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(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-
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HR 10 PCS 
sumers, as published by the Department of 
Labor.’’. 
SEC. 163. 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, 1999, 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. 164. 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— 
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HR 10 PCS 
‘‘(A) providing funds to any member for 
residential housing finance; and 
‘‘(B) providing funds to any community fi-
nancial institution for small business, 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 rep-
resenting a whole interest in such secured 
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loans, in the case of any community financial 
institution.’’; 
(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 subparagraphs 
(D) and (E) of paragraph (3), and may, if necessary 
for safety and soundness purposes, require an in-
crease in the collateral standards for any or all of 
those classes of collateral. 
‘‘(6) DEFINITIONS.—For purposes of this sub-
section, the terms ‘small business’, ‘agriculture’, 
‘rural development’, and ‘low-income community de-
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HR 10 PCS 
velopment’ shall have the meanings given those 
terms by rule or regulation of the Finance Board.’’. 
(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.’’. 
(c) CONFORMING AMENDMENTS RELATING TO MEM-
BERS WHICH ARE NOT QUALIFIED THRIFT LENDERS— 
The first of the 2 subsections designated as subsection (e) 
of section 10 of the Federal Home Loan Bank Act (12 
U.S.C. 1430(e)(1)) is amended— 
(1) in the last sentence of paragraph (1), by in-
serting ‘‘or, in the case of any community financial 
institution, for the purposes described in subsection 
(a)(2)’’ before the period; and 
(2) in paragraph (5)(C), by inserting ‘‘except 
that, in determining the actual thrift investment per-
centage of any community financial institution for 
purposes of this subsection, the total investment of 
such member in loans for small business, agri-
culture, rural development, or low-income commu-
nity development, or securities representing a whole 
interest in such loans, shall be treated as a qualified 
thrift investment (as defined in such section 10(m))’’ 
before the period. 
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SEC. 165. 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. 166. MANAGEMENT OF BANKS. 
(a) BOARD OF DIRECTORS.—Section 7(d) of the Fed-
eral Home Loan Bank Act (12 U.S.C. 1427(d)) is amend-
ed— 
(1) by striking ‘‘(d) The term’’ and inserting 
the following: 
‘‘(d) TERMS OF OFFICE.—The term’’; and 
(2) 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’’. 
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(c) 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). 
(d) 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’’ the first 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, con-
sistent with applicable laws and regulations, as 
administered by the Finance Board. No officer, 
employee, attorney, or agent of a Federal home 
loan bank’’; and 
(D) by striking ‘‘Board of directors’’ where 
such term appears in the penultimate sentence 
and inserting ‘‘board of directors’’; and 
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(2) in subsection (b), by striking ‘‘loans banks’’ 
and inserting ‘‘loan banks’’. 
(e) 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 paragraphs: 
‘‘(5) To issue and serve a notice of charges 
upon a Federal home loan bank or upon any execu-
tive 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 
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HR 10 PCS 
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 directors 
as the Office of Federal Housing Enterprise Over-
sight 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 address any insufficiencies in capital 
levels resulting from the application of section 5(f) 
of the Home Owners’ Loan Act. 
‘‘(7) 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 
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striking ‘‘Federal Home Loan Bank Board,’’ and in-
serting ‘‘Director of the Office of Thrift Supervision, 
‘‘the Federal Housing Finance Board,’’. 
(f) ELIGIBILITY TO SECURE ADVANCES.— 
(1) SECTION
9.—Section 9 of the Federal 
Home Loan Bank Act (12 U.S.C. 1429) is amend-
ed— 
(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 amend-
ed— 
(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 
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(C) in subsection (j)(1)— 
(i) by striking ‘‘to subsidize the inter-
est rate on advances’’ and inserting ‘‘to 
provide subsidies, including subsidized in-
terest rates on advances’’; 
(ii) by striking ‘‘Pursuant’’ and in-
serting the following: 
‘‘(A) ESTABLISHMENT.—Pursuant’’; and 
(iii) by adding at the end the fol-
lowing 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.’’. 
(g) 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 
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HR 10 PCS 
(B) by striking ‘‘, and then only with the 
approval of the Federal Housing Finance 
Board’’; and 
(2) by striking the fourth sentence. 
(h) 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. 167. 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 calendar 
year, 20.75 percent of the net earnings of 
that bank (after deducting expenses relat-
ing to section 10(j) and operating ex-
penses). 
‘‘(ii) ANNUAL DETERMINATION.—The 
Board annually shall determine the extent 
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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 sub-
paragraph as necessary to ensure that the 
value of all payments made by the banks 
is equivalent to the value of an annuity re-
ferred 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 ex-
penses relating to section 10(j) and oper-
ating expenses) to the Treasury of the 
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United States until the value of all such 
payments by the Federal home loan banks 
is equivalent to the value of an annuity re-
ferred to in clause (ii). In the final year in 
which the Federal home loan banks are re-
quired to make any payment to the Treas-
ury 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 percentage 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, 1999. 
Payments made by a Federal home loan bank before that 
effective date shall be counted toward the total obligation 
of that bank under section 21B(f)(2)(C) of the Federal 
Home Loan Bank Act, as amended by this section. 
SEC. 168. 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: 
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HR 10 PCS 
‘‘SEC. 6. CAPITAL STRUCTURE OF FEDERAL HOME LOAN 
BANKS. 
‘‘(a) REGULATIONS.— 
‘‘(1) CAPITAL STANDARDS.—Not later than 1 
year after the date of the enactment of the Financial 
Services Act of 1999, the Finance Board shall issue 
regulations prescribing uniform capital standards 
applicable to each Federal home loan bank, which 
shall require each such bank to meet— 
‘‘(A) the leverage requirement specified in 
paragraph (2); and 
‘‘(B) the risk-based capital requirements, 
in accordance with paragraph (3). 
‘‘(2) LEVERAGE REQUIREMENT.— 
‘‘(A) IN GENERAL.—The leverage require-
ment shall require each Federal home loan 
bank to maintain a minimum amount of total 
capital based on the aggregate on-balance sheet 
assets of the bank and shall be 5 percent. 
‘‘(B) TREATMENT
OF
STOCK
AND
RE-
TAINED EARNINGS.—In determining compliance 
with the minimum leverage ratio established 
under subparagraph (A), the paid-in value of 
the outstanding Class B stock shall be multi-
plied by 1.5, the paid-in value of the out-
standing Class C stock and the amount of re-
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tained earnings shall be multiplied by 2.0, and 
such higher amounts shall be deemed to be cap-
ital for purposes of meeting the 5 percent min-
imum leverage ratio. 
‘‘(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 rig-
orously tests for changes in market vari-
ables, including changes in interest rates, 
rate volatility, and changes in the shape of 
the yield curve. 
‘‘(B) 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 
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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 pref-
erences, not inconsistent with this Act and the 
regulations issued hereunder, as the board of 
directors of that bank may approve, any one 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-
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ten notice of its intent to redeem such 
shares; and 
‘‘(iii) Class C stock, which shall be 
nonredeemable; 
‘‘(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-
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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 
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‘‘(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.—Notwithstanding 
any other provisions of this Act, the requirements 
relating to purchase and retention of capital stock of 
a Federal home loan bank by any member thereof in 
effect on the day before the date of the enactment 
of the Federal Home Loan Bank System Moderniza-
tion Act of 1999, shall continue in effect with re-
spect to each Federal home loan bank until the reg-
ulations required by this subsection have taken ef-
fect 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 ap-
proval a plan establishing and implementing a cap-
ital structure for such bank that— 
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‘‘(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 modi-
fications that the bank proposes to make to an ap-
proved capital structure plan. 
‘‘(c) CONTENTS
OF PLAN.—The capital structure 
plan of each Federal home loan bank shall contain provi-
sions addressing each of the following: 
‘‘(1) MINIMUM INVESTMENT.— 
‘‘(A) IN GENERAL.—Each capital structure 
plan of a Federal home loan bank shall require 
each member of the bank to maintain a min-
imum investment in the stock of the bank, the 
amount of which shall be determined in a man-
ner to be prescribed by the board of directors 
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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 discretion, 
include any one 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; or 
‘‘(II) a stock purchase based on a 
percentage of the outstanding ad-
vances from the bank to 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 
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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 im-
pose a continuing obligation on the board of di-
rectors 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 the enactment of the Financial 
Services Act of 1999, to come into compliance 
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