I
104TH CONGRESS
1ST SESSION
H. R. 1487
To reform and modernize the Federal Home Loan Bank System.
IN THE HOUSE OF REPRESENTATIVES
APRIL 7, 1995
Mr. BAKER of Louisiana (for himself and Mr. CHRYSLER) introduced the fol-
lowing bill; which was referred to the Committee on Banking and Finan-
cial Services
A BILL
To reform and modernize the Federal Home Loan Bank
System.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE; TABLE OF CONTENTS.
(a) SHORT TITLE.—This Act may be cited as the
‘‘Federal Home Loan Bank System Modernization Act of
1995’’.
(b) TABLE OF CONTENTS.—
Sec. 1. Short title; table of contents.
Sec. 2. Mission of the Federal home loan banks.
Sec. 3. Federal Housing Finance Board.
Sec. 4. The Office of Finance Corporation.
Sec. 5. Capital stock of the Federal home loan banks.
Sec. 8. Modification of annual contribution to the resolution funding corpora-
tion.
Sec. 9. Community support requirements.
Sec. 10. Technical and conforming amendments.
Sec. 11. Incorporation of banks; corporate powers.
Sec. 12. Liquidation or reorganization.
Sec. 13. Definitions.
Sec. 14. Effective date.
SEC. 2. MISSION OF THE FEDERAL HOME LOAN BANKS.
The Federal Home Loan Bank Act (12 U.S.C. 1421)
is amended by inserting after section 4 the following new
section:
‘‘SEC. 5. MISSION STATEMENT; FEDERAL HOME LOAN BANK
DISTRICTS AND MEMBERS.
‘‘(a) MISSION
STATEMENT.—The Federal Home
Loan Bank System shall—
‘‘(1) be a profit-making enterprise whose pur-
pose is to support residential mortgage lending (in-
cluding mortgages on housing for low- and mod-
erate-income families), and related community and
economic development lending, throughout the na-
tion, safely and soundly, through a program of
collateralized advances and other financial services
to members; and
‘‘(2) facilitate such lending by providing long-
term credit and liquidity and other financial services
to members of Federal home loan banks.
‘‘(b) DISTRICTS ESTABLISHED.—
‘‘(1) IN GENERAL.—Subject to subsection (c),
there shall be 12 districts known as Federal home
loan bank districts.
‘‘(2) NAME OF DISTRICT.—Each district shall
bear a name descriptive of the geographic location of
the district.
‘‘(3) DISTRICTS DESIGNATED.—Subject to sub-
section (c), the 12 districts shall be comprised as fol-
lows:
‘‘(A) District 1 shall be composed of the
states of Connecticut, Maine, Massachusetts,
New Hampshire, Rhode Island, and Vermont.
‘‘(B) District 2 shall be composed of the
states of New Jersey and New York, the Com-
monwealth of Puerto Rico, and the territory of
the Virgin Islands.
‘‘(C) District 3 shall be composed of the
states of Delaware, Pennsylvania, and West
Virginia.
‘‘(D) District 4 shall be composed of the
states of Alabama, Florida, Georgia, Maryland,
North Carolina, South Carolina, and Virginia,
and the District of Columbia.
‘‘(E) District 5 shall be composed of the
states of Kentucky, Ohio, and Tennessee.
‘‘(F) District 6 shall be composed of the
states of Indiana and Michigan.
‘‘(G) District 7 shall be composed of the
states of Illinois and Wisconsin.
‘‘(H) District 8 shall be composed of the
states of Iowa, Minnesota, Missouri, North Da-
kota, and South Dakota.
‘‘(I) District 9 shall be composed of the
states of Arkansas, Louisiana, Mississippi, New
Mexico, and Texas.
‘‘(J) District 10 shall be composed of the
states of Colorado, Kansas, Nebraska, and
Oklahoma.
‘‘(K) District 11 shall be composed of the
states of Arizona, California, and Nevada.
‘‘(L) District 12 shall be composed of the
states of Alaska, Hawaii, Idaho, Montana, Or-
egon, Utah, Washington, and Wyoming, and
the territories of Guam and the Pacific Islands.
‘‘(c) MERGERS, CONSOLIDATIONS
AND COMBINA-
TIONS OF BANKS.—
‘‘(1) IN GENERAL.—Notwithstanding subsection
(b), 2 or more Federal home loan banks may merge
or otherwise combine or consolidate.
‘‘(2) PREREQUISITES
FOR
TRANSACTION.—A
merger, combination, or consolidation of Federal
home loan banks may be consummated under this
subsection only if the transaction is approved by—
‘‘(A) a majority of the board of directors
of each bank participating in the transaction;
and
‘‘(B) the holders of a majority of the
shares of capital stock of each such bank.
‘‘(3) EFFECTIVE
DATE
OF
TRANSACTION.—If
the requirements of paragraph (2) have been met, a
merger, combination, or consolidation of Federal
home loan banks shall be effective at such time as
a certificate of merger, combination, or consolidation
(in such form as the Finance Board shall prescribe)
is—
‘‘(A) executed by the banks participating
in such transaction; and
‘‘(B) filed with the Finance Board in ac-
cordance with section 12(a)(3).
‘‘(4) MERGER AGREEMENT.—
‘‘(A) IN GENERAL.—Any merger, combina-
tion, or consolidation of Federal home loan
banks under this subsection shall be carried out
pursuant to an agreement entered into by all
the Federal home loan banks participating in
the transaction.
‘‘(B) CONTENTS
OF
AGREEMENT.—Any
agreement referred to in subparagraph (A)
shall specify—
‘‘(i) the terms and conditions of the
merger, combination, or consolidation;
‘‘(ii) the amendments to the chartered
documents of the resulting bank to be af-
fected by the transaction, if any;
‘‘(iii) the principal offices of the re-
sulting bank;
‘‘(iv) the manner of converting the
shares of each of the banks participating
in the transaction into shares of the result-
ing bank; and
‘‘(v) such other details or provisions
as are appropriate.
‘‘(5) SUCCESSION IN INTEREST.—Upon the ef-
fective date of any merger, combination, or consoli-
dation of Federal home loan banks under this sub-
section—
‘‘(A) the separate existence of any bank
participating in the transaction other than the
resulting bank shall cease to exist;
‘‘(B) the resulting bank shall—
‘‘(i) succeed to all the rights and
properties of each of the banks described
in subparagraph (A) without other trans-
fer; and
‘‘(ii) be subject to all the debts and li-
abilities of each such bank in the same
manner as if the resulting bank had in-
curred such debts and liabilities.
‘‘(6) EXISTING RIGHTS NOT AFFECTED.—This
subsection shall not affect any right of any creditor
of any Federal home loan bank which is participat-
ing in any merger, combination, or consolidation
under this subsection.
‘‘(7) PRESERVATION OF LIENS.—All liens upon
the property of any Federal home loan bank which
is participating in any merger, combination, or con-
solidation under this subsection shall continue to be
effective after the consummation of the transaction
except that any lien upon property of any bank other
than the resulting bank shall be effective only with
respect to the property which was subject to the lien
immediately before consummation of the transaction.
‘‘(8) CONTINUATION OF SUITS.—
‘‘(A) IN
GENERAL.—No action or other
proceeding commenced by or against any Fed-
eral home loan bank which is participating in
any merger, combination, or consolidation
under this subsection shall abate by reason of
the consummation of such transaction.
‘‘(B) 
SUBSTITUTION
OF
RESULTING
BANK.—In any action or proceeding described
in subparagraph (A), the Federal home loan
bank resulting from the transaction referred to
in such subparagraph shall be substituted for
the Federal home loan bank involved in such
action or proceeding before the consummation
of the transaction.
‘‘(C) 
APPLICABILITY
TO
RESULTING
BANK.—Any final judgment or other determina-
tion which becomes final in any action or pro-
ceeding described in subparagraph (A) shall be
binding on the bank resulting from the trans-
action referred to in such subparagraph.
‘‘(9) NUMBER OF ELECTED DIRECTORS OF RE-
SULTING BANK.—Any Bank resulting from a merg-
er, combination, or consolidation pursuant to this
section may have a number of directors equal to or
less than the total number of elected directors of all
the banks which participated in such transaction (as
determined immediately before such transaction).
and
‘‘(10) NUMBER OF APPOINTED DIRECTORS OF
RESULTING BANK.—The number of appointed direc-
tors of any Bank resulting from a merger, combina-
tion, or consolidation pursuant to this section shall
be not less than 1⁄2 and not more than 3⁄4 of the
number of elected directors.
‘‘(11) ADJUSTMENT
OF
DISTRICT
BOUND-
ARIES.—After a merger, combination, or consolida-
tion of 2 or more Federal home loan banks under
this subsection is consummated, the Finance Board
shall adjust the districts established in subsection
(b) to reflect such merger, combination, or consoli-
dation.
‘‘(d) CRITERIA FOR ELIGIBILITY FOR MEMBERSHIP
IN A BANK.—
‘‘(1) IN GENERAL.—Any insurance company or
regulated financial institution shall be eligible to be-
come and remain a member of a Federal home loan
bank if the institution meets and continues to meet
the following eligibility requirements:
‘‘(A) The institution is subject to inspec-
tion and regulation under the banking laws, or
under similar laws, of the State in which the in-
stitution is organized or of the United States.
‘‘(B) The institution maintains an invest-
ment in residential mortgage assets in an
amount not less than the amount which is equal
to 10 percent of the total assets of the institu-
tion.
‘‘(2) APPLICABILITY OF MINIMUM RESIDENTIAL
MORTGAGE INVESTMENT REQUIREMENT TO NEW IN-
STITUTIONS.—
‘‘(A) IN GENERAL.—In the case of an in-
stitution which is applying for membership in a
Federal home loan bank before or as of the
date on which the institution commences initial
business operations, paragraph (1)(B) shall not
apply with respect to such institution until the
end of the 1-year period beginning on such
date.
‘‘(B) INTENTION TO INVEST IN RESIDEN-
TIAL MORTGAGE ASSETS.—A Federal home loan
bank may require an institution described in
subparagraph (A) to provide the bank with such
evidence of the institution’s intention to comply
with paragraph (1)(B) as the bank considers
appropriate.
‘‘(3) BANK MEMBERSHIP.—An institution which
is eligible to become a member of a Federal home
loan bank under this section may only become a
member of, or secure advances from—
‘‘(A) the Federal home loan bank of the
district in which is located the institution’s
principal place of business; or
‘‘(B) the bank of a district adjoining the
district described in subparagraph (A) if—
‘‘(i) demanded by convenience; and
‘‘(ii) the Finance Board approves.
‘‘(4) INSURANCE
COMPANY
SUBJECT
TO
IN-
SPECTION
AND
REGULATION.—Notwithstanding
paragraph (1)(A), any insurance company which
would be eligible to become a member of a Federal
home loan bank but for the fact that the institution
is not subject to inspection and regulation under the
banking laws or similar laws of the State in which
such company is organized shall be eligible to be-
come a member if the company agrees to be subject
to such inspection and regulation as the Finance
Board shall prescribe.
‘‘(5) VOLUNTARY
MEMBERSHIP.—Subject to
section 6(e), no insurance company or regulated fi-
nancial institution may be required to become or re-
main a member of a Federal home loan bank by any
State, or by any agency, department or independent
establishment of the United States or any State.’’.
SEC. 3. FEDERAL HOUSING FINANCE BOARD.
(a) IN GENERAL.—Section 3 of the Federal Home
Loan Bank Act (12 U.S.C. 1423) is amended to read as
follows:
‘‘SEC. 3. FEDERAL HOUSING FINANCE BOARD.
‘‘(a) ESTABLISHMENT.
‘‘(1) IN GENERAL.—There shall be a Federal
Housing Finance Board in the executive branch
which shall be an independent agency to regulate the
safety and soundness of the Federal Home Loan
Bank System.
‘‘(2) DUTIES.—The duties of the Finance
Board shall be the following:
‘‘(A) To ensure that the Federal home loan
banks—
‘‘(i) operate in accordance with this
Act in a safe and sound manner; and
‘‘(ii) remain adequately capitalized.
‘‘(B) To provide periodic reports to the
Congress regarding the safety and soundness of
the Federal Home Loan Bank System.
‘‘(b) COMPOSITION OF FINANCE BOARD.—
‘‘(1) IN GENERAL.—The Finance Board shall
be composed of 3 directors appointed by the Presi-
dent, by and with the advice and consent of the Sen-
ate, from among individuals who—
‘‘(A) are citizens of the United States; and
‘‘(B) have—
‘‘(i) extensive experience or training in
housing finance or the operation of regu-
lated financial institutions; or
‘‘(ii) a commitment to provide special-
ized housing credit.
‘‘(2) TERMS.—
‘‘(A) IN GENERAL.—Each director of the
Finance Board shall be appointed for a term of
7 years.
‘‘(B) INTERIM
APPOINTMENTS.—Any di-
rector appointed to fill a vacancy occurring be-
fore the expiration of the term for which such
director’s predecessor was appointed shall be
appointed only for the remainder of such term.
‘‘(C) CONTINUATION
OF
SERVICE.—Each
director may continue to serve after the expira-
tion of the term to which such director was ap-
pointed until a successor has been appointed
and qualified.
‘‘(3) 
CHAIRPERSON
AND
ACTING
CHAIR-
PERSON.—
‘‘(A) CHAIRPERSON.—The President shall
designate 1 of the directors to be the Chair-
person of the Finance Board.
‘‘(B) ACTING CHAIRPERSON.—
‘‘(i) IN GENERAL.—The Chairperson
shall designate another director to serve as
Acting Chairperson during the absence or
disability of the Chairperson.
‘‘(ii) SELECTION BY DIRECTORS.—If a
designation by the Chairperson has not
been made pursuant to clause (i) and the
position of Chairperson becomes vacant,
the remaining directors shall elect a direc-
tor to serve as the Acting Chairperson
until a Chairperson has been appointed.
‘‘(4) REPRESENTATIONAL REQUIREMENTS.—
‘‘(A) POLITICAL AFFILIATION.—Not more
than 2 directors may be members of the same
political party.
‘‘(B) DISTRICT
REPRESENTATION.—Not
more than 1 director may be appointed from
any single district of the Federal Home Loan
Bank System.
‘‘(5) VACANCY.—Any vacancy on the Finance
Board shall be filled in the manner in which the
original appointment was made.
‘‘(6) LIMITATIONS
ON
CONFLICTS
OF
INTER-
EST.—No director on the Finance Board may, while
serving as a director—
‘‘(A) serve as a director, officer, employee,
counsel, or agent of any Federal home loan
bank; or
‘‘(B) hold shares of, serve as a director, of-
ficer, employee, counsel, or agent of, or have
any other financial interest in any member of
any such bank.
‘‘(7) FULL-TIME SERVICE.—All directors shall
serve on a full-time basis.
‘‘(8) QUORUM.—2 directors shall constitute a
quorum.
‘‘(c) GENERAL POWERS.—The Finance Board shall
have the following powers:
‘‘(1) To maintain such oversight of the Federal
home loan banks as may be necessary to ensure that
such banks operate in a financially safe and sound
manner.
‘‘(2) To prescribe or issue, and enforce, such
regulations and orders as the Finance Board deter-
mines to be necessary to achieve such purpose.
‘‘(3) To suspend or remove for cause a director,
officer, employee, or agent of any Federal home loan
bank or joint office of the Federal Home Loan Bank
System.
‘‘(4) To determine necessary expenditures of
the Finance Board under this Act and the manner
in which such expenditures shall be incurred, al-
lowed, and paid.
‘‘(5) To use the United States mails in the
same manner and under the same conditions as a
department or agency of the United States.
‘‘(d) RECEIPTS OF THE FINANCE BOARD.—
‘‘(1) DEPOSIT IN TREASURY.—Receipts of the
Finance Board derived from assessments imposed on
the Federal home loan banks and from other sources
shall be deposited in the Treasury of the United
States.
‘‘(2) PAYMENT OF EXPENSES.—Salaries of the
directors and other employees of the Finance Board
and all other expenses of the Finance Board may be
paid from the receipts described in paragraph (1).
‘‘(3) TREATMENT
OF
AMOUNTS
RECEIVED.—
Notwithstanding any other provision of law—
‘‘(A) no amount received by the Finance
Board pursuant to any assessment imposed on
any Federal home loan bank or any other in-
come of the Finance Board may be construed
to be Government funds or appropriated money;
‘‘(B) no authority of the Finance Board to
spend or otherwise obligate any such amount
may be treated as budget authority, spending
authority, or credit authority or as authority to
obligate funds of the United States; and
‘‘(C) no such amount shall be subject to
apportionment for purposes of chapter 15 of
title 31, United States Code, or under any
other authority.
‘‘(e) STAFF.—
‘‘(1) IN GENERAL.—Subject to title IV of the
Financial Institutions Reform, Recovery, and En-
forcement Act of 1989, the Finance Board may em-
ploy, direct, and fix the compensation and number
of employees, attorneys, and agents of the Finance
Board.
‘‘(2) PROHIBITION ON DELEGATION TO BANKS
OR THE OFFICE OF FINANCE CORPORATION.—The
Finance Board may not delegate any function to any
employee or administrative unit of any bank or the
Office of Finance Corporation.
‘‘(3) CONSULTATION.—In directing and fixing
the compensation of staff, attorneys, and agents, the
Finance Board shall consult with and maintain com-
parability with the compensation at the Federal
banking agencies (as defined in section 3(z) of the
Federal Deposit Insurance Act).
‘‘(4) RESTATEMENT OF PRIOR LAW.—The com-
pensation of staff, attorneys, and agents shall be
paid without regard to the provisions of other laws
applicable to officers or employees of the United
States.
‘‘(f) PROHIBITION ON JOINT OFFICES.—
‘‘(1) IN GENERAL.—Except to the extent spe-
cifically provided in this Act, there shall be no joint
or collective offices of the Federal home loan banks
in the Federal Home Loan Bank System.
‘‘(2) TRANSITION PROVISION.—
‘‘(A) PRIOR JOINT OR COLLECTIVE OFFICE
ABOLISHED.—Effective at the end of the 6-
month period beginning on the effective date of
the Federal Home Loan Bank System Mod-
ernization Act of 1995, any entity which existed
as or was operated as a joint or collective office
of the Federal home loan banks on the day be-
fore the date of the enactment of such Act is
hereby abolished.
‘‘(B) TRANSFER
OF
FUNCTIONS.—Any
function of any entity abolished under subpara-
graph (A) shall be transferred by the Finance
Board to the Office of Finance Corporation be-
fore the end of the 6-month period beginning on
the effective date of the Federal Home Loan
Bank System Modernization Act of 1995.
‘‘(C) SAVINGS
PROVISION.—The abolish-
ment of the Office of Finance pursuant to this
section shall not affect the validity of any right,
duty, or obligation of any person or entity per-
taining in any manner to the Office of Finance.
‘‘(g) ANNUAL REPORTS.—
‘‘(1) BOARD
REPORTS.—The Finance Board
shall make an annual report to the Congress regard-
ing the safety and soundness of the Federal Home
Loan Bank System.
‘‘(2) BANK REPORTS.—The Federal home loan
banks shall submit a collective annual report to the
Congress on the fulfillment of the mission of the
banks under this Act.
‘‘(3) AFFORDABLE HOUSING ADVISORY COUN-
CILS.—The affordable housing advisory councils of
the Federal home loan banks shall submit a collec-
tive annual report to the Congress on the fulfillment
by the Bank System of the system’s affordable hous-
ing mission under section 10 of this Act.
‘‘(h) STATUS OF BANK EMPLOYEES.—Notwithstand-
ing any other provision of this Act, no officer, employee,
or agent of a Federal home loan bank or any joint office
of such banks shall be considered to be an officer or em-
ployee of the United States for purposes of title 5, United
States Code.
‘‘(i) SUSPENSION OR REMOVAL OF BANK EMPLOY-
EES FOR CAUSE.—
‘‘(1) WRITTEN NOTICE.—In exercising any au-
thority under subsection (c)(2) to suspend or remove
for cause a director, officer, employee, or agent of
any Federal home loan bank or joint office of the
Federal Home Loan Bank System, the Finance
Board shall provide written notice of such suspen-
sion or removal and the cause of the suspension or
removal to such director, officer, employee, or agent
and to such bank or joint office.
‘‘(2) HEARING.—The notice provided pursuant
to paragraph (1) shall establish the time and place
for a hearing on the suspension or removal in ac-
cordance with section 554 of title 5, United States
Code.’’.
SEC. 4. THE OFFICE OF FINANCE CORPORATION.
Section 4 of the Federal Home Loan Bank Act (12
U.S.C. 1424) is amended to read as follows:
‘‘SEC. 4 THE OFFICE OF FINANCE CORPORATION.
‘‘(a) ESTABLISHMENT.—
‘‘(1) IN GENERAL.—There is hereby established
the Office of Finance Corporation (hereafter in this
section referred to as the ‘Corporation’) which shall
be a federally chartered instrumentality of the
United States.
‘‘(2) PURPOSES.—The purpose of the Corpora-
tion shall be to issue the notes, bonds, and deben-
tures of the Federal home loan banks in accordance
with this Act.
‘‘(3) TRANSFER OF FUNCTIONS.—The functions
of the Office of Finance of the Federal home loan
banks shall be transferred to the Corporation before
the end of the 6-month period beginning on the ef-
fective date of the Federal Home Loan Bank System
Modernization Act of 1995 in accordance with sec-
tion 3(f)(2).
‘‘(b) POWERS.—Subject to the other provisions of
this Act and such safety and soundness regulations as the
Finance Board may prescribe, the Corporation shall have
the following powers:
‘‘(1) To issue voting capital stock to the Fed-
eral home loan banks.
‘‘(2) To issue Federal home loan bank notes,
bonds and debentures pursuant to section 11 of this
Act on behalf of the banks.
‘‘(3) To determine the amount, maturities, rate
of interest, terms, and other conditions of Federal
home loan bank notes, bonds and debentures.
‘‘(4) To adopt, alter, and use a corporate seal.
‘‘(5) To enter into contracts.
‘‘(6) To sue and be sued in the corporate capac-
ity of the corporation, and to complain and defend
in any action brought by or against the Corporation
in any court of competent jurisdiction.
‘‘(7) To exercise such incidental powers not in-
consistent with the provisions of this Act as are nec-
essary and appropriate to carry out the provisions of
this Act.
‘‘(c) BOARD OF DIRECTORS.—
‘‘(1) ESTABLISHMENT.—The management of
the Corporation shall be vested in a board of direc-
tors composed of directors elected by the Federal
home loan banks in accordance with paragraph (2).
‘‘(2) COMPOSITION OF BOARD.—Each Federal
home loan bank shall annually elect 1 individual
who, as of the time of the election, is an officer or
director of such bank to serve as a member of the
board of directors of the Corporation.
‘‘(3) DUTIES.—The board of directors shall ad-
minister the affairs of the Corporation in accordance
with the provisions of this Act.
‘‘(4) TERMS.—
‘‘(A) IN GENERAL.—Each member of the
board of directors shall be elected for a term of
1 year and shall serve at the pleasure of the
board of directors of the Federal home loan
bank which elected such member.
‘‘(B) TERM LIMITATION.—No member of
the board of directors may serve more than 3
full consecutive terms.
‘‘(C) INTERIM
APPOINTMENTS.—Any di-
rector elected to fill a vacancy occurring before
the expiration of the term for which such direc-
tor’s predecessor was elected shall be elected
only for the remainder of such term.
‘‘(D) CONTINUATION OF SERVICE.—Each
director may continue to serve after the expira-
tion of the term to which such director was
elected until a successor has been elected and
qualified.
‘‘(5) POWERS.—The board of directors shall ex-
ercise such powers as may be necessary and appro-
priate to carry out the purposes of this section, in-
cluding the power—
‘‘(A) to impose an assessment on the Fed-
eral home loan banks to cover the operating ex-
penses of the Corporation; and
‘‘(B) to appoint, establish the duties of,
compensate, and dismiss at will the employees
of the Corporation.
‘‘(6) PAY.—The members of the board of direc-
tors shall serve without additional compensation, but
shall be reimbursed for reasonable expenses of trav-
el, lodging, and subsistence incurred in attending
meetings and other activities of the Corporation.
‘‘(7) QUORUM
REQUIREMENT.—No business
may be conducted by the board of directors unless
a quorum of the members of such board of directors
is present.
‘‘(8) VACANCIES.—Any vacancy on the board of
directors shall be filled in the same manner in which
the original appointment was made.
‘‘(9) APPOINTMENT OF OFFICERS AND ADOP-
TIONS OF RULES OF PROCEDURE.—The board of di-
rectors shall—
‘‘(A) select, from among the members of
such board, a Chairperson, a Vice Chairperson,
and a Secretary; and
‘‘(B) adopt rules of procedure for actions
before the board of directors.
‘‘(d) STOCK.—
‘‘(1) ISSUANCE OF EQUAL AMOUNT TO EACH
BANK.—The Corporation shall issue 100 shares of
voting capital stock, with a par value of $100 per
share to each Federal home loan bank.
‘‘(2) 
NONTRANSFERABILITY.—Stock 
issued
under paragraph (1) may be owned and held only by
the Federal home loan banks.
‘‘(3) PAYMENT
UPON
ISSUANCE.—Upon issu-
ance of any share of stock under this subsection to
any Federal home loan bank, the bank shall pay to
the Corporation the total amount due for such stock.
‘‘(4) DISTRIBUTION REQUIREMENT.—The total
amount of outstanding stock of the Corporation
shall, at all times, be distributed equally among all
the Federal home loan banks.
‘‘(e) STATUS.—Except to the extent expressly pro-
vided in this Act, the Corporation shall be treated as a
Federal home loan bank for purposes of any law.
‘‘(f) JURISDICTION, REMOVAL POWER.—
‘‘(1) IN GENERAL.—Notwithstanding any other
provision of law, any civil action or proceeding to
which the Corporation is a party shall be deemed to
arise under the laws of the United States.
‘‘(2) VENUE.—The United States District
Court for the District of Columbia shall have exclu-
sive jurisdiction over any action to which the Cor-
poration is a party.
‘‘(3) REMOVAL.—The Corporation may, without
bond or security, remove any action or proceeding to
which the corporation is or becomes a party from a
State court to the United States District Court for
the District of Columbia.’’.
SEC. 5. CAPITAL STOCK OF THE FEDERAL HOME LOAN
BANKS.
(a) ISSUANCE OF CAPITAL STOCK.—Section 6(a) of
the Federal Home Loan Bank Act is amended—
(1) by striking ‘‘(a) The capital stock’’ and in-
serting ‘‘(a) ISSUANCE OF CAPITAL STOCK.—
‘‘(1) IN GENERAL.—The capital stock’’;
(2) by striking the 2d and 3d sentences and in-
serting ‘‘The capital stock shall be issued at par.’’;
and
(3) by adding at the end the following new
paragraph:
‘‘(2) RULES AND REQUIREMENTS.—The board
of directors of each Federal home loan bank shall
promptly prescribe rules and requirements, consist-
ent with this Act, governing the capital stock of such
bank and other provisions of this section.’’.
(b) SUBSCRIPTION AND RETIREMENT OF STOCK.—
Section 6(b) of the Federal Home Loan Bank Act is
amended to read as follows:
‘‘(b) SUBSCRIPTION AND RETIREMENT OF STOCK.—
‘‘(1) MINIMUM INVESTMENT REQUIREMENT.—
Subject to paragraphs (3) and (6), the minimum in-
vestment of each institution eligible to become a
member of a Federal home loan bank under section
5 in the stock of such bank shall be an amount not
less than the greater of—
‘‘(A) the minimum amount required to
meet the asset-based investment requirement
established by the bank pursuant to paragraph
(2); or
‘‘(B) the minimum amount required to
meet the advances-related investment require-
ment established by the bank pursuant to para-
graph (4).
‘‘(2) ASSET-BASED REQUIREMENT.—
‘‘(A) 
TRANSITION
SCHEDULE.—During
calendar years 1996, 1997, and 1998, the mini-
mum investment of each member of a Federal
home loan bank in the stock of such bank, as
determined on the basis of the assets of such
member, shall be an amount not less than the
amount set forth in the following table, as de-
termined annually by the bank’s board of direc-
tors by April 30 of each year as of the close of
the preceding year:
‘‘During the year:
The minimum amount of stock
shall be:
1996 ...............................................
An amount equal to the lesser of 0.6
percent of member’s total assets or
1.0 percent of the member’s resi-
dential mortgage assets, but in any
case not less than the amount
equal to 0.3 percent of total assets
1997 ...............................................
An amount equal to the lesser of 0.5
percent of a member’s total assets
or 1.0 percent of the member’s res-
idential mortgage assets, but in
any case not less than the amount
equal to 0.35 percent of total as-
sets
1998 ...............................................
An amount equal to the lesser of 0.4
percent of a member’s total assets
or 1.0 percent of the member’s res-
idential mortgage assets
‘‘(B) AFTER 1998.—The minimum invest-
ment of each member of a Federal home loan
bank in the stock of such bank after 1998, as
determined on the basis of the assets of such
member, shall be an amount equal to not less
than 0.3 percent and not more than 0.6 percent
of the member’s total assets, as determined by
the bank’s board of directors from time to time.
‘‘(3) DISCRETIONARY INCREASE IN AMOUNT OF
MINIMUM
INVESTMENT
AUTHORIZED.—Notwith-
standing paragraph (2)(A), the board of directors of
each Federal home loan bank may, in the discretion
of the board of directors, substitute—
‘‘(A) ‘an amount determined by the board
of directors between 0.5 percent and 0.6 per-
cent of a member’s total assets’ for ‘0.5 percent
of a member’s total assets’ where such term ap-
pears in the table in paragraph (2)(A) in con-
nection with 1997; and
‘‘(B) ‘an amount determined by the board
of directors between 0.4 percent and 0.6 per-
cent of a member’s total assets’ for ‘0.4 percent
of a member’s total assets’ where such term ap-
pears in the table in paragraph (2)(A) in con-
nection with 1998.
‘‘(4) ADVANCES-RELATED REQUIREMENT.—The
minimum investment of each member of a Federal
home loan bank in the stock of such bank, as deter-
mined on the basis of the amount of outstanding ad-
vances from such bank to the member, shall be an
amount which is equal to not less than 3.0 percent
of such advances and not more than 6.0 percent of
such advances, as determined by the board of direc-
tors of the bank from time to time.
‘‘(5) DE MINIMUS INVESTMENT REQUIREMENT
AUTHORIZED.—Notwithstanding the requirements of
this section, the board of directors of each Federal
home loan bank may establish a minimum capital
stock subscription of at least $1,000.
‘‘(6) FINANCE BOARD AUTHORITY TO INCREASE
INVESTMENT
REQUIREMENT
TO
MAINTAIN
BANK
SAFETY AND SOUNDNESS OR SYSTEM LIQUIDITY.—
‘‘(A) DISTRICT-WIDE APPLICATION.—If the
Finance Board determines that the safety and
soundness of a Federal home loan bank re-
quires an increase in the amount of capital of
such bank, the Finance Board may require each
member of such bank to maintain an invest-
ment in the capital stock of such bank in an
amount determined by the Finance Board
which shall not exceed, as applied with respect
to any member, the greater of—
‘‘(i) an amount equal to 0.6 percent of
the total assets of the member; or
‘‘(ii) an amount equal to 6.0 percent
of the total outstanding advances of the
member from such bank.
‘‘(B) SYSTEM-WIDE APPLICATION.—If the
Finance Board determines that the ability of
the Federal Home Loan Bank System to meet
the collective financial obligations of the Fed-
eral home loan banks requires an increase in
the amount of capital of all such banks, the Fi-
nance Board may require all the members of all
the banks to maintain an investment in the cap-
ital stock of each such member’s bank in an
amount determined by the Finance Board
which shall not exceed the greater of the
amounts described in clauses (i) and (ii) of sub-
paragraph (A).
‘‘(7) RETIREMENT OF STOCK UPON APPLICA-
TION OF MEMBER.—
‘‘(A) IN GENERAL.—Upon application by a
member, a bank shall retire the amount of
stock sought to be retired by such member, no
later than 6 months after the date of the filing
of the application, if the board of directors of
the bank determines that the following addi-
tional conditions have been met:
‘‘(i) The amount of such member’s in-
vestment in the capital stock of the bank
which would remain after the retirement of
the stock sought in the application is not
less than the minimum required invest-
ment amount applicable to such member.
‘‘(ii) The bank is adequately capital-
ized, and would remain adequately capital-
ized, if the stock subject to all pending ap-
plications by members for retirement of
stock were immediately deducted from the
Bank’s capital.
‘‘(iii) The member is not in breach of
any agreement with the bank.
‘‘(B) PRO RATA BASIS.—If the retirement,
in any calendar quarter, of the total amount of
stock which is subject to pending applications
by members of a bank under subparagraph (A)
would cause the bank to cease to be adequately
capitalized, the bank may retire such pro rata
portion of the total amount of stock each such
member is seeking to retire as would allow the
Bank to remain adequately capitalized after
such retirement.
‘‘(C) RETIREMENT
OF
EXCESS
STOCK
GIVEN PRECEDENCE OVER WITHDRAWAL FROM
MEMBERSHIP NOTICES.—Except as provided in
subparagraph (D), a bank shall dispose of all
pending applications for retirement of stock
under subparagraph (A), and make all pay-
ments with respect to the retirement of such
stock, before taking any action to retire the
stock of any member of the bank which has
submitted a notice of withdrawal from member-
ship pursuant to subsection (e)(1).
‘‘(D) TREATMENT
OF
NOTICE
OF
WITH-
DRAWAL AS APPLICATION TO RETIRE EXCESS
STOCK FOR PURPOSES OF ALLOWING PROMPT
PAYMENT.—Subject to such regulations as the
Finance Board may prescribe, a bank may
treat, for purposes of subparagraph (C), the
submission by a member of a notice of with-
drawal of membership under subsection (e)(1)
as an application by such member under sub-
paragraph (A) to retire that portion of such
member’s investment in the capital stock of the
bank as exceeds the minimum investment
amount applicable to such member.
‘‘(8) RETIREMENT OF STOCK DISTRICT-WIDE.—
‘‘(A) IN GENERAL.—Upon a determination
of the board of directors of a bank, a bank may
retire all, or any portion, of the outstanding
stock of the bank in excess of the total of the
minimum investment amounts of all the mem-
bers of the bank, if the board of directors deter-
mines that the bank is adequately capitalized,
and would remain adequately capitalized if all
the stock of the bank which—
‘‘(i) the bank proposes to retire under
this subparagraph; and
‘‘(ii) is subject to pending applications
for retirement, and pending notices of ter-
mination of or withdrawal from member-
ship,
were deducted from the bank’s capital.
‘‘(B) RETIREMENT REQUIRED TO BE MADE
ON A PRO RATA BASIS.—The determination of
the amount of shares held by each member of
a bank which are subject to retirement pursu-
ant to a determination by the board of directors
of the bank in accordance with subparagraph
(A) shall be made on a pro rata basis.
‘‘(C) RETIREMENT SUBJECT TO MINIMUM
INVESTMENT
REQUIREMENTS.—No retirement
of shares held by a member of a bank may be
made under this section to the extent such re-
tirement of shares would cause the amount of
such member’s remaining investment in the
capital stock of the bank after such retirement
to fall below the minimum investment amount
applicable to such member.
‘‘(9) PAYMENT
AND
CANCELLATION.—In the
case of any retirement of stock of a Federal home
loan bank in accordance with this subsection, the
bank shall—
‘‘(A) at the election of the bank—
(i) pay the member an amount equal
to the product of the number of shares of
stock retired and the par value of such
stock; or
(ii) credit such amount, in whole or in
part, against any indebtedness of the mem-
ber to the bank, including any outstanding
prepayment fees; and
‘‘(B) cancel the shares so retired.
‘‘(10) ISSUANCE AND RETIREMENT OF WHOLE
SHARES.—The board of directors of each bank may
provide for such adjustments in amounts of any
stock to be issued or retired as may be appropriate
in order that stock may be issued or retired only in
entire shares.
‘‘(11) MINIMUM
INVESTMENT
AMOUNT
DE-
FINED.—For purposes of this subsection, the term
‘minimum investment amount’ means, with respect
to any member of a Federal home loan bank, the
minimum amount required, under this subsection, to
be invested by such member in such bank.’’.
(c) TERMINATION OF MEMBERSHIP.—Section 6(e) of
the Federal Home Loan Bank Act (12 U.S.C. 1426(e))
is amended to read as follows:
‘‘(e) TERMINATION OF MEMBERSHIP.—
‘‘(1) VOLUNTARY WITHDRAWAL FROM MEMBER-
SHIP.—
‘‘(A) IN
GENERAL.—Any member of a
Federal home loan bank may withdraw from
membership in such bank by—
‘‘(i) filing a written notice of the
member’s intention to withdraw with the
board of directors of the bank; and
‘‘(ii) paying a fee equal to 0.1 percent
of the minimum investment amount appli-
cable to such member under subsection
(b).
‘‘(B) RESCISSION OF NOTICE.—Any mem-
ber of a Federal home loan bank may rescind
any notice submitted to the board of directors
of the bank in accordance with subparagraph
(A) at any time before the member receives any
payment in connection with any retirement of
such member’s stock in the bank pursuant to
such notice (other than any payment made pur-
suant to a determination by the board of direc-
tors under subsection (b)(6)(D).
‘‘(C) LIMITATION ON AUTHORITY TO VOTE
SHARES WHILE NOTICE IS PENDING.—No mem-
ber may vote the capital stock of a Federal
home loan bank on any matter while a notice
by such member of withdrawal from member-
ship of the bank is pending before the board of
directors of the bank.
‘‘(2) 
REMOVAL
FROM
MEMBERSHIP.—The
board of directors of any Federal home loan bank
may remove any member from membership, if—
‘‘(A) in the opinion of the board of direc-
tors, such member has failed to comply with a
provision of this Act or any other applicable
law; or
‘‘(B) the member has been determined to
be insolvent, or otherwise subject to the ap-
pointment of a conservator, receiver, or other
legal custodian, by a state or Federal authority
with regulatory and supervisory responsibility
for such member.
‘‘(2) LIQUIDATION OF DEBT.—
‘‘(A) IN
GENERAL.—If any member’s
membership in a Federal home loan bank is ter-
minated for any reason, the indebtedness of
such member to the Federal home loan bank
shall be liquidated in an orderly manner (as de-
termined by the bank).
‘‘(B) TREATMENT AS PREPAYMENT.—Any
liquidation of indebtedness pursuant to sub-
paragraph (A) shall be treated as a prepayment
of any such indebtedness, and shall be subject
to any penalties or other fees applicable to such
prepayment.
‘‘(C) RETURN OF COLLATERAL.—Upon the
liquidation of indebtedness of a member pursu-
ant to subparagraph (A), the member shall be
entitled to the return of any collateral relating
to the indebtedness.
‘‘(3) SURRENDER
AND
CANCELLATION
OF
STOCK.—If any member’s membership in a Federal
home loan bank is terminated for any reason, the
capital stock in the bank owned by such member
shall be surrendered and canceled after the liquida-
tion of any indebtedness (of the member to the
bank) is completed pursuant to paragraph (2).
‘‘(4) PAYMENT ON CANCELED STOCK.—
‘‘(A) IN
GENERAL.—Upon the surrender
and cancellation of any capital stock of a mem-
ber in a Federal home loan bank in accordance
with paragraph (3), the member shall be paid
an amount equal to the product of the number
of shares of stock canceled and the par value of
such stock.
‘‘(B) WITHHOLDING OF PAYMENT IN CASE
OF UNDERCAPITALIZED BANK.—If the Finance
Board finds that a Federal home loan bank is
less than adequately capitalized, or would be
less than adequately capitalized if all the shares
of stock in such bank which are the subject of
pending applications for stock retirement and
notices of withdrawal were immediately de-
ducted from the bank’s capital, the Finance
Board may order the bank to—
‘‘(i) withhold the amount to be paid
required under subparagraph (A) with re-
spect to any stock for up to 12 months;
and
‘‘(ii) in the case of a critically
undercapitalized bank (as defined by the
Finance Board in accordance with section
28), withhold a pro rata share of the
amount to be paid with respect to such
stock under subparagraph (A) equal to the
additional capital which members of the
bank are required to contribute to the
bank under a capital restoration plan im-
posed by the Finance Board in accordance
with section 28, until such capital restora-
tion plan has been terminated by the Fi-
nance Board.’’.
(d) REDUCTION
OF PERIOD REQUIRED BEFORE
WITHDRAWN MEMBER MAY RESUME MEMBERSHIP.—
Section 6(h) of the Federal Home Loan Bank Act (12
U.S.C. 1426(h)) is amended—
(1) by striking ‘‘10’’ and inserting ‘‘5’’; and
(2) by inserting before the period at the end ‘‘,
except that any institution that withdrew from mem-
bership in any such bank before the date of the en-
actment of the Federal Home Loan Bank Mod-
ernization Act of 1995 may acquire membership in
a Federal Home Loan Bank at any time after such
date subject to the requirements of this Act.’’
(e) ELIGIBILITY OF NON-QTL SAVINGS ASSOCIA-
TIONS TO OBTAIN NEW ADVANCES AND MAINTAIN AD-
VANCES.—Section 10(m)(3)(B) of the Home Owners’
Loan Act (12 U.S.C. 1467a(m)(3)(B)) is amended—
(1) in clause (i), by striking subclause (III) and
redesignating subclause (IV) as subclause (III); and
(2) in clause (ii), by striking subclause (II).
(f) VOLUNTARY MEMBERSHIP OF FEDERAL SAVINGS
ASSOCIATIONS.—Section 5(f) of the Home Owners’ Loan
Act (12 U.S.C. 1464(f)) is amended to read as follows:
‘‘(f) VOLUNTARY MEMBERSHIP IN FEDERAL HOME
LOAN BANK.—Each Federal savings association may
qualify for membership in a Federal home loan bank in
the manner provided in the Federal Home Loan Bank
Act.’’.
SEC. 6. CAPITAL REQUIREMENTS.
(a) ESTABLISHMENT OF CAPITAL REQUIREMENTS.—
The Federal Home Loan Bank Act (12 U.S.C. 1421 et
seq.) is amended by redesignating sections 28, 29, and 30
as sections 29, 30, and 31, respectively, and by inserting
after section 27 the following new section:
‘‘SEC. 28. BANK CAPITAL REQUIREMENTS.
‘‘(a) IN GENERAL.—
‘‘(1) UNIFORM CAPITAL STANDARDS.—The Fi-
nance Board shall, by regulation, establish a uni-
form capital requirement for Federal home loan
banks which shall take into consideration interest
rate risk, credit risk, and all other risks and obliga-
tions associated with the operation of the banks.
‘‘(2) MINIMUM TOTAL TANGIBLE CAPITAL RE-
QUIREMENT.—At a minimum, the regulations pre-
scribed by the Finance Board under paragraph (1)
shall require each Federal home loan bank to main-
tain total tangible capital in an amount which is
equal to or greater than the greater of—
‘‘(A) the sum of—
‘‘(i) 2.5 percent of the bank’s total as-
sets; and
‘‘(ii) 0.45 percent of the bank’s net
off-balance sheet exposure; or
‘‘(B) 10 percent of the bank’s risk-weight-
ed assets.
‘‘(3) TOTAL
TANGIBLE
CAPITAL
DEFINED.—
For purposes of this section, the term ‘total tangible
capital’ means capital stock and retained earnings.
‘‘(b) CAPITAL CLASSIFICATIONS.—
‘‘(1) IN GENERAL.—Before the end of the 120-
day period beginning on the date of the enactment
of the Federal Home Loan Bank System Moderniza-
tion Act of 1995, the Finance Board shall prescribe
standards for classifying the capital adequacy of
Federal home loan banks in accordance with the fol-
lowing capital categories:
‘‘(A) Adequately capitalized.
‘‘(B) Undercapitalized.
‘‘(C) Significantly undercapitalized.
‘‘(D) Critically undercapitalized.
‘‘(2) MINIMUM
REQUIREMENTS
FOR
ADE-
QUATELY
CAPITALIZED
CATEGORY.—Under 
the
standards established by the Finance Board under
paragraph (1) a bank may not be classified as ade-
quately capitalized unless the bank—
‘‘(A) meets the minimum tangible capital
requirements referred to in subsection (a); and
‘‘(B) maintains additional capital as may
be prescribed by the Finance Board to ensure
that the bank has sufficient capital to account
for the bank’s exposure to interest-rate risk,
credit risk, and all other risks and obligations
associated with operating the bank.
‘‘(3) QUARTERLY
EVALUATION
OF
CAPITAL
ADEQUACY.—
‘‘(A) IN
GENERAL.—The Finance Board
shall
‘‘(i) evaluate the capital adequacy of
each Federal home loan bank at least once
in each calendar quarter; and
‘‘(ii) classify the capital adequacy of
the bank in accordance with the categories
established pursuant to paragraph (1).
‘‘(B) JUDICIAL REVIEW.—For the purpose
of obtaining judicial review of—
‘‘(i) any classification of the capital
adequacy of a Federal home loan bank
under subparagraph (A); or
‘‘(ii) any action taken by the Finance
Board pursuant to such classification,
the classification, or the action taken pursuant
to a classification, shall be treated as a final
order of the Finance Board.
‘‘(c) CAPITAL AND INCOME RESTORATION PLANS.—
‘‘(1) IN GENERAL.—The Finance Board shall
prescribe regulations which require any Federal
home loan bank that is less than adequately capital-
ized to file an acceptable capital and income restora-
tion plan with the Finance Board.
‘‘(2) CONTENTS OF PLAN.—A capital and in-
come restoration plan of a Federal home loan bank
shall demonstrate the actions the bank will take to
become adequately capitalized and to increase earn-
ings and the time frame within which such goals will
be achieved.
‘‘(3) AUTHORITY
TO
PROHIBIT
DISTRIBU-
TIONS.—In addition to any other actions which the
Finance Board may take against an undercapitalized
Federal home loan bank which—
‘‘(A) does not submit an acceptable capital
restoration plan; or
‘‘(B) does not substantially comply with a
capital restoration plan that has been accepted
by the Finance Board,
the Finance Board may prohibit such Bank from
making any capital distribution until the bank is
adequately capitalized.
‘‘(d) OWNERSHIP INTEREST IN CAPITAL.—
‘‘(1) IN GENERAL.—Notwithstanding any provi-
sion of this Act or any other provision of law, each
Federal home loan bank and the members of each
bank shall have an ownership interest in, and a
property right in, the paid-in-capital and retained
earnings of the bank.
‘‘(2) DESCRIPTION OF INTEREST.—The owner-
ship interests and property rights of members re-
ferred to in paragraph (1) with respect to a Federal
home loan bank shall be the same in all respects as
the ownership interest in, and property right in, the
paid-in-capital and retained earnings of a private
for-profit business corporation organized under the
laws of the State in which such bank is located.
‘‘(3) SHARES TREATED AS EVIDENCE OF OWN-
ERSHIP INTEREST.—The shares of a Federal home
loan bank which are held by a member shall be
treated as evidence of ownership interest and prop-
erty right of the member with respect to the paid-
in-capital and retained earnings of such bank.’’.
SEC. 7. MANAGEMENT OF BANKS.
Section 7 of the Federal Home Loan Bank Act (12
U.S.C. 1427) is amended to read as follows:
‘‘SEC. 7. MANAGEMENT OF BANKS.
‘‘(a) BOARD OF DIRECTORS.—
‘‘(1) COMPOSITION OF BOARD.—Except as oth-
erwise provided in this section, the management of
each Federal home loan bank shall be vested in a
board of directors consisting of 14 directors selected
as follows:
‘‘(A) 8 shall be elected by the members of
the bank as provided in paragraph (5).
‘‘(B) 6 shall be appointed by the President
of the United States.
‘‘(2) QUALIFICATIONS.—
‘‘(A) IN
GENERAL.—Each director of a
Federal home loan bank shall be a citizen of the
United States and a bona fide resident of the
district in which such bank is located.
‘‘(B) DISQUALIFICATION.—An individual
who is an officer or director of a member that
fails to meet any applicable capital requirement
shall not be qualified to be a director on the
board of directors of a Federal home loan bank.
‘‘(3) STATE REPRESENTATIONAL CRITERIA.—
‘‘(A) IN GENERAL.—The number of elected
directors of a Federal home loan bank from
each State within the district of such bank shall
bear the same approximate relationship to the
total number of elected directors of such bank
half and not more than three-quarters of
the number of elected directors.
‘‘(D) MANDATORY INCREASE TO ACHIEVE
MINIMUM STATE REPRESENTATION.—If, at any
time, the number of elected directors of a Fed-
eral home loan bank is less than the number of
States in the district of such bank, the board of
directors of the bank shall increase the number
of elected directors on such board of directors
to a number at least equal to the number of
States in such district.
‘‘(E) 
MAXIMUM
NUMBER
FROM
ANY
STATE.—Not more than 6 directors on the
board of directors of any Federal home loan
bank may be residents of the same State.
‘‘(F) NO DECREASE IN STATE REPRESEN-
TATION.—The number of elected directors on
the board of directors of any Federal home loan
bank from any State may not decrease below
the number of elected directors on the board of
directors from such State as of January 1,
1995.
‘‘(4) CHAIRPERSON AND VICE CHAIRPERSON.—
The board of directors of each Federal home loan
bank shall elect—
‘‘(A) 1 of the directors of the bank to be
the chairperson of the board of directors; and
‘‘(B) 1 of the directors of the bank to be
vice chairperson of the board of directors.
‘‘(5) PROVISIONS APPLICABLE TO APPOINTED
DIRECTORS.—
‘‘(A) 
REPRESENTATIONAL
REQUIRE-
MENT.—At least 2 of the directors of each Fed-
eral home loan bank who are appointed by the
President shall be appointed from among rep-
resentatives of organizations with more than a
2-year history of representing consumer or com-
munity interests on banking services, credit
needs, housing, or financial consumer protec-
tions.
‘‘(B) CONFLICT
OF
INTEREST
PROVI-
SION.—No director on the board of directors of
a Federal home loan bank who is appointed
pursuant to this subsection may, during such
director’s term of office—
‘‘(i) serve as an officer of any Federal
home loan bank or as a director or officer
of any member of a bank; or
‘‘(ii) hold shares, or any other finan-
cial interest in, any member of a bank.
‘‘(6) PROVISIONS APPLICABLE TO ELECTED DI-
RECTORS.—
‘‘(A) DESIGNATION OF STATE TO BE REP-
RESENTED.—Each position of elected director
on the board of directors of any Federal home
loan bank shall be designated by the board of
directors as a position to be filled by a director
representing the members of the bank whose
principal places of business are located in a
particular State.
‘‘(B) QUALIFICATION.—Only officers and
directors of members whose principal places of
business are located in a State shall be qualified
to serve as a director representing such State.
‘‘(C) NOMINATION
OF
DIRECTORS.—All
members (of a Federal home loan bank) whose
principal places of business are located in any
State may nominate any qualified individual for
election as a director representing such State.
‘‘(D) VOTING PROCEDURE.—In any elec-
tion of a director of a Federal home loan bank,
each member whose principal place of business
is located in the State which such director rep-
resents may cast for such office a number of
votes equal to the lesser of—
‘‘(i) the minimum number of shares of
the capital stock of such bank in which
such member is required, under section
6(b), to be invested as of the end of the
calendar year immediately preceding the
election, as determined by the board of di-
rectors of the Federal home loan bank; and
‘‘(ii) the average of the minimum
number of shares of such stock in which all
members whose principal places of business
are located in such State are required,
under section 6(b), to be invested as of the
end of the calendar year immediately pre-
ceding the election, as so determined.
‘‘(E) PLURALITY
DECISION.—Each posi-
tion of elected director of a Federal home loan
bank shall be filled by the nominee, for such po-
sition, who receives a larger number of the
votes cast in an election held for the purpose of
filling such position than any other nominee.
‘‘(7) TERMS.—
‘‘(A) IN GENERAL.—The term of each di-
rector who is elected or appointed to the board
of directors of a Federal home loan bank after
the date of the enactment of the Federal Home
Loan Bank System Modernization Act of 1995
shall be 4 years.
‘‘(B) TERM
LIMIT.—No individual may
serve as a director on the board of directors of
a Federal home loan bank for more than 2 full
consecutive 4-year terms.
‘‘(C) INTERIM
APPOINTMENTS.—Any di-
rector appointed or elected to fill a vacancy oc-
curring before the expiration of the term for
which such director’s predecessor was appointed
or elected shall be appointed or elected only for
the remainder of such term.
‘‘(D) CONTINUATION OF SERVICE.—Each
director of a Federal home loan bank may con-
tinue to serve after the expiration of the term
to which such director was appointed or elected
until a successor has been qualified.
‘‘(8) VACANCIES.—
‘‘(A) APPOINTED DIRECTOR.—Any vacancy
occurring in the position of appointed director
of a Federal home loan bank shall be filled in
the manner in which the original appointment
was made.
‘‘(B) ELECTED DIRECTOR.—Any vacancy
occurring in the position of elected director of
a Federal home loan bank shall be filled by an
affirmative vote of a majority of the remaining
directors of such bank, without regard to
whether such remaining directors constitute a
quorum of the board of directors.
‘‘(C) VACANCY AS A RESULT OF DISQUALI-
FICATION OF DIRECTOR.—
‘‘(i) IN GENERAL.—If any director of
a Federal home loan bank ceases to meet
any qualification for such position—
‘‘(I) the position shall imme-
diately become vacant by operation of
law; and
‘‘(II) service by such director in
such position shall cease.
‘‘(ii) CONTINUATION.—Notwithstand-
ing clause (i), an appointed director of a
Federal home loan bank whose position be-
came vacant pursuant to such clause may
continue to serve in such position until a
successor has been qualified.
‘‘(9) REGULATIONS GOVERNING NOMINATIONS
AND ELECTIONS.—The bylaws of each Federal home
loan bank shall provide procedures for the nomina-
tion and election of directors on the board of direc-
tors of the bank.
‘‘(10) DEFINITIONS.—For purposes of this sub-
section, the following definitions shall apply:
‘‘(A) 
MEMBER.—The 
term 
‘member’
means, with respect to any year, any institution
which is a member of a Federal home loan bank
and was a member of such bank at the end of
the immediately preceding calendar year.
‘‘(B) STATE.—The term ‘State’ means any
State, the District of Columbia, and the Com-
monwealth of Puerto Rico.
‘‘(b) POWERS
OF BOARDS
OF DIRECTORS.—The
board of directors of each Federal home loan bank shall
have all power necessary to exercise the responsibility of
such board with respect to such bank, including the follow-
ing powers:
‘‘(1) Establish financial and other performance
targets.
‘‘(2) Conduct studies of trends of home or other
property values, methods of appraisals, state and
Federal laws, regulations, policies, and procedures
relevant to the operations of the bank and the mem-
bers of the bank, and such other subjects as the
board of directors may consider to be useful for the
general guidance of the policies and operations of
the bank and institutions authorized to secure ad-
vances from the bank.
‘‘(3) Establish credit policy and policy for man-
agement of the bank’s investments.
‘‘(4) Establish policy regarding the bank’s in-
terest rate risk.
‘‘(5) Determine dividends.
‘‘(6) Establish policy regarding the documenta-
tion required for advances.
‘‘(7) Establish policy regarding item processing
pricing.
‘‘(8) Establish policy regarding the sale and
purchase of, and participations in, advances.
‘‘(9) Establish policy regarding lending to mem-
bers that are insolvent or not in compliance with ap-
plicable capital requirements.
‘‘(10) Establish policy regarding—
‘‘(A) lending to and borrowing from the
Federal home loan banks; and
‘‘(B) making deposits in and accepting de-
posits from such banks.
‘‘(11) Establish policy regarding the community
investment program.
‘‘(12) Establish policy regarding incentives for
community support by member institutions.
‘‘(13) Establish policy regarding publication of
community support activities of member institutions.
‘‘(14) Establish policy regarding the develop-
ment and implementation of the business plan of the
bank.
‘‘(15) Approve the budget of the bank and
modifications to such budget.
‘‘(16) Approve the bylaws of the bank and
modifications to such bylaws.
‘‘(17) Establish the travel policy of the bank.
‘‘(18) Determine the location of meetings of
boards of directors.
‘‘(19) Determine the eligibility of individuals to
serve as directors and conduct elections of directors.
‘‘(20) Establish policy regarding audit plans
and charters of the audit committee and audit direc-
tor of the bank and select independent accountants
to prepare the bank’s financial reports.
‘‘(21) Establish policy regarding charitable do-
nations and membership in organizations.
‘‘(22) Establish policy regarding mandatory re-
tirement of directors, officers and employees.
‘‘(23) Establish policy regarding gold and gold-
related transactions.
‘‘(24) Establish policy regarding indemnifica-
tion of directors, officers, employees, and agents.
‘‘(25) Establish policy regarding the disaster re-
covery plan of the bank.
‘‘(26) Establish the records retention policy of
the bank.
‘‘(c) DUTIES OF DIRECTORS.—The board of directors
of each Federal home loan bank shall—
‘‘(1) administer the affairs of the bank fairly
and impartially and without discrimination in favor
of or against any member borrower; and
‘‘(2) subject to the provisions of this Act, ex-
tend to each institution authorized to secure ad-
vances such advances as may be made safely and
reasonably with due regard for—
‘‘(A) the claims and demands of other in-
stitutions; and
‘‘(B) the maintenance of adequate credit
standing for the bank and the bank’s obliga-
tions.’’.
SEC. 8. MODIFICATION OF ANNUAL CONTRIBUTION TO THE
RESOLUTION FUNDING CORPORATION.
(a) FUNDING OF INTEREST PAYMENTS BY THE RES-
OLUTION
FUNDING
CORPORATION.—Subsection
21B(f)(2)(C) of the Federal Home Loan Bank Act (12
U.S.C. 1441b(f)(2)(C)) is amended to read as follows:
‘‘(C) PAYMENTS BY FEDERAL HOME LOAN
BANKS.—
‘‘(i) IN GENERAL.—To the extent the
amounts available pursuant to subpara-
graphs (A) and (B) are insufficient to
cover the amount of interest payments, the
Federal home loan banks shall pay to the
Funding Corporation each calendar year
$300,000,000.
‘‘(ii) INDIVIDUAL
BANK
SHARE.—
Each Federal home loan bank’s share of
the amount required to be paid under
clause (i) for any year shall be determined
by dividing—
‘‘(I) the daily average minimum
level of tangible capital which such
bank was required to maintain in
order to comply with the bank’s mini-
mum capital requirement for the ade-
quately capitalized category estab-
lished pursuant to section 28(b)(2);
by
‘‘(II) the sum of the daily aver-
age minimum levels of tangible capital
which all the banks were required to
maintain in order to comply with each
such bank’s minimum capital require-
ment for the adequately capitalized
category.’’
(b) BANK CONTRIBUTIONS TO THE BANK’S AFFORD-
ABLE HOUSING PROGRAM.—
‘‘(1) 1995.—Subsection 10(j)(5)(C) of the Fed-
eral 
Home 
Loan 
Bank 
Act 
(12 
U.S.C.
1430(j)(5)(C)) is amended to read as follows:
‘‘(C) In 1995, the greater of—
‘‘(i) 10 percent of the net income of
the bank in the preceding year; or
‘‘(ii) such prorated sum as the Fi-
nance Board may determine to be nec-
essary to assure that the aggregate con-
tribution of all the Federal home loan
banks shall not be less than $100,000,000
for 1995.’’
(c) 1996 AND SUBSEQUENT YEARS.—Subsection
10(j)(5) of the Federal Home Loan Bank Act (12 U.S.C.
1430(j)(5)) is amended by adding at the end the following
new subparagraph:
‘‘(D) In 1996 and subsequent years, 10
percent of the net income of the bank in the
preceding year, as determined after deducting
the payment made by each Federal home loan
bank to the Funding Corporation under section
21B(f)(2)(C).’’.
SEC. 9. COMMUNITY SUPPORT REQUIREMENTS.
Subsection (g) of section 10 of the Federal Home
Loan Bank Act (12 U.S.C. 1430(g)) is amended by adding
at the end the following new paragraph:
‘‘(3) SAFE HARBOR FOR MEMBER’S RECEIVING
CRA RATINGS OF SATISFACTORY OR BETTER.—Not-
withstanding paragraphs (1) and (2), any member
which receives a rating of satisfactory or outstand-
ing pursuant to section 807 of the Community Rein-
vestment Act of 1977 in such member’s most recent
examination shall be treated as having satisfied the
requirements of such paragraphs.’’.
SEC. 10. TECHNICAL AND CONFORMING AMENDMENTS.
(a) SECTION 9.—Section 9 of the Federal Home
Loan Bank Act (12 U.S.C. 1429) is amended—
(1) in the 2d sentence, by striking ‘‘with the
approval of the Board’’; and
(2) in the 3d sentence, by striking ‘‘, subject to
the approval of the Board,’’.
(b) SECTION 10.—
(1) Subsection (a) of section 10 of the Federal
Home Loan Bank Act (12 U.S.C. 1430(a)) is
amended—
(A) in the 1st sentence before paragraph
(1), by striking ‘‘or section 11(g) of this Act’’;
(B) in the 2d sentence before paragraph
(1), by striking ‘‘housing finance’’ and inserting
‘‘mortgage assets’’;
(C) in the 2d sentence of paragraph (5),
by striking ‘‘and the Board’’; and
(D) in the last sentence of paragraph (5),
by striking ‘‘Board’’ and inserting ‘‘bank’’.
(2) The last sentence of section 10(b) of the
Federal Home Loan Bank Act (12 U.S.C. 1430(b))
is amended by striking ‘‘Board’’ and inserting
‘‘bank’’.
(3) Section 10(c) of the Federal Home Loan
Bank Act (12 U.S.C. 1430(c) is amended—
(A) in the 1st sentence, by striking
‘‘Board’’ and inserting ‘‘bank’’; and
(B) by striking the 2d sentence.
(4) The last sentence of section 10(d) of the
Federal Home Loan Bank Act (12 U.S.C. 1430(d))
is amended by striking ‘‘Subject to the approval of
the Board, any’’ and inserting ‘‘Any’’.
(5) Section 10 of the Federal Home Loan Bank
Act (12 U.S.C. 1430) is amended by striking the 1st
of the 2 subsections designated as subsection (e).
(c) SECTION 10b.—Subsection (a) of section 10b of
the Federal Home Loan Bank Act (12 U.S.C. 1430b) is
amended—
(1) by striking ‘‘Board’’ and inserting ‘‘bank’’;
and
(2) by inserting ‘‘home’’ before ‘‘mortgage
loan’’.
(d) SECTION 11.—
(1) Subsection (a) of section 11 of the Federal
Home Loan Bank Act (12 U.S.C. 1431(a)) is
amended—
(A) by striking ‘‘(a) Each Federal Home
Loan Bank’’ and inserting ‘‘(a) BORROWING
AUTHORITY.—
‘‘(1) IN GENERAL.—Each Federal home loan
bank’’;
(B) by striking ‘‘, subject to rules and reg-
ulations prescribed by the Board’’;
SEC. 11. INCORPORATION OF BANKS; CORPORATE POWERS.
Section 12 of the Federal Home Loan Bank Act is
amended to read as follows:
‘‘SEC. 12. INCORPORATION OF BANKS; CORPORATE POW-
ERS.
‘‘(a) ORGANIZATIONAL CERTIFICATES.—
‘‘(1) CUSTODIANSHIP.—The Finance Board
shall be the custodian of the organizational certifi-
cates of the Federal home loan banks previously
filed with the Federal Home Loan Bank Board (as
in existence before the end of the 60-day period be-
ginning on the date of the enactment of the Finan-
cial Institutions Reform, Recovery, and Enforcement
Act of 1989) or the Finance Board.
‘‘(2) REPLACEMENT OF LOST OR DESTROYED
CERTIFICATE.—If the organizational certificate of a
Federal home loan bank is lost or destroyed, the
board of directors of the bank shall provide the Fi-
nance Board with a substitute certificate containing
such information as the Finance Board may require.
‘‘(3) AMENDMENT IN CASE OF MERGER, COM-
BINATION, OR CONSOLIDATION.—If 2 or more Fed-
eral home loan banks merge, combine, or otherwise
consolidate, the resulting bank shall provide the Fi-
nance Board with an amended organizational certifi-
cate containing such information as the Finance
Board may require.
‘‘(b) CORPORATE STATUS.—Each Federal home loan
bank shall be a corporation.
‘‘(c) POWERS.—Each Federal home loan bank shall
have the following powers:
‘‘(1) To adopt, alter, and use a corporate seal.
‘‘(2) To make contracts.
‘‘(3) To purchase or lease and hold or dispose
of such real estate as may be necessary or conven-
ient for the transaction of the business of the bank.
‘‘(4) To sue and be sued, to complain, and to
defend, in any court of competent jurisdiction.
‘‘(5) To select, employ, and fix the compensa-
tion of such officers, employees, attorneys, and
agents as the board of directors determines to be
necessary for the transaction of the business of the
bank.
‘‘(6) To define the duties of, and require bonds
of, officers, employees, attorneys, and agents of the
bank and fix the penalties of any such bonds.
‘‘(7) To dismiss at pleasure officers, employees,
attorneys, and agents of the bank.
‘‘(8) By the board of directors, to prescribe,
amend, and repeal bylaws and policies governing the
manner in which the affairs of the bank may be ad-
ministered.
‘‘(9) Such incidental powers as are not incon-
sistent with the provisions of this Act and are cus-
tomary and usual in corporations generally.
‘‘(d) PROHIBITION ON EXCESSIVE COMPENSATION.—
‘‘(1) IN GENERAL.—The Finance Board shall
prohibit the Federal home loan banks from provid-
ing compensation to any employee of the bank that
is not reasonable and comparable with compensation
for employment in other similar businesses (includ-
ing other financial institutions or major financial
services companies) involving similar duties and re-
sponsibilities.
‘‘(2) LIMITATION
ON FINANCE BOARD’S AU-
THORITY TO SET COMPENSATION.—In carrying out
paragraph (1), the Finance Board may not prescribe
or set a specific level or range of compensation.’’.
SEC. 12. LIQUIDATION OR REORGANIZATION.
Section 25 of the Federal Home Loan Bank Act (12
U.S.C. 1445) is amended by striking ‘‘the Board under
this Act’’ and inserting ‘‘operation of law’’.
SEC. 13. DEFINITIONS.
(a) FINANCE BOARD DEFINED.—Paragraph (1) of
section 2 of the Federal Home Loan Bank Act (12 U.S.C.
1422(1)) is amended to read as follows:
‘‘(1) FINANCE
BOARD.—The term ‘Finance
Board’ means the Federal Housing Finance Board
established under section 3.’’
‘‘(b) HOME MORTGAGE LOAN DEFINED.—Section 2
of the Federal Home Loan Bank Act (12 U.S.C. 1422)
is amended by striking paragraphs (5) and (6) and insert-
ing the following new paragraph:
‘‘(5) HOME MORTGAGE LOAN.—
‘‘(A) IN GENERAL.—The term ‘home mort-
gage loan’ means a loan made by a member or
a nonmember borrower upon the security of—
‘‘(i) a mortgage, deed of trust or other
security arrangement upon qualified real
estate, in fee simple; or
‘‘(ii) on a qualified leasehold—
‘‘(I) under a lease which has a
period to maturity of not less than 99
years and is renewable; or
‘‘(II) under a lease having a pe-
riod of not less than 50 years to run
from the date the mortgage, deed of
trust, or other security arrangement
was executed.
‘‘(B) CERTAIN
LOANS
INCLUDED.—The
term ‘home mortgage loan’ includes—
‘‘(i) such classes of first liens as are
commonly given to secure advances on real
estate, under the laws of the State in
which the real estate is located, by institu-
tions authorized under this Act to become
members of a Federal home loan bank;
and
‘‘(ii) the credit instruments, if any, se-
cured by such liens.
‘‘(C) QUALIFIED REAL ESTATE; QUALIFIED
LEASEHOLD.—The terms ‘qualified real estate’
and ‘qualified leasehold’ mean real estate upon
which is located, or which comprises or in-
cludes, 1 or more homes or other dwelling
units.
‘‘(D) DEFINITION OF FURTHER TERMS.—
The Finance Board may define any term used
in this paragraph.’’.
(c) RESIDENTIAL MORTGAGE ASSETS DEFINED.—
Section 2 of the Federal Home Loan Bank Act (12 U.S.C.
1422) is amended—
(1) by redesignating paragraphs (7), (8), (9),
(10), (11), and (12) as paragraphs (6), (7), (8), (9),
(10), (11), respectively; and
(2) by adding at the end the following new
paragraph:
‘‘(12) RESIDENTIAL MORTGAGE ASSETS.—The
term ‘residential mortgage asset’—
‘‘(A) means a home mortgage, deed of
trust, or other security arrangement upon real
estate that is solely residential; and
‘‘(B) includes any mortgage pass-through
security or mortgage debt security representing
an interest in, or which is collateralized by, a
home mortgage loan.’’
(d) REGULATED
FINANCIAL
INSTITUTION
DE-
FINED.—Section 2 of the Federal Home Loan Bank Act
(12 U.S.C. 1422) is amended by adding after paragraph
(12) (as added by subsection (c) of this section) the follow-
ing new paragraph:
‘‘(13) REGULATED FINANCIAL INSTITUTION.—
The term ‘regulated financial institution’ means—
‘‘(A) any insured depository institution;
and
‘‘(B) any building and loan association,
saving and loan association, cooperative bank,
homestead association, or savings bank which is
duly organized under the laws of any state or
of the United States.’’.
(e) CAPITAL DISTRIBUTION DEFINED.—Section 2 of
the Federal Home Loan Bank Act (12 U.S.C. 1422) is
amended by adding after paragraph (13) (as added by
subsection (d) of this section) the following new para-
graph:
‘‘(14) CAPITAL DISTRIBUTION.—The term ‘cap-
ital distribution’ means—
‘‘(A) any dividend or other distribution in
cash or other property made with respect to any
shares of, or other ownership interest in, a Fed-
eral home loan bank, other than a dividend con-
sisting only of shares of any such bank;
‘‘(B) any payment in cash or other prop-
erty made by a Federal home loan bank to re-
purchase, redeem, retire, or otherwise acquire
any of the shares of the bank, including any ex-
tension of credit made to finance an acquisition
by a bank of such shares; and
‘‘(C) any transaction that the Finance
Board determines by regulation to be, in sub-
stance, a distribution of capital of a Federal
home loan bank.’’.
SEC. 14. EFFECTIVE DATE.
Except as otherwise expressly provided in this Act,
this Act and the amendments made by this Act shall take
effect on the first January 1 which occurs after the date
of the enactment of this Act.
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