I
106TH CONGRESS
1ST SESSION
H. R. 822
To modernize and improve the Federal Home Loan Bank System, and for
other purposes.
IN THE HOUSE OF REPRESENTATIVES
FEBRUARY 24, 1999
Mr. BAKER (for himself and Mr. KANJORSKI) introduced the following bill;
which was referred to the Committee on Banking and Financial Services
A BILL
To modernize and improve the Federal Home Loan Bank
System, and for other purposes.
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
1999’’.
(b) TABLE OF CONTENTS.—The table of contents for
this Act is as follows:
Sec. 1. Short title; table of contents.
Sec. 2. Definitions.
Sec. 3. Federal Home Loan Banks.
Sec. 4. Savings association membership.
Sec. 5. Advances to members; collateral.
Sec. 6. Eligibility criteria.
Sec. 7. Qualified thrift lender status.
Sec. 8. Federal Home Loan Bank Finance Corporation.
Sec. 9. Management of Banks.
Sec. 10. Powers and duties of Banks.
Sec. 11. Mergers and consolidations of Federal Home Loan Banks.
Sec. 12. Other amendments relating to Bank operation and administration.
Sec. 13. Resolution Funding Corporation.
Sec. 14. Capital structure of Federal Home Loan Banks.
SEC. 2. DEFINITIONS.
Section 2 of the Federal Home Loan Bank Act (12
U.S.C. 1422) is amended—
(1) in paragraph (1), by striking ‘‘term ‘Board’
means’’ and inserting ‘‘terms ‘Finance Board’ and
‘Board’ mean’’;
(2) by striking paragraph (3) and inserting the
following:
‘‘(3) STATE.—The term ‘State’, in addition to
the States of the United States, includes the District
of Columbia, Guam, Puerto Rico, the United States
Virgin Islands, American Samoa, and the Common-
wealth of the Northern Mariana Islands.’’; and
(3) by adding at the end the following new
paragraph:
‘‘(13) COMMUNITY FINANCIAL INSTITUTION.—
‘‘(A) IN GENERAL.—The term ‘community
financial institution’ means a member—
‘‘(i) the deposits of which are insured
under the Federal Deposit Insurance Act;
and
‘‘(ii) that has, as of the date of the
transaction 
at 
issue, 
less 
than
$500,000,000 in average total assets,
based on an average of total assets over
the 3 years preceding that date.
‘‘(B) ADJUSTMENTS.—The $500,000,000
limit referred to in subparagraph (A)(ii) shall
be adjusted annually by the Finance Board,
based on the annual percentage increase, if any,
in the Consumer Price Index for all urban con-
sumers, as published by the Department of
Labor.’’.
SEC. 3. FEDERAL HOME LOAN BANKS.
Section 3 of the Federal Home Loan Bank Act (12
U.S.C. 1423) is amended in the first sentence, by striking
‘‘the continental United States’’ and all that follows
through ‘‘eight’’ and inserting ‘‘the States into not fewer
than 1’’.
SEC. 4. SAVINGS ASSOCIATION MEMBERSHIP.
Section 5(f) of the Home Owners’ Loan Act (12
U.S.C. 1464(f)) is amended to read as follows:
‘‘(f) FEDERAL HOME LOAN BANK MEMBERSHIP.—
On and after January 1, 2000, a Federal savings associa-
tion 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.’’.
SEC. 5. ADVANCES TO MEMBERS; COLLATERAL.
(a) IN GENERAL.—Section 10(a) of the Federal
Home Loan Bank Act (12 U.S.C. 1430(a)) is amended—
(1) by redesignating paragraphs (1) through
(4) as subparagraphs (A) through (D), respectively,
and indenting appropriately;
(2) by striking ‘‘(a) Each’’ and inserting the
following:
‘‘(a) IN GENERAL.—
‘‘(1) ALL ADVANCES.—Each’’;
(3) by striking the second sentence and insert-
ing the following:
‘‘(2) PURPOSES
OF
ADVANCES.—A long-term
advance may only be made for the purposes of—
‘‘(A) providing funds to any member for
residential housing finance; and
‘‘(B) providing funds to any community fi-
nancial institution for small businesses, agricul-
tural, rural development, or low-income commu-
nity development lending.’’;
(4) by striking ‘‘A Bank’’ and inserting the fol-
lowing:
‘‘(3) COLLATERAL.—A Bank’’;
(5) in paragraph (3) (as so designated by para-
graph (4) of this subsection)—
(A) in subparagraph (C) (as so redesig-
nated by paragraph (1) of this subsection) by
striking ‘‘Deposits’’ and inserting ‘‘Cash or de-
posits’’;
(B) in subparagraph (D) (as so redesig-
nated by paragraph (1) of this subsection), by
striking the second sentence; and
(C) by inserting after subparagraph (D)
(as so redesignated by paragraph (1) of this
subsection) the following new subparagraph:
‘‘(E) Secured loans for small business, ag-
riculture, rural development, or low-income
community development, or securities represent-
ing a whole interest in such secured loans, in
the case of any community financial institu-
tion.’’;
(6) in paragraph (5)—
(A) in the second sentence, by striking
‘‘and the Board’’;
(B) in the third sentence, by striking
‘‘Board’’ and inserting ‘‘Federal Home Loan
Bank’’; and
(C) by striking ‘‘(5) Paragraphs (1)
through (4)’’ and inserting the following:
‘‘(4) ADDITIONAL BANK AUTHORITY.—Subpara-
graphs (A) through (E) of paragraph (3)’’; and
(7) by adding at the end the following:
‘‘(5) REVIEW OF CERTAIN COLLATERAL STAND-
ARDS.—The Board may review the collateral stand-
ards applicable to each Federal Home Loan Bank
for the classes of collateral described in paragraph
(3)(E), and may, if necessary for safety and sound-
ness purposes, require an increase in the collateral
standards for any or all of those classes of collateral.
‘‘(6) DEFINITIONS.—For purposes of this
subsection—
‘‘(A) the terms ‘small business’, ‘agri-
culture’, ‘rural development’, and ‘low-income
community development’ shall have the mean-
ings given those terms by rule or regulation of
the Finance Board; and
‘‘(B) the term ‘loans for small business’
may include a loan guaranteed by the Small
Business Administration under section 7(a) of
the Small Business Act.’’.
(b) CLERICAL AMENDMENT.—The section heading
for section 10 of the Federal Home Loan Bank Act (12
U.S.C. 1430) is amended to read as follows:
‘‘SEC. 10. ADVANCES TO MEMBERS.’’.
SEC. 6. ELIGIBILITY CRITERIA.
Section 4(a) of the Federal Home Loan Bank Act
(12 U.S.C. 1424(a)) is amended—
(1) in paragraph (2)(A), by inserting, ‘‘(other
than a community financial institution)’’ after ‘‘in-
stitution’’; and
(2) by adding at the end the following new
paragraph:
‘‘(3) LIMITED EXEMPTION FOR COMMUNITY FI-
NANCIAL INSTITUTIONS.—A community financial in-
stitution that otherwise meets the requirements of
paragraph (2) may become a member without regard
to the percentage of its total assets that is rep-
resented by residential mortgage loans, as described
in subparagraph (A) of paragraph (2).’’.
SEC. 7. QUALIFIED THRIFT LENDER STATUS.
(a) FEDERAL HOME LOAN BANK ACT.—Section
10(e) of the Federal Home Loan Bank Act (12 U.S.C.
1430(e)), as added by section 105 of Public Law 100–
86 and subsequently amended (relating to qualified thrift
lender status) is amended—
(1) by striking paragraphs (1) and (3);
(2) in paragraph (2), by striking the first sen-
tence;
(3) in paragraph (4), by striking ‘‘Paragraphs
(1) and (2) of this subsection do not’’ and inserting
‘‘Paragraph (1) does not’’;
(4) in paragraph (5), by striking subparagraph
(C); and
(5) by redesignating paragraphs (2), (4), and
(5) as paragraphs (1), (2), and (3), respectively.
(b) 
HOME
OWNERS’ 
LOAN
ACT.—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
by redesignating subclause (IV) as subclause (III);
and
(2) by amending clause (ii) to read as follows:
‘‘(ii) ADDITIONAL RESTRICTIONS EF-
FECTIVE
AFTER
THREE
YEARS.—Begin-
ning 3 years after the date on which a sav-
ings association should have become or
ceases to be a qualified thrift lender, the
savings association shall not retain any in-
vestment (including an investment in any
subsidiary) or engage, directly or indi-
rectly, in any activity unless that invest-
ment or activity would be permissible for
the savings association if it were a national
bank, and is also permissible for the sav-
ings association as a savings association.’’.
SEC. 8. FEDERAL HOME LOAN BANK FINANCE CORPORA-
TION.
(a) ESTABLISHMENT OF FINANCE CORPORATION.—
The Federal Home Loan Bank Act (12 U.S.C. 1421 et
seq.) is amended by inserting after section 4 the following
new section:
‘‘SEC. 5. THE FEDERAL HOME LOAN BANK FINANCE COR-
PORATION.
‘‘(a) ESTABLISHMENT.—
‘‘(1) IN
GENERAL.—There is established the
Federal Home Loan Bank Finance Corporation
(hereafter in this section referred to as the ‘Corpora-
tion’), which shall be a federally chartered instru-
mentality of the United States.
‘‘(2) PURPOSES.—The purposes of the Corpora-
tion shall be—
‘‘(A) to issue and service the notes, bonds,
debentures, and other debt obligations of the
Federal Home Loan Banks in accordance with
this Act; and
‘‘(B) to perform or cause to be performed
all other necessary and proper functions in rela-
tion to the issuance and servicing of obligations
referred to in subparagraph (A), as fiscal agent
on behalf of the Federal Home Loan Banks,
and any functions performed by the Office of
Finance on behalf of the Financing Corporation
(established pursuant to section 21) and the
Resolution Funding Corporation (established
pursuant to section 21B) before the date of en-
actment of the Federal Home Loan Bank Sys-
tem Modernization Act of 1999.
‘‘(b) POWERS.—Subject to the other provisions of
this Act and to such regulations as the Board may pre-
scribe, the Corporation shall have the power—
‘‘(1) to issue voting capital stock to the Federal
Home Loan Banks;
‘‘(2) to issue and service Federal Home Loan
Bank notes, bonds, debentures, and other obligations
pursuant to section 11 on behalf of the Federal
Home Loan Banks;
‘‘(3) to determine the amount, maturities, rate
of interest, terms, and other conditions of Federal
Home Loan Bank notes, bonds, debentures, and
other obligations;
‘‘(4) to adopt, alter, and use a corporate seal;
‘‘(5) to make contracts;
‘‘(6) to sue and be sued, by and through its
own attorneys, in the corporate capacity of the Cor-
poration, and to complain and defend in any action
brought by or against the Corporation in any court
of competent jurisdiction;
‘‘(7) to determine the terms and conditions
under which the Corporation shall indemnify its di-
rectors, officers, employees, and agents; and
‘‘(8) to exercise such incidental powers not in-
consistent with the provisions of this Act as are nec-
essary or advisable to carry out 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 Bank
shall annually elect 1 individual who, as of the time
of the election, is an officer or director of the 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 this Act.
‘‘(4) TERMS.—
‘‘(A) IN GENERAL.—Each member of the
board of directors of the Corporation 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 that elected that
member.
‘‘(B) INTERIM
APPOINTMENTS.—Any di-
rector elected to fill a vacancy on the board of
directors of the Corporation occurring before
the expiration of the term for which the prede-
cessor of that director was elected shall be
elected only for the remainder of the unexpired
term.
‘‘(C) CONTINUATION
OF
SERVICE.—Each
director may continue to serve after the expira-
tion of the term to which that 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 this section, including the
power—
‘‘(A) to review, adopt, and monitor the an-
nual budget of the Corporation;
‘‘(B) to set policies for the Corporation;
‘‘(C) to impose assessments on the Federal
Home Loan Banks to fund the expenditures of
the Corporation; and
‘‘(D) to appoint, establish the duties of,
and compensate the employees of the Corpora-
tion, and to 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 performing
the business of the Corporation.
‘‘(7) QUORUM
REQUIREMENT.—No business
may be conducted by the board of directors unless
a quorum of the members of the board of directors
is present in person or by telephone, or through ac-
tion taken by unanimous written consent executed
by the members of the board of directors.
‘‘(8) APPOINTMENT OF OFFICERS AND ADOP-
TIONS OF RULES OF PROCEDURE.—The board of di-
rectors shall—
‘‘(A) select, from among the members of
the board, a Chairperson and a Vice Chair-
person; and
‘‘(B) adopt bylaws and other rules of pro-
cedure for actions before the board of directors,
including the establishment of 1 or more com-
mittees to take action on behalf of the board of
directors and the delegation of powers of the
board of directors to any such committee or of-
ficer of the Corporation.
‘‘(d) STOCK.—
‘‘(1) ISSUANCE OF EQUAL AMOUNT TO EACH
BANK.—The Corporation shall issue to each Bank
100 shares of voting capital stock, with a par value
of $100 per share.
‘‘(2) RESTRICTED
TRANSFERABILITY.—Stock
issued under paragraph (1) may be owned and held
only by the Federal Home Loan Banks.
‘‘(3) MERGER.—Stock issued under paragraph
(1) shall be redeemable or transferable at par in the
event of a merger or consolidation pursuant to sec-
tion 26.
‘‘(4) 
PAYMENT
UPON
ISSUANCE.—Upon
issuance 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.
‘‘(5) DISTRIBUTION REQUIREMENT.—The total
amount of outstanding stock of the Corporation
shall, at all times, be distributed equally among all
of the Federal Home Loan Banks, and the board of
directors of the Corporation shall adopt procedures
from time to time to implement this paragraph.
‘‘(e) STATUS.—Except to the extent that it would
conflict with any provision of this section, or that the con-
text of this Act otherwise requires, 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.’’.
(b) TRANSFER OF FUNCTIONS.—The functions of the
Office of Finance of the Federal Home Loan Banks (here-
after in this section referred to as the ‘‘Office of Finance’’)
shall be transferred to the Federal Home Loan Bank Fi-
nance Corporation established under section 5 of the Fed-
eral Home Loan Bank Act, as added by this section, (here-
after in this section referred to as the ‘‘Corporation’’) be-
fore the end of the 6-month period beginning on the date
of enactment of this Act.
(c) SAVINGS PROVISION.—The transfer of functions
from the Office of Finance to the Corporation in accord-
ance with this section shall not affect the validity of any
right, duty, contract, or obligation of the Office of Finance
(with respect to any person or entity) that existed on the
day before the effective date of the transfer of functions.
(d) TECHNICAL AMENDMENTS.—The Federal Home
Loan Bank Act (12 U.S.C. 1421 et seq.) is amended—
(1) in section 2B(a)(2), by striking ‘‘or joint of-
fice’’ each place that term appears;
(2) in section 2B(b)(1)—
(A) in paragraph (1), by striking ‘‘em-
ployee,’’ and all that follows through ‘‘11(b)’’
and inserting ‘‘employee or administrative unit
of any Bank of the Federal Home Loan Bank
System.’’;
(B) by striking paragraph (2); and
(C) by striking ‘‘(1) BOARD STAFF.—’’;
(3) in section 21(b)(1), by striking subpara-
graph (A) and inserting the following:
‘‘(A) The Chairperson of the Federal
Home Loan Bank Finance Corporation estab-
lished under section 5.’’; and
(4) in section 21B(c)(1), by striking subpara-
graph (A) and inserting the following:
‘‘(A) The Chairperson of the Federal
Home Loan Bank Finance Corporation estab-
lished under section 5.’’.
SEC. 9. MANAGEMENT OF BANKS.
(a) BOARD OF DIRECTORS.—Section 7 of the Federal
Home Loan Bank Act (12 U.S.C. 1427) is amended—
(1) in subsection (a)—
(A) by striking ‘‘(a) The management’’
and inserting the following:
‘‘(a) BOARD OF DIRECTORS.—
‘‘(1) NUMBER AND CLASSES OF DIRECTORS.—
The management’’; and
(B) by adding at the end the following:
‘‘(2) APPROVAL
OF
ALTERNATIVE
STRUC-
TURE.—Subject to the approval of the Finance
Board, a Federal Home Loan Bank may include as
part of its capital structure plan submitted under
section 6, or any modification thereto, provisions es-
tablishing a structure for its elective and appointive
directors other than as provided for in this section.’’;
and
(2) in subsection (d)—
(A) by striking ‘‘(d) The term’’ and insert-
ing the following:
‘‘(d) TERMS OF OFFICE.—The term’’; and
(B) by striking ‘‘shall be two years’’.
(b) COMPENSATION.—Section 7(i) of the Federal
Home Loan Bank Act (12 U.S.C. 1427(i)) is amended by
striking ‘‘, subject to the approval of the board’’.
(c) OBLIGATIONS AS LAWFUL INVESTMENTS.—Sec-
tion 15 of the Federal Home Loan Bank Act (12 U.S.C.
1435) is amended by striking ‘‘with the approval of the
Board’’.
SEC. 10. POWERS AND DUTIES OF BANKS.
(a) BONDS AND DEBENTURES.—Section 11(a) of the
Federal Home Loan Bank Act (12 U.S.C. 1431(a)) is
amended—
(1) by inserting ‘‘through the Federal Home
Loan Bank Finance Corporation’’ after ‘‘to issue’’;
and
(2) by striking ‘‘Board may approve’’ and in-
serting ‘‘board of directors of the Bank may ap-
prove’’.
(b) ISSUANCE OF CONSOLIDATED OBLIGATIONS.—
Section 11(b) 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
CONSOLIDATED OBLIGATIONS.—
‘‘(1) IN GENERAL.—The Federal Home Loan
Bank Finance Corporation may issue consolidated
Federal Home Loan Bank bonds and other consoli-
dated obligations on behalf of the Banks.
‘‘(2) JOINT AND SEVERAL OBLIGATION; TERMS
AND CONDITIONS.—Consolidated obligations issued
by the Federal Home Loan Bank Finance Corpora-
tion under paragraph (1) shall—
‘‘(A) be the joint and several obligations of
all of the Federal Home Loan Banks; and
‘‘(B) shall be issued upon such terms and
conditions as shall be established by the Federal
Home Loan Bank Finance Corporation, subject
to such rules and regulations as the Finance
Board may prescribe.’’.
(c) REDISCOUNTING OF NOTES.—Section 11(f) of the
Federal Home Loan Bank Act (12 U.S.C. 1431(f)) is
amended by striking ‘‘permit, to require,’’ and inserting
‘‘permit or to require’’.
(d) TREASURY PURCHASE OF BANK OBLIGATIONS.—
Section 11(i) of the Federal Home Loan Bank Act (12
U.S.C. 1431(i)) is amended by striking the second undes-
ignated paragraph.
(e) CONFORMING AMENDMENTS.—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.
SEC. 11. MERGERS AND CONSOLIDATIONS OF FEDERAL
HOME LOAN BANKS.
Section 26 of the Federal Home Loan Bank Act (12
U.S.C. 1446) is amended to read as follows:
‘‘SEC. 26. MERGERS AND CONSOLIDATIONS.
‘‘(a) IN GENERAL.—
‘‘(1) IN GENERAL.—Notwithstanding section 7,
any Bank resulting from a merger, combination, or
consolidation pursuant to this section may have,
with the approval of the Finance Board, elected and
appointed directors in a number that is equal to or
less than the total number of the directors of all of
the Banks that participated in the transaction (as
determined immediately before the transaction).
‘‘(2) FULFILLMENT OF UNEXPIRED TERMS.—
Consistent with paragraph (1), a director of any
Bank involved in a transaction referred to in para-
graph (1) may continue to serve on the board of di-
rectors of the resulting Bank during the unexpired
portion of that director’s current term, if such con-
tinuation of service is provided for under the terms
of the merger, combination, or consolidation trans-
action, and whether or not that director remains
qualified after the transaction to fill a directorship.
‘‘(d) NUMBER OF APPOINTED DIRECTORS OF RE-
SULTING BANK.—The number of appointed directors on
the board of directors of a Bank resulting from a merger,
combination, or consolidation pursuant to this section
shall not exceed three-fourths the number of elected direc-
tors on the board of directors of that Bank.
‘‘(e) ADJUSTMENT OF DISTRICT BOUNDARIES.—Not
later than 30 days after consummation of any merger,
combination, or consolidation of 2 or more Federal Home
Loan Banks, the Finance Board shall adjust the districts
established under section 3 to reflect such merger, com-
bination, or consolidation.
‘‘(f) SUBSIDIARIES; HOLDING COMPANIES.—
‘‘(1) AUTHORITY
TO
ESTABLISH.—Any 1 or
more Federal Home Loan Banks may establish a
subsidiary or holding company, subject to the ap-
proval of the Finance Board.
‘‘(2) LIMITATIONS.—Any subsidiary or holding
company established under this subsection—
‘‘(A) shall be subject to supervision by the
Finance Board;
‘‘(B) shall be restricted to engaging only in
those activities permitted for Federal Home
Loan Banks under this Act; and
‘‘(C) may only transact business with
members of the Federal Home Loan Banks
that established the subsidiary or holding com-
pany.
‘‘(3) PURPOSES.—A Federal Home Loan Bank
may use a subsidiary or holding company established
under this subsection to perform administrative and
operational functions.’’.
SEC. 12. OTHER AMENDMENTS RELATING TO BANK OPER-
ATION AND ADMINISTRATION.
(a) REPEAL OF SECTIONS 22A AND 27.—The Fed-
eral 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.—Section 12 of the Federal Home
Loan Bank Act (12 U.S.C. 1432) is amended—
(1) in subsection (a)—
(A) by striking ‘‘, but, except’’ and all that
follows through ‘‘ten years’’;
(B) by striking ‘‘, subject to the approval
of the Board’’ each place that term appears;
(C) by striking ‘‘and, by its Board of direc-
tors,’’ and all that follows through ‘‘agent of
such bank,’’ and inserting ‘‘and, by the board
of directors of the Bank, to prescribe, amend,
and repeal by-laws governing the manner in
which its affairs may be administered, consist-
ent with applicable laws and regulations, as ad-
ministered by the Finance Board. No officer,
employee, attorney, or agent of a Federal Home
Loan Bank’’; and
(D) by striking ‘‘Board of directors’’ each
place that term appears and inserting ‘‘board of
directors’’; and
(2) in subsection (b), by striking ‘‘loans banks’’
and inserting ‘‘loan banks’’.
(c) POWERS AND DUTIES OF FEDERAL HOUSING FI-
NANCE BOARD.—
(1) ISSUANCE OF NOTICES OF VIOLATIONS.—
Section 2B(a) of the Federal Home Loan Bank Act
(12 U.S.C. 1422b(a)) is amended by adding at the
end the following new paragraph:
‘‘(5) To issue and serve a notice of charges
upon a Federal Home Loan Bank or upon any exec-
utive officer or director of a Federal Home Loan
Bank if, in the determination of the Finance Board,
the Bank, executive officer, or director is engaging
or has engaged in, or the Finance Board has reason-
able cause to believe that the Bank, executive officer,
or director is about to engage in, any conduct that
violates any provision of this Act or any law, order,
rule, or regulation or any condition imposed in writ-
ing by the Finance Board in connection with the
granting of any application or other request by the
Bank, or any written agreement entered into by the
Bank with the agency, in accordance with the proce-
dures provided in section 1371(c) of the Federal
Housing Enterprises Financial Safety and Sound-
ness Act of 1992. Such authority includes the same
authority to take affirmative action to correct condi-
tions resulting from violations or practices or to
limit activities of a Bank or any executive officer or
director of a Bank as appropriate Federal banking
agencies have to take with respect to insured deposi-
tory institutions under paragraphs (6) and (7) of
section 8(b) of the Federal Deposit Insurance Act,
and to have all other powers, rights, and duties to
enforce this Act with respect to the Federal Home
Loan Banks and their executive officers and direc-
tors as the Office of Federal Housing Enterprise
Oversight has to enforce the Federal Housing Enter-
prises Financial Safety and Soundness Act of 1992,
the Federal National Mortgage Association Charter
Act, or the Federal Home Loan Mortgage Corpora-
tion Act with respect to the Federal housing enter-
prises under the Federal Housing Enterprises Fi-
nancial Safety and Soundness Act of 1992.
‘‘(6) To sue and be sued, by and through its
own attorneys.’’.
(2) TECHNICAL AMENDMENT.—Section 111 of
Public Law 93–495 (12 U.S.C. 250) is amended by
inserting ‘‘Federal Housing Finance Board,’’ after
‘‘Director of the Office of Thrift Supervision,’’.
(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 ‘‘,
subject to the approval of the Board,’’.
(2) SECTION
10.—Section 10 of the Federal
Home Loan Bank Act (12 U.S.C. 1430) is
amended—
(A) in subsection (c)—
(i) in the first sentence, by striking
‘‘Board’’ and inserting ‘‘Federal Home
Loan Bank’’; and
(ii) by striking the second sentence;
(B) in subsection (d)—
(i) in the first sentence, by striking
‘‘and the approval of the Board’’; and
(ii) by striking ‘‘Subject to the ap-
proval of the Board, any’’ and inserting
‘‘Any’’; and
(C) in subsection (j)—
(i) in paragraph (1)—
(I) by striking ‘‘to subsidize the
interest rate on advances’’ and insert-
ing ‘‘to provide subsidies, including
subsidized 
interest 
rates 
on 
ad-
vances’’;
(II) by striking ‘‘Pursuant’’ and
inserting the following:
‘‘(A) ESTABLISHMENT.—Pursuant’’; and
(III) by adding at the end the
following new subparagraph:
‘‘(B) NONDELEGATION OF APPROVAL AU-
THORITY.—Subject to such regulations as the
Finance Board may prescribe, the board of di-
rectors of each Federal Home Loan Bank may
approve or disapprove requests from members
for Affordable Housing Program subsidies, and
may not delegate such authority.’’;
(ii) in each of paragraphs (3), (4),
(9)(B), (9)(C), (11), and (12), by striking
‘‘advances’’ each place that term appears
and inserting ‘‘subsidies’’;
(iii) in each of paragraphs (2), (5),
(9)(A), and (9)(F), by striking ‘‘subsidized
advances’’ each place that term appears
and inserting ‘‘subsidies, including sub-
sidized advances,’’;
(iv) in paragraph (9)(F), by striking
‘‘such advances’’ and inserting ‘‘such sub-
sidies’’;
(v) in the paragraph heading for para-
graph (3), by striking ‘‘ADVANCES’’ and in-
serting ‘‘SUBSIDIES’’;
(vi) in paragraph (2), by striking sub-
paragraph (B) and inserting the following:
‘‘(B) finance the purchase, construction, or
rehabilitation of rental housing if, for a period
of not less than 15 years, either—
‘‘(i) 20 percent or more of the units
in such housing are occupied by and af-
fordable for households whose income is 50
percent or less of area median income; or
‘‘(ii) 40 percent or more of the units
in such housing are occupied by and af-
fordable for households whose income is 60
percent or less of area median income.’’;
(vii) by striking paragraph (5) and in-
serting the following:
‘‘(5) CONTRIBUTION TO PROGRAM.—Each Fed-
eral Home Loan Bank shall annually contribute 10
percent of the net income of that Bank during the
preceding year, or such prorated sums as may be re-
quired to assure that the aggregate contribution of
the Banks shall not be less than $100,000,000 for
each such year, to support subsidies, including sub-
sidized advances, through the Affordable Housing
Program.’’;
(viii) in paragraph (11)—
(I) by inserting ‘‘agencies and’’
after ‘‘15 persons drawn from’’; and
(I) by inserting after the first
sentence, the following: ‘‘Representa-
tives of no one group shall constitute
an undue proportion of the member-
ship of the Advisory Council.’’; and
(ix) in paragraph (13)—
(I) by striking ‘‘subsection—’’
and inserting ‘‘subsection, the follow-
ing definitions shall apply:’’; and
(II) by striking subparagraph
(D) and inserting the following:
‘‘(D) 
AFFORDABLE.—For 
purposes 
of
paragraph (2)(B), the term ‘affordable’ means
that the rent with respect to a unit does not ex-
ceed 30 percent of the income limitation under
paragraph (2)(B) applicable to occupants of
such unit.’’.
(e) SECTION 16.—Section 16(a) of the Federal Home
Loan Bank Act (12 U.S.C. 1436(a)) is amended—
(1) in the third sentence—
(A) by striking ‘‘net earnings’’ and insert-
ing ‘‘previously retained earnings or current net
earnings’’; and
(B) by striking ‘‘, and then only with the
approval of the Federal Housing Finance
Board’’; and
(2) by striking the fourth sentence.
(f) SECTION 18.—Section 18(b) of the Federal Home
Loan Bank Act (12 U.S.C. 1438(b)) is amended by strik-
ing paragraph (4).
SEC. 13. RESOLUTION FUNDING CORPORATION.
(a) IN GENERAL.—Section 21B(f)(2)(C) of the Fed-
eral 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 that
the amounts available pursuant to sub-
paragraphs (A) and (B) are insufficient to
cover the amount of interest payments,
each Federal Home Loan Bank shall pay
to the Funding Corporation in each cal-
endar year, 20.75 percent of the net earn-
ings of that Bank (after deducting ex-
penses relating to section 10(j) and operat-
ing expenses).
‘‘(ii) ANNUAL DETERMINATION.—The
Board annually shall determine the extent
to which the value of the aggregate
amounts paid by the Federal Home Loan
Banks exceeds or falls short of the value of
an annuity of $300,000,000 per year that
commences on the issuance date and ends
on the final scheduled maturity date of the
obligations, and shall select appropriate
present value factors for making such de-
terminations.
‘‘(iii) 
PAYMENT
TERM
ALTER-
ATIONS.—The Board shall extend or short-
en the term of the payment obligations of
a Federal Home Loan Bank under this
subparagraph as necessary to ensure that
the value of all payments made by the
Banks is equivalent to the value of an an-
nuity referred to in clause (ii).
‘‘(iv) TERM
BEYOND
MATURITY.—If
the Board extends the term of payments
beyond the final scheduled maturity date
for the obligations, each Federal Home
Loan Bank shall continue to pay 20.75
percent of its net earnings (after deducting
expenses relating to section 10(j) and oper-
ating expenses) to the Treasury of the
United States until the value of all such
payments by the Federal Home Loan
Banks is equivalent to the value of an an-
nuity referred to in clause (ii). In the final
year in which the Federal Home Loan
Banks are required to make any payment
to the Treasury under this subparagraph,
if the dollar amount represented by 20.75
percent of the net earnings of the Federal
Home Loan Banks exceeds the remaining
obligation of the Banks to the Treasury,
the Finance Board shall reduce the per-
centage pro rata to a level sufficient to pay
the remaining obligation.’’.
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall become effective on January 1, 2000.
Payments made by a Federal Home Loan Bank before
that effective date shall be counted toward the total obliga-
tion of that Bank under section 21B(f)(2)(C) of the Fed-
eral Home Loan Bank Act, as amended by this section.
SEC. 14. CAPITAL STRUCTURE OF FEDERAL HOME LOAN
BANKS.
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) REGULATIONS.—
‘‘(1) CAPITAL STANDARDS.—Not later than 1
year after the date of enactment of the Federal
Home Loan Bank System Modernization Act of
1999, the Finance Board shall issue regulations pre-
scribing uniform capital standards applicable to each
Federal Home Loan Bank, which shall require each
such Bank to meet—
‘‘(A) the leverage limitation requirement
specified in paragraph (2); and
‘‘(B) the risk-based capital requirements,
in accordance with paragraph (3).
‘‘(2) MINIMUM
LEVERAGE
LIMITATION
RE-
QUIREMENT.—Each Federal Home Loan Bank shall
maintain total capital in an amount equal to not less
than 2.5 percent of the total assets of that Bank.
‘‘(3) RISK-BASED CAPITAL STANDARDS.—
‘‘(A) IN GENERAL.—Each Federal Home
Loan Bank shall maintain permanent capital in
an amount that is sufficient, as determined in
accordance with the regulations of the Finance
Board, to meet—
‘‘(i) the credit risk to which the Fed-
eral Home Loan Bank is subject; and
‘‘(ii) the market risk, including inter-
est rate risk, to which the Federal Home
Loan Bank is subject, based on a stress
test established by the Finance Board that
rigorously tests for changes in market vari-
ables, including changes in interest rates,
rate volatility, and changes in the shape of
the yield curve.
‘‘(B) TREATMENT
OF
CERTAIN
OBLIGA-
TIONS.—For purposes of subparagraph (A), ob-
ligations issued or guaranteed by the United
States, obligations issued by any agency or in-
strumentality of the United States and for
which the timely repayment of principal and in-
terest is explicitly guaranteed by the full faith
and credit of the United States, and advances
made pursuant to section 10 or 10b that are se-
cured by eligible collateral having a market
value (in accordance with the regulations adopt-
ed by the Finance Board) in excess of the bal-
ance due on such advances shall be deemed to
present no credit risk.
‘‘(C) CONSIDERATION
OF
OTHER
RISK-
BASED STANDARDS.—In establishing the risk-
based standard under subparagraph (A)(ii), the
Finance Board shall take due consideration of
any risk-based capital test established pursuant
to section 1361 of the Federal Housing Enter-
prises Financial Safety and Soundness Act of
1992 (12 U.S.C. 4611) for the enterprises (as
defined in that Act), with such modifications as
the Finance Board determines to be appro-
priate to reflect differences in operations be-
tween the Federal Home Loan Banks and those
enterprises.
‘‘(4) OTHER
REGULATORY
REQUIREMENTS.—
The regulations issued by the Finance Board under
paragraph (1) shall—
‘‘(A) permit each Federal Home Loan
Bank to issue, with such rights, terms, and
preferences, not inconsistent with this Act and
the regulations issued hereunder, as the board
of directors of that Bank may approve, any 1
or more of—
‘‘(i) Class A stock, which shall be re-
deemable in cash and at par 6 months fol-
lowing submission by a member of a writ-
ten notice of its intent to redeem such
shares;
‘‘(ii) Class B stock, which shall be re-
deemable in cash and at par 5 years fol-
lowing submission by a member of a writ-
ten notice of its intent to redeem such
shares;
‘‘(iii) Class C stock, which shall be
nonredeemable; and
‘‘(iv) any other class of stock author-
ized by the board of directors of the Fed-
eral Home Loan Bank and approved by
the Finance Board, through such proce-
dures as the Finance Board may prescribe,
which, if nonredeemable, may be des-
ignated as permanent capital;
‘‘(B) provide that the stock of a Federal
Home Loan Bank may be issued to and held by
only members of the Bank, and that a Bank
may not issue any stock other than as provided
in this section;
‘‘(C) prescribe the manner in which stock
of a Federal Home Loan Bank may be sold,
transferred, redeemed, or repurchased; and
‘‘(D) provide the manner of disposition of
outstanding stock held by, and the liquidation
of any claims of the Federal Home Loan Bank
against, an institution that ceases to be a mem-
ber of the Bank, through merger or otherwise,
or that provides notice of intention to withdraw
from membership in the Bank.
‘‘(5) DEFINITIONS OF CAPITAL.—For purposes
of determining compliance with the capital standards
established under this subsection—
‘‘(A) permanent capital of a Federal Home
Loan Bank shall include (as determined in ac-
cordance with generally accepted accounting
principles)—
‘‘(i) the amounts paid for the Class C
stock and any other nonredeemable stock
approved by the Finance Board;
‘‘(ii) the amounts paid for the Class B
stock, in an amount not to exceed 1 per-
cent of the total assets of the Bank; and
‘‘(iii) the retained earnings of the
Bank; and
‘‘(B) total capital of a Federal Home Loan
Bank shall include—
‘‘(i) permanent capital;
‘‘(ii) the amounts paid for the Class A
stock, Class B stock (excluding any
amount treated as permanent capital
under subparagraph (5)(A)(ii)), or any
other class of redeemable stock approved
by the Finance Board;
‘‘(iii) consistent with generally accept-
ed accounting principles, and subject to the
regulation of the Finance Board, a general
allowance for losses, which may not include
any reserves or allowances made or held
against specific assets; and
‘‘(iv) any other amounts from sources
available to absorb losses incurred by the
Bank that the Finance Board determines
by regulation to be appropriate to include
in determining total capital.
‘‘(6) TRANSITION PERIOD.—Notwithstand-
ing any other provisions of this Act, the re-
quirements relating to purchase and retention
of capital stock of a Federal Home Loan Bank
by any member thereof in effect on the day be-
fore the date of enactment of the Federal Home
Loan Bank System Modernization Act of 1999,
shall continue in effect with respect to each
Federal Home Loan Bank until the regulations
required by this subsection have taken effect
and the capital structure plan required by sub-
section (b) has been approved by the Finance
Board and implemented by such Bank.
‘‘(b) CAPITAL STRUCTURE PLAN.—
‘‘(1) APPROVAL OF PLANS.—Not later than 270
days after the date of publication by the Finance
Board of final regulations in accordance with sub-
section (a), 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 that—
‘‘(A) the board of directors determines is
best suited for the condition and operation of
the Bank and the interests of the members of
the Bank;
‘‘(B) meets the requirements of subsection
(c); and
‘‘(C) meets the minimum capital standards
and requirements established under subsection
(a) and other regulations prescribed by the Fi-
nance Board.
‘‘(2) 
APPROVAL
OF
MODIFICATIONS.—The
board of directors of a Federal Home Loan Bank
shall submit to the Finance Board for approval any
modifications that the Bank proposes to make to an
approved capital structure plan.
‘‘(c) CONTENTS
OF PLAN.—The capital structure
plan of each Federal Home Loan Bank shall contain pro-
visions addressing each of the following:
‘‘(1) MINIMUM INVESTMENT.—
‘‘(A) IN GENERAL.—Each capital structure
plan of a Federal Home Loan Bank shall re-
quire each member of the Bank to maintain a
minimum investment in the stock of the Bank,
the amount of which shall be determined in a
manner to be prescribed by the board of direc-
tors of each Bank and to be included as part
of the plan.
‘‘(B) INVESTMENT ALTERNATIVES.—
‘‘(i) IN GENERAL.—In establishing the
minimum investment required for each
member under subparagraph (A), a Fed-
eral Home Loan Bank may, in its discre-
tion, include any 1 or more of the require-
ments referred to in clause (ii), or any
other provisions approved by the Finance
Board.
‘‘(ii) AUTHORIZED REQUIREMENTS.—
A requirement is referred to in this clause
if it is a requirement for—
‘‘(I) a stock purchase based on a
percentage of the total assets of a
member (not to exceed the lesser of
0.3 percent of the total assets of the
member or $300,000,000); or
‘‘(II) a stock purchase based on a
percentage of the outstanding ad-
vances from the Bank to the member
(not to exceed 5 percent of the total
outstanding advances of the member).
‘‘(C) MINIMUM
AMOUNT.—Each capital
structure plan of a Federal Home Loan Bank
shall require that the minimum stock invest-
ment established for members shall be set at a
level that is sufficient for the Bank to meet the
minimum capital requirements established by
the Finance Board under subsection (a).
‘‘(D) ADJUSTMENTS
TO
MINIMUM
RE-
QUIRED
INVESTMENT.—The capital structure
plan of each Federal Home Loan Bank shall
impose a continuing obligation on the board of
directors of the Bank to review and adjust the
minimum investment required of each member
of that Bank, as necessary to ensure that the
Bank remains in compliance with applicable
minimum capital levels established by the Fi-
nance Board, and shall require each member to
comply promptly with any adjustments to the
required minimum investment.
‘‘(2) TRANSITION RULE.—
‘‘(A) IN GENERAL.—The capital structure
plan of each Federal Home Loan Bank shall
specify the date on which it shall take effect,
and may provide for a transition period of not
longer than 3 years to allow the Bank to come
into compliance with the capital requirements
prescribed under subsection (a), and to allow
any institution that was a member of the Bank
on the date of enactment of the Federal Home
Loan Bank System Modernization Act of 1999,
to come into compliance with the minimum in-
vestment required pursuant to the plan.
structure plan provisions establishing terms,
rights, and preferences, including minimum in-
vestment, dividends, voting, and liquidation
preferences of each class of stock issued by the
Bank, consistent with Finance Board regula-
tions and market requirements.
‘‘(C) REDUCED MINIMUM INVESTMENT.—
The capital structure plan of a Federal Home
Loan Bank may provide for a reduced mini-
mum stock investment for any member of that
Bank that elects to purchase Class B, Class C,
or any other class of nonredeemable stock, in a
manner that is consistent with meeting the min-
imum capital requirements of the Bank, as es-
tablished by the Finance Board.
‘‘(D) LIQUIDATION OF CLAIMS.—The cap-
ital structure plan of a Federal Home Loan
Bank shall provide for the liquidation in an or-
derly manner, as determined by the Bank, of
any claim of that Bank against a member, in-
cluding claims for any applicable prepayment
fees or penalties resulting from prepayment of
advances prior to stated maturity.
‘‘(5) LIMITED TRANSFERABILITY OF STOCK.—
The capital structure plan of a Federal Home Loan
Bank shall—
‘‘(A) provide that—
‘‘(i) any stock issued by that Bank
shall be available only to, held only by, and
tradable only among members of that
Bank and between that Bank and its mem-
bers; and
‘‘(ii) a Bank has no obligation to re-
purchase its outstanding Class C stock but
may do so, provided it is consistent with
Finance Board regulations and is at a
price that is mutually agreeable to the
Bank and the member; and
‘‘(B) establish standards, criteria, and re-
quirements for the issuance, purchase, transfer,
retirement, and redemption of stock issued by
that Bank.
‘‘(6) BANK REVIEW OF PLAN.—Before filing a
capital structure plan with the Finance Board, each
Federal Home Loan Bank shall conduct a review of
the plan by—
‘‘(A) an independent certified public ac-
countant, to ensure, to the extent possible, that
implementation of the plan would not result in
any write-down of the redeemable Bank stock
investment of its members; and
‘‘(B) at least 1 major credit rating agency,
to determine, to the extent possible, whether
implementation of the plan would have any ma-
terial effect on the credit ratings of the Bank.
‘‘(d) TERMINATION OF MEMBERSHIP.—
‘‘(1) VOLUNTARY WITHDRAWAL.—Any member
may withdraw from a Federal Home Loan Bank by
providing written notice to the Bank of its intent to
do so. The applicable stock redemption notice peri-
ods shall commence upon receipt of the notice by the
Bank. Upon the expiration of the applicable notice
period for each class of redeemable stock, the mem-
ber may surrender such stock to the Bank, and shall
be entitled to receive in cash the par value of the
stock. During the applicable notice periods, the
member shall be entitled to dividends and other
membership rights commensurate with continuing
stock ownership.
‘‘(2) INVOLUNTARY WITHDRAWAL.—
‘‘(A) IN GENERAL.—The board of directors
of a Federal Home Loan Bank may terminate
the membership of any institution if, subject to
Finance 
Board 
regulations, 
it 
determines
that—
‘‘(i) the member has failed to comply
with a provision of this Act or any regula-
tion prescribed under this Act; or
‘‘(ii) the member has been determined
to be insolvent, or otherwise subject to the
appointment of a conservator, receiver, or
other legal custodian, by a State or Fed-
eral authority with regulatory and super-
visory responsibility for the member.
‘‘(B) STOCK DISPOSITION.—An institution,
the membership of which is terminated in ac-
cordance with subparagraph (A)—
‘‘(i) shall surrender redeemable stock
to the Federal Home Loan Bank, and shall
receive in cash the par value of the stock,
upon the expiration of the applicable notice
period under subsection (a)(4)(A);
‘‘(ii) shall receive any dividends de-
clared on its redeemable stock, during the
applicable notice period under subsection
(a)(4)(A); and
‘‘(iii) shall not be entitled to any other
rights or privileges accorded to members
after the date of the termination.
‘‘(C) COMMENCEMENT
OF
NOTICE
PE-
RIOD.—With respect to an institution, the
membership of which is terminated in accord-
ance with subparagraph (A), the applicable no-
tice period under subsection (a)(4) for each
class of redeemable stock shall commence on
the earlier of—
‘‘(i) the date of such termination; or
‘‘(ii) the date on which the member
has provided notice of its intent to redeem
such stock.
‘‘(3) LIQUIDATION OF INDEBTEDNESS.—Upon
the termination of the membership of an institution
for any reason, the outstanding indebtedness of the
member to the Bank shall be liquidated in an or-
derly manner, as determined by the Bank and, upon
the extinguishment of all such indebtedness, the
Bank shall return to the member all collateral
pledged to secure the indebtedness.
‘‘(e) REDEMPTION OF EXCESS STOCK.—
‘‘(1) IN
GENERAL.—A Federal Home Loan
Bank, in its sole discretion, may redeem or repur-
chase, as appropriate, any shares of Class A or
Class B stock issued by the Bank and held by a
member that are in excess of the minimum stock in-
vestment required of that member.
‘‘(2) EXCESS STOCK.—Shares of stock held by
a member shall not be deemed to be ‘excess stock’
for purposes of this subsection by virtue of a mem-
ber’s submission of a notice of intent to withdraw
from membership or termination of its membership
in any other manner.
‘‘(3) PRIORITY.—A Federal Home Loan Bank
may not redeem any excess Class B stock prior to
the end of the 5-year notice period, unless the mem-
ber has no Class A stock outstanding that could be
redeemed as excess.
‘‘(f) IMPAIRMENT
OF CAPITAL.—If the Finance
Board or the board of directors of a Federal Home Loan
Bank determines that the Bank has incurred or is likely
to incur losses that result in or are expected to result in
charges against the capital of the Bank, the Bank shall
not redeem or repurchase any stock of the Bank without
the prior approval of the Finance Board while such
charges are continuing or are expected to continue. In no
case may a Bank redeem or repurchase any applicable
capital stock if, following the redemption, the Bank would
fail to satisfy any minimum capital requirement.
‘‘(g) REJOINING
AFTER
DIVESTITURE
OF
ALL
SHARES.—
‘‘(1) IN GENERAL.—Except as provided in para-
graph (2), and notwithstanding any other provision
of this Act, an institution that divests all shares of
stock in a Federal Home Loan Bank may not, after
such divestiture, acquire shares of any Federal
Home Loan Bank before the end of the 5-year pe-
riod beginning on the date of the completion of such
divestiture, unless the divestiture is a consequence of
a transfer of membership on an uninterrupted basis
between Banks.
‘‘(2) EXCEPTION
FOR
WITHDRAWALS
FROM
MEMBERSHIP
BEFORE
1998.—Any institution that
withdrew from membership in any Federal Home
Loan Bank before December 31, 1997, may acquire
shares of a Federal Home Loan Bank at any time
after that date, subject to the approval of the Fi-
nance Board and the requirements of this Act.
‘‘(h) TREATMENT OF RETAINED EARNINGS.—
‘‘(1) IN GENERAL.—The holders of the Class C
stock of a Federal Home Loan Bank, and any other
classes of nonredeemable stock approved by the Fi-
nance Board (to the extent provided in the terms
thereof), shall own the retained earnings, surplus,
undivided profits, and equity reserves, if any, of the
Bank.
‘‘(2) 
NO
NONREDEEMABLE
CLASSES
OF
STOCK.—If a Federal Home Loan Bank has no out-
standing Class C or other such nonredeemable stock,
then the holders of any other classes of stock of the
Bank then outstanding shall have ownership in, and
a private property right in, the retained earnings,
surplus, undivided profits, and equity reserves, if
any, of the Bank.
‘‘(3) EXCEPTION.—Except as specifically pro-
vided in this section or through the declaration of a
dividend or a capital distribution by a Federal Home
Loan Bank, or in the event of liquidation of the
Bank, a member shall have no right to withdraw or
otherwise receive distribution of any portion of the
retained earnings of the Bank.
‘‘(4) LIMITATION.—A Federal Home Loan
Bank may not make any distribution of its retained
earnings unless, following such distribution, the
Bank would continue to meet all applicable capital
requirements.’’.
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