‘‘(9) NUMBER OF ELECTED DIRECTORS OF RE-
SULTING BANK.—Subject to section 7(a), any enter-
prise resource bank resulting from a merger, com-
bination, or consolidation pursuant to this section
may have a number of elected directors equal to or
less than the total number of elected directors of all
the banks which participated in such transaction (as
determined immediately before such transaction).
‘‘(10) NUMBER OF APPOINTED DIRECTORS OF
RESULTING BANK.—The number of appointed direc-
tors of any enterprise resource bank resulting from
a merger, combination, or consolidation pursuant to
this section shall be the amount which is 2 less than
the number of elected directors.
‘‘(11) ADJUSTMENT
OF
DISTRICT
BOUND-
ARIES.—After a merger, combination, or consolida-
tion of 2 or more enterprise resource banks under
this subsection is consummated, the Finance Board
shall adjust the districts established pursuant to
subsection (b) to reflect such merger, combination,
or consolidation.
‘‘(12) FINANCE BOARD AUTHORITY.—Upon re-
ceipt of a certificate of merger, combination, or con-
solidation filed with the Finance Board in accord-
ance with section 12(a)(3), the Finance Board
may—
‘‘(A) approve the transaction on the basis
of a determination that the transaction provides
for a resulting enterprise resource bank which
is safe and sound; or
‘‘(B) disapprove the transaction on the
basis of a determination that the transaction
does not provide for a resulting enterprise re-
source bank which is safe and sound.
‘‘(d) PROHIBITION ON JOINT OFFICES.—Except with
regard to the office of finance or to the extent specifically
provided in this Act, there shall be no joint or collective
offices of the enterprise resource banks.’’.
SEC. 4. FEDERAL HOUSING FINANCE BOARD.
(a) IN GENERAL.—Section 3 of the Federal Home
Loan Bank Act (12 U.S.C. 1423) is amended to read as
follows:
‘‘SEC. 3. FEDERAL HOUSING FINANCE BOARD.
‘‘(a) ESTABLISHMENT.—
‘‘(1) IN GENERAL.—There shall be a Federal
Housing Finance Board in the executive branch
which shall be an independent agency to regulate the
safety and soundness of the enterprise resource
banks.
‘‘(2) DUTIES.—The duties of the Finance
Board shall be the following:
‘‘(A) To ensure that the enterprise re-
source banks—
‘‘(i) operate in accordance with this
Act and in a safe and sound manner; and
‘‘(ii) remain adequately capitalized.
‘‘(B) To ensure that programs adminis-
tered by any enterprise resource bank are con-
sistent with, and contribute to the fulfillment
of, the mission of the bank.
‘‘(C) To provide periodic reports to the
Congress regarding the safety and soundness
and the composition of the shareholders in the
enterprise resource banks and the extent to
which such banks are fulfilling their mission.
‘‘(3) CLARIFICATION
OF
AUTHORITY
OF
FI-
NANCE BOARD.—The Finance Board shall have no
authority—
‘‘(A) to manage the operations of any en-
terprise resource bank;
‘‘(B) to manage the sustainable economic
development program of any enterprise resource
bank, including the community investment pro-
gram or the affordable housing program of any
such bank; or
‘‘(C) to approve or disapprove funding by
any such bank for any program referred to in
subparagraph (B).
‘‘(4) MANAGEMENT OF FINANCE BOARD.—The
management of the Finance Board shall be vested in
a chief executive officer.
‘‘(b) COMPOSITION OF FINANCE BOARD.—
‘‘(1) IN GENERAL.—Subject to paragraph (9),
the Finance Board shall be composed of 5 directors
as follows:
‘‘(A) The Secretary of the Department of
Housing and Urban Development, who shall
serve without additional compensation.
‘‘(B) 3 directors appointed by the Presi-
dent, by and with the advice and consent of the
Senate, from among individuals who—
‘‘(i) are citizens of the United States;
and
‘‘(ii) have—
‘‘(I) 
extensive 
experience 
or
training in housing finance, commu-
nity and economic development (in-
cluding rural economic development),
financial safety and soundness regula-
tion, or extensive experience with an
organization 
which 
represents
consumer or community interest in
banking services, credit needs, hous-
ing, financial consumer protection, or
small businesses; and
‘‘(II) a commitment to provide
specialized housing, small business, or
rural credit.
‘‘(C) 1 director appointed by the President,
by and with the advice and consent of the Sen-
ate, from among individuals who—
‘‘(i) are citizens of the United States;
and
‘‘(ii) have extensive experience or
training in financial safety and soundness
regulation.
‘‘(2) TERMS.—
‘‘(A) IN GENERAL.—Except as provided in
paragraph (10), each director of the Finance
Board appointed under subparagraph (B) or
(C) of paragraph (1) shall be appointed for a
term of 7 years.
‘‘(B) INTERIM
APPOINTMENTS.—Any di-
rector appointed to fill a vacancy occurring be-
fore the expiration of the term for which such
director’s predecessor was appointed shall be
appointed only for the remainder of such term.
‘‘(C) CONTINUATION
OF
SERVICE.—Each
director may continue to serve after the expira-
tion of the term to which such director was ap-
pointed until a successor has been appointed
and qualified.
‘‘(3) 
CHAIRPERSON
AND
ACTING
CHAIR-
PERSON.—
‘‘(A) CHAIRPERSON.—The President shall
designate 1 of the directors appointed pursuant
to subparagraph (B) or (C) of paragraph (1) to
be the Chairperson of the Finance Board.
‘‘(B) SERVICE AS CHIEF EXECUTIVE OFFI-
CER.—The Chairperson shall be the chief exec-
utive officer of the Finance Board.
‘‘(C) ACTING CHAIRPERSON.—
‘‘(i) IN GENERAL.—The Chairperson
shall designate another director to serve as
acting Chairperson during the absence or
disability of the Chairperson.
‘‘(ii) SELECTION BY DIRECTORS.—If a
designation by the Chairperson has not
been made pursuant to clause (i) and the
position of Chairperson becomes vacant,
the remaining directors shall elect a direc-
tor to serve as the Acting Chairperson
until a Chairperson has been appointed.
‘‘(D) POWERS
AND
RESPONSIBILITY
OF
CEO.—
‘‘(i) IN GENERAL.—As the chief exec-
utive officer, the Chairperson shall be re-
sponsible for—
‘‘(I) the overall management, or-
ganization, and functioning of the Fi-
nance Board in accordance with the
policies established and regulations
prescribed by the Finance Board;
‘‘(II) directing the implementa-
tion of regulations prescribed and
policies established by the Finance
Board; and
‘‘(III) appoint, remove, promote,
direct, and set rates of compensation
for employees, attorneys, and agents
of the Finance Board consistent with
the policies established by the Finance
Board pursuant to subsection (e)(1).
‘‘(ii) MEETINGS.—The Chairperson
may call a meeting of the Finance Board.
‘‘(iii) DELEGATION.—The Chairperson
may delegate any authority of the Chair-
person as the chief executive officer of the
Finance Board to any officer or employee
of the Finance Board, including another
director of the Finance Board.
‘‘(iv) GOVERNING
STANDARDS.—In
carrying out the duties of the chief execu-
tive officer, the Chairperson shall be sub-
ject to and governed by the policies adopt-
ed by the Finance Board and any regu-
latory decision, finding, or determination
made by the Finance Board.
‘‘(4) REPRESENTATIONAL REQUIREMENTS.—
‘‘(A) POLITICAL AFFILIATION.—Not more
than 2 of the directors appointed under sub-
paragraphs (B) and (C) of paragraph (1) may
be members of the same political party.
‘‘(B) DISTRICT
REPRESENTATION.—Not
more than 1 director may be appointed under
subparagraphs (B) and (C) of paragraph (1)
from any single district of the enterprise re-
source Bank System.
‘‘(5) VACANCY.—Any vacancy on the Finance
Board shall be filled in the manner in which the
original appointment was made.
‘‘(6) LIMITATIONS
ON
CONFLICTS
OF
INTER-
EST.—No director on the Finance Board may, while
serving as a director—
‘‘(A) serve as a director, officer, employee,
counsel, or agent of any enterprise resource
bank; or
‘‘(B) hold shares of, serve as a director, of-
ficer, employee, counsel, or agent of, or have
any other financial interest in any shareholder
of any such bank.
‘‘(7) FULL-TIME SERVICE.—No director other
than the Chairperson (or any director serving as the
acting Chairperson) may serve on the Finance
Board on a full-time basis.
‘‘(8) QUORUM.—A quorum of the Finance
Board shall consist of at least one-half of all the di-
rectors serving on the Finance Board.
‘‘(9) DELEGATION BY SECRETARY.—The Sec-
retary of Housing and Urban Development may del-
egate such Secretary’s position on the Finance
Board to an officer of such Secretary’s agency who
has been appointed to such office by the President,
by and with the advice and consent of the Senate.
‘‘(10) CONTINUED SERVICE OF FEDERAL HOUS-
ING FINANCE BOARD DIRECTORS.—Any director of
the Federal Housing Finance Board whose term has
not expired before the date of enactment of the En-
terprise Resource Bank Act of 1996 shall remain a
director of the Finance Board, in the same capacity,
and shall be deemed to have been appointed under
subparagraph (B) or (C) of paragraph (1).
‘‘(c) GENERAL
POWERS.—Subject to subsection
(a)(3), the Finance Board shall have the following powers:
‘‘(1) To maintain such oversight of the enter-
prise resource banks, subsidiaries of such banks, and
the office of finance as may be necessary to ensure
that such banks and subsidiaries and the office of fi-
nance operate in accordance with this Act and in a
financially safe and sound manner.
‘‘(2) To prescribe or issue, and enforce, such
regulations and orders as the Finance Board deter-
mines to be necessary to carry out the provisions of
this Act.
‘‘(3) To suspend or remove for cause a director,
officer, employee, or agent of any enterprise resource
bank or the office of finance.
‘‘(4) To determine necessary expenditures of
the Finance Board under this Act and the manner
in which such expenditures shall be incurred, al-
lowed, and paid.
‘‘(5) To use the United States mails in the
same manner and under the same conditions as a
department or agency of the United States.
‘‘(6) To sue and be sued and to complain and
defend, by and through the Finance Board’s own at-
torneys, in any action brought by or against the Fi-
nance Board in any court of competent jurisdiction.
‘‘(7) To make contracts.
‘‘(8) To exercise incidental powers that are con-
sistent with this Act and are appropriate to carry
out the provisions of this Act.
‘‘(d) RECEIPTS OF THE FINANCE BOARD.—
‘‘(1) DEPOSIT IN TREASURY.—Receipts of the
Finance Board derived from assessments imposed on
the enterprise resource banks and from other
sources shall be deposited in an account of the Fi-
nance Board in the Treasury of the United States.
‘‘(2) PAYMENT OF EXPENSES.—Salaries of the
directors and other employees of the Finance Board
and all other expenses of the Finance Board may be
paid from the receipts described in paragraph (1).
‘‘(3) TREATMENT
OF
AMOUNTS
RECEIVED.—
Notwithstanding any other provision of law—
‘‘(A) no amount received by the Finance
Board pursuant to any assessment imposed on
any enterprise resource bank or any other in-
come of the Finance Board may be construed
to be Government funds or appropriated money;
‘‘(B) no authority of the Finance Board to
spend or otherwise obligate any such amount
may be treated as budget authority, spending
authority, or credit authority or as authority to
obligate funds of the United States, notwith-
standing the fact that the receipts described in
paragraph (1) are deposited in the account of
the Finance Board in the Treasury; and
‘‘(C) no such amount shall be subject to
apportionment for purposes of chapter 15 of
title 31, United States Code, or under any
other authority.
‘‘(e) STAFF.—
‘‘(1) IN GENERAL.—The Finance Board may
provide for the employment, direction, compensation,
and number of employees, attorneys, and agents of
the Finance Board.
‘‘(2) PROHIBITION ON DELEGATION TO BANKS
OR THE OFFICE OF FINANCE.—The Finance Board
may not delegate, or provide for the delegation of,
any function of the Finance Board to any employee
or administrative unit of any bank or the office of
finance.
‘‘(3) RESTATEMENT OF PRIOR LAW.—The com-
pensation of staff, attorneys, and agents shall be
paid without regard to the provisions of other laws
applicable to officers or employees of the United
States, except that the chairperson and the other ap-
pointed directors shall be compensated pursuant to
sections 5314 and 5315 of title 5, United States
Code, respectively.
‘‘(f) ANNUAL REPORTS.—
‘‘(1) BOARD
REPORTS.—The Finance Board
shall make an annual report to the Congress regard-
ing—
‘‘(A) the safety and soundness of the en-
terprise resource banks and the office of fi-
nance;
‘‘(B) the fulfillment of the mission of the
banks under this Act; and
‘‘(C) the composition of the shareholders in
the enterprise resource banks.
‘‘(2) BANK
REPORTS.—Each enterprise re-
source bank shall submit an annual report to the Fi-
nance Board on the fulfillment of the mission of the
bank under this Act.
‘‘(3) AFFORDABLE HOUSING ADVISORY COUN-
CILS.—The affordable housing advisory councils of
the enterprise resource banks shall each submit an
annual report to the Finance Board on the fulfill-
ment by such bank of its affordable housing mission
under section 10.
‘‘(g) SUSPENSION OR REMOVAL OF BANK EMPLOY-
EES FOR CAUSE.—
‘‘(1) WRITTEN NOTICE.—In exercising any au-
thority under subsection (c)(3) to suspend or remove
for cause a director, officer, employee, or agent of
any enterprise resource bank or the office of finance,
the Finance Board shall provide written notice of
such suspension or removal and the cause of the sus-
pension or removal to such director, officer, em-
ployee, or agent and to such bank or office.
‘‘(2) HEARING.—The notice provided pursuant
to paragraph (1) shall establish the time and place
for a hearing on the suspension or removal in ac-
cordance with section 554 of title 5, United States
Code.’’.
(b) INDEPENDENCE OF FINANCE BOARD.—Section
111 of Public Law 93—495 (12 U.S.C. 250) is amended
by striking ‘‘the Federal Home Loan Bank Board,’’ and
inserting ‘‘the Director of the Office of Thrift Supervision,
the Federal Housing Finance Board,’’.
SEC. 5. THE OFFICE OF FINANCE.
Section 4 of the Federal Home Loan Bank Act (12
U.S.C. 1424) is amended to read as follows:
‘‘SEC. 4. THE OFFICE OF FINANCE.
‘‘(a) OPERATION.—The enterprise resource banks
shall operate jointly an office of finance (hereafter in this
section referred to as the ‘office’) to issue the notes, bonds,
and debentures of the enterprise resource banks in accord-
ance with this Act.
‘‘(b) POWERS.—Subject to the other provisions of
this Act and such safety and soundness regulations as the
Finance Board may prescribe, the office shall be author-
ized by the enterprise resource banks to act as the agent
of such banks to issue enterprise resource bank notes,
bonds and debentures pursuant to section 11 of this Act
on behalf of the banks.
‘‘(c) CENTRAL BOARD OF DIRECTORS.—
‘‘(1) ESTABLISHMENT.—The enterprise re-
source banks shall establish a central board of direc-
tors of the office of finance to administer the affairs
of the office in accordance with the provisions of this
Act.
‘‘(2) COMPOSITION
OF
BOARD.—Each enter-
prise resource bank shall annually select 1 individual
who, as of the time of the election, is an officer or
director of such bank to serve as a member of the
central board of directors.
‘‘(d) STATUS.—Except to the extent expressly pro-
vided in this Act, the office shall be treated as an enter-
prise resource bank for purposes of any law.
‘‘(e) MONITORING INVESTMENT EXPOSURE.—
‘‘(1) 
REGULAR
POSITION
REPORTING
RE-
QUIRED.—
‘‘(A) IN
GENERAL.—Beginning 30 days
after the date of the enactment of the Enter-
prise Resource Bank Act of 1996, each enter-
prise resource bank shall regularly report the
bank’s closing position on all of the bank’s in-
vestments and qualified financial contracts (as
defined in section 11(e)(8)(D) of the Federal
Deposit Insurance Act) to the office of finance
and the Finance Board.
‘‘(B) FINANCE BOARD REQUIREMENTS.—
The Finance Board may specify the contents of
the reports required under subparagraph (A).
‘‘(2) SYSTEM PROCEDURES.—In addition to the
reports required under paragraph (1), the Finance
Board, the enterprise resource banks, and the office
shall jointly establish procedures for monitoring the
investment exposure, including credit and interest
rate risk, of the banks’ individual and combined in-
vestment portfolios.’’.
SEC. 6. CAPITAL.
(a) IN GENERAL.—Section 6 of the Federal Home
Loan Bank Act (12 U.S.C. 1426) is amended by striking
all that precedes subsection (h) and inserting the follow-
ing:
‘‘SEC. 6. CAPITAL STRUCTURE OF ENTERPRISE RESOURCE
BANKS.
‘‘(a) CAPITAL STRUCTURE PLAN.—Before the end of
the 6-month period beginning on the date of the enact-
ment of the Enterprise Resource Bank Act of 1996, the
board of directors of each enterprise resource bank shall
complete, and file with the Finance Board for approval,
a plan for establishing and implementing a capital struc-
ture for such bank which—
‘‘(1) the board of directors determines is the
best suited for the condition and operation of the
bank and the interests of the shareholders of the
bank;
‘‘(2) meets the requirements of subsection (b);
and
‘‘(3) meets the minimum capital standards and
requirements established under subsection (c) and
any regulations prescribed by the Finance Board
pursuant to such subsection.
‘‘(b) CONTENTS OF PLAN.—The capital structure
plan of each enterprise resource bank shall meet the fol-
lowing requirements:
‘‘(1) ADJUSTMENT OF EQUITY INVESTMENTS.—
The plan shall include a timetable for adjusting, by
such amount as the board of directors may deter-
mine to be appropriate, the amount of the equity in-
vestment of the shareholders of the bank as of the
date of the enactment of the Enterprise Resource
Bank Act of 1996.
‘‘(2) UNIFORM STANDARDS FOR SHAREHOLD-
ERS.—The plan shall establish uniform standards,
criteria, and requirements for the issuance, pur-
chase, trading, and transfer of shares of any class
of stock of the bank.
‘‘(3) PROCEDURE
FOR
MEETING
PERMANENT
CAPITAL REQUIREMENT.—The plan shall establish
the process by which the bank shall meet the perma-
nent capital requirement in subsection (c)(5) as soon
as practicable after the date of the enactment of the
Enterprise Resource Bank Act of 1996.
‘‘(4) LIMITED TRANSFERABILITY OF STOCK.—
The plan shall provide that any equity securities is-
sued by the bank shall be available only to, held only
by, and tradable only among, shareholders of the
bank or institutions eligible to become shareholders
of the bank under subsection (d).
‘‘(5) DESCRIPTION OF STOCK AND RIGHTS OF
SHAREHOLDERS.—The plan shall provide for and
describe the terms, rights (voting, liquidation, and
other rights), and preferences (such as dividends) of
any class or series of stock and any other type of eq-
uity security issued or to be issued by the bank.
‘‘(6) ACQUISITION, TRANSFER, AND
REDEMP-
TION OF STOCK.—The plan shall identify the man-
ner in which any equity securities to be issued by
the bank may be sold, transferred, or redeemed.
‘‘(7) FINAL
DISPOSITION
OF
OWNERSHIP
IN-
TERESTS OF SHAREHOLDER.—The plan shall pro-
vide for the manner of disposition of any outstand-
ing equity securities held by, and the liquidation of
any claims of the bank against, a shareholder who
provides notice of intention to dispose of all owner-
ship interest in the enterprise resource bank.
‘‘(8) CLARIFICATION OF VOTING RIGHTS.—The
voting rights of any shareholder of any enterprise re-
source bank shall cease upon disposition of all own-
ership interests of the shareholder in the bank.
‘‘(9) 
APPROVAL
OF
CAPITAL
STRUCTURE
PLANS.—In approving capital structure plans under
this subsection, the Finance Board shall ensure
that—
‘‘(A) the capital instruments, and the char-
acteristics of such instruments, of the enter-
prise resource banks are consistent among all
such banks; and
‘‘(B) the plan for each enterprise resource
bank establishes a process for managing the or-
derly redemption of redeemable stock and other
equity interests in the bank.
‘‘(c) CAPITAL STANDARDS.—
‘‘(1) IN GENERAL.—The Finance Board shall
prescribe, by regulation, uniform capital standards
applicable to each enterprise resource bank which
shall include—
‘‘(A) a leverage limit;
‘‘(B) a risk-based capital requirement; and
‘‘(C) a permanent capital requirement.
‘‘(2) RISK-BASED CAPITAL TEST.—The Finance
Board shall adopt a capital stress test substantially
similar to the risk-based capital test established by
the Director of the Office of Federal Housing Enter-
prise Oversight of the Department of Housing and
Urban Development pursuant to section 1361 of the
Federal Housing Enterprises Financial Safety and
Soundness Act of 1992, with such modifications as
the Finance Board determines appropriate to reflect
differences in operation between the enterprise re-
source bank system and the enterprises (as defined
in section 1303(6) of such Act).
‘‘(3) MINIMUM LEVERAGE LIMIT.—The leverage
limit established by the Finance Board shall require
each enterprise resource bank to maintain total cap-
ital in an amount not less than the applicable
amount in the following subparagraphs, as deter-
mined in accordance with generally accepted ac-
counting principles:
‘‘(A) 5 percent of the total assets of the
bank, during any period in which—
‘‘(i) the bank does not meet the re-
quirement of paragraph (5); and
‘‘(ii) the amount of the capital of the
bank which is taken into account under
paragraph (5) is less than 0.5 percent of
such total assets.
‘‘(B) 4.5 percent of the total assets of the
bank, during any period in which—
‘‘(i) the bank does not meet the re-
quirement of paragraph (5); and
‘‘(ii) the amount of the capital of the
bank which is taken into account under
paragraph (5) is 0.5 percent or more, and
less than 1 percent, of such total assets.
‘‘(C) 4 percent of the bank’s total assets
during any period in which—
‘‘(i) the amount of the capital of the
bank which is taken into account under
paragraph (5) is 1 percent or more of such
total assets; and
‘‘(ii) the bank is obligated, under sec-
tion 21B(f)(2)(C), to provide funding to
cover interest payments on obligations is-
sued by the Resolution Funding Corpora-
tion.
‘‘(D) 3 percent of the bank’s total assets
during any other period.
‘‘(4) RISK-BASED
CAPITAL
STANDARD.—The
risk-based capital standard established by the Fi-
nance Board shall require each enterprise resource
bank to maintain total capital in an amount not less
than the greater of the following:
‘‘(A) 10 percent of the risk-adjusted assets
of the bank, as determined using the risk
weighting established by the Bank for Inter-
national Settlements pursuant to the Basel Ac-
cord.
‘‘(B) The amount which enables the bank
to maintain a positive equity account under the
application of the capital stress test adopted es-
tablished by the Finance Board pursuant to
paragraph (2).
‘‘(5) PERMANENT CAPITAL REQUIREMENT.—
‘‘(A) IN
GENERAL.—Subject to subpara-
graph (B), the Finance Board shall require
each enterprise resource bank to maintain, as
soon as practicable after the date of the enact-
ment of the Enterprise Resource Bank Act of
1996, such amount of permanent capital as the
Finance Board may prescribe in any of the fol-
lowing forms or combination of forms:
‘‘(i) Retained earnings.
‘‘(ii) A risk-insurance pool.
‘‘(iii) Nonredeemable stock of the
bank.
‘‘(iv) Stock of the bank as to which
any right to redeem is explicitly suspended
during any period in which the bank is
undercapitalized.
‘‘(B) MINIMUM
AMOUNT.—The amount
prescribed by the Finance Board under sub-
paragraph (A) may not be less than 1 percent
of the total assets of the bank.
‘‘(d) CRITERIA FOR ELIGIBILITY FOR OWNERSHIP
INTEREST IN A BANK.—
‘‘(1) IN GENERAL.—Any insured depository in-
stitution and insured credit union, and, except as
provided in paragraph (5), only such institutions
and credit unions, may acquire and retain shares of
stock of an enterprise resource bank.
‘‘(2) WHOLE MORTGAGE TEST FOR LARGE DE-
POSITORY INSTITUTIONS.—
‘‘(A) IN GENERAL.—Notwithstanding para-
graph (1), an institution which has an average
annual amount of total assets of $500,000,000
or more at any time after June 30, 1998, shall
maintain an investment in whole mortgage
loans in accordance with the following table:
‘‘Annually—
Not less than the following per-
cent of the average annual
amount of total assets of
the institution are invested
in whole mortgage loans—
During the 1-year period beginning on July 1, 1998 ..............
7%
During the 1-year period beginning on July 1, 1999 ..............
8%
During the 1-year period beginning on July 1, 2000 ..............
9%
After June 30, 2001 ................................................................
10%
‘‘(B) 
WHOLE
MORTGAGE
LOAN
DE-
FINED.—For purposes of this subsection, the
term ‘whole mortgage loan’ does not include—
‘‘(i) a partial interest in a residential
mortgage on improved residential real
property; or
‘‘(ii) a security that represents an in-
terest in a residential mortgage loan.
‘‘(C) OTHER ASSETS.—The Finance Board
may identify other mission-related assets as as-
sets which may be taken into account, in addi-
tion to whole mortgage loans, for purposes of
subparagraph (A).
‘‘(D) PENALTIES FOR FAILING TO MEET
WHOLE MORTGAGE LOAN TEST.—An enterprise
resource bank shall take the appropriate action
under the following clauses with respect to an
institution which is subject to the requirement
of subparagraph (A) and fails to comply with
such requirement:
‘‘(i) An institution which fails to meet
such requirement shall not be eligible for
any long-term advance from the bank until
the institution has met such requirement
on an average daily basis for 2 consecutive
calendar quarters.
‘‘(ii) An institution which fails to meet
such requirement for 4 consecutive cal-
endar quarters shall not be eligible for any
advance from the bank.
‘‘(iii) An institution which fails to
meet such requirement for 8 consecutive
calendar quarters shall be required to di-
vest all ownership interests of the institu-
tion in the bank in accordance with sub-
section (e)(2).
‘‘(E) 
INDEXING
OF
TOTAL
ASSETS
AMOUNT.—The Finance Board shall establish a
methodology for adjusting the dollar amount of
total assets in subparagraph (A) after Decem-
ber 31, 1998, to reflect asset inflation and
other relevant factors.
‘‘(3) DESIGNATION OF BANK.—An institution
which is eligible to acquire and retain shares of an
enterprise resource bank under paragraph (1) may
only acquire the shares of, or secure advances
from—
‘‘(A) the enterprise resource bank of the
district in which is located the institution’s
principal place of business; or
‘‘(B) the bank of a district adjoining the
district described in subparagraph (A) if—
‘‘(i) demanded by convenience; and
‘‘(ii) an application by such institution
to the bank and the Finance Board for the
acquisition of shares of such bank is—
‘‘(I) approved by the bank; and
‘‘(II) not disapproved by the Fi-
nance Board before the end of the 30-
day period beginning on the date the
Finance Board receives the applica-
tion from such institution.
‘‘(4) EXCEPTION
FOR
CERTAIN
NONDEPOSI-
TORY INSTITUTIONS.—Any company which, as of the
day before the date of the enactment of the Enter-
prise Resource Bank Act of 1996, was a member of
a Federal home loan bank may continue, subject to
this Act, to be a voting shareholder of the bank after
such date with all rights and privileges as a voting
shareholder.
‘‘(e) REDEMPTION OF CAPITAL.—
‘‘(3) IMPAIRMENT OF CAPITAL.—If the Finance
Board or the board of directors of an enterprise re-
source bank determines that the paid-in capital of
the bank is, or is likely to be, impaired as a result
of losses in or depreciation of the assets of the bank,
the enterprise resource bank shall withhold that por-
tion of the amount due any shareholder with respect
to any redemption or retirement of any class of
stock which bears the same ratio to the total of such
amount as the amount of the impaired capital bears
to the total amount of capital allocable to such class
of stock.
‘‘(4) POLICIES.—Subject to the requirements of
this section, the board of directors of each enterprise
resource bank shall promptly establish policies, con-
sistent with this Act, governing the capital stock of
such bank and other provisions of this section.’’.
(b) REDUCTION
OF PERIOD REQUIRED BEFORE
FULLY
DIVESTED
STOCKHOLDER
MAY
REACQUIRE
SHARES OF A BANK.—Subsection (h) of section 6 of the
Federal Home Loan Bank Act (12 U.S.C. 1426) (as
amended by subsection (a)) is amended—
(1) by redesignating such subsection as sub-
section (f);
(2) by striking ‘‘10’’ and inserting ‘‘5’’; and
(3) by inserting before the period at the end ‘‘,
except that any institution that withdrew from mem-
bership in any such bank before December 31, 1995,
may acquire an ownership interest in a enterprise
resource bank at any time after such date subject to
the requirements of this Act.’’.
(c) ELIGIBILITY OF NON-QTL SAVINGS ASSOCIA-
TIONS TO OBTAIN NEW ADVANCES AND MAINTAIN AD-
VANCES.—Section 10(m)(3)(B) of the Home Owners’
Loan Act (12 U.S.C. 1467a(m)(3)(B)) is amended—
(1) in clause (i), by striking subclause (III) and
redesignating subclause (IV) as subclause (III); and
(2) in clause (ii), by striking subclause (II).
(d) VOLUNTARY OWNERSHIP INTERESTS OF FED-
ERAL SAVINGS ASSOCIATIONS.—Section 5(f) of the Home
Owners’ Loan Act (12 U.S.C. 1464(f)) is amended to read
as follows:
‘‘(f) VOLUNTARY OWNERSHIP INTERESTS IN ENTER-
PRISE RESOURCE BANK.—Each Federal savings associa-
tion may be eligible to acquire shares of stock in an enter-
prise resource bank in the manner provided in the Enter-
prise Resource Bank System Act.’’.
SEC. 7. PROMPT CORRECTIVE ACTION.
Section 24 of the Federal Home Loan Bank Act (12
U.S.C. 1444) is amended to read as follows:
‘‘SEC. 24. PROMPT CORRECTIVE ACTION.
‘‘(a) PURPOSES.—The purposes of this section are to
ensure that the enterprise resource banks remain—
‘‘(1) adequately capitalized;
‘‘(2) able to raise funds in the capital markets;
and
‘‘(3) able to meet the obligations of such banks
under this Act.
‘‘(b) 
CAPITAL
CLASSIFICATIONS.—The 
Finance
Board shall classify the capital adequacy of enterprise re-
source banks in accordance with the following capital cat-
egories:
‘‘(1) ADEQUATELY
CAPITALIZED.—An enter-
prise resource bank shall be classified as adequately
capitalized if such bank meets the required mini-
mum level for each relevant capital measure.
‘‘(2) UNDERCAPITALIZED.—An enterprise re-
source bank shall be classified as undercapitalized if
such bank fails to meet the minimum level for any
capital measure required by this Act, or any addi-
tional capital requirement that may be established
for such bank by the Finance Board.
‘‘(3) CRITICALLY UNDERCAPITALIZED.—An en-
terprise resource bank shall be classified as critically
undercapitalized for purposes of this section if the
bank fails to meet the requirements specified by the
Finance Board under paragraph (4) which must be
met in order not to be treated as critically under-
capitalized.
‘‘(4) 
CAPITAL
CATEGORIES.—The 
Finance
Board shall, by regulation, specify for each relevant
capital measure the levels at which an enterprise re-
source bank is adequately capitalized, undercapital-
ized, and critically undercapitalized.
‘‘(5) QUARTERLY
EVALUATION
OF
CAPITAL
ADEQUACY.—
‘‘(A) IN
GENERAL.—The Finance Board
shall—
‘‘(i) evaluate the capital adequacy of
each enterprise resource bank at least once
in each calendar quarter, and
‘‘(ii) classify the capital adequacy of
the bank in accordance with the categories
established pursuant to paragraph (1).
‘‘(B) JUDICIAL REVIEW.—For the purpose
of obtaining judicial review of—
‘‘(i) any classification of the capital
adequacy of an enterprise resource bank
under subparagraph (A); or
‘‘(ii) any action taken by the Finance
Board pursuant to such classification,
the classification, or the action taken pursuant
to a classification, shall be treated as a final
order of the Finance Board.
‘‘(c) PROVISION APPLICABLE TO ALL ENTERPRISE
RESOURCE BANKS.—
‘‘(1) CAPITAL DISTRIBUTIONS RESTRICTED.—
An enterprise resource bank shall make no capital
distribution if, after making the distribution, the
bank would be undercapitalized.
‘‘(2) 
EXCEPTIONS.—Notwithstanding 
para-
graph (1)—
‘‘(A) an enterprise resource bank may re-
deem a voting shareholder’s stock in accordance
with section 6(e)(3); and
‘‘(B) the Finance Board may permit an
enterprise resource bank to repurchase, redeem,
retire, or otherwise acquire the shares of the
bank if the repurchase, redemption, retirement,
or other acquisition—
‘‘(i) is made in connection with the is-
suance of additional shares of the bank in
at least an equivalent amount; and
‘‘(ii) will reduce the bank’s financial
obligations or otherwise improve the bank’s
financial condition.
‘‘(d) 
SUPERVISORY
ACTIONS
APPLICABLE
TO
UNDERCAPITALIZED ENTERPRISE RESOURCE BANKS.—
‘‘(1) MANDATORY ACTIONS.—
‘‘(A) CAPITAL AND INCOME RESTORATION
PLANS.—Any undercapitalized enterprise re-
source bank shall file an acceptable capital and
income restoration plan with the Finance
Board, in accordance with subsection (f).
‘‘(B) RECLASSIFICATION
FROM
UNDER-
CAPITALIZED
TO
CRITICALLY
UNDER-
CAPITALIZED.—The Finance Board shall reclas-
sify as critically undercapitalized any enterprise
resource bank that is classified as undercapital-
ized if—
‘‘(i) the bank does not submit an ac-
ceptable capital and income restoration
plan within the time periods prescribed; or
‘‘(ii) the Finance Board determines
that the bank has failed to make, in good
faith, reasonable efforts to comply with an
accepted capital and income restoration
plan.
‘‘(C) PRIOR APPROVAL FOR NEW ACTIVI-
TIES.—The Finance Board shall require an
undercapitalized enterprise resource bank to ob-
tain prior approval from the Finance Board be-
fore engaging in any new activities.
‘‘(2) DISCRETIONARY
ACTIONS.—The Finance
Board may, with respect to an undercapitalized en-
terprise resource bank, take such other actions as
the Finance Board determines are necessary or ap-
propriate to carry out the purpose of this section in-
cluding—
‘‘(A) imposition of restrictions on growth
in assets;
‘‘(B) limitations on increases in bank obli-
gations;
‘‘(C) imposition of restrictions on activities
that the Finance Board determines create ex-
cessive risk to the bank; and
‘‘(D) requiring changes in or any restric-
tion on the board of directors or management
of the bank.
‘‘(e) SUPERVISORY ACTIONS APPLICABLE TO CRITI-
CALLY
UNDERCAPITALIZED
ENTERPRISE
RESOURCE
BANKS.—
‘‘(1) MERGER, LIQUIDATION, REORGANIZATION,
OR OTHER ACTION REQUIRED.—The Finance Board
shall—
‘‘(A) combine, by merger or otherwise, any
critically undercapitalized enterprise resource
bank with another enterprise resource bank;
‘‘(B) liquidate or reorganize any such criti-
cally undercapitalized bank; or
‘‘(C) take such other action in connection
with such bank as the Finance Board deter-
mines would better achieve the purpose of this
section.
‘‘(2) 
PERIODIC
REDETERMINATION
RE-
QUIRED.—Any determination by the Finance Board
under paragraph (1) to take any action with respect
to a critically undercapitalized enterprise resource
bank other than combining, reorganizing, or liq-
uidating the bank shall cease to be effective not later
than the end of the 90-day period after the deter-
mination was made and the bank shall be combined,
reorganized or liquidated unless the Finance Board
makes a new determination.
‘‘(3) ACTIVITIES RESTRICTIONS.—The Finance
Board shall restrict and closely monitor the activities
of a critically undercapitalized enterprise resource
bank, including taking any of the discretionary ac-
tions applicable to an undercapitalized bank.
‘‘(f) CAPITAL AND INCOME RESTORATION PLANS.—
‘‘(1) IN GENERAL.—The Finance Board shall
prescribe regulations which require any undercapital-
ized enterprise resource bank to file within the pre-
scribed periods and implement an acceptable capital
and income restoration plan with the Finance
Board.
‘‘(2) REQUIREMENTS RELATING TO PLAN.—
‘‘(A) CONTENTS OF PLAN.—A capital and
income restoration plan shall—
‘‘(i) specify the steps that the bank
will take to become adequately capitalized
and to increase earnings;
‘‘(ii) specify the levels of capital to be
attained during each year in which the
plan will be in effect;
‘‘(iii) describe how the bank will com-
ply with the restrictions or requirements in
effect under this section; and
‘‘(iv) specify the types and levels of
activities in which the bank will engage
during the term of the plan.
‘‘(B) DEADLINES FOR SUBMISSION.—
‘‘(i) INITIAL
PERIOD.—The Finance
Board shall, by regulation, establish a
deadline for submission of a capital and in-
come restoration plan which may not be
more than 45 days after the bank is noti-
fied that a plan is required.
‘‘(ii) EXTENSION OF DEADLINE.—The
regulations shall provide that the Finance
Board may extend, in writing, the deadline
to a date certain if the Finance Board de-
termines such extension is appropriate.
‘‘(C) APPROVAL.—
‘‘(i) REVIEW
PERIOD.—The Finance
Board shall review each capital and income
restoration plan submitted under this sec-
tion and, not later than 30 days after re-
ceipt of the plan, approve or disapprove
the plan.
‘‘(ii) EXTENSION
OF
REVIEW
PE-
RIOD.—The Finance Board may extend, in
writing, the period for approval or dis-
approval for any plan for a single addi-
tional 30-day period if the Finance Board
determines such extension is appropriate.
‘‘(D) NOTICE OF BOARD ACTION.—The Fi-
nance Board shall provide written notice to any
bank which submits a plan under this sub-
section of the approval or disapproval of the
plan and shall include the reasons for any dis-
approval of the plan.
‘‘(E) 
RESUBMISSION.—If 
the 
Finance
Board disapproves the initial capital and in-
come restoration plan submitted by the bank,
the bank shall submit an amended plan accept-
able to the Finance Board within 30 days or
such longer period that the Finance Board de-
termines is in the public interest.
‘‘(g) APPOINTMENT OF CONSERVATOR FOR CRITI-
CALLY
UNDERCAPITALIZED
ENTERPRISE
RESOURCE
BANK.—
‘‘(1) GROUNDS.—The Finance Board may ap-
point a conservator for a critically undercapitalized
enterprise resource bank upon a written determina-
tion that—
‘‘(A) the bank is not likely to pay obliga-
tions of the bank in the normal course of busi-
ness;
‘‘(B) the bank has incurred or is reason-
ably likely to incur losses, or has pending appli-
cations for stock redemptions, that would de-
plete substantially all of the capital of the bank
and it is unlikely that the bank will replenish
such capital within a reasonable period;
‘‘(C) the bank has concealed or is conceal-
ing books, papers, records, or assets of the
bank that are material to the discharge of the
Finance Board’s responsibilities under this sub-
title, or has refused or is refusing to submit
such books, papers, records, or information re-
garding the affairs of the bank for inspection to
the Finance Board upon the demand of the Fi-
nance Board;
‘‘(D) the bank has willfully violated, or is
willfully violating, a final cease-and-desist order;
or
‘‘(E) the bank, by an affirmative vote of a
majority of the bank’s board of directors or an
affirmative vote of the shareholders of the bank,
consents to such appointment.
‘‘(2) QUALIFICATIONS.—The Finance Board
may appoint—
‘‘(A) itself as the conservator for any en-
terprise resource bank;
‘‘(B) as conservator for any such bank,
any other Federal agency or department or
other person that the Finance Board deter-
mines has—
‘‘(i) no claim against, or financial in-
terest in, the bank;
‘‘(ii) no other basis for a conflict of
interest with respect to the bank; and
‘‘(iii) the financial and management
expertise necessary to direct the operations
and affairs of the bank.
‘‘(3) APPOINTMENT EX PARTE AND WITHOUT
NOTICE.—If, in the opinion of the Finance Board, a
ground for the appointment of a conservator for an
enterprise resource bank exists, the Finance Board
may appoint a conservator for the bank ex parte and
without notice.
‘‘(4) JUDICIAL REVIEW.—
‘‘(A) JURISDICTION.—Except as provided
in subparagraph (D), a bank for which a con-
servator is appointed may bring an action dur-
ing the 30-day period beginning upon the ap-
pointment of the conservator in the United
States District Court for the District of Colum-
bia for an order requiring the Finance Board to
terminate the appointment of the conservator.
‘‘(B) STANDARD OF REVIEW.—A decision
of the Finance Board to appoint a conservator
may be set aside only if the court finds that the
decision was arbitrary, capricious, an abuse of
discretion, or otherwise not in accordance with
applicable laws.
‘‘(C) LIMITATION ON JURISDICTION.—Ex-
cept as otherwise provided in this subsection, no
court may take any action regarding the re-
moval of a conservator or otherwise restrain or
affect the exercise of powers or functions of a
conservator.
‘‘(D) CONSENSUAL
APPOINTMENTS.—Ap-
pointment of a conservator pursuant to consent
of the bank shall not be subject to judicial re-
view under this subsection.
‘‘(5) REPLACEMENT.—
‘‘(A) IN
GENERAL.—The Finance Board
may, without notice or hearing, replace a con-
servator for an enterprise resource bank with
another conservator.
‘‘(B) NO EFFECT ON JUDICIAL REVIEW.—
The replacement of a conservator for an enter-
prise resource bank shall not affect the right of
the bank to obtain judicial review under para-
graph (4) of the Finance Board’s decision to
make the initial appointment of a conservator.
‘‘(6) EXAMINATIONS.—The Finance Board may
examine and supervise any enterprise resource bank
for which a conservator has been appointed during
the period in which the bank continues to operate as
a going concern.
‘‘(7) TERMINATION.—
‘‘(A) IN GENERAL.—If, at any time, the
Finance Board determines that termination of
a conservatorship for an enterprise resource
bank is in the public interest and may safely be
accomplished, the Finance Board may termi-
nate the conservatorship and permit the bank
to resume the transaction of the business of the
bank subject to such terms, conditions, and lim-
itations as the Finance Board may prescribe.
‘‘(B) ENFORCEMENT
OF
TERMS, CONDI-
TIONS, AND LIMITATIONS.—Any terms, condi-
tions, and limitations imposed by the Finance
Board in accordance with subparagraph (A)
upon termination of a conservatorship for an
enterprise resource bank shall be enforceable
and renewable to the same extent as any cease-
and-desist order issued by the Finance Board.
‘‘(h) POWERS OF CONSERVATOR.—A conservator ap-
pointed for an enterprise resource bank shall have all the
powers of the shareholders, the directors, and the officers
of the bank and may operate the bank in the bank’s own
name or conserve the assets of the bank in the manner
and to the extent authorized by the Finance Board.
‘‘(i) EXCEPTION.—Notwithstanding any other provi-
sion of this section, the Finance Board may permit an en-
terprise resource bank to redeem the stock of a share-
holder of such bank, repurchase, retire, or otherwise ac-
quire shares of the bank if the repurchase, redemption,
retirement, or other acquisition—
‘‘(1) is made in connection with the issuance of
additional shares of the bank in at least an equiva-
lent amount; and
‘‘(2) will reduce the bank’s financial obligations
or otherwise improve the bank’s financial condi-
tion.’’.
SEC. 8. MANAGEMENT OF BANKS.
Section 7 of the Federal Home Loan Bank Act (12
U.S.C. 1427) is amended to read as follows:
‘‘SEC. 7. MANAGEMENT OF BANKS.
‘‘(a) BOARD OF DIRECTORS.—
shareholders of the bank from the various
States within such bank’s district will be dis-
tributed among the positions of the elected di-
rectors of such bank.
‘‘(B) TRANSITION
PROVISION.—Notwith-
standing subparagraph (A), the composition of
the boards of directors of the 12 enterprise re-
source banks immediately after the effective
date of the Enterprise Resource Bank Act of
1996 shall be the same as the composition of
such boards of directors on January 1, 1996.
‘‘(C) DISCRETIONARY INCREASE IN OVER-
ALL NUMBER OF DIRECTORS.—
‘‘(i) ELECTED DIRECTORS.—In order
to ensure director representation on the
board of directors of an enterprise resource
bank consistent with this paragraph, the
board of directors of the bank may in-
crease the number of elected directors on
the board of directors.
‘‘(ii) APPOINTED DIRECTORS.—If the
board of directors of an enterprise resource
bank increases the number of elected direc-
tors pursuant to clause (i), the number of
appointed directors on such board of direc-
tors shall be increased to the amount
which is 2 less than the number of elected
directors.
‘‘(D) INCREASE
TO
ACHIEVE
MINIMUM
STATE REPRESENTATION.—If, at any time, the
number of elected directors of an enterprise re-
source bank is less than the number of States
in the district of such bank, the board of direc-
tors of the bank may increase the number of
elected directors on such board of directors to
a number at least equal to the number of
States in such district.
‘‘(E) REPRESENTATIONAL
COMPOSITION
OF BOARD OF DIRECTORS.—In establishing by-
laws for the election of directors, and in ap-
pointing directors, to the board of directors of
an enterprise resource bank, the board of direc-
tors shall establish such procedures as may be
appropriate to achieve a board of directors
which reflects the geographical diversity of the
district and the representation of both large
and small institutional shareholders.
‘‘(4) CHAIRPERSON AND VICE CHAIRPERSON.—
‘‘(A) IN GENERAL.—The board of directors
of each enterprise resource bank shall elect—
‘‘(i) 1 of the directors appointed
under paragraph (1)(B) to be the chair-
person of the board of directors; and
‘‘(ii) 1 of the directors to be vice
chairperson of the board of directors.
‘‘(B) LIMITATION.—The president of an
enterprise resource bank may not be designated
under subparagraph (A) as the chairperson or
vice chairperson of the bank.
‘‘(5) PROVISIONS APPLICABLE TO APPOINTED
DIRECTORS.—
‘‘(A) 
REPRESENTATIONAL
REQUIRE-
MENT.—At least 2 of the directors of each en-
terprise resource bank who are appointed by the
Finance Board shall be appointed from among
representatives of organizations with more than
a 2-year history of representing consumer or
community interests on banking services, credit
needs, housing, or financial consumer protec-
tions.
‘‘(B) CONFLICT
OF
INTEREST
PROVI-
SION.—No director on the board of directors of
an enterprise resource bank who is appointed
pursuant to this subsection may, during such
director’s term of office, serve as an officer of
any enterprise resource bank or as a director or
officer of any shareholder of a bank.
‘‘(6) PROVISIONS APPLICABLE TO ELECTED DI-
RECTORS.—
‘‘(A) DESIGNATION OF STATE TO BE REP-
RESENTED.—Each position of elected director
on the board of directors of any enterprise re-
source bank shall be designated by the board of
directors as a position to be filled by a director
representing the voting shareholders of the
bank whose principal places of business are lo-
cated in a particular State.
‘‘(B) SHAREHOLDERS
LOCATED
IN
U.S.
TERRITORIES.—In the case of any voting share-
holder (of an enterprise resource bank) whose
principal place of business is not located in any
State, the enterprise resource bank shall des-
ignate the State in such bank’s district in which
such shareholder shall be deemed to be located
for purposes of this subsection.
‘‘(C) QUALIFICATION.—Only presidents,
chief executive officers, and other senior execu-
tive officers (as defined by the Finance Board)
of voting shareholders whose principal places of
business are located in a State shall be qualified
to serve as a director representing such State.
‘‘(D) NOMINATION OF DIRECTORS.—Each
voting shareholder (of an enterprise resource
bank) whose principal place of business is lo-
cated in any State may nominate any qualified
individual for election as a director representing
such State.
‘‘(E) PLURALITY
DECISION.—Each posi-
tion of elected director of an enterprise resource
bank shall be filled by the nominee, for such po-
sition, who receives a larger number of the
votes cast in an election held for the purpose of
filling such position than any other nominee.
‘‘(7) TERMS.—
‘‘(A) IN GENERAL.—Except as provided in
subparagraph (E), the term of each director
who is elected or appointed to the board of di-
rectors of an enterprise resource bank after the
date of the enactment of the Enterprise Re-
source Bank Act of 1996 shall be 4 years.
‘‘(B) TERM LIMITS.—
‘‘(i) APPOINTED DIRECTORS.—No in-
dividual may serve as an appointed direc-
tor on the board of directors of an enter-
prise resource bank for more than 2 full
consecutive 4-year terms.
‘‘(ii) ELECTED DIRECTORS.—If, dur-
ing any 8-year period, the board of direc-
tors of any enterprise resource bank has
included, as an elected director, any officer
of a specific voting shareholder of the
bank, no officer of such shareholder shall
be eligible to serve as an elected member of
such board of directors during the subse-
quent 4-year period.
‘‘(C) INTERIM
APPOINTMENTS.—Any di-
rector appointed or elected to fill a vacancy oc-
curring before the expiration of the term for
which such director’s predecessor was appointed
or elected shall be appointed or elected only for
the remainder of such term.
‘‘(D) CONTINUATION OF SERVICE.—Each
director of an enterprise resource bank may
continue to serve after the expiration of the
term to which such director was appointed or
elected until a successor has been qualified.
‘‘(E) STAGGERED TERMS.—
‘‘(i) IN
GENERAL.—The bylaws of
each enterprise resource bank shall provide
for staggering the terms of the elected and
appointed directors so that the positions of
approximately one-quarter of the appointed
directors and approximately one-quarter of
the elected directors shall become vacant
each year.
‘‘(ii) 
DESIGNATION
OF
SHORTER
TERMS TO ACHIEVE STAGGERING.—When-
ever necessary to achieve staggered terms
for the directors of an enterprise resource
bank, the board of directors of such bank,
with respect to elected directors, and the
Finance Board, with respect to appointed
directors, may, by resolution (and in ac-
cordance with the bylaws of the bank) and
before the election or appointment of a di-
rector, designate a shorter term for such
position for the next succeeding term.
‘‘(8) VACANCIES.—
‘‘(A) APPOINTED DIRECTOR.—Any vacancy
occurring in the position of appointed director
of an enterprise resource bank shall be filled in
the manner in which the original appointment
was made.
‘‘(B) ELECTED DIRECTOR.—Any vacancy
occurring in the position of elected director of
an enterprise resource bank shall be filled by an
affirmative vote of a majority of the remaining
directors of such bank, without regard to
whether such remaining directors constitute a
quorum of the board of directors.
‘‘(C) VACANCY AS A RESULT OF DISQUALI-
FICATION OF DIRECTOR.—
‘‘(i) IN GENERAL.—If any director of
an enterprise resource bank ceases to meet
any qualification for such position—
‘‘(I) the position shall imme-
diately become vacant by operation of
law; and
‘‘(II) service by such director in
such position shall cease.
‘‘(ii) CONTINUATION.—Notwithstand-
ing clause (i)(II), an appointed director of
an enterprise resource bank whose position
became vacant pursuant to clause (i)(I)
may continue to serve in such position
until a successor has been qualified.
‘‘(9) INELIGIBILITY OF CERTAIN OFFICERS FOR
POSITION OF DIRECTOR.—No officer or employee of,
or any attorney or agent for, any enterprise resource
bank who receives compensation for such service,
other than the president of the bank, shall be eligible
to serve on the board of directors of such bank or
any other enterprise resource bank.
‘‘(10) NOMINATIONS AND ELECTIONS.—The by-
laws of each enterprise resource bank shall provide
procedures for the nomination and election of direc-
tors on the board of directors of the bank.
‘‘(11) DEFINITIONS.—For purposes of this sub-
section, the following definitions shall apply:
‘‘(A) VOTING
SHAREHOLDER.—The term
‘voting shareholder’ means, with respect to any
year, any institution which holds voting shares
of an enterprise resource bank and held voting
shares of such bank at the end of the imme-
diately preceding calendar year.
‘‘(B) STATE.—The term ‘State’ means any
State, the District of Columbia, and the Com-
monwealth of Puerto Rico.
‘‘(12) APPLICABILITY.—This subsection shall
apply to elections and appointments of directors to
terms that begin after the date of enactment of the
Enterprise Resource Bank Act of 1996.
‘‘(b) POWERS
OF BOARDS
OF DIRECTORS.—The
board of directors of each enterprise resource bank shall
have all power necessary to exercise the responsibility of
such board with respect to such bank.
‘‘(c) DUTIES
OF BOARDS
OF DIRECTORS.—The
board of directors of each enterprise resource bank shall—
‘‘(1) administer the affairs of the bank fairly
and impartially and without discrimination in favor
of or against any voting shareholder or borrower;
and
‘‘(2) subject to the provisions of this Act, ex-
tend to each institution authorized to secure ad-
vances such advances as may be made safely and
soundly with due regard for—
‘‘(A) the claims and demands of other in-
stitutions; and
‘‘(B) the maintenance of adequate credit
standing for the bank and the bank’s obliga-
tions.
‘‘(d) SHAREHOLDER VOTING PROCEDURES.—
‘‘(1) BEFORE APPROVAL OF CAPITAL STRUC-
TURE PLAN.—Before the capital structure plan of an
enterprise resource bank is approved in accordance
with section 6, each voting shareholder of the bank
may, with respect to any matter on which voting
shareholders of the bank are entitled to vote, cast a
number of votes equal to the lesser of—
‘‘(A) the minimum number of voting
shares of the capital stock of such bank in
which such shareholder is required to be in-
vested as of the end of the calendar year imme-
diately preceding the vote, as determined by the
board of directors of the enterprise resource
bank; and
‘‘(B) the average of the minimum number
of voting shares of such stock in which all vot-
ing shareholders whose principal places of busi-
ness are located in the State in which is located
the principal place of business of such share-
holder are required to be invested as of the end
of the calendar year immediately preceding the
election, as so determined.
‘‘(2) AFTER APPROVAL OF CAPITAL STRUCTURE
PLAN.—After the capital structure plan of an enter-
prise resource bank is approved in accordance with
section 6, votes of shareholders shall be conducted in
accordance with the provisions of the plan.’’.
SEC. 9. SUSTAINABLE ECONOMIC DEVELOPMENT PRO-
GRAM.
(a) FINDINGS AND PURPOSE.—
(1) FINDINGS.—The Congress finds as follows:
(A) In exchange for Federal deposit insur-
ance, the Federal Government has placed regu-
lations on financial institutions to ensure safety
and soundness and to promote lending to un-
derserved communities.
(B) These regulations place a significant
cost on financial institutions.
(C) While there is a compelling need for
solutions to the country’s most difficult social
problems, including poverty and high unemploy-
ment, in economically distressed communities,
especially inner-cities and rural areas, the most
effective model for solutions to such problems is
through the development of a sustainable eco-
nomic base for these communities.
(D) To develop a sustainable economic
base the Government should encourage main-
stream private institutions to improve the envi-
ronment for growth and new business opportu-
nities in distressed neighborhoods by providing
incentives for such actions.
(E) The Congress recognizes the difficul-
ties facing community banks in attempting to
increase the availability of credit in economi-
cally distressed neighborhoods, including—
(i) the lack of a mutual understanding
between the lenders and the potential bor-
rowers;
(ii) the perception that loans to bor-
rowers in such neighborhoods are or would
be high-risk;
(iii) the frequent need for credit en-
hancement in connection with loans to bor-
rowers in such neighborhoods; and
(iv) the higher costs involved in lend-
ing in such neighborhoods due to the addi-
tional time and effort which is frequently
required in conducting adequate credit
analysis.
(F) Lending in economically distressed
neighborhoods is most effective if community
banks make rational credit decisions with re-
gard to—
(i) the profitability of lending in such
neighborhoods; and
(ii) the potential profits from the es-
tablishment of a market presence by com-
munity banks in such neighborhoods.
(G) While it may be desirable for the Gov-
ernment to encourage depository institutions to
provide banking services and extend credit in
economically distressed communities, such en-
couragement should come in the form of incen-
tives.
(2) PURPOSE.—It is the purpose of this section
to enhance the efficiency of providing debt and eq-
uity capital and other financial services to under-
served communities by encouraging, and creating in-
centives for, community banks to develop a sustain-
able economic base in such communities.
(b) MISSION OF SUSTAINABLE ECONOMIC DEVELOP-
MENT.—The mission of the community support require-
ments, the community investment program, and the af-
fordable housing program is to serve depository institu-
tions as an intermediary—
(1) to aid in the development of a sustainable
economic base in the banks’ communities;
(2) to promote access to credit throughout the
Nation (including rural areas and underserved
neighborhoods by increasing the liquidity of eco-
nomic development financing and improving the dis-
tribution of investment capital available for economic
development financing; and
(3) to assist with technical expertise for compli-
ance with the Community Reinvestment Act of
1977.
(c) AVAILABILITY OF PORTION OF AHP FUNDS FOR
CIP.—Section 10(j) of the Federal Home Loan Bank Act
(12 U.S.C. 1430(j)) is amended by adding at the end the
following new paragraph:
‘‘(13) AVAILABILITY
OF
CONTRIBUTIONS
FOR
COMMUNITY INVESTMENT PROGRAM.—The board of
directors of each enterprise resource bank may, in
the discretion of the board of directors, use not more
than 25 percent of such bank’s contribution pursu-
ant to paragraph (5) to the affordable housing pro-
gram of such bank for any year to provide funding
under subsection (i) for new community-oriented
mortgage lending, and for interest rate subsidies for
advances, under the community investment program
of such bank.’’.
(d) CASH ADVANCES THROUGH COMMUNITY INVEST-
MENT PROGRAM.—
(1) ANNUAL GOALS.—
(A) IN GENERAL.—The Federal Housing
Finance Board (hereafter in this subsection re-
ferred to as the ‘‘Finance Board’’) shall estab-
lish, by regulation, an annual goal for the vol-
ume of cash advances made by each of the en-
terprise resource banks through the Community
Investment Program.
(B) SUBGOALS FOR CERTAIN GOALS.—The
Finance Board shall establish separate subgoals
within the goal under this subsection for cash
advances used for eligible community economic
development activities, for low- and very-low in-
come housing, and such other subgoals as the
Finance Board may deem appropriate.
(C) CONSULTATION.—Such annual goals
and subgoals shall be established by the Fi-
nance Board in consultation with each enter-
prise resource bank and each enterprise re-
source bank affordable housing advisory coun-
cil.
(2) FACTORS TO BE APPLIED.—In establishing
the goals and subgoals under this subsection, the Fi-
nance Board shall consider—
(A) regional economic conditions within
each District;
(B) low- and moderate-income housing and
community economic development needs within
each bank district;
(C) the performance and effort of the
banks toward achieving the goals and subgoals
in previous years;
(D) the total level of regular (nonspecial-
ized cash advances) outstanding;
(E) the size and scope of the conventional
mortgage market serving low- and moderate-in-
come families relative to the size of the overall
conventional mortgage market;
(F) the size and scope of the market serv-
ing eligible community economic development
needs relative to the size of the overall commer-
cial loan market;
(G) the ability of the banks to encourage
voting shareholders of the banks to make credit
available for activities eligible under the com-
munity investment program;
(H) the need to maintain the sound finan-
cial condition of the enterprise resource bank
system; and
(I) such other factors the Finance Board
deems appropriate.
(3) MONITORING.—
(A) GENERAL.—The Finance Board shall
monitor the performance of each enterprise re-
source bank in carrying out the requirements of
this subsection and enforce compliance with the
goals and subgoals established under this sub-
section.
(B) GUIDELINES.—The Finance Board
shall establish guidelines to measure the extent
of compliance with the goals and subgoals,
which may assign full credit, partial credit, or
no credit toward achievement of the goals and
subgoals to different categories of housing and
community economic activities, based on such
criteria as the Finance Board deems appro-
priate.
(C) NOTICE
AND
DETERMINATION
OF
FAILURE TO MEET GOALS.—
(i) IN
GENERAL.—If the Finance
Board determines that an enterprise re-
source bank has failed to meet any goal or
subgoal established under this subsection,
the Finance Board shall provide written
notice to the bank of such determination,
the reasons for such determination, and
the information on which the Finance
Board based the determination.
(ii) RESPONSE PERIOD.—During the
30-day period beginning on the date that
the enterprise resource bank is provided
notice under clause (i), the bank may sub-
mit to the Finance Board any written in-
formation that the bank considers appro-
priate for consideration by the Finance
Board in determining whether such failure
has occurred or whether achievement of
such goal was or is feasible.
(iii) GOAL
ACHIEVEMENT
PLAN.—If
the Finance Board finds pursuant to
clause (i) that an enterprise resource bank
has failed or there is a substantial prob-
ability that an enterprise resource bank
will fail to meet the goal or subgoals estab-
lished under this subsection, and the
achievement of that goal or subgoal was or
is feasible, the Finance Board shall require
the bank to submit a goal achievement
plan for approval describing the specific
actions the bank will undertake to achieve
the goal or subgoal for the next calendar
year.
(e) COMMUNITY SUPPORT REQUIREMENTS.—Sub-
section (g) of section 10 of the Federal Home Loan Bank
Act (12 U.S.C. 1430(g)) is amended by adding at the end
the following new paragraph:
‘‘(3) SAFE HARBOR FOR SHAREHOLDERS RE-
CEIVING CRA RATINGS OF SATISFACTORY OR BET-
TER.—Notwithstanding paragraphs (1) and (2), any
depository institution which is a shareholder in an
enterprise resource bank and receives a rating of
satisfactory or outstanding pursuant to section 807
of the Community Reinvestment Act of 1977 in such
shareholder’s most recent examination, if any, shall
be treated as having satisfied the requirements of
such paragraphs.’’.
(f) PROHIBITION
ON DELEGATION
OF CERTAIN
FUNDING
DETERMINATIONS
TO
MANAGEMENT
OF
BANK.—The board of directors of an enterprise resource
may not delegate, or provide for the delegation of, any
authority of the board of directors to approve or dis-
approve funding by such bank under the affordable hous-
ing program established pursuant to section 10(j) of the
Federal Home Loan Bank Act to any officer or employee
of the bank.
SEC. 10. ENFORCEMENT AUTHORITY TO PROMOTE SAFETY
AND SOUNDNESS OF ENTERPRISE RESOURCE
BANKS.
Section 3 of the Federal Home Loan Bank Act (as
amended by section 4 of this Act) is amended—
(1) by redesignating subsections (f) and (g) as
subsections (g) and (h), respectively; and
(2) by inserting after subsection (e) the follow-
ing new subsection:
‘‘(f) ENFORCEMENT POWERS.—The Finance Board
shall have the same powers, rights, and duties to enforce
this Act with regard to the enterprise resource banks as
the appropriate Federal banking agencies (as defined in
section 3(q) of the Federal Deposit Insurance Act) have
under section 8 of the Federal Deposit Insurance Act with
respect to insured depository institutions (as defined in
section 3(c) of such Act).’’.
SEC. 11. RESOLUTION FUNDING CORPORATION OBLIGA-
TION.
Effective 
on 
January 
1, 
1998, 
section
21B(f)(2)(C)(ii) of the Federal Home Loan Bank Act (12
U.S.C. 1441b(f)(2)(C)(ii)) is amended to read as follows:
‘‘(C) PAYMENTS BY ENTERPRISE RE-
SOURCE
BANKS.—To 
the 
extent 
the
amounts available pursuant to subpara-
graphs (A) and (B) are insufficient to
cover the amount of interest payments,
each enterprise resource bank shall pay to
the Funding Corporation each calendar
year an amount equal to 23.7 percent of
the bank’s net earnings for the year for
which such amount is required to be
paid.’’.
SEC. 12. POWERS AND DUTIES OF BANKS; TECHNICAL AND
CONFORMING AMENDMENTS.
(a) SECTION 9.—Section 9 of the Federal Home
Loan Bank Act (12 U.S.C. 1429) is amended—
(1) in the 2d sentence, by striking ‘‘with the
approval of the Board’’; and
(2) in the 3d sentence, by striking ‘‘, subject to
the approval of the Board,’’.
(b) SECTION 10.—
(1) Subsection (a) of section 10 of the Federal
Home Loan Bank Act (12 U.S.C. 1430(a)) is
amended—
(A) in that portion of the subsection which
precedes paragraph (1)—
(i) by inserting ‘‘and subject to regu-
lations prescribed by the Finance Board’’
after ‘‘in the judgment of the Bank’’; and
(ii) by striking the 2d sentence;
(A) by striking ‘‘(b) For the purposes of
this section’’ and inserting ‘‘(b) PROTECTION
OF INTEREST IN COLLATERAL.—
‘‘(1) INVESTIGATIONS.—For the purposes of
this section’’;
(B) by striking ‘‘Board’’ where such term
appears in the last sentence and inserting
‘‘bank’’; and
(C) by adding at the end the following new
paragraphs:
‘‘(2) ADEQUACY
OF
CONTROLS.—In order to
minimize the various risks borne by an enterprise re-
source bank with regard to advances, each enterprise
resource bank shall ensure that—
‘‘(A) adequate controls exist to manage
risk;
‘‘(B) ensure that the collateral has a read-
ily ascertainable market value; and
‘‘(C) a security interest in such collateral
can be perfected.
‘‘(3) OTHER PROTECTIVE MEASURES.—
‘‘(A) ADDITIONAL
COLLATERAL.—An en-
terprise resource bank may take such steps as
the bank determines to be necessary to protect
the security position of the bank with respect to
outstanding advances, including requiring the
deposit of additional collateral security whether
or not such collateral would be eligible under
subsection (a) to be eligible to be used as collat-
eral for an advance at the time of origination.
‘‘(B) REDUCTION
IN
OUTSTANDING
AD-
VANCE.—If a borrower from an enterprise re-
source bank has insufficient eligible collateral to
support an outstanding advance to such bor-
rower, the borrower shall promptly and pru-
dently reduce the level of outstanding advances
in accordance with a schedule determined by
such bank.’’.
(3) Section 10(c) of the Federal Home Loan
Bank Act (12 U.S.C. 1430(c)) is amended—
(A) in the 1st sentence, by striking
‘‘Board’’ and inserting ‘‘bank’’; and
(B) by striking the 2d sentence.
(4) Section 10(d) of the Federal Home Loan
Bank Act (12 U.S.C. 1430(d)) is amended—
(A) in the first sentence, by striking ‘‘and
the approval of the Board’’; and
(B) in the last sentence, by striking ‘‘Sub-
ject to the approval of the Board, any’’ and in-
serting ‘‘Any’’.
(5) Section 10 of the Federal Home Loan Bank
Act (12 U.S.C. 1430) is amended by striking the
first of the 2 subsections designated as subsection
(e) (relating to qualified thrift lender status).
(6) Section 10(j)(1) of the Federal Home Loan
Bank Act (12 U.S.C. 1430(j)(1)) is amended—
(A) by striking ‘‘IN GENERAL.—Pursuant
to’’ and inserting ‘‘ESTABLISHMENT.—
‘‘(A) IN GENERAL.—Pursuant to’’;
(B) by striking ‘‘to subsidize the interest
rate on advances’’ and inserting ‘‘to provide
subsidies, including subsidized interest rates on
advances,’’; and
(C) by adding at the end the following new
subparagraph:
‘‘(B) BANK APPROVAL AUTHORITY.—The
board of directors of each enterprise resource
bank may—
‘‘(i) approve or disapprove a request
from a shareholder of the bank for a sub-
sidy under the affordable housing program
of the bank; and
‘‘(ii) not delegate such approval or
disapproval authority.’’.
(7) Section 10(j) of the Federal Home Loan
Bank Act is amended by striking the terms ‘‘ad-
vances’’ and ‘‘subsidized advances’’ each place such
terms appear in paragraphs (2), (3), (4), (5), (9),
(10), (11), and (12) and inserting ‘‘subsidies, includ-
ing subsidized advances’’.
(8) The 1st sentence of paragraph (11) of sec-
tion 10(j) of the Federal Home Loan Bank Act is
amended—
(A) by striking ‘‘drawn from community
and nonprofit organizations’’ and inserting
‘‘representing consumer or community interests
or nonprofit organizations’’; and
(B) by striking the period at the end and
inserting ‘‘, except that not more than 30 per-
cent of the members of the advisory council
may consist of representatives of State and
local housing agencies’’.
(9) Section 10 of the Federal Home Loan Bank
Act (12 U.S.C. 1430) is amended by adding at the
end the following new subsection:
‘‘(k) LIMITATIONS
ON
ADVANCES
TO
UNDER-
CAPITALIZED INSTITUTIONS.—
‘‘(1) LIMITATION
ON
EXTENDED
PERIODS.—
Except as provided in paragraph (2), no new ad-
vances to any undercapitalized depository institution
by any enterprise resource bank under this section
may be outstanding for more than 60 days in any
120-day period.
‘‘(2) VIABILITY EXCEPTION.—
‘‘(A) IN GENERAL.—If the head of the ap-
propriate Federal banking agency certifies in
advance in writing to the enterprise resource
bank that any depository institution is viable,
the limitation contained in paragraph (1) shall
not apply during the 60-day period beginning
on the date such certification is received.
‘‘(B) EXTENSIONS OF PERIOD.—The 60-
day period may be extended for additional 60-
day periods upon receipt by the enterprise re-
source bank of additional written certifications
under subparagraph (A) with respect to each
such additional period.
‘‘(C) AUTHORITY TO ISSUE A CERTIFICATE
OF VIABILITY MAY NOT BE DELEGATED.—The
authority of the head of any agency to issue a
written certification of viability under this para-
graph may not be delegated to any other per-
son.
‘‘(3) PROHIBITION
ON
ADVANCES
TO
CRITI-
CALLY
UNDERCAPITALIZED
DEPOSITORY
INSTITU-
TIONS.—Notwithstanding any other provision of this
Act, no new advances may be made to a critically
undercapitalized depository institution.
‘‘(4) NO OBLIGATION TO MAKE ADVANCES.—An
enterprise resource bank shall have no obligation to
make, increase, renew, or extend any advance or dis-
count under this Act to any shareholder.
‘‘(5) DEFINITIONS.—For purposes of this sub-
section, the following definitions shall apply:
‘‘(A) APPROPRIATE
FEDERAL
BANKING
AGENCY.—The term ‘appropriate Federal bank-
ing agency’—
‘‘(i) has the same meaning as in sec-
tion 3 of the Federal Deposit Insurance
Act; and
‘‘(ii) includes the National Credit
Union Administration.
‘‘(B) CRITICALLY
UNDERCAPITALIZED.—
The term ‘critically undercapitalized’ has the
meaning given to such term in section 38 of the
Federal Deposit Insurance Act.
‘‘(C) NEW ADVANCE.—The term ‘new ad-
vance’ includes a renewal or extension of, or an
increase in, an outstanding advance.
‘‘(D) UNDERCAPITALIZED DEPOSITORY IN-
STITUTION.—The term ‘undercapitalized depos-
itory institution’ means any depository institu-
tion which—
‘‘(i) is undercapitalized, as defined in
section 38 of the Federal Deposit Insur-
ance Act (or as defined by the National
Credit Union Administration Board, in the
case of an insured credit union); or
‘‘(ii) has a composite CAMEL rating
of 5 under the Uniform Financial Institu-
tions Rating System (or an equivalent rat-
ing by any such agency under a com-
parable rating system) as of the most re-
cent examination of such institution.
‘‘(E) VIABLE.—The term ‘viable’ means,
with respect to a depository institution, a de-
pository institution which the appropriate Fed-
eral banking agency determines, giving due re-
gard to the economic conditions and cir-
cumstances in the market in which the institu-
tion operates—
‘‘(i) is not critically undercapitalized;
‘‘(ii) is not expected to become criti-
cally undercapitalized; and
‘‘(iii) is not expected to be placed in
conservatorship or receivership.’’.
(c) SECTION 10b.—Subsection (a) of section 10b of
the Federal Home Loan Bank Act (12 U.S.C. 1430b) is
amended to read as follows:
‘‘(a) IN GENERAL.—
‘‘(1) AUTHORITY.—Each enterprise resource
bank may make advances to a permissible nonshare-
holder mortgagee.
‘‘(2) PERMISSIBLE NONSHAREHOLDER MORTGA-
GEE.—For purposes of paragraph (1), the term ‘per-
missible nonshareholder mortgagee’ means—
‘‘(A) any State or local housing finance
agency or Indian housing authority (including
any subsidiary of such agency or authority) ap-
proved under title II of the National Housing
Act—
‘‘(i) which is a chartered institution
having succession and subject to the in-
spection and supervision of a governmental
agency; and
‘‘(ii) whose principal activity in the
mortgage field must consist of lending the
institution’s own funds; or
‘‘(B) any community development financial
institution—
‘‘(i) which is not an insured deposi-
tory institution or a subsidiary of an in-
sured depository institution;
‘‘(ii) which, at the time the advance is
made, has been certified within the last
year as a community development financial
institution under the Community Develop-
ment Banking and Financial Institutions
Act of 1994;
‘‘(iii) which is a chartered institution
having succession; and
‘‘(iv) whose principal activity in the
mortgage field must consist of lending the
institution’s own funds.
‘‘(3) SECURITY.—Advances under paragraph
(1) shall be collateralized in accordance with the re-
quirements of section 10.
‘‘(4) TERMS AND CONDITIONS.—Advances made
under the terms of this section shall be at such rates
of interest and upon such terms and conditions as
shall be determined by the enterprise resource bank.
‘‘(5) DEFINITIONS
OF
COMMUNITY
DEVELOP-
MENT FINANCIAL INSTITUTION.—The term ‘commu-
nity development financial institution’ has the same
meaning as in section 103 of the Community Devel-
opment Banking and Financial Institutions Act of
1994.’’.
(d) SECTION 11.—
(1) Subsection (a) of section 11 of the Federal
Home Loan Bank Act (12 U.S.C. 1431(a)) is
amended—
(A) by striking ‘‘(a) Each Federal Home
Loan Bank’’ and inserting ‘‘(a) BORROWING
AUTHORITY.—
‘‘(1) IN
GENERAL.—Each enterprise resource
bank’’;
(B) by striking ‘‘, subject to rules and reg-
ulations prescribed by the Board’’;
(C) by striking ‘‘Board’’ and inserting
‘‘board of directors of the bank’’; and
(D) by adding at the end the following new
paragraph:
‘‘(2) BORROWING THROUGH THE OFFICE OF FI-
NANCE ONLY.—Notwithstanding paragraph (1), all
notes, bonds, and debentures issued by any enter-
prise resource bank shall be issued through the of-
fice of finance as agent for the banks.’’.
(2) Subsection (b) of section 11 of the Federal
Home Loan Bank Act (12 U.S.C. 1431(b)) is
amended to read as follows:
‘‘(b) ISSUANCE OF ENTERPRISE RESOURCE BANK
BONDS.—
‘‘(1) IN GENERAL.—The office of finance may
issue consolidated enterprise resource bank bonds
and other consolidated obligations on behalf of the
banks.
‘‘(2) JOINT AND SEVERAL OBLIGATIONS.—Con-
solidated obligations issued by the office of finance
under paragraph (1) shall be the joint and several
obligations of all the enterprise resource banks.’’.
(3) Subsection (c) of section 11 of the Federal
Home Loan Bank Act (12 U.S.C. 1431(c)) is
amended to read as follows:
‘‘(c) SEPARATELY CAPITALIZED SUBSIDIARIES.—
‘‘(1) ESTABLISHMENT AUTHORIZED.—
‘‘(A) IN
GENERAL.—Any enterprise re-
source bank may, subject to Finance Board ap-
proval, establish a subsidiary for the purpose of
providing mission-related products and services
as described in paragraph (2).
‘‘(B) SEPARATE
CAPITALIZATION
FROM
SURPLUS CAPITAL.—In determining compliance
by an enterprise resource bank with the capital
standards established under section 6, all of the
bank’s investments in and extensions of credit
to a subsidiary established pursuant to this
paragraph shall be deducted from the capital of
the bank.
‘‘(2) PRODUCTS AND SERVICES.—The board of
directors of an enterprise resource bank may request
authority to establish a subsidiary pursuant to para-
graph (1) to provide products and services to share-
holders which—
‘‘(A) assist shareholders in providing credit
for housing and other mission-related purposes;
‘‘(B) facilitate the mission of the enterprise
resource banks; and
‘‘(C) do not duplicate credit products and
services otherwise readily available in the dis-
trict of the enterprise resource bank.
‘‘(3) FINANCE BOARD APPROVAL.—In determin-
ing whether to approve the establishment, by an
enterprise resource bank, of a subsidiary under
paragraph (1), the Finance Board shall consider the
impact of the subsidiary on the safe and sound oper-
ation of such bank.’’.
(4) Section 11(d) of the Federal Home Loan
Bank Act (12 U.S.C. 1431(d)) is amended to read
as follows:
‘‘(d) ADDITIONAL OR SUBSTITUTED COLLATERAL.—
The Finance Board, for safety and soundness reasons,
may require any enterprise resource bank to deposit addi-
tional collateral or to make substitutions of collateral.’’.
(5) Section 11(e) of the Federal Home Loan
Bank Act (12 U.S.C. 1431(e)) is amended to read
as follows:
‘‘(e) ACCEPTANCE OF DEPOSITS; REGULATIONS.—
‘‘(1) ACCEPTANCE
OF
DEPOSITS.—Subject to
regulations prescribed by the Finance Board, each
enterprise resource bank may accept deposits made
by shareholders of such bank or by any other enter-
prise resource bank or other instrumentality of the
United States, upon such terms and conditions as
the bank may determine.
‘‘(2) 
COLLECTION
AND
SETTLEMENT
OF
CHECKS.—
‘‘(A) IN GENERAL.—Subject to regulations
of the Finance Board, an enterprise resource
bank may be a drawee of, and engage in, or be
agents or intermediaries for, or otherwise par-
ticipate or assist in, the collection and settle-
ment of (including presentment, clearing, and
payment of, and remitting for), checks, drafts,
or any other negotiable or nonnegotiable items
or instruments of payment drawn on or issued
by shareholders of any enterprise resource bank
or by institutions which are eligible to make ap-
plication to become shareholders pursuant to
section 6, and to have such incidental powers as
the Finance Board shall find necessary for the
exercise of any such authorization.
‘‘(B) CHARGES.—An enterprise resource
bank shall make charges, to be determined by
the bank consistent with the principles set forth
in section 11A(c) of the Federal Reserve Act, or
utilize the services of, or act as agent for, or be
a member of, a Federal reserve bank, clearing-
house, or any other public or private financial
institution or other agency, in the exercise of
any powers or functions pursuant to this para-
graph.
‘‘(C) REGULATIONS.—
‘‘(i) 
IN
GENERAL.—The 
Finance
Board may, with respect to participation in
the collection and settlement of any items
by enterprise resource banks, and with re-
spect to the collection and settlement (in-
cluding payment by the payor institution)
of items payable by shareholders of such
banks, to prescribe regulations regarding
the rights, powers, responsibilities, duties,
and liabilities, including standards relating
to such rights, powers, responsibilities, du-
ties, and liabilities, of such enterprise re-
source banks, shareholders, and other par-
ties to any such item or the collection and
settlement of any such item.
‘‘(ii) 
APPLICATION
OF
BANKING
USAGE
AND
PRACTICE.—In prescribing
such regulations, the Finance Board may
adopt or apply, in whole or in part, general
banking usage and practices, and, in in-
stances or respects in which they would
otherwise not be applicable, regulations of
the Board of Governors of the Federal Re-
serve System and operating letters, the
Uniform Commercial Code, and clearing-
house rules.
‘‘(3) PROHIBITION ON OTHER GENERAL BANK-
ING ACTIVITIES.—An enterprise resource bank may
not engage in any banking or other commercial ac-
tivities other than the activities specifically author-
ized under this Act and activities incidental to such
authorized activities.’’.
(6) Subsection (f) of section 11 of the Federal
Home Loan Bank Act is amended to read as follows:
‘‘(f) REDISCOUNT
OF NOTES HELD
BY OTHER
BANKS; PURCHASE OF BONDS OF OTHER BANKS.—The
enterprise resource banks may—
‘‘(1) rediscount the discounted notes of share-
holders of an enterprise resource bank which are
held by other enterprise resource banks;
‘‘(2) make loans to, or make deposits with,
other enterprise resource banks; or
‘‘(3) purchase any bonds or debentures issued
under this section.’’.
(7) Subsection (h) of section 11 of the Federal
Home Loan Bank Act is amended by striking ‘‘sec-
tion 301(d) of the Small Business Investment Act of
1958’’ and inserting ‘‘title III of the Small Business
Investment Act of 1958’’.
(8) Subsection (j) of section 11 of the Federal
Home Loan Bank Act is amended to read as follows:
‘‘(j) AUDITS.—
‘‘(1) AUDITS
BY
INSPECTOR
GENERAL
AND
GAO.—The financial transactions of each enterprise
resource bank and the office of finance shall be au-
dited in accordance with paragraph (1) of section
9105(a) of title 31, United States Code, and may be
audited in accordance with paragraph (4) of such
section.
‘‘(2) SELECTION OF EXTERNAL AUDITORS.—
‘‘(A) IN
GENERAL.—The enterprise re-
source banks and the office of finance shall con-
tract jointly for an annual external audit.
‘‘(B) ROLE
OF
THE
BOARD.—Notwith-
standing any other provision of law, the Fi-
nance Board shall not participate in the audit
contracting process under this paragraph except
100
that the Finance Board may establish require-
ments for external audit contracts and require-
ments to assure consistency in financial re-
port.’’.
(e) SECTION 16.—
(1) Section 16(a) of the Federal Home Loan
Bank Act (12 U.S.C. 1436(a)) is amended in the 3d
sentence, by striking ‘‘and then only with the ap-
proval of the Federal Housing Finance Board’’ and
inserting ‘‘subject to such regulations as may be pre-
scribed by the Finance Board’’.
(2) Section 16 of the Federal Home Loan Bank
Act (12 U.S.C. 1436) is amended by adding at the
end the following new subsection:
‘‘(d) OWNERSHIP INTEREST IN RETAINED EARNINGS
RECOGNIZED.—Subject to any other provision of this Act,
each enterprise resource bank and, indirectly, the voting
shareholders of each bank, shall have an ownership inter-
est in, and a property right in, the retained earnings of
the bank.’’.
(f) REPEAL OF SECTIONS 2A, 2B, 26, AND 27.—The
Federal Home Loan Bank Act (12 U.S.C. 1421 et seq.)
is amended by striking sections 2A, 2B, 26, and 27.
101
SEC. 13. INCORPORATION OF BANKS; CORPORATE POWERS.
Section 12 of the Federal Home Loan Bank Act is
amended to read as follows:
‘‘SEC. 12. INCORPORATION OF BANKS; CORPORATE POW-
ERS.
‘‘(a) ORGANIZATIONAL CERTIFICATES.—
‘‘(1) CUSTODIANSHIP.—The Finance Board
shall be the custodian of the organizational certifi-
cates of the enterprise resource banks previously
filed with the Federal Home Loan Bank Board (as
in existence before the end of the 60-day period be-
ginning on the date of the enactment of the Finan-
cial Institutions Reform, Recovery, and Enforcement
Act of 1989) or the Finance Board.
‘‘(2) REPLACEMENT OF LOST OR DESTROYED
CERTIFICATE.—If the organizational certificate of an
enterprise resource bank is lost or destroyed, the
board of directors of the bank shall provide the Fi-
nance Board with a substitute certificate containing
such information as the Finance Board may require.
‘‘(3) AMENDMENT IN CASE OF MERGER, COM-
BINATION, OR CONSOLIDATION.—If 2 or more enter-
prise resource banks merge, combine, or otherwise
102
consolidate, the resulting bank shall provide the Fi-
nance Board with an amended organizational certifi-
cate containing such information as the Finance
Board may require.
‘‘(b) CORPORATE STATUS.—Each enterprise resource
bank shall be a corporation.
‘‘(c) POWERS.—Each enterprise resource bank shall
have the following powers:
‘‘(1) To adopt, alter, and use a corporate seal.
‘‘(2) To make contracts.
‘‘(3) To purchase or lease and hold or dispose
of such real estate as may be necessary or conven-
ient for the transaction of the business of the bank.
‘‘(4) To sue and be sued, to complain, and to
defend, in any court of competent jurisdiction.
‘‘(5) To select, employ, and fix the compensa-
tion of such officers, employees, attorneys, and
agents as the board of directors determines to be
necessary for the transaction of the business of the
bank.
‘‘(6) To define the duties of, and require bonds
of, officers, employees, attorneys, and agents of the
bank and fix the penalties of any such bonds.
‘‘(7) To dismiss, at pleasure, officers, employ-
ees, attorneys, and agents of the bank.
103
‘‘(8) By the board of directors, to prescribe,
amend, and repeal bylaws and policies governing the
manner in which the affairs of the bank may be ad-
ministered.
‘‘(9) Such incidental powers as are not incon-
sistent with the provisions of this Act and are cus-
tomary and usual in corporations generally.
‘‘(d) PROHIBITION ON EXCESSIVE COMPENSATION.—
‘‘(1) IN GENERAL.—The Finance Board shall
prohibit the enterprise resource banks from provid-
ing compensation to any employee of the bank that
is not reasonable and comparable with compensation
for employment in other similar businesses (includ-
ing other financial institutions or major financial
services companies) involving similar duties and re-
sponsibilities.
‘‘(2) LIMITATION
ON
FINANCE
BOARD’S
AU-
THORITY TO SET COMPENSATION.—In carrying out
paragraph (1), the Financial Board may not pre-
scribe or set a specific level or range of compensa-
tion.
‘‘(e) STATUS OF BANK EMPLOYEES.—Notwithstand-
ing any other provision of this Act, no officer, employee,
or agent of an enterprise resource bank or the office of
finance of such banks shall be considered to be an officer
104
or employee of the United States for purposes of title 5,
United States Code.
‘‘(f) GUARANTEED HOUSING PROJECT LOANS.—
Subject to such regulations as may be prescribed by the
Finance Board, an enterprise resource bank may acquire,
hold, or dispose of, in whole or in part, or facilitate the
acquisition, holding, or disposition by shareholders of such
bank of, any housing project loan which has the benefit
of any guaranty under section 221, 222, or 224 of the
Foreign Assistance Act of 1961, any interest in any such
loan, or any commitment or agreement with respect to any
such loan or interest.’’.
SEC. 14. SUCCESSION OF ENTERPRISE RESOURCE BANKS.
Section 25 of the Federal Home Loan Bank Act (12
U.S.C. 1445) is amended by inserting ‘‘, operation of
law,’’ after ‘‘the Board under this Act’’.
SEC. 15. DEFINITIONS.
(a) FINANCE BOARD DEFINED.—Paragraph (1) of
section 2 of the Federal Home Loan Bank Act (12 U.S.C.
1422(1)) is amended to read as follows:
‘‘(1) FINANCE
BOARD.—The term ‘Finance
Board’ means the Federal Housing Finance Board
established under section 3.’’.
(b) HOME MORTGAGE LOAN DEFINED.—Section 2 of
the Federal Home Loan Bank Act (12 U.S.C. 1422) is
105
amended by striking paragraphs (5) and (6) and inserting
the following new paragraph:
‘‘(5) HOME MORTGAGE LOAN.—
‘‘(A) IN GENERAL.—The term ‘home mort-
gage loan’ means a loan made by a voting
shareholder or nonshareholder borrower upon
the security of—
‘‘(i) a mortgage, deed of trust, or
other security arrangement upon qualified
real estate, in fee simple; or
‘‘(ii) on a qualified leasehold—
‘‘(I) under a lease which has a
period to maturity of not less than 99
years and is renewable; or
‘‘(II) under a lease having a pe-
riod of not less than 50 years to run
from the date the mortgage, deed of
trust, or other security arrangement
was executed.
‘‘(B) CERTAIN
LOANS
INCLUDED.—The
term ‘home mortgage loan’ includes—
‘‘(i) such classes of first liens as are
commonly given to secure advances on real
estate, under the laws of the State in
106
which the real estate is located, by institu-
tions authorized under this Act to become
shareholders of an enterprise resource
bank; and
‘‘(ii) the credit instruments, if any, se-
cured by such liens.
‘‘(C) QUALIFIED REAL ESTATE; QUALIFIED
LEASEHOLD.—The term ‘qualified real estate’
and ‘qualified leasehold’ mean real estate upon
which is located, or which comprises or in-
cludes, 1 or more homes or other dwelling
units.
‘‘(D) DEFINITION OF FURTHER TERMS.—
The Finance Board may define any term used
in this paragraph.’’.
(c) RESIDENTIAL MORTGAGE ASSETS DEFINED.—
Section 2 of the Federal Home Loan Bank Act (12 U.S.C.
1422) is amended—
(1) by redesignating paragraphs (7), (8), (9),
(10), (11), and (12) as paragraphs (6), (7), (8), (9),
(10), and (11), respectively; and
(2) by adding at the end the following new
paragraph:
‘‘(12) RESIDENTIAL MORTGAGE ASSETS.—The
term ‘residential mortgage asset’—
107
‘‘(A) means a home mortgage, deed of
trust, or other security arrangement upon real
estate that is solely residential; and
‘‘(B) includes any mortgage pass-through
security or mortgage debt security representing
an interest in, or which is collateralized by,
home mortgage loans.’’.
(d) REGULATED
FINANCIAL
INSTITUTION
DE-
FINED.—Section 2 of the Federal Home Loan Bank Act
(12 U.S.C. 1422) is amended by adding after paragraph
(12) (as added by subsection (c) of this section) the follow-
ing new paragraph:
‘‘(13) REGULATED FINANCIAL INSTITUTION.—
The term ‘regulated financial institution’ means—
‘‘(A) any depository institution (as defined
in section 3(c) of the Federal Deposit Insurance
Act); and
‘‘(B) any insured or noninsured credit
union (as such terms are defined in section
101(7) of the Federal Credit Union Act).’’.
(e) CAPITAL DISTRIBUTION DEFINED.—Section 2 of
the Federal Home Loan Bank Act (12 U.S.C. 1422) is
amended by adding after paragraph (13) (as added by
subsection (d) of this section) the following new para-
graph:
108
‘‘(14) CAPITAL DISTRIBUTION.—The term ‘cap-
ital distribution’ means—
‘‘(A) any dividend or other distribution in
cash or other property made with respect to any
shares of, or other ownership interest in, an en-
terprise resource bank, other than a dividend
consisting only of shares of any such bank;
‘‘(B) any payment in cash or other prop-
erty made by an enterprise resource bank to re-
purchase, redeem, retire, or otherwise acquire
any of the shares of the bank, including any ex-
tension of credit made to finance an acquisition
by a bank of such shares; and
‘‘(C) any transaction that the Finance
Board determines by regulation to be, in sub-
stance, a distribution of capital of an enterprise
resource bank.’’.
(f) BANK-AFFILIATED PARTY.—Section 2 of the
Federal Home Loan Bank Act (12 U.S.C. 1422) is
amended by adding after paragraph (14) (as added by
subsection (e) of this section) the following new para-
graph:
‘‘(15) BANK-AFFILIATED
PARTY.—The term
‘bank-affiliated party’ means—
109
‘‘(A) any director, officer, or employee of,
or agent for, an enterprise resource bank;
‘‘(B) any voting shareholder, consultant,
joint venture partner, and any other person as
determined by the Finance Board who partici-
pates in the conduct of the affairs of an enter-
prise resource bank; and
‘‘(C) any independent contractor (including
any attorney, appraiser, or accountant) who
knowingly or recklessly participates in—
‘‘(i) any violation of any law or regu-
lation;
‘‘(ii) any breach of fiduciary duty; or
‘‘(iii) any unsafe or unsound practice,
which caused or is likely to cause more than a
minimal financial loss to, or a significant ad-
verse effect on, the enterprise resource bank.’’.
(g) VOTING SHAREHOLDER.—Section 2 of the Fed-
eral Home Loan Bank Act (12 U.S.C. 1422) is amended
by adding after paragraph (15) (as added by subsection
(f) of this section) the following new paragraph:
‘‘(16) VOTING SHAREHOLDER.—The term ‘vot-
ing shareholder’ means any regulated financial insti-
tution or insurance company which holds any voting
stock of an enterprise resource bank.’’.
110
SEC. 16. STUDY OF OVERCOLLATERALIZATION.
(a) STUDY REQUIRED.—The Federal Housing Fi-
nance Board shall conduct a study on the effects of the
requirement for overcollateralization of advances from en-
terprise resource banks and issues relating to such re-
quirement, including the benefits and drawbacks of such
requirement as it relates to the banks, the voting share-
holders of the banks, and State and local housing finance
agencies, and the availability and usefulness of advances
for housing and State and local housing finance agencies.
(b) REPORT REQUIRED.—Before the end of the 1-
year period beginning on the date of the enactment of this
Act, the Federal Housing Finance Board shall submit a
report to the Congress on the findings and conclusions of
the Finance Board in connection with the study conducted
pursuant to subsection (a).
(c) RECOMMENDATIONS.—The report submitted pur-
suant to subsection (b) shall include such recommenda-
tions for legislative or administrative actions as the Fed-
eral Housing Finance Board may determine to be appro-
priate.
Æ