H. R. 2029
One Hundred Fourth Congress
of the
United States of America
AT THE SECOND SESSION
Begun and held at the City of Washington on Wednesday,
the third day of January, one thousand nine hundred and ninety-six
An Act
To amend the Farm Credit Act of 1971 to provide regulatory relief, and for other
purposes.
Be it enacted by the Senate and House of Representatives 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 ‘‘Farm Credit
System Reform Act of 1996’’.
(b) TABLE OF CONTENTS.—The table of contents for this Act
is as follows:
Sec. 1. Short title; table of contents.
TITLE I—AGRICULTURAL MORTGAGE SECONDARY MARKET
Sec. 101. Definition of real estate.
Sec. 102. Definition of certified facility.
Sec. 103. Duties of Federal Agricultural Mortgage Corporation.
Sec. 104. Powers of the Corporation.
Sec. 105. Federal reserve banks as depositaries and fiscal agents.
Sec. 106. Certification of agricultural mortgage marketing facilities.
Sec. 107. Guarantee of qualified loans.
Sec. 108. Mandatory reserves and subordinated participation interests eliminated.
Sec. 109. Standards requiring diversified pools.
Sec. 110. Small farms.
Sec. 111. Definition of an affiliate.
Sec. 112. State usury laws superseded.
Sec. 113. Extension of capital transition period.
Sec. 114. Minimum capital level.
Sec. 115. Critical capital level.
Sec. 116. Enforcement levels.
Sec. 117. Recapitalization of the Corporation.
Sec. 118. Liquidation of the Federal Agricultural Mortgage Corporation.
TITLE II—REGULATORY RELIEF
Sec. 201. Compensation of association personnel.
Sec. 202. Use of private mortgage insurance.
Sec. 203. Removal of certain borrower reporting requirement.
Sec. 204. Reform of regulatory limitations on dividend, member business, and vot-
ing practices of eligible farmer-owned cooperatives.
Sec. 205. Removal of Federal Government certification requirement for certain pri-
vate sector financings.
Sec. 206. Borrower stock.
Sec. 207. Disclosure relating to adjustable rate loans.
Sec. 208. Borrowers’ rights.
Sec. 209. Formation of administrative service entities.
Sec. 210. Joint management agreements.
Sec. 211. Dissemination of quarterly reports.
Sec. 212. Regulatory review.
Sec. 213. Examination of farm credit system institutions.
Sec. 214. Conservatorships and receiverships.
Sec. 215. Farm Credit Insurance Fund operations.
Sec. 216. Examinations by the Farm Credit System Insurance Corporation.
Sec. 217. Powers with respect to troubled insured System banks.
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Sec. 218. Oversight and regulatory actions by the Farm Credit System Insurance
Corporation.
Sec. 219. Farm Credit System Insurance Corporation board of directors.
Sec. 220. Interest rate reduction program.
Sec. 221. Liability for making criminal referrals.
TITLE III—IMPLEMENTATION AND EFFECTIVE DATE
Sec. 301. Implementation.
Sec. 302. Effective date.
TITLE I—AGRICULTURAL MORTGAGE
SECONDARY MARKET
SEC. 101. DEFINITION OF REAL ESTATE.
Section 8.0(1)(B)(ii) of the Farm Credit Act of 1971 (12 U.S.C.
2279aa(1)(B)(ii)) is amended by striking ‘‘with a purchase price’’
and inserting ‘‘, excluding the land to which the dwelling is affixed,
with a value’’.
SEC. 102. DEFINITION OF CERTIFIED FACILITY.
Section 8.0(3) of the Farm Credit Act of 1971 (12 U.S.C.
2279aa(3)) is amended—
(1) in subparagraph (A), by striking ‘‘a secondary marketing
agricultural loan’’ and inserting ‘‘an agricultural mortgage
marketing’’; and
(2) in subparagraph (B), by striking ‘‘, but only’’ and all
that follows through ‘‘(9)(B)’’.
SEC. 103. DUTIES OF FEDERAL AGRICULTURAL MORTGAGE CORPORA-
TION.
Section 8.1(b) of the Farm Credit Act of 1971 (12 U.S.C. 2279aa–
1(b)) is amended—
(1) in paragraph (2), by striking ‘‘and’’ at the end;
(2) in paragraph (3), by striking the period at the end
and inserting ‘‘; and’’; and
(3) by adding at the end the following:
‘‘(4) purchase qualified loans and issue securities represent-
ing interests in, or obligations backed by, the qualified loans,
guaranteed for the timely repayment of principal and interest.’’.
SEC. 104. POWERS OF THE CORPORATION.
Section 8.3(c) of the Farm Credit Act of 1971 (12 U.S.C. 2279aa–
3(c)) is amended—
(1) by redesignating paragraphs (13) and (14) as paragraphs
(14) and (15), respectively; and
(2) by inserting after paragraph (12) the following:
‘‘(13) To purchase, hold, sell, or assign a qualified loan,
to issue a guaranteed security, representing an interest in,
or an obligation backed by, the qualified loan, and to perform
all the functions and responsibilities of an agricultural mort-
gage marketing facility operating as a certified facility under
this title.’’.
SEC. 105. FEDERAL RESERVE BANKS AS DEPOSITARIES AND FISCAL
AGENTS.
Section 8.3 of the Farm Credit Act of 1971 (12 U.S.C. 2279aa–
3) is amended—
(1) in subsection (d), by striking ‘‘may act as depositories
for, or’’ and inserting ‘‘shall act as depositories for, and’’; and
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(2) in subsection (e), by striking ‘‘Secretary of the Treasury
may authorize the Corporation to use’’ and inserting ‘‘Corpora-
tion shall have access to’’.
SEC. 106. CERTIFICATION OF AGRICULTURAL MORTGAGE MARKETING
FACILITIES.
Section 8.5 of the Farm Credit Act of 1971 (12 U.S.C. 2279aa–
5) is amended—
(1) in subsection (a)—
(A) in paragraph (1), by inserting ‘‘(other than the
Corporation)’’ after ‘‘agricultural mortgage marketing facili-
ties’’; and
(B) in paragraph (2), by inserting ‘‘(other than the
Corporation)’’ after ‘‘agricultural mortgage marketing facil-
ity’’; and
(2) in subsection (e)(1), by striking ‘‘(other than the Cor-
poration)’’.
SEC. 107. GUARANTEE OF QUALIFIED LOANS.
Section 8.6 of the Farm Credit Act of 1971 (12 U.S.C. 2279aa–
6) is amended—
(1) in subsection (a)(1)—
(A) by striking ‘‘Corporation shall guarantee’’ and
inserting the following: ‘‘Corporation—
‘‘(A) shall guarantee’’;
(B) by striking the period at the end and inserting
‘‘; and’’; and
(C) by adding at the end the following:
‘‘(B) may issue a security, guaranteed as to the timely
payment of principal and interest, that represents an
interest solely in, or an obligation fully backed by, a pool
consisting of qualified loans that—
‘‘(i) meet the standards established under section
8.8; and
‘‘(ii) have been purchased and held by the Corpora-
tion.’’;
(2) in subsection (d)—
(A) by striking paragraph (4); and
(B) by redesignating paragraphs (5), (6), and (7) as
paragraphs (4), (5), and (6), respectively; and
(3) in subsection (g)(2), by striking ‘‘section 8.0(9)(B))’’ and
inserting ‘‘section 8.0(9))’’.
SEC. 108. MANDATORY RESERVES AND SUBORDINATED PARTICIPA-
TION INTERESTS ELIMINATED.
(a) GUARANTEE OF QUALIFIED LOANS.—Section 8.6 of the Farm
Credit Act of 1971 (12 U.S.C. 2279aa–6) is amended by striking
subsection (b).
(b) RESERVES AND SUBORDINATED PARTICIPATION INTERESTS.—
Section 8.7 of the Farm Credit Act of 1971 (12 U.S.C. 2279aa–
7) is repealed.
(c) CONFORMING AMENDMENTS.—
(1) Section 8.0(9)(B)(i) of the Farm Credit Act of 1971
(12 U.S.C. 2279aa(9)(B)(i)) is amended by striking ‘‘8.7, 8.8,’’
and inserting ‘‘8.8’’.
(2) Section 8.6(a)(2) of the Farm Credit Act of 1971 (12
U.S.C. 2279aa–6(a)(2)) is amended by striking ‘‘subject to the
provisions of subsection (b)’’.
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SEC. 109. STANDARDS REQUIRING DIVERSIFIED POOLS.
(a) IN GENERAL.—Section 8.6 of the Farm Credit Act of 1971
(12 U.S.C. 2279aa–6) (as amended by section 108) is amended—
(1) by striking subsection (c); and
(2) by redesignating subsections (d) through (g) as sub-
sections (b) through (e), respectively.
(b) CONFORMING AMENDMENTS.—
(1) Section 8.0(9)(B)(i) of the Farm Credit Act of 1971
(12 U.S.C. 2279aa(9)(B)(i)) is amended by striking ‘‘(f)’’ and
inserting ‘‘(d)’’.
(2) Section 8.13(a) of the Farm Credit Act of 1971 (12
U.S.C. 2279aa–13(a)) is amended by striking ‘‘sections 8.6(b)
and’’ in each place it appears and inserting ‘‘section’’.
(3) Section 8.32(b)(1)(C) of the Farm Credit Act of 1971
(12 U.S.C. 2279bb–1(b)(1)(C)) is amended—
(A) by striking ‘‘shall’’ and inserting ‘‘may’’; and
(B) by inserting ‘‘(as in effect before the date of the
enactment of the Farm Credit System Reform Act of 1996)’’
before the semicolon.
(4) Section 8.6(b) of the Farm Credit Act of 1971 (12 U.S.C.
2279aa–6(b)) 
(as 
redesignated 
by 
subsection 
(a)(2)) 
is
amended—
(A) by striking paragraph (4) (as redesignated by sec-
tion 107(2)(B)); and
(B) by redesignating paragraphs (5) and (6) (as redesig-
nated by section 107(2)(B)) as paragraphs (4) and (5),
respectively.
SEC. 110. SMALL FARMS.
Section 8.8(e) of the Farm Credit Act of 1971 (12 U.S.C. 2279aa–
8(e)) is amended by adding at the end the following: ‘‘The Board
shall promote and encourage the inclusion of qualified loans for
small farms and family farmers in the agricultural mortgage second-
ary market.’’.
SEC. 111. DEFINITION OF AN AFFILIATE.
Section 8.11(e) of the Farm Credit Act of 1971 (12 U.S.C.
2279aa–11(e)) is amended—
(1) by striking ‘‘a certified facility or’’; and
(2) by striking ‘‘paragraphs (3) and (7), respectively, of
section 8.0’’ and inserting ‘‘section 8.0(7)’’.
SEC. 112. STATE USURY LAWS SUPERSEDED.
Section 8.12 of the Farm Credit Act of 1971 (12 U.S.C. 2279aa–
12) is amended by striking subsection (d) and inserting the follow-
ing:
‘‘(d) STATE USURY LAWS SUPERSEDED.—A provision of the Con-
stitution or law of any State shall not apply to an agricultural
loan made by an originator or a certified facility in accordance
with this title for sale to the Corporation or to a certified facility
for inclusion in a pool for which the Corporation has provided,
or has committed to provide, a guarantee, if the loan, not later
than 180 days after the date the loan was made, is sold to the
Corporation or included in a pool for which the Corporation has
provided a guarantee, if the provision—
‘‘(1) limits the rate or amount of interest, discount points,
finance charges, or other charges that may be charged, taken,
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received, or reserved by an agricultural lender or a certified
facility; or
‘‘(2) limits or prohibits a prepayment penalty (either fixed
or declining), yield maintenance, or make-whole payment that
may be charged, taken, or received by an agricultural lender
or a certified facility in connection with the full or partial
payment of the principal amount due on a loan by a borrower
in advance of the scheduled date for the payment under the
terms of the loan, otherwise known as a prepayment of the
loan principal.’’.
SEC. 113. EXTENSION OF CAPITAL TRANSITION PERIOD.
Section 8.32 of the Farm Credit Act of 1971 (12 U.S.C. 2279bb–
1) is amended—
(1) in the first sentence of subsection (a), by striking ‘‘Not
later than the expiration of the 2-year period beginning on
December 13, 1991,’’ and inserting ‘‘Not sooner than the expira-
tion of the 3-year period beginning on the date of enactment
of the Farm Credit System Reform Act of 1996,’’;
(2) in the first sentence of subsection (b)(2), by striking
‘‘5-year’’ and inserting ‘‘8-year’’; and
(3) in subsection (d)—
(A) in the first sentence—
(i) by striking ‘‘The regulations establishing’’ and
inserting the following:
‘‘(1) IN GENERAL.—The regulations establishing’’; and
(ii) by striking ‘‘shall contain’’ and inserting the
following: ‘‘shall—
‘‘(A) be issued by the Director for public comment in
the form of a notice of proposed rulemaking, to be first
published after the expiration of the period referred to
in subsection (a); and
‘‘(B) contain’’; and
(B) in the second sentence, by striking ‘‘The regulations
shall’’ and inserting the following:
‘‘(2) SPECIFICITY.—The regulations referred to in paragraph
(1) shall’’.
SEC. 114. MINIMUM CAPITAL LEVEL.
Section 8.33 of the Farm Credit Act of 1971 (12 U.S.C. 2279bb–
2) is amended to read as follows:
‘‘SEC. 8.33. MINIMUM CAPITAL LEVEL.
‘‘(a) IN GENERAL.—Except as provided in subsection (b), for
purposes of this subtitle, the minimum capital level for the Corpora-
tion shall be an amount of core capital equal to the sum of—
‘‘(1) 2.75 percent of the aggregate on-balance sheet assets
of the Corporation, as determined in accordance with generally
accepted accounting principles; and
‘‘(2) 0.75 percent of the aggregate off-balance sheet obliga-
tions of the Corporation, which, for the purposes of this subtitle,
shall include—
‘‘(A) the unpaid principal balance of outstanding securi-
ties that are guaranteed by the Corporation and backed
by pools of qualified loans;
‘‘(B) instruments that are issued or guaranteed by the
Corporation 
and 
are 
substantially 
equivalent 
to
instruments described in subparagraph (A); and
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‘‘(C) other off-balance sheet obligations of the Corpora-
tion.
‘‘(b) TRANSITION PERIOD.—
‘‘(1) IN GENERAL.—For purposes of this subtitle, the mini-
mum capital level for the Corporation—
‘‘(A) prior to January 1, 1997, shall be the amount
of core capital equal to the sum of—
‘‘(i) 0.45 percent of aggregate off-balance sheet
obligations of the Corporation;
‘‘(ii) 0.45 percent of designated on-balance sheet
assets of the Corporation, as determined under para-
graph (2); and
‘‘(iii) 2.50 percent of on-balance sheet assets of
the Corporation other than assets designated under
paragraph (2);
‘‘(B) during the 1-year period ending December 31,
1997, shall be the amount of core capital equal to the
sum of—
‘‘(i) 0.55 percent of aggregate off-balance sheet
obligations of the Corporation;
‘‘(ii) 1.20 percent of designated on-balance sheet
assets of the Corporation, as determined under para-
graph (2); and
‘‘(iii) 2.55 percent of on-balance sheet assets of
the Corporation other than assets designated under
paragraph (2);
‘‘(C) during the 1-year period ending December 31,
1998, shall be the amount of core capital equal to—
‘‘(i) if the Corporation’s core capital is not less
than $25,000,000 on January 1, 1998, the sum of—
‘‘(I) 0.65 percent of aggregate off-balance sheet
obligations of the Corporation;
‘‘(II) 1.95 percent of designated on-balance
sheet assets of the Corporation, as determined
under paragraph (2); and
‘‘(III) 2.65 percent of on-balance sheet assets
of the Corporation other than assets designated
under paragraph (2); or
‘‘(ii) if the Corporation’s core capital is less than
$25,000,000 on January 1, 1998, the amount deter-
mined under subsection (a); and
‘‘(D) on and after January 1, 1999, shall be the amount
determined under subsection (a).
‘‘(2) DESIGNATED ON-BALANCE SHEET ASSETS.—For purposes
of this subsection, the designated on-balance sheet assets of
the Corporation shall be—
‘‘(A) the aggregate on-balance sheet assets of the Cor-
poration acquired under section 8.6(e); and
‘‘(B) the aggregate amount of qualified loans purchased
and held by the Corporation under section 8.3(c)(13).’’.
SEC. 115. CRITICAL CAPITAL LEVEL.
Section 8.34 of the Farm Credit Act of 1971 (12 U.S.C. 2279bb–
3) is amended to read as follows:
‘‘SEC. 8.34. CRITICAL CAPITAL LEVEL.
‘‘For purposes of this subtitle, the critical capital level for
the Corporation shall be an amount of core capital equal to 50
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percent of the total minimum capital amount determined under
section 8.33.’’.
SEC. 116. ENFORCEMENT LEVELS.
Section 8.35(e) of the Farm Credit Act of 1971 (12 U.S.C.
2279bb–4(e)) is amended by striking ‘‘during the 30-month period
beginning on the date of the enactment of this section,’’ and insert-
ing ‘‘during the period beginning on December 13, 1991, and ending
on the effective date of the risk based capital regulation issued
by the Director under section 8.32,’’.
SEC. 117. RECAPITALIZATION OF THE CORPORATION.
Title VIII of the Farm Credit Act of 1971 (12 U.S.C. 2279aa
et seq.) is amended by adding at the end the following:
‘‘SEC. 8.38. RECAPITALIZATION OF THE CORPORATION.
‘‘(a) MANDATORY RECAPITALIZATION.—The Corporation shall
increase the core capital of the Corporation to an amount equal
to or greater than $25,000,000, not later than the earlier of—
‘‘(1) the date that is 2 years after the date of enactment
of this section; or
‘‘(2) the date that is 180 days after the end of the first
calendar quarter that the aggregate on-balance sheet assets
of the Corporation, plus the outstanding principal of the off-
balance sheet obligations of the Corporation, equal or exceed
$2,000,000,000.
‘‘(b) RAISING CORE CAPITAL.—In carrying out this section, the
Corporation may issue stock under section 8.4 and otherwise employ
any recognized and legitimate means of raising core capital in
the power of the Corporation under section 8.3.
‘‘(c) LIMITATION ON GROWTH OF TOTAL ASSETS.—During the
2-year period beginning on the date of enactment of this section,
the aggregate on-balance sheet assets of the Corporation plus the
outstanding principal of the off-balance sheet obligations of the
Corporation may not exceed $3,000,000,000 if the core capital of
the Corporation is less than $25,000,000.
‘‘(d) ENFORCEMENT.—If the Corporation fails to carry out sub-
section (a) by the date required under paragraph (1) or (2) of
subsection (a), the Corporation may not purchase a new qualified
loan or issue or guarantee a new loan-backed security until the
core capital of the Corporation is increased to an amount equal
to or greater than $25,000,000.’’.
SEC. 118. LIQUIDATION OF THE FEDERAL AGRICULTURAL MORTGAGE
CORPORATION.
Title VIII of the Farm Credit Act of 1971 (12 U.S.C. 2279aa
et seq.) (as amended by section 117) is amended by adding at
the end the following:
‘‘Subtitle 
C—Receivership, 
Conservator-
ship, and Liquidation of the Federal
Agricultural Mortgage Corporation
‘‘SEC. 8.41. CONSERVATORSHIP; LIQUIDATION; RECEIVERSHIP.
‘‘(a) VOLUNTARY LIQUIDATION.—The Corporation may volun-
tarily liquidate only with the consent of, and in accordance with
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a plan of liquidation approved by, the Farm Credit Administration
Board.
‘‘(b) INVOLUNTARY LIQUIDATION.—
‘‘(1) IN GENERAL.—The Farm Credit Administration Board
may appoint a conservator or receiver for the Corporation under
the circumstances specified in section 4.12(b).
‘‘(2) APPLICATION.—In applying section 4.12(b) to the Cor-
poration under paragraph (1)—
‘‘(A) the Corporation shall also be considered insolvent
if the Corporation is unable to pay its debts as they fall
due in the ordinary course of business;
‘‘(B) a conservator may also be appointed for the Cor-
poration if the authority of the Corporation to purchase
qualified loans or issue or guarantee loan-backed securities
is suspended; and
‘‘(C) a receiver may also be appointed for the Corpora-
tion if—
‘‘(i)(I) the authority of the Corporation to purchase
qualified loans or issue or guarantee loan-backed secu-
rities is suspended; or
‘‘(II) the Corporation is classified under section
8.35 as within level III or IV and the alternative
actions available under subtitle B are not satisfactory;
and
‘‘(ii) the Farm Credit Administration determines
that the appointment of a conservator would not be
appropriate.
‘‘(3) NO EFFECT ON SUPERVISORY ACTIONS.—The grounds
for appointment of a conservator for the Corporation under
this subsection shall be in addition to those in section 8.37.
‘‘(c) APPOINTMENT OF CONSERVATOR OR RECEIVER.—
‘‘(1) QUALIFICATIONS.—Notwithstanding section 4.12(b), if
a conservator or receiver is appointed for the Corporation,
the conservator or receiver shall be—
‘‘(A) the Farm Credit Administration or any other
governmental entity or employee, including the Farm
Credit System Insurance Corporation; or
‘‘(B) any person that—
‘‘(i) has no claim against, or financial interest in,
the Corporation or other basis for a conflict of interest
as the conservator or receiver; and
‘‘(ii) has the financial and management expertise
necessary to direct the operations and affairs of the
Corporation and, if necessary, to liquidate the Corpora-
tion.
‘‘(2) COMPENSATION.—
‘‘(A) IN GENERAL.—A conservator or receiver for the
Corporation and professional personnel (other than a Fed-
eral employee) employed to represent or assist the con-
servator or receiver may be compensated for activities con-
ducted as, or for, a conservator or receiver.
‘‘(B) LIMIT ON COMPENSATION.—Compensation may not
be provided in amounts greater than the compensation
paid to employees of the Federal Government for similar
services, except that the Farm Credit Administration may
provide for compensation at higher rates that are not in
excess of rates prevailing in the private sector if the Farm
H. R. 2029—9
Credit Administration determines that compensation at
higher rates is necessary in order to recruit and retain
competent personnel.
‘‘(C) CONTRACTUAL ARRANGEMENTS.—The conservator
or receiver may contract with any governmental entity,
including the Farm Credit System Insurance Corporation,
to make personnel, services, and facilities of the entity
available to the conservator or receiver on such terms
and compensation arrangements as shall be mutually
agreed, and each entity may provide the same to the con-
servator or receiver.
‘‘(3) EXPENSES.—A valid claim for expenses of the
conservatorship or receivership (including compensation under
paragraph (2)) and a valid claim with respect to a loan made
under subsection (f) shall—
‘‘(A) be paid by the conservator or receiver from funds
of the Corporation before any other valid claim against
the Corporation; and
‘‘(B) may be secured by a lien, on such property of
the Corporation as the conservator or receiver may deter-
mine, that shall have priority over any other lien.
‘‘(4) LIABILITY.—If the conservator or receiver for the Cor-
poration is not a Federal entity, or an officer or employee
of the Federal Government, the conservator or receiver shall
not be personally liable for damages in tort or otherwise for
an act or omission performed pursuant to and in the course
of the conservatorship or receivership, unless the act or omis-
sion constitutes gross negligence or any form of intentional
tortious conduct or criminal conduct.
‘‘(5) INDEMNIFICATION.—The Farm Credit Administration
may allow indemnification of the conservator or receiver from
the assets of the conservatorship or receivership on such terms
as the Farm Credit Administration considers appropriate.
‘‘(d) JUDICIAL REVIEW OF APPOINTMENT.—
‘‘(1) IN GENERAL.—Notwithstanding subsection (i)(1), not
later than 30 days after a conservator or receiver is appointed
under subsection (b), the Corporation may bring an action
in the United States District Court for the District of Columbia
for an order requiring the Farm Credit Administration Board
to remove the conservator or receiver. The court shall, on
the merits, dismiss the action or direct the Farm Credit
Administration Board to remove the conservator or receiver.
‘‘(2) STAY OF OTHER ACTIONS.—On the commencement of
an action under paragraph (1), any court having jurisdiction
of any other action or enforcement proceeding authorized under
this Act to which the Corporation is a party shall stay the
action or proceeding during the pendency of the action for
removal of the conservator or receiver.
‘‘(e) GENERAL POWERS
OF CONSERVATOR
OR RECEIVER.—The
conservator or receiver for the Corporation shall have such powers
to conduct the conservatorship or receivership as shall be provided
pursuant to regulations adopted by the Farm Credit Administration
Board. Such powers shall be comparable to the powers available
to a conservator or receiver appointed pursuant to section 4.12(b).
‘‘(f) BORROWINGS FOR WORKING CAPITAL.—
‘‘(1) IN
GENERAL.—If the conservator or receiver of the
Corporation determines that it is likely that there will be
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insufficient funds to pay the ongoing administrative expenses
of the conservatorship or receivership or that there will be
insufficient liquidity to fund maturing obligations of the
conservatorship or receivership, the conservator or receiver may
borrow funds in such amounts, from such sources, and at such
rates of interest as the conservator or receiver considers nec-
essary or appropriate to meet the administrative expenses or
liquidity needs of the conservatorship or receivership.
‘‘(2) WORKING CAPITAL FROM FARM CREDIT BANKS.—A Farm
Credit bank may loan funds to the conservator or receiver
for a loan authorized under paragraph (1) or, in the event
of receivership, a Farm Credit bank may purchase assets of
the Corporation.
‘‘(g) AGREEMENTS AGAINST INTERESTS
OF CONSERVATOR
OR
RECEIVER.—No agreement that tends to diminish or defeat the
right, title, or interest of the conservator or receiver for the Corpora-
tion in any asset acquired by the conservator or receiver as con-
servator or receiver for the Corporation shall be valid against the
conservator or receiver unless the agreement—
‘‘(1) is in writing;
‘‘(2) is executed by the Corporation and any person claiming
an adverse interest under the agreement, including the obligor,
contemporaneously with the acquisition of the asset by the
Corporation;
‘‘(3) is approved by the Board or an appropriate committee
of the Board, which approval shall be reflected in the minutes
of the Board or committee; and
‘‘(4) has been, continuously, from the time of the agree-
ment’s execution, an official record of the Corporation.
‘‘(h) REPORT TO THE CONGRESS.—On a determination by the
receiver for the Corporation that there are insufficient assets of
the receivership to pay all valid claims against the receivership,
the receiver shall submit to the Secretary of the Treasury, the
Committee on Agriculture of the House of Representatives, and
the Committee on Agriculture, Nutrition, and Forestry of the Senate
a report on the financial condition of the receivership.
‘‘(i) TERMINATION OF AUTHORITIES.—
‘‘(1) CORPORATION.—The charter of the Corporation shall
be canceled, and the authority provided to the Corporation
by this title shall terminate, on such date as the Farm Credit
Administration Board determines is appropriate following the
placement of the Corporation in receivership, but not later
than the conclusion of the receivership and discharge of the
receiver.
‘‘(2) OVERSIGHT.—The Office of Secondary Market Over-
sight established under section 8.11 shall be abolished, and
section 8.11(a) and subtitle B shall have no force or effect,
on such date as the Farm Credit Administration Board deter-
mines is appropriate following the placement of the Corporation
in receivership, but not later than the conclusion of the receiver-
ship and discharge of the receiver.’’.
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TITLE II—REGULATORY RELIEF
SEC. 201. COMPENSATION OF ASSOCIATION PERSONNEL.
Section 1.5(13) of the Farm Credit Act of 1971 (12 U.S.C.
2013(13)) is amended by striking ‘‘, and the appointment and com-
pensation of the chief executive officer thereof,’’.
SEC. 202. USE OF PRIVATE MORTGAGE INSURANCE.
(a) IN GENERAL.—Section 1.10(a)(1) of the Farm Credit Act
of 1971 (12 U.S.C. 2018(a)(1)) is amended by adding at the end
the following:
‘‘(D) PRIVATE MORTGAGE INSURANCE.—A loan on which
private mortgage insurance is obtained may exceed 85 per-
cent of the appraised value of the real estate security
to the extent that the loan amount in excess of such 85
percent is covered by the insurance.’’.
(b) CONFORMING AMENDMENT.—Section 1.10(a)(1)(A) of the
Farm Credit Act of 1971 (12 U.S.C. 2018(a)(1)(A)) is amended
by striking ‘‘paragraphs (2) and (3)’’ and inserting ‘‘subparagraphs
(C) and (D)’’.
SEC. 203. REMOVAL OF CERTAIN BORROWER REPORTING REQUIRE-
MENT.
Section 1.10(a) of the Farm Credit Act of 1971 (12 U.S.C.
2018(a)) is amended by striking paragraph (5).
SEC. 204. REFORM OF REGULATORY LIMITATIONS ON DIVIDEND, MEM-
BER BUSINESS, AND VOTING PRACTICES OF ELIGIBLE
FARMER-OWNED COOPERATIVES.
(a) IN GENERAL.—Section 3.8(a) of the Farm Credit Act of
1971 (12 U.S.C. 2129(a)) is amended by adding at the end the
following: ‘‘Any such association that has received a loan from
a bank for cooperatives shall, without regard to the requirements
of paragraphs (1) through (4), continue to be eligible for so long
as more than 50 percent (or such higher percentage as is established
by the bank board) of the voting control of the association is held
by farmers, producers or harvesters of aquatic products, or eligible
cooperative associations.’’.
(b) CONFORMING AMENDMENT.—Section 3.8(b)(1)(D) of the Farm
Credit Act of 1971 (12 U.S.C. 2129(b)(1)(D)) is amended by striking
‘‘and (4) of subsection (a)’’ and inserting ‘‘and (4), or under the
last sentence, of subsection (a)’’.
SEC. 205. REMOVAL OF FEDERAL GOVERNMENT CERTIFICATION
REQUIREMENT 
FOR 
CERTAIN 
PRIVATE 
SECTOR
FINANCINGS.
Section 3.8(b)(1)(A) of the Farm Credit Act of 1971 (12 U.S.C.
2129(b)(1)(A)) is amended—
(1) by striking ‘‘have been certified by the Administrator
of the Rural Electrification Administration to be eligible for
such’’ and inserting ‘‘are eligible under the Rural Electrification
Act of 1936 (7 U.S.C. 901 et seq.) for’’; and
(2) by striking ‘‘loan guarantee, and’’ and inserting ‘‘loan
guarantee from the Administration or the Bank (or a successor
of the Administration or the Bank), and’’.
H. R. 2029—12
SEC. 206. BORROWER STOCK.
Section 4.3A of the Farm Credit Act of 1971 (12 U.S.C. 2154a)
is amended—
(1) by redesignating subsections (f) and (g) as subsections
(g) and (h), respectively; and
(2) by inserting after subsection (e) the following:
‘‘(f) LOANS DESIGNATED FOR SALE OR SOLD INTO THE SECONDARY
MARKET.—
‘‘(1) IN GENERAL.—Subject to paragraph (2) and notwith-
standing any other provision of this section, the bylaws adopted
by a bank or association under subsection (b) may provide—
‘‘(A) in the case of a loan made on or after the date
of enactment of this paragraph that is designated, at the
time the loan is made, for sale into a secondary market,
that no voting stock or participation certificate purchase
requirement shall apply to the borrower for the loan; and
‘‘(B) in the case of a loan made before the date of
enactment of this paragraph that is sold into a secondary
market, that all outstanding voting stock or participation
certificates held by the borrower with respect to the loan
shall, subject to subsection (d)(1), be retired.
‘‘(2) APPLICABILITY.—Notwithstanding any other provision
of this section, in the case of a loan sold to a secondary market
under title VIII, paragraph (1) shall apply regardless of whether
the bank or association retains a subordinated participation
interest in a loan or pool of loans or contributes to a cash
reserve.
‘‘(3) EXCEPTION.—
‘‘(A) IN GENERAL.—Subject to subparagraph (B) and
notwithstanding any other provision of this section, if a
loan designated for sale under paragraph (1)(A) is not
sold into a secondary market during the 180-day period
that begins on the date of the designation, the voting
stock or participation certificate purchase requirement that
would otherwise apply to the loan in the absence of a
bylaw provision described in paragraph (1)(A) shall be effec-
tive.
‘‘(B) RETIREMENT.—The bylaws adopted by a bank or
association under subsection (b) may provide that if a loan
described in subparagraph (A) is sold into a secondary
market after the end of the 180-day period described in
the subparagraph, all outstanding voting stock or participa-
tion certificates held by the borrower with respect to the
loan shall, subject to subsection (d)(1), be retired.’’.
SEC. 207. DISCLOSURE RELATING TO ADJUSTABLE RATE LOANS.
Section 4.13(a)(4) of the Farm Credit Act of 1971 (12 U.S.C.
2199(a)(4)) is amended by inserting before the semicolon at the
end the following: ‘‘, and notice to the borrower of a change in
the interest rate applicable to the loan of the borrower may be
made within a reasonable time after the effective date of an increase
or decrease in the interest rate’’.
SEC. 208. BORROWERS’ RIGHTS.
(a) DEFINITION
OF LOAN.—Section 4.14A(a)(5) of the Farm
Credit Act of 1971 (12 U.S.C. 2202a(a)(5)) is amended—
(1) by striking ‘‘(5) LOAN.—The’’ and inserting the following:
H. R. 2029—13
‘‘(5) LOAN.—
‘‘(A) IN GENERAL.—Subject to subparagraph (B), the’’;
and
(2) by adding at the end the following:
‘‘(B) EXCLUSION FOR LOANS DESIGNATED FOR SALE INTO
SECONDARY MARKET.—
‘‘(i) IN
GENERAL.—Except as provided in clause
(ii), the term ‘loan’ does not include a loan made on
or after the date of enactment of this subparagraph
that is designated, at the time the loan is made, for
sale into a secondary market.
‘‘(ii) UNSOLD LOANS.—
‘‘(I) IN
GENERAL.—Except as provided in
subclause (II), if a loan designated for sale under
clause (i) is not sold into a secondary market dur-
ing the 180-day period that begins on the date
of the designation, the provisions of this section
and sections 4.14, 4.14B, 4.14C, 4.14D, and 4.36
that would otherwise apply to the loan in the
absence of the exclusion described in clause (i)
shall become effective with respect to the loan.
‘‘(II) LATER
SALE.—If a loan described in
subclause (I) is sold into a secondary market after
the end of the 180-day period described in
subclause (I), subclause (I) shall not apply with
respect to the loan beginning on the date of the
sale.’’.
(b) BORROWERS’ RIGHTS FOR POOLED LOANS.—The first sentence
of section 8.9(b) of the Farm Credit Act of 1971 (12 U.S.C. 2279aa–
9(b)) is amended by inserting ‘‘(as defined in section 4.14A(a)(5))’’
after ‘‘application for a loan’’.
SEC. 209. FORMATION OF ADMINISTRATIVE SERVICE ENTITIES.
Part E of title IV of the Farm Credit Act of 1971 is amended
by inserting after section 4.28 (12 U.S.C. 2214) the following:
‘‘SEC. 4.28A. DEFINITION OF BANK.
‘‘In this part, the term ‘bank’ includes each association operat-
ing under title II.’’.
SEC. 210. JOINT MANAGEMENT AGREEMENTS.
The first sentence of section 5.17(a)(2)(A) of the Farm Credit
Act of 1971 (12 U.S.C. 2252(a)(2)(A)) is amended by striking ‘‘or
management agreements’’.
SEC. 211. DISSEMINATION OF QUARTERLY REPORTS.
Section 5.17(a)(8) of the Farm Credit Act of 1971 (12 U.S.C.
2252(a)(8)) is amended by inserting after ‘‘except that’’ the following:
‘‘the requirements of the Farm Credit Administration governing
the dissemination to stockholders of quarterly reports of System
institutions may not be more burdensome or costly than the require-
ments applicable to national banks, and’’.
SEC. 212. REGULATORY REVIEW.
(a) FINDINGS.—Congress finds that—
(1) the Farm Credit Administration, in the role of the
Administration as an arms-length safety and soundness regu-
H. R. 2029—14
lator, has made considerable progress in reducing the regu-
latory burden on Farm Credit System institutions;
(2) the efforts of the Farm Credit Administration described
in paragraph (1) have resulted in cost savings for Farm Credit
System institutions; and
(3) the cost savings described in paragraph (2) ultimately
benefit the farmers, ranchers, agricultural cooperatives, and
rural residents of the United States.
(b) CONTINUATION OF REGULATORY REVIEW.—The Farm Credit
Administration shall continue the comprehensive review of regula-
tions governing the Farm Credit System to identify and eliminate,
consistent with law, safety, and soundness, all regulations that
are unnecessary, unduly burdensome or costly, or not based on
law.
SEC. 213. EXAMINATION OF FARM CREDIT SYSTEM INSTITUTIONS.
The first sentence of section 5.19(a) of the Farm Credit Act
of 1971 (12 U.S.C. 2254(a)) is amended by striking ‘‘each year’’
and inserting ‘‘during each 18-month period’’.
SEC. 214. CONSERVATORSHIPS AND RECEIVERSHIPS.
(a) DEFINITIONS.—Section 5.51 of the Farm Credit Act of 1971
(12 U.S.C. 2277a) is amended—
(1) by striking paragraph (5); and
(2) by redesignating paragraph (6) as paragraph (5).
(b) GENERAL CORPORATE POWERS.—Section 5.58 of the Farm
Credit Act of 1971 (12 U.S.C. 2277a–7) is amended by striking
paragraph (9) and inserting the following:
‘‘(9) CONSERVATOR OR RECEIVER.—The Corporation may act
as a conservator or receiver.’’.
SEC. 215. FARM CREDIT INSURANCE FUND OPERATIONS.
(a) ADJUSTMENT OF PREMIUMS.—
(1) IN GENERAL.—Section 5.55(a) of the Farm Credit Act
of 1971 (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 insured System bank for any calendar year’’ and insert-
ing the following: ‘‘If at the end of any calendar year
the aggregate of amounts in the Farm Credit Insurance
Fund does not exceed the secure base amount, subject
to paragraph (2), the annual premium due from any insured
System bank for the calendar year’’;
(B) by redesignating paragraph (2) as paragraph (3);
and
(C) by inserting after paragraph (1) the following:
‘‘(2) REDUCED
PREMIUMS.—The Corporation, in the sole
discretion of the Corporation, may reduce by a percentage uni-
formly applied to all insured System banks the annual premium
due from each insured System bank during any calendar year,
as determined under paragraph (1).’’.
(2) CONFORMING AMENDMENTS.—
(A) Section 5.55(b) of the Farm Credit Act of 1971
(12 U.S.C. 2277a–4(b)) is amended—
(i) by striking ‘‘Insurance Fund’’ each place it
appears and inserting ‘‘Farm Credit Insurance Fund’’;
H. R. 2029—15
(ii) by striking ‘‘for the following calendar year’’;
and
(iii) by striking ‘‘subsection (a)’’ and inserting ‘‘sub-
section (a)(1)’’.
(B) Section 5.56(a) of the Farm Credit Act of 1971
(12 U.S.C. 2277a–5(a)) is amended by striking ‘‘section
5.55(a)(2)’’ each place it appears in paragraphs (2) and
(3) and inserting ‘‘section 5.55(a)(3)’’.
(C) 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 
‘‘government-guaranteed
loans’’; and
(ii) in paragraph (3), by inserting ‘‘(as so defined)’’
after ‘‘government-guaranteed loans’’ each place such
term appears.
(b) ALLOCATION TO INSURED SYSTEM BANKS AND OTHER SYSTEM
INSTITUTIONS OF EXCESS AMOUNTS IN THE FARM CREDIT INSURANCE
FUND.—Section 5.55 of the Farm Credit Act of 1971 (12 U.S.C.
2277a–4) is amended by adding at the end the following:
‘‘(e) 
ALLOCATION
TO
SYSTEM
INSTITUTIONS
OF
EXCESS
RESERVES.—
‘‘(1) ESTABLISHMENT OF ALLOCATED INSURANCE RESERVES
ACCOUNTS.—There is hereby established in the Farm Credit
Insurance Fund an Allocated Insurance Reserves Account—
‘‘(A) for each insured System bank; and
‘‘(B) subject to paragraph (6)(C), for all holders, in
the aggregate, of Financial Assistance Corporation stock.
‘‘(2) TREATMENT.—Amounts in any Allocated Insurance
Reserves Account shall be considered to be part of the Farm
Credit Insurance Fund.
‘‘(3) ANNUAL ALLOCATIONS.—If, at the end of any calendar
year, the aggregate of the amounts in the Farm Credit Insur-
ance Fund exceeds the average 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 the excess amount less the amount that
the Corporation, in its sole discretion, determines to be the
sum of the estimated operating expenses and estimated insur-
ance obligations of the Corporation for the immediately succeed-
ing calendar year.
‘‘(4) ALLOCATION
FORMULA.—From the total amount
required to be allocated at the end of a calendar year under
paragraph (3)—
‘‘(A) 10 percent of the total amount shall be credited
to the Allocated Insurance Reserves Account established
under paragraph (1)(B), subject to paragraph (6)(C); and
‘‘(B) there shall be credited to the Allocated Insurance
Reserves Account of each insured System bank an amount
that bears the same ratio to the total amount (less any
amount credited under subparagraph (A)) as the average
principal outstanding for the 3-year period ending on the
end of the calendar year on loans made by the bank that
are in accrual status bears to the average principal
outstanding for the 3-year period ending on the end of
the calendar year on loans made by all insured System
banks that are in accrual status (excluding, in each case,
H. R. 2029—16
the guaranteed portions of government-guaranteed loans
described in subsection (a)(1)(C)).
‘‘(5) 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 calendar year exceeds the sum of operat-
ing expenses and insurance obligations determined under para-
graph (3) for the calendar year, the Corporation shall cover
the expenses and obligations by—
‘‘(A) reducing each Allocated Insurance Reserves
Account by the same proportion; and
‘‘(B) expending the amounts obtained under subpara-
graph (A) before expending other amounts in the Fund.
‘‘(6) OTHER DISPOSITION OF ACCOUNT FUNDS.—
‘‘(A) IN GENERAL.—As soon as practicable during each
calendar year beginning more than 8 years after the date
on which the aggregate of the amounts in the Farm Credit
Insurance Fund exceeds the secure base amount, but not
earlier than January 1, 2005, the Corporation may—
‘‘(i) subject to subparagraphs (D) and (F), 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 insured
System 
bank’s 
Allocated 
Insurance 
Reserves
Account as of the preceding December 31; or
‘‘(II) 20 percent of the balance in the bank’s
Allocated Insurance Reserves Account on the date
of the payment; and
‘‘(ii) subject to subparagraphs (C), (E), and (F),
pay to each System bank and association holding
Financial Assistance Corporation stock a proportionate
share, determined by dividing the number of shares
of Financial Assistance Corporation stock held by the
institution by the total number of shares of Financial
Assistance Corporation stock outstanding, of the lesser
of—
‘‘(I) 20 percent of the balance in the Allocated
Insurance Reserves Account established under
paragraph (1)(B) as of the preceding December
31; or
‘‘(II) 20 percent of the balance in the Allocated
Insurance Reserves Account established under
paragraph (1)(B) on the date of the payment.
‘‘(B) AUTHORITY TO ELIMINATE OR REDUCE PAYMENTS.—
The Corporation may eliminate or reduce payments during
a calendar year under subparagraph (A) if the Corporation
determines, in its sole discretion, that the payments, or
other circumstances that might require use of the Farm
Credit Insurance Fund, could cause the amount in the
Farm Credit Insurance Fund during the calendar year
to be less than the secure base amount.
‘‘(C) REIMBURSEMENT FOR FINANCIAL ASSISTANCE COR-
PORATION STOCK.—
‘‘(i) SUFFICIENT FUNDING.—Notwithstanding para-
graph (4)(A), on provision by the Corporation for the
accumulation in the Account established under para-
H. R. 2029—17
graph (1)(B) of funds in an amount equal to
$56,000,000 (in addition to the amounts described in
subparagraph (F)(ii)), the Corporation shall not allocate
any further funds to the Account except to replenish
the Account if funds are diminished below $56,000,000
by the Corporation under paragraph (5).
‘‘(ii) WIND DOWN AND TERMINATION.—
‘‘(I) FINAL DISBURSEMENTS.—On disbursement
of $53,000,000 (in addition to the amounts
described in subparagraph (F)(ii)) from the Allo-
cated Insurance Reserves Account, the Corporation
shall disburse the remaining amounts in the
Account, as determined under subparagraph
(A)(ii), without regard to the percentage limitations
in subclauses (I) and (II) of subparagraph (A)(ii).
‘‘(II) TERMINATION OF ACCOUNT.—On disburse-
ment of $56,000,000 (in addition to the amounts
described in subparagraph (F)(ii)) from the Allo-
cated Insurance Reserves Account, the Corporation
shall close the Account established under para-
graph (1)(B) and transfer any remaining funds
in the Account to the remaining Allocated Insur-
ance Reserves Accounts in accordance with para-
graph (4)(B) for the calendar year in which the
transfer occurs.
‘‘(D) DISTRIBUTION OF PAYMENTS RECEIVED.—Not later
than 60 days after receipt of a payment made under
subparagraph (A)(i), each insured System bank, in con-
sultation with affiliated associations of the insured System
bank, and taking into account the direct or indirect pay-
ment of insurance premiums by the associations, shall
develop and implement an equitable plan to distribute
payments received under subparagraph (A)(i) among the
bank and associations of the bank.
‘‘(E) EXCEPTION FOR PREVIOUSLY REIMBURSED ASSOCIA-
TIONS.—For purposes of subparagraph (A)(ii), in any Farm
Credit district in which the funding bank has reimbursed
1 or more affiliated associations of the bank for the pre-
viously unreimbursed portion of the Financial Assistance
Corporation stock held by the associations, the funding
bank shall be deemed to be the holder of the shares of
Financial Assistance Corporation stock for which the fund-
ing bank has provided the reimbursement.
‘‘(F) INITIAL PAYMENT.—Notwithstanding subparagraph
(A), the initial payment made to each payee under subpara-
graph (A) shall be in such amount determined by the
Corporation to be equal to the sum of—
‘‘(i) the total of the amounts that would have been
paid if payments under subparagraph (A) had been
authorized to begin, under the same terms and condi-
tions, in the first calendar year beginning more than
5 years after the date on which the aggregate of the
amounts in the Farm Credit Insurance Fund exceeds
the secure base amount, and to continue through the
2 immediately subsequent years;
‘‘(ii) interest earned on any amounts that would
have been paid as described in clause (i) from the
H. R. 2029—18
date on which the payments would have been paid
as described in clause (i); and
‘‘(iii) the payment to be made in the initial year
described in subparagraph (A), based on the amount
in each Account after subtracting the amounts to be
paid under clauses (i) and (ii).’’.
(c) TECHNICAL AMENDMENTS.—Section 5.55(d) of the Farm
Credit Act of 1971 (12 U.S.C. 2277a–4(d)) is amended—
(1) in the matter preceding paragraph (1)—
(A) by striking ‘‘subsections (a) and (c)’’ and inserting
‘‘subsections (a), (c), and (e)’’; and
(B) by striking ‘‘a Farm Credit Bank’’ and inserting
‘‘an insured System bank’’; and
(2) in paragraphs (1), (2), and (3), by striking ‘‘Farm Credit
Bank’’ each place it appears and inserting ‘‘insured System
bank’’.
SEC. 216. EXAMINATIONS BY THE FARM CREDIT SYSTEM INSURANCE
CORPORATION.
Section 5.59(b)(1)(A) of the Farm Credit Act of 1971 (12 U.S.C.
2277a–8(b)(1)(A)) is amended by adding at the end the following:
‘‘Notwithstanding any other provision of this Act, on cancellation
of the charter of a System institution, the Corporation shall have
authority to examine the system institution in receivership. An
examination shall be performed at such intervals as the Corporation
shall determine.’’.
SEC. 217. POWERS WITH RESPECT TO TROUBLED INSURED SYSTEM
BANKS.
(a) LEAST-COST RESOLUTION.—Section 5.61(a)(3) of the Farm
Credit Act of 1971 (12 U.S.C. 2277a–10(a)) is amended—
(1) by redesignating subparagraph (B) as subparagraph
(F); and
(2) by striking subparagraph (A) and inserting the follow-
ing:
‘‘(A) LEAST-COST RESOLUTION.—Assistance may not be
provided to an insured System bank under this subsection
unless the means of providing the assistance is the least
costly means of providing the assistance by the Farm Credit
Insurance Fund of all possible alternatives available to
the Corporation, including liquidation of the bank (includ-
ing paying the insured obligations issued on behalf of the
bank). Before making a least-cost determination under this
subparagraph, the Corporation shall accord such other
insured System banks as the Corporation determines to
be appropriate the opportunity to submit information relat-
ing to the determination.
‘‘(B) DETERMINING LEAST COSTLY APPROACH.—In deter-
mining the least costly alternative under subparagraph
(A), the Corporation shall—
‘‘(i) evaluate alternatives on a present-value basis,
using a reasonable discount rate;
‘‘(ii) document the evaluation and the assumptions
on which the evaluation is based; and
‘‘(iii) retain the documentation for not less than
5 years.
‘‘(C) TIME OF DETERMINATION.—
H. R. 2029—19
‘‘(i) GENERAL
RULE.—For purposes of this sub-
section, the determination of the costs of providing
any assistance under any provision of this section with
respect to any insured System bank shall be made
as of the date on which the Corporation makes the
determination to provide the assistance to the institu-
tion under this section.
‘‘(ii) RULE FOR LIQUIDATIONS.—For purposes of this
subsection, the determination of the costs of liquidation
of any insured System bank shall be made as of the
earliest of—
‘‘(I) the date on which a conservator is
appointed for the insured System bank;
‘‘(II) the date on which a receiver is appointed
for the insured System bank; or
‘‘(III) the date on which the Corporation makes
any determination to provide any assistance under
this section with respect to the insured System
bank.
‘‘(D) RULE
FOR
STAND-ALONE
ASSISTANCE.—Before
providing any assistance under paragraph (1), the Corpora-
tion shall evaluate the adequacy of managerial resources
of the insured System bank. The continued service of any
director or senior ranking officer who serves in a policy-
making role for the assisted insured System bank, as deter-
mined by the Corporation, shall be subject to approval
by the Corporation as a condition of assistance.
‘‘(E) DISCRETIONARY
DETERMINATIONS.—Any deter-
mination that the Corporation makes under this paragraph
shall be in the sole discretion of the Corporation.’’.
(b) CONFORMING AMENDMENTS.—Section 5.61(a) of the Farm
Credit Act of 1971 (12 U.S.C. 2277a–10(a)) is amended—
(1) in paragraph (1) by striking ‘‘IN GENERAL.—’’ and insert-
ing ‘‘STAND-ALONE ASSISTANCE.—’’; and
(2) in paragraph (2)—
(A) by striking ‘‘ENUMERATED POWERS.—’’ and inserting
‘‘FACILITATION OF MERGERS OR CONSOLIDATION.—’’; and
(B) in subparagraph (A) by striking ‘‘FACILITATION OF
MERGERS
OR
CONSOLIDATION.—’’ and inserting ‘‘IN
GEN-
ERAL.—’’.
SEC. 218. OVERSIGHT AND REGULATORY ACTIONS BY THE FARM
CREDIT SYSTEM INSURANCE CORPORATION.
The Farm Credit Act of 1971 is amended by inserting after
section 5.61 (12 U.S.C. 2279a–10) the following:
‘‘SEC. 5.61A. OVERSIGHT ACTIONS BY THE CORPORATION.
‘‘(a) DEFINITIONS.—In this section, the term ‘institution’
means—
‘‘(1) an insured System bank; and
‘‘(2) a production credit association or other association
making loans under section 7.6 with a direct loan payable
to the funding bank of the association that comprises 20 percent
or more of the funding bank’s total loan volume net of
nonaccrual loans.
‘‘(b) 
CONSULTATION
REGARDING
PARTICIPATION
OF
UNDERCAPITALIZED BANKS IN ISSUANCE OF INSURED OBLIGATIONS.—
The Farm Credit Administration shall consult with the Corporation
H. R. 2029—20
prior to approving an insured obligation that is to be issued by
or on behalf of, or participated in by, any insured System bank
that fails to meet the minimum level for any capital requirement
established by the Farm Credit Administration for the bank.
‘‘(c) CONSULTATION REGARDING APPLICATIONS
FOR MERGERS
AND RESTRUCTURINGS.—
‘‘(1) CORPORATION
TO
RECEIVE
COPY
OF
TRANSACTION
APPLICATIONS.—On receiving an application for a merger or
restructuring of an institution, the Farm Credit Administration
shall forward a copy of the application to the Corporation.
‘‘(2) CONSULTATION REQUIRED.—If the proposed merger or
restructuring involves an institution that fails to meet the
minimum level for any capital requirement established by the
Farm Credit Administration applicable to the institution, the
Farm Credit Administration shall allow 30 days within which
the Corporation may submit the views and recommendations
of the Corporation, including any conditions for approval. In
determining whether to approve or disapprove any proposed
merger or restructuring, the Farm Credit Administration shall
give due consideration to the views and recommendations of
the Corporation.
‘‘SEC. 5.61B. AUTHORITY TO REGULATE GOLDEN PARACHUTE AND
INDEMNIFICATION PAYMENTS.
‘‘(a) DEFINITIONS.—In this section:
‘‘(1) GOLDEN PARACHUTE PAYMENT.—The term ‘golden para-
chute payment’—
‘‘(A) means a payment (or any agreement to make
a payment) in the nature of compensation for the benefit
of any institution-related party under an obligation of any
Farm Credit System institution that—
‘‘(i) is contingent on the termination of the party’s
relationship with the institution; and
‘‘(ii) is received on or after the date on which—
‘‘(I) the institution is insolvent;
‘‘(II) a conservator or receiver is appointed for
the institution;
‘‘(III) the institution has been assigned by the
Farm Credit Administration a composite CAMEL
rating of 4 or 5 under the Farm Credit Administra-
tion Rating System, or an equivalent rating; or
‘‘(IV) the Corporation otherwise determines
that the institution is in a troubled condition (as
defined in regulations issued by the Corporation);
and
‘‘(B) includes a payment that would be a golden para-
chute payment but for the fact that the payment was
made before the date referred to in subparagraph (A)(ii)
if the payment was made in contemplation of the occurrence
of an event described in any subclause of subparagraph
(A); but
‘‘(C) does not include—
‘‘(i) a payment made under a retirement plan that
is qualified (or is intended to be qualified) under section
401 of the Internal Revenue Code of 1986 or other
nondiscriminatory benefit plan;
H. R. 2029—21
‘‘(ii) a payment made under a bona fide supple-
mental executive retirement plan, deferred compensa-
tion plan, or other arrangement that the Corporation
determines, by regulation or order, to be permissible;
or
‘‘(iii) a payment made by reason of the death or
disability of an institution-related party.
‘‘(2) INDEMNIFICATION
PAYMENT.—The term ‘indemnifica-
tion payment’ means a payment (or any agreement to make
a payment) by any Farm Credit System institution for the
benefit of any person who is or was an institution-related
party, to pay or reimburse the person for any liability or legal
expense with regard to any administrative proceeding or civil
action instituted by the Farm Credit Administration that
results in a final order under which the person—
‘‘(A) is assessed a civil money penalty; or
‘‘(B) is removed or prohibited from participating in
the conduct of the affairs of the institution.
‘‘(3) INSTITUTION-RELATED
PARTY.—The term ‘institution-
related party’ means—
‘‘(A) a director, officer, employee, or agent for a Farm
Credit System institution or any conservator or receiver
of such an institution;
‘‘(B) a stockholder (other than another Farm Credit
System institution), consultant, joint venture partner, or
any other person determined by the Farm Credit Adminis-
tration to be a participant in the conduct of the affairs
of a Farm Credit System institution; and
‘‘(C) an independent contractor (including any attorney,
appraiser, or accountant) that knowingly or recklessly
participates in any violation of any law or regulation, any
breach of fiduciary duty, or any unsafe or unsound practice
that caused or is likely to cause more than a minimal
financial loss to, or a significant adverse effect on, the
Farm Credit System institution.
‘‘(4) LIABILITY OR LEGAL EXPENSE.—The term ‘liability or
legal expense’ means—
‘‘(A) a legal or other professional expense incurred in
connection with any claim, proceeding, or action;
‘‘(B) the amount of, and any cost incurred in connection
with, any settlement of any claim, proceeding, or action;
and
‘‘(C) the amount of, and any cost incurred in connection
with, any judgment or penalty imposed with respect to
any claim, proceeding, or action.
‘‘(5) PAYMENT.—The term ‘payment’ means—
‘‘(A) a direct or indirect transfer of any funds or any
asset; and
‘‘(B) any segregation of any funds or assets for the
purpose of making, or under an agreement to make, any
payment after the date on which the funds or assets are
segregated, without regard to whether the obligation to
make the payment is contingent on—
‘‘(i) the determination, after that date, of the liabil-
ity for the payment of the amount; or
‘‘(ii) the liquidation, after that date, of the amount
of the payment.
H. R. 2029—22
‘‘(b) PROHIBITION.—The Corporation may prohibit or limit, by
regulation or order, any golden parachute payment or indemnifica-
tion payment by a Farm Credit System institution (including any
conservator or receiver of the Federal Agricultural Mortgage Cor-
poration) in troubled condition (as defined in regulations issued
by the Corporation).
‘‘(c) FACTORS TO BE TAKEN INTO ACCOUNT.—The Corporation
shall prescribe, by regulation, the factors to be considered by the
Corporation in taking any action under subsection (b). The factors
may include—
‘‘(1) whether there is a reasonable basis to believe that
an institution-related party has committed any fraudulent act
or omission, breach of trust or fiduciary duty, or insider abuse
with regard to the Farm Credit System institution involved
that has had a material effect on the financial condition of
the institution;
‘‘(2) whether there is a reasonable basis to believe that
the institution-related party is substantially responsible for
the insolvency of the Farm Credit System institution, the
appointment of a conservator or receiver for the institution,
or the institution’s troubled condition (as defined in regulations
prescribed by the Corporation);
‘‘(3) whether there is a reasonable basis to believe that
the institution-related party has materially violated any
applicable law or regulation that has had a material effect
on the financial condition of the institution;
‘‘(4) whether there is a reasonable basis to believe that
the institution-related party has violated or conspired to vio-
late—
‘‘(A) section 215, 657, 1006, 1014, or 1344 of title 18,
United States Code; or
‘‘(B) section 1341 or 1343 of title 18, United States
Code, affecting a Farm Credit System institution;
‘‘(5) whether the institution-related party was in a position
of managerial or fiduciary responsibility; and
‘‘(6) the length of time that the party was related to the
Farm Credit System institution and the degree to which—
‘‘(A) the payment reasonably reflects compensation
earned over the period of employment; and
‘‘(B) the compensation represents a reasonable payment
for services rendered.
‘‘(d) CERTAIN PAYMENTS PROHIBITED.—No Farm Credit System
institution may prepay the salary or any liability or legal expense
of any institution-related party if the payment is made—
‘‘(1) in contemplation of the insolvency of the institution
or after the commission of an act of insolvency; and
‘‘(2) with a view to, or with the result of—
‘‘(A) preventing the proper application of the assets
of the institution to creditors; or
‘‘(B) preferring 1 creditor over another creditor.
‘‘(e) RULE OF CONSTRUCTION.—Nothing in this section—
‘‘(1) prohibits any Farm Credit System institution from
purchasing any commercial insurance policy or fidelity bond,
so long as the insurance policy or bond does not cover any
legal or liability expense of an institution described in sub-
section (a)(2); or
H. R. 2029—23
‘‘(2) limits the powers, functions, or responsibilities of the
Farm Credit Administration.’’.
SEC. 219. FARM CREDIT SYSTEM INSURANCE CORPORATION BOARD
OF DIRECTORS.
(a) IN GENERAL.—Section 5.53 of the Farm Credit Act of 1971
(12 U.S.C. 2277a–2) is amended to read as follows:
‘‘SEC. 5.53. BOARD OF DIRECTORS.
‘‘(a) ESTABLISHMENT.—The Corporation shall be managed by
a Board of Directors that shall consist of the members of the
Farm Credit Administration Board.
‘‘(b) CHAIRMAN.—The Board of Directors shall be chaired by
any Board member other than the Chairman of the Farm Credit
Administration Board.’’.
(b) CONFORMING AMENDMENTS.—
(1) Section 5314 of title 5, United States Code, is amended
by striking ‘‘Chairperson, Board of Directors of the Farm Credit
System Insurance Corporation.’’.
(2) Section 5315 of title 5, United States Code, is amended
by striking ‘‘Members, Board of Directors of the Farm Credit
System Insurance Corporation.’’.
SEC. 220. INTEREST RATE REDUCTION PROGRAM.
Section 351(a) of the Consolidated Farm and Rural Develop-
ment Act (7 U.S.C. 1999) is amended—
(a) by striking ‘‘SEC. 351. (a) The’’ and inserting the following:
‘‘SEC. 351. INTEREST RATE REDUCTION PROGRAM.
‘‘(a) ESTABLISHMENT OF PROGRAM.—
‘‘(1) IN GENERAL.—The’’; and
(b) by adding at the end the following:
‘‘(2) TERMINATION OF AUTHORITY.—The authority provided
by this subsection shall terminate on September 30, 2002.’’.
SEC. 221. LIABILITY FOR MAKING CRIMINAL REFERRALS.
(a) IN GENERAL.—Any institution of the Farm Credit System,
or any director, officer, employee, or agent of a Farm Credit System
institution, that discloses to a Government authority information
proffered in good faith that may be relevant to a possible violation
of any law or regulation shall not be liable to any person under
any law of the United States or any State—
(1) for the disclosure; or
(2) for any failure to notify the person involved in the
possible violation.
(b) NO PROHIBITION ON DISCLOSURE.—Any institution of the
Farm Credit System, or any director, officer, employee, or agent
of a Farm Credit System institution, may disclose information to
a Government authority that may be relevant to a possible violation
of any law or regulation.
H. R. 2029—24
TITLE III—IMPLEMENTATION AND
EFFECTIVE DATE
SEC. 301. IMPLEMENTATION.
The Secretary of Agriculture and the Farm Credit Administra-
tion shall promulgate regulations and take other required actions
to implement the provisions of this Act not later than 90 days
after the effective date of this Act.
SEC. 302. EFFECTIVE DATE.
Except as otherwise provided in this Act, this Act and the
amendments made by this Act shall become effective on the date
of enactment.
Speaker of the House of Representatives.
Vice President of the United States and
President of the Senate.