HR 2029 EAS
‘‘(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 85 percent is cov-
ered 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 in-
serting ‘‘subparagraphs (B), (C), and (D)’’.
SEC. 203. 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. 204. 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
HR 2029 EAS
board) of the voting control of the association is held by
farmers, producers or harvesters of aquatic products, or eli-
gible cooperative associations.’’.
(b) CONFORMING AMENDMENT.—Section 3.8(b)(1)(D)
of the Farm Credit Act of 1971 (12 U.S.C. 2129(b)(1)(D))
is amended by striking ‘‘and (4) of subsection (a)’’ and in-
serting ‘‘and (4), or under the last sentence, of subsection
(a)’’.
SEC. 205. REMOVAL OF FEDERAL GOVERNMENT CERTIFI-
CATION REQUIREMENT FOR CERTAIN PRI-
VATE SECTOR FINANCINGS.
Section 3.8(b)(1)(A) of the Farm Credit Act of 1971
(12 U.S.C. 2129(b)(1)(A)) is amended—
(1) by striking ‘‘have been certified by the Ad-
ministrator of the Rural Electrification Administra-
tion to be eligible for such’’ and inserting ‘‘are eligible
under the Rural Electrification Act of 1936 (7 U.S.C.
901 et seq.) for’’; and
(2) by striking ‘‘loan guarantee, and’’ and in-
serting ‘‘loan guarantee from the Administration or
the Bank (or a successor of the Administration or the
Bank), and’’.
SEC. 206. BORROWER STOCK.
Section 4.3A of the Farm Credit Act of 1971 (12
U.S.C. 2154a) is amended—
HR 2029 EAS
(1) by redesignating subsections (f) and (g) as
subsections (g) and (h), respectively; and
(2) by inserting after subsection (e) the following:
‘‘(f) LOANS DESIGNATED FOR SALE OR SOLD INTO
THE SECONDARY MARKET.—
‘‘(1) IN
GENERAL.—Subject to paragraph (2)
and notwithstanding any other provision of this sec-
tion, the bylaws adopted by a bank or association
under subsection (b) may provide—
‘‘(A) in the case of a loan made on or after
the date of enactment of this paragraph that is
designated, at the time the loan is made, for sale
into a secondary market, that no voting stock or
participation certificate purchase requirement
shall apply to the borrower for the loan; and
‘‘(B) in the case of a loan made before the
date of enactment of this paragraph that is sold
into a secondary market, that all outstanding
voting stock or participation certificates held by
the borrower with respect to the loan shall, sub-
ject to subsection (d)(1), be retired.
‘‘(2) 
APPLICABILITY.—Notwithstanding 
any
other provision of this section, in the case of a loan
sold to a secondary market under title VIII, para-
graph (1) shall apply regardless of whether the bank
HR 2029 EAS
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.’’.
HR 2029 EAS
SEC. 207. 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. 208. 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-
HR 2029 EAS
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
HR 2029 EAS
defined in section 4.14A(a)(5))’’ after ‘‘application for a
loan’’.
SEC. 209. 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. 210. 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. 211. 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. 212. REGULATORY REVIEW.
(a) FINDINGS.—Congress finds that—
HR 2029 EAS
(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. 213. 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. 214. CONSERVATORSHIPS AND RECEIVERSHIPS.
(a) DEFINITIONS.—Section 5.51 of the Farm Credit
Act of 1971 (12 U.S.C. 2277a) is amended—
HR 2029 EAS
(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. 215. 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’’;
HR 2029 EAS
(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)’’.
HR 2029 EAS
(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.—The Corporation shall estab-
lish an Allocated Insurance Reserves Account in the
Farm Credit Insurance Fund—
‘‘(A) for each insured System bank; and
‘‘(B) subject to paragraph (6)(C), for all
holders, in the aggregate, of Financial Assistance
Corporation stock.
‘‘(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
HR 2029 EAS
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
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)).
HR 2029 EAS
‘‘(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.—
‘‘(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—
HR 2029 EAS
‘‘(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
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-
HR 2029 EAS
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
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).
HR 2029 EAS
‘‘(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
(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.
HR 2029 EAS
‘‘(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
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
HR 2029 EAS
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-
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—
HR 2029 EAS
(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. 216. 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
system institution in receivership. An examination shall be
performed at such intervals as the Corporation shall deter-
mine.’’.
SEC. 217. 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
HR 2029 EAS
based, including any assumptions with re-
gard to interest rates, asset recovery rates,
asset holding costs, and payment of contin-
gent liabilities; 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-
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;
HR 2029 EAS
‘‘(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.
‘‘(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—
HR 2029 EAS
(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. 218. 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—
‘‘(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.
HR 2029 EAS
‘‘(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-
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
HR 2029 EAS
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 by any Farm Credit System institution (in-
cluding the Federal Agricultural Mortgage Cor-
poration and any conservator or receiver for the
Federal Agricultural Mortgage Corporation) for
the benefit of any institution-related party under
an obligation of the 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;
‘‘(II) a conservator or receiver is
appointed for the institution;
HR 2029 EAS
‘‘(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;
‘‘(ii) a payment made under a bona
fide supplemental executive retirement plan,
HR 2029 EAS
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;
‘‘(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.
HR 2029 EAS
‘‘(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 the Federal Agricultural Mort-
gage Corporation) in troubled condition (as defined in regu-
lations issued by the Corporation).
‘‘(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—
HR 2029 EAS
‘‘(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
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
HR 2029 EAS
‘‘(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—
‘‘(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
HR 2029 EAS
‘‘(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. 219. FARM CREDIT SYSTEM INSURANCE CORPORATION
BOARD OF DIRECTORS.
Section 201 of the Farm Credit Banks and Associa-
tions Safety and Soundness Act of 1992 (106 Stat. 4104)
is repealed.
SEC. 220. INTEREST RATE REDUCTION PROGRAM.
Section 351(a) of the Consolidated Farm and Rural
Development Act (7 U.S.C. 1999) is amended—
(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:
HR 2029 EAS
‘‘(2) TERMINATION OF AUTHORITY.—The author-
ity provided by this subsection shall terminate on
September 30, 2002.’’.
SEC. 221. 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.
(b) NO PROHIBITION ON DISCLOSURE.—Any institu-
tion of the Farm Credit System, or any director, officer,
employee, or agent of a Farm Credit System institution,
may disclose information to a Government authority that
may be relevant to a possible violation of any law or regula-
tion.