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including a foreign bank that does not own or
control a wholesale financial institution, may re-
quest a determination from the Board that such
bank or company be treated as a bank holding
company which controls a company pursuant to
this subsection.
‘‘(B) CONDITIONS
FOR
TREATMENT
AS
A
BANK HOLDING COMPANY SUBJECT TO THIS SUB-
SECTION.—A foreign bank and a company that
owns or controls a foreign bank may not be
treated, under this paragraph, as a bank holding
company which controls a company pursuant to
this subsection, unless the bank and company
meet and continue to meet the following criteria:
‘‘(i) NO INSURED DEPOSITS.—No de-
posits which are held directly by a foreign
bank or through an affiliate are insured
under the Federal Deposit Insurance Act.
‘‘(ii) CAPITAL
STANDARDS.—The for-
eign bank meets risk-based capital stand-
ards comparable to the capital standards
required for a wholesale financial institu-
tion, giving due regard to the principle of
national treatment and equality of competi-
tive opportunity.
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‘‘(iii) TRANSACTIONS
WITH
AFFILI-
ATES.—Transactions between a branch,
agency, or commercial lending company
subsidiary of the foreign bank in the United
States, and any affiliate or company in
which the foreign bank (or any company
that owns or controls such foreign bank) has
invested in accordance with this subsection,
shall comply with the provisions of sections
23A and 23B of the Federal Reserve Act in
the same manner and to the same extent as
such transactions would be required to com-
ply with such sections if the bank were a
member bank.
‘‘(C) TREATMENT AS A WHOLESALE FINAN-
CIAL INSTITUTION.—
‘‘(i) IN GENERAL.—Any foreign bank
which is, or is affiliated with a company
which is, treated as a bank holding com-
pany which controls a company pursuant
to this subsection shall be treated as a
wholesale financial institution for purposes
of subparagraphs (A) and (B) of paragraph
(3) and section 111 of the Financial Serv-
ices Competition Act of 1997, except that
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the Board may adopt such modifications,
conditions, or exemptions as the Board
deems appropriate, giving due regard to the
principle of national treatment and equal-
ity of competitive opportunity.
‘‘(ii) APPLICABILITY
OF
COMMUNITY
REINVESTMENT ACT OF 1977.—The branches
in the United States of any foreign bank
that is, or is affiliated with a company
which is, treated as a bank holding com-
pany which controls a company pursuant
to this subsection shall be subject to section
9B(b)(6) of the Federal Reserve Act as if the
foreign bank were a wholesale financial in-
stitution under such section. The Board and
the Comptroller of the Currency shall apply
the provisions of sections 803(2), 804, and
807(1) of the Community Reinvestment Act
of 1977 to branches of foreign banks which
receive only such deposits as are permissible
for receipt by a corporation organized
under section 25A of the Federal Reserve
Act, in the same manner and to the same
extent such sections apply to such a cor-
poration.
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‘‘(D) NONAPPLICABILITY OF OTHER EXEMP-
TION.—Any foreign bank or company which is
treated as a bank holding company which con-
trols a company pursuant to this subsection shall
not be eligible for any exemption described in
section 2(h).
‘‘(E) 
SUPERVISION
ASSESSMENT.—The
Board shall assess the extent to which any for-
eign bank which is, or is affiliated with a com-
pany which is, treated as a bank holding com-
pany which controls a company pursuant to this
subsection is subject to supervision by authorities
in the home country of such foreign bank.
‘‘(F) AUTHORITY
TO
IMPOSE
ADDITIONAL
RESTRICTIONS AND REQUIREMENTS.—The Board
may impose additional requirements on any for-
eign bank which is, or is affiliated with a com-
pany which is, treated as a bank holding com-
pany which controls a company pursuant to this
subsection that are determined to be appropriate
or necessary to protect taxpayers and the finan-
cial system from risks associated with access to
the payments system and availability of dis-
counts, advances, and other extensions of credit
from a Federal reserve bank, giving due regard
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to the principles of national treatment and
equality of competitive opportunity.’’.
Subtitle H—Federal Home Loan
Bank System
SEC. 171. FEDERAL HOME LOAN BANKS–
The 1st sentence of section 3 of the Federal Home Loan
Bank Act (12 U.S.C. 1423) is amended—
(1) by striking ‘‘the continental United States’’
and all that follows through the ‘‘eight’’; and
(2) by inserting ‘‘the States into not less than 1’’
before ‘‘nor’’.
SEC. 172. MEMBERSHIP AND COLLATERAL.
(a) Subsection (f) of section 5 of the Home Owners’
Loan Act (12 U.S.C. 1464) is amended to read as follows:
‘‘(f) FEDERAL HOME LOAN BANK MEMBERSHIP.—A
Federal savings association may become a member, of the
Federal Home Loan Bank System, and shall qualify for
such membership in the manner provided by the Federal
Home Loan Bank Act, beginning January 1, 1999.’’.
(b) Section 10(a)(5) of the Federal Home Loan Bank
Act (12 U.S.C. 1430(a)(5)) is amended—
(1) in the 2d sentence, by striking ‘‘and the
Board’’; and
(2) in the 3d sentence, by striking ‘‘Board’’ and
inserting ‘‘Bank’’.
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(c) Section 10(a) of the Federal Home Loan Bank Act
(12 U.S.C. 1430(a)) is amended—
(1) in the 2d sentence, by striking ‘‘All long-term
advances’’ and inserting ‘‘Except as provided in the
succeeding sentence, all long-term advances’’;
(2) by inserting after the 2d sentence, the follow-
ing sentence: ‘‘Notwithstanding the preceding sen-
tence, long-term advances may be made to FDIC-in-
sured members which have less than $500,000,000 in
total assets for the purpose of funding small busi-
nesses, agriculture, rural development, or low-income
community development (as defined by the Board).’’;
and
(3) by redesignating paragraph (5) as para-
graph (6) and inserting after paragraph (4) the fol-
lowing new paragraph:
‘‘(5) In the case of any FDIC-insured member
which has total assets of less than $500,000,000, se-
cured loans for small business, agriculture, rural de-
velopment, or low-income community development, or
securities representing a whole interest in such se-
cured loans.’’.
(d) Section 4(a) of the Federal Home Loan Bank Act
(12 U.S.C. 1424(a)) is amended by adding at the end the
following new paragraph:
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‘‘(3) ELIGIBILITY REQUIREMENTS FOR COMMU-
NITY FINANCIAL INSTITUTIONS.—The requirements of
paragraph (2) (other than subparagraph (B) of such
paragraph) shall not apply to any FDIC-insured de-
pository institution which has total assets of less than
$500,000,000.
(e) 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) (relating to quali-
fied thrift lender status).
SEC. 172A. THE OFFICE OF FINANCE.
The Federal Home Loan Bank Act (12 U.S.C. 1421)
is amended by inserting after section 4 the following new
section:
‘‘SEC. 5. THE OFFICE OF FINANCE.
‘‘(a) OPERATION.—The Federal home loan banks shall
operate jointly an office of finance (hereafter in this section
referred to as the ‘Office’) to issue the notes, bonds, and de-
bentures of the Federal home loan banks in accordance with
this Act.
‘‘(b) POWERS.—Subject to the other provisions of this
Act and such safety and soundness regulations as the Fi-
nance Board may prescribe, the Office shall be authorized
by the Federal home loan banks to act as the agent of such
banks to issue Federal home loan bank notes, bonds and
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debentures pursuant to section 11 of this Act on behalf of
the banks.
‘‘(c) CENTRAL BOARD OF DIRECTORS.—
‘‘(1) ESTABLISHMENT.—The Federal home loan
banks shall establish a central board of directors of
the Office to administer the affairs of the Office in ac-
cordance with the provisions of this Act.
‘‘(2) COMPOSITION
OF BOARD.—Each Federal
home loan bank shall annually select 1 individual
who, as of the time of the election, is an officer or di-
rector of such bank to serve as a member of the
central board of directors of the Office.
‘‘(d) STATUS.—Except to the extent expressly provided
in this Act, the Office shall be treated as a Federal home
loan bank for purposes of any law.’’.
SEC. 172B. MANAGEMENT OF BANKS.
(a) Subsections (a) and (b) of section 7 of the Federal
Home Loan Bank Act (12 U.S.C. 1427(a) and (b)) are
amended to read as follows:
‘‘(a) The management of each Federal home loan bank
shall be vested in a board of 15 directors, 9 of whom shall
be elected by the members in accordance with this section,
6 of whom shall be appointed by the Board referred to in
section 2A, and all of whom shall be citizens of the United
States and bona fide residents of the district in which such
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bank is located. At least 2 of the Federal home loan bank
directors who are appointed by the Board shall be represent-
atives chosen from organizations with more than a 2-year
history of representing consumer or community interests on
banking services, credit needs, housing, or financial
consumer protections. No Federal home loan bank director
who is appointed pursuant to this subsection may, during
such bank director’s term of office, serve as an officer of
any Federal home loan bank or a director or officer of any
member of a bank, or hold shares, or any other financial
interest in, any member of a bank.
‘‘(b) The elective directors shall be divided into three
classes, designated as classes A, B, and C, as nearly equal
in number as possible. Each directorship shall be filled by
a person who is an officer or director of a member located
in that bank’s district. Each class shall represent members
of similar asset size, and the Board shall, to the maximum
extent possible, seek to achieve geographic diversity. The Fi-
nance Board shall establish the minimum and maximum
asset size for each class. Any member shall be entitled to
nominate and elect eligible persons for its class of director-
ship; such offices shall be filled from such nominees by a
plurality of the votes which members of each class may cast
for nominees in their corresponding class of directors in an
election held for the purpose of filling such offices. Each
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member shall be permitted to cast one vote for each share
of Federal home loan bank stock owned by that member.
No person who is an officer or director of a member that
fails to meet any applicable capital requirement is eligible
to hold the office of Federal Home Loan Bank director. As
used in this subsection, the term ‘‘member’’ means a mem-
ber of a Federal home loan bank which was a member of
such Bank as of a record date established by the Bank.’’.
(b) Section 7 of the Federal Home Loan Bank Act (12
U.S.C. 1427) is amended—
(1) by striking subsections (c) and (h); and
(2) by redesignating subsections (d), (e), (f), (g),
(i), (j), and (k) as subsections (c), (d), (e), (f), (g),
(h), and (i), respectively.
(c) Subsection (c) of section 7 of the Federal Home
Loan Bank Act (12 U.S.C. 1427(d)) (as so redesignated by
subsection (b) of this section) is amended by striking the
1st and 2d sentences and inserting the following 2 new sen-
tences: ‘‘The term of each elective directorship and each ap-
pointive directorship shall be 3 years. No director serving
for 3 consecutive terms, nor any other officer, director or
that member or any affiliated depository institution, shall
be eligible for another term earlier than 3 years after the
expiration of the last expiring of said 3-year terms. 3 elected
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directors of different classes as specified by the Finance
Board shall be elected by ballot annually.’’.
(d) Subsection (d) of section 7 of the Federal Home
Loan Bank Act (12 U.S.C. 1427(e)) (as so redesignated by
subsection (b) of this section) is amended to read as follows:
‘‘(d) TRANSITION PROVISION.—In the 1st election after
the date of the enactment of the Financial Services Competi-
tion Act of 1997, 3 directors shall be elected in each of the
3 classes of elective directorship. The Finance Board may,
in the 1st election after such date of enactment, designate
the terms of each elected director in each class, not to exceed
3 years, to assure that, in each subsequent election, 3 direc-
tors from different classes of elective directorships are elected
each year.’’.
(e) Subsection (g) of section 7 of the Federal Home
Loan Bank Act (12 U.S.C. 1427(i)) (as so redesignated by
subsection (b) of this section) is amended by striking ‘‘sub-
ject to the approval of the board’’.
SEC. 173. ADVANCES TO NONMEMBER BORROWERS.
Section 10b of the Federal Home Loan Bank Act (12
U.S.C. 1430b) is amended—
(1) in subsection (a), by striking ‘‘(a) IN GEN-
ERAL.—’’;
(2) by striking the 4th sentence of subsection (a),
and inserting ‘‘Notwithstanding the preceding sen-
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tence, if an advance is made for the purpose of facili-
tating mortgage lending that benefits individuals and
families that meet the income requirements set forth
in section 142(d) or 143(f) of the Internal Revenue
Code of 1986, the advance may be collateralized as
provided in section 10(a) of this Act.’’; and
(3) by striking subsection (b).
SEC. 174. POWERS AND DUTIES OF BANKS.
(a) Subsection (a) of section 11 of the Federal Home
Loan Bank Act (12 U.S.C. 1431(a)) is amended—
(1) by inserting ‘‘through the Office of Finance’’
after ‘‘to issue’’;
(2) by striking ‘‘Board’’ after ‘‘upon such terms
and conditions as the’’ and inserting ‘‘board of direc-
tors of the bank’’.
(b) Subsection (b) of section 11 of the Federal Home
Loan Bank Act (12 U.S.C. 1431(b)) is amended to read
as follows:
‘‘(b) ISSUANCE OF FEDERAL HOME LOAN BANK CON-
SOLIDATED BONDS.—
‘‘(1) IN GENERAL.— The Office of Finance may
issue consolidated Federal home loan bank bonds and
other consolidated obligations on behalf of the banks.
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‘‘(2) JOINT AND SEVERAL OBLIGATION; TERMS
AND CONDITIONS.—Consolidated obligations issued by
the Office of Finance under paragraph (1) shall—
‘‘(A) be the joint and several obligations of
all the Federal home loan banks; and
‘‘(B) shall be issued upon such terms and
conditions as shall be established by the Office of
Finance subject to such rules and regulations as
the Finance Board may prescribe.’’.
(c) Section 11(f) of the Federal Home Loan Bank Act
(12 U.S.C. 1430(f) (as designated before the redesignation
by subsection (e) of this section) is amended by striking both
commas immediately following ‘‘permit’’ and inserting
‘‘or’’.
(d) Subsection (i) of section 11 of the Federal Home
Loan Bank Act (12 U.S.C. 1431(i)) is amended by striking
the 2d undesignated paragraph.
(e) Section 11 of the Federal Home Loan Bank Act
(12 U.S.C. 1431) is amended—
(1) by striking subsection (c); and
(2) by redesignating subsections (d) through (k)
as subsections (c) through (j), respectively.
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SEC. 174A. MERGERS AND CONSOLIDATIONS OF FEDERAL
HOME LOAN BANKS.
Section 26 of the Federal Home Loan Bank Act (12
U.S.C. 1446) is amended by designating the current para-
graph as ‘‘(a)’’ and adding the following new sections:
‘‘(b) Nothing in this section shall preclude voluntary
mergers, combinations or consolidation by or among the
Federal home loan banks pursuant to such regulations as
the Finance Board may prescribe.
‘‘(c) NUMBER OF ELECTED DIRECTORS OF RESULTING
BANK.— Subject to section 7 of this Act, any bank resulting
from a merger, combination, or consolidation pursuant to
this section may have a number of elected directors equal
to or less than the total number of elected directors of all
the banks which participated in such transaction (as deter-
mined immediately before such transaction).
‘‘(d) NUMBER OF APPOINTED DIRECTORS OF RESULT-
ING BANK.—The number of appointed directors of any bank
resulting from a merger, combination, or consolidation pur-
suant to this section shall be a number that is three less
than the number of elected directors.
‘‘(e) ADJUSTMENT OF DISTRICT BOUNDARIES.—After
consummation of any merger, combination, or consolida-
tion of 2 or more Federal home loan banks, the Finance
Board shall adjust the districts established in section 3 of
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this Act to reflect such merger, combination, or consolida-
tion.’’.
SEC. 174B. TECHNICAL AMENDMENTS.
(a) REPEAL OF SECTIONS 22A AND 27.—The Federal
Home Loan Bank Act (12 U.S.C. 1421 et seq.) is amended
by striking sections 22A (12 U.S.C. 1442a) and 27 (12
U.S.C. 1447).
(b) SECTION 12.—
(1) Section 12(a) of the Federal Home Loan
Bank Act (12 U.S.C. 1432(a)) is amended—
(A) by striking ‘‘subject to the approval of
the Board’’ immediately following ‘‘transaction
of its business’’; and
(B) by striking ‘‘and, by its Board of direc-
tors, to prescribe, amend, and repeal by-laws,
rules, and regulations governing the manner in
which its affairs may be administered; and the
powers granted to it by law may be exercised
and enjoyed subject to the approval of the Board.
The president of a Federal Home Loan Bank
may also be a member of the Board of directors
thereof, but no other officer, employee, attorney,
or agent of such bank,’’ and inserting ‘‘and, by
the board of directors of the bank, to prescribe,
amend, and repeal by-laws governing the man-
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ner in which its affairs may be administered,
consistent with applicable statute and regula-
tion, as administered by the Finance Board. No
officer, employee, attorney, or agent of a Federal
home loan bank’’.
(2) Section 12 of the Federal Home Loan Bank
Act (12 U.S.C. 1432) is amended by inserting after
subsection (b) the following new subsection:
‘‘(c) PROHIBITION ON EXCESSIVE COMPENSATION.—
‘‘(1) IN
GENERAL.—The Finance Board shall
prohibit the Federal home loan banks from providing
compensation to any officer, director, or employee
that is not reasonable and comparable with the com-
pensation for employment in other similar businesses
involving similar duties and responsibilities. How-
ever, the Finance Board may not prescribe or set a
specific level or range of compensation for any officer,
director, or employee.
‘‘(2) REGULATIONS.—The Finance Board, by
regulation, may provide for the requirements of para-
graph (1) to be phased-in over a period not to exceed
3 years.
‘‘(3) EXCEPTION
FOR
EXISTING
CONTRACTS.—
Paragraph (1) shall not apply to any contract en-
tered into before June 1, 1997.’’.
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(c) POWERS AND DUTIES OF FEDERAL HOUSING FI-
NANCE BOARD.—
(1) Subsection (a)(1) of section 2B of the Federal
Home Loan Bank Act (12 U.S.C. 1422b(a)(1)) is
amended by striking the period at the end of the sen-
tence and inserting ‘‘; and to have the same powers,
rights, and duties to enforce this Act with respect to
the Federal home loan banks and the senior officers
and directors of such banks as the Office of Federal
Housing Enterprise Oversight has over the Federal
housing enterprises and the senior officers and direc-
tors of such enterprises under the Federal Housing
Enterprises Financial Safety and Soundness Act of
1992.’’.
(2) Subsection (b) of section 2B of the Federal
Home Loan Bank Act (12 U.S.C. 1422b(b)) is amend-
ed—
(A) by striking ‘‘(1) BOARD STAFF.—’’;
(B) by striking ‘‘function to any employee,
administrative unit’’ and inserting ‘‘function to
any employee or administrative unit’’;
(C) by striking the 2d sentence in para-
graph (1); and
(D) by striking paragraph (2).
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(3) Section 111 of Public Law 93–495 (12
U.S.C. 250) is amended by striking ‘‘Federal Home
Loan Bank Board’’ and inserting ‘‘Federal Housing
Finance Board’’.
(d) ELIGIBILITY TO SECURE ADVANCES.—
(1) SECTION 9.—Section 9 of the Federal Home
Loan Bank Act (12 U.S.C. 1429) is amended—
(A) in the second sentence, by striking
‘‘with the approval of the Board’’; and
(B) in the third sentence, by striking ‘‘, sub-
ject to the approval of the Board,’’.
(2) SECTION 10.—
(A) Subsection (a) of section 10 of the Fed-
eral Home Loan Bank Act (12 U.S.C. 1430(a))
is amended in paragraph (3), by striking ‘‘De-
posits’’ and inserting ‘‘Cash or deposits’’.
(B) Subsection (c) of section 10 of the Fed-
eral Home Loan Bank Act (12 U.S.C. 1430(c))
is amended—
(i) in the 1st sentence by striking
‘‘Board’’ and inserting ‘‘Federal home loan
bank’’; and
(ii) by striking the 2d sentence.
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(C) Subsection (d) of section 10 of the Fed-
eral Home Loan Bank Act (12 U.S.C. 1430(d))
is amended—
(i) in the 1st sentence, by striking
‘‘and the approval of the Board’’;
(ii) in the last sentence, by striking
‘‘Subject to the approval of the Board, any’’
and inserting ‘‘Any’’.
(D) Section 10(j) of the Federal Home Loan
Bank Act (12 U.S.C. 1430(j)) is amended—
(i) in the 1st sentence of paragraph (1)
by striking ‘‘to subsidize the interest rate on
advances’’ and inserting ‘‘to provide sub-
sidies, including subsidized interest rates on
advances’’;
(ii) in paragraphs (2), (3), (4), (5),
(9), (11), and (12) by striking ‘‘advances’’
and ‘‘subsidized advances’’ each place such
terms appear and inserting ‘‘subsidies, in-
cluding subsidized advances’’;
(iii) in paragraph (1), by inserting
‘‘(A)’’ before the 1st sentence, and inserting
the following at the end of the paragraph:
‘‘(B) Subject to such regulations as the Fi-
nance Board may prescribe, the board of direc-
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tors of each Federal home loan bank may ap-
prove or disapprove requests from members for
Affordable Housing Program subsidies, and may
not delegate such authority.’’;
(iv) in paragraph (2), by striking sub-
paragraph (B) and inserting the following
new subparagraph:
‘‘(B) finance the purchase, construction or
rehabilitation of rental housing if, for a period
of at least 15 years, either 20 percent or more of
the units in such housing are occupied by and
affordable for households whose income is 50 per-
cent or less of area median income (as deter-
mined by the Secretary of Housing and Urban
Development, and as adjusted for family size); or
40 percent or more of the units in such housing
are occupied by and affordable for households
whose income is 60 percent or less of area me-
dian income (as determined by the Secretary of
Housing and Urban Development, and as ad-
justed for family size).’’;
(v) in paragraph (5)—
(I) by striking the colon after ‘‘Af-
fordable Housing Program’’;
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(II) by striking subparagraphs
(A) and (B); and
(III) by striking ‘‘(C) In 1995,
and subsequent years,’’;
(vi) in paragraph (11)—
(I) by inserting ‘‘, pursuant to a
nomination process that is as broad
and as participatory as possible, and
giving consideration to the size of the
District and the diversity of low- and
moderate-income housing needs and ac-
tivities within the District,’’ after ‘‘Ad-
visory Council of 7 to 15 persons’’;
(II) by inserting ‘‘a diverse range
of’’ before ‘‘community and nonprofit
organizations’’; and
(III) by inserting after the 1st
sentence, the following new sentence:
‘‘Representatives of no one group shall
constitute an undue proportion of the
membership of the Advisory Council.’’;
and
(vii) in paragraph (13), by striking
subparagraph (D) and inserting the follow-
ing new subparagraph:
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‘‘(D) AFFORDABLE.—For purposes of para-
graph (2)(B), the term ‘‘affordable’’ means that
the rent with respect to a unit shall not exceed
30 percent of the income limitation under para-
graph (2)(B) applicable to occupants of such
unit.’’.
(e) SECTION 16.—Subsection (a) of section 16 of the
Federal Home Loan Bank Act (12 U.S.C. 1436) is amended
in the 3d sentence by striking ‘‘net earnings’’ and inserting
‘‘previously retained earnings or current net earnings’’; by
striking ‘‘, and then only with the approval of the Federal
Housing Finance Board’’; and by striking the 4th sentence.
(f) SECTION 18.—Subsection (b) of section 18 of the
Federal Home Loan Bank Act (12 U.S.C. 1438) is amended
by striking paragraph (4).
(g) SECTION 11.—Section 11 of the Federal Home
Loan Bank Act (12 U.S.C. 1431) is amended by inserting
after subsection (j) (as so redesignated by section 174(e) of
this subtitle) the following subsection:
‘‘(k) PROHIBITION ON OTHER ACTIVITIES.—
‘‘(1) A Federal home loan bank may not engage
in any activity other than the activities authorized
under this Act and activities incidental to such au-
thorized activities.
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‘‘(2) All activities specified in paragraph (1) are
subject to Finance Board approval.’’.
SEC. 175. DEFINITIONS.
Paragraph (3) of section 2 of the Federal Home Loan
Bank Act (12 U.S.C. 1422(3)) is amended to read as fol-
lows:
‘‘(3) The term ‘‘State’’ in addition to the states
of the United States, includes the District of Colum-
bia, Guam, Puerto Rico, the United States Virgin Is-
lands, American Samoa, and the Commonwealth of
the Northern Mariana Islands.’’
SEC. 176. RESOLUTION FUNDING CORPORATION
(a) IN GENERAL.—Section 21B(f)(2)(C) of the Federal
Home Loan Bank Act (12 U.S.C. 1441b(f)(2)(C)) is amend-
ed to read as follows:
‘‘(C) PAYMENTS BY FEDERAL HOME LOAN
BANKS.—To the extent the amounts available
pursuant to subparagraphs (A) and (B) are in-
sufficient to cover the amount of interest pay-
ments, each Federal home loan bank shall pay to
the Funding Corporation each calendar year
20.75 percent of the net earnings of such bank
(after deducting expenses relating to subsection
(j) of section 10 and operating expenses).’’.
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(b) EFFECTIVE DATE.—The amendment made by sub-
section (a) shall take effect on January 1, 1999.
SEC. 177. CAPITAL STRUCTURE OF THE FEDERAL HOME
LOAN BANKS.
(a) IN GENERAL.—Section 6 of the Federal Home
Loan Bank Act (12 U.S.C. 1426) is amended to read as
follows:
‘‘SEC. 6. CAPITAL STRUCTURE OF FEDERAL HOME LOAN
BANKS.
‘‘(a) CAPITAL STRUCTURE PLAN.—On or before Janu-
ary 1, 1999, the board of directors of each Federal home
loan bank shall submit for Finance Board approval a plan
establishing and implementing a capital structure for such
bank which—
‘‘(1) the board of directors determines is the best
suited for the condition and operation of the bank
and the interests of the shareholders of the bank;
‘‘(2) meets the requirements of subsection (b);
and
‘‘(3) meets the minimum capital standards and
requirements established under subsection (c) and any
regulations prescribed by the Finance Board pursuant
to such subsection.
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‘‘(b) CONTENTS OF PLAN.—The capital structure plan
of each Federal home loan bank shall meet the following
requirements:
‘‘(1) STOCK PURCHASE REQUIREMENTS.—
‘‘(A) IN GENERAL.—Each capital structure
plan of a Federal home loan bank shall require
the shareholders of the bank to maintain an in-
vestment in the stock of the bank in amount not
less than—
‘‘(i) a minimum percentage of the total
assets of the shareholder; and
‘‘(ii) a minimum percentage of the out-
standing advances from the bank to the
shareholder.
‘‘(B) MINIMUM PERCENTAGE LEVELS.—The
minimum percentages established pursuant to
subparagraph (A) shall be set at levels sufficient
to meet the bank’s minimum capital require-
ments established by the Finance Board under
subsection (c).
‘‘(C) MAXIMUM ASSET BASED CAPITAL RE-
QUIREMENT.—The asset-based capital require-
ment applicable to any shareholder of a Federal
home loan bank in any year shall not exceed the
lesser of—
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‘‘(i) 0.6 percent of a shareholder’s total
assets at the close of the preceding year; or
‘‘(ii) $300,000,000.
‘‘(D) MAXIMUM ADVANCE-BASED REQUIRE-
MENT.—The advance-based capital requirement
applicable to any shareholder of a Federal home
loan bank shall not exceed 6 percent of the total
outstanding advances from the bank to the share-
holder.
‘‘(E) MINIMUM STOCK PURCHASE REQUIRE-
MENT AUTHORIZED.—A capital structure plan
may establish a minimum dollar amount of
stock of a Federal home loan bank in which a
shareholder shall be required to invest.
‘‘(2) ADJUSTMENTS
TO
STOCK
PURCHASE
RE-
QUIREMENTS.—The capital structure plan adopted by
each Federal home loan bank shall impose a continu-
ing obligation on the board of directors of the bank
to review and adjust as necessary member stock pur-
chase requirements in order to ensure that the bank
remains in compliance with applicable minimum
capital levels established by the Finance Board.
‘‘(3) TRANSITION RULE FOR STOCK PURCHASE
REQUIREMENTS.—
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‘‘(A) IN
GENERAL.—A capital structure
plan may allow shareholders who were members
of a Federal home loan bank on the date of the
enactment of the Financial Services Competition
Act of 1997 to come into compliance with the
asset-based stock purchase requirement estab-
lished under paragraph (1) during a transition
period established under the plan of not more
than 3 years, if such requirement exceeds the
asset-based stock purchase requirement in effect
on such date of enactment.
‘‘(B) 
INTERIM
PURCHASE
REQUIRE-
MENTS.—A capital structure plan may establish
interim asset-based stock purchase requirements
applicable to members referred to in subpara-
graph (A) during a transition period established
under subparagraph (A).
‘‘(4) CLASSES OF STOCK.—
‘‘(A) IN GENERAL.—Each capital structure
plan shall afford each shareholder of a Federal
home loan bank the option of meeting the share-
holder’s stock purchase requirements through the
purchase of any combination of Class A or Class
B stock.
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‘‘(B) CLASS A STOCK.—Class A stock shall
be stock of a Federal home loan bank that shall
be redeemed in cash and at par by the bank no
later than 12 months following submission of a
written notice by a shareholder of the sharehold-
er’s intention to divest all shares of stock in the
bank.
‘‘(C) CLASS B STOCK.—Class B stock shall
be stock of a Federal home loan bank that shall
be redeemed in cash and at par by the bank no
later than 5 years following submission of a
written notice by a shareholder of the sharehold-
er’s intention to divest all shares of stock in the
bank.
‘‘(D) RIGHTS REQUIREMENT.—The Class B
stock of a Federal home loan bank may receive
a dividend premium over that paid on Class A
stock, and may have preferential voting rights in
the election of Federal home loan bank directors.
‘‘(E) LOWER STOCK PURCHASE REQUIRE-
MENTS FOR CLASS B STOCK.—A capital struc-
ture plan may provide for lower stock purchase
requirements with respect to those shareholder’s
that elect to purchase Class B stock in a manner
that is consistent with meeting the bank’s own
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minimum capital requirements as established by
the Finance Board.
‘‘(F) NO OTHER CLASSES OF STOCK PER-
MITTED.—No class of stock other than the Class
A and Class B stock described in subparagraphs
(B) and (C) may be issued by a Federal home
loan bank.
‘‘(5) LIMITED
TRANSFERABILITY
OF
STOCK.—
Each capital structure plan shall provide that any
equity securities issued by the bank shall be available
only to, held only by, and tradable only among share-
holders of the bank.
‘‘(c) CAPITAL STANDARDS.—
‘‘(1) IN
GENERAL.—The Finance Board shall
prescribe, by regulation, uniform capital standards
applicable to each Federal home loan bank which
shall include—
‘‘(A) a leverage limit in accordance with
paragraph (2); and
‘‘(B) a risk-based capital requirement in ac-
cordance with paragraph (3).
‘‘(2) MINIMUM LEVERAGE LIMIT.—The leverage
limit established by the Finance Board shall require
each Federal home loan bank to maintain total cap-
ital in an amount not less than 5 percent of the total
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assets of the bank. In determining compliance with
the minimum leverage ratio, the amount of retained
earnings and the paid-in value of Class B stock, if
any, shall be multiplied by 1.5 and such higher
amount shall be deemed to be capital for purposes of
meeting the 5 percent minimum leverage ratio.
‘‘(3) RISK-BASED CAPITAL STANDARD.—The risk-
based capital requirement shall be composed of the fol-
lowing components:
‘‘(A) Capital sufficient to meet the credit
risk to which a Federal home loan bank is sub-
ject, based on an amount which is not less than
the amount of tier 1, risk-based capital required
by regulations prescribed, or guidelines issued
under section 38 of the Federal Deposit Insur-
ance Act for a well capitalized insured deposi-
tory institution.
‘‘(B) Capital sufficient to meet the interest
rate risk to which a Federal home loan bank is
subject, based on an interest rate stress test ap-
plied by the Finance Board that rigorously tests
for changes in interest rates, rate volatility, and
changes in the shape of the yield curve.
‘‘(d) REDEMPTION OF CAPITAL.—
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‘‘(1) IN GENERAL.—Any shareholder of a Federal
home loan bank shall have the right to withdraw the
shareholder’s membership from a Federal home loan
bank and to redeem the shareholder’s stock in accord-
ance with the redemption rights associated with the
class of stock the shareholder holds, if—
‘‘(A) such shareholder has filed a written
notice of an intention to redeem all such shares;
and
‘‘(B) the shareholder has no outstanding ad-
vances from any Federal home loan bank at the
time of such redemption.
‘‘(2) PARTIAL REDEMPTION.—A shareholder who
files notice of intention to redeem all shares of stock
in a Federal home loan bank may redeem not more
than 1/2 of all such shares, in cash and at par, 6
months before the date by which the bank is required
to redeem such stock pursuant to subparagraph (B) or
(C) of subsection (b)(4).
‘‘(3) DIVESTITURE.—The board of directors of
any Federal home loan bank may, after a hearing,
order the divestiture by any shareholder of all owner-
ship interests of such shareholder in the bank, if—
‘‘(A) in the opinion of the board of direc-
tors, such shareholder has failed to comply with
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a provision of this Act or any regulation pre-
scribed under this Act; or
‘‘(B) the shareholder has been determined to
be insolvent, or otherwise subject to the appoint-
ment of a conservator, receiver, or other legal
custodian, by a State or Federal authority with
regulatory and supervisory responsibility for
such shareholder.
‘‘(4) RETIREMENT
OF
EXCESS
STOCK.—Any
shareholder may—
‘‘(A) retire shares of Class A stock or, at the
option of the shareholder, shares of Class B stock,
or any combination of Class A and Class B
stock, that are excess to the minimum stock pur-
chase requirements applicable to the shareholder;
and
‘‘(B) receive from the Federal home loan
bank a prompt payment in cash equal to the par
value of such stock.
‘‘(5) IMPAIRMENT OF CAPITAL.—If the Finance
Board or the board of directors of a Federal home
loan bank determines that the paid-in capital of the
bank is, or is likely to be, impaired as a result of
losses in or depreciation of the assets of the bank, the
Federal home loan bank shall withhold that portion
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of the amount due any shareholder with respect to
any redemption or retirement of any class of stock
which bears the same ratio to the total of such
amount as the amount of the impaired capital bears
to the total amount of capital allocable to such class
of stock.
‘‘(6) POLICIES.—Subject to the requirements of
this section, the board of directors of each Federal
home loan bank shall promptly establish policies, con-
sistent with this Act, governing the capital stock of
such bank and other provisions of this section.’’.
SEC. 178. INVESTMENTS.
Subsection (j) of section 11 of the Federal Home Loan
Bank Act (12 U.S.C. 1431) (as so redesignated by section
174(e) of this subtitle) is amended to read as follows:
‘‘(j) INVESTMENTS.—Each bank shall reduce its invest-
ments to those necessary for liquidity purposes, for safe and
sound operation of the banks, or for housing finance, as ad-
ministered by the Finance Board.’’.
SEC. 179. FEDERAL HOUSING FINANCE BOARD.
Section 2A(b)(1) of the Federal Home Loan Bank Act
(12 U.S.C. 1422(b)(1)) is amended—
(1) by redesignating subparagraphs (A) and (B)
as subparagraphs (B) and (C), respectively;
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(2) by inserting before subparagraph (B) (as so
redesignated by paragraph (1) of this section) the fol-
lowing new subparagraph:
‘‘(A) The Secretary of the Treasury (or the
Secretary of the Treasury’s designee), who shall
serve without additional compensation.’’; and
(3) in subparagraph (C) (as so redesignated by
paragraph (1) of this section) by striking ‘‘Four’’ and
inserting ‘‘3’’.
Subtitle I—Streamlining Antitrust
Review of Bank Acquisitions and
Mergers
SEC. 181. AMENDMENTS TO THE BANK HOLDING COMPANY
ACT OF 1956.
(a) AMENDMENTS TO SECTION 3 TO REQUIRE FILING
OF APPLICATION COPIES WITH ATTORNEY GENERAL.—Sec-
tion 3 of the Bank Holding Company Act of 1956 (12
U.S.C. 1842) is amended—
(1) in subsection (b) by inserting after para-
graph (2) the following new paragraph:
‘‘(3) REQUIREMENT TO FILE INFORMATION WITH
ATTORNEY GENERAL.—Any applicant seeking prior
approval of the Board to engage in an acquisition
transaction under this section must file simulta-
neously with the Attorney General copies of any docu-
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ments regarding the proposed transaction required by
the Board.’’; and
(2) in subsection (c)—
(A) by striking paragraph (1); and
(B) 
by 
redesignating 
paragraphs 
(2)
through (5) as paragraphs (1) through (4), re-
spectively.
(b) AMENDMENTS TO SECTION 11 TO MODIFY JUSTICE
DEPARTMENT NOTIFICATION AND POST-APPROVAL WAIT-
ING PERIOD FOR SECTION 3 TRANSACTIONS.—Section 11
of the Bank Holding Company Act of 1956 (12 U.S.C.
1849) is amended—
(1) in subsection (b)(1)—
(A) by striking ‘‘, if the Board has not re-
ceived any adverse comment from the Attorney
General of the United States relating to competi-
tive factors,’’;
(B) by striking ‘‘as may be prescribed by
the Board with the concurrence of the Attorney
General, but in no event less than 15 calendar
days after the date of approval.’’ and inserting
‘‘as may be prescribed by the Attorney General.’’;
and
(C) by striking the 3d to last sentence and
the penultimate sentence; and
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(5) comply with a lawful order issued in—
(A) a delinquency proceeding commenced by
the State insurance regulator of any licensed
State if there has been a judicial finding of fi-
nancial impairment under paragraph (7); or
(B) a voluntary dissolution proceeding;
(6) comply with any State law regarding decep-
tive, false, or fraudulent acts or practices, except that
if the licensed State seeks an injunction regarding the
conduct described in this paragraph, such injunction
must be obtained from a court of competent jurisdic-
tion as provided in subsection (d);
(7) comply with an injunction issued by a court
of competent jurisdiction, upon a petition by the
State insurance regulator alleging that the redomes-
ticating insurer is in hazardous financial condition
or is financially impaired;
(8) participate in any insurance insolvency
guaranty association on the same basis as any other
insurer licensed in the licensed State; and
(9) require a person acting, or offering to act, as
an insurance licensee for a redomesticated insurer in
the licensed State to obtain a license from that State,
except that such State may not impose any qualifica-