I
104TH CONGRESS
1ST SESSION
H. R. 1657
To restructure and modernize the Federal Home Loan Bank System.
IN THE HOUSE OF REPRESENTATIVES
MAY 17, 1995
Mr. GONZALEZ (by request) introduced the following bill; which was referred
to the Committee on Banking and Financial Services
A BILL
To restructure and modernize the Federal Home Loan Bank
System.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE AND TABLE OF CONTENTS.
(a) SHORT TITLE.—This Act may be cited as the
‘‘Federal Home Loan Bank System Restructuring and
Modernization Act of 1995’’.
(b) TABLE OF CONTENTS.—The table of contents for
this Act is as follows:
Sec. 1. Short title; table of contents.
TITLE I—AMENDMENT OF FEDERAL HOME LOAN BANK ACT
Sec. 101. Statement of purpose.
Sec. 102. Definitions.
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Sec. 103. Federal Housing Finance Board.
Sec. 104. Powers and duties of the Federal Housing Finance Board.
Sec. 105. Continuing regulations and policies.
Sec. 106. Readjustment of Federal Home Loan Bank districts; names.
Sec. 107. Eligibility for membership.
Sec. 108. Capital stock.
Sec. 109. Transitional provisions concerning capital stock.
Sec. 110. Prompt corrective action.
Sec. 111. Federal Home Loan Bank directors.
Sec. 112. Eligibility to secure advances.
Sec. 113. Advances.
Sec. 114. Advances to nonmember mortgagees; terms and conditions.
Sec. 115. Powers and duties of banks.
Sec. 116. Incorporation of banks; corporate powers; housing project loans.
Sec. 117. Exemption from taxation; obligations acceptable as credit on debt of
home owner.
Sec. 118. Obligations as lawful investments; liability of United States for obli-
gations issued by banks.
Sec. 119. Reserves and dividends.
Sec. 120. Financing Corporation.
Sec. 121. Obligations of Resolution Funding Corporation.
Sec. 122. Eligibility to membership in banks.
Sec. 123. Merger, liquidation or reorganization.
Sec. 124. General enforcement powers.
TITLE II—EMPLOYEE PROVISIONS
Sec. 201. Federal Housing Finance Board employees.
TITLE III—CONFORMING AMENDMENTS
Sec. 301. Amendments to the Federal Credit Union Act.
Sec. 302. Amendments to the Federal Deposit Insurance Act.
Sec. 303. Amendment to the Home Owners’ Loan Act.
Sec. 304. Amendment to the Housing and Urban-Rural Recovery Act of 1983.
Sec. 305. Amendments to the Right to Financial Privacy Act of 1978.
Sec. 306. Amendments to the Thrift Institutions Restructuring Act.
Sec. 307. Amendments to title 18, United States Code.
TITLE I—AMENDMENT OF FEDERAL HOME
LOAN BANK ACT
SEC. 101. STATEMENT OF PURPOSE.
The Federal Home Loan Bank Act is amended by
adding after section 1 (12 U.S.C. 1421) the following new
section:
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‘‘SEC. 1A. STATEMENT OF PURPOSE.
‘‘The Federal Home Loan Bank System is a profit-
making enterprise whose purpose is to support residential
mortgage lending (including mortgages on housing for
low- and moderate-income families), as well as community
development lending, throughout the Nation, safely and
soundly, primarily through a program of collateralized ad-
vances to System members. The System facilitates such
lending by increasing the liquidity and improving the dis-
tribution of investment capital available through its mem-
ber institutions.’’.
SEC. 102. DEFINITIONS.
Section 2 of the Federal Home Loan Bank Act (12
U.S.C. 1422) is amended to read as follows:
‘‘SEC. 2. DEFINITIONS.
‘‘As used in this Act—
‘‘(1) BANK.—The term ‘Federal Home Loan
Bank’ or ‘Bank’ means a bank established under the
authority of this Act.
‘‘(2) BANK-AFFILIATED
PARTY.—The term
‘Bank-affiliated party’ means—
‘‘(A) any director, officer, or employee of,
or agent for, a Federal Home Loan Bank;
‘‘(B) any member, consultant, joint ven-
ture partner, and any other person as deter-
mined by the Board who participates in the
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conduct of the affairs of a Federal Home Loan
Bank; and
‘‘(C) any independent contractor (including
any attorney, appraiser, or accountant) who
knowingly or recklessly participates in—
‘‘(i) any violation of any law or regu-
lation;
‘‘(ii) any breach of fiduciary duty; or
‘‘(iii) any unsafe or unsound practice,
which caused or is likely to cause more than a
minimal financial loss to, or a significant ad-
verse effect on, the Federal Home Loan Bank.
‘‘(3) BOARD.—The term ‘Board’ means the
Federal Housing Finance Board established under
section 2A.
‘‘(4) FEDERAL HOME LOAN BANK SYSTEM AND
SYSTEM.—The term ‘Federal Home Loan Bank Sys-
tem’ or ‘System’ means the Federal Home Loan
Banks, including any central office established by
the Banks, under the supervision of the Board.
‘‘(5) HOME MORTGAGE.—The term ‘home mort-
gage’ means a mortgage upon real estate, in fee sim-
ple, or on a leasehold—(A) under a lease for not less
than ninety-nine years which is renewable or (B)
under a lease having a period of not less than fifty
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years to run from the date the mortgage was exe-
cuted, upon which is located, or which comprises or
includes, one or more homes or other dwelling units,
all of which may be defined by the Board, and shall
include, in addition to first mortgages, such classes
of first liens as are commonly given to secure ad-
vances on real estate by institutions authorized
under this Act to become members, under the laws
of the State in which the real estate is located, to-
gether with the credit instruments, if any, secured
thereby.
‘‘(6) HOME MORTGAGE LOAN.—The term ‘home
mortgage loan’ means a loan made by a member
upon the security of a home mortgage.
‘‘(7) INSURED DEPOSITORY INSTITUTION.—The
term ‘insured depository institution’ means—
‘‘(A) an insured depository institution (as
defined in section 3 of the Federal Deposit In-
surance Act), and
‘‘(B) except as used in sections 21A and
21B, an insured credit union (as defined in sec-
tion 101 of the Federal Credit Union Act).
‘‘(8) MEMBER.—The term ‘member’ means any
institution which has subscribed for the stock of a
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Federal Home Loan Bank and has not surrendered
all of that stock.
‘‘(9) SAVINGS ASSOCIATION.—The term ‘savings
association’ has the meaning given to such term in
section 3 of the Federal Deposit Insurance Act.
‘‘(10) STATE.—The term ‘State’ includes the
District of Columbia, Guam, Puerto Rico, and the
Virgin Islands of the United States.
‘‘(11) TOTAL CAPITAL.—The term ‘total cap-
ital’ means—
‘‘(A) except as provided in subparagraphs
(B) ad (C), total capital that is calculated at
least quarterly;
‘‘(B) with respect to a Federal Home Loan
Bank, total capital that is calculated on the last
day of each month net of all stock to be re-
deemed under all pending notices of redemption
and withdrawal filed under section 6(e) with the
Bank and all stock pending retirement by the
Bank; and
‘‘(C) with respect to the Federal Home
Loan Bank System, total capital that is cal-
culated on the last day of each month net of all
stock to be redeemed under all pending notices
of redemption and withdrawal filed under sec-
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tion 6(e) with any of the Federal Home Loan
Banks and all stock pending retirement by any
of the Banks.
‘‘(12) UNPAID PRINCIPAL.—The term ‘unpaid
principal’, when used in respect of a loan secured by
a home mortgage means the principal thereof less
the sum of (A) payments made on such principal,
and (B) in cases where shares or stock are pledged
as security for the loan, the payments made on such
shares or stock plus earnings or dividends appor-
tioned or credited thereon.’’.
SEC. 103. FEDERAL HOUSING FINANCE BOARD.
(a) ESTABLISHMENT.—Section 2A(a) of the Federal
Home Loan Bank Act (12 U.S.C. 1422a(a)) is amended
by deleting paragraph (3).
(b) BOARD MEMBERS.—Section 2A(b) of the Federal
Home Loan Bank Act (12 U.S.C. 1422(b)) is amended
to read as follows:
‘‘(b) BOARD MEMBERS.—
‘‘(1) IN GENERAL.—The Board shall consist of
the following directors:
‘‘(A) The Secretary of the Treasury (or the
Secretary of the Treasury’s designee), who shall
serve without additional compensation.
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‘‘(B) The Secretary of the Department of
Housing and Urban Development (or the Sec-
retary of the Department of Housing and
Urban Development’s designee), who shall serve
without additional compensation.
‘‘(C) 3 directors appointed by the Presi-
dent, by and with the advice and consent of the
Senate—
‘‘(i) from among individuals who are
citizens of the United States; and
‘‘(ii) from among individuals—
‘‘(I) with extensive experience or
training in housing finance or finan-
cial institution safety and soundness
regulation, or
‘‘(II) with a commitment to pro-
viding specialized housing credit.
‘‘(2) APPOINTED DIRECTORS.—
‘‘(A) FULL-TIME DIRECTOR.—
‘‘(I) ONE
DIRECTOR.—1 of the ap-
pointed directors shall serve full-time as a
director of the Board.
‘‘(II) CHAIRPERSON.—The full-time
appointed director shall be designated to
serve as the Chairperson of the Board and
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the Chairperson shall be designated as the
chief executive officer, subject to the super-
vision of the Board.
‘‘(III) ACTING
CHAIRPERSON.—The
Chairperson shall designate another ap-
pointed director to serve as Acting Chair-
person during the absence or disability of
the Chairperson.
‘‘(B) PART-TIME DIRECTORS.—2 of the ap-
pointed directors shall serve part-time as direc-
tors of the Board and at least 1 of the part-
time directors shall be chosen from an organiza-
tion with more than a 2-year history of rep-
resenting consumer or community interests on
banking services, credit needs, housing, or fi-
nancial consumer protections.
‘‘(3) NOMINATIONS.—Nominations pursuant to
this subsection shall be referred in the Senate to the
Committee on Banking, Housing, and Urban Af-
fairs.’’.
(c) APPOINTED DIRECTORS’ TERMS.—Section 2A(c)
of the Federal Home Loan Bank Act (12 U.S.C. 1422(c))
is amended to read as follows:
‘‘(c) APPOINTED DIRECTORS’ TERMS.—
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‘‘(1) IN
GENERAL.—The appointed directors
shall each be appointed for a term of 6 years.
‘‘(2) INITIAL
TERM.—Notwithstanding para-
graph (1), of the directors first appointed after the
enactment of the Federal Home Loan Bank System
Restructuring and Modernization Act of 1995—
‘‘(i) 1 shall be appointed for a term of 2
years;
‘‘(ii) 1 shall be appointed for a term of 4
years; and
‘‘(iii) 1 shall be appointed for a term of 6
years.’’.
(d) VACANCIES.—Section 2A(d) of the Federal Home
Loan Bank Act (12 U.S.C. 1422(d)) is amended to read
as follows:
‘‘(d) VACANCIES.—
‘‘(1) IN GENERAL.—Any vacancy on the Board
shall be filled in the same manner in which the origi-
nal appointment was made.
‘‘(2) EXPIRATION OF TERM.—Any director ap-
pointed to fill a vacancy occurring before the expira-
tion of the term for which such director’s prede-
cessor was appointed shall be appointed only for the
remainder of such term.
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‘‘(3) CONTINUATION OF SERVICE.—Each direc-
tor may continue to serve until a successor has been
appointed and qualified.
‘‘(4) QUORUM.—
‘‘(A) IN GENERAL.—3 directors shall con-
stitute a quorum of the board of directors of
the Federal Housing Finance Board.
‘‘(B) EXCEPTION.—If there shall be on the
Board less than a quorum, all powers and func-
tions vested in, or exercisable by, the Board
shall vest in and be exercisable by the remain-
ing directors, until such time as there shall be
a quorum of the Board.’’.
(e) EMPLOYMENT AND OTHER RESTRICTIONS ON DI-
RECTORS; APPOINTED DIRECTORS COMPENSATION.—Sec-
tion 2A of the Federal Home Loan Bank Act (12 U.S.C.
1422a) is amended by adding after subsection (d) the fol-
lowing new subsections:
‘‘(e) EMPLOYMENT AND OTHER RESTRICTIONS ON
DIRECTORS.—No director may—
‘‘(1) serve as a director or officer of any Fed-
eral Home Loan Bank or any member of any Bank;
or
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‘‘(2) hold shares of, or any other financial inter-
est in, any member of any Federal Home Loan
Bank.
‘‘(f) APPOINTED DIRECTORS COMPENSATION.—The
Chairperson and the other appointed directors shall be
compensated as prescribed in sections 5314 and 5315 of
title 5, United States Code, respectively.’’.
(f) TRANSITIONAL PROVISION.—
(1) CONTINUED SERVICE OF FEDERAL HOUSING
FINANCE BOARD DIRECTORS.—Any Federal Housing
Finance Board director serving on the date of enact-
ment of the Federal Home Loan Bank Restructur-
ing and Modernization Act of 1995, whose term has
not expired prior to that date, shall remain a direc-
tor of the Board and shall be deemed to have been
appointed under subsection (b).
(2) TERMS OF APPOINTMENT.—The President
shall determine the length of the term of any direc-
tor described in paragraph (1), subject to subsection
(c)(2), and shall determine which director described
in paragraph (1) shall serve as the full-time director
and which shall serve part-time.
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SEC. 104. POWERS AND DUTIES OF THE FEDERAL HOUSING
FINANCE BOARD.
(a) POWERS AND DUTIES.—Section 2B(a) of the
Federal Home Loan Bank Act (12 U.S.C. 1422b(a)) is
amended to read as follows:
‘‘(a) POWERS AND DUTIES.—
‘‘(1) SAFETY AND SOUNDNESS.—The primary
duty of the Board shall be to ensure that the Fed-
eral Home Loan Banks operate in a safe and sound
manner.
‘‘(2) ADDITIONAL POWERS AND DUTIES.—The
Board also shall have the following powers and
duties—
‘‘(A) to supervise the Federal Home Loan
Banks and the Federal Home Loan Bank Sys-
tem and to promulgate and enforce such regula-
tions and orders as are necessary from time to
time to carry out the provisions of this Act;
‘‘(B) to ensure that the Federal Home
Loan Banks carry out their housing finance
mission;
‘‘(C) to ensure that the Federal Home
Loan Banks and the Federal Home Loan Bank
System remain appropriately capitalized and
able to raise funds in the capital markets;
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‘‘(D) to determine necessary expenditures
of the Board under this Act and the manner in
which such expenditures shall be incurred, al-
lowed, and paid;
‘‘(E) to use the United States mails in the
same manner and under the same conditions as
a department or agency of the United States;
and
‘‘(F) utilizing the services of the Adminis-
trator of the General Services, to purchase,
lease, hold or dispose of such real estate for its
premises as may be necessary or convenient for
it to carry out the purposes of this Act.’’.
(b) AMENDMENTS
CONCERNING
STAFF.—Section
2B(b) of the Federal Home Loan Bank Act (12 U.S.C.
1422b(b)) is amended to read as follows:
‘‘(b) STAFF.—
‘‘(1) FEDERAL
HOUSING
FINANCE
BOARD
STAFF.—Subject to title II of the Federal Home
Loan Bank System Restructuring and Moderniza-
tion Act of 1995, the Board may employ, direct, and
fix the compensation and number of employees, at-
torneys, and agents of the Board, except that in no
event shall the Board delegate any function to any
employee or administrative unit of any bank.
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‘‘(2) COMPENSATION.—
‘‘(a) 
EMPLOYEES, 
ATTORNEYS, 
AND
AGENTS.—In directing and fixing the com-
pensation of employees, attorneys, and agents,
the Board shall consult with and maintain com-
parability with the compensation at the Federal
bank regulatory agencies.
‘‘(B) OTHER LAWS.—Except for the com-
pensation of the directors of the Board, com-
pensation under subparagraph (A) shall be paid
without regard to the provisions of other laws
applicable to officers or employees of the United
States.
‘‘(3) ABOLITION
OF
THE
OFFICE
OF
FI-
NANCE.—The Office of Finance is abolished on the
earlier of the date—
‘‘(A) the central office described in section
11(k) is established, or
‘‘(B) 6 months after the Federal Home
Loan Bank System Restructuring and Mod-
ernization Act of 1995 is enacted.’’.
SEC. 105. CONTINUING REGULATIONS AND POLICIES.
Not later than 270 days after the date of enactment
of this Act, the Federal Housing Finance Board shall—
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(a) identify the regulations and policies of the
Board that will continue in effect after the enact-
ment of this Act;
(b) identify the regulations and policies de-
scribed in subsection (a) that need to be amended to
comply with changes made to the Federal Home
Loan Bank Act by this Act; and
(c) publish the information required by sub-
sections (a) and (b) in the Federal Register.
SEC. 106. READJUSTMENT OF FEDERAL HOME LOAN BANK
DISTRICTS; NAMES.
Section 3 of the Federal Home Loan Bank Act (12
U.S.C. 1423) is amended to read as follows:
‘‘SEC. 3. READJUSTMENT OF FEDERAL HOME LOAN BANK
DISTRICTS; NAMES.
‘‘(a) READJUSTMENTS.—
‘‘(1) AUTHORITY
OF
FEDERAL
HOME
LOAN
BANKS.—The Federal Home Loan Bank districts
and the Federal Home Loan Banks in existence on
the date of enactment of the Federal Home Loan
Bank System Restructuring and Modernization Act
of 1995 may be readjusted (through merger or oth-
erwise) by 2 or more Banks as long as—
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‘‘(A) there are never fewer than 1 nor
more than 12 districts and Federal Home Loan
Banks; and
‘‘(B) the requirements of paragraph (2)
are satisfied.
‘‘(2) ADDITIONAL REQUIREMENTS.—Any read-
justment described in this subsection—
‘‘(A) CONVENIENCE TEST.—shall be with
due regard to the convenience and customary
course of business of the current members and
institutions eligible to and likely to subscribe
for stock of a Federal Home Loan Bank, and
no Federal Home Loan Bank district shall con-
tain a fractional part of any State.
‘‘(B) PRIOR
APPROVALS.—Must be ap-
proved (taking into account, among other
things, the convenience test in subparagraph
(A)), by—
‘‘(i) the Federal Housing Finance
Board;
‘‘(ii) the majority of the board of di-
rectors of each participating Bank; and
‘‘(iii) the majority of the votes that all
members of each participating Bank may
cast with respect to the readjustment.
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‘‘(I) VOTES TO BE CAST.—Each
member may cast a number of votes
equal to the number of votes the
member may cast in an election under
section 7(b).
‘‘(II) 
MEMBER
DEFINED.—As
used in this subparagraph, ‘‘member’’
means a member of a Federal Home
Loan Bank that was a member of
such Bank at the end of the calendar
year next preceding the vote.
‘‘(b) NAME.—
‘‘(1) DISTRICTS.—All districts shall be known
as Federal Home Loan Bank districts and may be
designated by number.
‘‘(2) CITY.—The title of each Federal Home
Loan Bank shall include the name of the city at
which it is established.’’.
SEC. 107. ELIGIBILITY FOR MEMBERSHIP.
(a) ELIGIBILITY CRITERIA.—Section 4(a) of the Fed-
eral Home Loan Bank Act (12 U.S.C. 1424(a)) is amend-
ed to read as follows:
‘‘(a) CRITERIA FOR ELIGIBILITY.—
‘‘(1) IN GENERAL.—Any building and loan as-
sociation, savings and loan association, cooperative
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bank, homestead association, insurance company,
savings bank, or any insured depository institution
(as defined in section 2), shall be eligible to be a
member of a Federal Home Loan Bank if—
‘‘(A) it is duly organized under the laws of
any State or of the United States;
‘‘(B) it is subject to inspection and regula-
tion under the banking laws, or under similar
laws, of any State or of the United States;
‘‘(C) it makes long-term home mortgage
loans, as defined by the Board;
‘‘(D) it maintains at least 10 percent of its
total assets in whole first mortgages on im-
proved residential property (based on an aver-
age in each calendar quarter);
‘‘(E) its financial condition is such that ad-
vances may be safely made to such institution;
and
‘‘(F) the character of its management and
its home-financing policy are consistent with
sound and economical home financing.
‘‘(2) DEFINITION
OF
WHOLE
MORTGAGE.—A
whole first mortgage on improved residential prop-
erty for purposes of this subsection does not include
either a partial interest in a residential mortgage
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loan or any security that represents an interest in a
residential mortgage loan.
‘‘(3) TRANSITION PERIODS FOR NEW INSTITU-
TIONS AND EXISTING MEMBERS.—
‘‘(A) NEW INSTITUTIONS.—An institution
commencing its initial business operations may
become a member of a Federal Home Loan
Bank prior to complying with paragraph (1)(D)
if it complies with paragraph (1)(D) within one
year after the commencement of its operations.
‘‘(B) 
EXISTING
MEMBERS.—Paragraph
(1)(D) does not apply to an institution that is
a member of a Federal Home Loan Bank on
the day before the date of enactment of the
Federal Home Loan Bank System Supervision
and Modernization Act of 1995 until 2 years
after the date of enactment of the Federal
Home Loan Bank System Restructuring and
Modernization Act of 1995.
‘‘(C) REMOVAL.—A new institution or an
existing member that fails to comply with para-
graph (1)(D) within the time period provided by
subparagraph (A) or subparagraph (B), respec-
tively, shall be removed from membership by
the Board under section (6)(e).
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‘‘(4) FAILURE TO MAINTAIN ASSET REQUIRE-
MENT.—Except as provided in paragraph (3), any
member that fails to maintain compliance with the
10 percent whole first mortgage asset requirement
described in paragraph (1)(D)—
‘‘(A) ADVANCES.—For 2 consecutive quar-
ters shall not be eligible to obtain advances
from its Federal Home Loan Bank until the
member meets the 10 percent whole first mort-
gage asset requirement; and
‘‘(B) REMOVAL OF MEMBER.—For 4 con-
secutive quarters shall be removed from mem-
bership by the Board under section 6(e).’’.
(b) MEMBERSHIP BASED ON CONVENIENCE; APPLI-
CATIONS.—Section 4(b) of the Federal Home Loan Bank
Act (12 U.S.C. 1424(b)) is amended to read as follows:
‘‘(b) MEMBERSHIP BASED ON CONVENIENCE; APPLI-
CATIONS.—
‘‘(1) MEMBERSHIP BASED ON CONVENIENCE.—
An institution eligible to become a member under
this section may become a member only of, and se-
cure advances only from—
‘‘(A) the Federal Home Loan Bank of the
district in which the institution’s principal place
of business is located, or
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‘‘(B) the Bank of a district adjoining the
district in which the institution’s principal place
of business is located if demanded by conven-
ience and then only if—
‘‘(i) the application for membership is
approved by the Bank of the adjoining dis-
trict; and
‘‘(ii) the Board does not disapprove
the application within 30 days after Bank
approval is granted under clause (i).
‘‘(2) APPLICATIONS.—
‘‘(A) SUBMISSION.—An institution eligible
to become a member may submit an application
for membership—
‘‘(i) to the Bank in the district in
which the principal place of business of the
institution is located; or
‘‘(ii) if the institution is seeking to be-
come a member of a Bank of a district ad-
joining the district in which the institu-
tion’s principal place of business is located,
to the Bank of the adjoining district and
to the Board.
‘‘(B) APPROVAL.—Each Federal Home
Loan Bank is authorized to approve or dis-
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approve, subject to the requirements of this
Act, applications appropriately submitted to the
Bank.’’.
SEC. 108. CAPITAL STOCK.
(a) REQUIRED SUBSCRIPTIONS; RETIREMENT
OF
OVERSUBSCRIPTIONS; LIMITATIONS; CANCELLATION OF
OVERSUBSCRIPTIONS; REPORTS
AND INFORMATION.—
Section 6(b) of the Federal Home Loan Bank Act (12
U.S.C. 1426(b)) is amended to read as follows:
‘‘(b) REQUIRED SUBSCRIPTIONS; RETIREMENT OF
OVERSUBSCRIPTIONS; LIMITATIONS; CANCELLATION OF
OVERSUBSCRIPTIONS; REPORTS AND INFORMATION.—
‘‘(1) REQUIRED SUBSCRIPTIONS.—
‘‘(A) IN GENERAL.—
‘‘(i) PERCENTAGE
OF
TOTAL
AS-
SETS.—The minimum stock subscription of
each institution that becomes a member
shall be an amount equal to a percentage
of the subscriber’s total assets.
‘‘(ii) EACH BANK TO SET INDIVIDUAL
REQURIEMENTS.—The percentage of total
assets in clause (i), which shall apply to all
members of the same Bank, shall be estab-
lished individually by each Federal Home
Loan Bank based, at a minimum, on the
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capital standards set by the Board under
Section 6(A).
‘‘(B) ADJUSTMENTS.—Each Federal Home
Loan Bank shall annually, as of the close of the
calendar year, adjust, at such time, and in such
manner and upon such terms and conditions as
the Board may by regulation or otherwise pre-
scribe, the amount of stock required to be held
by each member of the Bank so that such mem-
ber shall have invested in the stock of the Bank
at least an amount calculated in the manner
provided in subparagraph (A).
‘‘(C) EXCESS STOCK.—
‘‘(i) 
RETIREMENT.—If 
a 
Federal
Home Loan Bank finds that the invest-
ment of any member in stock of the Bank
is greater than that required under this
paragraph, it may, unless prohibited by the
Board or by the provisions of paragraph
(2), retire the stock of such member in ex-
cess of the amount so required.
‘‘(ii) 
PAYMENT
FOR
RETIRED
STOCK.—The retirement of stock under
this subparagraph is subject to all of the
requirements imposed on the partial re-
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demption of stock under subsection (e), ex-
cept for the notice requirement contained
in subsection (e)(1).
‘‘(D) ENTIRE SHARES.—The Board, in its
discretion, may, by regulation or otherwise, pro-
vide for adjustments in amounts of stock to be
issued or retired in order that stock may be is-
sued or retired only in entire shares.
‘‘(2) LIMITATION ON RETIREMENT OF EXCESS
SHARES.—Notwithstanding any other provision of
this subsection, no action shall be taken by any
Bank with respect to any member pursuant to para-
graph (1) if the effect of the action would be to
cause the aggregate outstanding advances made by
the Bank to exceed 20 times the amounts paid in by
the member for outstanding capital stock, unless the
member has established a permissible compensating
balance to support the excess advance.
‘‘(3) 
REPORTS
AND
INFORMATION.—The
Board, by regulations or otherwise, may require each
member to submit such reports and information as
the Board, in its discretion, may determine to be
necessary or appropriate for the purposes of this
subsection.’’.
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(b) PARTIAL STOCK REDEMPTION OR WITHDRAWAL;
REMOVAL OF MEMBERS; SURRENDER AND CANCELLA-
TION OF STOCK; STOCK REDEMPTIONS.—Section 6(e) of
the Federal Home Loan Bank (12 U.S.C. 1426(e)) is
amended to read as follows:
‘‘(e) PARTIAL
STOCK
REDEMPTION
OR
WITH-
DRAWAL; REMOVAL OF MEMBERS; SURRENDER AND CAN-
CELLATION OF STOCK; STOCK REDEMPTIONS.—
‘‘(1) PARTIAL STOCK REDEMPTION AND WITH-
DRAWAL OF MEMBERS.—
‘‘(A) IN GENERAL.—
‘‘(i) NOTICE OF WITHDRAWAL.—Any
member may withdraw from membership
in a Federal Home Loan Bank, subject to
the conditions of this Act, by filing with
the Board and the Bank a written notice
of intention to withdraw.
‘‘(ii) NOTICE
OF
PARTIAL
REDEMP-
TION.—
‘‘(I) IN
GENERAL.—Except as
provided in subclause (II), any mem-
ber may redeem stock in excess of the
amount of stock required to be owned
by the member under section 6(b)(1),
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by filing a written notice of a partial
redemption.
‘‘(II) 
EXCEPTION.—Stock 
de-
scribed in subclause (I) may not be
redeemed if, following the redemption,
the aggregate outstanding advances to
the member would exceed 20 times
the amounts paid in by the member
for outstanding capital stock and the
member has not (or is not permitted
to) established a compensating bal-
ance to support the excess advances.
‘‘(iii) DATE OF NOTICE.—Any notice
filed under this paragraph shall be deemed
to have been filed on the last day of the
month in which the notice is filed.
‘‘(B) FEE
FOR
CANCELLATION
OF
NO-
TICE.—
‘‘(i) FEE
IMPOSED.—If a member
cancels a notice filed under subparagraph
(A), the member shall pay a fee in an
amount established by the Board.
‘‘(ii) FEE AMOUNT.—The Board shall
set the cancellation fee at an amount de-
termined by the Board to be sufficient to
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discourage members from filing a notice
for the purpose of maintaining a partial re-
demption option or withdrawal option.
‘‘(iii) CAPITAL
ACCOUNT.—The fee
paid by a member under this subparagraph
shall be added to the Bank’s retained earn-
ings account or other capital reserve ac-
count.
‘‘(C) PROCESS.—For purposes of this sub-
section, notices of partial redemption and with-
drawal shall be processed in the order received.
‘‘(2) REMOVAL OF MEMBERS.—
‘‘(A) FEDERAL HOUSING FINANCE BOARD
ACTION.—The Board may, after hearing, re-
move any member from membership if such
member—
‘‘(i) in the opinion of the Board—
‘‘(I) has failed to comply with
any provision of this Act or regulation
of the Board prescribed under this
Act, including a failure to maintain at
least 10 percent of its total assets in
whole first mortgages on improved
residential property as required under
section 4; or
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‘‘(II) has a management or
home-financing policy of a character
inconsistent with sound and economi-
cal home financing or with the pur-
poses of this Act; or
‘‘(ii) has been determined to be insol-
vent, or otherwise subject to the appoint-
ment of a conservator, receiving, or other
legal custodian, by a State or Federal au-
thority with regulatory and supervisory re-
sponsibility for the member.
‘‘(B) FEDERAL HOME LOAN BANK REFER-
RAL.—
‘‘(i) IN GENERAL.—A Federal Home
Loan Bank may refer a member to the
Board for removal if the Bank believes any
basis for removal set forth in subpara-
graph (A) is present.
‘‘(ii) BOARD
DECISION.—Within 30
days after receiving a referral described in
clause (i), the Board shall determine
whether to initiate a removal action under
subparagraph (A) and shall notify the re-
ferring Bank of its decision.
‘‘(3) LIQUIDATION OF MEMBER’S DEBTS.—
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‘‘(A) IN
GENERAL.—When a member’s
membership in a Federal Home Loan Bank is
terminated by removal, or a member files a no-
tice of withdrawal, the indebtedness of the
member to the Federal Home Loan Bank shall
be liquidated in an orderly manner as deter-
mined by the Federal Home Loan Bank and
the liquidation shall be completed no later than
the date the member’s stock is to be surren-
dered and canceled under paragraph (4).
‘‘(B) LIQUIDATION DEEMED PREPAYMENT
OF DEBT.—Any liquidation described in sub-
paragraph (A) shall be deemed a prepayment of
the indebtedness, and shall be subject to any
penalties or other fees applicable to such pre-
payment.
‘‘(C) PROHIBITION ON NEW ADVANCES.—
New advances may not be made to a member
and outstanding advances to a member may not
be renewed—
‘‘(i) if the member has filed a notice
of withdrawal, unless the notice is canceled
and the fee described in paragraph (1)(B)
has been paid; or
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‘‘(ii) if the Board has determined,
after hearing, to remove the member.
‘‘(D) RETURN OF COLLATERAL AND COM-
PENSATING
BALANCES.—Upon the liquidation
of indebtedness described in subparagraph (A),
the member shall be entitled to the return of
any of its remaining collateral and compensat-
ing balance.
‘‘(4) WITHDRAWALS
AND
REMOVALS.—All of
the stock in the Federal Home Loan Bank owned by
a member shall be surrendered and canceled—
‘‘(i) in the case of withdrawal, 6
months after the date the member filed the
notice of withdrawal, unless the notice has
been canceled and the fee described in
paragraph (1)(B) has been paid; or
‘‘(ii) in a removal case, upon the com-
pletion of the liquidation described in para-
graph (3).
‘‘(B) PARTIAL REDEMPTION.—The amount
of stock in the Federal Home Loan Bank being
redeemed by a member in a partial redemption
shall be surrendered and canceled 6 months
after the date the member filed the notice of
partial redemption, unless the notice has been
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canceled and the fee described in paragraph
(1)(B) has been paid.
‘‘(5) PAYMENT FOR STOCK REDEMPTIONS.—
‘‘(A) CASH SUBSCRIPTIONS PAID IN TWO
INSTALLMENTS.—Except as provided in sub-
paragraphs (B) and (C), a member that has
surrendered all or part of its capital stock shall
receive from the Federal Home Loan Bank a
sum equal to the member’s cash paid subscrip-
tions for the capital stock surrendered to be
paid in two equal installments as follows—
‘‘(i) upon the surrender and cancella-
tion of the member’s stock; and
‘‘(ii) six months after receiving the
payment described in clause (i).
‘‘(B) EXTENSION
OF
TIME
FOR
PAY-
MENT.—
‘‘(i) IN
GENERAL.—Except as pro-
vided in subparagraph (C), a member that
has surrendered all or part of its capital
stock shall receive from the Bank a sum
equal to the member’s cash subscription
for the capital stock surrendered to be paid
in three equal installments as set forth in
clause (ii) when—
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‘‘(I) pending stock redemptions
in the Federal Home Loan Bank ex-
ceed 20 percent of the Bank’s current
capital, or
‘‘(II) the Board makes a written
determination that, for reasons of
safety and soundness, the period for
payment on redemptions should be ex-
tended.
‘‘(ii) 
THREE
INSTALLMENTS.—The
three equal installment payments referred
to in clause (i) shall be made as follows—
‘‘(I) upon the surrender and can-
cellation of the member’s capital
stock;
‘‘(II) six months after receiving
the payment described in subclause
(I); and
‘‘(III) six months after receiving
the payment described in subclause
(II).
‘‘(iii) WAIVER REQUEST.—In response
to a request from the Federal Home Loan
Bank, the Board in its discretion may
waive an extension of the payment period
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imposed, or to be imposed, because pend-
ing capital redemptions exceed 20 percent
of the Bank’s current capital.
‘‘(C) UNDERCAPITALIZATION.—If at any
time the Board finds that a Federal Home
Loan Bank is undercapitalized or is likely to
be undercapitalized for any reason including,
losses in or depreciation of the assets held or
capital stock redemptions, the Federal Home
Loan Bank shall on the order of the Board
withhold from the amount to be paid under this
paragraph a pro rata share of the amount equal
to the additional capital required for the Bank
to be adequately capitalized as determined by
the Board.’’.
(c) ACQUISITION
OF MEMBERSHIP AFTER WITH-
DRAWAL
OR REMOVAL.—Section 6(h) of the Federal
Home Loan Bank Act (12 U.S.C. 1426(h)) is amended
to read as follows:
‘‘(h) ACQUISITION OF MEMBERSHIP AFTER WITH-
DRAWAL OR REMOVAL.—Notwithstanding any other provi-
sion of this Act, an institution which withdraws, or is re-
moved, from membership may acquire membership in any
Federal Home Loan Bank only after the expiration of a
period of 10 years thereafter, except where such with-
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drawal is a consequence of a transfer of membership on
a noninterrupted basis between Banks.’’.
SEC. 109. TRANSITIONAL PROVISIONS CONCERNING CAP-
ITAL STOCK.
(a) TRANSITION FOR WITHDRAWAL.—
(1) DELAYED EFFECTIVE DATE.—Section 6(e)
of the Federal Home Loan Bank Act, as amended
by this Act, shall become effective 90 days after the
date of enactment of this Act.
(2) WITHDRAWAL BY CURRENT MEMBERS.—
(A) NOTICE
TO
WITHDRAW
UNDER
OLD
SYSTEM.—Any institution, other than a Federal
savings association, that was a member of a
Federal Home Loan Bank on the day before
the date of enactment of this Act shall have 90
days after the date of enactment of this Act to
file a notice with the Board of its intention to
withdraw from membership in a Federal Home
Loan Bank under the terms and conditions for
withdrawal existing on the day before the date
of enactment of the Federal Home Loan Bank
System Restructuring and Modernization Act of
1995, including the prohibition on an institu-
tion that withdraws from membership acquiring
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membership in any Bank prior to the expiration
of a 10 year period.
(B) EXCEPTION CONCERNING TERMS AND
CONDITIONS OF WITHDRAWAL.—A member that
files a notice of withdrawal under subparagraph
(A) may not cancel the notice after the expira-
tion of the 90 day period described in subpara-
graph (A).
(C) NOTICES PENDING ON DATE OF EN-
ACTMENT.—The membership withdrawal by a
member that has a notice of withdrawal pend-
ing on the date of enactment of the Federal
Home Loan Bank System Restructuring and
Modernization Act of 1995 shall be subject to
the terms and conditions for withdrawal exist-
ing on the day before the date of enactment of
the Federal Home Loan Bank System Restruc-
turing and Modernization Act of 1995, except
the member shall not be permitted to cancel the
notice of withdrawal after the expiration of the
90 day period described in subparagraph (A).
(b) TRANSITION FOR STOCK SUBSCRIPTIONS.—
(1) REQUIRED STOCK SUBSCRIPTION.—
(A) BOARD
REGULATIONS.—The Board
shall prescribe final regulations establishing the
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capital standards required under section 6A of
the Federal Home Loan Bank Act that become
effective no later than 1 year after the date of
enactment of this Act.
(B) BANKS REQUIRED TO ESTABLISH IN-
DIVIDUAL
STOCK
SUBSCRIPTIONS.—Within 30
days after the regulations described in subpara-
graph (A) become effective, each Federal Home
Loan Bank shall establish its stock subscription
requirements under section 6(b)(1) of the Fed-
eral Home Loan Bank Act and shall submit a
plan to the Federal Housing Finance Board
specifying how the Bank intends to implement
its stock subscription requirements.
(C) 2 YEAR TRANSITION PERIOD.—Begin-
ning 2 years after a Bank first establishes its
stock subscription requirement described in
subparagraph (B), each member of the Bank
shall comply with that requirement.
(2) EXISTING
REQUIREMENTS
CONTINUED.—
Until a Federal Home Loan Bank has established
the stock subscription requirements described in
paragraph (1)(B), the minimum amount of stock re-
quired to be held by a member and the aggregate
amount of advances that may be outstanding to a
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member shall continue to be determined under the
statutory provisions in effect on the day before the
date of enactment of this Act.
(c) TRANSITION FOR STOCK OR COMPENSATING BAL-
ANCE REQUIREMENT.—
(1) INITIAL
DETERMINATION.—Prior to the
time a Bank first establishes its stock subscription
requirements under section 6(b)(1) of the Federal
Home Loan Bank Act, each Bank shall determine
whether members of the Bank wishing to obtain ad-
vances that exceed the standard leverage limit will
be—
(A) required to purchase additional stock;
(B) required to maintain a compensating
balance; or
(C) permitted to elect to purchase addi-
tional stock or maintain a compensating bal-
ance.
(2) 
SUBSEQUENT
DETERMINATIONS.—Each
Bank may change its initial determination under
paragraph (1).
(3) MEMBERS THAT WILL MAINTAIN A COM-
PENSATING BALANCE.—
(A) 2 YEAR TRANSITION PERIOD.—
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(i) IN GENERAL.—Beginning 2 years
after its Bank first establishes stock sub-
scription 
requirements 
under 
section
6(b)(1) of the Federal Home Loan Bank
Act, a member described in clause (ii) shall
comply with the compensating balance re-
quirements or reduce the amount of its
outstanding advances to an amount that
does not exceed the standard leverage
limit.
(ii) REQUIREMENTS.—Clauses (i) ap-
plies to a member that—
(I) is required, or has made a
permissible election, to maintain a
compensating balance to support ad-
vances that exceed the standard lever-
age limit; and
(II) on the day the member’s
Bank first established its stock sub-
scription requirements under section
6(b)(1) of the Federal Home Loan
Bank Act, had outstanding advances
that exceeded the standard leverage
limit.
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(B) PROHIBITION ON RENEWING CERTAIN
ADVANCES.—
(i) During the 2-year period described
in subparagraph (A), an advance to a
member described in clause (ii) shall not
be renewed, unless the compensating bal-
ance required by section 10(c)(2) of the
Federal Home Loan Bank Act is estab-
lished.
(ii) MEMBERS SUBJECT TO PROHIBI-
TION.—Clause (i) applies when—
(I) a member is required, or has
made a permissible election, to main-
tain compensating balances to support
advances that exceed the standard le-
verage limit; and
(II) the aggregate outstanding
advances to the member following the
renewal would exceed the standard le-
verage limit.
(4) STANDARD
LEVERAGE
LIMIT.—For pur-
poses of this subsection, the term ‘‘standard leverage
limit’’ means 20 times the amounts paid in by the
member for outstanding stock required under section
6(b)(1) of the Federal Home Loan Bank.
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SEC. 110. PROMPT CORRECTIVE ACTION.
The Federal Home Loan Bank Act is amended by
adding after section 6 (12 U.S.C. 1426) the following new
section:
‘‘SEC. 6A. PROMPT CORRECTIVE ACTION.
‘‘(a) DEFINITIONS.—For purposes of this section—
‘‘(1) CAPITAL CATEGORIES.—
‘‘(A) ADEQUATELY CAPITALIZED.—A Fed-
eral Home Loan Bank is ‘adequately capital-
ized’ if it meets the required minimum level for
each relevant capital measure.
‘‘(B) 
UNDERCAPITALIZED.—A 
Federal
Home Loan Bank is ‘undercapitalized’ if it fails
to meet the required minimum level for any rel-
evant capital measure.
‘‘(C) 
SIGNIFICANTLY
UNDERCAPITAL-
IZED.—A Federal Home Loan Bank is ‘signifi-
cantly undercapitalized’ if it is significantly
below the required minimum level for any rel-
evant capital measure.
‘‘(D) CRITICALLY UNDERCAPITALIZED.—A
Federal 
Home 
Loan 
Bank 
is 
‘critically
undercapitalized’ if it fails to meet any level
specified under subsection (b)(4)(A).
‘‘(2) OTHER DEFINITIONS.—
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‘‘(A) AVERAGE.—The ‘average’ of an ac-
counting item (such as total assets or tangible
equity) during a given period means the sum of
that item at the close of business on each busi-
ness day during that period divided by the total
number of business days in that period.
‘‘(B) CAPITAL DISTRIBUTIONS.—The term
‘capital distribution’ means—
‘‘(i) a distribution of cash or other
property by a Federal Home Loan Bank to
its members made on account of that
membership but not including—
‘‘(I) any dividend consisting only
of shares of the Bank or right to pur-
chase such shares; or
‘‘(II) any amount paid on the de-
posits of a Bank that the Board de-
termines is not a distribution for pur-
poses of this section;
‘‘(ii) a payment by a Bank to repur-
chase, redeem, retire, or otherwise acquire
any of its shares, including any extension
of credit to finance an acquisition of those
shares; or
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‘‘(iii) a transaction that the Board de-
termines, by order or regulation, to be in
substance a distribution of capital to the
members of the Bank.
‘‘(C) CAPITAL RESTORATION PLAN.—The
term ‘capital restoration plan’ means a plan
submitted under subsection (d)(2).
‘‘(D) COMPENSATION.—The term ‘com-
pensation’ includes any payment of money or
provision of any other thing of value in consid-
eration of employment.
‘‘(E) RELEVANT CAPITAL MEASURE.—The
term ‘relevant capital measure’ means the
measures described in subsection (b).
‘‘(F) REQURIED
MINIMUM
LEVEL.—The
term ‘required minimum level’ means, with re-
spect to each relevant capital measure, the min-
imum acceptable capital level specified by the
Board.
‘‘(G) SENIOR EXECUTIVE OFFICER.—The
term ‘senior executive officer’ means a person
who participates or has authority to participate
(other than in the capacity of a director) in
major policy functions of the Federal Home
Loan Bank, whether or not: the officer has an
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official title; the title designates the officer as
assistant; or the officer is serving without sal-
ary or other compensation.
‘‘(b) CAPITAL STANDARDS.—
‘‘(1) RELEVANT CAPITAL MEASURES.—
‘‘(A) IN GENERAL.—The capital standard
prescribed by the Board shall include—
‘‘(i) a leverage limit; and
‘‘(ii) a risk-based capital requirement.
‘‘(B) OTHER
CAPITAL
MEASURES.—The
Board may, by regulation establish any addi-
tional relevant capital measures to carry out the
purpose of this section.
‘‘(2) RISK-BASED CAPITAL REQUIREMENT.—
‘‘(A) IN GENERAL.—The risk-based capital
requirement under paragraph (1) shall be com-
posed of the following components.—
(i) capital for credit risk;
(ii) capital for interest rate risk; and
(iii) capital for a source of earnings.
‘‘(B) CAPITAL COMPONENTS.—
‘‘(i) CAPITAL
FOR
CREDIT
RISK.—
Capital required for credit risk shall be no
less than the tier 1 risk-based capital re-
quired by regulation or guideline issued
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under section 38 of the Federal Deposit
Insurance Act for a well-capitalized in-
sured depository institution.
‘‘(ii) INTEREST RATE RISK.—Capital
required for interest rate risk shall be
based on an interest rate risk stress test
that rigorously tests for changes in interest
rates, rate volatility, and changes in the
shape of the yield curve.
‘‘(iii) CAPITAL
FOR
A
SOURCE
OF
EARNINGS.—
‘‘(I) IN
GENERAL.—Capital re-
quired to provide a source of earnings
for the System’s obligations to the
Funding Corporation and the Afford-
able Housing Program shall include
an amount at least equal to each
Bank’s proportionate share of the
System’s yearly obligation under sec-
tion 21B(f)(2)(C).
‘‘(II) CALCULATION.—For pur-
poses of subclause (I), a Bank’s pro-
portionate share of the System’s year-
ly 
obligation 
under 
section
21B(f)(2)(C) shall be calculated based
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on the previous year’s actual payment
under that section.
‘‘(3) CAPITAL CATEGORIES GENERALLY.—
‘‘(A) IN GENERAL.—The Board shall, by
regulation, specify for each relevant capital
measure the levels at which a Federal Home
Loan Bank is adequately capitalized, under-
capitalized, and significantly undercapitalized.
‘‘(B) MINIMUM LEVERAGE LIMIT FOR ADE-
QUATELY
CAPITALIZED
CATEGORY.—The level
specified by the Board for a Bank to be ade-
quately capitalized shall require total capital in
an amount not less than 4 percent of the
Bank’s total assets.
‘‘(4) CRITICAL CAPITAL.—
‘‘(A) FEDERAL HOUSING FINANCE BOARD
TO SPECIFY LEVEL.—
‘‘(i) LEVERAGE
LIMIT.—The board
shall, by regulation, specify the ratio of
total capital to total assets at which a Fed-
eral 
Home 
Loan 
Bank 
is 
critically
undercapitalized.
‘‘(ii) 
OTHER
RELEVANT
CAPITAL
MEASURES.—The Board may, by regula-
tion, specify for one or more other relevant
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capital measures, the level at which a
Bank is critically undercapitalized.
‘‘(B) LEVERAGE LIMIT RANGE.—The level
specified under subparagraph (A)(i) shall re-
quire tangible equity in an amount—
‘‘(i) not less than 2 percent of total
assets; and
‘‘(ii) except as provided in clause (i),
not more than 65 percent of the required
minimum level of capital under the lever-
age limit.
‘‘(c) PROVISIONS APPLICABLE
TO ALL FEDERAL
HOME LOAN BANKS.—
‘‘(1) CAPITAL
DISTRIBUTIONS
RESTRICTED.—
Except as provided in paragraph (2), a Federal
Home Loan Bank shall make no capital distribution
if, after making the distribution, the Bank would be
undercapitalized.
‘‘(2) 
EXCEPTIONS.—Notwithstanding 
para-
graph (1)—
‘‘(A) A Federal Home Loan Bank may re-
deem a member’s stock under, and subject to
the conditions of, section 6(e); and
‘‘(B) The board may permit a Federal
Home Loan Bank to repurchase, redeem, retire,
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or otherwise acquire its shares if the repur-
chase, redemption, retirement, or other acquisi-
tion—
‘‘(i) is made in connection with the is-
suance of additional shares of the Bank in
at least an equivalent amount; and
‘‘(ii) will reduce the Bank’s financial
obligations 
or 
otherwise 
improve 
the
Bank’s financial condition.
‘‘(d) PROVISIONS
APPLICABLE
TO
UNDERCAPI-
TALIZED FEDERAL HOME LOAN BANKS.—
‘‘(1) 
MONITORING
REQUIRED.—The 
Board
shall—
‘‘(A) closely monitor the condition of any
undercapitalized Federal Home Loan Bank;
‘‘(B) closely monitor compliance with cap-
ital restoration plans, restrictions, and require-
ments imposed under this section; and
‘‘(C) periodically review the plan, restric-
tions, and requirements applicable to any
undercapitalized Bank to determine whether the
plan, restrictions, and requirements are achiev-
ing the purpose of this section.
‘‘(2) 
CAPITAL
RESTORATION
PLAN
RE-
QUIRED.—
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‘‘(A) IN GENERAL.—Any undercapitalized
Bank shall submit an acceptable capital res-
toration plan to the Board within the time al-
lowed by the Board under subparagraph D.
‘‘(B) CONTENTS
OF
PLAN.—The capital
restoration plan shall—
‘‘(i) specify—
‘‘(I) the steps the Bank will take
to become adequately capitalized;
‘‘(II) the levels of capital to be
attained during each year in which
the plan will be in effect;
‘‘(III) how the Bank will comply
with the restrictions or requirements
then in effect under this section; and
‘‘(IV) the types and levels of ac-
tivities in which the Bank will engage;
and
‘‘(ii) contain such other information
as the Board may require.
‘‘(C) CRITERIA
FOR
ACCEPTING
PLAN.—
The Board shall not accept a capital restoration
plan unless the Board determines that the
plan—
‘‘(i) complies with subparagraph (B);
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‘‘(ii) is based on realistic assumptions,
and is likely to succeed in restoring the
Bank’s capital; and
‘‘(iii) would not appreciably increase
the risk (including credit risk, interest-rate
risk, and other type of risk) to which the
Bank is exposed.
‘‘(D) DEADLINES
FOR
SUBMISSION
AND
REVIEW OF PLANS.—The Board shall, by regu-
lation, establish deadlines that—
‘‘(i) provide Federal Home Loan
Banks with reasonable time to submit cap-
ital restoration plans, and generally require
a Bank to submit a plan not later than 45
days 
after 
the 
Bank 
becomes
undercapitalized; and
‘‘(ii) require the Board to act on cap-
ital restoration plans expeditiously, and
generally not later than 60 days after the
plan is submitted.
‘‘(3) 
ASSET
GROWTH
RESTRICTED.—An
undercapitalized Federal Home Loan Bank shall not
permit its average total assets during any calendar
quarter to exceed its average total assets during the
preceding calendar quarter unless—
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‘‘(A) the Board has accepted the Bank’s
capital restoration plan;
‘‘(B) any increase in total assets is consist-
ent with the plan; and
‘‘(C) the Bank’s ratio of total capital to as-
sets increases during the calendar quarter at a
rate sufficient to enable the Bank to become
adequately capitalized within a reasonable time.
‘‘(4) PRIOR APPROVAL FOR NEW ACTIVITIES.—
An undercapitalized Federal Home Loan Bank shall
not engage in any new activity unless—
‘‘(A) the Board has accepted the Bank’s
capital restoration plan, the Bank is implement-
ing the plan and Board determines that the
proposed action is consistent with and will fur-
ther the achievement of the plan; or
‘‘(B) the Board determines that the pro-
posed action will further the purpose of this
section.
‘‘(5) 
DISCRETIONARY
SAFEGUARDS.—The
Board may, with respect to any undercapitalized
Federal Home Loan Bank, take action described in
any subparagraph of subsection (e)(2) if the Board
determines that those actions are necessary to carry
out the purpose of this section.
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‘‘(e) PROVISIONS APPLICABLE
TO SIGNIFICANTLY
UNDERCAPITALIZED FEDERAL HOME LOAN BANKS AND
UNDERCAPITALIZED BANKS THAT FAIL TO SUBMIT AND
IMPLEMENT CAPITAL RESTORATION PLANS.—
‘‘(1) IN GENERAL.—This subsection shall apply
with respect to any Federal Home Loan Bank that
is—
‘‘(A) significantly undercapitalized; or
‘‘(B) undercapitalized and fails—
‘‘(i) to submit an acceptable capital
restoration plan within the time allowed by
the Board under subsection (d)(2); or
‘‘(ii) in any material respect to imple-
ment a plan accepted by the Board.
‘‘(2) SPECIFIC
ACTIONS
AUTHORIZED.—The
Board shall carry out this section by taking one or
more of the following actions—
‘‘(A) 
REQUIRED
RECAPITALIZATION.—
Doing one or more of the following—
‘‘(i) Requiring the Federal Home
Loan Bank to sell enough shares of the
Bank to its members or institutions eligible
to become members so that the Bank will
be adequately capitalized after the sale.
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‘‘(ii) Requiring the Bank to be ac-
quired by, or combine with, one or more
Federal Home Loan Banks.
‘‘(B) 
RESTRICTING
INTEREST
RATES
PAID.—
‘‘(i) IN GENERAL.—Restricting the in-
terest rates that the Bank pays on deposits
to an amount determined by the Board.
‘‘(ii) 
RETROACTIVE
RESTRICTIONS
PROHIBITED.—This subparagraph does not
authorize the Board to restrict interest
rates paid on time deposits made before
(and not renewed or renegotiated after)
the Board acted under this subparagraph.
‘‘(C) RESTRICTING ASSET GROWTH.—Re-
stricting the Bank’s asset growth more strin-
gently than subsection (d)(3), or requiring the
Bank to reduce its total assets.
‘‘(D) RESTRICTING
ACTIVITIES.—Requir-
ing the Bank to alter, reduce, or terminate any
activity that the Board determines poses exces-
sive risk to the Bank.
‘‘(E) IMPROVING
MANAGEMENT.—Doing
one or more of the following:
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‘‘(i) NEW ELECTION OF DIRECTORS.—
Ordering a new election for the Bank’s
board of directors.
‘‘(ii) DISMISSING DIRECTORS OR SEN-
IOR EXECUTIVE OFFICERS.—Requiring the
Bank to dismiss from office any elected di-
rector or senior executive officer who had
held office for more than 180 days imme-
diately 
before 
the 
Bank 
became
undercapitalized.
‘‘(iii) DISMISSING APPOINTED DIREC-
TORS.—Dismissing from office any ap-
pointed director who had held office for
more than 180 days immediately before
the Bank became undercapitalized.
‘‘(iv) 
CLARIFICATION
OF
DISMIS-
SALS.—Dismissal under clause (ii) or (iii)
shall not be construed to be a removal
under section 27A.
‘‘(v) EMPLOYING QUALIFIED SENIOR
EXECUTIVE
OFFICERS.—Requiring 
the
Bank to employ qualified senior executive
officers (who, if the Board so specifies,
shall be subject to approval by the Board).
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‘‘(F) REQUIRING OTHER ACTION.—Requir-
ing the Bank to take any other action that the
Board determines will better carry out the pur-
pose of this section.
‘‘(3) PRESUMPTION IN FAVOR OF CERTAIN AC-
TIONS.—In complying with paragraph (2), the
Board shall take the action described in clause (i) or
(ii) of paragraph (2)(A) (relating to requiring the
sale of shares or requiring the Federal Home Loan
Bank to be acquired by, or combine with, another
Federal Home Loan Bank).
‘‘(4) SENIOR EXECUTIVE OFFICERS’ COMPENSA-
TION RESTRICTED.—
‘‘(A) IN
GENERAL.—The Federal Home
Loan Bank shall not do any of the following
without the prior written approval of the Board:
‘‘(i) Pay any bonus to any senior exec-
utive officer.
‘‘(ii) Provide compensation to any sen-
ior executive officer at a rate exceeding
that officer’s average rate of compensation
(excluding bonuses, and (profit-sharing))
during the 12 calendar months preceding
the calendar month in which the Bank be-
came undercapitalized.
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‘‘(B) FAILURE
TO
SUBMIT
PLAN.—The
Board shall not grant any approval under sub-
paragraph (A) with respect to a Bank that has
failed to submit an acceptable capital restora-
tion plan.
‘‘(5) DISCRETION TO IMPOSE CERTAIN ADDI-
TIONAL RESTRICTIONS.—The Board may impose one
or more of the restrictions prescribed by regulation
under subsection (h) if the Board determines that
those restrictions are necessary to carry out the pur-
pose of this section.
‘‘(f) MORE STRINGENT TREATMENT BASED
ON
OTHER SUPERVISORY CRITERIA.—
‘‘(1) IN
GENERAL.—If the Board determines
(after notice and an opportunity for hearing) that a
Federal Home Loan Bank is in an unsafe or un-
sound condition or, pursuant to section 27A, deems
the Bank to be engaging in an unsafe or unsound
practice, the Board may—
‘‘(A) if the Bank is adequately capitalized,
require the Bank to comply with one or more
provisions of subsections (c) and (d) as if the
Bank were undercapitalized; or
‘‘(B) if the Bank is undercapitalized, take
any one or more actions authorized under sub-
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section (e)(2) as if the Bank were significantly
undercapitalized.
‘‘(2) CONTENTS OF PLAN.—
‘‘(A) IN
GENERAL.—Any plan required
under paragraph (1) shall specify the steps that
the Bank will take to correct the unsafe or un-
sound condition or practice.
‘‘(B) PLAN NOT REQUIRED.—Capital res-
toration plans shall not be required under para-
graph (1)(A).
‘‘(g) PROVISIONS
APPLICABLE
TO
CRITICALLY
UNDERCAPITALIZED FEDERAL HOME LOAN BANKS.—
‘‘(1) ACTIVITIES
RESTRICTED.—Any critically
undercapitalized Federal Home Loan Bank shall
comply with restrictions prescribed by the Board
under subsection (h).
‘‘(2) MERGER, LIQUIDATION, REORGANIZATION
OR OTHER ACTION REQUIRED.—
‘‘(A) IN GENERAL.—The Board shall, not
later than 90 days after a Federal Home Loan
Bank becomes critically undercapitalized—
‘‘(i) combine (by merger or otherwise)
the Bank with another Federal Home
Loan Bank;
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‘‘(ii) liquidate or reorganize the bank;
or
‘‘(iii) take such other action as the
Board determines would better achieve the
purpose of this section, after documenting
why the action would better achieve that
purpose.
‘‘(B) PERIODIC
REDETERMINATION
RE-
QUIRED.—Any determination by the Board
under subparagraph (A)(iii) to take any action
with respect to a Bank in lieu of combining the
Bank with another Federal Home Loan Bank
or reorganizing or liquidating the Bank shall
cease to be effective not later than the end of
the 90-day period beginning on the date that
the determination is made and the Bank shall
be combined, reorganized, or liquidated under
subparagraph (A) unless the Board makes a
new determination under subparagraph (A)(iii)
at the end of the effective period of the prior
determination.
‘‘(h) RESTRICTING
ACTIVITIES
OF
CRITICALLY
UNDERCAPITALIZED FEDERAL HOME LOAN BANKS.—To
carry out this section, the Board shall, by regulation or
order—
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‘‘(1) restrict the activities of any critically
undercapitalized Federal Home Loan Bank; and
‘‘(2) at a minimum, prohibit any critically
undercapitalized Bank from doing any of the follow-
ing without the Board’s prior written approval:
‘‘(A) Entering into any material trans-
action other than in the usual course of busi-
ness, including any investment, expansion, ac-
quisition, sale of assets, or other similar action.
‘‘(B) Amending the Bank’s bylaws, except
to the extent necessary to carry out any other
requirement of any law, regulation, or order.
‘‘(C) Making any material change in ac-
counting methods.
‘‘(D) Paying excessive compensation or bo-
nuses.
‘‘(E) Paying interest on new or renewed li-
abilities at a rate that would increase the
bank’s weighted average cost of funds to a level
significantly exceeding the prevailing rates of
interest on insured deposits in the Bank’s nor-
mal market areas.
‘‘(i) ADMINISTRATIVE REVIEW OF DISMISSAL OR-
DERS.—
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‘‘(1) TIMELY PETITION REQURIED.—A director
or senior executive officer dismissed pursuant to an
order under subsection (e)(2)(E)(ii) may obtain re-
view of that order by filing a written petition for re-
instatement with the Board not later than 10 days
after receiving notice of the dismissal.
‘‘(2) PROCEDURE.—
‘‘(A) HEARING
REQURIED.—The Board
shall give the petitioner an opportunity to—
‘‘(i) submit written materials in sup-
port of the petition; and
‘‘(ii) appear, personally or through
counsel, before 1 or more members of the
Board or designated employees of the
Board.
‘‘(B) 
DEADLINE
FOR
HEARING.—The
Board shall—
‘‘(i) schedule the hearing referred to
in subparagraph (A)(ii) promptly after the
petition is filed; and
‘‘(ii) hold the hearing not later than
30 days after the petition is filed, unless
the petitioner requests that the hearing be
held at a later time.
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‘‘(C) DEADLINE FOR DECISION.—Not later
than 60 days after the date of the hearing, the
Board shall—
‘‘(i) by order, grant or deny the peti-
tion;
‘‘(ii) if the order is adverse to the pe-
titioner, set forth the basis for the order;
and
‘‘(iii) notify the petitioner of the
order.
‘‘(3) STANDARD FOR REVIEW OF DISMISSAL OR-
DERS.—The petitioner shall bear the burden of prov-
ing that the petitioner’s continued employment
would materially strengthen the Federal Home Loan
Bank’s ability—
‘‘(A) to become adequately capitalized, to
the extent that the order is based on the Bank’s
failure to submit or implement a capital res-
toration plan; and
‘‘(B) to correct the unsafe or unsound con-
dition or unsafe or unsound practice, to the ex-
tent that the order is based on subsection
(f)(1).
‘‘(j) SAFEGUARDING SYSTEMWIDE CAPITAL.—
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‘‘(1) 
CAPITAL
RESTORATION
PLAN
RE-
QUIRED.—
‘‘(A) IN
GENERAL.—If for any calendar
quarter the total capital of the Federal Home
Loan bank System is less than $7 billion, the
System shall submit an acceptable capital res-
toration plan to the Board within the time al-
lowed by regulations prescribed by the Board.
‘‘(B) CONTENTS
OF
PLAN.—The capital
restoration plan shall—
‘‘(i) take into account the different
levels of capital of each Bank;
‘‘(ii) 
focusing 
first 
on 
each
undercapitalized Bank, specify—
‘‘(I) the steps that will be taken
to increase the total capital of any
undercapitalized Bank and the Sys-
tem;
‘‘(II) the amount of capital to be
raised during each year the plan will
be in effect; and
‘‘(III) the types and levels of ac-
tivities in which any undercapitalized
bank and the system will engage; and
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‘‘(iii) contain such other information
as the Board may require.
‘‘(2) PROHIBITION
ON
DISTRIBUTING
RE-
SERVES.—Except as provided in subparagraph
(3)(B), if for any calendar quarter the total capital
of the Federal Home Loan Bank System is less than
$6 billion, no Federal Home Loan bank may distrib-
ute any of its reserves.
‘‘(3) CAPITAL DISTRIBUTIONS RESTRICTED.—
‘‘(A) IN
GENERAL.—If for any calendar
quarter the total capital of the Federal Home
Loan Bank System is less than $5 billion, each
Federal Home Loan Bank shall make no cap-
ital distribution.
‘‘(B) EXCEPTION.—Notwithstanding sub-
paragraph (A)—
‘‘(i) A Federal Home Loan Bank may
redeem a member’s stock under, and sub-
ject to the conditions of, section 6(e); and
‘‘(ii) The Board may permit a Federal
Home Loan Bank to repurchase, redeem,
retire, or otherwise acquire its shares if the
repurchase, redemption, retirement, or
other acquisition—
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‘‘(I) is made in connection with
the issuance of additional shares of
the Bank in at least an equivalent
amount; and
‘‘(II) will reduce the Bank’s fi-
nancial obligations or otherwise im-
prove the Bank’s financial condition.
‘‘(k) IMPLEMENTATION.—
‘‘(1) REGULATIONS AND OTHER ACTIONS.—The
Board shall prescribe such regulations, issue such
orders, and take such other actions as are necessary
to carry out this section.
‘‘(2) WRITTEN
DETERMINATION
REQUIRED.—
Any determination by the Board required under this
section shall be written.
‘‘(l) OTHER AUTHORITY NOT AFFECTED.—This sec-
tion does not limit any authority of the Board to take ac-
tion in addition to (but not in derogation of) that required
under this section.
‘‘(m) PURPOSE.—The purpose of this section is to en-
sure that the Federal Home Loan Banks remain appro-
priately capitalized and able to raise funds in the capital
markets and to meet their obligations under this Act.’’.
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SEC. 111. FEDERAL HOME LOAN BANK DIRECTORS.
(a) NUMBER; QUALIFICATIONS; CONFLICTS OF IN-
TEREST.—Section 7(a) of the Federal Home Loan Bank
Act (12 U.S.C. 1427(a)) is amended to read as follows:
‘‘(a) NUMBER; QUALIFICATIONS; CONFLICTS OF IN-
TEREST.—
‘‘(1) NUMBER.—
‘‘(A) IN GENERAL.—Except as provided in
subparagraph (B), the management of each
Federal Home Loan Bank shall be vested in a
board of fourteen directors, eight of whom shall
be elected by the members as hereinafter pro-
vided in this section and six of whom shall be
appointed by the Board, all of whom shall be
citizens of the United States and bona fide resi-
dents of the district in which such Bank is lo-
cated.
‘‘(B) INCREASE IN DIRECTORS.—
‘‘(i) 
ELECTIVE
DIRECTORS.—Each
Federal Home Loan Bank may increase
the number of the Bank’s elective directors
to a number set by the Bank as long as
the number of directors in the case of any
district is at least equal to the number of
States in such district.
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‘‘(ii) INCREASE IN APPOINTED DIREC-
TORS.—If the number of elective directors
of a Bank is increased, the Board may in-
crease the number of appointed directors
of the Bank to a number not exceeding
three-fourths the number of elective direc-
tors.
‘‘(2) QUALIFICATIONS.—At least 2 of the Fed-
eral Home Loan Bank directors who are appointed
by the Board shall be representatives chosen from
organizations with more than a 2-year history of
representing consumer or community interests on
banking services, credit needs, housing, or financial
consumer protection.
‘‘(3) CONFLICTS
OF
INTEREST.—No Federal
Home Loan Bank director who is appointed pursu-
ant to this subsection may, during such Bank direc-
tor’s term of office, serve as an officer of any Fed-
eral Home Loan Bank or director or officer of any
member of a Bank, or hold shares, or any other fi-
nancial interest in, any member of a Bank.’’.
(b) TERMS.—Section 7(d) of the Federal Home Loan
Bank Act (12 U.S.C. 1427(d)) is revised to read as
follows:
‘‘(d) TERMS.—
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‘‘(1) IN GENERAL.—
‘‘(A) ELECTED DIRECTORS.—The term of
each elective directorship that begins after the
date of enactment of the Federal Home Loan
Bank Restructuring and Modernization Act of
1995 shall be 4 years.
‘‘(B) APPOINTED DIRECTORS.—The term
of each appointive directorship shall be 4 years.
‘‘(2) TERM LIMITS.—If any person has been
elected to each of 2 consecutive full terms as an elec-
tive director of a Federal Home Loan Bank in any
elective directorship or elective directorships and has
served for all or part of each of said terms, such
person (and any person that is a director, officer or
employee of the same member as such person) shall
not be eligible for election to an elective directorship
of the Bank for a term which begins earlier than 2
years after the expiration of the last expiring of said
2 terms.’’.
(c) CHAIRPERSON AND VICE CHAIRPERSON.—Sec-
tion 7(g) of the Federal Home Loan Bank Act (12 U.S.C.
1427(g)) is amended to read as follows:
‘‘(g) CHAIRPERSON AND VICE CHAIRPERSON.—
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‘‘(1) DESIGNATION BY BANK DIRECTORS.—The
board of directors of each Federal Home Loan Bank
shall designate—
‘‘(A) one of the directors of the Bank to be
chairperson of the Bank; and
‘‘(B) one of the directors of the Bank to
be vice chairperson of the Bank.
‘‘(2) REQUIREMENTS.—
‘‘(A) APPOINTED
DIRECTOR.—Either the
chairperson or the vice chairperson of the Bank
shall be an appointed director.
‘‘(B) LIMITATION.—The President of a
Federal Home Loan Bank may not be des-
ignated as the chairperson or vice chairperson
of the Bank.’’.
(d) COMPENSATION
AND
EXPENSES
OF
DIREC-
TORS.—Section 7(i) of the Federal Home Loan Bank Act
(12 U.S.C. 1427(i)) is amended to read as follows:
‘‘(i) COMPENSATION
AND EXPENSES
OF DIREC-
TORS.—Each Bank may pay its directors reasonable com-
pensation for the time required of them, and their nec-
essary expenses, in the performance of their duties, in ac-
cordance with the resolutions adopted by the directors of
the Bank.’’.
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(e) CONFORMING AMENDMENTS.—Section 7 of the
Federal Home Loan Bank Act (12 U.S.C. 1427) is
amended—
(1) in subsection (b), by—
(A) deleting ‘‘as determined pursuant to
regulation of the Board’’ and inserting ‘‘as de-
termined by the Bank’’;
(B) deleting ‘‘such bank’’ each place it ap-
pears and inserting ‘‘such Bank’’; and
(C) deleting ‘‘Federal home loan bank’’
and inserting ‘‘Federal Home Loan Bank’’;
(2) in subsection (c), by—
(A) deleting ‘‘as determined pursuant to
regulation of the Board’’ and inserting ‘‘as de-
termined by the Bank’’;
(B) deleting ‘‘bank’’ each place it appears
and inserting ‘‘Bank’’;
(C) deleting ‘‘Federal home loan bank’’
and inserting ‘‘Federal Home Loan Bank’’; and
(3) in subsection (h), by deleting ‘‘Federal
home loan bank’’ and inserting ‘‘Federal Home
Loan Bank’’.
SEC. 112. ELIGIBILITY TO SECURE ADVANCES.
Section 9 of the Federal Home Loan Bank Act (12
U.S.C. 1429) is amended to read as follows:
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‘‘SEC. 9. ELIGIBILITY TO SECURE ADVANCES.
‘‘(a) WRITTEN APPLICATION.—Any member of a
Federal Home Loan Bank shall be entitled to apply in
writing for advances and the application shall be in such
form as shall be required by the Federal Home Loan
Bank.
‘‘(b) BANK RESPONSE TO APPLICATIONS.—A Fed-
eral Home Loan Bank may at its discretion deny any ap-
plication described in subsection (a) or, subject to the re-
quirements of this Act, grant it on such conditions as the
Bank may prescribe.’’.
SEC. 113. ADVANCES.
(a) NOTES
OF BORROWING MEMBERS; INTEREST
RATE; LIEN ON STOCK; LIMITATIONS ON LOANS.—Sec-
tion 10(c) of the Federal Home Loan Bank Act (12
U.S.C. 1430(c)) is amended to read as follows:
‘‘(c) NOTES OF BORROWING MEMBERS; INTEREST
RATE; LIEN ON STOCK; LIMITATIONS ON LOANS.—
‘‘(1) NOTES
OF
BORROWING
MEMBER.—Ad-
vances under subsection (a) shall be made upon the
note or obligation of the member secured as provided
in this section, bearing such rate of interest as the
Federal Home Loan Bank may approve or deter-
mine, and the Bank shall have a lien upon and shall
hold the stock of such member and any compensat-
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ing balances as further collateral security for all in-
debtedness of the member to the Bank.
‘‘(2) LEVERAGE LIMITATION ON ADVANCES.—
At no time shall the aggregate outstanding advances
made by any Federal Home Loan Bank to any
member exceed 20 times the amounts paid in by
such member for outstanding capital stock required
to be owned by a member under section 6(b)(1),
unless—
‘‘(A) in the case of a member that is re-
quired, or has made a permissible election, to
purchase additional stock to support advances,
the member purchases additional stock so that
the aggregate outstanding advances made to
the member do not exceed 20 times the
amounts paid in by the member for outstanding
stock; or
‘‘(B) in the case of a member that is re-
quired, or has made a permissible election, to
maintain a compensating balance to support ad-
vances, the member makes and maintains a
compensating balance with the Bank with re-
spect to the amount of the advances that exceed
20 times the amounts paid in by the member
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for outstanding stock required to be owned by
the member under section 6(b)(1).
‘‘(3) ADDITIONAL STOCK.—Stock purchased to
meet the requirements of paragraph (2)(A) is sub-
ject to the same terms and conditions applicable to
all stock in a Federal Home Loan Bank owned by
the member, including the conditions imposed under
section 6(e) on partial stock redemptions and with-
drawals.
‘‘(4) COMPENSATING BALANCES.—
‘‘(A) LEVERAGE
LIMIT.—The amount of
the compensating balance required under para-
graph (2)(B) shall be established by the Bank
except, in no event may the amount of advances
made in reliance on a compensating balance ex-
ceed 20 times the compensating balance.
‘‘(B) TERMS
AND
CONDITIONS.—Subject
to subparagraph (A), the terms and conditions
applicable to compensating balances under this
paragraph shall be established by each Bank.’’.
(b) OBLIGATIONS TO REPAY; ADDITIONAL SECU-
RITY: SALE OF ASSETS TO OTHER BANKS.—Section 10(d)
of the Federal Home Loan Bank Act (12 U.S.C. 1430(d))
is amended to read as follows:
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ticipation therein, together with an appropriate as-
signment or security therefore.’’.
(c) COMMUNITY SUPPORT REQUIREMENT.—Section
10(g) of the Federal Home Loan Bank Act (12 U.S.C.
1430(g)) is amended to read as follows:
‘‘(g) COMMUNITY SUPPORT REQUIREMENT.—
‘‘(1) IN GENERAL.—Before the end of the 2-
year period beginning on August 9, 1989, the Board
shall adopt regulations establishing standards of
community investment or service for members of
Banks to maintain continued access to long-term ad-
vances.
‘‘(2) FACTORS TO BE INCLUDED.—The regula-
tions promulgated pursuant to paragraph (1) shall
take into account factors such as member’s perform-
ance under the Community Reinvestment Act of
1977 and the member’s record of lending to first-
time homebuyers.
‘‘(3) COMMUNITY REINVESTMENT ACT COMPLI-
ANCE.—
‘‘(A) IN GENERAL.—In determining wheth-
er a member has satisfied the standards estab-
lished under this subsection, the Board shall
rely only on the assessment of a member’s com-
pliance with the Community Reinvestment Act
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of 1977 made by the member’s appropriate
Federal financial supervisory agency, unless the
Board is required under subparagraph (b) to
conduct an independent assessment.
‘‘(B) 
INDEPENDENT
ASSESSMENT
RE-
QUIRED.—The board is required to independ-
ently assess whether a member has satisfied the
standards established under this subsection, in-
cluding the member’s record of lending to first-
time homebuyers, if—
‘‘(i) the member is not subject to the
Community Reinvestment Act of 1977; or
‘‘(ii) an assessment has not been pre-
pared by the member’s appropriate Federal
financial supervisory agency.
‘‘(C) APPROPRIATE
FEDERAL
FINANCIAL
SUPERVISORY AGENCY.—The term ‘‘appropriate
Federal financial supervisory agency’’ has the
same meaning as in section 803 of the Commu-
nity Reinvestment Act of 1977.’’.
(d) AFFORDABLE
HOUSING
PROGRAM
APPLICA-
TIONS.—Section 10(j)(1) of the Federal Home Loan Bank
Act (12 U.S.C. 1430(j)(1)) is amended to read as follows:
‘‘(1) IN GENERAL.—
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‘‘(A) EACH BANK MUST ESTABLISH PRO-
GRAM.—Pursuant to regulations promulgated
by the Board, each Bank shall establish an Af-
fordable Housing Program to provide subsidies,
including subsidized interest rates on advances,
to members to assist the members in financing
for low- and moderate-income, owner-occupied,
affordable rental housing.
‘‘(B) APPLICATIONS.—Each Federal Home
Loan Bank is authorized to approve or dis-
approve, subject to the requirements of this
Act, applications by members of the Bank to
participate in the Bank’s Affordable Housing
Program.’’.
(e) AFFORDABLE HOUSING PROGRAM CONTRIBU-
TION.—Section 10(j)(5) of the Federal Home Loan Bank
Act (12 U.S.C. 1430(j)(5)) is amended to read as follows:
‘‘(5) CONTRIBUTION TO PROGRAM.—Each Bank
shall annually contribute the percentage of its an-
nual net earnings prescribed in the following sub-
paragraphs to support subsidies, including sub-
sidized advances, through the Affordable Housing
Program:
‘‘(A) Except as provided in subparagraph
(B), 10 percent of the preceding year’s net
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earnings, or such prorated sums as may be re-
quired to assure that the aggregate contribution
of 
the 
Banks 
shall 
not 
be 
less 
than
$100,000,000 for each such year.
‘‘(B) If the total capital of the Federal
Home Loan Bank System for the preceding
year is less than $6 billion, 10 percent of the
preceding year’s net earnings.’’.
(f) BRANCHES FOR COMMUNITY INVESTMENT AND
AFFORDABLE HOUSING PROGRAMS; AND LIMITATIONS ON
ADVANCES.—Section 10 of the Federal Home Loan Bank
Act (12 U.S.C. 1430) is amended by adding after sub-
section (j) the following new subsections:
‘‘(k) BRANCHES FOR COMMUNITY INVESTMENT AND
AFFORDABLE HOUSING PROGRAMS.—
‘‘(1) IN GENERAL.—With the prior approval of
the Board each Federal Home Loan Bank is author-
ized to establish 1 or more branches within its Fed-
eral Home Loan Bank district for the exclusive pur-
pose of conducting activities related to the Bank’s
community investment and affordable housing pro-
grams.
‘‘(2) LIMITATION ON ACTIVITIES.—Only activi-
ties relating to the programs described in sub-
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sections (h) and (i) may be conducted at a branch
established under paragraph (1).
‘‘(l) LIMITATIONS ON ADVANCES.—
‘‘(1) LIMITATION
ON
EXTENDED
PERIODS.—
Except as provided in paragraph (2), no new ad-
vances to any undercapitalized depository institution
by any Federal Home Loan Bank under this section
may be outstanding for more than 60 days in any
120-day period.
‘‘(2) VIABILITY EXCEPTION.—
‘‘(A) IN GENERAL.—If the head of the ap-
propriate Federal banking agency certifies in
advance in writing to the Federal Home Loan
Bank that any depository institution is viable,
the limitation contained in paragraph (1) shall
not apply during the 60-day period beginning
on the date such certification is received.
‘‘(B) EXTENSIONS OF PERIOD.—The 60-
day period may be extended for additional 60-
day periods upon receipt by the Federal Home
Loan Bank of additional written certifications
under subparagraph (A) with respect to each
such additional period.
‘‘(C) AUTHORITY TO ISSUE A CERTIFICATE
OF VIABILITY MAY NOT BE DELEGATED.—The
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authority of the head of any agency to issue a
written certification of viability under this para-
graph may not be delegated to any other
person.
‘‘(3) PROHIBITION
ON
ADVANCES
TO
CRITI-
CALLY
UNDERCAPITALIZED
DEPOSITORY
INSTITU-
TIONS.—Notwithstanding any other provision of this
Act, no new advances may be made to a critically
undercapitalized depository institution.
‘‘(4) NO OBLIGATION TO MAKE ADVANCES.—A
Federal Home Loan Bank shall have no obligation
to make, increase, renew, or extend any advance or
discount under this Act to any member.
‘‘(5) DEFINITIONS.—
‘‘(A) APPROPRIATE
FEDERAL
BANKING
AGENCY.—The term ‘appropriate Federal bank-
ing agency’ has the same meaning as in section
3 of the Federal Deposit Insurance Act and
also includes the National Credit Union Admin-
istration.
‘‘(B) CRITICALLY
UNDERCAPITALIZED.—
The term ‘critically undercapitalized’ has the
same meaning as in section 38 of the Federal
Deposit Insurance Act.
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‘‘(C) 
DEPOSITORY
INSTITUTION.—The
term ‘depository institution’ has the same
meaning as the term ‘insured depository institu-
tion’ in section 2.
‘‘(D) NEW ADVANCE.—The term ‘new ad-
vance’ includes a renewal or extension of, or an
increase in, an outstanding advance.
‘‘(E) UNDERCAPITALIZED DEPOSITORY IN-
STITUTION.—The term ‘undercapitalized depos-
itory institution’ means any depository institu-
tion which—
‘‘(i) is undercapitalized, as defined in
section 38 of the Federal Deposit Insur-
ance Act; or
‘‘(ii) has a composite CAMEL rating
of 5 under the Uniform Financial Institu-
tions Rating System (or an equivalent rat-
ing by any such agency under a com-
parable rating system) as of the most re-
cent examination of such institution.
‘‘(F) VIABLE.—A depository institution is
‘viable’ if the appropriate Federal banking
agency determines, giving due regard to the
economic conditions and circumstances in the
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market in which the institution operates, that
the institution—
‘‘(i) is not critically undercapitalized;
‘‘(ii) is not expected to become criti-
cally undercapitalized; and
‘‘(iii) is not expected to be placed in
conservatorship or receivership.’’.
(g) ADDITIONAL AMENDMENTS.—Section 10 of the
Federal Home Loan Bank Act (1430) is amended—
(1) DELETION OF QUALIFIED THRIFT LENDER
STATUS.—By deleting the first subparagraph (e) as
added by section 714(b) of the Financial Institutions
Reform, Recovery, and Enforcement Act of 1989
Public Law 101–73.
(2) REDESIGNATION.—By redesignating sub-
sections (g), (h), (i), (j), (k), and (l) as subsections
(f), (g), (h), (i), (j), and (k), respectively.
(3) AFFORDABLE
HOUSING
PROGRAM
CON-
FORMING AMENDMENTS.—In subsection (j)—
(A) by deleting ‘‘subsidized advances’’ each
place it appears and inserting ‘‘subsidies, in-
cluding subsidized advances’’;
(B) in paragraph (9)(C), by deleting ‘‘ad-
vances made under this program’’ and inserting
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‘‘subsidies, including subsidized advances pro-
vided under this program’’; and
(C) by deleting ‘‘advances’’ each place it
appears and inserting ‘‘subsidies’’.
(4) TECHNICAL
AMENDMENT.—In subsection
(a), in the first sentence before paragraph (1), by
striking ‘‘or section 11(g) of this Act’’.
SEC. 
114. 
ADVANCES 
TO 
NONMEMBER 
MORTGAGEES;
TERMS AND CONDITIONS.
Section 10B(a) of the Federal Home Loan Bank Act
(12 U.S.C. 1430b(a)) is amended to read as follows:
‘‘(a) IN GENERAL.—
‘‘(1) AUTHORITY.—Each Federal Home Loan
Bank is authorized to make advances to a
nonmember mortgagee described in paragraph (2).
‘‘(2) PERMISSIBLE NONMEMBER MORTGAGEE.—
‘‘(A) A State housing finance agency or an
Indian housing authority approved under title
II of the National Housing Act—
‘‘(i) that is a chartered institution
having succession and subject to the in-
spection and supervision of some govern-
mental agency; and
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‘‘(ii) whose principal activity in the
mortgage field must consist of lending its
own funds; or
‘‘(B) a Community Development Financial
Institution—
‘‘(i) that is not an insured depository
institution or a subsidiary of an insured
depository institution;
‘‘(ii) that, at the time the advance is
made, has been certified within the last
year as a Community Development Finan-
cial Institution under the Community De-
velopment Banking and Financial Institu-
tions Act of 1994;
‘‘(iii) that is a chartered institution
having succession; and
‘‘(iv) whose principal activity in the
mortgage field must consist of lending its
own funds.
‘‘(3) SECURITY.—Such advances shall not be
subject to the other provisions and restrictions of
this Act, but shall be made upon the security of
mortgages insured under title II of the National
Housing Act.
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‘‘(4) TERMS AND CONDITIONS.—Advances made
under the terms of this section shall be at such rates
of interest and upon such terms and conditions as
shall be determined by the Federal Home Loan
Bank, but no advance may be for an amount in ex-
cess of 90 percent of the unpaid principal of the
mortgage loan given as security.
‘‘(5) DEFINITIONS
OF
COMMUNITY
DEVELOP-
MENT FINANCIAL INSTITUTION.—The term ‘Commu-
nity Development Financial Institution’ has the
same meaning as in section 103 of the Community
Development Banking and Financial Institutions Act
of 1994.
‘‘(b) EXCEPTION.—An advance made to a State
housing finance agency or an Indian housing authority for
the purpose of facilitating mortgage lending that benefits
individuals and families that meet the income require-
ments set forth in section 142(d) or 143(f) of title 26,
United States Code need not be collateralized by a mort-
gage insured under title II of the National Housing Act
or otherwise if—
‘‘(1) such advance otherwise meets the require-
ments of this subsection; and
‘‘(2) such advance meets the requirements of
section 10(a), and any real estate collateral for such
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loan comprises single family or multifamily residen-
tial mortgages.’’.
SEC. 115. POWERS AND DUTIES OF BANKS.
(a) BORROWING MONEY; GENERAL POWERS.—Sec-
tion 11(a) of the Federal Home Loan Bank (12 U.S.C.
1431(a)) is amended to read as follows:
‘‘(a) BORROWING MONEY; GENERAL POWERS.—
Each Federal Home Loan Bank shall have power, subject
to rules and regulations prescribed by the Board to borrow
and give security therefor and to pay interest thereon
upon such terms and conditions as the Bank may deter-
mine and to do all things necessary for carrying out the
provisions of this Act and all things incident thereto.’’.
(b) ISSUANCE
OF
FEDERAL
HOME
LOAN
BANK
BONDS.—Section 11(c) of the Federal Home Loan Bank
Act (12 U.S.C. 1431(c)) is amended to read as follows:
‘‘(c) ISSUANCE
OF FEDERAL HOME LOAN BANK
BONDS.—The Federal Home Loan Bank System, subject
to rules and regulations prescribed by the Board, may
issue consolidated Federal Home Loan Bank bonds which
shall be the joint and several obligations of all the Federal
Home Loan Banks, and shall be secured and be issued
upon such terms and conditions as the Banks may deter-
mine.’’.
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SETTLEMENT
OF CHECKS, DRAFTS, ETC.; CHARGES;
RULES AND REGULATIONS.—
‘‘(1) ACCEPTANCE
OF
DEPOSITS.—Subject to
rules and regulations prescribed by the Board, each
Federal Home Loan Bank shall have power to ac-
cept deposits made by members of such Bank or by
any other Federal Home Loan Bank or other instru-
mentality of the United States, upon such terms and
conditions as the Bank may determine, but no Fed-
eral Home Loan Bank shall transact any banking or
other business not incidental to activities authorized
by this Act.
‘‘(2) 
COLLECTION
AND
SETTLEMENT
OF
CHECKS.—
‘‘(A) IN GENERAL.—Subject to rules and
regulations of the Board, the Federal Home
Loan Bank are authorized to be drawees of,
and to engage in, or be agents or intermediaries
for, or otherwise participate or assist in, the
collection and settlement of (including present-
ment, clearing, and payment of, and remitting
for), checks, drafts, or any other negotiable or
nonnegotiable items or instruments of payment
drawn on or issued by members of any Federal
Home Loan Bank or by institutions which are
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eligible to make application to become members
pursuant to section 4, and to have such inciden-
tal powers as the Board shall find necessary for
the exercise of any such authorization.
‘‘(B) CHARGES.—A Federal Home Loan
Bank shall make charges, to be determined by
the Bank consistent with the principles set
forth in section 11A(c) of the Federal Reserve
Act, or utilize the services of, or act as agent
for, or be a member of, a Federal Reserve bank,
clearinghouse, or any other public or private fi-
nancial institution or other agency, in the exer-
cise of any powers or functions pursuant to this
paragraph.
‘‘(C) RULES AND REGULATIONS.—
‘‘(i) IN
GENERAL.—(The Board) is
authorized, with respect to participation in
the collection and settlement of any items
by Federal Home Loan Banks, and with
respect to the collection and settlement (in-
cluding payment by the payor institution)
of items payable by members, to prescribe
rules and regulations regarding the rights,
powers, responsibilities, duties, and liabil-
ities, including standards relating thereto,
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of such Federal Home Loan Banks, asso-
ciations, or banks and other parties to any
such items or their collection and settle-
ment.
‘‘(ii) 
APPLICATION
OF
BANKING
USAGE
AND
PRACTICE.—In prescribing
such rules and regulations, the Board may
adopt or apply, in whole or in part, general
banking usage and practices, and, in in-
stances or respects in which they would
otherwise not be applicable, Federal Re-
serve regulations and operating letters, the
Uniform Commercial Code, and clearing-
house rule.’’.
(f) REDISCOUNT
OF
NOTES
HELD
BY
OTHER
BANKS; PURCHASE OF BONDS OF OTHER BANKS.—Sec-
tion 11(f) of the Federal Home Loan Bank Act (12 U.S.C.
1431(f)) is amended to read as follows:
‘‘(f) REDISCOUNT
OF NOTES HELD
BY OTHER
BANKS; PURCHASE OF BONDS OF OTHER BANKS.—
‘‘(1) IN GENERAL.—Each Federal Home Loan
Bank is authorized, upon the terms and conditions
determined by the Bank, to rediscount the dis-
counted notes of members held by other Federal
Home Loan Banks, or to make loans to, or make de-
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posits with, such other Federal Home Loan Banks,
or to purchase any bonds issued under this section.
‘‘(2) BOARD
AUTHORITY.—The Board is au-
thorized to require Federal Home Loan Banks, upon
such terms and conditions as the Board may pre-
scribe, to engage in any activity described in para-
graph (1).’’.
(g) AUDITS.—Section 11(j) of the Federal Home
Loan Bank Act (12 U.S.C. 1431(j)) is amended to read
as follows:
‘‘(j) AUDITS.—
‘‘(1) GOVERNMENT CAPITAL NOT REQUIRED.—
Notwithstanding the provisions of the first sentence
of section 202 of the Government Corporation Con-
trol Act, the audits of the financial transactions of
a Federal Home Loan Bank required by that section
shall not be limited to periods during which Govern-
ment capital has been invested therein.
‘‘(2) EXCLUSIONS
FROM
GOVERNMENT
COR-
PORATION
CONTROL
ACT.—The provisions of the
first sentence of subsection (d) of section 303 of the
Government Corporation Control Act shall not apply
to any Federal Home Loan Bank.
‘‘(3) SELECTION OF EXTERNAL AUDITORS.—
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‘‘(A) IN
GENERAL.—The Federal Home
Loan Banks shall contract jointly for an annual
external audit.
‘‘(B) ROLE
OF
THE
BOARD.—Notwith-
standing any other provision of law, the Board
shall not participate in the audit contracting
process under this paragraph, except that the
Board may establish requirements for external
audit contracts and requirements to assure con-
sistency in financial report.’’.
(h) FISCAL AGENT OF FEDERAL HOME LOAN BANK
SYSTEM.—Section 11 of the Federal Home Loan Bank
Act (12 U.S.C. 1431) is amended by adding after sub-
section (k) the following new subsection:
‘‘(l) FISCAL AGENT OF FEDERAL HOME LOAN BANK
SYSTEM.—
‘‘(1) IN GENERAL.—The Federal Home Loan
Bank System shall establish, within 6 months after
the date of enactment of the Federal Home Loan
Bank System Restructuring and Modernization Act
of 1995, a central office that, on behalf of the Sys-
tem, will carry out the issuance of the systems’ con-
solidated obligations under this section.
‘‘(2) DAY-TO-DAY
OPERATIONS.—The System
may delegate other operational functions to the
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central office described in subparagraph (A), or to
other offices, as the System may agree.’’.
(i) DELETION AND REDESIGNATION.—Section 11 of
the Federal Home Loan Bank Act (12 U.S.C. 1431) is
amended by—
(1) CONSOLIDATED
FEDERAL
HOME
LOAN
BANK DEBENTURES.—Deleting subsection (b); and
(2) 
REDESIGNATION.—Redesignating 
sub-
sections (c), (d), (e), (f), (g), (h), (i), (j), (k), and
(l) as (b), (c), (d), (e), (f), (g), (h), (i), (j), and (k).
SEC. 116. INCORPORATION OF BANKS; CORPORATE POW-
ERS; HOUSING PROJECT LOANS.
(a) INCORPORATION
AND CORPORATE POWERS.—
Section 12(a) of the Federal Home Loan Bank Act (12
U.S.C. 1432(a)) is amended to read as follows:
‘‘(a) INCORPORATION AND CORPORATE POWERS.—
‘‘(1) ORGANIZATIONAL CERTIFICATE.—
‘‘(A) IN GENERAL.—In the event that any
new Federal Home Loan Bank district and any
new Federal Home Loan Bank are created, the
directors of the new Federal Home Loan Bank
shall, in accordance with such rules and regula-
tions as the Board may prescribe, make and file
with the Board at the earliest practicable date
after the establishment of such Bank, an orga-