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(4) by adding at the end the following new sen-
tences: ‘‘Payment for work undertaken pursuant to
this paragraph may be made from any appropriation
of the Forest Service that is available for similar
work if a written agreement so provides and reim-
bursement will be provided by a cooperator in the
same fiscal year as the expenditure by the Forest
Service. A reimbursement received from a cooperator
that covers the proportionate share of the cooperator
of the cost of the work shall be deposited to the credit
of the appropriation of the Forest Service from which
the payment was initially made or, if the appropria-
tion is no longer available to the credit of an appro-
priation of the Forest Service that is available for
similar work. The Secretary of Agriculture shall es-
tablish written rules that establish criteria to be used
to determine whether the acceptance of contributions
of money under this paragraph would adversely affect
the ability of an officer or employee of the United
States Department of Agriculture to carry out a duty
or program of the officer or employee in a fair and
objective manner or would compromise, or appear to
compromise, the integrity of the program, officer, or
employee. The Secretary of Agriculture shall establish
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written rules that protect the interests of the Forest
Service in cooperative work agreements.’’.
SEC. 546. AMENDMENT OF THE VIRUS-SERUM TOXIN ACT OF
1913.
The Act of March 4, 1913 (37 Stat. 828, chapter 145),
is amended in the eighth paragraph under the heading
‘‘BUREAU OF ANIMAL INDUSTRY’’, commonly known
as the ‘‘Virus-Serum Toxin Act of 1913’’, by striking the
10th sentence (21 U.S.C. 158) and inserting ‘‘A person,
firm, or corporation that knowingly violates any of the pro-
visions of this paragraph or regulations issued under this
paragraph, or knowingly forges, counterfeits, or, without
authorization by the Secretary of Agriculture, uses, alters,
defaces, or destroys any certificate, permit, license, or other
document provided for in this paragraph, may, for each
violation, after written notice and opportunity for a hear-
ing on the record, be assessed a civil penalty by the Sec-
retary of Agriculture of not more than $5,000, or shall, on
conviction, be assessed a criminal penalty of not more than
$10,000, imprisoned not more than 1 year, or both. In the
course of an investigation of a suspected violation of this
paragraph, the Secretary of Agriculture may issue subpoe-
nas requiring the attendance and testimony of witnesses
and the production of evidence that relates to the matter
under investigation. In determining the amount of a civil
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penalty, the Secretary of Agriculture shall take into account
the nature, circumstances, extent, and gravity of the viola-
tion, the ability of the violator to pay the penalty, the effect
that the assessment would have on the ability of the violator
to continue to do business, any history of such violations
by the violator, the degree of culpability of the violator, and
such other matters as justice may require. An order assess-
ing a civil penalty shall be treated as a final order
reviewable under chapter 158 of title 28, United State’s
Code. The Secretary of Agriculture may compromise, mod-
ify, or remit a civil penalty with or without conditions.
The amount of a civil penalty that is paid (including any
amount agreed on in compromise) may be deducted from
any sums owing by the United States to the violator. The
total amount of civil penalties assessed against a violator
shall not exceed $300,000 for all such violations adjudicated
in a single proceeding. The validity of an order assessing
a civil penalty shall not be subject to review in an action
to collect the civil penalty. The unpaid amount of a civil
penalty not paid in full when due shall accrue interest at
the rate of interest applicable to civil judgments of the
courts of the United States.’’.
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SEC. 547. OVERSEAS TORT CLAIMS.
Title VII of Public Law 102–142 (105 Stat. 911) is
amended by inserting after section 737 (7 U.S.C. 2277) the
following:
‘‘SEC. 737A. OVERSEAS TORT CLAIMS.
‘‘The Secretary of Agriculture may pay a tort claim
in the manner authorized in section 2672 of title 28, United
States Code, if the claim arises outside the United States
in connection with activities of individuals who are per-
forming services for the Secretary. A claim may not be al-
lowed under this section unless the claim is presented in
writing to the Secretary within 2 years after the date on
which the claim accrues.’’.
SEC. 548. GRADUATE SCHOOL OF THE UNITED STATES DE-
PARTMENT OF AGRICULTURE.
(a) PURPOSE.—The purpose of this section is to au-
thorize the continued operation of the Graduate School as
a nonappropriated fund instrumentality of the Department
of Agriculture.
(b) DEFINITIONS.—In this section:
(1) BOARD.—The term ‘‘Board’’ means the Gen-
eral Administration Board of the Graduate School.
(2) DEPARTMENT.—The term ‘‘Department’’
means the Department of Agriculture.
(3) DIRECTOR.—The term ‘‘Director’’ means the
Director of the Graduate School.
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(4) GRADUATE SCHOOL.—The term ‘‘Graduate
School’’ means the Graduate School of the United
States Department of Agriculture.
(5) SECRETARY.—The term ‘‘Secretary’’ means
the Secretary of Agriculture.
(c) FUNCTIONS AND AUTHORITY.—
(1) IN
GENERAL.—The Graduate School shall
continue as a nonappropriated fund instrumentality
of the Department under the general supervision of
the Secretary.
(2) ACTIVITIES.—The Graduate School shall de-
velop and administer education, training, and profes-
sional development activities, including the provision
of educational activities for Federal agencies, Federal
employees, nonprofit organizations, other entities, and
members of the general public.
(3) FEES.—
(A) IN
GENERAL.—The Graduate School
may charge and retain fair and reasonable fees
for the activities that it provides based on the
cost of the activities to the Graduate School.
(B) NOT FEDERAL FUNDS.—Fees under sub-
paragraph (A) shall not be considered to be Fed-
eral funds and shall not required to be deposited
in the Treasury of the United States.
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(4) NAME.—The Graduate School shall operate
under the name ‘‘United States Department of Agri-
culture Graduate School’’ or such other name as the
Graduate School may adopt.
(d) GENERAL ADMINISTRATION BOARD.—
(1) APPOINTMENT.—The Secretary shall appoint
a General Administration Board to serve as a govern-
ing board subject to regulation by the Secretary.
(2) SUPERVISION.—The Graduate School shall be
subject to the supervision and direction of the Board.
(3) DUTIES.—The Board shall—
(A) formulate broad policies in accordance
with which the Graduate School shall be admin-
istered;
(B) take all steps necessary to see that the
highest possible educational standards are main-
tained;
(C) exercise general supervision over the ad-
ministration of the Graduate School; and
(D) establish such bylaws, rules, and proce-
dures as may be necessary for the fulfillment of
the duties described in subparagraph (A), (B),
and (C).
(4) DIRECTOR
AND
OTHER
OFFICERS.—The
Board shall select the Director and such other officers
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as the Board may consider necessary, who shall serve
on such terms and perform such duties as the Board
may prescribe.
(5) BORROWING.—The Board may authorize the
Director to borrow money on the credit of the Grad-
uate School.
(e) DIRECTOR OF THE GRADUATE SCHOOL.—
(1) DUTIES.—The Director shall be responsible,
subject to the supervision and direction of the Board,
for carrying out the functions of the Graduate School.
(2) INVESTMENT OF FUNDS.—The Board may
authorize the Director to invest funds held in excess
of the current operating requirements of the Graduate
School for purposes of maintaining a reasonable re-
serve.
(f) LIABILITY.—The Director and the members of the
Board shall not be held personally liable for any loss or
damage that may accrue to the funds of the Graduate
School as the result of any act or exercise of discretion per-
formed in carrying out the duties described in this section.
(g) EMPLOYEES.—Employees of the Graduate School
are employees of a nonappropriated fund instrumentality
and shall not be considered to be Federal employees.
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(h) NOT A FEDERAL AGENCY.—The Graduate School
shall not be considered to be a Federal Agency for purposes
of—
(1) chapter 171 of title 28, United States Code;
(2) section 552 or 552a of title 28, United States
Code; or
(3) the Federal Advisory Committee Act (5
U.S.C. App.).
(i) ACCEPTANCE
OF
DONATIONS.—The Graduate
School shall not accept a donation from a person that is
actively engaged in a procurement activity with the Grad-
uate School or has an interest that may be substantially
affected by the performance or nonperformance of an official
duty of a member of the Board or an employee of the Grad-
uate School.
(j) ADMINISTRATIVE PROVISIONS.—In order to carry
out the functions of the Graduate School, the Graduate
School may—
(1) accept, use, hold, dispose, and administer
gifts, bequests, or devises of money, securities, and
other real or personal property made for the benefit
of, or in connection with, the Graduate School;
(2) notwithstanding any other law—
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(A) acquire real property in the District of
Columbia and in other places by lease, purchase,
or otherwise;
(B) maintain, enlarge, or remodel any such
property; and
(C) have sole control of any such property;
(3) enter into contracts without regard to the
Federal Property and Administrative Services Act of
1949 (40 U.S.C. 471) or any other law that prescribes
procedures for the procurement of property or services
by an executive agency;
(4) dispose of real and personal property without
regard to the requirements of the Federal Property
and Administrative Services Act of 1949 (40 U.S.C.
471); and
(5) use the facilities and resources of the Depart-
ment, on the condition that any costs incurred by the
Department that are attributable solely to Graduate
School operations and all costs incurred by the Grad-
uate School arising out of such operations shall be
borne by the fees paid by or on behalf of students or
by other means and not with Federal funds.
SEC. 549. STUDENT INTERN SUBSISTENCE PROGRAM.
(a) DEFINITION.—In this section, the term ‘‘student
intern’’ means a person who—
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(1) is employed by the Department of Agri-
culture to assist scientific, professional, administra-
tive, or technical employees of the Department; and
(2) is a student in good standing at an accred-
ited college or university pursuing a course of study
related to the field in which the person is employed
by the Department.
(b) PAYMENT OF CERTAIN EXPENSES BY THE SEC-
RETARY.—The Secretary of Agriculture may, out of user fee
funds or funds appropriated to any agency, pay for lodging
expenses, subsistence expenses, and transportation expenses
of a student intern (including expenses of transportation
to and from the student intern’s residence at or near the
college or university attended by the student intern and the
official duty station at which the student intern is em-
ployed).
SEC. 550. CONVEYANCE OF LAND TO WHITE OAK CEMETERY.
(a) IN GENERAL.—
(1) RELEASE OF INTEREST.—After execution of
the agreement described in subsection (b), the Sec-
retary of Agriculture shall release the condition stated
in the deed on the land described in subsection (c)
that the land be used for public purposes, and that if
the land is not so used, that the land revert the Unit-
ed States, on the condition that the land be used ex-
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clusively for cemetery purposes, and that if the land
is not so used, that the land revert the United States.
(2) BANKHEAD-JONES ACT.—Section 32(c) of the
Bankhead-Jones Farm Tenant Act (7 U.S.C. 1011(c))
shall not apply to the release under paragraph (1).
(b) AGREEMENT.—The Secretary of Agriculture shall
make the release under in subsection (a) on execution by
the Board of Trustees of the University of Arkansas, in con-
sideration of the release, of an agreement, satisfactory to
the Secretary of Agriculture, that—
(1) the Board of Trustees will not sell, lease, ex-
change, or otherwise dispose of the land described in
subsection (c) except to the White Oak Cemetery Asso-
ciation of Washington County, Arkansas, or a succes-
sor organization, for exclusive use for an expansion of
the cemetery maintained by the Association; and
(2) the proceeds of such a disposition of the land
will be deposited and held in an account open to in-
spection by the Secretary of Agriculture, and used, if
withdrawn from the account, for public purposes.
(c) LAND DESCRIPTION.—The land described in this
subsection is the land conveyed to the Board of Trustees of
the University of Arkansas, with certain other land, by deed
dated November 18, 1953, comprising approximately 2.2
acres located within property of the University of Arkansas
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in Washington, County, Arkansas, commonly known as the
‘‘Savor property’’ and described as follows:
The part of Section 20, Township 17 north,
range 31 west, beginning at the north corner of the
White Oak Cemetery and the University of Arkansas
Agricultural Experiment Station farm at Washington
County road #874, running west approximately 330
feet, thence south approximately 135 feet, thence
southeast approximately 384 feet, thence north ap-
proximately 330 feet to the point of beginning.
SEC. 551. ADVISORY BOARD ON AGRICULTURAL AIR QUAL-
ITY.
(a) FINDINGS.—Congress finds that—
(1) various studies have identified agriculture as
a major atmospheric polluter;
(2) Federal research activities are underway to
determine the extent of the pollution problem and the
extent of the role of agriculture in the problem; and
(3) any Federal policy decisions that may result,
and any Federal regulations that may be imposed on
the agricultural sector, should be based on sound sci-
entific findings;
(b) PURPOSE.—The purpose of this section is to estab-
lish an advisory board to assist and provide the Secretary
of Agriculture with information, analyses, and policy rec-
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ommendations for determining matters of fact and technical
merit and addressing scientific questions dealing with par-
ticulate matter less than 10 microns that become lodged in
human lungs (known as ‘‘PM10’’) and other airborne par-
ticulate matter or gases that affect agricultural production
yields and the economy.
(c) ESTABLISHMENT.—
(1) IN GENERAL.—The Secretary of Agriculture
may establish a board to be known as the ‘‘Advisory
Board on Agricultural Air Quality’’ (referred to in
this section as the ‘‘Board’’) to advise the Secretary,
through the Chief of the Natural Resources Conserva-
tion Service, with respect to carrying out this act and
obligations agriculture incurred under the Clean Air
Act (42 U.S.C. 7401 et seq.) and the Act entitled ‘An
Act to amend the Clean Air Act to provide for attain-
ment and maintenance of health protective national
ambient air quality standards, and for other pur-
poses’, approved November 15, 1990 (commonly
known as the ‘Clean Air Act Amendments of 1990’)
(42 U.S.C. 7401 et seq.).
(2) OVERSIGHT COORDINATION.—The Secretary
of Agriculture shall provide oversight and coordina-
tion with respect to other Federal departments and
agencies to ensure intergovernmental cooperation in
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research activities and to avoid duplication of Federal
efforts.
(d) COMPOSITION.—
(1) IN GENERAL.—The Board shall be composed
of at least 17 members appointed by the Secretary in
consultation with the Administrator of the Environ-
mental Protection Agency.
(2) REGIONAL REPRESENTATION.—The member-
ship of the Board shall be 2 persons from each of the
6 regions of the Natural Resources Conservation Serv-
ice, of whom 1 from each region shall be an agricul-
tural producer.
(3) ATMOSPHERIC SCIENTIST.—At least 1 mem-
ber of the Board shall be an atmospheric scientist.
(e) CHAIRPERSON.—The Chief of the Natural Re-
sources Conservation Service shall—
(1) serve as chairman of the Board; and
(2) provide technical support to the Board.
(f) TERM.—Each member of the Board shall be ap-
pointed for a 3-year term, except that the Secretary of Agri-
culture shall appoint 4 of the initial members for a term
of 1 year and 4 for a term of 2 years.
(g) MEETINGS.—The Board shall meet not less than
twice annually.
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(h) COMPENSATION.—Members of the Board shall serve
without compensation, but while away from their homes or
regular place of business in performance of services for the
Board, members of the Board shall be allowed travel ex-
penses, including a per diem allowance in lieu of subsist-
ence, in the same manner as persons employed in Govern-
ment service are allowed travel expenses under section 5703
of title 5, United States Code.
(i) FUNDING.—The Board shall be funded using ap-
propriations for conservation operations.
SEC. 552. WATER SYSTEMS FOR RURAL AND NATIVE VIL-
LAGES IN ALASKA.
The Consolidated Farm and Rural Development Act
is amended by inserting after section 306C (7 U.S.C. 1926c)
the following:
‘‘SEC. 306D. WATER SYSTEMS FOR RURAL AND NATIVE VIL-
LAGES IN ALASKA.
‘‘(a) IN GENERAL.—The Secretary may make grants
to the State of Alaska for the benefit of rural or Native vil-
lages in Alaska to provide for the development and construc-
tion of water and wastewater systems to improve the health
and sanitation conditions in those villages.
‘‘(b) MATCHING FUNDS.—To be eligible to receive a
grant under subsection (a), the State of Alaska shall provide
equal matching funds from non-Federal sources.
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‘‘(c) CONSULTATION WITH THE STATE OF ALASKA.—
The Secretary shall consult with the State of Alaska on a
method of prioritizing the allocation of grants under sub-
section (a) according to the needs of, and relative health
and sanitation conditions in, each village.
‘‘(d) AUTHORIZATION OF APPROPRIATIONS.—There is
authorized to be appropriated to carry out this section
$15,000,000 for each of fiscal years 1996 through 2002.’’.
SEC. 553. ELIGIBILITY FOR GRANTS TO BROADCASTING SYS-
TEMS.
Section 310B(j) of the Consolidated Farm and Rural
Development Act (7 U.S.C. 1932(j)) is amended by striking
‘‘SYSTEMS.—The’’ and inserting the following: ‘‘SYS-
TEMS.—
‘‘(1) DEFINITION OF STATEWIDE.—In this sub-
section, the term ‘statewide’ means having a coverage
area of not less than 90 percent of the population of
a State and 80 percent of the rural land area of the
State (as determined by the Secretary).
‘‘(2) GRANTS.—The’’.
SEC. 554. WILDLIFE HABITAT INCENTIVES PROGRAM.
(a) IN GENERAL.—The Secretary of Agriculture, in
consultation with the State Technical Committee, shall es-
tablish a program in the Natural Resources Conservation
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Service to be known as the Wildlife Habitat Incentive Pro-
gram.
(b) COST-SHARE
PAYMENTS.—The Program shall
make cost-share payments to landowners to develop upland
wildlife, wetland wildlife, threatened and endangered spe-
cies, fisheries, and other types of wildlife habitat approved
by the Secretary.
(c) FUNDING.—To carry out this section, $10,000,000
shall be made available for each of fiscal years 1996 through
2002 from funds made available to carry out subchapter
B of chapter 1 of subtitle D of title XII of the Food Security
Act of 1985 (16 U.S.C. 3831 et seq.).
SEC. 555. INDIAN RESERVATIONS.
(a) INDIAN RESERVATION EXTENSION AGENT PRO-
GRAM.—
(1) REAUTHORIZATION.—The program estab-
lished under section 1677 of the Food, Agriculture,
Conservation, and Trade Act of 1990 (7 U.S.C. 5930)
is reauthorized through fiscal year 2002.
(2) REDUCED REGULATORY BURDEN.—On a de-
termination by the Secretary of Agriculture that a
program carried out under section 1677 of the Act (7
U.S.C. 5930) has been satisfactorily administered for
not less than 2 years, the Secretary shall implement
a reduced re-application process for the continued op-
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eration of the program in order to reduce regulatory
burdens on participating university and tribal enti-
ties.
(b) MEMORANDUM OF AGREEMENT.—
(1) IN GENERAL.—Not later than January 6,
1997, the Secretary shall develop and implement a
formal Memorandum of Agreement with the 29 trib-
ally controlled colleges eligible under Federal law to
receive funds from the Secretary of Agriculture as
partial land grant institutions.
(2) EQUITABLE PARTICIPATION.—The Memoran-
dum shall establish programs to ensure that tribally-
controlled colleges and Native American communities
equitably participate in Department of Agriculture
employment programs, services, and resources.
SEC. 556. ICD REIMBURSEMENT FOR OVERHEAD EXPENSES.
Section 1542(d)(1)(D) of the Food, Agriculture, Con-
servation, and Trade Act of 1990 (Public Law 101–624;7
U.S.C. 5622 note) is amended by adding at the end the fol-
lowing: ‘‘Notwithstanding any other provision of law, the
assistance shall include assistance for administrative and
overhead expenses, to the extent that the expenses were in-
curred pursuant to reimbursable agreements entered into
prior to September 30, 1993, the expenses do not exceed
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$2,000,000 per year, and the expenses were not incurred
for information technology systems.’’.
SEC. 557. CLARIFICATION OF EFFECT OF RESOURCE PLAN-
NING ON ALLOCATION OR USE OF WATER.
(a) NATIONAL FOREST SYSTEM RESOURCE PLAN-
NING.—Section 6 of the Forest and Rangeland Renewable
Resources Planning Act of 1974 (16 U.S.C. 1604) is amend-
ed by adding at the end the following new subsection:
‘‘(n) LIMITATION ON AUTHORITY.—Nothing in this
section shall be construed to supersede, abrogate or otherwise
impair any right or authority of a State to allocate quan-
tities of water (including boundary waters). Nothing in this
section shall be implemented, enforced, or construed to allow
any officer or agency of the United States to utilize directly
or indirectly the authorities established under this section
to impose any requirement not imposed by the State which
would supersede, abrogate, or otherwise impair rights to the
use of water resources allocated under State law, interstate
water compact, or Supreme Court decree, or held by the
United States for use by a State, its political subdivisions,
or its citizens. No water rights arise in the United States
or any other person under the provisions of this Act.’’.
(b) AUTHORIZATION
TO GRANT RIGHTS-OF-WAY.—
Section 501 of the Federal Land Policy and Management
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Act of 1976 (43 U.S.C. 1761) is amended as it applies to
the Secretary of Agriculture—
(1) in subsection (c)(1)—
(A) by striking subparagraph (B);
(B) in subparagraph (D), by striking
‘‘originally constructed’’;
(C) in subparagraph (G), by striking
‘‘1996’’ and inserting ‘‘1998’’; and
(D) by redesignating subparagraphs (C)
through (G) as subparagraphs (B) through (F),
respectively;
(2) in subsection (c)(3)(A), by striking the second
and third sentences; and
(3) by adding at the end the following new sub-
section:
‘‘(e) EFFECT ON VALID EXISTING RIGHTS.—Notwith-
standing any provision of this section, the Secretary of Ag-
riculture may not require, as a condition of, or in connec-
tion with, the renewal of a right-of-way under this section,
a restriction or limitation on the operation, use, repair, or
replacement of an existing water supply facility which is
located on or above National Forest lands or the exercise
and use of existing water rights, if such condition would
reduce the quantity of water which would otherwise be made
available for use by the owner of such facility or water
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rights, or cause an increase in the cost of the water supply
provided from such facility.’’.
TITLE VI—CREDIT
Subtitle A—Agricultural Credit
CHAPTER 1—FARM OWNERSHIP LOANS
SEC. 601. LIMITATION ON DIRECT FARM OWNERSHIP
LOANS.
Section 302 of the Consolidated Farm and Rural De-
velopment Act (7 U.S.C. 1922) is amended by striking sub-
section (b) and inserting the following:
‘‘(b) DIRECT LOANS.—
‘‘(1) IN GENERAL.—Subject to paragraph (3), the
Secretary may only make a direct loan under this
subtitle to a farmer or rancher who has operated a
farm or ranch for not less than 3 years and—
‘‘(A) is a qualified beginning farmer or
rancher;
‘‘(B) has not received a previous direct farm
ownership loan made under this subtitle; or
‘‘(C) has not received a direct farm owner-
ship loan under this subtitle more than 10 years
before the date the new loan would be made.
‘‘(2) YOUTH LOANS.—The operation of an enter-
prise by a youth under section 311(b) shall not be
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considered the operation of a farm or ranch for pur-
poses of paragraph (1).
‘‘(3) TRANSITION RULE.—
‘‘(A) IN
GENERAL.—Subject to subpara-
graphs (B) and (C), paragraph (1) shall not
apply to a farmer or rancher who has a direct
loan outstanding under this subtitle on the date
of enactment of this paragraph.
‘‘(B) LESS THAN 5 YEARS.—If, as of the
date of enactment of this paragraph, a farmer or
rancher has had a direct loan outstanding under
this subtitle for less than 5 years, the Secretary
shall not make another loan to the farmer or
rancher under this subtitle after the date that is
10 years after the date of enactment of this para-
graph.
‘‘(C) 5 YEARS OR MORE.—If, as of the date
of enactment of this paragraph, a farmer or
rancher has had a direct loan outstanding under
this subtitle for 5 years or more, the Secretary
shall not make another loan to the farmer or
rancher under this subtitle after the date that is
5 years after the date of enactment of this para-
graph.’’.
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SEC. 602. PURPOSES OF LOANS.
Section 303 of the Consolidated Farm and Rural De-
velopment Act (7 U.S.C. 1923) is amended to read as fol-
lows:
‘‘SEC. 303. PURPOSES OF LOANS.
‘‘(a) ALLOWED PURPOSES.—
‘‘(1) DIRECT LOANS.—A farmer or rancher may
use a direct loan made under this subtitle only for—
‘‘(A) acquiring or enlarging a farm or
ranch;
‘‘(B) making capital improvements to a
farm or ranch;
‘‘(C) paying loan closing costs related to ac-
quiring, enlarging, or improving a farm or
ranch; or
‘‘(D) paying for activities to promote soil
and water conservation and protection under
section 304 on the farm or ranch.
‘‘(2) GUARANTEED LOANS.—A farmer or rancher
may use a loan guaranteed under this subtitle only
for—
‘‘(A) acquiring or enlarging a farm or
ranch;
‘‘(B) making capital improvements to a
farm or ranch;
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‘‘(C) paying loan closing costs related to ac-
quiring, enlarging, or improving a farm or
ranch;
‘‘(D) paying for activities to promote soil
and water conservation and protection under
section 304 on the farm or ranch; or
‘‘(E) refinancing indebtedness.
‘‘(b) PREFERENCES.—In making or guaranteeing a
loan for farm or ranch purchase, the Secretary shall give
a preference to a person who—
‘‘(1) has a dependent family;
‘‘(2) to the extent practicable, is able to make an
initial down payment; or
‘‘(3) is an owner of livestock or farm or ranch
equipment that is necessary to successfully carry out
farming or ranching operations.
‘‘(c) HAZARD INSURANCE REQUIREMENT.—
‘‘(1) IN GENERAL.—The Secretary may not make
a loan to a farmer or rancher under this subtitle un-
less the farmer or rancher has, or agrees to obtain,
hazard insurance on any real property to be acquired
or improved with the loan.
‘‘(2) DETERMINATION.—Not later than 180 days
after the date of enactment of this subsection, the Sec-
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retary shall determine the appropriate level of insur-
ance to be required under paragraph (1).
‘‘(3) TRANSITIONAL PROVISION.—Paragraph (1)
shall not apply until the Secretary makes the deter-
mination required under paragraph (2).’’.
SEC. 603. SOIL AND WATER CONSERVATION AND PROTEC-
TION.
Section 304 of the Consolidated Farm and Rural De-
velopment Act (7 U.S.C. 1924) is amended—
(1) by striking subsections (b) and (c);
(2) by striking ‘‘SEC. 304. (a)(1) Loans’’ and in-
serting the following:
‘‘SEC. 304. SOIL AND WATER CONSERVATION AND PROTEC-
TION.
‘‘(a) IN GENERAL.—Loans’’;
(3) by striking ‘‘(2) In making or insuring’’ and
inserting the following:
‘‘(b) PRIORITY.—In making or guaranteeing’’;
(4) by striking ‘‘(3) The Secretary’’ and insert-
ing the following:
‘‘(c) LOAN MAXIMUM.—The Secretary’’;
(5) by redesignating subparagraphs (A) through
(F) of subsection (a) (as amended by paragraph (2))
as paragraphs (1) through (6), respectively; and
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(6) by redesignating subparagraphs (A) and (B)
of subsection (c) (as amended by paragraph (4)) as
paragraphs (1) and (2), respectively.
SEC. 604. INTEREST RATE REQUIREMENTS.
Section 307(a)(3) of the Consolidated Farm and Rural
Development Act (7 U.S.C. 1927(a)(3)) is amended—
(1) in subparagraph (B), by inserting ‘‘subpara-
graph (D) and in’’ after ‘‘Except as provided in’’;
and
(2) by adding at the end the following:
‘‘(D) JOINT FINANCING ARRANGEMENT.—If a di-
rect farm ownership loan is made under this subtitle
as part of a joint financing arrangement and the
amount of the direct farm ownership loan does not ex-
ceed 50 percent of the total principal amount fi-
nanced under the arrangement, the interest rate on
the direct farm ownership loan shall be 4 percent an-
nually.’’.
SEC. 605. INSURANCE OF LOANS.
Section 308 of the Consolidated Farm and Rural De-
velopment Act (7 U.S.C. 1928) is amended to read as fol-
lows:
‘‘SEC. 308. FULL FAITH AND CREDIT.
‘‘(a) IN GENERAL.—A contract of insurance or guar-
antee executed by the Secretary under this title shall be an
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obligation supported by the full faith and credit of the Unit-
ed States.
‘‘(b) CONTESTABILITY.—A contract of insurance or
guarantee executed by the Secretary under this title shall
be incontestable except for fraud or misrepresentation that
the lender or any holder—
‘‘(1) has actual knowledge of at the time the con-
tract or guarantee is executed; or
‘‘(2) participates in or condones.’’.
SEC. 606. LOANS GUARANTEED.
Section 309(h) of the Consolidated Farm and Rural
Development Act (7 U.S.C. 1929(h)) is amended by adding
at the end the following:
‘‘(4) MAXIMUM GUARANTEE OF 90 PERCENT.—
Except as provided in paragraph (5), a loan guaran-
tee under this title shall be for not more than 90 per-
cent of the principal and interest due on the loan.
‘‘(5) REFINANCED
LOANS
GUARANTEED
AT
PERCENT.—The Secretary shall guarantee 95 percent
of—
‘‘(A) in the case of a loan that solely refi-
nances a direct loan made under this title, the
principal and interest due on the loan on the
date of the refinancing; or
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‘‘(B) in the case of a loan that is used for
multiple purposes, the portion of the loan that
refinances the principal and interest due on a
direct loan made under this title that is out-
standing on the date the loan is guaranteed.
‘‘(6) BEGINNING
FARMER
LOANS
GUARANTEED
UP TO 95 PERCENT.—The Secretary may guarantee
up to 95 percent of—
‘‘(A) a farm ownership loan for acquiring a
farm or ranch to a borrower who is participat-
ing in the down payment loan program under
section 310E; or
‘‘(B) an operating loan to a borrower who
is participating in the down payment loan pro-
gram under section 310E that is made during
the period that the borrower has a direct loan for
acquiring a farm or ranch.’’.
CHAPTER 2—OPERATING LOANS
SEC. 611. LIMITATION ON DIRECT OPERATING LOANS.
(a) IN GENERAL.—Section 311 of the Consolidated
Farm and Rural Development Act (7 U.S.C. 1941) is
amended by striking subsection (c) and inserting the follow-
ing:
‘‘(c) DIRECT LOANS.—
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‘‘(1) IN GENERAL.—Subject to paragraph (3), the
Secretary may only make a direct loan under this
subtitle to a farmer or rancher who—
‘‘(A) is a qualified beginning farmer or
rancher who has not operated a farm or ranch,
or who has operated a farm or ranch for not
more than 5 years;
‘‘(B) has not had a previous direct operat-
ing loan under this subtitle; or
‘‘(C) has not had a previous direct operat-
ing loan under this subtitle for more than 7
years.
‘‘(2) YOUTH LOANS.—In this subsection, the
term ‘direct operating loan’ shall not include a loan
made to a youth under subsection (b).
‘‘(3) TRANSITION RULE.—If, as of the date of en-
actment of this paragraph, a farmer or rancher has
received a direct operating loan under this subtitle
during each of 4 or more previous years, the borrower
shall be eligible to receive a direct operating loan
under this subtitle during 3 additional years after the
date of enactment of this paragraph.’’.
(b) YOUTH ENTERPRISES NOT FARMING OR RANCH-
ING.—Section 311(b) of the Consolidated Farm and Rural
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Development Act (7 U.S.C. 1941(b)) is amended by adding
at the end the following:
‘‘(4) YOUTH
ENTERPRISES
NOT
FARMING
OR
RANCHING.—The operation of an enterprise by a
youth under this subsection shall not be considered the
operation of a farm or ranch under this title.’’.
SEC. 612. PURPOSES OF OPERATING LOANS.
Section 312 of the Consolidated Farm and Rural De-
velopment Act (7 U.S.C. 1942) is amended to read as fol-
lows:
‘‘SEC. 312. PURPOSES OF LOANS.
‘‘(a) IN GENERAL.—A direct loan may be made under
this subtitle only for—
‘‘(1) paying the costs incident to reorganizing a
farming or ranching system for more profitable oper-
ation;
‘‘(2) purchasing livestock, poultry, or farm or
ranch equipment;
‘‘(3) purchasing feed, seed, fertilizer, insecticide,
or farm or ranch supplies, or to meet other essential
farm or ranch operating expenses, including cash
rent;
‘‘(4) financing land or water development, use,
or conservation;
‘‘(5) paying loan closing costs;
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‘‘(6) assisting a farmer or rancher in effecting
an addition to, or alteration of, the equipment, facili-
ties, or methods of operation of a farm or ranch to
comply with a standard promulgated under section 6
of the Occupational Safety and Health Act of 1970
(29 U.S.C. 655) or a standard adopted by a State
under a plan approved under section 18 of the Act
(29 U.S.C. 667), if the Secretary determines that
without assistance under this paragraph the farmer
or rancher is likely to suffer substantial economic in-
jury due to compliance with the standard;
‘‘(7) training a limited-resource borrower receiv-
ing a loan under section 310D in maintaining
records of farming and ranching operations;
‘‘(8) training a borrower under section 359;
‘‘(9) refinancing the indebtedness of a borrower
if the borrower—
‘‘(A) has refinanced a loan under this sub-
title not more than 4 times previously; and
‘‘(B)(i) is a direct loan borrower under this
title at the time of the refinancing and has suf-
fered a qualifying loss because of a natural dis-
aster declared by the Secretary under this title or
a major disaster or emergency designated by the
President under the Robert T. Stafford Disaster
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Relief and Emergency Assistance Act (42 U.S.C.
5121 et seq.); or
‘‘(ii) is refinancing a debt obtained from a
creditor other than the Secretary; or
‘‘(10) providing other farm, ranch, or home
needs, including family subsistence.
‘‘(b) GUARANTEED LOANS.—A loan may be guaran-
teed under this subtitle only for—
‘‘(1) paying the costs incident to reorganizing a
farming or ranching system for more profitable oper-
ation;
‘‘(2) purchasing livestock, poultry, or farm or
ranch equipment;
‘‘(3) purchasing feed, seed, fertilizer, insecticide,
or farm or ranch supplies, or to meet other essential
farm or ranch operating expenses, including cash
rent;
‘‘(4) financing land or water development, use,
or conservation;
‘‘(5) refinancing indebtedness;
‘‘(6) paying loan closing costs;
‘‘(7) assisting a farmer or rancher in effecting
an addition to, or alteration of, the equipment, facili-
ties, or methods of operation of a farm or ranch to
comply with a standard promulgated under section 6
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of the Occupational Safety and Health Act of 1970
(29 U.S.C. 655) or a standard adopted by a State
under a plan approved under section 18 of the Act
(29 U.S.C. 667), if the Secretary determines that
without assistance under this paragraph the farmer
or rancher is likely to suffer substantial economic in-
jury due to compliance with the standard;
‘‘(8) training a borrower under section 359; or
‘‘(9) providing other farm, ranch, or home needs,
including family subsistence.
‘‘(c) HAZARD INSURANCE REQUIREMENT.—
‘‘(1) IN GENERAL.—The Secretary may not make
a loan to a farmer or rancher under this subtitle un-
less the farmer or rancher has, or agrees to obtain,
hazard insurance on any property to be acquired
with the loan.
‘‘(2) DETERMINATION.—Not later than 180 days
after the date of enactment of this paragraph, the Sec-
retary shall determine the appropriate level of insur-
ance to be required under paragraph (1).
‘‘(3) TRANSITIONAL PROVISION.—Paragraph (1)
shall not apply until the Secretary makes the deter-
mination required under paragraph (2).
‘‘(d) PRIVATE RESERVE.—
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‘‘(1) IN GENERAL.—Notwithstanding any other
provision of this title, the Secretary may reserve the
lesser of 10 percent or $5,000 of the amount of a di-
rect loan made under this subtitle, to be placed in a
nonsupervised bank account that may be used at the
discretion of the borrower for any necessary family
living need or purpose that is consistent with any
farming or ranching plan agreed to by the Secretary
and the borrower prior to the date of the loan.
‘‘(2) ADJUSTMENT OF RESERVE.—If a borrower
exhausts the amount of funds reserved under para-
graph (1), the Secretary may—
‘‘(A) review and adjust the farm or ranch
plan referred to in paragraph (1) with the bor-
rower and reschedule the loan;
‘‘(B) extend additional credit;
‘‘(C) use income proceeds to pay necessary
farm, ranch, home, or other expenses; or
‘‘(D) provide additional available loan serv-
icing.’’.
SEC. 613. PARTICIPATION IN LOANS.
Section 315 of the Consolidated Farm and Rural De-
velopment Act (7 U.S.C. 1945) is repealed.
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SEC. 614. LINE-OF-CREDIT LOANS.
Section 316 of the Consolidated Farm and Rural De-
velopment Act (7 U.S.C. 1946) is amended by adding at
the end the following:
‘‘(c) LINE-OF-CREDIT LOANS.—
‘‘(1) IN GENERAL.—A loan made or guaranteed
by the Secretary under this subtitle may be in the
form of a line-of-credit loan.
‘‘(2) TERM.—A line-of-credit loan under para-
graph (1) shall terminate not later than 5 years after
the date that the loan is made or guaranteed.
‘‘(3) ELIGIBILITY.—For purposes of determining
eligibility for a farm operating loan, each year in
which a farmer or rancher takes an advance or draws
on a line-of-credit loan the farmer or rancher shall be
considered to have received an operating loan for 1
year.’’.
SEC. 615. INSURANCE OF OPERATING LOANS.
Section 317 of the Consolidated Farm and Rural De-
velopment Act (7 U.S.C. 1947) is repealed.
SEC. 616. SPECIAL ASSISTANCE FOR BEGINNING FARMERS
AND RANCHERS.
(a) IN GENERAL.—Section 318 of the Consolidated
Farm and Rural Development Act (7 U.S.C. 1948) is re-
pealed.
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(b) CONFORMING AMENDMENT.—Section 310F of the
Consolidated Farm and Rural Development Act (7 U.S.C.
1936) is repealed.
SEC. 617. LIMITATION ON PERIOD FOR WHICH BORROWERS
ARE ELIGIBLE FOR GUARANTEED ASSIST-
ANCE.
Section 319 of the Consolidated Farm and Rural De-
velopment Act (7 U.S.C. 1949) is amended by striking sub-
section (b) and inserting the following:
‘‘(b) LIMITATION ON PERIOD BORROWERS ARE ELIGI-
BLE FOR GUARANTEED ASSISTANCE.—
‘‘(1) GENERAL RULE.—Subject to paragraph (2),
the Secretary shall not guarantee a loan under this
subtitle for a borrower for any year after the 15th
year that a loan is made to, or a guarantee is pro-
vided with respect to, the borrower under this subtitle.
‘‘(2) TRANSITION RULE.—If, as of October 28,
1992, a farmer or rancher has received a direct or
guaranteed operating loan under this subtitle during
each of 10 or more previous years, the borrower shall
be eligible to receive a guaranteed operating loan
under this subtitle during 5 additional years after
October 28, 1992.’’.
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CHAPTER 3—EMERGENCY LOANS
SEC. 621. HAZARD INSURANCE REQUIREMENT.
Section 321 of the Consolidated Farm and Rural De-
velopment Act (7 U.S.C. 1961) is amended by striking sub-
section (b) and inserting the following:
‘‘(b) HAZARD INSURANCE REQUIREMENT.—
‘‘(1) IN GENERAL.—The Secretary may not make
a loan to a farmer or rancher under this subtitle to
cover a property loss unless the farmer or rancher had
hazard insurance that insured the property at the
time of the loss.
‘‘(2) DETERMINATION.—Not later than 180 days
after the date of enactment of this paragraph, the Sec-
retary shall determine the appropriate level of insur-
ance to be required under paragraph (1).
‘‘(3) TRANSITIONAL PROVISION.—Paragraph (1)
shall not apply until the Secretary makes the deter-
mination required under paragraph (2).’’.
SEC. 622. MAXIMUM EMERGENCY LOAN INDEBTEDNESS.
Section 324 of the Consolidated Farm and Rural De-
velopment Act (7 U.S.C. 1964) is amended by striking
‘‘SEC. 324. (a) No loan’’ and all that follows through the
end of subsection (a) and inserting the following:
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‘‘SEC. 324. TERMS OF LOANS.
‘‘(a) MAXIMUM AMOUNT
OF LOAN.—The Secretary
may not make a loan under this subtitle that—
‘‘(1) exceeds the actual loss caused by a disaster;
or
‘‘(2) would cause the total indebtedness of the
borrower under this subtitle to exceed $500,000.’’.
SEC. 623. INSURANCE OF EMERGENCY LOANS.
Section 328 of the Consolidated Farm and Rural De-
velopment Act (7 U.S.C. 1968) is repealed.
CHAPTER 4—ADMINISTRATIVE
PROVISIONS
SEC. 631. USE OF COLLECTION AGENCIES.
Section 331 of the Consolidated Farm and Rural De-
velopment Act (7 U.S.C. 1981) is amended by adding at
the end the following:
‘‘(d) PRIVATE COLLECTION AGENCY.—The Secretary
may use a private collection agency to collect a claim or
obligation described in subsection (b)(5).’’.
SEC. 632. NOTICE OF LOAN SERVICE PROGRAMS.
Section 331D(a) of the Consolidated Farm and Rural
Development Act (7 U.S.C. 1981d(a)) is amended by strik-
ing ‘‘180 days delinquent in’’ and inserting ‘‘90 days past
due on’’.
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SEC. 633. SALE OF PROPERTY.
Section 335 of the Consolidated Farm and Rural De-
velopment Act (7 U.S.C. 1985) is amended—
(1) in subsection (b), by striking ‘‘subsection (e)’’
and inserting ‘‘subsections (c) and (e)’’;
(2) by striking subsection (c) and inserting the
following:
‘‘(c) SALE OF PROPERTY.—
‘‘(1) IN
GENERAL.—Subject to this subsection
and subsection (e)(1)(A), the Secretary shall offer to
sell real property that is acquired by the Secretary
under this title in the following order and method of
sale:
‘‘(A) ADVERTISEMENT.—Not later than 15
days after acquiring real property, the Secretary
shall publicly advertise the property for sale.
‘‘(B) BEGINNING FARMER OR RANCHER.—
‘‘(i) IN GENERAL.—Not later than 75
days after acquiring real property, the Sec-
retary shall attempt to sell the property to
a qualified beginning farmer or rancher at
current market value based on a current ap-
praisal.
‘‘(ii) RANDOM
SELECTION.—If more
than 1 qualified beginning farmer or ranch-
er offers to purchase the property, the Sec-
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retary shall select between the qualified ap-
plicants on a random basis.
‘‘(iii) APPEAL
OF
RANDOM
SELEC-
TION.—A random selection or denial by the
Secretary of a beginning farmer or rancher
for farm inventory property under this sub-
paragraph shall be final and not adminis-
tratively appealable.
‘‘(C) PUBLIC SALE.—If no acceptable offer
is received from a qualified beginning farmer or
rancher under subparagraph (B) within 75 days
of acquiring the real property, the Secretary
shall, within 30 days, sell the property after pub-
lic notice at a public sale, and, if no acceptable
bid is received, by negotiated sale, at the best
price obtainable.
‘‘(2) TRANSITIONAL RULES.—
‘‘(A) PREVIOUS LEASE.—In the case of real
property acquired prior to the date of enactment
of this subparagraph that the Secretary leased
prior to the date of enactment of this subpara-
graph, the Secretary shall offer to sell the prop-
erty according to paragraph (1) not later than
60 days after the lease expires.
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‘‘(B) PREVIOUSLY IN INVENTORY.—In the
case of real property acquired prior to the date
of enactment of this subparagraph that the Sec-
retary has not leased, the Secretary shall offer to
sell the property according to paragraph (1) not
later than 60 days after the date of enactment of
this subparagraph.
‘‘(3) INTEREST.—
‘‘(A) IN
GENERAL.—Subject to subpara-
graph (B), any conveyance under this subsection
shall include all of the interest of the United
States, including mineral rights.
‘‘(B) CONSERVATION.—The Secretary may
for conservation purposes grant or sell an ease-
ment, restriction, development right, or similar
legal right to a State, a political subdivision of
a State, or a private nonprofit organization sep-
arately from the underlying fee or other rights
owned by the Secretary.
‘‘(4) OTHER LAW.—This title shall not be subject
to the Federal Property and Administrative Services
Act of 1949 (40 U.S.C. 471 et seq.).
‘‘(5) LEASE OF PROPERTY.—
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‘‘(A) IN
GENERAL.—Subject to subpara-
graph (B), the Secretary may not lease any real
property acquired under this title.
‘‘(B) EXCEPTION.—
‘‘(i) BEGINNING
FARMER
OR
RANCH-
ER.—Notwithstanding paragraph (1), the
Secretary may lease or contract to sell a
farm or ranch acquired by the Secretary
under this title to a beginning farmer or
rancher if the beginning farmer or rancher
qualifies for a credit sale or direct farm
ownership loan but credit sale authority for
loans or direct farm ownership funds, re-
spectively, are not available.
‘‘(ii) TERM.—A lease or contract to sell
to a beginning farmer or rancher under
clause (i) shall be until the earlier of—
‘‘(I) the date that is 18 months
after the date of the lease or sale; or
‘‘(II) the date that direct farm
ownership loan funds or credit sale au-
thority for loans become available to
the beginning farmer or rancher.
‘‘(iii) 
INCOME-PRODUCING
CAPABIL-
ITY.—In determining the rental rate on real
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property leased under this subparagraph,
the Secretary shall consider the income-pro-
ducing capability of the property during the
term that the property is leased.
‘‘(6) DETERMINATION BY SECRETARY.—
‘‘(A) EXPEDITED REVIEW.—On the request
of an applicant, the Secretary shall provide
within 30 days of denial of the applicant’s ap-
plication for an expedited review by the appro-
priate State Director of whether the applicant is
a beginning farmer or rancher for the purpose of
acquiring farm inventory property.
‘‘(B) APPEAL.—The results of a review con-
ducted by a State Director under subparagraph
(A) shall be final and not administratively ap-
pealable.
‘‘(C) EFFECTS OF REVIEW.—
‘‘(i) IN GENERAL.—The Secretary shall
maintain statistical data on the number
and results of reviews conducted under sub-
paragraph (A) and whether the reviews ad-
versely impact on—
‘‘(I) selling farm inventory prop-
erty to beginning farmers and ranch-
ers; and
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‘‘(II) disposing of real property in
inventory.
‘‘(ii) NOTIFICATION.—The Secretary
shall notify the Committee on Agriculture of
the House of Representatives and the Com-
mittee on Agriculture, Nutrition, and For-
estry of the Senate if the Secretary deter-
mines that reviews under subparagraph (A)
are adversely impacting the selling of farm
inventory property to beginning farmers or
ranchers or on disposing of real property in
inventory.’’; and
(3) in subsection (e)—
(A) in paragraph (1)—
(i) by striking subparagraphs (A)
through (C);
(ii) by redesignating subparagraphs
(D) through (G) as subparagraphs (A)
through (D), respectively;
(iii) in subparagraph (A) (as redesig-
nated by clause (ii))—
(I) in clause (i)—
(aa) in the matter preceding
subclause (I), by striking ‘‘(G)’’
and inserting ‘‘(D)’’;
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(bb) by striking subclause (I)
and inserting the following:
‘‘(I) the Secretary acquires property under this
title that is located within an Indian reservation;
and’’;
(cc) in subclause (II), by
striking ‘‘, and’’ at the end and
inserting a semicolon; and
(dd) by striking subclause
(III); and
(II) in clause (iii), by striking
‘‘The Secretary shall’’ and all that fol-
lows through ‘‘of subparagraph (A),’’
and inserting ‘‘Not later than 90 days
after acquiring the property, the Sec-
retary shall’’; and
(iv) in subparagraph (D) (as redesig-
nated by clause (ii))—
(I) in clause (i), by striking
‘‘(D)’’ 
in 
the 
matter 
following
subclause (IV) and inserting ‘‘(A)’’;
(II) in clause (iii)(I), by striking
‘‘subparagraphs (C)(i), (C)(ii), and
(D)’’ and inserting ‘‘subparagraph
(A)’’; and
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(III) by striking clause (v) and
inserting the following:
‘‘(v) FORECLOSURE PROCEDURES.—
‘‘(I) NOTICE TO BORROWER.—If a
borrower-owner does not voluntarily
convey to the Secretary real property
described in clause (i), not less than 30
days before a foreclosure sale of the
property the Secretary shall provide
the Indian borrower-owner with the
option of—
‘‘(aa) requiring the Secretary
to assign the loan and security in-
struments to the Secretary of the
Interior, provided the Secretary of
the Interior agrees to the assign-
ment, releasing the Secretary of
Agriculture from all further re-
sponsibility for collection of any
amounts with regard to the loan
secured by the real property; or
‘‘(bb) requiring the Secretary
to assign the loan and security in-
struments to the tribe having ju-
risdiction over the reservation in
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which the real property is located,
provided the tribe agrees to the as-
signment.
‘‘(II) NOTICE
TO
TRIBE.—If a
borrower-owner does not voluntarily
convey to the Secretary real property
described in clause (i), not less than 30
days before a foreclosure sale of the
property the Secretary shall provide
written notice to the Indian tribe that
has jurisdiction over the reservation in
which the real property is located of—
‘‘(aa) the sale;
‘‘(bb) the fair market value of
the property; and
‘‘(cc) the requirements of this
subparagraph.
‘‘(III) ASSUMED LOANS.—If an
Indian tribe assumes a loan under
subclause (I)—
‘‘(aa) the Secretary shall not
foreclose the loan because of any
default that occurred prior to the
date of the assumption;
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‘‘(bb) the loan shall be for the
lesser of the outstanding principal
and interest of the loan or the fair
market value of the property; and
‘‘(cc) the loan shall be treated
as though the loan was made
under Public Law 91–229 (25
U.S.C. 488 et seq.).’’;
(B) by striking paragraph (3);
(C) in paragraph (4)—
(i) by striking subparagraph (B);
(ii) in subparagraph (A)—
(I) in clause (i), by striking ‘‘(i)’’;
and
(II) by redesignating clause (ii)
as subparagraph (B); and
(iii) in subparagraph (B) (as redesig-
nated by clause (ii)(II)), by striking ‘‘clause
(i)’’ and inserting ‘‘subparagraph (A)’’;
(D) by striking paragraph (5);
(E) by striking paragraph (6);
(F) by redesignating paragraph (4) as
paragraph (3); and
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(G) 
by 
redesignating 
paragraphs 
(7)
through (10) as paragraphs (4) through (7), re-
spectively.
SEC. 634. DEFINITIONS.
Section 343(a) of the Consolidated Farm and Rural
Development Act (7 U.S.C. 1991(a)) is amended—
(1) in paragraph (11)—
(A) in the text preceding subparagraph (A),
by striking ‘‘applicant—’’ and inserting ‘‘appli-
cant, regardless of whether participating in a
program under section 310E—’’; and
(B) in subparagraph (F)—
(i) by striking ‘‘15 percent’’ and in-
serting ‘‘35 percent’’; and
(ii) by inserting before the semicolon at
the end the following: ‘‘, except that this
subparagraph shall not apply to loans
under subtitle B’’; and
(2) by adding at the end the following:
‘‘(12) DEBT FORGIVENESS.—
‘‘(A) IN GENERAL.—The term ‘debt forgive-
ness’ means reducing or terminating a farm loan
made or guaranteed under this title, in a man-
ner that results in a loss to the Secretary,
through—
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‘‘(i) writing-down or writing-off a loan
under section 353;
‘‘(ii) compromising, adjusting, reduc-
ing, or charging-off a debt or claim under
section 331;
‘‘(iii) paying a loss on a guaranteed
loan under section 357; or
‘‘(iv) discharging a debt as a result of
bankruptcy.
‘‘(B) LOAN
RESTRUCTURING.—The term
‘debt forgiveness’ does not include consolidation,
rescheduling, reamortization, or deferral.’’.
SEC. 635. AUTHORIZATION FOR LOANS.
Section 346 of the Consolidated Farm and Rural De-
velopment Act (7 U.S.C. 1994) is amended—
(1) in the second sentence of subsection (a), by
striking ‘‘with or without’’ and all that follows
through ‘‘administration’’ and inserting the following:
‘‘without authority for the Secretary to transfer
amounts between the categories’’; and
(2) by striking subsection (b) and inserting the
following:
‘‘(b) AUTHORIZATION FOR LOANS.—
‘‘(1) IN GENERAL.—The Secretary may make or
guarantee loans under subtitles A and B from the Ag-
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ricultural Credit Insurance Fund established under
section 309 in not more than the following amounts:
‘‘(A) FISCAL
YEAR
1996.—For fiscal year
1996, $3,085,000,000, of which—
‘‘(i) $585,000,000 shall be for direct
loans, of which—
‘‘(I) $85,000,000 shall be for farm
ownership loans under subtitle A; and
‘‘(II) $500,000,000 shall be for op-
erating loans under subtitle B; and
‘‘(ii) $2,500,000,000 shall be for guar-
anteed loans, of which—
‘‘(I) $600,000,000 shall be for
farm ownership loans under subtitle A;
and
‘‘(II) $1,900,000,000 shall be for
operating loans under subtitle B.
‘‘(B) FISCAL YEAR 1997.—For fiscal year
1997, $3,165,000,000, of which—
‘‘(i) $585,000,000 shall be for direct
loans, of which—
‘‘(I) $85,000,000 shall be for farm
ownership loans under subtitle A; and
‘‘(II) $500,000,000 shall be for op-
erating loans under subtitle B; and
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‘‘(ii) $2,580,000,000 shall be for guar-
anteed loans, of which—
‘‘(I) $630,000,000 shall be for
farm ownership loans under subtitle A;
and
‘‘(II) $1,950,000,000 shall be for
operating loans under subtitle B.
‘‘(C) FISCAL
YEAR
1998.—For fiscal year
1998, $3,245,000,000, of which—
‘‘(i) $585,000,000 shall be for direct
loans, of which—
‘‘(I) $85,000,000 shall be for farm
ownership loans under subtitle A; and
‘‘(II) $500,000,000 shall be for op-
erating loans under subtitle B; and
‘‘(ii) $2,660,000,000 shall be for guar-
anteed loans, of which—
‘‘(I) $660,000,000 shall be for
farm ownership loans under subtitle A;
and
‘‘(II) $2,000,000,000 shall be for
operating loans under subtitle B.
‘‘(D) FISCAL YEAR 1999.—For fiscal year
1999, $3,325,000,000, of which—
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‘‘(i) $585,000,000 shall be for direct
loans, of which—
‘‘(I) $85,000,000 shall be for farm
ownership loans under subtitle A; and
‘‘(II) $500,000,000 shall be for op-
erating loans under subtitle B; and
‘‘(ii) $2,740,000,000 shall be for guar-
anteed loans, of which—
‘‘(I) $690,000,000 shall be for
farm ownership loans under subtitle A;
and
‘‘(II) $2,050,000,000 shall be for
operating loans under subtitle B.
‘‘(E) FISCAL YEAR 2000.—For fiscal year
2000, $3,435,000,000, of which—
‘‘(i) $585,000,000 shall be for direct
loans, of which—
‘‘(I) $85,000,000 shall be for farm
ownership loans under subtitle A; and
‘‘(II) $500,000,000 shall be for op-
erating loans under subtitle B; and
‘‘(ii) $2,850,000,000 shall be for guar-
anteed loans, of which—
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‘‘(I) $750,000,000 shall be for
farm ownership loans under subtitle A;
and
‘‘(II) $2,100,000,000 shall be for
operating loans under subtitle B.
‘‘(F) FISCAL
YEAR
2001.—For fiscal year
2001, $3,435,000,000, of which—
‘‘(i) $585,000,000 shall be for direct
loans, of which—
‘‘(I) $85,000,000 shall be for farm
ownership loans under subtitle A; and
‘‘(II) $500,000,000 shall be for op-
erating loans under subtitle B; and
‘‘(ii) $2,850,000,000 shall be for guar-
anteed loans, of which—
‘‘(I) $750,000,000 shall be for
farm ownership loans under subtitle A;
and
‘‘(II) $2,100,000,000 shall be for
operating loans under subtitle B.
‘‘(G) FISCAL YEAR 2002.—For fiscal year
2002, $3,435,000,000, of which—
‘‘(i) $585,000,000 shall be for direct
loans, of which—
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‘‘(I) $85,000,000 shall be for farm
ownership loans under subtitle A; and
‘‘(II) $500,000,000 shall be for op-
erating loans under subtitle B; and
‘‘(ii) $2,850,000,000 shall be for guar-
anteed loans, of which—
‘‘(I) $750,000,000 shall be for
farm ownership loans under subtitle A;
and
‘‘(II) $2,100,000,000 shall be for
operating loans under subtitle B.
‘‘(2) BEGINNING FARMERS AND RANCHERS.—
‘‘(A) DIRECT LOANS.—
‘‘(i) FARM OWNERSHIP LOANS.—Of the
amounts made available under paragraph
(1) for direct farm ownership loans, the
Secretary shall reserve 70 percent of avail-
able funds for qualified beginning farmers
and ranchers.
‘‘(ii) 
OPERATING
LOANS.—Of 
the
amounts made available under paragraph
(1) for direct operating loans, the Secretary
shall reserve for qualified beginning farmers
and ranchers—
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‘‘(I) for fiscal year 1996, 25 per-
cent;
‘‘(II) for fiscal year 1997, 25 per-
cent;
‘‘(III) for fiscal year 1998, 25
percent;
‘‘(IV) for fiscal year 1999, 30 per-
cent; and
‘‘(V) for each of fiscal years 2000
through 2002, 35 percent.
‘‘(iii) FUNDS
RESERVED
UNTIL
SEP-
TEMBER 1.—Funds reserved for beginning
farmers or ranchers under this subpara-
graph shall be reserved only until Septem-
ber 1 of each fiscal year.
‘‘(B) GUARANTEED LOANS.—
‘‘(i) FARM OWNERSHIP LOANS.—Of the
amounts made available under paragraph
(1) for guaranteed farm ownership loans,
the Secretary shall reserve 25 percent for
qualified beginning farmers and ranchers.
‘‘(ii) 
OPERATING
LOANS.—Of 
the
amounts made available under paragraph
(1) for guaranteed operating loans, the Sec-
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retary shall reserve 40 percent for qualified
beginning farmers and ranchers.
‘‘(iii) FUNDS RESERVED UNTIL APRIL
1.—Funds reserved for beginning farmers or
ranchers under this subparagraph shall be
reserved only until April 1 of each fiscal
year.
‘‘(C) RESERVED FUNDS FOR ALL QUALIFIED
BEGINNING
FARMERS
AND
RANCHERS.—If a
qualified beginning farmer or rancher meets the
eligibility criteria for receiving a direct or guar-
anteed loan under section 302, 310E, or 311, the
Secretary shall make or guarantee the loan if
sufficient funds reserved under this paragraph
are available to make or guarantee the loan.
‘‘(3) TRANSFER FOR DOWN PAYMENT LOANS.—
‘‘(A) IN
GENERAL.—Notwithstanding sub-
section (a), subject to subparagraph (B)—
‘‘(i) beginning on August 1 of each fis-
cal year, the Secretary shall use available
unsubsidized guaranteed farm operating
loan funds to fund approved direct farm
ownership loans to beginning farmers and
ranchers under the down payment loan pro-
gram established under section 310E; and
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‘‘(ii) beginning on September 1 of each
fiscal year, the Secretary shall use available
unsubsidized guaranteed farm operating
loan funds to fund approved direct farm
ownership loans to beginning farmers and
ranchers.
‘‘(B) LIMITATION.—The Secretary shall
limit the transfer of funds under subparagraph
(A) so that all guaranteed farm operating loans
that have been approved, or will be approved,
during the fiscal year shall be funded to extent
of appropriated amounts.
‘‘(4) TRANSFER FOR CREDIT SALES OF FARM IN-
VENTORY PROPERTY.—
‘‘(A) IN
GENERAL.—Notwithstanding sub-
section (a), subject to subparagraphs (B) and
(C), beginning on September 1 of each fiscal
year, the Secretary may use available emergency
disaster loan funds appropriated for the fiscal
year to fund the credit sale of farm real estate
in the inventory of the Secretary.
‘‘(B) SUPPLEMENTAL
APPROPRIATIONS.—
The transfer authority provided under subpara-
graph (A) does not include any emergency disas-
ter loan funds made available to the Secretary
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for any fiscal year as a result of a supplemental
appropriation made by Congress.
‘‘(C) LIMITATION.—The Secretary shall
limit the transfer of funds under subparagraph
(A) so that all emergency disaster loans that
have been approved, or will be approved, during
the fiscal year shall be funded to extent of appro-
priated amounts.’’.
SEC. 636. LIST OF CERTIFIED LENDERS AND INVENTORY
PROPERTY DEMONSTRATION PROJECT.
(a) IN GENERAL.—Section 351 of the Consolidated
Farm and Rural Development Act (7 U.S.C. 1999) is
amended—
(1) in subsection (f)—
(A) by striking ‘‘Each Farmers Home Ad-
ministration county supervisor’’ and inserting
‘‘The Secretary’’;
(B) by striking ‘‘approved lenders’’ and in-
serting ‘‘lenders’’; and
(C) by striking ‘‘the Farmers Home Admin-
istration’’; and
(2) by striking subsection (h).
(b) TECHNICAL AMENDMENTS.—
(1) Section 1320 of the Food Security Act of
1985 (Public Law 99–198; 7 U.S.C. 1999 note) is
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amended by striking ‘‘Effective only’’ and all that fol-
lows through ‘‘1995, the’’ and inserting ‘‘The’’.
(2) Section 351(a) of the Consolidated Farm and
Rural Development Act (7 U.S.C. 1999) is amend-
ed—
(A) by striking ‘‘SEC. 351. (a) The’’ and in-
serting the following:
‘‘SEC. 351. INTEREST RATE REDUCTION PROGRAM.
‘‘(a) ESTABLISHMENT OF PROGRAM.—
‘‘(1) IN GENERAL.—The’’; and
(B) by adding at the end the following:
‘‘(2) TERMINATION OF AUTHORITY.—The author-
ity provided by this subsection shall terminate on
September 30, 2002.’’.
SEC. 637. HOMESTEAD PROPERTY.
Section 352(c) of the Consolidated Farm and Rural
Development Act (7 U.S.C. 2000(c)) is amended—
(1) in paragraph (1)(A), by striking ‘‘90’’ each
place it appears and inserting ‘‘30’’; and
(2) in paragraph (6), by striking ‘‘Within 30’’
and all that follows through ‘‘title,’’ and insert ‘‘Not
later than the date of acquisition of the property se-
curing a loan made under this title (or, in the case
of real property in inventory on the effective date of
the Agricultural Reform and Improvement Act of
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1996, not later than 5 days after the date of enact-
ment of the Act),’’ and by striking the second sen-
tence.
SEC. 638. RESTRUCTURING.
Section 353 of the Consolidated Farm and Rural De-
velopment Act (7 U.S.C. 2001) is amended—
(1) in subsection (c)—
(A) in paragraph (3) by striking subpara-
graph (C) and inserting the following:
‘‘(C) CASH FLOW MARGIN.—
‘‘(i) ASSUMPTION.—For the purpose of
assessing under subparagraph (A) the abil-
ity of a borrower to meet debt obligations
and continue farming operations, the Sec-
retary shall assume that the borrower needs
up to 110 percent of the amount indicated
for payment of farm operating expenses,
debt service obligations, and family living
expenses.
‘‘(ii) 
AVAILABLE
INCOME.—If 
an
amount up to 110 percent of the amount de-
termined under subparagraph (A) is avail-
able, the Secretary shall consider the income
of the borrower to be adequate to meet all
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expenses, including the debt obligations of
the borrower.’’; and
(B) by striking paragraph (6) and inserting
the following:
‘‘(6) TERMINATION OF LOAN OBLIGATIONS.—The
obligations of a borrower to the Secretary under a
loan shall terminate if—
‘‘(A) the borrower satisfies the requirements
of paragraphs (1) and (2) of subsection (b);
‘‘(B) the value of the restructured loan is
less than the recovery value; and
‘‘(C) not later than 90 days after receipt of
the notification described in paragraph (4)(B),
the borrower pays (or obtains third-party fi-
nancing to pay) the Secretary an amount equal
to the current market value.’’;
(2) by striking subsection (k); and
(3) by redesignating subsections (l) through (p)
as subsections (k) through (o), respectively.
SEC. 639. TRANSFER OF INVENTORY LANDS.
Section 354 of the Consolidated Farm and Rural De-
velopment Act (7 U.S.C. 2002) is amended—
(1) in the matter preceding paragraph (1), by
striking ‘‘The Secretary, without reimbursement,’’
and inserting the following:
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‘‘(a) IN GENERAL.—Subject to subsection (b), the Sec-
retary’’;
(2) by striking paragraph (2) and inserting the
following:
‘‘(2) that is eligible to be disposed of in accord-
ance with section 335; and’’; and
(3) by adding at the end the following:
‘‘(b) CONDITIONS.—The Secretary may not transfer
any property or interest under subsection (a) unless—
‘‘(1) at least 2 public notices are given of the
transfer;
‘‘(2) if requested, at least 1 public meeting is
held prior to the transfer; and
‘‘(3) the Governor and at least 1 elected county
official are consulted prior to the transfer.’’.
SEC. 640. IMPLEMENTATION OF TARGET PARTICIPATION
RATES.
Section 355 of the Consolidated Farm and Rural De-
velopment Act (7 U.S.C. 2003) is amended by adding at
the end the following:
‘‘(f) IMPLEMENTATION CONSISTENT WITH SUPREME
COURT HOLDING.—Not later than 180 days after the date
of enactment of this subsection, the Secretary shall ensure
that the implementation of this section is consistent with
the holding of the Supreme Court in Adarand Constructors,
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Inc. v. Federico Pena, Secretary of Transportation, 63
U.S.L.W. 4523 (U.S. June 12, 1995).’’.
SEC. 641. DELINQUENT BORROWERS AND CREDIT STUDY.
The Consolidated Farm and Rural Development Act
(7 U.S.C. 1921 et seq.) is amended by adding at the end
the following:
‘‘SEC. 372. PAYMENT OF INTEREST AS A CONDITION OF
LOAN SERVICING FOR BORROWERS.
‘‘The Secretary may not reschedule or reamortize a
loan for a borrower under this title who has not requested
consideration under section 331D(e) unless the borrower
pays a portion, as determined by the Secretary, of the inter-
est due on the loan.
‘‘SEC. 373. LOAN AND LOAN SERVICING LIMITATIONS
‘‘(a) DELINQUENT BORROWERS PROHIBITED
FROM
OBTAINING DIRECT OPERATING LOANS.—The Secretary
may not make a direct operating loan under subtitle B to
a borrower who is delinquent on any loan made or guaran-
teed under this title.
‘‘(b) LOANS PROHIBITED
FOR BORROWERS
THAT
HAVE RECEIVED DEBT FORGIVENESS.—
‘‘(1) IN GENERAL.—Except as provided in para-
graph (2), the Secretary may not make or guarantee
a loan under this title to a borrower who received
debt forgiveness under this title.
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‘‘(2) EXCEPTION.—The Secretary may make a
direct or guaranteed farm operating loan for paying
annual farm or ranch operating expenses to a bor-
rower who was restructured with debt write-down
under section 353.
‘‘(c) NO MORE THAT 1 DEBT FORGIVENESS FOR A
BORROWER ON A DIRECT LOAN.—The Secretary may not
provide debt forgiveness to a borrower on a direct loan made
under this title if the borrower has received debt forgiveness
on another direct loan under this title.
‘‘SEC. 374. CREDIT STUDY.
‘‘(a) IN GENERAL.—The Secretary of Agriculture shall
perform a study and report to the Committee on Agriculture
in the House of Representatives and the Committee on Agri-
culture, Nutrition, and Forestry in the Senate on the de-
mand for and availability of credit in rural areas for agri-
culture, rural housing, and rural development.
‘‘(b) PURPOSE.—The purpose of the study is to ensure
that Congress has current and comprehensive information
to consider as Congress deliberates on the credit needs of
rural America and the availability of credit to satisfy the
needs of rural America.
‘‘(c) ITEMS IN STUDY.—The study should be based on
the most current available data and should include—
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‘‘(1) rural demand for credit from the Farm
Credit System, the ability of the Farm Credit System
to meet the demand, and the extent to which the
Farm Credit System provided loans to satisfy the de-
mand;
‘‘(2) rural demand for credit from the nation’s
banking system, the ability of banks to meet the de-
mand, and the extent to which banks provided loans
to satisfy the demand;
‘‘(3) rural demand for credit from the Secretary,
the ability of the Secretary to meet the demand, and
the extent to which the Secretary provided loans to
satisfy the demand;
‘‘(4) rural demand for credit from other Federal
agencies, the ability of the agencies to meet the de-
mand, and the extent to which the agencies provided
loans to satisfy the demand;
‘‘(5) what measure or measures exist to gauge the
overall demand for rural credit and the extent to
which rural demand for credit is satisfied, and what
the measures have shown;
‘‘(6) a comparison of the interest rates and terms
charged by the Farm Credit System Farm Credit
Banks, production credit associations, and banks for
cooperatives with the rates and terms charged by the
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nation’s banks for credit of comparable risk and ma-
turity;
‘‘(7) the advantages and disadvantages of the
modernization and expansion proposals of the Farm
Credit System on the Farm Credit System, the na-
tion’s banking system, rural users of credit, local
rural communities, and the Federal Government, in-
cluding—
‘‘(A) any added risk to the safety and
soundness of the Farm Credit System that may
result from approval of a proposal; and
‘‘(B) any positive or adverse impacts on
competition between the Farm Credit System
and the nation’s banks in providing credit to
rural users;
‘‘(8) the nature and extent of the unsatisfied
rural credit need that the Farm Credit System pro-
posal are supposed to address and what aspects of the
present Farm Credit System prevent the Farm Credit
System from meeting the need;
‘‘(9) the advantages and disadvantages of the
proposal by commercial bankers to allow banks access
to the Farm Credit System as a funding source on the
Farm Credit System, the nation’s banking system,
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rural users of credit, local rural communities, and the
Federal Government, including—
‘‘(A) any added risk to the safety and
soundness of the Farm Credit System that may
result from approval of the proposal; and
‘‘(B) any positive or adverse impacts on
competition between the Farm Credit System
and the nation’s banks in providing credit to
rural users; and
‘‘(10) problems that commercial banks have in
obtaining capital for lending in rural areas, how ac-
cess to Farm Credit System funds would improve the
availability of capital in rural areas in ways that
cannot be achieved in the present system, and the pos-
sible effects on the viability of the Farm Credit Sys-
tem of granting banks access to Farm Credit System
funds.
‘‘(d) INTERAGENCY TASK FORCE.—In completing the
study, the Secretary shall use, among other things, data and
information obtained by the interagency task force on rural
credit.’’.
CHAPTER 5—GENERAL PROVISIONS
SEC. 651. CONFORMING AMENDMENTS.
(a) Section 307(a) of the Consolidated Farm and
Rural Development Act (7 U.S.C. 1927(a)) is amended—
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(1) in paragraph (4), by striking ‘‘304(b),
306(a)(1), and 310B’’ and inserting ‘‘306(a)(1) and
310B’’; and
(2) in paragraph (6)(B)—
(A) by striking clauses (i), (ii), and (vii);
(B) in clause (v), by adding ‘‘and’’ at the
end;
(C) in clause (vi), by striking ‘‘, and’’ at
the end and inserting a period; and
(D) by redesignating clauses (iii) through
(vi) as clauses (i) through (iv), respectively.
(b) The second sentence of section 309(g)(1) of the Con-
solidated Farm and Rural Development Act (7 U.S.C.
1929(g)(1)) is amended by striking ‘‘section 308,’’.
(c) Section 309A of the Consolidated Farm and Rural
Development Act (7 U.S.C. 1929a) is amended—
(1) in the second sentence of subsection (a), by
striking ‘‘304(b), 306(a)(1), 306(a)(14), 310B, and
312(b)’’ and inserting ‘‘306(a)(1), 306(a)(14), and
310B’’; and
(2) in subsection (b), by striking ‘‘and section
308’’.
(d) Section 310B(d) of the Consolidated Farm and
Rural Development Act (7 U.S.C. 1932(d)) is amended—
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(1) by striking ‘‘sections 304(b), 310B, and
312(b)’’ each place it appears in paragraphs (2), (3),
and (4) and inserting ‘‘this section’’; and
(2) in paragraph (6), by striking ‘‘this section,
section 304, or section 312’’ and inserting ‘‘this sec-
tion’’.
(e) The first sentence of section 310D(a) of the Consoli-
dated Farm and Rural Development Act (7 U.S.C. 1934(a))
is amended by striking ‘‘paragraphs (1) through (5) of sec-
tion 303(a), or subparagraphs (A) through (E) of section
304(a)(1)’’ and inserting ‘‘section 303(a), or paragraphs (1)
through (5) of section 304(b)’’.
(f) Section 311(b)(1) of the Consolidated Farm and
Rural Development Act (7 U.S.C. 1941(b)(1)) is amended
by striking ‘‘and for the purposes specified in section 312’’.
(g) Section 316(a) of the Consolidated Farm and
Rural Development Act (7 U.S.C. 1946(a)) is amended by
striking paragraph (3).
(h) Section 343 of the Consolidated Farm and Rural
Development Act (7 U.S.C. 1991) is amended—
(1) in subsection (a)(10), by striking ‘‘recreation
loan (RL) under section 304,’’; and
(2) in subsection (b)—
(A) in the matter preceding paragraph (1),
by striking ‘‘351(h),’’; and
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(B) by striking paragraph (4) and inserting
the following:
‘‘(4) PRESERVATION LOAN SERVICE PROGRAM.—
The term ‘‘preservation loan service program’’ means
homestead retention as authorized under section
352.’’.
(i) The first sentence of section 344 of the Consolidated
Farm and Rural Development Act (7 U.S.C. 1992) is
amended by striking ‘‘304(b), 306(a)(1), 310B, 312(b), or
312(c)’’ and inserting ‘‘306(a)(1), 310B, or 312(c)’’.
(j) Section 353(l) of the Consolidated Farm and Rural
Development Act (as redesignated by section 638(3)) is fur-
ther amended by striking ‘‘and subparagraphs (A)(i) and
(C)(i) of section 335(e)(1),’’.
Subtitle B—Farm Credit System
CHAPTER 1—AGRICULTURAL MORTGAGE
SECONDARY MARKET
SEC. 661. DEFINITION OF REAL ESTATE.
Section 8.0(1)(B)(ii) of the Farm Credit Act of 1971
(12 U.S.C. 2279aa(1)(B)(ii)) is amended by striking ‘‘with
a purchase price’’ and inserting ‘‘, excluding the land to
which the dwelling is affixed, with a value’’.
SEC. 662. DEFINITION OF CERTIFIED FACILITY.
Section 8.0(3) of the Farm Credit Act of 1971 (12
U.S.C. 2279aa(3)) is amended—
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(1) in subparagraph (A), by striking ‘‘a second-
ary marketing agricultural loan’’ and inserting ‘‘an
agricultural mortgage marketing’’; and
(2) in subparagraph (B), by striking ‘‘, but
only’’ and all that follows through ‘‘(9)(B)’’.
SEC. 663. DUTIES OF FEDERAL AGRICULTURAL MORTGAGE
CORPORATION.
Section 8.1(b) of the Farm Credit Act of 1971 (12
U.S.C. 2279aa–1(b)) is amended—
(1) in paragraph (2), by striking ‘‘and’’ at the
end;
(2) in paragraph (3), by striking the period at
the end and inserting ‘‘; and’’; and
(3) by adding at the end the following:
‘‘(4) purchase qualified loans and issue securities
representing interests in, or obligations backed by, the
qualified loans, guaranteed for the timely repayment
of principal and interest.’’.
SEC. 664. POWERS OF THE CORPORATION.
Section 8.3(c) of the Farm Credit Act of 1971 (12
U.S.C. 2279aa–3(c)) is amended—
(1) by redesignating paragraphs (13) and (14)
as paragraphs (14) and (15), respectively; and
(2) by inserting after paragraph (12) the follow-
ing:
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‘‘(13) To purchase, hold, sell, or assign a quali-
fied loan, to issue a guaranteed security, representing
an interest in, or an obligation backed by, the quali-
fied loan, and to perform all the functions and re-
sponsibilities of an agricultural mortgage marketing
facility operating as a certified facility under this
title.’’.
SEC. 665. FEDERAL RESERVE BANKS AS DEPOSITARIES AND
FISCAL AGENTS.
Section 8.3 of the Farm Credit Act of 1971 (12 U.S.C.
2279aa–3) is amended—
(1) in subsection (d), by striking ‘‘may act as de-
positories for, or’’ and inserting ‘‘shall act as deposi-
tories for, and’’; and
(2) in subsection (e), by striking ‘‘Secretary of
the Treasury may authorize the Corporation to use’’
and inserting ‘‘Corporation shall have access to’’.
SEC. 666. CERTIFICATION OF AGRICULTURAL MORTGAGE
MARKETING FACILITIES.
Section 8.5 of the Farm Credit Act of 1971 (12 U.S.C.
2279aa–5) is amended—
(1) in subsection (a)—
(A) in paragraph (1), by inserting ‘‘(other
than the Corporation)’’ after ‘‘agricultural mort-
gage marketing facilities’’; and
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(B) in paragraph (2), by inserting ‘‘(other
than the Corporation)’’ after ‘‘agricultural mort-
gage marketing facility’’; and
(2) in subsection (e)(1), by striking ‘‘(other than
the Corporation)’’.
SEC. 667. GUARANTEE OF QUALIFIED LOANS.
Section 8.6 of the Farm Credit Act of 1971 (12 U.S.C.
2279aa–6) is amended—
(1) in subsection (a)(1)—
(A) by striking ‘‘Corporation shall guaran-
tee’’ and inserting the following: ‘‘Corporation—
‘‘(A) shall guarantee’’;
(B) by striking the period at the end and
inserting ‘‘; and’’; and
(C) by adding at the end the following:
‘‘(B) may issue a security, guaranteed as to
the timely payment of principal and interest,
that represents an interest solely in, or an obli-
gation fully backed by, a pool consisting of
qualified loans that—
‘‘(i) meet the standards established
under section 8.8; and
‘‘(ii) have been purchased and held by
the Corporation.’’;
(2) in subsection (d)—
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(A) by striking paragraph (4); and
(B) by redesignating paragraphs (5), (6),
and (7) as paragraphs (4), (5), and (6), respec-
tively; and
(3) in subsection (g)(2), by striking ‘‘section
8.0(9)(B))’’ and inserting ‘‘section 8.0(9))’’.
SEC. 668. MANDATORY RESERVES AND SUBORDINATED
PARTICIPATION INTERESTS ELIMINATED.
(a) GUARANTEE OF QUALIFIED LOANS.—Section 8.6
of the Farm Credit Act of 1971 (12 U.S.C. 2279aa–6) is
amended by striking subsection (b).
(b) RESERVES
AND SUBORDINATED PARTICIPATION
INTERESTS.—Section 8.7 of the Farm Credit Act of 1971
(12 U.S.C. 2279aa–7) is repealed.
(c) CONFORMING AMENDMENTS.—
(1) Section 8.0(9)(B)(i) of the Farm Credit Act
of 1971 (12 U.S.C. 2279aa(9)(B)(i)) is amended by
striking ‘‘8.7, 8.8,’’ and inserting ‘‘8.8’’.
(2) Section 8.6(a)(2) of the Farm Credit Act of
1971 (12 U.S.C. 2279aa–6(a)(2)) is amended by
striking ‘‘subject to the provisions of subsection (b)’’.
SEC. 669. STANDARDS REQUIRING DIVERSIFIED POOLS.
(a) IN GENERAL.—Section 8.6 of the Farm Credit Act
of 1971 (12 U.S.C. 2279aa–6) (as amended by section 668)
is amended—
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(1) by striking subsection (c); and
(2) by redesignating subsections (d) through (g)
as subsections (b) through (e), respectively.
(b) CONFORMING AMENDMENTS.—
(1) Section 8.0(9)(B)(i) of the Farm Credit Act
of 1971 (12 U.S.C. 2279aa(9)(B)(i)) is amended by
striking ‘‘(f)’’ and inserting ‘‘(d)’’.
(2) Section 8.13(a) of the Farm Credit Act of
1971 (12 U.S.C. 2279aa–13(a)) is amended by strik-
ing ‘‘sections 8.6(b) and’’ in each place it appears
and inserting ‘‘section’’.
(3) Section 8.32(b)(1)(C) of the Farm Credit Act
of 1971 (12 U.S.C. 2279bb–1(b)(1)(C)) is amended—
(A) by striking ‘‘shall’’ and inserting
‘‘may’’; and
(B) by inserting ‘‘(as in effect before the
date of the enactment of the Agricultural Reform
and Improvement Act of 1996)’’ before the semi-
colon.
(4) Section 8.6(b) of the Farm Credit Act of
1971 (12 U.S.C. 2279aa–6(b)) (as redesignated by
subsection (a)(2)) is amended—
(A) by striking paragraph (4) (as redesig-
nated by section 667(2)(B)); and
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(B) by redesignating paragraphs (5) and
(6) (as redesignated by section 667(2)(B)) as
paragraphs (4) and (5), respectively.
SEC. 670. SMALL FARMS.
Section 8.8(e) of the Farm Credit Act of 1971 (12
U.S.C. 2279aa–8(e)) is amended by adding at the end the
following: ‘‘The Board shall promote and encourage the in-
clusion of qualified loans for small farms and family farm-
ers in the agricultural mortgage secondary market.’’.
SEC. 671. DEFINITION OF AN AFFILIATE.
Section 8.11(e) of the Farm Credit Act of 1971 (21
U.S.C. 2279aa–11(e)) is amended—
(1) by striking ‘‘a certified facility or’’; and
(2) by striking ‘‘paragraphs (3) and (7), respec-
tively, of section 8.0’’ and inserting ‘‘section 8.0(7)’’.
SEC. 672. STATE USURY LAWS SUPERSEDED.
Section 8.12 of the Farm Credit Act of 1971 (12 U.S.C.
2279aa–12) is amended by striking subsection (d) and in-
serting the following:
‘‘(d) STATE USURY LAWS SUPERSEDED.—A provision
of the Constitution or law of any State shall not apply to
an agricultural loan made by an originator or a certified
facility in accordance with this title for sale to the Corpora-
tion or to a certified facility for inclusion in a pool for
which the Corporation has provided, or has committed to
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provide, a guarantee, if the loan, not later than 180 days
after the date the loan was made, is sold to the Corporation
or included in a pool for which the Corporation has pro-
vided a guarantee, if the provision—
‘‘(1) limits the rate or amount of interest, dis-
count points, finance charges, or other charges that
may be charged, taken, received, or reserved by an ag-
ricultural lender or a certified facility; or
‘‘(2) limits or prohibits a prepayment penalty
(either fixed or declining), yield maintenance, or
make-whole payment that may be charged, taken, or
received by an agricultural lender or a certified facil-
ity in connection with the full or partial payment of
the principal amount due on a loan by a borrower in
advance of the scheduled date for the payment under
the terms of the loan, otherwise known as a prepay-
ment of the loan principal.’’.
SEC. 673. EXTENSION OF CAPITAL TRANSITION PERIOD.
Section 8.32 of the Farm Credit Act of 1971 (12 U.S.C.
2279bb–1) is amended—
(1) in the first sentence of subsection (a), by
striking ‘‘Not later than the expiration of the 2-year
period beginning on December 13, 1991,’’ and insert-
ing ‘‘Not sooner than the expiration of the 3-year pe-
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riod beginning on the date of enactment of the Agri-
cultural Reform and Improvement Act of 1996,’’;
(2) in the first sentence of subsection (b)(2), by
striking ‘‘5-year’’ and inserting ‘‘8-year’’; and
(3) in subsection (d)—
(A) in the first sentence—
(i) by striking ‘‘The regulations estab-
lishing’’ and inserting the following:
‘‘(1) IN
GENERAL.—The regulations establish-
ing’’; and
(ii) by striking ‘‘shall contain’’ and in-
serting the following: ‘‘shall—
‘‘(A) be issued by the Director for public
comment in the form of a notice of proposed
rulemaking, to be first published after the expi-
ration of the period referred to in subsection (a);
and
‘‘(B) contain’’; and
(B) in the second sentence, by striking ‘‘The
regulations shall’’ and inserting the following:
‘‘(2) SPECIFICITY.—The regulations referred to
in paragraph (1) shall’’.
SEC. 674. MINIMUM CAPITAL LEVEL.
Section 8.33 of the Farm Credit Act of 1971 (12 U.S.C.
2279bb–2) is amended to read as follows:
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‘‘SEC. 8.33. MINIMUM CAPITAL LEVEL.
‘‘(a) IN GENERAL.—Except as provided in subsection
(b), for purposes of this subtitle, the minimum capital level
for the Corporation shall be an amount of core capital equal
to the sum of—
‘‘(1) 2.75 percent of the aggregate on-balance
sheet assets of the Corporation, as determined in ac-
cordance with generally accepted accounting prin-
ciples; and
‘‘(2) 0.75 percent of the aggregate off-balance
sheet obligations of the Corporation, which, for the
purposes of this subtitle, shall include—
‘‘(A) the unpaid principal balance of out-
standing securities that are guaranteed by the
Corporation and backed by pools of qualified
loans;
‘‘(B) instruments that are issued or guaran-
teed by the Corporation and are substantially
equivalent to instruments described in subpara-
graph (A); and
‘‘(C) other off-balance sheet obligations of
the Corporation.
‘‘(b) TRANSITION PERIOD.—
‘‘(1) IN GENERAL.—For purposes of this subtitle,
the minimum capital level for the Corporation—
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‘‘(A) prior to January 1, 1997, shall be the
amount of core capital equal to the sum of—
‘‘(i) 0.45 percent of aggregate off-bal-
ance sheet obligations of the Corporation;
‘‘(ii) 0.45 percent of designated on-bal-
ance sheet assets of the Corporation, as de-
termined under paragraph (2); and
‘‘(iii) 2.50 percent of on-balance sheet
assets of the Corporation other than assets
designated under paragraph (2);
‘‘(B) during the 1-year period ending De-
cember 31, 1997, shall be the amount of core cap-
ital equal to the sum of—
‘‘(i) 0.55 percent of aggregate off-bal-
ance sheet obligations of the Corporation;
‘‘(ii) 1.20 percent of designated on-bal-
ance sheet assets of the Corporation, as de-
termined under paragraph (2); and
‘‘(iii) 2.55 percent of on-balance sheet
assets of the Corporation other than assets
designated under paragraph (2);
‘‘(C) during the 1-year period ending De-
cember 31, 1998, shall be the amount of core cap-
ital equal to—
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‘‘(i) if the Corporation’s core capital is
not less than $25,000,000 on January 1,
1998, the sum of—
‘‘(I) 0.65 percent of aggregate off-
balance sheet obligations of the Cor-
poration;
‘‘(II) 1.95 percent of designated
on-balance sheet assets of the Corpora-
tion, as determined under paragraph
(2); and
‘‘(III) 2.65 percent of on-balance
sheet assets of the Corporation other
than assets designated under para-
graph (2); or
‘‘(ii) if the Corporation’s core capital
is less than $25,000,000 on January 1,
1998, the amount determined under sub-
section (a); and
‘‘(D) on and after January 1, 1999, shall be
the amount determined under subsection (a).
‘‘(2) DESIGNATED
ON-BALANCE
SHEET
AS-
SETS.—For purposes of this subsection, the designated
on-balance sheet assets of the Corporation shall be—
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‘‘(A) the aggregate on-balance sheet assets of
the Corporation acquired under section 8.6(e);
and
‘‘(B) the aggregate amount of qualified
loans purchased and held by the Corporation
under section 8.3(c)(13).’’.
SEC. 675. CRITICAL CAPITAL LEVEL.
Section 8.34 of the Farm Credit Act of 1971 (12 U.S.C.
2279bb–3) is amended to read as follows:
‘‘SEC. 8.34. CRITICAL CAPITAL LEVEL.
‘‘For purposes of this subtitle, the critical capital level
for the Corporation shall be an amount of core capital equal
to 50 percent of the total minimum capital amount deter-
mined under section 8.33.’’.
SEC. 676. ENFORCEMENT LEVELS.
Section 8.35(e) of the Farm Credit Act of 1971 (12
U.S.C. 2279bb–4(e)) is amended by striking ‘‘during the 30-
month period beginning on the date of the enactment of this
section,’’ and inserting ‘‘during the period beginning on De-
cember 13, 1991, and ending on the effective date of the
risk based capital regulation issued by the Director under
section 8.32,’’.
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SEC. 677. RECAPITALIZATION OF THE CORPORATION.
Title VIII of the Farm Credit Act of 1971 (12 U.S.C.
2279aa et seq.) is amended by adding at the end the follow-
ing:
‘‘SEC. 8.38. RECAPITALIZATION OF THE CORPORATION.
‘‘(a) MANDATORY RECAPITALIZATION.—The Corpora-
tion shall increase the core capital of the Corporation to
an amount equal to or greater than $25,000,000, not later
than the earlier of—
‘‘(1) the date that is 2 years after the date of en-
actment of this section; or
‘‘(2) the date that is 180 days after the end of
the first calendar quarter that the aggregate on-bal-
ance sheet assets of the Corporation, plus the out-
standing principal of the off-balance sheet obligations
of the Corporation, equal or exceed $2,000,000,000.
‘‘(b) RAISING CORE CAPITAL.—In carrying out this
section, the Corporation may issue stock under section 8.4
and otherwise employ any recognized and legitimate means
of raising core capital in the power of the Corporation
under section 8.3.
‘‘(c) LIMITATION ON GROWTH OF TOTAL ASSETS.—
During the 2-year period beginning on the date of enact-
ment of this section, the aggregate on-balance sheet assets
of the Corporation plus the outstanding principal of the off-
balance sheet obligations of the Corporation may not exceed
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$3,000,000,000 if the core capital of the Corporation is less
than $25,000,000.
‘‘(d) ENFORCEMENT.—If the Corporation fails to carry
out subsection (a) by the date required under paragraph
(1) or (2) of subsection (a), the Corporation may not pur-
chase a new qualified loan or issue or guarantee a new
loan-backed security until the core capital of the Corpora-
tion is increased to an amount equal to or greater than
$25,000,000.’’.
SEC. 678. LIQUIDATION OF THE FEDERAL AGRICULTURAL
MORTGAGE CORPORATION.
Title VIII of the Farm Credit Act of 1971 (12 U.S.C.
2279aa et seq.) (as amended by section 677) is amended
by adding at the end the following:
‘‘Subtitle 
C—Receivership, 
Con-
servatorship, and Liquidation of
the Federal Agricultural Mort-
gage Corporation
‘‘SEC. 8.41. CONSERVATORSHIP; LIQUIDATION; RECEIVER-
SHIP.
‘‘(a) VOLUNTARY
LIQUIDATION.—The Corporation
may voluntarily liquidate only with the consent of, and in
accordance with a plan of liquidation approved by, the
Farm Credit Administration Board.
‘‘(b) INVOLUNTARY LIQUIDATION.—
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‘‘(1) IN GENERAL.—The Farm Credit Adminis-
tration Board may appoint a conservator or receiver
for the Corporation under the circumstances specified
in section 4.12(b).
‘‘(2) APPLICATION.—In applying section 4.12(b)
to the Corporation under paragraph (1)—
‘‘(A) the Corporation shall also be consid-
ered insolvent if the Corporation is unable to
pay its debts as they fall due in the ordinary
course of business;
‘‘(B) a conservator may also be appointed
for the Corporation if the authority of the Cor-
poration to purchase qualified loans or issue or
guarantee loan-backed securities is suspended;
and
‘‘(C) a receiver may also be appointed for
the Corporation if—
‘‘(i)(I) the authority of the Corporation
to purchase qualified loans or issue or guar-
antee loan-backed securities is suspended; or
‘‘(II) the Corporation is classified
under section 8.35 as within level III or IV
and the alternative actions available under
subtitle B are not satisfactory; and
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‘‘(ii) the Farm Credit Administration
determines that the appointment of a con-
servator would not be appropriate.
‘‘(3) NO EFFECT ON SUPERVISORY ACTIONS.—
The grounds for appointment of a conservator for the
Corporation under this subsection shall be in addition
to those in section 8.37.
‘‘(c) APPOINTMENT OF CONSERVATOR OR RECEIVER.—
‘‘(1) QUALIFICATIONS.—Notwithstanding section
4.12(b), if a conservator or receiver is appointed for
the Corporation, the conservator or receiver shall be—
‘‘(A) the Farm Credit Administration or
any other governmental entity or employee, in-
cluding the Farm Credit System Insurance Cor-
poration; or
‘‘(B) any person that—
‘‘(i) has no claim against, or financial
interest in, the Corporation or other basis
for a conflict of interest as the conservator
or receiver; and
‘‘(ii) has the financial and manage-
ment expertise necessary to direct the oper-
ations and affairs of the Corporation and,
if necessary, to liquidate the Corporation.
‘‘(2) COMPENSATION.—
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‘‘(A) IN
GENERAL.—A conservator or re-
ceiver for the Corporation and professional per-
sonnel (other than a Federal employee) employed
to represent or assist the conservator or receiver
may be compensated for activities conducted as,
or for, a conservator or receiver.
‘‘(B) 
LIMIT
ON
COMPENSATION.—Com-
pensation may not be provided in amounts
greater than the compensation paid to employees
of the Federal Government for similar services,
except that the Farm Credit Administration may
provide for compensation at higher rates that are
not in excess of rates prevailing in the private
sector if the Farm Credit Administration deter-
mines that compensation at higher rates is nec-
essary in order to recruit and retain competent
personnel.
‘‘(C) CONTRACTUAL
ARRANGEMENTS.—The
conservator or receiver may contract with any
governmental entity, including the Farm Credit
System Insurance Corporation, to make person-
nel, services, and facilities of the entity available
to the conservator or receiver on such terms and
compensation arrangements as shall be mutually
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agreed, and each entity may provide the same to
the conservator or receiver.
‘‘(3) EXPENSES.—A valid claim for expenses of
the conservatorship or receivership (including com-
pensation under paragraph (2)) and a valid claim
with respect to a loan made under subsection (f)
shall—
‘‘(A) be paid by the conservator or receiver
from funds of the Corporation before any other
valid claim against the Corporation; and
‘‘(B) may be secured by a lien, on such
property of the Corporation as the conservator or
receiver may determine, that shall have priority
over any other lien.
‘‘(4) LIABILITY.—If the conservator or receiver
for the Corporation is not a Federal entity, or an offi-
cer or employee of the Federal Government, the con-
servator or receiver shall not be personally liable for
damages in tort or otherwise for an act or omission
performed pursuant to and in the course of the
conservatorship or receivership, unless the act or
omission constitutes gross negligence or any form of
intentional tortious conduct or criminal conduct.
‘‘(5) INDEMNIFICATION.—The Farm Credit Ad-
ministration may allow indemnification of the con-
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servator 
or 
receiver 
from 
the 
assets 
of 
the
conservatorship or receivership on such terms as the
Farm Credit Administration considers appropriate.
‘‘(d) JUDICIAL REVIEW OF APPOINTMENT.—
‘‘(1) IN GENERAL.—Notwithstanding subsection
(i)(1), not later than 30 days after a conservator or
receiver is appointed under subsection (b), the Cor-
poration may bring an action in the United States
District Court for the District of Columbia for an
order requiring the Farm Credit Administration
Board to remove the conservator or receiver. The court
shall, on the merits, dismiss the action or direct the
Farm Credit Administration Board to remove the
conservator or receiver.
‘‘(2) STAY OF OTHER ACTIONS.—On the com-
mencement of an action under paragraph (1), any
court having jurisdiction of any other action or en-
forcement proceeding authorized under this Act to
which the Corporation is a party shall stay the action
or proceeding during the pendency of the action for
removal of the conservator or receiver.
‘‘(e) GENERAL POWERS
OF CONSERVATOR
OR RE-
CEIVER.—The conservator or receiver for the Corporation
shall have such powers to conduct the conservatorship or
receivership as shall be provided pursuant to regulations
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adopted by the Farm Credit Administration Board. Such
powers shall be comparable to the powers available to a con-
servator or receiver appointed pursuant to section 4.12(b).
‘‘(f) BORROWINGS FOR WORKING CAPITAL.—
‘‘(1) IN GENERAL.—If the conservator or receiver
of the Corporation determines that it is likely that
there will be insufficient funds to pay the ongoing ad-
ministrative expenses of the conservatorship or receiv-
ership or that there will be insufficient liquidity to
fund maturing obligations of the conservatorship or
receivership, the conservator or receiver may borrow
funds in such amounts, from such sources, and at
such rates of interest as the conservator or receiver
considers necessary or appropriate to meet the admin-
istrative 
expenses 
or 
liquidity 
needs 
of 
the
conservatorship or receivership.
‘‘(2) WORKING
CAPITAL
FROM
FARM
CREDIT
BANKS.—A Farm Credit bank may loan funds to the
conservator or receiver for a loan authorized under
paragraph (1) or, in the event of receivership, a Farm
Credit bank may purchase assets of the Corporation.
‘‘(g) AGREEMENTS AGAINST INTERESTS
OF CON-
SERVATOR OR RECEIVER.—No agreement that tends to di-
minish or defeat the right, title, or interest of the conserva-
tor or receiver for the Corporation in any asset acquired
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by the conservator or receiver as conservator or receiver for
the Corporation shall be valid against the conservator or
receiver unless the agreement—
‘‘(1) is in writing;
‘‘(2) is executed by the Corporation and any per-
son claiming an adverse interest under the agreement,
including the obligor, contemporaneously with the ac-
quisition of the asset by the Corporation;
‘‘(3) is approved by the Board or an appropriate
committee of the Board, which approval shall be re-
flected in the minutes of the Board or committee; and
‘‘(4) has been, continuously, from the time of the
agreement’s execution, an official record of the Cor-
poration.
‘‘(h) REPORT TO THE CONGRESS.—On a determina-
tion by the receiver for the Corporation that there are insuf-
ficient assets of the receivership to pay all valid claims
against the receivership, the receiver shall submit to the Sec-
retary of the Treasury, the Committee on Agriculture of the
House of Representatives, and the Committee on Agri-
culture, Nutrition, and Forestry of the Senate a report on
the financial condition of the receivership.
‘‘(i) TERMINATION OF AUTHORITIES.—
‘‘(1) CORPORATION.—The charter of the Corpora-
tion shall be canceled, and the authority provided to
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the Corporation by this title shall terminate, on such
date as the Farm Credit Administration Board deter-
mines is appropriate following the placement of the
Corporation in receivership, but not later than the
conclusion of the receivership and discharge of the re-
ceiver.
‘‘(2) OVERSIGHT.—The Office of Secondary Mar-
ket Oversight established under section 8.11 shall be
abolished, and section 8.11(a) and subtitle B shall
have no force or effect, on such date as the Farm
Credit Administration Board determines is appro-
priate following the placement of the Corporation in
receivership, but not later than the conclusion of the
receivership and discharge of the receiver.’’.
CHAPTER 2—REGULATORY RELIEF
SEC. 681. COMPENSATION OF ASSOCIATION PERSONNEL.
Section 1.5(13) of the Farm Credit Act of 1971 (12
U.S.C. 2013(13)) is amended by striking ‘‘, and the ap-
pointment and compensation of the chief executive officer
thereof,’’.
SEC. 682. USE OF PRIVATE MORTGAGE INSURANCE.
(a) IN GENERAL.—Section 1.10(a)(1) of the Farm
Credit Act of 1971 (12 U.S.C. 2018(a)(1)) is amended by
adding at the end the following:
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‘‘(D) PRIVATE
MORTGAGE
INSURANCE.—A
loan on which private mortgage insurance is ob-
tained may exceed 85 percent of the appraised
value of the real estate security to the extent that
the loan amount in excess of such 85 percent is
covered by the insurance.’’.
(b) 
CONFORMING
AMENDMENT.— Section
1.10(a)(1)(A) of the Farm Credit Act of 1971 (12 U.S.C.
2018(a)(1)(A)) is amended by striking ‘‘paragraphs (2) and
(3)’’ and inserting ‘‘subparagraphs (C) and (D)’’.
SEC. 683. REMOVAL OF CERTAIN BORROWER REPORTING
REQUIREMENT.
Section 1.10(a) of the Farm Credit Act of 1971 (12
U.S.C. 2018(a)) is amended by striking paragraph (5).
SEC. 684. REFORM OF REGULATORY LIMITATIONS ON DIVI-
DEND, 
MEMBER 
BUSINESS, 
AND 
VOTING
PRACTICES OF ELIGIBLE FARMER-OWNED CO-
OPERATIVES.
(a) IN GENERAL.—Section 3.8(a) of the Farm Credit
Act of 1971 (12 U.S.C. 2129(a)) is amended by adding at
the end the following: ‘‘Any such association that has re-
ceived a loan from a bank for cooperatives shall, without
regard to the requirements of paragraphs (1) through (4),
continue to be eligible for so long as more than 50 percent
(or such higher percentage as is established by the bank
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or association retains a subordinated participation
interest in a loan or pool of loans or contributes to
a cash reserve.
‘‘(3) EXCEPTION.—
‘‘(A) IN
GENERAL.—Subject to subpara-
graph (B) and notwithstanding any other provi-
sion of this section, if a loan designated for sale
under paragraph (1)(A) is not sold into a sec-
ondary market during the 180-day period that
begins on the date of the designation, the voting
stock or participation certificate purchase re-
quirement that would otherwise apply to the
loan in the absence of a bylaw provision de-
scribed in paragraph (1)(A) shall be effective.
‘‘(B) RETIREMENT.—The bylaws adopted by
a bank or association under subsection (b) may
provide that if a loan described in subparagraph
(A) is sold into a secondary market after the end
of the 180-day period described in the subpara-
graph, all outstanding voting stock or participa-
tion certificates held by the borrower with respect
to the loan shall, subject to subsection (d)(1), be
retired.’’.
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SEC. 687. DISCLOSURE RELATING TO ADJUSTABLE RATE
LOANS.
Section 4.13(a)(4) of the Farm Credit Act of 1971 (12
U.S.C. 2199(a)(4)) is amended by inserting before the semi-
colon at the end the following: ‘‘, and notice to the borrower
of a change in the interest rate applicable to the loan of
the borrower may be made within a reasonable time after
the effective date of an increase or decrease in the interest
rate’’.
SEC. 688. BORROWERS’ RIGHTS.
(a) DEFINITION OF LOAN.—Section 4.14A(a)(5) of the
Farm Credit Act of 1971 (12 U.S.C. 2202a(a)(5)) is amend-
ed—
(1) by striking ‘‘(5) LOAN.—The’’ and inserting
the following:
‘‘(5) LOAN.—
‘‘(A) IN
GENERAL.—Subject to subpara-
graph (B), the’’; and
(2) by adding at the end the following:
‘‘(B) EXCLUSION FOR LOANS DESIGNATED
FOR SALE INTO SECONDARY MARKET.—
‘‘(i) IN GENERAL.—Except as provided
in clause (ii), the term ‘loan’ does not in-
clude a loan made on or after the date of
enactment of this subparagraph that is des-
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ignated, at the time the loan is made, for
sale into a secondary market.
‘‘(ii) UNSOLD LOANS.—
‘‘(I) IN GENERAL.—Except as pro-
vided in subclause (II), if a loan des-
ignated for sale under clause (i) is not
sold into a secondary market during
the 180-day period that begins on the
date of the designation, the provisions
of this section and sections 4.14, 4.14B,
4.14C, 4.14D, and 4.36 that would oth-
erwise apply to the loan in the absence
of the exclusion described in clause (i)
shall become effective with respect to
the loan.
‘‘(II) LATER SALE.—If a loan de-
scribed in subclause (I) is sold into a
secondary market after the end of the
180-day period described in subclause
(I), subclause (I) shall not apply with
respect to the loan beginning on the
date of the sale.’’.
(b) BORROWERS’ RIGHTS FOR POOLED LOANS.—The
first sentence of section 8.9(b) of the Farm Credit Act of
1971 (12 U.S.C. 2279aa–9(b)) is amended by inserting ‘‘(as
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defined in section 4.14A(a)(5))’’ after ‘‘application for a
loan’’.
SEC. 689. FORMATION OF ADMINISTRATIVE SERVICE ENTI-
TIES.
Part E of title IV of the Farm Credit Act of 1971 is
amended by inserting after section 4.28 (12 U.S.C. 2214)
the following:
‘‘SEC. 4.28A. DEFINITION OF BANK.
‘‘In this part, the term ‘bank’ includes each association
operating under title II.’’.
SEC. 690. JOINT MANAGEMENT AGREEMENTS.
The first sentence of section 5.17(a)(2)(A) of the Farm
Credit Act of 1971 (12 U.S.C. 2252(a)(2)(A)) is amended
by striking ‘‘or management agreements’’.
SEC. 691. DISSEMINATION OF QUARTERLY REPORTS.
Section 5.17(a)(8) of the Farm Credit Act of 1971 (12
U.S.C. 2252(a)(8)) is amended by inserting after ‘‘except
that’’ the following: ‘‘the requirements of the Farm Credit
Administration governing the dissemination to stockholders
of quarterly reports of System institutions may not be more
burdensome or costly than the requirements applicable to
national banks, and’’.
SEC. 692. REGULATORY REVIEW.
(a) FINDINGS.—Congress finds that—
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(1) the Farm Credit Administration, in the role
of the Administration as an arms-length safety and
soundness regulator, has made considerable progress
in reducing the regulatory burden on Farm Credit
System institutions;
(2) the efforts of the Farm Credit Administration
described in paragraph (1) have resulted in cost sav-
ings for Farm Credit System institutions; and
(3) the cost savings described in paragraph (2)
ultimately benefit the farmers, ranchers, agricultural
cooperatives, and rural residents of the United States.
(b) CONTINUATION
OF REGULATORY REVIEW.—The
Farm Credit Administration shall continue the comprehen-
sive review of regulations governing the Farm Credit Sys-
tem to identify and eliminate, consistent with law, safety,
and soundness, all regulations that are unnecessary, unduly
burdensome or costly, or not based on law.
SEC. 693. EXAMINATION OF FARM CREDIT SYSTEM INSTITU-
TIONS.
The first sentence of section 5.19(a) of the Farm Credit
Act of 1971 (12 U.S.C. 2254(a)) is amended by striking
‘‘each year’’ and inserting ‘‘during each 18-month period’’.
SEC. 694. CONSERVATORSHIPS AND RECEIVERSHIPS.
(a) DEFINITIONS.—Section 5.51 of the Farm Credit
Act of 1971 (12 U.S.C. 2277a) is amended—
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(1) by striking paragraph (5); and
(2) by redesignating paragraph (6) as para-
graph (5).
(b) GENERAL CORPORATE POWERS.—Section 5.58 of
the Farm Credit Act of 1971 (12 U.S.C. 2277a–7) is amend-
ed by striking paragraph (9) and inserting the following:
‘‘(9) CONSERVATOR
OR
RECEIVER.—The Cor-
poration may act as a conservator or receiver.’’.
SEC. 695. FARM CREDIT INSURANCE FUND OPERATIONS.
(a) ADJUSTMENT OF PREMIUMS.—
(1) IN GENERAL.—Section 5.55(a) of the Farm
Credit Act of 1971 (12 U.S.C. 2277a–4(a)) is amend-
ed—
(A) in paragraph (1), by striking ‘‘Until
the aggregate of amounts in the Farm Credit In-
surance Fund exceeds the secure base amount,
the annual premium due from any insured Sys-
tem bank for any calendar year’’ and inserting
the following: ‘‘If at the end of any calendar year
the aggregate of amounts in the Farm Credit In-
surance Fund does not exceed the secure base
amount, subject to paragraph (2), the annual
premium due from any insured System bank for
the calendar year’’;
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(B) by redesignating paragraph (2) as
paragraph (3); and
(C) by inserting after paragraph (1) the fol-
lowing:
‘‘(2) REDUCED PREMIUMS.—The Corporation, in
the sole discretion of the Corporation, may reduce by
a percentage uniformly applied to all insured System
banks the annual premium due from each insured
System bank during any calendar year, as deter-
mined under paragraph (1).’’.
(2) CONFORMING AMENDMENTS.—
(A) Section 5.55(b) of the Farm Credit Act
of 1971 (12 U.S.C. 2277a–4(b)) is amended—
(i) by striking ‘‘Insurance Fund’’ each
place it appears and inserting ‘‘Farm Cred-
it Insurance Fund’’;
(ii) by striking ‘‘for the following cal-
endar year’’; and
(iii) by striking ‘‘subsection (a)’’ and
inserting ‘‘subsection (a)(1)’’.
(B) Section 5.56(a) of the Farm Credit Act
of 1971 (12 U.S.C. 2277a–5(a)) is amended by
striking ‘‘section 5.55(a)(2)’’ each place it ap-
pears in paragraphs (2) and (3) and inserting
‘‘section 5.55(a)(3)’’.
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(C) Section 1.12(b) (12 U.S.C. 2020(b)) is
amended—
(i) in paragraph (1), by inserting ‘‘(as
defined in section 5.55(a)(3))’’ after ‘‘gov-
ernment-guaranteed loans’’; and
(ii) in paragraph (3), by inserting
‘‘(as so defined)’’ after ‘‘government-guaran-
teed loans’’ each place such term appears.
(b) ALLOCATION TO INSURED SYSTEM BANKS AND
OTHER SYSTEM INSTITUTIONS OF EXCESS AMOUNTS IN
THE FARM CREDIT INSURANCE FUND.—Section 5.55 of the
Farm Credit Act of 1971 (12 U.S.C. 2277a–4) is amended
by adding at the end the following:
‘‘(e) ALLOCATION TO SYSTEM INSTITUTIONS OF EX-
CESS RESERVES.—
‘‘(1) ESTABLISHMENT OF ALLOCATED INSURANCE
RESERVES ACCOUNTS.—There is hereby established in
the Farm Credit Insurance Fund an Allocated Insur-
ance Reserves Account—
‘‘(A) for each insured System bank; and
‘‘(B) subject to paragraph (6)(C), for all
holders, in the aggregate, of Financial Assistance
Corporation stock.
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‘‘(2) TREATMENT.—Amounts in any Allocated
Insurance Reserves Account shall be considered to be
part of the Farm Credit Insurance Fund.
‘‘(3) ANNUAL ALLOCATIONS.—If, at the end of
any calendar year, the aggregate of the amounts in
the Farm Credit Insurance Fund exceeds the average
secure base amount for the calendar year (as cal-
culated on an average daily balance basis), the Cor-
poration shall allocate to the Allocated Insurance Re-
serves Accounts the excess amount less the amount
that the Corporation, in its sole discretion, determines
to be the sum of the estimated operating expenses and
estimated insurance obligations of the Corporation for
the immediately succeeding calendar year.
‘‘(4) ALLOCATION
FORMULA.—From the total
amount required to be allocated at the end of a cal-
endar year under paragraph (3)—
‘‘(A) 10 percent of the total amount shall be
credited to the Allocated Insurance Reserves Ac-
count established under paragraph (1)(B), sub-
ject to paragraph (6)(C); and
‘‘(B) there shall be credited to the Allocated
Insurance Reserves Account of each insured Sys-
tem bank an amount that bears the same ratio
to the total amount (less any amount credited
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under subparagraph (A)) as the average prin-
cipal outstanding for the 3-year period ending
on the end of the calendar year on loans made
by the bank that are in accrual status bears to
the average principal outstanding for the 3-year
period ending on the end of the calendar year on
loans made by all insured System banks that are
in accrual status (excluding, in each case, the
guaranteed portions of government-guaranteed
loans described in subsection (a)(1)(C)).
‘‘(5) USE OF FUNDS IN ALLOCATED INSURANCE
RESERVES ACCOUNTS.—To the extent that the sum of
the operating expenses of the Corporation and the in-
surance obligations of the Corporation for a calendar
year exceeds the sum of operating expenses and insur-
ance obligations determined under paragraph (3) for
the calendar year, the Corporation shall cover the ex-
penses and obligations by—
‘‘(A) reducing each Allocated Insurance Re-
serves Account by the same proportion; and
‘‘(B) expending the amounts obtained under
subparagraph 
(A) 
before 
expending 
other
amounts in the Fund.
‘‘(6) OTHER DISPOSITION OF ACCOUNT FUNDS.—
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‘‘(A) IN GENERAL.—As soon as practicable
during each calendar year beginning more than
8 years after the date on which the aggregate of
the amounts in the Farm Credit Insurance Fund
exceeds the secure base amount, but not earlier
than January 1, 2005, the Corporation may—
‘‘(i) subject to subparagraphs (D) and
(F), pay to each insured System bank, in a
manner determined by the Corporation, an
amount equal to the lesser of—
‘‘(I) 20 percent of the balance in
the insured System bank’s Allocated
Insurance Reserves Account as of the
preceding December 31; or
‘‘(II) 20 percent of the balance in
the bank’s Allocated Insurance Reserves
Account on the date of the payment;
and
‘‘(ii) subject to subparagraphs (C), (E),
and (F), pay to each System bank and asso-
ciation holding Financial Assistance Cor-
poration stock a proportionate share, deter-
mined by dividing the number of shares of
Financial Assistance Corporation stock held
by the institution by the total number of
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shares of Financial Assistance Corporation
stock outstanding, of the lesser of—
‘‘(I) 20 percent of the balance in
the Allocated Insurance Reserves Ac-
count established under paragraph
(1)(B) as of the preceding December
31; or
‘‘(II) 20 percent of the balance in
the Allocated Insurance Reserves Ac-
count established under paragraph
(1)(B) on the date of the payment.
‘‘(B) AUTHORITY TO ELIMINATE OR REDUCE
PAYMENTS.—The Corporation may eliminate or
reduce payments during a calendar year under
subparagraph (A) if the Corporation determines,
in its sole discretion, that the payments, or other
circumstances that might require use of the
Farm Credit Insurance Fund, could cause the
amount in the Farm Credit Insurance Fund
during the calendar year to be less than the se-
cure base amount.
‘‘(C) REIMBURSEMENT FOR FINANCIAL AS-
SISTANCE CORPORATION STOCK.—
‘‘(i) SUFFICIENT
FUNDING.—Notwith-
standing paragraph (4)(A), on provision by
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the Corporation for the accumulation in the
Account established under paragraph (1)(B)
of funds in an amount equal to $56,000,000
(in addition to the amounts described in
subparagraph 
(F)(ii)), 
the 
Corporation
shall not allocate any further funds to the
Account except to replenish the Account if
funds are diminished below $56,000,000 by
the Corporation under paragraph (5).
‘‘(ii) WIND DOWN AND TERMINATION.—
‘‘(I) FINAL DISBURSEMENTS.—On
disbursement of $53,000,000 (in addi-
tion to the amounts described in sub-
paragraph (F)(ii)) from the Allocated
Insurance Reserves Account, the Cor-
poration shall disburse the remaining
amounts in the Account, as determined
under subparagraph (A)(ii), without
regard to the percentage limitations in
subclauses (I) and (II) of subpara-
graph (A)(ii).
‘‘(II) 
TERMINATION
OF
AC-
COUNT.—On 
disbursement 
of
$56,000,000 
(in 
addition 
to 
the
amounts described in subparagraph
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(F)(ii)) from the Allocated Insurance
Reserves Account, the Corporation shall
close the Account established under
paragraph (1)(B) and transfer any re-
maining funds in the Account to the
remaining Allocated Insurance Re-
serves Accounts in accordance with
paragraph (4)(B) for the calendar year
in which the transfer occurs.
‘‘(D) DISTRIBUTION
OF
PAYMENTS
RE-
CEIVED.—Not later than 60 days after receipt of
a payment made under subparagraph (A)(i),
each insured System bank, in consultation with
affiliated associations of the insured System
bank, and taking into account the direct or indi-
rect payment of insurance premiums by the asso-
ciations, shall develop and implement an equi-
table plan to distribute payments received under
subparagraph (A)(i) among the bank and asso-
ciations of the bank.
‘‘(E) EXCEPTION
FOR
PREVIOUSLY
REIM-
BURSED
ASSOCIATIONS.—For purposes of sub-
paragraph (A)(ii), in any Farm Credit district
in which the funding bank has reimbursed 1 or
more affiliated associations of the bank for the
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previously unreimbursed portion of the Finan-
cial Assistance Corporation stock held by the as-
sociations, the funding bank shall be deemed to
be the holder of the shares of Financial Assist-
ance Corporation stock for which the funding
bank has provided the reimbursement.
‘‘(F) INITIAL
PAYMENT.—Notwithstanding
subparagraph (A), the initial payment made to
each payee under subparagraph (A) shall be in
such amount determined by the Corporation to
be equal to the sum of—
‘‘(i) the total of the amounts that
would have been paid if payments under
subparagraph (A) had been authorized to
begin, under the same terms and conditions,
in the first calendar year beginning more
than 5 years after the date on which the ag-
gregate of the amounts in the Farm Credit
Insurance Fund exceeds the secure base
amount, and to continue through the 2 im-
mediately subsequent years;
‘‘(ii) interest earned on any amounts
that would have been paid as described in
clause (i) from the date on which the pay-
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ments would have been paid as described in
clause (i); and
‘‘(iii) the payment to be made in the
initial year described in subparagraph (A),
based on the amount in each Account after
subtracting the amounts to be paid under
clauses (i) and (ii).’’
(c) TECHNICAL AMENDMENTS.—Section 5.55(d) of the
Farm Credit Act of 1971 (12 U.S.C. 2277a–4(d)) is amend-
ed—
(1) in the matter preceding paragraph (1)—
(A) by striking ‘‘subsections (a) and (c)’’
and inserting ‘‘subsections (a), (c), and (e)’’; and
(B) by striking ‘‘a Farm Credit Bank’’ and
inserting ‘‘an insured System bank’’; and
(2) in paragraphs (1), (2), and (3), by striking
‘‘Farm Credit Bank’’ each place it appears and in-
serting ‘‘insured System bank’’.
SEC. 696. EXAMINATIONS BY THE FARM CREDIT SYSTEM IN-
SURANCE CORPORATION.
Section 5.59(b)(1)(A) of the Farm Credit Act of 1971
(12 U.S.C. 2277a–8(b)(1)(A)) is amended by adding at the
end the following: ‘‘Notwithstanding any other provision of
this Act, on cancellation of the charter of a System institu-
tion, the Corporation shall have authority to examine the
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system institution in receivership. An examination shall be
performed at such intervals as the Corporation shall deter-
mine.’’.
SEC. 697. POWERS WITH RESPECT TO TROUBLED INSURED
SYSTEM BANKS.
(a) LEAST-COST RESOLUTION.—Section 5.61(a)(3) of
the Farm Credit Act of 1971 (12 U.S.C. 2277a–10(a)) is
amended—
(1) by redesignating subparagraph (B) as sub-
paragraph (F); and
(2) by striking subparagraph (A) and inserting
the following:
‘‘(A) LEAST-COST RESOLUTION.—Assistance
may not be provided to an insured System bank
under this subsection unless the means of provid-
ing the assistance is the least costly means of
providing the assistance by the Farm Credit In-
surance Fund of all possible alternatives avail-
able to the Corporation, including liquidation of
the bank (including paying the insured obliga-
tions issued on behalf of the bank). Before mak-
ing a least-cost determination under this sub-
paragraph, the Corporation shall accord such
other insured System banks as the Corporation
determines to be appropriate the opportunity to
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submit information relating to the determina-
tion.
‘‘(B) DETERMINING
LEAST
COSTLY
AP-
PROACH.—In determining the least costly alter-
native under subparagraph (A), the Corporation
shall—
‘‘(i) evaluate alternatives on a present-
value basis, using a reasonable discount
rate;
‘‘(ii) document the evaluation and the
assumptions on which the evaluation is
based; and
‘‘(iii) retain the documentation for not
less than 5 years.
‘‘(C) TIME OF DETERMINATION.—
‘‘(i) GENERAL RULE.—For purposes of
this subsection, the determination of the
costs of providing any assistance under any
provision of this section with respect to any
insured System bank shall be made as of the
date on which the Corporation makes the
determination to provide the assistance to
the institution under this section.
‘‘(ii) RULE
FOR
LIQUIDATIONS.—For
purposes of this subsection, the determina-
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tion of the costs of liquidation of any in-
sured System bank shall be made as of the
earliest of—
‘‘(I) the date on which a conserva-
tor is appointed for the insured System
bank;
‘‘(II) the date on which a receiver
is appointed for the insured System
bank; or
‘‘(III) the date on which the Cor-
poration makes any determination to
provide any assistance under this sec-
tion with respect to the insured System
bank.
‘‘(D) RULE
FOR
STAND-ALONE
ASSIST-
ANCE.—Before providing any assistance under
paragraph (1), the Corporation shall evaluate
the adequacy of managerial resources of the in-
sured System bank. The continued service of any
director or senior ranking officer who serves in
a policymaking role for the assisted insured Sys-
tem bank, as determined by the Corporation,
shall be subject to approval by the Corporation
as a condition of assistance.
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‘‘(E) DISCRETIONARY
DETERMINATIONS.—
Any determination that the Corporation makes
under this paragraph shall be in the sole discre-
tion of the Corporation.’’.
(b) CONFORMING AMENDMENTS.—Section 5.61(a) of
the Farm Credit Act of 1971 (12 U.S.C. 2277a–10(a)) is
amended—
(1) in paragraph (1) by striking ‘‘IN
GEN-
ERAL.—’’ and inserting ‘‘STAND-ALONE
ASSIST-
ANCE.—’’; and
(2) in paragraph (2)—
(A) by striking ‘‘ENUMERATED POWERS.—’’
and inserting ‘‘FACILITATION OF MERGERS OR
CONSOLIDATION.—’’; and
(B) in subparagraph (A) by striking ‘‘FA-
CILITATION OF MERGERS OR CONSOLIDATION.—’’
and inserting ‘‘IN GENERAL.—’’.
SEC. 698. OVERSIGHT AND REGULATORY ACTIONS BY THE
FARM CREDIT SYSTEM INSURANCE CORPORA-
TION.
The Farm Credit Act of 1971 is amended by inserting
after section 5.61 (12 U.S.C. 2279a–10) the following:
‘‘SEC. 5.61A. OVERSIGHT ACTIONS BY THE CORPORATION.
‘‘(a) DEFINITIONS.—In this section, the term ‘institu-
tion’ means—
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‘‘(1) an insured System bank; and
‘‘(2) a production credit association or other as-
sociation making loans under section 7.6 with a di-
rect loan payable to the funding bank of the associa-
tion that comprises 20 percent or more of the funding
bank’s total loan volume net of nonaccrual loans.
‘‘(b) CONSULTATION REGARDING PARTICIPATION OF
UNDERCAPITALIZED BANKS IN ISSUANCE OF INSURED OB-
LIGATIONS.—The Farm Credit Administration shall consult
with the Corporation prior to approving an insured obliga-
tion that is to be issued by or on behalf of, or participated
in by, any insured System bank that fails to meet the mini-
mum level for any capital requirement established by the
Farm Credit Administration for the bank.
‘‘(c) CONSULTATION REGARDING APPLICATIONS FOR
MERGERS AND RESTRUCTURINGS.—
‘‘(1) CORPORATION TO RECEIVE COPY OF TRANS-
ACTION APPLICATIONS.—On receiving an application
for a merger or restructuring of an institution, the
Farm Credit Administration shall forward a copy of
the application to the Corporation.
‘‘(2) CONSULTATION REQUIRED.—If the proposed
merger or restructuring involves an institution that
fails to meet the minimum level for any capital re-
quirement established by the Farm Credit Adminis-
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tration applicable to the institution, the Farm Credit
Administration shall allow 30 days within which the
Corporation may submit the views and recommenda-
tions of the Corporation, including any conditions for
approval. In determining whether to approve or dis-
approve any proposed merger or restructuring, the
Farm Credit Administration shall give due consider-
ation to the views and recommendations of the Cor-
poration.
‘‘SEC. 5.61B. AUTHORITY TO REGULATE GOLDEN PARA-
CHUTE AND INDEMNIFICATION PAYMENTS.
‘‘(a) DEFINITIONS.—In this section:
‘‘(1) GOLDEN PARACHUTE PAYMENT.—The term
‘golden parachute payment’—
‘‘(A) means a payment (or any agreement
to make a payment) in the nature of compensa-
tion for the benefit of any institution-related
party under an obligation of any Farm Credit
System institution that—
‘‘(i) is contingent on the termination of
the party’s relationship with the institution;
and
‘‘(ii) is received on or after the date on
which—
‘‘(I) the institution is insolvent;
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‘‘(II) a conservator or receiver is
appointed for the institution;
‘‘(III) the institution has been as-
signed by the Farm Credit Adminis-
tration a composite CAMEL rating of
4 or 5 under the Farm Credit Admin-
istration Rating System, or an equiva-
lent rating; or
‘‘(IV) the Corporation otherwise
determines that the institution is in a
troubled condition (as defined in regu-
lations issued by the Corporation); and
‘‘(B) includes a payment that would be a
golden parachute payment but for the fact that
the payment was made before the date referred to
in subparagraph (A)(ii) if the payment was
made in contemplation of the occurrence of an
event described in any subclause of subparagraph
(A); but
‘‘(C) does not include—
‘‘(i) a payment made under a retire-
ment plan that is qualified (or is intended
to be qualified) under section 401 of the In-
ternal Revenue Code of 1986 or other non-
discriminatory benefit plan;
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‘‘(ii) a payment made under a bona
fide supplemental executive retirement plan,
deferred compensation plan, or other ar-
rangement that the Corporation determines,
by regulation or order, to be permissible; or
‘‘(iii) a payment made by reason of the
death or disability of an institution-related
party.
‘‘(2) INDEMNIFICATION PAYMENT.—The term ‘in-
demnification payment’ means a payment (or any
agreement to make a payment) by any Farm Credit
System institution for the benefit of any person who
is or was an institution-related party, to pay or re-
imburse the person for any liability or legal expense
with regard to any administrative proceeding or civil
action instituted by the Farm Credit Administration
that results in a final order under which the person—
‘‘(A) is assessed a civil money penalty; or
‘‘(B) is removed or prohibited from partici-
pating in the conduct of the affairs of the insti-
tution.
‘‘(3) INSTITUTION-RELATED
PARTY.—The term
‘institution-related party’ means—
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‘‘(A) a director, officer, employee, or agent
for a Farm Credit System institution or any
conservator or receiver of such an institution;
‘‘(B) a stockholder (other than another
Farm Credit System institution), consultant,
joint venture partner, or any other person deter-
mined by the Farm Credit Administration to be
a participant in the conduct of the affairs of a
Farm Credit System institution; and
‘‘(C) an independent contractor (including
any attorney, appraiser, or accountant) that
knowingly or recklessly participates in any vio-
lation of any law or regulation, any breach of fi-
duciary duty, or any unsafe or unsound practice
that caused or is likely to cause more than a
minimal financial loss to, or a significant ad-
verse effect on, the Farm Credit System institu-
tion.
‘‘(4) LIABILITY OR LEGAL EXPENSE.—The term
‘liability or legal expense’ means—
‘‘(A) a legal or other professional expense
incurred in connection with any claim, proceed-
ing, or action;
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‘‘(B) the amount of, and any cost incurred
in connection with, any settlement of any claim,
proceeding, or action; and
‘‘(C) the amount of, and any cost incurred
in connection with, any judgment or penalty im-
posed with respect to any claim, proceeding, or
action.
‘‘(5) PAYMENT.—The term ‘payment’ means—
‘‘(A) a direct or indirect transfer of any
funds or any asset; and
‘‘(B) any segregation of any funds or assets
for the purpose of making, or under an agree-
ment to make, any payment after the date on
which the funds or assets are segregated, without
regard to whether the obligation to make the
payment is contingent on—
‘‘(i) the determination, after that date,
of the liability for the payment of the
amount; or
‘‘(ii) the liquidation, after that date, of
the amount of the payment.
‘‘(b) PROHIBITION.—The Corporation may prohibit or
limit, by regulation or order, any golden parachute pay-
ment or indemnification payment by a Farm Credit Sys-
tem institution (including any conservator or receiver of
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the Federal Agricultural Mortgage Corporation) in troubled
condition (as defined in regulations issued by the Corpora-
tion).
‘‘(c) FACTORS TO BE TAKEN INTO ACCOUNT.—The
Corporation shall prescribe, by regulation, the factors to be
considered by the Corporation in taking any action under
subsection (b). The factors may include—
‘‘(1) whether there is a reasonable basis to believe
that an institution-related party has committed any
fraudulent act or omission, breach of trust or fidu-
ciary duty, or insider abuse with regard to the Farm
Credit System institution involved that has had a
material effect on the financial condition of the insti-
tution;
‘‘(2) whether there is a reasonable basis to believe
that the institution-related party is substantially re-
sponsible for the insolvency of the Farm Credit Sys-
tem institution, the appointment of a conservator or
receiver for the institution, or the institution’s trou-
bled condition (as defined in regulations prescribed by
the Corporation);
‘‘(3) whether there is a reasonable basis to believe
that the institution-related party has materially vio-
lated any applicable law or regulation that has had
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a material effect on the financial condition of the in-
stitution;
‘‘(4) whether there is a reasonable basis to believe
that the institution-related party has violated or con-
spired to violate—
‘‘(A) section 215, 657, 1006, 1014, or 1344
of title 18, United States Code; or
‘‘(B) section 1341 or 1343 of title 18, Unit-
ed States Code, affecting a Farm Credit System
institution;
‘‘(5) whether the institution-related party was in
a position of managerial or fiduciary responsibility;
and
‘‘(6) the length of time that the party was related
to the Farm Credit System institution and the degree
to which—
‘‘(A) the payment reasonably reflects com-
pensation earned over the period of employment;
and
‘‘(B) the compensation represents a reason-
able payment for services rendered.
‘‘(d) CERTAIN PAYMENTS PROHIBITED.—No Farm
Credit System institution may prepay the salary or any
liability or legal expense of any institution-related party
if the payment is made—
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‘‘(1) in contemplation of the insolvency of the in-
stitution or after the commission of an act of insol-
vency; and
‘‘(2) with a view to, or with the result of—
‘‘(A) preventing the proper application of
the assets of the institution to creditors; or
‘‘(B) preferring 1 creditor over another
creditor.
‘‘(e) RULE OF CONSTRUCTION.—Nothing in this sec-
tion—
‘‘(1) prohibits any Farm Credit System institu-
tion from purchasing any commercial insurance pol-
icy or fidelity bond, so long as the insurance policy
or bond does not cover any legal or liability expense
of an institution described in subsection (a)(2); or
‘‘(2) limits the powers, functions, or responsibil-
ities of the Farm Credit Administration.’’.
SEC. 699. FARM CREDIT SYSTEM INSURANCE CORPORATION
BOARD OF DIRECTORS.
(a) IN GENERAL.—Section 5.53 of the Farm Credit
Act of 1971 (12 U.S.C. 2277a–2) is amended to read as
follows:
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‘‘SEC. 5.53. BOARD OF DIRECTORS.
‘‘(a) ESTABLISHMENT.—The Corporation shall be
managed by a Board of Directors that shall consist of the
members of the Farm Credit Administration Board.
‘‘(b) CHAIRMAN.—The Board of Directors shall be
chaired by any Board member other than the Chairman
of the Farm Credit Administration Board.’’.
(b) CONFORMING AMENDMENTS.—
(1) Section 5314 of title 5, United States Code,
is amended by striking ‘‘Chairperson, Board of Direc-
tors of the Farm Credit System Insurance Corpora-
tion.’’.
(2) Section 5315 of title 5, United States Code,
is amended by striking ‘‘Members, Board of Directors
of the Farm Credit System Insurance Corporation.’’.
SEC. 699A. LIABILITY FOR MAKING CRIMINAL REFERRALS.
(a) IN GENERAL.—Any institution of the Farm Credit
System, or any director, officer, employee, or agent of a
Farm Credit System institution, that discloses to a Govern-
ment authority information proffered in good faith that
may be relevant to a possible violation of any law or regula-
tion shall not be liable to any person under any law of
the United States or any State—
(1) for the disclosure; or
(2) for any failure to notify the person involved
in the possible violation.