I

106TH CONGRESS

1ST SESSION H. R. 1161

To revise the banking and bankruptcy insolvency laws with respect to the

termination and netting of financial contracts, and for other purposes.

IN THE HOUSE OF REPRESENTATIVES

MARCH 17, 1999

Mr. LEACH (for himself, Mr. LAFALCE, and Mrs. ROUKEMA) introduced the

following bill; which was referred to the Committee on Banking and Financial Services, and in addition to the Committees on the Judiciary, and

Commerce, for a period to be subsequently determined by the Speaker,

in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned

A BILL

To revise the banking and bankruptcy insolvency laws with

respect to the termination and netting of financial contracts, and for other purposes.

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

3 SECTION 1. SHORT TITLE.

4 This Act may be cited as the ‘‘Financial Contract

5 Netting Improvement Act of 1999’’.
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1 SEC. 2. TREATMENT OF CERTAIN AGREEMENTS BY CON2 SERVATORS OR RECEIVERS OF INSURED DE3 POSITORY INSTITUTIONS.

4 (a) DEFINITION OF QUALIFIED FINANCIAL CON5 TRACT.—Section 11(e)(8)(D)(i) of the Federal Deposit In6 surance Act (12 U.S.C. 1821(e)(8)(D)(i)) is amended by

7 inserting ‘‘, resolution or order’’ after ‘‘any similar agree8 ment that the Corporation determines by regulation’’.

9 (b) DEFINITION OF SECURITIES CONTRACT.—Sec10 tion 11(e)(8)(D)(ii) of the Federal Deposit Insurance Act

11 (12 U.S.C. 1821(e)(8)(D)(ii)) is amended to read as fol12 lows:

13 ‘‘(ii) SECURITIES CONTRACT.—The

14 term ‘securities contract’—

15 ‘‘(I) means a contract for the

16 purchase, sale, or loan of a security, a

17 certificate of deposit, a mortgage loan,

18 or any interest in a mortgage loan, a

19 group or index of securities, certifi20 cates of deposit, or mortgage loans or

21 interests therein (including any inter22 est therein or based on the value

23 thereof) or any option on any of the

24 foregoing, including any option to

25 purchase or sell any such security,
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1 certificate of deposit, loan, interest,

2 group or index, or option;

3 ‘‘(II) does not include any pur4 chase, sale, or repurchase obligation

5 under a participation in a commercial

6 mortgage loan unless the Corporation

7 determines by regulation, resolution,

8 or order to include any such agree9 ment within the meaning of such

10 term;

11 ‘‘(III) means any option entered

12 into on a national securities exchange

13 relating to foreign currencies;

14 ‘‘(IV) means the guarantee by or

15 to any securities clearing agency of

16 any settlement of cash, securities, cer17 tificates of deposit, mortgage loans or

18 interests therein, group or index of se19 curities, certificates of deposit, or

20 mortgage loans or interests therein

21 (including any interest therein or

22 based on the value thereof) or option

23 on any of the foregoing, including any

24 option to purchase or sell any such se-
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1 curity, certificate of deposit, loan, in2 terest, group or index or option;

3 ‘‘(V) means any margin loan;

4 ‘‘(VI) means any other agree5 ment or transaction that is similar to

6 any agreement or transaction referred

7 to in this clause;

8 ‘‘(VII) means any combination of

9 the agreements or transactions re10 ferred to in this clause;

11 ‘‘(VIII) means any option to

12 enter into any agreement or trans13 action referred to in this clause;

14 ‘‘(IX) means a master agreement

15 that provides for an agreement or

16 transaction referred to in subclause

17 (I), (III), (IV), (V), (VI), (VII), or

18 (VIII), together with all supplements

19 to any such master agreement, with20 out regard to whether the master

21 agreement provides for an agreement

22 or transaction that is not a securities

23 contract under this clause, except that

24 the master agreement shall be consid25 ered to be a securities contract under
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1 this clause only with respect to each

2 agreement or transaction under the

3 master agreement that is referred to

4 in subclause (I), (III), (IV), (V), (VI),

5 (VII), or (VIII); and

6 ‘‘(X) means any security agree7 ment or arrangement or other credit

8 enhancement related to any agree9 ment or transaction referred to in this

10 clause.’’.

11 (c) DEFINITION OF COMMODITY CONTRACT.—Sec12 tion 11(e)(8)(D)(iii) of the Federal Deposit Insurance Act

13 (12 U.S.C. 1821(e)(8)(D)(iii)) is amended to read as fol14 lows:

15 ‘‘(iii) COMMODITY CONTRACT.—The

16 term ‘commodity contract’ means—

17 ‘‘(I) with respect to a futures

18 commission merchant, a contract for

19 the purchase or sale of a commodity

20 for future delivery on, or subject to

21 the rules of, a contract market or

22 board of trade;

23 ‘‘(II) with respect to a foreign fu24 tures commission merchant, a foreign

25 future;
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1 ‘‘(III) with respect to a leverage

2 transaction merchant, a leverage

3 transaction;

4 ‘‘(IV) with respect to a clearing

5 organization, a contract for the pur6 chase or sale of a commodity for fu7 ture delivery on, or subject to the

8 rules of, a contract market or board

9 of trade that is cleared by such clear10 ing organization, or commodity option

11 traded on, or subject to the rules of,

12 a contract market or board of trade

13 that is cleared by such clearing orga14 nization;

15 ‘‘(V) with respect to a commodity

16 options dealer, a commodity option;

17 ‘‘(VI) any other agreement or

18 transaction that is similar to any

19 agreement or transaction referred to

20 in this clause;

21 ‘‘(VII) any combination of the

22 agreements or transactions referred to

23 in this clause;
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1 ‘‘(VIII) any option to enter into

2 any agreement or transaction referred

3 to in this clause;

4 ‘‘(IX) a master agreement that

5 provides for an agreement or trans6 action referred to in subclause (I),

7 (II), (III), (IV), (V), (VI), (VII), or

8 (VIII), together with all supplements

9 to any such master agreement, with10 out regard to whether the master

11 agreement provides for an agreement

12 or transaction that is not a com13 modity contract under this clause, ex14 cept that the master agreement shall

15 be considered to be a commodity con16 tract under this clause only with re17 spect to each agreement or trans18 action under the master agreement

19 that is referred to in subclause (I),

20 (II), (III), (IV), (V), (VI), (VII), or

21 (VIII); or

22 ‘‘(X) a security agreement or ar23 rangement or other credit enhance24 ment related to any agreement or
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1 transaction referred to in this

2 clause.’’.

3 (d) DEFINITION OF FORWARD CONTRACT.—Section

4 11(e)(8)(D)(iv) of the Federal Deposit Insurance Act (12

5 U.S.C. 1821(e)(8)(D)(iv)) is amended to read as follows:

6 ‘‘(iv) FORWARD CONTRACT.—The

7 term ‘forward contract’ means—

8 ‘‘(I) a contract (other than a

9 commodity contract) for the purchase,

10 sale, or transfer of a commodity or

11 any similar good, article, service,

12 right, or interest which is presently or

13 in the future becomes the subject of

14 dealing in the forward contract trade,

15 or product or byproduct thereof, with

16 a maturity date more than 2 days

17 after the date the contract is entered

18 into, including a repurchase agree19 ment, reverse repurchase agreement,

20 consignment, lease, swap, hedge

21 transaction, deposit, loan, option, allo22 cated transaction, unallocated trans23 action, or any other similar agree24 ment;
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1 ‘‘(II) any combination of agree2 ments or transactions referred to in

3 subclauses (I) and (III);

4 ‘‘(III) any option to enter into

5 any agreement or transaction referred

6 to in subclause (I) or (II);

7 ‘‘(IV) a master agreement that

8 provides for an agreement or trans9 action referred to in subclauses (I),

10 (II), or (III), together with all supple11 ments to any such master agreement,

12 without regard to whether the master

13 agreement provides for an agreement

14 or transaction that is not a forward

15 contract under this clause, except that

16 the master agreement shall be consid17 ered to be a forward contract under

18 this clause only with respect to each

19 agreement or transaction under the

20 master agreement that is referred to

21 in subclause (I), (II), or (III); or

22 ‘‘(V) a security agreement or ar23 rangement or other credit enhance24 ment related to any agreement or
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1 transaction referred to in subclause

2 (I), (II), (III), or (IV).’’.

3 (e) DEFINITION OF REPURCHASE AGREEMENT.—

4 Section 11(e)(8)(D)(v) of the Federal Deposit Insurance

5 Act (12 U.S.C. 1821(e)(8)(D)(v)) is amended to read as

6 follows:

7 ‘‘(v) REPURCHASE AGREEMENT.—The

8 terms ‘repurchase agreement’ and ‘reverse

9 repurchase agreement’—

10 ‘‘(I) mean an agreement, includ11 ing related terms, which provides for

12 the transfer of 1 or more certificates

13 of deposit, mortgage-related securities

14 (as such term is defined in the Securi15 ties Exchange Act of 1934), mortgage

16 loans, interests in mortgage-related

17 securities or mortgage loans, eligible

18 bankers’ acceptances, qualified foreign

19 government securities or securities

20 that are direct obligations of, or that

21 are fully guaranteed by, the United

22 States or any agency of the United

23 States against the transfer of funds

24 by the transferee of such certificates

25 of deposit, eligible bankers’ accept-
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1 ances, securities, loans, or interests

2 with a simultaneous agreement by

3 such transferee to transfer to the

4 transferor thereof certificates of de5 posit, eligible bankers’ acceptances,

6 securities, loans, or interests as de7 scribed above, at a date certain not

8 later than 1 year after such transfers

9 or on demand, against the transfer of

10 funds, or any other similar agreement;

11 ‘‘(II) does not include any repur12 chase obligation under a participation

13 in a commercial mortgage loan unless

14 the Corporation determines by regula15 tion, resolution, or order to include

16 any such participation within the

17 meaning of such term;

18 ‘‘(III) means any combination of

19 agreements or transactions referred to

20 in subclauses (I) and (IV);

21 ‘‘(IV) means any option to enter

22 into any agreement or transaction re23 ferred to in subclause (I) or (III);

24 ‘‘(V) means a master agreement

25 that provides for an agreement or
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1 transaction referred to in subclause

2 (I), (III), or (IV), together with all

3 supplements to any such master

4 agreement, without regard to whether

5 the master agreement provides for an

6 agreement or transaction that is not a

7 repurchase agreement under this

8 clause, except that the master agree9 ment shall be considered to be a re10 purchase agreement under this sub11 clause only with respect to each agree12 ment or transaction under the master

13 agreement that is referred to in sub14 clause (I), (III), or (IV); and

15 ‘‘(VI) means a security agree16 ment or arrangement or other credit

17 enhancement related to any agree18 ment or transaction referred to in

19 subclause (I), (III), (IV), or (V).

20 For purposes of this clause, the term

21 ‘qualified foreign government security’

22 means a security that is a direct obligation

23 of, or that is fully guaranteed by, the cen24 tral government of a member of the Orga25 nization for Economic Cooperation and
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1 Development (as determined by regulation

2 or order adopted by the appropriate Fed3 eral banking authority).’’.

4 (f) DEFINITION OF SWAP AGREEMENT.—The Fed5 eral Deposit Insurance Act (12 U.S.C. 1821(e)(8)(D)(vi))

6 is amended to read as follows:

7 ‘‘(vi) SWAP AGREEMENT.—The term

8 ‘swap agreement’ means—

9 ‘‘(I) any agreement, including the

10 terms and conditions incorporated by

11 reference in any such agreement,

12 which is an interest rate swap, option,

13 future, or forward agreement, includ14 ing a rate floor, rate cap, rate collar,

15 cross-currency rate swap, and basis

16 swap; a spot, same day-tomorrow, to17 morrow-next, forward, or other for18 eign exchange or precious metals

19 agreement; a currency swap, option,

20 future, or forward agreement; an eq21 uity index or equity swap, option, fu22 ture, or forward agreement; a debt

23 index or debt swap, option, future, or

24 forward agreement; a credit spread or

25 credit swap, option, future, or forward
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1 agreement; a commodity index or

2 commodity swap, option, future, or

3 forward agreement;

4 ‘‘(II) any agreement or trans5 action similar to any other agreement

6 or transaction referred to in this

7 clause that is presently, or in the fu8 ture becomes, regularly entered into

9 in the swap market (including terms

10 and conditions incorporated by ref11 erence in such agreement) and that is

12 a forward, swap, future, or option on

13 1 or more rates, currencies, commod14 ities, equity securities or other equity

15 instruments, debt securities or other

16 debt instruments, or economic indices

17 or measures of economic risk or value;

18 ‘‘(III) any combination of agree19 ments or transactions referred to in

20 this clause;

21 ‘‘(IV) any option to enter into

22 any agreement or transaction referred

23 to in this clause;

24 ‘‘(V) a master agreement that

25 provides for an agreement or trans-
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1 action referred to in subclause (I),

2 (II), (III), or (IV), together with all

3 supplements to any such master

4 agreement, without regard to whether

5 the master agreement contains an

6 agreement or transaction that is not a

7 swap agreement under this clause, ex8 cept that the master agreement shall

9 be considered to be a swap agreement

10 under this clause only with respect to

11 each agreement or transaction under

12 the master agreement that is referred

13 to in subclause (I), (II), (III), or (IV);

14 and

15 ‘‘(VI) any security agreement or

16 arrangement or other credit enhance17 ment related to any agreements or

18 transactions referred to in subpara19 graph (I), (II), (III), or (IV).

20 Such term is applicable for purposes of

21 this Act only and shall not be construed or

22 applied so as to challenge or affect the

23 characterization, definition, or treatment of

24 any swap agreement under any other stat25 ute, regulation, or rule, including the Secu-
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1 rities Act of 1933, the Securities Exchange

2 Act of 1934, the Public Utility Holding

3 Company Act of 1935, the Trust Indenture

4 Act of 1939, the Investment Company Act

5 of 1940, the Investment Advisers Act of

6 1940, the Securities Investor Protection

7 Act of 1970, the Commodity Exchange

8 Act, and the regulations promulgated by

9 the Securities and Exchange Commission

10 or the Commodity Futures Trading Com11 mission.’’.

12 (g) DEFINITION OF TRANSFER.—Section

13 11(e)(8)(D)(viii) of the Federal Deposit Insurance Act (12

14 U.S.C. 1821(e)(8)(D)(viii)) is amended to read as follows:

15 ‘‘(viii) TRANSFER.—The term ‘trans16 fer’ means every mode, direct or indirect,

17 absolute or conditional, voluntary or invol18 untary, of disposing of or parting with

19 property or with an interest in property,

20 including retention of title as a security in21 terest and foreclosure of the depository in22 stitution’s equity of redemption.’’.

23 (h) TREATMENT OF QUALIFIED FINANCIAL CON24 TRACTS.—Section 11(e)(8) of the Federal Deposit Insur25 ance Act (12 U.S.C. 1821(e)(8)) is amended—
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1 (1) in subparagraph (A), by striking ‘‘para2 graph (10)’’ and inserting ‘‘paragraphs (9) and

3 (10)’’;

4 (2) in subparagraph (A)(i), by striking ‘‘to

5 cause the termination or liquidation’’ and inserting

6 ‘‘such person has to cause the termination, liquida7 tion, or acceleration’’;

8 (3) by amending subparagraph (A)(ii) to read

9 as follows:

10 ‘‘(ii) any right under any security

11 agreement or arrangement or other credit

12 enhancement related to 1 or more qualified

13 financial contracts described in clause

14 (i);’’; and

15 (4) by amending subparagraph (E)(ii) to read

16 as follows:

17 ‘‘(ii) any right under any security

18 agreement or arrangement or other credit

19 enhancement related to 1 or more qualified

20 financial contracts described in clause

21 (i);’’.

22 (i) AVOIDANCE OF TRANSFERS.—Section

23 11(e)(8)(C)(i) of the Federal Deposit Insurance Act (12

24 U.S.C. 1821(e)(8)(C)(i)) is amended by inserting ‘‘section

25 5242 of the Revised Statutes (12 U.S.C. 91) or any other
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1 Federal or State law relating to the avoidance of pref2 erential or fraudulent transfers,’’ before ‘‘the Corpora3 tion’’.

4 SEC. 3. AUTHORITY OF THE CORPORATION WITH RESPECT

5 TO FAILED AND FAILING INSTITUTIONS.

6 (a) IN GENERAL.—Section 11(e)(8) of the Federal

7 Deposit Insurance Act (12 U.S.C. 1821(e)(8)) is

8 amended—

9 (1) in subparagraph (E), by striking ‘‘other

10 than paragraph (12) of this subsection, subsection

11 (d)(9)’’ and inserting ‘‘other than subsections (d)(9)

12 and (e)(10)’’; and

13 (2) by adding at the end the following new sub14 paragraphs:

15 ‘‘(F) CLARIFICATION.—No provision of law

16 shall be construed as limiting the right or

17 power of the Corporation, or authorizing any

18 court or agency to limit or delay, in any man19 ner, the right or power of the Corporation to

20 transfer any qualified financial contract in ac21 cordance with paragraphs (9) and (10) of this

22 subsection or to disaffirm or repudiate any such

23 contract in accordance with subsection (e)(1) of

24 this section.
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1 ‘‘(G) WALKAWAY CLAUSES NOT EFFEC2 TIVE.—

3 ‘‘(i) IN GENERAL.—Notwithstanding

4 the provisions of subparagraphs (A) and

5 (E), and sections 403 and 404 of the Fed6 eral Deposit Insurance Corporation Im7 provement Act of 1991, no walkaway

8 clause shall be enforceable in a qualified fi9 nancial contract of an insured depository

10 institution in default.

11 ‘‘(ii) WALKAWAY CLAUSE DEFINED.—

12 For purposes of this subparagraph, the

13 term ‘walkaway clause’ means a provision

14 in a qualified financial contract that, after

15 calculation of a value of a party’s position

16 or an amount due to or from 1 of the par17 ties in accordance with its terms upon ter18 mination, liquidation, or acceleration of the

19 qualified financial contract, either does not

20 create a payment obligation of a party or

21 extinguishes a payment obligation of a

22 party in whole or in part solely because of

23 such party’s status as a nondefaulting

24 party.’’.
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1 (b) TECHNICAL AND CONFORMING AMENDMENT.—

2 Section 11(e)(12)(A) of the Federal Deposit Insurance

3 Act (12 U.S.C. 1821(e)(12)(A)) is amended by inserting

4 ‘‘or the exercise of rights or powers’’ after ‘‘the appoint5 ment’’.

6 SEC. 4. AMENDMENTS RELATING TO TRANSFERS OF QUALI7 FIED FINANCIAL CONTRACTS.

8 (a) TRANSFERS OF QUALIFIED FINANCIAL CON9 TRACTS TO FINANCIAL INSTITUTIONS.—Section 11(e)(9)

10 of the Federal Deposit Insurance Act (12 U.S.C.

11 1821(e)(9)) is amended to read as follows:

12 ‘‘(9) TRANSFER OF QUALIFIED FINANCIAL CON13 TRACTS.—

14 ‘‘(A) IN GENERAL.—In making any trans15 fer of assets or liabilities of a depository institu16 tion in default which includes any qualified fi17 nancial contract, the conservator or receiver for

18 such depository institution shall either—

19 ‘‘(i) transfer to 1 financial institution,

20 other than a financial institution for which

21 a conservator, receiver, trustee in bank22 ruptcy, or other legal custodian has been

23 appointed or which is otherwise the subject

24 of a bankruptcy or insolvency proceeding—
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1 ‘‘(I) all qualified financial con2 tracts between any person or any af3 filiate of such person and the deposi4 tory institution in default;

5 ‘‘(II) all claims of such person or

6 any affiliate of such person against

7 such depository institution under any

8 such contract (other than any claim

9 which, under the terms of any such

10 contract, is subordinated to the claims

11 of general unsecured creditors of such

12 institution);

13 ‘‘(III) all claims of such deposi14 tory institution against such person or

15 any affiliate of such person under any

16 such contract; and

17 ‘‘(IV) all property securing or

18 any other credit enhancement for any

19 contract described in subclause (I) or

20 any claim described in subclause (II)

21 or (III) under any such contract; or

22 ‘‘(ii) transfer none of the qualified fi23 nancial contracts, claims, property or other

24 credit enhancement referred to in clause (i)
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1 (with respect to such person and any affil2 iate of such person).

3 ‘‘(B) TRANSFER TO FOREIGN BANK, FOR4 EIGN FINANCIAL INSTITUTION, OR BRANCH OR

5 AGENCY OF A FOREIGN BANK OR FINANCIAL IN6 STITUTION.—In transferring any qualified fi7 nancial contracts and related claims and prop8 erty pursuant to subparagraph (A)(i), the con9 servator or receiver for such depository institu10 tion shall not make such transfer to a foreign

11 bank, financial institution organized under the

12 laws of a foreign country, or a branch or agency

13 of a foreign bank or financial institution unless,

14 under the law applicable to such bank, financial

15 institution, branch or agency, to the qualified

16 financial contracts, and to any netting contract,

17 any security agreement or arrangement or other

18 credit enhancement related to 1 or more quali19 fied financial contracts the contractual rights of

20 the parties to such qualified financial contracts,

21 netting contracts, security agreements or ar22 rangements, or other credit enhancements are

23 enforceable substantially to the same extent as

24 permitted under this section.
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1 ‘‘(C) TRANSFER OF CONTRACTS SUBJECT

2 TO THE RULES OF A CLEARING ORGANIZA3 TION.—In the event that a conservator or re4 ceiver transfers any qualified financial contract

5 and related claims, property and credit en6 hancements pursuant to subparagraph (A)(i)

7 and such contract is subject to the rules of a

8 clearing organization, the clearing organization

9 shall not be required to accept the transferee as

10 a member by virtue of the transfer.

11 ‘‘(D) DEFINITION.—For purposes of this

12 section, the term ‘financial institution’ means a

13 broker or dealer, a depository institution, a fu14 tures commission merchant, or any other insti15 tution as determined by the Corporation by reg16 ulation to be a financial institution.’’.

17 (b) NOTICE TO QUALIFIED FINANCIAL CONTRACT

18 COUNTERPARTIES.—Section 11(e)(10)(A) of the Federal

19 Deposit Insurance Act (12 U.S.C. 1821(e)(10)(A)) is

20 amended by amending the flush material following clause

21 (ii) to read as follows: ‘‘the conservator or receiver shall

22 notify any person who is a party to any such contract of

23 such transfer by 5:00 p.m. (eastern time) on the business

24 day following the date of the appointment of the receiver,
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1 in the case of a receivership, or the business day following

2 such transfer, in the case of a conservatorship.’’.

3 (c) RIGHTS AGAINST RECEIVER AND TREATMENT OF

4 BRIDGE BANKS.—Section 11(e)(10) of the Federal De5 posit Insurance Act (12 U.S.C. 1821(e)(10)) is further

6 amended—

7 (1) by redesignating subparagraph (B) as sub8 paragraph (D); and

9 (2) by inserting after subparagraph (A) the fol10 lowing new subparagraphs:

11 ‘‘(B) CERTAIN RIGHTS NOT ENFORCE12 ABLE.—

13 ‘‘(i) RECEIVERSHIP.—A person who is

14 a party to a qualified financial contract

15 with an insured depository institution may

16 not exercise any right such person has to

17 terminate, liquidate, or net such contract

18 under paragraph (8)(A) or section 403 or

19 404 of the Federal Deposit Insurance Cor20 poration Improvement Act of 1991 solely

21 by reason of or incidental to the appoint22 ment of a receiver for the depository insti23 tution (or the insolvency or financial condi24 tion of the depository institution for which

25 the receiver has been appointed)—
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1 ‘‘(I) until 5:00 p.m. (eastern

2 time) on the business day following

3 the date of the appointment of the re4 ceiver; or

5 ‘‘(II) after the person has re6 ceived notice that the contract has

7 been transferred pursuant to para8 graph (9)(A).

9 ‘‘(ii) CONSERVATORSHIP.—A person

10 who is a party to a qualified financial con11 tract with an insured depository institution

12 may not exercise any right such person has

13 to terminate, liquidate, or net such con14 tract under paragraph (8)(E) or sections

15 403 or 404 of the Federal Deposit Insur16 ance Corporation Improvement Act of

17 1991, solely by reason of or incidental to

18 the appointment of a conservator for the

19 depository institution (or the insolvency or

20 financial condition of the depository insti21 tution for which the conservator has been

22 appointed).

23 ‘‘(iii) NOTICE.—For purposes of this

24 subsection, the Corporation as receiver or

25 conservator of an insured depository insti-
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1 tution shall be deemed to have notified a

2 person who is a party to a qualified finan3 cial contract with such depository institu4 tion if the Corporation has taken steps

5 reasonably calculated to provide notice to

6 such person by the time specified in sub7 paragraph (A) of this subsection.

8 ‘‘(C) TREATMENT OF BRIDGE BANKS.—

9 The following institutions shall not be consid10 ered a financial institution for which a conser11 vator, receiver, trustee in bankruptcy, or other

12 legal custodian has been appointed or which is

13 otherwise the subject of a bankruptcy or insol14 vency proceeding for purposes of subsection

15 (e)(9)—

16 ‘‘(i) a bridge bank; or

17 ‘‘(ii) a depository institution organized

18 by the Corporation, for which a conser19 vator is appointed either—

20 ‘‘(I) immediately upon the orga21 nization of the institution; or

22 ‘‘(II) at the time of a purchase

23 and assumption transaction between

24 such institution and the Corporation
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1 as receiver for a depository institution

2 in default.’’.

3 SEC. 5. AMENDMENTS RELATING TO DISAFFIRMANCE OR

4 REPUDIATION OF QUALIFIED FINANCIAL

5 CONTRACTS.

6 Section 11(e) of the Federal Deposit Insurance Act

7 (12 U.S.C. 1821(e)) is further amended—

8 (1) by redesignating paragraphs (11) through

9 (15) as paragraphs (12) through (16), respectively;

10 and

11 (2) by inserting after paragraph (10) the fol12 lowing new paragraph:

13 ‘‘(11) DISAFFIRMANCE OR REPUDIATION OF

14 QUALIFIED FINANCIAL CONTRACTS.—In exercising

15 the rights of disaffirmance or repudiation of a con16 servator or receiver with respect to any qualified fi17 nancial contract to which an insured depository in18 stitution is a party, the conservator or receiver for

19 such institution shall either—

20 ‘‘(A) disaffirm or repudiate all qualified fi21 nancial contracts between—

22 ‘‘(i) any person or any affiliate of

23 such person; and

24 ‘‘(ii) the depository institution in de25 fault; or
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1 ‘‘(B) disaffirm or repudiate none of the

2 qualified financial contracts referred to in sub3 paragraph (A) (with respect to such person or

4 any affiliate of such person).’’.

5 SEC. 6. CLARIFYING AMENDMENT RELATING TO MASTER

6 AGREEMENTS.

7 Section 11(e)(8)(D)(vii) of the Federal Deposit In8 surance Act (12 U.S.C. 1821(e)(8)(D)(vii)) is amended to

9 read as follows:

10 ‘‘(vii) TREATMENT OF MASTER

11 AGREEMENT AS 1 AGREEMENT.—Any mas12 ter agreement for any contract or agree13 ment described in any preceding clause of

14 this subparagraph (or any master agree15 ment for such master agreement or agree16 ments), together with all supplements to

17 such master agreement, shall be treated as

18 a single agreement and a single qualified

19 financial contract. If a master agreement

20 contains provisions relating to agreements

21 or transactions that are not themselves

22 qualified financial contracts, the master

23 agreement shall be deemed to be a quali24 fied financial contract only with respect to
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•HR 1161 IH

1 those transactions that are themselves

2 qualified financial contracts.’’.

3 SEC. 7. FEDERAL DEPOSIT INSURANCE CORPORATION IM4 PROVEMENT ACT OF 1991.

5 (a) DEFINITIONS.—Section 402 of the Federal De6 posit Insurance Corporation Improvement Act of 1991 (12

7 U.S.C. 4402) is amended—

8 (1) in paragraph (6)—

9 (A) by redesignating subparagraphs (B)

10 through (D) as subparagraphs (C) through (E),

11 respectively;

12 (B) by inserting after subparagraph (A)

13 the following new subparagraph:

14 ‘‘(B) an uninsured national bank or an un15 insured State bank that is a member of the

16 Federal Reserve System if the national bank or

17 State member bank is not eligible to make ap18 plication to become an insured bank under sec19 tion 5 of the Federal Deposit Insurance Act;’’;

20 and

21 (C) by amending subparagraph (C) (as re22 designated) to read as follows:

23 ‘‘(C) a branch or agency of a foreign bank,

24 a foreign bank and any branch or agency of the

25 foreign bank, or the foreign bank that estab-
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•HR 1161 IH

1 lished the branch or agency, as those terms are

2 defined in section 1(b) of the International

3 Banking Act of 1978;’’;

4 (2) in paragraph (11), by adding before the pe5 riod ‘‘and any other clearing organization with which

6 such clearing organization has a netting contract’’;

7 (3) by amending paragraph (14)(A)(i) to read

8 as follows:

9 ‘‘(i) means a contract or agreement

10 between 2 or more financial institutions,

11 clearing organizations, or members that

12 provides for netting present or future pay13 ment obligations or payment entitlements

14 (including liquidation or closeout values re15 lating to such obligations or entitlements)

16 among the parties to the agreement; and’’;

17 and

18 (4) by adding at the end the following new

19 paragraph:

20 ‘‘(15) PAYMENT.—The term ‘payment’ means a

21 payment of United States dollars, another currency,

22 or a composite currency, and a noncash delivery, in23 cluding a payment or delivery to liquidate an

24 unmatured obligation.’’.
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1 (b) ENFORCEABILITY OF BILATERAL NETTING CON2 TRACTS.—Section 403 of the Federal Deposit Insurance

3 Corporation Improvement Act of 1991 (12 U.S.C. 4403)

4 is amended—

5 (1) by amending subsection (a) to read as fol6 lows:

7 ‘‘(a) GENERAL RULE.—Notwithstanding any other

8 provision of State or Federal law (other than paragraphs

9 (8)(E), (8)(F), and (10)(B) of section 11(e) of the Federal

10 Deposit Insurance Act or any order authorized under sec11 tion 5(b)(2) of the Securities Investor Protection Act of

12 1970, the covered contractual payment obligations and the

13 covered contractual payment entitlements between any 2

14 financial institutions shall be netted in accordance with,

15 and subject to the conditions of, the terms of any applica16 ble netting contract (except as provided in section

17 561(b)(2) of title 11).’’; and

18 (2) by adding at the end the following new sub19 section:

20 ‘‘(f) ENFORCEABILITY OF SECURITY AGREE21 MENTS.—The provisions of any security agreement or ar22 rangement or other credit enhancement related to 1 or

23 more netting contracts between any 2 financial institu24 tions shall be enforceable in accordance with their terms

25 (except as provided in section 561(b)(2) of title 11) and
32

•HR 1161 IH

1 shall not be stayed, avoided, or otherwise limited by any

2 State or Federal law (other than paragraphs (8)(E),

3 (8)(F), and (10)(B) of section 11(e) of the Federal De4 posit Insurance Act and section 5(b)(2) of the Securities

5 Investor Protection Act of 1970).’’.

6 (c) ENFORCEABILITY OF CLEARING ORGANIZATION

7 NETTING CONTRACTS.—Section 404 of the Federal De8 posit Insurance Corporation Improvement Act of 1991 (12

9 U.S.C. 4404) is amended—

10 (1) by amending subsection (a) to read as fol11 lows:

12 ‘‘(a) GENERAL RULE.—Notwithstanding any other

13 provision of State or Federal law (other than paragraphs

14 (8)(E), (8)(F), and (10)(B) of section 11(e) of the Federal

15 Deposit Insurance Act and any order authorized under

16 section 5(b)(2) of the Securities Investor Protection Act

17 of 1970, the covered contractual payment obligations and

18 the covered contractual payment entitlements of a member

19 of a clearing organization to and from all other members

20 of a clearing organization shall be netted in accordance

21 with and subject to the conditions of any applicable net22 ting contract (except as provided in section 561(b)(2) of

23 title 11, United States Code).’’; and

24 (2) by adding at the end the following new sub25 section:
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•HR 1161 IH

1 ‘‘(h) ENFORCEABILITY OF SECURITY AGREE2 MENTS.—The provisions of any security agreement or ar3 rangement or other credit enhancement related to 1 or

4 more netting contracts between any 2 members of a clear5 ing organization shall be enforceable in accordance with

6 their terms (except as provided in section 561(b)(2) of

7 title 11, United States Code) and shall not be stayed,

8 avoided, or otherwise limited by any State or Federal law

9 other than paragraphs (8)(E), (8)(F), and (10)(B) of sec10 tion 11(e) of the Federal Deposit Insurance Act and sec11 tion 5(b)(2) of the Securities Investor Protection Act of

12 1970.’’.

13 (d) ENFORCEABILITY OF CONTRACTS WITH UNIN14 SURED NATIONAL BANKS AND UNINSURED FEDERAL

15 BRANCHES AND AGENCIES.—The Federal Deposit Insur16 ance Corporation Improvement Act of 1991 (12 U.S.C.

17 4401 et seq.) is amended—

18 (1) by redesignating section 407 as section 408;

19 and

20 (2) by adding after section 406 the following

21 new section:
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•HR 1161 IH

1 ‘‘SEC. 407. TREATMENT OF CONTRACTS WITH UNINSURED

2 NATIONAL BANKS AND UNINSURED FEDERAL

3 BRANCHES AND AGENCIES.

4 ‘‘(a) IN GENERAL.—Notwithstanding any other pro5 vision of law, paragraphs (8), (9), (10), and (11) of section

6 11(e) of the Federal Deposit Insurance Act shall apply

7 to an uninsured national bank or uninsured Federal

8 branch or Federal agency except—

9 ‘‘(1) any reference to the ‘Corporation as re10 ceiver’ or ‘the receiver or the Corporation’ shall refer

11 to the receiver of an uninsured national bank or un12 insured Federal branch or Federal agency appointed

13 by the Comptroller of the Currency;

14 ‘‘(2) any reference to the ‘Corporation’ (other

15 than in section 11(e)(8)(D) of such Act), the ‘Cor16 poration, whether acting as such or as conservator

17 or receiver’, a ‘receiver’, or a ‘conservator’ shall refer

18 to the receiver or conservator of an uninsured na19 tional bank or uninsured Federal branch or Federal

20 agency appointed by the Comptroller of the Cur21 rency; and

22 ‘‘(3) any reference to an ‘insured depository in23 stitution’ or ‘depository institution’ shall refer to an

24 uninsured national bank or an uninsured Federal

25 branch or Federal agency.
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•HR 1161 IH

1 ‘‘(b) LIABILITY.—The liability of a receiver or conser2 vator of an uninsured national bank or uninsured Federal

3 branch or agency shall be determined in the same manner

4 and subject to the same limitations that apply to receivers

5 and conservators of insured depository institutions under

6 section 11(e) of the Federal Deposit Insurance Act.

7 ‘‘(c) REGULATORY AUTHORITY.—

8 ‘‘(1) IN GENERAL.—The Comptroller of the

9 Currency, in consultation with the Federal Deposit

10 Insurance Corporation, may promulgate regulations

11 to implement this section.

12 ‘‘(2) SPECIFIC REQUIREMENT.—In promul13 gating regulations to implement this section, the

14 Comptroller of the Currency shall ensure that the

15 regulations generally are consistent with the regula16 tions and policies of the Federal Deposit Insurance

17 Corporation adopted pursuant to the Federal De18 posit Insurance Act.

19 ‘‘(d) DEFINITIONS.—For purposes of this section, the

20 terms ‘Federal branch’, ‘Federal agency’, and ‘foreign

21 bank’ have the same meaning as in section 1(b) of the

22 International Banking Act.’’.

23 SEC. 8. BANKRUPTCY CODE AMENDMENTS.

24 (a) DEFINITIONS OF FORWARD CONTRACT, REPUR25 CHASE AGREEMENT, SECURITIES CLEARING AGENCY,
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•HR 1161 IH

1 SWAP AGREEMENT, COMMODITY CONTRACT, AND SECU2 RITIES CONTRACT.—Title 11, United States Code, is

3 amended—

4 (1) in section 101—

5 (A) in paragraph (25)—

6 (i) by striking ‘‘means a contract’’

7 and inserting ‘‘means—

8 ‘‘(A) a contract’’;

9 (ii) by striking ‘‘, or any combination

10 thereof or option thereon;’’ and inserting

11 ‘‘, or any other similar agreement;’’; and

12 (iii) by adding at the end the fol13 lowing:

14 ‘‘(B) a combination of agreements or

15 transactions referred to in subparagraphs (A)

16 and (C);

17 ‘‘(C) an option to enter into an agreement

18 or transaction referred to in subparagraph (A)

19 or (B);

20 ‘‘(D) a master netting agreement that pro21 vides for an agreement or transaction referred

22 to in subparagraph (A), (B), or (C), together

23 with all supplements to such master netting

24 agreement, without regard to whether such

25 master netting agreement provides for an
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•HR 1161 IH

1 agreement or transaction that is not a forward

2 contract under this paragraph, except that such

3 master netting agreement shall be considered to

4 be a forward contract under this paragraph

5 only with respect to each agreement or trans6 action under such master netting agreement

7 that is referred to in subparagraph (A), (B) or

8 (C); or

9 ‘‘(E) a security agreement or arrangement,

10 or other credit enhancement, directly pertaining

11 to a contract, option, agreement, or transaction

12 referred to in subparagraph (A), (B), (C), or

13 (D), but not to exceed the actual value of such

14 contract, option, agreement, or transaction on

15 the date of the filing of the petition;’’;

16 (B) by amending paragraph (47) to read

17 as follows:

18 ‘‘(47) ‘repurchase agreement’ and ‘reverse re19 purchase agreement’—

20 ‘‘(A) mean—

21 ‘‘(i) an agreement, including related

22 terms, which provides for the transfer of—

23 ‘‘(I) a certificate of deposit,

24 mortgage-related security (as defined

25 in the Securities Exchange Act of
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•HR 1161 IH

1 1934), mortgage loan, interest in a

2 mortgage-related security or mortgage

3 loan, eligible bankers’ acceptance,

4 qualified foreign government security;

5 or

6 ‘‘(II) security that is a direct ob7 ligation of, or that is fully guaranteed

8 by, the United States or an agency of

9 the United States against the transfer

10 of funds by the transferee of such cer11 tificate of deposit, eligible bankers’ ac12 ceptance, security, loan, or interest;

13 with a simultaneous agreement by such

14 transferee to transfer to the transferor

15 thereof a certificate of deposit, eligible

16 bankers’ acceptance, security, loan, or in17 terest of the kind described in subclause

18 (I) or (II), at a date certain not later than

19 1 year after the transferor’s transfer or on

20 demand, against the transfer of funds;

21 ‘‘(ii) a combination of agreements or

22 transactions referred to in clauses (i) and

23 (iii);
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•HR 1161 IH

1 ‘‘(iii) an option to enter into an agree2 ment or transaction referred to in clause

3 (i) or (ii);

4 ‘‘(iv) a master netting agreement that

5 provides for an agreement or transaction

6 referred to in clause (i), (ii), or (iii), to7 gether with all supplements to such master

8 netting agreement, without regard to

9 whether such master netting agreement

10 provides for an agreement or transaction

11 that is not a repurchase agreement under

12 this subparagraph, except that such master

13 netting agreement shall be considered to be

14 a repurchase agreement under this sub15 paragraph only with respect to each agree16 ment or transaction under such master

17 netting agreement that is referred to in

18 clause (i), (ii), or (iii); or

19 ‘‘(v) a security agreement or arrange20 ment, or other credit enhancement, directly

21 pertaining to a contract referred to in

22 clause (i), (ii), (iii), or (iv), but not to ex23 ceed the actual value of such contract on

24 the date of the filing of the petition; and
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•HR 1161 IH

1 ‘‘(B) do not include a repurchase obliga2 tion under a participation in a commercial

3 mortgage loan;

4 and, for purposes of this paragraph, the term ‘quali5 fied foreign government security’ means a security

6 that is a direct obligation of, or that is fully guaran7 teed by, the central government of a member of the

8 Organization for Economic Cooperation and Devel9 opment;’’;

10 (C) in paragraph (48) by inserting ‘‘or ex11 empt from such registration under such section

12 pursuant to an order of the Securities and Ex13 change Commission’’ after ‘‘1934’’; and

14 (D) by amending paragraph (53B) to read

15 as follows:

16 ‘‘(53B) ‘swap agreement’ means—

17 ‘‘(A) an agreement, including the terms

18 and conditions incorporated by reference in

19 such agreement, that is—

20 ‘‘(i) an interest rate swap, option, fu21 ture, or forward agreement, including a

22 rate floor, rate cap, rate collar, cross-cur23 rency rate swap, and basis swap;
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•HR 1161 IH

1 ‘‘(ii) a spot, same day-tomorrow, to2 morrow-next, forward, or other foreign ex3 change or precious metals agreement;

4 ‘‘(iii) a currency swap, option, future,

5 or forward agreement;

6 ‘‘(iv) an equity index or an equity

7 swap, option, future, or forward agree8 ment;

9 ‘‘(v) a debt index or a debt swap, op10 tion, future, or forward agreement;

11 ‘‘(vi) a credit spread or a credit swap,

12 option, future, or forward agreement; or

13 ‘‘(vii) a commodity index or a com14 modity swap, option, future, or forward

15 agreement;

16 ‘‘(B) an agreement or transaction similar

17 to an agreement or transaction referred to in

18 this paragraph that—

19 ‘‘(i) is currently, or in the future be20 comes, regularly entered into in the swap

21 market (including terms and conditions in22 corporated by reference therein); and

23 ‘‘(ii) is a forward, swap, future, or op24 tion on a rate, currency, commodity, equity

25 security, or other equity instrument, on a
42

•HR 1161 IH

1 debt security or other debt instrument, or

2 on an economic index or measure of eco3 nomic risk or value;

4 ‘‘(C) a combination of agreements or

5 transactions referred to in this paragraph;

6 ‘‘(D) an option to enter into an agreement

7 or transaction referred to in this paragraph;

8 ‘‘(E) a master netting agreement that pro9 vides for an agreement or transaction referred

10 to in subparagraph (A), (B), (C), or (D), to11 gether with all supplements to such master net12 ting agreement and without regard to whether

13 such master netting agreement contains an

14 agreement or transaction described in any such

15 subparagraph, but only with respect to each

16 agreement or transaction referred to in any

17 such subparagraph that is under such master

18 netting agreement; or

19 ‘‘(F) is applicable for purposes of this title

20 only and shall not be construed or applied so as

21 to challenge or affect the characterization, defi22 nition, or treatment of any swap agreement

23 under any other statute, regulation, or rule, in24 cluding the Securities Act of 1933, the Securi25 ties Exchange Act of 1934, the Public Utility
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•HR 1161 IH

1 Holding Company Act of 1935, the Trust In2 denture Act of 1939, the Investment Company

3 Act of 1940, the Investment Advisers Act of

4 1940, the Securities Investor Protection Act of

5 1970, the Commodity Exchange Act, and the

6 regulations prescribed by the Securities and Ex7 change Commission or the Commodity Futures

8 Trading Commission.’’;

9 (2) by amending section 741(7) to read as fol10 lows:

11 ‘‘(7) ‘securities contract’—

12 ‘‘(A) means—

13 ‘‘(i) a contract for the purchase, sale,

14 or loan of a security, a mortgage loan or

15 an interest in a mortgage loan, a group or

16 index of securities, or mortgage loans or

17 interests therein (including an interest

18 therein or based on the value thereof), or

19 option on any of the foregoing, including

20 an option to purchase or sell any of the

21 foregoing;

22 ‘‘(ii) an option entered into on a na23 tional securities exchange relating to for24 eign currencies;
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1 ‘‘(iii) the guarantee by or to a securi2 ties clearing agency of a settlement of

3 cash, securities, mortgage loans or inter4 ests therein, group or index of securities,

5 or mortgage loans or interests therein (in6 cluding any interest therein or based on

7 the value thereof), or option on any of the

8 foregoing, including an option to purchase

9 or sell any of the foregoing;

10 ‘‘(iv) a margin loan;

11 ‘‘(v) any other agreement or trans12 action that is similar to an agreement or

13 transaction referred to in this subpara14 graph;

15 ‘‘(vi) a combination of the agreements

16 or transactions referred to in this subpara17 graph;

18 ‘‘(vii) an option to enter into an

19 agreement or transaction referred to in

20 this subparagraph;

21 ‘‘(viii) a master netting agreement

22 that provides for an agreement or trans23 action referred to in clause (i), (ii), (iii),

24 (iv), (v), (vi), or (vii), together with all

25 supplements to such master netting agree-
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1 ment, without regard to whether such mas2 ter netting agreement provides for an

3 agreement or transaction that is not a se4 curities contract under this subparagraph,

5 except that such master netting agreement

6 shall be considered to be a securities con7 tract under this subparagraph only with

8 respect to each agreement or transaction

9 under such master netting agreement that

10 is referred to in clause (i), (ii), (iii), (iv),

11 (v), (vi), or (vii); or

12 ‘‘(ix) a security agreement or arrange13 ment, or other credit enhancement, directly

14 pertaining to a contract referred to in this

15 subparagraph, but not to exceed the actual

16 value of such contract on the date of the

17 filing of the petition; and

18 ‘‘(B) does not include a purchase, sale, or

19 repurchase obligation under a participation in a

20 commercial mortgage loan;’’; and

21 (3) in section 761(4)—

22 (A) by striking ‘‘or’’ at the end of subpara23 graph (D); and

24 (B) by adding at the end the following:
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•HR 1161 IH

1 ‘‘(F) any other agreement or transaction

2 that is similar to an agreement or transaction

3 referred to in this paragraph;

4 ‘‘(G) a combination of the agreements or

5 transactions referred to in this paragraph;

6 ‘‘(H) an option to enter into an agreement

7 or transaction referred to in this paragraph;

8 ‘‘(I) a master netting agreement that pro9 vides for an agreement or transaction referred

10 to in subparagraph (A), (B), (C), (D), (E), (F),

11 (G), or (H), together with all supplements to

12 such master netting agreement, without regard

13 to whether such master netting agreement pro14 vides for an agreement or transaction that is

15 not a commodity contract under this paragraph,

16 except that such master netting agreement shall

17 be considered to be a commodity contract under

18 this paragraph only with respect to each agree19 ment or transaction under such master netting

20 agreement that is referred to in subparagraph

21 (A), (B), (C), (D), (E), (F), (G), or (H); or

22 ‘‘(J) a security agreement or arrangement,

23 or other credit enhancement, directly pertaining

24 to a contract referred to in this paragraph, but
47

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1 not to exceed the actual value of such contract

2 on the date of the filing of the petition;’’.

3 (b) DEFINITIONS OF FINANCIAL INSTITUTION, FI4 NANCIAL PARTICIPANT, AND FORWARD CONTRACT MER5 CHANT.—Section 101 of title 11, United States Code, is

6 amended—

7 (1) by amending paragraph (22) to read as fol8 lows:

9 ‘‘(22) ‘financial institution’ means—

10 ‘‘(A) a Federal reserve bank, or an entity

11 that is a commercial or savings bank, industrial

12 savings bank, savings and loan association,

13 trust company, or receiver or conservator for

14 such entity and, when such Federal reserve

15 bank, receiver, or conservator or entity is acting

16 as agent or custodian for a customer in connec17 tion with a securities contract, as defined in

18 section 741 of this title, such customer; or

19 ‘‘(B) in connection with a securities con20 tract, as defined in section 741 of this title, an

21 investment company registered under the In22 vestment Company Act of 1940;’’;

23 (2) by inserting after paragraph (22) the fol24 lowing:
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•HR 1161 IH

1 ‘‘(22A) ‘financial participant’ means an entity

2 that is a party to a securities contract, commodity

3 contract or forward contract, or on the date of the

4 filing of the petition, has a commodity contract (as

5 defined in section 761 of this title) with the debtor

6 or any other entity (other than an affiliate) of a

7 total gross dollar value of at least $1,000,000,000 in

8 notional or actual principal amount outstanding on

9 any day during the previous 15-month period, or has

10 gross mark-to-market positions of at least

11 $100,000,000 (aggregated across counterparties) in

12 any such agreement or transaction with the debtor

13 or any other entity (other than an affiliate) on any

14 day during the previous 15-month period;’’; and

15 (3) by amending paragraph (26) to read as fol16 lows:

17 ‘‘(26) ‘forward contract merchant’ means a

18 Federal reserve bank, or an entity whose business

19 consists in whole or in part of entering into forward

20 contracts as or with merchants or in a commodity,

21 as defined or in section 761 of this title, or any simi22 lar good, article, service, right, or interest which is

23 presently or in the future becomes the subject of

24 dealing or in the forward contract trade;’’.
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1 (c) DEFINITION OF MASTER NETTING AGREEMENT

2 AND MASTER NETTING AGREEMENT PARTICIPANT.—Sec3 tion 101 of title 11, United States Code, is amended by

4 inserting after paragraph (38) the following new para5 graphs:

6 ‘‘(38A) the term ‘master netting agreement’

7 means an agreement providing for the exercise of

8 rights, including rights of netting, setoff, liquidation,

9 termination, acceleration, or closeout, under or in

10 connection with 1 or more contracts that are de11 scribed in any 1 or more of paragraphs (1) through

12 (5) of section 561(a), or any security agreement or

13 arrangement or other credit enhancement related to

14 1 or more of the foregoing. If a master netting

15 agreement contains provisions relating to agree16 ments or transactions that are not contracts de17 scribed in paragraphs (1) through (5) of section

18 561(a), the master netting agreement shall be

19 deemed to be a master netting agreement only with

20 respect to those agreements or transactions that are

21 described in any 1 or more of the paragraphs (1)

22 through (5) of section 561(a);

23 ‘‘(38B) the term ‘master netting agreement

24 participant’ means an entity that, at any time before

25 the filing of the petition, is a party to an out-
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1 standing master netting agreement with the debt2 or;’’.

3 (d) SWAP AGREEMENTS, SECURITIES CONTRACTS,

4 COMMODITY CONTRACTS, FORWARD CONTRACTS, REPUR5 CHASE AGREEMENTS, AND MASTER NETTING AGREE6 MENTS UNDER THE AUTOMATIC-STAY.—

7 (1) IN GENERAL.—Section 362(b) of title 11,

8 United States Code, as amended by sections 120,

9 134, 139, 203 and 818, is amended—

10 (A) in paragraph (6), by inserting ‘‘,

11 pledged to, and under the control of,’’ after

12 ‘‘held by’’;

13 (B) in paragraph (7), by inserting ‘‘,

14 pledged to, and under the control of,’’ after

15 ‘‘held by’’;

16 (C) by amending paragraph (17) to read

17 as follows:

18 ‘‘(17) under subsection (a), of the setoff by a

19 swap participant of a mutual debt and claim under

20 or in connection with a swap agreement that con21 stitutes the setoff of a claim against the debtor for

22 a payment or transfer due from the debtor under or

23 in connection with a swap agreement against a pay24 ment due to the debtor from the swap participant

25 under or in connection with a swap agreement or
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1 against cash, securities, or other property held by,

2 pledged to, and under the control of, or due from

3 such swap participant to guarantee, secure, or settle

4 a swap agreement;’’;

5 (D) in paragraph (27), by striking ‘‘or’’ at

6 the end;

7 (E) in paragraph (28) by striking the pe8 riod at the end and inserting ‘‘; and’’; and

9 (F) by inserting after paragraph (28) the

10 following new paragraph:

11 ‘‘(29) under subsection (a), of the setoff by a

12 master netting agreement participant of a mutual

13 debt and claim under or in connection with 1 or

14 more master netting agreements or any contract or

15 agreement subject to such agreements that con16 stitutes the setoff of a claim against the debtor for

17 any payment or other transfer of property due from

18 the debtor under or in connection with such agree19 ments or any contract or agreement subject to such

20 agreements against any payment due to the debtor

21 from such master netting agreement participant

22 under or in connection with such agreements or any

23 contract or agreement subject to such agreements or

24 against cash, securities, or other property held by,

25 pledged or and under the control of, or due from
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1 such master netting agreement participant to mar2 gin, guarantee, secure, or settle such agreements or

3 any contract or agreement subject to such agree4 ments, to the extent such participant is eligible to

5 exercise such offset rights under paragraph (6), (7),

6 or (17) for each individual contract covered by the

7 master netting agreement in issue.’’.

8 (2) LIMITATION.—Section 362 of title 11,

9 United States Code, is amended by adding at the

10 end the following:

11 ‘‘(i) LIMITATION.—The exercise of rights not subject

12 to the stay arising under subsection (a) pursuant to para13 graph (6), (7), or (17) of subsection (b) shall not be stayed

14 by an order of a court or administrative agency in any

15 proceeding under this title.’’.

16 (e) LIMITATION OF AVOIDANCE POWERS UNDER

17 MASTER NETTING AGREEMENT.—Section 546 of title 11,

18 United States Code, is amended—

19 (1) in subsection (g) (as added by section 103

20 of Public Law 101–311)—

21 (A) by striking ‘‘under a swap agreement’’;

22 (B) by striking ‘‘in connection with a swap

23 agreement’’ and inserting ‘‘under or in connec24 tion with any swap agreement’’;
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1 (2) by redesignating subsection (g) (as added

2 by section 222(a) of Public Law 103–394) as sub3 section (i); and

4 (3) by inserting before subsection (i) (as redes5 ignated) the following new subsection:

6 ‘‘(h) Notwithstanding sections 544, 545, 547,

7 548(a)(2)(B), and 548(b) of this title, the trustee may not

8 avoid a transfer made by or to a master netting agreement

9 participant under or in connection with any master netting

10 agreement or any individual contract covered thereby that

11 is made before the commencement of the case, and except

12 to the extent the trustee could otherwise avoid such a

13 transfer made under an individual contract covered by

14 such master netting agreement, except under section

15 548(a)(1)(A) of this title.’’.

16 (f) FRAUDULENT TRANSFERS OF MASTER NETTING

17 AGREEMENTS.—Section 548(d)(2) of title 11, United

18 States Code, is amended—

19 (1) in subparagraph (C), by striking ‘‘and’’;

20 (2) in subparagraph (D), by striking the period

21 and inserting ‘‘; and’’; and

22 (3) by adding at the end the following new sub23 paragraph:

24 ‘‘(E) a master netting agreement partici25 pant that receives a transfer in connection with
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1 a master netting agreement or any individual

2 contract covered thereby takes for value to the

3 extent of such transfer, except, with respect to

4 a transfer under any individual contract covered

5 thereby, to the extent such master netting

6 agreement participant otherwise did not take

7 (or is otherwise not deemed to have taken) such

8 transfer for value.’’.

9 (g) TERMINATION OR ACCELERATION OF SECURITIES

10 CONTRACTS.—Section 555 of title 11, United States Code,

11 is amended—

12 (1) by amending the section heading to read as

13 follows:

14 ‘‘§ 555. Contractual right to liquidate, terminate, or

15 accelerate a securities contract’’; and

16 (2) in the first sentence, by striking ‘‘liquida17 tion’’ and inserting ‘‘liquidation, termination, or ac18 celeration’’.

19 (h) TERMINATION OR ACCELERATION OF COMMOD20 ITIES OR FORWARD CONTRACTS.—Section 556 of title 11,

21 United States Code, is amended—

22 (1) by amending the section heading to read as

23 follows:
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1 ‘‘§ 556. Contractual right to liquidate, terminate, or

2 accelerate a commodities contract or for3 ward contract’’; and

4 (2) in the first sentence, by striking ‘‘liquida5 tion’’ and inserting ‘‘liquidation, termination, or ac6 celeration’’.

7 (i) TERMINATION OR ACCELERATION OF REPUR8 CHASE AGREEMENTS.—Section 559 of title 11, United

9 States Code, is amended—

10 (1) by amending the section heading to read as

11 follows:

12 ‘‘§ 559. Contractual right to liquidate, terminate, or

13 accelerate a repurchase agreement’’; and

14 (2) in the first sentence, by striking ‘‘liquida15 tion’’ and inserting ‘‘liquidation, termination, or ac16 celeration’’.

17 (j) LIQUIDATION, TERMINATION, OR ACCELERATION

18 OF SWAP AGREEMENTS.—Section 560 of title 11, United

19 States Code, is amended—

20 (1) by amending the section heading to read as

21 follows:

22 ‘‘§ 560. Contractual right to liquidate, terminate, or

23 accelerate a swap agreement’’; and

24 (2) in the first sentence, by striking ‘‘termi25 nation of a swap agreement’’ and inserting ‘‘liquida-
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1 tion, termination, or acceleration of a swap agree2 ment’’; and

3 (3) by striking ‘‘in connection with any swap

4 agreement’’ and inserting ‘‘in connection with the

5 termination, liquidation, or acceleration of a swap

6 agreement’’.

7 (k) LIQUIDATION, TERMINATION, ACCELERATION, OR

8 OFFSET UNDER A MASTER NETTING AGREEMENT AND

9 ACROSS CONTRACTS.—Title 11, United States Code, is

10 amended by inserting after section 560 the following new

11 section:

12 ‘‘§ 561. Contractual right to terminate, liquidate, ac13 celerate, or offset under a master netting

14 agreement and across contracts

15 ‘‘(a) IN GENERAL.—Subject to subsection (b), the ex16 ercise of any contractual right, because of a condition of

17 the kind specified in section 365(e)(1), to cause the termi18 nation, liquidation, or acceleration of or to offset or net

19 termination values, payment amounts or other transfer ob20 ligations arising under or in connection with 1 or more

21 (or the termination, liquidation, or acceleration of 1 or

22 more—

23 ‘‘(1) securities contracts, as defined in section

24 741(7);
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1 ‘‘(2) commodity contracts, as defined in section

2 761(4);

3 ‘‘(3) forward contracts;

4 ‘‘(4) repurchase agreements;

5 ‘‘(5) swap agreements; or

6 ‘‘(6) master netting agreements,

7 shall not be stayed, avoided, or otherwise limited by oper8 ation of any provision of this title or by any order of a

9 court or administrative agency in any proceeding under

10 this title.

11 ‘‘(b) EXCEPTION.—

12 ‘‘(1) A party may exercise a contractual right

13 described in subsection (a) to terminate, liquidate, or

14 accelerate only to the extent that such party could

15 exercise such a right under section 555, 556, 559,

16 or 560 for each individual contract covered by the

17 master netting agreement in issue.

18 ‘‘(2) If a debtor is a commodity broker subject

19 to subchapter IV of chapter 7 of this title—

20 ‘‘(A) a party may not net or offset an obli21 gation to the debtor arising under, or in con22 nection with, a commodity contract against any

23 claim arising under, or in connection with,

24 other instruments, contracts, or agreements

25 listed in subsection (a) except to the extent the
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1 party has no positive net equity in the com2 modity accounts at the debtor, as calculated

3 under subchapter IV;

4 ‘‘(B) another commodity broker may not

5 net or offset an obligation to the debtor arising

6 under, or in connection with, a commodity con7 tract entered into or held on behalf of a cus8 tomer of the debtor against any claim arising

9 under, or in connection with, other instruments,

10 contracts, or agreements listed in subsection

11 (a).

12 ‘‘(c) DEFINITION.—As used in this section, the term

13 ‘contractual right’ includes a right set forth in a rule or

14 bylaw of a national securities exchange, a national securi15 ties association, or a securities clearing agency, a right

16 set forth in a bylaw of a clearing organization or contract

17 market or in a resolution of the governing board thereof,

18 and a right, whether or not evidenced in writing, arising

19 under common law, under law merchant, or by reason of

20 normal business practice.’’.

21 (l) MUNICIPAL BANKRUPTCIES.—Section 901 of title

22 11, United States Code, is amended—

23 (1) by inserting ‘‘, 555, 556’’ after ‘‘553’’; and

24 (2) by inserting ‘‘, 559, 560, 561,’’ after ‘‘557’’.
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1 (m) ANCILLARY PROCEEDINGS.—Section 304 of title

2 11, United States Code, is amended by adding at the end

3 the following:

4 ‘‘(d) Any provisions of this title relating to securities

5 contracts, commodity contracts, forward contracts, repur6 chase agreements, swap agreements, or master netting

7 agreements shall apply in a case ancillary to a foreign pro8 ceeding under this section or any other section of this title,

9 so that enforcement of contractual provisions of such con10 tracts and agreements in accordance with their terms will

11 not be stayed or otherwise limited by operation of any pro12 vision of this title or by order of a court in any case under

13 this title, and to limit avoidance powers to the same extent

14 as in a proceeding under chapter 7 or 11 of this title (such

15 enforcement not to be limited based on the presence or

16 absence of assets of the debtor in the United States).’’.

17 (n) COMMODITY BROKER LIQUIDATIONS.—Title 11,

18 United States Code, is amended by inserting after section

19 766 the following:
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1 ‘‘§ 767. Commodity broker liquidation and forward

2 contract merchants, commodity brokers,

3 stockbrokers, financial institutions, secu4 rities clearing agencies, swap partici5 pants, repo participants, and master net6 ting agreement participants

7 ‘‘Notwithstanding any other provision of this title,

8 the exercise of rights by a forward contract merchant,

9 commodity broker, stockbroker, financial institution, secu10 rities clearing agency, swap participant, repo participant,

11 or master netting agreement participant under this title

12 shall not affect the priority of any unsecured claim it may

13 have after the exercise of such rights.’’.

14 (o) STOCKBROKER LIQUIDATIONS.—Title 11, United

15 States Code, is amended by inserting after section 752 the

16 following:

17 ‘‘§ 753. Stockbroker liquidation and forward contract

18 merchants, commodity brokers, stock19 brokers, financial institutions, securities

20 clearing agencies, swap participants,

21 repo participants, and master netting

22 agreement participants

23 ‘‘Notwithstanding any other provision of this title,

24 the exercise of rights by a forward contract merchant,

25 commodity broker, stockbroker, financial institution, secu26 rities clearing agency, swap participant, repo participant,
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1 financial participant, or master netting agreement partici2 pant under this title shall not affect the priority of any

3 unsecured claim it may have after the exercise of such

4 rights.’’.

5 (p) SETOFF.—Section 553 of title 11, United States

6 Code, is amended—

7 (1) in subsection (a)(3)(C), by inserting ‘‘(ex8 cept for a setoff of a kind described in section

9 362(b)(6), 362(b)(7), 362(b)(17), 362(b)(19), 555,

10 556, 559, or 560 of this title)’’ before the period;

11 and

12 (2) in subsection (b)(1), by striking

13 ‘‘362(b)(14),’’ and inserting ‘‘362(b)(17),

14 362(b)(19), 555, 556, 559, 560,’’.

15 (q) SECURITIES CONTRACTS, COMMODITY CON16 TRACTS, AND FORWARD CONTRACTS.—Title 11, United

17 States Code, is amended—

18 (1) in section 362(b)(6), by striking ‘‘financial

19 institutions,’’ each place such term appears and in20 serting ‘‘financial institution, financial participant’’;

21 (2) in section 546(e), by inserting ‘‘financial

22 participant’’ after ‘‘financial institution,’’;

23 (3) in section 548(d)(2)(B), by inserting ‘‘fi24 nancial participant’’ after ‘‘financial institution,’’;

25 (4) in section 555—
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1 (A) by inserting ‘‘financial participant’’

2 after ‘‘financial institution,’’; and

3 (B) by inserting before the period ‘‘, a

4 right set forth in a bylaw of a clearing organi5 zation or contract market or in a resolution of

6 the governing board thereof, and a right,

7 whether or not in writing, arising under com8 mon law, under law merchant, or by reason of

9 normal business practice’’; and

10 (5) in section 556, by inserting ‘‘, financial par11 ticipant’’ after ‘‘commodity broker’’.

12 (r) CONFORMING AMENDMENTS.—Title 11 of the

13 United States Code is amended—

14 (1) in the table of sections of chapter 5—

15 (A) by amending the items relating to sec16 tions 555 and 556 to read as follows:

‘‘555. Contractual right to liquidate, terminate, or accelerate a securities contract.

‘‘556. Contractual right to liquidate, terminate, or accelerate a commodities contract or forward contract.’’; and

17 (B) by amending the items relating to sec18 tions 555 and 556 to read as follows:

‘‘559. Contractual right to liquidate, terminate, or accelerate a repurchase

agreement.

‘‘560. Contractual right to liquidate, terminate, or accelerate a swap agreement.’’; and

19 (2) in the table of sections of chapter 7—

20 (A) by inserting after the item relating to

21 section 766 the following:
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‘‘767. Commodity broker liquidation and forward contract merchants, commodity brokers, stockbrokers, financial institutions, securities

clearing agencies, swap participants, repo participants, and

master netting agreement participants.’’; and

1 (B) by inserting after the item relating to

2 section 752 the following:

‘‘753. Stockbroker liquidation and forward contract merchants, commodity brokers, stockbrokers, financial institutions, securities clearing

agencies, swap participants, repo participants, and master netting agreement participants.’’.

3 SEC. 9. RECORDKEEPING REQUIREMENTS.

4 Section 11(e)(8) of the Federal Deposit Insurance

5 Act (12 U.S.C. 1821(e)(8)) is amended by adding at the

6 end the following new subparagraph:

7 ‘‘(H) RECORDKEEPING REQUIREMENTS.—

8 The Corporation, in consultation with the ap9 propriate Federal banking agencies, may pre10 scribe regulations requiring more detailed rec11 ordkeeping with respect to qualified financial

12 contracts (including market valuations) by in13 sured depository institutions.’’.

14 SEC. 10. EXEMPTIONS FROM CONTEMPORANEOUS EXECU15 TION—REQUIREMENT.

16 Section 13(e)(2) of the Federal Deposit Insurance

17 Act (12 U.S.C. 1823(e)(2)) is amended to read as follows:

18 ‘‘(2) EXEMPTIONS FROM CONTEMPORANEOUS

19 EXECUTION REQUIREMENT.—An agreement to pro20 vide for the lawful collateralization of—
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1 ‘‘(A) deposits of, or other credit extension

2 by, a Federal, State, or local governmental enti3 ty, or of any depositor referred to in section

4 11(a)(2), including an agreement to provide col5 lateral in lieu of a surety bond;

6 ‘‘(B) bankruptcy estate funds pursuant to

7 section 345(b)(2) of title 11, United States

8 Code;

9 ‘‘(C) extensions of credit, including any

10 overdraft, from a Federal reserve bank or Fed11 eral home loan bank; or

12 ‘‘(D) 1 or more qualified financial con13 tracts, as defined in section 11(e)(8)(D), shall

14 not be deemed invalid pursuant to paragraph

15 (1)(B) solely because such agreement was not

16 executed contemporaneously with the acquisi17 tion of the collateral or because of pledges, de18 livery, or substitution of the collateral made in

19 accordance with such agreement.’’.

20 SEC. 11. DAMAGE MEASURE.

21 (a) Title 11, United States Code, is amended—

22 (1) by inserting after section 561 the following:
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1 ‘‘§ 562. Damage measure in connection with swap

2 agreements, securities contracts, forward

3 contracts, commodity contracts, repur4 chase agreements, or master netting

5 agreements

6 ‘‘If the trustee rejects a swap agreement, securities

7 contract as defined in section 741 of this title, forward

8 contract, commodity contract (as defined in section 761

9 of this title) repurchase agreement, or master netting

10 agreement pursuant to section 365(a) of this title, or if

11 a forward contract merchant, stockbroker, financial insti12 tution, securities clearing agency, repo participant, finan13 cial participant, master netting agreement participant, or

14 swap participant liquidates, terminates, or accelerates

15 such contract or agreement, damages shall be measured

16 as of the earlier of—

17 ‘‘(1) the date of such rejection; or

18 ‘‘(2) the date of such liquidation, termination,

19 or acceleration.’’; and

20 (2) in the table of sections of chapter 5 by in21 serting after the item relating to section 561 the fol22 lowing:

‘‘562. Damage measure in connection with swap agreements, securities contracts, forward contracts, commodity contracts, repurchase

agreements, or master netting agreements.’’.

23 (b) CLAIMS ARISING FROM REJECTION.—Section

24 502(g) of title 11, United States Code, is amended—
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1 (1) by designating the existing text as para2 graph (1); and

3 (2) by adding at the end the following:

4 ‘‘(2) A claim for damages calculated in accordance

5 with section 561 of this title shall be allowed under sub6 section (a), (b), or (c), or disallowed under subsection (d)

7 or (e), as if such claim had arisen before the date of the

8 filing of the petition.’’.

9 SEC. 12. SIPC STAY.

10 Section 5(b)(2) of the Securities Investor Protection

11 Act of 1970 (15 U.S.C. 78eee(b)(2)) is amended by adding

12 after subparagraph (B) the following new subparagraph:

13 ‘‘(C) EXCEPTION FROM STAY.—

14 ‘‘(i) Notwithstanding section 362 of

15 title 11, United States Code, neither the

16 filing of an application under subsection

17 (a)(3) nor any order or decree obtained by

18 Securities Investor Protection Corporation

19 from the court shall operate as a stay of

20 any contractual rights of a creditor to liq21 uidate, terminate, or accelerate a securities

22 contract, commodity contract, forward con23 tract, repurchase agreement, swap agree24 ment, or master netting agreement, each

25 as defined in title 11, to offset or net ter-
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1 mination values, payment amounts, or

2 other transfer obligations arising under or

3 in connection with 1 or more of such con4 tracts or agreements, or to foreclose on

5 any cash collateral pledged by the debtor

6 whether or not with respect to 1 or more

7 of such contracts or agreements.

8 ‘‘(ii) Notwithstanding clause (i), such

9 application, order, or decree may operate

10 as a stay of the foreclosure on securities

11 collateral pledged by the debtor, whether

12 or not with respect to 1 or more of such

13 contracts or agreements, securities sold by

14 the debtor under a repurchase agreement

15 or securities lent under a securities lending

16 agreement.

17 ‘‘(iii) As used in this section, the term

18 ‘contractual right’ includes a right set

19 forth in a rule or bylaw of a national secu20 rities exchange, a national securities asso21 ciation, or a securities clearing agency, a

22 right set forth in a bylaw of a clearing or23 ganization or contract market or in a reso24 lution of the governing board thereof, and

25 a right, whether or not in writing, arising
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1 under common law, under law merchant,

2 or by reason of normal business practice.’’.

3 SEC. 13. ASSET-BACKED SECURITIZATIONS.

4 Section 541 of title 11, United States Code, is

5 amended—

6 (1) in subsection (b), by striking ‘‘or’’ at the

7 end of paragraph (4);

8 (2) by redesignating paragraph (5) of sub9 section (b) as paragraph (6);

10 (3) by inserting after paragraph (4) of sub11 section (b) the following new paragraph:

12 ‘‘(5) any eligible asset (or proceeds thereof), to

13 the extent that such eligible asset was transferred by

14 the debtor, before the date of commencement of the

15 case, to an eligible entity in connection with an

16 asset-backed securitization, except to the extent such

17 asset (or proceeds or value thereof) may be recov18 ered by the trustee under section 550 by virtue of

19 avoidance under section 548(a); or’’; and

20 (4) by adding at the end the following new sub21 section:

22 ‘‘(e) DEFINITIONS.—For purposes of this section, the

23 following definitions shall apply:

24 ‘‘(1) ASSET-BACKED SECURITIZATION.—The

25 term ‘asset-backed securitization’ means a trans-
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1 action in which eligible assets transferred to an eligi2 ble entity are used as the source of payment on se3 curities, the most senior of which are rated invest4 ment grade by 1 or more nationally recognized secu5 rities rating organizations, issued by an issuer;

6 ‘‘(2) ELIGIBLE ASSET.—The term ‘eligible

7 asset’ means—

8 ‘‘(A) financial assets (including interests

9 therein and proceeds thereof), either fixed or re10 volving, including residential and commercial

11 mortgage loans, consumer receivables, trade re12 ceivables, and lease receivables, that, by their

13 terms, convert into cash within a finite time pe14 riod, plus any rights or other assets designed to

15 assure the servicing or timely distribution of

16 proceeds to security holders;

17 ‘‘(B) cash; and

18 ‘‘(C) securities.

19 ‘‘(3) ELIGIBLE ENTITY.—The term ‘eligible en20 tity’ means—

21 ‘‘(A) an issuer; or

22 ‘‘(B) a trust, corporation, partnership, or

23 other entity engaged exclusively in the business

24 of acquiring and transferring eligible assets di-
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1 rectly or indirectly to an issuer and taking ac2 tions ancillary thereto;

3 ‘‘(4) ISSUER.—The term ‘issuer’ means a trust,

4 corporation, partnership, or other entity engaged ex5 clusively in the business of acquiring and holding eli6 gible assets, issuing securities backed by eligible as7 sets, and taking actions ancillary thereto.

8 ‘‘(5) TRANSFERRED.—The term ‘transferred’

9 means the debtor, pursuant to a written agreement,

10 represented and warranted that eligible assets were

11 sold, contributed, or otherwise conveyed with the in12 tention of removing them from the estate of the

13 debtor pursuant to subsection (b)(5), irrespective,

14 without limitation of—

15 ‘‘(A) whether the debtor directly or indi16 rectly obtained or held an interest in the issuer

17 or in any securities issued by the issuer;

18 ‘‘(B) whether the debtor had an obligation

19 to repurchase or to service or supervise the

20 servicing of all or any portion of such eligible

21 assets; or

22 ‘‘(C) the characterization of such sale, con23 tribution, or other conveyance for tax, account24 ing, regulatory reporting, or other purposes.’’.
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1 SEC. 14. FEDERAL RESERVE COLLATERAL REQUIREMENTS.

2 The 2d sentence of the 2d undesignated paragraph

3 of section 16 of the Federal Reserve Act (12 U.S.C. 412)

4 is amended by striking ‘‘acceptances acquired under sec5 tion 13 of this Act’’ and inserting ‘‘acceptances acquired

6 under section 10A, 10B, 13, or 13A of this Act’’.

7 SEC. 15. SEVERABILITY; EFFECTIVE DATE; APPLICATION

8 OF AMENDMENTS.

9 (a) SEVERABILITY.—If any provision of this Act or

10 any amendment made by this Act, or the application of

11 any such provision or amendment to any person or cir12 cumstance, is held to be unconstitutional, the remaining

13 provisions of and amendments made by this Act and the

14 application of such other provisions and amendments to

15 any person or circumstance shall not be affected thereby.

16 (b) EFFECTIVE DATE.—This Act shall take effect on

17 the date of the enactment of this Act.

18 (c) APPLICATION OF AMENDMENTS.—The amend19 ments made by this Act shall apply with respect to cases

20 commenced or appointments made under any Federal or

21 State law after the date of enactment of this Act, but shall

22 not apply with respect to cases commenced or appoint23 ments made under any Federal or State law before the

24 date of enactment of this Act.

Æ