166
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 reg-
ulated 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 en-
tity is implementing the plan, and the Director 
determines that the proposed action is con-
sistent 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 
section.’’; 
(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 
Director may take, with respect to a regulated entity that
167
is classified as undercapitalized, any of the actions author-
ized to be taken under section 1366 with respect to a regu-
lated entity that is classified as significantly undercapital-
ized, if the Director determines that such actions are nec-
essary to carry out the purpose of this subtitle.’’. 
SEC. 143. SUPERVISORY ACTIONS APPLICABLE TO SIGNIFI-
CANTLY 
UNDERCAPITALIZED 
REGULATED 
ENTITIES. 
Section 1366 of the Housing and Community Devel-
opment 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;
168
(D) by inserting after paragraph (4) the 
following 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 
regulated entity. 
‘‘(B) DISMISSAL OF DIRECTORS OR EXECU-
TIVE OFFICERS.—Require the regulated entity 
to dismiss from office any director or executive 
officer who had held office for more than 180 
days immediately before the entity became 
undercapitalized. Dismissal under this subpara-
graph shall not be construed to be a removal 
pursuant to the Director’s enforcement powers 
provided in section 1377. 
‘‘(C) EMPLOY QUALIFIED EXECUTIVE OF-
FICERS.—Require the regulated entity to em-
ploy qualified executive officers (who, if the Di-
rector 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 
entity to take any other action that the Director de-
169
termines will better carry out the purpose of this 
section than any of the actions specified in this 
paragraph.’’; 
(4) by redesignating subsection (c) as sub-
section (d); and 
(5) by inserting after subsection (b) the fol-
lowing new subsection: 
‘‘(c) RESTRICTION ON COMPENSATION OF EXECU-
TIVE OFFICERS.—A regulated entity that is classified as 
significantly undercapitalized may not, without prior writ-
ten approval 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 
entity 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:
170
‘‘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 Di-
rector shall appoint the Agency as conservator or re-
ceiver. 
‘‘(3) 
GROUNDS
FOR
APPOINTMENT.—The 
grounds for appointing a conservator or receiver for 
a regulated 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.—Sub-
stantial dissipation of assets or earnings due 
to—
171
‘‘(i) any violation of any provision of 
Federal or State law; or 
‘‘(ii) any unsafe or unsound practice. 
‘‘(C) UNSAFE OR UNSOUND CONDITION.—
An unsafe or unsound condition to transact 
business. 
‘‘(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 reg-
ulated entity, or any refusal to submit the 
books, papers, records, or affairs of the regu-
lated 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 
creditors in the normal course of business. 
‘‘(G) LOSSES.—The regulated entity has 
incurred 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 regu-
lated entity to become adequately capitalized 
(as defined in section 1364(a)(1)).