‘‘(2) the taxpayer’s first taxable year which be-
gins during the 1-year period beginning on such 
date. 
Such election may be made for a taxable year only if made 
before the due date (including extensions) for filing the 
return of tax for such taxable year.’’. 
(b) CLERICAL AMENDMENT.—The item in the table 
of sections for subpart F of part III of subchapter N of 
chapter 1 of such Code relating to section 965 is amended 
to read as follows: 
‘‘Sec. 965. Deduction for dividends received.’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years ending on or after 
the date of the enactment of this Act. 
SEC. 603. GAIN OR LOSS FROM SALE OR EXCHANGE OF 
CERTAIN PREFERRED STOCK. 
(a) IN GENERAL.—For purposes of the Internal Rev-
enue Code of 1986, gain or loss from the sale or exchange 
of any applicable preferred stock by any applicable finan-
cial institution shall be treated as ordinary income or loss. 
(b) APPLICABLE PREFERRED STOCK.—For purposes 
of this section, the term ‘‘applicable preferred stock’’ 
means any stock— 
(1) which is preferred stock in— 
(A) the Federal National Mortgage Asso-
ciation, established pursuant to the Federal Na-
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tional Mortgage Association Charter Act (12 
U.S.C. 1716 et seq.), or 
(B) the Federal Home Loan Mortgage 
Corporation, established pursuant to the Fed-
eral Home Loan Mortgage Corporation Act (12 
U.S.C. 1451 et seq.), and 
(2) which— 
(A) was held by the applicable financial in-
stitution on September 6, 2008, or 
(B) was sold or exchanged by the applica-
ble financial institution on or after January 1, 
2008, and before September 7, 2008. 
(c) APPLICABLE FINANCIAL INSTITUTION.—For pur-
poses of this section: 
(1) IN GENERAL.—Except as provided in para-
graph (2), the term ‘‘applicable financial institution’’ 
means— 
(A) a financial institution referred to in 
section 582(c)(2) of the Internal Revenue Code 
of 1986, or 
(B) a depository institution holding com-
pany (as defined in section 3(w)(1) of the Fed-
eral 
Deposit 
Insurance 
Act 
(12 
U.S.C. 
1813(w)(1))). 
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(2) SPECIAL RULES FOR CERTAIN SALES.—In 
the case of— 
(A) a sale or exchange described in sub-
section (b)(2)(B), an entity shall be treated as 
an applicable financial institution only if it was 
an entity described in subparagraph (A) or (B) 
of paragraph (1) at the time of the sale or ex-
change, and 
(B) a sale or exchange after September 6, 
2008, of preferred stock described in subsection 
(b)(2)(A), an entity shall be treated as an appli-
cable financial institution only if it was an enti-
ty described in subparagraph (A) or (B) of 
paragraph (1) at all times during the period be-
ginning on September 6, 2008, and ending on 
the date of the sale or exchange of the pre-
ferred stock. 
(d) SPECIAL RULE FOR CERTAIN PROPERTY NOT 
HELD ON SEPTEMBER 6, 2008.—The Secretary of the 
Treasury or the Secretary’s delegate may extend the appli-
cation of this section to all or a portion of the gain or 
loss from a sale or exchange in any case where— 
(1) an applicable financial institution sells or 
exchanges applicable preferred stock after Sep-
tember 6, 2008, which the applicable financial insti-
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tution did not hold on such date, but the basis of 
which in the hands of the applicable financial insti-
tution at the time of the sale or exchange is the 
same as the basis in the hands of the person which 
held such stock on such date, or 
(2) the applicable financial institution is a part-
ner in a partnership which— 
(A) held such stock on September 6, 2008, 
and later sold or exchanged such stock, or 
(B) sold or exchanged such stock during 
the period described in subsection (b)(2)(B). 
(e) REGULATORY AUTHORITY.—The Secretary of the 
Treasury or the Secretary’s delegate may prescribe such 
guidance, rules, or regulations as are necessary to carry 
out the purposes of this section. 
(f) EFFECTIVE DATE.—This section shall apply to 
sales or exchanges occurring after December 31, 2007, in 
taxable years ending after such date. 
TITLE 
VII—EXECUTIVE 
COM-
PENSATION 
ADJUSTMENTS 
AND MISCELLANEOUS PROVI-
SIONS 
SEC. 701. COMPENSATION ADJUSTMENT. 
(a) COMPENSATION ADJUSTMENT DUE TO GOVERN-
MENT INTERVENTION.— 
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(1) IN GENERAL.—An officer of an institution 
shall pay to the Department of the Treasury any 
amounts received by such officer during a year as a 
bonus or other incentive-based or equity-based com-
pensation from the institution during— 
(A) a year in which the institution is sub-
ject to a government intervention; and 
(B) the two years prior to a year in which 
the institution is subject to a government inter-
vention. 
(2) COMPENSATION ADJUSTMENT DEFINED.— 
For purposes of this subsection, and with respect to 
an issuer, the term ‘‘government intervention’’ 
means— 
(A) the placement of the issuer under con-
servatorship, receivership, or other assumption 
of the management, governance, and control of 
the issuer by the Department of the Treasury 
or the Board of Governors of the Federal Re-
serve; or 
(B) an emergency loan of public funds 
made to the issuer by the Department of the 
Treasury or the Board of Governors of the Fed-
eral Reserve, if the Chairman of the Board of 
Governors of the Federal Reserve determines 
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that such a loan is necessary to prevent the im-
minent failure of the issuer. 
(b) EFFECTIVE DATE.—This compensation adjust-
ment shall take effect on enactment of this Act, and shall 
have no effect after September 30, 2009. 
SEC. 702. LIMITATIONS ON GSE SECURITIZATION AUTHOR-
ITY. 
Part 2 of subtitle A of the Federal Housing Enter-
prise Financial Safety and Soundness Act of 1992 (12 
U.S.C. 4541 et seq.), as amended by the Housing and 
Economic Recovery Act of 2008 (Public Law 110–289) 
is amended by adding at the end of the following new sec-
tion: 
‘‘SEC. 1327. LIMITATIONS ON GSE SECURITIZATION AU-
THORITY. 
‘‘(a) PROHIBITION.—The director shall, by regula-
tion, prohibit each enterprise from issuing, guaranteeing, 
or selling securities based on or backed by mortgages de-
scribed in subsection (b). 
‘‘(b) COVERED MORTGAGES.—The mortgages de-
scribed in this subsection are— 
‘‘(1) mortgages commonly known as Alt-A or 
Alternative A-paper mortgages, as defined by the Di-
rector, which shall include mortgages that the Direc-
tor determines to have an increased level of credit 
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risk due to borrower’s not meeting traditional or 
standard underwriting guidelines, including guide-
lines with respect to— 
‘‘(A) documentation of amount or source 
of income or assets; 
‘‘(B) debt-to-income ratio; 
‘‘(C) assets and type of property being fi-
nanced; 
‘‘(D) credit history; 
‘‘(E) loan-to-value ratios; and 
‘‘(F) occupancy of the property being fi-
nanced or borrower characteristics involved; and 
‘‘(2) mortgages having characteristics that are 
not typical of the lending practices of the mortgages 
that are made to comply with a provision of Federal 
or State law or regulation.’’. 
SEC. 703. FINANCIAL STATEMENT REVIEW. 
(a) IN GENERAL.—The Securities and Exchange 
Commission shall— 
(1) review any financial statements required 
under section 13 of the Securities Exchange Act of 
1934 (15 U.S.C. 78m) of any rescued issuer for the 
rescued issuer’s fiscal year 2005 and each suc-
ceeding fiscal year up to and including the fiscal 
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year in which such issuer became a rescued issuer; 
and 
(2) examine each of the audits that were the 
basis of such financial statements, and all the sup-
porting books, papers, correspondence, memoranda, 
or other records or materials on which such audits 
were performed. 
(b) ADDITIONAL ACTION.—The Commission shall— 
(1) if the Commission determines there was a 
material misstatement made in any financial state-
ment reviewed under subsection (a), require the 
issuer to file with the Commission a financial state-
ment correcting such misstatement; and 
(2) take all other appropriate actions under the 
Securities Exchange Act of 1934 (15 U.S.C. 78a et 
seq.). 
(c) DEFINITION.—For purposes of this section, the 
term ‘‘rescued issuer’’ means any issuer (as such term is 
defined in section 3(a)(8) of the Securities Exchange Act 
of 1934 (15 U.S.C. 78c(a)(8)) that has received, prior to 
the date of 5 enactment of this Act, Federal Government 
intervention through sale negotiation assistance, loan 
guarantee, placement under conservatorship or receiver-
ship, or other assumption of the management, governance, 
and control of the issuer by the Department of the Treas-
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ury or the Board of Governors of the Federal Reserve, 
an emergency loan of public funds made to the issuer by 
the Department of the Treasury or the Board of Gov-
ernors of the Federal Reserve, or other similar Federal 
Government intervention. 
Æ 
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