‘‘(3) ACTIVITIES RESTRICTIONS.—The Finance
Board shall restrict and closely monitor the activities
of a critically undercapitalized enterprise resource
bank, including taking any of the discretionary ac-
tions applicable to an undercapitalized bank.
‘‘(f) CAPITAL AND INCOME RESTORATION PLANS.—
‘‘(1) IN GENERAL.—The Finance Board shall
prescribe regulations which require any under- cap-
italized enterprise resource bank to file within the
prescribed periods and implement an acceptable cap-
ital and income restoration plan with the Finance
Board.
‘‘(2) REQUIREMENTS RELATING TO PLAN.—
‘‘(A) CONTENTS OF PLAN.—A capital and
income restoration plan shall—
‘‘(i) specify the steps that the bank
will take to become adequately capitalized
and to increase earnings;
‘‘(ii) specify the levels of capital to be
attained during each year in which the
plan will be in effect;
‘‘(iii) describe how the bank will com-
ply with the restrictions or requirements in
effect under this section; and
‘‘(iv) specify the types and levels of
activities in which the bank will engage
during the term of the plan.
‘‘(B) DEADLINES FOR SUBMISSION.—
‘‘(i) INITIAL
PERIOD.—The Finance
Board shall, by regulation, establish a
deadline for submission of a capital and in-
come restoration plan which may not be
more than 45 days after the bank is noti-
fied that a plan is required.
‘‘(ii) EXTENSION OF DEADLINE.—The
regulations shall provide that the Finance
Board may extend, in writing, the deadline
to a date certain if the Finance Board de-
termines such extension is appropriate.
‘‘(C) APPROVAL.—
‘‘(i) REVIEW
PERIOD.—The Finance
Board shall review each capital and income
restoration plan submitted under this sec-
tion and, not later than 30 days after sub-
mission of the plan, approve or disapprove
the plan.
‘‘(ii) EXTENSION
OF
REVIEW
PE-
RIOD.—The Finance Board may extend, in
writing, the period for approval or dis-
approval for any plan for a single addi-
tional 30-day period if the Finance Board
determines such extension is appropriate.
‘‘(D) NOTICE OF BOARD ACTION.—The Fi-
nance Board shall provide written notice to any
bank which submits a plan under this sub-
section of the approval or disapproval of the
plan and shall include the reasons for any dis-
approval of the plan.
‘‘(E) 
RESUBMISSION.—If 
the 
Finance
Board disapproves the initial capital and in-
come restoration plan submitted by the bank,
the bank shall submit an amended plan accept-
able to the Finance Board within 30 days or
such longer period that the Finance Board de-
termines is in the public interest.
‘‘(g) APPOINTMENT OF CONSERVATOR FOR CRITI-
CALLY
UNDERCAPITALIZED
ENTERPRISE
RESOURCE
BANK.—
‘‘(1) GROUNDS.—The Finance Board may ap-
point a conservator for a critically undercapitalized
enterprise resource bank under subsection (e)(2)
upon a written determination that alternative rem-
edies available to the Finance Board are not satis-
factory and that—
‘‘(A) the bank is not likely to pay obliga-
tions of the bank in the normal course of busi-
ness;
‘‘(B) the bank has incurred or is reason-
ably likely to incur losses, or has pending appli-
cations for stock redemptions, that would de-
plete substantially all of the capital of the bank
and it is unlikely that the bank will replenish
such capital within a reasonable period;
‘‘(C) the bank has concealed or is conceal-
ing books, papers, records, or assets of the
bank that are material to the discharge of the
Finance Board’s responsibilities under this sub-
title, or has refused or is refusing to submit
such books, papers, records, or information re-
garding the affairs of the bank for inspection to
the Finance Board upon the demand of the Fi-
nance Board;
‘‘(D) the bank has willfully violated, or is
willfully violating, a final cease-and-desist order;
or
‘‘(E) the bank, by an affirmative vote of a
majority of the bank’s board of directors or an
affirmative vote of the shareholders of the bank,
consents to such appointment.
‘‘(2) QUALIFICATIONS.—The Finance Board
may appoint—
‘‘(A) itself as the conservator for any en-
terprise resource bank;
‘‘(B) as conservator for any such bank,
any other Federal agency or department or
other person that the Finance Board deter-
mines has—
‘‘(i) no claim against, or financial in-
terest in, the bank;
‘‘(ii) no other basis for a conflict of
interest with respect to the bank; and
‘‘(iii) the financial and management
expertise necessary to direct the operations
and affairs of the bank.
‘‘(3) APPOINTMENT EX PARTE AND WITHOUT
NOTICE.—If, in the opinion of the Finance Board, a
ground for the appointment of a conservator for an
enterprise resource bank exists, the Finance Board
may appoint a conservator for the bank ex parte and
without notice.
‘‘(4) JUDICIAL REVIEW.—
‘‘(A) JURISDICTION.—Except as provided
in subparagraph (D), a bank for which a con-
servator is appointed may bring an action dur-
SEC. 8. MANAGEMENT OF BANKS.
Section 7 of the Federal Home Loan Bank Act (12
U.S.C. 1427) is amended to read as follows:
‘‘SEC. 7. MANAGEMENT OF BANKS.
‘‘(a) BOARD OF DIRECTORS.—
‘‘(1) COMPOSITION OF BOARD.—Except as oth-
erwise provided in this section, the management of
each enterprise resource bank shall be vested in a
board of directors consisting of 14 directors selected
as follows:
‘‘(A) 8 shall be elected by the members of
the bank as provided in paragraph (6).
‘‘(B) 6 shall be appointed by the Finance
Board.
‘‘(2) QUALIFICATIONS.—
‘‘(A) IN GENERAL.—Each director of an
enterprise resource bank shall be a citizen of
the United States and a bona fide resident of
the district in which such bank is located.
‘‘(B) DISQUALIFICATION.—An individual
who is an officer or director of a depository in-
stitution that fails to meet any applicable cap-
ital requirement shall not be qualified to be a
director on the board of directors of an enter-
prise resource bank.
‘‘(3) REPRESENTATIONAL CRITERIA.—
‘‘(A) REPRESENTATION OF STATES.—Sub-
ject to subparagraph (B), the bylaws of each
enterprise resource bank shall provide for the
manner in which the representation of the
shareholders of the bank from the various
States within such bank’s district will be dis-
tributed among the positions of the elected di-
rectors of such bank.
‘‘(B) TRANSITION
PROVISION.—Notwith-
standing subparagraph (A), the composition of
the boards of directors of the 12 enterprise re-
source banks immediately after the effective
date of the Enterprise Resource Bank Act of
1996 shall be the same as the composition of
such boards of directors on January 1, 1996.
‘‘(C) DISCRETIONARY INCREASE IN OVER-
ALL NUMBER OF DIRECTORS.—In order to en-
sure director representation on the board of di-
rectors of an enterprise resource bank consist-
ent with this paragraph, the board of directors
of the bank may—
‘‘(i) increase the number of elected di-
rectors on the board of directors; and
‘‘(ii) increase the number of appointed
directors to an amount not more than 3⁄4
of the number of elected directors.
‘‘(D) INCREASE
TO
ACHIEVE
MINIMUM
STATE REPRESENTATION.—If, at any time, the
number of elected directors of an enterprise re-
source bank is less than the number of States
in the district of such bank, the board of direc-
tors of the bank may increase the number of
elected directors on such board of directors to
a number at least equal to the number of
States in such district.
‘‘(E) REPRESENTATIONAL
COMPOSITION
OF BOARD OF DIRECTORS.—In establishing by-
laws for the election of directors, and in ap-
pointing directors, to the board of directors of
an enterprise resource bank, the board of direc-
tors and the Finance Board shall establish such
procedures as may be appropriate to achieve a
board of directors which reflects the geographi-
cal diversity of the district, the representation
of both large and small institutional stock-
holder, and the representation of the public in-
terest.
‘‘(4) CHAIRPERSON AND VICE CHAIRPERSON.—
‘‘(A) IN GENERAL.—The board of directors
of each enterprise resource bank shall elect—
‘‘(i) 1 of the directors of the bank to
be the chairperson of the board of direc-
tors; and
‘‘(ii) 1 of the directors of the bank to
be vice chairperson of the board of direc-
tors.
‘‘(B) LIMITATION.—The president of an
enterprise resource bank may not be designated
under subparagraph (A) as the chairperson or
vice chairperson of the bank.
‘‘(C) PUBLIC
INTEREST
REPRESENTA-
TION.—At least 1 of the members of the board
of directors of an enterprise resource bank who
were appointed pursuant to paragraph (5)(A)
shall be elected to be the chairperson or the vice
chairperson of the board of directors.
‘‘(5) PROVISIONS APPLICABLE TO APPOINTED
DIRECTORS.—
‘‘(A) 
REPRESENTATIONAL
REQUIRE-
MENT.—At least 2 of the directors of each en-
terprise resource bank who are appointed by the
Finance Board shall be appointed from among
representatives of organizations with more than
a 2-year history of representing consumer or
community interests on banking services, credit
needs, housing, or financial consumer protec-
tions.
‘‘(B) CONFLICT
OF
INTEREST
PROVI-
SION.—No director on the board of directors of
an enterprise resource bank who is appointed
pursuant to this subsection may, during such
director’s term of office, serve as an officer of
any enterprise resource bank or as a director or
officer of any member of a bank.
‘‘(6) PROVISIONS APPLICABLE TO ELECTED DI-
RECTORS.—
‘‘(A) DESIGNATION OF STATE TO BE REP-
RESENTED.—Each position of elected director
on the board of directors of any enterprise re-
source bank shall be designated by the board of
directors as a position to be filled by a director
representing the voting shareholders of the
bank whose principal places of business are lo-
cated in a particular State.
‘‘(B) SHAREHOLDERS
LOCATED
IN
U.S.
TERRITORIES.—In the case of any voting share-
holder (of an enterprise resource bank) whose
principal place of business is not located in any
State, the enterprise resource bank shall des-
ignate the State in such bank’s district in which
such member shall be deemed to be located for
purposes of this subsection.
‘‘(C) QUALIFICATION.—Only presidents,
chief executive officers, and other senior execu-
tive officers (as defined by the Finance Board)
of voting shareholders whose principal places of
business are located in a State shall be qualified
to serve as a director representing such State.
‘‘(D) NOMINATION
OF
DIRECTORS.—All
voting shareholders (of an enterprise resource
bank) whose principal places of business are lo-
cated in any State may nominate any qualified
individual for election as a director representing
such State.
‘‘(E) VOTING PROCEDURE.—In any elec-
tion of a director of an enterprise resource
bank, each voting shareholder of the bank
whose principal place of business is located in
the State which such director represents may
cast for such office a number of votes equal to
the lesser of—
‘‘(i) the minimum number of voting
shares of the capital stock of such bank in
which such shareholder is required, under
section 6(b), to be invested as of the end
of the calendar year immediately preceding
the election, as determined by the board of
directors of the enterprise resource bank;
and
‘‘(ii) the average of the minimum
number of voting shares of such stock in
which all voting shareholders whose prin-
cipal places of business are located in such
State are required, under section 6(b), to
be invested as of the end of the calendar
year immediately preceding the election, as
so determined.
‘‘(F) PLURALITY
DECISION.—Each posi-
tion of elected director of an enterprise resource
bank shall be filled by the nominee, for such po-
sition, who receives a larger number of the
votes cast in an election held for the purpose of
filling such position than any other nominee.
‘‘(7) TERMS.—
‘‘(A) IN GENERAL.—The term of each di-
rector who is elected or appointed to the board
of directors of an enterprise resource bank after
the date of the enactment of the Enterprise Re-
source Bank Act of 1996 shall be 4 years.
‘‘(B) TERM LIMITS.—
‘‘(i) APPOINTED DIRECTORS.—No in-
dividual may serve as an appointed direc-
tor on the board of directors of an enter-
prise resource bank for more than 2 full
consecutive 4-year terms.
‘‘(ii) ELECTED DIRECTORS.—If, dur-
ing any 8-year period, the board of direc-
tors of any enterprise resource bank has
included, as an elected director, any officer
of a specific voting shareholder of the
bank, no officer of such shareholder shall
be eligible to serve as an elected member of
such board of directors during the subse-
quent 4-year period.
‘‘(C) INTERIM
APPOINTMENTS.—Any di-
rector appointed or elected to fill a vacancy oc-
curring before the expiration of the term for
which such director’s predecessor was appointed
or elected shall be appointed or elected only for
the remainder of such term.
‘‘(D) CONTINUATION OF SERVICE.—Each
director of an enterprise resource bank may
continue to serve after the expiration of the
term to which such director was appointed or
elected until a successor has been qualified.
‘‘(E) STAGGERED TERMS.—
‘‘(i) IN
GENERAL.—The bylaws of
each enterprise resource bank shall provide
for staggering the terms of the elected and
appointed directors so that the positions of
approximately 1⁄4 of the appointed direc-
tors and approximately 1⁄4 of the appointed
directors shall become vacant each year.
‘‘(ii) 
DESIGNATION
OF
SHORTER
TERMS TO ACHIEVE STAGGERING.—When-
ever necessary to achieve staggered terms
for the directors of an enterprise resource
bank, the board of directors of such bank
may, by resolution (and in accordance with
the bylaws of the bank) and before the
election or appointment of a director, des-
ignate a shorter term for such position for
the next succeeding term.
‘‘(8) VACANCIES.—
‘‘(A) APPOINTED DIRECTOR.—Any vacancy
occurring in the position of appointed director
of an enterprise resource bank shall be filled in
the manner in which the original appointment
was made.
‘‘(B) ELECTED DIRECTOR.—Any vacancy
occurring in the position of elected director of
an enterprise resource bank shall be filled by an
affirmative vote of a majority of the remaining
directors of such bank, without regard to
whether such remaining directors constitute a
quorum of the board of directors.
‘‘(C) VACANCY AS A RESULT OF DISQUALI-
FICATION OF DIRECTOR.—
‘‘(i) IN GENERAL.—If any director of
an enterprise resource bank ceases to meet
any qualification for such position—
‘‘(I) the position shall imme-
diately become vacant by operation of
law; and
‘‘(II) service by such director in
such position shall cease.
‘‘(ii) CONTINUATION.—Notwithstand-
ing clause (i), an appointed director of an
enterprise resource bank whose position
became vacant pursuant to such clause
may continue to serve in such position
until a successor has been qualified.
‘‘(9) INELIGIBILITY OF CERTAIN OFFICERS FOR
POSITION OF DIRECTOR.—No officer or employee of,
or any attorney or agent for, any enterprise resource
bank who receives compensation for such service,
other than the president of the bank, shall be eligible
to serve on the board of directors of such bank or
any other enterprise resource bank.
‘‘(10) REGULATIONS GOVERNING NOMINATIONS
AND ELECTIONS.—The bylaws of each enterprise re-
source bank shall provide procedures for the nomina-
tion and election of directors on the board of direc-
tors of the bank.
‘‘(11) DEFINITIONS.—For purposes of this sub-
section, the following definitions shall apply:
‘‘(A) VOTING
SHAREHOLDER.—The term
‘voting shareholder’ means, with respect to any
year, any institution which holds voting shares
of an enterprise resource bank and held voting
shares of such bank at the end of the imme-
diately preceding calendar year.
‘‘(B) STATE.—The term ‘State’ means any
State, the District of Columbia, and the Com-
monwealth of Puerto Rico.
‘‘(12) APPLICABILITY.—This subsection shall
apply to elections and appointments of directors to
terms that begin after the date of enactment of the
Enterprise Resource Bank Act of 1996.
‘‘(b) POWERS
OF BOARDS
OF DIRECTORS.—The
board of directors of each enterprise resource bank shall
have all power necessary to exercise the responsibility of
such board with respect to such bank, including the follow-
ing powers:
‘‘(1) Establish financial and other performance
targets.
‘‘(2) Conduct studies of trends of home or other
property values, methods of appraisals, state and
Federal laws, regulations, policies, and procedures
relevant to the operations of the bank and the mem-
bers of the bank, and such other subjects as the
board of directors may consider to be useful for the
general guidance of the policies and operations of
the bank and institutions authorized to secure ad-
vances from the bank.
‘‘(3) Establish credit policy and policy for man-
agement of the bank’s investments.
‘‘(4) Establish policy regarding the bank’s in-
terest rate risk.
‘‘(5) Determine dividends.
‘‘(6) Establish policy regarding the documenta-
tion required for advances.
‘‘(7) Establish policy regarding item processing
pricing.
‘‘(8) Establish policy regarding the sale and
purchase of, and participations in, advances.
‘‘(9) Establish policy regarding lending to mem-
bers that are insolvent or not in compliance with ap-
plicable capital requirements.
‘‘(10) Establish policy regarding—
‘‘(A) lending to and borrowing from the
enterprise resource banks; and
‘‘(B) making deposits in and accepting de-
posits from such banks.
‘‘(11) Establish policy regarding the community
investment program and the affordable housing pro-
gram.
‘‘(12) Establish policy regarding incentives for
community support by member institutions.
‘‘(13) Establish policy regarding publication of
community support activities of member institutions.
‘‘(14) Establish policy regarding the develop-
ment and implementation of the business plan of the
bank.
‘‘(15) Approve the budget of the bank and
modifications to such budget.
‘‘(16) Approve the bylaws of the bank and
modifications to such bylaws.
‘‘(17) Establish the travel policy of the bank.
‘‘(18) Determine the location of meetings of
boards of directors.
‘‘(19) Determine the eligibility of individuals to
serve as directors and conduct elections of directors.
‘‘(20) Establish policy regarding charitable do-
nations and membership in organizations.
‘‘(21) Establish policy regarding mandatory re-
tirement of directors, officers and employees.
‘‘(22) Establish policy regarding indemnifica-
tion of directors, officers, employees, and agents.
‘‘(23) Establish policy regarding the disaster re-
covery plan of the bank.
‘‘(24) Establish the records retention policy of
the bank.
‘‘(25) Provide, in accordance with resolutions of
the board of directors and any regulations prescribed
by the Finance Board, for the payment of reason-
able rates of compensation to members of the board
of directors for such periods of time, including travel
time, during which the members are engaged in the
actual performance of duties vested in the board of
directors and travel expenses, including per diem in
lieu of subsistence.
‘‘(26) Approve and disapprove membership ap-
plications.
‘‘(27) Establish policies regarding the issuance
of letters of credit.
‘‘(28) Establish policies regarding the safekeep-
ing of securities.
‘‘(c) DUTIES
OF BOARDS
OF DIRECTORS.—The
board of directors of each enterprise resource bank shall—
‘‘(1) administer the affairs of the bank fairly
and impartially and without discrimination in favor
of or against any voting shareholder or borrower;
and
‘‘(2) subject to the provisions of this Act, ex-
tend to each institution authorized to secure ad-
vances such advances as may be made safely and
soundly with due regard for—
‘‘(A) the claims and demands of other in-
stitutions; and
‘‘(B) the maintenance of adequate credit
standing for the bank and the bank’s obliga-
tions.’’.
SEC. 9. SUSTAINABLE ECONOMIC DEVELOPMENT PRO-
GRAM.
(a) FINDINGS AND PURPOSE.—
(1) FINDINGS.—The Congress finds as follows:
(A) In exchange for Federal deposit insur-
ance, the Federal Government has placed regu-
lations on financial institutions to ensure safety
and soundness and to promote lending to un-
derserved communities.
(B) These regulations place a significant
cost on financial institutions.
(C) While there is a compelling need for
solutions to the country’s most difficult social
problems, including poverty and high unemploy-
ment, in economically distressed communities,
especially inner-cities and rural areas, the most
effective model for solutions to such problems is
through the development of a sustainable eco-
nomic base for these communities.
(D) To develop a sustainable economic
base the Government should encourage main-
stream private institutions to improve the envi-
ronment for growth and new business opportu-
nities in distressed neighborhoods by providing
incentives for such actions.
(E) The Congress recognizes the difficul-
ties facing community banks in attempting to
increase the availability of credit in economi-
cally distressed neighborhoods, including—
(i) the lack of a mutual understanding
between the lenders and the potential bor-
rowers;
(ii) the perception that loans to bor-
rowers in such neighborhoods are or would
be high-risk;
(iii) the frequent need for credit en-
hancement in connection with loans to bor-
rowers in such neighborhoods; and
(iv) the higher costs involved in lend-
ing in such neighborhoods due to the addi-
tional time and effort which is frequently
required in conducting adequate credit
analysis.
(F) Lending in economically distressed
neighborhoods is most effective if community
banks make rational credit decisions with re-
gard to—
(i) the profitability of lending in such
neighborhoods; and
(ii) the potential profits from the es-
tablishment of a market presence by com-
munity banks in such neighborhoods.
(G) While it may be desirable for the Gov-
ernment to encourage depository institutions to
provide banking services and extend credit in
economically distressed communities, such en-
couragement should come in the form of incen-
tives and not mandates.
(2) PURPOSE.—It is the purpose of this section
to enhance the efficiency of providing debt and eq-
uity capital and other financial services to under-
served communities by encouraging, and creating in-
centives for, communities to develop a sustainable
economic base in such communities.
(b) MISSION OF SUSTAINABLE ECONOMIC DEVELOP-
MENT.—The purpose of the community support require-
ments, the community investment program, and the af-
fordable housing program is to serve depository institu-
tions as an intermediary—
(1) to aid in the development of a sustainable
economic base in the banks’ communities;
(2) to promote access to credit throughout the
Nation (including rural areas and underserved
neighborhoods by increasing the liquidity of eco-
nomic development financing and improving the dis-
tribution of investment capital available for economic
development financing; and
(3) to assist with technical expertise for compli-
ance with the Community Reinvestment Act of
1977.
(c) COMMUNITY SUPPORT REQUIREMENTS.—Sub-
section (g) of section 10 of the Federal Home Loan Bank
Act (12 U.S.C. 1430(g)) is amended by adding at the end
the following new paragraph:
‘‘(3) SAFE HARBOR FOR MEMBERS RECEIVING
CRA RATINGS OF SATISFACTORY OR BETTER.—Not-
withstanding paragraphs (1) and (2), any depository
institution which is a shareholder in an enterprise
resource bank and receives a rating of satisfactory
or outstanding pursuant to section 807 of the Com-
munity Reinvestment Act of 1977 in such member’s
most recent examination, if any, shall be treated as
having satisfied the requirements of such para-
graphs.’’.
(d) PROHIBITION
ON DELEGATION
OF CERTAIN
FUNDING
DETERMINATIONS
TO
MANAGEMENT
OF
BANK.—The board of directors of an enterprise resource
may not delegate, or provide for the delegation of, any
authority of the board of directors to approve or dis-
approve funding by such bank under the affordable hous-
ing program established pursuant to section 10(j) of the
Federal Home Loan Bank Act to any officer or employee
of the bank.
SEC. 10. ENFORCEMENT AUTHORITY TO PROMOTE SAFETY
AND SOUNDNESS OF ENTERPRISE RESOURCE
BANKS.
Section 3 of the Federal Home Loan Bank Act (as
amended by section 4 of this Act) is amended—
(1) by redesignating subsection (f) as sub-
section (g); and
(2) by inserting after subsection (e) the follow-
ing new subsection:
‘‘(f) ENFORCEMENT POWERS.—The Finance Board
shall have the same powers, rights, and duties to enforce
this Act with regard to the enterprise resource banks as
the appropriate Federal banking agencies (as defined in
section 3(q) of the Federal Deposit Insurance Act) have
under section 8 of the Federal Deposit Insurance Act with
respect to insured depository institutions (as defined in
section 3(c) of such Act).’’.
SEC. 11. RESOLUTION FUNDING CORPORATION OBLIGA-
TION.
Effective 
on 
January 
1, 
1998, 
section
21B(f)(2)(C)(ii) of the Federal Home Loan Bank Act (12
U.S.C. 1441b(f)(2)(C)(ii)) is amended to read as follows:
‘‘(C) PAYMENTS BY ENTERPRISE RE-
SOURCE
BANKS.—To 
the 
extent 
the
amounts available pursuant to subpara-
graphs (A) and (B) are insufficient to
cover the amount of interest payments,
each enterprise resource bank shall pay to
the Funding Corporation each calendar
year an amount equal to 23.7 percent of
the bank’s net earnings for the year for
which such amount is required to be
paid.’’.
SEC. 12. POWERS AND DUTIES OF BANKS; TECHNICAL AND
CONFORMING AMENDMENTS.
(a) SECTION 9.—Section 9 of the Federal Home
Loan Bank Act (12 U.S.C. 1429) is amended—
(1) in the 2d sentence, by striking ‘‘with the
approval of the Board’’; and
(2) in the 3d sentence, by striking ‘‘, subject to
the approval of the Board,’’.
(b) SECTION 10.—
(1) Subsection (a) of section 10 of the Federal
Home Loan Bank Act (12 U.S.C. 1430(a)) is
amended—
(A) in that portion of the subsection which
precedes paragraph (1)—
(i) by inserting ‘‘and subject to regu-
lations prescribed by the Finance Board’’
after ‘‘in the judgment of the Bank’’; and
(ii) by striking the 2d sentence;
(B) in paragraph (1), by inserting ‘‘mort-
gages on improved residential property which
are insured or guaranteed by the United States
or any agency or department of the United
States,’’ after ‘‘90 days delinquent),’’;
(C) in paragraph (3), by striking ‘‘Depos-
its’’ and inserting ‘‘Cash or deposits’’;
(D) in paragraph (4)—
(i) by striking ‘‘Other real estate re-
lated collateral’’ and inserting ‘‘Other mis-
sion-related collateral (as defined by the
Finance Board’’; and
(ii) by striking ‘‘30 percent’’ and in-
serting ‘‘50 percent’’; and
(E) by striking paragraph (5) and insert-
ing the following new paragraphs:
‘‘(5) Assets consisting of small business loans
the principal amounts of which are less than
$250,000.
‘‘(6) Assets consisting of loans to municipalities
and other units for general local government for
maintenance and improvement of the infrastructure
(as defined by the Finance Board) the principal
amounts of which are less than $2,500,000.
‘‘(7) Municipal securities rated by investment
grade by 1 or more nationwide statistical rating or-
ganizations.’’.
(2) Section 10(b) of the Federal Home Loan
Bank Act (12 U.S.C. 1430(b)) is amended—
(A) by striking ‘‘(b) For the purposes of
this section’’ and inserting ‘‘(b) PROTECTION
OF INTEREST IN COLLATERAL.—
‘‘(1) INVESTIGATIONS.— For the purposes of
this section’’;
(B) by striking ‘‘Board’’ where such term
appears in the last sentence and inserting
‘‘bank’’; and
(C) by adding at the end the following new
paragraphs:
‘‘(2) ADEQUACY
OF
CONTROLS.—In order to
minimize the various risks borne by an enterprise re-
source bank with regard to advances to stockholders,
each enterprise resource bank shall ensure that—
‘‘(A) adequate controls exist to manage
risk, 
including 
a 
strict 
policy 
of
overcollateralization;
‘‘(B) ensure that the collateral has a read-
ily ascertainable market value;
‘‘(C) a security interest in such collateral
can be perfected; and
‘‘(D) the security interest of the bank has
priority over any other claim against the collat-
eral.
‘‘(3) OTHER PROTECTIVE MEASURES.—
‘‘(A) ADDITIONAL
COLLATERAL.—An en-
terprise resource bank may take such steps as
the bank determines to be necessary to protect
the security position of the bank with respect to
outstanding advances, including requiring the
deposit of additional collateral security whether
or not such collateral would be eligible under
subsection (a) to be eligible to be used as collat-
eral for an advance at the time of origination.
‘‘(B) REDUCTION
IN
OUTSTANDING
AD-
VANCE.—If a stockholder of an enterprise re-
source bank has insufficient eligible collateral to
support an outstanding advance to such stock-
holder, the stockholder shall promptly and pru-
dently reduce the level of outstanding advances
in accordance with a schedule determined by
such bank.’’.
(3) Section 10(c) of the Federal Home Loan
Bank Act (12 U.S.C. 1430(c)) is amended—
(A) in the 1st sentence, by striking
‘‘Board’’ and inserting ‘‘bank’’; and
(B) by striking the 2d sentence.
(4) Section 10(d) of the Federal Home Loan
Bank Act (12 U.S.C. 1430(d)) is amended—
(A) in the first sentence, by striking ‘‘and
the approval of the Board’’; and
(B) in the last sentence, by striking ‘‘Sub-
ject to the approval of the Board, any’’ and in-
serting ‘‘Any’’.
(5) Section 10 of the Federal Home Loan Bank
Act (12 U.S.C. 1430) is amended by striking the
first of the 2 subsections designated as subsection
(e) (relating to qualified thrift lender status).
(6) Section 10(j)(1) of the Federal Home Loan
Bank Act (12 U.S.C. 1430(j)(1)) is amended—
(A) by striking ‘‘IN GENERAL.—Pursuant
to’’ and inserting ‘‘ESTABLISHMENT.—
‘‘(A) IN GENERAL.—Pursuant to’’; and
(B) by adding at the end the following new
subparagraph:
‘‘(B) BANK APPROVAL AUTHORITY.—The
board of directors of each enterprise resource
bank may—
‘‘(i) approve or disapprove a request
from a shareholder of the bank for a sub-
sidy under the affordable housing program
of the bank; and
‘‘(ii) delegate such approval or dis-
approval authority to the president or any
other senior executive officer of the bank.’’.
(7) Section 10 of the Federal Home Loan Bank
Act (12 U.S.C. 1430) is amended by adding at the
end the following new subsection:
‘‘(k) LIMITATIONS ON ADVANCES TO UNDERCAPI-
TALIZED INSTITUTIONS.—
‘‘(1) LIMITATION
ON
EXTENDED
PERIODS.—
Except as provided in paragraph (2), no new ad-
vances to any undercapitalized depository institution
by any enterprise resource bank under this section
may be outstanding for more than 60 days in any
120-day period.
‘‘(2) VIABILITY EXCEPTION.—
‘‘(A) IN GENERAL.—If the head of the ap-
propriate Federal banking agency certifies in
advance in writing to the enterprise resource
bank that any depository institution is viable,
the limitation contained in paragraph (1) shall
not apply during the 60-day period beginning
on the date such certification is received.
‘‘(B) EXTENSIONS OF PERIOD.—The 60-
day period may be extended for additional 60-
day periods upon receipt by the enterprise re-
source bank of additional written certifications
under subparagraph (A) with respect to each
such additional period.
‘‘(C) AUTHORITY TO ISSUE A CERTIFICATE
OF VIABILITY MAY NOT BE DELEGATED.—The
authority of the head of any agency to issue a
written certification of viability under this para-
graph may not be delegated to any other per-
son.
‘‘(3) PROHIBITION
ON
ADVANCES
TO
CRITI-
CALLY
UNDERCAPITALIZED
DEPOSITORY
INSTITU-
TIONS.—Notwithstanding any other provision of this
Act, no new advances may be made to a critically
undercapitalized depository institution.
‘‘(4) NO OBLIGATION TO MAKE ADVANCES.—An
enterprise resource bank shall have no obligation to
make, increase, renew, or extend any advance or dis-
count under this Act to any member.
‘‘(5) DEFINITIONS.—For purposes of this sub-
section, the following definitions shall apply:
‘‘(A) APPROPRIATE
FEDERAL
BANKING
AGENCY.—The term ‘appropriate Federal bank-
ing agency’—
‘‘(i) has the same meaning as in sec-
tion 3 of the Federal Deposit Insurance
Act; and
‘‘(ii) includes the National Credit
Union Administration.
‘‘(B) CRITICALLY
UNDERCAPITALIZED.—
The term ‘critically undercapitalized’ has the
same meaning as in section 6A(b)(3).
‘‘(C) NEW ADVANCE.—The term ‘new ad-
vance’ includes a renewal or extension of, or an
increase in, an outstanding advance.
‘‘(D) UNDERCAPITALIZED DEPOSITORY IN-
STITUTION.—The term ‘undercapitalized depos-
itory institution’ means any depository institu-
tion which—
‘‘(i) is undercapitalized, as defined in
section 38 of the Federal Deposit Insur-
ance Act (or as defined by the National
Credit Union Administration Board, in the
case of an insured credit union); or
‘‘(ii) has a composite CAMEL rating
of 5 under the Uniform Financial Institu-
tions Rating System (or an equivalent rat-
ing by any such agency under a com-
parable rating system) as of the most re-
cent examination of such institution.
‘‘(E) VIABLE.—The term ‘viable’ means,
with respect to a depository institution, a de-
pository institution which the appropriate Fed-
eral banking agency determines, giving due re-
gard to the economic conditions and cir-
cumstances in the market in which the institu-
tion operates—
‘‘(i) is not critically undercapitalized;
‘‘(ii) is not expected to become criti-
cally undercapitalized; and
‘‘(iii) is not expected to be placed in
conservatorship or receivership.’’.
(c) SECTION 10b.—
(1) Subsection (a) of section 10b of the Federal
Home Loan Bank Act (12 U.S.C. 1430b) is amend-
ed to read as follows:
‘‘(a) IN GENERAL.—
‘‘(1) AUTHORITY.—Each enterprise resource
bank 
may 
make 
advances 
to 
a 
permissible
nonmember mortgagee.
‘‘(2) PERMISSIBLE NONMEMBER MORTGAGEE.—
For purposes of paragraph (1), the term ‘permissible
nonmember mortgagee’ means—
‘‘(A) any State housing finance agency or
Indian housing authority (including any sub-
sidiary of such agency or authority) approved
under title II of the National Housing Act—
‘‘(i) which is a chartered institution
having succession and subject to the in-
spection and supervision of a governmental
agency; and
‘‘(ii) whose principal activity in the
mortgage field must consist of lending the
institution’s own funds; or
‘‘(B) any community development financial
institution—
‘‘(i) which is not an insured deposi-
tory institution or a subsidiary of an in-
sured depository institution;
‘‘(ii) which, at the time the advance is
made, has been certified within the last
year as a community development financial
institution under the Community Develop-
ment Banking and Financial Institutions
Act of 1994;
‘‘(iii) which is a chartered institution
having succession; and
‘‘(iv) whose principal activity in the
mortgage field must consist of lending the
institution’s own funds.
‘‘(3) SECURITY.—Advances under paragraph
(1) shall not be subject to the other provisions and
restrictions of this Act, but shall be made upon the
security of mortgages insured under title II of the
National Housing Act.
‘‘(4) TERMS AND CONDITIONS.—Advances made
under the terms of this section shall be at such rates
of interest and upon such terms and conditions as
shall be determined by the enterprise resource bank,
but no advance may be for an amount in excess of
90 percent of the unpaid principal of the mortgage
loan given as security.
‘‘(5) DEFINITIONS
OF
COMMUNITY
DEVELOP-
MENT FINANCIAL INSTITUTION.—The term ‘commu-
nity development financial institution’ has the same
meaning as in section 103 of the Community Devel-
opment Banking and Financial Institutions Act of
1994.’’.
(2) Subsection (b) of section 10b of the Federal
Home Loan Bank Act (12 U.S.C. 1430b(b)) is
amended by inserting ‘‘or Indian housing authority’’
after ‘‘State housing finance agency’’.
(d) SECTION 11.—
(1) Subsection (a) of section 11 of the Federal
Home Loan Bank Act (12 U.S.C. 1431(a)) is
amended—
(A) by striking ‘‘(a) Each Federal Home
Loan Bank’’ and inserting ‘‘(a) BORROWING
AUTHORITY.—
‘‘(1) IN
GENERAL.—Each enterprise resource
bank’’;
(B) by striking ‘‘, subject to rules and reg-
ulations prescribed by the Board’’;
(C) by striking ‘‘Board’’ and inserting
‘‘board of directors of the bank’’; and
(D) by adding at the end the following new
paragraph:
‘‘(2) BORROWING THROUGH THE OFFICE OF FI-
NANCE ONLY.—Notwithstanding paragraph (1), all
notes, bonds, and debentures issued by any enter-
prise resource bank shall be issued through the of-
fice of finance as agent for the banks.’’.
(2) 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 ENTERPRISE RESOURCE BANK
BONDS.—
‘‘(1) IN GENERAL.—The office of finance may
issue consolidated enterprise resource bank bonds
and other consolidated obligations on behalf of the
banks.
‘‘(2) JOINT AND SEVERAL OBLIGATIONS.—Con-
solidated obligations issued by the office of finance
under paragraph (1) shall be the joint and several
obligations of all the enterprise resource banks.’’.
(3) Section 11 of the Federal Home Loan Bank
Act (12 U.S.C. 1431) is amended by striking sub-
section (c).
(4) Section 11(d) of the Federal Home Loan
Bank Act (12 U.S.C. 1431(d)) is amended to read
as follows:
‘‘(d) ADDITIONAL OR SUBSTITUTED COLLATERAL.—
The Finance Board, for safety and soundness reasons,
may require any enterprise resource bank to deposit addi-
tional collateral or to make substitutions of collateral.’’.
(5) Section 11(e) of the Federal Home Loan
Bank Act (12 U.S.C. 1431(e)) is amended to read
as follows:
‘‘(e) ACCEPTANCE OF DEPOSITS; REGULATIONS.—
‘‘(1) ACCEPTANCE
OF
DEPOSITS.—Subject to
regulations prescribed by the Finance Board, each
enterprise resource bank may accept deposits made
by members of such bank or by any other enterprise
resource bank or other instrumentality of the United
States, upon such terms and conditions as the bank
may determine.
‘‘(2) 
COLLECTION
AND
SETTLEMENT
OF
CHECKS.—
‘‘(A) IN GENERAL.—Subject to regulations
of the Finance Board, an enterprise resource
bank may be a drawee of, and engage in, or be
agents or intermediaries for, or otherwise par-
ticipate or assist in, the collection and settle-
ment of (including presentment, clearing, and
payment of, and remitting for), checks, drafts,
or any other negotiable or nonnegotiable items
or instruments of payment drawn on or issued
by members of any enterprise resource bank or
by institutions which are eligible to make appli-
cation to become members pursuant to section
4, and to have such incidental powers as the Fi-
nance Board shall find necessary for the exer-
cise of any such authorization.
‘‘(B) CHARGES.—An enterprise resource
bank shall make charges, to be determined by
the bank consistent with the principles set forth
in section 11A(c) of the Federal Reserve Act, or
utilize the services of, or act as agent for, or be
a member of, a Federal reserve bank, clearing-
house, or any other public or private financial
institution or other agency, in the exercise of
any powers or functions pursuant to this para-
graph.
‘‘(C) REGULATIONS.—
‘‘(i) 
IN
GENERAL.—The 
Finance
Board may, with respect to participation in
the collection and settlement of any items
by enterprise resource banks, and with re-
spect to the collection and settlement (in-
cluding payment by the payor institution)
of items payable by members, to prescribe
regulations regarding the rights, powers,
responsibilities, duties, and liabilities, in-
cluding standards relating to such rights,
powers, responsibilities, duties, and liabil-
ities, of such enterprise resource banks,
members, and other parties to any such
item or the collection and settlement of
any such item.
‘‘(ii) 
APPLICATION
OF
BANKING
USAGE
AND
PRACTICE.—In prescribing
such regulations, the Finance Board may
adopt or apply, in whole or in part, general
banking usage and practices, and, in in-
stances or respects in which they would
otherwise not be applicable, regulations of
the Board of Governors of the Federal Re-
serve System and operating letters, the
Uniform Commercial Code, and clearing-
house rules.
‘‘(3) PROHIBITION ON OTHER GENERAL BANK-
ING ACTIVITIES.—An enterprise resource bank may
not engage in any banking or other commercial ac-
tivities other than the activities specifically author-
ized under this Act and activities incidental to such
authorized activities.’’.
(6) Subsection (f) of section 11 of the Federal
Home Loan Bank Act is amended to read as follows:
‘‘(f) REDISCOUNT
OF NOTES HELD
BY OTHER
BANKS; PURCHASE OF BONDS OF OTHER BANKS.—The
enterprise resource banks may—
‘‘(1) rediscount the discounted notes of share-
holders of an enterprise resource bank which are
held by other enterprise resource banks;
‘‘(2) make loans to, or make deposits with,
other enterprise resource banks; or
‘‘(3) purchase any bonds or debentures issued
under this section.’’.
(7) Subsection (h) of section 11 of the Federal
Home Loan Bank Act is amended by striking ‘‘sec-
tion 301(d) of the Small Business Investment Act of
1958’’ and inserting ‘‘title III of the Small Business
Investment Act of 1958’’.
(8) Subsection (j) of section 11 of the Federal
Home Loan Bank Act is amended to read as follows:
‘‘(j) AUDITS.—
‘‘(1) AUDITS
BY
INSPECTOR
GENERAL
AND
GAO.—The financial transactions of each enterprise
103
SEC. 15. DEFINITIONS.
(a) FINANCE BOARD DEFINED.—Paragraph (1) of
section 2 of the Federal Home Loan Bank Act (12 U.S.C.
1422(1)) is amended to read as follows:
‘‘(1) FINANCE
BOARD.—The term ‘Finance
Board’ means the Federal Housing Finance Board
established under section 3.’’.
(b) HOME MORTGAGE LOAN DEFINED.—Section 2 of
the Federal Home Loan Bank Act (12 U.S.C. 1422) is
amended by striking paragraphs (5) and (6) and inserting
the following new paragraph:
‘‘(5) HOME MORTGAGE LOAN.—
‘‘(A) IN GENERAL.—The term ‘home mort-
gage loan’ means a loan made by a voting
shareholder or nonshareholder borrower upon
the security of—
‘‘(i) a mortgage, deed of trust, or
other security arrangement upon qualified
real estate, in fee simple; or
‘‘(ii) on a qualified leasehold—
‘‘(I) under a lease which has a
period to maturity of not less than 99
years and is renewable; or
‘‘(II) under a lease having a pe-
riod of not less than 50 years to run
from the date the mortgage, deed of