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 elimi-
nated.
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 State usury laws superseded.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
voting practices of eligible farmer-owned cooperatives.
Sec. 205. Removal of Federal Government certification requirement for certain
private 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.
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 MORT-
GAGE 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 second-
ary 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
CORPORATION.
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
representing 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 follow-
ing:
‘‘(13) To purchase, hold, sell, or assign a quali-
fied loan, to issue a guaranteed security, representing
an interest in, or an obligation backed by, the quali-
fied loan, and to perform all the functions and re-
sponsibilities of an agricultural mortgage 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 de-
positories for, or’’ and inserting ‘‘shall act as deposi-
tories for, and’’; and
(2) in subsection (e), by striking ‘‘Secretary of
the Treasury may authorize the Corporation to use’’
and inserting ‘‘Corporation 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 mort-
gage marketing facilities’’; and
(B) in paragraph (2), by inserting ‘‘(other
than the Corporation)’’ after ‘‘agricultural mort-
gage marketing facility’’; and
(2) in subsection (e)(1), by striking ‘‘(other than
the Corporation)’’.
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 guaran-
tee’’ 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 obli-
gation 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 Corporation.’’;
(2) in subsection (d)—
(A) by striking paragraph (4); and
(B) by redesignating paragraphs (5), (6),
and (7) as paragraphs (4), (5), and (6), respec-
tively; 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
PARTICIPATION 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)’’.
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 subsections (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 strik-
ing ‘‘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 redesig-
nated by section 107(2)(B)); and
(B) by redesignating paragraphs (5) and
(6) (as redesignated 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 in-
clusion of qualified loans for small farms and family farm-
ers in the agricultural mortgage secondary market.’’.
SEC. 111. DEFINITION OF AN AFFILIATE.
Section 8.11(e) of the Farm Credit Act of 1971 (21
U.S.C. 2279aa–11(e)) is amended—
(1) by striking ‘‘a certified facility or’’; and
(2) by striking ‘‘paragraphs (3) and (7), respec-
tively, 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 in-
serting the following:
‘‘(d) STATE USURY LAWS SUPERSEDED.—A provision
of the Constitution 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 Corpora-
tion 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 pro-
vided a guarantee, if the provision—
‘‘(1) limits the rate or amount of interest, dis-
count points, finance charges, or other charges that
may be charged, taken, received, or reserved by an ag-
ricultural 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 facil-
ity 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 prepay-
ment 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 insert-
ing ‘‘Not sooner than the expiration of the 3-year pe-
riod 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 estab-
lishing’’ and inserting the following:
‘‘(1) IN
GENERAL.—The regulations establish-
ing’’; and
(ii) by striking ‘‘shall contain’’ and in-
serting 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 expi-
ration 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 Corporation 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 ac-
cordance with generally accepted accounting prin-
ciples; and
‘‘(2) 0.75 percent of the aggregate off-balance
sheet obligations of the Corporation, which, for the
purposes of this subtitle, shall include—
‘‘(A) the unpaid principal balance of out-
standing securities that are guaranteed by the
Corporation and backed by pools of qualified
loans;
‘‘(B) instruments that are issued or guaran-
teed by the Corporation and are substantially
equivalent to instruments described in subpara-
graph (A); and
‘‘(C) other off-balance sheet obligations of
the Corporation.
‘‘(b) TRANSITION PERIOD.—
‘‘(1) IN GENERAL.—For purposes of this subtitle,
the minimum 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-bal-
ance sheet obligations of the Corporation;
‘‘(ii) 0.45 percent of designated on-bal-
ance sheet assets of the Corporation, as de-
termined under paragraph (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 De-
cember 31, 1997, shall be the amount of core cap-
ital equal to the sum of—
‘‘(i) 0.55 percent of aggregate off-bal-
ance sheet obligations of the Corporation;
‘‘(ii) 1.20 percent of designated on-bal-
ance sheet assets of the Corporation, as de-
termined under paragraph (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 De-
cember 31, 1998, shall be the amount of core cap-
ital 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 Cor-
poration;
‘‘(II) 1.95 percent of designated
on-balance sheet assets of the Corpora-
tion, as determined under paragraph
(2); and
‘‘(III) 2.65 percent of on-balance
sheet assets of the Corporation other
than assets designated under para-
graph (2); or
‘‘(ii) if the Corporation’s core capital
is less than $25,000,000 on January 1,
1998, the amount determined under sub-
section (a); and
‘‘(D) on and after January 1, 1999, shall be
the amount determined under subsection (a).
‘‘(2) DESIGNATED
ON-BALANCE
SHEET
AS-
SETS.—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 Corporation 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 percent of the total minimum capital amount deter-
mined 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 inserting ‘‘during the period beginning on De-
cember 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 follow-
ing:
‘‘SEC. 8.38. RECAPITALIZATION OF THE CORPORATION.
‘‘(a) MANDATORY RECAPITALIZATION.—The Corpora-
tion 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 en-
actment of this section; or
‘‘(2) the date that is 180 days after the end of
the first calendar quarter that the aggregate on-bal-
ance sheet assets of the Corporation, plus the out-
standing 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 enact-
ment 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 subsection (a) by the date required under paragraph
(1) or (2) of subsection (a), the Corporation may not pur-
chase a new qualified loan or issue or guarantee a new
loan-backed security until the core capital of the Corpora-
tion 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, 
Con-
servatorship, and Liquidation of
the Federal Agricultural Mort-
gage Corporation
‘‘SEC. 8.41. CONSERVATORSHIP; LIQUIDATION; RECEIVER-
SHIP.
‘‘(a) VOLUNTARY
LIQUIDATION.—The Corporation
may voluntarily liquidate only with the consent of, and in
accordance with a plan of liquidation approved by, the
Farm Credit Administration Board.
‘‘(b) INVOLUNTARY LIQUIDATION.—
‘‘(1) IN GENERAL.—The Farm Credit Adminis-
tration 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 Corporation under paragraph (1)—
‘‘(A) the Corporation shall also be consid-
ered 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 Corporation if the authority of the Cor-
poration to purchase qualified loans or issue or
guarantee loan-backed securities is suspended;
and
‘‘(C) a receiver may also be appointed for
the Corporation if—
‘‘(i)(I) the authority of the Corporation
to purchase qualified loans or issue or guar-
antee loan-backed securities 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 con-
servator 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, in-
cluding the Farm Credit System Insurance Cor-
poration; 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 manage-
ment expertise necessary to direct the oper-
ations and affairs of the Corporation and,
if necessary, to liquidate the Corporation.
‘‘(2) COMPENSATION.—
‘‘(A) IN
GENERAL.—A conservator or re-
ceiver for the Corporation and professional per-
sonnel (other than a Federal employee) employed
to represent or assist the conservator or receiver
may be compensated for activities conducted as,
or for, a conservator or receiver.
‘‘(B) 
LIMIT
ON
COMPENSATION.—Com-
pensation 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 Credit Administration deter-
mines that compensation at higher rates is nec-
essary 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 person-
nel, 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 conservator or receiver.
‘‘(3) EXPENSES.—A valid claim for expenses of
the conservatorship or receivership (including com-
pensation 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 determine, that shall have priority
over any other lien.
‘‘(4) LIABILITY.—If the conservator or receiver
for the Corporation is not a Federal entity, or an offi-
cer or employee of the Federal Government, the con-
servator 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
omission constitutes gross negligence or any form of
intentional tortious conduct or criminal conduct.
‘‘(5) INDEMNIFICATION.—The Farm Credit Ad-
ministration may allow indemnification of the con-
servator 
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 Cor-
poration 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 com-
mencement of an action under paragraph (1), any
court having jurisdiction of any other action or en-
forcement 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 RE-
CEIVER.—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 con-
servator 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 insufficient funds to pay the ongoing ad-
ministrative expenses of the conservatorship or receiv-
ership 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 necessary or appropriate to meet the admin-
istrative 
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 CON-
SERVATOR OR RECEIVER.—No agreement that tends to di-
minish or defeat the right, title, or interest of the conserva-
tor or receiver for the Corporation in any asset acquired
by the conservator or receiver as conservator 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 per-
son claiming an adverse interest under the agreement,
including the obligor, contemporaneously with the ac-
quisition of the asset by the Corporation;
‘‘(3) is approved by the Board or an appropriate
committee of the Board, which approval shall be re-
flected in the minutes of the Board or committee; and
‘‘(4) has been, continuously, from the time of the
agreement’s execution, an official record of the Cor-
poration.
‘‘(h) REPORT TO THE CONGRESS.—On a determina-
tion by the receiver for the Corporation that there are insuf-
ficient assets of the receivership to pay all valid claims
against the receivership, the receiver shall submit to the Sec-
retary of the Treasury, the Committee on Agriculture of the
House of Representatives, and the Committee on Agri-
culture, 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 Corpora-
tion shall be canceled, and the authority provided to
the Corporation by this title shall terminate, 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 receivership and discharge of the re-
ceiver.
‘‘(2) OVERSIGHT.—The Office of Secondary Mar-
ket Oversight 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 determines is appro-
priate following the placement of the Corporation in
receivership, but not later than the conclusion of the
receivership and discharge of the receiver.’’.
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 ap-
pointment and compensation 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 ob-
tained may exceed 85 percent 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 in-
serting ‘‘subparagraphs (C) and (D)’’.
SEC. 203. REMOVAL OF CERTAIN BORROWER REPORTING
REQUIREMENT.
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 DIVI-
DEND, 
MEMBER 
BUSINESS, 
AND 
VOTING
PRACTICES OF ELIGIBLE FARMER-OWNED CO-
OPERATIVES.
(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 re-
ceived 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 eli-
gible 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 in-
serting ‘‘and (4), or under the last sentence, of subsection
(a)’’.
SEC. 205. REMOVAL OF FEDERAL GOVERNMENT CERTIFI-
CATION REQUIREMENT FOR CERTAIN PRI-
VATE 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 Ad-
ministrator of the Rural Electrification Administra-
tion 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 in-
serting ‘‘loan guarantee from the Administration or
the Bank (or a successor of the Administration or the
Bank), and’’.
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 notwithstanding any other provision of this sec-
tion, 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, sub-
ject 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, para-
graph (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 subpara-
graph (B) and notwithstanding any other provi-
sion of this section, if a loan designated for sale
under paragraph (1)(A) is not sold into a sec-
ondary market during the 180-day period that
begins on the date of the designation, the voting
stock or participation certificate purchase re-
quirement that would otherwise apply to the
loan in the absence of a bylaw provision de-
scribed in paragraph (1)(A) shall be effective.
‘‘(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 subpara-
graph, 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 semi-
colon 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 amend-
ed—
(1) by striking ‘‘(5) LOAN.—The’’ and inserting
the following:
‘‘(5) LOAN.—
‘‘(A) IN
GENERAL.—Subject to subpara-
graph (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 in-
clude a loan made on or after the date of
enactment of this subparagraph that is des-
ignated, at the time the loan is made, for
sale into a secondary market.
‘‘(ii) UNSOLD LOANS.—
‘‘(I) IN GENERAL.—Except as pro-
vided in subclause (II), if a loan des-
ignated for sale under clause (i) is not
sold into a secondary market during
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 oth-
erwise 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 de-
scribed 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 ENTI-
TIES.
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
operating 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 requirements 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 regulator, has made considerable progress
in reducing the regulatory burden on Farm Credit
System institutions;
(2) the efforts of the Farm Credit Administration
described in paragraph (1) have resulted in cost sav-
ings 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 comprehen-
sive review of regulations governing the Farm Credit Sys-
tem 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 INSTITU-
TIONS.
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 para-
graph (5).
(b) GENERAL CORPORATE POWERS.—Section 5.58 of
the Farm Credit Act of 1971 (12 U.S.C. 2277a–7) is amend-
ed by striking paragraph (9) and inserting the following:
‘‘(9) CONSERVATOR
OR
RECEIVER.—The Cor-
poration 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 amend-
ed—
(A) in paragraph (1), by striking ‘‘Until
the aggregate of amounts in the Farm Credit In-
surance Fund exceeds the secure base amount,
the annual premium due from any insured Sys-
tem bank for any calendar year’’ and inserting
the following: ‘‘If at the end of any calendar year
the aggregate of amounts in the Farm Credit In-
surance 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 fol-
lowing:
‘‘(2) REDUCED PREMIUMS.—The Corporation, in
the sole discretion of the Corporation, 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 deter-
mined 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 Cred-
it 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) 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 ap-
pears 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 ‘‘gov-
ernment-guaranteed loans’’; and
(ii) in paragraph (3), by inserting
‘‘(as so defined)’’ after ‘‘government-guaran-
teed 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 EX-
CESS RESERVES.—
‘‘(1) ESTABLISHMENT OF ALLOCATED INSURANCE
RESERVES ACCOUNTS.—There is hereby established in
the Farm Credit Insurance Fund an Allocated Insur-
ance 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 Insurance Fund exceeds the average
secure base amount for the calendar year (as cal-
culated on an average daily balance basis), the Cor-
poration shall allocate to the Allocated Insurance Re-
serves 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 insurance obligations of the Corporation for
the immediately succeeding calendar year.
‘‘(4) ALLOCATION
FORMULA.—From the total
amount required to be allocated at the end of a cal-
endar year under paragraph (3)—
‘‘(A) 10 percent of the total amount shall be
credited to the Allocated Insurance Reserves Ac-
count established under paragraph (1)(B), sub-
ject to paragraph (6)(C); and
‘‘(B) there shall be credited to the Allocated
Insurance Reserves Account of each insured Sys-
tem bank an amount that bears the same ratio
to the total amount (less any amount credited
under subparagraph (A)) as the average prin-
cipal 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, 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 in-
surance obligations of the Corporation for a calendar
year exceeds the sum of operating expenses and insur-
ance obligations determined under paragraph (3) for
the calendar year, the Corporation shall cover the ex-
penses and obligations by—
‘‘(A) reducing each Allocated Insurance Re-
serves Account by the same proportion; and
‘‘(B) expending the amounts obtained under
subparagraph 
(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 asso-
ciation holding Financial Assistance Cor-
poration stock a proportionate share, deter-
mined 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 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 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 se-
cure base amount.
‘‘(C) REIMBURSEMENT FOR FINANCIAL AS-
SISTANCE CORPORATION STOCK.—
‘‘(i) SUFFICIENT
FUNDING.—Notwith-
standing paragraph (4)(A), on provision by
the Corporation for the accumulation in the
Account established under paragraph (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 addi-
tion to the amounts described in sub-
paragraph (F)(ii)) from the Allocated
Insurance Reserves Account, the Cor-
poration 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 subpara-
graph (A)(ii).
‘‘(II) 
TERMINATION
OF
AC-
COUNT.—On 
disbursement 
of
$56,000,000 
(in 
addition 
to 
the
amounts described in subparagraph
(F)(ii)) from the Allocated Insurance
Reserves Account, the Corporation shall
close the Account established under
paragraph (1)(B) and transfer any re-
maining funds in the Account to the
remaining Allocated Insurance Re-
serves Accounts in accordance with
paragraph (4)(B) for the calendar year
in which the transfer occurs.
‘‘(D) DISTRIBUTION
OF
PAYMENTS
RE-
CEIVED.—Not later than 60 days after receipt of
a payment made under subparagraph (A)(i),
each insured System bank, in consultation with
affiliated associations of the insured System
bank, and taking into account the direct or indi-
rect payment of insurance premiums by the asso-
ciations, shall develop and implement an equi-
table plan to distribute payments received under
subparagraph (A)(i) among the bank and asso-
ciations of the bank.
‘‘(E) EXCEPTION
FOR
PREVIOUSLY
REIM-
BURSED
ASSOCIATIONS.—For purposes of sub-
paragraph (A)(ii), in any Farm Credit district
in which the funding bank has reimbursed 1 or
more affiliated associations of the bank for the
previously unreimbursed portion of the Finan-
cial Assistance Corporation stock held by the as-
sociations, the funding bank shall be deemed to
be the holder of the shares of Financial Assist-
ance Corporation stock for which the funding
bank has provided the reimbursement.
‘‘(F) INITIAL
PAYMENT.—Notwithstanding
subparagraph (A), the initial payment made to
each payee under subparagraph (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 conditions,
in the first calendar year beginning more