II

105TH CONGRESS

2D SESSION S. 1986

To restructure the regulation of the Federal Home Loan Bank System.

IN THE SENATE OF THE UNITED STATES

APRIL 24, 1998

Mr. D’AMATO (for himself and Mr. SHELBY) introduced the following bill;

which was read twice and referred to the Committee on Banking, Housing, and Urban Affairs

A BILL

To restructure the regulation of the Federal Home Loan

Bank System.

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

3 SECTION 1. SHORT TITLE.

4 This Act may be cited as the ‘‘Federal Home Loan

5 Bank System Regulatory Restructuring Act of 1998’’.

6 SEC. 2. RESTRUCTURING OF FEDERAL HOME LOAN BANK

7 REGULATOR.

8 (a) IN GENERAL.—The Federal Home Loan Bank

9 Act (12 U.S.C. 1421 et seq.) is amended by striking sec10 tions 2A and 2B and inserting the following:
2

•S 1986 IS

1 ‘‘SEC. 2A. DUTIES AND POWERS OF THE DIRECTOR.

2 ‘‘(a) DUTIES.—The Director shall—

3 ‘‘(1) as a primary duty, ensure that the Federal

4 Home Loan Banks operate in a financially safe and

5 sound manner; and

6 ‘‘(2) to the extent consistent with paragraph

7 (1), supervise the Federal Home Loan Banks and

8 ensure that the Federal Home Loan Banks remain

9 adequately capitalized and able to—

10 ‘‘(A) raise funds in the capital markets;

11 ‘‘(B) satisfy their obligations to support af12 fordable housing as required by section 10(j);

13 ‘‘(C) make payments to the Resolution

14 Funding Corporation as required by section

15 21B(f)(2)(C); and

16 ‘‘(D) pay dividends on bank stock suffi17 cient for such stock to remain a competitive in18 vestment for the holders of the stock.

19 ‘‘(b) GENERAL POWERS.—The Director may—

20 ‘‘(1) supervise the Federal Home Loan Banks

21 and promulgate and enforce such regulations and or22 ders as are necessary to carry out this Act;

23 ‘‘(2) suspend or remove for cause a director, of24 ficer, employee, or agent of any Federal Home Loan

25 Bank or joint office, except that—
3

•S 1986 IS

1 ‘‘(A) the cause of such suspension or re2 moval shall be communicated in writing to such

3 director, officer, employee, or agent and to such

4 Bank or joint office; and

5 ‘‘(B) notwithstanding any other provision

6 of this Act, no officer, employee, or agent of a

7 Bank or joint office shall be a Federal officer

8 or employee under any definition of either term

9 in title 5, United States Code;

10 ‘‘(3) determine necessary expenditures of the

11 Director under this Act and the manner in which

12 such expenditures shall be incurred, allowed, and

13 paid;

14 ‘‘(4) use the United States mails in the same

15 manner and under the same conditions as a depart16 ment or agency of the United States;

17 ‘‘(5) issue such notice and orders, and, subject

18 to the same terms and conditions, exercise the same

19 powers, rights, and duties to enforce this Act with

20 respect to the Federal Home Loan Banks and their

21 officers and directors, as may be issued or exercised

22 by the OFHEO with respect to Federal housing en23 terprises under—
4

•S 1986 IS

1 ‘‘(A) subtitle C of title XIII of the Federal

2 Housing Enterprises Financial Safety and

3 Soundness Act of 1992;

4 ‘‘(B) the Federal National Mortgage Asso5 ciation Charter Act; or

6 ‘‘(C) the Federal Home Loan Mortgage

7 Corporation Act.

8 ‘‘(c) STAFF.—

9 ‘‘(1) IN GENERAL.—Subject to title IV of the

10 Financial Institutions Reform, Recovery, and En11 forcement Act of 1989, the OFHEO may employ, di12 rect, and fix the compensation and number of em13 ployees, attorneys, and agents of the OFHEO nec14 essary to carry out its duties under this Act, except

15 that in no event shall the Director delegate any

16 function to any employee or administrative unit of

17 any bank, or joint office of the Federal Home Loan

18 Bank System.

19 ‘‘(2) COMPENSATION.—In directing and fixing

20 such compensation, the Director shall consult with

21 and maintain comparability with the compensation

22 at the Federal bank regulatory agencies. Such com23 pensation shall be paid without regard to the provi24 sion of other laws applicable to officers or employees

25 of the United States, except that the Director shall
5

•S 1986 IS

1 receive no additional compensation above that speci2 fied by section 5313 of title 5, United States Code.’’.

3 ‘‘(d) RECEIPTS OF THE BOARD.—

4 ‘‘(1) RECEIPTS.—Receipts of the Board derived

5 from assessments levied upon the Federal Home

6 Loan Banks and from other sources (other than re7 ceipts from the sale of consolidated Federal Home

8 Loan Bank bonds and debentures issued under sec9 tion 11 of this Act) shall be deposited in the Treas10 ury of the United States.

11 ‘‘(2) SALARIES.—Salaries of the directors and

12 other employees of the OFHEO, and all other ex13 penses necessary for the Director to carry out the

14 duties of the Director under this Act—

15 ‘‘(A) may be paid from assessments de16 scribed in paragraph (1), or from other sources;

17 and

18 ‘‘(B) shall not be construed to be Govern19 ment Funds or appropriated monies, or subject

20 to apportionment for the purposes of chapter

21 15 of title 31, United States Code, or any other

22 authority.

23 ‘‘(e) ANNUAL REPORT.—The Director shall submit to

24 Congress an annual report.’’.
6

•S 1986 IS

1 (b) ASSESSMENTS.—Section 18(b) of the Federal

2 Home Loan Bank Act (12 U.S.C. 1438(b)) is amended

3 by striking paragraph (1) and inserting the following:

4 ‘‘(1) IN GENERAL.—To the extent provided in

5 advance in appropriations Acts, the Director may

6 impose a semiannual assessment on the Federal

7 Home Loan Banks, the aggregate amount of which

8 shall be sufficient to provide for the payment of the

9 expenses of the Director estimated to be incurred

10 under this Act for the period for which the assess11 ment is made.’’.

12 (c) TECHNICAL AND CONFORMING AMENDMENTS.—

13 (1) DEFINITIONS.—Section 2 of the Federal

14 Home Loan Bank Act (12 U.S.C. 1422) is amend15 ed—

16 (A) by striking paragraph (1) and insert17 ing the following: 

18 ‘‘(1) OFHEO.—The term ‘OFHEO’ means the

19 Office of Federal Housing Enterprise Oversight, es20 tablished under section 1311 of the Federal Housing

21 Enterprises Financial Safety and Soundness Act of

22 1992.’’;

23 (B) in paragraph (2)(B), by striking

24 ‘‘Board’’ and inserting ‘‘OFHEO’’;
7

•S 1986 IS

1 (C) in paragraph (6), by striking ‘‘Board’’,

2 and inserting ‘‘Secretary’’; and

3 (D) by striking paragraph (10) and insert4 ing the following:

5 ‘‘(10) DIRECTOR.—The term ‘Director’ means

6 the Director of the OFHEO, appointed under sec7 tion 1312 of the Federal Housing Enterprises Fi8 nancial Safety and Soundness Act of 1992.’’.

9 (2) ELIGIBILITY.—Section 4(a) of the Federal

10 Home Loan Bank Act (12 U.S.C. 1424(a)) is

11 amended in the last sentence, by striking ‘‘Board’’

12 and inserting ‘‘Secretary’’.

13 (3) MANAGEMENT OF BANKS.—Section 7 of the

14 Federal Home Loan Bank Act (12 U.S.C. 1427) is

15 amended by striking ‘‘Board’’ each place it appears

16 and inserting ‘‘Secretary’’.

17 (4) ADVANCES TO MEMBERS.—Section 10 of

18 the Federal Home Loan Bank Act (12 U.S.C. 1430)

19 is amended—

20 (A) in each of subsections (a) through (d),

21 by striking ‘‘Board’’ each place it appears, and

22 inserting ‘‘Director’’; and

23 (B) in each of subsections (e), (g), and (j),

24 by striking ‘‘Board’’ each place it appears, and

25 inserting ‘‘Secretary’’.
8

•S 1986 IS

1 (5) GENERAL POWERS AND DUTIES OF

2 BANKS.—Section 11(i) of the Federal Home Loan

3 Bank Act (12 U.S.C. 1431(i)) is amended by strik4 ing ‘‘Chairperson of the Board’’ and inserting ‘‘Di5 rector’’.

6 (6) FINANCING CORPORATION.—Section 21 of

7 the Federal Home Loan Bank Act (12 U.S.C. 1441)

8 is amended—

9 (A) in each of subsections (b)(5) and

10 (e)(9), by striking ‘‘Chairperson of the Federal

11 Housing Finance Board’’ and inserting ‘‘Direc12 tor’’; and

13 (B) by striking ‘‘Federal Housing Finance

14 Board’’ each place it appears and inserting

15 ‘‘Director’’.

16 (7) RESOLUTION TRUST CORPORATION.—Sec17 tion 21B of the Federal Home Loan Bank Act (12

18 U.S.C. 1442) is amended by striking ‘‘Federal

19 Housing Finance Board’’ each place it appears and

20 inserting ‘‘Director’’.

21 (8) MEMBER FINANCIAL INFORMATION.—Sec22 tion 22 of the Federal Home Loan Bank Act (12

23 U.S.C. 1442) is amended—
9

•S 1986 IS

1 (A) in subsection (a), in the last sentence,

2 by striking ‘‘Board or’’ each place it appears

3 and inserting ‘‘Director or’’; and 

4 (B) in subsection (b), by striking ‘‘Board’’

5 each place that term appears and inserting ‘‘Di6 rector’’.

7 (9) FORMS OF BANK STOCK AND OBLIGA8 TIONS.—Section 23 of the Federal Home Loan

9 Bank Act (12 U.S.C. 1443) is amended by striking

10 ‘‘Board of Directors of the Federal Housing Finance

11 Board’’ and inserting ‘‘Director’’.

12 (10) HOUSING OPPORTUNITY HOTLINE PRO13 GRAM.—Section 27(a) of the Federal Home Loan

14 Bank Act (12 U.S.C. 1447) is amended—

15 (A) by striking ‘‘Federal Housing Finance

16 Board’’ and inserting ‘‘Secretary’’; and

17 (B) by striking ‘‘Board’’ and inserting

18 ‘‘Secretary’’.

19 (11) FEDERAL HOUSING ENTERPRISE FINAN20 CIAL SAFETY AND SOUNDNESS ACT OF 1992.—Sec21 tion 1313 of the Federal Housing Enterprise Finan22 cial Safety and Soundness Act of 1992 (12 U.S.C.

23 4513) is amended—

24 (A) in subsection (a), by inserting before

25 the period at the end the following: ‘‘, and that
10

•S 1986 IS

1 the Federal Home Loan Banks are adequately

2 capitalized and operating safely in accordance

3 with the Federal Home Loan Bank Act (12

4 U.S.C. 1421 et seq.)’’; and

5 (B) in subsection (b)—

6 (i) in paragraph (10), by striking

7 ‘‘and’’ at the end ;

8 (ii) in paragraph (11), by striking the

9 period and inserting ‘‘; and’’; and

10 (iii) by adding at the end the follow11 ing:

12 ‘‘(12) the performance of any function or the

13 exercise of any authority assigned to the Director

14 pursuant to the Federal Home Loan Bank Act.’’.

15 (12) OTHER REFERENCES.—Except as other16 wise provided in the amendments made by this sub17 section, any reference in the Federal Home Loan

18 Bank Act (12 U.S.C. 1421 et seq.), or any other

19 provision of Federal law, to the Federal Housing Fi20 nance Board, shall be construed to refer to the Di21 rector of the Office of Federal Housing Enterprise

22 Oversight.

23 (d) EFFECTIVE DATE.—The amendments made by

24 this section shall take effect 60 days after the date of en25 actment of this Act.
11

•S 1986 IS

1 SEC. 3. TRANSITION PROVISIONS.

2 (a) DEFINITIONS.—In this section:

3 (1) APPROPRIATE AGENCY.—The term ‘‘appro4 priate agency’’ means—

5 (A) with respect to the functions trans6 ferred under subsection (b)(1), the Department

7 of Housing and Urban Development; and

8 (B) with respect to the functions trans9 ferred under subsection (b)(2), the Office.

10 (2) BOARD.—The term ‘‘Board’’ means the

11 Federal Housing Finance Board established under

12 section 22A of the Federal Home Loan Bank Act

13 (as in effect on the day before the effective date of

14 the amendments made by section 2 of this Act).

15 (3) DIRECTOR.—The term ‘‘Director’’ means

16 the Director of the Office.

17 (4) FUNCTION.—The term ‘‘function’’ means

18 any duty, obligation, power, authority, responsibility,

19 right, privilege, activity, or program.

20 (5) HEAD OF THE APPROPRIATE AGENCY.—The

21 term ‘‘head of the appropriate agency’’ means—

22 (A) with respect to the functions trans23 ferred under subsection (b)(1), the Secretary;

24 and

25 (B) with respect to the functions trans26 ferred under subsection (b)(2), the Director.
12

•S 1986 IS

1 (6) OFFICE.—The term ‘‘Office’’ means the

2 Federal Housing Enterprise Oversight established

3 under section 1311 of the Federal Housing Enter4 prises Financial Safety and Soundness Act of 1992.

5 (7) SECRETARY.—The term ‘‘Secretary’’ means

6 the Secretary of Housing and Urban Development.

7 (b) TRANSFER OF FUNCTIONS.—

8 (1) TRANSFER TO DEPARTMENT OF HOUSING

9 AND URBAN DEVELOPMENT.—Effective 60 days

10 after the date of enactment of this Act there are

11 transferred to the Department of Housing and

12 Urban Development all functions that the Board ex13 ercised before the date of enactment of this Act (in14 cluding all related functions of any officer or em15 ployee of the Board) relating to the functions of the

16 Board under the following provisions of the Federal

17 Home Loan Bank Act (12 U.S.C. 1421 et seq.) (as

18 in effect on the day before the effective date of the

19 amendments made by section 2 of this Act):

20 (A) The last sentence of section 4(a).

21 (B) Section 7.

22 (C) Subsections (e), (g), and (j) of section

23 10.

24 (D) Section 27(a).
13

•S 1986 IS

1 (2) TRANSFER TO OFFICE.—Effective 60 days

2 after the date of enactment of this Act there are

3 transferred to the Office all functions, other than

4 the functions transferred under paragraph (1), that

5 the Board exercised before the date of enactment of

6 this Act (including all related functions of any offi7 cer or employee of the Board) under the Federal

8 Home Loan Bank Act (12 U.S.C. 1421 et seq.).

9 (b) DISPOSITION OF AFFAIRS.—During the 60-day

10 period beginning on the date of enactment of this Act, the

11 Chairperson of the Board—

12 (1) shall, solely for the purpose of facilitating

13 the orderly implementation of this section—

14 (A) manage the employees of the Board

15 and provide for the payment of the compensa16 tion and benefits of any such employee that ac17 crue before the effective date of the transfer of

18 such employee pursuant to subsection (g); and

19 (B) manage any property of the Board and

20 arrange for the transfer thereof to the Office as

21 promptly as practicable; and

22 (2) may take any other action necessary for the

23 purpose of facilitating the orderly implementation of

24 this section.
14

•S 1986 IS

1 (c) TREATMENT OF REFERENCES IN ADJUSTABLE

2 RATE MORTGAGE INSTRUMENTS.—

3 (1) IN GENERAL.—For purposes of adjustable

4 rate mortgage instruments that are in effect on the

5 day before the effective date of the amendments

6 made by section 2, any reference in the instrument

7 to the Board shall be construed to be a reference to

8 the Secretary, unless the context of the reference re9 quires otherwise.

10 (2) SUBSTITUTION FOR INDEXES.—If any index

11 used to calculate the applicable interest rate on any

12 adjustable rate mortgage instrument is no longer

13 calculated and made available as a direct or indirect

14 result of the enactment of this Act, any index—

15 (A) made available by the Secretary, pur16 suant to paragraph (3); or

17 (B) determined by the Secretary, pursuant

18 to paragraph (4), to be substantially similar to

19 the index that is no longer calculated or made

20 available, may be substituted by the holder of

21 any such adjustable rate mortgage instrument

22 upon notice to the borrower.

23 (3) AGENCY ACTION REQUIRED TO PROVIDE

24 CONTINUED AVAILABILITY OF INDEXES.—As soon as

25 practicable after the effective date of the amend-
15

•S 1986 IS

1 ments made by section 2, the Secretary shall take

2 such actions as may be necessary to assure that the

3 indexes prepared by the Board and the Federal

4 Home Loan Banks immediately before the effective

5 date of the amendments made by section 2 and used

6 to calculate the interest rate on adjustable rate

7 mortgage instruments continue to be available.

8 (4) REQUIREMENTS RELATING TO SUBSTITUTE

9 INDEXES.—If any index can no longer be made

10 available pursuant to paragraph (3), an index that

11 is substantially similar to such index may be sub12 stituted for such index for purposes of paragraph (2)

13 if the Secretary determines, after notice and oppor14 tunity for comment, that—

15 (A) the new index is based upon data sub16 stantially similar to that of the original index;

17 and

18 (B) the substitution of the new index will

19 result in an interest rate substantially similar to

20 the rate in effect at the time the original index

21 became unavailable.

22 (d) CONTINUATION OF SERVICES.—

23 (1) IN GENERAL.—The head of the appropriate

24 agency may use the services of employees and other

25 personnel and the property of the Board, on a reim-
16

•S 1986 IS

1 bursable basis, to perform functions transferred by

2 this section to the appropriate agency, for such time

3 as is reasonable to facilitate the orderly transfer of

4 functions so transferred.

5 (2) AGENCY SERVICES.—Any agency, depart6 ment, or other instrumentality of the United States,

7 and any successor to any such agency, department,

8 or instrumentality, that is providing supporting serv9 ices to the Board before the effective date of the

10 amendments made by section 2 in connection with

11 functions that are transferred to the head of the ap12 propriate agency under this section, shall—

13 (A) continue to provide such services, on a

14 reimbursable basis, until the transfer of such

15 functions is complete; and

16 (B) consult with the Director to coordinate

17 and facilitate a prompt and reasonable transi18 tion.

19 (e) SAVINGS PROVISIONS.—

20 (1) EXISTING RIGHTS, DUTIES, AND OBLIGA21 TIONS NOT AFFECTED.—This section shall not affect

22 the validity of any right, duty, or obligation of the

23 United States, the Board, or any other person,

24 that—
17

•S 1986 IS

1 (A) arises under or pursuant to the Fed2 eral Home Loan Bank Act (12 U.S.C. 1421 et

3 seq.) or any other provision of law applicable

4 with respect to such Board; and

5 (B) exists on the day before the effective

6 date of the amendments made by section 2.

7 (2) CONTINUATION OF SUITS.—No action or

8 other proceeding commenced by or against the

9 Board, or any person or entity with respect to any

10 function of the Board that was delegated to such

11 person or entity, shall abate by reason of the enact12 ment of this Act, except that the head of the appro13 priate agency shall be substituted for the Board or

14 a party to any such action or proceeding.

15 (f) CONTINUATION OF ORDERS, RESOLUTIONS, DE16 TERMINATIONS, AND REGULATIONS.—

17 (1) IN GENERAL.—Except as provided in para18 graph (2), all orders, resolutions, determinations,

19 and regulations, shall continue in effect according to

20 the terms of such orders, resolutions, determina21 tions, and regulations and shall be enforceable by or

22 against the head of the appropriate agency until

23 modified, terminated, set aside, or superseded in ac24 cordance with applicable law by the head of the ap25 propriate agency by any court of competent jurisdic-
18

•S 1986 IS

1 tion, or by operation of law, if such orders, resolu2 tions, determination, and regulations—

3 (A) have been issued, made, prescribed, or

4 allowed to become effective by the Board in the

5 performance of functions that are transferred

6 by this section; and

7 (B) are in effect on the effective date of

8 the amendments made by section 2.

9 (2) EXCEPTION.—Paragraph (1) does not apply

10 to any order, resolution, determination, or regulation

11 of the Board the authority of which is terminated

12 under this Act or the amendments made by this Act.

13 (g) TRANSFER OF EMPLOYEES.—

14 (1) IN GENERAL.—Not later than 60 days after

15 the date of enactment of this Act, each employee of

16 the Board shall be transferred to the appropriate

17 agency and each such transfer shall be construed to

18 be a transfer of function for the purpose of section

19 3503 of title 5, United States Code.

20 (2) RETENTION OF STATUS, TENURE, PAY.—

21 Each employee transferred under this subsection

22 shall be guaranteed a position with the same status,

23 tenure, and pay as that held on the day immediately

24 preceding the transfer. Each such employee holding

25 a permanent position shall not be involuntarily sepa-
19

•S 1986 IS

1 rated or reduced in grade or compensation during

2 the 6-month period beginning on the date of the

3 transfer, except for cause.

4 (3) APPOINTMENT AUTHORITY.—

5 (A) IN GENERAL.—Subject to subpara6 graph (B), in the case of any employee trans7 ferred under this subsection who occupies a po8 sition in the excepted service or the Senior Ex9 ecutive Service, any appointment authority es10 tablished pursuant to law or regulations of the

11 Office of Personnel Management for filling such

12 a position shall be transferred.

13 (B) DECLINE.—The head of the appro14 priate agency may decline a transfer of an em15 ployee described in subparagraph (A) to the ex16 tent that the authority transferred to the ap17 propriate agency relates to positions excepted

18 from the competitive service because of their

19 confidential, policy-making, policy-determining,

20 or policy-advocating character, and noncareer

21 positions in the Senior Executive Service (with22 in the meaning of section 3132(a)(7) of title 5,

23 United States Code).

24 (4) REORGANIZATION.—If the head of the ap25 propriate agency determines, after the end of the 1-
20

•S 1986 IS

1 year period beginning on the date on which the

2 transfer of functions to the appropriate agency

3 under this section is completed, that a reorganiza4 tion of the combined work-force is required, that re5 organization shall be deemed a ‘‘major reorganiza6 tion’’ for purposes of affording affected employees

7 retirement under section 8336(d)(2) or

8 8414(b)(1)(B) of title 5, United States Code.

9 (5) EMPLOYEE BENEFIT PROGRAMS.—

10 (A) IN GENERAL.—Any employee accepting

11 employment as a result of a transfer under this

12 subsection may retain, during the 1-year period

13 beginning on the date on which that transfer

14 occurs, membership in any employee benefit

15 program of the Board, including insurance, to

16 which such employee belongs on the effective

17 date of the amendments made by section 2 if—

18 (i) the employee does not elect to give

19 up the benefit or membership in the pro20 gram; and

21 (ii) the benefit or program is contin22 ued by the head of the appropriate agency,

23 as applicable.

24 (B) COSTS.—The difference in the costs

25 between the benefits that would have been pro-
21

•S 1986 IS

1 vided by such agency or entity and those pro2 vided by this section shall be paid by the head

3 of the appropriate agency, as applicable. If any

4 employee elects to give up membership in a

5 health insurance program or the health insur6 ance program is not continued by the head of

7 the appropriate agency the employee shall be

8 permitted to select an alternate Federal health

9 insurance program within 30 days of such elec10 tion or notice, without regard to any other reg11 ularly scheduled open season.

12 (6) INSURANCE.—Any employee employed by

13 the head of the appropriate agency as a result of a

14 transfer under this subsection may retain member15 ship in any employee benefit program of the Board,

16 including insurance, that such employee has on the

17 day before the effective date of the amendments

18 made by section 2, if the employee does not elect to

19 give up such membership and the benefit or program

20 is continued by the head of the appropriate agency,

21 as applicable.

22 (7) NOTICE.—Each employee transferred under

23 this subsection shall receive notice of the position as-
22

•S 1986 IS

1 signment of that employee not later than 60 days

2 after the effective date of that transfer.

Æ