143 
(i) in subparagraph (A), by inserting 
‘‘and’’ after the semicolon at the end; 
(ii) in subparagraph (B), by striking 
‘‘; and’’ and inserting a period; and 
(iii) by striking subparagraph (C); 
and 
(B) in paragraph (2), by inserting after the 
period at the end the following: ‘‘In determining 
the penalty under subsection (a)(1), the Director 
shall give consideration to the length of time the 
enterprise should reasonably take to achieve the 
goal.’’; 
(3) in the first sentence of subsection (d)— 
(A) by striking ‘‘request the Attorney Gen-
eral of the United States to’’ and inserting ‘‘, in 
the discretion of the Director,’’; and 
(B) by inserting ‘‘, or request that the At-
torney General of the United States bring such 
an action’’ before the period at the end; 
(4) by striking subsection (f); and 
(5) by redesignating subsection (g) as subsection 
(f). 
(d) ENFORCEMENT OF SUBPOENAS.—Section 1348(c) 
of the Housing and Community Development Act of 1992 
(12 U.S.C. 4588(c)) is amended—
144 
(1) by striking ‘‘request the Attorney General of 
the United States to’’ and inserting ‘‘, in the discre-
tion of the Director,’’; and 
(2) by inserting ‘‘or request that the Attorney 
General of the United States bring such an action,’’ 
after ‘‘District of Columbia,’’ 
(e) CONFORMING AMENDMENT.—The heading for sub-
part C of part 2 of subtitle A of the Housing and Commu-
nity Development Act of 1992 is amended to read as follows: 
‘‘Subpart C—Enforcement’’. 
SEC. 131. CONFORMING AMENDMENTS. 
Part 2 of subtitle A of title XIII of the Housing and 
Community Development Act of 1992 (12 U.S.C. 4541 et 
seq.) is amended— 
(1) by striking ‘‘Secretary’’ each place such term 
appears in such part and inserting ‘‘Director’’; 
(2) in the section heading for section 1323 (12 
U.S.C. 4543), by inserting ‘‘OF ENTERPRISES’’ be-
fore the period at the end; 
(3) by striking section 1327 (12 U.S.C. 4547); 
(4) by striking section 1328 (12 U.S.C. 4548); 
(5) in sections 1345(c)(1)(A) and 1346(b) (12 
U.S.C. 4585(c)(1)(A), 4586(b)), by striking ‘‘Sec-
retary’s’’ each place such term appears and inserting 
‘‘Director’s’’; and
145 
(6) by striking section 1349 (12 U.S.C. 4589). 
Subtitle C—Prompt Corrective 
Action 
SEC. 141. CAPITAL CLASSIFICATIONS. 
(a) IN GENERAL.—Section 1364 of the Housing and 
Community Development Act of 1992 (12 U.S.C. 4614) is 
amended— 
(1) in the heading for subsection (a) by striking 
‘‘In General’’ and inserting ‘‘Enterprises’’; 
(2) in subsection (c)— 
(A) by striking ‘‘subsection (b)’’ and insert-
ing ‘‘subsection (c)’’; 
(B) by striking ‘‘enterprises’’ and inserting 
‘‘regulated entities’’; and 
(C) by striking the last sentence; 
(3) by redesignating subsections (c) (as so 
amended by paragraph (2) of this subsection) and (d) 
as subsections (d) and (f), respectively; 
(4) by striking subsection (b) and inserting the 
following new subsections: 
‘‘(b) FEDERAL HOME LOAN BANKS.— 
‘‘(1) ESTABLISHMENT AND CRITERIA.—For pur-
poses of this subtitle, the Director shall, by regula-
tion—
146 
‘‘(A) establish the capital classifications 
specified under paragraph (2) for the Federal 
home loan banks; 
‘‘(B) establish criteria for each such capital 
classification based on the amount and types of 
capital held by a bank and the risk-based, min-
imum, and critical capital levels for the banks 
and taking due consideration of the capital clas-
sifications established under subsection (a) for 
the enterprises, with such modifications as the 
Director determines to be appropriate to reflect 
the difference in operations between the banks 
and the enterprises; and 
‘‘(C) shall classify the Federal home loan 
banks according to such capital classifications. 
‘‘(2) CLASSIFICATIONS.—The capital classifica-
tions specified under this paragraph are— 
‘‘(A) adequately capitalized; 
‘‘(B) undercapitalized; 
‘‘(C) significantly undercapitalized; and 
‘‘(D) critically undercapitalized. 
‘‘(c) DISCRETIONARY CLASSIFICATION.— 
‘‘(1) GROUNDS
FOR
RECLASSIFICATION.—The 
Director may reclassify a regulated entity under 
paragraph (2) if—
147 
‘‘(A) at any time, the Director determines 
in writing that the regulated entity is engaging 
in conduct that could result in a rapid depletion 
of core or total capital or, in the case of an en-
terprise, that the value of the property subject to 
mortgages held or securitized by the enterprise 
has decreased significantly; 
‘‘(B) after notice and an opportunity for 
hearing, the Director determines that the regu-
lated entity is in an unsafe or unsound condi-
tion; or 
‘‘(C) pursuant to section 1371(b), the Direc-
tor deems the regulated entity to be engaging in 
an unsafe or unsound practice. 
‘‘(2) RECLASSIFICATION.—In addition to any 
other action authorized under this title, including the 
reclassification of a regulated entity for any reason 
not specified in this subsection, if the Director takes 
any action described in paragraph (1) the Director 
may classify a regulated entity— 
‘‘(A) as undercapitalized, if the regulated 
entity is otherwise classified as adequately cap-
italized;
148 
‘‘(B) as significantly undercapitalized, if 
the regulated entity is otherwise classified as 
undercapitalized; and 
‘‘(C) as critically undercapitalized, if the 
regulated entity is otherwise classified as signifi-
cantly undercapitalized.’’; and 
(5) by inserting after subsection (d) (as so redes-
ignated by paragraph (3) of this subsection), the fol-
lowing new subsection: 
‘‘(e) RESTRICTION ON CAPITAL DISTRIBUTIONS.— 
‘‘(1) IN
GENERAL.—A regulated entity shall 
make no capital distribution if, after making the dis-
tribution, the regulated entity would be undercapital-
ized. 
‘‘(2) EXCEPTION.—Notwithstanding paragraph 
(1), the Director may permit a regulated entity, to 
the extent appropriate or applicable, to repurchase, 
redeem, retire, or otherwise acquire shares or owner-
ship interests if the repurchase, redemption, retire-
ment, or other acquisition— 
‘‘(A) is made in connection with the 
issuance of additional shares or obligations of the 
regulated entity in at least an equivalent 
amount; and
149 
‘‘(B) will reduce the financial obligations of 
the regulated entity or otherwise improve the fi-
nancial condition of the entity.’’. 
(b) REGULATIONS.—Not later than the expiration of 
the 180-day period beginning on the effective date under 
section 185, the Director of the Federal Housing Finance 
Agency shall issue regulations to carry out section 1364(b) 
of the Housing and Community Development Act of 1992 
(as added by paragraph (4) of this subsection), relating to 
capital classifications for the Federal home loan banks. 
SEC. 142. SUPERVISORY ACTIONS APPLICABLE TO UNDER-
CAPITALIZED REGULATED ENTITIES. 
Section 1365 of the Housing and Community Develop-
ment Act of 1992 (12 U.S.C. 4615) is amended— 
(1) in the section heading, by striking ‘‘ENTER-
PRISES’’ and inserting ‘‘REGULATED ENTITIES’’; 
(2) in subsection (a)— 
(A) by redesignating paragraphs (1) and 
(2) as paragraphs (2) and (3), respectively; 
(B) by inserting before paragraph (2) the 
following paragraph: 
‘‘(1) REQUIRED
MONITORING.—The Director 
shall—
150 
‘‘(A) closely monitor the condition of any 
regulated entity that is classified as under-
capitalized; 
‘‘(B) closely monitor compliance with the 
capital restoration plan, restrictions, and re-
quirements imposed under this section; and 
‘‘(C) periodically review the plan, restric-
tions, and requirements applicable to the under-
capitalized regulated entity to determine whether 
the plan, restrictions, and requirements are 
achieving the purpose of this section.’’; and 
(C) by inserting at the end the following 
new paragraphs: 
‘‘(4) RESTRICTION OF ASSET GROWTH.—A regu-
lated entity that is classified as undercapitalized shall 
not permit its average total assets (as such term is de-
fined in section 1316(b) during any calendar quarter 
to exceed its average total assets during the preceding 
calendar quarter unless— 
‘‘(A) the Director has accepted the capital 
restoration plan of the regulated entity; 
‘‘(B) any increase in total assets is con-
sistent with the plan; and 
‘‘(C) the ratio of total capital to assets for 
the regulated entity increases during the cal-
151 
endar quarter at a rate sufficient to enable the 
entity to become adequately capitalized within a 
reasonable time. 
‘‘(5) PRIOR
APPROVAL
OF
ACQUISITIONS, NEW 
PROGRAMS, AND NEW BUSINESS ACTIVITIES.—A regu-
lated entity that is classified as undercapitalized shall 
not, directly or indirectly, acquire any interest in 
any entity or engage in any new program or new 
business activity unless— 
‘‘(A) the Director has accepted the capital 
restoration plan of the regulated entity, the enti-
ty is implementing the plan, and the Director 
determines that the proposed action is consistent 
with and will further the achievement of the 
plan; or 
‘‘(B) the Director determines that the pro-
posed action will further the purpose of this sec-
tion.’’; 
(3) in the subsection heading for subsection (b), 
by striking ‘‘FROM UNDERCAPITALIZED TO SIGNIFI-
CANTLY UNDERCAPITALIZED’’; and 
(4) by striking subsection (c) and inserting the 
following new subsection: 
‘‘(c) OTHER DISCRETIONARY SAFEGUARDS.—The Di-
rector may take, with respect to a regulated entity that is
152 
classified as undercapitalized, any of the actions authorized 
to be taken under section 1366 with respect to a regulated 
entity that is classified as significantly undercapitalized, 
if the Director determines that such actions are necessary 
to carry out the purpose of this subtitle.’’. 
SEC. 143. SUPERVISORY ACTIONS APPLICABLE TO SIGNIFI-
CANTLY UNDERCAPITALIZED REGULATED EN-
TITIES. 
Section 1366 of the Housing and Community Develop-
ment Act of 1992 (12 U.S.C. 4616) is amended— 
(1) in the section heading, by striking ‘‘ENTER-
PRISES’’ and inserting ‘‘ENTITIES’’; 
(2) in subsection (a)(2)(A), by striking ‘‘enter-
prise’’ the last place such term appears; 
(3) in subsection (b)— 
(A) in the subsection heading, by striking 
‘‘Discretionary Supervisory Actions’’ and insert-
ing ‘‘Specific Actions’’; 
(B) in the matter preceding paragraph (1), 
by striking ‘‘may, at any time, take any’’ and 
inserting ‘‘shall carry out this section by taking, 
at any time, one or more’’; 
(C) by redesignating paragraphs (5) and 
(6) as paragraphs (6) and (7), respectively;
153 
(D) by inserting after paragraph (4) the fol-
lowing new paragraph: 
‘‘(5) IMPROVEMENT OF MANAGEMENT.—Take one 
or more of the following actions: 
‘‘(A) NEW ELECTION OF BOARD.—Order a 
new election for the board of directors of the reg-
ulated entity. 
‘‘(B) DISMISSAL OF DIRECTORS OR EXECU-
TIVE OFFICERS.—Require the regulated entity to 
dismiss from office any director or executive offi-
cer who had held office for more than 180 days 
immediately before the entity became under-
capitalized. Dismissal under this subparagraph 
shall not be construed to be a removal pursuant 
to the Director’s enforcement powers provided in 
section 1377. 
‘‘(C) EMPLOY QUALIFIED EXECUTIVE OFFI-
CERS.—Require the regulated entity to employ 
qualified executive officers (who, if the Director 
so specifies, shall be subject to approval by the 
Director).’’; and 
(E) by inserting at the end the following 
new paragraph: 
‘‘(8) OTHER ACTION.—Require the regulated en-
tity to take any other action that the Director deter-
154 
mines will better carry out the purpose of this section 
than any of the actions specified in this paragraph.’’; 
(4) by redesignating subsection (c) as subsection 
(d); and 
(5) by inserting after subsection (b) the following 
new subsection: 
‘‘(c) RESTRICTION ON COMPENSATION OF EXECUTIVE 
OFFICERS.—A regulated entity that is classified as signifi-
cantly undercapitalized may not, without prior written ap-
proval by the Director— 
‘‘(1) pay any bonus to any executive officer; or 
‘‘(2) provide compensation to any executive offi-
cer at a rate exceeding that officer’s average rate of 
compensation (excluding bonuses, stock options, and 
profit sharing) during the 12 calendar months pre-
ceding the calendar month in which the regulated en-
tity became undercapitalized.’’. 
SEC. 144. AUTHORITY OVER CRITICALLY UNDERCAPITAL-
IZED REGULATED ENTITIES. 
(a) IN GENERAL.—Section 1367 of the Housing and 
Community Development Act of 1992 (12 U.S.C. 4617) is 
amended to read as follows:
155 
‘‘SEC. 1367. AUTHORITY OVER CRITICALLY UNDERCAPITAL-
IZED REGULATED ENTITIES. 
‘‘(a) APPOINTMENT OF AGENCY AS CONSERVATOR OR 
RECEIVER.— 
‘‘(1) IN GENERAL.—Notwithstanding any other 
provision of Federal or State law, if any of the 
grounds under paragraph (3) exist, at the discretion 
of the Director, the Director may establish a con-
servatorship or receivership, as appropriate, for the 
purpose of reorganizing, rehabilitating, or winding 
up the affairs of a regulated entity. 
‘‘(2) APPOINTMENT.—In any conservatorship or 
receivership established under this section, the Direc-
tor shall appoint the Agency as conservator or re-
ceiver. 
‘‘(3) GROUNDS FOR APPOINTMENT.—The grounds 
for appointing a conservator or receiver for a regu-
lated entity are as follows: 
‘‘(A) ASSETS
INSUFFICIENT
FOR
OBLIGA-
TIONS.—The assets of the regulated entity are 
less than the obligations of the regulated entity 
to its creditors and others. 
‘‘(B) SUBSTANTIAL DISSIPATION.—Substan-
tial dissipation of assets or earnings due to— 
‘‘(i) any violation of any provision of 
Federal or State law; or
156 
‘‘(ii) any unsafe or unsound practice. 
‘‘(C) UNSAFE OR UNSOUND CONDITION.—An 
unsafe or unsound condition to transact busi-
ness. 
‘‘(D) 
CEASE-AND-DESIST
ORDERS.—Any 
willful violation of a cease-and-desist order that 
has become final. 
‘‘(E) CONCEALMENT.—Any concealment of 
the books, papers, records, or assets of the regu-
lated entity, or any refusal to submit the books, 
papers, records, or affairs of the regulated entity, 
for inspection to any examiner or to any lawful 
agent of the Director. 
‘‘(F) INABILITY TO MEET OBLIGATIONS.— 
The regulated entity is likely to be unable to pay 
its obligations or meet the demands of its credi-
tors in the normal course of business. 
‘‘(G) LOSSES.—The regulated entity has in-
curred or is likely to incur losses that will de-
plete all or substantially all of its capital, and 
there is no reasonable prospect for the regulated 
entity to become adequately capitalized (as de-
fined in section 1364(a)(1)).
157 
‘‘(H) VIOLATIONS OF LAW.—Any violation 
of any law or regulation, or any unsafe or un-
sound practice or condition that is likely to— 
‘‘(i) cause insolvency or substantial 
dissipation of assets or earnings; or 
‘‘(ii) weaken the condition of the regu-
lated entity. 
‘‘(I) CONSENT.—The regulated entity, by 
resolution of its board of directors or its share-
holders or members, consents to the appointment. 
‘‘(J) 
UNDERCAPITALIZATION.—The 
regu-
lated entity is undercapitalized or significantly 
undercapitalized 
(as 
defined 
in 
section 
1364(a)(3) or in regulations issued pursuant to 
section 1364(b), as applicable), and— 
‘‘(i) has no reasonable prospect of be-
coming adequately capitalized; 
‘‘(ii) fails to become adequately cap-
italized, as required by— 
‘‘(I) section 1365(a)(1) with re-
spect to an undercapitalized regulated 
entity; or 
‘‘(II) section 1366(a)(1) with re-
spect to a significantly undercapital-
ized regulated entity;
158 
‘‘(iii) fails to submit a capital restora-
tion plan acceptable to the Agency within 
the time prescribed under section 1369C; or 
‘‘(iv) materially fails to implement a 
capital restoration plan submitted and ac-
cepted under section 1369C. 
‘‘(K) CRITICAL
UNDERCAPITALIZATION.— 
The regulated entity is critically undercapital-
ized, as defined in section 1364(a)(4) or in regu-
lations issued pursuant to section 1364(b), as 
applicable. 
‘‘(L) MONEY
LAUNDERING.—The Attorney 
General notifies the Director in writing that the 
regulated entity has been found guilty of a 
criminal offense under section 1956 or 1957 of 
title 18, United States Code, or section 5322 or 
5324 of title 31, United States Code. 
‘‘(4) JUDICIAL REVIEW.— 
‘‘(A) IN GENERAL.—If the Agency is ap-
pointed conservator or receiver under this sec-
tion, the regulated entity may, within 30 days of 
such appointment, bring an action in the United 
States District Court for the judicial district in 
which the principal place of business of such reg-
ulated entity is located, or in the United States
159 
District Court for the District of Columbia, for 
an order requiring the Agency to remove itself as 
conservator or receiver. 
‘‘(B) REVIEW.—Upon the filing of an ac-
tion under subparagraph (A), the court shall, 
upon the merits, dismiss such action or direct 
the Agency to remove itself as such conservator 
or receiver. 
‘‘(5) DIRECTORS NOT LIABLE FOR ACQUIESCING 
IN APPOINTMENT OF CONSERVATOR OR RECEIVER.— 
The members of the board of directors of a regulated 
entity shall not be liable to the shareholders or credi-
tors of the regulated entity for acquiescing in or con-
senting in good faith to the appointment of the Agen-
cy as conservator or receiver for that regulated entity. 
‘‘(6) AGENCY NOT SUBJECT TO ANY OTHER FED-
ERAL AGENCY.—When acting as conservator or re-
ceiver, the Agency shall not be subject to the direction 
or supervision of any other agency of the United 
States or any State in the exercise of the rights, pow-
ers, and privileges of the Agency. 
‘‘(b) POWERS AND DUTIES OF THE AGENCY AS CON-
SERVATOR OR RECEIVER.— 
‘‘(1) RULEMAKING
AUTHORITY
OF
THE
AGEN-
CY.—The Agency may prescribe such regulations as