104TH CONGRESS
1ST SESSION
H. R. 2029
AN ACT
To amend the Farm Credit Act of 1971 to provide
regulatory relief, and for other purposes.
(b) TABLE OF CONTENTS.—The table of contents of
this Act is as follows:
Sec. 1. Short title; table of contents.
Sec. 2. References.
Sec. 3. Regulatory review.
Sec. 4. Examination of Farm Credit System institutions.
Sec. 5. Farm Credit Insurance Fund operations.
Sec. 6. Powers with respect to troubled insured System banks.
Sec. 7. Farm Credit System Insurance Corporation board of directors.
Sec. 8. Conservatorship and receiverships.
Sec. 9. Oversight and regulatory actions by the Farm Credit System Insurance
Corporation.
Sec. 10. Formation of administrative service entities.
Sec. 11. Requirements for loans sold into the secondary market.
Sec. 12. Removal of antiquated and unnecessary paperwork requirements.
Sec. 13. Removal of government certification requirement for certain private
sector financing.
Sec. 14. Reform of regulatory limitations on the dividend, member business,
and voting practices of eligible farmer-owned cooperatives.
Sec. 15. Extension of interest rate reduction program for 5 years.
SEC. 2. REFERENCES.
Except as otherwise expressly provided, wherever in
this Act an amendment or repeal is expressed in terms
of an amendment to, or repeal of, a section or other provi-
sion, the reference shall be considered to be made to a
section or other provision of the Farm Credit Act of 1971.
SEC. 3. REGULATORY REVIEW.
(a) FINDINGS.—The Congress finds that—
(1) the Farm Credit Administration, in its role
as an arms-length, safety and soundness regulator,
has made considerable progress in reducing the reg-
ulatory burden on Farm Credit System institutions;
(2) the efforts of the Farm Credit Administra-
tion in this regard have resulted in cost savings for
Farm Credit System institutions; and
(3) such cost savings ultimately benefit the Na-
tion’s farmers, ranchers, agricultural cooperatives,
and rural residents.
(b) REQUIREMENT FOR CONTINUED REVIEW.—The
Farm Credit Administration shall continue its comprehen-
sive review of regulations governing the Farm Credit Sys-
tem in order to further identify and eliminate, consistent
with safety and soundness, all regulations that are unnec-
essary, unduly burdensome or costly, or not based on
statute.
SEC. 4. EXAMINATION OF FARM CREDIT SYSTEM INSTITU-
TIONS.
Section 5.19(a) (12 U.S.C. 2254(a)) is amended by
striking ‘‘each year’’ in the first sentence and inserting
‘‘every 18 months’’.
SEC. 5. FARM CREDIT INSURANCE FUND OPERATIONS.
(a) ADJUSTMENT OF PREMIUMS.—
(1) IN GENERAL.—Section 5.55(a) (12 U.S.C.
2277a–4(a)) is amended—
(A) in paragraph (1), by striking ‘‘Until
the aggregate of amounts in the Farm Credit
Insurance Fund exceeds the secure base
amount, the annual premium due from any in-
sured System bank for any calendar year shall’’
and inserting ‘‘If, at the end of any calendar
year, the aggregate of the amounts in the Farm
Credit Insurance Fund does not exceed the se-
cure base amount, the annual premium due
from any insured System bank for that cal-
endar year shall, subject to paragraph (2),’’;
and
(B) by redesignating paragraph (2) as
paragraph (3) and inserting after paragraph
(1) the following:
‘‘(2) REDUCED PREMIUMS.—The Corporation,
in its sole discretion, may reduce, by a percentage
uniformly applied to all insured System banks, the
annual premium due from each insured System bank
during any calendar year, as determined under para-
graph (1).’’.
(2) CONFORMING AMENDMENTS.—
(A) SECTION 5.55(b).—Section 5.55(b) (12
U.S.C. 2277a–4(b)) is amended—
(i) by striking ‘‘Insurance Fund’’ each
place such term appears and inserting
‘‘Farm Credit Insurance Fund’’;
(ii) by striking ‘‘for the following cal-
endar year’’; and
(iii) by striking ‘‘subsection (a)’’ and
inserting ‘‘subsection (a)(1)’’.
(B) SECTION 5.56(a).—Section 5.56(a) (12
U.S.C. 2277a–5(a)) is amended in each of
paragraphs (2) and (3) by striking ‘‘section
5.55(a)(2)’’ and inserting ‘‘section 5.55(a)(3)’’.
(C) SECTION 1.12(b).—Section 1.12(b) (12
U.S.C. 2020(b)) is amended—
(i) in paragraph (1), by inserting ‘‘(as
defined in section 5.55(a)(3))’’ after ‘‘gov-
ernment-guaranteed loans’’; and
(ii) in paragraph (3), by inserting
‘‘(as so defined)’’ after ‘‘government-guar-
anteed loans’’ each place such term ap-
pears.
(b) TECHNICAL AMENDMENT.—Section 5.55(d) (12
U.S.C. 2277a–4(d)) is amended—
(1) in the matter preceding paragraph (1)—
(A) by striking ‘‘and (c)’’ and inserting ‘‘,
(c), and (e)’’; and
(B) by striking ‘‘a Farm Credit Bank’’ and
inserting ‘‘an insured System bank’’; and
(2) by striking ‘‘Farm Credit Bank’’ each sub-
sequent place such term appears and inserting ‘‘in-
sured System bank’’.
(c) ALLOCATION TO INSURED SYSTEM BANKS AND
OTHER SYSTEM INSTITUTIONS OF EXCESS AMOUNTS IN
THE FARM CREDIT INSURANCE FUND.—Section 5.55 (12
U.S.C. 2277a–4) is amended by adding at the end the fol-
lowing:
‘‘(e) ALLOCATION TO SYSTEM INSTITUTIONS OF EX-
CESS RESERVES.—
‘‘(1) ESTABLISHMENT OF ALLOCATED INSUR-
ANCE RESERVES ACCOUNTS.—There is hereby estab-
lished within the Farm Credit Insurance Fund—
‘‘(A) for each insured System bank; and
‘‘(B) subject to paragraph (5)(C), for all
holders, in the aggregate, of Financial Assist-
ance Corporation stock,
an Allocated Insurance Reserves Account. Amounts
in any Allocated Insurance Reserves Account shall
be considered to be part of the Farm Credit Insur-
ance Fund.
‘‘(2) ANNUAL ALLOCATIONS.—If, at the end of
any calendar year, the aggregate of the amounts in
the Farm Credit Insurance Fund exceeds the aver-
age secure base amount for the calendar year (as
calculated on an average daily balance basis), the
Corporation shall allocate to the Allocated Insurance
Reserves Accounts such excess amount less the
amount that the Corporation, in its sole discretion,
determines to be the sum of the estimated operating
‘‘(4) USE OF FUNDS IN ALLOCATED INSURANCE
RESERVES ACCOUNTS.—To the extent that the sum
of the operating expenses of the Corporation and the
insurance obligations of the Corporation for a cal-
endar year exceeds the estimated sum described in
paragraph (2) for the calendar year, the Corporation
shall cover such expenses and obligations by reduc-
ing each Allocated Insurance Reserves Account by
the same proportion and expending the amounts so
obtained, before expending other monies in the
Fund.
‘‘(5) 
OTHER
DISPOSITION
OF
ACCOUNT
FUNDS.—
‘‘(A) IN GENERAL.—Beginning in calendar
year 2003, if the aggregate of the amounts in
the Farm Credit Insurance Fund exceeds the
secure base amount, the Corporation may—
‘‘(i) subject to subparagraph (D), pay
to each insured System bank, in a manner
determined by the Corporation, an amount
equal to the lesser of—
‘‘(I) 20 percent of the balance in
the bank’s Allocated Insurance Re-
serves Account as of the preceding
December 31; or
‘‘(II) 20 percent of the balance in
the bank’s Allocated Insurance Re-
serves Account on the date of pay-
ment; and
‘‘(ii) subject to subparagraphs (C)
and (E), pay to each System bank and as-
sociation holding Financial Assistance Cor-
poration stock its proportionate share, de-
termined by dividing the number of shares
of Financial Assistance Corporation stock
held by such institution by the total num-
ber of shares of Financial Assistance Cor-
poration stock outstanding, of the lesser
of—
‘‘(I) 20 percent of the balance in
the Allocated Insurance Reserves Ac-
count established under paragraph
(1)(B) as of the preceding December
31; or
‘‘(II) 20 percent of the balance in
the Allocated Insurance Reserves Ac-
count established under paragraph
(1)(B) on the date of the payment.
‘‘(B) AUTHORITY TO ELIMINATE OR RE-
DUCE PAYMENTS.—The Corporation may elimi-
nate or reduce payments under subparagraph
(A) if the Corporation determines, in its sole
discretion, that such payments, or other cir-
cumstances that might require use of the Farm
Credit Insurance Fund, could cause the amount
in the Farm Credit Insurance Fund during that
calendar year to be less than the secure base
amount.
‘‘(C) REIMBURSEMENT FOR FINANCIAL AS-
SISTANCE CORPORATION STOCK.—
‘‘(i) SUFFICIENT FUNDING.—Notwith-
standing paragraph (3)(A), upon provision
by the Corporation for the accumulation in
the account established under paragraph
(1)(B) of funds in an amount equal to $56
million, the Corporation shall not allocate
any further funds to such account except
to replenish such account in the event that
funds are diminished below such amount
by the Corporation pursuant to paragraph
(4).
‘‘(ii) 
WIND
DOWN
AND
TERMI-
NATION.—
‘‘(I) FINAL
DISBURSEMENTS.—
Upon disbursement of a total of $53
million from such Allocated Insurance
Reserves Account, the Corporation
shall disburse the remaining amounts
in such account, as determined under
paragraph (5)(A)(ii), without regard
to 
the 
percentage 
limitation 
in
subclauses (I) and (II) thereof.
‘‘(II) 
TERMINATION
OF
AC-
COUNT.—Upon disbursement of a
total of $56 million from such Allo-
cated Insurance Reserves Account es-
tablished under paragraph (1)(B), the
Corporation shall close the Allocated
Insurance Reserves Account estab-
lished under paragraph (1)(B) and
transfer any remaining funds in such
Account to the remaining Allocated
Insurance Reserves Accounts in ac-
cordance with the formula in para-
graph (3)(B) for the calendar year in
which the transfer occurs.
‘‘(D) DISTRIBUTION
OF
PAYMENTS
RE-
CEIVED.—Within 60 days after receipt of a
payment made under subparagraph (5)(A)(i),
each insured System bank, in consultation with
its affiliated associations, and taking into ac-
count the direct or indirect payment of insur-
ance premiums by such associations, shall de-
velop and implement an equitable plan to dis-
tribute payments received pursuant to subpara-
graph (5)(A)(i) among the bank and its associa-
tions.
‘‘(E) EXCEPTION FOR PREVIOUSLY REIM-
BURSED ASSOCIATIONS.—For purposes of sub-
paragraph (5)(A)(ii), in any Farm Credit Dis-
trict in which the funding bank has reimbursed
one or more of its affiliated associations for the
previously unreimbursed portion of the Finan-
cial Assistance stock held by such associations,
the funding bank shall be deemed to be the
holder of the shares of Financial Assistance
Corporation stock for which it has provided
such reimbursement.’’.
SEC. 6. POWERS WITH RESPECT TO TROUBLED INSURED
SYSTEM BANKS.
(a) LEAST-COST RESOLUTION.—Section 5.61(a)(3)
(12 U.S.C. 2277a–10(a)(3)) is amended—
(1) by redesignating subparagraph (B) as sub-
paragraph (F); and