such rate or 

under such terms and conditions.

(d) PUBLIC OFFERINGS.

(1) NOTIFICATION OF PREVIOUS OWNER. If an institution 

of the System elects to sell or lease acquired property or a portion 

thereof through a public auction, competitive bidding process, or other 

similar public offering, the institution shall notify the previous owner, by 

certified mail, of the availability of the property. Such notice shall 

contain the minimum amount, if any, required to qualify a bid as 

acceptable to the institution and any terms and conditions to which such 

sale or lease will be subject.

(2) PRIORITY. If two or more qualified bids in the same 

amount are received by the institution under paragraph (1), such bids are 

the highest received, and one of the qualified bids is offered by the 

previous owner, the institution shall accept the offer by the previous 

owner.

(3) NONDISCRIMINATION. No institution of the System may 

discriminate against a previous owner in any public auction, competitive 

bidding process, or other similar public offering of property acquired by 

the institution from such person.

(e) TERM OR CONDITION. For the purposes of this section, 

financing by a System institution shall not be considered to be a term or 

condition of a sale of acquired real estate.

(f) FINANCING. Notwithstanding any other provision of this 

section, a System institution shall not be required to provide financing to the 

previous owner in connection with the sale of acquired real estate.

(g) MAILING OF NOTICE. Notwithstanding any other provision of 

this section, each certified mail notice requirement in this section shall be 

fully satisfied by mailing one certified mail notice to the last known address of 

the previous owner. 

(h) STATE LAWS. The rights provided in this section shall not 

diminish any such right of first refusal under the law of the State in which the 

property is located.

(i) APPLICABILITY. This section shall not apply to a bank for 

cooperatives.
64

12 U.S.C. 2219b Sec. 4.37. Application of Uninsured Accounts.

(a) IN GENERAL. Money of a borrower held by a Farm Credit 

System institution in an uninsured voluntary or involuntary account as 

authorized under regulations issued by the Farm Credit Administration (as in 

effect immediately before the date of the enactment of this section), including 

all such other accounts known as "advanced payment accounts" or "future 

prepayment accounts" shall, in the event the institution is placed in 

liquidation, be immediately applied as payment against the indebtedness of 

any outstanding loans of such borrower.

(b) REGULATIONS. The Farm Credit Administration shall 

promulgate regulations—

(1) that define the term "uninsured voluntary or involuntary 

account"; and

(2) to otherwise effectively carry out this section.

12 U.S.C. 2219c Sec. 4.38. Affirmative Action.

All institutions of the Farm Credit System with more than 20 employees 

shall establish and maintain an affirmative action program plan that applies 

the affirmative action standards otherwise applied to contractors of the Federal 

Government.

12 U.S.C. 2219d Sec. 4.39. Encouragement of Conservation Practices.

At the time a System institution or an agricultural mortgage loan 

originator (as defined in section 8.0) approves a loan made to a borrower that, 

in the opinion of the institution or originator, would be ineligible for a loan 

made, insured, or guaranteed under the Consolidated Farm and Rural 

Development Act (7 U.S.C. 1921 et seq.) by reason of subtitle B or C of title 

XII of the Food Security Act of 1985 (16 U.S.C. 3811 et seq.), the institution 

or originator as the case may be, shall encourage the borrower to contact the 

Department of Agriculture Soil Conservation Service to obtain information 

about soil conservation methods and practices.
65

Title V—Farm Credit Administration Organization

Part B—Farm Credit Administration Organization

12 U.S.C. 2241 Sec. 5.7. The Farm Credit Administration.

The Farm Credit Administration shall be an independent agency in the 

executive branch of the Government. It shall be composed of the Farm Credit 

Administration Board and such other personnel as are employed in carrying 

out the functions, powers, and duties vested in the Farm Credit Administration 

by this Act.

12 U.S.C. 2242 Sec. 5.8. The Farm Credit Administration Board; Appointment; 

Terms of Office; Organization and Compensation.

(a) The management of the Farm Credit Administration shall be 

vested in a Farm Credit Administration Board (referred to in this part as "the 

Board"). The Board shall consist of three members, who shall be citizens of 

the United States and broadly representative of the public interest. Members 

of the Board shall be appointed by the President, by and with the advice and 

consent of the Senate. Not more than two members of the Board shall be 

members of the same political party. Of the persons thus appointed, one shall 

be designated by the President to serve as Chairman of the Board for the 

duration of the member's term. The members of the Board shall be ineligible 

during the time they are in office and for two years thereafter to hold any 

office, position, or employment in any institution of the Farm Credit System.

(b) The term of office of each member of the Board shall be six years, 

except that the terms of the two members, other than the Chairman, first 

appointed under subsection (a) shall expire, one on the expiration of two years 

after the date of appointment, and one on the expiration of four years after the 

date of appointment. Members of the Board shall not be appointed to succeed 

themselves, except that the members first appointed under subsection (a) for a 

term of less than six years may be reappointed for a full six-year term and 

members appointed to fill unexpired terms of three years or less may be 

reappointed for a full six-year term. Any vacancy shall be filled for the 

unexpired term on like appointment. Any member of the Board shall continue 

to serve as such after the expiration of the member's term until a successor has 

been appointed and qualified.

(c) Each member of the Board, within fifteen days after notice of 

appointment, shall subscribe to the oath of office. The Board may transact 

business if a vacancy exists, provided a quorum is present. A quorum shall 

consist of two members of the Board. The Board shall hold at least one 

meeting each month and such additional meetings at such times and places as 

it may fix and determine. Such meetings shall be held on the call of the 

Chairman or any two Board members. The Board shall adopt such rules as it 

deems appropriate for the transaction of business by the Board, and shall keep 

permanent and accurate records and minutes of the actions and proceedings of 

the Board.

(d) The members of the Board shall devote their full time and attention 

to the business of the Board. The Chairman of the Board shall receive 
66

compensation at the rate prescribed for level III of the Executive Schedule 

under section 5314 of title 5 of the United States Code. Each of the other 

members of the Board shall receive compensation at the rate prescribed for 

level IV of the Executive Schedule under section 5315 of title 5 of the United 

States Code. Each member of the Board shall be reimbursed for necessary 

travel, subsistence, and other expenses in the discharge of the member's 

official duties without regard to other laws with respect to allowance for travel 

and subsistence of officers and employees of the United States. This 

subsection shall be subject to the provisions of section 5.11 of this Act.

(e) The President shall appoint members of the Board who—

(1) are experienced or knowledgeable in agricultural economics 

and financial reporting and disclosure;

(2) are experienced or knowledgeable in the regulation of 

financial entities; or

(3) have a strong financial, legal, or regulatory background.

12 U.S.C. 2243 Sec. 5.9. Powers of the Board.

The Board shall manage and administer, and establish policies for, the 

Farm Credit Administration. It—

(1) shall approve the rules and regulations for the 

implementation of this Act not inconsistent with its provisions;

(2) shall provide for the examination of the condition of, and 

general regulation of the performance of the powers, functions, and 

duties vested in, each institution of the Farm Credit System;

(3) shall provide for the performance of all the powers and duties 

vested in the Farm Credit Administration; and

(4) may require such reports as it deems necessary from the 

institutions of the Farm Credit System.

12 U.S.C. 2244 Sec. 5.10. Chairman; Responsibilities; Governing Standards.

(a)(1) The Chairman of the Board shall be the chief executive officer of 

the Farm Credit Administration.

(2) In carrying out the responsibilities of the chief executive 

officer, the Chairman shall be responsible for directing the 

implementation of policies and regulations adopted by the Board and, 

after consultation with the Board, the execution of the administrative 

functions and duties of the Farm Credit Administration.

(3) In carrying out policies as directed by the Board, the 

Chairman shall act as spokesperson for the Board and represent the 

Board and the Farm Credit Administration in their official relations 

within the Federal Government.

(4) Under policies adopted by the Board, the Chairman shall 

consult on a regular basis with—

(A) the Secretary of the Treasury concerning the exercise, 

by the System, of the powers conferred under section 4.2;
67

(B) the Board of Governors of the Federal Reserve System 

concerning the effect of System lending activities on national 

monetary policy; and 

(C) the Secretary of Agriculture concerning the effect of 

System policies on farmers, ranchers, and the agricultural 

economy.

(b) In carrying out responsibilities under this Act, the Chairman of the 

Board shall be governed by general policies adopted by the Board and by such 

regulatory decisions, findings, and determinations as the Board may by law be 

authorized to make and, as to third persons, all acts of the Chairman of the 

Board shall be conclusively presumed to be in compliance with such general 

policies and regulatory decisions, findings, and determinations.

(c) The Chairman of the Board shall enforce the rules, regulations, and 

orders of the Board. Except as provided in section 518 of title 28 of the 

United States Code, relating to litigation before the Supreme Court, attorneys 

designated by the Chairman shall represent the Farm Credit Administration in 

any civil proceeding or civil action brought in connection with the 

administration of conservatorships and receiverships. Attorneys designated 

by the Chairman may represent the Farm Credit Administration in any other 

civil proceedings or civil action when so authorized by the Attorney General 

under provisions of title 28.

12 U.S.C. 2245 Sec. 5.11. Organization of the Farm Credit Administration.

(a) POLICIES OF THE BOARD. The Chairman of the Farm Credit 

Administration Board, in carrying out the powers and duties vested in the 

Chairman by this Act, and Acts supplementary thereto, shall be governed by 

policies of the Board and by such regulatory decisions, findings, and 

determinations as the Board may by law be authorized to make.

(b) APPOINTMENTS. The Chairman of the Board shall appoint such 

personnel as may be necessary to carry out the functions of the Farm Credit 

Administration. The appointment by the Chairman of the heads of major 

administrative divisions under the Board shall be subject to the approval of the 

Board.

(c) PERSONNEL.

(1) APPOINTMENTS BY BOARD MEMBERS. Personnel 

employed regularly and full-time in the immediate offices of Board 

members shall be appointed by each such Board member.

(2) OFFICERS AND EMPLOYEES.

(A) APPOINTMENT, COMPENSATION, AND 

BENEFITS. The Chairman shall fix the compensation and number 

of, and appoint and direct, employees of the Administration. The 

Chairman may set and adjust the rates of basic pay for employees 

of the Administration without regard to the provisions of chapter 

51, or subchapter III of chapter 53, of title 5, United States Code. 

The Chairman may provide such additional compensation and 

benefits to employees of the Administration as is necessary to 

maintain comparability with the total amount of compensation and 

benefits provided by other Federal bank regulatory agencies. In 
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setting and adjusting the total amount of compensation and 

benefits for employees of the Administration, the Chairman shall 

consult with, and seek to maintain comparability with, other 

Federal bank regulatory agencies.

(B) OTHER FEDERAL BANK REGULATORY 

AGENCIES DEFINED. For purposes of this subsection, the term 

"other Federal bank regulatory agencies" has the same meaning 

given to the term "appropriate Federal banking agency" in section 

3(q) of the Federal Deposit Insurance Act.

(C) ETHICS IN GOVERNMENT. The officers and 

employees of the agency shall be—

(i) subject to the Ethics in Government Act of 1978; 

and

(ii) considered officers or employees of the United 

States for the purposes of sections 201 through 203, and 

sections 205 through 209, of title 18, United States Code.

(3) DELEGATION. The powers of the Chairman as chief 

executive officer necessary for day to day management may be 

exercised and performed by the Chairman through such other officers 

and employees of the Administration as the Chairman shall designate, 

except that the Chairman may not delegate powers specifically reserved 

to the Chairman by this Act without Board approval.

(d) FUNDING. The operations of the Farm Credit Administration, 

and the salaries of members of the Board and employees of the 

Administration, shall be funded and paid for from the fund created under 

section 5.15.

12 U.S.C. 2246 Sec. 5.12. Advisory Committees.

The Chairman of the Board, subject to the approval of the Board, may 

establish one or more advisory committees in accordance with the Federal 

Advisory Committee Act and may appoint to such committee or committees 

individuals who are members of the Federal Farm Credit Board when such 

Board is terminated by the Farm Credit Amendments Act of 1985.

12 U.S.C. 2248 Sec. 5.13. Seal.

The Farm Credit Administration shall have a seal, as adopted by the 

Board, which shall be judicially noted.

12 U.S.C. 2249 Sec. 5.14. Administrative Expenses.

The Farm Credit Administration may, within the limits of funds 

available therefor, make necessary expenditures for personnel services and 

rent at the seat of Government and elsewhere; contract stenographic reporting 

services; purchase and exchange lawbooks, books of reference, periodicals, 

newspapers, expenses of attendance at meetings and conferences; purchase, 

operation, and maintenance at the seat of Government and elsewhere of 

motor-propelled passenger-carrying vehicles and other vehicles; printing and 

binding; and for such other facilities and services, including temporary 

employment by contract or otherwise, as it may from time to time find 
69

necessary for the proper administration of this Act. The Farm Credit 

Administration may dispose of property so acquired and any amounts 

collected from the disposition of such property shall be deposited in the 

special fund provided for in section 5.15(b) of this Act and shall be available 

to the Administration in the same manner and for the same purposes as the 

funds collected under section 5.15(a) of this Act.

12 U.S.C. 2250 Sec. 5.15. Farm Credit Administration Operating Expenses

Fund.

(a) DETERMINATIONS REQUIRED.

(1) GENERALLY. Prior to the first day of each fiscal year, the 

Farm Credit Administration shall determine—

(A) the cost of administering this Act for the subsequent 

fiscal year, including expenses for official functions;

(B) the amount of assessments that will be required to pay 

such administrative expenses, taking into consideration the funds 

contained in the Administrative Expense Account, and maintain a 

necessary reserve; and 

(C) the amount of assessments that will be required to pay 

the costs of supervising and examining the Mortgage Corporation 

established under title VIII.

(2) APPORTIONMENTS. On the basis of the determinations 

made under paragraph (1), the Farm Credit Administration shall —

(A) apportion the amount of the assessment described in 

paragraph (1)(B) among the System institutions on a basis that is 

determined to be equitable by the Farm Credit Administration;

(B) assess and collect such apportioned amounts from time 

to time during the fiscal year as determined necessary by the Farm 

Credit Administration; and

(C) assess and collect from the Mortgage Corporation, from 

time to time during the fiscal year, the amount described in 

paragraph (1)(C).

(b) DEPOSITS INTO FUND.

(1) TREASURY FUND. The amounts collected under 

subsection (a) shall be deposited in the Farm Credit Administration 

Administrative Expense Account. The Expense Account shall be 

maintained in the Treasury of the United States and shall be available, 

without regard, for purposes of sequestration, to the Balanced Budget 

and Emergency Deficit Control Act of 1985 (2 U.S.C. 901 note), to pay 

the expenses of the Farm Credit Administration.

(2) NONGOVERNMENT FUNDS. The funds contained in the 

Expense Account shall not be construed to be Federal Government funds 

or appropriated moneys.

(3) INVESTMENT.

(A) AUTHORITY. On request of the Farm Credit 

Administration, the Secretary of the Treasury shall invest and 

reinvest such amounts contained in the Expense Account as, in the 
70

determination of the Farm Credit Administration, are in excess of 

the amounts necessary for current expenses of the Farm Credit 

Administration.

(B) RETURNS. All income earned from such investments 

and reinvestments shall be deposited in the Expense Account.

(C) TYPE. Such investments shall be made in public debt 

securities with maturities suitable to the needs of the Expense 

Account, as determined by the Farm Credit Administration, and 

bearing interest at rates determined by the Secretary of the 

Treasury, taking into consideration current market yields on 

outstanding marketable obligations of the United States of 

comparable maturities.

12 U.S.C. 2251 Sec. 5.16. Quarters and Facilities for the Farm Credit 

Administration.

(a) The Farm Credit Administration shall maintain its principal office 

within the Washington D.C.-Maryland-Virginia standard metropolitan 

statistical area, and such other offices within the United States as in its 

judgment are necessary.

(b) As an alternate to the rental of quarters under section 5.14, and 

without regard to any other provision of law, the banks of the System, with the 

concurrence of two-thirds of the bank boards, are hereby authorized—

(1) To lease or acquire real property in the District of Columbia 

or elsewhere for quarters of the Farm Credit Administration.

(2) To construct, develop, furnish, and equip such building 

thereon and such facilities appurtenant thereto as in their judgment may 

be appropriate to provide, to the extent the Board may deem advisable, 

suitable, and adequate quarters and facilities for the Farm Credit 

Administration.

(3) To enlarge, remodel, or reconstruct the same.

(4) To make or enter into contracts for any of the foregoing.

(5) To sell or otherwise dispose of any interest in property leased 

or acquired under the foregoing if authorized by the Board.

(c) FINANCING.-

(1) IN GENERAL. -The Board may require of the respective banks 

of the System, and they shall make to the Farm Credit Administration, 

such advances of funds for the purposes set out in this section as in the 

sole judgment of the Board may from time to time be advisable for the 

purposes of this section. 

(2) ADVANCES.- The advances of funds described in paragraph 

(1) shall be in addition to and kept in a separate fund from the 

assessments authorized in section 5.15 and shall be apportioned by the 

Board among the banks in proportion to the total assets of the respective 

banks, and determined in such manner and at such times as the Board 

may prescribe. 

(3) POWERS OF BANKS. - The powers of the banks of the 

System and purposes for which obligations may be issued by such banks 
71

are hereby enlarged to include the purpose of obtaining funds to permit 

the making of advances required by this section. 

(4) APPROVAL OF BOARD. -The plans and decisions for such 

building and facilities and for the enlargement, remodeling, or 

reconstruction thereof shall be such as is approved in the sole discretion 

of the Board. 

(5) AGENT FOR BANKS. -In actions undertaken by the banks 

pursuant to this section, the Farm Credit Administration may act as 

agent for the banks.

12 U.S.C. 2252 Sec. 5.17. Enumerated Powers.

(a) The Farm Credit Administration shall have the following powers, 

functions, and responsibilities in connection with the institutions of the Farm 

Credit System and the administration of this Act:

(1) Modify the boundaries of farm credit districts, with due 

regard for the farm credit needs of the country, as approved by the 

Board, with the concurrence of the district banks involved.

(2) Where necessary or appropriate to carry out the policy and 

objectives of this Act, issue and approve amendments to Federal charters 

of institutions of the System; approve change in names of banks 

operating under this Act; approve the merger of districts when agreed to 

by the district bank boards involved and by a majority vote of the voting 

stockholders and contributors to the guaranty funds of each bank for 

each of such districts, voting in the same manner as is provided in 

section 7.0 of this Act; approve mergers and any related activities as 

provided for in title VII; and approve the consolidation or division of the 

territories of institutions when agreed to by a majority vote of the voting 

stockholders or contributors to the guaranty fund of each of the 

institutions involved; and approve consolidations of boards of directors 

when agreed to by a majority vote of the voting stockholders or 

contributors to the guaranty fund of each of the institutions involved. 

The Farm Credit Administration Board, after consultation with the 

respective boards of directors of the affected banks, may require two or 

more banks operating under the same or different titles to merge if the 

Board determines that one of such banks has failed to meet its 

outstanding obligations. 

(3) Make annual reports directly to Congress on the condition of 

the System and its institutions, based on the examinations carried out 

under section 5.19 of this Act, and on the manner and extent to which 

the purposes and objectives of this Act are being carried out and, from 

time to time, recommend directly legislative changes. The annual 

reports shall include a summary and analysis of the reports submitted to 

the Farm Credit Administration by the Farm Credit Banks under section 

4.19(b) of this Act relating to programs for serving young, beginning, 

and small farmers and ranchers.

(4) Approve the issuance of obligations of the System under 

subsections (c) and (d) of section 4.2 of this Act for the purpose of 

funding the authorized operations of the institutions of the System, and 

prescribe collateral therefor.
72

(5) Grant approvals provided for under this Act either on a caseby-case basis or through regulations that confer approval on actions of 

Farm Credit System institutions. 

(6) Establish standards for the System institutions with respect to 

loan security requirements and regulate the borrowing, repayment, and 

transfer of funds and equities between institutions of the System.

(7) Conduct loan and collateral security review.

(8) Regulate the preparation by System institutions and the 

dissemination to stockholders and investors of information on the 

financial condition and operations of such institutions, except that the 

requirements of the Farm Credit Administration governing the 

dissemination to stockholders of quarterly reports of System institutions 

may not be more burdensome or costly than the requirements applicable 

to national banks, and the Farm Credit Administration may not require 

any System institution to disclose in any report to stockholders 

information concerning the condition or classification of a loan—

(A) to a director of the institution—

(i) who has resigned before the time for filing the 

applicable report with the Farm Credit Administration; or

(ii) whose term of office will expire no later than the 

date of the meeting of stockholders to which the report 

relates; or 

(B) to a member of the immediate family of a director of 

the institution unless—

(i) the family member resides in the same household 

as the director; or

(ii) the director has a material financial or legal 

interest in the loan or business operation of the family 

member.

(9) Prescribe rules and regulations necessary or appropriate for 

carrying out this Act.

(10) Exercise the powers conferred on it under part C of this title 

for the purpose of ensuring the safety and soundness of System 

institutions.

(11) Exercise such incidental powers as may be necessary or 

appropriate to fulfill its duties and carry out the purposes of this Act.

(12) Require surety bonds or other provisions for protection of the 

assets of the institutions of the System against losses occasioned by 

employees.

(13)(A) Subject to subparagraph (B), the Farm Credit 

Administration may approve an amendment to the charter of any 

institution of the Farm Credit System operating under title I or II, which 

would authorize the institution to exercise lending authority in any 

territory—

(i) in the geographic area served by an association 

that was reassigned pursuant to section 433 of the 

Agricultural Credit Act of 1987 (12 U.S.C. 2071 note) 
73

(where the geographic area was a part of the association's 

territory as of the date of the reassignment); and

(ii) in which the charter of an institution that is not 

seeking the charter amendment authorizes the institution to 

exercise the type of lending authority that is the subject of the 

charter request.

(B) The Farm Credit Administration may approve a charter 

amendment under subparagraph (A) only on the approval of—

(i) the respective boards of directors of the 

associations that, if the charter request is approved, would 

exercise like lending authority in any of the territory that is 

the subject of the charter request;

(ii) a majority of the stockholders of each association 

described in clause (i) voting, in person or by proxy, at a duly 

authorized stockholders’ meeting; and

(iii) the respective boards of directors of the Farm 

Credit Banks that, if the charter request is approved, would 

exercise, either directly or through associations, like lending 

authority in any of the territory described in subparagraph 

(A)(i).

(14)(A) Subject to subparagraph (B), the Farm Credit 

Administration may approve a request to charter an association of the 

Farm Credit System to operate under title II where the proposed 

charter—

(i) will include any of the geographic area included 

in the territory served by an association that was reassigned 

pursuant to section 433 of the Agricultural Credit Act of 

1987 (12 U.S.C. 2071 note) (where the geographic area was a 

part of the association's territory as of the date of the 

reassignment); and

(ii) will authorize the association to exercise lending 

authority in any territory in the geographic area in which the 

charter of an association that is not requesting the charter 

authorizes the association to exercise the type of lending 

authority that is the subject of the charter request.

(B) The Farm Credit Administration may approve a charter 

request under subparagraph (A) only on the approval of—

(i) the respective boards of directors of the 

associations that, if the charter request is approved, would 

exercise like lending authority in any of the territory that is 

the subject of the charter request;

(ii) a majority vote of the stockholders (if any) of 

each association described in clause (i) voting, in person or 

by proxy, at a duly authorized stockholder's meeting; and

(iii) the respective boards of directors of the Farm 

Credit Banks that, if the charter request is approved, would 

exercise, either directly or through associations, like lending 

authority in any of the territory described in subparagraph 

(A)(i).
74

(15)(A) Approve amendments to the charters of institutions of the 

Farm Credit System to implement the equalization of loan-making 

powers of a Farm Credit System association under section 7.7.

(B) Amendments described in subparagraph (A) to the 

charters of an association and the related Farm Credit Bank shall 

be approved by the Farm Credit Administration, subject to any 

conditions of approval imposed, by not later than 30 days after the 

date on which the Farm Credit Administration receives all 

approvals required by section 7.7(a)(2).

(b) The Farm Credit Administration shall not have authority, either 

direct or indirect, to approve bylaws, or any amendments or modifications or 

changes to bylaws, of System institutions.

(c)(1) At least thirty days prior to publishing any proposed regulation in 

the Federal Register, the Farm Credit Administration shall transmit a copy of 

the regulation to the Committee on Agriculture of the House of 

Representatives and the Committee on Agriculture, Nutrition, and Forestry of 

the Senate. The Farm Credit Administration shall also transmit to such 

committees a copy of any final regulation prior to its publication in the 

Federal Register. Except as provided in paragraph (2) of this subsection, no 

final regulation of the Farm Credit Administration shall become effective 

prior to the expiration of thirty calendar days after it is published in the 

Federal Register during which either or both Houses of the Congress are in 

session.

(2) In the case of an emergency, a final regulation of the Farm 

Credit Administration may become effective without regard to the last 

sentence of paragraph (1) of this subsection if the Farm Credit 

Administration notifies in writing the Committee on Agriculture of the 

House of Representatives and the Committee on Agriculture, Nutrition, 

and Forestry of the Senate setting forth the reasons why it is necessary to 

make the regulation effective prior to the expiration of the thirty-day 

period.

(d)(1) If there are any unresolved differences between the Farm Credit 

Administration and the Board of Governors of the Federal Reserve System as 

to whether any regulation implementing section 3.7(b) or the other provisions 

of title III relating to the authority under section 3.7(b) conforms to national 

banking policies, objectives, and limitations, simultaneously with 

promulgation of any such regulation under this Act and simultaneously with 

promulgation of any regulation implementing section 1.7(b), the Farm Credit 

Administration shall transmit a copy thereof to the Secretary of the Senate and 

the Clerk of the House of Representatives. Except as provided in paragraph 

(2), the regulation shall not become effective if, within ninety calendar days of 

continuous session of Congress after the date of promulgation, both Houses of 

Congress adopt a concurrent resolution, the matter after the resolving clause 

of which is as follows: "That Congress disapproves the regulations 

promulgated by the Farm Credit Administration dealing with the matter 

of , which regulation was transmitted to Congress on ", the blank 

spaces therein being appropriately filled.

(2) If at the end of sixty calendar days of continuous session of 

Congress after the date of promulgation of a regulation, no committee of 
75

either House of Congress has reported or been discharged from further 

consideration of a concurrent resolution disapproving the regulation, and 

neither House has adopted such a resolution, the regulation may go into 

effect immediately. If, within such sixty calendar days, such a 

committee has reported or been discharged from further consideration of 

such a resolution, or either House has adopted such a resolution, the 

regulation may go into effect not sooner than ninety calendar days of 

continuous session of Congress after its promulgation unless 

disapproved as provided in paragraph (1).

(3) For the purposes of paragraphs (1) and (2) of this 

subsection—

(i) continuity of session is broken only by an 

adjournment of Congress sine die; and

(ii) the days on which either House is not in session 

because of an adjournment of more than three days to a day 

certain are excluded in the computation of sixty and ninety 

calendar days of continuous session of Congress.

(4) Congressional inaction on or rejection of a resolution of 

disapproval shall not be deemed an expression of approval of such 

regulation.

NOTE: The amendments made by section 5407 of Public Law 110-246 

became effective on January 1, 2010. 

Sec. 5.18. [Repealed]

Repealed by section 5411(30) of the Agriculture Improvement Act of 

2018.

12 U.S.C. 2254 Sec. 5.19. Examinations.

(a) Each institution of the System shall be examined by Farm Credit 

Administration examiners at such times as the Board may determine, but in no 

event less than once during each 18-month period. Such examinations may 

include, if appropriate, but are not limited to, an analysis of credit and 

collateral quality and capitalization of the institution, and appraisals of the 

effectiveness of the institution’s management and application of policies 

governing the carrying out of this Act and regulations of the Farm Credit 

Administration and servicing all eligible borrowers. Examination of banks 

shall include an analysis of the compensation paid to the chief executive 

officer and the salary scales of the employees of the bank. At the direction of 

the Board, Farm Credit Administration examiners also shall make 

examinations of the condition of any organization, other than federally 

regulated financial institutions, to, for, or with which any institution of the 

System contemplates making a loan or discounting paper. For the purposes of 

this Act, examiners of the Farm Credit Administration shall be subject to the 

same requirements, responsibilities, and penalties as are applicable to 

examiners under the National Bank Act, the Federal Reserve Act, and Federal 

Deposit Insurance Act, and other provisions of law and shall have the same 

powers and privileges as are vested in such examiners by law.
76

(b) Each institution of the System shall make and publish an annual 

report of condition as prescribed by the Farm Credit Administration. Each 

such report shall contain financial statements prepared in accordance with 

generally accepted accounting principles, and contain such additional 

information as the Farm Credit Administration by regulation may require. 

Such financial statements of System institutions shall be audited by an 

independent public accountant.

(c) The Farm Credit Administration may publish the report of 

examination of any System institution that does not, before the end of the 

120th day after the date of notification of the recommendations and 

suggestions of the Farm Credit Administration, based on such examination, 

comply with such recommendations and suggestions to the satisfaction of the 

Farm Credit Administration. The Farm Credit Administration shall give 

notice of intention to publish in the event of such noncompliance at least 90 

days before such publication. Such notice of intention may be given any time 

after such notification of recommendations and suggestions.

(d) On receipt of a request made under section 5.59(b)(1)(B) with 

respect to a System institution, the Farm Credit Administration shall

(1) furnish for the confidential use of the Farm Credit System 

Insurance Corporation reports of examination of the institution and other 

reports or information on the institution; and

(2)(A) examine, or obtain other information on, the institution and 

furnish for the confidential use of the Farm Credit System Insurance 

Corporation the report of the examination and such other information; or

(B) if the Farm Credit Administration Board determines 

that compliance with the request would substantially impair the 

ability of the Farm Credit Administration to carry out the other 

duties and responsibilities of the Farm Credit Administration under 

this Act, notify the Board of Directors of the Farm Credit System 

Insurance Corporation that the Farm Credit Administration will be 

unable to comply with the request.

(e) SHARING OF PRIVILEGED AND CONFIDENTIAL 

INFORMATION.—A System institution shall not be considered to have 

waived the confidentiality of a privileged communication with an attorney or 

an accountant if the System institution provides the content of the 

communication to the Farm Credit Administration pursuant to the supervisory 

or regulatory authorities of the Farm Credit Administration.

12 U.S.C. 2255 Sec. 5.20. Conditions of Other Banks and Lending Institutions.

The Comptroller of the Currency is authorized and directed, upon 

request of the Farm Credit Administration to furnish for confidential use of an 

institution of the System such reports, records, and other information as he 

may have available relating to the financial condition of national banks 

through, for, or with which such institution of the System has made or 

contemplates making discounts or loans and to make such further 

examination, as may be agreed, of organizations through, for, or with which 

such institution of the Farm Credit System has made or contemplates making 

discounts or loans.
77

12 U.S.C. 2256 Sec 5.21. Consent to the Availability of Reports and to 

Examinations.

Any organization other than State banks, trust companies, and savings 

associations shall, as a condition precedent to securing discount privileges 

with a bank of the Farm Credit System, file with such bank its written consent 

to examination by farm credit examiners as may be directed by the Farm 

Credit Administration; and State banks, trust companies, and savings 

associations may be required in like manner to file a written consent that 

reports of their examination by constituted State authorities may be furnished 

by such authorities upon the request of the Farm Credit Administration.

12 U.S.C. 2257 Sec. 5.22. Reports on Conditions of Institutions Receiving 

Loans or Deposits.

The executive departments, boards, commissions, and independent 

establishments of the Government of the United States, the Federal Deposit 

Insurance Corporation, the Comptroller of the Currency, the Board of 

Governors of the Federal Reserve System, and the Federal Reserve banks are 

severally authorized under such conditions as they may prescribe, upon 

request of the Farm Credit Administration, to make available to it or to any 

institution of the System in confidence all reports, records, or other 

information relating to the condition of any organization to which such 

institution of the System has made or contemplates making loan or for which 

it has or contemplates discounting paper, or which it is using or contemplates 

using as a custodian of securities or other credit instruments, or a depository. 

The Federal Reserve banks in their capacity as depositories, agents, and 

custodians for bonds, debentures, and other obligations issued by the banks of 

the System or book entries thereof are also authorized and directed, upon 

request of the Farm Credit Administration, to make available for audit by farm 

credit examiners all appropriate books, accounts, financial records, files, and 

other papers.

12 U.S.C. 2257a Sec. 5.22A. Uniform Financial Reporting Instructions.

(a) IN GENERAL. Each System institution shall comply with 

uniform financial reporting instructions required by the Farm Credit 

Administration, to standardize and facilitate the reporting of System data.

(b) COMPUTERIZED SYSTEM. If the financial reports are 

maintained by a computer system, each System institution may develop an 

internal computer system or it may contract out to a vendor under open 

competitive bidding any or all aspects of the computerized system.

(c) SUBMISSION OF PROPOSAL. Within 6 months of the date of 

the enactment of this section, each System institution shall submit to the Farm 

Credit Administration a report on the plan of that institution to bring the 

operations of the institution into compliance with the uniform financial 

reporting instructions required by the Farm Credit Administration.
78

12 U.S.C. 2258 Sec. 5.23. Jurisdiction. 

Each institution of the System shall for the purposes of jurisdiction be 

deemed to be a citizen of the State, commonwealth, or District of Columbia in 

which its principal office is located.

12 U.S.C. 2259 Sec. 5.24. State Legislation.

Whenever it is determined by the Farm Credit Administration, or by 

judicial decision, that a State law is applicable to the obligations and securities 

authorized to be held by the institutions of the System under this Act, which 

law would provide insufficient protection, or inadequate safeguards against 

loss in the event of default, the Farm Credit Administration may declare such 

obligations or securities to be ineligible as collateral for the issuance of new 

notes, bonds, debentures, and other obligations under this Act.

Part C—Enforcement Powers of Farm Credit Administration

12 U.S.C. 2261 Sec. 5.25. Cease and Desist Proceedings.

(a) If, in the opinion of the Farm Credit Administration, any institution 

in the Farm Credit System, or any director, officer, employee, agent, or other 

person participating in the conduct of the affairs of such an institution is 

engaging or has engaged, or the Farm Credit Administration has reasonable 

cause to believe that the institution or any director, officer, employee, agent, 

or other person participating in the conduct of the affairs of such institution is 

about to engage, in an unsafe or unsound practice in conducting the business 

of such institution, or is violating or has violated, or the Farm Credit 

Administration has reasonable cause to believe that the institution or any 

director, officer, employee, agent, or other person participating in the conduct 

of the affairs of such institution is about to violate, a law, rule, or regulation, 

or any condition imposed in writing by the Farm Credit Administration in 

connection with the granting of any application or other request by the 

institution or any written agreement entered into with the Farm Credit 

Administration, the Farm Credit Administration may issue and serve upon the 

institution or such director, officer, employee, agent, or other person a notice 

of charges in respect thereof. The notice shall contain a statement of the facts 

constituting the alleged violation or violations or the unsafe or unsound 

practice or practices, and shall fix a time and place at which a hearing will be 

held to determine whether an order to cease and desist therefrom should issue 

against the institution or the director, officer, employee, agent, or other person 

participating in the conduct of the affairs of such institution. Such hearing 

shall be fixed for a date not earlier than thirty days nor later than sixty days 

after service of such notice unless an earlier or a later date is set by the Farm 

Credit Administration at the request of any party so served. Unless the party 

or parties so served shall appear at the hearing personally or by a duly 

authorized representative, they shall be deemed to have consented to the 

issuance of the cease and desist order. In the event of such consent, or if upon 

the record made at any such hearing, the Farm Credit Administration shall 

find that any violation or unsafe or unsound practice specified in the notice of 

charges has been established, the Farm Credit Administration may issue and 

serve upon the institution or the director, officer, employee, agent, or other 
79

person participating in the conduct of the affairs of such institution an order to 

cease and desist from any such violation or practice. Such order may, by 

provisions that may be mandatory or otherwise, require the institution or its 

directors, officers, employees, agents, and other persons participating in the 

conduct of the affairs of such institution to cease and desist from the same, 

and, further, to take affirmative action to correct the conditions resulting from 

any such violation or practice.

(b) A cease and desist order shall become effective at the expiration of 

thirty days after the service of such order upon the institution or other person 

concerned (except in the case of a cease and desist order issued upon consent, 

which shall become effective at the time specified therein), and shall remain 

effective and enforceable as provided therein except to such extent as it is 

stayed, modified, terminated, or set aside by action of the Farm Credit 

Administration or a reviewing court.

12 U.S.C. 2262 Sec. 5.26. Temporary Cease and Desist Orders

(a) Whenever the Farm Credit Administration shall determine that the 

violation or threatened violation or the unsafe or unsound practice or 

practices, specified in the notice of charges served upon the institution or any 

director, officer, employee, agent, or other person participating in the conduct 

of the affairs of such institution under section 5.25, or the continuation 

thereof, is likely to cause insolvency or substantial dissipation of assets or 

earnings of the institution, or is likely to seriously weaken the condition of the 

institution or otherwise seriously prejudice the interests of the investors in 

Farm Credit System obligations or shareholders in the institution prior to the 

completion of the proceedings conducted under section 5.25, the Farm Credit 

Administration may issue a temporary order requiring the institution or such 

director, officer, employee, agent, or other person to cease and desist from any 

such violation or practice and to take affirmative action to prevent such 

insolvency, dissipation, condition, or prejudice pending completion of such 

proceedings. Such order shall become effective upon service upon the 

institution or such director, officer, employee, agent, or other person 

participating in the conduct of the affairs of such institution and, unless set 

aside, limited, or suspended by a court in proceedings authorized by 

subsection (b), shall remain effective and enforceable pending the completion 

of the administrative proceedings pursuant to such notice and until such time 

as the Farm Credit Administration shall dismiss the charges specified in such 

notice, or if a cease and desist order is issued against the institution or such 

director, officer, employee, agent, or other person, until effective date of such 

order.

(b) Within ten days after the institution concerned or any director, 

officer, employee, agent, or other person participating in the conduct of the 

affairs of such institution has been served with a temporary cease and desist 

order, the institution or such director, officer, employee, agent, or other person 

may apply to the United States district court for the judicial district in which 

the home office of the institution is located, or the United States district court 

for the District of Columbia, for an injunction setting aside, limiting, or 

suspending the enforcement, operation, or effectiveness of such order pending 

the completion of the administrative proceedings pursuant to the notice of 
80

charges served upon the institution or such director, officer, employee, agent, 

or other person under section 5.25, and such court shall have jurisdiction to 

issue such injunction.

12 U.S.C. 2263 Sec. 5.27. Enforcement of Temporary Cease and Desist Orders.

In the case of violation or threatened violation of, or failure to obey, a 

temporary cease and desist order issued under section 5.26, the Farm Credit 

Administration may apply to the United States district court, or the United 

States court of any territory, within the jurisdiction of which the home office 

of the institution is located, for an injunction to enforce such order, and, if the 

court shall determine that there has been such violation or threatened violation 

or failure to obey, it shall be the duty of the court to issue such injunction.

12 U.S.C. 2264 Sec. 5.28. Suspension or Removal of Director or Officer.

(a) Whenever, in the opinion of the Farm Credit Administration, any 

director or officer of any institution in the Farm Credit System has committed 

any violation of law, rule, or regulation or of a cease and desist order that has 

become final, or has engaged or participated in any unsafe or unsound practice 

in connection with the institution, or has committed or engaged in any act, 

omission, or practice which constitutes a breach of a fiduciary duty as such 

director or officer, and the Farm Credit Administration determines that the 

institution has suffered or will probably suffer substantial financial loss or 

other damage or that the interests of its shareholders or investors in Farm 

Credit System obligations could be seriously prejudiced by reason of such 

violation or practice or breach of fiduciary duty, or that the director or officer 

has received financial gain by reason of such violation or practice or breach of 

fiduciary duty, and that such violation or practice or breach of fiduciary duty 

is one involving personal dishonesty on the part of such director or officer, or 

one that demonstrates a willful or continuing disregard for the safety or 

soundness of the System institution, the Farm Credit Administration may 

serve upon such director or officer a written notice of its intention to remove 

him from office.

(b) Whenever, in the opinion of the Farm Credit Administration, any 

director or officer of an institution in the Farm Credit System, by conduct or 

practice with respect to another institution in the Farm Credit System or other 

business institution that resulted in substantial financial loss or other damage, 

has evidenced either his personal dishonesty or a willful or continuing 

disregard for its safety and soundness and, in addition, has evidenced his 

unfitness to continue as a director or officer, and whenever, in the opinion of 

the Farm Credit Administration, any other person participating in the conduct 

of the affairs of an institution in the Farm Credit System, by the conduct or 

practice with respect to such institution or other institution in the Farm Credit 

System or other business institution that resulted in substantial financial loss 

or other damage, has evidenced either personal dishonesty or a willful or 

continuing disregard for its safety and soundness and, in addition, has 

evidenced his unfitness to participate in the conduct of the affairs of such 

institution, the Farm Credit Administration may serve upon such director, 

officer, or other person a written notice of its intention to remove that director, 
81

officer, or other person from office or to prohibit his further participation in 

any manner in the conduct of the affairs of the institution.

(c) In respect to any director or officer of an institution in the Farm 

Credit System or any other person referred to in subsection (a) or (b) of this 

section, the Farm Credit Administration may, if it deems it necessary for the 

protection of the institution or the interests of its shareholders and the 

investors in the Farm Credit System obligations, by written notice to such 

effect served upon such director, officer, or other person, suspend such 

director, officer, or other person from office or prohibit such director, officer, 

or other person from further participation in any manner in the conduct of the 

affairs of the institution. Such suspension or prohibition shall become 

effective upon service of such notice and, unless stayed by a court in 

proceedings authorized by subsection (e) of this section, shall remain in effect 

pending the completion of the administrative proceedings pursuant to the 

notice served under subsection (a) or (b) and until such time as the Farm 

Credit Administration shall dismiss the charges specified in such notice, or, if 

an order of removal or prohibition is issued against the director or officer or 

other person, until the effective date of any such order. Copies of any such 

notice shall also be served upon the institution of which the person is a 

director or officer or in the conduct of whose affairs the person has 

participated.

(d) A notice of intention to remove a director, officer, or other person 

from office or to prohibit such director's, officer's, or other person's 

participation in the conduct of the affairs of an institution in the Farm Credit 

System, shall contain a statement of the facts constituting grounds therefor, 

and shall fix a time and place at which a hearing will be held thereon. Such 

hearing shall be fixed for a date not earlier than thirty days nor later than sixty 

days after the date of service of such notice, unless an earlier or a later date is 

set by the Farm Credit Administration at the request of (1) such director or 

officer or other person, and for good cause shown, or (2) the Attorney General 

of the United States. Unless such director, officer, or other person shall 

appear at the hearing in person or by a duly authorized representative, such 

director, officer, or other person shall be deemed to have consented to the 

issuance of an order of such removal or prohibition. In the event of such 

consent, or if upon the record made at any such hearing the Farm Credit 

Administration shall find that any of the grounds specified in such notice have 

been established, the Farm Credit Administration may issue such orders of 

suspension or removal from office, or prohibition from participation in the 

conduct of the affairs of the institution, as it may deem appropriate. A copy of 

an order issued under this subsection shall be served upon the institution 

concerned. Any such order shall become effective at the expiration of thirty 

days after service upon such institution and the director, officer, or other 

person concerned (except in the case of an order issued upon consent, which 

shall become effective at the time specified therein). Such order shall remain 

effective and enforceable except to such extent as it is stayed, modified, 

terminated, or set aside by action of the agency or a reviewing court.

(e) Within ten days after any director, officer, or other person has been 

suspended from office or prohibited from participation in the conduct of the 

affairs of a System institution under subsection (c) of this section, such 
82

director, officer, or other person may apply to the United States district court 

for the judicial district in which the home office of the institution is located, or 

the United States district court for the District of Columbia, for a stay of either 

such suspension or prohibition, or both, pending the completion of the 

administrative proceedings pursuant to the notice served upon such director, 

officer, or other person under subsection (a) or (b), and such court shall have 

jurisdiction to stay either such suspension or prohibition, or both.

12 U.S.C. 2265 Sec. 5.29. Suspension or Removal of Director or Officer 

Charged with Felony.

(a) Whenever any director or officer of an institution in the Farm 

Credit System, or other person participating in the conduct of the affairs of 

such institution, is charged in any information, indictment, or complaint 

authorized by a United States attorney, with the commission of or 

participation in a crime involving dishonesty or breach of trust that is 

punishable by imprisonment for a term exceeding one year under State or 

Federal law, the Farm Credit Administration may, if continued service or 

participation by the individual may pose a threat to the interests of the 

institution's shareholders or investors in Farm Credit System obligations or 

may threaten to impair public confidence in the institution or the Farm Credit 

System, by written notice served upon such director, officer, or other person, 

suspend such director, officer, or other person from office or prohibit such 

director, officer, or other person from further participation in any manner in 

the conduct of the affairs of the institution. A copy of such notice shall also 

be served upon the institution. Such suspension or prohibition shall remain in 

effect until such information, indictment, or complaint is finally disposed of or 

until terminated by the Farm Credit Administration. In the event that a 

judgment of conviction with respect to such crime is entered against such 

director, officer, or other person, and at such time as such judgment is not 

subject to further appellate review, the Farm Credit Administration may, if 

continued service or participation by the individual may pose a threat to the 

interests of the institution's shareholders or the investors in Farm Credit 

System obligations or may threaten to impair public confidence in the 

institution or the Farm Credit System, issue and serve upon such director, 

officer, or other person an order removing such director, officer, or other 

person from office or prohibiting such director, officer, or other person from 

further participation in any manner in the conduct of the affairs of the 

institution except with the consent of the Farm Credit Administration. A copy 

of such order shall also be served upon such institution, whereupon such 

director or officer shall cease to be a director or officer of such institution. A 

finding of not guilty or other disposition of the charge shall not preclude the 

Farm Credit Administration from thereafter instituting proceedings to remove 

such director, officer, or other person from office or to prohibit further 

participation in Farm Credit System affairs under section 5.28. Any notice of 

suspension or order of removal issued under this paragraph shall remain 

effective and outstanding until the completion of any hearing or appeal 

authorized under subsection (b) unless terminated by the Farm Credit 

Administration.
83

(b) Within thirty days from service of any notice of suspension or 

order of removal issued under subsection (a), the director, officer, or other 

person concerned may request in writing an opportunity to appear before the 

Farm Credit Administration to show that the continued service to or 

participation in the conduct of the affairs of the institution by such individual 

does not, or is not likely to, pose a threat to the interest of the institution's 

shareholders or the investors in Farm Credit System obligations or threaten to 

impair public confidence in the institution or the Farm Credit System. Upon 

receipt of any such request, the Farm Credit Administration shall fix a time 

(not more than thirty days after receipt of such request, unless extended at the 

request of the concerned director, officer, or other person) and place at which 

the director, officer, or other person may appear, personally or through 

counsel, before the Chairman of the Farm Credit Administration or designated 

employees of the Farm Credit Administration to submit written materials (or, 

at the discretion of the Farm Credit Administration oral testimony) and oral 

argument. Within sixty days of such hearing, the Farm Credit Administration 

shall notify the director, officer, or other person whether the suspension or 

prohibition from participation in any manner in the conduct of the affairs of 

the institution will be continued, terminated, or otherwise modified, or 

whether the order removing such director, officer, or other person from office 

or prohibiting such individual from further participation in any manner in the 

conduct of the affairs of the institution will be rescinded or otherwise 

modified. Such notification shall contain a statement of the basis for the Farm 

Credit Administration’s decision, if adverse to the director, officer or other 

person. The Farm Credit Administration may prescribe such rules as may be 

necessary to effectuate the purposes of this subsection.

12 U.S.C. 2265a Sec. 5.29A. Removal and Prohibition Authority; Industrywide 

Prohibition.

(a) DEFINITION OF PERSON.—In this section, the term “person”

means—

(1) an individual; and

(2) in the case of a specific determination by the Farm Credit 

Administration, a legal entity.

(b) INDUSTRY-WIDE PROHIBITION.—Except as provided in 

subsection (c), any person who, pursuant to an order issued under section 5.28 

or 5.29, has been removed or suspended from office at a System institution or 

prohibited from participating in the conduct of the affairs of a System 

institution shall not, during the period of effectiveness of the order, continue 

or commence to hold any office in, or participate in any manner in the conduct 

of the affairs of—

(1) any insured depository institution subject to section 

8(e)(7)(A)(i) of the Federal Deposit Insurance Act (12 U.S.C. 

1818(e)(7)(A)(i));

(2) any institution subject to section 8(e)(7)(A)(ii) of the Federal 

Deposit Insurance Act (12 U.S.C. 1818(e)(7)(A)(ii));

(3) any insured credit union under the Federal Credit Union Act 

(12 U.S.C. 1751 et seq.);
84

(4) any Federal home loan bank;

(5) any institution chartered under this Act;

(6) any appropriate Federal financial institutions regulatory agency 

(as defined in section 8(e)(7)(D) of the Federal Deposit Insurance Act 

(12 U.S.C. 1818(e)(7)(D)));

(7) the Federal Housing Finance Agency; or

(8) the Farm Credit Administration.

(c) EXCEPTION FOR INSTITUTION-AFFILIATED PARTY THAT 

RECEIVES WRITTEN CONSENT.—

(1) IN GENERAL.—

(A) AFFILIATED PARTIES.—If, on or after the date on 

which an order described in subsection (b) is issued that removes 

or suspends an institution-affiliated party from office at a System 

institution or prohibits an institution-affiliated party from 

participating in the conduct of the affairs of a System institution, 

that party receives written consent described in subparagraph (B), 

subsection (b) shall not apply to that party—

(i) to the extent provided in the written consent 

received;

and

(ii) with respect to the institution described in each 

written consent.

(B) WRITTEN CONSENT DESCRIBED.—The written 

consent referred to in subparagraph (A) is written consent received 

from—

(i) the Farm Credit Administration; and

(ii) each appropriate Federal financial institutions 

regulatory agency (as defined in section 8(e)(7)(D) of the 

Federal Deposit Insurance Act (12 U.S.C. 1818(e)(7)(D))) of 

the applicable institution described in any of paragraphs (1), 

(2), (3), or (4) of subsection (b) with respect to which the party 

proposes to be become an affiliated party.

(2) DISCLOSURE.—Any agency described in clause (i) or (ii) of 

paragraph (1)(B) that provides a written consent under that paragraph 

shall—

(A) report the action to the Farm Credit Administration; and

(B) publicly disclose the action.

(3) CONSULTATION BETWEEN AGENCIES.—The agencies 

described in clauses (i) and (ii) of paragraph (1)(B) shall consult with 

each other before providing any written consent under that paragraph.

(d) VIOLATIONS.—A violation of subsection (b) by any person who is 

subject to an order described in that subsection shall be treated as violation of 

that order.

12 U.S.C. 2266 Sec. 5.30. Hearings and Judicial Review.

(a) Any hearing provided for in this part (other than the hearing 

provided for in section 5.29) shall be held in the Federal judicial district or in 
85

the territory in which the home office of the institution is located unless the 

party afforded the hearing consents to another place, and shall be conducted in 

accordance with the provisions of chapter 5 of title 5 of the United States 

Code. Such hearing shall be private, unless the Farm Credit Administration, 

in its discretion, after fully considering the views of the party afforded the 

hearing, determines that a public hearing is necessary to protect the public 

interest. After such hearing, and within ninety days after the Farm Credit 

Administration has notified the parties that the case has been submitted to it 

for final decision, it shall render its decision (which shall include findings of 

fact upon which its decision is predicated) and shall issue and serve upon each 

party to the proceeding an order or orders consistent with the provisions of 

this part. Judicial review of any such order shall be exclusively as provided in 

this section. Unless a petition for review is timely filed in a court of appeals 

of the United States, as hereinafter provided in subsection (b), and thereafter 

until the record in the proceeding has been filed as so provided, the Farm 

Credit Administration may at any time, upon such notice and in such manner 

as it shall deem proper, modify, terminate, or set aside any such order. Upon 

such filing of the record, the Farm Credit Administration may modify, 

terminate, or set aside any such order with permission of the court.

(b) Any party to the proceeding, or any person required by an order 

issued under this part to cease and desist from any of the violations or 

practices stated therein, may obtain a review of any order served under 

subsection (a) (other than an order issued with the consent of the System 

institution or the director or officer or other person concerned, or an order 

issued under section 5.29) by the filing in the court of appeals of the United 

States for the circuit in which the home office of the institution is located, or 

in the United States Court of Appeals for the District of Columbia Circuit, 

within thirty days after the date of service of such order, a written petition 

praying that the order of the Farm Credit Administration be modified, 

terminated, or set aside. A copy of such petition shall be forthwith transmitted 

by the clerk of the court to the Farm Credit Administration, and thereupon the 

Farm Credit Administration shall file in the court the record in the proceeding, 

as provided in section 2112 of title 28 of the United States Code. Upon the 

filing of such petition, such court shall have jurisdiction, which upon the filing 

of the record shall except as provided in the last sentence of subsection (a) be 

exclusive, to affirm, modify, terminate, or set aside, in whole or in part, the 

order of the Farm Credit Administration. Review of such proceedings shall be 

had as provided in chapter 7 of title 5 of the United States Code. The 

judgment and decree of the court shall be final, except that the same shall be 

subject to review by the Supreme Court upon certiorari, as provided in section 

1254 of title 28 of the United States Code.

(c) The commencement of proceedings for judicial review under 

subsection (b) shall not, unless specifically ordered by the court, operate as a 

stay of any order issued by the Farm Credit Administration.

12 U.S.C. 2267 Sec. 5.31. Jurisdiction and Enforcement.

The Farm Credit Administration may in its discretion apply to the 

United States district court, or the United States court of any territory, within 

the jurisdiction of which the home office of the institution is located, for the 
86

enforcement of any effective and outstanding notice or order issued under this 

part, and such courts shall have jurisdiction and power to order and require 

compliance herewith; but except as otherwise provided in this part no court 

shall have jurisdiction to affect by injunction or otherwise the issuance or 

enforcement of any notice or order under this part, or to review, modify, 

suspend, terminate, or set aside any such notice or order. For purposes of this 

section, any directive issued under section 4.3(b)(2), 4.3A(e), or 4.14A(h) 

shall be treated as an effective and outstanding order issued under section 5.25 

that has become final.

12 U.S.C. 2267a Sec. 5.31A. Jurisdiction Over Institution -Affiliated Parties.

(a) IN GENERAL.—For purposes of sections 5.25, 5.26, and 5.32, the 

jurisdiction of the Farm Credit Administration over parties, and the authority 

of the Farm Credit Administration to initiate actions, shall include 

enforcement authority over institution-affiliated parties.

(b) EFFECT OF SEPARATION ON JURISDICTION AND 

AUTHORITY.—Subject to subsection (c), the resignation, termination of 

employment or participation, or separation of an institution-affiliated party 

(including a separation caused by the merger, consolidation, conservatorship, 

or receivership of a Farm Credit System institution) shall not affect the 

jurisdiction and authority of the Farm Credit Administration to issue any 

notice or order and proceed under this part against that party.

(c) LIMITATION.—To proceed against a party under subsection (b), 

the notice or order described in that subsection shall be served not later than 6 

years after the date on which the party ceased to be an institution-affiliated 

party with respect to the applicable Farm Credit System institution.

(d) APPLICABILITY.—The date on which a party ceases to be an 

institution-affiliated party described in subsection (c) may occur before, on, or 

after the date of enactment of this section.

12 U.S.C. 2268 Sec. 5.32. Penalty.

(a) Any institution in the System that violates or any officer, director, 

employee, agent, or other person participating in the conduct of the affairs of 

such an institution who violates the terms of any order that has become final 

and was issued under section 5.25 or 5.26 of this Act, shall forfeit and pay a 

civil penalty of not more than $1,000 per day for each day during which such 

violation continues. Any such institution or person who violates any 

provision of this Act or any regulation issued under this Act shall forfeit and 

pay a civil penalty of not more than $500 per day for each day during which 

such violation continues. Notwithstanding the preceding sentences, the Farm 

Credit Administration may, in its discretion, compromise, modify, or remit 

any civil money penalty that is subject to imposition or has been imposed 

under such authority. The penalty may be assessed and collected by the Farm 

Credit Administration by written notice.

(b) Before determining whether to assess a civil money penalty and 

determining the amount of such penalty, the Farm Credit Administration shall 

notify the institution or person to be assessed of the violation or violations 

alleged to have occurred or to be occurring, and shall solicit the views of the 

institution or person regarding the imposition of such penalty. In determining 
87

the amount of the penalty, the Farm Credit Administration shall take into 

account the appropriateness of the penalty with respect to the size of financial 

resources and good faith of the System institution or person charged, the 

gravity of the violation, the history of previous violations, and such other 

matters as justice may require.

(c) The System institution or person assessed shall be afforded an 

opportunity for a hearing by the Farm Credit Administration, upon request 

made within ten days after issuance of the notice of assessment. In such 

hearing all issues shall be determined on the record pursuant to section 554 of 

title 5 of the United States Code. The Farm Credit Administration 

determination shall be made by final order which may be reviewed only as 

provided in subsection (d). If no hearing is requested as herein provided, the 

assessment shall constitute a final and unappealable order.

(d) Any System institution or person against whom an order imposing 

a civil money penalty has been entered after a Farm Credit Administration 

hearing under this section may obtain review by the United States court of 

appeals for the circuit in which the home office of the System institution is 

located, or the United States Court of Appeals for the District of Columbia 

Circuit, by filing a notice of appeal in such court within twenty days after the 

service of such order, and simultaneously sending a copy of such notice by 

registered or certified mail to the Farm Credit Administration. The Farm 

Credit Administration shall promptly certify and file in such Court the record 

upon which the penalty was imposed, as provided in section 2112 of title 28 

of the United States Code. Final orders of the Farm Credit Administration 

issued under subsection (c) shall be reviewable under chapter 7 of title 5, 

United States Code.

(e) If any System institution or person fails to pay an assessment after 

it has become a final and unappealable order, or after the court of appeals has 

entered final judgment in favor of the Farm Credit Administration, the Farm 

Credit Administration shall refer the matter to the Attorney General, who shall 

recover the amount assessed by action in the appropriate United States district 

court. In such action, the validity and appropriateness of the final order 

imposing the penalty shall not be subject to review.

(f) The Farm Credit Administration shall promulgate regulations 

establishing procedures necessary to implement section 5.31 and this section.

(g) All penalties collected under authority of this section shall be 

covered into the Treasury of the United States.

(h) For purposes of this section, any directive issued under section 

4.3(b)(2), 4.3A(e), or 4.14A(h) shall be treated as an order that has become 

final and was issued under section 5.25.

12 U.S.C. 2269 Sec. 5.33. Further Penalties.

Any director or officer, or former director or officer of a System 

institution, or any other person, against whom there is outstanding and 

effective any notice or order (which is an order which has become final) 

served upon such director, officer, or other person under section 5.28 or 5.29 

of this Act, and who (1) participates in any manner in the conduct of the 

affairs of the institution involved, or directly or indirectly solicits or procures, 

or transfers or attempts to transfer, or votes or attempts to vote, any proxies, 
88

consents, or authorizations in respect of any voting rights in such institution, 

or (2) without the prior written approval of the Farm Credit Administration, 

votes for a director, serves or acts as a director, officer, or employee of any 

System institution, shall upon conviction be fined not more than $5,000 or 

imprisoned for not more than one year, or both.

12 U.S.C. 2270 Sec. 5.34. Replacement of Suspended or Removed Directors.

If at any time, because of the suspension or removal of one or more 

directors pursuant to section 5.28 or 5.29 of this Act, there shall be on the 

board of directors of a System institution less than a quorum of directors not 

so suspended, the Chairman shall appoint persons to serve temporarily as 

directors in their place and stead so as to establish a quorum until such time as 

those who have been removed are reinstated or their respective successors are 

duly elected and take office.

12 U.S.C. 2271 Sec. 5.35. Definitions.

As used in this part—

(1) the terms "cease and desist order that has become final" and 

"order which has become final" mean a cease and desist order, or an 

order, issued by the Farm Credit Administration with the consent of the 

System institution or the director or officer or other person concerned, or 

with respect to which no petition for review of the action of the Farm 

Credit Administration has been filed and perfected in a court of appeals 

as specified in section 5.30(b) of this Act, or with respect to which the 

action of the court in which such petition is so filed is not subject to 

further review by the Supreme Court of the United States in proceedings 

provided for in section 5.30(b) of this Act, or an order issued under 

section 5.29 of this Act;

(2) the term "violation" includes without limitation any action 

(alone or with another or others) for or toward causing, bringing about, 

participating in, counseling, or aiding or abetting a violation;

(3) the terms "institution in the System", "System institution", 

and "institution" mean all institutions enumerated in section 1.2 of this 

Act, any service organization chartered under part E of title IV of this 

Act, and the Financial Assistance Corporation; 

(4) the term institution-affiliated party means—

(A) a director, officer, employee, shareholder, or agent of a 

System institution;

(B) an independent contractor (including an attorney,

appraiser, or accountant) who knowingly or recklessly participates

in—

(i) a violation of law (including regulations) that is

associated with the operations and activities of 1 or more 

System institutions;

(ii) a breach of fiduciary duty; or

(iii) an unsafe practice that causes or is likely to cause 

more than a minimum financial loss to, or a significant

adverse effect on, a System institution; and
89

(C) any other person, as determined by the Farm Credit 

Administration (by regulation or on a case-by-case basis) who 

participates in the conduct of the affairs of a System institution; 

and

(5) the term "unsafe or unsound practice" shall—

(A) have the meaning given to it by the Farm Credit 

Administration by regulation, rule, or order; and

(B) mean any significant noncompliance by a System 

institution (as determined by the Farm Credit Administration, in 

consultation with the Farm Credit System Insurance Corporation) 

with any term or condition imposed on the institution by the Farm 

Credit System Insurance Corporation under section 5.61.

12 U.S.C. 2272 Sec. 5.36. Notice of Service.

Any service required or authorized to be made by the Farm Credit 

Administration under this section may be made by registered mail, or in such 

other manner reasonably calculated to give actual notice as the Farm Credit 

Administration may by regulation or otherwise provide. Any such service by 

mail is complete upon mailing. Copies of any notice or order served by the 

Farm Credit Administration on any association or any director or officer 

thereof or other person participating in the conduct of its affairs, under the 

provisions of this part, shall also be sent to the supervisory bank.

12 U.S.C. 2273 Sec. 5.37. Ancillary Provisions; Subpena Power, etc.

In the course of or in connection with any proceeding under this part or 

any examination or investigation under this Act, the Farm Credit 

Administration or any designated representative thereof, including any person 

designated to conduct any hearing under this part, shall have the power to 

administer oaths and affirmations, to take or cause to be taken depositions, 

and to issue, revoke, quash, or modify subpenas and subpenas duces tecum; 

and the Farm Credit Administration is empowered to make rules and 

regulations with respect to any such proceedings, examinations, or 

investigations. The attendance of witnesses and the production of documents 

provided for in this section may be required from any place in any State or in 

any territory or other place subject to the jurisdiction of the United States at 

any designated place where such proceeding is being conducted. The Farm 

Credit Administration or any party to proceedings under this part may apply to 

the United States District Court for the District of Columbia, or the United 

States district court for the judicial district or the United States court in any 

territory in which such proceeding is being conducted, or where the witness 

resides or carries on business, for enforcement of any subpena or subpena 

duces tecum issued pursuant to this part, and such courts shall have 

jurisdiction and power to order and require compliance therewith. Witnesses 

subpenaed under this section shall be paid the same fees and mileage that are 

paid witnesses in the district courts of the United States. Any court having 

jurisdiction of any proceeding instituted under this part by a System institution 

or a director or officer thereof, may allow to any such party such reasonable 

expenses and attorneys' fees as it deems just and proper; and such expenses 

and fees shall be paid by the System institution or from its assets. Any person 
90

who willfully shall fail or refuse to attend or testify or to answer any lawful 

inquiry or to produce books, papers, correspondence, memoranda, contracts, 

agreements, or other records, if in such person's power so to do, in obedience 

to the subpena of the Farm Credit Administration, shall be guilty of a 

misdemeanor and, upon conviction, shall be subject to a fine of not more than 

$1,000 or to imprisonment for a term of not more than one year or both.

12 U.S.C. 2274 Sec. 5.38. Power to Remove Directors and Officers.

Notwithstanding any other provision of this Act, a Farm Credit Bank 

board, officer, or employee shall not remove any director or officer of any 

association.

Part D—Miscellaneous

12 U.S.C. 2001 Sec. 5.40. Repeal.

Note (a) The Federal Farm Loan Act, as amended; section 2 of the Act 

of March 10, 1924 (Public Numbered 35, Sixty-eighth Congress, 43 Stat. 17), 

as amended; section 6 of the Act of January 23, 1932 (Public Numbered 3, 

Seventy-second Congress, 47 Stat. 14), as amended; the Farm Credit Act of 

1933, as amended; sections 29 and 40 of the Emergency Farm Mortgage Act 

of 1933; Act of June 18, 1934 (Public Numbered 381, Seventy-third Congress, 

48 Stat. 983); Act of June 4, 1936 (Public Numbered 644, Seventy-fourth 

Congress, 49 Stat. 1461), as amended; sections 5, 6, 20, 25(b) and 39 of the 

Farm Credit Act of 1937, as amended; sections 601 and 602 of the Act of 

September 21, 1944 (Public Law 425, Seventy-eighth Congress, 58 Stat. 740, 

741), as amended; sections 1, 2, 3, 4, 5, 6, 7, 8, 16, and 17(b) of the Farm 

Credit Act of 1953, as amended; sections 2, 101, and 201(b) of the Farm 

Credit Act of 1956 are hereby repealed. All references in other legislation, 

State or Federal, rules and regulations of any agency, stock, contracts, deeds, 

security instruments, bonds, debentures, notes, mortgages and other 

documents of the institutions of the System, to the Acts repealed hereby shall 

be deemed to refer to comparable provisions of this Act.

(b) All regulations of the Farm Credit Administration or the 

institutions of the System and all charters, bylaws, resolutions, stock 

classifications, and policy directives issued or approved by the Farm Credit 

Administration, and all elections held and appointments made under the Acts 

repealed by subsection (a) of this section shall be continuing and remain valid 

until superseded, modified, or replaced under the authority of this Act. All 

stock, notes, bonds, debentures, and other obligations issued under the 

repealed acts shall be valid and enforceable upon the terms and conditions 

under which they were issued, including the pledge of collateral against which 

they were issued, and all loans made and security or collateral therefor held 

by, and all contracts entered into by, institutions of the System shall remain 

enforceable according to their terms unless and until modified in accordance 

with the provisions of this Act; it being the purpose of this subsection to avoid 

disruption in the effective operation of the System by reason of said repeals.
91

12 U.S.C. 2001 note Sec. 5.41. Amendments to Other Laws.

* * * * *

(b) The third paragraph of section 15 of the Federal Reserve Act (12 

U.S.C. 393) is amended to read as follows:

"The Federal Reserve banks are authorized to act as depositaries for and 

fiscal agents of any Federal land bank, Federal intermediate credit bank, bank 

for cooperatives, or other institutions of the Farm Credit System."

12 U.S.C. 2001 note Sec. 5.42. Separability.

If any provision of this Act, or the application thereof to any persons or 

in any circumstances, is held invalid, the remainder of this Act and the 

application of such provision to other persons or in other circumstances shall 

not be affected thereby.

12 U.S.C. 2001 note Sec. 5.43. Reserve Right to Amend or Repeal.

The right to alter, amend, or repeal any provision or all of this Act is 

expressly reserved.

Sec. 5.44. [Repealed]

Repealed by section 5411(36) of the Agriculture Improvement Act of 2018.

12 U.S.C. 2275a Sec. 5.45. Transition Rules Relating to Amendment of Certain

FCA Approval Authorities.

(a) IN GENERAL. Any approvals granted by the Farm Credit 

Administration before the date of the enactment of this section shall remain in 

effect on and after such date.

(b) AUTHORITY TO ISSUE REGULATIONS.

(1) IN GENERAL. Any approval authority of the Farm Credit 

Administration that, under the amendments made by section 802 of the 

Agricultural Credit Act of 1987, became an authority to issue 

regulations may be exercised only until the earlier of the date the Farm 

Credit Administration issues final regulations under such authority, or 1 

year after the date of the enactment of this section.

(2) ENFORCEMENT ACTIONS. At the close of the 1-year 

period referred to in paragraph (1), the Farm Credit Administration shall 

not take any enforcement action against any System institution with 

respect to any provision so amended, until the Farm Credit 

Administration issues final regulations under such provision.

(c) EFFECT OF SECTION. This section shall not affect the authority 

of the Farm Credit Administration to exercise any other approval authority 

either on a case-by-case basis or through regulation, as provided in section 

5.17(a)(5).

NOTE: This section was enacted on January 6, 1988.
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Part E—Farm Credit System Insurance Corporation

12 U.S.C. 2277a Sec. 5.51. Definitions.

As used in this part:

(1) BOARD OF DIRECTORS. The term "Board of Directors" 

means the Board of Directors of the Corporation.

(2) CORPORATION. The term "Corporation" means the Farm 

Credit System Insurance Corporation established in section 5.52.

(3) INSURED OBLIGATION. The term "insured obligation" 

means any note, bond, debenture, or other obligation issued under 

subsection (c) or (d) of section 4.2—

(A) on or before January 5, 1989, on behalf of any System 

bank; and

(B) after such date, which, when issued, is issued on behalf 

of any insured System bank.

(4) INSURED SYSTEM BANK. The term "insured System 

bank" means any System bank whose participation in notes, bonds, 

debentures, and other obligations issued under subsection (c) or (d) of 

section 4.2 is insured under this part.

(5) STATE. The term "State" means any of the 50 States, the 

District of Columbia, any Territory of the United States, Puerto Rico, 

Guam, American Samoa, the Trust Territory of the Pacific Islands, or 

the Virgin Islands.

12 U.S.C. 2277a-1 Sec. 5.52. Establishment of Farm Credit System Insurance 

Corporation. 

There is hereby established the Farm Credit System Insurance 

Corporation which shall insure, in accordance with this part, the timely 

payment of principal and interest on notes, bonds, debentures, and other 

obligations issued under subsection (c) or (d) of section 4.2 on behalf of one 

or more System banks all of which are entitled to the benefits of insurance 

under this part.

12 U.S.C. 2277a-2 Sec. 5.53. Board of Directors. 

(a) ESTABLISHMENT. The Corporation shall be managed by a 

Board of Directors that shall consist of the members of the Farm Credit 

Administration Board.

(b) CHAIRMAN. The Board of Directors shall be chaired by any 

Board member other than the Chairman of the Farm Credit Administration 

Board.

12 U.S.C. 2277a-3 Sec. 5.54. Commencement of Insurance.

Effective beginning on January 1, 1989, or 12 months after the date of 

the enactment of this part, whichever is later, each System bank shall be an 

insured System bank and shall be subject to this part. Each System bank that 

is authorized to commence or resume operations under a title of this Act shall 

be an insured System bank from the time of such authorization. A bank 
93

resulting from the merger or consolidation of insured System banks shall be 

an insured System bank.

12 U.S.C. 2277a-4 Sec. 5.55. Premiums. 

(a) AMOUNT IN FUND NOT EXCEEDING SECURE BASE 

AMOUNT.

(1) IN GENERAL. If at the end of any calendar year the 

aggregate of amounts in the Farm Credit Insurance Fund does not 

exceed the secure base amount, subject to paragraph (3), the premium 

due from any insured System bank for the calendar year shall be equal to 

the sum of—

(A) the average outstanding insured obligations issued by 

the bank for the calendar year, after deducting from the obligations 

the percentages of the guaranteed portions of loans and 

investments described in paragraph (2), multiplied by 0.0020; and

(B) the product obtained by multiplying—

(i) the sum of—

(I)the average principal outstanding for the 

calendar year on loans made by the bank that are in 

nonaccrual status; and

(II) the average amount outstanding for the 

calendar year of other-than-temporarily impaired 

investments made by the bank; by

(ii) 0.0010.

(2) DEDUCTIONS FROM AVERAGE OUTSTANDING 

INSURED OBLIGATIONS.—The average outstanding insured 

obligations issued by the bank for the calendar year referred to in 

paragraph (1)(A) shall be reduced by deducting from the obligations the 

sum of (as determined by the Corporation)—

(A) 90 percent of each of—

(i) the average principal outstanding for the calendar 

year on the guaranteed portions of Federal governmentguaranteed loans made by the bank that are in accrual status; 

and

(ii) the average amount outstanding for the calendar 

year of the guaranteed portions of Federal governmentguaranteed investments made by the bank that are not 

permanently impaired; and

(B) 80 percent of each of—

(i) the average principal outstanding for the calendar 

year on the guaranteed portions of State governmentguaranteed loans made by the bank that are in accrual status; 

and

(ii) the average amount outstanding for the calendar 

year of the guaranteed portions of State governmentguaranteed investments made by the bank that are not 

permanently impaired.
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(3) REDUCED PREMIUMS. The Corporation, in the sole 

discretion of the Corporation, may reduce by a percentage uniformly 

applied to all insured System banks the premium due from each insured 

System bank during any calendar year, as determined under paragraph 

(1).

(4) DEFINITION OF GOVERNMENT-GUARANTEED 

LOANS OR INVESTMENTS. In this section, the term "governmentguaranteed", when applied to a loan or an investment, means a loan, 

credit, or investment, or portion of a loan, credit, or investment, that is 

guaranteed—

(A) by the full faith and credit of the United States 

Government or any State government;

(B) by an agency or other entity of the United States 

Government whose obligations are explicitly guaranteed by the 

United States Government; or

(C) by an agency or other entity of a State government 

whose obligations are explicitly guaranteed by such State 

government.

(b) AMOUNT IN FUND EXCEEDING SECURE BASE AMOUNT. 

At any time the aggregate of amounts in the Farm Credit Insurance Fund 

exceeds the secure base amount, the Corporation shall reduce the premium 

due from each insured System bank, as determined under subsection (a)(1), by 

a percentage determined by the Corporation so that the aggregate of the 

premiums payable by all System banks is sufficient to ensure that the 

aggregate of amounts in the Farm Credit Insurance Fund after such premiums 

are paid is not less than the secure base amount at such time.

(c) SECURE BASE AMOUNT. 

(1) IN GENERAL.—For purposes of this part, the term "secure 

base amount" means, with respect to any point in time, 2 percent of the 

aggregate outstanding insured obligations of all insured System banks at 

such time (as adjusted under paragraph (2)), or such other percentage of 

the aggregate amount as the Corporation in its sole discretion determines 

is actuarially sound to maintain in the Insurance Fund taking into 

account the risk of insuring outstanding insured obligations.

(2) ADJUSTMENT.—The aggregate outstanding insured 

obligations of all insured System banks under paragraph (1) shall be 

adjusted downward to exclude an amount equal to the sum of (as 

determined by the corporation)—

(A) 90 percent of each of—

(i) the guaranteed portions of principal outstanding 

on Federal government-guaranteed loans in accrual status 

made by the banks; and

(ii) the guaranteed portions of the amount of Federal 

government-guaranteed investments made by the banks that 

are not permanently impaired; and

(B) 80 percent of each of—
95

(i) the guaranteed portions of principal outstanding 

on State government-guaranteed loans in accrual status made 

by the banks; and

(ii) the guaranteed portions of the amount of State 

government-guaranteed investments made by the banks that 

are not permanently impaired.

(d) DETERMINATION OF LOAN AND INVESTMENT 

AMOUNTS. For the purpose of subsections (a) and (c), the principal 

outstanding on all loans made by an insured System bank, and the amount 

outstanding on all investments made by an insured System bank, shall be 

determined based on—

(1) all loans or investments made by any production credit 

association, or any other association making direct loans under authority 

provided under section 7.6, that is able to make such loans or 

investments because such association is receiving, or has received, funds 

provided through the insured System bank;

(2) all loans or investments made by any bank, company, 

institution, corporation, union, or association described in section 

1.7(b)(1)(B), that is able to make such loans or investments because 

such entity is receiving, or has received, funds provided through the 

insured System bank; and

(3) all loans or investments made by such insured System bank 

(other than loans made to any party described in paragraph (1) or (2)).

(e) ALLOCATION TO SYSTEM INSTITUTIONS OF EXCESS 

RESERVES.

(1) ESTABLISHMENT OF ALLOCATED INSURANCE 

RESERVES ACCOUNTS. There is hereby established in the Farm 

Credit Insurance Fund an Allocated Insurance Reserves Account—

(A) for each insured System bank; and

(B) subject to paragraph (6)(C), for all holders, in the 

aggregate, of Financial Assistance Corporation stock.

(2) TREATMENT. Amounts in any Allocated Insurance 

Reserves Account shall be considered to be part of the Farm Credit 

Insurance Fund.

(3) ANNUAL ALLOCATIONS. If, at the end of any calendar 

year, the aggregate of the amounts in the Farm Credit Insurance Fund 

exceeds the secure base amount, the Corporation shall allocate to the 

Allocated Insurance Reserves Accounts the excess amount less the 

amount that the Corporation, in its sole discretion, determines to be the 

sum of the estimated operating expenses and estimated insurance 

obligations of the Corporation for the immediately succeeding calendar 

year.

(4) ALLOCATION FORMULA. From the total amount 

required to be allocated at the end of a calendar year under paragraph 

(3)—

(A) 10 percent of the total amount shall be credited to the 

Allocated Insurance Reserves Account established under paragraph 

(1)(B), subject to paragraph (6)(C); and
96

(B) there shall be credited to the allocated insurance 

reserves account of each insured system bank an amount that bears 

the same ratio to the total amount (less any amount credited under 

subparagraph (A)) as—

(i) the average principal outstanding for the calendar 

year on insured obligations issued by the bank (after 

deducting from the principal the percentages of the 

guaranteed portions of loans and investments described in 

subsection (a)(2)); bears to

(ii) the average principal outstanding for the calendar 

year on insured obligations issued by all insured System 

banks (after deducting from the principal the percentages of 

the guaranteed portions of loans and investments described in 

subsection (a)(2)).

(5) USE OF FUNDS IN ALLOCATED INSURANCE 

RESERVES ACCOUNTS. To the extent that the sum of the operating 

expenses of the Corporation and the insurance obligations of the 

Corporation for a calendar year exceeds the sum of operating expenses 

and insurance obligations determined under paragraph (3) for the 

calendar year, the Corporation shall cover the expenses and obligations 

by—

(A) reducing each Allocated Insurance Reserves Account 

by the same proportion; and

(B) expending the amounts obtained under subparagraph 

(A) before expending other amounts in the Fund.

(6) OTHER DISPOSITION OF ACCOUNT FUNDS.

(A) IN GENERAL. As soon as practicable during each 

calendar year, the Corporation may—

(i) subject to subparagraph (D), pay to each insured 

System bank, in a manner determined by the Corporation, an 

amount equal to the balance in the Allocated Insurance 

Reserves Account of the System bank; and

(ii) subject to subparagraphs (C) and (E), pay to each 

System bank and association holding Financial Assistance 

Corporation stock a proportionate share, determined by 

dividing the number of shares of Financial Assistance 

Corporation stock held by the institution by the total number 

of shares of Financial Assistance Corporation stock 

outstanding at the time of the termination of the Financial 

Assistance Corporation, of the balance in the Allocated 

Insurance Reserves Account established under paragraph 

(1)(B).

(B) AUTHORITY TO ELIMINATE OR REDUCE 

PAYMENTS. The Corporation may eliminate or reduce payments 

during a calendar year under subparagraph (A) if the Corporation 

determines, in its sole discretion, that the payments, or other 

circumstances that might require use of the Farm Credit Insurance 

Fund, could cause the amount in the Farm Credit Insurance Fund 

during the calendar year to be less than the secure base amount.
97

(C) REIMBURSEMENT FOR FINANCIAL 

ASSISTANCE CORPORATION STOCK.

(i) SUFFICIENT FUNDING. Notwithstanding 

paragraph (4)(A), on provision by the Corporation for the 

accumulation in the Account established under paragraph 

(1)(B) of funds in an amount equal to $56,000,000, the 

Corporation shall not allocate any further funds to the 

Account except to replenish the Account if funds are 

diminished below $56,000,000 by the Corporation under 

paragraph (5).

(ii) TERMINATION OF ACCOUNT.—On 

disbursement of an amount equal to $56,000,000, the 

Corporation shall—

(I)close the account established under paragraph 

(1)(B); and

(II) transfer any remaining funds in the 

Account to the remaining Allocated Insurance Reserves 

Accounts in accordance with paragraph (4)(B) for the 

calendar year in which the transfer occurs.

(D) DISTRIBUTION OF PAYMENTS RECEIVED. Not 

later than 60 days after receipt of a payment made under 

subparagraph (A)(i), each insured System bank, in consultation 

with affiliated associations of the insured System bank, and taking 

into account the direct or indirect payment of insurance premiums 

by the associations, shall develop and implement an equitable plan 

to distribute payments received under subparagraph (A)(i) among 

the bank and associations of the bank.

(E) EXCEPTION FOR PREVIOUSLY REIMBURSED 

ASSOCIATIONS. For purposes of subparagraph (A)(ii), in any 

Farm Credit district in which the funding bank has reimbursed 1 or 

more affiliated associations of the bank for the previously 

unreimbursed portion of the Financial Assistance Corporation 

stock held by the associations, the funding bank shall be deemed to 

be the holder of the shares of Financial Assistance Corporation 

stock for which the funding bank has provided the reimbursement.

12 U.S.C. 2277a-5 Sec. 5.56. Certification of Premiums.

(a) FILING CERTIFIED STATEMENT. On a date to be determined 

in the sole discretion of the Board of Directors of the Corporation, each 

insured System bank that became insured before the beginning of the period 

for which premiums are being assessed (referred to in this section as the 

"period") shall file with the Corporation a certified statement showing—

(1) the average outstanding insured obligations for the period 

issued by the bank;

(2)(A) the average principal outstanding for the period on the 

guaranteed portion of Federal government-guaranteed loans that are in 

accrual status; and
98

(B) the average amount outstanding for the period of 

Federal government-guaranteed investments that are not 

permanently impaired (as defined in section 5.55(a)(4));

(3)(A) the average principal outstanding for the period on State 

government-guaranteed loans that are in accrual status; and

(B) the average amount outstanding for the period of State 

government-guaranteed investments that are not permanently 

impaired (as defined in section 5.55(a)(4));

(4)(A) the average principal outstanding for the period on loans 

that are in nonaccrual status; and

(B) the average amount outstanding for the period of otherthan-temporarily impaired investments; and

(5) the amount of the premium due the Corporation from the 

bank for the period. 

(b) CONTENTS AND FORM OF STATEMENT. The certified 

statement required to be filed with the Corporation under subsection (a) shall 

be in such form and set forth such supporting information as the Board of 

Directors shall prescribe, and shall be certified by the president of the bank or 

any other officer designated by its board of directors that to the best of the 

person’s knowledge and belief the statement is true, correct, complete, and has 

been prepared in accordance with this part and all regulations issued 

thereunder.

(c) PREMIUM PAYMENTS.—

(1) IN GENERAL.—Except as provided in paragraph (2), each 

insured System bank shall pay to the Corporation the premium payments 

required under subsection (a), not more frequently than once in each 

calendar quarter, in such manner and at such 1 or more times as the 

Board of Directors shall prescribe.

(2) PREMIUM AMOUNT.—The amount of the premium shall 

be established not later than 60 days after filing the certified statement 

specifying the amount of the premium.

(d) REGULATIONS. The Board of Directors shall prescribe all rules 

and regulations necessary for the enforcement of this section. The Board of 

Directors may limit the retroactive effect, if any, of any of its rules or 

regulations.

NOTE: The amendments made by section 5403 of Public Law 107-171 

shall apply with respect to determinations of premiums for calendar year 

2002 and for any succeeding calendar year, and to certified statements 

with respect to such premiums.

12 U.S.C. 2277a-6 Sec. 5.57. Overpayment and Underpayment of Premiums; 

Remedies.

(a) OVERPAYMENTS. The Corporation may refund to any insured 

System bank any premium payment made by the bank exceeding the amount 

due the Corporation.

(b) UNDERPAYMENTS.
99

(1) RECOVERY. The Corporation, in a suit brought at law or in 

equity in any court of competent jurisdiction, may recover from any 

insured System bank the amount of any unpaid premium lawfully 

payable by the bank to the Corporation, whether or not the bank has 

filed any certified statement under section 5.56, and whether or not suit 

has been brought to compel the bank to file any such statement.

(2) LIMITATION. Any action or proceeding for the recovery of 

any premium due the Corporation under paragraph (1), or for the 

recovery of any amount paid to the Corporation exceeding the amount 

due the Corporation, shall be brought within 5 years after the right 

accrued for which the claim is made. If an insured System bank has 

filed with the Corporation a false or fraudulent certified statement with 

the intent to evade, in whole or in part, the payment of a premium, the 

claim shall not be deemed to have accrued until the Corporation 

discovers that the certified statement is false or fraudulent.

(c) FAILURE TO FILE STATEMENT OR PAY PREMIUM.

(1) FORFEITURE OF RIGHTS. If any insured System bank 

fails to file any certified statement required to be filed by such bank 

under section 5.56 or fails to pay any premium required to be paid by 

such bank under any provision of this part, and if the bank does not 

correct such failure within 30 days after the Corporation gives written 

notice to an officer of the bank, citing this subsection and stating that the 

bank has failed to so file or pay as required by law, all the rights, 

privileges, and franchises of the bank granted to it under this Act shall 

be thereby forfeited.

(2) ENFORCEMENT. The Corporation may bring an action to 

enforce this subsection against any such bank in any court of competent 

jurisdiction for the judicial district in which the bank is located.

(3) LIABILITY OF DIRECTORS. Every director who 

participated in or assented to a failure (described in paragraph (1)) shall 

be held personally liable for all consequential damages.

(d) EFFECT ON OTHER REMEDIES. The remedies provided in 

subsections (b) and (c) shall not be construed as limiting any other remedies 

against any insured System bank, but shall be in addition thereto.

12 U.S.C. 2277a-7 Sec. 5.58. General Corporate Powers. 

On the date of the enactment of this part, the Corporation shall become a 

body corporate and as such shall have the following powers:

(1) SEAL. The Corporation may adopt and use a corporate seal.

(2) SUCCESSION. The Corporation may have succession until 

dissolved by an Act of Congress. 

(3) CONTRACTS. The Corporation may make contracts.

(4) LEGAL ACTIONS.

(A) IN GENERAL. The Corporation may sue and be sued, 

complain and defend, in any court of law or equity, State or 

Federal.
100

(B) JURISDICTION. All suits of a civil nature at common 

law or in equity to which the Corporation shall be a party shall be 

deemed to arise under the laws of the United States, and the United 

States district courts shall have original jurisdiction thereof, 

without regard to the amount in controversy, and the Corporation, 

in any capacity, without bond or security, may remove any such 

action, suit, or proceeding from a State court to the United States 

district court for the district or division embracing the place where 

the same is pending by following any procedure for removal then 

in effect.

(C) ATTACHMENT AND EXECUTION. No attachment 

or execution may be issued against the Corporation or its property 

before final judgment in any suit, action, or proceeding in any 

State, county, municipal, or United States court.

(D) AGENT FOR SERVICE OF PROCESS. The Board of 

Directors shall designate an agent on whom service of process may 

be made in any State or jurisdiction in which any insured System 

bank is located.

(5) OFFICERS AND EMPLOYEES.

(A) IN GENERAL. The Corporation may appoint by its 

Board of Directors such officers and employees as are not 

otherwise provided for in this part, define their duties, fix their 

compensation, and require bonds of them and fix the penalty 

thereof, and dismiss at pleasure such officers or employees.

(B) EMPLOYEES OF THE UNITED STATES. Nothing 

in this or any other Act shall be construed to prevent the 

appointment and compensation, as an officer or employee of the 

Corporation, of any officer or employee of the United States in any 

board, commission, independent establishment, or executive 

department thereof.

(6) BYLAWS. The Corporation may prescribe, by its Board of 

Directors, bylaws not inconsistent with law, regulating the manner in 

which its general business may be conducted, and the privileges granted 

to it by law may be exercised and enjoyed.

(7) INCIDENTAL POWERS. The Corporation may exercise by 

its Board of Directors, or duly authorized officers or agents, all powers 

specifically granted by the provisions of this part, and such incidental 

powers as shall be necessary to carry out the powers so granted.

(8) INFORMATION. The Corporation may, when necessary, 

make examinations of, and require information and reports from, System 

institutions, as provided in this part.

(9) CONSERVATOR OR RECEIVER. The Corporation may 

act as a conservator or receiver.

(10) RULES AND REGULATIONS. The Corporation may 

prescribe by its Board of Directors such rules and regulations as it 

considers necessary to carry out this part and section 1.12(b) (except to 

the extent that authority to issue such rules and regulations has been 

expressly and exclusively granted to any other regulatory agency).
101

12 U.S.C. 2277a-8 Sec. 5.59. Conduct of Corporate Affairs; Examination of System 

Institutions. 

(a) CONDUCT OF CORPORATE AFFAIRS.

(1) FAIR ADMINISTRATION. The Board of Directors shall 

administer the affairs of the Corporation fairly and impartially and 

without discrimination.

(2) OBLIGATIONS AND EXPENSES. The Board of Directors 

shall determine and prescribe the manner in which the obligations of the 

Corporation may be incurred and the expenses of the Corporation may 

be allowed and paid.

(3) USE OF MAILS. The Corporation may use the United 

States mails in the same manner and under the same conditions as the 

executive departments of the Federal Government.

(4) USE OF INFORMATION. The Corporation, with the 

consent of any board, commission, independent establishment, or 

executive department of the Federal Government, including any field 

service thereof, may avail itself of the use of information, services, and 

facilities thereof in carrying out this part.

(5) USE OF FARM CREDIT ADMINISTRATION 

PERSONNEL. To the extent practicable, the Corporation shall use the 

personnel and resources of the Farm Credit Administration to minimize 

duplication of effort and to reduce costs.

(b) EXAMINATION OF SYSTEM INSTITUTIONS.

(1) EXAMINATION AUTHORITY.

(A) IN GENERAL. If the Board of Directors considers it 

necessary to examine an insured System bank, a production credit 

association, an association making direct loans under the authority 

provided under section 7.6, or any System institution in 

receivership, the Board may, using Farm Credit Administration 

examiners, conduct the examination using reports and other 

information on the System institution prepared or held by the Farm 

Credit Administration. Notwithstanding any other provision of 

this Act, on cancellation of the charter of a System institution, the 

Corporation shall have authority to examine the system institution 

in receivership. An examination shall be performed at such 

intervals as the Corporation shall determine.

(B) REQUEST FOR ADDITIONAL EXAMINATION OR 

OTHER INFORMATION. If the Board determines that such 

reports or information are not adequate to enable the Corporation 

to carry out the duties of the Corporation under this subsection, the 

Board shall request the Farm Credit Administration to examine or 

to obtain other information from or about the System institution 

and provide to the Corporation the resulting examination report or 

such other information.

(2) APPOINTMENT OF EXAMINERS. If the Farm Credit 

Administration informs the Corporation that the Farm Credit 

Administration is unable to comply with a request made under paragraph 
102

(1)(B) with respect to a System institution, the Board may appoint 

examiners to examine the institution.

(3) POWERS AND REPORT. Each examiner appointed under 

paragraph (2) shall make such examination of the affairs of the System 

institution as the Board may direct, and shall make a full and detailed 

report of the examination to the Corporation.

(4) APPOINTMENT OF CLAIM AGENTS. The Board of 

Directors of the Corporation shall appoint claim agents who may 

investigate and examine all claims for insured obligations.

(c) OATH, AFFIRMATIONS, AND TESTIMONY. In connection 

with examinations under this section, the Corporation or its designated 

representatives may administer oaths and affirmations, and may examine, 

take, and preserve testimony under oath, as to any matter with respect to the 

affairs of any such institution.

(d) COOPERATION WITH FCA EXAMINERS. The examiners 

appointed by the Board of Directors shall cooperate to the maximum extent 

possible with examiners of the Farm Credit Administration to minimize 

duplication of effort and minimize costs.

12 U.S.C. 2277a-9 Sec. 5.60. Insurance Fund. 

(a) ESTABLISHMENT. There is hereby established a Farm Credit 

Insurance Fund (hereinafter referred to in this section as the "Insurance Fund") 

for insuring the timely payment of principal and interest on insured 

obligations. The assets in the Fund shall be held by the Corporation for the 

uses and purposes of the Corporation.

(b) AMOUNTS IN FUND.- The Corporation shall deposit in the 

Insurance Fund all premium payments received by the Corporation under this 

part.

(c) USES OF FUND.

(1) MANDATORY USE. Beginning January 1, 1993, the 

Corporation shall expend amounts in the Insurance Fund to the extent 

necessary to insure the timely payment of interest and principal on 

insured obligations.

(2) OTHER MANDATORY USES. Beginning January 1, 1993, 

the Corporation shall use amounts in the Insurance Fund to ensure the 

retirement of eligible borrower stock at par value under section 4.9A.

(3) PERMISSIVE USES. The Corporation may expend amounts 

in the Insurance Fund to carry out section 5.61 and to cover the 

operating costs of the Corporation.

(4) CORPORATE PAYMENT OR REFUNDS. The 

Corporation shall make all payments and refunds required to be made by 

the Corporation under this part from amounts in the Insurance Fund.

12 U.S.C. 2277a-10 Sec. 5.61. Powers of Corporation with Respect to Troubled 

Insured System Banks.

(a) AUTHORITY TO PROVIDE ASSISTANCE.
103

(1) STAND-ALONE ASSISTANCE. The Corporation, in its 

sole discretion and on such terms and conditions as the Board of 

Directors may prescribe, may make loans to, purchase the assets or 

securities of, assume the liabilities of, or make contributions to, any 

insured System bank if such action is taken—

(A) to prevent the placing of the bank in receivership;

(B) to restore the bank to normal operation; or

(C) to reduce the risk to the Corporation posed by the bank 

when severe financial conditions threaten the stability of a 

significant number of insured System banks or of insured System 

banks possessing significant financial resources.

(2) FACILITATION OF MERGERS OR CONSOLIDATION.

(A) IN GENERAL. To facilitate a merger or consolidation 

of a qualifying insured System bank, the sale of assets of such 

insured System bank to another insured System bank, the 

assumption of such insured System bank's liabilities by such other 

insured System bank, or the acquisition of the stock of such 

insured System bank by such other insured System bank, the 

Corporation, in its sole discretion and on such terms and conditions 

as the Board of Directors may prescribe, may—

(i) purchase any such assets or assume any such 

liabilities;

(ii) make loans or contributions to, or purchase debt 

securities of, such other insured System bank;

(iii) guarantee such other insured System bank against 

loss by reason of such other insured System bank's merging 

or consolidating with, or assuming the liabilities and 

purchasing the assets of, such insured System bank; or

(iv) take any combination of the actions referred to in 

the preceding clauses.

(B) QUALIFYING INSURED SYSTEM BANK. For 

purposes of subparagraph (A), the term "qualifying insured System 

bank" means any insured System bank that—

(i) is in receivership;

(ii) is, in the judgment of the Board of Directors, in 

danger of being placed in receivership; or

(iii) is, in the sole discretion of the Corporation, an 

insured System bank that, when severe financial conditions 

exist that threaten the stability of a significant number of 

insured System banks or of insured System banks possessing 

significant financial resources, requires assistance under 

subparagraph (A) to lessen the risk to the Corporation posed 

by such insured System bank under such threat of instability.

(3) LIMITATION.

(A) LEAST-COST RESOLUTION. Assistance may not be 

provided to an insured System bank under this subsection unless 

the means of providing the assistance is the least costly means of 

providing the assistance by the Farm Credit Insurance Fund of all 
104

possible alternatives available to the Corporation, including 

liquidation of the bank (including paying the insured obligations 

issued on behalf of the bank). Before making a least-cost 

determination under this subparagraph, the Corporation shall 

accord such other insured System banks as the Corporation 

determines to be appropriate the opportunity to submit information 

relating to the determination.

(B) DETERMINING LEAST COSTLY APPROACH. In 

determining the least costly alternative under subparagraph (A), 

the Corporation shall—

(i) evaluate alternatives on a present-value basis, 

using a reasonable discount rate;

(ii) document the evaluation and the assumptions on 

which the evaluation is based; and

(iii) retain the documentation for not less than 5 years.

(C) TIME OF DETERMINATION.

(i) GENERAL RULE. For purposes of this 

subsection, the determination of the costs of providing any 

assistance under any provision of this section with respect to 

any insured System bank shall be made as of the date on 

which the Corporation makes the determination to provide 

the assistance to the institution under this section.

(ii) RULE FOR LIQUIDATIONS. For purposes of 

this subsection, the determination of the costs of liquidation 

of any insured System bank shall be made as of the earliest 

of—

(I)the date on which a conservator is appointed for 

the insured System bank;

(II) the date on which a receiver is appointed 

for the insured System bank; or

(III) the date on which the Corporation makes 

any determination to provide any assistance under this 

section with respect to the insured System bank.

(D) RULE FOR STAND-ALONE ASSISTANCE. Before 

providing any assistance under paragraph (1), the Corporation shall 

evaluate the adequacy of managerial resources of the insured 

System bank. The continued service of any director or senior 

ranking officer who serves in a policymaking role for the assisted 

insured System bank, as determined by the Corporation, shall be 

subject to approval by the Corporation as a condition of assistance.

(E) DISCRETIONARY DETERMINATIONS. Any 

determination that the Corporation makes under this paragraph 

shall be in the sole discretion of the Corporation.

(F) PURCHASE OF STOCK. The Corporation may not 

use its authority under this subsection to purchase any stock of an 

insured System bank. The preceding sentence shall not be 

construed to limit the ability of the Corporation to enter into and 

enforce covenants and agreements that it determines to be 

necessary to protect the financial interests of the Corporation.
105

(4) SUBORDINATION. Any assistance provided under this 

subsection may be in subordination to the rights of owners of obligations 

and other creditors.

(5) REPORTS. The Corporation, in its annual report to 

Congress, shall report the total amount saved, or it estimates to be saved, 

by the Corporation exercising the authority provided to the Corporation 

in this subsection.

(b) AUTHORITY TO PLEDGE OR SELL ASSETS. The 

Corporation, in its discretion, may make loans on the security of, or may 

purchase, and liquidate or sell, any part of the assets of, any insured System 

bank that is placed in receivership because of the inability of the bank to pay 

principal or interest on any of its notes, bonds, debentures, or other obligations 

in a timely manner.

(c) SUBROGATION.

(1) IN GENERAL. On the payment to an owner of an insured 

obligation issued on behalf of an insured System bank in receivership, 

the Corporation shall be subrogated to all rights of the owner against the 

bank to the extent of the payment.

(2) RECEIPT OF DIVIDENDS. Subrogation under paragraph 

(1) shall include the right on the part of the Corporation to receive the 

same dividends from the proceeds of the assets of the bank as would 

have been payable to the owner on a claim for the insured obligation. 

(d) RIGHT TO ASSETS. Any agreement that shall diminish or defeat 

the right, title, or interest of the Corporation in any asset acquired by such 

Corporation under this section, either as security for a loan or by purchase, 

shall not be valid against the Corporation unless the agreement—

(1) is in writing;

(2) is executed by the bank and the person or persons claiming 

an adverse interest thereunder, including the obligor, contemporaneously 

with the acquisition of the asset by the bank;

(3) has been approved by the board of directors of the bank or its 

loan committee, which approval shall be reflected in the minutes of the 

board or committee; and

(4) has been, continuously, from the time of its execution, an 

official record of the bank.

(e) INSURED SYSTEM BANK. As used in this section, the terms 

"insured System bank" and "bank" include each production credit association 

and other association making direct loans under the authority provided under 

section 7.6.

(f) EFFECTIVE DATE. The Corporation shall not exercise any 

authority under this section during the 5-year period prior to January 1, 1993.

12 U.S.C. 2277a-10a Sec. 5.61A. Oversight Actions by the Corporation.

(a) DEFINITIONS. In this section, the term "institution" means—

(1) an insured System bank; and

(2) a production credit association or other association making 

loans under section 7.6 with a direct loan payable to the funding bank of 
106

the association that comprises 20 percent or more of the funding bank's 

total loan volume net of nonaccrual loans.

(b) CONSULTATION REGARDING PARTICIPATION OF 

UNDERCAPITALIZED BANKS IN ISSUANCE OF INSURED 

OBLIGATIONS. The Farm Credit Administration shall consult with the 

Corporation prior to approving an insured obligation that is to be issued by or 

on behalf of, or participated in by, any insured System bank that fails to meet 

the minimum level for any capital requirement established by the Farm Credit 

Administration for the bank.

(c) CONSULTATION REGARDING APPLICATIONS FOR 

MERGERS AND RESTRUCTURINGS.

(1) CORPORATION TO RECEIVE COPY OF 

TRANSACTION APPLICATIONS. On receiving an application for a 

merger or restructuring of an institution, the Farm Credit Administration 

shall forward a copy of the application to the Corporation.

(2) CONSULTATION REQUIRED. If the proposed merger or 

restructuring involves an institution that fails to meet the minimum level 

for any capital requirement established by the Farm Credit 

Administration applicable to the institution, the Farm Credit 

Administration shall allow 30 days within which the Corporation may 

submit the views and recommendations of the Corporation, including 

any conditions for approval. In determining whether to approve or 

disapprove any proposed merger or restructuring, the Farm Credit 

Administration shall give due consideration to the views and 

recommendations of the Corporation.

12 U.S.C. 2277a-10b Sec. 5.61B. Authority to Regulate Golden Parachute and 

Indemnification Payments.

(a) DEFINITIONS. In this section:

(1) GOLDEN PARACHUTE PAYMENT. The term "golden 

parachute payment"—

(A) means a payment (or any agreement to make a 

payment) in the nature of compensation for the benefit of any 

institution-related party under an obligation of any Farm Credit 

System institution that—

(i) is contingent on the termination of the party's 

relationship with the institution; and

(ii) is received on or after the date on which—

(I)the institution is insolvent;

(II) a conservator or receiver is appointed for 

the institution;

(III) the institution has been assigned by the 

Farm Credit Administration a composite CAMEL 

rating of 4 or 5 under the Farm Credit Administration 

Rating System, or an equivalent rating; or

(IV) the Corporation otherwise determines 

that the institution is in a troubled condition (as defined 

in regulations issued by the Corporation); and
107

(B) includes a payment that would be a golden parachute 

payment but for the fact that the payment was made before the date 

referred to in subparagraph (A)(ii) if the payment was made in 

contemplation of the occurrence of an event described in any 

subclause of subparagraph (A); but 

(C) does not include—

(i) a payment made under a retirement plan that is 

qualified (or is intended to be qualified) under section 401 of 

the Internal Revenue Code of 1986 or other 

nondiscriminatory benefit plan;

(ii) a payment made under a bona fide supplemental 

executive retirement plan, deferred compensation plan, or 

other arrangement that the Corporation determines, by 

regulation or order, to be permissible; or

(iii) a payment made by reason of the death or 

disability of an institution-related party.

(2) INDEMNIFICATION PAYMENT. The term 

"indemnification payment" means a payment (or any agreement to make 

a payment) by any Farm Credit System institution for the benefit of any 

person who is or was an institution-related party, to pay or reimburse the 

person for any liability or legal expense with regard to any 

administrative proceeding or civil action instituted by the Farm Credit 

Administration that results in a final order under which the person—

(A) is assessed a civil money penalty; or

(B) is removed or prohibited from participating in the 

conduct of the affairs of the institution.

(3) INSTITUTION-RELATED PARTY. The term "institutionrelated party" means—

(A) a director, officer, employee, or agent for a Farm Credit 

System institution or any conservator or receiver of such an 

institution;

(B) a stockholder (other than another Farm Credit System 

institution), consultant, joint venture partner, or any other person 

determined by the Farm Credit Administration to be a participant 

in the conduct of the affairs of a Farm Credit System institution; 

and

(C) an independent contractor (including any attorney, 

appraiser, or accountant) that knowingly or recklessly participates 

in any violation of any law or regulation, any breach of fiduciary 

duty, or any unsafe or unsound practice that caused or is likely to 

cause more than a minimal financial loss to, or a significant 

adverse effect on, the Farm Credit System institution.

(4) LIABILITY OR LEGAL EXPENSE. The term "liability or 

legal expense" means—

(A) a legal or other professional expense incurred in 

connection with any claim, proceeding, or action;

(B) the amount of, and any cost incurred in connection 

with, any settlement of any claim, proceeding, or action; and
108

(C) the amount of, and any cost incurred in connection 

with, any judgment or penalty imposed with respect to any claim, 

proceeding, or action.

(5) PAYMENT. The term "payment" means—

(A) a direct or indirect transfer of any funds or any asset; 

and

(B) any segregation of any funds or assets for the purpose 

of making, or under an agreement to make, any payment after the 

date on which the funds or assets are segregated, without regard to 

whether the obligation to make the payment is contingent on—

(i) the determination, after that date, of the liability 

for the payment of the amount; or

(ii) the liquidation, after that date, of the amount of 

the payment.

(b) PROHIBITION. The Corporation may prohibit or limit, by 

regulation or order, any golden parachute payment or indemnification 

payment by a Farm Credit System institution (including any conservator or 

receiver of the Federal Agricultural Mortgage Corporation) in troubled 

condition (as defined in regulations issued by the Corporation).

(c) FACTORS TO BE TAKEN INTO ACCOUNT. The Corporation 

shall prescribe, by regulation, the factors to be considered by the Corporation 

in taking any action under subsection (b). The factors may include—

(1) whether there is a reasonable basis to believe that an 

institution-related party has committed any fraudulent act or omission, 

breach of trust or fiduciary duty, or insider abuse with regard to the 

Farm Credit System institution involved that has had a material effect on 

the financial condition of the institution;

(2) whether there is a reasonable basis to believe that the 

institution-related party is substantially responsible for the insolvency of 

the Farm Credit System institution, the appointment of a conservator or 

receiver for the institution, or the institution's troubled condition (as 

defined in regulations prescribed by the Corporation);

(3) whether there is a reasonable basis to believe that the 

institution-related party has materially violated any applicable law or 

regulation that has had a material effect on the financial condition of the 

institution;

(4) whether there is a reasonable basis to believe that the 

institution-related party has violated or conspired to violate—

(A) section 215, 657, 1006, 1014, or 1344 of title 18, 

United States Code; or

(B) section 1341 or 1343 of title 18, United States Code, 

affecting a Farm Credit System institution;

(5) whether the institution-related party was in a position of 

managerial or fiduciary responsibility; and

(6) the length of time that the party was related to the Farm 

Credit System institution and the degree to which—
109

(A) the payment reasonably reflects compensation earned 

over the period of employment; and

(B) the compensation represents a reasonable payment for 

services rendered.

(d) CERTAIN PAYMENTS PROHIBITED. No Farm Credit System 

institution may prepay the salary or any liability or legal expense of any 

institution-related party if the payment is made—

(1) in contemplation of the insolvency of the institution or after 

the commission of an act of insolvency; and

(2) with a view to, or with the result of—

(A) preventing the proper application of the assets of the 

institution to creditors; or

(B) preferring 1 creditor over another creditor.

(e) RULE OF CONSTRUCTION. Nothing in this section—

(1) prohibits any Farm Credit System institution from purchasing 

any commercial insurance policy or fidelity bond, so long as the 

insurance policy or bond does not cover any legal or liability expense of 

an institution described in subsection (a)(2); or

(2) limits the powers, functions, or responsibilities of the Farm 

Credit Administration.

12 U.S.C. 2277a-10c Sec. 5.61C. Corporation as Conservator or Receiver; Certain

Other Powers.

(a) DEFINITION OF INSTITUTION.—In this section, the term

“institution” includes any System institution for which the Corporation has 

been appointed as conservator or receiver.

(b) CERTAIN POWERS AND DUTIES OF CORPORATION AS 

CONSERVATOR OR RECEIVER.—In addition to the powers inherent in the 

express grant of corporate authority under section 5.58(9), and other powers 

exercised by the Corporation under this part, the Corporation shall have the 

following express powers to act as a conservator or receiver:

(1) RULEMAKING AUTHORITY OF CORPORATION.—The 

Corporation may prescribe such regulations as the Corporation 

determines to be appropriate regarding the conduct of conservatorships 

or receiverships.

(2) GENERAL POWERS.—

(A) SUCCESSOR TO SYSTEM INSTITUTION.—The 

Corporation shall, as conservator or receiver, and by operation of

law, succeed to—

(i) all rights, titles, powers, and privileges of the

System institution, and of any stockholder, member, officer, 

or director of such System institution with respect to the 

System institution and the assets of the System institution; 

and

(ii) title to the books, records, and assets of any

previous conservator or other legal custodian of such System 

institution.
110

(B) OPERATE THE SYSTEM INSTITUTION.—The 

Corporation may, as conservator or receiver—

(i) take over the assets of and operate the System 

institution with all the powers of the stockholders or

members, the directors, and the officers of the System

institution and conduct all business of the System institution;

(ii) collect all obligations and money due the System

institution;

(iii) perform all functions of the System institution in 

the name of the System institution which are consistent with 

the appointment as conservator or receiver;

(iv) preserve and conserve the assets and property of 

such System institution; and

(v) provide by contract for assistance in fulfilling

any function, activity, action, or duty of the Corporation as 

conservator or receiver.

(C) FUNCTIONS OF SYSTEM INSTITUTION’S 

OFFICERS, DIRECTORS, MEMBERS, AND 

STOCKHOLDERS.—The Corporation may, by regulation or 

order, provide for the exercise of any function by any stockholder, 

member, director, or officer of any System institution for which the 

Corporation has been appointed conservator or receiver.

(D) POWERS AS CONSERVATOR.—Subject to any 

Farm Credit Administration approvals required under this Act, the 

Corporation may, as conservator, take such action as may be—

(i) necessary to put the System institution in a sound 

and solvent condition; and

(ii) appropriate to carry on the business of the System 

institution and preserve and conserve the assets and property 

of the System institution.

(E) ADDITIONAL POWERS AS RECEIVER.—The 

Corporation may, as receiver, liquidate the System institution and 

proceed to realize upon the assets of the System institution, in such 

manner as the Corporation determines to be appropriate.

(F) ORGANIZATION OF NEW SYSTEM BANK.—The 

Corporation may, as receiver with respect to any System bank, 

organize a bridge System bank under subsection (h).

(G) MERGER; TRANSFER OF ASSETS AND 

LIABILITIES.—

(i) IN GENERAL.—Subject to clause (ii), the 

Corporation may, as conservator or receiver—

(I) merge the System institution with another 

System institution; and

(II) transfer or sell any asset or liability of the 

System institution in default without any approval, 

assignment, or consent with respect to such transfer.

(ii) APPROVAL.—No merger or transfer under 

clause (i) may be made to another System institution (other 
111

than a bridge System bank under subsection (h)) without the 

approval of the Farm Credit Administration. 

(H) PAYMENT OF VALID OBLIGATIONS.—The 

Corporation, as conservator or receiver, shall, to the extent that 

proceeds are realized from the performance of contracts or the sale 

of the assets of a System institution, pay all valid obligations of the 

System institution in accordance with the prescriptions and 

limitations of this section.

(I) INCIDENTAL POWERS.—

(i) IN GENERAL.—The Corporation may, as 

conservator or receiver—

(I) exercise all powers and authorities 

specifically granted to conservators or receivers, 

respectively, under this section and such incidental 

powers as shall be necessary to carry out such powers; 

and

(II) take any action authorized by this section, 

which the Corporation determines is in the best interests 

of—

(aa) the System institution in receivership 

or conservatorship;

(bb) System institutions;

(cc) System institution stockholders or 

investors; or

(dd) the Corporation.

(ii) TERMINATION OF RIGHTS AND CLAIMS.—

(I) IN GENERAL.—Except as provided in 

subclause (II), notwithstanding any other provision of

law, the appointment of the Corporation as receiver for 

a System institution and the succession of the 

Corporation, by operation of law, to the rights, titles, 

powers, and privileges described in subparagraph (A) 

shall terminate all rights and claims that the 

stockholders and creditors of the System institution 

may have, arising as a result of their status as 

stockholders or creditors, against the assets or charter of 

the System institution or the Corporation.

(II) EXCEPTIONS.—Subclause (I) shall not 

terminate the right to payment, resolution, or other 

satisfaction of the claims of stockholders and creditors 

described in that subclause, as permitted under 

paragraphs (10) and (11) and subsection (d).

(iii) CHARTER.—Notwithstanding any other

provision of law, for purposes of this section, the charter of a 

System institution shall not be considered to be an asset of 

the System institution.

(J) UTILIZATION OF PRIVATE SECTOR.—In carrying 

out its responsibilities in the management and disposition of assets 

from System institutions, as conservator, receiver, or in its 
112

corporate capacity, the Corporation may utilize the services of 

private persons, including real estate and loan portfolio asset 

management, property management, auction marketing, legal, and 

brokerage services, if the Corporation determines utilization of 

such services is practicable, efficient, and cost effective.

(3) AUTHORITY OF RECEIVER TO DETERMINE 

CLAIMS.—

(A) IN GENERAL.—The Corporation may, as receiver, 

determine claims in accordance with the requirements of this 

subsection and regulations prescribed under paragraph (4).

(B) NOTICE REQUIREMENTS.—The receiver, in any 

case involving the liquidation or winding up of the affairs of a 

closed System institution, shall—

(i) promptly publish a notice to the System 

institution’s creditors to present their claims, together with 

proof, to the receiver by a date specified in the notice which 

shall be not less than 90 days after the publication of such 

notice; and

(ii) republish such notice approximately 1 month and 

2 months, respectively, after the publication under clause (i).

(C) MAILING REQUIRED.—The receiver shall mail a 

notice similar to the notice published under subparagraph (B)(i) at 

the time of such publication to any creditor shown on the System 

institution’s books—

(i) at the creditor’s last address appearing in such 

books; or

(ii) upon discovery of the name and address of a 

claimant not appearing on the System institution’s books 

within 30 days after the discovery of such name and address.

(4) RULEMAKING AUTHORITY RELATING TO 

DETERMINATION OF CLAIMS.—The Corporation may prescribe 

regulations regarding the allowance or disallowance of claims by the 

receiver and providing for administrative determination of claims and 

review of such determination.

(5) PROCEDURES FOR DETERMINATION OF CLAIMS.—

(A) DETERMINATION PERIOD.—

(i) IN GENERAL.—Before the end of the 180-day 

period beginning on the date any claim against a System 

institution is filed with the Corporation as receiver, the 

Corporation shall determine whether to allow or disallow the 

claim and shall notify the claimant of any determination with 

respect to such claim.

(ii) EXTENSION OF TIME.—The period described 

in clause (i) may be extended by a written agreement 

between the claimant and the Corporation.

(iii) MAILING OF NOTICE SUFFICIENT.—The 

requirements of clause (i) shall be deemed to be satisfied if 

the notice of any determination with respect to any claim is 

mailed to the last address of the claimant which appears—
113

(I) on the System institution’s books;

(II) in the claim filed by the claimant; or

(III) in documents submitted in proof of the claim.

(iv) CONTENTS OF NOTICE OF 

DISALLOWANCE.—If any claim filed under clause (i) is 

disallowed, the notice to the claimant shall contain—

(I) a statement of each reason for the 

disallowance; and

(II) the procedures available for obtaining 

agency review of the determination to disallow the 

claim or judicial determination of the claim.

(B) ALLOWANCE OF PROVEN CLAIMS.—The 

receiver shall allow any claim received on or before the date 

specified in the notice published under paragraph (3)(B)(i) by the 

receiver from any claimant which is proved to the satisfaction of 

the receiver.

(C) DISALLOWANCE OF CLAIMS FILED AFTER 

END OF FILING PERIOD.—

(i) IN GENERAL.—Except as provided in clause 

(ii), claims filed after the date specified in the notice 

published under paragraph (3)(B)(i) shall be disallowed and 

such disallowance shall be final.

(ii) CERTAIN EXCEPTIONS.—Clause (i) shall not 

apply with respect to any claim filed by any claimant after 

the date specified in the notice published under paragraph 

(3)(B)(i) and such claim may be considered by the receiver 

if—

(I) the claimant did not receive notice of the 

appointment of the receiver in time to file such claim 

before such date; and

(II) such claim is filed in time to permit payment 

of such claim.

(D) AUTHORITY TO DISALLOW CLAIMS.—

(i) IN GENERAL.—The receiver may disallow any 

portion of any claim by a creditor or claim of security, 

preference, or priority which is not proved to the satisfaction 

of the receiver.

(ii) PAYMENTS TO LESS THAN FULLY 

SECURED CREDITORS.—In the case of a claim of a 

creditor against a System institution which is secured by any 

property or other asset of such System institution, any 

receiver appointed for any System institution—

(I) may treat the portion of such claim which 

exceeds an amount equal to the fair market value of 

such property or other asset as an unsecured claim 

against the System institution; and

(II) may not make any payment with respect to 

such unsecured portion of the claim other than in 
114

connection with the disposition of all claims of 

unsecured creditors of the System institution.

(iii) EXCEPTIONS.—No provision of this paragraph 

shall apply with respect to—

(I) any extension of credit from any Federal 

Reserve bank or the United States Treasury to any 

System institution; or

(II) any security interest in the assets of the 

System institution securing any such extension of 

credit.

(E) NO JUDICIAL REVIEW OF DETERMINATION 

PURSUANT TO SUBPARAGRAPH (D).—No court may review 

the Corporation’s determination pursuant to subparagraph (D) to 

disallow a claim.

(F) LEGAL EFFECT OF FILING.—

(i) STATUTE OF LIMITATION TOLLED.—For 

purposes of any applicable statute of limitations, the filing of 

a claim with the receiver shall constitute a commencement of 

an action.

(ii) NO PREJUDICE TO OTHER ACTIONS.—

Subject to paragraph (12) and the determination of claims by 

a receiver, the filing of a claim with the receiver shall not 

prejudice any right of the claimant to continue any action 

which was filed before the appointment of the receiver.

(6) PROVISION FOR JUDICIAL DETERMINATION OF 

CLAIMS.—

(A) IN GENERAL.—Before the end of the 60-day period 

beginning on the earlier of—

(i) the end of the period described in paragraph 

(5)(A)(i) with respect to any claim against a System 

institution for which the Corporation is receiver; or

(ii) the date of any notice of disallowance of such 

claim pursuant to paragraph (5)(A)(i), the claimant may 

request administrative review of the claim in accordance with 

paragraph (7) or file suit on such claim (or continue an action 

commenced before the appointment of the receiver) in the 

district or territorial court of the United States for the district 

within which the System institution’s principal place of 

business is located or the United States District Court for the 

District of Columbia (and such court shall have jurisdiction 

to hear such claim).

(B) STATUTE OF LIMITATIONS.—If any claimant fails 

to file suit on such claim (or continue an action commenced before 

the appointment of the receiver), before the end of the 60-day 

period described in subparagraph (A), the claim shall be deemed to 

be disallowed (other than any portion of such claim which was 

allowed by the receiver) as of the end of such period, such 

disallowance shall be final, and the claimant shall have no further 

rights or remedies with respect to such claim.
115

(7) REVIEW OF CLAIMS; ADMINISTRATIVE 

HEARING.— If any claimant requests review under this paragraph in 

lieu of filing or continuing any action under paragraph (6) and the 

Corporation agrees to such request, the Corporation shall consider the 

claim after opportunity for a hearing on the record. The final 

determination of the Corporation with respect to such claim shall be 

subject to judicial review under chapter 7 of title 5, United States Code.

(8) EXPEDITED DETERMINATION OF CLAIMS.—

(A) ESTABLISHMENT REQUIRED.—The Corporation 

shall establish a procedure for expedited relief outside of the 

routine claims process established under paragraph (5) for 

claimants who—

(i) allege the existence of legally valid and 

enforceable or perfected security interests in assets of any 

System institution for which the Corporation has been 

appointed receiver; and

(ii) allege that irreparable injury will occur if the 

routine claims procedure is followed.

(B) DETERMINATION PERIOD.—Before the end of the 

90-day period beginning on the date any claim is filed in 

accordance with the procedures established pursuant to 

subparagraph (A), the Corporation shall—

(i) determine—

(I) whether to allow or disallow such claim; or

(II) whether such claim should be determined 

pursuant to the procedures established pursuant to 

paragraph (5); and

(ii) notify the claimant of the determination, and if 

the claim is disallowed, provide a statement of each reason 

for the disallowance and the procedure for obtaining agency 

review or judicial determination.

(C) PERIOD FOR FILING OR RENEWING SUIT.—Any 

claimant who files a request for expedited relief shall be permitted 

to file a suit, or to continue a suit filed before the appointment of 

the receiver, seeking a determination of the claimant’s rights with 

respect to such security interest after the earlier of—

(i) the end of the 90-day period beginning on the date 

of the filing of a request for expedited relief; or

(ii) the date the Corporation denies the claim.

(D) STATUTE OF LIMITATIONS.—If an action 

described in subparagraph (C) is not filed, or the motion to renew a 

previously filed suit is not made, before the end of the 30-day 

period beginning on the date on which such action or motion may 

be filed in accordance with subparagraph (B), the claim shall be 

deemed to be disallowed as of the end of such period (other than 

any portion of such claim which was allowed by the receiver), such 

disallowance shall be final, and the claimant shall have no further 

rights or remedies with respect to such claim.

(E) LEGAL EFFECT OF FILING.—
116

(i) STATUTE OF LIMITATION TOLLED.—For 

purposes of any applicable statute of limitations, the filing of 

a claim with the receiver shall constitute a commencement of 

an action.

(ii) NO PREJUDICE TO OTHER ACTIONS.—

Subject to paragraph (12), the filing of a claim with the 

receiver shall not prejudice any right of the claimant to 

continue any action which was filed before the appointment 

of the receiver.

(9) AGREEMENT AS BASIS OF CLAIM.—

(A) REQUIREMENTS.—Except as provided in 

subparagraph (B), any agreement which does not meet the 

requirements set forth in section 5.61(d) shall not form the basis of, 

or substantially comprise, a claim against the receiver or the 

Corporation.

(B) EXCEPTION TO CONTEMPORANEOUS 

EXECUTION REQUIREMENT.—Notwithstanding section 

5.61(d), any agreement relating to an extension of credit between a 

Federal Reserve bank or the United States Treasury and any 

System institution which was executed before such extension of 

credit to such System institution shall be treated as having been 

executed contemporaneously with such extension of credit for 

purposes of subparagraph (A).

(10) PAYMENT OF CLAIMS.—

(A) IN GENERAL.—The receiver may, in the receiver’s 

discretion and to the extent funds are available from the assets of 

the System institution, pay creditor claims which are allowed by 

the receiver, approved by the Corporation pursuant to a final 

determination pursuant to paragraph (7) or (8), or determined by 

the final judgment of any court of competent jurisdiction in such 

manner and amounts as are authorized under this Act.

(B) LIQUIDATION PAYMENTS.—The receiver may, in 

the receiver’s sole discretion, pay from the assets of the System 

institution portions of proved claims at any time, and no liability 

shall attach to the Corporation (in such Corporation’s corporate 

capacity or as receiver), by reason of any such payment, for failure 

to make payments to a claimant whose claim is not proved at the 

time of any such payment.

(C) RULEMAKING AUTHORITY OF 

CORPORATION.—The Corporation may prescribe such rules, 

including definitions of terms, as it deems appropriate to establish 

a single uniform interest rate for or to make payments of post 

insolvency interest to creditors holding proven claims against the 

receivership estates of System institutions following satisfaction by 

the receiver of the principal amount of all creditor claims.

(11) PRIORITY OF EXPENSES AND CLAIMS.—

(A) IN GENERAL.—Amounts realized from the 

liquidation or other resolution of any System institution by any 
117

receiver appointed for such System institution shall be distributed 

to pay claims (other than secured claims to the extent of any such 

security) in the following order of priority:

(i) Administrative expenses of the receiver.

(ii) If authorized by the Corporation, wages, salaries, 

or commissions, including vacation, severance, and sick 

leave pay earned by an individual—

(I) in an amount that is not more than $11,725 

for each individual (as indexed for inflation, by 

regulation of the Corporation); and

(II) that is earned 180 days or fewer before the 

date of appointment of the Corporation as receiver.

(iii) In the case of the resolution of a System bank, all 

claims of holders of consolidated and System-wide bonds 

and all claims of the other System banks arising from the 

payments of the System banks pursuant to—

(I) section 4.4 on consolidated and Systemwide 

bonds issued under subsection (c) or (d) of section 4.2; 

or

(II) an agreement, in writing and approved by the 

Farm Credit Administration, among the System banks 

to reallocate the payments.

(iv) In the case of the resolution of a production 

credit association or other association making direct loans 

under section 7.6, all claims of a System bank based on the 

financing agreement between the association and the System 

bank—

(I) including interest accrued before and after 

the appointment of the receiver; and

(II) not including any setoff for stock or other 

equity of that System bank owned by the association, 

on that condition that, prior to making that setoff, that 

System bank shall obtain the approval of the Farm 

Credit Administration Board for the retirement of that 

stock or equity.

(v) Any general or senior liability of the System 

institution (which is not a liability described in clause (vi) or 

(vii)).

(vi) Any obligation subordinated to general creditors 

(which is not an obligation described in clause (vii)).

(vii) Any obligation to stockholders or members 

arising as a result of their status as stockholders or members.

(B) PAYMENT OF CLAIMS.—

(i) IN GENERAL.—

(I) PAYMENT.—All claims of each priority 

described in clauses (i) through (vii) of subparagraph 

(A) shall be paid in full, or provisions shall be made for 

that payment, prior to the payment of any claim of a 

lesser priority.
118

(II) INSUFFICIENT FUNDS.—If there are 

insufficient funds to pay in full all claims in any priority 

described clauses (i) through (vii) of subparagraph (A), 

distribution on that priority of claims shall be made on a 

pro rata basis.

(ii) DISTRIBUTION OF REMAINING ASSETS.—

Following the payment of all claims in accordance with 

subparagraph (A), the receiver shall distribute the remainder 

of the assets of the System institution to the owners of stock, 

participation certificates, and other equities in accordance 

with the priorities for impairment under the bylaws of the 

System institution.

(iii) ELIGIBLE BORROWER STOCK.—

Notwithstanding subparagraph (C) or any other provision of 

this section, eligible borrower stock shall be retired in 

accordance with section 4.9A.

(C) EFFECT OF STATE LAW.—

(i) IN GENERAL.—The provisions of subparagraph 

(A) shall not supersede the law of any State except to the 

extent such law is inconsistent with the provisions of such 

subparagraph, and then only to the extent of the 

inconsistency.

(ii) PROCEDURE FOR DETERMINATION OF 

INCONSISTENCY.—Upon the Corporation’s own motion 

or upon the request of any person with a claim described in 

subparagraph (A) or any State which is submitted to the 

Corporation in accordance with procedures which the 

Corporation shall prescribe, the Corporation shall determine 

whether any provision of the law of any State is inconsistent 

with any provision of subparagraph (A) and the extent of any 

such inconsistency.

(iii) JUDICIAL REVIEW.—The final determination 

of the Corporation under clause (ii) shall be subject to 

judicial review under chapter 7 of title 5, United States Code.

(D) ACCOUNTING REPORT.—Any distribution by the 

Corporation in connection with any claim described in 

subparagraph (A)(vii) shall be accompanied by the accounting 

report required under paragraph (15)(B).

(12) SUSPENSION OF LEGAL ACTIONS.—

(A) IN GENERAL.—After the appointment of a 

conservator or receiver for a System institution, the conservator or 

receiver may request a stay for a period not to exceed—

(i) 45 days, in the case of any conservator; and

(ii) 90 days, in the case of any receiver, in any judicial 

action or proceeding to which such System institution is or 

becomes a party.

(B) GRANT OF STAY BY ALL COURTS 

REQUIRED.—Upon receipt of a request by any conservator or 

receiver pursuant to subparagraph (A) for a stay of any judicial 
119

action or proceeding in any court with jurisdiction of such action 

or proceeding, the court shall grant such stay as to all parties.

(13) ADDITIONAL RIGHTS AND DUTIES.—

(A) PRIOR FINAL ADJUDICATION.—The Corporation 

shall abide by any final unappealable judgment of any court of 

competent jurisdiction which was rendered before the appointment 

of the Corporation as conservator or receiver.

(B) RIGHTS AND REMEDIES OF CONSERVATOR OR 

RECEIVER.— In the event of any appealable judgment, the 

Corporation as conservator or receiver shall—

(i) have all the rights and remedies available to the 

System institution (before the appointment of such 

conservator or receiver) and the Corporation in its corporate 

capacity, including removal to Federal court and all appellate 

rights; and

(ii) not be required to post any bond in order to 

pursue such remedies.

(C) NO ATTACHMENT OR EXECUTION.—No 

attachment or execution may issue by any court on—

(i) assets in the possession of the receiver; or

(ii) the charter of a System institution for which the 

Corporation has been appointed receiver.

(D) LIMITATION ON JUDICIAL REVIEW.—Except as 

otherwise provided in this subsection, no court shall have 

jurisdiction over—

(i) any claim or action for payment from, or any 

action seeking a determination of rights with respect to, the 

assets of any System institution for which the Corporation 

has been appointed receiver, including assets which the 

Corporation may acquire from itself as such receiver; or

(ii) any claim relating to any act or omission of such 

System institution or the Corporation as receiver.

(E) DISPOSITION OF ASSETS.—In exercising any right, 

power, privilege, or authority as receiver in connection with any 

sale or disposition of assets of any System institution for which the 

Corporation is acting as receiver, the December 20, 2018 

Corporation shall, to the maximum extent practicable, conduct its 

operations in a manner which—

(i) maximizes the net present value return from the 

sale or disposition of such assets;

(ii) minimizes the amount of any loss realized in the 

resolution of cases;

(iii) ensures adequate competition and fair and 

consistent treatment of offerors;

(iv) prohibits discrimination on the basis of race, sex, 

or ethnic groups in the solicitation and consideration of 

offers; and

(v) mitigates the potential for serious adverse effects 

to the rest of the System.
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(14) STATUTE OF LIMITATIONS FOR ACTIONS 

BROUGHT BY CONSERVATOR OR RECEIVER.—

(A) IN GENERAL.—Notwithstanding any provision of 

any contract, the applicable statute of limitations with regard to 

any action brought by the Corporation as conservator or receiver 

shall be—

(i) in the case of any contract claim, the longer of—

(I) the 6-year period beginning on the date the 

claim accrues; or

(II) the period applicable under State law; and

(ii) in the case of any tort claim, the longer of—

(I) the 3-year period beginning on the date the 

claim accrues; or

(II) the period applicable under State law.

(B) DETERMINATION OF THE DATE ON WHICH A 

CLAIM ACCRUES.—For purposes of subparagraph (A), the date 

on which the statute of limitations begins to run on any claim 

described in such subparagraph shall be the later of—

(i) the date of the appointment of the Corporation as 

conservator or receiver; or

(ii) the date on which the cause of action accrues.

(C) REVIVAL OF EXPIRED STATE CAUSES OF 

ACTION.—

(i) IN GENERAL.—In the case of any tort claim 

described in clause (ii) for which the statute of limitation 

applicable under State law with respect to such claim has 

expired not more than 5 years before the appointment of the 

Corporation as conservator or receiver, the Corporation may 

bring an action as conservator or receiver on such claim 

without regard to the expiration of the statute of limitation 

applicable under State law.

(ii) CLAIMS DESCRIBED.—A tort claim referred 

to in clause (i) is a claim arising from fraud, intentional 

misconduct resulting in unjust enrichment, or intentional 

misconduct resulting in substantial loss to the System 

institution.

(15) ACCOUNTING AND RECORDKEEPING 

REQUIREMENTS.—

(A) IN GENERAL.—The Corporation as conservator or 

receiver shall, consistent with the accounting and reporting 

practices and procedures established by the Corporation, maintain 

a full accounting of each conservatorship and receivership or other 

disposition of System institutions in default.

(B) ANNUAL ACCOUNTING OR REPORT.—With 

respect to each conservatorship or receivership to which the 

Corporation was appointed, the Corporation shall make an annual 

accounting or report, as appropriate, available to the Farm Credit 

Administration Board.
121

(C) AVAILABILITY OF REPORTS.—Any report 

prepared pursuant to subparagraph (B) shall be made available by 

the Corporation upon request to any stockholder of the System 

institution for which the Corporation was appointed conservator or 

receiver or any other member of the public.

(D) RECORDKEEPING REQUIREMENT.—

(i) IN GENERAL.—Except as provided in clause 

(ii), after the end of the 6-year period beginning on the date 

the Corporation is appointed as receiver of a System 

institution, the Corporation may destroy any records of such 

System institution which the Corporation, in the 

Corporation’s discretion, determines to be unnecessary unless 

directed not to do so by a court of competent jurisdiction or 

governmental agency, or prohibited by law.

(ii) OLD RECORDS.—Notwithstanding clause (i), 

the Corporation may destroy records of a System institution 

which are at least 10 years old as of the date on which the 

Corporation is appointed as the receiver of such System 

institution in accordance with clause (i) at any time after such 

appointment is final, without regard to the 6-year period of 

limitation contained in clause (i).

(16) FRAUDULENT TRANSFERS.—

(A) IN GENERAL.—The Corporation, as conservator or 

receiver for any System institution, may avoid a transfer of any 

interest of a System institution- affiliated party, or any person who 

the Corporation determines is a debtor of the System institution, in 

property, or any obligation incurred by such party or person, that 

was made within 5 years of the date on which the Corporation was 

appointed conservator or receiver if such party or person 

voluntarily or involuntarily made such transfer or incurred such 

liability with the intent to hinder, delay, or defraud the System 

institution, the Farm Credit Administration, or the Corporation.

(B) RIGHT OF RECOVERY.—To the extent a transfer is 

avoided under subparagraph (A), the Corporation may recover, for 

the benefit of the System institution, the property transferred, or, if 

a court so orders, the value of such property (at the time of such 

transfer) from—

(i) the initial transferee of such transfer or the System 

institution-affiliated party or person for whose benefit such 

transfer was made; or

(ii) any immediate or mediate transferee of any such 

initial transferee.

(C) RIGHTS OF TRANSFEREE OR OBLIGEE.—The 

Corporation may not recover under subparagraph (B) from—

(i) any transferee that takes for value, including 

satisfaction or securing of a present or antecedent debt, in 

good faith; or

(ii) any immediate or mediate good faith transferee of 

such transferee.
122

(D) RIGHTS UNDER THIS PARAGRAPH.—The rights 

under this paragraph of the Corporation shall be superior to any 

rights of a trustee or any other party (other than any party which is 

a Federal agency) under title 11, United States Code.

(17) ATTACHMENT OF ASSETS AND OTHER 

INJUNCTIVE RELIEF.—Subject to paragraph (18), any court of 

competent jurisdiction may, at the request of the Corporation (in the 

Corporation’s capacity as conservator or receiver for any System 

institution or in the Corporation’s corporate capacity with respect to any 

asset acquired or liability assumed by the Corporation under section 

5.61), issue an order in accordance with Rule 65 of the Federal Rules of 

Civil Procedure, including an order placing the assets of any person 

designated by the Corporation under the control of the court and 

appointing a trustee to hold such assets.

(18) STANDARDS.—

(A) SHOWING.—Rule 65 of the Federal Rules of Civil 

Procedure shall apply with respect to any proceeding under 

paragraph (17) without regard to the requirement of such rule that 

the applicant show that the injury, loss, or damage is irreparable 

and immediate.

(B) STATE PROCEEDING.—If, in the case of any 

proceeding in a State court, the court determines that rules of civil 

procedure available under the laws of such State provide 

substantially similar protections to such party’s right to due 

process as Rule 65 (as modified with respect to such proceeding by 

subparagraph (A)), the relief sought by the Corporation pursuant 

to paragraph (17) may be requested under the laws of such State.

(19) TREATMENT OF CLAIMS ARISING FROM BREACH 

OF CONTRACTS EXECUTED BY THE RECEIVER OR 

CONSERVATOR.—Notwithstanding any other provision of this 

subsection, any final and unappealable judgment for monetary damages 

entered against a receiver or conservator for a System institution for the 

breach of an agreement executed or approved by such receiver or 

conservator after the date of its appointment shall be paid as an 

administrative expense of the receiver or conservator. Nothing in this 

paragraph shall be construed to limit the power of a receiver or 

conservator to exercise any rights under contract or law, including 

terminating, breaching, canceling, or otherwise discontinuing such 

agreement.

(c) PROVISIONS RELATING TO CONTRACTS ENTERED INTO 

BEFORE APPOINTMENT OF CONSERVATOR OR RECEIVER.—

(1) AUTHORITY TO REPUDIATE CONTRACTS.—In 

addition to any other rights a conservator or receiver may have, the 

conservator or receiver for a System institution may disaffirm or 

repudiate any contract or lease—

(A) to which such System institution is a party;
123

(B) the performance of which the conservator or receiver, 

in the conservator’s or receiver’s discretion, determines to be 

burdensome; and

(C) the disaffirmance or repudiation of which the 

conservator or receiver determines, in the conservator’s or 

receiver’s discretion, will promote the orderly administration of the 

System institution’s affairs.

(2) TIMING OF REPUDIATION.—The Corporation as 

conservator or receiver for any System institution shall determine 

whether or not to exercise the rights of repudiation under this subsection 

within a reasonable period following such appointment.

(3) CLAIMS FOR DAMAGES FOR REPUDIATION.—

(A) IN GENERAL.—Except as otherwise provided in 

subparagraph (C) and paragraphs (4), (5), and (6), the liability of 

the conservator or receiver for the disaffirmance or repudiation of 

any contract pursuant to paragraph (1) shall be—

(i) limited to actual direct compensatory damages;

and

(ii) determined as of—

(I) the date of the appointment of the 

conservator or receiver; or

(II) in the case of any contract or agreement 

referred to in paragraph (8), the date of the 

disaffirmance or repudiation of such contract or 

agreement.

(B) NO LIABILITY FOR OTHER DAMAGES.—For 

purposes of subparagraph (A), the term actual direct compensatory 

damages does not include—

(i) punitive or exemplary damages;

(ii) damages for lost profits or opportunity; or

(iii) damages for pain and suffering.

(C) MEASURE OF DAMAGES FOR REPUDIATION 

OF FINANCIAL CONTRACTS.—In the case of any qualified 

financial contract or agreement to which paragraph (8) applies, 

compensatory damages shall be—

(i) deemed to include normal and reasonable costs of 

cover or other reasonable measures of damages utilized in the 

industries for such contract and agreement claims; and

(ii) paid in accordance with this subsection and

subsection (j), except as otherwise specifically provided in 

this section.

(4) LEASES UNDER WHICH THE SYSTEM INSTITUTION 

IS THE LESSEE.—

(A) IN GENERAL.—If the conservator or receiver 

disaffirms or repudiates a lease under which the System institution 

was the lessee, the conservator or receiver shall not be liable for 

any damages (other than damages determined pursuant to 
124

subparagraph (B)) for the disaffirmance or repudiation of such 

lease.

(B) PAYMENTS OF RENT.—Notwithstanding 

subparagraph (A), the lessor under a lease to which such 

subparagraph applies shall—

(i) be entitled to the contractual rent accruing before 

the later of the date—

(I) the notice of disaffirmance or repudiation is 

mailed; or

(II) the disaffirmance or repudiation becomes 

effective, unless the lessor is in default or breach of the 

terms of the lease; and

(ii) have no claim for damages under any acceleration 

clause or other penalty provision in the lease; and

(iii) have a claim for any unpaid rent, subject to all 

appropriate offsets and defenses, due as of the date of the 

appointment, which shall be paid in accordance with this 

subsection and subsection (j).

(5) LEASES UNDER WHICH THE SYSTEM INSTITUTION 

IS THE LESSOR.—

(A) IN GENERAL.—If the conservator or receiver 

repudiates an unexpired written lease of real property of the 

System institution under which the System institution is the lessor 

and the lessee is not, as of the date of such repudiation, in default, 

the lessee under such lease may either—

(i) treat the lease as terminated by such repudiation;

or

(ii) remain in possession of the leasehold interest for 

the balance of the term of the lease, unless the lessee defaults 

under the terms of the lease after the date of such repudiation.

(B) PROVISIONS APPLICABLE TO LESSEE 

REMAINING IN POSSESSION.—If any lessee under a lease 

described in subparagraph (A) remains in possession of a leasehold 

interest pursuant to clause (ii) of such subparagraph—

(i) the lessee—

(I) shall continue to pay the contractual rent 

pursuant to the terms of the lease after the date of the 

repudiation of such lease; and

(II) may offset against any rent payment which 

accrues after the date of the repudiation of the lease, 

any damages which accrue after such date due to the 

nonperformance of any obligation of the System 

institution under the lease after such date; and

(ii) the conservator or receiver shall not be liable to 

the lessee for any damages arising after such date as a result 

of the repudiation, other than the amount of any offset 

allowed under clause (i)(II).

(6) CONTRACTS FOR THE SALE OF REAL PROPERTY.—
125

(A) IN GENERAL.—If the conservator or receiver 

repudiates any contract that meets the requirements of paragraphs 

(1) through (4) of section 5.61(d) for the sale of real property, and 

the purchaser of such real property under such contract is in 

possession and is not, as of the date of such repudiation, in default, 

such purchaser may either—

(i) treat the contract as terminated by such 

repudiation; or

(ii) remain in possession of such real property.

(B) PROVISIONS APPLICABLE TO PURCHASER 

REMAINING IN POSSESSION.—If any purchaser of real 

property under any contract described in subparagraph (A) remains 

in possession of such property pursuant to clause (ii) of such 

subparagraph—

(i) the purchaser—

(I) shall continue to make all payments due 

under the contract after the date of the repudiation of 

the contract; and

(II) may offset against any such payments any 

damages which accrue after such date due to the 

nonperformance (after such date) of any obligation of 

the System institution under the contract; and

(ii) the conservator or receiver shall—

(I) not be liable to the purchaser for any 

damages arising after that date as a result of the 

repudiation, other than the amount of any offset 

allowed under clause (i)(II);

(II) deliver title to the purchaser in accordance 

with the contract; and

(III) have no obligation under the contract, other 

than the performance required under subclause (II).

(C) ASSIGNMENT AND SALE ALLOWED.—

(i) IN GENERAL.—No provision of this paragraph 

shall be construed as limiting the right of the conservator or 

receiver to assign the contract described in subparagraph (A) 

and sell the property subject to the contract and this 

paragraph.

(ii) NO LIABILITY AFTER ASSIGNMENT AND 

SALE.—If an assignment and sale described in clause (i) is 

consummated, the Corporation, acting as conservator or 

receiver, shall have no further liability under the applicable 

contract described in subparagraph (A) or with respect to the 

real property which was the subject of such contract.

(7) PROVISIONS APPLICABLE TO SERVICE 

CONTRACTS.—

(A) SERVICES PERFORMED BEFORE 

APPOINTMENT.—In the case of any contract for services 

between any person and any System institution for which the 

Corporation has been appointed conservator or receiver, any claim 
126

of such person for services performed before the appointment of 

the conservator or the receiver shall be—

(i) a claim to be paid in accordance with subsections 

(b) and (d); and

(ii) deemed to have arisen as of the date the 

conservator or receiver was appointed.

(B) SERVICES PERFORMED AFTER APPOINTMENT 

AND PRIOR TO REPUDIATION.—If, in the case of any contract 

for services described in subparagraph (A), the conservator or 

receiver accepts performance by the other person before the 

conservator or receiver makes any determination to exercise the 

right of repudiation of such contract under this section—

(i) the other party shall be paid under the terms of the 

contract for the services performed; and

(ii) the amount of such payment shall be treated as an 

administrative expense of the conservatorship or 

receivership.

(C) ACCEPTANCE OF PERFORMANCE NO BAR TO 

SUBSEQUENT REPUDIATION.—The acceptance by any 

conservator or receiver of services referred to in subparagraph (B) 

in connection with a contract described in such subparagraph shall 

not affect the right of the conservator or receiver, to repudiate such 

contract under this section at any time after such performance.

(8) CERTAIN QUALIFIED FINANCIAL CONTRACTS.—

(A) DEFINITIONS.—In this paragraph:

(i) COMMODITY CONTRACT.—The term 

commodity contract means—

(I) with respect to a futures commission 

merchant, a contract for the purchase or sale of a 

commodity for future delivery on, or subject to the rules 

of, a contract market or board of trade;

(II) with respect to a foreign futures commission 

merchant, a foreign future;

(III) with respect to a leverage transaction 

merchant, a leverage transaction;

(IV) with respect to a clearing organization, a 

contract for the purchase or sale of a commodity for 

future delivery on, or subject to the rules of, a contract 

market or board of trade that is cleared by such clearing 

organization, or commodity option traded on, or subject 

to the rules of, a contract market or board of trade that 

is cleared by such clearing organization;

(V) with respect to a commodity options dealer, 

a commodity option;

(VI) any other agreement or transaction that is 

similar to any agreement or transaction referred to in 

this clause;

(VII) any combination of the agreements or 

transactions referred to in this clause;
127

(VIII) any option to enter into any agreement or 

transaction referred to in this clause;

(IX) a master agreement that provides for an 

agreement or transaction referred to in any of 

subclauses (I) through (VIII), together with all 

supplements to any such master agreement, without 

regard to whether the master agreement provides for an 

agreement or transaction that is not a commodity 

contract under this clause, except that the master 

agreement shall be considered to be a commodity 

contract under this clause only with respect to each 

agreement or transaction under the master agreement 

that is referred to in subclause (I), (II), (III), (IV), (V), 

(VI), (VII), or (VIII); or

(X) any security agreement or arrangement 

or other credit enhancement related to any 

agreement or transaction referred to in this clause, 

including any guarantee or reimbursement 

obligation in connection with any agreement or 

transaction referred to in this clause.

(ii) FORWARD CONTRACT.—The term forward 

contract means—

(I) a contract (other than a commodity contract) 

for the purchase, sale, or transfer of a commodity or any 

similar good, article, service, right, or interest which is 

presently or in the future becomes the subject of dealing 

in the forward contract trade, or product or byproduct 

thereof, with a maturity date more than 2 days after the 

date the contract is entered into, including a repurchase 

or reverse repurchase transaction (whether or not such 

repurchase or reverse repurchase transaction is a 

repurchase agreement), consignment, lease, swap, 

hedge transaction, deposit, loan, option, allocated 

transaction, unallocated transaction, or any other similar 

agreement;

(II) any combination of agreements or 

transactions referred to in subclauses (I) and (III);

(III) any option to enter into any agreement or 

transaction referred to in subclause (I) or (II);

(IV) a master agreement that provides for an 

agreement or transaction referred to in subclauses (I)

through (III), together with all supplements to any such 

master agreement, without regard to whether the master 

agreement provides for an agreement or transaction that 

is not a forward contract under this clause, except that 

the master agreement shall be considered to be a 

forward contract under this clause only with respect to 

each agreement or transaction under the master 

agreement that is referred to in subclause (I), (II), or 

(III); or
128

(V) any security agreement or arrangement or 

other credit enhancement related to any agreement or 

transaction referred to in subclause (I), (II), (III), or 

(IV), including any guarantee or reimbursement 

obligation in connection with any agreement or 

transaction referred to in any such subclause.

(iii) PERSON.—The term person—

(I) has the meaning given the term in section 1 

of title 1, United States Code; and

(II) includes any governmental entity.

(iv) QUALIFIED FINANCIAL CONTRACT.—The 

term qualified financial contract means any securities 

contract, commodity contract, forward contract, repurchase 

agreement, swap agreement, and any similar agreement that 

the Corporation determines by regulation, resolution, or order 

to be a qualified financial contract for purposes of this 

paragraph.

(v) REPURCHASE AGREEMENT.—

(I) IN GENERAL.—The term repurchase 

agreement (including with respect to a reverse 

repurchase agreement)—

(aa) means—

(AA) an agreement, including 

related terms, which provides for the 

transfer of one or more certificates of 

deposit, mortgage-related securities (as such 

term is defined in section 3(a) of the 

Securities Exchange Act of 1934 (15 U.S.C. 

78c(a))), mortgage loans, interests in 

mortgage-related securities or mortgage 

loans, eligible bankers’ acceptances, 

qualified foreign government securities or 

securities that are direct obligations of, or 

that are fully guaranteed by, the United 

States or any agency of the United States 

against the transfer of funds by the 

transferee of such certificates of deposit, 

eligible bankers’ acceptances, securities, 

mortgage loans, or interests with a 

simultaneous agreement by such transferee 

to transfer to the transferor thereof 

certificates of deposit, eligible bankers’ 

acceptances, securities, mortgage loans, or 

interests as described above, at a date certain 

not later than 1 year after such transfers or 

on demand, against the transfer of funds, or 

any other similar agreement;

(BB) any combination of agreements 

or transactions referred to in subitems (AA) 

and (CC);
129

(CC) any option to enter into any 

agreement or transaction referred to in 

subitem (AA) or (BB);

(DD) a master agreement that 

provides for an agreement or transaction 

referred to in subitem (AA), (BB), or (CC), 

together with all supplements to any such 

master agreement, without regard to whether 

the master agreement provides for an 

agreement or transaction that is not a 

repurchase agreement under this item, 

except that the master agreement shall be 

considered to be a repurchase agreement 

under this item only with respect to each 

agreement or transaction under the master 

agreement that is referred to in subitem 

(AA), (BB), or (CC); and

(EE) any security agreement or 

arrangement or other credit enhancement 

related to any agreement or transaction 

referred to in any of subitems (AA) through 

(DD), including any guarantee or 

reimbursement obligation in connection with 

any agreement or transaction referred to in 

any such subitem; and

(bb) does not include any repurchase 

obligation under a participation in a commercial 

mortgage, loan unless the Corporation determines 

by regulation, resolution, or order to include any 

such participation within the meaning of such term.

(II) RELATED DEFINITION.—For purposes of 

subclause (I)(aa), the term qualified foreign government 

security means a security that is a direct obligation of, 

or that is fully guaranteed by, the central government of 

a member of the Organization for Economic 

Cooperation and Development (as determined by 

regulation or order adopted by the appropriate Federal 

banking authority).

(vi) SECURITIES CONTRACT.—The term 

securities contract—

(I) means—

(aa) a contract for the purchase, sale, or 

loan of a security, a certificate of deposit, a 

mortgage loan, any interest in a mortgage loan, a 

group or index of securities, certificates of deposit, 

or mortgage loans or interests therein (including 

any interest therein or based on the value thereof) 

or any option on any of the foregoing, including 

any option to purchase or sell any such security, 

certificate of deposit, mortgage loan, interest, 
130

group or index, or option, and including any 

repurchase or reverse repurchase transaction on 

any such security, certificate of deposit, mortgage 

loan, interest, group or index, or option (whether or 

not the repurchase or reverse repurchase 

transaction is a repurchase agreement); 

(bb) any option entered into on a national 

securities exchange relating to foreign currencies;

(cc) the guarantee (including by novation) 

by or to any securities clearing agency of any 

settlement of cash, securities, certificates of 

deposit, mortgage loans or interests therein, group 

or index of securities, certificates of deposit, or 

mortgage loans or interests therein (including any 

interest therein or based on the value thereof) or 

option on any of the foregoing, including any 

option to purchase or sell any such security, 

certificate of deposit, mortgage loan, interest, 

group or index, or option (whether or not the 

settlement is in connection with any agreement or 

transaction referred to in any of items (aa), (bb), 

and (dd) through (kk));

(dd) any margin loan;

(ee) any extension of credit for the 

clearance or settlement of securities transactions;

(ff) any loan transaction coupled with a 

securities collar transaction, any prepaid securities 

forward transaction, or any total return swap 

transaction coupled with a securities sale 

transaction;

(gg) any other agreement or transaction 

that is similar to any agreement or transaction 

referred to in this subclause;

(hh) any combination of the agreements or 

transactions referred to in this subclause;

(ii) any option to enter into any 

agreement or transaction referred to in this 

subclause;

(jj) a master agreement that provides for 

an agreement or transaction referred to in any of 

items (aa) through (ii), together with all 

supplements to any such master agreement, 

without regard to whether the master agreement 

provides for an agreement or transaction that is not 

a securities contract under this subclause, except 

that the master agreement shall be considered to be 

a securities contract under this subclause only with 

respect to each agreement or transaction under the 

master agreement that is referred to in item (aa), 

(bb), (cc), (dd), (ee), (ff), (gg), (hh), or (ii); and
131

(kk) any security agreement or 

arrangement or other credit enhancement related to 

any agreement or transaction referred to in this 

subclause, including any guarantee or 

reimbursement obligation in connection with any 

agreement or transaction referred to in this 

subclause; and

(II) does not include any purchase, sale, or 

repurchase obligation under a participation in a 

commercial mortgage loan unless the Corporation 

determines by regulation, resolution, or order to include 

any such agreement within the meaning of such term. 

(vii) SWAP AGREEMENT.—The term swap 

agreement means—

(I) any agreement, including the terms and 

conditions incorporated by reference in any such 

agreement, that is—

(aa) an interest rate swap, option, future, or 

forward agreement, including a rate floor, rate cap, 

rate collar, cross-currency rate swap, and basis 

swap;

(bb) a spot, same day-tomorrow, 

tomorrow-next, forward, or other foreign exchange 

precious metals or other commodity agreement;

(cc) a currency swap, option, future, or 

forward agreement;

(dd) an equity index or equity swap, 

option, future, or forward agreement;

(ee) a debt index or debt swap, option, 

future, or forward agreement;

(ff) a total return, credit spread or credit 

swap, option, future, or forward agreement;

(gg) a commodity index or commodity 

swap, option, future, or forward agreement;

(hh) a weather swap, option, future, or 

forward agreement;

(ii) an emissions swap, option, future, or 

forward agreement; or

(jj) an inflation swap, option, future, or 

forward agreement;

(II) any agreement or transaction that is similar 

to any other agreement or transaction referred to in this 

clause and that is of a type that has been, is presently, or 

in the future becomes, the subject of recurrent dealings 

in the swap or other derivatives markets (including 

terms and conditions incorporated by reference in such 

agreement) and that is a forward, swap, future, option 

or spot transaction on one or more rates, currencies, 

commodities, equity securities or other equity 

instruments, debt securities or other debt instruments, 
132

quantitative measures associated with an occurrence, 

extent of an occurrence, or contingency associated with 

a financial, commercial, or economic consequence, or 

economic or financial indices or measures of economic 

or financial risk or value;

(III) any combination of agreements or 

transactions referred to in this clause;

(IV) any option to enter into any agreement or 

transaction referred to in this clause;

(V) a master agreement that provides for an 

agreement or transaction referred to in any of 

subclauses (I) through (IV), together with all 

supplements to any such master agreement, without 

regard to whether the master agreement contains an 

agreement or transaction that is not a swap agreement 

under this clause, except that the master agreement 

shall be considered to be a swap agreement under this 

clause only with respect to each agreement or 

transaction under the master agreement that is referred 

to in subclause (I), (II), (III), or (IV); and

(VI) any security agreement or arrangement or 

other credit enhancement related to any agreements or 

transactions referred to in any of subclauses (I) through 

(V), including any guarantee or reimbursement 

obligation in connection with any agreement or 

transaction referred to in any such subclause.

(viii) TRANSFER.—The term transfer means every 

mode, direct or indirect, absolute or conditional, voluntary or 

involuntary, of disposing of or parting with property or with 

an interest in property, including retention of title as a 

security interest and foreclosure of the equity of redemption 

of a System institution.

(ix) TREATMENT OF MASTER AGREEMENT 

AS 1 AGREEMENT.—For purposes of this subparagraph—

(I) any master agreement for any contract or 

agreement described in this subparagraph (or any 

master agreement for such a master agreement or 

agreements), together with all supplements to the 

master agreement, shall be treated as a single agreement 

and a single qualified financial contact; and

(II) if a master agreement contains provisions 

relating to agreements or transactions that are not 

qualified financial contracts, the master agreement shall 

be deemed to be a qualified financial contract only with 

respect to those transactions that are themselves 

qualified financial contracts.

(B) RIGHTS OF PARTIES TO CONTRACTS.— Subject 

to paragraphs (9) and (10), and notwithstanding any other 

provision of this Act (other than subsection (b)(9) and section 
133

5.61(d)) or any other Federal or State law, no person shall be 

stayed or prohibited from exercising—

(i) any right such person has to cause the termination, 

liquidation, or acceleration of any qualified financial contract 

with a System institution which arises upon the appointment 

of the Corporation as receiver for such System institution at 

any time after such appointment;

(ii) any right under any security agreement or 

arrangement or other credit enhancement related to one or 

more qualified financial contracts described in clause (i); or

(iii) any right to offset or net out any termination value, 

payment amount, or other transfer obligation arising under, 

or in connection with, 1 or more contracts and agreements 

described in clause (i), including any master agreement for 

such contracts or agreements.

(C) APPLICABILITY OF OTHER PROVISIONS.—

Subsection (b)(12) shall apply in the case of any judicial action or 

proceeding brought against any receiver referred to in 

subparagraph (A), or the System institution for which such receiver 

was appointed, by any party to a contract or agreement described 

in subparagraph (B)(i) with such System institution.

(D) CERTAIN TRANSFERS NOT AVOIDABLE.—

(i) IN GENERAL.—Notwithstanding paragraph (11) 

or any other Federal or State law relating to the avoidance of 

preferential or fraudulent transfers, the Corporation, whether 

acting as such or as conservator or receiver of a System 

institution, may not avoid any transfer of money or other 

property in connection with any qualified financial contract 

with a System institution.

(ii) EXCEPTION FOR CERTAIN TRANSFERS.—

Clause (i) shall not apply to any transfer of money or other 

property in connection with any qualified financial contract 

with a System institution if the Corporation determines that 

the transferee had actual intent to hinder, delay, or defraud 

such System institution, the creditors of such System 

institution, or any conservator or receiver appointed for such 

System institution.

(E) CERTAIN PROTECTIONS IN EVENT OF 

APPOINTMENT OF CONSERVATOR.—Notwithstanding any 

other provision of this Act (other than subparagraph (G), paragraph 

(10), subsection (b)(9), and section 5.61(d)) or any other Federal or 

State law, no person shall be stayed or prohibited from 

exercising—

(i) any right such person has to cause the termination, 

liquidation, or acceleration of any qualified financial contract 

with a System institution in a conservatorship based upon a 

default under such financial contract which is enforceable 

under applicable noninsolvency law;
134

(ii) any right under any security agreement or 

arrangement or other credit enhancement related to one or 

more qualified financial contracts described in clause (i); and

(iii) any right to offset or net out any termination 

values, payment amounts, or other transfer obligations arising

under or in connection with such qualified financial 

contracts.

(F) CLARIFICATION.—No provision of law shall be 

construed as limiting the right or power of the Corporation, or 

authorizing any court or agency to limit or delay, in any manner, 

the right or power of the Corporation to transfer any qualified 

financial contract in accordance with paragraphs (9) and (10) or to 

disaffirm or repudiate any such contract in accordance with 

paragraph (1).

(G) WALKAWAY CLAUSES NOT EFFECTIVE.—

(i) DEFINITION OF WALKAWAY CLAUSE.—In 

this subparagraph, the term walkaway clause means any 

provision in a qualified financial contract that suspends, 

conditions, or extinguishes a payment obligation of a party, 

in whole or in part, or does not create a payment obligation of 

a party that would otherwise exist—

(I) solely because of—

(aa) the status of the party as a 

nondefaulting party in connection with the 

insolvency of a System institution that is a party to 

the contract; or

(bb) the appointment of, or the exercise of 

rights or powers by, the Corporation as a 

conservator or receiver of the System institution; 

and

(II) not as a result of the exercise by a party of 

any right to offset, setoff, or net obligations that exist 

under—

(aa) the contract;

(bb) any other contract between those 

parties; or

(cc) applicable law.

(ii) TREATMENT.—Notwithstanding the provisions 

of subparagraphs (B) and (E), no walkaway clause shall be 

enforceable in a qualified financial contract of a System 

institution in default.

(iii) LIMITED SUSPENSION OF CERTAIN 

OBLIGATIONS.—In the case of a qualified financial 

contract referred to in clause (ii), any payment or delivery 

obligations otherwise due from a party pursuant to the 

qualified financial contract shall be suspended from the time 

the receiver is appointed until the earlier of—

(I) the time such party receives notice that such 

contract has been transferred pursuant to subparagraph 

(B); or
135

(II) 5:00 p.m. (eastern time) on the business day 

following the date of the appointment of the receiver.

(H) RECORDKEEPING REQUIREMENTS.—The 

Corporation, in consultation with the Farm Credit Administration, 

may prescribe regulations requiring more detailed recordkeeping 

by any System institution with respect to qualified financial 

contracts (including market valuations), only if such System 

institution is subject to subclause (I), (III), or (IV) of section 

5.61B(a)(1)(A)(ii).

(9) TRANSFER OF QUALIFIED FINANCIAL 

CONTRACTS.—

(A) DEFINITIONS.—In this paragraph:

(i) CLEARING ORGANIZATION.—The term 

clearing organization has the meaning given the term in 

section 402 of the Federal Deposit Insurance Corporation 

Improvement Act of 1991 (12 U.S.C. 4402).

(ii) FINANCIAL INSTITUTION.—The term 

financial institution means a System institution, a broker or 

dealer, a depository institution, a futures commission 

merchant, or any other institution, as determined by the 

Corporation by regulation to be a financial institution.

(B) REQUIREMENT.—In making any transfer of assets 

or liabilities of a System institution in default which includes any 

qualified financial contract, the conservator or receiver for such 

System institution shall either—

(i) transfer to one financial institution, other than a 

financial institution for which a conservator, receiver, trustee 

in bankruptcy, or other legal custodian has been appointed, or 

that is otherwise the subject of a bankruptcy or insolvency 

proceeding—

(I) all qualified financial contracts between any 

person or any affiliate of such person and the System 

institution in default;

(II) all claims of such person or any affiliate of 

such person against such System institution under any 

such contract (other than any claim which, under the 

terms of any such contract, is subordinated to the claims 

of general unsecured creditors of such System 

institution);

(III) all claims of such System institution against 

such person or any affiliate of such person under any 

such contract; and

(IV) all property securing or any other credit 

enhancement for any contract described in subclause (I)

or any claim described in subclause (II) or (III) under 

any such contract; or

(ii) transfer none of the qualified financial contracts, 

claims, property or other credit enhancement referred to in 
136

clause (i) (with respect to such person and any affiliate of 

such person).

(C) TRANSFER TO FOREIGN BANK, FOREIGN 

FINANCIAL INSTITUTION, OR BRANCH OR AGENCY OF A 

FOREIGN BANK OR FINANCIAL INSTITUTION.—In 

transferring any qualified financial contracts and related claims and 

property under subparagraph (B)(i), the conservator or receiver for 

the System institution shall not make such transfer to a foreign 

bank, financial institution organized under the laws of a foreign 

country, or a branch or agency of a foreign bank or financial 

institution unless, under the law applicable to such bank, financial 

institution, branch or agency, to the qualified financial contracts, 

and to any netting contract, any security agreement or arrangement 

or other credit enhancement related to one or more qualified 

financial contracts, the contractual rights of the parties to such 

qualified financial contracts, netting contracts, security agreements 

or arrangements, or other credit enhancements are enforceable 

substantially to the same extent as permitted under this section.

(D) TRANSFER OF CONTRACTS SUBJECT TO THE 

RULES OF A CLEARING ORGANIZATION.—In the event that 

a conservator or receiver transfers any qualified financial contract 

and related claims, property, and credit enhancements pursuant to 

subparagraph (B)(i) and such contract is cleared by or subject to 

the rules of a clearing organization, the clearing organization shall 

not be required to accept the transferee as a member by virtue of 

the transfer.

(10) NOTIFICATION OF TRANSFER.—

(A) DEFINITION OF BUSINESS DAY.—In this 

paragraph, the term business day means any day other than any 

Saturday, Sunday, or any day on which either the New York Stock 

Exchange or the Federal Reserve Bank of New York is closed.

(B) NOTIFICATION.—If—

(i) the conservator or receiver for a System institution 

in default makes any transfer of the assets and liabilities of 

such System institution; and

(ii) the transfer includes any qualified financial 

contract, the conservator or receiver shall notify any person 

who is a party to any such contract of such transfer by 5:00 

p.m. (eastern time) on the business day following the date of 

the appointment of the receiver in the case of a receivership, 

or the business day following such transfer in the case of a 

conservatorship.

(C) CERTAIN RIGHTS NOT ENFORCEABLE.—

(i) RECEIVERSHIP.—A person who is a party to a 

qualified financial contract with a System institution may not 

exercise any right that such person has to terminate, liquidate, 

or net such contract under paragraph (8)(B) of this 

subsection, solely by reason of or incidental to the 

appointment of a receiver for the System institution (or the 
137

insolvency or financial condition of the System institution for 

which the receiver has been appointed)—

(I) until 5:00 p.m. (eastern time) on the business 

day following the date of the appointment of the 

receiver; or

(II) after the person has received notice that the 

contract has been transferred pursuant to paragraph 

(9)(B).

(ii) CONSERVATORSHIP.—A person who is a 

party to a qualified financial contract with a System 

institution may not exercise any right that such person has to 

terminate, liquidate, or net such contract under paragraph 

(8)(E) of this subsection, solely by reason of or incidental to 

the appointment of a conservator for the System institution 

(or the insolvency or financial condition of the System 

institution for which the conservator has been appointed).

(iii) NOTICE.—For purposes of this paragraph, the 

Corporation as receiver or conservator of a System 

institution shall be deemed to have notified a person who is a 

party to a qualified financial contract with such System 

institution if the Corporation has taken steps reasonably 

calculated to provide notice to such person by the time 

specified in subparagraph (B).

(D) TREATMENT OF BRIDGE SYSTEM 

INSTITUTIONS.—The following System institutions shall not be 

considered to be a financial institution for which a conservator, 

receiver, trustee in bankruptcy, or other legal custodian has been 

appointed or which is otherwise the subject of a bankruptcy or 

insolvency proceeding for purposes of paragraph (9):

(i) A bridge System bank.

(ii) A System institution organized by the Corporation 

or the Farm Credit Administration, for which a conservator is 

appointed either—

(I) immediately upon the organization of the 

System institution; or

(II) at the time of a purchase and assumption 

transaction between the System institution and the 

Corporation as receiver for a System institution in 

default.

(11) DISAFFIRMANCE OR REPUDIATION OF QUALIFIED 

FINANCIAL CONTRACTS.—In exercising the rights of disaffirmance 

or repudiation of a conservator or receiver with respect to any qualified 

financial contract to which a System institution is a party, the 

conservator or receiver for such System institution shall either—

(A) disaffirm or repudiate all qualified financial contracts 

between—

(i) any person or any affiliate of such person; and

(ii) the System institution in default; or
138

(B) disaffirm or repudiate none of the qualified financial 

contracts referred to in subparagraph (A) (with respect to such 

person or any affiliate of such person). 

(12) CERTAIN SECURITY INTERESTS NOT 

AVOIDABLE.—No provision of this subsection shall be construed as 

permitting the avoidance of any legally enforceable or perfected security 

interest in any of the assets of any System institution except where such 

an interest is taken in contemplation of the System institution’s 

insolvency or with the intent to hinder, delay, or defraud the System 

institution or the creditors of such System institution.

(13) AUTHORITY TO ENFORCE CONTRACTS.—

(A) IN GENERAL.—The conservator or receiver may 

enforce any contract, other than a director’s or officer’s liability 

insurance contract or a System institution bond, entered into by the 

System institution notwithstanding any provision of the contract 

providing for termination, default, acceleration, or exercise of 

rights upon, or solely by reason of, insolvency or the appointment 

of or the exercise of rights or powers by a conservator or receiver.

(B) CERTAIN RIGHTS NOT AFFECTED.—No provision 

of this paragraph may be construed as impairing or affecting any

right of the conservator or receiver to enforce or recover under a 

director’s or officer’s liability insurance contract or institution 

bond under other applicable law.

(C) CONSENT REQUIREMENT.—

(i) IN GENERAL.—Except as otherwise provided 

by this section, no person may exercise any right or power to 

terminate, accelerate, or declare a default under any contract 

to which the System institution is a party, or to obtain 

possession of or exercise control over any property of the 

System institution or affect any contractual rights of the 

System institution, without the consent of the conservator or 

receiver, as appropriate, during the 45-day period beginning 

on the date of the appointment of the conservator, or during 

the 90-day period beginning on the date of the appointment 

of the receiver, as applicable.

(ii) CERTAIN EXCEPTIONS.—No provision of this 

subparagraph shall apply to a director or officer liability 

insurance contract or an institution bond, to the rights of 

parties to certain qualified financial contracts pursuant to 

paragraph (8), or shall be construed as permitting the 

conservator or receiver to fail to comply with otherwise 

enforceable provisions of such contract.

(14) EXCEPTION FOR FEDERAL RESERVE AND THE 

UNITED STATES TREASURY.—No provision of this subsection shall 

apply with respect to—

(A) any extension of credit from any Federal Reserve bank 

or the United States Treasury to any System institution; or
139

(B) any security interest in the assets of the System 

institution securing any such extension of credit.

(15) SAVINGS CLAUSE.—The meanings of terms used in this 

subsection—

(A) are applicable for purposes of this subsection only; and

(B) shall not be construed or applied so as to challenge or 

affect the characterization, definition, or treatment of any similar 

terms under any other law, regulation, or rule, including—

(i) the Gramm-Leach-Bliley Act (12 U.S.C. 1811 

note; Public Law 106–102);

(ii) the Legal Certainty for Bank Products Act of 2000 

(7 U.S.C. 27 et seq.);

(iii) the securities laws (as that term is defined in 

section 3(a) of the Securities Exchange Act of 1934 (15 

U.S.C. 78c(a))); and

(iv) the Commodity Exchange Act (7 U.S.C. 1 et seq.).

(d) VALUATION OF CLAIMS IN DEFAULT.—

(1) IN GENERAL.—Notwithstanding any other provision of 

Federal law or the law of any State and regardless of the method which 

the Corporation determines to utilize with respect to a System institution 

in default or in danger of default, including transactions authorized 

under subsection (h) and section 5.61(a), this subsection shall govern the 

rights of the creditors of such System institution.

(2) MAXIMUM LIABILITY.—The maximum liability of the 

Corporation, acting as receiver or in any other capacity, to any person 

having a claim against the receiver or the System institution for which 

such receiver is appointed shall equal the amount such claimant would 

have received if the Corporation had liquidated the assets and liabilities 

of such System institution without exercising the Corporation’s authority 

under subsection (h) or section 5.61(a).

(3) ADDITIONAL PAYMENTS AUTHORIZED.—

(A) IN GENERAL.—The Corporation may, in its 

discretion and in the interests of minimizing its losses, use its own 

resources to make additional payments or credit additional 

amounts to or with respect to or for the account of any claimant or 

category of claimants. Notwithstanding any other provision of 

Federal or State law, or the constitution of any State, the 

Corporation shall not be obligated, as a result of having made any 

such payment or credited any such amount to or with respect to or 

for the account of any claimant or category of claimants, to make 

payments to any other claimant or category of claimants.

(B) MANNER OF PAYMENT.—The Corporation may 

make the payments or credit the amounts specified in subparagraph 

(A) directly to the claimants or may make such payments or credit 

such amounts to an open System institution to induce such System 

institution to accept liability for such claims.

(e) LIMITATION ON COURT ACTION.—Except as provided in 

this section, no court may take any action, except at the written request of the 
140

Board of Directors, to restrain or affect the exercise of powers or functions of 

the Corporation as a conservator or a receiver.

(f) LIABILITY OF DIRECTORS AND OFFICERS.—

(1) IN GENERAL.—A director or officer of a System 

institution may be held personally liable for monetary damages in any 

civil action—

(A) brought by, on behalf of, or at the request or direction 

of the Corporation;

(B) prosecuted wholly or partially for the benefit of the

Corporation—

(i) acting as conservator or receiver of that System 

institution;

(ii) acting based on a suit, claim, or cause of action 

purchased from, assigned by, or otherwise conveyed by that 

receiver or conservator; or

(iii) acting based on a suit, claim, or cause of action 

purchased from, assigned by, or otherwise conveyed in whole 

or in part by a System institution or an affiliate of a System 

institution in connection with assistance provided under 

section 5.61(a); and

(C) for, as determined under the applicable State law—

(i) gross negligence; or

(ii) any similar conduct, including conduct that 

demonstrates a greater disregard of a duty of care than gross 

negligence, such as intentional tortious conduct.

(2) EFFECT.—Nothing in paragraph (1) impairs or affects any 

right of the Corporation under any other applicable law.

(g) DAMAGES.—In any proceeding related to any claim against a 

System institution’s director, officer, employee, agent, attorney, accountant, 

appraiser, or any other party employed by or providing services to a System 

institution, recoverable damages determined to result from the improvident or 

otherwise improper use or investment of any System institution’s assets shall 

include principal losses and appropriate interest.

(h) BRIDGE FARM CREDIT SYSTEM BANKS.—

(1) ORGANIZATION.—

(A) PURPOSE.—

(i) IN GENERAL.—When 1 or more System banks

are in default, or when the Corporation anticipates that 1 or 

more System banks may become in default, the Corporation 

may, in its discretion, organize, and the Farm Credit 

Administration may, in its discretion, charter, 1 or more 

System banks, with the powers and attributes of System 

banks, subject to the provisions of this subsection, to be 

referred to as bridge System banks.

(ii) INTENT OF CONGRESS.—It is the intent of the 

Congress that, in order to prevent unnecessary hardship or 

losses to the customers of any System bank in default with 
141

respect to which a bridge System bank is chartered, the 

Corporation should—

(I) continue to honor commitments made by the 

System bank in default to creditworthy customers; and

(II) not interrupt or terminate adequately secured 

loans which are transferred under this subsection and 

are being repaid by the debtor in accordance with the 

terms of the loan instrument.

(B) AUTHORITIES.—Once chartered by the Farm Credit 

Administration, the bridge System bank may—

(i) assume such liabilities of the System bank or 

banks in default or in danger of default as the Corporation 

may, in its discretion, determine to be appropriate;

(ii) purchase such assets of the System bank or banks 

in default or in danger of default as the Corporation may, in 

its discretion, determine to be appropriate; and

(iii) perform any other temporary function which the 

Corporation may, in its discretion, prescribe in accordance 

with this Act.

(C) ARTICLES OF ASSOCIATION.—The articles of 

association and organization certificate of a bridge System bank as 

approved by the Corporation shall be executed by 3 representatives 

designated by the Corporation.

(D) INTERIM DIRECTORS.—A bridge System bank shall 

have an interim board of directors consisting of not fewer than 5 

nor more than 10 members appointed by the Corporation.

(2) CHARTERING.—

(A) CONDITIONS.—The Farm Credit Administration 

may charter a bridge System bank only if the Board of Directors 

determines that—

(i) the amount which is reasonably necessary to 

operate such bridge System bank will not exceed the amount 

which is reasonably necessary to save the cost of liquidating 

1 or more System banks in default or in danger of default 

with respect to which the bridge System bank is chartered;

(ii) the continued operation of such System bank or 

banks in default or in danger of default with respect to which 

the bridge System bank is chartered is essential to provide 

adequate farm credit services in the 1 or more communities 

where each such System bank in default or in danger of 

default is or was providing those farm credit services; or

(iii) the continued operation of such System bank or 

banks in default or in danger of default with respect to which 

the bridge System bank is chartered is in the best interest of 

the Farm Credit System or the public.

(B) BRIDGE SYSTEM BANK TREATED AS BEING IN 

DEFAULT FOR CERTAIN PURPOSES.—A bridge System bank 

shall be treated as being in default at such times and for such 

purposes as the Corporation may, in its discretion, determine.
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(C) MANAGEMENT.—A bridge System bank, upon the 

granting of its charter, shall be under the management of a board of 

directors consisting of not fewer than 5 nor more than 10 members 

appointed by the Corporation, in consultation with the Farm Credit 

Administration.

(D) BYLAWS.—The board of directors of a bridge 

System bank shall adopt such bylaws as may be approved by the 

Corporation.

(3) TRANSFER OF ASSETS AND LIABILITIES.—

(A) TRANSFER UPON GRANT OF CHARTER.—Upon 

the granting of a charter to a bridge System bank pursuant to this 

subsection, the Corporation, as receiver, may transfer any assets 

and liabilities of the System bank to the bridge System bank in 

accordance with paragraph (1).

(B) SUBSEQUENT TRANSFERS.—At any time after a 

charter is granted to a bridge System bank, the Corporation, as 

receiver, may transfer any assets and liabilities of such System 

bank in default as the Corporation may, in its discretion, determine

to be appropriate in accordance with paragraph (1).

(C) EFFECTIVE WITHOUT APPROVAL.—The transfer 

of any assets or liabilities of a System bank in default or danger of 

default transferred to a bridge System bank shall be effective 

without any further approval under Federal or State law, 

assignment, or consent with respect thereto.

(4) POWERS OF BRIDGE SYSTEM BANKS.—Each bridge 

System bank chartered under this subsection shall, to the extent 

described in the charter of the System bank in default with respect to 

which the bridge System bank is chartered, have all corporate powers of, 

and be subject to the same provisions of law as, any System bank, 

except that—

(A) the Corporation may—

(i) remove the interim directors and directors of a 

bridge System bank;

(ii) fix the compensation of members of the interim 

board of directors and the board of directors and senior 

management, as determined by the Corporation in its 

discretion, of a bridge System bank; and

(iii) waive any requirement established under Federal 

or State law which would otherwise be applicable with 

respect to directors of a bridge System bank, on the condition 

that the waiver of any requirement established by the Farm 

Credit Administration shall require the concurrence of the 

Farm Credit Administration;

(B) the Corporation may indemnify the representatives for 

purposes of paragraph (1)(B) and the interim directors, directors, 

officers, employees, and agents of a bridge System bank on such 

terms as the Corporation determines to be appropriate;
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(C) no requirement under any provision of law relating to 

the capital of a System institution shall apply with respect to a 

bridge System bank;

(D) the Farm Credit Administration Board may establish a 

limitation on the extent to which any person may become indebted 

to a bridge System bank without regard to the amount of the bridge 

System bank’s capital or surplus;

(E)(i) the board of directors of a bridge System bank shall 

elect a chairperson who may also serve in the position of chief 

executive officer, except that such person shall not serve either as 

chairperson or as chief executive officer without the prior approval 

of the Corporation; and

(ii) the board of directors of a bridge System bank 

may appoint a chief executive officer who is not also the 

chairperson, except that such person shall not serve as chief 

executive officer without the prior approval of the 

Corporation;

(F) the Farm Credit Administration may waive any 

requirement for a fidelity bond with respect to a bridge System 

bank at the request of the Corporation;

(G) any judicial action to which a bridge System bank 

becomes a party by virtue of its acquisition of any assets or 

assumption of any liabilities of a System bank in default shall be 

stayed from further proceedings for a period of up to 45 days at the 

request of the bridge System bank;

(H) no agreement which tends to diminish or defeat the 

right, title or interest of a bridge System bank in any asset of a 

System bank in default acquired by it shall be valid against the 

bridge System bank unless such agreement—

(i) is in writing;

(ii) was executed by such System bank in default and 

the person or persons claiming an adverse interest thereunder, 

including the obligor, contemporaneously with the 

acquisition of the asset by such System bank in default;

(iii) was approved by the board of directors of such 

System bank in default or its loan committee, which approval 

shall be reflected in the minutes of said board or committee; 

and

(iv) has been, continuously from the time of its 

execution, an official record of such System bank in default;

(I) notwithstanding subsection 5.61(d)(2), any agreement 

relating to an extension of credit between a System bank, Federal 

Reserve bank, or the United States Treasury and any System 

institution which was executed before the extension of credit by 

such lender to such System institution shall be treated as having 

been executed contemporaneously with such extension of credit for 

purposes of subparagraph (H); and

(J) except with the prior approval of the Corporation and 

the concurrence of the Farm Credit Administration, a bridge 
144

System bank may not, in any transaction or series of transactions, 

issue capital stock or be a party to any merger, consolidation, 

disposition of substantially all of the assets or liabilities of the 

bridge System bank, sale or exchange of capital stock, or similar 

transaction, or change its charter.

(5) CAPITAL.—

(A) NO CAPITAL REQUIRED.—The Corporation shall 

not be required to—

(i) issue any capital stock on behalf of a bridge 

System bank chartered under this subsection; or

(ii) purchase any capital stock of a bridge System 

bank, except that notwithstanding any other provision of 

Federal or State law, the Corporation may purchase and 

retain capital stock of a bridge System bank in such amounts 

and on such terms as the Corporation, in its discretion, 

determines to be appropriate.

(B) OPERATING FUNDS IN LIEU OF CAPITAL.—

Upon the organization of a bridge System bank, and thereafter, as 

the Corporation may, in its discretion, determine to be necessary or 

advisable, the Corporation may make available to the bridge 

System bank, upon such terms and conditions and in such form and 

amounts as the Corporation may in its discretion determine, funds 

for the operation of the bridge System bank in lieu of capital.

(C) AUTHORITY TO ISSUE CAPITAL STOCK.—

Whenever the Farm Credit Administration Board determines it is 

advisable to do so, the Corporation shall cause capital stock of a 

bridge System bank to be issued and offered for sale in such 

amounts and on such terms and conditions as the Corporation may, 

in its discretion, determine.

(6) EMPLOYEE STATUS.—Representatives for purposes of 

paragraph (1)(C), interim directors, directors, officers, employees, or 

agents of a bridge System bank are not, solely by virtue of service in any 

such capacity, officers or employees of the United States. Any employee 

of the Corporation, the Farm Credit Administration, or any Federal

instrumentality who serves at the request of the Corporation as a 

representative for purposes of paragraph (1)(C), interim director, 

director, officer, employee, or agent of a bridge System bank shall not—

(A) solely by virtue of service in any such capacity lose 

any existing status as an officer or employee of the United States 

for purposes of any provision of law; or

(B) receive any salary or benefits for service in any such 

capacity with respect to a bridge System bank in addition to such 

salary or benefits as are obtained through employment with the 

Corporation or such Federal instrumentality.

(7) ASSISTANCE AUTHORIZED.—The Corporation may, in 

its discretion, provide assistance under section 5.61(a) to facilitate any 

merger or consolidation of a bridge System bank in the same manner 

and to the same extent as such assistance may be provided to a 
145

qualifying insured System bank (as defined in section 5.61(a)(2)(B)) or 

to facilitate a bridge System bank’s acquisition of any assets or the 

assumption of any liabilities of a System bank in default or in danger of 

default.

(8) DURATION OF BRIDGE SYSTEM BANKS.—Subject to 

paragraphs (10) and (11), the status of a bridge System bank as such 

shall terminate at the end of the 2-year period following the date it was 

granted a charter. The Farm Credit Administration Board may, in its 

discretion, extend the status of the bridge System bank as such for 3 

additional 1-year periods.

(9) TERMINATION OF BRIDGE SYSTEM BANKS 

STATUS.—The status of any bridge System bank as such shall 

terminate upon the earliest of—

(A) the merger or consolidation of the bridge System bank 

with a System institution that is not a bridge System bank, on the 

condition that the merger or consolidation shall be subject to the 

approval of the Farm Credit Administration;

(B) at the election of the Corporation and with the 

approval of the Farm Credit Administration, the sale of a majority 

or all of the capital stock of the bridge System bank to a System 

institution or another bridge System bank;

(C) at the election of the Corporation, and with the 

approval of the Farm Credit Administration, either the assumption 

of all or substantially all of the liabilities of the bridge System 

bank, or the acquisition of all or substantially all of the assets of 

the bridge System bank, by a System institution that is not a bridge 

System bank or other entity as permitted under applicable law; and

(D) the expiration of the period provided in paragraph (8), 

or the earlier dissolution of the bridge System bank as provided in 

paragraph (11).

(10) EFFECT OF TERMINATION EVENTS.—

(A) MERGER OR CONSOLIDATION.—A bridge 

System bank that participates in a merger or consolidation as 

provided in paragraph (9)(A) shall be for all purposes a System

institution, with all the rights, powers, and privileges thereof, and 

such merger or consolidation shall be conducted in accordance 

with, and shall have the effect provided in, the provisions of 

applicable law.

(B) CHARTER CONVERSION.—Following the sale of a 

majority or all of the capital stock of the bridge System bank as 

provided in paragraph (9)(B), the Farm Credit Administration 

Board may amend the charter of the bridge System bank to reflect 

the termination of the status of the bridge System bank as such, 

whereupon the System bank shall remain a System bank, with all 

of the rights, powers, and privileges thereof, subject to all laws and 

regulations applicable thereto.

(C) ASSUMPTION OF LIABILITIES AND SALE OF 

ASSETS.—Following the assumption of all or substantially all of 
146

the liabilities of the bridge System bank, or the sale of all or 

substantially all of the assets of the bridge System bank, as 

provided in paragraph (9)(C), at the election of the Corporation, 

the bridge System bank may retain its status as such for the period 

provided in paragraph (8).

(D) AMENDMENTS TO CHARTER.—Following the 

consummation of a transaction described in subparagraph (A), (B), 

or (C) of paragraph (9), the charter of the resulting System 

institution shall be amended by the Farm Credit Administration to 

reflect the termination of bridge System bank status, if appropriate.

(11) DISSOLUTION OF BRIDGE SYSTEM BANK.—

(A) IN GENERAL.—Notwithstanding any other provision 

of State or Federal law, if the bridge System bank’s status as such 

has not previously been terminated by the occurrence of an event 

specified in subparagraph (A), (B), or (C) of paragraph (9)—

(i) the Corporation, after consultation with the Farm 

Credit Administration, may, in its discretion, dissolve a 

bridge System bank in accordance with this paragraph at any 

time; and

(ii) the Corporation, after consultation with the Farm 

Credit Administration, shall promptly commence dissolution 

proceedings in accordance with this paragraph upon the 

expiration of the 2-year period following the date the bridge 

System bank was chartered, or any extension thereof, as 

provided in paragraph (8).

(B) PROCEDURES.—The Farm Credit Administration 

Board shall appoint the Corporation as receiver for a bridge 

System bank upon determining to dissolve the bridge System bank. 

The Corporation as such receiver shall wind up the affairs of the 

bridge System bank in conformity with the provisions of law 

relating to the liquidation of closed System banks. With respect to 

any such bridge System bank, the Corporation as such receiver 

shall have all the rights, powers, and privileges and shall perform 

the duties related to the exercise of such rights, powers, or 

privileges granted by law to a receiver of any insured System bank 

and, notwithstanding any other provision of law in the exercise of 

such rights, powers, and privileges, the Corporation shall not be 

subject to the direction or supervision of any State agency or other 

Federal agency.

(12) MULTIPLE BRIDGE SYSTEM BANKS.—The 

Corporation may, in the Corporation’s discretion, organize, and the 

Farm Credit Administration may, in its discretion, charter, 2 or more 

bridge System banks under this subsection to assume any liabilities and 

purchase any assets of a single System institution in default.

(i) CERTAIN SALES OF ASSETS PROHIBITED.—

(1) PERSONS WHO ENGAGED IN IMPROPER CONDUCT 

WITH, OR CAUSED LOSSES TO, SYSTEM INSTITUTIONS.—The 

Corporation shall prescribe regulations which, at a minimum, shall 
147

prohibit the sale of assets of a failed System institution by the 

Corporation to—

(A) any person who—

(i) has defaulted, or was a member of a partnership or 

an officer or director of a corporation that has defaulted, on 1 

or more obligations the aggregate amount of which exceed 

$1,000,000, to such failed System institution;

(ii) has been found to have engaged in fraudulent 

activity in connection with any obligation referred to in 

clause (i); and

(iii) proposes to purchase any such asset in whole or in 

part through the use of the proceeds of a loan or advance of 

credit from the Corporation or from any System institution 

for which the Corporation has been appointed as conservator 

or receiver;

(B) any person who participated, as an officer or director 

of such failed System institution or of any affiliate of such System 

institution, in a material way in transactions that resulted in a 

substantial loss to such failed System institution;

(C) any person who has been removed from, or prohibited 

from participating in the affairs of, such failed System institution 

pursuant to any final enforcement action by the Farm Credit 

Administration;

(D) any person who has demonstrated a pattern or practice 

of defalcation regarding obligations to such failed System 

institution; or

(E) any person who is in default on any loan or other 

extension of credit from such failed System institution which, if 

not paid, will cause substantial loss to the System institution or the 

Corporation.

(2) DEFAULTED DEBTORS.—Except as provided in 

paragraph (3), any person who is in default on any loan or other 

extension of credit from the System institution, which, if not paid, will 

cause substantial loss to the System institution or the Corporation, may 

not purchase any asset from the conservator or receiver.

(3) SETTLEMENT OF CLAIMS.—Paragraph (1) shall not 

apply to the sale or transfer by the Corporation of any asset of any 

System institution to any person if the sale or transfer of the asset 

resolves or settles, or is part of the resolution or settlement, of—

(A) 1 or more claims that have been, or could have been, 

asserted by the Corporation against the person; or

(B) obligations owed by the person to any System 

institution, or the Corporation.

(4) DEFINITION OF DEFAULT.—For purposes of this 

subsection, the term default means a failure to comply with the terms of 

a loan or other obligation to such an extent that the property securing the 

obligation is foreclosed upon.

(j) EXPEDITED PROCEDURES FOR CERTAIN CLAIMS.—
148

(1) TIME FOR FILING NOTICE OF APPEAL.—The notice of 

appeal of any order, whether interlocutory or final, entered in any case 

brought by the Corporation against a System institution’s director, 

officer, employee, agent, attorney, accountant, or appraiser or any other 

person employed by or providing services to a System institution shall 

be filed not later than 30 days after the date of entry of the order. The 

hearing of the appeal shall be held not later than 120 days after the date 

of the notice of appeal. The appeal shall be decided not later than 180 

days after the date of the notice of appeal.

(2) SCHEDULING.—A court of the United States shall 

expedite the consideration of any case brought by the Corporation 

against a System institution’s director, officer, employee, agent, 

attorney, accountant, or appraiser or any other person employed by or 

providing services to a System institution. As far as practicable the court 

shall give such case priority on its docket.

(3) JUDICIAL DISCRETION.—The court may modify the 

schedule and limitations stated in paragraphs (1) and (2) in a particular 

case, based on a specific finding that the ends of justice that would be 

served by making such a modification would outweigh the best interest 

of the public in having the case resolved expeditiously.

(k) BOND NOT REQUIRED; AGENTS; FEE.—The Corporation as 

conservator or receiver of a System institution shall not be required to furnish 

bond and may appoint an agent or agents to assist in its duties as such 

conservator or receiver. All fees, compensation, and expenses of liquidation 

and administration shall be fixed by the Corporation and may be paid by it out 

of funds coming into its possession as such conservator or receiver.

(l) CONSULTATION REGARDING CONSERVATORSHIPS AND 

RECEIVERSHIPS.—To the extent practicable—

(1) the Farm Credit Administration shall consult with the 

Corporation prior to taking a preresolution action concerning a System 

institution that may result in a conservatorship or receivership; and

(2) the Corporation, acting in the capacity of the Corporation as 

a conservator or receiver, shall consult with the Farm Credit 

Administration prior to taking any significant action impacting System 

institutions or service to System borrowers.

(m) APPLICABILITY.—This section shall become applicable with 

respect to the power of the Corporation to act as a conservator or receiver on 

the date on which the Farm Credit Administration appoints the Corporation as 

a conservator or receiver under section 4.12 or 8.41. 

12 U.S.C. 2277a-11 Sec. 5.62. Investment of Funds.

Money of the Corporation not otherwise employed shall be invested in 

obligations of the United States or in obligations guaranteed as to principal 

and interest by the United States.

12 U.S.C. 2277a-12 Sec. 5.63. Exemption from Taxation.

Notwithstanding any other provision of law, the Corporation, including 

its franchise, and its capital, reserves, surplus, and income, shall be exempt 
149

from all taxation imposed by the United States, or by any State, county, 

municipality, or local taxing authority, except that any real property of the 

Corporation shall be subject to State, county, municipal, and local taxation to 

the same extent according to its value as other real property is taxed.

12 U.S.C. 2277a-13 Sec. 5.64. Reports.

(a) IN GENERAL. The Corporation annually shall prepare and 

submit to Congress a report of the operations of the Corporation, as soon as 

practicable after the first day of January in each calendar year.

(b) CONTENTS. Reports submitted under subsection (a) shall include 

information concerning the—

(1) aggregate amount in the Insurance Fund at the close of the 

preceding calendar year;

(2) projections of the costs to be incurred by the Corporation 

during the calendar year; and

(3) estimates of the aggregate amount to be collected as 

premiums during the calendar year.

12 U.S.C. 2277a-14 Sec. 5.65. Prohibitions.

(a) CORPORATE NAME.

(1) USE OF CORPORATE NAME. It shall be unlawful for any 

person or entity to use the words "Farm Credit System Insurance 

Corporation" or any combination of such words that would have the 

effect of leading the public to believe that there is any connection 

between such person or entity and the Corporation, by virtue of the 

name under which such person or entity does business.

(2) FALSE REPRESENTATION.

(A) BY OUTSIDE PERSON OR ENTITIES. It shall be 

unlawful for any person or entity to falsely represent by any 

device, that the notes, bonds, debentures, or other obligations of 

the person or entity are insured or in any way guaranteed by the 

Corporation.

(B) SYSTEM BANKS. It shall be unlawful for any insured 

System bank or person that markets insured obligations to falsely 

represent the extent to which or the manner in which such 

obligations are insured by the Corporation.

(3) PENALTY. Any person or entity that willfully violates any 

provision of this subsection shall be fined not more than $1,000, 

imprisoned for not more than 1 year, or both.

(b) PAYMENTS OR DISTRIBUTIONS WHILE IN DEFAULT.

(1) IN GENERAL. It shall be unlawful for any insured System 

bank to pay any dividends on bank stock or participation certificates or 

interest on the capital notes or debentures of such bank (if such interest 

is required to be paid only out of net profits) or distribute any of the 

capital assets of such bank while the bank remains in default in the 

payment of any premium due to the Corporation.
150

(2) LIABILITY OF DIRECTORS. Each director or officer of 

any insured System bank who willfully participates in the declaration or 

payment of any dividend or interest or in any distribution in violation of 

this subsection shall be fined not more than $1,000, imprisoned not more 

than 1 year, or both.

(3) APPLICABILITY. This subsection shall not apply to any 

default that is due to a dispute between the insured System bank and the 

Corporation over the amount of such premium if such bank deposits 

security satisfactory to the Corporation for payment on final 

determination of the issue.

(c) FAILURE TO FILE STATEMENT OR PAY PREMIUM.

(1) IN GENERAL. Any insured System bank that willfully fails 

or refuses to file any certified statement or pay any premium required 

under this part shall be subject to a penalty of not more than $100 for 

each day that such violations continue, which penalty the Corporation 

may recover for its use.

(2) APPLICABILITY. This subsection shall not apply to 

conduct with respect to any default that is due to a dispute between the 

insured System bank and the Corporation over the amount of such 

premium if such bank deposits security satisfactory to the Corporation 

for payment on final determination of the issue.

(d) EMPLOYMENT OF PERSONS CONVICTED OF CRIMINAL 

OFFENSES.

(1) IN GENERAL. Except with the prior written consent of the 

Farm Credit Administration, it shall be unlawful for any person 

convicted of any criminal offense involving dishonesty or a breach of 

trust to serve as a director, officer, or employee of any System 

institution. 

(2) PENALTY. For each willful violation of paragraph (1), the 

institution involved shall be subject to a penalty of not more than $100 

for each day during which the violation continues, which the 

Corporation may recover for its use.

(e) PROHIBITION ON USES OF FUNDS RELATED TO FEDERAL 

AGRICULTURAL MORTGAGE CORPORATION.—No funds from 

administrative accounts or from the Farm Credit System Insurance Fund may

be used by the Corporation to provide assistance to the Federal Agricultural

Mortgage Corporation or to support any activities related to the Federal 

Agricultural Mortgage Corporation.
151

Title VI—Assistance to Farm Credit System

The entire title was repealed by section 5411(39) of the Agriculture Improvement Act of 2018.

Title VII—Restructuring of System Institutions

Subtitle A—Merger of Banks Within a District 

12 U.S.C. 2279a Sec. 7.0. Power to Merge.

The banks within a district may merge into a single entity (hereinafter in 

this title referred to as a "merged bank") if the plan of merger is approved 

by—

(1) the Farm Credit Administration Board;

(2) the respective boards of directors of the banks involved;

(3) a majority of the stockholders of each bank voting, in person 

or by proxy, at a duly authorized stockholders' meeting with each 

association entitled to cast a number of votes equal to the number of its 

voting stockholders; and

(4) in the case of a bank for cooperatives, a majority of the total 

equity interests in such merging bank for cooperatives (including 

allocated, but not unallocated, surplus and reserves) held by those 

stockholders or subscribers to the guaranty fund of the bank voting.

12 U.S.C. 2279a-1 Sec. 7.1. Board of Directors.

Each merged bank shall elect a board of directors of such number, for 

such term, in such manner, and with such qualifications, as may be required in 

its bylaws, except that at least one member shall be elected by the other 

directors, which member shall not be a director, officer, employee, or 

stockholder of a System institution.

12 U.S.C. 2279a-2 Sec. 7.2. Powers of Merged Banks.

(a) IN GENERAL. Except as otherwise provided in this title, a 

merged bank shall have all of the powers granted to, and shall be subject to all 

of the obligations imposed on, any of the constituent entities of the merged 

bank.

(b) REGULATIONS. The Farm Credit Administration shall issue 

regulations that establish the manner in which the powers and obligations of 

the banks that form the merged bank are consolidated, and to the extent 

necessary, reconciled in the merged bank.

12 U.S.C. 2279a-3 Sec. 7.3. Capitalization.

In accordance with section 4.3A, each merged bank shall provide, 

through bylaws and subject to Farm Credit Administration regulations, for the 

capitalization of the bank and the manner in which bank stock shall be issued, 

held, transferred, and retired and bank earnings distributed.
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Subtitle B—Mergers, Transfers of Assets, and Powers of Associations Within a 

District

Chapter 1—Transfers by Federal Land Banks to Federal Land Bank Associations

12 U.S.C. 2279b Sec. 7.6. Transfer of Lending Authority.

(a) VOLUNTARY TRANSFERS. A Federal land bank or a merged 

bank having a Federal land bank as one of its constituents, may transfer to a 

Federal land bank association, and the association may assume, the authority 

of the transferring bank in the territorial area served by the association, to 

make and participate in long-term real estate mortgage loans under this Act if 

the transfer is approved by—

(1) the Farm Credit Administration Board;

(2) the Board of Directors of both institutions; and

(3) a majority of the stockholders of the bank and of the 

association, in accordance with the voting provisions of sections 7.0 and 

7.8, respectively.

(b) DIRECT LOANS AND FINANCIAL ASSISTANCE. After a 

transfer described in subsection (a) or (d)—

(1) the Federal land bank association shall possess all of the 

direct long-term real estate mortgage loan authority, formerly possessed 

by the transferring bank, in the territory served by the association; and

(2) the bank may provide and extend financial assistance to, and 

discount for, or purchase from, the transferee Federal land bank 

association any note, draft, or other obligation with the endorsement or 

guarantee of the association, the proceeds of which have been advanced 

to persons eligible and for purposes of financing by the association 

under subsection (a).

(c) REGULATIONS. The Farm Credit Administration shall issue 

regulations that establish the manner in which the powers and obligations of 

the banks that make transfers are consolidated and, to the extent necessary, 

reconciled in the association referred to in subsection (a).

(d) MANDATORY TRANSFER. On the merger of one or more 

production credit associations with one or more Federal land bank 

associations, the bank supervising the Federal land bank association shall 

transfer all of the direct lending authority of the bank in the territory served by 

such Federal land bank association to such merged association.

12 U.S.C. 2279cSec. 7.7. Equalization of Loan-Making Powers of Certain District 

Associations.

(a) EQUALIZATION OF LOAN-MAKING POWERS.—

(1) IN GENERAL.—

(A) FEDERAL LAND BANK ASSOCIATIONS.—Subject 

to paragraph (2), any association that owns a Federal land bank 

association authorized as of January 1, 2007, to make long-term 

loans under title I in its chartered territory within the geographic 
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area described in subsection (b) may make short- and intermediateterm loans and otherwise operate as a production credit association 

under title II within that same chartered territory.

(B) PRODUCTION CREDIT ASSOCIATIONS.—Subject 

to paragraph (2), any association that under its charter has title I 

lending authority and that owns a production credit association 

authorized as of January 1, 2007, to make short- and intermediateterm loans under title II in the geographic area described in 

subsection (b) may make long-term loans and otherwise operate, 

directly or through a subsidiary association, as a Federal land bank 

association or Federal land credit association under title I in the 

geographic area.

(C) FARM CREDIT BANK.—Notwithstanding section 

5.17(a), the Farm Credit Bank with which any association had a 

written financing agreement as of January 1, 2007, may make 

loans and extend other comparable financial assistance with 

respect to, and may purchase, any loans made under the new 

authority provided under subparagraph (A) or (B) by an 

association exercising such authority.

(2) REQUIRED APPROVALS.—An association may exercise 

the additional authority provided for in paragraph (1) only after the 

exercise of the authority is approved by—

(A) the board of directors of the association; and

(B) a majority of the voting stockholders of the association 

(or, if the association is a subsidiary of another association, the 

voting stockholders of the parent association) voting, in person or 

by proxy, at a duly authorized meeting of stockholders in 

accordance with the process described in section 7.11.

(b) APPLICABILITY.—This section applies only to associations the 

chartered territory of which was within the geographic area served by the 

Federal intermediate credit bank immediately prior to its merger with a Farm 

Credit Bank under section 410(e)(1) of the Agricultural Credit Act of 1987 

(12 U.S.C. 2011 note; Public Law 100-233).

NOTE: The amendments made by section 5407 of Public Law 110-246 

became effective on January 1, 2010.

Chapter 2—Merger of Like and Unlike Associations

12 U.S.C. 2279c-1 Sec. 7.8. Merger of Associations.

(a) IN GENERAL. Two or more associations within the same district, 

whether or not organized under the same title of this Act, may merge into a 

single entity (hereinafter in this title referred to as a "merged association") if 

the plan of merger is approved by—

(1) the Farm Credit Administration Board;

(2) the boards of directors of the associations;

(3) a majority of the shareholders of each association voting, in 

person or by proxy, at a duly authorized stockholders' meeting; and
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(4) the Farm Credit Bank.

(b) POWERS, OBLIGATIONS, AND CONSOLIDATION.

(1) POWERS AND OBLIGATIONS. Except as otherwise 

provided by this title, a merged association shall—

(A) possess all powers granted under this Act to the 

associations forming the merged association; and 

(B) be subject to all of the obligations imposed under this 

Act on the associations forming the merged association.

(2) CONSOLIDATION. The Farm Credit Administration shall 

issue regulations that establish the manner in which the powers and 

obligations of the associations that form the merged association are 

consolidated and, to the extent necessary, reconciled in the merged 

association. 

(c) STOCK ISSUANCE.

(1) PLAN OF MERGER. Subject to section 4.3A, the number of 

shares of capital stock issued by a merged association to the 

stockholders of any association forming such merged association, and 

the rights and privileges of such shares (including voting power, 

preferences on liquidation, and the right to dividends), shall be 

determined by the plan of merger adopted by the merged associations.

(2) CAPITALIZATION. In accordance with section 4.3A, each 

merged association shall provide, through bylaws and subject to Farm 

Credit Administration regulations, for the capitalization of the 

association and the manner in which association stock shall be issued, 

held, transferred, and retired, and association earnings shall be 

distributed.

Chapter 3—Reconsideration

12 U.S.C. 2279c-2Sec. 7.9. Reconsideration.

(a) PERIOD. A stockholder vote in favor of—

(1) the merger of districts under this Act;

(2) the merger of banks within a district under section 7.0;

(3) the transfer of the lending authority of a Federal land bank or 

a merged bank having a Federal land bank as one of its constituents, 

under section 7.6;

(4) the merger of two or more associations under section 7.8 or 

7.13;

(5) the termination of the status of an institution as a System 

institution under section 7.10; or

(6) the merger of similar banks under section 7.12;

shall not take effect except in accordance with subsection (b).

(b) RECONSIDERATION.

(1) NOTICE. Not later than 30 days after a stockholder vote in

favor of any of the actions described in subsection (a), the officer or 
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employee that records such vote shall ensure that all stockholders of the 

voting entity receive notice of the final results of the vote.

(2) EFFECTIVE DATE. A voluntary merger, transfer, or 

termination that is approved by a vote of the stockholders of two or 

more banks or associations shall not take effect until the expiration of 30 

days after the date on which the stockholders of such banks or 

associations are notified of the final result of the vote in accordance with 

paragraph (1).

(3) PETITION FILED. If a petition for reconsideration of a 

merger, transfer, or termination vote, signed by at least 15 percent of the 

stockholders of one or more of the affected banks or associations, is 

presented to the Farm Credit Administration within 30 days after the 

date of the notification required under paragraph (1)—

(A) a voluntary merger, transfer, or termination shall not 

take effect until the expiration of 60 days after the date on which 

the stockholders were notified of the final result of the vote; and

(B) a special meeting of the stockholders of the affected 

banks or associations shall be held during the period referred to in 

subparagraph (A) to reconsider the vote.

(4) VOTE ON RECONSIDERATION. If a majority of 

stockholders of any one of the affected banks or associations voting, in 

person or by written proxy, at a duly authorized stockholders' meeting, 

vote against the proposed merger, transfer, or termination, such action 

shall not take place.

(5) FAILURE TO FILE PETITION. If a petition for 

reconsideration of such vote is either not filed prior to the 60th day after 

the vote or, if timely filed, is not signed by at least 15 percent of the 

stockholders, the merger, transfer, or termination shall become effective 

in accordance with the plan of merger, transfer, or termination.

Chapter 4—Termination and Dissolution of Institutions

12 U.S.C. 2279d Sec. 7.10. Termination of System Institution Status.

(a) CONDITIONS. A System institution may terminate the status of 

the institution as a System institution if—

(1) the institution provides written notice to the Farm Credit 

Administration Board not later than 90 days prior to the proposed 

termination date;

(2) the termination is approved by the Farm Credit 

Administration Board;

(3) the appropriate Federal or State authority grants approval to 

charter the institution as a bank, savings and loan association, or other 

financial institution;

(4) the institution pays to the Farm Credit Insurance Fund the 

amount by which the total capital of the institution exceeds, 6 percent of 

the assets;
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(5) the institution pays or makes adequate provision for payment 

of all outstanding debt obligations of the institution;

(6) the termination is approved by a majority of the stockholders 

of the institution voting, in person or by written proxy, at a duly 

authorized stockholders' meeting, held prior to giving notice to the Farm 

Credit Administration Board; and

(7) the institution meets such other conditions as the Farm Credit 

Administration Board by regulation considers appropriate.

(b) EFFECT. On termination of its status as a System institution—

(1) the Farm Credit Administration Board shall revoke the 

charter of the institution; and

(2) the institution shall no longer be an instrumentality of the 

United States under this Act.

Subtitle C—Approval of Disclosure Information and Issuance of Charters by 

the Farm Credit Administration Board

12 U.S.C. 2279e Sec. 7.11. Approval of Disclosure Information and Issuance of 

Charters.

(a) DISCLOSURE OF INFORMATION.

(1) APPROVAL OF PLAN. With respect to any plan of merger, 

transfer of lending authority, dissolution, or termination, prior to 

submission to the voters (voting stockholders and, where required, 

contributors to guaranty funds) of the institutions involved, such plan 

shall be submitted to the Farm Credit Administration Board, together 

with all information that is to be distributed to the voters with respect to 

the contemplated action, including an enumerated statement of the 

anticipated benefits and potential disadvantages of such action. 

(2) NOTICE OF APPROVAL. On notification that the Farm 

Credit Administration Board has approved such plan for submission to 

the stockholders, or after 60 days of no action on the plan by the Board, 

the submitting institutions may submit the plan, together with the 

disclosure information, to the voters for the prescribed vote.

(b) NOTICE OF REASONS FOR DISAPPROVAL. If the Farm 

Credit Administration Board disapproves the plan for submission to the 

stockholders, notification to the submitting institutions shall specify the 

reasons for the determination by the Board. If such plan is determined to be 

inadequate, it shall not be submitted to the voters for a vote.

(c) FEDERAL CHARTER. Each plan of merger or transfer of 

lending authority may include a proposed new or revised Federal charter for 

the merged or transferee entity. The Farm Credit Administration Board shall 

issue such charter on the approval of the plan, as prescribed in this title, unless 

the Board determines that the charter submitted is not consistent with this Act.
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Subtitle D—Mergers of Like Entities

12 U.S.C. 2279f Sec. 7.12. Merger of Similar Banks.

(a) IN GENERAL. Banks organized or operating under this Act may 

merge with banks in other districts operating under the same title if the plan of 

merger is approved by—

(1) the Farm Credit Administration Board;

(2) the respective Boards of Directors of the banks involved;

(3) a majority vote of the stockholders of each bank voting, in 

person or by proxy, at a duly authorized stockholders' meeting, with 

each association having a number of votes equal to the number of such 

association's voting stockholders; and

(4) in the case of a bank for cooperatives, a majority of the total 

equity interests in such merging bank for cooperatives (including 

allocated, but not unallocated, surplus and reserves) held by those 

stockholders or subscribers to the guaranty fund of the bank voting.

(b) POWERS AND CAPITALIZATION. Sections 7.2 and 7.3 shall 

apply to banks merged under this section.

(c) BOARD OF DIRECTORS.

(1) IN GENERAL. After a merger under subsection (a), a board 

of directors shall be created for the resulting bank.

(2) COMPOSITION. The board shall be composed of—

(A) two directors elected by each of the bank boards, with 

at least one such director from each bank being elected by the 

eligible stockholders of, or subscribers to, the guaranty fund of the 

merging banks; and

(B) one outside director elected by the directors elected 

under subparagraph (A).

(3) OUTSIDE DIRECTOR.

(A) QUALIFICATIONS. The outside director elected 

under paragraph (2)(B) shall be experienced in financial services 

and credit, and within the 2-year period prior to such election, shall 

not have been a borrower from, shareholder in, or director, officer, 

employee, or agent of any institution of the Farm Credit System.

(B) FAILURE TO ELECT. If the other members of the 

board fail to elect an outside director, the Farm Credit 

Administration Board shall appoint a qualified person to serve on 

the board of directors until such member is so elected.

(4) BYLAWS. Notwithstanding paragraph (2), the bylaws of the 

merged bank may, with the approval of the Farm Credit Administration, 

provide for a different number of directors to be selected in a different 

manner, except that the bylaws shall provide for at least one outside 

director.
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12 U.S.C. 2279f-1 Sec. 7.13. Merger of Similar Associations.

(a) IN GENERAL. Associations may voluntarily merge with other 

like associations if the plan of merger is approved by—

(1) the Farm Credit Administration Board;

(2) the respective Boards of Directors of the associations 

involved;

(3) a majority vote of the stockholders of each association 

voting, in person or by proxy, at a duly authorized stockholders' 

meeting; and

(4) the Farm Credit Banks involved.

(b) PROCEDURES. The provisions of subsections (b) and (c) of 

section 7.8 shall apply to associations merged under this section.

Subtitle E—Taxation of Merger Transactions

12 U.S.C. 2279g Sec. 7.14. Transactions to Accomplish Mergers Exempt from 

Certain State Taxes.

No State or political subdivision thereof may treat the merger or 

consolidation of two or more institutions of the Farm Credit System under this 

title or title IV of the Agricultural Credit Act of 1987 as resulting in a change 

of ownership of any property owned by any of such merging or consolidating 

institutions, for purposes of any law of such State or political subdivision 

providing for reassessment of property on the occurrence of a change of 

ownership or imposing a tax on the ownership or transfer of property.
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Title VIII—Agricultural Mortgage Secondary Market

12 U.S.C. 2279aa Sec. 8.0. Definitions.

For purposes of this title:

(1) AGRICULTURAL REAL ESTATE. The term "agricultural 

real estate" means—

(A) a parcel or parcels of land, or a building or structure 

affixed to the parcel or parcels, that—

(i) is used for the production of one or more 

agricultural commodities or products; and

(ii) consists of a minimum acreage or is used in 

producing minimum annual receipts, as determined by the 

Corporation; or

(B) a principal residence that is a single family, moderatepriced residential dwelling located in a rural area, excluding—

(i) any community having a population in excess of 

2,500 inhabitants; and

(ii) any dwelling, excluding the land to which the 

dwelling is affixed, with a value exceeding $100,000 (as 

adjusted for inflation).

(2) BOARD. The term "Board" means the board of directors 

established in section 8.2.

(3) CERTIFIED FACILITY. The term "certified facility" 

means:

(A) an agricultural mortgage marketing facility that is 

certified under section 8.5; or

(B) the Corporation and any affiliate thereof.

(4) CORPORATION. The term "Corporation" means the 

Federal Agricultural Mortgage Corporation established in section 8.1.

(5) GUARANTEE. The term "guarantee" means the guarantee 

of timely payment of the principal and interest on securities representing 

interests in, or obligations backed by, pools of qualified loans, in 

accordance with this title.

(6) ORIGINATOR. The term "originator" means any Farm 

Credit System institution, bank, insurance company, business and 

industrial development company, savings and loan association, 

association of agricultural producers, agricultural cooperative, 

commercial finance company, trust company, credit union, or other 

entity that originates and services agricultural mortgage loans.

(7) QUALIFIED LOAN. The term "qualified loan" means an 

obligation—

(A)(i) that is secured by a fee-simple or leasehold mortgage 

with status as a first lien, on agricultural real estate located in the 

United States that is not subject to any legal or equitable claims 

deriving from a preceding fee-simple or leasehold mortgage;

(ii) of—
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(I)a citizen or national of the United States or an 

alien lawfully admitted for permanent residence in the 

United States; or

(II) a private corporation or partnership 

whose members, stockholders, or partners holding a 

majority interest in the corporation or partnership are 

individuals described in subclause (I); and

(iii) of a person, corporation, or partnership that has 

training or farming experience that, under criteria established 

by the Corporation, is sufficient to ensure a reasonable 

likelihood that the loan will be repaid according to its terms; 

(B) that is the portion of a loan guaranteed by the Secretary 

of Agriculture pursuant to the Consolidated Farm and Rural 

Development Act (7 U.S.C. 1921 et seq.), except that—

(i) subsections (b) and (c) of section 8.6, and sections 

8.8 and 8.9, shall not apply to the portion of a loan 

guaranteed by the Secretary or to an obligation, pool, or 

security representing an interest in or obligation backed by a 

pool of obligations relating to the portion of a loan 

guaranteed by the Secretary; and

(ii) the portion of a loan guaranteed by the Secretary 

shall be considered to meet all standards for qualified loans 

for all purposes under this Act; or

(C) that is a loan, or an interest in a loan, for an electric or 

telephone facility by a cooperative lender to a borrower that has 

received, or is eligible to receive, a loan under the Rural 

Electrification Act of 1936 (7 U.S.C. 901 et seq.).

(8) STATE. The term "State" has the meaning given such term 

in section 5.51.

Subtitle A—Establishment and Activities of Federal Agricultural Mortgage 

Corporation

12 U.S.C. 2279aa-1 Sec. 8.1. Federal Agricultural Mortgage Corporation.

(a) ESTABLISHMENT.

(1) IN GENERAL. There is hereby established a corporation to 

be known as the Federal Agricultural Mortgage Corporation, which shall 

be a federally chartered instrumentality of the United States.

(2) INSTITUTION WITHIN FARM CREDIT SYSTEM. The 

Corporation shall be an institution of the Farm Credit System.

(3) LIABILITY.

(A) CORPORATION. The Corporation shall not be liable 

for any debt or obligation of any other institution of the Farm 

Credit System.

(B) SYSTEM INSTITUTIONS. The Farm Credit System 

and System institutions (other than the Corporation) shall not be 

liable for any debt or obligation of the Corporation.
161

(b) DUTIES. The Corporation shall—

(1) in consultation with originators, develop uniform 

underwriting, security appraisal, and repayment standards for qualified 

loans;

(2) determine the eligibility of agricultural mortgage marketing 

facilities to contract with the Corporation for the provision of guarantees 

for specific mortgage pools; 

(3) provide guarantees for the timely repayment of principal and 

interest on securities representing interests in, or obligations backed by, 

pools of qualified loans; and

(4) purchase qualified loans and issue securities representing 

interests in, or obligations backed by, the qualified loans, guaranteed for 

the timely repayment of principal and interest.

12 U.S.C. 2279aa-2 Sec. 8.2. Board of Directors.

(a) IN GENERAL.-

(1) ESTABLISHMENT.- The Corporation shall be under the 

management of the board of directors.

(2) COMPOSITION.- The Board shall consist of 15 members, of 

which—

(A) 5 members shall be elected by holders of common stock 

that are insurance companies, banks, or other financial institutions 

or entities;

(B) 5 members shall be elected by holders of common stock 

that are Farm Credit System institutions; and

(C) 5 members shall be appointed by the President, by and 

with the advice and consent of the Senate

(i) which members shall not be, or have been, 

officers or directors of any financial institutions or entities;

(ii) which members shall be representatives of the 

general public;

(iii) of which members not more than 3 shall be 

members of the same political party; and

(iv) of which members at least 2 shall be experienced 

in farming or ranching.

(3) VACANCY.

(A) ELECTED MEMBERS. Subject to paragraph (5), a 

vacancy among the members elected to the Board in the manner 

described in subparagraph (A) or (B) of paragraph (2) shall be 

filled by the Board from among persons eligible for election to the 

position for which the vacancy exists.

(B) APPOINTED MEMBERS. A vacancy among the 

members appointed to the Board under paragraph (2)(C) shall be 

filled in the manner in which the original appointment was made.

(4) CONTINUATION OF MEMBERSHIP. If—

(A) any member of the Board who was appointed or elected 

to the Board from among persons who are representatives of 
162

banks, other financial institutions or entities, insurance companies, 

or Farm Credit System institutions ceases to be such a 

representative; or

(B) any member who was appointed from persons who are 

not or have not been directors or officers of any financial 

institution or entity becomes a director or an officer of any 

financial institution or entity; such member may continue as a 

member for not longer than the 45-day period beginning on the 

date such member ceases to be such a representative, officer, or 

employee or becomes such a director or officer, as the case may 

be.

(5) TERMS.

(A) APPOINTED MEMBERS. The members appointed by 

the President shall serve at the pleasure of the President.

(B) ELECTED MEMBERS. The members elected under 

subparagraphs (A) and (B) of subsection (b)(2) shall each be 

elected annually for a term ending on the date of the next annual 

meeting of the common stockholders of the Corporation and shall 

serve until their successors are elected and qualified. Any seat on 

the Board that becomes vacant after the annual election of the

directors shall be filled by the members of the Board from the 

same category of directors, but only for the unexpired portion of 

the term.

(C) VACANCY APPOINTMENT. Any member appointed 

to fill a vacancy occurring before the expiration of the term for 

which the predecessor of the member was appointed shall be 

appointed only for the remainder of such term.

(D) SERVICE AFTER EXPIRATION OF TERM. A 

member may serve after the expiration of the term of the member 

until the successor of the member has taken office.

(6) QUORUM. 8 members of the Board shall constitute a 

quorum.

(7) NO ADDITIONAL PAY FOR FEDERAL OFFICERS OR 

EMPLOYEES. Members of the Board who are fulltime officers or 

employees of the United States shall receive no additional pay by reason 

of service on the Board.

(8) CHAIRPERSON. The President shall designate 1 of the 

members of the Board who are appointed by the President as the 

chairperson of the Board.

(9) MEETINGS. The Board shall meet at the call of the 

chairperson or a majority of its members.

(b) OFFICERS AND STAFF. The Board may appoint, employ, fix 

the pay of, and provide other allowances and benefits for such officers and 

employees of the Corporation as the Board determines to be appropriate.
163

12 U.S.C. 2279aa-3 Sec. 8.3. Powers and Duties of Corporation and Board.

(a) GUARANTEES. After the Board has been duly constituted, 

subject to the other provisions of this title and other commitments and 

requirements established pursuant to law, the Corporation may provide 

guarantees on terms and conditions determined by the Corporation of 

securities issued on the security of, or in participation in, pooled interests in 

qualified loans.

(b) DUTIES OF THE BOARD.

(1) IN GENERAL. The Board shall—

(A) determine the general policies that shall govern the 

operations of the Corporation;

(B) select, appoint, and determine the compensation of 

qualified persons to fill such offices as may be provided for in the 

bylaws of the Corporation; and

(C) assign to such persons such executive functions, 

powers, and duties as may be prescribed by the bylaws of the 

Corporation or by the Board.

(2) EXECUTIVE OFFICERS AND FUNCTIONS. The persons 

elected or appointed under paragraph (1)(B) shall be the executive 

officers of the Corporation and shall discharge the executive functions, 

powers, and duties of the Corporation.

(c) POWERS OF THE CORPORATION. The Corporation shall be a 

body corporate and shall have the following powers:

(1) To operate under the direction of its Board.

(2) To issue stock in the manner provided in section 8.4.

(3) To adopt, alter, and use a corporate seal, which shall be 

judicially noted.

(4) To provide for a president, 1 or more vice presidents, 

secretary, treasurer, and such other officers, employees, and agents, as 

may be necessary, define their duties and compensation levels, all 

without regard to title 5, United States Code, and require surety bonds or 

make other provisions against losses occasioned by acts of such persons.

(5) To provide guarantees in the manner provided under section 

8.6.

(6) To have succession until dissolved by a law enacted by the 

Congress.

(7) To prescribe bylaws, through the Board, not inconsistent with 

law, that shall provide for—

(A) the classes of the stock of the Corporation; and

(B) the manner in which—

(i) the stock shall be issued, transferred, and retired;

(ii) the officers, employees, and agents of the 

Corporation are selected;

(iii) the property of the Corporation is acquired, held, 

and transferred;
164 

(iv) the commitments and other financial assistance of 

the Corporation are made; 

(v) the general business of the Corporation is 

conducted; and 

(vi) the privileges granted by law to the Corporation 

are exercised and enjoyed;

(8) To prescribe such standards as may be necessary to carry out 

this title.

(9) To enter into contracts and make payments with respect to 

the contracts.

(10) To sue and be sued in its corporate capacity and to complain 

and defend in any action brought by or against the Corporation in any 

State or Federal court of competent jurisdiction. 

(11) To make and perform contracts, agreements, and 

commitments with persons and entities both inside and outside of the 

Farm Credit System.

(12) To acquire, hold, lease, mortgage or dispose of, at public or 

private sale, real and personal property, purchase or sell any securities or 

obligations, and otherwise exercise all the usual incidents of ownership 

of property necessary and convenient to the business of the Corporation. 

(13) To purchase, hold, sell, or assign a qualified loan, to issue a 

guaranteed security, representing an interest in, or an obligation backed 

by, the qualified loan, and to perform all the functions and 

responsibilities of an agricultural mortgage marketing facility operating 

as a certified facility under this title.

(14) To establish, acquire, and maintain affiliates (as such term is 

defined in section 8.11(e)) under applicable State laws to carry out any 

activities that otherwise would be performed directly by the Corporation 

under this title.

(15) To exercise such other incidental powers as are necessary to 

carry out the powers, duties, and functions of the Corporation in 

accordance with this title.

(d) FEDERAL RESERVE BANKS AS DEPOSITORIES AND 

FISCAL AGENTS. The Federal Reserve banks may act as depositories for, 

or as fiscal agents or custodians of, the Corporation.1

(e) ACCESS TO BOOK-ENTRY SYSTEM. The Corporation shall 

have access to the book-entry system of the Federal Reserve System.

12 U.S.C. 2279aa-4 Sec. 8.4. Stock Issuance. 

(a) VOTING COMMON STOCK.

(1) ISSUE.- 

(A) IN GENERAL.-The Corporation shall issue voting 

common stock having such par value as may be fixed by the Board 

from time to time. 

1 Section 105(1) of the Farm Credit System Reform Act of 1996 (P.L. 104–105) attempted to amend section 8.3(d) by striking may act as depositories for, or and 

inserting shall act as depositories for, and. The amendment was not executed because the phrase intended to be stricken does not appear. 
165

(B) NUMBER OF VOTES.-Each share of voting common 

stock shall be entitled to one vote with rights of cumulative voting 

at all elections of directors. 

(C) OFFERS.-

(i) IN GENERAL.-The Board shall offer the voting 

common stock to banks, other financial institutions, 

insurance companies, and System institutions under such 

terms and conditions as the Board may adopt.

(ii) REQUIREMENTS.-The voting common stock 

shall be fairly and broadly offered to ensure that-

(I) no institution or institutions acquire a 

disproportionate share of the total quantity of the voting

common stock outstanding of a class of stock; and

(II) capital contributions and issuances of voting 

common stock for the contributions are fairly 

distributed between entities eligible to hold class A 

stock and class B stock.

(D) CLASSES OF STOCK. –

(i) IN GENERAL.-The stock shall be divided into 

two classes with the same par value per share. 

(ii) CLASS A STOCK.-Class A stock may be held 

only by entities that are not Farm Credit System institutions 

and that are entitled to vote for directors specified in section 

8.2(a)(2)(A), including national banking associations (which 

shall be allowed to purchase and hold such stock). 

(iii) CLASS B STOCK.-Class B stock may be held 

only by Farm Credit System institutions that are entitled to 

vote for directors specified in section 8.2(a)(2)(B).

(2) LIMITATION ON ISSUE. After the date the permanent 

board first meets with a quorum of its members present, voting common 

stock of the Corporation may be issued only to originators and certified 

facilities.

(3) AUTHORITY OF BOARD TO ESTABLISH TERMS AND 

PROCEDURES. The Board shall adopt such terms, conditions, and 

procedures with regard to the issue of stock under this section as may be 

necessary, including the establishment of a maximum amount limitation 

on the number of shares of voting common stock that may be 

outstanding at any time.

(4) TRANSFERABILITY. Subject to such limitations as the 

Board may impose, any share of any class of voting common stock 

issued under this section shall be transferable among the institutions or 

entities to which shares of such class of common stock may be offered 

under paragraph (1), except that, as to the Corporation, such shares shall 

be transferable only on the books of the Corporation.

(5) MAXIMUM NUMBER OF SHARES. No stockholder, 

other than a holder of class B stock, may own, directly or indirectly, 

more than 33 percent of the outstanding shares of such class of the 

voting common stock of the Corporation.

(b) REQUIRED CAPITAL CONTRIBUTIONS.
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(1) IN GENERAL. The Corporation may require each originator 

and each certified facility to make, or commit to make, such 

nonrefundable capital contributions to the Corporation as are reasonable 

and necessary to meet the administrative expenses of the Corporation.

(2) STOCK ISSUED AS CONSIDERATION FOR 

CONTRIBUTION. The Corporation, from time to time, shall issue to 

each originator or certified facility voting common stock evidencing any 

capital contributions made pursuant to this subsection.

(c) DIVIDENDS.

(1) IN GENERAL. Such dividends as may be declared by the 

Board, in the discretion of the Board, shall be paid by the Corporation to 

the holders of the voting common stock of the Corporation pro rata 

based on the total number of shares of both classes of stock outstanding.

(2) RESERVES REQUIREMENT. No dividend may be 

declared or paid by the Board under this section unless the Board 

determines that adequate provision has been made for the reserve 

required under section 8.10(c)(1).

(3) DIVIDENDS PROHIBITED WHILE OBLIGATIONS ARE 

OUTSTANDING. No dividend may be declared or paid by the Board 

under this section while any obligation issued by the Corporation to the 

Secretary of the Treasury under section 8.13 remains outstanding.

(d) NONVOTING COMMON STOCK. The Corporation is 

authorized to issue nonvoting common stock having such par value as may be 

fixed by the Board from time to time. Such nonvoting common stock shall be 

freely transferable, except that, as to the Corporation, such stock shall be 

transferable only on the books of the Corporation. Such dividends as may be 

declared by the Board, in the discretion of the Board, may be paid by the 

Corporation to the holders of the nonvoting common stock of the Corporation, 

subject to paragraphs (2) and (3) of subsection (c).

(e) PREFERRED STOCK.

(1) AUTHORITY OF BOARD. The Corporation is authorized 

to issue nonvoting preferred stock having such par value as may be fixed 

by the Board from time to time. Such preferred stock issued shall be 

freely transferable, except that, as to the Corporation, such stock shall be 

transferred only on the books of the Corporation.

(2) RIGHTS OF PREFERRED STOCK. Subject to paragraphs 

(2) and (3) of subsection (c), the holders of the preferred stock shall be 

entitled to such rate of cumulative dividends, and such holders shall be 

subject to such redemption or other conversion provisions, as may be 

provided for at the time of issuance. No dividends shall be payable on 

any share of common stock at any time when any dividend is due on any 

share of preferred stock and has not been paid.

(3) PREFERENCE OF TERMINATION OF BUSINESS. In the 

event of any liquidation, dissolution, or winding up of the business of 

the Corporation, the holders of the preferred shares of stock shall be paid 

in full at the par value thereof, plus all accrued dividends, before the 

holders of the common shares receive any payment.
167

12 U.S.C. 2279aa-5 Sec. 8.5. Certification of Agricultural Mortgage Marketing 

Facilities.

(a) ELIGIBILITY STANDARDS.

(1) ESTABLISHMENT REQUIRED. Within 120 days after the 

date on which the permanent board first meets with a quorum present, 

the Corporation shall issue standards for the certification of agricultural 

mortgage marketing facilities (other than the Corporation), including 

eligibility standards in accordance with paragraph (2).

(2) MINIMUM REQUIREMENTS. To be eligible to be 

certified under the standards referred to in paragraph (1), an agricultural 

mortgage marketing facility (other than the Corporation) shall—

(A) be an institution of the Farm Credit System or a 

corporation, association, or trust organized under the laws of the 

United States or of any State;

(B) meet or exceed capital standards established by the 

Board;

(C) have as one of the purposes of the facility, the sale or 

resale of securities representing interests in, or obligations backed 

by, pools of qualified loans that have been provided guarantees by 

the Corporation;

(D) demonstrate managerial ability with respect to 

agricultural mortgage loan underwriting, servicing, and marketing 

that is acceptable to the Corporation;

(E) adopt appropriate agricultural mortgage loan 

underwriting, appraisal, and servicing standards and procedures 

that meet or exceed the standards established by the Board;

(F) for purposes of enabling the Corporation to examine the 

facility, agree to allow officers or employees of the Corporation to 

have access to all books, accounts, financial records, reports, files, 

and all other papers, things, or property, of any type whatsoever, 

belonging to or used by the Corporation that are necessary to 

facilitate an examination of the operations of the facility in 

connection with securities, and the pools of qualified loans that 

back securities, for which the Corporation has provided 

guarantees; and

(G) adopt appropriate minimum standards and procedures 

relating to loan administration and disclosure to borrowers 

concerning the terms and rights applicable to loans for which 

guarantee is provided, in conformity with uniform standards 

established by the Corporation.

(3) NONDISCRIMINATION REQUIREMENT. The standards 

established under this subsection shall not discriminate between or 

against Farm Credit System and non-Farm Credit System applicants.

(b) CERTIFICATION BY CORPORATION. Within 60 days after 

receiving an application for certification under this section, the Corporation 

shall certify the facility if the facility meets the standards established by the 

Corporation under subsection (a)(1).
168

(c) MAXIMUM TIME PERIOD FOR CERTIFICATION. Any 

certification by the Corporation of an agricultural mortgage marketing facility 

shall be effective for a period determined by the Corporation of not to exceed 

5 years.

(d) REVOCATION.

(1) IN GENERAL. After notice and an opportunity for a 

hearing, the Corporation may revoke the certification of an agricultural 

mortgage marketing facility if the Corporation determines that the 

facility no longer meets the standards referred to in subsection (a).

(2) EFFECT OF REVOCATION. Revocation of a certification 

shall not affect any pool guarantee that has been issued by the 

Corporation.

(e) AFFILIATION OF FCS INSTITUTIONS WITH FACILITY.

(1) ESTABLISHMENT OF AFFILIATE AUTHORIZED. 

Notwithstanding any other provision of this Act, any Farm Credit 

System institution, acting for such institution alone or in conjunction 

with one or more other such institutions, may establish and operate, as 

an affiliate, an agricultural mortgage marketing facility if, within a 

reasonable time after such establishment, such facility obtains and 

thereafter retains certification under subsection (b) as a certified facility.

(2) EXCLUSIVE AGENCY AGREEMENT AUTHORIZED. 

Any number of Farm Credit System institutions (other than the 

Corporation) may enter into an agreement with any certified facility 

(including an affiliate established under paragraph (1)) to sell the 

qualified loans of such institutions exclusively to or through the facility.

12 U.S.C. 2279aa-6 Sec. 8.6. Guarantee of Qualified Loans.

(a) GUARANTEE AUTHORIZED FOR CERTIFIED FACILITIES. 

(1) IN GENERAL. Subject to the requirements of this section 

and on such other terms and conditions as the Corporation shall consider 

appropriate, the Corporation—

(A) shall guarantee the timely payment of principal and 

interest on the securities issued by a certified facility that 

represents interests solely in, or obligations fully backed by, any 

pool consisting solely of qualified loans which meet the applicable 

standards established under section 8.8 and which are held by such 

facility; and

(B) may issue a security, guaranteed as to the timely 

payment of principal and interest, that represents an interest solely 

in, or an obligation fully backed by, a pool consisting of qualified 

loans that—

(i) meet the applicable standards established under 

section 8.8; and

(ii) have been purchased and held by the Corporation.

(2) INABILITY OF FACILITY TO PAY. If the facility is 

unable to make any payment of principal or interest on any security for 

which a guarantee has been provided by the Corporation under 

paragraph (1), the Corporation shall make such payment as and when 
169

due in cash, and on such payment shall be subrogated fully to the rights 

satisfied by such payment.

(3) POWER OF CORPORATION. Notwithstanding any other 

provision of law, the Corporation is empowered, in connection with any 

guarantee under this subsection, whether before or after any default, to 

provide by contract with the facility for the extinguishment, on default 

by the facility, of any redemption, equitable, legal, or other right, title, or 

interest of the facility in any mortgage or mortgages constituting the 

pool against which the guaranteed securities are issued. With respect to 

any issue of guaranteed securities, in the event of default and pursuant 

otherwise to the terms of the contract, the mortgages that constitute such 

pool shall become the absolute property of the Corporation subject only 

to the unsatisfied rights of the holders of the securities based on and 

backed by such pool.

(b) OTHER RESPONSIBILITIES OF AND LIMITATIONS ON 

CERTIFIED FACILITIES. As a condition for providing any guarantees 

under this section for securities issued by a certified facility that represent 

interests in, or obligations backed by, any pool of qualified loans, the 

Corporation shall require such facility to agree to comply with the following 

requirements:

(1) LOAN DEFAULT RESOLUTION. The facility shall act in 

accordance with the standards of a prudent institutional lender to resolve 

loan defaults.

(2) SUBROGATION OF UNITED STATES AND 

CORPORATION TO INTERESTS OF FACILITY. The proceeds of 

any collateral, judgments, settlements, or guarantees received by the 

facility with respect to any loan in such pool, shall be applied, after 

payment of costs of collection—

(A) first, to reduce the amount of any principal outstanding

on any obligation of the Corporation that was purchased by the 

Secretary of the Treasury under section 8.13 to the extent the 

proceeds of such obligation were used to make guarantees in 

connection with such securities; and

(B) second, to reimburse the Corporation for any such 

guarantee payments.

(3) LOAN SERVICING. The originator of any loan in such pool 

shall be permitted to retain the right to service the loan.

(4) MINORITY PARTICIPATION IN PUBLIC OFFERINGS. 

The facility shall take such steps as may be necessary to ensure that 

minority owned or controlled investment banking firms, underwriters, 

and bond counsels throughout the United States have an opportunity to 

participate to a significant degree in any public offering of securities.

(5) NO DISCRIMINATION AGAINST STATES WITH 

BORROWERS RIGHTS. The facility may not refuse to purchase 

qualified loans originating in States that have established borrowers 

rights laws either by statute or under the constitution of such States, 

except that the facility may require discounts or charge fees reasonably 
170

related to costs and expenses arising from such statutes or constitutional 

provisions.

(c) ADDITIONAL AUTHORITY OF THE BOARD. To ensure the 

liquidity of securities for which guarantees have been provided under this 

section, the Board shall adopt appropriate standards regarding—

(1) the characteristics of any pool of qualified loans serving as 

collateral for such securities; and

(2) transfer requirements.

(d) PURCHASE OF GUARANTEED SECURITIES.

(1) PURCHASE AUTHORITY. The Corporation (and 

affiliates) may purchase, hold, and sell any securities guaranteed under 

this section by the Corporation that represent interests in, or obligations 

backed by, pools of qualified loans. Securities issued under this section

shall have maturities and bear rates of interest as determined by the 

Corporation.

(2) ISSUANCE OF DEBT OBLIGATIONS. The Corporation 

(and affiliates) may issue debt obligations solely for the purpose of 

obtaining amounts for the purchase of any securities under paragraph 

(1), for the purchase of qualified loans (as defined in section 8.0), and 

for maintaining reasonable amounts for business operations (including 

adequate liquidity) relating to activities under this subsection.

(3) TERMS AND LIMITATIONS.

(A) TERMS. The obligations issued under this subsection 

shall have maturities and bear rates of interest as determined by the 

Corporation, and may be redeemable at the option of the 

Corporation before maturity in the manner stipulated in the 

obligations.

(B) REQUIREMENT. Each obligation shall clearly 

indicate that the obligation is not an obligation of, and is not 

guaranteed as to principal and interest by, the Farm Credit 

Administration, the United States, or any other agency or 

instrumentality of the United States (other than the Corporation).

(C) AUTHORITY. The Corporation may not issue 

obligations pursuant to paragraph (2) under this subsection while 

any obligation issued by the Corporation under section 8.13(a) 

remains outstanding.

12 U.S.C. 2279aa-7 Sec. 8.7. [Repealed]

12 U.S.C. 2279aa-8 Sec. 8.8. Standards for Qualified Loans.

(a) STANDARDS. 

(1) IN GENERAL.—The Corporation shall establish 

underwriting, security appraisal, and repayment standards for qualified 

loans taking into account the nature, risk profile, and other differences 

between different categories of qualified loans. 
171 

(2) SUPERVISION, EXAMINATION, AND REPORT OF 

CONDITION.—The standards shall be subject to the authorities of the 

Farm Credit Administration under section 8.11. 

(3) MORTGAGE LOANS.—In establishing standards for 

qualified loans, the Corporation shall confine corporate operations, so 

far as practicable, to mortgage loans that are deemed by the Board to be 

of such quality so as to meet, substantially and generally, the purchase 

standards imposed by private institutional mortgage investors. 

(b) MINIMUM CRITERIA. To further the purpose of this title to 

provide a new source of long-term fixed rate financing to assist farmers and 

ranchers to purchase agricultural real estate, the standards established by the 

Board pursuant to subsection (a) with respect to loans secured by agricultural 

real estate shall, at a minimum— 

(1) provide that no agricultural mortgage loan with a loan-tovalue ratio in excess of 80 percent may be treated as a qualified loan; 

(2) require each borrower to demonstrate sufficient cash-flow to 

adequately service the agricultural mortgage loan;

(3) contain sufficient documentation standards; 

(4) contain adequate standards to protect the integrity of the 

appraisal process with respect to any agricultural mortgage loans; 

(5) contain adequate standards to ensure that the farmer or 

rancher is or will be actively engaged in agricultural production, and 

require the borrower to certify to the originator that the borrower intends 

to continue agricultural production on the farm or ranch involved; 

(6) minimize speculation in agricultural real estate for 

nonagricultural purposes; and 

(7) in establishing the value of agricultural real estate, consider 

the purpose for which the real estate is taxed.

(c) LOAN AMOUNT LIMITATION.

(1) IN GENERAL. A loan secured by agricultural real estate 

may not be treated as a qualified loan if the principal amount of such 

loan exceeds $2,500,000, adjusted for inflation, except as provided in 

paragraph (2). 

(2) ACREAGE EXCEPTION. Paragraph (1) shall not apply 

with respect to any agricultural mortgage loan described in such 

paragraph if such loan is secured by agricultural real estate that, in the 

aggregate, comprises not more than 2,000 acres.2

(d) NONDISCRIMINATION REQUIREMENT. The standards 

established under subsection (a) shall not discriminate against small 

originators or small agricultural mortgage loans that are at least $50,000. The 

2

 Section 5410(b) of the Agriculture Improvement Act of 2018 provided the following: 

(b) EFFECTIVE DATE.—The amendment made by subsection (a) [striking “1,000” and inserting 

“2,000” in section 8.8(c)(2) of the Farm Credit Act of 1971] shall take effect 1 year after the date a 

report submitted in accordance with section 5414 of this Act indicates that it is feasible to increase

the acreage limitation in section 8.8(c)(2) of the Farm Credit Act of 1971 to 2,000 acres. 
172

Board shall promote and encourage the inclusion of qualified loans for small 

farms and family farmers in the agricultural mortgage secondary market.

12 U.S.C. 2279aa-9 Sec. 8.9. Exemption from Restructuring and Borrowers Rights 

Provisions for Pooled Loans.

(a) RESTRUCTURING. Notwithstanding any other provision of law, 

sections 4.14, 4.14A, 4.14B, 4.14D, and 4.36 shall not apply to any loan 

included in a pool of qualified loans backing securities or obligations for 

which the Corporation provides guarantee. The loan servicing standards 

established by the Corporation shall be patterned after similar standards 

adopted by other federally sponsored secondary market facilities.

(b) BORROWERS RIGHTS. At the time of application for a loan (as 

defined in section 4.14A(a)(5)), originators that are Farm Credit System 

institutions shall give written notice to each applicant of the terms and 

conditions of the loan, setting forth separately terms and conditions for pooled 

loans and loans that are not pooled. This notice shall include a statement, if 

applicable, that the loan may be pooled and that, if pooled, sections 4.14, 

4.14A, 4.14B, 4.14D, and 4.36 shall not apply. This notice also shall inform 

the applicant that he or she has the right not to have the loan pooled. Within 3 

days from the time of commitment, an applicant has the right to refuse to 

allow the loan to be pooled, thereby retaining rights under sections 4.14, 

4.14A, 4.14B, 4.14D, and 4.36, if applicable.

12 U.S.C. 2279aa-10 Sec. 8.10. Funding for Guarantee; Reserves of Corporation.

(a) GUARANTEE. The Corporation shall provide guarantees for 

securities representing interests in, or obligations backed by, pools of qualified 

loans through commitments issued by the Corporation providing for 

guarantees.

(b) GUARANTEE FEES.

(1) INITIAL FEE. At the time a guarantee is issued by the 

Corporation, the Corporation shall assess the certified facility a fee of 

not more than 1/2 of 1 percent of the initial principal amount of each 

pool of qualified loans.

(2) ANNUAL FEES. Beginning in the second year after the date 

the guarantee is issued under paragraph (1), the Corporation may, at the 

end of each year, assess the certified facility an annual fee of not more 

than 1/2 of 1 percent of the principal amount of the loans then 

constituting the pool.

(3) DETERMINATION OF AMOUNT. The Corporation shall 

establish such fees on the amount of risk incurred by the Corporation in 

providing the guarantees with respect to which such fee is assessed, as 

determined by the Corporation. Fees assessed under paragraphs (1) and 

(2) shall be established on an actuarially sound basis.

(4) REVIEW BY GAO. The Comptroller General of the United 

States may review, and submit to the Congress a report regarding, the 

actuarial soundness and reasonableness of the fees established by the 

Corporation under this subsection.
173

(c) CORPORATION RESERVE AGAINST GUARANTEES 

LOSSES REQUIRED.

(1) IN GENERAL. So much of the fees assessed under this 

section as the Board determines to be necessary shall be set aside by the 

Corporation in a segregated account as a reserve against losses arising 

out of the guarantee activities of the Corporation.

(2) EXHAUSTION OF RESERVE REQUIRED. The 

Corporation may not issue obligations to the Secretary of the Treasury 

under section 8.13 in order to meet the obligations of the Corporation 

with respect to any guarantees provided under this title until the reserve 

established under paragraph (1) has been exhausted.

(d) FEES TO COVER ADMINISTRATIVE COSTS AUTHORIZED. 

The Corporation may impose charges or fees in reasonable amounts in 

connection with the administration of its activities under this title to recover 

its costs for performing such administration.

12 U.S.C. 2279aa-11 Sec. 8.11. Supervision, Examination, and Report of Condition.

(a) REGULATION.

(1) AUTHORITY. Notwithstanding any other provision of this 

Act, the Farm Credit Administration shall have the authority to provide, 

acting through the Office of Secondary Market Oversight—

(A) for the examination of the Corporation and its affiliates; 

and

(B) for the general supervision of the safe and sound 

performance of the powers, functions, and duties vested in the 

Corporation and its affiliates by this title, including through the use 

of the authorities granted to the Farm Credit Administration 

under—

(i) part C of title V; and

(ii) beginning 6 months after December 13, 1991, 

section 5.17(a)(9).

(2) CONSIDERATIONS. In exercising its authority pursuant to 

this section, the Farm Credit Administration shall consider—

(A) the purposes for which the Corporation was created;

(B) the practices appropriate to the conduct of secondary 

markets in agricultural loans; and

(C) the reduced levels of risk associated with appropriately 

structured secondary market transactions.

(3) OFFICE OF SECONDARY MARKET OVERSIGHT.

(A) Not later than 180 days after the date of enactment of 

this paragraph, the Farm Credit Administration Board shall 

establish within the Farm Credit Administration the Office of 

Secondary Market Oversight.

(B) The Farm Credit Administration Board shall carry out 

the authority set forth in this section through the Office of 

Secondary Market Oversight.
174

(C) The Office of Secondary Market Oversight shall be 

managed by a full-time Director who shall be selected by and 

report to the Farm Credit Administration Board.

(b) EXAMINATIONS AND AUDITS.

(1) IN GENERAL. The financial transactions of the Corporation 

shall be examined by examiners of the Farm Credit Administration in 

accordance with the principles and procedures applicable to commercial 

corporate transactions under such rules and regulations as may be 

prescribed by the Administration.

(2) FREQUENCY. The examinations shall occur at such times 

as the Farm Credit Administration Board may determine, but in no event 

less than once each year.

(3) ACCESS. The examiners shall—

(A) have access to all books, accounts, financial records, 

reports, files, and all other papers, things, or property belonging to 

or in use by the Corporation and necessary to facilitate the audit; 

and

(B) be afforded full access for verifying transactions with 

certified facilities and other entities with whom the Corporation 

conducts transactions.

(c) ANNUAL REPORT OF CONDITION. The Corporation shall 

make and publish an annual report of condition as prescribed by the Farm 

Credit Administration. Each report shall contain financial statements prepared 

in accordance with generally accepted accounting principles and contain such 

additional information as the Farm Credit Administration may by regulation 

prescribe. The financial statements of the Corporation shall be audited by an 

independent public accountant.

(d) FCA ASSESSMENTS TO COVER COSTS. The Farm Credit 

Administration shall assess the Corporation for the cost to the Administration 

of any regulatory activities conducted under this section, including the cost of 

any examination.

(e) DEFINITION OF AFFILIATE. As used in this title, the term 

"affiliate" shall mean an entity effectively controlled or owned by the 

Corporation, except that such term shall not include an originator (as defined 

in section 8.0).

(f) The Farm Credit Administration Board shall ensure that

(1) the Office of Secondary Market Oversight has access to a 

sufficient number of qualified and trained employees to adequately 

supervise the secondary market activities of the Corporation; and

(2) the supervision of the powers, functions, and duties of the 

Corporation is performed, to the extent practicable, by personnel who 

are not responsible for the supervision of the banks and associations of 

the Farm Credit System.

12 U.S.C. 2279aa-12 Sec. 8.12. Securities in Credit Enhanced Pools.

(a) FEDERAL LAWS.
175

(1) APPLICABILITY OF CERTAIN FEDERAL SECURITIES 

LAWS. For purposes of section 3(a)(2) of the Securities Act of 1933, no 

security representing an interest in, or obligations backed by, a pool of 

qualified loans for which guarantees have been provided by the 

Corporation shall be deemed to be a security issued or guaranteed by a 

person controlled or supervised by, or acting as an instrumentality of, 

the Government of the United States. No such security shall be deemed 

to be a "government security" for purposes of the Securities Exchange 

Act of 1934 or for purposes of the Investment Company Act of 1940.

(2) NO FULL FAITH AND CREDIT OF THE UNITED 

STATES. Each security for which credit enhancement has been 

provided by the Corporation shall clearly indicate that the security is not 

an obligation of, and is not guaranteed as to principal or interest by, the 

Farm Credit Administration, the United States, or any other agency or 

instrumentality of the United States (other than the Corporation).

(b) STATE SECURITIES LAWS.

(1) GENERAL EXEMPTION. Any security or obligation that 

has been provided a guarantee by the Corporation shall be exempt from 

any law of any State with respect to or requiring registration or 

qualification of securities or real estate to the same extent as any 

obligation issued by, or guaranteed as to principal and interest by, the 

United States or any agency or instrumentality of the United States.

(2) STATE OVERRIDE. The provisions of paragraph (1) shall 

not be applicable to any State that, during the 8-year period beginning 

on the date of the enactment of this title, enacts a law that—

(A) specifically refers to this subsection; and

(B) expressly provides that paragraph (1) shall not apply to 

the State.

(c) AUTHORIZED INVESTMENTS.

(1) IN GENERAL. Securities representing an interest in, or 

obligations backed by, pools of qualified loans with respect to which the 

Corporation has provided a guarantee shall be authorized investments of 

any person, trust, corporation, partnership, association, business trust, or 

business entity created pursuant to or existing under the laws of the 

United States or any State to the same extent that the person, trust, 

corporation, partnership, association, business trust, or business entity is 

authorized under any applicable law to purchase, hold, or invest in 

obligations issued by or guaranteed as to principal and interest by the 

United States or any agency or instrumentality of the United States. 

Such securities or obligations may be accepted as security for all 

fiduciary, trust, and public funds, the investment or deposits of which 

shall be under the authority and control of the United States or any State 

or any officers of either.

(2) STATE LIMITATIONS ON PURCHASE, HOLDING, OR 

INVESTMENT. If State law limits the purchase, holding, or investment 

in obligations issued by the United States by the person, trust, 

corporation, partnership, association, business trust, or business entity, 

securities or obligations of a certified facility issued on which the 
176

Corporation has provided a guarantee shall be considered to be 

obligations issued by the United States for purposes of the limitation.

(3) NONAPPLICABILITY OF PROVISIONS.

(A) SUBSEQUENT STATE LAW. Paragraphs (1) and (2) 

shall not apply with respect to a particular person, trust, 

corporation, partnership, association, business trust, or business 

entity, or class thereof, in any State that, prior to the expiration of 

the 8-year period beginning on the date of the enactment of this 

title, enacts a law that specifically refers to this section and either 

prohibits or provides for a more limited authority to purchase, 

hold, or invest in the securities by any person, trust, corporation, 

partnership, association, business trust, or business entity, or class 

thereof, than is provided in paragraphs (1) and (2).

(B) EFFECT OF SUBSEQUENT STATE LAW. The 

enactment by any State of a law of the type described in 

subparagraph (A) shall not affect the validity of any contractual 

commitment to purchase, hold, or invest that was made prior to the 

effective date of the law and shall not require the sale or other 

disposition of any securities acquired prior to the effective date of 

the law.

(d) STATE USURY LAWS SUPERSEDED. A provision of the 

Constitution or law of any State shall not apply to an agricultural loan made 

by an originator or a certified facility in accordance with this title for sale to 

the Corporation or to a certified facility for inclusion in a pool for which the 

Corporation has provided, or has committed to provide, a guarantee, if the 

loan, not later than 180 days after the date the loan was made, is sold to the 

Corporation or included in a pool for which the Corporation has provided a 

guarantee, if the provision—

(1) limits the rate or amount of interest, discount points, finance 

charges, or other charges that may be charged, taken, received, or 

reserved by an agricultural lender or a certified facility; or

(2) limits or prohibits a prepayment penalty (either fixed or 

declining), yield maintenance, or make-whole payment that may be 

charged, taken, or received by an agricultural lender or a certified 

facility in connection with the full or partial payment of the principal 

amount due on a loan by a borrower in advance of the scheduled date for 

the payment under the terms of the loan, otherwise known as a 

prepayment of the loan principal.

12 U.S.C. 2279aa-13 Sec. 8.13. Authority to Issue Obligations to Cover Guarantee 

Losses of Corporation.

(a) SALE OF OBLIGATIONS TO TREASURY.

(1) IN GENERAL. Subject to the limitations contained in 

section 8.10(c) and the requirement of paragraph (2), the Corporation 

may issue obligations to the Secretary of the Treasury the proceeds of 

which may be used by the Corporation solely for the purpose of 

fulfilling the obligations of the Corporation under any guarantee 

provided by the Corporation under this title.
177

(2) CERTIFICATION. The Secretary of the Treasury may 

purchase obligations of the Corporation under paragraph (1) only if the 

Corporation certifies to the Secretary that—

(A) the requirements of section 8.10(c) have been fulfilled; 

and

(B) the proceeds of the sale of such obligations are needed 

to fulfill the obligations of the Corporation under any guarantee 

provided by the Corporation under this title.

(b) EXPEDITIOUS TRANSACTION REQUIRED. Not later than 10 

business days after receipt by the Secretary of the Treasury of any certification 

by the Corporation under subsection (a)(2), the Secretary of the Treasury shall 

purchase obligations issued by the Corporation in an amount determined by 

the Corporation to be sufficient to meet the guarantee liabilities of the 

Corporation.

(c) LIMITATION ON AMOUNT OF OUTSTANDING 

OBLIGATIONS. The aggregate amount of obligations issued by the 

Corporation under subsection (a)(1) which may be held by the Secretary of the 

Treasury at any time (as determined by the Secretary) shall not exceed 

$1,500,000,000.

(d) TERMS OF OBLIGATION.

(1) INTEREST. Each obligation purchased by the Secretary of 

the Treasury shall bear interest at a rate determined by the Secretary, 

taking into consideration the average rate on outstanding marketable 

obligations of the United States as of the last day of the last calendar 

month ending before the date of the purchase of such obligation.

(2) REDEMPTION. The Secretary of the Treasury shall require 

that such obligations be repurchased by the Corporation within a 

reasonable time.

(e) COORDINATION WITH TITLE 31, UNITED STATES CODE.

(1) AUTHORITY TO USE PROCEEDS FROM SALE OF 

TREASURY SECURITIES. For the purpose of purchasing obligations 

of the Corporation, the Secretary of the Treasury may use as a public 

debt transaction the proceeds from the sale by the Secretary of any 

securities issued under chapter 31 of title 31, United States Code, and 

the purposes for which securities may be issued under such chapter are 

extended to include such purchases.

(2) TREATMENT OF TRANSACTIONS. All purchases and 

sales by the Secretary of the Treasury of obligations issued by the 

Corporation under this section shall be treated as public debt 

transactions of the United States.

(f) AUTHORIZATION OF APPROPRIATIONS. There is authorized 

to be appropriated to the Secretary of the Treasury $1,500,000,000, without 

fiscal year limitation, to carry out the purposes of this title.

12 U.S.C. 2279aa-14 Sec. 8.14. Federal Jurisdiction.

Notwithstanding section 1349 of title 28, United States Code, or any 

other provision of law:
178

(1) The Corporation shall be considered an agency under 

sections 1345 and 1442 of such title.

(2) All civil actions to which the Corporation is a party shall be 

deemed to arise under the laws of the United States and, to the extent 

applicable, shall be deemed to be governed by Federal common law. 

The district courts of the United States shall have original jurisdiction of 

all such actions, without regard to amount of value.

(3) Any civil or other action, case, or controversy in a court of a 

State or any court, other than a district court of the United States, to 

which the Corporation is a party may at any time before trial be removed 

by the Corporation, without the giving of any bond or security—

(A) to the District Court of the United States for the district 

and division embracing the place where the same is pending; or

(B) if there is no such district court, to the District Court of 

the United States for the district in which the principal office of the 

Corporation is located; by following any procedure for removal for 

causes in effect at the time of such removal.

(4) No attachment or execution shall be issued against the 

Corporation or any of the property of the Corporation before final 

judgment in any Federal, State, or other court.

Subtitle B—Regulation of Financial Safety and Soundness of Federal 

Agricultural Mortgage Corporation

12 U.S.C. 2279bb Sec. 8.31. Definitions.

For purposes of this subtitle:

(1) COMPENSATION. The term "compensation" means any 

payment of money or the provision of any other thing of current or 

potential value in connection with employment.

(2) CORE CAPITAL. The term "core capital" means, with 

respect to the Corporation, the sum of the following (as determined in 

accordance with generally accepted accounting principles):

(A) The par value of outstanding common stock.

(B) The par value of outstanding preferred stock.

(C) Paid-in capital.

(D) Retained earnings.

(3) DIRECTOR. The term "Director" means the Director of the 

Office of Secondary Market Oversight of the Farm Credit 

Administration, selected under section 8.11(a)(3).

(4) OFFICE. The term "Office" means the Office of Secondary 

Market Oversight of the Farm Credit Administration, established in 

section 8.11(a).

(5) REGULATORY CAPITAL. The term "regulatory capital" 

means, with respect to the Corporation, the core capital of the 

Corporation plus an allowance for losses and guarantee claims, as 

determined in accordance with generally accepted accounting principles.
179

(6) STATE. The term "State" means the States of the United 

States, the District of Columbia, the Commonwealth of Puerto Rico, the 

Commonwealth of the Northern Mariana Islands, Guam, the Virgin 

Islands, American Samoa, the Trust Territory of the Pacific Islands, and 

any other territory or possession of the United States.

12 U.S.C. 2279bb-1 Sec. 8.32. Risk-Based Capital Levels.

(a) RISK-BASED CAPITAL TEST. The Director of the Office of 

Secondary Market Oversight shall, by regulation, establish a risk-based capital 

test under this section for the Corporation. When applied to the Corporation, 

the risk-based capital test shall determine the amount of regulatory capital for 

the Corporation that is sufficient for the Corporation to maintain positive 

capital during a 10-year period in which both of the following circumstances 

occur:

(1) CREDIT RISK. 

(A) IN GENERAL.—With respect to securities 

representing an interest in, or obligations backed by, a pool of 

qualified loans owned or guaranteed by the Corporation and other 

obligations of the Corporation, losses on the underlying qualified 

loans occur throughout the United States at a rate of default and 

severity (based on any measurements of default reasonably related 

to prevailing industry practice in determining capital adequacy) 

reasonably related to the rate and severity that occurred in 

contiguous areas of the United States containing an aggregate of 

not less than 5 percent of the total population of the United States 

that, for a period of not less than 2 years (as established by the 

Director), experienced the highest rates of default and severity of 

agricultural mortgage losses, in comparison with such rates of 

default and severity of agricultural mortgage losses in other such 

areas for any period of such duration, as determined by the 

Director.

(B) RURAL UTILITY LOANS.—With respect to 

securities representing an interest in, or obligation backed by, a 

pool of qualified loans described in section 8.0(7)(C) owned or 

guaranteed by the Corporation, losses occur at a rate of default and 

severity reasonably related to risks in electric and telephone 

facility loans (as applicable), as determined by the Director.

(2) INTEREST RATE RISK. Interest rates on Treasury 

obligations of varying terms increase or decrease over the first 12 

months of such 10-year period by not more than the lesser of (A) 50 

percent (with respect to the average interest rates on such obligations 

during the 12-month period preceding the 10-year period), or (B) 600 

basis points, and remain at such level for the remainder of the period. 

This paragraph may not be construed to require the Director to 

determine interest rate risk under this paragraph based on the interest 

rates for various long-term and short-term obligations all increasing or 

all decreasing concurrently.

(b) CONSIDERATIONS.
180

(1) ESTABLISHMENT OF TEST. In establishing the riskbased capital test under subsection (a)—

(A) the Director shall take into account appropriate 

distinctions based on various types of agricultural mortgage 

products, varying terms of Treasury obligations, and any other 

factors the Director considers appropriate;

(B) the Director shall conform loan data used in 

determining credit risk to the minimum geographic and commodity 

diversification standards applicable to pools of qualified loans 

eligible for guarantee;

(C) the Director may take into account retained 

subordinated participating interests under section 8.6(b)(2) (as in 

effect before the date of the enactment of the Farm Credit System 

Reform Act of 1996);

(D) the Director may take into account other methods or 

tests to determine credit risk developed by the Corporation before 

December 13, 1991; and

(E) the Director shall consider any other information 

submitted by the Corporation in writing during the 180-day period 

beginning on December 13, 1991.

(2) REVISING TEST. Upon the expiration of the 8-year period 

beginning on December 13, 1991, the Director shall examine the riskbased capital test under subsection (a) and may revise the test. In 

making examinations and revisions under this paragraph, the Director 

shall take into account that, before December 13, 1991, the Corporation 

has not issued guarantees for pools of qualified loans. To the extent that 

the revision of the risk-based capital test causes a change in the 

classification of the Corporation within the enforcement levels 

established under section 8.35, the Director shall waive the applicability 

of any additional enforcement actions available because of such change 

for a reasonable period of time, to permit the Corporation to increase the 

amount of regulatory capital of the Corporation accordingly.

(c) RISK-BASED CAPITAL LEVEL. For purposes of this subtitle, 

the risk-based capital level for the Corporation shall be equal to the sum of the 

following amounts:

(1) CREDIT AND INTEREST RATE RISK. The amount of 

regulatory capital determined by applying the risk-based capital test 

under subsection (a) to the Corporation, adjusted to account for foreign 

exchange risk.

(2) MANAGEMENT AND OPERATIONS RISK. To provide 

for management and operations risk, 30 percent of the amount of 

regulatory capital determined by applying the risk-based capital test 

under subsection (a) to the Corporation.

(d) SPECIFIED CONTENTS.

(1) IN GENERAL. The regulations establishing the risk-based 

capital test under this section shall—
181

(A) be issued by the Director for public comment in the 

form of a notice of proposed rulemaking, to be first published after 

the expiration of the period referred to in subsection (a); and

(B) contain specific requirements, definitions, methods, 

variables, and parameters used under the risk-based capital test and 

in implementing the test (such as loan loss severity, float income, 

loan-to-value ratios, taxes, yield curve slopes, default experience, 

prepayment rates, and performance of pools of qualified loans). 

(2) SPECIFICITY. The regulations referred to in paragraph (1) 

shall be sufficiently specific to permit an individual other than the 

Director to apply the test in the same manner as the Director.

(e) AVAILABILITY OF MODEL. The Director shall make copies of 

the statistical model or models used to implement the risk-based capital test 

under this section available for public acquisition and may charge a 

reasonable fee for such copies.

12 U.S.C. 2279bb-2 Sec. 8.33. Minimum Capital Level.

(a) IN GENERAL. Except as provided in subsection (b), for purposes 

of this subtitle, the minimum capital level for the Corporation shall be an 

amount of core capital equal to the sum of—

(1) 2.75 percent of the aggregate on-balance sheet assets of the 

Corporation, as determined in accordance with generally accepted 

accounting principles; and

(2) 0.75 percent of the aggregate off-balance sheet obligations of 

the Corporation, which, for the purposes of this subtitle, shall include—

(A) the unpaid principal balance of outstanding securities 

that are guaranteed by the Corporation and backed by pools of 

qualified loans;

(B) instruments that are issued or guaranteed by the 

Corporation and are substantially equivalent to instruments 

described in subparagraph (A); and

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

(b) TRANSITION PERIOD.

(1) IN GENERAL. For purposes of this subtitle, the minimum 

capital level for the Corporation—

(A) prior to January 1, 1997, shall be the amount of core 

capital equal to the sum of—

(i) 0.45 percent of aggregate off-balance sheet 

obligations of the Corporation;

(ii) 0.45 percent of designated on-balance sheet assets 

of the Corporation, as determined under paragraph (2); and

(iii) 2.50 percent of on-balance sheet assets of the 

Corporation other than assets designated under paragraph (2);

(B) during the 1-year period ending December 31, 1997, 

shall be the amount of core capital equal to the sum of—

(i) 0.55 percent of aggregate off-balance sheet 

obligations of the Corporation;
182

(ii) 1.20 percent of designated on-balance sheet assets 

of the Corporation, as determined under paragraph (2); and

(iii) 2.55 percent of on-balance sheet assets of the 

Corporation other than assets designated under paragraph (2);

(C) during the 1-year period ending December 31, 1998, 

shall be the amount of core capital equal to—

(i) if the Corporation's core capital is not less than 

$25,000,000 on January 1, 1998, the sum of—

(I)0.65 percent of aggregate off-balance sheet 

obligations of the Corporation;

(II) 1.95 percent of designated on-balance 

sheet assets of the Corporation, as determined under 

paragraph (2); and

(III) 2.65 percent of on-balance sheet assets 

of the Corporation other than assets designated under 

paragraph (2); or

(ii) if the Corporation's core capital is less than 

$25,000,000 on January 1, 1998, the amount determined 

under subsection (a); and

(D) on and after January 1, 1999, shall be the amount 

determined under subsection (a).

(2) DESIGNATED ON-BALANCE SHEET ASSETS. For 

purposes of this subsection, the designated on-balance sheet assets of the 

Corporation shall be—

(A) the aggregate on-balance sheet assets of the 

Corporation acquired under section 8.6(d); and

(B) the aggregate amount of qualified loans purchased and 

held by the Corporation under section 8.3(c)(13).

12 U.S.C. 2279bb-3 Sec. 8.34. Critical Capital Level.

For purposes of this subtitle, the critical capital level for the Corporation 

shall be an amount of core capital equal to 50 percent of the total minimum 

capital amount determined under section 8.33.

12 U.S.C. 2279bb-4 Sec. 8.35. Enforcement Levels.

(a) IN GENERAL. The Director shall classify the Corporation, for 

purposes of this subtitle, according to the following enforcement levels:

(1) LEVEL I. The Corporation shall be classified as within level 

I if the Corporation—

(A) maintains an amount of regulatory capital that is equal 

to or exceeds the risk-based capital level established under section 

8.32; and

(B) equals or exceeds the minimum capital level established 

under section 8.33.

(2) LEVEL II. The Corporation shall be classified as within 

level II if—

(A) the Corporation—
183

(i) maintains an amount of regulatory capital that is 

less than the risk-based capital level; and

(ii) equals or exceeds the minimum capital level; or

(B) the Corporation is otherwise classified as within level II 

under subsection (b) of this section.

(3) LEVEL III. The Corporation shall be classified as within 

level III if—

(A) the Corporation—

(i) does not equal or exceed the minimum capital 

level; and

(ii) equals or exceeds the critical capital level 

established under section 8.34; or

(B) the Corporation is otherwise classified as within level 

III under subsection (b) of this section.

(4) LEVEL IV. The Corporation shall be classified as within 

level IV if the Corporation—

(A) does not equal or exceed the critical capital level; or

(B) is otherwise classified as within level IV under 

subsection (b) of this section.

(b) DISCRETIONARY CLASSIFICATION. If at any time the 

Director determines in writing (and provides written notification to the 

Corporation and the Farm Credit Administration) that the Corporation is 

taking any action not approved by the Director that could result in a rapid 

depletion of core capital or that the value of the property subject to mortgages 

securitized by the Corporation or property underlying securities guaranteed by 

the Corporation, has decreased significantly, the Director may classify the 

Corporation—

(1) as within level II, if the Corporation is otherwise within level 

I;

(2) as within level III, if the Corporation is otherwise within 

level II; or

(3) as within level IV, if the Corporation is otherwise within 

level III.

(c) QUARTERLY DETERMINATION. The Director shall determine 

the classification of the Corporation for purposes of this subtitle on not less 

than a quarterly basis (and as appropriate under subsection (b)). The first such 

determination shall be made for the quarter ending March 31, 1992.

(d) NOTICE. Upon determining under subsection (b) or (c) that the 

Corporation is within level II or III, the Director shall provide written notice 

to the Congress and to the Corporation—

(1) that the Corporation is within such level;

(2) that the Corporation is subject to the provisions of section 

8.36 or 8.37, as applicable; and

(3) stating the reasons for the classification of the Corporation 

within such level.
184

12 U.S.C. 2279bb-5 Sec. 8.36. Mandatory Actions Applicable to Level II.

(a) CAPITAL RESTORATION PLAN. If the Corporation is 

classified as within level II, the Corporation shall, within the time period 

determined by the Director, submit to the Director a capital restoration plan 

and, after approval, carry out the plan.

(b) RESTRICTION ON DIVIDENDS. If the Corporation is classified 

as within level II, the Corporation may not make any payment of dividends 

that would result in the Corporation being reclassified as within level III or 

IV.

(c) RECLASSIFICATION FROM LEVEL II TO LEVEL III. The 

Director shall immediately reclassify the Corporation as within level III (and 

the Corporation shall be subject to the provisions of section 8.37), if—

(1) the Corporation is within level II; and

(2)(A) the Corporation does not submit a capital restoration plan 

that is approved by the Director; or

(B) the Director determines that the Corporation has failed 

to make, in good faith, reasonable efforts necessary to comply with 

such a capital restoration plan and fulfill the schedule for the plan 

approved by the Director.

(d) EFFECTIVE DATE. This section shall take effect upon the 

expiration of the 30-month period beginning on the date of the enactment of 

this section.

12 U.S.C. 2279bb-6 Sec. 8.37. Supervisory Actions Applicable to Level III.

(a) MANDATORY SUPERVISORY ACTIONS.

(1) CAPITAL RESTORATION PLAN. If the Corporation is 

classified as within level III, the Corporation shall, within the time 

period determined by the Director, submit to the Director a capital 

restoration plan and, after approval, carry out the plan.

(2) RESTRICTIONS ON DIVIDENDS.

(A) PRIOR APPROVAL. If the Corporation is classified as 

within level III, the Corporation—

(i) may not make any payment of dividends that 

would result in the Corporation being reclassified as within 

level IV; and

(ii) may make any other payment of dividends only if 

the Director approves the payment before the payment.

(B) STANDARD FOR APPROVAL. If the Corporation is 

classified as within level III, the Director may approve a payment 

of dividends by the Corporation only if the Director determines 

that the payment (i) will enhance the ability of the Corporation to 

meet the risk-based capital level and the minimum capital level 

promptly, (ii) will contribute to the long-term safety and soundness 

of the Corporation, or (iii) is otherwise in the public interest.

(3) RECLASSIFICATION FROM LEVEL III TO LEVEL IV. 

The Director shall immediately reclassify the Corporation as within 

level IV if—
185

(A) the Corporation is classified as within level III; and

(B)(i) the Corporation does not submit a capital restoration 

plan that is approved by the Director; or

(ii) the Director determines that the Corporation has 

failed to make, in good faith, reasonable efforts necessary to 

comply with such a capital restoration plan and fulfill the 

schedule for the plan approved by the Director.

(b) DISCRETIONARY SUPERVISORY ACTIONS. In addition to 

any other actions taken by the Director (including actions under subsection 

(a)), the Director may, at any time, take any of the following actions if the 

Corporation is classified as within level III:

(1) LIMITATION ON INCREASE IN OBLIGATIONS. Limit 

any increase in, or order the reduction of, any obligations of the 

Corporation, including off-balance sheet obligations.

(2) LIMITATION ON GROWTH. Limit or prohibit the growth 

of the assets of the Corporation or require contraction of the assets of the 

Corporation.

(3) PROHIBITION ON DIVIDENDS. Prohibit the Corporation 

from making any payment of dividends.

(4) ACQUISITION OF NEW CAPITAL. Require the 

Corporation to acquire new capital in any form and in any amount 

sufficient to provide for the reclassification of the Corporation as within 

level II.

(5) RESTRICTION OF ACTIVITIES. Require the Corporation 

to terminate, reduce, or modify any activity that the Director determines 

creates excessive risk to the Corporation.

(6) CONSERVATORSHIP. Appoint a conservator for the 

Corporation consistent with this Act.

(c) EFFECTIVE DATE. This section shall take effect on January 1, 

1992.

Sec. 8.38. [Repealed}

Repealed by section 5411(51) of the Agriculture Improvement Act of 2018.

Subtitle C—Receivership, Conservatorship, and Liquidation of the Federal 

Agricultural Mortgage Corporation

12 U.S.C. 2279cc Sec. 8.41. Conservatorship; Liquidation; Receivership.

(a) VOLUNTARY LIQUIDATION. The Corporation may 

voluntarily liquidate only with the consent of, and in accordance with a plan 

of liquidation approved by, the Farm Credit Administration Board.

(b) INVOLUNTARY LIQUIDATION.

(1) IN GENERAL. The Farm Credit Administration Board may 

appoint a conservator or receiver for the Corporation under the 

circumstances specified in section 4.12(b).
186

(2) APPLICATION. In applying section 4.12(b) to the 

Corporation under paragraph (1)—

(A) the Corporation shall also be considered insolvent if the 

Corporation is unable to pay its debts as they fall due in the 

ordinary course of business;

(B) a conservator may also be appointed for the 

Corporation if the authority of the Corporation to purchase 

qualified loans or issue or guarantee loan-backed securities is 

suspended; and

(C) a receiver may also be appointed for the Corporation if-

(i)(I) the authority of the Corporation to purchase 

qualified loans or issue or guarantee loan-backed securities is 

suspended; or

(II) the Corporation is classified under 

section 8.35 as within level III or IV and the alternative 

actions available under subtitle B are not satisfactory; 

and

(ii) the Farm Credit Administration determines that 

the appointment of a conservator would not be appropriate.

(3) NO EFFECT ON SUPERVISORY ACTIONS. The grounds 

for appointment of a conservator for the Corporation under this 

subsection shall be in addition to those in section 8.37.

(c) APPOINTMENT OF CONSERVATOR OR RECEIVER.

(1) QUALIFICATIONS. Notwithstanding section 4.12(b), if a 

conservator or receiver is appointed for the Corporation, the conservator 

or receiver shall be—

(A) the Farm Credit Administration or any other 

governmental entity or employee, including the Farm Credit 

System Insurance Corporation; or

(B) any person that—

(i) has no claim against, or financial interest in, the 

Corporation or other basis for a conflict of interest as the 

conservator or receiver; and

(ii) has the financial and management expertise 

necessary to direct the operations and affairs of the 

Corporation and, if necessary, to liquidate the Corporation.

(2) COMPENSATION.

(A) IN GENERAL. A conservator or receiver for the 

Corporation and professional personnel (other than a Federal 

employee) employed to represent or assist the conservator or 

receiver may be compensated for activities conducted as, or for, a 

conservator or receiver.

(B) LIMIT ON COMPENSATION. Compensation may 

not be provided in amounts greater than the compensation paid to 

employees of the Federal Government for similar services, except 

that the Farm Credit Administration may provide for compensation 

at higher rates that are not in excess of rates prevailing in the 

private sector if the Farm Credit Administration determines that 
187

compensation at higher rates is necessary in order to recruit and 

retain competent personnel.

(C) CONTRACTUAL ARRANGEMENTS. The 

conservator or receiver may contract with any governmental entity, 

including the Farm Credit System Insurance Corporation, to make 

personnel, services, and facilities of the entity available to the 

conservator or receiver on such terms and compensation 

arrangements as shall be mutually agreed, and each entity may 

provide the same to the conservator or receiver.

(3) EXPENSES. A valid claim for expenses of the 

conservatorship or receivership (including compensation under 

paragraph (2)) and a valid claim with respect to a loan made under 

subsection (f) shall—

(A) be paid by the conservator or receiver from funds of the 

Corporation before any other valid claim against the Corporation; 

and 

(B) may be secured by a lien, on such property of the 

Corporation as the conservator or receiver may determine, that 

shall have priority over any other lien.

(4) LIABILITY. If the conservator or receiver for the 

Corporation is not a Federal entity, or an officer or employee of the 

Federal Government, the conservator or receiver shall not be personally 

liable for damages in tort or otherwise for an act or omission performed 

pursuant to and in the course of the conservatorship or receivership, 

unless the act or omission constitutes gross negligence or any form of 

intentional tortious conduct or criminal conduct.

(5) INDEMNIFICATION. The Farm Credit Administration may 

allow indemnification of the conservator or receiver from the assets of 

the conservatorship or receivership on such terms as the Farm Credit 

Administration considers appropriate.

(d) JUDICIAL REVIEW OF APPOINTMENT.

(1) IN GENERAL. Notwithstanding subsection (i)(1), not later 

than 30 days after a conservator or receiver is appointed under 

subsection (b), the Corporation may bring an action in the United States 

District Court for the District of Columbia for an order requiring the 

Farm Credit Administration Board to remove the conservator or 

receiver. The court shall, on the merits, dismiss the action or direct the 

Farm Credit Administration Board to remove the conservator or 

receiver.

(2) STAY OF OTHER ACTIONS. On the commencement of an 

action under paragraph (1), any court having jurisdiction of any other 

action or enforcement proceeding authorized under this Act to which the 

Corporation is a party shall stay the action or proceeding during the 

pendency of the action for removal of the conservator or receiver.

(e) GENERAL POWERS OF CONSERVATOR OR RECEIVER. 

The conservator or receiver for the Corporation shall have such powers to 

conduct the conservatorship or receivership as shall be provided pursuant to 

regulations adopted by the Farm Credit Administration Board. Such powers 
188

shall be comparable to the powers available to a conservator or receiver 

appointed pursuant to section 4.12(b).

(f) BORROWINGS FOR WORKING CAPITAL.

(1) IN GENERAL. If the conservator or receiver of the 

Corporation determines that it is likely that there will be insufficient 

funds to pay the ongoing administrative expenses of the conservatorship 

or receivership or that there will be insufficient liquidity to fund 

maturing obligations of the conservatorship or receivership, the 

conservator or receiver may borrow funds in such amounts, from such 

sources, and at such rates of interest as the conservator or receiver 

considers necessary or appropriate to meet the administrative expenses 

or liquidity needs of the conservatorship or receivership.

(2) WORKING CAPITAL FROM FARM CREDIT BANKS. A 

Farm Credit bank may loan funds to the conservator or receiver for a 

loan authorized under paragraph (1) or, in the event of receivership, a 

Farm Credit bank may purchase assets of the Corporation.

(g) AGREEMENTS AGAINST INTERESTS OF CONSERVATOR 

OR RECEIVER. No agreement that tends to diminish or defeat the right, title, 

or interest of the conservator or receiver for the Corporation in any asset 

acquired by the conservator or receiver as conservator or receiver for the 

Corporation shall be valid against the conservator or receiver unless the 

agreement—

(1) is in writing;

(2) is executed by the Corporation and any person claiming an 

adverse interest under the agreement, including the obligor, 

contemporaneously with the acquisition of the asset by the Corporation;

(3) is approved by the Board or an appropriate committee of the 

Board, which approval shall be reflected in the minutes of the Board or 

committee; and

(4) has been, continuously, from the time of the agreement's 

execution, an official record of the Corporation.

(h) REPORT TO THE CONGRESS. On a determination by the 

receiver for the Corporation that there are insufficient assets of the 

receivership to pay all valid claims against the receivership, the receiver shall 

submit to the Secretary of the Treasury, the Committee on Agriculture of the 

House of Representatives, and the Committee on Agriculture, Nutrition, and 

Forestry of the Senate a report on the financial condition of the receivership.

(i) TERMINATION OF AUTHORITIES.

(1) CORPORATION. The charter of the Corporation shall be 

canceled, and the authority provided to the Corporation by this title shall 

terminate, on such date as the Farm Credit Administration Board 

determines is appropriate following the placement of the Corporation in 

receivership, but not later than the conclusion of the receivership and 

discharge of the receiver.

(2) OVERSIGHT. The Office of Secondary Market Oversight 

established under section 8.11 shall be abolished, and section 8.11(a) 

and subtitle B shall have no force or effect, on such date as the Farm 

Credit Administration Board determines is appropriate following the 
189

placement of the Corporation in receivership, but not later than the 

conclusion of the receivership and discharge of the receiver.
190 

Title 12—United States Code

Banks and Banking

* * * * * 

Sec. 1786. Termination of Insured Credit Union Status; Cease and

Desist Orders; Removal or Suspension from Office; Procedure. 

* * * * *

(g) REMOVAL AND PROHIBITION AUTHORITY.

* * * * *

(7) INDUSTRYWIDE PROHIBITION.

(A) IN GENERAL. Except as provided in subparagraph 

(B), any person who, pursuant to an order issued under this 

subsection or subsection (i), has been removed or suspended from 

office in an insured credit union or prohibited from participating in 

the conduct of the affairs of an insured credit union may not, while 

such order is in effect, continue or commence to hold any office in, 

or participate in any manner in the conduct of the affairs of— 

(i) any insured depository institution; 

(ii) any institution treated as an insured bank under 

paragraph (3) or (4) of section 8(b) of the Federal Deposit 

Insurance Act, or as a savings association under section 

8(b)(8) of such Act;

(iii) any insured credit union; 

(iv) any institution chartered under the Farm Credit 

Act of 1971; 

(v) any appropriate Federal depository institution 

regulatory agency; and 

(vi) the Federal Housing Finance Board and any 

Federal home loan bank. 

(B) EXCEPTION IF AGENCY PROVIDES WRITTEN 

CONSENT. If, on or after the date an order is issued under this 

subsection which removes or suspends from office any institutionaffiliated party or prohibits such party from participating in the 

conduct of the affairs of an insured credit union, such party 

receives the written consent of— 

(i) the Board; and 

(ii) the appropriate Federal financial institutions 

regulatory agency of the institution described in any clause of 

subparagraph (A) with respect to which such party proposes 

to become an institution-affiliated party, subparagraph (A) 

shall, to the extent of such consent, cease to apply to such 

party with respect to the institution described in each written 

consent. If any person receives such a written consent from 
191 

the Board, the Board shall publicly disclose such consent. If 

the agency referred to in clause (ii) grants such a written 

consent, such agency shall report such action to the Board 

and publicly disclose such consent. 

(C) VIOLATION OF PARAGRAPH TREATED AS 

VIOLATION OF ORDER. Any violation of subparagraph (A) by 

any person who is subject to an order described in such 

subparagraph shall be treated as a violation of the order. 

(D) APPROPRIATE FEDERAL FINANCIAL 

INSTITUTIONS REGULATORY AGENCY DEFINED. For 

purposes of this paragraph, the term "appropriate Federal financial 

institutions regulatory agency" means— 

(i) the appropriate Federal banking agency, as 

provided in section 3(q) of the Federal Deposit Insurance 

Act;

(ii) the Farm Credit Administration, in the case of an 

institution chartered under the Farm Credit Act of 1971; 

(iii) the National Credit Union Administration Board, 

in the case of an insured credit union (as defined in section 

101(7) of the Federal Credit Union Act); and 

(iv) the Secretary of the Treasury, in the case of the 

Federal Housing Finance Board and any Federal home loan 

bank. 

(E) CONSULTATION BETWEEN AGENCIES. The 

agencies referred to in clauses (i) and (ii) of subparagraph (B) shall 

consult with each other before providing any written consent 

described in subparagraph (B). 

(F) APPLICABILITY. This paragraph shall only apply to 

a person who is an individual, unless the Board specifically finds 

that it should apply to a corporation, firm, or other business 

enterprise.

* * * * *

(l) CRIMINAL PENALTY FOR VIOLATION OF CERTAIN 

ORDERS.

Whoever— 

(1) under this Act, is suspended or removed from, or prohibited 

from participating in the affairs of any credit union described in 

subsection (g)(5); and 

(2) knowingly participates, directly or indirectly, in any manner 

(including by engaging in an activity specifically prohibited in such an 

order or in subsection (g)(5)) in the conduct of the affairs of such a 

credit union; shall be fined not more than $1,000,000, imprisoned for not 

more than 5 years, or both. 

* * * * *
192 

Sec. 1818. Termination of Status as Insured Bank. 

* * * * *

(e) REMOVAL AND PROHIBITION AUTHORITY.

* * * * * 

(7) INDUSTRYWIDE PROHIBITION.

(A) IN GENERAL. Except as provided in subparagraph 

(B), any person who, pursuant to an order issued under this 

subsection or subsection (g), has been removed or suspended from 

office in an insured depository institution or prohibited from 

participating in the conduct of the affairs of an insured depository 

institution may not, while such order is in effect, continue or 

commence to hold any office in, or participate in any manner in the 

conduct of the affairs of— 

(i) any insured depository institution; 

(ii) any institution treated as an insured bank under 

subsection (b)(3) or (b)(4), or as a savings association under 

subsection (b)(8); 

(iii) any insured credit union under the Federal Credit 

Union Act; 

(iv) any institution chartered under the Farm Credit 

Act of 1971; 

(v) any appropriate Federal depository institution 

regulatory agency; and 

(vi) the Federal Housing Finance Board and any 

Federal home loan bank. 

(B) EXCEPTION IF AGENCY PROVIDES WRITTEN 

CONSENT. If, on or after the date an order is issued under this 

subsection which removes or suspends from office any institutionaffiliated party or prohibits such party from participating in the 

conduct of the affairs of an insured depository institution, such 

party receives the written consent of— 

(i) the agency that issued such order; and 

(ii) the appropriate Federal financial institutions 

regulatory agency of the institution described in any clause of 

subparagraph (A) with respect to which such party proposes 

to become an institution-affiliated party, subparagraph (A) 

shall, to the extent of such consent, cease to apply to such 

party with respect to the institution described in each written 

consent. Any agency that grants such a written consent shall 

report such action to the Corporation and publicly disclose 

such consent. 

(C) VIOLATION OF PARAGRAPH TREATED AS 

VIOLATION OF ORDER. Any violation of subparagraph (A) by 
193 

any person who is subject to an order described in such 

subparagraph shall be treated as a violation of the order. 

(D) APPROPRIATE FEDERAL FINANCIAL 

INSTITUTIONS REGULATORY AGENCY DEFINED. For 

purposes of this paragraph and subsection (j), the term "appropriate 

Federal financial institutions regulatory agency" means— 

(i) the appropriate Federal banking agency, in the 

case of an insured depository institution; 

(ii) the Farm Credit Administration, in the case of an 

institution chartered under the Farm Credit Act of 1971; 

(iii) the National Credit Union Administration Board, 

in the case of an insured credit union (as defined in section 

101(7) of the Federal Credit Union Act); and 

(iv) the Secretary of the Treasury, in the case of the 

Federal Housing Finance Board and any Federal home loan 

bank. 

(E) CONSULTATION BETWEEN AGENCIES. The 

agencies referred to in clauses (i) and (ii) of subparagraph (B) shall 

consult with each other before providing any written consent 

described in subparagraph (B). 

(F) APPLICABILITY. This paragraph shall only apply to 

a person who is an individual, unless the appropriate Federal 

banking agency specifically finds that it should apply to a 

corporation, firm, or other business enterprise. 

* * * * *

(j) CRIMINAL PENALTY. Whoever, being subject to an order in 

effect under subsection (e) or (g), without the prior written approval of the 

appropriate Federal financial institutions regulatory agency, knowingly 

participates, directly or indirectly, in any manner (including by engaging in an 

activity specifically prohibited in such an order or in subsection (e)(6) in the 

conduct of the affairs of— 

(1) any insured depository institution; 

(2) any institution treated as an insured bank under subsection 

(b)(3) or (b)(4);

(3) any insured credit union (as defined in section 101(7) of the 

Federal Credit Union Act); or 

(4) any institution chartered under the Farm Credit Act of 1971, 

shall be fined not more than $1,000,000, imprisoned for not more than 5 

years, or both. 

* * * * *

Sec. 1821. Insurance Funds. 

* * * * *
194 

(t) AGENCIES MAY SHARE INFORMATION WITHOUT 

WAIVING PRIVILEGE.

(1) IN GENERAL. A covered agency shall not be deemed to 

have waived any privilege applicable to any information by transferring 

that information to or permitting that information to be used by— 

(A) any other covered agency, in any capacity; or 

(B) any other agency of the Federal Government (as defined 

in section 6 of title 18). 

(2) DEFINITIONS.— 

For purposes of this subsection: 

(A) COVERED AGENCY.— 

The term covered agency means any of the following: 

(i) Any appropriate Federal banking agency. 

(ii) The Farm Credit Administration.

(iii) The Farm Credit System Insurance Corporation. 

(iv) The National Credit Union Administration.

(v) The Government Accountability Office. 

(vi) The Bureau of Consumer Financial Protection.

(vii) Federal Housing Finance Agency. 

(B) PRIVILEGE.— 

The term privilege includes any work-product, attorney-client, or 

other privilege recognized under Federal or State law. 

(3) RULE OF CONSTRUCTION.— 

Paragraph (1) shall not be construed as implying that any person waives 

any privilege applicable to any information because paragraph (1) does 

not apply to the transfer or use of that information. 

* * * * *

 Sec. 2276. Access to and Examination by Comptroller General of 

Books, Documents, etc. of Farm Credit System Banks and 

Institutions. 

On and after December 19, 1985, the Comptroller General or his duly 

authorized representatives shall have access to and the right to examine all 

books, documents, papers, records, or other recorded information within the 

possession or control of the Federal land banks and Federal land bank 

associations, Federal intermediate credit banks and production credit 

associations and banks for cooperatives. [This section was added by the 

Furthering Continuing Appropriations, 1985, P.L. 99-190, Title I, § 107, Dec. 

19, 1985, 99 Stat. 1316.] 

* * * * *

 Sec. 3025. Examination and Audit. 

The Farm Credit Administration and the Government Accountability 

Office are hereby authorized and directed to examine and audit the Bank. 

Reports regarding such examinations and audits shall be promptly forwarded 

to both Houses of the Congress. The Bank shall reimburse the Farm Credit 
195 

Administration for the costs of any examination or audit conducted by the 

Farm Credit Administration. (Pub. L. 95-351, Title I, § 115, Aug. 20, 1978, 

92 Stat. 511; Pub. L. 97-35, Title III, § 394(a)(1), Aug. 13, 1981, 95 Stat. 

436.) 

* * * * *
196 

Public Law 101-220

* * * * * 

 Sec. 7. Purchases of Financial Assistance Corporation Stock by 

Farm Credit System Institutions. 

* * * * *

(b) PAYMENTS.

(1) FOUR ANNUAL PAYMENTS. Notwithstanding any other 

provision of law, the Financial Assistance Corporation shall pay, out of 

the Financial Assistance Corporation Trust Fund (hereinafter in this 

section referred to as the "Trust Fund") established under section 6.25(b) 

of the Farm Credit Act of 1971 (12 U.S.C. 2278b5(b)), to each of the 

institutions of the Farm Credit System that purchased stock in the 

Financial Assistance Corporation under section 6.29 of the Farm Credit 

Act of 1971, four annual payments as provided in this section. 

(2) TIMING OF PAYMENTS. The annual payments provided 

for by this subsection shall be made available as soon as practicable after 

October 1 of each of the calendar years 1989 through 1992. 

(3) CALCULATION OF FIRST PAYMENT. The first annual 

payment made available under this subsection shall be in an amount 

equal to— 

(A) a percentage equal to 1.5 times the average rate of 

interest received by the Financial Assistance Corporation on assets 

of the Trust Fund from March 30, 1988, through September 30, 

1989; times 

(B) the difference between $177,000,000 and 4.4 percent of 

the cumulative amount of the bonds issued by the Financial 

Assistance Corporation through September 30, 1989. 

(4) CALCULATION OF REMAINING PAYMENTS. The 

second, third, and fourth annual payments made available under this 

subsection shall be in the amount equal to— 

(A) a percentage equal to the average rate of interest 

received by the Financial Assistance Corporation on assets of the 

Trust Fund during each of the fiscal years 1990 through 1992; 

times 

(B) the difference between $177,000,000 and 4.4 percent of 

the cumulative amount of the bonds issued by the Financial 

Assistance Corporation through September 30 of each of such 

fiscal years.

(5) DISTRIBUTION OF ANNUAL PAYMENTS. Annual 

payments due under this subsection shall be made available to each 

institution described in paragraph (1) in an amount equal to the total 
197 

amount of annual payments to be made available times the ratio of the 

amount of stock each institution purchased divided by $177,000,000. 

Note: Pub. L. 101-239, section 1006, December 19, 1989, contains a 

statutory provision that is identical to this section 7(b) of Pub. L. 101-220. 
198 

Terrorism Risk Insurance Program Reauthorization Act of 2015

* * * * * 

Title III—Business Risk Mitigation and Price Stabilization

* * * * *

Sec. 301. Short Title. 

This title may be cited as the Business Risk Mitigation and Price 

Stabilization Act of 2015. 

Sec. 302. Margin Requirements. 

(a) COMMODITY EXCHANGE ACT AMENDMENT.—Section 4s(e) 

of the Commodity Exchange Act (7 U.S.C. 6s(e)), as added by section 731 of 

the Dodd-Frank Wall Street Reform and Consumer Protection Act, is 

amended by adding at the end the following new paragraph: 

(4) APPLICABILITY WITH RESPECT TO 

COUNTERPARTIES.—The requirements of paragraphs (2)(A)(ii) and 

(2)(B)(ii), including the initial and variation margin requirements 

imposed by rules adopted pursuant to paragraphs (2)(A)(ii) and 

(2)(B)(ii), shall not apply to a swap in which a counterparty qualifies for 

an exception under section 2(h)(7)(A), or an exemption issued under 

section 4(c)(1) from the requirements of section 2(h)(1)(A) for 

cooperative entities as defined in such exemption, or satisfies the criteria 

in section 2(h)(7)(D).. 

(b) SECURITIES EXCHANGE ACT AMENDMENT.—Section 15F(e) 

of the Securities Exchange Act of 1934 (15 U.S.C. 78o–10(e)), as

added by section 764(a) of the Dodd-Frank Wall Street Reform

and Consumer Protection Act, is amended by adding at the end 

the following new paragraph: 

(4) APPLICABILITY WITH RESPECT TO 

COUNTERPARTIES.—The requirements of paragraphs (2)(A)(ii) and 

(2)(B)(ii) shall not apply to a security-based swap in which a 

counterparty qualifies for an exception under section 3C(g)(1) or 

satisfies

the criteria in section 3C(g)(4)..

Sec. 303. Implementation. 

The amendments made by this title to the Commodity Exchange 

Act shall be implemented— 

(1) without regard to— 

(A) chapter 35 of title 44, United States Code; and 

(B) the notice and comment provisions of section 553 of title 

5, United States Code; 

(2) through the promulgation of an interim final rule, pursuant to 

which public comment will be sought before a final rule is issued; and
199 

(3) such that paragraph (1) shall apply solely to changes to rules 

and regulations, or proposed rules and regulations, that are limited to 

and directly a consequence of such amendments. 
200 

Agricultural Act of 2014

* * * * * 

Title V—Credit

* * * * * 

Subtitle E—Miscellaneous

* * * * * 

12 USC 2252 note Sec. 5404. Compensation Disclosure by Farm Credit System 

Institutions. 

(a) FINDINGS.—Congress finds that — 

(1) the reasonable disclosure to stockholders by Farm Credit 

System institutions regarding the compensation of Farm Credit System 

institution senior officers is beneficial to stockholders’ understanding of 

the operation of their institutions; 

(2) transparency regarding compensation practices reinforces the 

cooperative nature of Farm Credit System institutions;

(3) the unique cooperative structure of the Farm Credit System 

should be considered when promulgating rules; 

(4) the participation of stockholders in the election of the boards of 

directors of Farm Credit System institutions provides stockholders the 

opportunity to participate in the management of their institutions;

(5) as representatives of stockholders, the boards of directors of 

Farm Credit System institutions importantly establish and oversee the 

compensation practices of Farm Credit System institutions to ensure the 

safe and sound operation of those institutions; and

(6) any regulation should strengthen and not hinder the ability of 

Farm Credit System boards of directors to oversee compensation 

practices.

(b) IMPLEMENTATION.—Not later than 60 days after the date of 

enactment of this Act, the Farm Credit Administration shall review its rules to 

reflect Congressional intent that a primary responsibility of the boards of 

directors of Farm Credit System institutions, as elected representatives of their 

stockholders, is to oversee compensation practices.

Note: Section 5404 of the Agricultural Credit Act of 2014 modifies section 514 of the Farm 

Credit Banks and Association Safety and Soundness Act of 1992, Pub. L. 102-552, § 514, 106 

Stat 4102, 4134 (Oct. 28, 1992).
201 

Dodd-Frank Wall Street Reform and Consumer Protection Act

Part I 

Title I—Financial Stability

12 U.S.C. 5311 Sec. 102. Definitions. 

(a) IN GENERAL.—For purposes of this title, unless the context 

otherwise requires, the following definitions shall apply:

* * * * * 

(4) NONBANK FINANCIAL COMPANY DEFINITIONS. 

* * * * * 

(B) U.S. NONBANK FINANCIAL COMPANY.—The term

U.S. nonbank financial company means a company (other than a 

bank holding company, a Farm Credit System institution chartered 

and subject to the provisions of the Farm Credit Act of 1971 (12 

U.S.C. 2001 et seq.), or a national securities exchange (or parent 

thereof), clearing agency (or parent thereof, unless the parent is a 

bank holding company), security-based swap execution facility, or 

security-based swap data repository registered with the 

Commission, or a board of trade designated as a contract market 

(or parent thereof), or a derivatives clearing organization (or parent 

thereof, unless the parent is a bank holding company), swap 

execution facility or a swap data repository registered with the 

Commodity Futures Trading Commission), that is— 

(i) incorporated or organized under the laws of the 

United States or any State; and

(ii) predominantly engaged in financial activities, as 

defined in paragraph (6). 

* * * * *

Title II—Orderly Liquidation Authority

12 U.S.C. 5381 Sec. 201. Definitions. 

* * * * * 

(a) IN GENERAL.—In this title, the following definitions shall apply: 

* * * * * 

(11) FINANCIAL COMPANY.—The term financial company

means any company that— 
202 

(A) is incorporated or organized under any provision of 

Federal law or the laws of any State;

* * * * * 

(C) is not a Farm Credit System institution chartered under 

and subject to the provisions of the Farm Credit Act of 1971, as 

amended (12 U.S.C. 2001 et seq.), a governmental entity, or a 

regulated entity, as defined under section 1303(20) of the Federal 

Housing Enterprises Financial Safety and Soundness Act of 1992 

(12 U.S.C. 4502(20)). 

* * * * * 

Title VI—Improvements to Regulation of Bank and Savings Association 

Holding Companies and Depository Institutions

* * * * * 

12 U.S.C. 1851 Sec. 619. Prohibitions on Proprietary Trading and Certain 

Relationships with Hedge Funds and Private Equity Funds. 

The Bank Holding Company Act of 1956 (12 U.S.C. 1841 et seq.) is 

amended by adding at the end the following: 

SEC. 13. PROHIBITIONS ON PROPRIETARY TRADING AND 

CERTAIN RELATIONSHIPS WITH HEDGE FUNDS AND PRIVATE 

EQUITY FUNDS. * * * * * 

(d) PERMITTED ACTIVITIES.—‘ 

(1) IN GENERAL.—Notwithstanding the restrictions under 

subsection (a), to the extent permitted by any other provision of Federal 

or State law, and subject to the limitations under paragraph (2) and any 

restrictions or limitations that the appropriate Federal banking agencies, 

the Securities and Exchange Commission, and the Commodity Futures 

Trading Commission, may determine, the following activities (in this 

section referred to as ‘permitted activities’) are permitted:

(A) The purchase, sale, acquisition, or disposition of 

obligations of the United States or any agency thereof, obligations, 

participations, or other instruments of or issued by the Government 

National Mortgage Association, the Federal National Mortgage 

Association, the Federal Home Loan Mortgage Corporation, a 

Federal Home Loan Bank, the Federal Agricultural Mortgage 

Corporation, or a Farm Credit System institution chartered under 

and subject to the provisions of the Farm Credit Act of 1971 (12 

U.S.C. 2001 et seq.), and obligations of any State or of any 

political subdivision thereof. 

* * * * * 
203 

Part II—Regulation of Swap Markets

Title VII—Wall Street Transparency and Accountability

7 U.S.C. 1a Sec. 721. Definitions. 

(a) IN GENERAL.—Section 1a of the Commodity Exchange Act (7 

U.S.C. 1a) is amended— 

* * * * * 

(2) by inserting after paragraph (1) the following: 

(2) APPROPRIATE FEDERAL BANKING AGENCY.—The 

term ‘appropriate Federal banking agency’— 

(A) has the meaning given the term in section 3 of the 

Federal Deposit Insurance Act (12 U.S.C. 1813); 

(B) means the Board in the case of a noninsured State bank; 

and

(C) is the Farm Credit Administration for farm credit system 

institutions.

* * * * * 

(39) PRUDENTIAL REGULATOR.—The term ‘prudential 

regulator’ means— 

* * * * * 

(D) the Farm Credit Administration, in the case of a swap 

dealer, major swap participant, security-based swap dealer, or 

major security-based swap participant that is an institution 

chartered under the Farm Credit Act of 1971 (12 U.S.C. 2001 et 

seq.); 

* * * * * 

7 U.S.C. 2 Sec. 723. Clearing. 

* * * * *

(h) CLEARING REQUIREMENT.— 

(1) IN GENERAL.— 

(A) STANDARD FOR CLEARING.—It shall be unlawful 

for any person to engage in a swap unless that person submits such 

swap for clearing to a derivatives clearing organization that is 

registered under this Act or a derivatives clearing organization that 

is exempt from registration under this Act if the swap is required to 

be cleared.
204 

* * * * * 

(7) EXCEPTIONS.— 

(A) IN GENERAL.—The requirements of paragraph (1)(A) 

shall not apply to a swap if 1 of the counterparties to the swap— 

(i) is not a financial entity;

(ii) is using swaps to hedge or mitigate commercial 

risk; and 

(iii) notifies the Commission, in a manner set forth by 

the Commission, how it generally meets its financial 

obligations associated with entering into noncleared 

swaps.

(B) OPTION TO CLEAR.—The application of the clearing 

exception in subparagraph (A) is solely at the discretion

of the counterparty to the swap that meets the conditions of 

clauses (i) through (iii) of subparagraph (A). 

(C) FINANCIAL ENTITY DEFINITION.— 

(i) IN GENERAL.—For the purposes of this paragraph, 

the term ‘financial entity’ means— 

* * * * * 

(VIII) a person predominantly engaged in 

activities that are in the business of banking, or in 

activities that are financial in nature, as defined in 

section 4(k) of the Bank Holding Company Act of 

1956. 

(ii) EXCLUSION.—The Commission shall consider 

whether to exempt small banks, savings associations, farm 

credit system institutions, and credit unions, including— 

(I) depository institutions with total assets of 

$10,000,000,000 or less; 

(II) farm credit system institutions with total assets 

of $10,000,000,000 or less; or 

(III) credit unions with total assets of

$10,000,000,000 or less. 

7 U.S.C. 6s Sec. 731. Registration and Regulation of Swap Dealers and 

Major Swap Participants. 

* * * * * 

Sec. 4s. Registration and Regulation of Swap Dealers and Major 

Swap Participants. 

* * * * * 

(d) RULEMAKINGS.— 

(1) IN GENERAL.—The Commission shall adopt rules for 

persons that are registered as swap dealers or major swap participants 

under this section. 
205 

(2) EXCEPTION FOR PRUDENTIAL REQUIREMENTS.— 

(A) IN GENERAL.—The Commission may not prescribe 

rules imposing prudential requirements on swap dealers or major 

swap participants for which there is a prudential regulator. 

* * * * * 

(e) CAPITAL AND MARGIN REQUIREMENTS.— 

(1) IN GENERAL.— 

(A) SWAP DEALERS AND MAJOR SWAP 

PARTICIPANTS THAT ARE BANKS.—Each registered swap 

dealer and major swap participant for which there is a prudential 

regulator shall meet such minimum capital requirements and 

minimum initial and variation margin requirements as the 

prudential regulator shall by rule or regulation prescribe under 

paragraph (2)(A). 

(B) SWAP DEALERS AND MAJOR SWAP 

PARTICIPANTS THAT ARE NOT BANKS.—Each registered 

swap dealer and major swap participant for which there is not a 

prudential regulator shall meet such minimum capital requirements

and minimum initial and variation margin requirements as the 

Commission shall by rule or regulation prescribe under paragraph 

(2)(B).

(2) RULES.— 

(A) SWAP DEALERS AND MAJOR SWAP 

PARTICIPANTS THAT ARE BANKS.—The prudential 

regulators, in consultation with the Commission and the Securities 

and Exchange Commission, shall jointly adopt rules for swap 

dealers and major swap participants, with respect to their activities

as a swap dealer or major swap participant, for which there is a 

prudential regulator imposing— 

(i) capital requirements; and

(ii) both initial and variation margin requirements on all 

swaps that are not cleared by a registered derivatives

clearing organization.

(B) SWAP DEALERS AND MAJOR SWAP 

PARTICIPANTS THAT ARE NOT BANKS.—The Commission 

shall adopt rules for swap dealers and major swap participants, 

with respect to their activities as a swap dealer or major swap 

participant, for which there is not a prudential regulator 

imposing— 

(i) capital requirements; and 

(ii) both initial and variation margin requirements on all 

swaps that are not cleared by a registered derivatives clearing 

organization. 

(C) CAPITAL.—In setting capital requirements for a person 

that is designated as a swap dealer or a major swap participant for 

a single type or single class or category of swap or activities, the 

prudential regulator and the Commission shall take into account 
206 

the risks associated with other types of swaps or classes of swaps 

or categories of swaps engaged in and the other activities 

conducted by that person that are not otherwise subject to 

regulation applicable to that person by virtue of the status of the 

person as a swap dealer or a major swap participant.

(3) STANDARDS FOR CAPITAL AND MARGIN.— 

(A) IN GENERAL.—To offset the greater risk to the swap 

dealer or major swap participant and the financial system arising 

from the use of swaps that are not cleared, the requirements 

imposed under paragraph (2) shall— 

(i) help ensure the safety and soundness of the swap 

dealer or major swap participant; and

(ii) be appropriate for the risk associated with the noncleared swaps held as a swap dealer or major swap 

participant.

* * * * * 

(C) MARGIN REQUIREMENTS.—In prescribing margin 

requirements under this subsection, the prudential regulator with 

respect to swap dealers and major swap participants for which it is 

the prudential regulator and the Commission with respect to swap 

dealers and major swap participants for which there is no 

prudential regulator shall permit the use of noncash collateral, as 

the regulator or the Commission determines to be consistent 

with— 

(i) preserving the financial integrity of markets trading 

swaps; and

(ii) preserving the stability of the United States 

financial system.

(D) COMPARABILITY OF CAPITAL AND MARGIN 

REQUIREMENTS.— 

(i) IN GENERAL.—The prudential regulators, the 

Commission, and the Securities and Exchange Commission 

shall periodically (but not less frequently than annually) 

consult on minimum capital requirements and minimum 

initial and variation margin requirements.

(ii) COMPARABILITY.—The entities described in

clause (i) shall, to the maximum extent practicable, establish 

and maintain comparable minimum capital requirements and 

minimum initial and variation margin requirements, 

including the use of non cash collateral, for— 

(I) swap dealers; and

(II) major swap participants.

* * * * * 

Sec. 742. Retail Commodity Transactions. 

(a) IN GENERAL.—Section 2(c) of the Commodity Exchange Act (7 

U.S.C. 2(c)) is amended— 
207 

(1) in paragraph (1), by striking 5a (to the extent provided in 

section 5a(g)), 5b, 5d, or 12(e)(2)(B)) and inserting , 5b, or 12(e)(2)(B)); 

and

(2) in paragraph (2), by adding at the end the following: 

(D) RETAIL COMMODITY TRANSACTIONS.— 

(i) APPLICABILITY.—Except as provided in clause 

(ii), this subparagraph shall apply to any agreement, contract, 

or transaction in any commodity that is— 

(I) entered into with, or offered to (even if not 

entered into with), a person that is not an eligible 

contract participant or eligible commercial entity; and

(II) entered into, or offered (even if not entered 

into), on a leveraged or margined basis, or financed by 

the offeror, the counterparty, or a person acting in 

concert with the offeror or counterparty on a similar 

basis.

(ii) EXCEPTIONS.—This subparagraph shall not apply 

to— 

(I) an agreement, contract, or transaction described 

in paragraph (1) or subparagraphs (A), (B), or (C), 

including any agreement, contract, or transaction 

specifically excluded from subparagraph (A), (B), or 

(C);

(II) any security; 

(III) a contract of sale that— 

(aa) results in actual delivery within 28 days 

or such other longer period as the Commission 

may determine by rule or regulation based upon 

the typical commercial practice in cash or spot 

markets for the commodity involved; or 

(bb) creates an enforceable obligation to

deliver between a seller and a buyer that have the 

ability to deliver and accept delivery, respectively, 

in connection with the line of business of the seller 

and buyer; or 

(IV) an agreement, contract, or transaction that is 

listed on a national securities exchange registered under 

section 6(a) of the Securities Exchange Act of 1934 (15 

U.S.C. 78f(a)); or 

(V) an identified banking product, as defined in 

section 402(b) of the Legal Certainty for Bank Products 

Act of 2000 (7 U.S.C.27(b)). 

(iii) ENFORCEMENT.—Sections 4(a), 4(b), and 4b 

apply to any agreement, contract, or transaction described in 

clause (i), as if the agreement, contract, or transaction was a 

contract of sale of a commodity for future delivery. 

(iv) ELIGIBLE COMMERCIAL ENTITY.—For 

purposes of this subparagraph, an agricultural producer, 

packer, or handler shall be considered to be an eligible 

commercial entity for any agreement, contract, or transaction
208 

for a commodity in connection with the line of business of 

the agricultural producer, packer, or handler.. 

* * * * * 

(c) CONFORMING AMENDMENTS RELATING TO RETAIL 

FOREIGN EXCHANGE TRANSACTIONS.— 

(1) Section 2(c)(2)(B)(i)(II) of the Commodity Exchange Act (7 

U.S.C. 2(c)(2)(B)(i)(II)) is amended— 

(A) in item (aa), by inserting United States before financial 

institution;

(B) by striking items (dd) and (ff); 

(C) by redesignating items (ee) and (gg) as items (dd) and 

(ff), respectively; and

(D) in item (dd) (as so redesignated), by striking the 

semicolon and inserting ; or. 

(2) Section 2(c)(2) of the Commodity Exchange Act (7 U.S.C. 

2(c)(2)) (as amended by subsection (a)(2)) is amended by adding at the 

end the following: 

(E) PROHIBITION.— 

(i) DEFINITION OF FEDERAL REGULATORY

AGENCY.—In this subparagraph, the term ‘Federal 

regulatory agency’ means— 

(I) the Commission;

(II) the Securities and Exchange Commission; 

(III) an appropriate Federal banking agency; 

(IV) the National Credit Union Association; and

(V) the Farm Credit Administration.

(ii) PROHIBITION.— 

(I) IN GENERAL.—Except as provided in 

subclause (II), a person described in subparagraph 

(B)(i)(II) for which there is a Federal regulatory agency 

shall not offer to, or enter into with, a person that is not 

an eligible contract participant, any agreement, 

contract, or transaction in foreign currency described in 

subparagraph (B)(i)(I) except pursuant to a rule or 

regulation of a Federal regulatory agency allowing the 

agreement, contract, or transaction under such terms 

and conditions as the Federal regulatory agency shall 

prescribe. described in subparagraph (B)(i)(II) for 

which a Federal regulatory agency has issued a 

proposed rule concerning agreements, contracts, or 

transactions in foreign currency described in 

subparagraph (B)(i)(I) prior to the date of enactment of 

this subclause, subclause (I) shall take effect 90 days 

after the date of enactment of this subclause.

(iii) REQUIREMENTS OF RULES AND 

REGULATIONS.— 
209 

(I) IN GENERAL.—The rules and regulations 

described in clause (ii) shall prescribe appropriate

requirements with respect to— 

(aa) disclosure; 

(bb) recordkeeping; 

(cc) capital and margin; 

(dd) reporting; 

(ee) business conduct;

(ff) documentation; and 

(gg) such other standards or requirements as 

the Federal regulatory agency shall determine to be 

necessary.

(II) TREATMENT.—The rules or regulations 

described in clause (ii) shall treat all agreements,

contracts, and transactions in foreign currency 

described in subparagraph (B)(i)(I), and all agreements,

contracts, and transactions in foreign currency that are 

functionally or economically similar to agreements, 

contracts, or transactions described in subparagraph 

(B)(i)(I), similarly..

* * * * * 

Sec. 761. Definitions Under the Securities Exchange Act of 1934.

(a) DEFINITIONS.—Section 3(a) of the Securities Exchange Act of 

1934 (15 U.S.C. 78c(a)) is amended— 

* * * * * 

(74) PRUDENTIAL REGULATOR.—The term ‘prudential 

regulator’ has the same meaning as in section 1a of the Commodity 

Exchange Act (7 U.S.C. 1a). 

* * * * * 

* * * * * 

15 U.S.C. 78c-3 Sec. 763. Amendments to the Securities Exchange Act of 1934.

(a) CLEARING FOR SECURITY-BASED SWAPS.—The Securities 

Exchange Act of 1934 (15 U.S.C. 78a et seq.) is amended by inserting after 

section 3B (as added by section 717 of this Act): 

Sec. 3C. Clearing for Security-Based Swaps. 

(a) IN GENERAL.— 

(1) STANDARD FOR CLEARING.—It shall be unlawful for any 

person to engage in a security-based swap unless that person submits 

such security-based swap for clearing to a clearing agency that is 

registered under this Act or a clearing agency that is exempt from 

registration under this Act if the security-based swap is required to be 

cleared.
210 

* * * * * 

(g) EXCEPTIONS.— 

(1) IN GENERAL.—The requirements of subsection (a)(1) shall 

not apply to a security-based swap if 1 of the counterparties to the 

security-based swap— 

(A) is not a financial entity;

(B) is using security-based swaps to hedge or mitigate 

commercial risk; and

(C) notifies the Commission, in a manner set forth by the 

Commission, how it generally meets its financial obligations 

associated with entering into non-cleared security-based swaps.

(2) OPTION TO CLEAR.—The application of the clearing 

exception in paragraph (1) is solely at the discretion of the counterparty 

to the security-based swap that meets the conditions of subparagraphs 

(A) through (C) of paragraph (1). 

(3) FINANCIAL ENTITY DEFINITION.— 

(A) IN GENERAL.—For the purposes of this subsection, the 

term ‘financial entity’ means— 

* * * * * 

(viii) a person predominantly engaged in activities that 

are in the business of banking or financial in nature, as 

defined in section 4(k) of the Bank Holding Company Act of 

1956. 

(B) EXCLUSION.—The Commission shall consider whether 

to exempt small banks, savings associations, farm credit system 

institutions, and credit unions, including— 

(i) depository institutions with total assets of 

$10,000,000,000 or less; 

(ii) farm credit system institutions with total assets of 

$10,000,000,000 or less; or 

(iii) credit unions with total assets of $10,000,000,000 

or less.

* * * * * 

* * * * * 

Sec. 764. Registration and Regulation of Security-Based Swap 

Dealers and Major Security-Based Swap Participants. 

* * * * * 

(d) RULEMAKING.— 

(1) IN GENERAL.—The Commission shall adopt rules for 

persons that are registered as security-based swap dealers or
211 

major security-based swap participants under this section. 

(2) EXCEPTION FOR PRUDENTIAL REQUIREMENTS.— 

(A) IN GENERAL.—The Commission may not prescribe 

rules imposing prudential requirements on security-based swap 

dealers or major security-based swap participants for which there 

is a prudential regulator. 

* * * * * 

(e) CAPITAL AND MARGIN REQUIREMENTS.— 

(1) IN GENERAL.— 

(A) SECURITY-BASED SWAP DEALERS AND MAJOR 

SECURITY-BASED SWAP PARTICIPANTS THAT ARE 

BANKS.—Each registered security-based swap dealer and major 

security-based swap participant for which there is not a prudential 

regulator shall meet such minimum capital requirements and 

minimum initial and variation margin requirements as the 

prudential regulator shall by rule or regulation prescribe under 

paragraph (2)(A). 

(B) SECURITY-BASED SWAP DEALERS AND MAJOR 

SECURITY-BASED SWAP PARTICIPANTS THAT ARE NOT 

BANKS.—Each registered security-based swap dealer and major 

security-based swap participant for which there is not a prudential 

regulator shall meet such minimum capital requirements and 

minimum initial and variation margin requirements as the 

Commission shall by rule or regulation prescribe 

under paragraph (2)(B). 

(2) RULES.— 

(A) SECURITY-BASED SWAP DEALERS AND MAJOR 

SECURITY-BASED SWAP PARTICIPANTS THAT ARE 

BANKS.—The prudential regulators, in consultation with the 

Commission and the Commodity Futures Trading Commission, 

shall adopt rules for security-based swap dealers and major 

security-based swap participants, with respect to their activities as 

a swap dealer or major swap participant, for which there is a 

prudential regulator imposing— 

(i) capital requirements; and

(ii) both initial and variation margin requirements on all 

security-based swaps that are not cleared by a registered 

clearing agency.

(B) SECURITY-BASED SWAP DEALERS AND MAJOR 

SECURITY-BASED SWAP PARTICIPANTS THAT ARE NOT 

BANKS.—The Commission shall adopt rules for security-based 

swap dealers and major security-based swap participants, with 

respect to their activities as a swap dealer or major swap

participant, for which there is not a prudential regulator 

imposing— 

(i) capital requirements; and
212 

(ii) both initial and variation margin requirements on all 

swaps that are not cleared by a registered clearing agency.

(C) CAPITAL.—In setting capital requirements for a person 

that is designated as a security-based swap dealer or a major 

security-based swap participant for a single type or single class or 

category of security-based swap or activities, the prudential 

regulator and the Commission shall take into account the risks 

associated with other types of security-based swaps or classes of 

security-based swaps or categories of security-based swaps 

engaged in and the other activities conducted by that person that 

are not otherwise subject to regulation applicable to that person by 

virtue of the status of the person. 

(3) STANDARDS FOR CAPITAL AND MARGIN.— 

(A) IN GENERAL.—To offset the greater risk to the 

security-based swap dealer or major security-based swap

participant and the financial system arising from the use of 

security-based swaps that are not cleared, the requirements

imposed under paragraph (2) shall — 

(i) help ensure the safety and soundness of the securitybased swap dealer or major security-based swap participant; 

and

(ii) be appropriate for the risk associated with the noncleared security-based swaps held as a security-based swap 

dealer or major security-based swap participant.

* * * * * 

(C) MARGIN REQUIREMENTS.—In prescribing margin 

requirements under this subsection, the prudential regulator with 

respect to security-based swap dealers and major security-based 

swap participants that are depository institutions, and the 

Commission with respect to security-based swap dealers and major 

security-based swap participants that are not depository institutions 

shall permit the use of noncash collateral, as the regulator or the 

Commission determines to be consistent with— 

(i) preserving the financial integrity of markets trading 

security-based swaps; and

(ii) preserving the stability of the United States 

financial system.

(D) COMPARABILITY OF CAPITAL AND MARGIN 

REQUIREMENTS.— 

(i) IN GENERAL.—The prudential regulators, the 

Commission, and the Securities and Exchange Commission 

shall periodically (but not less frequently than annually) 

consult on minimum capital requirements and minimum 

initial and variation margin requirements.

(ii) COMPARABILITY.—The entities described in

clause (i) shall, to the maximum extent practicable, establish 

and maintain comparable minimum capital requirements and 
213 

minimum initial and variation margin requirements, 

including the use of noncash collateral, for— 

(I) security-based swap dealers; and

(II) major security-based swap participants.

* * * * * 

Title IX—Investor Protections and Improvements to the Regulation of 

Securities

Sec. 901. Short Title. 

This title may be cited as the Investor Protection and Securities Reform Act of 2010. 

* * * * * 

12 U.S.C. 78o-7 note Sec. 939A. Review of Reliance on Ratings. 

(a) AGENCY REVIEW.—Not later than 1 year after the date of the 

enactment of this subtitle, each Federal agency shall, to

the extent applicable, review— 

(1) any regulation issued by such agency that requires the use of an 

assessment of the credit-worthiness of a security or money market 

instrument; and

(2) any references to or requirements in such regulations regarding 

credit ratings.

(b) MODIFICATIONS REQUIRED.—Each such agency shall modify 

any such regulations identified by the review conducted under subsection (a) 

to remove any reference to or requirement of reliance on credit ratings and to 

substitute in such regulations such standard of credit-worthiness as each 

respective agency shall determine as appropriate for such regulations. In 

making such determination, such agencies shall seek to establish, to the extent 

feasible, uniform standards of credit-worthiness for use by each such agency, 

taking into account the entities regulated by each such agency and the 

purposes for which such entities would rely on such standards of creditworthiness. 

(c) REPORT.—Upon conclusion of the review required under 

subsection (a), each Federal agency shall transmit a report to Congress

containing a description of any modification of any regulation such agency 

made pursuant to subsection (b). 

* * * * * 

Note: Section 939A of the Dodd-Frank Wall Street Reform and Consumer Protection Act adds a 

new provision to the Securities Exchange Act of 1934. United States Code cite is a note after the 

statutory provision. 

* * * * * 
214 

Sec. 941. Regulation of Credit Risk Retention. 

(a) DEFINITION OF ASSET-BACKED SECURITY.—Section 3(a) of 

the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)) is amended by adding 

at the end the following: 

(77) ASSET-BACKED SECURITY.—The term ‘asset-backed 

security’— 

(A) means a fixed-income or other security 

collateralized by any type of self-liquidating financial 

asset (including a loan, a lease, a mortgage, or a secured 

or unsecured receivable) that allows the holder of the 

security to receive payments that depend primarily on 

cash flow from the asset, including— 

(i) a collateralized mortgage obligation;

(ii) a collateralized debt obligation;

(iii) a collateralized bond obligation; 

(iv) a collateralized debt obligation of asset-backed 

securities;

(v) a collateralized debt obligation of collateralized debt 

obligations; and 

(vi) a security that the Commission, by rule, determines 

to be an asset-backed security for purposes of this section; 

* * * * * 

(b) CREDIT RISK RETENTION.—The Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.) is 

amended by inserting after section 15F, as added by this Act, the following: 

15 U.S.C. 78o–11 Sec. 15G. Credit Risk Retention. 

* * * * * 

(b) REGULATIONS REQUIRED.— 

(1) IN GENERAL.—Not later than 270 days after the date of 

enactment of this section, the Federal banking agencies and the 

Commission shall jointly prescribe regulations to require any securitizer 

to retain an economic interest in a portion of the credit risk for any asset 

that the securitizer, through the issuance of an asset-backed security, 

transfers, sells, or conveys to a third party. 

(2) RESIDENTIAL MORTGAGES.—Not later than 270 days 

after the date of the enactment of this section, the Federal banking 

agencies, the Commission, the Secretary of Housing and Urban 

Development, and the Federal Housing Finance Agency, shall jointly 

prescribe regulations to require any securitizer to retain an economic 

interest in a portion of the credit risk for any residential mortgage asset 

that the securitizer, through the issuance of an asset-backed security,

transfers, sells, or conveys to a third party. 

(c) STANDARDS FOR REGULATIONS.— 
215 

(1) STANDARDS.—The regulations prescribed under subsection 

(b) shall— 

(A) prohibit a securitizer from directly or indirectly hedging 

or otherwise transferring the credit risk that the securitizer is 

required to retain with respect to an asset;

(B) require a securitizer to retain— 

(i) not less than 5 percent of the credit risk for any 

asset— 

(I) that is not a qualified residential mortgage that 

is transferred, sold, or conveyed through the issuance of 

an asset-backed security by the securitizer; or

(II) that is a qualified residential mortgage that is 

transferred, sold, or conveyed through the issuance of 

an asset-backed security by the securitizer, if 1 or more 

of the assets that collateralize the asset-backed security 

are not qualified residential mortgages; or 

(ii) less than 5 percent of the credit risk for an asset that 

is not a qualified residential mortgage that is transferred, 

sold, or conveyed through the issuance of an asset-backed 

security by the securitizer, if the originator of the asset meets 

the underwriting standards prescribed under paragraph 

(2)(B);

(C) specify— 

(i) the permissible forms of risk retention for purposes 

of this section; 

(ii) the minimum duration of the risk retention required 

under this section; and 

(iii) that a securitizer is not required to retain any part 

of the credit risk for an asset that is transferred, sold or 

conveyed through the issuance of an asset-backed security by 

the securitizer, if all of the assets that collateralize the assetbacked security are qualified residential mortgages;

* * * * * 

(e) EXEMPTIONS, EXCEPTIONS, AND ADJUSTMENTS.— 

* * * * * 

(3) CERTAIN INSTITUTIONS AND PROGRAMS EXEMPT.— 

(A) FARM CREDIT SYSTEM INSTITUTIONS.—

Notwithstanding any other provision of this section, the 

requirements of this section shall not apply to any loan or other 

financial asset made, insured, guaranteed, or purchased by any 

institution that is subject to the supervision of the Farm Credit 

Administration, including the Federal Agricultural Mortgage 

Corporation. 

* * * * * 
216 

Note: Bills have been introduced in Congress to substantially revise the Dodd-Frank Act. 

Accordingly, any portion of the Dodd-Frank Act may be modified or repealed in the next 4-

years (2017-21). 

* * * * * 

Sec. 951. Shareholder Vote on Executive Compensation

Disclosures. 

The Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.) is amended 

by inserting after section 14 (15 U.S.C. 78n) the following: 

15 U.S.C. 78n–1 Sec. 14A. Shareholder Approval of Executive Compensation. 

(a) SEPARATE RESOLUTION REQUIRED.— 

(1) IN GENERAL.—Not less frequently than once every 3 years, a 

proxy or consent or authorization for an annual or other meeting of the 

shareholders for which the proxy solicitation rules of the Commission 

require compensation disclosure shall include a separate resolution 

subject to shareholder vote to approve the compensation of executives, 

as disclosed pursuant to section 229.402 of title 17, Code of Federal 

Regulations, or any successor thereto. 

(2) FREQUENCY OF VOTE.—Not less frequently than once 

every 6 years, a proxy or consent or authorization for an annual or other 

meeting of the shareholders for which the proxy solicitation rules of the 

Commission require compensation disclosure shall include a separate 

resolution subject to shareholder vote to determine whether votes on the 

resolutions required under paragraph (1) will occur every 1, 2, or 3 

years.

(3) EFFECTIVE DATE.—The proxy or consent or authorization 

for the first annual or other meeting of the shareholders occurring after 

the end of the 6-month period beginning on the date of enactment of this 

section shall include— 

(A) the resolution described in paragraph (1); and 

(B) a separate resolution subject to shareholder vote to 

determine whether votes on the resolutions required under 

paragraph (1) will occur every 1, 2, or 3 years. 

(b) SHAREHOLDER APPROVAL OF GOLDEN PARACHUTE 

COMPENSATION.— 

(1) DISCLOSURE.—In any proxy or consent solicitation material 

(the solicitation of which is subject to the rules of the Commission 

pursuant to subsection (a)) for a meeting of the shareholders occurring 

after the end of the 6-month period beginning on the date of enactment 

of this section, at which shareholders are asked to approve an 

acquisition, merger, consolidation, or proposed sale or other disposition 

of all or substantially all the assets of an issuer, the person making such 

solicitation shall disclose in the proxy or consent solicitation material, in 

a clear and simple form in accordance with regulations to be 

promulgated by the Commission, any agreements or understandings that 

such person has with any named executive officers of such issuer (or of 
217 

the acquiring issuer, if such issuer is not the acquiring issuer) concerning 

any type of compensation (whether present, deferred, or contingent) that 

is based on or otherwise relates to the acquisition, merger, consolidation, 

sale, or other disposition of all or substantially all of the assets of the 

issuer and the aggregate total of all such compensation that may (and the 

conditions upon which it may) be paid or become payable to or on 

behalf of such executive officer.

(2) SHAREHOLDER APPROVAL.—Any proxy or consent or 

authorization relating to the proxy or consent solicitation material 

containing the disclosure required by paragraph (1) shall include a 

separate resolution subject to shareholder vote to approve such 

agreements or understandings and compensation as disclosed, unless 

such agreements or understandings have been subject to a shareholder 

vote under subsection (a). 

(c) RULE OF CONSTRUCTION.—The shareholder vote referred to in 

subsections (a) and (b) shall not be binding on the issuer 

or the board of directors of an issuer, and may not be construed— 

(1) as overruling a decision by such issuer or board of 

directors;

(2) to create or imply any change to the fiduciary duties of such 

issuer or board of directors; 

(3) to create or imply any additional fiduciary duties for such 

issuer or board of directors; or 

(4) to restrict or limit the ability of shareholders to make proposals 

for inclusion in proxy materials related to executive compensation. 

(d) DISCLOSURE OF VOTES.—Every institutional investment

manager subject to section 13(f) shall report at least annually how it voted on 

any shareholder vote pursuant to subsections (a) and (b), unless such vote is 

otherwise required to be reported publicly by rule or regulation of the 

Commission.

(e) EXEMPTION.—The Commission may, by rule or order, exempt an 

issuer or class of issuers from the requirement under subsection (a) or (b). In 

determining whether to make an exemption under this subsection, the 

Commission shall take into account, among other considerations, whether the 

requirements under subsections (a) and (b) disproportionately burdens small 

issuers..

No

* * * * * 

Note: This provision only affects companies whose stock is publicly traded and, therefore, it 

applies to Farmer Mac, but not other Farm Credit System institutions.

* * * * * 

15 USC 78l note Sec. 953. Executive Compensation Disclosures. 

(a) DISCLOSURE OF PAY VERSUS PERFORMANCE.—Section 14 

of the Securities Exchange Act of 1934 (15 U.S.C. 78n), as amended by this 

title, is amended by adding at the end the following: 
218 

(i) DISCLOSURE OF PAY VERSUS 

PERFORMANCE.—The Commission shall, by rule, require 

each issuer to disclose in any proxy or consent solicitation 

material for an annual meeting of the shareholders of the 

issuer a clear description of any compensation required to be 

disclosed by the issuer under section 229.402 of title 17, 

Code of Federal Regulations (or any successor thereto), 

including information that shows the relationship between 

executive compensation actually paid and the financial 

performance of the issuer, taking into account any change in 

the value of the shares of stock and dividends of the issuer 

and any distributions. The disclosure under this subsection 

may include a graphic representation of the information 

required to be disclosed.. 

(b) ADDITIONAL DISCLOSURE REQUIREMENTS.— 

(1) IN GENERAL.—The Commission shall amend section

229.402 of title 17, Code of Federal Regulations, to require each issuer 

to disclose in any filing of the issuer described in section 229.10(a) of 

title 17, Code of Federal Regulations (or any successor thereto)— 

(A) the median of the annual total compensation of all 

employees of the issuer, except the chief executive officer (or any 

equivalent position) of the issuer; 

(B) the annual total compensation of the chief executive 

officer (or any equivalent position) of the issuer; and 

(C) the ratio of the amount described in subparagraph (A) to 

the amount described in subparagraph (B). 

(2) TOTAL COMPENSATION.—For purposes of this subsection, 

the total compensation of an employee of an issuer shall be determined 

in accordance with section 229.402(c)(2)(x) of title 17, Code of Federal 

Regulations, as in effect on the day before the date of enactment of this 

Act.

Note: This provision only affects companies whose stock is publicly traded and, therefore, it 

applies to Farmer Mac, but not other Farm Credit System institutions.

* * * * * 

Sec. 954. Recovery of Erroneously Awarded Compensation. 

The Securities Exchange Act of 1934 is amended by inserting after 

section 10C, as added by section 952, the following: 

15 U.S.C. 78j–4 Sec. 10D. Recovery of Erroneously Awarded Compensation

Policy. 

(a) LISTING STANDARDS.—The Commission shall, by rule, direct 

the national securities exchanges and national securities associations to 

prohibit the listing of any security of an issuer that does not comply with the 

requirements of this section. 
219 

(b) RECOVERY OF FUNDS.—The rules of the Commission under 

subsection (a) shall require each issuer to develop and implement a policy 

providing— 

(1) for disclosure of the policy of the issuer on incentive-based

compensation that is based on financial information required to be 

reported under the securities laws; and

(2) that, in the event that the issuer is required to prepare an 

accounting restatement due to the material noncompliance of the issuer 

with any financial reporting requirement under the securities laws, the 

issuer will recover from any current or former executive officer of the 

issuer who received incentive-based compensation (including stock 

options awarded as compensation) during the 3-year period preceding 

the date on which the issuer is required to prepare an accounting 

restatement, based on the erroneous data, in excess of what would have 

been paid to the executive officer under the accounting restatement..

Note: This provision only affects companies whose stock is publicly traded and, therefore, it 

applies to Farmer Mac, but not other Farm Credit System institutions.

* * * * * 

Title X—Bureau of Consumer Financial Protection

12 U.S.C. 5301 note Sec. 1001. Short Title. 

This title may be cited as the Consumer Financial Protection Act of 

2010. 

* * * * * 

* * * * * 

12 U.S.C. 5514 Sec. 1024. Supervision of Nondepository Covered Persons. 

* * * * * 

(f) PRESERVATION OF FARM CREDIT ADMINISTRATION

AUTHORITY.—No provision of this title may be construed as 

modifying, limiting, or otherwise affecting the authority of the Farm Credit 

Administration.

* * * * * 

* * * * * 

12 U.S.C. 5517 Sec. 1027. Limitations on Authorities of the Bureau; 

Preservation of Authorities. 

* * * * * 
220 

(k) EXCLUSION FOR PERSONS REGULATED BY THE FARM 

CREDIT ADMINISTRATION.— 

(1) IN GENERAL.—No provision of this title shall be construed

as altering, amending, or affecting the authority of the Farm Credit 

Administration to adopt rules, initiate enforcement proceedings, or take 

any other action with respect to a person regulated by the Farm Credit 

Administration. The Bureau shall have no authority to exercise any 

power to enforce this title with respect to a person regulated by the Farm 

Credit Administration.

(2) DEFINITION.—For purposes of this subsection, the term 

person regulated by the Farm Credit Administration means any Farm 

Credit System institution that is chartered and subject to the provisions 

of the Farm Credit Act of 1971 (12 

U.S.C. 2001 et seq.). 

* * * * * 

* * * * * 

Sec. 1100. Amendments to the Secure and Fair Enforcement for

Mortgage Licensing Act of 2008.

The S.A.F.E. Mortgage Licensing Act of 2008 (12 U.S.C. 5101 et seq.) 

is amended— 

* * * * * 

(5) in section 1507 (12 U.S.C. 5106)—(A) in subsection (a)— 

(i) by striking paragraph (1) and inserting the following:

(1) IN GENERAL.—The Bureau shall develop and maintain a 

system for registering employees of a depository institution, employees 

of a subsidiary that is owned and controlled by a depository institution 

and regulated by a Federal banking agency, or employees of an 

institution regulated by the Farm Credit Administration, as registered 

loan originators with the Nationwide Mortgage Licensing System and 

Registry. The system shall be implemented before the end of the 1-year

period beginning on the date of enactment of the Consumer Financial 

Protection Act of 2010.; and 

(ii) in paragraph (2)— 

(I) by striking appropriate Federal banking agency 

and the Farm Credit Administration and inserting 

Bureau; and

* * * * * 

(B) in subsection (b), by striking through the Financial 

Institutions Examination Council, and the Farm Credit 

Administration, and inserting and the Bureau of Consumer 

Financial Protection;

* * * * * 
221 

(7) by striking section 1510 (12 U.S.C. 5109) and inserting the 

following: 

12 U.S.C. 5109 SEC. 1510. Fees. 

The Bureau, the Farm Credit Administration, and the Nationwide 

Mortgage Licensing System and Registry may charge reasonable fees to cover 

the costs of maintaining and providing access to information from the 

Nationwide Mortgage Licensing System and Registry, to the extent that such 

fees are not charged to consumers for access to such system and registry.; 

* * * * * 

* * * * * 

 Sec. 1100A. Amendments to the Truth in Lending Act. 

The Truth in Lending Act (15 U.S.C. 1601 et seq.) is amended— 

* * * * * 

(8) in section 108 (15 U.S.C. 1604), by adding at the end the 

following: 

(A) by striking subsection (a) and inserting the following: 

(a) ENFORCING AGENCIES.—Subject to subtitle B of the Consumer 

Financial Protection Act of 2010, compliance with the requirements imposed 

under this title shall be enforced under— 

* * * * * 

(5) the Farm Credit Act of 1971, by the Farm Credit 

Administration with respect to any Federal land bank, Federal land bank 

association, Federal intermediate credit bank, or production credit 

association; 
222 

Food, Conservation, and Energy Act of 2008

* * * * * 

Title V—Credit

* * * * * 

Subtitle E—Farm Credit

* * * * * 

12 U.S.C. 2252 note Sec. 5407. Equalization of Loan-Making Powers of Certain District 

Associations.

* * * * * 

(d) EFFECTIVE DATE.—The amendments made by this section take 

effective on January 1, 2010. 

* * * * * 

NOTE: Section 5407 added a new section 7.7 and amended 

sections 5.17 of the Farm Credit Act of 1971, 401 of the Farm 

Credit Banks and Associations Safety and Soundness Act of 1992, 

and 410 of the Agricultural Credit Act of 1987. 
223 

Housing and Economic Recovery Act of 2008

Title V—S.A.F.E. Mortgage Licensing Act

12 U.S.C. 5101 note Sec. 1501. Short Title. 

This title may be cited as the Secure and Fair Enforcement for Mortgage 

Licensing Act of 2008 or S.A.F.E. Mortgage Licensing Act of 2008. 

12 U.S.C. 5101 Sec. 1502. Purposes and Methods for Establishing a Mortgage 

Licensing System and Registry. 

In order to increase uniformity, reduce regulatory burden, enhance 

consumer protection, and reduce fraud, the States, through the Conference of 

State Bank Supervisors and the American Association of Residential 

Mortgage Regulators, are hereby encouraged to establish a Nationwide 

Mortgage Licensing System and Registry for the residential mortgage industry 

that accomplishes all of the following objectives: 

(1) Provides uniform license applications and reporting 

requirements for State-licensed loan originators. 

(2) Provides a comprehensive licensing and supervisory database. 

(3) Aggregates and improves the flow of information to and 

between regulators.

(4) Provides increased accountability and tracking of loan 

originators. 

(5) Streamlines the licensing process and reduces the regulatory 

burden. 

(6) Enhances consumer protections and supports anti-fraud 

measures.

(7) Provides consumers with easily accessible information, offered 

at no charge, utilizing electronic media, including the Internet, regarding 

the employment history of, and publicly adjudicated disciplinary and 

enforcement actions against, loan originators. 

(8) Establishes a means by which residential mortgage loan 

originators would, to the greatest extent possible, be required to act in 

the best interests of the consumer. 

(9) Facilitates responsible behavior in the subprime mortgage 

market place and provides comprehensive training and examination 

requirements related to subprime mortgage lending. 

(10) Facilitates the collection and disbursement of consumer 

complaints on behalf of State and Federal mortgage regulators. 

12 U.S.C. 5102 Sec. 1503. Definitions. 

For purposes of this title, the following definitions shall apply:

* * * * * 
224

(4) LOAN ORIGINATOR.—

(A) IN GENERAL.—The term loan originator—

(i) means an individual who—

(I) takes a residential mortgage loan application;

and

(II) offers or negotiates terms of a residential

mortgage loan for compensation or gain;

(ii) does not include any individual who is not

otherwise described in clause (i) and who performs purely 

administrative or clerical tasks on behalf of a person who is 

described in any such clause;

(iii) does not include a person or entity that only

performs real estate brokerage activities and is licensed or 

registered in accordance with applicable State law, unless the 

person or entity is compensated by a lender, a mortgage 

broker, or other loan originator or by any agent of such 

lender, mortgage broker, or other loan originator; and

(iv) does not include a person or entity solely involved 

in extensions of credit relating to timeshare plans, as that 

term is defined in section 101(53D) of title 11, United States 

Code.

(B) OTHER DEFINITIONS RELATING TO LOAN 

ORIGINATOR.—For purposes of this subsection, an individual

assists a consumer in obtaining or applying to obtain a residential 

mortgage loan by, among other things, advising on loan terms 

(including rates, fees, other costs), preparing loan packages, or 

collecting information on behalf of the consumer with regard to a 

residential mortgage loan.

(C) ADMINISTRATIVE OR CLERICAL TASKS.—The 

term administrative or clerical tasks means the receipt, collection,

and distribution of information common for the processing or 

underwriting of a loan in the mortgage industry and 

communication with a consumer to obtain information necessary 

for the processing or underwriting of a residential mortgage loan.

(D) REAL ESTATE BROKERAGE ACTIVITY 

DEFINED.—The term real estate brokerage activity means any 

activity that involves offering or providing real estate brokerage

services to the public, including—

(i) acting as a real estate agent or real estate broker for a 

buyer, seller, lessor, or lessee of real property;

(ii) bringing together parties interested in the sale,

purchase, lease, rental, or exchange of real property;

(iii) negotiating, on behalf of any party, any portion of a 

contract relating to the sale, purchase, lease, rental, or 

exchange of real property (other than in connection with 

providing financing with respect to any such transaction);

(iv) engaging in any activity for which a person

engaged in the activity is required to be registered or licensed 
225

as a real estate agent or real estate broker under any 

applicable law; and

(v) offering to engage in any activity, or act in any 

capacity, described in clause (i), (ii), (iii), or (iv).

(5) LOAN PROCESSOR OR UNDERWRITER.—

(A) IN GENERAL.—The term loan processor or underwriter

means an individual who performs clerical or support duties at the 

direction of and subject to the supervision and instruction of—

(i) a State-licensed loan originator; or

(ii) a registered loan originator.

(B) CLERICAL OR SUPPORT DUTIES.—For purposes of

subparagraph (A), the term clerical or support duties may 

include—

(i) the receipt, collection, distribution, and analysis of 

information common for the processing or underwriting of a 

residential mortgage loan; and

(ii) communicating with a consumer to obtain the

information necessary for the processing or underwriting of a 

loan, to the extent that such communication does not include 

offering or negotiating loan rates or terms, or counseling 

consumers about residential mortgage loan rates or terms.

(6) NATIONWIDE MORTGAGE LICENSING SYSTEM AND 

REGISTRY.—The term Nationwide Mortgage Licensing System and

Registry means a mortgage licensing system developed and maintained 

by the Conference of State Bank Supervisors and the American 

Association of Residential Mortgage Regulators for the State licensing 

and registration of State-licensed loan originators and the registration of 

registered loan originators or any system established by the Secretary 

under section 1509.

(7) NONTRADITIONAL MORTGAGE PRODUCT.—The term 

nontraditional mortgage product means any mortgage product other than 

a 30-year fixed rate mortgage.

(8) REGISTERED LOAN ORIGINATOR.—The term registered

loan originator means any individual who—

(A) meets the definition of loan originator and is an

employee of—

(i) a depository institution;

(ii) a subsidiary that is—

(I) owned and controlled by a depository

institution; and

(II) regulated by a Federal banking agency; or

(iii) an institution regulated by the Farm Credit

Administration; and

(B) is registered with, and maintains a unique identifier

through, the Nationwide Mortgage Licensing System and Registry.

(9) RESIDENTIAL MORTGAGE LOAN.—The term residential

mortgage loan means any loan primarily for personal, family, or 

household use that is secured by a mortgage, deed of trust, or other 
226 

equivalent consensual security interest on a dwelling (as defined in 

section 103(v) of the Truth in Lending Act) or residential real estate 

upon which is constructed or intended to be constructed a dwelling (as 

so defined). 

* * * * * 

(12) STATE-LICENSED LOAN ORIGINATOR.—The term 

State-licensed loan originator means any individual who— 

(A) is a loan originator; 

(B) is not an employee of— 

(i) a depository institution; 

(ii) a subsidiary that is— 

(I) owned and controlled by a depository 

institution; and

(II) regulated by a Federal banking agency; or 

(iii) an institution regulated by the Farm Credit 

Administration; and

(C) is licensed by a State or by the Secretary under section 

1508 and registered as a loan originator with, and maintains a 

unique identifier through, the Nationwide Mortgage Licensing 

System and Registry. 

(13) UNIQUE IDENTIFIER.— 

(A) IN GENERAL.—The term unique identifier means a 

number or other identifier that— 

(i) permanently identifies a loan originator; 

(ii) is assigned by protocols established by the 

Nationwide Mortgage Licensing System and Registry and the 

Federal banking agencies to facilitate electronic tracking of 

loan originators and uniform identification of, and public 

access to, the employment history of and the publicly 

adjudicated disciplinary and enforcement actions against loan

originators; and 

(iii) shall not be used for purposes other than those set 

forth under this title.

12 U.S.C. 5103 Sec. 1504. License or Registration Required. 

(a) IN GENERAL.—Subject to the existence of a licensing or

registration regime, as the case may be, an individual may not engage in the 

business of a loan originator without first— 

(1) obtaining, and maintaining annually— 

(A) a registration as a registered loan originator; or 

(B) a license and registration as a State-licensed loan

originator; and 

(2) obtaining a unique identifier. 

(b) LOAN PROCESSORS AND UNDERWRITERS.— 

(1) SUPERVISED LOAN PROCESSORS AND 

UNDERWRITERS.—A loan processor or underwriter who does not 
227

represent to the public, through advertising or other means of 

communicating or providing information (including the use of business

cards, stationery, brochures, signs, rate lists, or other promotional items), 

that such individual can or will perform any of the activities of a loan 

originator shall not be required to be a State-licensed loan originator.

(2) INDEPENDENT CONTRACTORS.—An independent 

contractor may not engage in residential mortgage loan origination

activities as a loan processor or underwriter unless such independent

contractor is a State-licensed loan originator.

12 U.S.C. 5106 Sec. 1507. System of Registration Administration by Federal 

Agencies.

(a) DEVELOPMENT.—

(1) IN GENERAL.—The Bureau shall develop and maintain a 

system for registering employees of a depository institution, employees 

of a subsidiary that is owned and controlled by a depository institution 

and regulated by a Federal banking agency, or employees of an 

institution regulated by the Farm Credit Administration, as registered 

loan originators with the Nationwide Mortgage Licensing System and 

Registry. The system shall be implemented before the end of the 1-year 

period beginning on the date of enactment of this title.

(2) REGISTRATION REQUIREMENTS.—In connection with the

registration of any loan originator under this subsection, the Bureau

shall, at a minimum, furnish or cause to be furnished to the Nationwide 

Mortgage Licensing System and Registry information concerning the 

employees’ identity, including—

(A) fingerprints for submission to the Federal Bureau of 

Investigation, and any governmental agency or entity authorized to 

receive such information for a State and national criminal history 

background check; and

(B) personal history and experience, including authorization 

for the Nationwide Mortgage Licensing System and Registry to 

obtain information related to any administrative, civil or criminal 

findings by any governmental jurisdiction.

(b) COORDINATION.—

(1) UNIQUE IDENTIFIER.—The Bureau, and the Bureau of 

Consumer Financial Protection shall coordinate with the Nationwide 

Mortgage Licensing System and Registry to establish protocols for 

assigning a unique identifier to each registered loan originator that will 

facilitate electronic tracking and uniform identification of, and public 

access to, the employment history of and publicly adjudicated 

disciplinary and enforcement actions against loan originators.

(2) NATIONWIDE MORTGAGE LICENSING SYSTEM AND 

REGISTRY DEVELOPMENT.—To facilitate the transfer of 

information required by subsection (a)(2), the Nationwide Mortgage

Licensing System and Registry shall coordinate with the Bureau and the 

Bureau of Consumer Financial Protection concerning the development 
228

and operation, by such System and Registry, of the registration 

functionality and data requirements for loan originators.

(c) CONSIDERATION OF FACTORS AND PROCEDURES.—In 

establishing the registration procedures under subsection (a) and the protocols 

for assigning a unique identifier to a registered loan originator, the Bureau 

shall make such de minimis exceptions as may be appropriate to paragraphs 

(1)(A) and (2) of section 1504(a), shall make reasonable efforts to utilize

existing information to minimize the burden of registering loan originators, 

and shall consider methods for automating the process to the greatest extent 

practicable consistent with the purposes of this title.

12 U.S.C. 5109 Sec. 1510. Fees.

The Bureau, the Farm Credit Administration, and the Nationwide 

Mortgage Licensing System and Registry may charge reasonable fees to cover 

the costs of maintaining and providing access to information from the 

Nationwide Mortgage Licensing System and Registry, to the extent that such 

fees are not charged to consumers for access to such system and registry.
229 

Farm Security and Rural Investment Act of 2002

Title VI—Rural Development

7 U.S.C. 2009cc-9 Sec. 384J. Financial Institution Investments. 

(a) IN GENERAL.—Except as otherwise provided in this section and 

notwithstanding any other provision of law, the following banks, associations, 

and institutions are eligible both to establish and invest in any rural business 

investment company or in any entity established to invest solely in rural 

business investment companies: 

(1) Any bank or savings association the deposits of which are 

insured under the Federal Deposit Insurance Act (12 U.S.C. 1811 et 

seq.), including an investment pool created entirely by such bank or 

savings association. 

(2) Any Farm Credit System institution described in section 

1.2(a) of the Farm Credit Act of 1971 (12 U.S.C. 2002(a)). 

(b) LIMITATION.—No bank, association, or institution described in 

subsection (a) may make investments described in subsection (a) that are 

greater than 5 percent of the capital and surplus of the bank, association, or 

institution.

(c) LIMITATION ON RURAL BUSINESS INVESTMENT 

COMPANIES CONTROLLED BY FARM CREDIT SYSTEM 

INSTITUTIONS.—If a Farm Credit System institution described in section 

1.2(a) of the Farm Credit Act of 1971 (12 U.S.C. 2002(a)) holds more than 50 

percent of the shares of a rural business investment company, either alone or 

in conjunction with other System institutions (or affiliates), the rural business 

investment company shall not provide equity investments in, or provide other 

financial assistance to, entities that are not otherwise eligible to receive 

financing from the Farm Credit System under that Act (12 U.S.C. 2001 et 

seq.). 

* * * * * 

NOTE: Section 6029 of the Farm Security and Rural Investment 

Act of 2002, Public Law 107-171, added a new subtitle H to the 

Consolidated Farm and Rural Development Act. This subtitle 

establishes a new "Rural Business Investment Program." Section 

384J, reproduced here, discusses Farm Credit System institutions' 

investment in rural business investment companies. 
230 

Omnibus Consolidated Appropriations Act, 1997 

Public Law 104-208, September 30, 1996 

Title II—Economic Growth and Regulatory Paperwork Reduction

Subtitle F—Miscellaneous

Sec. 2615. Prohibitions on Certain Depository Institution 

Associations with Government-Sponsored Enterprises. 

Amends section 201 of the Federal Credit Union Act by addition 

subsection (e) as follows:

* * * * * 

12 U.S.C. 1781 (e)–PROHIBITION ON CERTAIN ASSOCIATIONS.— 

(1) IN GENERAL.—No insured credit union may be sponsored 

by or accept financial support, directly or indirectly, from any 

Government-sponsored enterprise, if the credit union includes the 

customers of the Government-sponsored enterprise in the field of 

membership of the credit union. 

(2) ROUTINE BUSINESS FINANCING.—Paragraph (1) shall 

not apply with respect to advances or other forms of financial assistance 

generally provided by a Government-sponsored enterprise in the 

ordinary course of business of the enterprise. 

(3) GOVERNMENT-SPONSORED ENTERPRISE DEFINED.—

For purposes of this subsection, the term "Government-sponsored 

enterprise" has the meaning given to such term in section 1404(e)(1)(A) 

of the Financial Institutions Reform, Recovery, and Enforcement Act of 

1989. 

(4) EMPLOYEE CREDIT UNION.—No provision of this 

subsection shall be construed as prohibiting any employee of a 

Government-sponsored enterprise from becoming a member of a credit 

union whose field of membership is the employees of such enterprise. 

* * * * * 

Amends section 18 of the Federal Credit Union Act of the Federal Deposit 

Insurance Act by addition subsection (s) as follows: 

12 U.S.C. 1828 (s) PROHIBITION ON CERTAIN AFFILIATIONS.— 

(1) IN GENERAL.—No depository institution may be an affiliate of, be 

sponsored by, or accept financial support, directly or indirectly, from any 

Government-sponsored enterprise. 

 (2) EXCEPTION FOR MEMBERS OF A FEDERAL HOME LOAN 

BANK.—Paragraph (1) shall not apply with respect to the membership of a 

depository institution in a Federal home loan bank. 
231 

 (3) ROUTINE BUSINESS FINANCING.—Paragraph (1) shall not 

apply with respect to advances or other forms of financial assistance provided 

by a Government-sponsored enterprise pursuant to the statutes governing such 

enterprise.

* * * * * 

(5) GOVERNMENT-SPONSORED ENTERPRISE DEFINED.—For 

purposes of this subsection, the term "Government-sponsored enterprise" has 

the meaning given to such term in section 1404(e)(1)(A) of the Financial 

Institutions Reform, Recovery, and Enforcement Act of 1989. 
232 

Farm Credit System Reform Act of 1996

Title II—Regulatory Relief

 Sec. 219. Farm Credit System Insurance Corporation Board of 

Directors. 

* * * * * 

(b) CONFORMING AMENDMENTS.

(1) Section 5314 of title 5, United States Code, is amended by 

striking "Chairperson, Board of Directors of the Farm Credit System 

Insurance Corporation.". 

(2) Section 5315 of title 5, United States Code, is amended by 

striking "Members, Board of Directors of the Farm Credit System 

Insurance Corporation.". 

* * * * * 

12 U.S.C. 2219e Sec. 221. Liability for Making Criminal Referrals. 

(a) IN GENERAL. Any institution of the Farm Credit System, or any 

director, officer, employee, or agent of a Farm Credit System institution, that 

discloses to a Government authority information proffered in good faith that 

may be relevant to a possible violation of any law or regulation shall not be 

liable to any person under any law of the United States of any State— 

(1) for the disclosure; 

(2) for any failure to notify the person involved in the possible 

violation. 

(b) NO PROHIBITION ON DISCLOSURE. Any institution of the 

Farm Credit System, or any director, officer, employee, or agent of a Farm 

Credit System institution, may disclose information to a Government authority 

that may be relevant to a possible violation of any law or regulation. 

* * * * * 

12 U.S.C. 2252 Sec. 212. Regulatory Review. 

Note (a) FINDINGS. Congress finds that— 

(1) the Farm Credit Administration, in the role of the 

Administration as an arms-length safety and soundness regulator, has 

made considerable progress in reducing the regulatory burden on Farm 

Credit System institutions;

(2) the efforts of the Farm Credit Administration described in 

paragraph (1) have resulted in cost savings for Farm Credit System 

institutions; and

(3) the cost savings described in paragraph (2) ultimately benefit 

the farmers, ranchers, agricultural cooperatives, and rural residents of 

the United States.
233

(b) CONTINUATION OF REGULATORY REVIEW. The Farm 

Credit Administration shall continue the comprehensive review of regulations 

governing the Farm Credit System to identify and eliminate, consistent with 

law, safety, and soundness, all regulations that are unnecessary, unduly 

burdensome or costly, or not based on law.
234 

Farm Credit Banks and Associations Safety and Soundness Act of 

1992

* * * * * 

Title II—Farm Credit System Insurance Corporation

* * * * * 

 Sec. 204. GAO Reports on Risk-Based Insurance Premiums, 

Access to Association Capital, Supplemental Premiums, and 

Consolidation. 

(a) IN GENERAL. The Comptroller General of the United States may 

investigate, review, and evaluate the feasibility and appropriateness, and 

report to the Committee on Agriculture of the House of Representatives and 

the Committee on Agriculture, Nutrition, and Forestry of the Senate, on the 

advantages and disadvantages of providing the Farm Credit System Insurance 

Corporation with— 

(1) the authority to directly or indirectly assess associations to 

ensure that all System capital is available to prevent losses to investors, 

including a study of— 

(A) the effects of direct assessments by the Insurance 

Corporation on associations, including interest rate charges to 

borrowers;

(B) the effects of requiring that banks pass along the cost of 

insurance premiums to owner associations and other financing 

institutions having a discount relationship with the bank; 

(C) the effects of requiring owner associations to purchase 

stock in the district bank, if needed, to prevent a bank from having 

to return to the Insurance Corporation for financial assistance once 

the assistance has been given;

(D) the effects of the purchase of stock from funds of the 

association (through funds obtained from other than the district 

bank) or allowing the bank to increase the direct line of credit to 

the association in order to fund the purchase; and 

(E) the effect that authorizing the Insurance Corporation to 

assess the association could have on the association's incentives for 

building capital; 

(2) the authority to collect supplemental insurance premiums 

under certain circumstances, including a study of— 

(A) the possibility of the Insurance Fund being depleted 

more rapidly than it could be replenished under the current 

premium structure;

(B) the effects of the depletion under alternate economic 

scenarios and the probability of the occurrence of each of those 

scenarios;
235 

(C) the effects on capital accumulation and interest rates of 

levying a supplemental premium; and 

(D) limitations on any authority to levy supplemental 

premiums and the underlying basis for the limitations; and 

(3) the authority to establish an insurance premium rate structure 

that would take into account, on an institution-by-institution basis, asset 

quality risk, interest rate risk, earnings, and capital. 

(b) REPORT ON CONSOLIDATION.

(1) IN GENERAL. The Comptroller General of the United 

States shall evaluate and report to the Committee on Agriculture of the 

House of Representatives and the Committee on Agriculture, Nutrition, 

and Forestry of the Senate on whether there are likely to be benefits to 

farmer and rancher borrowers of the Farm Credit System institutions of 

merging the 10 district Farm Credit Banks (and the Federal Intermediate 

Credit Bank of Jackson) into fewer regional Farm Credit Banks. 

(2) FACTORS. In preparing the report, the Comptroller General 

shall consider— 

(A) the potential reduction in services to farmers and 

ranchers;

(B) the potential benefits of jointly providing services to 

farmers and ranchers among these proposed regional districts; 

(C) any economy of scale effects on a district-by-district 

basis;

(D) the potential impact on the cooperative nature of the 

Farm Credit System;

(E) the potential impact on bank and association 

relationships; and 

(F) the potential impact on Systemwide bond issuances. 

(c) POTENTIAL SAVINGS. The Comptroller General of the United 

States shall evaluate and report to the appropriate committees of Congress on 

the potential savings to the Farm Credit System and its shareholders that 

might occur if System institutions and the Farm Credit Administration were 

required to comply with General Services Administration standards for office 

space, furniture, and equipment. 

(d) DEADLINE. The reports required under this section shall be 

provided to Congress not later than 12 months after the date of enactment of 

this Act.

* * * * * 

Title IV—Clarification of Certain Authorities

 Sec. 401. Clarification of the Status and Powers of Certain 

Institutions of the Farm Credit System. 

NOTE: See section 410(e) of the Agricultural Credit Act of 1987 added 

by subsection (a) of this section.
236 

* * * * * 

12 U.S.C. 2011 note

(b) LONG-TERM LENDING AUTHORITY OF THE FARM 

CREDIT BANK OF TEXAS WITH RESPECT TO THE STATES OF 

ALABAMA, LOUISIANA, AND MISSISSIPPI.

(1) IN GENERAL. Notwithstanding any other provision of law 

(except section 7.7 of the Farm Credit Act of 1971), the Farm Credit 

Bank of Texas may act in accordance with the exclusive charter of the 

bank, as amended by the Farm Credit Administration on February 7, 

1989, and effective February 9, 1989 (except to the extent that the 

charter may be further amended by the Farm Credit Administration in 

accordance with its general authorities under the Farm Credit Act of 

1971 (12 U.S.C. 2001 et seq.). 

(2) EFFECTIVE DATE. Paragraph (1) shall take effect as if 

such paragraph had become law on February 7, 1989. 

* * * * * 

NOTE: The amendments made by section 5407 of Public Law 110-246 

take effect on January 1, 2010. 

Title V—Miscellaneous

* * * * * 

 Sec. 514. Financial Disclosure and Conflict of Interest 

Reporting by Directors, Officers, and Employees of Farm Credit 

System Institutions. 

(a) FINDINGS. Congress finds that— 

(1) the disclosure of the compensation paid to, loans made to, 

and transactions made with a Farm Credit System institution by, 

directors and senior officers of the institution provides the stockholders 

of the institutions with information necessary to better manage the 

institutions, provides the Farm Credit Administration with information 

necessary to efficiently and effectively regulate the institutions, and 

enhances the financial integrity of the Farm Credit System by making 

the information available to potential investors;

(2) the reporting of potential conflicts of interest by directors, 

officers, and employees of institutions of the Farm Credit System 

benefits the stockholders of the institutions, helps to ensure the financial 

viability of the institutions, provides information valuable to the Farm 

Credit Administration in periodic examinations of the institutions, and 

therefore enhances the safety and soundness of the Farm Credit System; 

and
237

(3) the directors, officers, or employees of some Farm Credit 

System institutions may not be subject to the regulations of the Farm 

Credit Administration requiring the disclosure of the financial 

information and the reporting of the potential conflicts of interest.

(b) PURPOSE. It is the purpose of this section to ensure that the 

information reported by the directors, officers, and employees of Farm Credit 

System institutions under regulations of the Farm Credit Administration 

requiring the disclosure of financial information and the reporting of potential 

conflicts of interest—

(1) provides the stockholders of all Farm Credit System 

institutions with information to assist the stockholders in making 

informed decisions regarding the operation of the institutions;

(2) provides investors and potential investors with information 

necessary to assist them in making investment decisions regarding Farm 

Credit System obligations or institutions; and

(3) provides the Farm Credit Administration with information 

necessary to allow the Farm Credit Administration to effectively and 

efficiently examine and regulate all Farm Credit System institutions and 

thus enhance the safety and soundness of the Farm Credit System.

(c) REVIEW. Not later than 120 days after the date of enactment of 

this Act, the Farm Credit Administration shall complete a review of the 

current regulations of the Farm Credit Administration regarding the disclosure 

of financial information and the reporting of potential conflicts of interest by 

the directors, officers, and employees of Farm Credit System institutions. 

Consistent with the purpose of this section as provided in subsection (b), the 

review shall address whether the regulations—

(1) are adequate to fulfill the purpose of this section and such 

other purposes as the Farm Credit Administration determines to be 

consistent with the Farm Credit Act of 1971 (12 U.S.C. 2001 et seq.), 

and other applicable law, and to be otherwise necessary or appropriate;

(2) currently require the disclosure of financial information and 

the reporting of potential conflicts of interest by the directors, officers, 

and employees of all Farm Credit System institutions; and

(3) currently require the disclosure or reporting of the 

information by all of the appropriate directors, officers, or employees of 

Farm Credit System institutions.

(d) IMPLEMENTATION. Not later than 360 days after the date of 

enactment of this Act, the Farm Credit Administration shall amend its current 

financial disclosure and conflict of interest regulations as the Administration 

determines necessary to carry out the purpose of this section and to address 

any deficiencies in the regulations that the Farm Credit Administration 

determines necessary pursuant to the review conducted under subsection (c).
238 

Food, Agriculture, Conservation, and Trade Act of 1990

* * * * * 

Title XVIII—Credit

* * * * * 

Subtitle B—Farm Credit System

* * * * * 

 Sec. 1838. Termination of System Institution Status of 

California Livestock Production Credit Association. 

(a) AUTHORITY TO TERMINATE. Notwithstanding any other 

provision of law, effective on the date of enactment of this Act, the California 

Livestock Production Credit Association may terminate the status of the 

Association as a Farm Credit System institution.

(b) REQUIREMENTS. Notwithstanding section 7.10(a)(4) of the Farm 

Credit Act of 1971 (12 U.S.C. 2279(a)(4)), the California Livestock 

Production Credit Association shall not (on termination) be— 

(1) required to pay any part of the last $1,000,000 of its capital; or 

(2) restricted from transferring any part of the $1,000,000 to its 

successor institution. 

* * * * *

12 U.S.C. 2001 note Sec. 1842. GAO Study of Rural Credit Cost and Availability. 

(a) STUDY. The Comptroller General of the United States shall 

conduct a study of certain matters related to the cost and availability of credit 

in rural America, including a study of— 

(1) the relationship of the role and lending volume of the Farm 

Credit System to the ability of the System to repay the assistance 

provided under the Agricultural Credit Act of 1987 (Public Law 100-

233) and amendments made by such Act; 

(2) the ability of Farm Credit System institutions to be 

competitive taking into consideration the costs of rebuilding capital, 

repaying assistance, and capitalizing the Farm Credit Insurance Fund 

established under section 5.60 of the Farm Credit Act of 1971 (12 

U.S.C. 2277a-9);

(3) the rates Farm Credit Banks charge for credit and the rates 

prevailing in the market for credit of comparable risk and maturity; 

(4) the potential for credit pricing practices of rural lending 

institutions to adversely affect the financial soundness of other lending 

institutions that provide agricultural credit;
239 

(5) the pricing practices of commercial lending and insurance 

institutions and whether the practices adequately address the level of risk 

in agricultural lending; 

(6) whether the assistance authorized under the Agricultural 

Credit Act of 1987 and the amendments made by such Act, is being 

utilized in accordance with the purposes intended by Congress; 

(7) the availability and adequacy of credit in rural America for 

the purpose of financing agricultural production, infrastructure 

development (including development of roads, bridges, and water 

systems), and rural development; 

(8) the prudence and desirability for commercial lenders and 

Farm Credit System institutions who serve primarily agriculture to 

broaden lending activity to provide diversity in their portfolios; 

(9) the level of competitiveness among the major sector lenders 

in agriculture, whether competition among such lenders has increased or 

decreased in the last 5 years, and whether American producers have 

benefited from the competitive situation; and

(10) the level of farm lending activity, in relation to the total asset 

level, of agricultural lending institutions in rural America and the level 

of investment by the institutions outside of the rural community or area 

in which the lending institutions are located.

(b) REPORT. Not later than 2 years after the date of enactment of this 

Act, the Comptroller General shall submit a report on the study conducted 

under subsection (a) (including any related recommendations) to the 

Committee on Agriculture of the House of Representatives and the Committee 

on Agriculture, Nutrition, and Forestry of the Senate. 

* * * * *
240 

Omnibus Budget Reconciliation Act of 1990

* * * * * 

Title XIII—Budget Enforcement

* * * * * 

PART II—Related Amendments

* * * * * 

Subtitle E—Government-Sponsored Enterprises

2 U.S.C. 621 note Sec. 13501. Financial Safety and Soundness of GovernmentSponsored Enterprises. 

(a) DEFINITION. For the purposes of this section, the terms 

"Government-sponsored enterprise" and "GSE" mean the Farm Credit System 

(including the Farm Credit Banks, Banks for Cooperatives, and Federal 

Agricultural Mortgage Corporation), the Federal Home Loan Bank System, 

the Federal Home Loan Mortgage Corporation, and the Federal National 

Mortgage Association, and the Student Loan Marketing Association. 

(b) TREASURY DEPARTMENT STUDY AND PROPOSED 

LEGISLATION.

(1) The Department of the Treasury shall prepare and submit to 

Congress no later than April 30, 1991, a study of GSEs and 

recommended legislation. 

(2) The study shall include an objective assessment of the 

financial soundness of GSEs, the adequacy of the existing regulatory 

structure for GSEs, the financial exposure of the Federal Government 

posed by GSEs, and the effects of GSE activities on Treasury 

borrowing. 

(c) CONGRESSIONAL BUDGET OFFICE STUDY.

(1) The Congressional Budget Office shall prepare and submit to 

Congress no later than April 30, 1991, a study of GSEs. 

(2) The study shall include an analysis of the financial risks each 

GSE assumes, how Congress may improve its understanding of those 

risks, the supervision and regulation of GSEs' risk management, the 

financial exposure of the Federal Government posed by GSEs, and the 

effects of GSE activities on Treasury borrowing. The study shall also 

include an analysis of alternative models for oversight of GSEs and of 

the costs and benefits of each alternative model to the Government and 

to the markets and beneficiaries served by GSEs.

(d) ACCESS TO RELEVANT INFORMATION.

(1) For the studies required by this section, each GSE shall 

provide full and prompt access to the Secretary of the Treasury and the 
241

Director of the Congressional Budget Office to its books and records 

and other information requested by the Secretary of the Treasury or the 

Director of the Congressional Budget Office.

(2) In preparing the studies required by this section, the 

Secretary of the Treasury and the Director of the Congressional Budget 

Office may request information from, or the assistance of, any Federal 

department or agency authorized by law to supervise the activities of a 

GSE.

(e) CONFIDENTIALITY OF RELEVANT INFORMATION.

(1) The Secretary of the Treasury and the Director of the 

Congressional Budget Office shall determine and maintain the

confidentiality of any book, record, or information made available by a 

GSE under this section in a manner consistent with the level of 

confidentiality established for the material by the GSE involved.

(2) The Department of the Treasury shall be exempt from section 

552 of title 5, United States Code, for any book, record, or information 

made available under subsection (d) and determined by the Secretary of 

the Treasury to be confidential under this subsection.

(3) Any officer or employee of the Department of the Treasury 

shall be subject to the penalties set forth in section 1906 of title 18, 

United States Code, if—

(A) by virtue of his or her employment or official position, 

he or she has possession of or access to any book, record, or 

information made available under and determined to be 

confidential under this section; and

(B) he or she discloses the material in any manner other 

than:

(i) to an officer or employee of the Department of the 

Treasury; or

(ii) pursuant to the exception set forth in such section 

1906.

(4) The Congressional Budget Office shall be exempt from 

section 203 of the Congressional Budget Act of 1974 with respect to any 

book, record, or information made available under this subsection and 

determined by the Director to be confidential under paragraph (1).

(f) REQUIREMENT TO REPORT LEGISLATION.

(1) The committees of jurisdiction in the House shall prepare and 

report to the House no later than September 15, 1991, legislation to 

ensure the financial soundness of GSEs and to minimize the possibility 

that a GSE might require future assistance from the Government.

(2) It is the sense of the Senate that the committees of 

jurisdiction in the Senate shall prepare and report to the Senate no later 

than September 15, 1991, legislation to ensure the financial safety and 

soundness of GSEs and to minimize the possibility that a GSE might 

require future assistance from the Government.

(g) PRESIDENT'S BUDGET. The President's annual budget 

submission shall include an analysis of the financial condition of the GSEs 

and the financial exposure of the Government, if any, posed by GSEs.
242 

Financial Institutions Reform, Recovery, and Enforcement Act of 

1989

* * * * * 

Title X—Studies of Federal Deposit Insurance, Banking Services, and 

the Safety and Soundness of Government-Sponsored Enterprises

* * * * * 

12 U.S.C. 1811 note Sec. 1004. Study Regarding Capital Requirements for 

Government-Sponsored Enterprises. 

(a) IN GENERAL. The Comptroller General of the United States 

shall conduct a study of the risks undertaken by all government-sponsored 

enterprises and the appropriate level of capital for such enterprises consistent 

with— 

(1) the financial soundness and stability of the governmentsponsored enterprises; 

(2) minimizing any potential financial exposure of the Federal 

Government; and 

(3) minimizing any potential impact on borrowing of the Federal 

Government. 

(b) CONSULTATION AND COOPERATION WITH OTHER 

AGENCIES. The Comptroller General shall determine the structure and 

methodology of the study under this section in consultation with and with the 

cooperation of the Secretary of Agriculture and the Farm Credit 

Administration (with respect to the Farm Credit Banks, the Banks for 

Cooperatives, and the Federal Agricultural Mortgage Corporation), the 

Secretary of Education (with respect to the Student Loan Marketing 

Association and the College Construction Loan Corporation), the Secretary of 

Housing and Urban Development (with respect to the Federal National 

Mortgage Association and the Federal Home Loan Mortgage Corporation), 

and the government-sponsored enterprises. 

(c) ACCESS TO RELEVANT INFORMATION. Each governmentsponsored enterprise shall provide full and prompt access to the Comptroller 

General to its books and records and shall promptly provide any other 

information requested by the Comptroller General. In conducting the study 

under this section, the Comptroller General may request information from, or 

the assistance of, any department or agency of the Federal Government that is 

authorized by law to supervise or approve any of the activities of any 

government-sponsored enterprise. 

(d) SPECIFIC REQUIREMENTS. The study shall examine and 

evaluate— 

 (1) the degrees and types of risks that are undertaken by the 

government-sponsored enterprises in the course of their operations, 
243

including credit risk, interest rate risk, management and operational risk, 

and business risk;

 (2)the most appropriate method or methods for quantifying the 

types of risks undertaken by the government-sponsored enterprises;

 (3)the actual level of risk that exists with respect to each 

government-sponsored enterprise, which shall take into account factors 

including the volume and type of securities outstanding that are issued 

or guaranteed by each government-sponsored enterprise and the extent 

of off-balance-sheet expense of each government-sponsored enterprise;

 (4)the appropriateness of applying a risk-based capital standard 

to each government-sponsored enterprise, taking into account the nature 

of the business each government-sponsored enterprise conducts;

 (5)the costs and benefits to the public from application of a riskbased capital standard to the government-sponsored enterprises and the 

impact of such a standard on the capability of each governmentsponsored enterprise to carry out its purpose under law;

 (6)the impact, if any, of the operation of the governmentsponsored enterprises on borrowing of the Federal Government;

 (7)the overall level of capital appropriate for each of the 

government-sponsored enterprises; and

 (8)the quality and timeliness of information currently available 

to the public and the Federal Government concerning the extent and 

nature of the activities of government-sponsored enterprises and the 

financial risk associated with such activities.

(e) REPORTS TO CONGRESS. The Comptroller General shall 

submit to the Congress 2 reports regarding the study under this section. The 

first report shall be submitted to the Congress not later than 9 months after the 

date of the enactment of this Act and the second report shall be submitted to 

the Congress not later than 21 months after the date of the enactment of this 

Act. Each report shall set forth—

(1) the results of the study under this section;

(2) any recommendations of the Comptroller General with 

respect to appropriate capital standards for each government-sponsored 

enterprise;

(3) any recommendations of the Comptroller General with 

respect to information that, in the determination of the Comptroller 

General, should be provided to the Congress concerning—

(A) the extent and nature of the activities of the 

government-sponsored enterprises; and

(B) the nature of any periodic reports that the Comptroller 

General believes should be submitted to the Congress relating to 

the capital condition and operations of the government-sponsored 

enterprises; and

(4) any recommendations and opinions of the Secretary of 

Agriculture, the Secretary of Education, the Secretary of Housing and 

Urban Development, and the Secretary of the Treasury regarding the 

report, to the extent that the recommendations and views of such officers 
244 

differ from the recommendations and opinions of the Comptroller 

General.

(f) DEFINITION. For purposes of this section, the term 

"government-sponsored enterprises" means the Federal Home Loan Mortgage 

Corporation, the Federal National Mortgage Association, the Federal Home 

Loan Bank System, the Farm Credit Banks, the Banks for Cooperatives, the 

Federal Agricultural Mortgage Corporation, the College Construction Loan 

Insurance Corporation, the Student Loan Marketing Association. 

* * * * *

Title XIV—Tax Provisions

* * * * * 

12 U.S.C. 1811 note Sec. 1404. Studies of Relationship Between Public Debt and

Activities of Government-Sponsored Enterprises. 

(a) IN GENERAL. In order to better manage the bonded indebtedness 

of the United States, the Secretary shall conduct 2 annual studies to assess the 

financial safety and soundness of the activities of all Government-sponsored 

enterprises and the impact of their operations on Federal borrowing. 

(b) ACCESS TO RELEVANT INFORMATION.

 (1)INFORMATION FROM GSE'S. Each Governmentsponsored enterprise shall provide full and prompt access to the 

Secretary to its books and records, and shall promptly provide any other 

information requested to the Secretary. 

 (2) INFORMATION FROM SUPERVISORY AGENCIES. In 

conducting the studies under this section, the Secretary may request 

information from, or the assistance of, any Federal department or agency 

authorized by law to supervise the activities of any Governmentsponsored enterprise. 

 (3)CONFIDENTIALITY OF INFORMATION.

(A) IN GENERAL. The Secretary shall determine and 

maintain the confidentiality of any book, record, or information 

made available under this subsection in a manner generally 

consistent with the level of confidentiality established for the 

material by the Government-sponsored enterprise involved. 

(B) EXEMPTION FROM PUBLIC DISCLOSURE 

REQUIREMENTS. The Department of the Treasury shall be 

exempt from section 552 of Title 5, United States Code, with 

respect to any book, record, or information made available under 

this subsection and determined by the Secretary to be confidential 

under subparagraph (A). 

(C) PENALTY FOR UNAUTHORIZED DISCLOSURE. 

Any officer or employee of the Department of the Treasury shall 

be subject to the penalties set forth in section 1906 of title 18, 

United States Code, if— 
245 

(i) by virtue of his employment or official position, 

he has possession of or access to any book, record, or 

information made available under this subsection and 

determined by the Secretary to be confidential under 

subparagraph (A); and 

(ii) he discloses the material in any manner other 

than: 

(I) to an officer or employee of the Department 

of the Treasury; or 

(II) pursuant to the exceptions set forth in such section 

1906. 

(c) ASSESSMENT OF RISK. In assessing the financial safety and 

soundness of the activities of Government-sponsored enterprises, and the 

impact of their activities on Federal borrowing, the Secretary shall quantify 

the risks associated with each Government-sponsored enterprise. In 

quantifying such risks, the Secretary shall determine the volume and type of 

securities outstanding which are issued or guaranteed by each Governmentsponsored enterprise, the capitalization of each Government-sponsored 

enterprise, and the degree of risk involved in the operations of each 

Government-sponsored enterprise due to factors such as credit risk, interest 

rate risk, management and operations risk, and business risk. The Secretary 

shall also report on the quality and timeliness of information currently 

available to the public and the Federal Government concerning the extent and 

nature of the activities of Government-sponsored enterprises and the financial 

risk associated with such activities.

(d) REPORTS TO CONGRESS. The Secretary shall submit to the 

Congress 

(1) by May 15, 1990, a report setting forth the results of the 1st 

annual study conducted under this section; and 

(2) by May 15, 1991, a report setting forth the results of the 2nd 

annual study conducted under this section. 

(e) DEFINITIONS. For purposes of this section: 

 (1) GOVERNMENT-SPONSORED ENTERPRISE. The term 

"Government-sponsored enterprise" means— 

(A) the Federal National Mortgage Association, the Federal 

Home Loan Mortgage Corporation, the Federal Home Loan Bank 

System, the Farm Credit Banks, the Banks for Cooperatives, the 

Federal Agricultural Mortgage Corporation, the Student Loan 

Marketing Association, the College Construction Loan Insurance 

Association, and any of their affiliated or member institutions; and 

(B) any other Government-sponsored enterprise, as 

designated by the Secretary. 

(2) SECRETARY. The term "Secretary" means the Secretary of 

the Treasury or his delegate.

* * * * *
246 

Agricultural Credit Act of 1987

* * * * * 

No Title

12 U.S.C. 2202a note Sec. 102. Restructuring Distressed Loans. 

* * * * *

(b) SENSE OF CONGRESS.—It is the sense of Congress that the 

banks and associations (except banks for cooperatives) operating under the 

Farm Credit Act of 1971 (12 U.S.C. 2001 et seq.) should administer distressed 

loans to farmers with the objective of using the loan guarantee programs of 

the Farmers Home Administration and other loan restructuring measures, 

including participation in interest rate buy-down programs that are Federally 

or State funded, and other Federal and State sponsored financial assistance 

programs that offer relief to financially distressed farmers, as alternatives to 

foreclosure, considering the availability and appropriateness of such programs 

on a case-by-case basis.

* * * * *

Sec. 206. Financial Report.— 

During the period beginning September 30, 2001, and ending December 

31, 2001, the Farm Credit Administration shall review and evaluate the 

financial condition of the Farm Credit System and report to the Secretary of 

the Treasury and the appropriate committees of Congress on— 

(1) the general financial condition of each System institution; 

(2) the total outstanding principal of debt obligations issued 

under section 6.26 of the Farm Credit Act of 1971 (as added by section 

201 of this Act); and 

(3) the ability of each System institution to retire, at par value, 

preferred stock issued by the institution in accordance with section 6.27

of the Farm Credit Act of 1971 (as added by section 201 of this Act). 

* * * * *

Title III—Capitalization of System Institutions

12 U.S.C. 2154 Sec. 301. Capitalization of System Institutions

note

(a) MINIMUM CAPITAL ADEQUACY STANDARDS.

(1) IN GENERAL.

(A) ESTABLISHMENT. Within 120 days after the date of 

the enactment of this Act, the Farm Credit Administration shall 
247 

issue regulations under section 4.3(a) of the Farm Credit Act of 

1971 (12 U.S.C. 2154(c)) that establish minimum permanent 

capital adequacy standards for Farm Credit System institutions.

(B) BASIS FOR ESTABLISHMENT. The standards 

established under subparagraph (A) shall apply to an institution 

based on the financial statements of the institution prepared in 

accordance with generally accepted accounting principles. 

(C) RATIO OF CAPITAL TO ASSETS. The standards 

established under subparagraph (A) shall specify fixed percentages 

representing the ratio of permanent capital of the institution to the 

assets of the institution, taking into consideration relative risk 

factors as determined by the Farm Credit Administration.

(D) PHASE-IN PERIOD. The standards established under 

subparagraph (A) shall be phased in during the 5-year period 

beginning on the date of the enactment of this Act. 

(2) EMERGENCY POWER NOT AVAILABLE. The Farm 

Credit Administration shall not invoke the emergency provisions of 

section 5.17(c)(2) of the Farm Credit Act of 1971 (12 U.S.C. 2251(c)(2)) 

with respect to the issuance of the proposed regulations required under 

paragraph (1)(A).

(3) PROHIBITIONS DURING TRANSITION PERIOD. 

During the 5-year period specified in paragraph (1)(D), the Farm Credit 

Administration shall not initiate any receivership, conservatorship, 

liquidation, or enforcement action against any System institution 

certified to issue preferred stock under section 6.27 of the Farm Credit 

Act of 1971 (as added by section 201 of this Act), solely because of the 

failure of such institution to meet minimum permanent capital adequacy 

standards unless such action is recommended or concurred in by the 

Farm Credit System Assistance Board established under section 6.0 of 

such Act (as added by section 201 of this Act). 

(4) PERMANENT CAPITAL. For purposes of this subsection, 

the term "permanent capital" has the same meaning given that term in 

section 4.3A(a)(1) of the Farm Credit Act of 1971.

* * * * *

Title IV—Restructuring of the Farm Credit System

* * * * * 

Subtitle B—Merger of System Institutions

12 U.S.C. 2011 note Sec. 410. Mandatory Merger. 

(a) IN GENERAL. Not later than 6 months after the date of the 

enactment of this section, the Federal land bank and the Federal intermediate 

credit bank of each Farm Credit System district shall merge into a Farm Credit 

Bank in such district pursuant to a plan of merger agreed on by the Boards of 
248

Directors of such banks and approved by the Farm Credit Administration, or if 

such banks fail to agree, a plan of merger prescribed by the Farm Credit 

Administration. The mergers required by this section shall be implemented 

without regard to title VII.

(b) CAPITAL STOCK. Notwithstanding section 1.6 (as added by 

section 401 of this Act), the number of shares of capital stock issued by a 

Farm Credit Bank to stockholders and other owners of the institution involved 

in the merger, and the rights and privileges of such shares (including voting 

power, redemption rights, preferences on liquidation, and the right to 

dividends) shall be determined by the plan of merger adopted by the merging 

banks, and shall be consistent with section 4.3A and the regulations issued by 

the Farm Credit Administration.

(c) ASSISTANCE. The Assistance Board established under section 

6.0 shall direct the Financial Assistance Corporation established under section 

6.20 to provide any Farm Credit Bank with that amount of financial assistance 

as is necessary to ensure that the stock of the Farm Credit Bank, upon 

implementation of the merger, has a book value equal to 75 percent of par, 

and such Farm Credit Bank shall be subject to all of the requirements of title 

VI of the Farm Credit Act of 1971.

(d) INITIAL BOARD. Notwithstanding section 1.4 (as added by 

section 401 of this Act), the initial board of each Farm Credit Bank shall be 

composed of members of the district board (which is dissolved upon the 

creation of such bank) elected by the production credit associations, Federal 

land bank associations, and stockholders at large. Such initial board shall 

operate for such term as is agreed to by the members of the board, except that 

such period shall not exceed two years. Thereafter the board shall be elected 

and serve in accordance with the provisions of section 1.4 of the Farm Credit 

Act of 1971.

(e) CLARIFICATION OF AUTHORITY REGARDING 

REMAINING FEDERAL INTERMEDIATE CREDIT BANK.

(1) NEGOTIATED MERGER.

(A) REQUIREMENT.

(i) IN GENERAL. Not later than June 30, 1993, 

except as provided in subparagraph (C), the Federal 

Intermediate Credit Bank of Jackson (as chartered on the date 

of enactment of this subsection) shall merge with a Farm 

Credit Bank pursuant to the procedures prescribed by section 

7.12 of the Farm Credit Act of 1971 (12 U.S.C. 2279f).

(ii) MERGER OF ENTIRE BANK. Notwithstanding 

subparagraph (B), or any other provision of law, the Farm 

Credit Administration shall approve a merger of the Federal 

Intermediate Credit Bank of Jackson only if the Bank (as 

chartered on the date of enactment of this subsection, except 

as provided in subparagraph (B)(ii)(II)(bb)) merges in its 

entirety with a Farm Credit Bank.

(iii) LIMITED LENDING AUTHORITY. 

Notwithstanding any provision of the Farm Credit Act of 

1971 (12 U.S.C. 2001 et seq.)(except section 7.7 of that 

Act),the Farm Credit Bank resulting from a merger under this 
249

subsection shall have only the lending authorities in the 

States of Alabama, Louisiana, and Mississippi that the 

constituent banks exercised in such States immediately prior 

to the merger, except as may be provided in section 5.17

(a)(2) of such Act (12 U.S.C. 2252(a)(2)).

NOTE: The amendments made by section 5407 of Public Law 110-246 

became effective on January 1, 2010.

(B) OPERATING AND MERGER AUTHORITY.

(i) IN GENERAL. Except as provided in clause (ii), 

the Federal Intermediate Credit Bank of Jackson may operate 

subject to such provisions of part A of title II of the Farm 

Credit Act of 1971 (as in effect immediately before the 

amendment made by section 401 took effect) and such 

provisions of the Farm Credit Act of 1971 (12 U.S.C. 2001 et 

seq.) (as in effect after the amendment), as the Farm Credit 

Administration deems appropriate to carry out the purposes 

of this subsection and such Act. This subparagraph shall take 

effect as if it had become law at the same time as the 

amendment made by section 401 and shall remain in effect 

until the Bank's merger with a Farm Credit Bank under this 

subsection, or July 1, 1994, whichever is sooner.

(ii) LIMITATION ON OPERATING AUTHORITY.

(I)IN GENERAL. Notwithstanding clause (i) and 

subparagraph (A)(ii), the authority of the Federal 

Intermediate Credit Bank of Jackson to operate as 

provided under clause (i) shall expire, and the Farm

Credit Administration shall revoke the Banks charter, 

immediately on the Banks merger with a Farm Credit 

Bank under this subsection, or July 1, 1994, whichever 

is sooner.

(II) DISTRICT BOUNDARY 

MODIFICATION. Notwithstanding clause (i), the 

authority of the Federal Intermediate Credit Bank of 

Jackson shall not include the authority for the Bank to 

modify, nor shall the Farm Credit Administration 

approve such a modification to, the boundaries of the 

Fifth Farm Credit District to reaffiliate any portion of 

the District with another Farm Credit Bank, except

(aa) in the case of the merger of the entire 

Bank as an entity with a Farm Credit Bank such 

that the entire chartered territory of the Federal 

Intermediate Credit Bank of Jackson (except as 

provided in item (bb)) is merged with the Farm 

Credit Bank; and

(bb) in the case of the reaffiliation of the 

Northwest Louisiana Production Credit 

Association with another farm credit district 

pursuant to the Farm Credit Act of 1971 (12 U.S.C. 
250

2001 et seq.) and any applicable regulations under 

such Act.

(iii) LIMITATION ON AUTHORITY TO MERGE.

(I) IN GENERAL. Notwithstanding clause (i), 

the authority of the Federal Intermediate Credit Bank of 

Jackson to merge with a Farm Credit Bank as provided 

under clause (i) shall expire, and the Farm Credit 

Administration shall revoke the Bank's charter, 

immediately on the Bank's merger with a Farm Credit 

Bank under this subsection, or July 1, 1994, whichever 

is sooner.

(II) BANK INTEGRITY. Notwithstanding 

clause (i), the authority of the Federal Intermediate 

Credit Bank of Jackson to merge with a Farm Credit 

Bank shall be limited to a merger of the Federal 

Intermediate Credit Bank of Jackson (as chartered on 

the date of enactment of this subsection to include the 

territory in the States of Alabama, Louisiana, and 

Mississippi, except as provided in clause (ii)(II)(bb)) as 

a whole entity such that the entire chartered territory of 

the Federal Intermediate Credit Bank of Jackson is 

merged with the Farm Credit Bank.

(III) LIMITATION. Beginning on the date of an 

order issued by the Farm Credit Administration under 

subparagraph (D), the authority of the Federal 

Intermediate Credit Bank of Jackson to merge with a 

Farm Credit Bank shall be limited to the arbitrated 

merger provided for in paragraph (2).

(C) EXTENSION.

(i) LETTER OF INTENT. If no later than June 30, 

1993, the Federal Intermediate Credit Bank of Jackson 

delivers to the Farm Credit Administration a letter of intent to 

merge with a Farm Credit Bank, summarizing the terms and 

conditions of the merger (including, but not limited to, board 

composition, capital structure, exchange, or transfer of 

equities, and termination) signed by the chief executive 

officer and the members of the boards of directors of the 

Federal Intermediate Credit Bank of Jackson and the Farm 

Credit Bank, the Farm Credit Administration shall, on its 

determination that the letter of intent represents a bona fide 

good faith agreement in principle between the two banks to 

merge, and that there is at least a reasonable prospect that the 

merger will be completed in an expeditious manner, grant a 

one-time extension, until a date certain not later than October 

31, 1993, of the requirement under subparagraph (A). Any 

extension provided under this subparagraph may be 

conditioned on such terms and conditions as the Farm Credit 

Administration determines necessary to ensure that the 

merger described in the letter of intent is completed by the 

closing date of the extension.
251

(ii) COMPLIANCE. If the Farm Credit 

Administration grants an extension under clause (i), it shall 

issue an order under subparagraph (D) immediately if—

(I) the Federal Intermediate Credit Bank of 

Jackson, or the Farm Credit Bank that is a signatory to 

the letter of intent under clause (i), provides written 

notification to the Farm Credit Administration that the 

bank does not intend to complete the merger described 

in the letter of intent;

(II) the Farm Credit Administration determines 

that the Federal Intermediate Credit Bank of Jackson is 

not complying with any term or condition on which an 

extension under clause (i) was conditioned; or

(III) the Farm Credit Administration determines 

that the Federal Intermediate Credit Bank of Jackson is 

not pursuing in good faith the merger provided for in 

the letter of intent.

If the Farm Credit Administration issues an order under 

subparagraph (D) pursuant to this clause, the Federal Intermediate Credit 

Bank of Jackson shall be deemed to have failed to comply with the 

requirements of subparagraph (A).

(D) FAILURE TO MERGE; ISSUANCE OF ORDER. If 

the Federal Intermediate Credit Bank of Jackson fails to comply, or 

notifies the Farm Credit Administration in writing that it does not 

intend to comply, with the requirements of subparagraph(A), the 

Farm Credit Administration shall, within 5 days after the date 

specified in subparagraph (A), or such other date specified by the 

Farm Credit Administration under subparagraph (C), issue, 

notwithstanding any other provision of law, an order requiring the 

Federal Intermediate Credit Bank of Jackson to merge with the 

Farm Credit Bank of Texas in accordance with paragraph (2).

(2) ARBITRATED MERGER.

(A) IN GENERAL. Not later than 30 days after the 

issuance of an order by the Farm Credit Administration under 

paragraph (1)(D), an arbitrator (or panel of arbitrators) shall be 

named by the American Arbitration Association in accordance 

with the Commercial Arbitration Rules of the American 

Arbitration Association to serve as the arbitrator referred to in this 

paragraph.

(B) DUTIES. The arbitrator shall determine the terms and 

conditions of the merger required under an order issued under 

paragraph (1)(D), such that the terms and conditions are fair and 

equitable to the two banks, their affiliated associations, the 

stockholders and borrowers of the associations, and the other 

institutions of the Farm Credit System, and are designed to protect 

or enhance the safety and soundness of the Farm Credit System. 

The arbitrator shall have the authority to hire staff and secure the 

services of consultants as necessary to discharge the duties of the 

arbitrator under this paragraph.
252

(C) EXPENSES. Notwithstanding any other provision of 

law, the compensation and expenses of the arbitrator, the fees and 

expenses of the American Arbitration Association, and any 

expenses associated with the referendum required under 

subparagraph (F) shall be paid from the Farm Credit Assistance 

Fund established under section 6.25 of the Farm Credit Act of 

1971 (12 U.S.C. 2278b-5).

(D) DEVELOPMENT OF MERGER PLANS.

(i) IN GENERAL. Not later than 100 days after the 

issuance of an order by the Farm Credit Administration under 

paragraph (1)(D), the arbitrator shall develop and submit for 

certification to the Farm Credit Administration a plan 

specifying the terms and conditions of the merger of the two 

banks required under this paragraph, such that the terms and 

conditions are fair and equitable to the two banks, their 

affiliated associations, the stockholders or farmer-borrowers 

of the associations, and the other institutions of the Farm 

Credit System, and are designed to protect or enhance the 

safety and soundness of the Farm Credit System. In devising 

the plan, the arbitrator shall, to the extent practicable, achieve 

the following objectives:

(I) Implementation of the preferences expressed 

by the affected and interested parties in submissions 

under clause (ii).

(II) Valuation of assets fairly, equitably, and 

consistently for all parties involved.

(III) Establishment of capitalization and funding 

terms in a manner that treats farmer-borrowers and 

stockholders in the two involved farm credit districts 

equitably and takes account of risk.

(IV) Ensure the viability of the resulting Farm 

Credit Bank and associations of the bank and the ability 

of the resulting bank and associations of the bank to 

lend to eligible borrowers at reasonable and competitive 

rates of interest.

(ii) SUBMISSION OF VIEWS AND 

INFORMATION. The arbitrator shall receive from affected 

and interested parties written submissions, in accordance

with fair and reasonable procedures established by the 

arbitrator, regarding the terms and conditions of an 

appropriate plan for the merger of the two banks required 

under this paragraph. The Federal Intermediate Credit Bank 

of Jackson, the Farm Credit Bank of Texas, and their 

affiliated associations shall make available all books, records, 

financial information, and other material that the arbitrator 

determines is necessary to the development of the plan or the 

fulfillment of any other requirement under this paragraph. A 

copy of any submission or information provided to the 

arbitrator by any party under this paragraph shall be 

furnished to the Federal Intermediate Credit Bank of Jackson 
253

or the Farm Credit Bank of Texas on the written request of 

the bank and at the banks expense. The arbitrator shall 

provide both banks with a reasonable opportunity to review 

and respond to any submission or information provided by 

any party.

(iii) CONTENT OF PLAN; FARM CREDIT Bank. 

The plan developed and submitted under clause (i) shall 

include provisions regarding the following matters:

(I) The initial composition, following the 

merger, of the board of directors of the resulting Farm 

Credit Bank (which shall be subject to change thereafter 

in accordance with the Farm Credit Act of 1971 (12 

U.S.C. 2001 et seq.) and any applicable regulations).

(II) The valuation, for purposes of the merger, of 

the assets and liabilities of the merging banks.

(III) The terms and conditions on which the 

shares of capital stock of the Federal Intermediate 

Credit Bank of Jackson and, if necessary, the Farm 

Credit Bank of Texas, will be converted into shares of 

the resulting Farm Credit Bank.

(IV) The capital structure and capitalization 

levels of the resulting Farm Credit Bank and the 

affiliated associations of the Farm Credit Bank in the 

States of Alabama, Louisiana, and Mississippi as the 

arbitrator determines necessary to carry out the 

purposes of this paragraph (which shall be subject to 

change thereafter in accordance with the Farm Credit 

Act of 1971 (12 U.S.C. 2001 et seq.) and any applicable 

regulations).

(V) The terms of financing agreements between 

any production credit associations or agricultural credit 

associations described in clause (iv), and resulting Farm 

Credit Bank (which shall be subject to change thereafter 

in accordance with the Farm Credit Act of 1971 (12 

U.S.C. 2001 et seq.) and any applicable regulations).

(VI) Any other terms and conditions or other 

matters that the arbitrator considers necessary.

(iv) CONTENT OF PLAN; AGRICULTURAL

CREDIT ASSOCIATIONS. If the arbitrator determines that 

the chartering of agricultural credit associations in the States 

of Alabama, Louisiana, and Mississippi will be in the best 

interests of the farmers, ranchers, and aquatic producers 

eligible to borrow from Farm Credit System associations, the 

plan required under this subparagraph shall also include, 

based on submissions from the Federal Intermediate Credit 

Bank of Jackson and the Farm Credit Bank of Texas, 

provisions for the establishment of agricultural credit 

associations to operate in the States, subject to approval in 

the referendum under subparagraph (F). Such provisions 

shall include provisions regarding the following matters:
254

(I) A proposal for the establishment of an 

agricultural credit association in each of the geographic 

areas specified in subparagraph (F)(iii) (the charters of 

which, if validly issued under subparagraph (G)(i)

pursuant to approval in the referendum under 

subparagraph (F), shall be subject to change thereafter 

in accordance with the Farm Credit Act of 1971 (12 

U.S.C. 2001 et seq.) and any applicable regulations).

(II) The initial composition, if the proposal for 

the establishment of agricultural credit associations is 

approved, of the board of directors of each such 

agricultural credit association (which shall be subject to 

change thereafter in accordance with the Farm Credit 

Act of 1971 (12 U.S.C. 2001 et seq.) and any applicable 

regulations).

(III) The valuation, for purposes of the proposed 

merger of the production credit association and the 

Federal land bank association in each of the geographic 

areas specified in subparagraph (F)(iii), of the assets 

and liabilities of the associations.

(IV) The terms and conditions on which the 

shares of capital stock of any associations that may 

merge under the plan to form agricultural credit 

associations will be converted into shares of the 

resulting agricultural credit associations.

(V) The capital structure and capitalization 

levels of the resulting Farm Credit Bank and such 

affiliated associations of the Farm Credit Bank in the 

States of Alabama, Louisiana, and Mississippi as the 

arbitrator determines necessary to carry out the 

purposes of this paragraph (which capital structure and 

capitalization levels shall be subject to change 

thereafter in accordance with the Farm Credit Act of 

1971 (12 U.S.C. 2001 et seq.) and any applicable 

regulations).

(VI) The terms of financing agreements between 

any agricultural credit associations and the resulting 

Farm Credit Bank (which shall be subject to change 

thereafter in accordance with the Farm Credit Act of 

1971 (12 U.S.C. 2001 et seq.) and any applicable 

regulations).

(VII) Any other terms and conditions or other 

matters that the arbitrator considers necessary.

(v) CONSULTATION WITH INSURANCE 

CORPORATION. The arbitrator shall consult with the Farm 

Credit System Insurance Corporation regarding the valuation 

of the assets and liabilities under the plan of merger, the 

capitalization of the Farm Credit System institutions resulting 

under the plan, and any other matters relevant to the 
255

assistance to be provided by the Insurance Corporation to 

facilitate the merger under subparagraph (H).

(E) CERTIFICATION OF PLAN. Not later than 30 days 

after the receipt of the plan developed by the arbitrator, the Farm 

Credit Administration shall—

(i) certify; or

(ii) recommend to the arbitrator revisions to the plan 

that, if incorporated into the plan, will allow the Farm Credit 

Administration to certify,

that the resulting bank and any resulting associations are proposed 

to be organized in such a fashion that they will, on implementation of the plan, 

operate in compliance with applicable laws and regulations. The arbitrator and 

the Farm Credit Administration shall work cooperatively to ensure the 

expeditious issuance of the certification. If the Farm Credit Administration 

recommends to the arbitrator revisions to plan that, if incorporated into the 

plan, will allow the Farm Credit Administration to certify the plan, the 

arbitrator shall, not later than 15 days after receipt of the recommended 

revisions, incorporate the revisions into the plan as the arbitrator deems 

appropriate to secure the certification.

(F) REFERENDUM ON ASSOCIATION STRUCTURE.

(i) IN GENERAL. Not later than 170 days after the 

issuance of an order by the Farm Credit Administration under 

paragraph (1)(D), the American Arbitration Association shall 

conduct, and compile and forward to the Farm Credit 

Administration the results of, a vote of current farmerborrowers of the production credit associations and the 

Federal land bank associations in the States of Alabama, 

Louisiana, and Mississippi, in accordance with the Election 

Rules of the American Arbitration Association, to determine 

whether the farmer-borrowers of each association in the 

geographic areas described in clause (iii) prefer to have credit 

delivered—

(I) in the case of production credit association 

farmer-borrowers, through a production credit 

association or through an agricultural credit association 

as proposed in the plan; and

(II) in the case of Federal land bank association 

farmer-borrowers, through a Federal land bank 

association or through an agricultural credit association 

as proposed in the plan.

Each farmer-borrower shall be entitled to one vote. The arbitrator shall 

establish record dates and other procedures for conducting the referendum. 

The Federal Intermediate Credit Bank of Jackson, the Farm Credit Bank of 

Texas, and their affiliated associations shall cooperate in the conduct of the 

referendum, as determined necessary by the Arbitrator.

(ii) DISCLOSURE. The arbitrator shall send to 

farmer-borrowers eligible to vote under this subparagraph, 

with their ballot, a statement describing the potential 

consequences to the farmer-borrowers, and to the 
256

associations from which they borrow, of voting to charter an 

agricultural credit association and setting forth factors that 

farmer-borrowers should consider relevant to the choice 

between credit delivery through the current association 

structure and the chartering of an agricultural credit 

association. The arbitrator shall develop the disclosure 

materials in cooperation with the Farm Credit Administration 

and ensure that the materials are not inconsistent with 

applicable laws and regulations.

(iii) TABULATION OF RESULTS. The results of 

the vote under this subparagraph shall be compiled separately 

for production credit association farmer-borrowers and 

Federal land bank association farmer-borrowers in each of 

the following seven geographic areas:

(I) The area served by the Federal Land Bank 

Association of South Mississippi.

(II) The area served by the Federal Land Bank 

Association of North Mississippi.

(III) The area served by the Federal Land Bank 

Association of South Alabama.

(IV) The area served by the Federal Land Bank 

Association of North Alabama.

(V) The area served by the Federal Land Bank 

Association of South Louisiana.

(VI) The area served by both the Federal Land 

Bank Association of North Louisiana and the First 

South Production Credit Association.

(VII) The area served by both the Federal Land 

Bank Association of North Louisiana and the 

Northwest Louisiana Production Credit Association.

(iv) PUBLICATION OF RESULTS. The results of 

the vote under this subparagraph, as tabulated by the 

American Arbitration Association, shall be made promptly 

available to the public in a manner determined appropriate by 

the Farm Credit Administration.

(G) IMPLEMENTATION. Not later than 10 days after the 

date of the receipt of the results of the referendum conducted under 

subparagraph (F), the Farm Credit Administration shall issue such 

charters or charter amendments and take such other regulatory 

actions as may be necessary to implement the merger or mergers as 

provided for under the certified plan. In this regard, the Farm 

Credit Administration shall—

(i) issue a charter or charter amendment and take any 

such other regulatory actions as may be necessary to provide 

for the establishment of an agricultural credit association in 

each of the geographic areas described in subparagraph 

(F)(iii) where a majority of the farmer-borrowers of both the 

production credit association and the Federal land bank 

association voted under subparagraph (F)(i) that they 

preferred to have credit delivered through an agricultural 
257

credit association (which charter shall be subject to change 

thereafter in accordance with the Farm Credit Act of 1971 

(12 U.S.C. 2001 et seq.) and any applicable regulations); and

(ii) not issue a charter or charter amendment or take 

any such other regulatory action to provide for the 

establishment of an agricultural credit association in any of 

the geographic areas described in subparagraph (F)(iii) where 

less than a majority of the farmer-borrowers of the 

production credit association or the Federal land bank 

association voted in the referendum under subparagraph 

(F)(i) that they preferred to have credit delivered through an 

agricultural credit association (provided that the charter of 

any remaining association in such geographic area shall be 

subject to change thereafter in accordance with the Farm

Credit Act of 1971 (12 U.S.C. 2001 et seq.) and any 

applicable regulations).

(H) FACILITATION.

(i) IN GENERAL. Beginning on the date of the 

issuance of an order by the Farm Credit Administration under 

paragraph (1)(D), the Farm Credit System Insurance 

Corporation shall expend amounts from the Farm Credit 

Insurance Fund to the extent necessary to facilitate the 

merger prescribed in the plan.

(ii) MAINTENANCE OF BOOK VALUE. 

Assistance provided by the Corporation under this 

subparagraph shall be in amounts not to exceed that required 

to maintain book value per share of stockholders' equity at 

the same value reflected on the most recent audited financial 

statements of the Federal Intermediate Credit Bank of 

Jackson and the Farm Credit Bank of Texas prior to or

effective with the date of the merger.

(iii) OTHER ASSISTANCE. Until the expiration of 5 

years from the effective date of a merger authorized by this 

subsection, or the final resolution of any litigation against the 

Federal Intermediate Credit Bank of Jackson or any of its 

stockholders pending on the date of the enactment of this 

subsection, whichever is later, the Corporation shall 

guarantee prompt payment of any loss experienced by the 

merged bank, which loss is caused by the failure of any 

association-stockholder of the merged bank that was a 

stockholder of the Federal Intermediate Credit Bank of 

Jackson immediately prior to the merger, or any successor to 

the association, to pay when due any obligation of principal 

or interest owed by the association or its successor to the 

resulting bank.

(iv) TERMS AND CONDITIONS. Assistance 

provided by the Corporation under this subparagraph shall be 

on such terms and conditions as the Corporation deems 

appropriate to facilitate the merger.

(I)SAFETY AND SOUNDNESS.
258

(i) IN GENERAL. Except as provided in clause (ii), 

if at any time prior to the completion of the merger required 

under this subsection the Farm Credit Administration 

determines that the Federal Intermediate Credit Bank of 

Jackson is being operated in an unsafe or unsound manner (as 

determined in accordance with the Farm Credit Act of 1971 

(12 U.S.C. 2001 et seq.)), the Farm Credit Administration, 

after consultation with the respective boards of directors of 

the affected banks and taking into consideration the purposes 

of this subsection, may require the Federal Intermediate 

Credit Bank of Jackson to merge with a Farm Credit Bank, 

subject to such terms and conditions as the Farm Credit 

Administration may prescribe. The Farm Credit System 

Insurance Corporation shall expend amounts in the Farm 

Credit Insurance Fund to the extent necessary to facilitate the 

merger prescribed under this subparagraph, including the 

provision of assistance as provided in section 

5.61(a)(2)(A)(iii) of the Farm Credit Act of 1971 (12 U.S.C. 

2277a-10(a)(2)(A)(iii)), on such terms and conditions as the 

Corporation deems appropriate.

(ii) ARBITRATED MERGER. If at any time after 

the Farm Credit Administration issues an order under 

paragraph (1)(D), but prior to the completion of the merger 

required under this subsection, the Farm Credit 

Administration determines that the Federal Intermediate 

Credit Bank of Jackson is being operated in an unsafe or 

unsound manner (as determined in accordance with the Farm 

Credit Act of 1971 (12 U.S.C. 2001 et seq.)), the Farm Credit 

Administration shall, after consultation with the boards of 

directors of the Federal Intermediate Credit Bank of Jackson 

and the Farm Credit Bank of Texas, take such action as it 

deems necessary pursuant to the authorities provided under 

the Farm Credit Act of 1971 (12 U.S.C. 2001 et seq.) to 

return the operation of the Federal Intermediate Credit Bank 

of Jackson to a safe and sound condition, pending the 

completion of the merger under paragraph (2).

(J) MERGER PLAN FOR AGRICULTURAL CREDIT 

ASSOCIATIONS. In any of the States of Alabama, Louisiana, or 

Mississippi where all of the associations are chartered as 

agricultural credit associations, the boards of directors of each such 

association in each State are encouraged to submit to the farmerborrowers of each such association for their approval a plan for 

merging the associations into one statewide agricultural credit 

association, in accordance with the applicable provisions of the 

Farm Credit Act of 1971 (12 U.S.C. 2001 et seq.).

(K) DEFINITIONS. As used in this paragraph:

(i) AGRICULTURAL CREDIT ASSOCIATIONS. 

The term "agricultural credit association" means an 

association having the same authorities, attributes, and 

obligations as, and for all purposes an agricultural credit
259

association resulting from the implementation of the plan 

under this paragraph shall be deemed to be, an association 

resulting from the merger of a production credit association 

and a Federal land bank association under section 7.8 of the 

Farm Credit Act of 1971 (12 U.S.C. 2279c-1).

(ii) FARMER-BORROWER. The term "farmerborrower" means a borrower from a Farm Credit System 

association in the State of Alabama, Louisiana, or Mississippi 

who holds voting stock, or is eligible to hold voting stock, in 

the association or a stockholder in any such association.

(3) REVIEW.

(A) IN GENERAL. Actions and determinations of the 

arbitrator, the Farm Credit Administration, or the Farm Credit 

System Insurance Corporation pursuant to this subsection shall not 

be subject to judicial review except as provided in this paragraph, 

nor shall they be subject to the requirements of subchapter II of 

chapter 5 or chapter 7 of title 5, United States Code.

(B) AGENCY DETERMINATIONS.

(i) IN GENERAL. Any petition for review of a 

determination or other action of the Farm Credit 

Administration or the Farm Credit System Insurance 

Corporation under this subsection shall be filed in the United 

States Court of Appeals for the District of Columbia Circuit 

not later than 10 days after the determination, or the petition 

shall be barred. The court shall have exclusive jurisdiction to 

determine the proceeding in accordance with standard 

procedures as supplemented by procedures hereinafter 

provided and no other district court or court of appeals of the 

United States shall have jurisdiction over any such challenge 

in any proceeding instituted prior to, on, or after the date of 

enactment of this subsection. The review of any 

determination or action of the Farm Credit Administration or 

the Farm Credit System Insurance Corporation under this 

subsection shall be based on the examination of all of the 

information before the Farm Credit Administration or the 

Farm Credit System Insurance Corporation, as the case may 

be, at the time the determination was made. The court 

reviewing the determination or action shall not enter a stay or 

order of mandamus unless the court has determined, after 

notice and a hearing before a panel of the court, that the 

agency action complained of was arbitrary, capricious, an 

abuse of discretion, or otherwise not in accordance with law.

(ii) PROCEDURES. Notwithstanding any other 

provision of law, the court may set rules governing the 

procedures of any such proceeding that set page limits on 

briefs and time limits for filing briefs and motions and other 

actions that are shorter than the limits specified in the Federal 

Rules of Civil or Appellate Procedure.
260

(iii) EXPEDITED REVIEW. Any such proceeding 

before the court shall be assigned for hearing and completed 

at the earliest possible date, and shall be expedited in every 

way. The court shall render its final decision relative to any 

challenge not later than 50 days from the date the challenge is 

brought unless the court determines that a longer period of 

time is required to satisfy the requirements of the 

Constitution.

(C) ARBITRATOR DETERMINATIONS.

(i) IN GENERAL. Except as otherwise provided in 

this paragraph, any petition for review of a determination or 

other action of the arbitrator named under paragraph (2) shall 

be filed in accordance with the United States Arbitration Act 

(9 U.S.C. 1 et seq.). Such Act shall apply to the arbitration 

conducted pursuant to paragraph (2) to the same extent as if 

the arbitration were established in a contract evidencing a 

transaction in commerce between the Federal Intermediate 

Credit Bank of Jackson and the Farm Credit Bank of Texas.

(ii) PROCEDURES. Notwithstanding the United 

States Arbitration Act (9 U.S.C. 1 et seq.), any petition for 

review of a determination or other action of the arbitrator 

under this subsection shall be filed not later than 10 days 

after the determination, or the petition shall be barred. The 

court specified under such Act shall have exclusive 

jurisdiction to determine the proceeding in accordance with 

the applicable procedures under such Act, as supplemented 

by procedures hereinafter provided, and no other district 

court shall have jurisdiction over any such challenge in any 

such proceeding. Notwithstanding any other provision of 

law, the court may set rules governing the procedures of any 

such proceeding that set page limits on briefs and time limits 

for filing briefs and motions and other actions that are shorter 

than the limits specified in the United States Arbitration Act 

or the Federal Rules of Civil or Appellate Procedure.

(iii) EXPEDITED REVIEW. Any such proceeding 

before the court shall be assigned for hearing and completed 

at the earliest possible date, and shall be expedited in every 

way. The court shall render its final decision relative to any 

challenge as soon as possible in accordance with the United 

States Arbitration Act (9 U.S.C. 1 et seq.), or not later than 

30 days from the date the challenge is brought, whichever is 

sooner, unless the court determines that a longer period of 

time is required to satisfy the requirements of the 

Constitution.

NOTE: This subsection was added by section 401(a) of Public Law 

102-552.
261

12 U.S.C. 2071 note Sec. 411. Merger of Production Credit Associations and 

Federal Land Bank Associations.

(a) SUBMISSION OF PROPOSAL. Not later than 6 months after the 

date of the merger of the Federal land bank and the Federal intermediate credit 

bank in a district, the Boards of Directors of each Federal land bank 

association and each production credit association in such district, that share 

substantially the same geographical territory with each other, shall submit to 

the voting stockholders of each such association for their approval, a plan 

approved by the supervising bank and the Farm Credit Administration, for 

merging such associations.

(b) PREREQUISITES TO MERGER.

(1) STOCKHOLDER VOTE. The stockholder vote required for 

approval of a merger under subsection (a) shall be a majority of the 

voting stockholders of each association voting, in person or by written 

proxy, at a duly authorized stockholders meeting.

(2) SUBMISSION TO FCA. Not later than 60 days prior to the 

end of the 12-month period beginning on the date of the enactment of 

this section, the plan of merger under subsection (a), together with all 

information to be presented to the stockholders, shall be submitted to the 

Farm Credit Administration.

(3) EXPEDITED CONSIDERATION BY FCA. The Farm 

Credit Administration shall expedite its consideration of the plan and 

accompanying information submitted under paragraph (2) so that review 

and approval of such plan and information shall be completed by the 

Administration so as to enable a stockholder vote to occur within the 12-

month period referred to in paragraph (2).

(c) DIRECT LENDERS. On approval of a merger under this 

subsection, the resulting association shall be a direct lender in the same 

manner as applies to production credit associations.

12 U.S.C. 2002 note Sec. 412. Consolidation of District Farm Credit Banks.

(a) SUBMISSION OF PROPOSAL.

(1) SPECIAL COMMITTEE.

(A) IN GENERAL. Not later than 6 months after the date 

of the enactment of this section, a special committee shall be 

selected pursuant to regulations of the Farm Credit Administration 

for the purpose of developing a proposal for the consolidation of 

Farm Credit System districts.

(B) COMPOSITION. The special committee selected 

under subparagraph (A) shall be composed of one representative 

from each Farm Credit Bank board and the members of the Board 

of Directors of the Assistance Board.

(2) DEVELOPMENT OF PROPOSAL. Not later than 6 months 

after the formation of the special committee, the committee shall 

develop a proposal to consolidate the Farm Credit Banks into no less 

than six financially viable Farm Credit Banks through interdistrict 

mergers.
262

(3) REPORTS. Not later than the end of each calendar quarter 

beginning at least 6 months after the selection of the special committee, 

such committee shall prepare and submit, to the Committee on 

Agriculture of the House of Representatives, and the Committee on 

Agriculture, Nutrition, and Forestry of the Senate, a report on the 

progress of the committee in developing a proposal under this 

subsection.

(b) PREREQUISITES TO CONSOLIDATION.

(1) FCA REVIEW OF PROPOSAL. Prior to the submission of 

the proposal developed under subsection (a)(2) to the stockholders under 

paragraph (3), the proposal together with all information to be presented 

to the stockholders, shall be submitted to the Farm Credit 

Administration for approval.

(2) PREREQUISITES. The proposal developed under 

subsection (a)(2) shall not be submitted to stockholders under paragraph 

(3) unless the proposal is approved by—

(A) a majority of the members of the Board of Directors of 

the Assistance Board; and

(B) the members of the special committee that represent the 

districts affected by the terms of the proposal.

(3) SUBMISSION TO STOCKHOLDERS. Not later than the 

end of the 18-month period after the date of enactment of this Act, each 

Farm Credit Bank involved, in consultation with the special committee, 

shall submit the proposed merger affecting such bank to the voting 

stockholders of each such bank.

(4) STOCKHOLDER VOTE. Each association shall be entitled 

to cast a number of votes equal to the number of voting stockholders of 

such association.

12 U.S.C. 2121 note Sec. 413. Voluntary Merger of the Banks for Cooperatives.

(a) SUBMISSION OF PROPOSAL.

(1) SPECIAL COMMITTEE.

(A) IN GENERAL. Not later than 15 days after the date of 

the enactment of this section, a special committee shall be selected 

pursuant to subparagraph (B), for the purpose of developing a 

proposal for the voluntary merger of the banks for cooperatives.

(B) COMPOSITION. The special committee selected 

under subparagraph (A) shall be composed of—

(i) one member of each district board elected by the 

voting stockholders of the bank for cooperatives in the 

district; and

(ii) one member chosen from the board of directors of 

the Central Bank for Cooperatives by the board of such Bank.

(C) DEVELOPMENT OF PLAN. Not later than 75 days 

after the date of the enactment of this section, the special 

committee shall develop a plan of merger for all such banks and 
263

the Central Bank for Cooperatives into a National Bank for 

Cooperatives.

(2) PREREQUISITES TO MERGER.

(A) SUBMISSION TO FCA. On completion of the plan of 

merger pursuant to paragraph (1)(C), the special committee shall 

submit the proposed plan, together with all information that is to be 

distributed to the stockholders concerning such plan, to the Farm 

Credit Administration for approval.

(B) EXPEDITED REVIEW. Not later than 30 days after 

the Farm Credit Administration receives the plan of merger, the 

Administration shall promptly review such plan and advise the 

special committee concerning any required changes that are 

necessary to the plan.

(3) SUBMISSION TO STOCKHOLDERS. On approval of the 

plan by the Farm Credit Administration, the special committee shall, 

under such procedures as may be established by the committee, submit 

the plan and recommendations to all voting stockholders of the district 

banks for cooperatives and the Central Bank for Cooperatives.

(b) VOTING REQUIREMENTS.

(1) MAJORITY VOTE REQUIRED. An approval of the plan of 

merger developed and submitted under subsection (a) shall—

(A) require a majority vote of the stockholders of each 

district bank for cooperatives voting, in person or by proxy, at a 

duly authorized stockholders meeting, computed both—

(i) in accordance with the requirement that, except as 

provided in section 3.3(d), each cooperative that is the holder 

of voting stock in the bank for cooperatives shall be entitled 

to cast one vote; and

(ii) on the basis of the total equity interests in the 

bank (including allocated, but not unallocated, surplus and 

reserves) held by such stockholders;

(B) require a majority vote of the voting stockholders of the 

Central Bank for Cooperatives voting on a one bank-one vote 

basis;

(C) take place not later than 180 days after the date of the 

enactment of this section; and

(D) take place prior to any other merger vote involving a 

bank for cooperatives.

(2) APPROVAL BY ALL BANKS FOR COOPERATIVES. If 

the stockholders of all of the banks for cooperatives approve the merger, 

the merger shall take place.

(3) EFFECT OF LESSER VOTE. If the stockholders of more 

than one but fewer than all of the banks approve the plan, each such 

bank whose stockholders voted to approve the merger shall be merged 

into a single bank for cooperatives, as provided in paragraphs (4) or (5).

(4) NATIONAL BANK FOR COOPERATIVES.
264

(A) CREATION. If the stockholders of eight or more of 

the district banks for cooperatives approve the merger, such banks, 

and the Central Bank for Cooperatives, shall be merged into a 

single bank, which shall be referred to as the "National Bank for 

Cooperatives."

(B) SERVICES PROVIDED. The National Bank for 

Cooperatives may offer credit and related services to eligible 

borrowers located within any territory that may be served by Farm 

Credit System institutions under section 5.0, or to any borrower 

otherwise eligible under section 3.7(b).

(5) UNITED BANK FOR COOPERATIVES.

(A) CREATION. If the stockholders of more than one but 

fewer than eight of the district banks approve the plan, each such 

bank, and the Central Bank for Cooperatives (if approved by a 

numerical majority of its stockholders), shall be merged into a 

single bank, which shall be referred to as the "United Bank for 

Cooperatives."

(B) SERVICES PROVIDED. The United Bank for 

Cooperatives shall offer credit and related services only in the 

territory included, as of the date of the enactment of this section, 

within the boundaries of the districts that had been served by the 

constituent banks of the United Bank for Cooperatives, and to any 

borrower otherwise eligible under section 3.7(b).

(6) NONCONSENTING BANKS.

(A) IN GENERAL.

(i) NATIONAL BANK FOR COOPERATIVES. 

Any of the district banks whose stockholders did not approve 

the plan of merger may offer credit and related services to 

any eligible borrowers within any territory or area that may 

be served by the National Bank.

(ii) UNITED BANK FOR COOPERATIVES. Any 

of the district banks whose stockholders did not approve the 

plan of merger shall continue as district banks for 

cooperatives and shall continue to serve only the territory 

within the boundaries of the district that such banks served as 

of the date of the enactment of this section.

(B) NONDISCRIMINATION. Any district bank whose 

stockholders did not approve the plan of merger shall be entitled to 

the availability, from the National Bank for Cooperatives or the 

United Bank for Cooperatives, as the case may be, of the same 

credit and related services now provided by the Central Bank for 

Cooperatives as of the date of the enactment of this section, 

regardless of the decision not to merge.

(C) SUBSEQUENT MERGERS. Any district bank 

referred to in subparagraph (A) may subsequently merge with the 

National Bank for Cooperatives or the United Bank for 

Cooperatives, as the case may be, on the approval of the voting 
265 

stockholders of both banks proposing to merge based on the voting 

requirement of subsection (b)(1). 

(c) REFERENCES. References in this section to voting stockholders 

shall include subscribers to the guaranty fund. 

12 U.S.C. 2121 note Sec. 414. Bank for Cooperatives Board of Directors. 

Notwithstanding section 3.2, the initial board of each district bank for 

cooperatives shall be composed of the members of the district board (which is 

dissolved upon the creation of the district Farm Credit Bank) elected by the 

stockholders of the bank for cooperatives and one member elected by the 

other two members, which member shall not be a director, officer, employee, 

or stockholder of a System institution. The initial board shall operate for such 

term as is agreed to by the members of the board, except that such period shall 

not exceed two years. Thereafter, the board shall be elected and serve in 

accordance with section 3.0 of the Farm Credit Act of 1971. 

* * * * *

12 U.S.C. 2218 note Sec. 422. Sales of Insurance by System Institutions. 

* * * * *

(b) CONTINUATION OF PROGRAM. Notwithstanding the 

amendments made to section 4.29 by subsection (a), any insurance program 

offered by any bank or association of the Farm Credit System on the date of 

the enactment of this Act that does not meet the requirements of section 4.29, 

as so amended, may be continued until July 1, 1988. 

NOTE: The amendments to section 4.29 of the 1971 Act include the 

addition of the last sentence in paragraph (a)(1) and new paragraph 

(a)(2).

* * * * *

12 U.S.C. 2252 note Sec. 424. Limitation on FCA Authority to Require Disclosure of 

Information. 

* * * * *

(b) REGULATIONS. Within 30 days after the date of the enactment 

of this Act, the Farm Credit Administration shall amend its regulations as 

necessary to implement the amendment made by subsection (a). 

NOTE: The amendments made by subsection (a) are contained in the 

last proviso and in subparagraphs (A) and (B) of section 5.17(a)(9) of the 

1971 Act. 

* * * * *
266 

12 U.S.C. 2071 note Sec. 433. Reassignment of Associations to Adjoining Districts. 

(a) PETITION OF BANK. Notwithstanding any other provision of 

law, effective for the 12-month period beginning on the date of enactment of 

this Act, each Federal land bank association or production credit association, 

whose chartered territory adjoins the territory of another district, may petition 

the Farm Credit Administration to amend the charters of the association and 

the adjoining district bank to provide that the territory of the association is 

part of the adjoining district. 

(b) REQUIREMENTS OF PETITION. To be considered under this 

section, the petition must be signed by not less than 15 percent of the 

stockholders of the association. Only one such petition may be filed by an 

association under this section. 

(c) FCA ACTION. The Farm Credit Administration shall take any 

action necessary— 

(1) to amend the charters of the association and the district bank; 

and

(2) to incorporate the petitioning association into the adjoining 

district if the reassignment is approved by— 

(A) a majority of the stockholders of the association voting, 

in person or by proxy, at a duly authorized stockholders' meeting 

held for such purpose; 

(B) the board of directors of the adjoining district bank; 

(C) the Farm Credit System Assistance Board; and

(D) the Farm Credit Administration Board.

* * * * *

Title V—State Mediation Programs

* * * * * 

7 U.S.C. 5103 Sec. 503. Participation of Federal Agencies. 

* * * * *

(b) DUTIES OF THE FARM CREDIT ADMINISTRATION. The 

Farm Credit Administration shall prescribe rules requiring the institutions of 

the Farm Credit System— 

(1) to cooperate in good faith with requests for information or 

analysis of information made in the course of mediation under any 

agricultural loan mediation program described in section 501; and 

(2) to present and explore debt restructuring proposals advanced 

in the course of such mediation. 

NOTE: Section 501 of the Agricultural Credit Act of 1987 is codified at 7 

U.S.C. 5101. 
267 

7 U.S.C. 5104 Sec. 504. Regulations. 

The Secretary and the Farm Credit Administration shall prescribe such 

regulations as may be necessary to carry out this subtitle. The regulations 

prescribed by the Secretary shall require qualifying States to adequately train 

mediators to address all of the issues covered by the mediation program of the 

State.

* * * * *

Title VII—Agricultural Mortgage Secondary Markets

Subtitle A—The Federal Agricultural Mortgage Corporation

12 U.S.C. 2279aa note Sec. 701. Statement of Purpose. 

It is the purpose of this subtitle— 

(1) to establish a corporation chartered by the Federal 

Government; 

(2) to authorize the certification of agricultural mortgage 

marketing facilities by the corporation; 

(3) to provide for a secondary marketing arrangement for 

agricultural real estate mortgages that meet the underwriting standards 

of the corporation— 

(A) to increase the availability of long-term credit to 

farmers and ranchers at stable interest rates;

(B) to provide greater liquidity and lending capacity in 

extending credit to farmers and ranchers; and 

(C) to provide an arrangement for new lending to facilitate 

capital market investments in providing long-term agricultural 

funding, including funds at fixed rates of interest; and 

(4) to enhance the ability of individuals in small rural 

communities to obtain financing for moderate-priced homes. 

NOTE: See Title VIII of the 1971 Act for the provisions relating to the 

Federal Agricultural Mortgage Corporation.

* * * * *

Sec. 703. GAO Audit of Federal Agricultural Mortgage Corporation. 

Section 9105(a) of title 31, United States Code, is amended by adding at 

the end thereof the following new paragraph: 

(4) FEDERAL AGRICULTURAL MORTGAGE 

CORPORATION. 

(A) AUDITS AUTHORIZED. Notwithstanding any other 

provision of law and under such regulations as the Comptroller 

General may prescribe, the Comptroller General shall perform a 

financial audit of the Federal Agricultural Mortgage Corporation 
268 

on whatever basis the Comptroller General determines to be 

necessary.

(B) COOPERATION OF CORPORATION REQUIRED. 

The Federal Agricultural Mortgage Corporation shall— 

(i) make available to the Comptroller General for 

audit all records and property of, or used or managed by, the 

Corporation which may be necessary for the audit, and 

(ii) provide the Comptroller General with facilities for 

verifying transactions with the balances or securities held by 

any depositary, fiscal agent, or custodian. 

NOTE: This provision was repealed in §305 of Pub. L. 101-576 

(104 Stat. 2853). 

12 U.S.C. 2279aa note Sec. 704. GAO Studies. 

(a) STUDIES REQUIRED. The Comptroller General of the United 

States shall conduct studies of the following: 

(1) The implementation of the amendments made by this subtitle 

by the Federal Agricultural Mortgage Corporation and the effect of the 

operations of the Corporation on producers, the Farm Credit System, and 

other lenders, and the capital markets. 

(2) The feasibility and appropriateness of promoting the 

establishment of a secondary market for securities representing interests 

in, or obligations backed by, pools of agricultural real estate loans for 

which a guarantee has not been provided by the Federal Agricultural 

Mortgage Corporation. 

(3) The feasibility of expanding the authority granted under the 

amendments made by this subtitle to authorize the sale of securities 

based on or backed by a trust or pool consisting of loans made to farmrelated and rural small businesses. For purposes of the preceding 

sentence, the term "farm-related businesses" means businesses 90 

percent or more of the annual dollar volume of the sales of which are 

made to agricultural producers.

(b) SUBMISSION OF REPORT. Not later than 2 years after the date 

of enactment of this Act, the Comptroller General of the United States shall 

transmit to the Congress a report on the studies required by subsection (a), 

including therein such recommendations for administrative action and 

legislation as may be appropriate.

* * * * *
269 

Consolidated Appropriation Act, 2016

* * * * * 

Division O 

* * * * * 

Title VII—Financial Services

* * * * * 

Sec. 705. Treatment of Affiliate Transactions. 

(a) COMMODITY EXCHANGE ACT AMENDMENTS.—Section

2(h)(7)(D) of the Commodity Exchange Act (7 U.S.C. 2(h)(7)(D)) 

is amended— 

(1) by redesignating clause (iii) as clause (v); 

(2) by striking clauses (i) and (ii) and inserting the following: 

(i) IN GENERAL.—An affiliate of a person that

qualifies for an exception under subparagraph (A) (including 

affiliate entities predominantly engaged in providing 

financing for the purchase of the merchandise or 

manufactured goods of the person) may qualify for the 

exception only if the affiliate— 

(I) enters into the swap to hedge or mitigate the 

commercial risk of the person or other affiliate of the 

person that is not a financial entity, and the commercial 

risk that the affiliate is hedging or mitigating has been 

transferred to the affiliate;

(II) is directly and wholly-owned by another 

affiliate qualified for the exception under this 

subparagraph or an entity that is not a financial entity; 

(III) is not indirectly majority-owned by a 

financial entity;

(IV) is not ultimately owned by a parent company 

that is a financial entity; and

(V) does not provide any services, financial or 

otherwise, to any affiliate that is a nonbank financial 

company supervised by the Board of Governors (as 

defined under section 102 of the Financial Stability Act 

of 2010). 

(ii) LIMITATION ON QUALIFYING 

AFFILIATES.—The exception in clause (i) shall not apply if 

the affiliate is— 

(I) a swap dealer;

(II) a security-based swap dealer;

(III) a major swap participant;

(IV) a major security-based swap participant;
270

(V) a commodity pool;

(VI) a bank holding company;

(VII) a private fund, as defined in section 202(a) of 

the Investment Advisers Act of 1940 (15 U.S.C. 80–b–

2(a));

(VIII) an employee benefit plan or government

plan, as defined in paragraphs (3) and (32) of section 3 

of the Employee Retirement Income Security Act of 

1974 (29 U.S.C. 1002);

(IX) an insured depository institution;

(X) a farm credit system institution;

(XI) a credit union;

(XII) a nonbank financial company supervised by 

the Board of Governors (as defined under section 102 

of the Financial Stability Act of 2010); Or

(XIII) an entity engaged in the business of

insurance and subject to capital requirements

established by an insurance governmental authority of a 

State, a territory of the United States, the District of 

Columbia, a country other than the United States, or a 

political subdivision of a country other than the United 

States that is engaged in the supervision of insurance 

companies under insurance law.

(iii) LIMITATION ON AFFILIATES’ 

AFFILIATES.— Unless the Commission determines, by 

order, rule, or regulation, that it is in the public interest, the 

exception in clause (i) shall not apply with respect to an

affiliate if the affiliate is itself affiliated with—

(I) a major security-based swap participant;

(II) a security-based swap dealer;

(III) a major swap participant; or

(IV) a swap dealer.

(iv) CONDITIONS ON TRANSACTIONS.—With 

respect to an affiliate that qualifies for the exception in clause

(i)—

(I) the affiliate may not enter into any swap other 

than for the purpose of hedging or mitigating

commercial risk; and

(II) neither the affiliate nor any person affiliated

with the affiliate that is not a financial entity may enter 

into a swap with or on behalf of any affiliate that is a 

financial entity or otherwise assume, net, combine, or 

consolidate the risk of swaps entered into by any such 

financial entity, except one that is an affiliate that 

qualifies for the exception under clause (i).; and (3) by 

adding at the end the following:

(vi) RISK MANAGEMENT PROGRAM.—Any swap

entered into by an affiliate that qualifies for the 

exception in clause (i) shall be subject to a centralized 

risk management program of the affiliate, which is 
271

reasonably designed both to monitor and manage the 

risks associated with the swap and to identify each of 

the affiliates on whose behalf a swap was entered into..

(b) SECURITIES EXCHANGE ACT OF 1934 AMENDMENT.—

Section 3C(g)(4) of the Securities Exchange Act of 1934 (15 U.S.C. 78c–

3(g)(4)) is amended—

(1) by redesignating subparagraph (C) as subparagraph (E);

(2) by striking subparagraphs (A) and (B) and inserting the 

following:

(A) IN GENERAL.—An affiliate of a person that qualifies

for an exception under this subsection (including affiliate entities 

predominantly engaged in providing financing for the purchase of 

the merchandise or manufactured goods of the person) may qualify 

for the exception only if the affiliate—

(i) enters into the security-based swap to hedge or 

mitigate the commercial risk of the person or other affiliate 

of the person that is not a financial entity, and the 

commercial risk that the affiliate is hedging or mitigating has 

been transferred to the affiliate;

(ii) is directly and wholly-owned by another affiliate

qualified for the exception under this paragraph or an entity 

that is not a financial entity;

(iii) is not indirectly majority-owned by a financial

entity;

(iv) is not ultimately owned by a parent company that is 

a financial entity; and

(v) does not provide any services, financial or

otherwise, to any affiliate that is a nonbank financial

company supervised by the Board of Governors (as defined 

under section 102 of the Financial Stability Act of 2010).

(B) LIMITATION ON QUALIFYING AFFILIATES.—The

exception in subparagraph (A) shall not apply if the affiliate is—

(i) a swap dealer;

(ii) a security-based swap dealer;

(iii) a major swap participant;

(iv) a major security-based swap participant;

(v) a commodity pool;

(vi) a bank holding company;

(vii) a private fund, as defined in section 202(a) of the 

Investment Advisers Act of 1940 (15 U.S.C. 80–b–2(a));

(viii) an employee benefit plan or government plan, as 

defined in paragraphs (3) and (32) of section 3 of the 

Employee Retirement Income Security Act of 1974 (29 

U.S.C. 1002);

(ix) an insured depository institution;

(x) a farm credit system institution;

(xi) a credit union;
272

(xii) a nonbank financial company supervised by the 

Board of Governors (as defined under section 102 of the 

Financial Stability Act of 2010); or

(xiii) an entity engaged in the business of insurance and 

subject to capital requirements established by an insurance 

governmental authority of a State, a territory of the United 

States, the District of Columbia, a country other than the 

United States, or a political subdivision of a country other 

than the United States that is engaged in the supervision of

insurance companies under insurance law.

(C) LIMITATION ON AFFILIATES’ AFFILIATES.—

Unless the Commission determines, by order, rule, or regulation,

that it is in the public interest, the exception in subparagraph (A) 

shall not apply with respect to an affiliate if such affiliate is itself 

affiliated with—

(i) a major security-based swap participant;

(ii) a security-based swap dealer;

(iii) a major swap participant; or

(iv) a swap dealer.

(D) CONDITIONS ON TRANSACTIONS.—With respect to

an affiliate that qualifies for the exception in subparagraph (A)—

(i) such affiliate may not enter into any security based swap 

other than for the purpose of hedging or mitigating commercial risk; 

and

(ii) neither such affiliate nor any person affiliated with such 

affiliate that is not a financial entity may enter into a security-based 

swap with or on behalf of any affiliate that is a financial entity or 

otherwise assume, net, combine, or consolidate the risk of securitybased swaps entered into by any such financial entity, except one that 

is an affiliate that qualifies for the exception under subparagraph (A).; 

and (3) by adding at the end the following:

(F) RISK MANAGEMENT PROGRAM.—Any securitybased swap entered into by an affiliate that qualifies for the

exception in subparagraph (A) shall be subject to a centralized risk 

management program of the affiliate, which is reasonably designed 

both to monitor and manage the risks associated with the securitybased swap and to identify each of the affiliates on whose behalf a 

security-based swap was entered into.
273 

Agriculture, Rural Development, Food and Drug Administration, 

and Related Agencies Appropriations Act, 2015

* * * * * 

Title VI—Related Agencies and Food and Drug Administration

* * * * * 

Independent Agencies

* * * * * 

Farm Credit Administration Limitation on Administrative Expenses

Not to exceed $54,000,000 (from assessments collected from farm credit 

institutions and from the Federal Agricultural Mortgage Corporation) shall be 

obligated during the current fiscal year for administrative expenses as 

authorized under 12 U.S.C. 2249; Provided,That this limitation shall not apply 

to expenses associated with receiverships. Provided further, That the agency 

may exceed this limitation by up to 10 percent with notification to the 

Committees on Appropriations of both Houses of Congress.

* * * * *
274 

Consolidated Appropriations Act, 2014

* * * * * 

Title IV – Related Agencies and Food and Drug Administration

* * * * * 

Farm Credit Administration Limitation on Administrative Expenses

Not to exceed $62,600,000 (from assessments collected from farm 

credit institutions, including the Federal Agricultural Mortgage Corporation) 

shall be obligated during the current fiscal year for administrative expenses as 

authorized under 12 U.S.C. 2249: Provided, That this limitation shall not 

apply to expenses associated with receiverships: Provided further, That the 

agency may exceed this limitation by up to 10 percent with notification to the 

Committees on Appropriations of both Houses of Congress: Provided further, 

That no funds available to the Farm Credit Administration shall be used to 

implement or enforce those portions of the final regulation published in the 

Federal Register on October 3, 2012, (77 Fed. Reg. 60, 582–602), establishing 

a requirement that Farm Credit System institutions hold an advisory vote on 

officer compensation.
275 

Agriculture, Rural Development, Food and Drug Administration, 

and Related Agencies Appropriations Act, 2013

* * * * * 

Title VI—Related Agencies and Food and Drug Administration

* * * * * 

Independent Agencies

* * * * * 

Farm Credit Administration Limitation on Administrative Expenses

Not to exceed $59,780,000 (from assessments collected from farm credit 

institutions and from the Federal Agricultural Mortgage Corporation) shall be 

obligated during the current fiscal year for administrative expenses as 

authorized under 12 U.S.C. 2249; Provided,That this limitation shall not apply 

to expenses associated with receiverships.

* * * * *
276 

Agriculture, Rural Development, Food and Drug Administration, 

and Related Agencies Appropriations Act, 2012

* * * * * 

Title VI—Related Agencies and Food and Drug Administration

* * * * * 

Independent Agencies

* * * * * 

Farm Credit Administration Limitation on Administrative Expenses

Not to exceed $61,000,000 (from assessments collected from farm credit 

institutions and from the Federal Agricultural Mortgage Corporation) shall be 

obligated during the current fiscal year for administrative expenses as 

authorized under 12 U.S.C. 2249; Provided,That this limitation shall not apply 

to expenses associated with receiverships. 

* * * * *
277 

Agriculture, Rural Development, Food and Drug Administration, 

and Related Agencies Appropriations Act, 2011

* * * * * 

Title VI—Related Agencies and Food and Drug Administration

* * * * * 

Independent Agencies

* * * * * 

Farm Credit Administration Limitation on Administrative Expenses

Not to exceed $59,400,000 (from assessments collected from farm credit 

institutions and from the Federal Agricultural Mortgage Corporation) shall be 

obligated during the current fiscal year for administrative expenses as 

authorized under 12 U.S.C. 2249; Provided,That this limitation shall not apply 

to expenses associated with receiverships.

* * * * *
278 

Agriculture, Rural Development, Food and Drug Administration, 

and Related Agencies Appropriations Act, 1996

* * * * * 

Title VI—Related Agencies and Food and Drug Administration

* * * * * 

Independent Agencies

* * * * * 

Farm Credit Administration Administrative Provision

5 U.S.C. 8901 note

SEC. 601. (a) For purposes of the administration of chapter 89 of title 

5, United States Code, any period of enrollment under a health benefits plan 

administered by the Farm Credit Administration prior to the effective date of 

this Act [October 21, 1995] shall be deemed to be a period of enrollment in a 

health benefits plan under chapter 89 of such title. 

(b)(1) An individual who, on September 30, 1995, is covered by a 

health benefits plan administered by the Farm Credit Administration may 

enroll in an approved health benefits plan described under section 8903 or 

8903a of title 5, United States Code— 

(A) either as an individual or for self and family, if such 

individual is an employee, annuitant, or former spouse as defined 

under section 8901 of such title; and 

(B) for coverage effective on and after September 30, 1995. 

(2) An individual who, on September 30, 1995, is entitled to 

continued coverage under a health benefits plan administered by the 

Farm Credit Administration— 

(A) shall be deemed to be entitled to continued coverage 

under section 8905a of title 5, United States Code, for the same 

period that would have been permitted under the plan administered 

by the Farm Credit Administration; and

(B) may enroll in an approved health benefits plan 

described under sections 8903 or 8903a of such title in accordance 

with section 8905a of such title for coverage effective on and after 

September 30, 1995. 

(3) An individual who, on September 30, 1995, is covered as an 

unmarried dependent child under a health benefits plan administered by 

the Farm Credit Administration and who is not a member of family as 

defined under section 8901(5) of title 5, United States Code— 

(A) shall be deemed to be entitled to continued coverage 

under section 8905a of such title as though the individual had, on 
279

September 30, 1995, ceased to meet the requirements for being 

considered an unmarried dependent child under chapter 89 of such 

title; and

(B) may enroll in an approved health benefits plan 

described under section 8903 or 8903a of such title in accordance 

with section 8905a for continued coverage on and after September 

30, 1995.

(c) The Farm Credit Administration shall transfer to the Federal 

Employees Health Benefits Fund established under section 8909 of title 5, 

United States Code, amounts determined by the Director of the Office of 

Personnel Management, after consultation with the Farm Credit 

Administration, to be necessary to reimburse the Fund for the cost of 

providing benefits under this section not otherwise paid for by the individuals 

covered by this section. The amount so transferred shall be held in the Fund 

and used by the Office in addition to the amounts available under section 

8906(g)(1) of such title.

(d) The Office of Personnel Management—

(1) shall administer the provisions of this section to provide 

for—

(A) a period of notice and open enrollment for individuals 

affected by this section; and

(B) no lapse of health coverage for individuals who enroll 

in a health benefits plan under chapter 89 of title 5, United States 

Code, in accordance with this section; and

(2) may prescribe regulations to implement this section.