Agricultural Credit Act of 1987
PL 100-233 (H.R.3030), enacted 01/06/1988

101 STAT. 1568 
PUBLIC LAW 100-233—JAN. 6, 1988 
uyjf^ff. 
Public Law 100-283 
100th Congress 
An Act 
Jan. 6, 1988 
[H.R. 3030] 
Agricultural 
Credit Act 
of 1987. 
Banks and 
banking. 
Rural areas. 
Securities. 
12 u s e 2001 
note. 
To provide credit assistance to farmers, to strengthen the Farm Credit System, to 
facilitate the establishment of secondary markets for agricultural loans, and for 
other purposes. 
Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled, 
SECTION 1. SHORT TITLE; TABLE OF CONTENTS. 
(a) SHORT TITLE.—This Act may be cited as the "Agricultural 
Credit Act of 1987". 
(b) TABLE OF CONTENTS.—The table of contents is as follows: 
TABLE OF CONTENTS 
Sec. 1. Short title; table of contents. 
Sec. 2. References to the Farm Credit Act of 1971. 
TITLE I—ASSISTANCE TO FARM CREDIT SYSTEM BORROWERS 
Sec. 101. Protection of borrower stock. 
Sec. 102. Restructuring distressed loans. 
Sec. 103. Disclosure by banks and associations. 
Sec. 104. Access to documents and information. 
Sec. 105. Notice of action on application for loans or restructuring. 
Sec. 106. Reconsideration of actions. 
Sec. 107. Protection of borrowers who meet all loan obligations. 
Sec. 108. Right of first refusal. 
Sec. 109. Differential interest rates. 
Sec. 110. Application of uninsured accounts. 
TITLE II—ASSISTANCE TO FARM CREDIT SYSTEM 
Sec. 201. Assistance to Farm Credit System. 
"TITLE VI—ASSISTANCE TO FARM CREDIT SYSTEM 
"Subtitle A—Assistance Board 
"Sec. 6.0. Establishment of Board. 
"Sec. 6.1. Purposes. 
"Sec. 6.2. Board of Directors. 
"Sec. 6.3. Corporate powers. 
"Sec. 6.4. Certification of eligibility to issue preferred stock. 
"Sec. 6.5. Assistance. 
"Sec. 6.6. Special powers. 
"Sec. 6.7. Administration. 
"Sec. 6.8. Limitation of powers. 
"Sec. 6.9. Succession. 
"Sec. 6.10. Effect of regulations; audits. 
"Sec. 6.11. Exemption from taxation. 
"Sec. 6.12. Termination. 
"Sec. 6.13. Transitional provisions. 
"Subtitle B—Financial Assistance Corporation 
"Sec. 6.20. Establishment of Corporation. 
"Sec. 6.21. Purpose. 
"Sec. 6.22. Board of Directors. 
"Sec. 6.23. Stock. 
"Sec. 6.24. Corporate powers. 
"Sec. 6.25. Accounts. 
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"Sec. 6.26. Debt obligations. 
PUBLIC LAW 100-233—JAN. 6, 1988 
101 STAT. 1569 
"Sec. 6.27. Preferred stock. 
"Sec. 6.28. Payments. 
"Sec. 6.29. One-time stock purchase. 
"Sec. 6.30. Exemption from taxation. 
"Sec. 6.31. Termination. 
Sec. 202. Revolving fund. 
Sec. 203. Unsafe or unsound practices. 
Sec. 204. Federal Farm Credit Banks Funding Corporation. 
Sec. 205. Regulatory accounting procedures. 
Sec. 206. Financial report. 
Sec. 207. Conforming amendments. 
TITLE III—CAPITALIZATION OF SYSTEM INSTITUTIONS 
Sec. 301. Capitalization of System institutions. 
Sec. 302. Insurance of obligations of Farm Credit System. 
"PART E—FARM CREDIT SYSTEM INSURANCE CORPORATION 
"Sec. 5.51. Definitions. 
"Sec. 5.52. Establishment of Farm Credit System Insurance Corporation. 
"Sec. 5.53. Board of Directors. 
"Sec. 5.54. Commencement of insurance. 
"Sec. 5.55. Premiums. 
"Sec. 5.56. Certification of premiums. 
"Sec. 5.57. Overpayment and underpayment of premiums; remedies. 
"Sec. 5.58. General corporate powers. 
"Sec. 5.59. Conduct of corporate affairs; examination of insured System banks. 
"Sec. 5.60. Insurance Fund. 
"Sec. 5.61. Powers of Corporation with respect to troubled insured System 
banks. 
"Sec. 5.62. Investment of funds. 
"Sec. 5.63. Exemption from taxation. 
"Sec. 5.64. Reports. 
"Sec. 5.65. Prohibitions. 
Sec. 303. Joint and several liability of banks. 
Sec. 304. Enhancement of capital adequacy of banks. 
Sec. 305. Federal intermediate credit bank assessment power. 
Sec. 306. Conservators and receivers. 
TITLE IV—RESTRUCTURING THE FARM CREDIT SYSTEM 
Subtitle A—Creation of Farm Credit Banks 
Sec. 401. Farm Credit Banks and associations charters. 
"TITLE I-FARM CREDIT BANKS 
"Sec. 1.3. Establishment, charters, titles, branches. 
"Sec. 1.4. Board of directors. 
"Sec. 1.5. General corporate powers. 
"Sec. 1.6. Farm Credit Bank capitalization. 
"Sec. 1.7. Lending authority. 
"Sec. 1.8. Interest rates and other charges. 
"Sec. 1.9. Eligibility. 
"Sec. 1.10. Security; terms. 
"Sec. 1.11. Purposes for extensions of credit. 
"Sec. 1.12. Related services. 
"Sec. 1.13. Loans through associations or agents. 
"Sec. 1.14. Liens on stock. 
"Sec. 1.15. Taxation. 
"TITLE II—FARM CREDIT ASSOCIATIONS 
"Subtitle A—Production Credit Associations 
"Sec. 2.0. Organization and charters. 
"Sec. 2.1. Board of directors. 
"Sec. 2.2. General corporate powers. 
"Sec. 2.3. Production credit association capitalization. 
"Sec. 2.4. Short- and intermediate-term loans; participation; other financial as-
sistance; terms; conditions; interest; security. 
101 STAT. 1570 
PUBLIC LAW 100-233—JAN. 6, 1988 
"Sec. 2.5. Other services. 
"Sec. 2.6. Taxation. 
"Subtitle B—Federal Land Bank Associations 
"Sec. 2.10. Organizations; articles; charters; powers of the Farm Credit Admin> 
istration. 
"Sec. 2.11. Board of directors. 
"Sec. 2.12. General corporate powers. 
"Sec. 2.13. Federal land bank association capitalization. 
"Sec. 2.14. Liquidation. 
"Sec. 2.15. Agreements for sharing gains or losses. 
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"Sec. 2.16. Liens on stock. 
"Sec. 2.17. Taxation. 
Subtitle B—Merger of System Institutions 
Sec. 410. Mandatory merger. 
Sec. 411. Merger of production credit associations and Federal land bank associa* 
tions. 
Sec. 412. Consolidation of Farm Credit System districts. 
Sec. 413. Voluntary merger of the banks for cooperatives. 
Sec. 414. Bank for cooperatives board of directors. 
Sec. 415. Organization and operation of the merged bank for cooperatives. 
"PART B—UNITED AND NATIONAL BANKS FOR COOPERATIVES 
"Sec. 3.20. Charter, powers, and operation. 
"Sec. 3.21. Board of directors provisions. 
"Sec. 3.22. Credit delivery office. 
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"Sec. 3.23. Consolidation of functions. 
"Sec. 3.24. Exchange of ownership interests. 
"Sec. 3.25. Capitalization. 
"Sec. 3.26. Patronage pools. 
"Sec. 3.27. Transactions to accomplish the merger. 
"Sec. 3.28. Lending limits. 
Sec. 416. Merger of System institutions. 
"TITLE VII—MERGERS OF SYSTEM INSTITUTIONS 
"Subtitle A—Merger of Banks Within a District 
"Sec. 7.0. Power to merge. 
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"Sec. 7.1. Board of Directors for the district. 
"Sec. 7.2. Powers of merged banks. 
"Sec. 7.3. Capital stock. 
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"Sec. 7.4. Earnings, reserves, and distributions. 
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"Sec. 7.5. Reports by merged banks for cooperatives. 
"Subtitle B—Mergers, Transfers of Assets, and Powers of Associations Within a 
District 
"Chapter 1—Transfers by Federal Land Banks to Federal Land Bank Associations 
"Sec. 7.6. Transfer of lending authority. 
"Chapter 2—Merger of Like and Unlike Associations 
"Sec. 7.7. Mergers of unlike associations. 
"Sec. 7.8. Merger of associations. 
"Sec. 7.9. Reconsideration. 
"Chapter 3—Termination and Dissolution of Institutions 
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"Sec. 7.10. Termination of System institution status. 
"Sec. 7.11. Approval of disclosure information and issuance of charters. 
"Sec. 7.12. Merger of similar banks. 
"Sec. 7.13. Merger of similar associations. 
Sec. 414. Nondiscrimination. 
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Sec. 415. Conforming amendments. 
Subtitle C—Other Restructuring Provisions 
Sec. 420. Communications with stockholders. 
Sec. 421. Eligibility to borrower from a bank for cooperatives. 
PUBLIC LAW 100-233—JAN. 6, 1988 
101 STAT. 1571 
Sec. 422. Sales of insurance by System institutions. 
Sec. 423. Civil money penalties. 
Sec. 424. Limitation on FCA authority to require disclosure of information. 
Sec. 425. Removal of certain sunset provisions; prohibition against use of signed 
ballots. 
Sec. 426. Federal land bank loan security. 
Sec. 427. Affirmative action. 
Sec. 428. Encouragement of conservation practices. 
Sec. 429. Uniform financial reporting instructions. 
Sec. 430. Compensation for directors. 
Sec. 431. Farm Credit Administration Board. 
Sec. 432. Farm Credit Administration organization. 
Sec. 433. Reassignment of associations to adjoining districts. 
Sec. 434. Conforming amendment. 
TITLE V—STATE MEDIATION PROGRAMS 
Subtitle A—Matching Grants foi State Mediation Programs 
Sec. 501. Qualifying States. 
Sec. 502. Matching grants to States. 
Sec. 503. Participation of Federal agencies. 
Sec. 504. Regulations. 
Sec. 505. Report. 
Sec. 506. Authorization of appropriations. 
Subtitle B—Waiver of Mediation Rights 
Sec. 511. Waiver of mediation rights by Farm Credit System borrowers. 
Sec. 512. Waiver of mediation rights by FmHA borrowers. 
TITLE VI—FARMERS HOME ADMINISTRATION LOANS 
Sec. 601. Amendment of Consolidated Farm and Rural Development Act. 
Sec. 602. Definitions. 
Sec. 603. Security for FmHA real estate loans. 
Sec. 604. Additional collateral. 
Sec. 605. Notice of loan service programs. 
Sec. 606. Planting and production history guidelines. 
Sec. 607. County committees. 
Sec. 608. Administrative appeals. 
Sec. 609. Borrowers' right to information. 
Sec. 610. Disposition and leasing of farmland. 
Sec. 611. Income release. 
Sec. 612. Conservation easements. 
Sec. 613. Interest rate reduction program; demonstration project for purchase of 
System land. 
Sec. 614. Homestead protection. 
Sec. 615. Debt restructuring and loan servicing. 
Sec. 616. Transfer of inventory lands. 
Sec. 617. Target participation rates. 
Sec. 618. Expedite clearing of title to inventory property. 
Sec. 619. Payment of losses on guaranteed loans. 
Sec. 620. Lease of certain acquired property. 
Sec. 621. Study and report to Congress before issuance of certain final regulations. 
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Sec. 622. Continuation of limited resource farmers' initiative. 
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Sec. 623. Farm ownership outreach program to socially disadvantaged individuals. 
Sec. 624. Regulations. 
Sec. 625. Sense of Congress regarding guaranteed loan program. 
Sec. 626. Sense of Congress regarding National Rural Crisis Response Center. 
TITLE VII—AGRICULTURAL MORTGAGE SECONDARY MARKETS 
Subtitle A—The Federal Agricultural Mortgage Corporation 
Sec. 701. Statement of purpose. 
Sec. 702. Agricultural mortgage secondary market. 
"TITLE VIII—AGRICULTURAL MORTGAGE SECONDARY MARKET 
"Sec. 8.0. Definitions. 
"Sec. 8.1. Federal Agricultural Mortgage Corporation. 
"Sec. 8.2. Board of directors. 
"Sec. 8.3. Powers and duties of Corporation and Board. 
"Sec. 8.4. Stock issuance. 
101 STAT. 1572 
PUBLIC LAW 100-233—JAN. 6, 1988 
"Sec. 8.5. Certification of agricultural mortgage marketing facilities. 
"Sec. 8.6. Guarantee of qualified loans. 
"Sec. 8.7. Reserves and subordinated participation interests of certified facili-
ties. 
"Sec. 8.8. Standards for qualified loans. 
"Sec. 8.9. Exemption from restructuring and borrowers rights provisions for 
pooled loans. 
"Sec. 8.10. Funding for guarantee; reserves of Corporation. 
"Sec. 8.11. Supervision, examination, and report of condition. 
"Sec. 8.12. Securities in credit enhanced pools. 
"Sec. 8.13. Authority to issue obligations to cover guarantee losses of Corpora-
tion. 
"Sec. 8.14. Federal jurisdiction. 
Sec. 703. GAO audit of Federal Agricultural Mortgage Corporation. 
Sec. 704. GAO studies. 
Sec. 705. Conforming amendments. 
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Subtitle B—Farmers Home Administration Loans 
Sec. 711. Improvement of secondary market operations for loans guaranteed by the 
Farmers Home Administration. 
TITLE VIII—MISCELLANEOUS 
Sec. 801. Ownership requirement under the conservation reserve program. 
Sec. 802. Repeal of preapproval and related authorities. 
Sec. 803. Sale of rural development notes. 
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Sec. 804. Other conforming amendments. 
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Sec. 805. Technical amendments. 
TITLE IX—REGULATIONS 
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Sec. 901. Effective dates. 
SEC. 2. REFERENCES TO THE FARM CREDIT ACT OF 1971. 
Except as otherwise specifically provided, whenever in this Act 
(other than in title VI) an amendment or repeal is expressed in 
terms of an amendment to, or repeal of, a section or other provision, 
the reference shall be considered to be made to a section or other 
provision of the Farm Credit Act of 1971 (12 U.S.C. 2001 et seq.). 
TITLE I—ASSISTANCE TO FARM CREDIT 
SYSTEM BORROWERS 
SEC. 101. PROTECTION OF BORROWER STOCK. 
Part A of title IV (12 U.S.C. 2151 et seq.) is amended by adding at 
the end thereof the following new section: 
12 u s e 2162. 
"SEC. 4.9A. PROTECTION OF BORROWER STOCK. 
"(a) RETIREMENT OF STOCK.—Notwithstanding any other section of 
this Act, each institution of the Farm Credit System, when retiring 
eligible borrower stock in accordance with this Act, shall retire such 
stock at par value. Any such institution whose capital stock is 
impaired (as determined in accordance with generally accepted 
accounting principles) shall coordinate such retirement of stock 
under this section with the activities of the Assistance Board and 
the Financial Assistance Corporation. 
"Qo) CERTAIN POWERS NOT AFFECTED.—This section does not affect 
the authority of any institution of the Farm Credit System— 
"(1) to retire or cancel borrower stock at par value for applica-
tion against a loan in default; 
PUBLIC LAW 100-233—JAN. 6, 1988 
101 STAT. 1573 
"(2) to cancel borrower stock at par value under section 4.14B; 
or 
"(3) to apply, against any outstanding indebtedness to a 
System association arising out of or in connection with a liq-
uidation referred to in subsection (dX2), the par value of bor-
rower stock frozen in such liquidation. 
"(c) INABIUTY TO RETIRE AT PAR VALUE.—If an institution is 
unable to retire eligible borrower stock at par value due to the 
freezing of such stock during a liquidation of the institution, the 
receiver of the institution shall retire such stock at par value as 
would have been retired in the ordinary course of business of the 
institution and the Financial Assistance Corporation, on request of 
the Assistance Board, shall provide the receiver with sufficient 
funds to enable the receiver to carry out this subsection. 
"(d) DEFINITIONS.—For purposes of this section: 
"(1) BORROWER STOCK.—The term 'borrower stock' means 
voting and nonvoting stock, equivalent contributions to a guar-
anty fund, participation certificates, allocated equities, and 
other similar equities that are subject to retirement under a 
revolving cycle issued by any System institution and held by 
any person other than any System institution. 
"(2) ELIGIBLE BORROWER STOCK.—The term 'eligible borrower 
stock' means borrower stock that— 
"(A) is outstanding on the date of the enactment of this 
section; 
"(B) is required to be purchased, and is purchased, as a 
condition of obtaining a loan made after the date of the 
enactment of this section, but prior to the earlier of— 
"(i) in the case of each bank and association, the date 
of approval, by the stockholders of such bank or 
association, of the capitalization requirements of the 
institution in accordance with section 4.9B; or 
"(ii) the date that is 9 months after the date of the 
enactment of this section; 
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"(C) was, after January 1, 1983, but before the date of the 
enactment of this section, frozen by an institution that was 
placed in liquidation; or 
"(D) W£is retired at less than par value by an institution 
that w£is placed in liquidation after January 1, 1983, but 
before the date of the enactment of this section. 
"(3) INSTITUTION.—The term 'institution' means a bank or 
association chartered under this Act. 
"(4) PAR VALUE.—The term 'par value' means— 
"(A) in the case of stock, par value; 
"(B) in the case of participation certificates and other 
equities and interests not described in subparagraph (C), 
face or equivalent value; or 
"(C) in the case of participation certificates and allocated 
equities subject to retirement under a revolving cycle but 
that a System institution elects to retire out of order for 
application against a loan in default or otherwise as pro-
vided in this Act, par or face value discounted, at a rate 
determined by the institution, to reflect the present value 
of the equity or interest as of the date of such retirement.". 
101 STAT. 1574 
PUBLIC LAW 100-233—JAN. 6, 1988 
SEC. 102. RESTRUCTURING DISTRESSED LOANS. 
(a) IN GENERAL.—Part C of title IV is amended by inserting after 
section 4.14 (12 U.S.C. 2202) the following new sections: 
12 u s e 2202a. 
"SEC. 4.14A. RESTRUCTURING DISTRESSED LOANS. 
"(a) DEFINITIONS.—As used in this part (other than in sections 4,17 
and 4.18): 
"(1) APPUCATION FOR RESTRUCTURING.—The term 'application 
for restructuring' means a written request— 
"(A) from a borrower for the restructuring of a distressed 
loan in accordance with a preliminary restructuring plan 
proposed by the borrower as a part of the application; 
"(B) submitted on the appropriate forms prescribed by 
the qualified lender; and 
"(C) accompanied by sufficient financial information and 
repayment projections, where appropriate, as required by 
the qualified lender to support a sound credit decision. 
"(2) COST OF FORECLOSURE.—The term 'cost of foreclosure' 
includes— 
"(A) the difference between the outstanding balance due 
on a loan made by a qualified lender and the liquidation 
value of the loan, taking into consideration the borrower's 
repa3mient capacity and the liquidation value of the coUat-
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eral used to secure the loan; 
a 
"(B) the estimated cost of maintaining a loan as a 
nonperforming asset; 
"(C) the estimated cost of administrative and legal actions 
necessary to foreclose a loan and dispose of property ac-
quired as the result of the foreclosure, including attorneys' 
fees and court costs; 
"(D) the estimated cost of changes in the value of collat-
eral used to secure a loan during the period beginning on 
the date of the initiation of an action to foreclose or liq-
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uidate the loan and ending on the date of the disposition of 
the collateral; and 
"(E) all other costs incurred as the result of the fore-
closure or liquidation of a loan. 
"(3) DISTRESSED LOAN.—The term 'distressed loan' means a 
loan that the borrower does not have the financial capacity to 
pay according to its terms and that exhibits one or more of the 
following characteristics: 
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"(A) The borrower is demonstrating adverse financial £md 
repayment trends. 
'(B) The loan is delinquent or past due under the terms of 
the loan contract. 
"(C) One or both of the factors listed in subparagraphs (A) 
and (B), together with inadequate collateralization, present 
a high probability of loss to the lender. 
"(4) 
FORECLOSURE 
PROCEEDING.—The 
term 
'foreclosure 
proceeding' means— 
"(A) a foreclosure or similar legal proceeding to enforce a 
lien on property, whether real or personal, that secures a 
nonaccrual or distressed loan; or 
"(B) the seizing of and realizing on nonreal property 
collateral, other than collateral subject to a statutory lien 
arising under title I or II, to effect collection of a nonaccrual 
or distressed loan. 
PUBLIC LAW 100-233—JAN. 6, 1988 
101 STAT. 1575 
"(5) LOAN.—The term 'loan' means a loan made to a farmer, 
rancher, or producer or harvester of aquatic products, for any 
agricultural or aquatic purpose and other credit needs of the 
borrower, including financing for basic processing and market-
ing directly related to the borrower's operations and those of 
other eligible farmers, ranchers, and producers or harvesters of 
aquatic products. 
"(6) QuAUFiED LENDER.—The term 'qualified lender' means— 
"(A) a System institution that makes loans (as defined in 
paragraph (5)) except a bank for cooperatives; and 
"(B) each bank, institution, corporation, company, union, 
and association described in section 2.3(aX2) but only with 
respect to loans discounted or pledged under section 2.3(a). 
"(7) RESTRUCTURE AND RESTRUCTURING.—The terms 'restruc-
ture' and 'restructuring' include rescheduling, reamortization, 
renewal, deferral of principal or interest, monetary concessions, 
and the taking of any other action to modify the terms of, or 
forbear on, a loan in any way that will make it probable that 
the operations of the borrower will become financially viable. 
"(b) NOTICE.— 
"(1) IN GENERAL.—On a determination by a quedified lender 
that a loan made by the lender is or has become a distressed 
loan, the lender shall provide written notice to the borrower 
that the loan may be suitable for restructuring, and include 
with such notice— 
"(A) a copy of the policy of the lender established under 
subsection (g) that governs the treatment of distressed 
loans; and 
"(B) all materials necessary to enable the borrower to 
submit an application for restructuring on the loan. 
"(2) NOTICE BEFORE FORECLOSURE.—Not later than 45 days 
before any qualified lender begins foreclosure proceedings with 
respect to a loan outstanding to any borrower, the lender shall 
notify the borrower that the loan may be suitable for restructur-
ing and that the lender will review any such suitable loan for 
restructuring, and shall include with such notice a copy of the 
policy and the materials described in paragraph (1). 
"(3) LIMITATION ON FORECLOSURE.—No qualified lender may 
foreclose or continue any foreclosure proceeding with respect to 
any distressed loan before the lender has completed any pend-
ing consideration of the loan for restructuring under this 
section. 
"(c) MEETINGS.—On determination by a qualified lender that a 
loan made by the lender is or has become a distressed loan, the 
lender shall provide a reasonable opportunity for the borrower 
thereof to personally meet with a representative of the lender— 
"(1) to review the status of the loan, the financial condition of 
the borrower, and the suitability of the loan for restructuring; 
and 
"(2) with respect to a loan that is in nonaccrual status, to 
develop a plan for restructuring the loan if the loan is suitable 
for restructuring. 
"(d) CONSIDERATION OF APPLICATIONS.— 
"(1) IN GENERAL.—When a qualified lender receives an ap-
plication for restructuring from a borrower, the qualified lender 
shall determine whether or not to restructure the loan, taking 
into consideration— 
101 STAT. 1576 
PUBLIC LAW 100-233—JAN. 6, 1988 
"(A) whether the cost to the lender of restructuring the 
loan is equal to or less than the cost of foreclosure; 
"(B) whether the borrower is applying all income over 
and above necessary and reasonable living and operating 
I 
expenses to the payment of primary obligations; 
"(C) whether the borrower has the financial capacity and 
the management skills to protect the collateral from diver-
sion, dissipation, or deterioration; 
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"(D) whether the borrower is capable of working out 
existing financial difficulties, reestablishing a viable oper-
ation, and repaying the loan on a rescheduled basis; and 
"(E) in the case of a distressed loan that is not delinquent, 
whether restructuring consistent with sound lending prac-
tices may be taken to reasonably ensure that the loan will 
not become a loan that it is necessary to place in 
nonaccrual status. 
"(2) APPUCATIONS NOT REQUIRED FOR RESTRUCTURING PLANS.— 
This section shall not prevent a qualified lender from proposing 
a restructuring plan for an individual borrower in the absence 
of an application for restructuring from the borrower. 
"(e) RESTRUCTURING.— 
"(1) IN GENERAL.—If a qualified lender determines that the 
potential cost to a qualified lender of restructuring the loan in 
accordance with a proposed restructuring plan is less than or 
equal to the potential cost of foreclosure, the qualified lender 
shall restructure the loan in accordance with the plan. 
"(2) COMPUTATION OF COST OF RESTRUCTURING.—In determin-
ing whether the potential cost to the qualified lender of 
restructuring a distressed loan is less than or equal to the 
potential cost of foreclosure, a qualified lender shall consider all 
relevant factors, including— 
"(A) the present value of interest income and principal 
forgone by the lender in carrying out the restructuring 
plan; 
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"(B) reasonable and necessary administrative expenses 
involved in working with the borrower to finalize and 
implement the restructuring plan; 
"(C) whether the borrower has presented a preliminary 
restructuring plan and cash-flow analysis taking into ac-
a 
count income from all sources to be applied to the debt and 
all assets to be pledged, showing a reasonable probability 
that orderly debt retirement will occur as a result of the 
proposed restructuring; and 
"(D) whether the borrower h£is furnished or is willing to 
furnish complete and current financial statements in a 
form acceptable to the institution. 
"(f) LEAST COST ALTERNATIVE.—If two or more restructuring alter-
natives are available to a qualified lender under this section with 
respect to a distressed loan, the lender shall restructure the loan in 
conformity with the alternative that results in the least cost to the 
lender. 
"(g) RESTRUCTURING POLICY.— 
"(1) ESTABLISHMENT.—Each farm credit district board of direc-
tors shall develop a policy within 60 days after the date of the 
enactment of this section, that is consistent with this section, to 
govern the restructuring of distressed loans. Such policy shall 
PUBLIC LAW 100-233—JAN. 6, 1988 
101 STAT. 1577 
constitute the restructuring policy of each qualified lender 
within the district. 
"(2) CONTENTS OF POUCY.—The policy established under para-
graph (1) shall include an explanation of— 
"(A) the procedure for submitting an application for 
restructuring; and 
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"(B) the right of borrowers with distressed loans to seek 
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review by a credit review committee in accordance with 
section 4,14 of a denial of an application for restructuring. 
"(3) SUBMISSION OF POUCY TO FCA.—Each district board shall 
submit the policy of the district governing the treatment of 
distressed loans under this section to the Farm Credit Adminis-
tration. Notwithstanding the duty imposed by the preceding 
sentence, the other duties imposed by this section shall take 
effect on the date of the enactment of this section. 
"(h) REPORTS.—During the 5-year period beginning on the date of 
the enactment of this section, each qualified lender shall submit 
semiannual reports to the Farm Credit Administration containing— 
"(1) the results of the review of distressed loans of the lender; 
and 
"(2) the financial effect of loan restructurings and liquidations 
on the lender. 
"(i) CoMPUANCE.—The Farm Credit Administration may issue a 
directive requiring compliance with any provision of this section to 
any qualified lender that fails to comply with such provision. 
"(j) PERMITTED FORECLOSURES.—This section shall not be construed 
to prevent any qualified lender from enforcing any contractual 
provision that allows the lender to foreclose a loan, or from taking 
such other lawful action as the lender deems appropriate, if the 
lender has reasonable grounds to believe that the loan collateral will 
be destroyed, dissipated, consumed, concealed, or permanently re-
moved from the State in which the collateral is located. 
"(k) APPUCATION OF SECTION.—The time limitation prescribed in 
subsection (bX2), and the requirements of subsection (c), shall not 
apply to a loan that became a distressed loan before the date of the 
enactment of this section if the borrower and lender of the loan are 
in the process of negotiating loan restructuring with respect to the 
loan. 
"(1) ASSISTANCE IN RESTRUCTURING.—Each Federal intermediate 
credit bank, on request of any production credit association, may 
assist the association in restructuring loans under this section. 
"SEC. 4.14B. EFFECT OF RESTRUCTURING ON BORROWER STOCK. 
12 USC 2202b. 
"(a) FEDERAL LAND BANK.—If a Federal land bank forgives and 
writes off, under section 4.14A, any of the principal outstanding on a 
loan made to any borrower, the Federal land bank association of 
which the borrower is a member and stockholder shall cancel the 
same dollar amount of borrower stock held by the borrower in 
respect of the loan, up to the total amount of such stock, and the 
Federal land bank shall retire an equal amount of stock owned by 
the Federal land bank association. 
"(b) PRODUCTION CREDIT ASSOCIATION.—If a production credit 
association forgives and writes off, under section 4.14A, any of the 
principal outstanding on a loan made to any borrower, the associa-
tion shall cancel the same dollar amount of borrower stock held by 
the borrower in respect of the loan, up to the total amount of such 
stock. 
101 STAT. 1578 
PUBLIC LAW 100-233—JAN. 6, 1988 
"(c) RETENTION OF STOCK.—Notwithstanding subsections (a) and 
(b), the borrower shall be entitled to retain at least one share of 
stock to maintain the borrower's membership and voting interest in 
the Eissociation. 
12 use 2202c. 
"SEC. 4.14C. REVIEW OF RESTRUCTURING DENIALS. 
"(a) 
REQUIREMENTS FOR RESTRUCTURING BY SYSTEM INSTITU-
TIONS.— 
"(1) EXISTING NONACCRUAL LOANS.—Within 9 months after a 
qualified lender is certified under section 6.4, such lender shall 
review each loan that has not been previously restructured and 
t 
that is in nonaccrual status on the date the lender is certified, 
' 
and determine whether to restructure the loan. 
"(2) NEW NONACCRUAL LOANS.—Within 6 months after a loan 
I 
made by a certified lender is placed in nonaccrual status, the 
lender shall determine whether to restructure the loan. 
. 
"(b) SPECIAL ASSET GROUPS.— 
• 
"(1) EsTABUSHMENT.—Within 30 days after a qualified lender 
in a district is certified to issue preferred stock under section 
fc 
6.27, the district board of such district shall establish a special 
asset group that shall review each determination by the lender 
f 
not to f 
estructure a loan. 
"(2) RESTRUCTURING PLAN.—If a special asset group deter-
mines under paragraph (1) that a loan under review should be 
restructured, the group shall prescribe a restructuring plan for 
the loan that the qualified lender shall implement, 
"(c) NATIONAL SPECIAL ASSET COUNCIL.— 
"(1) ESTABUSHMENT.—A National Special Asset Council shall 
be established by the Assistance Board to— 
"(A) monitor compliance with the restructuring require-
ments of this section by qualified lenders certified to issue 
preferred stock under section 6.27, and by special asset 
groups established under subsection (b); and 
"(B) review a sample of determinations made by each 
special asset group that a loan will not be restructured. 
"(2) REVIEW OF DETERMINATION.—The National Special Asset 
Council shall review a sufficient number of determinations 
* 
made by each special asset group to foreclose on any loan to 
assure the Council that such group is compljdng with this 
' 
section. With regard to each determination reviewed, the Coun-
cil shall make an independent judgment on the merits of the 
decision to foreclose rather than restructure the loan. 
"(3) NONCOMPUANCE.—If the National Special Asset Council 
determines that any special asset group is not in substantial 
compliance with this section, the Council shall notify the group 
V 
of the determination, and may take such other action as the 
Council considers necessary to ensure that such group complies 
with this section. 
"(d) REPORT.—With respect to determinations by a special asset 
group that a loan will not be restructured, the special asset group 
shall submit to the National Special Asset Council a report evaluat-
ing the loan and the basis for the determination that the loan should 
not be restructured. 
"(e) RESTRUCTURING FACTORS.—In determining whether a loan is 
to be restructured, the National Speciaf Asset Council, each special 
asset group, and each qualified lender certified under section 6.4 
12 u s e 2202a 
note. 
PUBLIC LAW 100-233—JAN. 6, 1988 
101 STAT. 1579 
shall take into consideration the factors specified in section 
4.14A(d)(l).". 
03) SENSE OF CONGRESS.—It is the sense of Congress that the banks 
State and local 
and associations (except banks for cooperatives) operating under the 
f 
OTTO'^O^O']!*! 
Farm Credit Act of 1971 (12 U.S.C. 2001 et seq.) should administer 
distressed loans to farmers with the objective of using the loan 
guarantee programs of the Farmers Home Administration and other 
loan restructuring measures, including participation in interest rate 
buy-down programs that are Federally or State funded, and other 
Federal and State sponsored financial assistance programs that 
offer relief to financially distressed farmers, as alternatives to fore-
closure, considering the availability and appropriateness of such 
programs on a case-by-case basis. 
SEC. 103. DISCLOSURE BY BANKS AND ASSOCIATIONS. 
Section 4.13 (12 U.S.C. 2199) is amended to read as follows: 
"SEC. 4.13. DISCLOSURE. 
"In accordance with regulations of the Farm Credit Administra-
tion, qualified lenders shall provide to borrowers, for all loans that 
are not subject to the Truth in Lending Act (15 U.S.C. 1601 et seq.), 
meaningful and timely disclosure not later than the time of the loan 
closing, o
f
— 
"(1) the current rate of interest on the loan; 
"(2) in the case of an adjustable or variable rate loan, the 
amount and frequency by which the interest rate can be in-
creased during the term of the loan or, if there are no such 
limitations, a statement to that effect, and the factors (including 
the cost of funds, operating expenses, and provision for loan 
losses) that will be taken into account by the qualified lender in 
determining adjustments to the interest rate; 
"(3) the effect, as shown by a representative example or 
examples, of any loan origination charges or purchases of stock 
or participation certificates on the effective rate of interest; 
"(4) any change in the interest rate applicable to the borrow-
er's loan; 
"(5) except with respect to stock guaranteed under section 
4.9A, a statement indicating that stock that is purchased is at 
risk; and 
"(6) a statement indicating the various types of loan options 
available to borrowers, with an explanation of the terms and 
borrowers' rights that apply to each type of loan.". 
SEC. 104. ACCESS TO DOCUMENTS AND INFORMATION. 
Section 4.13A (12 U.S.C. 2200) is amended— 
(1) by striking out "System institutions" and inserting in lieu 
thereof "qualified lenders"; and 
(2) by striking out the period at the end thereof and inserting 
in lieu thereof: "and copies of each appraisal of the borrower's 
assets made or used by the qualified lender.". 
SEC. 105. NOTICE 
OF 
ACTION 
ON 
APPLICATION FOR 
LOANS OR 
RESTRUCTURING. 
Section 4.13B (12 U.S.C. 2201) is amended to read as follows: 
101 STAT. 1580 
PUBLIC LAW 100-233—JAN. 6, 1988 
"SEC. 4.13B. NOTICE OF ACTION ON APPLICATION. 
"(a) LOAN APPLICATIONS.—Each qualified lender to which a person 
has applied for a loan shall provide the person with prompt written 
notice o
f
— 
"(1) the action on the application; 
"(2) if the loan applied for is reduced or denied, the reasons 
for such action; and 
"(3) the applicant's right to review under section 4,14. 
"(b) DISTRESSED LOANS.—Each qualified lender that has a dis-
tressed loan outstanding that is subject to restructuring require-
ments under this Act shall provide, in accordance with regulations 
prescribed by the Farm Credit Administration, the borrower with 
prompt written notice of— 
"(1) any action taken with respect to restructuring the loan 
under section 4.14A; 
"(2) if restructuring is denied, the reasons for such action; and 
"(3) the borrower's right to review under section 4.14.". 
SEC. 106. RECONSIDERATION OF ACTIONS. 
Section 4.14 (12 U.S.C. 2202) is amended to read as follows: 
..^ 
"SEC. 4.14. RECONSIDERATION OF ACTIONS. 
/t 
"(a) CREDIT REVIEW COMMITTEES.— 
'" 
.. 
i«?ifn! 
"(1) IN GENERAL.—The board of directors of each qualified 
lender shall establish one or more credit review committees, 
which shall include farmer board representation. 
"(2) MEMBERSHIP.—In no case shall a loan officer involved in 
the initial decision on a loan serve on the credit review commit-
tee when the committee reviews such loan. 
"(b) REVIEW OF DECISIONS.— 
"(1) DENIALS OR REDUCTIONS.—Any applicant for a loan from a 
qualified lender that has received a written notice issued under 
J 
section 4.13B of a decision to deny or reduce the loan applied for 
J 
may submit a written request, not later than 30 days after 
receiving a notice denying or reducing the amount of the loan 
application, to obtain a review of the decision by a credit review 
committee. 
"(2) DENIALS OF RESTRUCTURING.—A borrower of a loan from a 
1 
qualified lender that has received notice, under section 4.13B, of 
a decision to deny loan restructuring with respect to a loan 
made to the borrower, if the borrower so requests in writing 
within 7 days after receiving such notice, may obtain a review of 
such decision in person before the credit review committee. 
"(c) PERSONAL APPEARANCE.—An applicant for a loan or for 
restructuring, who is entitled to and has requested a review under 
this section, may appear in person before the credit review commit-
tee, and may be accompanied by counsel or by any other representa-
tive of such person's choice, to seek a reversal of the decision on the 
application under review. 
(d) INDEPENDENT APPRAISAL.— 
"(1) IN GENERAL.—An appeal filed with a credit review 
committee under this section may include, as a part of the 
request for a review of the decision filed under subsection (bXD, 
a request for an independent appraisal, by an accredited ap-
praiser, of any interests in property securing the loan (other 
than the stock or participation certificates of the qualified 
lender held by the borrower). 
PUBLIC LAW 100-233—JAN. 6, 1988 
101 STAT. 1581 
"(2) ARRANGEMENT AND COST.—Within 30 days after a request 
for an appraisal under paragraph (1), the credit review commit-
tee shall present the borrower with a list of three appraisers 
approved by the appropriate qualified lender from which the 
borrower shall select an appraiser to conduct the appraisal the 
cost of which shall be borne by the borrower, and shall consider 
the results of such appraisal in any final determination with 
respect to the loan. 
"(3) COPY TO BORROWER.—A copy of any appraisal made under 
this subsection shall be provided to the borrower. 
"(4) ADDITIONAL COLLATERAL.—An independent 
appraisal 
shall be permitted if additional collateral for a loan is de-
manded by the qualified lender when determining whether to 
restructure the loan. 
"(e) NOTIFICATION OF APPLICANT.—Promptly after a review by the 
credit review committee, the committee shall notify the applicant or 
borrower, as the case may be, in writing of the decision of the 
committee and the reasons for the decision.". 
SEC. 107. PROTECTION OF BORROWERS WHO MEET ALL LOAN OBLIGA-
TIONS. 
Part C of title IV is amended by inserting after the sections added 
by section 102(a) of this Act the following new section: 
"SEC. 4.14D. PROTECTION OF BORROWERS WHO MEET ALL LOAN 
12 USC 2202d. 
OBLIGATIONS. 
"(a) FORECLOSURE PROHIBITED.—A qualified lender may not fore-
close on any loan because of the failure of the borrower thereof to 
post additional collateral, if the borrower has made all accrued 
payments of principal, interest, and penalties with respect to the 
loan. 
"(b) PROHIBITION AGAINST REQUIRED PRINCIPAL REDUCTION.—A 
qualified lender may not require any borrower to reduce the 
outstanding principal balance of any loan made to the borrower by 
any amount that exceeds the regularly scheduled principal install-
ment payment (when due and payable), unless— 
"(1) the borrower sells or otherwise disposes of part or all of 
the collateral; or 
"(2) the parties eigree otherwise in a written agreement en-
tered into by the parties. 
"(c) NONENFORCEMENT.—After a borrower has made all accrued 
payments of principal, interest, and penalties with respect to a loan 
made by a qualified lender, the lender shall not enforce acceleration 
of the borrower's repayment schedule due to the borrower having 
not timely made one or more principal or interest payments. 
"(d) PLACING LOANS IN NONACCRUAL STATUS.— 
"(1) NOTIFICATION.—If a qualified lender places any loan in 
nonaccrual status, the lender shall document such change of 
status and promptly notify the borrower thereof in writing of 
such action and the reasons therefor. 
"(2) REVIEW OF DENIAL.—If the borrower was not delinquent 
in any principal or interest payment under the loan at the time 
of such action and the borrower's request to have the loan 
placed back into accrual status is denied, the borrower may 
obtain a review of such denial before the appropriate credit 
review committee under section 4.14. 
101 STAT. 1582 
PUBLIC LAW 100-233—JAN. 6, 1988 
"(3) APPLICATION.—This subsection shall only apply if a loan 
being placed in nonaccrual status results in an adverse action 
being taken against the borrower.". 
SEC. 108. RIGHT OF FIRST REFUSAL. 
Section 4.36 (12 U.S.C. 2219a) is amended to read as follows: 
"SEC. 4.36. RIGHT OF FIRST REFUSAL. 
"(a) GENERAL RULE.—Agricultural real estate that is acquired by 
an institution of the System as a result of a loan foreclosure or a 
voluntary conveyance by a borrower (hereinafter in this section 
referred to as the 'previous owner') who, as determined by the 
institution, does not have the financial resources to avoid fore-
closure (hereinafter in this section referred to as 'acquired real 
estate') shall be subject to the right of first refusal of the previous 
owner to repurchase or lease the property, as provided in this 
section. 
"(b) APPUCATION OF RIGHT OF FIRST REFUSAL TO SALE OF PROP-
ERTY.— 
"(1) ELECTION TO SELL AND NOTIFICATION.—Within 15 days 
after an institution of the System first elects to sell acquired 
real estate, or any portion of such real estate, the institution 
shall notify the previous owner by certified mail of the owner's 
,,...„,.y,j.. 
right— 
"(A) to purchase the property at the appraised fair 
market value of the property, as established by an accred-
ited appraiser; or 
"(B) to offer to purchase the property at a price less than 
the appraised value. 
$ri; 
"(2) EuGiBiUTY TO PURCHASE.—To be eligible to purchase the 
property under paragraph (1), the previous owner must, within 
15 days after receiving the notice required by such paragraph, 
submit an offer to purchase the property. 
"(3) MANDATORY SALE.—An institution of the System receiv-
ing an offer from the previous owner to purchase the property 
at the appraised value shall, within 30 days after the receipt of 
such offer, accept such offer and sell the property to the pre-
vious owner. 
"(4) PERMISSIVE SALE.—An institution of the System receiving 
an offer from the previous owner to purchase the property at a 
price less than the appraised value may accept such offer and 
sell the property to the previous owner. Notice shall be provided 
to the previous owner of the acceptance or rejection of such 
offer within 15 days after the receipt of such offer. 
"(5) REJECTION OF OFFER OF PREVIOUS OWNER.— 
"(A) DUTIES OF INSTITUTION.—An institution of the 
»
v i\ 
System that rejects an offer from the previous owner to 
purchase the property at a price less than the appraised 
value may not sell the property to any other person— 
"(i) at a price equal to, or less than, that offered by 
K^-4H>-iv. 
the previous owner; or 
»'• '; -' 
"(ii) on different terms and conditions than those 
*
"
^ 
' 
that were extended to the previous owner, 
without first affording the previous owner an opportunity 
to purchase the property at such price or under such terms 
and conditions. 
PUBLIC LAW 100-233—JAN. 6, 1988 
101 STAT. 1583 
"(B) NOTICE.—Notice of the opportunity in subparagraph 
(A) shall be provided to the previous owner by certified 
mail, and the previous owner shall have 15 days in which to 
submit an offer to purchase the property at such price or 
under such terms and conditions. 
"(c) APPLICATION OF RIGHT OF FIRST REFUSAL TO LEASING OF 
PROPERTY.— 
"(1) ELECTION TO LEASE AND NOTIFICATION.—Within 15 days 
after an institution of the System first elects to lease acquired 
real estate, or any portion of such real estate, the institution 
shall notify the previous owner by certified mail of the owner's 
right— 
"(A) to lease the property at a rate equivalent to the 
appraised rental value of the property, as established by an 
accredited appraiser; or 
"(B) to offer to lease the property at a rate that is less 
than the appraised rental value of the property. 
"(2) EuGiBiLiTY TO LEASE.—To be eligible to lease the property 
under paragraph (1), the previous owner must, within 15 days 
after receiving the notice required by such paragraph, submit 
an offer to lease the property. 
"(3) MANDATORY LEASE.—An institution of the System receiv-
ing an offer from the previous owner to lease the property at a 
rate equivalent to the appraised rental value of the property 
shall, within 15 days after the receipt of such offer, accept such 
offer and lease the property to the previous owner unless the 
institution determines that the previous owner— 
"(A) does not have the resources available to conduct a 
successful farming or ranching operation; or 
"(B) cannot meet all of the payments, terms, and condi-
tions of such lease. 
"(4) PERMISSIVE LEASE.—An institution of the System receiv-
ing an offer from the previous owner to lease the property at a 
rate that is less than the appraised rental value of the property 
may accept such offer and lease the property to the previous 
owner. 
"(5) NOTICE TO PREVIOUS OWNER.—An institution of the 
System receiving an offer from the previous owner to lease the 
property at a rate less than the appraised rental value of the 
property shall notify the previous owner of its acceptance or 
rejection of the offer within 15 days after the receipt of such 
offer. 
"(6) REJECTION OF OFFER OF PREVIOUS OWNER.— 
"(A) DUTIES OF INSTITUTION.—An institution of the 
System rejecting an offer from the previous owner to lease 
the property at a rate less than the appraised rental value 
of the property may not lease the property to any other 
person— 
"(i) at a rate equal to or less than that offered by the 
previous owner; or 
"(ii) on different terms and conditions than those 
that were extended to the previous owner, 
without first affording the previous owner an opportunity 
to lease the property at such rate or under such terms and 
conditions. 
"(B) NOTICE.—Notice of the opportunity described in 
subparagraph (A) shall be given to the previous owner by 
101 STAT. 1584 
PUBLIC LAW 100-233—JAN. 6, 1988 
certified mail, and the previous owner shall have 15 days 
after the receipt of such notice in which to agree to lease 
the property at such rate or under such terms and condi-
tions. 
"(d) PuBuc OFFERINGS.— 
"(1) NOTIFICATION OF PREVIOUS OWNER.—If an institution of 
the System elects to sell or lease acquired property or a portion 
"'-' thereof through a public auction, competitive bidding process, 
or other similar public offering, the institution shall notify the 
previous owner, by certified mail, of the availability of the 
« * property. Such notice shall contain the minimum amount, if 
any, required to qualify a bid as acceptable to the institution 
and any terms and conditions to which such sale or lease will be 
subject. 
"(2) PRIORITY.—If two or more qualified bids in the same 
• * amount are received by the institution under paragraph (1), 
such bids are the highest received, and one of the qualified bids 
is offered by the previous owner, the institution shall accept the 
offer by the previous owner. 
"(3) NONDISCRIMINATION.—No institution of the System may 
discriminate against a previous owner in any public auction, 
competitive bidding process, or other similar public offering of 
property acquired by the institution from such person. 
"(e) TERM OR CONDITION.—For the purposes of this section, financ-
ing by a System institution shall not be considered to be a term or 
condition of a sale of acquired real estate. 
"(f) FINANCING.—Notwithstanding any other provision of this sec-
tion, a System institution shall not be required to provide financing 
to the previous owner in connection with the sale of acquired real 
estate. 
"(g) MAIUNG OF NOTICE.—Notwithstanding any other provision of 
this section, each certified mail notice requirement in this section 
shall be fully satisfied by mailing one certified mail notice to the last 
known address of the former borrower. 
"(h) STATE LAWS.—The rights provided in this section shall not 
diminish any such right of first refusal under the law of the State in 
which the property is located. 
"(i) APPLICABILITY.—This section shall not apply to a bank for 
cooperatives.". 
SEC. 109. DIFFERENTIAL INTEREST RATES, 
12 use 2199. 
Section 4.13 (12 U.S.C. 2201) (as amended by section 103(a) of this 
Act) is further amended— 
(1) by striking out "In" and inserting in lieu thereof "(a) IN 
GENERAL.—In"; and 
(2) by adding at the end thereof the following new subsection: 
"(b) DIFFERENTIAL INTEREST RATES.—A qualified lender offering 
more than one rate of interest to borrowers shall, at the request of a 
borrower of a loan— 
"(1) provide a review of the loan to determine if the proper 
interest rate has been established; 
"(2) explain to the borrower in writing the basis for the 
interest rate charged; and 
"(3) explain to the borrower in writing how the credit status 
ar 
of the borrower may be improved to receive a lower interest 
Y'l 
rate on the loan.". 
PUBLIC LAW 100-233—JAN. 6, 1988 
101 STAT. 1585 
SEC. 110. APPLICATION OF UNINSURED ACCOUNTS. 
Part F of title IV (12 U.S.C. 2219 et seq.) is amended by adding at 
the end thereof the following new section: 
"SEC. 4.37. APPLICATION OF UNINSURED ACCOUNTS. 
"(a) IN GENERAL.—Money of a borrower held by a Farm Credit 
System institution in an uninsured voluntary or involuntary ac-
count £is authorized under regulations issued by the Farm Credit 
Administration (as in effect immediately before the date of the 
enactment of this section), including all such other accounts known 
as 'advanced payment accounts' or 'future prepayment accounts' 
shall, in the event the institution is placed in liquidation, be imme-
diately applied as payment sigainst the indebtedness of any 
outstanding loans of such borrower. 
"(b) REGULATIONS.—The Farm 
Credit Administration 
shall 
promulgate regulations— 
"(1) that define the term 'uninsured voluntary or involuntary 
account'; and 
"(2) to otherwise effectively carry out this section.". 
TITLE II—ASSISTANCE TO FARM CREDIT 
SYSTEM 
SEC. 201. ASSISTANCE TO FARM CREDIT SYSTEM. 
The Farm Credit Act of 1971 (12 U.S.C. 2001 et seq.) is amended by 
adding at the end thereof the following new title: 
"TITLE VI—ASSISTANCE TO FARM CREDIT 
SYSTEM 
"Subtitle A—Assistance Board 
12 u s e 2219b. 
"SEC. 6.0. ESTABLISHMENT OF BOARD. 
12 USC 2278a. 
"(a) CHARTERS.—On the date which is 15 days after the date of the 
enactment of this title, the Farm Credit Administration shall revoke 
the charter of the Farm Credit System Capital Corporation (herein-
after referred to in this title as the 'Capital Corporation') and shall 
charter the Farm Credit System Assistance Board (hereinafter re-
ferred to in this Act as the 'Assistance Board') that, subject to this 
subtitle, shall be a Federally chartered instrumentality of the 
United States. 
"(b) USE OF CAPITAL CORPORATION STAFF.—During the 90-day 
Contracts. 
period beginning on the date of the revocation of the charter of the 
Capital Corporation, the Assistance Board may temporarily employ, 
by contract or otherwise under reasonable and necessary terms and 
conditions, such staff of the Capital Corporation as is necessary to 
facilitate and effectuate an orderly transition to, and commence-
ment of, the Assistance Board, and the termination of the affairs of 
the Capital Corporation. 
"SEC. 6.1. PURPOSES. 
12 USC 2278a-l. 
"The purposes of the Assistance Board shall be to carry out a 
program to provide assistance to, and protect the stock of borrowers 
101 STAT. 1586 
PUBLIC LAW 100-233—JAN. 6, 1988 
of, the institutions of the Farm Credit System, and to assist in 
restoring System institutions to economic viability and permitting 
such institutions to continue to provide credit to farmers, ranchers, 
and the cooperatives of such, at reasonable and competitive rates. 
12 u s e 2278a-2. 
"SEC. 6.2. BOARD OF DIRECTORS. 
"(a) MEMBERSHIP.—The Board of Directors of the Assistance Board 
(hereinafter referred to in this subtitle as the 'Board of Directors') 
shall consist of three members— 
"(1) one of which shall be the Secretary of the Treasury; 
"(2) one of which shall be the Secretary of Agriculture; and 
President of U.S. 
"(3) one of which shall be an agricultural producer experi-
enced in financial matters, and appointed by the President, by 
and with the advice and consent of the Senate. 
"(b) CHAIRMAN.—The Board of Directors shall elect annually a 
Chairman from among the members of the Board. 
"(c) TERMS OF OFFICE, SUCCESSION, AND VACANCIES.— 
"(1) TERMS OF OFFICE AND SUCCESSION.—The term of each 
member of the Board of Directors shall expire when the Assist-
ance Board is terminated. 
"(2) VACANCIES.—Vacancies on the Board of Directors shall be 
filled in the same manner as the vacant position was previously 
filled. 
"(d) C!oMPENSATiON OF BoARD MEMBERS.—Members of the Board of 
Directors— 
"(1) appointed under paragraphs (1) and (2) of subsection (a) 
shall receive reasonable allowances for necessary expenses of 
travel, lodging, and subsistence incurred in attending meetings 
and other activities of the Assistance Board, as set forth in the 
bylaws issued by the Board of Directors, except that such level 
shall not exceed the maximum fixed by subchapter 1 of chapter 
57 of title 5, United States Code, for officers and employees of 
the United States; and 
"(2) appointed under paragraph (3) of subsection (a) shall 
receive compensation for the time devoted to meetings and 
'''""' 
other activities at a daily rate not to exceed the daily rate of 
p 
compensation prescribed for Level III of the Executive Schedule 
under section 5314 of title 5, United States Code, and reasonable 
allowances for necessary expenses of travel, lodging, and 
subsistence incurred in attending meetings and other activities 
of the Assistance Board, as set forth in the bylaws issued by the 
Board of Directors, except that such level shall not exceed the 
maximum fixed by subchapter 1 of chapter 57 of title 5, United 
States Code, for officers and employees of the United States. 
'^^"" '' 
"(e) RULES AND RECORDS.—The Board of Directors of the Assist-
ance Board shall adopt such rules as it may deem appropriate for 
the transaction of the business of the Assistance Board, and shall 
keep permanent and accurate records and minutes of its acts and 
proceedings. 
"(f) QUORUM REQUIRED.—A quorum shall consist of two members 
of the Board of Directors. All decisions of the Board shall require an 
affirmative vote of at least a majority of the members voting, 
*;?i:; A- 
"(g) CHIEF EXECUTIVE OFFICER.—A chief executive officer of the 
Assistance Board shall be selected by the Board of Directors of the 
Assistance Board and shall serve at the pleasure of the Board. 
PUBLIC LAW 100-233—JAN. 6, 1988 
101 STAT. 1587 
"SEC. 6.3. CORPORATE POWERS. 
12 USC 2278a-3. 
"(a) IN GENERAL.—The Assistance Board shall be a body corporate 
that shall have the power to— 
"(1) operate under the direction of its Board of Directors; 
"(2) adopt, alter, and use a corporate seal, which shall be 
judicially noted; 
"(3) provide for one or more vice presidents, a secretary, a 
treasurer, and such other officers, employees, and agents, as 
may be necessary, define their duties, and require surety bonds 
or make other provisions against losses occasioned by acts of 
such persons; 
"(4) hire, promote, compensate, and discharge officers and 
employees of the Assistance Board, without regard to title 5, 
United States Code, except that no such officer or employee 
shall receive an annual rate of basic pay in excess of the rate 
prescribed for Level III of the Executive Schedule under section 
5314 of title 5, United States Code; 
"(5) prescribe by its Board of Directors its bylaws, that shall 
be consistent with law, and that shall provide for the manner in 
which— 
"(A) its officers, employees, and agents are selected; 
"(B) its property is acquired, held, and transferred; 
"(C) its general operations are to be conducted; and 
"(D) the privileges granted by law are exercised and 
' 
enjoyed; 
"(6) with the consent of any executive department or 
independent agency, use the information, services, staff, and 
facilities of such in carrying out this title; 
"(7) enter into contracts and make advance, progress, or other Contracts. 
payments with respect to such contracts; 
'(8) sue and be sued in its corporate name, and complain and 
defend in courts of competent jurisdiction; 
"(9) acquire, hold, lease, mortgage, or dispose of, at public or 
private sale, real and personal property, and otherwise exercise 
all the usual incidents of ownership of property necessary and 
convenient to its operations; 
"(10) obtain insurance against loss; 
"(11) modify or consent to the modification of any contract or Contracts. 
agreement to which it is a party or in which it has an interest 
under this title; 
"(12) deposit its securities and its current funds with any 
member bank of the Federal Reserve System or any insured 
State nonmember bank (as defined in section 3(b) of the Federal 
-
Deposit Insurance Act (12 U.S.C. 1813(b)) and pay fees therefor 
and receive interest thereon as may be agreed; and 
"(13) exercise other powers as set forth in this title, and such 
other incidental powers as are necessary to carry out its powers, 
duties, and functions in accordance with this title. 
"(b) 
POWER TO REMOVE; JURISDICTION.—Notwithstanding 
any 
other provision of law, any civil action, suit, or proceeding to which 
the Assistance Board is a party shall be deemed to arise under the 
laws of the United States, and the United States District Court for 
the District of Columbia shall have original jurisdiction over such. 
The Assistance Board may, without bond or security, remove any 
such action, suit, or proceeding from a State court to the United 
States District Court for the District of Columbia. 
91-194 O - 90 -10 : QL.3 Part 3 
101 STAT. 1588 
PUBLIC LAW 100-233—JAN. 6, 1988 
12 use 2278a-4. 
"SEC. 6.4. CERTIFICATION OF ELIGIBILITY TO ISSUE PREFERRED STOCK. 
"(a) BOOK VALUE LESS THAN PAR VALUE OF STOCK AND EQUITIES.— 
If the book value of the stock, participation certificates, and other 
similar equities of a System institution, based on generally accepted 
accounting principles, is less than the par value of the stock or the 
face value of the certificates or equities— 
"(1) the Farm Credit Administration shall notify the Assist-
ance Board of such impairment; 
"(2) the Assistance Board shall monitor the financisd condi-
tion, business plans, and operations of the institution; and 
"(3) the institution may request the Assistance Board to grant 
certification to issue preferred stock under section 6.27(a). 
"(b) BOOK VALUE LESS THAN 75 PERCENT OF PAR VALUE OF STOCK 
AND EQUITIES.—If the book value of the stock, participation certifi-
cates, and other similar equities of a System institution, based on 
generally accepted accounting principles, is less than 75 percent of 
the par value of the stock or the face value of the certificates or 
equities, the institution shall request the Assistance Board to grant 
certification to issue preferred stock under section 6.27(a). 
"(c) MANDATORY DETERMINATION OF EUGIBIUTY.— 
"(1) IN GENERAL.—The Assistance Board shall determine 
whether to certify a System institution as eligible to issue 
preferred stock under section 6.27, if— 
b0i 
"(A) the institution requests such certification; 
"(B) the book value of the stock, participation certificates, 
^-' 
and other similar equities of the institution, based on gen-
^^iB 
erally accepted accounting principles, has declined to 75 
percent of the par value of the stock or the face value of the 
r i s 
ii»> t^. certificates or equities; and 
"(C) the institution agrees to meet the terms and condi-
ti-i ra :
? tions specified by the Assistance Board pursuant to section 
6.6. 
"(2) EFFECTIVE DATE OF CERTIFICATION.—If the determination 
of the Assistance Board is to certify the institution under 
' * 
paragraph (1), such certification shall be effective at the time of 
such determination. 
"(c) IMPLEMENTATION.—As soon as practicable after the date of the 
:;o urffj 
enactment of this title, the Assistance Board shall take such actions 
as are necessary to carry out this section. 
"(d) DEFINITION.—Except where otherwise provided in this Act, 
the term 'other similar equities' includes allocated equities. 
12 use 2278a-5. 
"SEC. 6.5. ASSISTANCE. 
"(a) IN GENERAL.—The Assistance Board shall assist an institution 
that has been certified under section 6.4 by— 
"(1) authorizing the institution to issue preferred stock under 
•• '^^ the appropriate provision of section 6.27, in amounts necessary 
to maintain the book value of stock, participation certificates, 
V,-- 
and other similar equities of the institution, at the level pro-
'<•' 
vided for in subsection (c); 
"(2) in the case of high-cost debt for which the institution is 
primarily liable, authorizing the institution to issue preferred 
stock under the appropriate provision of section 6.27, in an 
amount equal to the premium that would be required by the 
holder of the debt for the institution to retire the debt at the 
then current market value; 
. 
, , , 
- ... 
..^j 
PUBLIC LAW 100-233—JAN. 6, 1988 
101 STAT. 1589 
"(3) on a request by the institution, authorizing the issuance 
of preferred stock under the appropriate provision of section 
6.27 to facilitate the merger of the requesting institution with 
one or more other System institutions; or 
"(4) providing assistance by such other methods as the Assist-
ance Board determines appropriate. 
"(b) DEFINITION OF HIGH-COST DEBT.—For purposes of subsection 
(a)(2), the term 'high-cost debt' means securities or similar obliga-
tions issued before January 1, 1986, that mature on or after Decem-
ber 31, 1987, and bear a rate of interest in excess of the then current 
market rate for similar securities or obligations. 
"(c) MINIMUM EQUITY VALUE.—The Assistance Board shall au-
thorize a certified institution to issue amounts of preferred stock 
under the appropriate provision of section 6.27 sufficient to— 
"(1) maintain the value of stock, participation certificates and 
other similar equities at no less than 75 percent of the par value 
of the stock or the face value of the certificates or equities, as 
determined under generally accepted accounting principles; and 
"(2) strengthen the institution to a point where it is economi-
cally viable, and capable of delivering credit at reasonable and 
competitive rates. 
"(d) LIMITATION.—No assistance shall be provided in connection 
with a merger until the stockholders and the institutions involved 
have approved the merger and the Farm Credit Administration has 
given final approval to the merger plan. 
"SEC. 6.6. SPECIAL POWERS. 
12 USC 2278a-6. 
"(a) IN GENERAL.—In the case of a System institution that re-
quests certification under section 6.4, the Assistance Board may— 
"(1) require the institution to obtain approval from the Assist-
ance Board before implementing business, operating, and 
investment plans and policies; 
"(2) if one or more of the conditions described in section 
4.12(b) are met, as determined by the Farm Credit Administra-
tion, direct the Farm Credit Administration Board to appoint a 
conservator for the institution, in accordance with such section, 
and to instruct the conservator to evaluate the operations of the 
institution and report to the Farm Credit Administration Board 
and the Assistance Board on the possibility of restoring the 
institution to sound financial condition; 
"(3) request that the Farm Credit Administration Board or 
the Farm Credit Administration, as appropriate— 
"(A) approve or require a merger or consolidation of the 
•i 
institution to the extent authorized under this Act; 
"(B) initiate action to appoint a receiver under section 
4.12(b); or 
"(C) exercise any enforcement power authorized under 
this Act; 
"(4) require the institution to obtain approval from the Assist-
ance Board before setting the terms and conditions of any debt 
issuances of the institution; 
"(5) require the institution to obtain approval from the Assist-
ance Board before setting the policy on credit standards to be 
used, and the policy on rates of interest to be charged on loans, 
by the institution, including requiring that— 
"(A) the institution set interest rates at levels necessary 
to ensure that the cost of money to the institution reflects 
101 STAT. 1590 
PUBLIC LAW 100-233—JAN. 6, 1988 
the marginal cost to the institution of borrowing an addi-
tional amount of money at the time a new loan is made; and 
V < 
"(B) loans primarily secured by real estate mortgages not 
exceed 85 percent of the appraised agricultural value of the 
^sis 
real estate security, or 75 percent of the then current 
market value of the real estate security, whichever is 
greater; 
"(6) require the institution to obtain approval from the Assist-
ance Board for the design of management information and 
accounting systems at the institution, and of the continued use 
by the institution of regulatory accounting practices in accord-
ance with sections 4.8(b) and 5.19(b); 
"(7) require that the plans and policies of the institution 
resulting from the merger of System banks reduce the overhead 
costs of such institution, to the maximum extent practicable, 
with respect to the delivery of services to, and performance of 
duties for. System associations in the district; 
"(8) require the institution to obtain approval from the Assist-
ance Board of— 
"(A) the hiring policies of the institution; 
"(B) the compensation and retirement benefits of the 
(" 
chief executive officer, other managers, and directors of the 
institution notwithstanding the authority of the Farm 
Credit Administration to approve such matters under sec-
tions 5.5 and 5.17(aX15); 
;; e r 
i. 
"(C) any change in the management of the institution; 
and 
"(D) policy decisions regarding continued emplojonent 
and promotion of the officials referred to in subparagraph 
(B); 
"(9) may suspend for any period of time, or terminate, any 
certification granted to an institution under section 6.4 if the 
Farm Credit Administration notifies the Assistance Board that 
the institution has substantially deviated from the institution's 
business plan or has failed to comply with a term or condition 
governing the use of any financial assistance provided to the 
institution under this title; and 
"(10) take such other action as the Assistance Board deter-
mines may be necessary to establish prudent operating prac-
tices at the institution and to return the institution to a sound 
financial condition, 
t "(b) SUSPENSION OF ASSISTANCE.— 
"(1) NOTIFICATION.—The Assistance Board shall promptly 
i 
notify the Farm Credit Administration of any action taken by 
the Assistance Board under subsection (a)(8). 
"(2) ENFORCEMENT.—The Farm Credit Administration may 
use any of its enforcement powers, with respect to any institu-
tion to which the Assistance Board has provided assistance or 
has certified the institution to issue preferred stock under the 
appropriate provision of section 6.27, to obtain the complismce of 
the institution with the terms or conditions governing the use of 
financial assistance provided under this title. 
"(c) UNDATED LETTERS OF RESIGNATION.—The Assistance Board 
shall not, for any reason, request or require any member of the 
board of directors of any System institution to submit to the Assist-
ance Board an undated letter of resignation. Immediately after the 
PUBLIC LAW 100-233—JAN. 6, 1988 
101 STAT. 1591 
date of the enactment of this title, the Assistance Board shall 
destroy all such letters over which it has control. 
"(d) REPORTS.—During the 5-year period beginning on the date of 
the enactment of this title, the Assistance Board, in coordination 
with the Financial Assistance Corporation, shall report annually to 
the Committee on Agriculture of the House of Representatives and 
the Committee on Agriculture, Nutrition, and Forestry of the 
Senate on the extent to which System institutions translate the 
savings in the cost of the operations of such institutions due to 
the Federal assistance provided to the System under this title into 
lower interest rates charged to System borrowers or enhanced 
financial solvency of such institutions. 
"SEC. 6.7. ADMINISTRATION. 
"(a) EXPENSES.—The Financial Assistance Corporation shall pay 
the necessary and reasonable administrative expenses of the Assist-
ance Board from funds in the Assistance Fund established in section 
6.25. 
"(b) INTERIM FUNDING.—Before the availability of funding from 
the Assistance Fund, the Assistance Board may use the revolving 
fund established under section 4.0. Such amounts used shall be 
repaid to the revolving fund out of the Assistance Fund within the 
same fiscal year that such funds were received by the Assistance 
Board. 
"(c) ASSISTANCE OPERATIONS.—The Farm Credit Administration 
shall provide such personnel and facilities to the Assistance Board 
as the Farm Credit Administration considers are necessary to avoid 
unnecessary duplication and waste. 
"(d) ACCESS TO F C A DOCUMENTS.—The Assistance Board shall 
have access to all reports of examination and supervisory documents 
of the Farm Credit Administration, and relevant supporting mate-
rial for the purpose of carrying out the special powers of the 
Assistance Board under section 6.6, under terms and conditions that 
are acceptable to the Farm Credit Administration Board, as are 
necessary and appropriate to protect the confidentiality of the 
documents and materials. 
"SEC. 6.8. LIMITATION OF POWERS. 
"(a) PURPOSES.—The powers of the Assistance Board under this 
title shall be exercised only for the purposes specified in this title 
and shall not be exercised in a manner that would result in the 
Assistance Board supplanting the Farm Credit System lending 
institutions as the primary providers of credit and other financial 
services to farmers, ranchers, and the cooperatives of such. 
"(b) PROHIBITION.—The powers of the Assistance Board under this 
title shall not include the management, administration, or disposi-
tion of any loans or other assets owned by other System institutions, 
or the providing of technical assistance or other related services to 
other System institutions in connection with the administration of 
loans owned by such other institutions. 
"SEC. 6.9. SUCCESSION. 
"(a) LIABILITIES.—On the issuance by the Farm Credit Administra-
tion of the charter for the Assistance Board under this subtitle, the 
Assistance Board shall succeed to the assets of and assume all debts, 
obligations, contracts, and other liabilities of the Capital Corpora-
tion, matured or unmatured, accrued, absolute, contingent or other-
12 u s e 2278a-7. 
Classified 
information. 
12 u s e 2278a-8. 
12 u s e 2278a-9. 
Contracts. 
101 STAT. 1592 
PUBLIC LAW 100-233—JAN. 6, 1988 
wise, and whether or not reflected or reserved ag£iinst on balance 
sheets, books of account, or records of the Capital Corporation. 
"(b) CONTRACTS.—The existing contractual obligations, security 
instruments, and title instruments of the Capital Corporation shall, 
by operation of law and without any further action by the Farm 
Credit Administration, the Capital Corporation, or any court, 
become and be converted into obligations, entitlements, and in-
struments of the Assistance Board chartered under this subtitle, 
"(c) ADJUSTMENT OF ASSESSMENTS.—Not later than 15 days after 
the issuance of the charter of the Assistance Board, the Board shall 
retire all debt and equity obligations issued to any System institu-
tion under section 4.28G(aX14) or 4.28H (as in effect immediately 
„ 
, 
before the date of the enactment of this title) at the book value of 
such obligations (determined £is of such date of enactment) and shall 
pay such amounts to the holders of such debt and equity obligations. 
Contracts. 
(d) SURPLUS FuNDS.—To the extent that, on the extinguishing of 
liabilities assumed by the Assistance Board under this section, and 
on full performance or other final disposition of contract obligations 
of the Assistance Board, there remain surplus funds attributable to 
such obligations or contracts, the Assistance Board shall distribute 
such surplus funds among the System institutions that contributed 
funds to the Capital Corporation on the basis of the relative amount 
of funds so contributed by each institution. 
"(e) PRESERVATION AGREEMENTS.— 
"(1) TRANSFER OF OBLIGATIONS.—Notwithstanding any other 
: 
provision of this Act or the terms and conditions of the Thirty-
Seven Banks Capital Preservation Agreement, the Federal 
Land Banks Capital Preservation Agreement, the Federal Inter-
." 
mediate Credit Banks Capital Preservation Agreement, and the 
Banks for Cooperatives Loss Sharing Agreement— 
"(A) at the time the receiving bank receives funds from 
the Financial Assistance Corporation in an equal and 
equivalent amount in accordance with this subsection, any 
< 
amounts received by, or that remain accrued to, any System 
». , 
bank in accordance with the activation of any such agree-
ment for the calendar quarter ending on September 30, 
.^rt. . 
r 
1986, shall be— 
'n«s^, 
. 1 
"(i) repaid to the contributing bank by the bank that 
/? 
- 
received such payments; or 
"(ii) cancelled; 
"(B) on the date the Financial Assistance Corporation is 
chartered, the accounts payable of each contributing bank 
under such agreements for the calendar quarter ending on 
September 30, 1986, shall, by operation of law and without 
any further action by such contributing bank, any other 
bank, or any court, become and be converted into accounts 
payable of the Financial Assistance Corporation to each 
i. 
receiving bank under such agreement for such calendar 
?' 
quarter in the same amounts as previously carried on the 
books of each such receiving bank; and 
"(C) on the date the Financial Assistance Corporation is 
' 
:y 
chartered, the accounts receivable of each receiving bank 
5 
under such agreements for the calendar quarter ending 
September 30, 1986, shall, by operation of law and without 
^ 
any further action by such receiving bank or any other 
bank, or any court, become and be converted into accounts 
• 
.^. 
receivable to such receiving bank from the Financial Assist-
PUBLIC LAW 100-233—JAN. 6, 1988 
101 STAT. 1593 
ance Corporation, in the same amount as previously carried 
on the books of such receiving bank and such receivables 
shall, for all financial reporting purposes, be accounted for 
as an asset on the books of such receiving bank in accord-
ance with generally accepted accounting practices. 
"(2XA) Not later than 30 days after the first issuance of 
obligations by the Financial Assistance Corporation in accord-
ance with section 6.26, the Corporation shall pay to each receiv-
ing bank such sums as are necessary to permit each receiving 
bank to repay, in accordance with paragraph (1), the amounts 
each such receiving bank received under any such agreement. 
"(B) The accruals shall be paid by the Corporation to each 
receiving bank for the actual net loan charge-offs recorded on 
the books of each such bank before January 1, 1993, not pre-
viously paid by the contributing banks. 
"(3) DEBT OBLIGATIONS.— 
"(A) ISSUANCE.—For the purpose of obtaining funds to 
carry out this subsection, the Financial Assistance Corpora-
tion shall issue debt obligations under section 6.26. Such 
obligations shall be subject to the terms and conditions of 
such section, except as provided for in this paragraph. 
"(B) PAYMENT OF INTEREST.—During each year of the 15-
year period of such obligation issued pursuant to subpara-
graph (A), the banks operating under this Act shall pay to 
the Financial Assistance Corporation, at such times as the 
Corporation shall determine, an amount equal to the entire 
amount of interest due on such obligation. Each bank shall 
pay a proportion of such interest equal to— 
'^ 
"(i) the average accruing loan volume of the bank 
during the year preceding the year of such payment; 
divided by 
"(ii) the average accruing loan volume of all of the 
banks of the System for the same period. 
"(C) PAYMENT OF PRINCIPAL.—After the end of the 15-year 
period beginning on the date of the issuance of any obliga-
* 
tion issued to carry out this subsection, the banks operating 
under this Act shall pay to the Financial Assistance Cor-
poration, on demand, an amount equal to the outstanding 
principal of such obligation. Each bank shall pay a propor-
tion of such principal equal to— 
"(i) the average accruing loan volume of the bank for 
the preceding 15 years; divided by 
"(ii) the average accruing loan volume of all banks of 
the System for the same period. 
"(D) Until each obligation issued in accordance with this 
subsection reaches maturity, for all financial reporting pur-
poses, such obligation shall be considered to be the sole 
obligation of the Financial Assistance Corporation and 
shall not be considered a liability of any System bank. 
"(4) 
FUNDS NOT CONSIDERED FINANCIAL ASSISTANCE.—The 
funds made available to each bank, whether through the issu-
ance of stock or otherwise, by the Financial Assistance Corpora-
tion to meet obligations under any agreement referred to in 
paragraph (1) or to meet any obligations of the contributing 
banks under any such agreement, as required by this subsec-
tion, shall not be considered financial assistance under this Act. 
101 STAT. 1594 
PUBLIC LAW 100-233—JAN. 6, 1988 
12 use 
2278a-10. 
12 use 
2278a-ll. 
State and local 
governments. 
12 use 
2278a-12. 
12 use 
2278a-13. 
"(5) SUSPENSION OF PRESERVATION AGREEMENTS.—During the 
5-year period beginning on the date of enactment of this subsec-
tion and thereafter whenever funds from the Farm Credit 
System Insurance Fund are available for use in assisting 
System institutions to meet their obligations on their debt 
instruments, the Thirty-Seven Banks Capital Preservation 
Agreement, the Federal Land Banks Capital Preservation 
Agreement, the Federal Intermediate Credit Banks Capital 
Preservation Agreement, and the Banks for Cooperatives Loss 
Sharing Agreement shall be suspended, in exchange for the 
benefits flowing to the signatories to such agreements under the 
Agricultural Credit Act of 1987.". 
"SEC. 6.10. EFFECT OF REGULATIONS; AUDITS. 
"(a) ISSUANCE.—The Assistance Board may issue such regulations, 
policies, procedures, guidelines, or statements as the Board consid-
ers necessary or appropriate to carry out this title, all of which shall 
be promulgated and enforced without regard to subchapter II of 
chapter 5 of title 5, United States Code. 
"(b) REGULATION BY FARM CREDIT ADMINISTRATION.—The Assist-
ance Board shall not be subject to regulation by the Farm Credit 
Administration. 
"(c) AUDITS.—The Assistance Board shall not require an audit or 
examination of a System institution that would be duplicative of an 
audit or examination that is conducted under other provisions of 
law. 
"SEC. 6.11. EXEMPTION FROM TAXATION. 
"The Assistance Board, the capital, reserves, and surplus thereof, 
and the income derived therefrom, shall be exempt from Federal, 
State, municipal, and local taxation, except taxes on real estate held 
by the Assistance Board to the same extent, according to its value, 
as other similar property held by other persons is taxed. 
"SEC. 6.12. TERMINATION. 
"The Assistance Board and the authority provided by this subtitle 
shall terminate on December 31,1992. 
"SEC. 6.13. TRANSITIONAL PROVISIONS. 
"(a) EXERCISE OF POWERS.—The powers of the Assistance Board 
under this title shall be exercised by the Farm Credit Administra-
tion Board until the issuance of the charter of the Assistance Board, 
or such later date not to exceed 30 days thereafter, as may be 
requested by the Assistance Board. 
"Ot)) LIMITATION ON ASSISTANCE.—Any assistance provided to 
System institutions by the Farm Credit Administration in accord-
ance with this section shall be provided from, and shall not exceed, 
the amounts contained in the revolving fund established under 
section 4.0. 
"(c) ISSUANCE OF STOCK.—Each institution that receives assistance 
from the Farm Credit Administration during the interim period 
specified in subsection (a), in consideration thereof, shall issue pre-
ferred stock to the Financial Assistance Corporation in an amount 
equal to the amount of such assistance. Payments by the Financial 
Assistance Corporation under subsection (d) shall be considered to 
be payments to each such institution for such stock. 
PUBLIC LAW 100-233—JAN. 6, 1988 
101 STAT. 1595 
"(d) REPAYMENT.—The Financial Assistance Corporation shall pay 
to the Farm Credit Administration the full amount of all financial 
assistance provided by the Farm Credit Administration in accord-
ance with this section, from the proceeds from the sale of the first 
issue of obligations by the Financial Assistance Corporation in 
accordance with section 6.26. 
"Subtitle B—Financial Assistance Corporation 
"SEC. 6.20. ESTABLISHMENT OF CORPORATION. 
12 USC 2278b. 
"Not later than 5 days after the date of the enactment of this title, 
the Farm Credit Administration shall charter the Farm Credit 
System Financial Assistance Corporation (hereinafter referred to in 
this Act as the 'Financial Assistance Corporation') which shall be— 
"(1) an institution of the Farm Credit System; and 
"(2) a Federally chartered instrumentality of the United 
States. 
"SEC. 6.21. PURPOSE. 
12 USC 2278b-l. 
"The purpose of the Financial Assistance Corporation shall be to 
carry out a program to provide capital to institutions of the Farm 
Credit System that are experiencing financial difficulty. 
"SEC. 6.22. BOARD OF DIRECTORS. 
12 USC 2278b-2. 
"(a) BOARD OF DIRECTORS.— 
"(1) COMPOSITION.—The Board of Directors of the Financial 
Assistance (Corporation (hereinafter referred to in this Act as 
the 'Board of Directors') shall consist of the Board of Directors 
of the Federal Farm Credit Banks Funding Corporation. 
"(2) CHAIRMAN.—The Board of Directors shall elect annually 
a Chairman from among the members of the Board. 
.. ; 
"(3) COMPENSATION.—The members of the Board of Directors 
shall receive compensation for the time devoted to meetings and 
other activities of the Board and reasonable allowances for 
necessary expenses of travel, lodging, and subsistence incurred 
in attending meetings and other activities of the Board of 
Directors in amounts not exceeding levels set by the Farm 
Credit Administration Board. 
"(b) RULES AND RECORDS.—The Board of Directors shall adopt such 
rules as it may deem appropriate for the transaction of its business 
and shall keep permanent and accurate records and minutes of its 
acts and proceedings. 
"(c) QUORUM REQUIRED.—No business may be conducted at a 
meeting of the Board of Directors unless a quorum of the members 
of the Board is present, and a vote to approve an action requires a 
majority vote of the members voting. 
"(d) CHIEF EXECUTIVE OFFICER.—A chief executive officer of the 
Financial Assistance (Corporation shall be selected by the Board of 
Directors and shall serve at the pleasure of the Board. 
"SEC. 6.23. STOCK. 
12 USC 2278b-3. 
"The Financial Assistance Corporation shall issue stock with a 
par value of $5 to System institutions, as provided for in this 
subtitle, and such stock shall not be transferable. 
101 STAT. 1596 
PUBLIC LAW 100-233—JAN. 6, 1988 
12 use 2278b-4. "SEC. 6.24. CORPORATE POWERS. 
"(a) I N GENERAL.—The Financial Assistance Corporation shall 
have the power to— 
"(1) operate under the direction of its Board of Directors; 
"(2) adopt, alter, and use a corporate seal, which shall be 
judicially noted; 
"(3) provide for such officers, employees, and agents, includ-
ing joint employees with the Funding Corporation, as may be 
necessary, define their duties, and require surety bonds or make 
other provisions against losses occasioned by acts of such 
.-*><r{j;; •>;?.. v: 
persons; 
"(4) adopt a salary scale for officers and employees of the 
Financial Assistance Corporation, in accordance with the direc-
tives of the Board of Directors; 
"(5) prescribe by its Board of Directors bylaws, that are not 
inconsistent with law, and that shall provide for the manner in 
which— 
"(A) its officers, employees, and ^ e n t s are selected; 
"(B) its property is acquired, held, and transferred; 
' '- 
^ -• 
"(C) its general business is conducted; and 
. i f 
"(D) the privileges granted by law are exercised and 
i ; 
enjoyed; 
Contracts. 
"(6) enter into contracts and make advance, progress, or other 
pajonents with respect to such contracts; 
"(7) sue and be sued in its corporate name and complain and 
defend in courts of competent jurisdiction; 
"(8) acquire, hold, lease, mortgage, or dispose of, at public or 
private sale, real and personal property, and otherwise exercise 
all the usual incidents of ownership of property necessary and 
convenient to its business; 
^ j^ 
' '(9) obtain insurance sigainst loss; 
Contracts. 
"(10) modify or consent to the modification of any contract or 
agreement to which it is a party or in which it has an interest 
under this subtitle; 
"(11) borrow from any commercial bank on its own individual 
responsibility and on such terms and conditions as it may 
determine with the approval of the Farm Credit Administra-
tion; 
"(12) deposit its securities and its current funds with any 
member bank of the Federal Reserve System or any insured 
State nonmember bank (as defined in section 3(b) of the Federal 
Deposit Insurance Act (12 U.S.C. 1813(b)) and pay fees therefor 
and receive interest thereon as may be agreed; and 
"(13) exercise such other incidental powers as are necessary to 
carry out its powers, duties, and functions in accordance with its 
charter and this subtitle. 
"(b) POWER TO REMOVE, AND JURISDICTION.—Notwithstanding any 
other provision of law, any civil action, suit, or proceeding to which 
the Financial Assistance (Dorporation is a party shall be deemed to 
arise under the laws of the United States, and the United States 
District Court for the District of Columbia shall have original 
' 
jurisdiction over such. The Financial Assistance Corporation may, 
without bond or security, remove any such action, suit, or proceed-
ing from a State court to the United States District Court for the 
District of C!olumbia. 
PUBLIC LAW 100-233—JAN. 6, 1988 
101 STAT. 1597 
"SEC. 6.25. ACCOUNTS. 
12 USC 2278b-5. 
"(a) FARM CREDIT ASSISTANCE FUND.— 
"(1) ESTABLISHMENT.—The Financial Assistance Corporation 
shall establish an account called the Farm Credit Assistance 
Fund (referred to in this Act as the 'Assistance Fund') which 
shall be available to the Financial Assistance Corporation as a 
revolving fund to carry out this subtitle. The moneys of such 
Assistance Fund shall be invested in direct obligations of the 
United States or obligations guaranteed by the United States or 
an agency thereof. 
"(2) FUNDING.—The Assistance Fund shall be funded through 
the issuance of debt obligations and payments, as provided in 
section 6.26, and payments, as provided in section 6.28. 
"(b) 
FINANCIAL ASSISTANCE CORPORATION TRUST 
FUND.—The 
Financial Assistance Corporation shall establish an account called 
the Financial Assistance Corporation Trust Fund (hereinafter re-
ferred to in this Act as the 'Trust Fund') that shall consist of 
securities of the United States Treasury purchased by the Financial 
Assistance Corporation with the funds received from the purchase of 
stock by System institutions from the Financial Assistance Corpora-
tion under section 6.29. 
"SEC. 6.26. DEBT OBLIGATIONS. 
12 USC 2278b-6. 
"(a) ISSUANCE.—During the period beginning 61 days after the 
date of the enactment of this title and ending September 30, 1992, 
the Financial Assistance Corporation, subject to the approval of the 
Assistance Board, may issue uncoUateralized bonds, notes, deben-
tures, and similar obligations, guaranteed as to the timely payment 
of principal and interest by the Secretary of the Treasury as set 
forth in subsection (d), with semiannual interest coupon payments 
and a maturity period of 15 years— 
"(1) in an aggregate amount not to exceed $2,800,000,000; and 
"(2) beginning January 1, 1989, in an additional amount, not 
to exceed $1,200,000,000, if— 
"(A) debt obligations have been issued by the Corporation 
to the full extent authorized under paragraph (1); 
"(B) the Assistance Board determines that such addi-
tional funds are needed to carry out this title; and 
"(C) at least 90 days before the issuance of any debt 
Reports. 
obligations under this paragraph, the Assistance Board 
submits a report to Congress that sets forth the determina-
tion of the Assistance Board that such additional debt 
obligations should be issued, and that contains a detailed 
evaluation supporting the determination. 
"(b) CONDITIONS.—The debt obligations shall be in such forms and 
denominations, bear such rates of interest, be subject to such condi-
tions, be issued in such manner, and be sold at such prices as may be 
prescribed by the Financial Assistance Corporation. 
"(c) INTEREST PAYMENTS.— 
"(1) 
PAYMENT OF INTEREST DURING FIRST 5-YEAR PERIOD.— 
During each year of the first 5-year period of the 10-year period 
beginning on the date of issuance of each obligation under 
subsection (a), the Financial Assistance Corporation shall pay, 
without recourse to System institutions, other than that de-
scribed in paragraph (5), all of the interest due on such obliga-
tion. 
"(2) PAYMENT OF INTEREST DURING SECOND 5-YEAR PERIOD.— 
101 STAT. 1598 
PUBLIC LAW 100-233—JAN. 6, 1988 
"(A) IN GENERAL.—During each year of the second 5-year 
period of the 10-year period beginning on the date of issu-
ance of each obUgation under subsection (a), the Financial 
Assistance Corporation shall pay all of the interest due on 
such obligation. 
"(B) PAYMENT BY SYSTEM INSTITUTIONS TO FINANCIAL 
ASSISTANCE CORPORATION.—During each year of the second 
5-year period, System institutions shall pay to the Financial 
Assistance Corporation 50 percent of the interest due on the 
obligations, except that System institutions shall pay an 
additional 10 percent of the interest expense for each 1 
percent that the unallocated retained earnings of the 
" ' 
System (as determined under generally accepted accounting 
principles) exceed 5 percent of net assets (total assets less 
allowance for loan losses) based on a year-end financial 
statement for the preceding year. 
• 
"(C) ALLOCATION.—During each year of the second 5-year 
period, each System institution shall pay to the Financial 
Assistance Corporation a proportion of the interest due 
from System institutions under this paragraph equal to— 
"(i) the amount of the performing loan volume of the 
institution Ot>ased on the average loan volume for the 
preceding year); divided by 
"(ii) the total performing loan volume of the System 
for the preceding year. 
"(D) SPECIAL RULE.—For purposes of determining the 
average loan volume of Federal intermediate credit banks, 
loan volume shall consist of loans made by such banks with 
the exception of loans made to production credit associa-
tions. 
"(3) PAYMENTS BY TREASURY.—The Secretary of the Treasury, 
in accordance with section 6.28, shall pay to the Financial 
Assistance Corporation, in a timely manner, the balance of each 
interest payment not made by the System institutions. 
"(4) PAYMENT OF INTEREST AFTER FIRST IO-YEAR PERIOD.— 
During each year of the third 5-year period of the 15-year period 
beginning on the date of the issuance of each obligation under 
subsection (a), the Financial Assistance Corporation shall pay 
all of the interest due on such obligation. During each year of 
such 5-year period. System institutions shall pay the entire 
amount of interest due on the obligation allocated in the same 
manner as under paragraph (2)(C). Such payments shall be 
made to the Financial Assistance Corporation at such times as 
the Financial Assistance Corporation shall determine. 
"(5) REPAYMENT BY SYSTEM INSTITUTIONS.— 
"(A) IN GENERAL.—Subject to the other provisions of this 
paragraph, the institutions of the Farm Credit System 
shall, on a fair and equitable basis, repay to the Secretary 
of the Treasury the total amount of any annual interest 
charges on debt obligations issued under subsection (a) that 
such institutions have not previously paid, and such institu-
tions shall not be required to pay any additional interest 
charges on such payments. 
"(B) TIME OF PAYMENT.—The institutions of the Farm 
Credit System shall begin making interest payments when 
the Farm Credit Administration, in consultation with the 
Secretary of the Treasury, determines that such institu-
i,4,: 
PUBLIC LAW 100-233—JAN. 6, 1988 
101 STAT. 1599 
tions possess the financial viability to make such payments, 
except that such institutions shall not be required to begin 
making such payments until the obligations issued under 
subsection (dXlXC) have been fully repaid. 
"(C) TERMS OF PAYMENTS.— 
"(i) IN GENERAL.—The institutions of the Farm Credit 
System shall make interest payments at such levels, 
and on such dates, as the Farm Credit Administration 
determines appropriate, except that the Farm Credit 
Administration shall not set payment levels or dates 
that would jeopardize the financial viability of any 
such institution, 
"(ii) LIMITATIONS.—The institutions of the Farm 
^
^ 
Credit System shall not be required to make such 
repayments in a manner that— 
"(I) impairs the stock of such institution; or 
"(II) jeopardizes the minimum capital require-
ments of the institution, 
"(iii) UNCOLLATERAUZED OBUGATION.—Obligations to 
make repayments under this paragraph shall not be 
required to be collateralized. 
"(d) REFINANCING AND PAYMENT OF PRINCIPAL.— 
"(1) IN GENERAL.— 
"(A) TIME OF REPAYMENT.—On maturity of an obligation 
issued under subsection (a), the obligation shall be repaid by 
the Financial Assistance Corporation. 
"(B) PAYMENTS BY INSTITUTIONS.—Except as provided in 
subparagraph (C), in order to enable the Financial Assist-
ance Corporation to repay the obligation referred to in 
subparagraph (A), each institution that issued preferred 
stock under section 6.27(a) with respect to such obligation 
(or the successor thereto) shall pay to the Financial Assist-
ance Corporation, before the maturity date of such obliga-
tion, an amount equal to the par value of such stock 
outstanding for such institution. 
"(C) SYSTEMWIDE REPAYMENT.—In order to enable the 
Financial Assistance Corporation to repay the obligations 
referred to in section 410(c) of the Agricultural Credit Act of 
1987, each System institution shall pay to the Financial 
Assistance Corporation a proportion of such principal equal 
to— 
"(i) the average performing loan volume of the bank 
for the preceding 15 years; divided by 
"(ii) the average performing loan volume of all of the 
System banks for the same period. 
"(D) SPECIAL RULE.—For purposes of determining the 
average loan volume of Federal intermediate credit banks, 
loan volume shall consist of loans made by such banks with 
the exception of loans made to production credit associa-
tions. 
"(E) FUNDS FOR PAYMENTS.—Payments under subpara-
graph (B) shall be made by each such institution from the 
funds of the institution or from funds raised by the institu-
tion through the issuance of debt obligations, which may be 
issued without a collateral requirement and without any 
guarantee by the Secretary of the Treasury. 
101 STAT. 1600 
PUBLIC LAW 100-233—JAN. 6, 1988 
"(2) REFINANCED OBUGATIONS.—The refinanced obligations 
issued under paragraph (1) shall be solely the obligations of the 
institutions refinancing such, and sections 4.3 and 4.4 shall not 
apply to such obligations. 
"(3) DEFAULTS.— 
u ..• 
"(A) INTEREST.— 
"(i) PAYMENT BY CORPORATION.—If a System institu-
tion defaults on the payment of interest due under this 
subsection during the first 15 years after an obligation 
., 
, 
is issued under subsection (a), the Financial Assistance 
, ;j, ,., 
Corporation shall pay the amount of the interest due 
by the System institution out of the Trust Fund, and 
f, J, 
shall recover the amount of the interest due from the 
j^, 
defaulting System institution, and such amount shall 
be paid to the Trust Fund. 
"(ii) PAYMENT BY INSURANCE FUND.—If the Financial 
,^ . , 
Assistance Corporation has not recovered the full 
amount of interest due from a defaulting institution by 
^ 
the end of the 12-month period beginning on the date of 
', , ^^ '\ 
default, such uncollected interest shall be paid to the 
Trust Fund from the Insurance Fund established under 
section 5.60, to the full extent of funds available in the 
Insurance Fund as of the date the Financial Assistance 
Corporation notified the Farm Credit System Insurance 
Corporation of amounts due under this section, 
"(iii) PAYMENT BY REMAINING INSTITUTIONS.—To the 
, , ,^. 
extent that the payment from the Insurance Fund is 
'" 
insufficient to reimburse the Trust Fund, the remain-
ing balance shall be added to the amount of interest 
due from remaining System institutions, under this 
* 
subsection, and each remaining System institution, 
subject to the special rule provided in subsection 
(c)(2)(D), shall pay to the Trust Fund a proportion of the 
uncollected interest equal to— 
•"""' 
' 
"(I) the amount of the performing loan volume of 
the institution (based on the average loan volume 
c.'^t 
"M- 
for the preceding year); divided by 
"(II) the total performing loan volume of the 
System. 
"(B) PRINCIPAL.— 
"(i) EVALUATION.—Not later than 90 days before the 
maturity of any obligation issued under subsection (a), 
i't.^."" 
the Farm Credit Administration shall complete an 
evaluation of the general financial condition of each 
if'i' '" ' 
System institution that issued preferred stock under 
section 6.27(a) with respect to such obligation to deter-
mine whether such System institution will be able to 
redeem such stock at par value on the maturity of the 
obligation, and remain a viable institution capable of 
•,,iCK>^M;: 
providing credit to eligible borrowers at equitable and 
competitive interest rates. 
*o. . 
"(ii) AVAILABILITY OF EVALUATION.—A copy of the 
.1*. ». 
evaluation required under clause (i) shall be furnished 
, . 
to the Secretary of the Treasury and the appropriate 
,-, 
committees of Congress. 
/ • < , ' • 
"(iii) REDEMPTION BY INSTITUTION; PURCHASE BY SEC-
RETARY OF THE TREASURY.—If the Farm Credit Adminis-
PUBLIC LAW 100-233—JAN. 6, 1988 
101 STAT. 1601 
tration determines, in consultation with the Secretary 
of the Treasury, on the basis of the evaluation required 
under clause (i), that the redemption of such stock at 
par value would impair the other stock or equities of 
such institution or render such institution incapable of 
meeting its capital adequacy standards, the institution 
shall be prohibited from redeeming the preferred stock 
it issued under section 6.27 with respect to the matur-
ing obligation. If the Farm Credit Administration 
determines, in consultation with the Secretary of the 
Treasury, on the basis of the evaluation required under 
clause (i), that such institution will be able to redeem, 
in a timely manner and at par value, the preferred 
stock it issued under section 6.27 with respect to the 
maturing obligation, and remain a viable and competi-
tive institution, such institution shall have the option 
of redeeming or not redeeming such stock. If such 
institution elects not to redeem such stock, the Finan-
cial Assistance Corporation shall withdraw funds from 
the Trust Fund in an amount equal to the par value of 
the preferred stock issued by such institution under 
section 6.27 so as to enable the Financial Assistance 
Corporation to pay the principal of the maturing 
obligation. Simultsuieously with such withdrawal of 
fun^ from the Trust Fund, the Financial Assistance 
Corporation shall transfer to the Insurance Fund an 
equal smiount, at par value, of preferred stock of such 
institution. To the extent that the Trust Fund is insuffi-
cient to enable the Financial Assistance Corporation to 
pay the full principal of the maturing obligation, the 
Insurance Fund shall be used by the Farm Credit 
System Insurance Corporation to purchase, at par 
value, the preferred stock issued by such institution 
under section 6.27(a) to enable the Financial Assistance 
Corporation to pay the principal of the maturing 
obligation. To the extent that the Insurance Fund is 
insufficient to enable the Financial Assistance Corpora-
tion to pay the full principal of the maturing obliga-
tion, the Secretary of the Treasury shall purchase, at 
par value, the remaining quantity of the preferred 
stock issued by such institution to enable the Financial 
Assistance Corporation to make such full pajmient. For 
. -^,, ..^ 
that purpose, the Secretary of the Treasury may use, as 
'' *
" ' '' 
a public debt transaction, the proceeds from the sale of 
any securities issued under chapter 31 of title 31, 
United States Code. The purposes for which such secu-
rities may be issued under such chapter are extended 
to include such purchases of stock. Any preferred stock 
transferred to, or purchased by, the Farm Credit 
System Insurance Corporation under this clause shall 
be retired by the issuing institution at such times and 
under such terms £md conditions as are agreed to be-
tween the Insurance Corporation and such institution. 
"(C) RECOURSE BY OTHER SYSTEM INSTFTUTIONS.—A default-
ing institution shall be liable to the rem£uning System 
institutions for the amount of £my interest paid by the 
remaining institutions under this paragraph. 
101 STAT. 1602 
PUBLIC LAW 100-233—JAN. 6, 1988 
'.r . 
"(4) PAYMENT BY UNITED STATES.— 
"(A) INABILITY TO PAY.—Notwithstanding any other provi-
sion of this Act, if the Financial Assistance Corporation is 
unable to pay the principal or interest of any obligation 
f
^ 
issued under subsection (a), the Secretary of the Treasury 
•- 
shall pay to the Financial Assistance Corporation the 
amount due which shall be used by the Financial Assist-
ance Corporation to pay the obligation. 
"(B) RECOVERY.— 
"(i) INTEREST PAYMENTS.—In each instance in which 
the Secretary of the Treasury is required to make a 
payment under subparagraph (A) to the Financial 
Assistance Corporation as a result of a default made by 
a System institution on interest due from such System 
institution under subsection (c), the Secretary of the 
Treasury shall recover the amount of the payments the 
Secretary made, with respect to each defaulting institu-
tion, from such defaulting institution. If the Secretary 
has not recovered the full amount due from the default-
ing institution by the end of the 12-month period begin-
ning on the date of payment by the Secretary, the 
uncollected amount shall be paid to the Secretary from 
the Insurance Fund established under section 5.60. 
"(ii) PRINCIPAL PAYMENTS.—In each instance in which 
the Secretary of the Treasury is required under para-
graph (BXBXiii) to purchase preferred stock issued by a 
System institution under section 6.27(a), the Farm 
Credit System Insurance Corporation shall use funds 
deposited in the Insurance Fund to repurchase, at par 
value, from the Secretary of the Treasury such stock 
required to be purchased under paragraph (3)(B)(iii) as 
funds become available for such repurchase. 
"(iii) PRIORITY.—Notwithstanding any other provi-
sion of this Act except for section 5.60, during any year 
in which payments are due to the Secretary of the 
Treasury from the Insurance Fund under clause (i), or 
preferred stock held by the Secretary is due to be 
repurchased by the Insurance Fund under clause (ii), 
the funds in such Fund, and all funds deposited in such 
Fund during such year, shall be used first for the 
purposes specified in clauses (i) and (ii). 
12 use 2278b-7. "SEC. 6.27. PREFERRED STOCK. 
"(a) ISSUANCE.— 
"(1) IN GENERAL.—Each System institution that is certified 
under section 6.4 (a) or O
t
>
) may issue a special class of preferred 
stock only in an amount, and subject to such terms and condi-
tions, as authorized by the Assistance Board. 
"(2) DIVIDENDS.— 
"(A) IN GENERAL.—Except as provided in subparagraph 
(B), dividends shall not be payable on stock issued under 
this section. 
"(B) EXCEPTION.—Stock issued under this section shall be 
issued under such terms and conditions as to enable the 
Secretary of the Treasury, with respect to any of such stock 
SK 
the Secretary purchases under section 6.26(d)(3XB)(iii), and 
the Reserve Account Board, with respect to any of such 
PUBLIC LAW 100-233—JAN. 6, 1988 
101 STAT. 1603 
stock that the Board purchases or otherwise acquires under 
section 6.26(d)(3XB)(iii) or section 6.26(d)(4)(BXii), to establish 
for such stock a stated dividend rate equal to the current 
market yield on outstanding, marketable obligations of the 
United States with maturities of 30 years, plus a premium 
to reflect the cost of capital for institutions in financial 
,,. 
distress. 
"(3) VOTING RIGHTS.—A holder of stock issued under this 
subsection shall have no voting rights with respect to the stock. 
"Qa) PURCHASE.—The Financial Assistance Corporation shall pur-
chase shares of stock issued by certified System institutions under 
subsections (a) and (h) to the extent that the issuance of such stock is 
approved by the Assistance Board. 
"SEC. 6.28. PAYMENTS. 
12 USC 2278b-8. 
"(a) IN GENERAL.—Beginning in fiscal year 1989, the Secretary of 
the Treasury shall reimburse the Financial Assistance Corporation 
for any amounts such Corporation pays in interest charges under 
section 6.26(c) during fiscal year 1988, and thereafter the Secretary 
shall pay the Financial Assistance Corporation any amounts due 
from the Secretary to such Corporation under section 6.26(c). 
"(b) REPAYMENT OF INTEREST PAID BY SECRETARY OF TREASURY.— 
"(1) IN GENERAL.—Any amounts paid into the Assistance 
Fund by the Secretary of the Treasury pursuant to subsection 
(a) exceeding $2,000,000,000 shall be repaid by System institu-
tions in accordance with a schedule to be established by the 
Farm Credit Administration Board. 
"(2) ALLOCATION.—Until such repa3niient is completed, each 
System institution shall pay a proportionate share of the 
amount due under this paragraph to— 
"(A) the amount of the performing loan volume of the 
institution, determined in accordance with subsection 
(c)(lXD) Glased on the average loan volume for the preced-
ing year); divided by 
"(B) the total performing loan volume of the System for 
the preceding year. 
"(c) AUTHORIZATION OF APPROPRIATIONS.—There is authorized to 
be appropriated to the Secretary of the Treasury such sums on an 
annual basis as may be necessary to carry out this subtitle. 
"SEC. 6.29. ONE-TIME STOCK PURCHASE. 
12 USC 2278b-9. 
"(a) AMOUNT OF STOCK PURCHASE.— 
"(1) IN GENERAL.—Except as provided in paragraph (2), for the 
purpose of obtaining funds for the Trust Fund, each System 
institution shall purchase from the Financial Assistance Cor-
poration stock issued in accordance with section 6.23 in an 
amount equal to the amount by which the unallocated retained 
earnings of the institution (after taking into account any funds 
received by the institution under section 6.9(c)) exceeds— 
"(A) in the case of a System bank, 5 percent of assets; or 
"(B) in the case of a production credit association or a 
Federal land bank association, 13 percent of assets. 
"(2) REALLOCATION.—The district board of a district, subject to 
the unanimous consent of the bank and associations in the 
district that would be affected by the reallocation, may reallo-
cate the amount of stock required to be purchased by banks and 
associations in the district under paragraph (1) to equitably 
101 STAT. 1604 
PUBLIC LAW 100-233—JAN. 6, 1988 
reflect the ability of the banks and associations to pay, except 
that— 
"(A) the total amount of stock purchased by banks and 
associations in the district under this paragraph shall equal 
the total amount of stock required to be purchased by the 
banks and associations under paragraph (1); and 
"(B) the board may not impair the stock of an association 
^' 
in carrying out this paragraph; and 
"(C) a district board's authority to reallocate stock pur-
chases under this paragraph shall be limited to reallocation 
J 
among like associations of the amount of stock required to 
' 
be purchased by such associations; reallocation of the 
amount of stock required to be purchased by production 
; jj r5;! ' r;:; 
credit associations among such associations and the district 
Federal intermediate credit bank; and reallocation of the 
; ^ 
amount of stock required to be purchased by Federal land 
' 
bank associations among such associations and the district 
Federal land bank. Other reallocations than those enumer-
l 
ated above shall not be permitted. 
"(b) 
COMPUTATIONS.—For 
purposes 
of 
subsection 
(a), 
the 
unallocated retained earnings and assets of a System institution 
shall be computed in accordance with generally accepted accounting 
principles on the basis of the flnancial statement of the institution 
on December 31,1986. 
"(c) NOTICE.—Within 15 days after the retirement of the obliga-
tions of the Capital Corporation under section 6.9— 
"(1) the Financial Assistance Corporation shall notify each 
System institution of the amount of stock such institution is 
^ 
required to purchase under subsection (a); or 
"(2) in the case of a district in which the district board has 
•; 
reallocated the stock purchase requirement in accordance with 
' 
subsection (a)(2), the district board shall notify each System 
institution in the district of the amount of stock such institution 
is required to purchase under subsection (a). 
"' "(d) INSTITUTION REQUIREMENTS AFTER NOTICE.—Within 15 days 
after a System institution is notified of the amounts due under 
subsection (c), the institution shall purchase from the Financial 
Assistance Corporation the amount of stock required to be pur-
chased by the institution under this section. No further stock pur-
r ,- . . 
chases, obligations, or assessments shall be required beyond that 
provided in section 6.26 and this section. 
"(e) JURISDICTION OVER ACTIONS.—Notwithstanding any other 
provision of law, the United States district court for the District of 
Columbia shall have exclusive jurisdiction over any action brought 
under or arising out of this section. No suit or proceeding shall be 
maintained for the recovery of any amount of stock alleged to have 
been erroneously or illegally purchased, and no suit or proceeding 
shall be maintained to enjoin or otherwise prevent or impede the 
giving of notice or the purchase of stock required under this section, 
unless the amount of stock required to be purchased under this 
section has been purchased and paid for in full, 
12 use 
"SEC. 6.30. EXEMPTION FROM TAXATION. 
State and local 
"(^) AssETS.—The Financial Assistance Corporation, and the cap-
governments, 
ital, reserves, and surplus thereof, and the income derived there-
from, shall be exempt from Federal, State, municipal, and local 
taxation, except taxes on real estate held by the Financial Assist-
PUBLIC LAW 100-233—JAN. 6, 1988 
101 STAT. 1605 
ance Corporation to the same extent, according to its value, as other 
similar property held by other persons is taxed. 
"(b) OBLIGATIONS.—The notes, bonds, debentures, and other 
obligations issued by the Financial Assistance Corporation shall be 
accorded the same tax treatment as System-wide obligations. 
"SEC. 6.31. TERMINATION. 
12 USC 
"(a) FINANCIAL ASSISTANCE CORPORATION.—The Financial Assist-
ance Corporation and the authority provided to such Corporation by 
this subtitle shall terminate on the maturity and full payment of all 
debt obligations issued under section 6.26(a). 
"(b) ACCOUNTS.—Simultaneously with the termination of the 
Financial Assistance Corporation as provided in subsection (a), any 
funds in the accounts established under section 6.25 shall be trans-
ferred to the Insurance Fund established under section 5.60.". 
SEC. 202. REVOLVING FUND. 
Section 4.0 (12 U.S.C. 2151) is amended to read as follows: 
"SEC. 4.0. REVOLVING FUND. 
"(a) REVOLVING FUND.—The revolving fund established by this 
section (in effect immediately before the date of the enactment of 
the Agricultural Credit Act of 1987) shall be available to the Farm 
Credit Administration during the period, and for the purposes pro-
vided for, in sections 6.70t)) and 6.13. 
"Ot)) FARM CREDIT INSURANCE FUND.—On the date the first pre-
mium is due and payable under section 5.56(c), any funds remaining 
in the revolving fund shall be transferred to the Farm Credit 
Insurance Fund in accordance with the terms and conditions estab-
lished by the Farm Credit Administration,". 
SEC. 
2
0
3
. 
UNSAFE 
OR 
UNSOUND 
PRACTICES. 
Paragraph (4) of section 5.35 (12 U.S.C. 2271(4)) is amended to read 
as follows: 
"(4) the term 'unsafe or unsound practice' shall— 
"(A) have the meaning given to it by the Farm Credit 
Administration by regulation, rule, or order; and 
"(B) during the period beginning on the date of the 
enactment of this paragraph and ending December 31,1992, 
mean any noncompliance by a System institution, as deter-
mined by the Farm Credit Administration in consultation 
with the Assistance Board, with any term or condition 
imposed on the institution by the Assistance Board under 
section 6,6.". 
SEC. 204. 
FEDERAL 
FARM 
CREDIT 
BANKS 
FUNDING CORPORATION. 
(a) IN GENERAL.—Section 4.9 (12 U.S.C. 2160) is amended to read 
as follows: 
"SEC. 4
.
9
. 
FEDERAL 
FARM 
CREDIT 
BANKS 
FUNDING CORPORATION. 
"(a) ESTABUSHMENT.—There is hereby established the Federal 
Farm Credit Banks Funding Corporation (hereinafter in this section 
referred to as the '(Corporation'), which shall be an institution of the 
Farm Credit System. 
"Ot)) DUTIES.—The Corporation— 
"(1) shall issue, market, and handle the obligations of the 
banks of the Farm Credit System, and interbank or intersystem 
flow of funds as may from time to time be required; 
101 STAT. 1606 
PUBLIC LAW 100-233—JAN. 6, 1988 
"(2) acting for the banks of the Farm Credit System, subject to 
approval of the Farm Credit Administration, shall determine 
' 
the amount, maturities, rates of interest, terms, and conditions 
^ 
of participation by the several banks in each issue of joint, 
consolidated, or System-wide obligations; and 
"(3) shall exercise such other powers as were provided to the 
:' 
Funding Corporation in accordance with its charter issued 
under section 4.25, in effect immediately before the date of the 
enactment of the Agricultural Credit Act of 1987. 
"(c) OFFICERS AND COMMITTEES.— 
"(1) DESIGNATION.—The board of directors may designate such 
officers and committees for such terms and such purposes as 
may be agreed on by the board. 
*' 
"(2) ISSUANCE OF OBLIGATIONS.—When appropriate to the 
board's functions under this section, a committee of the board of 
directors of the Corporation, or representatives thereof, may act 
on behalf of the board in connection with the issuance of joint, 
consolidated, and System-wide obligations. 
"(d) BOARD OF DIRECTORS.— 
"(1) COMPOSITION.—The board of directors shall be composed 
of nine voting members and one nonvoting member, as follows: 
"(A) Four voting members shall be current or former 
directors of the System banks elected by the shareholders of 
the Corporation. 
_^fy. 
"(B) Three voting members shall be chief executive offi-
cers or presidents of System banks elected by the sharehold-
ers of the Corporation. 
^^ 
"(C) Two voting members shall be appointed by the mem-
bers elected under subparagraphs (A) and (B) after the 
elected members have received recommendations for such 
appointments from, and consulted with, the Secretary of 
i>m^ €'• the Treasury and the Chairman of the Board of Governors 
of the Federal Reserve System. The appointed members 
shall be selected from United States citizens— 
;
*
!
?
> >
i ' 
"(i) who are not borrowers from, shareholders in, or 
employees or agents of any System institution, who are 
^ f
- " 
not affiliated with the Farm Credit Administration, 
and who are not actively engaged with a bank or 
investment organization that is a member of the Cor-
poration's selling group for System-wide securities; and 
"(ii) who are experienced or knowledgeable in cor-
porate and public finance, agricultural economics, and 
financial reporting and disclosure. 
"(D) The president of the Corporation shall serve as a 
nonvoting member of the board. 
*
:
* 
In selecting candidates under subparagraphs (A) and (B), due 
consideration shall be given to choosing individuals knowledge-
able in sigricultural economics, public and corporate finance, 
and financial reporting and disclosure. 
"(2) NONVOTING REPRESENTATIVES.— 
"(A) ASSISTANCE BOARD.—During the period in which the 
» ; v
> 
Assistance Board is in existence, the board of directors of 
the Assistance Board shall designate one of its directors to 
serve as a nonvoting representative to the board of direc-
?/i n, 
tors of the Corporation. 
• • 
"(B) INSURANCE CORPORATION.—After such period, the 
board of directors of the Farm Credit System Insurance 
PUBLIC LAW 100-233—JAN. 6, 1988 
101 STAT. 1607 
Corporation may designate one of its directors to serve as a 
nonvoting representative to the board of directors of the 
Federal Farm Credit Banks Funding Corporation. 
"(C) MEETINGS.—The persons so designated by the Assist-
ance Board and by the Farm Credit System Insurance 
Corporation may attend and participate in all deliberations 
of the board of directors of the Federal Farm Credit Banks 
Funding Corporation. 
"(e) TRANSITIONAL AUTHORITY.—Until a quorum of the board of 
directors of the Corporation is elected or appointed, the finance 
committee established under section 4.5 in effect before the date of 
the enactment of this section, and the fiscal agency established 
under section 4.9 in effect before such date of enactment, shall 
- 
^ 
continue to operate £is if this section had not been enacted.". 
O
t
)
) CONFORMING REPEALER.—Section 4.5 
(12 
U.S.C. 
2156) 
is 
repealed. 
;; 
J 
SEC. 205. REGULATORY ACCOUNTING PROCEDURES. 
(a) DATES FOR PURCHASE AND SALE OF OBLIGATIONS.—Section 4.8(b) 
(12 U.S.C. 2159(b)) is amended by striking out "1988" each place it 
appears and inserting in lieu thereof "1992". 
(b) ANNUAL REPORTS.—Section 5.19(b) (12 U.S.C. 22530))) is 12 use 2254. 
amended— 
(1) by inserting "(1)" after the subsection designation; and 
(2) by adding at the end thereof the following new paragraphs: 
"(2) In accordance with the regulations of the Farm Credit 
Administration, for the period ending December 31, 1992, System 
institutions are authorized to use the authorities contained in this 
section except as otherwise provided in section 6.6. 
"(3) Any preferred stock issued under section 6.27 shall be subordi-
nated to, and impaired before, other stock or equities of the institu-
tion.". 
SEC. 206. FINANCIAL REPORT. 
12 USC 2278b 
During the period beginning September 30, 2001, and ending 
December 31, 2001, the Farm Credit Administration shall review 
and evaluate the financial condition of the Farm Credit System and 
report to the Secretary of the Treasury and the appropriate commit-
tees of Congress on— 
(1) the general financial condition of each System institution; 
(2) the total outstanding principal of debt obligations issued 
under section 6.26 of the Farm Credit Act of 1971 (as added by 
section 201 of this Act); and 
(3) the ability of each System institution to retire, at par 
value, preferred stock issued by the institution in accordance 
with section 6.27 of the Farm Credit Act of 1971 (as added by 
section 201 of this Act). 
SEC. 207. CONFORMING AMENDMENTS. 
(a) REPEAL.—The following provisions are hereby repealed: 
(1) Section 4.1 (12 U.S.C. 2152). 
(2) Section 5.17(aX8) (12 U.S.C. 2252(a)(8)). 
(3) Part Dl of title IV (12 U.S.C. 2216 et seq.). 
Ot)) EFFECTIVE DATE.—The repeals made by subsection (a) shall 12 USC 2152 
take effect 15 days after the date of the enactment of this Act. "°t^ 
101 STAT. 1608 
PUBLIC LAW 100-233—JAN. 6, 1988 
(c) DEFINITION OF BANK.—Section 4.4 (12 U.S.C. 2155) is amended 
by striking out subsection (c) and by redesignating subsection (d) as 
subsection (c). 
(d) REDESIGNATION.—Section 5.35(3) (12 U.S.C. 2271(3)) is amended 
by striking out "Capital Corporation" and inserting in lieu thereof 
"Financial Assistance Corporation.". 
TITLE III—CAPITALIZATION OF SYSTEM 
INSTITUTIONS 
12 u s e 2154 
note. 
Regulations. 
SEC. 301. CAPITALIZATION OF SYSTEM INSTITUTIONS. 
- ' 
(a) MINIMUM CAPITAL ADEQUACY STANDARDS.— 
;^ 
(1) IN GENERAL.— 
(A) ESTABLISHMENT.—Within 120 days after the date of 
the enactment of this Act, the Farm Credit Administration 
shall issue regulations under section 4.3(a) of the Farm 
: 
% 
Credit Act of 1971 (12 U.S.C. 2154(c)) that establish mini-
mum permanent capital adequacy standards for Farm 
Credit System institutions. 
(B) BASIS FOR ESTABLISHMENT.—The standards established 
under subparagraph (A) shall be based on the financial 
statements of the institution prepared in accordance with 
generally accepted accounting principles. 
(C) RATIO OF CAPITAL TO ASSETS.—The standards estab-
lished under subparagraph (A) shall specify fixed percent-
ages representing the ratio of permanent capital of the 
institution to the assets of the institution, taking into 
jt 
consideration relative risk factors as determined by the 
:, 
Farm Credit Administration. 
(D) PHASE-IN PERIOD.—The standards established under 
subparagraph (A) shall be phased in during the 5-year 
period beginning on the date of the enactment of this Act. 
(2) EMERGENCY POWER NOT AVAILABLE.—The Farm Credit 
Administration shall not invoke the emergency provisions of 
section 5.17(b)(2) of the Farm Credit Act of 1971 (12 U.S.C. 
2251(b)(2)) with respect to the issuance of the proposed regula-
tions required under paragraph (1)(A). 
(3) PROHIBITIONS DURING TRANSITION PERIOD.—During the 5-
year period specified in paragraph (1)(C), the Farm Credit 
Administration 
shall 
not 
initiate 
any 
receivership, 
conservatorship, liquidation, or enforcement action against any 
System institution certified to issue preferred stock under sec-
tion 6.27 of the Farm Credit Act of 1971 (as added by section 201 
of this Act), solely because of the failure of such institution to 
meet minimum permanent capital adequacy standards unless 
such action is recommended or concurred in by the Farm Credit 
System Assistance Board established under section 6.0 of such 
Act (as added by section 201 of this Act). 
(4) PERMANENT CAPITAL.—For purposes of this subsection, the 
term "permanent capital" heis the same meaning given that 
term in section 4.3A(a)(l) of the Farm Credit Act of 1971. 
(b) CAPITAUZATION BYLAWS.—Title IV (12 U.S.C. 2151 et seq.) is 
amended by inserting after section 4.3 the following new section: 
PUBLIC LAW 100-233—JAN. 6, 1988 
101 STAT. 1609 
"SEC. 4.3A. CAPITALIZATION OF SYSTEM INSTITUTIONS. 
12 USC 2154a. 
"(a) DEFINITIONS.—As used in this section: 
"(1) PERMANENT CAPITAL.—The term 'permanent capital' 
means 
current 
year 
retained 
earnings, 
allocated 
and 
unallocated earnings, all surplus (less allowances for losses), 
and stock issued by a System institution, except stock that— 
"(A) may be retired by the holder thereof on repayment 
of the holder's loan, or otherwise at the option or request of 
the holder; or 
"(B) is protected under section 4.9B or is otherwise not at 
risk. 
"(2) STOCK.—The term 'stock' means voting and nonvoting 
stock (including preferred stock), equivalent contributions to a 
guaranty fund, participation certificates, allocated equities, and 
other forms and types of equities. 
"(b) ADOPTION OF BYLAWS.—Subject to approval by shareholders 
under subsection (cX2), each bank and association shall adopt 
bylaws, developed by its board of directors, that provide for the 
capitalization of the institution in accordance with subsection (cXl)-
"(c) REQUIREMENTS OF BYLAWS.— 
"(1) IN GENERAL.—Notwithstanding any other provision of 
this Act, the bylaws adopted under subsection (b)— 
"(A) shall provide for such clgisses, par value, and 
amounts of the stock of the institution, the manner in 
which such stock shall be issued, transferred, and retired, 
and the payment of dividends and patronage refunds, as 
determined appropriate by the Board of Directors, subject 
to this section; 
"(B) may provide for the charging of loan origination fees 
as determined appropriate by the Board of Directors; 
"(C) shall enable the institution to meet the capital ade-
quacy standards established under the regulations issued 
under section 4.3(a); 
"(D) shall provide for the issuance of voting stock, which 
may only be held by— 
"(i) borrowers who are farmers, ranchers, or produc-
ers, or harvesters of aquatic products, and cooperative 
associations eligible to borrow from System institutions 
under this Act; 
"(ii) in the case of a Central Bank for Cooperatives, 
other banks for cooperatives; and 
"(iii) in the case of banks other than banks for co-
operatives. System associations; 
"(E) shall require that— 
"(i) as a condition of borrowing from or through the 
institution, any borrower who is entitled to hold voting 
stock or participation certificates shall, at the time a 
loan is made, acquire voting stock or participation 
certificates in an amount not less than $1,00() or 2 
percent of the amount of the loan, whichever is less; 
and 
"(ii) within 2 years after the loan of a borrower is 
repaid in full, any voting stock held by the borrower be 
converted to nonvoting stock; 
101 STAT. 1610 
PUBLIC LAW 100-233—JAN. 6, 1988 
"(F) may provide that persons who are not borrowers 
from the institution may hold nonvoting stock of the 
institution; 
"(G) shall require that any holder of stock issued before 
the adoption of bylaws under this section exchange a por-
tion of such stock for new voting stock; 
"(H) do not need to provide for maximum or minimum 
standards of borrower stock ownership based on a percent-
age of the loan of the borrower; 
3;5 
"(I) shall permit the retirement of stock at the discretion 
of the institution if the institution meets the capital ade-
quacy standards established under standards issued under 
f 
section 4.3(a); and 
"(J) shall permit stock to be transferable. 
"(2) EFFECTIVE DATE,—The bylaws adopted by the board of 
directors of a System institution under subsection (b) shall take 
effect only on approval of a majority of the stockholders of such 
institution present and voting, or voting by written proxy, at a 
duly authorized stockholders' meeting. 
"(d) REDUCTION OF CAPITAL.— 
"(1) GENERAL RULE.—Except as provided in paragraph (2) and 
in section 4.9A, the board of directors of a System institution 
may not reduce the permanent capital of the institution 
through the payment of patronage refunds or dividends, or the 
retirement of stock or allocated equities if, after or due to such 
action, the permanent capital of the institution would there-
after fail to meet the minimum capital adequacy standards 
established under section 4.3(a). 
Taxes. 
'' 
"(2) EXCEPTIONS.—Paragraph (1) shall not apply to the pay-
ment of noncash patronage refunds by any institution exempt 
from Federal income tax if the entire refund paid qualifies as 
permanent capital. Notwithstanding paragraph (1), any System 
institution subject to Federal income tax may pay patronage 
refunds partially in cash as long as the cash portion of the 
refund is the minimum amount required to qualify the refund 
as a deductible patroneige distribution for Federal income tax 
purposes and the remaining portion of the refund paid qualifies 
as permanent capital. 
"(e) CoMPUANCE.—The Farm Credit Administration may issue a 
directive that requires compliance with subsection (d), to the board 
of directors of any System institution that fails to comply therewith. 
"(f) CONSTRUCTION.—This section shall not be construed to affect 
the provisions of this Act that confer on System institutions a lien 
on borrower stock or other equities and the privilege to retire or 
cancel such stock or other equities for application against the 
indebtedness on a defaulted or restructured loan. 
"(g) CoNTROLUNG AUTHORITY.—To the extent that any provision 
of this section is inconsistent with any other provision of this Act 
(other than section 4.9A), the provision of this section shall control.". 
SEC. 
302. 
INSURANCE 
OF 
OBLIGATIONS 
OF 
FARM 
CREDIT 
SYSTEM. 
Title V (12 U.S.C. 2221 et seq.) is amended by adding at the end 
thereof the following new part: 
PUBLIC LAW 100-233—JAN. 6, 1988 
101 STAT. 1611 
"PART E—FARM CREDIT SYSTEM INSURANCE 
CORPORATION 
"SEC. 5.51. DEFINITIONS. 
12 USC 2277a. 
"As used in this part: 
"(1) BOARD OF DIRECTORS.—The term 'Board of Directors' 
means the Board of Directors of the Corporation. 
"(2) CORPORATION.—The term 'Corporation' means the Farm 
Credit System Insurance Corporation established in section 
5.52. 
"(3) INSURED OBLIGATION.—The term 'insured obligation' 
means any note, bond, debenture, or other obligation issued 
under subsection (c) or (d) of section 4.2— 
"(A) on or before the date of the enactment of this part, 
on behalf of any System bank; and 
"(B) after such date, on behalf of any insured System 
bank. 
"(4) INSURED SYSTEM BANK.—The term 'insured System bank* 
means any System bank whose participation in notes, bonds, 
debentures, and other obligations issued under subsection (c) or 
(d) of section 4.2 is insured under this part. 
"(5) RECEIVER.—The term 'receiver' means a receiver or con-
servator appointed by the Farm Credit Administration to liq-
uidate a System institution. 
"(6) STATE.—The term 'State' means any of the 50 States, the 
District of Columbia, any Territory of the United States, Puerto 
Rico, Guam, American Samoa, the Trust Territory of the Pacific 
Islands, or the Virgin Islands. 
"SEC. 5.52. ESTABLISHMENT OF FARM CREDIT SYSTEM INSURANCE 12 USC 2277a-l. 
CORPORATION. 
"There is hereby established the Farm Credit System Insurance 
Corporation which shall insure, in accordance with this part, the 
timely payment of principal and interest on notes, bonds, deben-
tures, and other obligations issued under subsection (c) or (d) of 
section 4.2 on behalf of one or more System banks all of which are 
entitled to the benefits of insurance under this part. 
"SEC. 5.53. BOARD OF DIRECTORS. 
12 USC 2277a-2. 
"(a) ESTABLISHMENT.—The Corporation shall be managed by a 
Board of Directors that shall consist of the members of the Farm 
Credit Administration Board. 
- -' - s; 
"(b) CHAIRMAN.—The Board of Directors shall be chaired by any 
Board member other than the Chairman of the Farm Credit 
Administration Board. 
"SEC. 5.54. COMMENCEMENT OF INSURANCE. 
12 USC 2277a-3. 
"Effective beginning on January 1, 1989, or 12 months after the 
date of the enactment of this part, whichever is later, each System 
bank shall be an insured System bank and shall be subject to this 
part. Each System bank that is authorized to commence or resume 
operations under a title of this Act shall be an insured System bank 
from the time of such authorization. A bank resulting from the 
merger or consolidation of insured System banks shall be an insured 
System bank. 
101 STAT. 1612 
PUBLIC LAW 100-233—JAN. 6, 1988 
12 u s e 2277a-4. 
"SEC. 5.55. PREMIUMS. 
12 u s e 2277a-5. 
"(a) AMOUNT IN FUND NOT EXCEEDING SECURE BASE AMOUNT.— 
Until the aggregate of amounts in the Farm Credit Insurance Fund 
exceeds the secure base amount, the annual premium due from any 
insured System bank for any calendar year shall be equal to the sum 
of— 
"(1) the annual average principal outstanding for such year 
on loans made by the bank that are in accrual status, multiplied 
by 0.0015; and 
"(2) the annual average principal outstanding for such year 
on loans made by the bank that are in nonaccrual status, 
multiplied by 0.0025. 
"Ot)) AMOUNT IN FUND EXCEEDING SECURE BASE AMOUNT.—At any 
time the aggregate of amounts in the Insurance Fund exceeds the 
secure base amount, the Corporation shall reduce the annual pre-
mium due from each insured System bank for the following cal-
endar year by a percentage determined by the Corporation so that 
the aggregate of the premiums payable by all System banks is 
sufficient to ensure that the aggregate of amounts in the Insurance 
Fund after such premiums are paid is not less than the secure base 
amount at such time. 
"(c) SECURE BASE AMOUNT.—For purposes of this part, the term 
'secure base amount' means, with respect to any point in time, 2 
percent of the aggregate outstanding insured obligations of all 
insured System banks at such time, or such other percentage of the 
aggregate amount as the Corporation in its sole discretion deter-
mines is actuarially sound to maintain in the Insurance Fund 
taking into account the risk of insuring outstanding insured 
obligations. 
"(d) DETERMINATION OF PRINCIPAL OUTSTANDING.—For the pur-
pose of subsection (a), the principal outstanding on all loans made by 
a Federal intermediate credit bank shall be determined based on all 
loans made— 
"(1) by the production credit associations in the district in 
which such bank is located; 
"(2) by any bank, company, institution, corporation, union, or 
^
, 
association described in section 2.3(aX2), that is able to make 
' 
such loans because such entity is receiving, or has received, 
funds provided through the Federal intermediate credit bank; 
and 
"(3) by such Federal intermediate credit bank (other than 
loans made to any party described in paragraph (1) or (2)). 
"SEC. 5.56. CERTIFICATION OF PREMIUMS. 
"(a) FiuNG CERTIFIED STATEMENT.—Annually, on a date to be 
determined in the sole discretion of the Board of Directors, each 
insured System bank that became insured before the beginning of 
such year shall file with the Corporation a certified statement 
showing the annual average principal outstanding on loans made by 
the bank that are in accrual status, the annual average principal 
outstanding on loans that are in nonaccrual status, and the amount 
of the premium due the Corporation from the bank for such year. 
"(b) CONTENTS AND FORM OF STATEMENT.—The certified statement 
required to be filed with the Corporation under subsection (a) shall 
be in such form and set forth such supporting information £is the 
Board of Directors shall prescribe, and shall be certified by the 
president of the bank or any other officer designated by its board of 
PUBLIC LAW 100-233—JAN. 6, 1988 
101 STAT. 1613 
directors that to the best of the person's knowledge and belief the 
statement is true, correct, complete, and has been prepared in 
accordance with this part and all regulations issued thereunder. 
"(c) INITIAL PREMIUM PAYMENT.—Each System bank shall pay to 
the Corporation the amount of the initial premium it is required to 
certify under subsection (a) as soon as practicable after January 1, 
1990, based on the application of section 5.55 to the accruing loan 
volume of the bank for calendar year 1989. 
"(d) SUBSEQUENT PREMIUM PAYMENTS.—The premium pa3mients 
required from insured System banks under subsection (a) shall be 
made not less frequently than annually in such manner and at such 
time or times as the Board of Directors shall prescribe, except that 
the amount of the premium shall be established not later than 60 
days after filing the certified statement setting forth the amount of 
the premium. 
"(e) REGULATIONS.—The Board of Directors shall prescribe all 
rules and regulations necessary for the enforcement of this section. 
The Board of Directors may limit the retroactive effect, if any, of 
any of its rules or regulations. 
"SEC. 5.57. OVERPAYMENT 
AND UNDERPAYMENT 
OF 
PREMIUMS; 12 USC 2277a-6. 
REMEDIES. 
"(a) OVERPAYMENTS.—The Corporation may refund to any insured 
System bank any premium payment made by the bank exceeding 
the amount due the Corporation. 
"(h) UNDERPAYMENTS.— 
"(1) RECOVERY.—The Corporation, in a suit brought at law or 
in equity in any court of competent jurisdiction, may recover 
from any insured System bank the amount of any unpaid 
premium lawfully payable by the bank to the Corporation, 
whether or not the bank has made any report of condition 
required under section 5.55 or filed any certified statement 
under section 5.56, and whether or not suit has been brought to 
compel the bank to make any such report or file any such 
statement. 
"(2) LIMITATION.—Any action or proceeding for the recovery 
of any premium due the Corporation under paragraph (1), or for 
the recovery of any amount paid to the Corporation exceeding 
the amount due the Corporation, shall be brought within 5 
years after the right accrued for which the claim is made. If an 
insured System bank has made or filed with the Corporation a 
false or fraudulent certified statement with the intent to evade, 
in whole or in part, the pajonent of a premium, the claim shall 
not be deemed to have accrued until the Corporation discovers 
that the certified statement is false or fraudulent. 
"(c) FAILURE TO FILE STATEMENT OR PAY PREMIUM.— 
"(1) FORFEITURE OF RIGHTS.—If any insured System bank fails 
to file any certified statement required to be filed by such bank 
under section 5.56 or fails to pay any premium required to be 
paid by such bank under any provision of this part, and if the 
bank does not correct such failure within 30 days after the 
Corporation gives written notice to an officer of the bank, citing 
this subsection and stating that the bank has failed to so file or 
pay £is required by law, all the rights, privileges, and franchises 
of the bank granted to it under this Act shall be thereby 
forfeited. 
101 STAT. 1614 
PUBLIC LAW 100-233—JAN. 6, 1988 
"(2) ENFORCEMENT.—The Corporation may bring an action to 
enforce this subsection against any such bank in any court of 
competent jurisdiction for the judicial district in which the bank 
is located. 
"(3) LIABILITY OF DIRECTORS.—Every director who participated 
in or assented to a failure (described in paragraph (1)) shall be 
held personally liable for all consequential damages. 
"(d) EFFECT ON OTHER REMEDIES.—The remedies provided in 
subsections (b) and (c) shall not be construed as limiting any other 
remedies against any insured System bank, but shall be in addition 
thereto. 
12 u s e 2277a-7. 
"SEC. 5.58. GENERAL CORPORATE POWERS. 
"On the date of the enactment of this part, the Corporation shall 
become a body corporate and as such shall have the following 
powers: 
"(1) SEAL.—The Corporation may adopt and use a corporate 
seal. 
"(2) SUCCESSION.—The Corporation may have succession until 
dissolved by an Act of Congress. 
"(3) CONTRACTS.—The Corporation may make contracts. 
"(4) LEGAL ACTIONS.— 
"(A) I N GENERAL.—The Corporation may sue and be sued, 
i^>' * 
complain and defend, in any court of law or equity, State or 
Federal. 
"(B) JURISDICTION.—All suits of a civil nature at common 
law or in equity to which the Corporation shall be a party 
shall be deemed to arise under the laws of the United 
States, and the United States district courts shall have 
original jurisdiction thereof, without regard to the amount 
in controversy, and the Corporation, without bond or secu-
rity, may remove any such action, suit, or proceeding from 
a State court to the United States district court for the 
district or division embracing the place where the same is 
pending by following any procedure for removal then in 
' 
effect. 
"(C) ATTACHMENT AND EXECUTION.—No attachment or 
execution may be issued against the Corporation or its 
property before final judgment in any suit, action, or 
proceeding in any State, county, municipal, or United 
States court. 
"(D) AGENT FOR SERVICE OF PROCESS.—The Board of Direc-
tors shall designate an agent on whom service of process 
may be made in any State or jurisdiction in which any 
insured System bank is located. 
"(5) OFFICERS AND EMPLOYEES.— 
"(A) IN GENERAL.—The Corporation may appoint by its 
Board of Directors such officers and employees as are not 
otherwise provided for in this part, to define their duties, 
fix their compensation, and require bonds of them and fix 
the penalty thereof, and to dismiss at pleasure such officers 
or employees. 
"(B) EMPLOYEES OF THE UNITED STATES.—Nothing in this 
or any other Act shall be construed to prevent the appoint-
ment and compensation, as an officer or employee of the 
Corporation, of any officer or employee of the United States 
PUBLIC LAW 100-233—JAN. 6, 1988 
101 STAT. 1615 
in any board, commission, independent establishment, or 
executive department thereof. 
"(6) BYLAWS.—The Corporation may prescribe, by its Board of 
Directors, bylaws not inconsistent with law, regulating the 
manner in which its general business may be conducted, and 
the privileges granted to it by law may be exercised and en-
joyed. 
"(7) INCIDENTAL POWERS.—The Corporation may exercise by 
its Board of Directors, or duly authorized officers or agents, all 
powers specifically granted by the provisions of this part, and 
such incidental powers as shall be necessary to carry out the 
powers so granted. 
"(8) INFORMATION.—The Corporation may, when necessary. Reports. 
make examinations of, and require information and reports 
from, System institutions, as provided in this part. 
"(9) RECEIVER.—The Corporation may act as receiver. 
"(10) RULES AND REGULATIONS.—The Corporation may pre-
scribe by its Board of Directors such rules and regulations as it 
considers necessary to carry out this part (except to the extent 
that authority to issue such rules and regulations has been 
expressly and exclusively granted to any other regulatory 
agency). 
'SEC. 5.59. CONDUCT OF CORPORATE 
INSURED SYSTEM BANKS. 
AFFAIRS; 
EXAMINATION OF 12 USC 2277a-
"(a) CONDUCT OF CORPORATE AFFAIRS.— 
"(1) FAIR ADMINISTRATION.—The Board of Directors shall 
administer the affairs of the Corporation fairly and impartially 
and without discrimination. 
"(2) OBLIGATIONS AND EXPENSES.—The Board of Directors 
shall determine and prescribe the manner in which the obliga-
tions of the Corporation may be incurred and the expenses of 
the Corporation may be allowed and paid. 
"(3) USE OF MAILS.—The Corporation may use the United 
States mails in the same manner and under the same conditions 
as the executive departments of the Federal Government. 
"(4) USE OF INFORMATION.—The Corporation, with the consent 
of any board, commission, independent establishment, or execu-
tive department of the Federal Government, including any field 
service thereof, may avail itself of the use of information, 
services, and facilities thereof in carrying out this part. 
"(b) EXAMINATION OF INSURED SYSTEM BANKS.— 
"(1) APPOINTMENT OF EXAMINERS.—The Board of Directors 
may appoint examiners who may, on behalf of the Corporation, 
examine any insured System bank, any production credit 
association, and any System institution in receivership, if in the 
judgment of the Board of Directors an examination of the 
institution is necessary. 
"(2) POWERS AND REPORT.—Each examiner may make a thor-
ough examination of all affairs of the institution, and shall 
make a full and detailed report of the condition of the institu-
tion to the Corporation. 
"(3) APPOINTMENT OF CLAIM AGENTS.—The Board of Directors, 
in like manner, shall appoint claim agents who may investigate 
and examine all claims for insured obligations. 
"(c) OATH, AFFIRMATIONS, AND TESTIMONY.—In connection with 
examinations under this section, the Corporation or its designated 
101 STAT. 1616 
PUBLIC LAW 100-233—JAN. 6, 1988 
representatives may administer oaths and affirmations, and may 
examine, take, and preserve testimony under oath, as to any matter 
with respect to the affairs of any such institution. 
"(d) 
COOPERATION WITH F C A EXAMINERS.—The examiners 
ap-
pointed by the Board of Directors shall cooperate to the maximum 
extent possible with examiners of the Farm Credit Administration 
to minimize duplication of effort and minimize costs. 
. ,, 
12 u s e 2277a-9. 
"SEC. 5.60. INSURANCE FUND. 
"(a) ESTABLISHMENT.—There is hereby established a Farm Credit 
Insurance Fund (hereinafter referred to in this section as the 'Insur-
ance Fund') for insuring the timely payment of principal and in-
; !' 
terest on insured obligations. The assets in the Fund shall be held by 
the Corporation for the uses and purposes of the Corporation. 
"(b) AMOUNTS IN FUND.— 
Effective date. 
"(1) REVOLVING FUND.—All amounts in the revolving fund 
established by section 4.0 (in effect immediately before the date 
of the enactment of this part) shall be transferred into the Farm 
Credit Insurance Fund on January 1, 1989, or 12 months after 
the date of the enactment of this part, whichever is later, except 
that the obligations to, and rights of, any person in such revolv-
ing fund arising out of any event or transaction before the date 
o -V, 
, r. 
of the enactment of this part shall remain unimpaired. 
"' " 
''• 
"(2) DEPOSIT OF PREMIUMS.—Beginning 5 years after the date 
of the enactment of this part, the Corporation shall deposit in 
the Insurance Fund all premium payments received by the 
Corporation under this part. 
"(c) USES OF FUND.— 
"(1) MANDATORY USE.—Beginning 5 years after the date of the 
enactment of this part, the Corporation shall expend amounts 
in the Insurance Fund to the extent necessary to insure the 
1 c timely payment of interest and principal on insured obligations. 
"(2) OTHER MANDATORY USES.—Beginning 5 years after the 
'' 
date of enactment of this part, the Corporation shall use 
: 
amounts in the Insurance Fund to— 
"(A) satisfy System institution defaults through the pur-
ic 
chase of preferred stock or other payments as provided for 
in section 6.26(dX3); and 
i 
"(B) ensure the retirement of borrower stock at par value 
,ui f r 
and participation certificates or other similar equities at 
face value as provided for under section 4.9A(cX2). 
"(3) PERMISSIVE USES.—The Corporation may expend amounts 
in the Insurance Fund to carry out section 5.61 and to cover the 
operating costs of the (Corporation. 
"(4) CORPORATE PAYMENT OR REFUNDS.—The Corporation shall 
make all payments and refunds required to be made by the 
Corporation under this part from amounts in the Insurance 
Fund. 
12 u s e 
"SEC. 5.61. POWERS OF CORPORATION WITH RESPECT TO TROUBLED 
2277a-10. 
INSURED SYSTEM BANKS. 
"(a) AUTHORITY TO PROVIDE ASSISTANCE.— 
"(1) IN GENERAL.—The Corporation, in its sole discretion and 
on such terms and conditions as the Board of Directors may 
prescribe, may make loans to, purchase the assets or securities 
of, assume the liabilities of, or make contributions to, any 
i..6-»s. insured System bank if such action is taken— 
PUBLIC LAW 100-233—JAN. 6, 1988 
101 STAT. 1617 
"(A) to prevent the placing of the bank in receivership; 
"(B) to restore the bank to normal operation; or 
"(C) to reduce the risk to the Corporation posed by the 
bank when severe financial conditions threaten the stabil-
ity of a significant number of insured System banks or of 
insured System banks possessing significant 
financial 
resources. 
"(2) ENUMERATED POWERS.— 
"(A) 
FACIUTATION OF MERGERS OR CONSOUDATION.—To 
facilitate a merger or consolidation of a qualifying insured 
System bank, the sale of assets of such insured System bank 
to another insured System bank, the assumption of such 
insured System bank's liabilities by such other insured 
System bank, or the acquisition of the stock of such insured 
System bank by such other insured System bank, the Cor-
poration, in its sole discretion and on such terms and 
conditions as the Board of Directors may prescribe, may— 
"(i) purchase any such assets or assume any such 
liabilities; 
"(ii) make loans or contributions to, or purchase debt 
securities of, such other insured System bank; 
"(iii) guarantee such other insured System bank 
•;-n'!:0 
against loss by reason of such other insured System 
bank's merging or consolidating with, or assuming the 
liabilities and purchasing the assets of, such insured 
System bank; or 
"(iv) take any combination of the actions referred to 
in the preceding clauses. 
"(B) QUAUFYING INSURED SYSTEM BANK.—For purpOSeS of 
subparagraph (A), the term 'qualifying insured System 
bank' means any insured System bank that— 
"(i) is in receivership; 
"(ii) is, in the judgment of the Board of Directors, in 
danger of being placed in receivership; or 
"(iii) is, in the sole discretion of the Corporation, an 
insured System bank that, when severe financial condi-
tions exist that threaten the stability of a significant 
number of insured System banks or of insured System 
banks possessing significant financial resources, re-
P"'••••'•' 
' 
quires assistance under subparagraph (A) to lessen the 
risk to the Corporation posed by such insured System 
bank under such threat of instability. 
' 
"(3) LIMITATION.— 
"(A) COST OF LIQUIDATION.—Assistance shall not be pro-
i^'~ 
vided to an insured System bank under this subsection if 
*'^ .' 
the amount of such assistance exceeds an amount deter-
mined by the Corporation to be the cost of liquidating the 
bank (including paying the insured obligations issued on 
behalf of the bank). This subparagraph shall not apply to 
v :: 
the provision of assistance to a bank if the Corporation 
determines that the continued operation of the bank is 
essential to provide adequate agricultural credit services in 
the area of operations of the bank. 
"(B) PURCHASE OF STOCK.—The Corporation may not use 
.; 
its authority under this subsection to purchase any stock of 
an insured System bank. The preceding sentence shall not 
be construed to limit the ability of the Corporation to enter 
'i 
101 STAT. 1618 
PUBLIC LAW 100-233—JAN. 6, 1988 
Claims. 
12 use 
2277a-ll. 
12 use 
2277a-12. 
State and local 
governments. 
•i^ry^i 
into and enforce covenants and agreements that it deter-
mines to be necessary to protect the financial interests of 
;; 
the Corporation. 
; 
"(4) SUBORDINATION.—Any assistance provided under this 
subsection may be in subordination to the rights of owners of 
obligations and other creditors. 
"(5) REPORTS.—The Corporation, in its annual report to Con-
gress, shall report the total amount saved, or it estimates to be 
saved, by the Corporation exercising the authority provided to 
the Corporation in this subsection. 
"(b) AUTHORITY TO PLEDGE OR SELL ASSETS.—The Corporation, in 
its discretion, may make loans on the security of, or may purchase, 
and liquidate or sell, any part of the assets of, any insured System 
bank that is placed in receivership because of the inability of the 
bank to pay principal or interest on any of its notes, bonds, deben-
tures, or other obligations in a timely manner. 
"(c) SUBROGATION.— 
"(1) IN GENERAL.—On the payment to an owner of an insured 
obligation issued on behalf of an insured System bank in re-
ceivership, the Corporation shall be subrogated to all rights of 
the owner against the bank to the extent of the payment, 
"(2) RECEIPT OF DIVIDENDS.—Subrogation under paragraph (1) 
shall include the right on the part of the Corporation to receive 
the same dividends from the proceeds of the assets of the bank 
as would have been payable to the owner on a claim for the 
insured obligation. 
"(d) RIGHT TO ASSETS.—Any agreement that shall diminish or 
defeat the right, title, or interest of the Corporation in any asset 
acquired by such Corporation under this section, either as security 
for a loan or by purchase, shall not be valid against the Corporation 
unless the agreement— 
"(1) is in writing; 
"(2) is executed by the bank and the person or persons 
claiming an adverse interest thereunder, including the obligor, 
contemporaneously with the acquisition of the asset by the 
bank; 
"(3) has been approved by the board of directors of the bank 
or its loan committee, which approval shall be reflected in the 
minutes of the board or committee; and 
"(4) has been, continuously, from the time of its execution, an 
official record of the bank. 
"(e) INSURED SYSTEM BANK.—As used in this section, the terms 
'insured System bank' and 'bank' include each production credit 
association. 
"(f) EFFECTIVE DATE.—The Corporation shall not exercise any 
authority under this section during the 5-year period beginning on 
the date of the enactment of this part. 
"SEC. 5.62. INVESTMENT OF FUNDS. 
"Money of the Corporation not otherwise employed shall be in-
vested in obligations of the United States or in obligations guaran-
teed as to principal and interest by the United States. 
"SEC. 5.63. EXEMPTION FROM TAXATION. 
"Notwithstanding any other provision of law, the Corporation, 
including its franchise, and its capital, reserves, surplus, and 
income, shall be exempt from all taxation imposed by the United 
PUBLIC LAW 100-233—JAN. 6, 1988 
101 STAT. 1619 
States, or by any State, county, municipality, or local taxing author-
ity, except that any real property of the Corporation shall be subject 
to State, county, municipal, and local taxation to the same extent 
according to its value as other real property is taxed. 
"SEC. 5.64. REPORTS. 
"(a) IN GENERAL.—The Corporation annually shall prepare and 
submit to Congress a report of the operations of the Corporation, as 
soon as practicable after the first day of January in each calendar 
year. 
"(b) CONTENTS.—Reports submitted under subsection (a) shall in-
clude information concerning the— 
"(1) aggregate amount in the Insurance Fund at the close of 
the preceding calendar year; 
"(2) projections of the costs to be incurred by the Corporation 
during the calendar year; and 
"(3) estimates of the aggregate amount to be collected as 
premiums during the calendar year. 
"SEC. 5.65. PROHIBITIONS. 
"(a) CORPORATE NAME.— 
"(1) USE OF CORPORATE NAME.—It shall be unlawful for any 
person or entity to use the words 'Farm Credit System Insur-
ance Corporation' or any combination of such words that would 
have the effect of leading the public to believe that there is any 
connection between such person or entity and the Corporation, 
by virtue of the name under which such person or entity does 
business. 
"(2) FALSE REPRESENTATION.— 
"(A) BY OUTSIDE PERSON OR ENTITIES.—It shall be unlawful 
for any person or entity to falsely represent by any device, 
that the notes, bonds, debentures, or other obligations of 
the person or entity are insured or in any way guaranteed 
by the Corporation. 
"(B) SYSTEM BANKS.—It shall be unlawful for any insured 
System bank or person that markets insured obligations to 
falsely represent the extent to which or the manner in 
which such obligations are insured by the Corporation. 
"(3) PENALTY.—Any person or entity that willfully violates 
any provision of this subsection shall be fined not more than 
$1,000, imprisoned for not more than 1 year, or both. 
"(b) PAYMENTS OR DISTRIBUTIONS WHILE IN DEFAULT.— 
"(1) IN GENERAL.—It shall be unlawful for any insured System 
bank to pay any dividends on bank stock or participation certifi-
cates or interest on the capital notes or debentures of such bank 
(if such interest is required to be paid only out of net profits) or 
distribute any of the capital assets of such bank while the bank 
remains in default in the payment of any premium due to the 
Corporation. 
"(2) LIABILITY OF DIRECTORS.—Each director or officer of any 
insured System bank who willfully participates in the declara-
tion or payment of any dividend or interest or in any distribu-
tion in violation of this subsection shall be fined not more than 
$1,000, imprisoned not more than 1 year, or both. 
"(3) APPLICABIUTY.—This subsection shall not apply to any 
default that is due to a dispute between the insured System 
bank and the Corporation over the amount of such premium if 
12 use 
2277a-13. 
12 use 
2277a-14. 
91-194 O - 90 -11 : QL.3 Part 3 
niVi, 
101 STAT. 1620 
PUBLIC LAW 100-233—JAN. 6, 1988 
such bank deposits security satisfactory to the Corporation for 
payment on final determination of the issue. 
"(c) FAILURE TO FILE STATEMENT OR PAY PREMIUM.— 
"(1) IN GENERAL.—Any insured System bank that willfully 
fails or refuses to file any certified statement or pay any 
premium required under this part shall be subject to a penalty 
of not more than $100 for each day that such violations con-
tinue, which penalty the Corporation may recover for its use. 
s' 
"(2) APPUCABILITY.—This subsection shall not apply to con-
duct with respect to any default that is due to a dispute between 
»-? the insured System bank and the Corporation over the amount 
of such premium if such bank deposits security satisfactory to 
k 5 the Corporation for payment on final determination of the 
issue. 
"(d) 
EMPLOYMENT OF PERSONS CONVICTED OF CRIMINAL OF-
FENSES.— 
-ic; 
"(1) IN GENERAL.—Except with the prior written consent of 
the Farm Credit Administration, it shall be unlawful for any 
. 
person convicted of any criminal offense involving dishonesty or 
^^ix^-l 
a breach of trust to serve as a director, officer, or employee of 
any insured System bank. 
"(2) PENALTY.—For each willful violation of paragraph (1), the 
bank involved shall be subject to a penalty of not more than 
$100 for each day during which the violation continues, which 
the Corporation may recover for its use.". 
SEC. 303. JOINT AND SEVERAL LIABILITY OF BANKS. 
(a) CLARIFICATION OF JOINT AND SEVERAL LIABILITY.—Subsection 
(a) of section 4.4 (12 U.S.C. 2155(a)) is amended to read as follows: 
"(a)(1) Each bank of the System shall be fully liable on notes, 
bonds, debentures, or other obligations issued by it individually, and 
shall iDe liable for the interest payments on long-term notes, bonds, 
debentures, or other obligations issued by other banks operating 
under the same title of this Act. 
"(2)(A) Each bank shall also be primarily liable for the portion of 
any issue of consolidated or System-wide obligations made on its 
behalf and be jointly and severally liable for the payment of any 
additional sums as called upon by the Farm Credit Administration 
in order to make payments of interest or principal which any bank 
primarily liable therefor shall be unable to make. 
"(B) Such calls first shall be made on all nondefaulting banks in 
proportion to each such bank's proportionate share of the aggregate 
available collateral held by all such banks. 
"(C) For purposes of this paragraph, the term 'available collateral' 
means the amount (determined at the close of the last calendar 
quarter ending before such call) by which a bank's collateral as 
described in section 4.3 exceeds the collateral required to support 
the bank's outstanding notes, bonds, debentures, and other similar 
obligations. 
"(D) If the Farm Credit Administration makes any such call and 
the available collateral of all such banks does not fully satisfy the 
liability necessitating such calls, such calls shall be made on all 
nondefaulting banks in proportion to each such bank's remaining 
assets. 
"(E) Any System bank that, pursuant to a call by the Farm Credit 
Administration, makes a payment of principal or interest to the 
holder of any consolidated or System-wide obligation issued on 
PUBLIC LAW 100-233—JAN. 6, 1988 
. 101 STAT. 1621 
behalf of another System bank shall be subrogated to all rights of 
the holder against such other bank to the extent of such payment. 
"(F) On making such a call with respect to obligations issued on 
behalf of a System bank, the Farm Credit Administration shall 
appoint a receiver for the bank, which shall expeditiously liquidate 
or otherwise wind up the affairs of the bank.". 
(b) INSURANCE FUND CALLED ON BEFORE INVOKING JOINT AND 
SEVERAL LIABIUTY.—Section 4.4 (12 U.S.C. 2155) is amended by 
adding at the end thereof the following new subsection: 
"(e) Beginning 5 years after the date of the enactment of this 
subsection, the Farm Credit Administration shall not call on any 
System institution to satisfy the liability of the institution on any 
joint, consolidated, or System-wide obligation participated in by the 
institution or with respect to which the institution is primarily, or 
jointly and severally, liable, before the Farm Credit Insurance Fund 
is exhausted, even if the Fund is only able to make a partial 
payment because of insufficient amounts in the Fund.". 
SEC. 
304. ENHANCEMENT OF CAPITAL ADEQUACY OF BANKS. 
Subsection (c) of section 4.3 (12 U.S.C. 2154(c)) is amended to read 
as follows: 
"(c) Each bank shall have on hand at the time of issuance of any 
note, bond, debenture, or other similar obligation and at all times 
thereafter maintain, free from any lien or other pledge, notes and 
other obligations representing loans made under this Act or real or 
personal property acquired in connection with loans made under 
this Act, obligations of the United States or any agency thereof 
direct or fully guaranteed, other bank assets (including marketable 
securities) approved by the Farm Credit Administration, or cash, in 
an aggregate value equal to the total amount of notes, bonds, 
>i^''>-u^;i 
debentures, or other similar obligations outstanding for which the 
bank is primarily liable.". 
SEC. 
305. FEDERAL INTERMEDIATE CREDIT BANK ASSESSMENT POWER 
Section 2.5 (12 U.S.C. 2076) is amended— 
(1) in the title, by inserting "; AUTHORITY TO PASS ALONG COST 
OF INSURANCE PREMIUMS" before the period; 
(2) by inserting "(a)" before "The Federal"; and 
(3) by adding at the end thereof the following new subsection: 
"(h) Each Federal intermediate credit bank may assess each 
production credit association and other financing institution de-
scribed in section 2.3(aX2) in the district in which the bank is located 
to cover the costs of making premium pa5anents under part E of title 
V. The assessment on any such association or other financing 
institution for any calendar year shall not exceed the sum of— 
"(1) the annual average principal outstanding for such year 
on loans made by the association, or on loans made by the other 
. 
, j 
financing institution and discounted with the Federal inter-
mediate credit bank, that are in accrual status, multiplied by 
0.0015; and 
"(2) the annual average principal outstanding for such year 
on loans made by the association, or on loans made by the other 
financing institution and discounted with the Federal inter-
mediate credit bank, that are in nonaccrual status, multiplied 
by 0.0025.". 
101 STAT. 1622 
PUBLIC LAW 100-233—JAN. 6, 1988 
SEC. 306. CONSERVATORS AND RECEIVERS. 
Section 4.12(b) (12 U.S.C. 2183(b)) is amended— 
(1) by striking out the period at the end of paragraph (5) and 
inserting in lieu thereof a semicolon; 
(2) by inserting after paragraph (5) the following new para-
graph: "(6) the institution is unable to timely pay principal or 
interest on any insured obligation (as defined in section 5.51(3)) 
issued by the institution."; and 
(3) in the second sentence by inserting before the period at the 
end thereof the following: ", and such receiver or conservator, 
after the 5-year period beginning on the date of the enactment 
of the Agricultural Credit Act of 1987, shall be the Farm Credit 
System Insurance CJorporation". 
TITLE IV—RESTRUCTURING THE FARM 
CREDIT SYSTEM 
Subtitle A—Creation of Farm Credit Banks 
SEC. 401. FARM CREDIT BANKS AND ASSOCIATIONS CHARTERS. 
Effective date. 
Effective 6 months after the date of enactment of this Act, titles I 
12 use 2011 
and II of the Farm Credit Act of 1971 (12 U.S.C. 2000 et seq.) are 
^° ^ 
amended to read as follows: 
"TITLE I—FARM CREDIT BANKS 
12 use 2011. 
"SEC. 1.3. ESTABLISHMENT, CHARTERS. TITLES, BRANCHES. 
"(a) EsTABUSHMENT.—The banks established pursuant to the 
merger of each District Federal Intermediate Credit Bank and 
Federal Land Bank (hereinafter referred to in this title as 'Farm 
Credit Banks') shall be Federally chartered instrumentalities of the 
United States. 
"(b) CHARTERS.—The charters or organization certificates of Farm 
Credit Banks may be modified from time to time by the Farm Credit 
Administration Board, not inconsistent with the provisions of this 
title, as may be necessary or expedient to implement this Act. 
"(c) TITLE.—Each Farm Credit Bank may include in its title the 
name of the city in which it is located or other geographical designa-
tion. 
"(d) BRANCHES.—Each Farm Credit Bank may establish such 
branches or other offices as may be appropriate for the effective 
operation of its business. 
12 use 2012. 
"SEC. 1.4. BOARD OF DIRECTORS. 
"Each Farm Credit Bank shall elect from its voting stockholders a 
board of directors of such number, for such term, in such manner, 
and with such qualifications, as may be required in its bylaws, 
except that, at least one member shall be elected by the other 
directors, which member shall not be a director, officer, employee, or 
stockholder of a System institution. 
PUBLIC LAW 100-233—JAN. 6, 1988 
101 STAT. 1623 
"SEC. 1.5. GENERAL CORPORATE POWERS. 
12 USC 2013. 
"Each Farm Credit Bank shall be a body corporate and, subject to 
regulation by the Farm Credit Administration, shall have power 
to— 
"(1) adopt and use a corporate seal; 
"(2) have succession until dissolved under the provisions of 
this Act or other Act of Congress; 
"(3) make contracts; 
Contracts. 
"(4) sue and be sued; 
"(5) acquire, hold, dispose, and otherwise exercise all the 
usual incidents of ownership of real and personal property 
necessary or convenient to its business; 
"(6) make, participate in, and discount loans, make commit-
ments for credit, accept advance payments, and provide services 
as authorized in this Act, and charge fees for such; 
"(7) operate under the direction of its board of directors; 
"(8) provide by its board of directors for a president, one or 
more vice presidents, a secretary, a tresisurer, and provide for 
such other officers, employees, and agents as may be necessary, 
as provided in this Act, define their duties, and require surety 
bonds or make other provision against losses occasioned by 
employees; 
"(9) prescribe by its board of directors— 
"(A) the bylaws of such bank that shall not be inconsist-
ent with law, providing for the classes of the stock of the 
bank and the manner in which such stock shall be issued, 
transferred, and retired; 
"(B) the officers, employees, and agents of the bank as 
provided for; 
"(C) the property of the bank acquired, held, and trans-
ferred; 
"(D) the loans and discounts made by the bank; 
"(E) the general business conducted by the bank; and 
"(F) the privileges granted to the bank by law exercised 
and enjoyed; 
"(10) borrow money and issue notes, bonds, debentures, or 
other obligations individually, or in concert with one or more 
other banks of the System, of such character, terms, conditions, 
and rates of interest as may be determined as provided for in 
this Act; 
"(11) purchase nonvoting stock in, or pay in surplus to, and 
accept deposits or securities of funds from associations in its 
district, and pay interest on such funds; 
"(12) participate with— 
"(A) one or more other Farm Credit Banks in loans under 
this title on such terms as may be agreed on among such 
banks; 
"(B) participate with one or more other Farm Credit 
System institutions in loans made under this title or other 
titles on the basis prescribed in section 4.18; and 
"(C) participate with lenders that are not Farm Credit 
System institutions in loans that the bank is authorized to 
make under this title; 
"(13) approve the salary scale of the officers and employees of 
the associations in its district, and the appointment and com-
pensation of the chief executive officer thereof, and supervise 
101 STAT. 1624 
PUBLIC LAW 100-233—JAN. 6, 1988 
n:n,.r 
SIC;" •JStiJivi 
the exercise by such associations of the functions vested in or 
xf 
delegated to them; 
•m 
"(14) deposit the securities and current funds of the bank with 
any member bank of the Federal Reserve System or any insured 
State nonmember bank as defined in section 3 of the Federal 
i^ 
Deposit Insurance Act and pay fees and receive interest on such 
as may be agreed, and when designated for that purpose by the 
^_,^, ^ ^, . 
Secretary of the Treasury, such bank— 
"(A) shall be a depository of public money, except receipts 
, ^ ^ ', from customs, under such regulations as may be prescribed 
yV. ,-. 
by the Secretary; 
"(B) may be employed as a fiscal agent of the Govern-
ment; and 
"(^^ shall perform all such reasonable duties as a deposi-
'"''' "" tory of public money or financial agent of the Government 
as may be required of such bank; 
except that no Government funds deposited under the provi-
sions of this paragraph shall be invested in loans or bonds or 
other obligations of the bank; 
"(15) buy and sell obligations of, or insured by, the United 
States or any agency thereof, or securities backed by the full 
faith and credit of any such agency, and make other invest-
ments as may be authorized under regulations issued by the 
Farm Credit Administration; 
"(16) sell to lenders that are not Farm Credit System institu-
tions interests in loans, and buy from and sell to Farm Credit 
-: >
; System institutions interests in loans and other extensions of 
credit, and nonvoting stock as may be authorized under regula-
S' 
tions issued by the Farm Credit Administration; 
"(17) conduct studies and make and adopt standards for lend-
-;r« ing; 
"(18) delegate to Federal land bank associations such func-
tions as the bank determines appropriate; 
Contracts. 
"(19) amend and modify loan contracts, documents, and pay-
ment schedules, and release, subordinate, or substitute security 
for any of such items; 
tr 
"(20) for loans made by the bank, require associations to 
endorse notes and other obligations of borrowers from the bank; 
"(21) exercise through the board of directors or authorized 
i» 
officers, employees, or agents of the bank, all such incidental 
powers as may be necessary or expedient to carry on the 
hi.-i: business of the bank; 
> i 
"(22) accept contributions to the capital of the bank from 
associations and account for such as authorized by the Farm 
Credit Administration; and 
"(23) as may be authorized by the board of directors of the 
bank and approved by the Farm Credit Administration Board, 
agree with other Farm Credit System institutions to share loan 
and other losses, whether to protect against capital impairment 
or for any other purpose. 
12 u s e 2014. 
"SEC. 1.6. FARM CREDIT BANK CAPITALIZATION. 
"In accordance with section 4.3A, the Farm Credit Banks shall 
provide, through bylaws and subject to Farm Credit Administration 
regulations, for the capitalization of the bank and the manner in 
which bank stock shall be issued, held, transferred, and retired and 
bank earnings distributed. 
PUBLIC LAW 100-233—JAN. 6, 1988 
101 STAT. 1625 
"SEC. 1.7. LENDING AUTHORITY. 
12 USC 2015. 
"(a) REAL ESTATE LOANS.—The Farm Credit Banks are authorized 
to make or participate with other lenders in long-term real estate 
mortgage loans in rural areas, as defined by the Farm Credit 
Administration, or to producers or harvesters of aquatic products, 
and make continuing commitments to make such loans under speci-
fied circumstances, for a term of not less than 5 nor more than 40 
years. 
"(b) INTERMEDIATE CREDIT.— 
"(1) IN GENERAL.—The Farm Credit Banks are authorized to 
make loans and extend other similar financial assistance to and 
to discount for or purchase from— 
"(A) any production credit association, or 
"(B) any national bank, State bank, trust company, agri-
cultural credit corporation, incorporated livestock loan 
company, savings institution, credit union, or any associa-
tion of agricultural producers engaged in the making of 
loans to farmers and ranchers, and any corporation en-
gaged in the making of loans to producers or harvesters of 
aquatic products, 
any note, draft, or other obligation with the institution's 
endorsement or guarantee, the proceeds of which note, draft, or 
other obligation have been advanced to persons and for pur-
poses eligible for financing by production credit associations as 
authorized by this Act. 
"(2) PARTICIPATION WITH OTHER ENTITIES.—The Farm Credit 
Banks may participate with one or more production credit 
Eissociations or other Farm Credit Banks in the making of loans 
to eligible borrowers and may participate with one or more 
other Farm Credit System institutions in loans made under this 
title or other titles of this Act on the basis prescribed in section 
4.18 of this Act. The banks may own and lease or lease with 
option to purchase to persons eligible for assistance under this 
title, equipment needed in the operations of such persons. 
"(3) LIMITATIONS ON EXTENSION OF FINANCIAL ASSISTANCE.— 
r 
"(A) GENERAL RULE.—No paper shall be purchased from 
or discounted for, and no loans shall be made or other 
similar financial £issistance extended by a Farm Credit 
Bank to any entity identified in paragraph (IXB) of this 
subsection if the amount of such paper added to the aggre-
gate liabilities of such entity, whether direct or contingent 
(other than bona fide deposit liabilities), exceeds ten times 
the paid-in and unimpaired capital and surplus of such 
entity or the amount of such liabilities permitted under the 
laws of the jurisdiction creating such institution, whichever 
is the lesser. 
"(B) LIMITATION ON NATIONAL BANK.—It shall be unlawful 
for any national bank which is indebted to any Farm Credit 
Bank, on paper discounted or purchased under paragraph 
(1), to incur any additional indebtedness, if by virtue of such 
,j 
additional indebtedness its aggregate liabilities direct or 
contingent, will exceed the limitation herein contained. 
"(4) FCA REGULATIONS.— 
"(A) IN GENERAL.—All of the loans, financial assistance, 
discounts and purchases authorized by this section shall be 
subject to regulations of the Farm Credit Administration 
101 STAT. 1626 
PUBLIC LAW 100-233—JAN. 6, 1988 
and shall be secured by collateral, if any, as may be re-
K,>, ,-, ; quired in such regulations. 
"(B) REQUIREMENT OF REGULATIONS.—The regulations 
shall assure that such loans, financial assistance, discounts, 
and purchases are available on a reasonable basis to any 
financing institution authorized to receive such services 
r; 
under paragraph (IXB) of this subsection, and that— 
"(i) is significantly involved in lending for agricul-
tural or aquatic purposes; 
"(ii) demonstrates a continuing need for supple-
mentary sources of funds to meet the credit require-
ments of its agricultural or aquatic borrowers; 
"(iii) has limited access to national or regional capital 
markets; and 
f' 
"(iv) does not use such services to expand its financ-
ing activities to persons and for purposes other than 
those authorized under title IL 
"(C) FEES.—The regulations may authorize a Farm Credit 
Bank to charge reasonable fees for any commitment to 
extend service under this section to such a financing 
;. 
institution. 
"(D) SUBSIDIARIES AND AFFIUATES.—For purposes of this 
subsection, a financing institution together with the 
subsidiaries and affiliates of such may be considered £is one, 
but such determination to consider such institution to-
gether with the subsidiaries and affiliates of such as one 
shall be made in the first instance by the bank and in the 
event of a denial by the bank of its services to a financial 
institution, then by the Farm Credit Administration on a 
case-by-case basis with due regard to the total relationship 
of the financing institution, its subsidiaries, and affiliates. 
"(5) EFFECTIVE DATE.—Nothing in this section shall require 
. 
termination of discount relationships in existence on the effec-
tive date of the Farm Credit Act Amendments of 1980. 
12 use 2016. 
"SEC. 1.8. INTEREST RATES AND OTHER CHARGES. 
"(a) IN GENERAL.—Loans and discounts made by a Farm Credit 
Bank shall bear interest at a rate or rates, and on such terms and 
conditions, as may be determined by the board of directors of the 
bank from time to time. 
"(b) SETTING RATES AND CHARGES.—In setting rates and charges, it 
shall be the objective to provide the types of credit needed by eligible 
borrowers at the lowest reasonable costs on a sound business basis 
taking into consideration the cost of money to the bank, necessary 
reserve and expenses of the bank and associations, and providing 
services to members. The loan documents or discounting and financ-
ing agreements, may provide for the interest rate or rates to vary 
from time to time during the repa3mient period of the loan or 
agreement. 
12 use 2017. 
"SEC. 1.9. ELIGIBILITY. 
"The credit and financial services authorized in this title may be 
made available to persons who are or become stockholders or mem-
bers of the bank or associations in the district, and who are— 
"(1) bona fide farmers, ranchers, or producers or harvesters of 
aquatic products; 
, .^ 
,. ,.^- 
., 
^ 
-
PUBLIC LAW 100-233—JAN. 6, 1988 
101 STAT. 1627 
"(2) persons furnishing to farmers and ranchers farm-related 
services directly related to their on-farm operating needs; or 
"(3) owners of rural homes. 
"SEC. 1.10. SECURITY; TERMS. 
12 USC 2018. 
"(a) REAL ESTATE LOANS.— 
"(1) MAXIMUM LEVEL OF LOANS.— 
"(A) IN GENERAL.—Real estate mortgage loans originated 
by a Farm Credit Bank, or in which a Farm Credit Bank 
participates in with a lender that is not a System institu-
tion, shall not exceed 85 percent of the appraised value of 
the real estate security, except as provided for in para-
graphs (2) and (3). 
"(B) REGULATION.—The Farm Credit Administration 
may, by regulation, require that loans not exceed 75 per-
cent of the appraised value of the real estate security. 
"(C) GUARANTEED LOANS.—If the loan is guaranteed by State and local 
Federal, State, or other governmental agencies, the loan governments. 
may not exceed 97 percent of the appraised value of the real 
estate security, as may be authorized under regulations of 
the Farm Credit Administration. 
"(2) SECURITY.—All loans originated or participated in by a 
bank under this section shall be secured by first liens on 
interests in real estate of such classes as may be approved by 
the Farm Credit Administration. 
"(3) VALUE OF SECURITY.—To adequately secure the loan, the 
value of security shall be determined by appraisal under 
appraisal standards prescribed by the bank and approved by the 
Farm Credit Administration. 
"(4) ADDITIONAL SECURITY.—Additional security for any loan 
may be required by the bank to supplement real estate security. 
Credit factors, other than the ratio between the amount of the 
loan and the security value, shall be given due consideration. 
"(5) FINANCIAL STATEMENT.—Each Farm Credit Bank shall 
require a financial statement from each borrower at least once 
every 3 years, or during such shorter period of time as may be 
required under regulations of the Farm Credit Administration. 
"(b) INTERMEDIATE CREDIT.—Loans, other than real estate loans, 
and discounts made under the provisions of this title shall be 
repayable in not more than 7 years (15 years if made to producers or 
harvester of aquatic products) from the time that such are made or 
discounted by the Farm Credit Bank, except that the Board of 
- ' i;. 
Directors, under regulations of the Farm Credit Administration, 
may approve policies permitting loans, advances, or discounts (other 
than those made to producers or harvesters of aquatic products) to 
be repayable in not more than 10 years from the time that such are 
made or discounted by such bank. 
"SEC. 1.11. PURPOSES FOR EXTENSIONS OF CREDIT. 
12 USC 2019. 
"(a) AGRICULTURAL OR AQUATIC PURPOSES.—Loans made by a 
Farm Credit Bank to farmers, ranchers, and producers or harvesters 
of aquatic products may be for any agricultural or aquatic purpose 
and other credit needs of the applicant, including financing for basic 
processing and marketing directly related to the applicant's oper-
ations and those of other eligible farmers, ranchers, and producers 
or harvesters of aquatic products, except that the operations of the 
applicant shall supply at least 20 percent, or such larger percent £is 
101 STAT. 1628 
PUBLIC LAW 100-233—JAN. 6, 1988 
may be required by the board of directors of the bank under 
regulations of the Farm Credit Administration, of the total process-
ing or marketing for which financing is extended. 
g, 
..^.j 
"(b) RURAL HOUSING FINANCING.— 
" " ^ 
"(1) IN GENERAL.—Loans and discounts may be made to rural 
residents for rural housing financing under regulations of the 
Farm Credit Administration. 
"(2) LIMITATIONS.—Rural housing financed under this title 
shall be for single-family, moderate-priced dwellings and their 
appurtenances not inconsistent with the general quality and 
standards of housing existing in, or planned or recommended 
for, the rural area where it is located, except that a Farm Credit 
Bank may not at any one time have a total amount of loans 
outstanding for such rural housing to persons other than farm-
ers or ranchers in amounts exceeding 15 percent of the total of 
, 
all loans outstanding in such bank. 
"(3) RURAL AREAS.—For rural housing purposes under this 
section the term 'rural areas' shall not be defined to include any 
city or village having a population in excess of 2,500 inhab-
itants. 
"(c) FARM-RELATED SERVICES.— 
"(1) IN GENERAL.—Loans to persons furnishing farm-related 
services to farmers and ranchers directly related to their on-
farm operating needs may be made for the necessary capital 
structures and equipment and initial working capital for such 
services. 
"(2) FACILITIES.—The banks may own and lease, or lease with 
option to purchase, to persons eligible for credit under this title, 
facilities needed in the operations of such persons. 
12 u s e 2020. 
"SEC. 1.12. RELATED SERVICES. 
"The Farm Credit Banks may provide technical assistance to 
borrowers, members, and applicants from the bank and associations 
in the district, including persons obligated on paper discounted by 
the bank, and may make available to them at their option such 
financial related services appropriate to their on-farm and aquatic 
operations as determined to be feasible by the board of directors of 
each district bank, under 
regulations of the Farm 
Credit 
Administration. 
12 u s e 2021. 
"SEC. 1.13. LOANS THROUGH ASSOCIATIONS OR AGENTS. 
"(a) IN GENERAL.—The Farm Credit Banks shall, except as other-
wise herein provided, make loans of the type authorized under 
section 1.7(a) through a Federal land bank association chartered to 
serve the territory in which the real estate of the borrower is 
located. 
gj ,^0oi 
"(h) No ACTIVE ASSOCIATION.—If there is no active association 
chartered to serve territory where the real estate is located, the 
bank may make the loan directly or through such bank or trust 
company or savings or other financial institution as such bank may 
designate. 
"(c) PURCHASE OF STOCK REQUIRED.—When the loan is not made 
through a Federal land bank association, the applicant shall pur-
chase stock in the bank in accordance with the capitalization 
requirements provided for in the bylaws of the bank. 
PUBLIC LAW 100-233—JAN. 6, 1988 
101 STAT. 1629 
"SEC. 1.14. LIENS ON STOCK. 
12 USC 2022. 
"The Farm Credit Banks shall have a first lien on the stock or 
participation certificates it issues for the payment of any liability of 
the stockholders to the bank. 
"SEC. 1.15. TAXATION. 
12 USC 2023. 
"The Farm Credit Banks and the capital, reserves, and surplus State and local 
thereof, and the income derived therefrom shall be exempt from governments. 
Federal, State, municipal, and local taxation, except taxes on real 
estate held by a Farm Credit Bank to the same extent, according to 
its value, as other similar property held by other persons is taxed. 
The mortgages held by the Farm Credit Banks and the notes, bonds, 
debentures, and other obligations issued by the banks shall be 
considered and held to be instrumentalities of the United States 
and, as such, they and the income therefrom shall be exempt from 
all Federal, State, municipal, and local taxation, other than Federal 
income tax liability of the holder thereof under the Public Debt Act 
of 1941 (31 U.S.C. 742(a)). 
"TITLE II—FARM CREDIT ASSOCIATIONS 
"Subtitle A—Production Credit Associations 
"SEC. 2.0. ORGANIZATION AND CHARTERS. 
12 USC 2071. 
"(a) CHARTER.—Each production credit association shall continue 
as a Federally chartered instrumentality of the United States. 
"(b) ORGANIZATION.— 
fTO :jrv si 
"(1) IN GENERAL.—Production credit associations may be orga-
nized by 10 or more farmers or ranchers or producers or 
harvesters of aquatic products desiring to borrow money under 
the provisions of this title. 
"(2) ARTICLES OF ASSOCIATION.—The proposed articles of 
association shall be forwarded to the Farm Credit Bank for the 
district accompanied by an agreement to subscribe on behalf of 
the association for stock in the bank in such amounts as may be 
i h tci: > 
required by the bank. 
"(3) CONTENTS OF ARTICLES.—The articles shall specify in gen-
eral terms the— 
"(A) objects for which the association is formed; 
"(B) the powers to be exercised by the association in 
canying out the functions authorized by this part; and 
"(C) the territory the association proposes to serve. 
"(4) SIGNATURES.—The articles shall be signed by persons 
desiring to form such an association and shall be accompanied 
by a statement signed by each such person establishing eligi-
bility to borrow from the eissociation in which such person will 
become a stockholder. 
"(5) COPY TO FCA.—A copy of the articles of association shall 
be forwarded to the Farm Credit Administration with the rec-
ommendations of the bank concerning the need for such an 
association in order to adequately serve the credit needs of 
eligible persons in the proposed territory and whether that 
territory includes any area described in the charter of another 
production credit association. 
101 STAT. 1630 
PUBLIC LAW 100-233—JAN. 6, 1988 
ui 
"(6) DENIAL OF CHARTER.—The Farm Credit Administration 
for good cause shown may deny the charter. 
"(7) APPROVAL OF ARTICLES.—On approval of the proposed 
articles by the Farm Credit Administration, and on the issuance 
of a charter, the association shall become as of such date a 
• ' 
federally chartered body corporate and an instrumentality of 
the United States. 
"(8) POWERS OF FCA,—The Farm Credit Administration shall 
have the power, under rules and regulations prescribed by the 
Farm Credit Administration or by prescribing in the terms of 
the charter or by approval of bylaws of the association to— 
"(A) provide for the organization of the association; 
"(B) provide for the initial amount of stock of the associa-
tion; 
"(C) provide for the territory within which the associa-
tion's operations may be carried on; and 
"(D) direct at any time such changes in the charter as the 
Farm Credit Administration finds necessary for the accom-
plishment of the purposes of this Act. 
12 use 2072. 
"SEC. 2.1. BOARD OF DIRECTORS. 
"Each production credit association shall elect from the voting 
members of such association, a board of directors of such number, 
for such terms, with such qualifications, and in such manner as may 
be required by the bylaws of the association, except that, at least one 
member shall be elected by the other directors, which member shall 
not be a director, officer, employee, or stockholder of a System 
institution. 
12 use 2073. 
"SEC. 2.2. GENERAL CORPORATE POWERS. 
"Each production credit association shall be a body corporate and, 
subject to supervision by the Farm Credit Bank for the district and 
regulation by the Farm Credit Administration, shall have the power 
to— 
"(1) have succession until terminated in accordance with this 
Act or any other Act of Congress; 
"(2) adopt and use a corporate seal; 
Contracts. 
"(3) make contracts; 
"(4) sue and be sued; 
"(5) acquire, hold, dispose, and otherwise exercise all of the 
usual incidents of ownership of real and personal property 
necessary or convenient to the business of the association; 
"(6) operate under the direction of the board of directors of 
the association in accordance with the provisions of this Act; 
"(7) subscribe to stock of the bank; 
"(8) purchase stock of the bank held by other production 
credit associations and stock of other production credit associa-
tions; 
"(9) contribute to the capital of the bank or other production 
credit associations; 
"(10) invest funds of the association as may be approved by 
the Farm Credit Bank under regulations of the Farm Credit 
Administration and deposit the current funds and securities of 
such with the Farm Credit Bank, a member bank of the Federal 
Reserve System, or any bank insured under the Federal Deposit 
Insurance Corporation, and may pay fees therefor and receive 
interest thereon as may be agreed; 
^
^
^
^
^
^
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; . v 
PUBLIC LAW 100-233—JAN. 6, 1988 
101 STAT. 1631 
"(11) buy and sell obligations of or insured by the United 
States or of any agency thereof or of any banks of the Farm 
Credit System and buy from and sell to such banks, interests in 
loans and in other Hnancial assistance extended and nonvoting 
stock, as may be authorized by the Farm Credit Bank in accord-
ance with regulations of the Farm Credit Administration; 
"(12) borrow money from the Farm Credit Bank, and with the 
approval of such bank, borrow from and issue notes or other 
obligations to any commercial bank or other 
financial 
institution; 
"(13) make and participate in loans, accept advance pay-
ments, and provide services and other assistance as authorized 
in this subtitle and charge fees therefor, and when authorized 
by the bank participate with one or more other Farm Credit 
System institutions in loans made under this title or other titles 
of this Act on the basis prescribed in section 4.18 of this Act; 
"(14) endorse and become liable on loans discounted or 
pledged to the Farm Credit Bank; 
"(15) as may be authorized by the Farm Credit Bank in 
accordance with regulations of the Farm Credit Administration, 
agree with other Farm Credit System institutions to share loan 
or other losses, whether to protect against capital impairment 
or for any other purpose; 
"(16) prescribe by the board of directors of the association the 
bylaws not inconsistent with law providing for— 
"(A) the classes of association stock and the meinner in 
which the stock shall be issued, transferred, and retired; 
"(B) the officers and employees elected or provided for; 
"(C) the property acquired, held, and transferred by the 
association; and 
•
< 
"(D) the general business conducted, and the privileges 
granted to the association by law exercised and enjoyed; 
"(17) elect by the board of directors of the association a 
manager or other chief executive officer, and provide for such 
other officers or employees as may be necessary, including joint 
employees as provided in this Act, define their duties, and 
require surety bonds or make other provisions against losses 
occasioned by employees, but no director shall, within one year 
after the date when such director ceases to be a member of the 
board, be elected or designated a salaried employee of the 
association on the board of which he served; 
"(18) elect by the board of directors of the association a loan 
committee with power to approve applications for membership 
in the association and loans or participations or, with the 
approval of the bank, delegate the approval of applications for 
membership and loans or participations within specified limits 
to other committees or to authorized officers and employees of 
the association; 
"(19) perform any functions delegated to the association by 
the bank; and 
"(20) exercise by the board of directors or authorized officers 
or employees of the association, all such incidental powers as 
may be necessary or expedient to carry on the business of the 
association. 
101 STAT. 1632 
PUBLIC LAW 100-233—JAN. 6, 1988 
12 u s e 2074. 
"SEC. 2.3. PRODUCTION CREDIT ASSOCIATION CAPITALIZATION. 
"(a) IN GENERAL.—In accordance with section 4.3A, each produc-
tion credit association shall provide, through its bylaws and subject 
to Farm Credit Administration regulations, for its capitalization and 
the manner in which its stock shall be issued, held, transferred, and 
retired and, except as provided in subsection (b), its earnings 
distributed. 
"(b) APPUCATION OF EARNINGS.—Each production credit associa-
tion at the end of each fiscal year shall apply the amount of the 
earnings of the association for such year in excess of the operating 
expenses of the association (including provision for valuation re-
serves against loan assets in an amount equal to one-half of 1 
percent of the loans outstanding at the end of the fiscal year to the 
extent that such earnings in such year in excess of other operating 
expenses permit, or in such greater amounts as are deemed nec-
essary under generally accepted accounting principles, until such 
reserves equal or exceed SV2 percent of the loans outstanding at the 
end of the fiscal year, beyond which SV2 percent further additions to 
such reserves may be made, if deemed necessary under generally 
accepted accounting principles) first to the restoration of the impair-
ment, if any, of capital, and second, to the establishment and 
maintenance of the surplus accounts, the minimum aggregate 
amount of which shall be prescribed by the Farm Credit Bank. 
"(c) PATRONAGE.—When the bylaws of an association so provide 
and subject to the general directions of the Farm Credit Administra-
tion, available net earnings at the end of any fiscal year may be 
distributed on a patronage basis in stock, participation certificates, 
or in cash. Any part of the earnings of the tiscal year in excess of the 
operating expenses for such year held in the surplus account may be 
allocated to patrons on a patronage basis. 
12 u s e 2075. 
"SEC. 2.4. SHORT- AND INTERMEDIATE-TERM LOANS; PARTICIPATION; 
OTHER 
FINANCIAL 
ASSISTANCE; TERMS; CONDITIONS; 
INTEREST; SECURITY. 
"(a) SHORT- AND INTERMEDIATE-TERM LOANS.—Each production 
credit association, under standards prescribed by the board of direc-
tors of the Farm Credit Bank of the district, may make, guarantee, 
or participate with other lenders in short- and intermediate-term 
loans and other similar financial assistance to— 
"(1) bona fide farmers and ranchers and the producers or 
harvesters of aquatic products, for agricultural or aquatic pur-
poses and other requirements of such borrowers, including 
financing for basic processing and marketing directly related to 
the operations of the borrower and those of other eligible farm-
ers, ranchers, and producers or harvesters of aquatic products, 
except that the operations of the borrower shall supply at least 
20 percent, or such larger percent as is required by the super-
vising bank under regulations of the Farm Credit Administra-
tion, of the total processing or marketing for which financing is 
extended; 
y 
"(2) rural residents for housing financing in rural areas, 
^ 
under regulations of the Farm Credit Administration; and 
"(3) persons furnishing to farmers and ranchers farm-related 
services directly related to their on-farm operating needs. 
"(b) RURAL HOUSING.— 
"(1) IN GENERAL.—Rural housing financed under this title 
shall be for single-family, moderate-priced dwellings and the 
PUBLIC LAW 100-233—JAN. 6, 1988 
101 STAT. 1633 
appurtenances of such not inconsistent with the general quality 
and standards of housing existing in, planned or recommended 
for, the rural area where it is located. 
"(2) LIMITATION.—The aggregate of such housing loans in an 
£issociation to persons other than farmers or ranchers shall not 
exceed 15 percent of the outstanding loans at the end of its 
preceding fiscal year except on prior approval by the Farm 
Credit Bank of the district. The aggregate of such housing loans 
in any farm credit district shall not exceed 15 percent of the 
outstanding loans of all associations in the district at the end of 
the preceding fiscal year. 
"(3) RURAL AREAS.—For rural housing purposes under this 
section the term 'rural areas' shall not be defined to include any 
city or village having a population in excess of 2,500 
inhabitants. 
"(4) EQUIPMENT.—Each association may own and lease, or 
lease with option to purchase, to stockholders of the association 
equipment needed in the operations of the stockholder. 
"(c) INTEREST RATES AND CHARGES.— 
"(1) IN GENERAL.—Loans authorized in subsection (a) hereof 
shall bear such rate or rates of interest as are determined under 
standards prescribed by the board of the bank subject to the 
provisions of section 4.17 of this Act, and shall be made upon 
such terms, conditions, and upon such security, if any, as shall 
be authorized in such standards. 
"(2) SETTING OF RATES.—In setting rates and charges, it shall 
be the objective to provide the types of credit needed by eligible 
borrowers, at the lowest reasonable cost on a sound business 
basis, taking into account the cost of money to the association, 
necessary reserves and expenses of the association, and services 
provided to borrowers and members. 
"(3) VARYING RATES.—The loan documents may provide for 
the interest rate or rates to vary from time to time during the 
repayment period of the loan in accordance with the rate or 
rates currently being charged by the association. 
"(4) PRIOR APPROVAL.—Such standards may require prior ap-
proval of the bank on certain classes of loans, and may 
authorize a continuing commitment to a borrower of a line of 
credit. 
"SEC. 2.5. OTHER SERVICES. 
12 USC 2076. 
"Each production credit association may provide technical assist-
ance to borrowers, applicants, and members and may make avail-
able to them at their option such financial related services appro-
priate to their on-farm and aquatic operations as is determined 
feasible by the board of directors of each Farm Credit Bank, under 
regulations prescribed by the Farm Credit Administration. 
"SEC. 2.6. TAXATION. 
State and local 
"Each production credit association and its obligations are i2^uscT()77. 
instrumentalities of the United States and as such any and all notes, 
debentures, and other obligations issued by such associations shall 
be exempt, both as to principal and interest from all taxation 
(except surtaxes, estate, inheritance, and gift taxes) now or here-
after imposed by the United States or any State, territorial, or local 
taxing authority. 
101 STAT. 1634 
PUBLIC LAW 100-233—JAN. 6, 1988 
''Subtitle B—Federal Land Bank Associations 
12 u s e 2091. 
"SEC. 2.10. ORGANIZATIONS; ARTICLES; CHARTERS; POWERS OF THE 
FARM CREDIT ADMINISTRATION. 
"(a) CHARTER.—Each Federal land bank association shall continue 
as a federally chartered instrumentality of the United States. 
"(b) ORGANIZATION.— 
"(1) IN GENERAL.—A Federal land bank association may be 
organized by any group of 10 or more persons desiring to borrow 
money from a Farm Credit Bank, including persons to whom 
the Farm Credit Bank has made a loan directly or through an 
agent and has taken as security real estate located in the 
territory proposed to be served by the association. 
"(2) ARTICLES OF ASSOCIATION.— 
"(A) DESCRIPTION OF TERRITORY.—The articles of associa-
tion shall describe the territory within which the associa-
tion proposes to carry on its operations. 
"(B) SUBMISSION TO FCA.—Proposed articles shall be for-
warded to the Farm Credit Bank for the district, accom-
panied by an agreement to subscribe on behalf of the 
association for stock in accordance with the bylaws of the 
Farm Credit Bank. 
"(C) STOCK PURCHASE.—Association stock may be paid for 
* 
by surrendering for cancellation stock in the bank held by a 
borrower and the issuance of an equivalent amount of stock 
to such borrower in the association. 
"(D) STATEMENT.—The articles shall be accompanied by a 
statement signed by each of the members of the proposed 
association establishing— 
"(i) the individual's eligibility for, and request or 
need of the individual of a Farm Credit Bank loan; 
"(ii) that the real estate with respect to which the 
individual desires the loan for is not being served by 
another Federal land bank association; and 
"(iii) that the individual is or will become a stock-
holder in the proposed association. 
"(E) SUBMISSION TO FCA.—A copy of the articles of associa-
tion shall be forwarded to the Farm Credit Administration 
with the recommendations of the bank concerning the need 
,,.-.,. 
, ^ 
for the proposed association in order to adequately serve 
the credit needs of eligible persons in the proposed territory 
and a statement as to whether or not the territory includes 
any territory described in the charter of another Federal 
land bank association. 
"(3) DENIALS OF CHARTERS.—The Farm Credit Administration 
for good cause shown may deny the charter applied for. 
"(4) APPROVAL OF ARTICLES.—On the approval of the proposed 
articles by the Farm Credit Administration and the issuance of 
such charter, the association shall become as of such date a 
federally chartered body corporate and an instrumentality of 
the United States. 
"(c) FCA AUTHORITY ON ORGANIZATION.—The Farm 
Credit 
Administration shall have power, in the terms of the charter, under 
rules and regulations prescribed by the Farm Credit Administration 
or by approving the bylaws of the association, to provide for the— 
(1) organization of the association; 
PUBLIC LAW 100-233—JAN. 6, 1988 
101 STAT. 1635 
"(2) the initial amount of stock of such association; 
"(3) the territory within which the operations of the associa-
tion may be carried on; and 
"(4) to direct at any time changes in the charter of such 
association as the Farm Credit Administration finds necessary 
in accomplishing the purposes of this Act. 
"SEC. 2.11. BOARD OF DIRECTORS. 
12 USC 2092. 
"Each Federal land bank association shall elect from its voting 
shareholders a board of directors of such number, for such terms, in 
such manner, and with such qualifications as may be required by its 
bylaws except that, at least one member shall be elected by the 
other directors, which member shall not be a director, officer, 
employee, or stockholder of a System institution. 
"SEC. 2.12. GENERAL CORPORATE POWERS. 
12 USC 2093. 
"Each Federal land bank sissociation shall be a body corporate 
and, subject to supervision of the Farm Credit Bank for the district 
and the regulation of the Farm Credit Administration, shall have 
the power to— 
"(1) adopt and use a corporate seal; 
"(2) have succession until dissolved under the provisions of 
this Act or other Act of Congress; 
"(3) make contracts; 
Contracts. 
"(4) sue and be sued; 
"(5) acquire, hold, dispose, and otherwise exercise all of the 
usual incidents of ownership of real estate and personal prop-
erty necessary or convenient to the business of the association; 
' (6) operate under the direction of the board of directors of 
the association in accordance with this Act; 
"(7) elect by its board of directors a manager or other chief 
executive officer, and provide for such other officers or employ-
ees £is may be necessary, including joint employees as provided 
in this Act, define the duties of such, and require surety bonds 
or make other provision sigainst losses occasioned by employees, 
except that no director shall, within one year after the date 
when such director ceases to be a member of the board, be 
elected or designated a salaried employee of the gissociation on 
the board of which such director served; 
"(8) prescribe by its board of directors, association bylaws, not 
inconsistent with law, providing for the classes of association 
stock and the manner in which such stock shall be issued, 
transferred, and retired; the officers and employees of the 
association elected or provided for, the property of the Eissocia-
tion that is acquired, held, and transferred, the general business 
of the association conducted, and the privileges granted to the 
association by law exercised and enjoyed; 
"(9) accept applications for Farm Credit Bank loans and 
receive from such bank and disburse to the borrowers the 
proceeds of such loans; 
"(10) subscribe to stock of the Farm Credit Bank of the 
district; 
"(11) elect by its board of directors a loan committee with 
power to elect applicants for membership in the £issociation and 
recommend loans to the Farm Credit Bank, or with the 
approval of the Farm Credit Bank, delegate the election of 
applicants for membership and the approval of loans within 
101 STAT. 1636 
PUBLIC LAW 100-233—JAN. 6, 1988 
specified limits to other committees or to authorized employees 
-mo of the association; 
"(12) on agreement with the bank, take such additional ac-
tions with respect to applications and loans and perform such 
functions as are vested by law in the Farm Credit Banks as may 
be agreed to or delegated to the association; 
,,, 
, ,,,- 
"(13) endorse and become liable to the bank on loans it makes 
to association members; 
' 
"(14) receive such compensation and deduct such sums from 
loan proceeds with respect to each loan as may be agreed 
between the association and the bank and make such other 
charges for services as may be approved by the bank; 
---' 
"(15) provide technical £issistance to members, borrowers, 
applicants, and other eligible persons and make available to 
^, 
them, at their option, such financial related services appro-
priate to their operations £is it determines, with Farm Credit 
Bank approval, are feasible, under regulations of the Farm 
Credit Administration; 
*»v 
"(16) borrow money from the bank and, with the approval of 
such bank, borrow from and issue association notes or other 
obligations to any commercial bank or other 
financial 
' ^ institution; 
"(17) buy and sell obligations of or insured by the United 
• • no ; 
States or any agency thereof or of any banks of the Farm Credit 
System; 
*
'
» 
"(18) invest association funds in such obligations as may be 
authorized in regulations of the Farm Credit Administration 
and approved by the bank and deposit securities and current 
funds of the association with any member bank of the Federal 
Reserve System, with the Farm Credit Bank, or with any bank 
insured by the Federal Deposit Insurance Corporation, and pay 
fees therefor and receive interest thereon as may be agreed; 
"(19) perform such other function delegated to the association 
by the Farm Credit Bank of the district; 
"(20) exercise by its board of directors or authorized officers or 
agents all such incidental powers as may be necessary or expedi-
ent in the conduct of its business; and 
"(21) contribute to the capital of the bank. 
12 use 2094. 
"SEC. 2.13. FEDERAL LAND BANK ASSOCIATION CAPITALIZATION. 
"In accordance with section 4.3A, the Federal land bank associa-
tion shall provide, through its bylaws and subject to Farm Credit 
Administration regulations, for its capitalization and the manner in 
which its stock shall be issued, held, transferred, and retired and its 
earnings distributed. 
12 use 2095. 
"SEC. 2.14. LIQUIDATION. 
"Whenever any Federal land bank association is liquidated, a sum 
equal to its reserve account as required in this Act shall be paid and 
become the property of the bank in which such association is a 
shareholder. 
12 use 2096. 
"SEC. 2.15. AGREEMENTS FOR SHARING GAINS OR LOSSES. 
"Each Farm Credit Bank may enter into agreements with Federal 
land bank associations in its district for sharing the gain or losses on 
? loans or on security held therefor or acquired in liquidation thereof, 
• and associations are authorized to enter into any such agreements 
PUBLIC LAW 100-233—JAN. 6, 1988 
101 STAT. 1637 
and also, subject to bank approval, agreements with other associa-
tions in the district for sharing the risk of loss on loans endorsed by 
each such association. As may be authorized by the bank in accord-
ance with regulations of the Farm Credit Administration, associa-
tions also may enter into agreements with other Farm Credit 
System institutions to share loan and other losses, whether to 
protect against capital impairment or for any other purpose. 
"SEC. 2.16. LIENS ON STOCK. 
12 USC 2097. 
"Each Federal land bank association shall have a first lien on the 
stock and participation certificates it issues, except on stock or 
participation certificates held by other Farm Credit System institu-
tions, for the payment of any liability of the stockholder to the 
association or to the bank, or to both of them. 
"SEC. 2.17. TAXATION. 
State and local 
"Each Federal land bank association and the capital, reserves, 12 usc 2098. 
and surplus thereof, and the income derived therefrom shall be 
exempt from Federal, State, municipal, and local taxation, except 
taxes on real estate held by a Federal land bank association to the 
same extent, according to its value, as other similar property held 
by other persons is taxed. The mortgages held by the Federsd land 
bank associations and the notes, bonds, debentures, and other 
obligations issued by the banks shall be considered and held to be 
instrumentalities of the United States and, as such, they and the 
income therefrom shall be exempt from all Federal, State, munici-
pal, and local taxation, other than Federal income tax liability of 
the holder thereof under the Public Debt Act of 1941 (31 U.S.C. 
742(a)).". 
Subtitle B—Merger of System Institutions 
SEC. 410. MANDATORY MERGER 
12 USC 2011 
(a) IN GENERAL.—Not later than 6 months gifter the date of the 
enactment of this section, the Federal land bank and the Federal 
intermediate credit bank of each district shall merge into a Farm 
Credit Bank in such district pursusint to a plan of merger agreed on 
by the Boards of Directors of such banks and approved by the Farm 
Credit Administration, or if such banks fail to agree, a plan of 
merger prescribed by the Farm Credit Administration. 
(b) CAPITAL STOCK.—The number of shares of capital stock issued 
' ' 
by a Farm Credit Bank to stockholders and other owners of the 
institution involved in the merger, and the rights and privileges of 
such shares (including voting power, redemption rights, preferences 
on liquidation, and the right to dividends) shall be determined by 
the plan of merger adopted by the merging banks, and shall be 
consistent with section 4.3A and the regulations issued by the Farm 
Credit Administration. 
(c) ASSISTANCE.—The Assistance Board shall direct the Financial 
Assistance Corporation to provide any Farm Credit Bank with that 
amount of financial assistance as is necessary to ensure that the 
stock of the Farm Credit Bank, upon implementation of the merger, 
has a book value equal to 75 percent of par, and such J^arm Credit 
Bank shall be subject to sill of the requirements of title VI of the 
Farm Credit Act of 1971. 
101 STAT. 1638 
PUBLIC LAW 100-233—JAN. 6, 1988 
(d) INITIAL BOARD.—The initial board of each Farm Credit Bank 
shall be composed of the members of the district board (which is 
dissolved upon the creation of such bank) elected by the production 
credit associations, Federal land bank associations, and stockholders 
at large. Such initial board shall operate for such term as is agreed 
to by the members of the board, except that such period shall not 
exceed two years. Thereafter the board shall be elected and serve in 
accordance with the provisions of section 1.4 of the Farm Credit Act 
of 1971. 
12 u s e 2071 
SEC. 411. MERGER OF PRODUCTION CREDIT ASSOCIATIONS AND FED-
note. 
ERAL LAND BANK ASSOCIATIONS. 
(a) SUBMISSION OF PROPOSAL.—Not later than 6 months after the 
date of the merger of the Federal land bank and the Federal 
intermediate credit bank in a district, the Boards of Directors of 
' 
each Federal land bank association and each production credit 
association in such district, that share substantially the same geo-
graphical territory with each other, shall submit to the voting 
stockholders of each such association for their approval, a plan, 
approved by the supervising bank and the Farm Credit Administra-
tion, for merging such associations. 
(b) PREREQUISITES TO MERGER.— 
(1) STOCKHOLDER VOTE.—The stockholder vote required for 
approval of a merger under subsection (a) shall be a majority of 
the voting stockholders of each association voting, in person or 
by written proxy, at a duly authorized stockholders meeting. 
(2) SUBMISSION TO FCA.—Not later than 60 days prior to the 
end of the 6-month period beginning on the date of the enact-
ment of this section, the plan of merger under subsection (a), 
together with all information to be presented to the stockhold-
ers, shall be submitted to the Farm Credit Administration. 
(3) EXPEDITED CONSIDERATION BY FCA.—The Farm Credit 
Administration shall expedite its consideration of the plan and 
. 
., 
accompanying information submitted under paragraph (2) so 
1. . 
that review and approval of such plan and information shall be 
completed by the Administration so as to enable a stockholder 
vote to occur within the 6-month period referred to in para-
graph (2). 
(c) DIRECT LENDERS.—On approval of a merger under this subsec-
tion, the resulting association shall be a direct lender in the same 
manner as applies to production credit associations. 
12 u s e 2221 
SEC. 412. CONSOLIDATION OF FARM CREDIT SYSTEM DISTRICTS. 
(a) SUBMISSION OF PROPOSAL.— 
(1) SPECIAL COMMITTEE.— 
(A) IN GENERAL.—Not later than 6 months after the date 
of the enactment of this section, a special committee shall 
be selected pursuant to regulations of the Farm Credit 
Administration for the purpose of developing a proposal for 
the consolidation of Farm Credit System districts. 
' ' 
(B) COMPOSITION.—The special committee selected under 
subparagraph (A) shall be composed of one representative 
from each Farm Credit Bank board and the members of the 
Board of Directors of the Assistance Board. 
(2) DEVELOPMENT OF PROPOSAL.—Not later than 6 months 
after the formation of the special committee, the committee 
shall develop, a proposal to consolidate the Farm Credit System 
PUBLIC LAW 100-233—JAN. 6, 1988 
101 STAT. 1639 
banks into no less than six financially viable farm credit banks 
through inter-district mergers. 
(3) REPORT.—Not later than the end of each calendar quarter 
beginning at least 6 months after the selection of the special 
committee, such committee shall prepare and submit, to the 
Committee on Agriculture of the House of Representatives, and 
the Committee on Agriculture, Nutrition, and Forestry of the 
Senate, a report on the progress of the committee in developing 
a proposal under this subsection, 
(b) PREREQUISITES TO CONSOUDATION.— 
(1) FCA REVIEW OF PROPOSAL.—Prior to the submission of the 
proposal developed under subsection (b)(2) to the stockholders 
under paragraph (2), the proposal together with all information 
to be presented to the stockholders, shall be submitted to the 
Farm Credit Administration for approval. 
(2) PREREQUISITES.—Proposals developed under subsection 
(aX2) shall not be submitted to stockholders under paragraph (3) 
unless the proposal is approved by— 
(A) a majority of the members of the Board of Directors of 
the Assistance Board; and 
(B) the members of the special committee that represent 
the districts affected by the terms of the proposal. 
(3) SUBMISSION TO STOCKHOLDERS.—Not later than the end of 
the 18-month period after the date of enactment of this Act, 
each Farm Credit Bank involved, in consultation with the 
special committee, shall submit the proposed merger affecting 
such bank to the voting stockholders of each such bank. 
(4) STOCKHOLDER VOTE.—Each association shall be entitled to 
cast a number of votes equal to the number of voting stockhold-
ers of such association. 
SEC. 413. VOLUNTARY MERGER OF THE BANKS FOR COOPERATIVES. 
12 USC 2121 
(a) SUBMISSION OF PROPOSAL.— 
^°^' 
(1) SPECIAL COMMITTEE.— 
(A) IN GENERAL.—Not later than 15 days after the date of 
the enactment of this section, a special committee shall be 
selected pursuant to subparagraph (B), for the purpose of 
developing a proposal for the voluntary merger of the banks 
for cooperatives. 
(B) COMPOSITION.—The special committee selected under 
suljparagraph (A) shall be composed of— 
(i) one member of each district board elected by the 
voting stockholders of the bank for cooperatives in the 
district; and 
(ii) one member chosen from the board of directors of 
the Central Bank for Cooperatives by the board of such 
Bank. 
(C) DEVELOPMENT OF PLAN.—Not later than 75 days after 
the date of the enactment of this section, the special 
committee shall develop a plan of merger for all such banks 
and the Central Bank for Cooperatives into a National 
Bank for Cooperatives. 
(2) PREREQUISITES TO MERGER.— 
(A) SUBMISSION TO FCA.—On completion of the plan of 
merger pursuant to subparagraph (C), the special commit-
tee shall submit the proposed plan, together with all 
information that is to be distributed to the stockholders 
101 STAT. 1640 
PUBLIC LAW 100-233—JAN. 6, 1988 
^uit.- 
concerning such plan, to the Farm Credit Administration 
for approval. 
^9 
(B) EXPEDITED REVIEW.—Not later than 30 days after the 
Farm Credit Administration receives the plan of merger, 
the Administration shall promptly review such plan and 
advise the special committee concerning any required 
changes that are necessary to the plan. 
"(3) SUBMISSION TO STOCKHOLDERS.—On approval of the plan 
by the Farm Credit Administration, the special committee shall, 
under such procedures as may be established by the committee, 
submit the plan and recommendations to all voting stockholders 
and subscribers to the guaranty funds of the district banks and 
the Central Bank for Cooperatives, 
(b) VOTING REQUIREMENTS.— 
(1) MAJORITY VOTE REQUIRED.—An approval of the plan of 
., merger developed and submitted under subsection (a) shall— 
,/ 
(A) require a majority vote of the stockholders of each 
district bank for cooperatives voting, in person or by proxy, 
h. .- , 
at a duly authorized stockholders' meeting, computed 
both— 
* j.-x, 
(i) in accordance with the requirement that, except as 
provided in section 3.3(d), each cooperative that is the 
holder of voting stock in, or a subscriber to the guar-
anty fund of the bank for cooperatives shall be entitled 
to cast one vote; and 
n^- 
(ii) on the basis of the total equity interests in the 
bank (including allocated, but not unallocated, surplus 
and reserves) held by such stockholders; 
(B) require a majority vote of the voting stockholders of 
the Central Bank for Cooperatives voting on a one-bank-
one-vote basis; 
- ' ' '^f 
- 
(C) take place not later than 180 days after the date of the 
"
"
^ ' 
enactment of this section; and 
(D) take place prior to any other merger vote involving a 
i .. 
bank for cooperatives. 
(2) APPROVAL BY ALL BANKS FOR COOPERATIVES.—If the stock-
holders of all of the banks for cooperatives approve the merger, 
^51 the merger shall take place. 
(3) EFFECT OF LESSER VOTE.—If the stockholders of more than 
^rt one but fewer than all of the banks approve the plan, each such 
bank whose stockholders voted to approve the merger shall be 
merged into a single bank for cooperatives, as provided in 
paragraphs (4) or (5). 
(4) NATIONAL BANK FOR COOPERATIVES.— 
(A) CREATION.—If the stockholders of eight or more of the 
district banks approve the merger, such banks, and the 
Central Bank for Cooperatives, shall be merged into a 
..jt; 
single bank, which shall be referred to as the "National 
Bank for Cooperatives". 
(B) SERVICES PROVIDED.—The National Bank for Coopera-
tives may offer credit and related services to eligible 
borrowers located within any territory that may be served 
by Farm Credit System institutions under section 5.0, or to 
-J 
any borrower otherwise eligible under section 3.70t)). 
(5) UNITED BANK FOR COOPERATIVES.— 
(A) CREATION.—If the stockholders of more than one but 
fewer than eight of the district banks approve the plan. 
PUBLIC LAW 100-233—JAN. 6, 1988 
101 STAT. 1641 
each such bank, and the Central Bank for Cooperatives (if 
approved by a numerical majority of its stockholders), shall 
be merged into a single bank, which shall be referred to as 
the "United Bank for Cooperatives". 
(B) SERVICES PROVIDED.—The United Bank for Coopera-
"
" • 
tives shall offer credit and related services only in the 
territory included, as of the date of the enactment of this 
section, within the boundaries of the districts that had been 
served by the constituent banks of the United Bank for 
Cooperatives, and to any borrower otherwise eligible under 
section 3.7(b). 
(6) NONCONSENTING BANKS.— 
,j^^,„ 
(A) IN GENERAL.— 
"
* "" 
(i) NATIONAL BANK FOR COOPERATIVES.—Any of 
the 
^^ 
district banks whose stockholders did not approve the 
* " 
plan of merger may offer credit and related services to 
any eligible borrowers within any territory or area that 
, 
, . 
may be served by the National Bank. 
t 
(ii) UNITED BANK FOR COOPERATIVES.—Any of the dis-
trict banks whose stockholders did not approve the 
plan of merger, shall continue as district banks for 
cooperatives and shall continue to serve only the terri-
tory within the boundaries of the district that such 
banks served as of the date of the enactment of this 
section. 
(B) NONDISCRIMINATION.—Any district bank whose stock-
holders did not approve the plan of merger, shall be entitled 
to the availability, from the National Bank for Cooperatives 
r
.
^
^
, 
or the United Bank for Cooperatives, £is the case may be, of 
the same credit and related services now provided by the 
Central Bank for Cooperatives as of the date of the enact-
ment of this section, regardless of the decision not to merge. 
" 
. . • 
(C) SUBSEQUENT MERGERS.—Any district bank referred to 
in subparagraph (A) may subsequently merge with the 
National Bank for Cooperatives or the United Bank for 
Cooperatives, as the case may be, on the approval of the 
voting stockholders of both banks proposing to merge based 
on the voting requirement of subsection (a). 
(c) REFERENCES.—References in this section to voting stockholders 
shall include subscribers to the guaranty fund. 
SEC. 414. BANK FOR COOPERATIVES BOARD OF DIRECTORS. 
12 USC 2121 
(a) INITIAL BOARD.—The initial board of each district bank for 
cooperatives shall be composed of the members of the district board 
(which is dissolved upon the creation of the district Farm Credit 
Bank) elected by the stockholders of the bank for cooperatives and 
one member elected by the other two members, which member shall 
not be a director, officer, employee, or stockholder of a System 
institution. The initial board shall operate for such term as is agreed 
to by the members of the board, except that such period shall not 
exceed two years. Thereafter, the board shall be elected and serve in 
accordance with section 3.0 of the Farm Credit Act of 1971. 
(b) PERMANENT BOARD.—Section 3.0 of the Act shall be amended— 
12 use 2121. 
(1) by inserting "(a)" after the section designation; and 
(2) by adding at the end thereof the following new subsection: 
"Ot)) Each bank for cooperatives shall elect from its voting stock-
holders a board of directors of such number, for guch term, in such 
101 STAT. 1642 
PUBLIC LAW 100-233—JAN. 6, 1988 
manner, and with such qualifications as may be required in its 
bylaws, except that, at least one member shall be elected by the 
other directors, which member shall not be a director, officer, 
employee, or stockholder of a System institution.". 
SEC. 4
1
5
. 
ORGANIZATION 
AND 
OPERATION 
OF 
THE 
MERGED 
BANK 
FOR 
COOPERATIVES. 
Title III (12 U.S.C. 2121 et seq.) is amended— 
(1) by inserting after the title designation the following: 
"PART A—BANKS FOR COOPERATIVES"; and 
(2) by adding at the end thereof the following new part: 
"PART B—UNITED AND NATIONAL BANKS FOR COOPERATIVES 
12 use 2141. 
"SEC. 3.20. CHARTER, POWERS, AND OPERATION. 
"(a) CHARTER.—The National Bank for Cooperatives or the United 
Bank for Cooperatives, as the case may be (hereinafter in this part 
referred to in this section as the 'consolidated bank') shall be a 
federally chartered instrumentality of the United States and an 
institution of the Farm Credit System. 
"(b) POWERS.—The consolidated bank and the board of directors of 
such bank shall have all of the powers, rights, responsibilities, and 
obligations of the district banks for cooperatives and the Central 
Bank for Cooperatives and the boards of directors of such banks, as 
otherwise provided for in this Act. 
"(c) OPERATION.—The consolidated bank shall be organized and 
operated on a cooperative basis. 
12 use 2142. 
"SEC. 3.21. BOARD OF DIRECTORS PROVISIONS. 
"(a) INITIAL BOARD OF DIRECTORS.—The initial board of directors of 
a consolidated bank shall include the members of the boards of 
directors of the farm credit districts who were elected by voting 
stockholders of the constituent district banks for cooperatives (as 
such banks existed on the date of the enactment of this section) and 
who shall serve out the terms for which they were elected. 
"(b) PERMANENT BOARD OF DIRECTORS.— 
"(1) COMPOSITION.—The permanent board of directors of a 
:: 
"'^ 
consolidated bank shall consist of— 
"(A) three members, elected by the voting stockholders of 
the consolidated bank, from each of the farm credit districts 
that had been served by constituent banks, as such districts 
existed on the date of the enactment of this section, at least 
one of whom, from each such district, shall be a farmer; 
"(B) one member elected by the voting stockholders of 
each district bank for cooperatives that is not a constituent 
of the consolidated bank; and 
"(C) one member appointed by the members chosen under 
subparagraphs (A) and (B) who shall not be a stockholder or 
' 
borrower of a System institution or an officer or director of 
any such stockholder or borrower. 
"(2) NOMINATION AND ELECTION.—For purposes of nominating 
and electing members of the board of directors under paragraph 
dXA): 
PUBLIC LAW 100-233—JAN. 6, 1988 
101 STAT. 1643 
"(A) FIRST MEMBER.—The nomination and election of the 
first member from each district shall be carried out on the 
basis provided for in section 3.3(d). 
"(B) SECOND MEMBER.— 
"(i) IN GENERAL.—The nomination and election of the 
second member from each district shall be carried out 
'> ': 
with each voting stockholder of the consolidated bank 
located in the district having one vote, plus a number 
of votes (or fractional part thereof) equal to the number 
of stockholders eligible to vote in that district multi-
plied by the percentage (or fractional part thereof) of 
the total equity interest (including allocated, but not 
unallocated, surplus and reserves) in the consolidated 
bank of all such stockholders located in that district 
' 
-' 
held by the individual voting stockholder— 
"(I) as of the final date of the fiscal year of the 
consolidated bank; or 
"(II) with respect to the first election held under 
this subsection, as of such date as the Farm Credit 
Administration shall prescribe, 
"(ii) TOTAL NUMBER OF VOTES.—The total number of 
votes for each district under this subparagraph shall be 
the number of voting stockholders of the consolidated 
bank located in the district multiplied by two. 
"(3) TERMS.— 
"(A) IN GENERAL.—The members of the board of directors 
of the consolidated bank shall serve for a term of 3 years. 
"(B) TIMING OF ELECTIONS.—Procedures for electing mem-
bers of the board of directors of the consolidated bank 
under this subsection shall ensure that the beginning of the 
terms of such members coincide with the expiration of the 
terms of members of the interim board of directors of 
the bank under subsection (a). 
"(4) FCA REGULATIONS.—The nomination and election of the 
members of the board of directors of the consolidated bank 
under this subsection shall be carried out in accordance with 
regulations issued by the Farm Credit Administration. 
"(c) MODIFICATION OF BOARD OF DIRECTORS PROVISIONS.—The 
provisions of subsection (b) relating to the board of directors of the 
consolidated bank, other than the provisions relating to the initial 
composition, nomination, and election of the members of the board, 
may be modified on an affirmative vote of at least two-thirds of the 
voting stockholders of the bank, with each such stockholder to have, 
for such purposes, only one vote. Any proposals for modifying such 
provisions shall be submitted for a vote by such stockholders in 
accordance with procedures prescribed by the Farm Credit Adminis-
tration. 
"SEC. 3.22. CREDIT DELIVERY OFFICE. 
12 USC 2143. 
"On a determination by the board of directors of the United Bank 
for Cooperatives or the National Bank for Cooperatives that the 
bank's loan portfolio is concentrated in any one district or districts 
(according to the district boundaries in effect immediately prior to 
the effective date of the merger), the bank may consider the creation 
of regional service centers to accommodate such loan concentra-
tions. 
101 STAT. 1644 
PUBLIC LAW 100-233—JAN. 6, 1988 
12 u s e 2144. 
"SEC. 3.23. CONSOLIDATION OF FUNCTIONS. 
"Subject to section 3.22, to the greatest extent practicable, the 
functions of the consolidated bank shall be consolidated in the 
central office of the bank. 
12 u s e 2145. 
"SEC. 3.24. EXCHANGE OF OWNERSHIP INTERESTS. 
"On the establishment of the consolidated bank, ownership in-
terests of the stockholders and subscribers to the guaranty funds of 
the constituent district banks for cooperatives (including stock, 
participation certificates, and allocated equities) shall be exchanged 
for like ownership interests in the consolidated bank on a book 
value basis. 
12 u s e 2146. 
"SEC. 3.25. CAPITALIZATION. 
"The board of directors of the consolidated bank shall provide for 
the capitalization of such bank in accordance with the provisions of 
section 4.3A. 
12 u s e 2147. 
"SEC. 3.26. PATRONAGE POOLS. 
* 
"Under such terms and conditions as may be determined by its 
board of directors, the consolidated bank may— 
"(1) for a period of at least 3 years following the date of the 
' 
enactment of this section, establish separate patronage pools 
consisting of loans to eligible borrowers located in each constitu-
ent farm credit district (as such district existed on the date of 
the enactment of this section); and 
"(2) allocate revenues, expenses, and net savings among such 
pools on an equitable basis. 
12 u s e 2148. 
"SEC. 3.27. TRANSACTIONS TO ACCOMPLISH THE MERGER 
,u 
"The receipt of assets or assumption of liabilities by the consoli-
dated bank, the exchange of stock, equities, or other ownership 
interests, and any other transaction carried out in accomplishing 
the merger of the banks for cooperatives shall not be treated as a 
taxable event under the laws of the United States or of any State or 
political subdivision thereof. The preceding sentence shall also apply 
to the receipt of assets and liabilities by a taxable institution to the 
extent that the net amount of the distribution is immediately 
reinvested in stock of a consolidated bank (and in such case the basis 
of such stock shall be appropriately reduced by the amount of gain 
not recognized by reason of this sentence). 
12 u s e 2149. 
"SEC. 3.28. LENDING LIMITS. 
"The Farm Credit Administration may not establish lending 
limits for the consolidated bank with respect to any loans or borrow-
ers that are more restrictive than the combined lending limits that 
were previously established by the Farm Credit Administration for 
; 
' 
a district bank for cooperatives and the Central Bank for Coopera-
tives with respect to such loans or borrowers.". 
SEC. 416. MERGER OF SYSTEM INSTITUTIONS. 
* 
The Act (12 U.S.C. 2001 et seq.) (as amended by section 201 of this 
Act) is further amended by adding at the end thereof the following 
new title: 
PUBLIC LAW 100-233—JAN. 6, 1988 
TITLE VII—MERGERS OF SYSTEM 
INSTITUTIONS 
'Subtitle A—Merger of Banks Within a 
District 
101 STAT. 1645 
"SEC. 7.0. POWER TO MERGE. 
12 USC 2279a. 
"Two or more banks within a district may merge into a single 
entity (hereinafter in this title referred to as a 'merged bank') if the 
plan of merger is approved by— 
"(1) the Farm Credit Administration Board; 
"(2) the respective boards of directors of the banks involved; 
"(3) a majority of the stockholders of each bank voting, in 
person or by proxy, at a duly authorized stockholders' meeting 
, ^ >
£ f -i 
in accordance with the provisions of section 5.2(c) relating to the 
casting of votes by stockholders; and 
"(4) in the case of a bank for cooperatives, a majority of the 
total equity interests in such merging bank for cooperatives 
(including allocated, but not unallocated, surplus and reserves) 
held by those stockholders or subscribers to the guaranty fund 
of the bank voting. 
"SEC. 7.1. BOARD OF DIRECTORS FOR THE DISTRICT. 
12 USC 2279a-l. 
"(a) COMPOSITION.— 
"(1) IN GENERAL.—Following a merger pursuant to section 7.1, 
the district Board of Directors shall continue to be composed of 
seven members as provided in section 5.1. 
"(2) REGULATIONS.—The Farm Credit Administration shall 
issue regulations to ensure the fair and equitable representation 
of the associations of each of the merging banks on the initial 
Board of Directors of the merged bank. 
"(b) ELECTION.—Following a merger pursuant to section 7.8, the 
members of the district board shall be elected pursuant to regula-
tions issued by the Farm Credit Administration prescribing proce-
dures that are as consistent as practicable with those set forth in 
section 5.2. 
"SEC. 
7
.
2
. 
POWERS 
OF 
MERGED 
BANKS. 
"(a) IN GENERAL.—Except as otherwise provided in this title, a 
merged bank shall have all of the powers granted to, and shall be 
subject to all of the obligations imposed on, any of the constituent 
entities of the merged bank. 
"(b) REGULATIONS.—The Farm Credit Administration shall issue 
regulations that establish the manner in which the powers and 
obligations of the banks that form the merged bank are consoli-
dated, and to the extent necessary, reconciled in the merged bank. 
"SEC. 7.3. CAPITAL STOCK. 
12 USC 2279a-3. 
"(a) PLAN OF MERGER.—Subject to subsection (c), the number of 
shares of capital stock issued by a merged bank to stockholders and 
other owners of any institution involved in the merger, and the 
rights and privileges of such shares (including voting power, 
redemption rights, preferences on liquidation, and the right to 
dividends) shall be determined by the plan of merger adopted by the 
?:'"l'mj-: 
12 USC 2279a-2. 
101 STAT. 1646 
PUBLIC LAW 100-233—JAN. 6, 1988 
banks involved, and shall be consistent with section 4.3A and the 
regulations issued by the Farm Credit Administration. 
"(b) BOARD OF DIRECTORS.—Subject to subsection (a), the number 
of shares of capital stock issued by a merged bank, and the rights 
and privileges thereof, shall be determined by the Board of Directors 
of the merged bank established under this subtitle. 
"(c) VOTING STOCK.—Voting stock of a merged bank shall be held 
only— 
"(1) by associations or cooperatives that were, immediately 
prior to the merger, entitled to hold voting stock of one of the 
banks that merged; or 
"(2) by farmers, ranchers, or producers or harvesters of 
aquatic products that are or were, immediately prior to the 
merger, direct borrowers from the merged bank or one of the 
banks that comprise the merged bank. 
12 use 2279a-4. 
"SEC. 7.4. EARNINGS, RESERVES, AND DISTRIBUTIONS. 
"(a) USE OF NET EARNINGS.—The Board of Directors of a merged 
bank shall determine the use or other application of net earnings 
after payment of operating expenses. 
"(b) RESTORATION OF VALUE OF IMPAIRED CAPITAL STOCK.—Net 
earnings shall first be applied to restore the value of impaired 
capital stock. 
"(c) OTHER USES.—After restoration, the application of net earn-
ings may include (but not necessarily in the following order)— 
"(1) additions to an allocated reserve account; 
"(2) additions to an unallocated reserve account; 
"(3) payment of a dividend on capital stock; and 
"(4) payment of patronage refunds in cash or in stock or other 
notices of allocation. 
"(d) USE OF CAPITAL AND RETAINED EARNINGS.—All capital and 
retained earnings of a merged bank shall be available for use in the 
activities of the merged bank as the Board of Directors shall deter-
mine, without regard to the activities giving rise to such earnings. 
12 use 2279a-5. 
"SEC. 7.5. REPORTS BY MERGED BANKS FOR COOPERATIVES. 
"(a) IN GENERAL.—When two or more banks for cooperatives 
merge, the resulting bank shall, not later than December 31 of each 
year of the succeeding 5 years following the date of the merger, file 
an annual report with the Farm Credit Administration that— 
"(1) analyzes the effect of the merger; 
"(2) includes a breakdown of loans outstanding according to 
the size of the cooperative stockholders of the bank; and 
"(3) describes the adequacy of credit and other assistance 
services provided to smaller cooperatives. 
"(b) AVAILABILITY.—A copy of the report required in subsection (a) 
shall be made available to the Committee on Agriculture of the 
House of Representatives and the Committee on Agriculture, Nutri-
tion, and Forestry of the Senate. 
PUBLIC LAW 100-233—JAN. 6, 1988 
101 STAT. 1647 
"Subtitle B—Mergers, Transfers of Assets, and 
Powers of Associations Within a District 
"Chapter 1—Transfers by Federal Land Banks to Federal Land 
Bank Associations 
"SEC. 7.6. TRANSFER OF LENDING AUTHORITY. 
12 USC 2279b. 
"(a) ASSIGNMENTS.—A Federal land bank or a merged bank 
having a Federal land bank as one of its constituents, may assign to 
a Federal land bank association, and the association may assume, 
the authority of the transferring bank in the territorial area served 
by the association, to make and participate in long-term real estate 
mortgage loans under sections 1.6 through 1.9 if the assignment is 
approved by— 
"(1) the Farm Credit Administration Board; 
"(2) the Board of Directors of both institutions; and 
"(3) a majority of the stockholders of the bank and of the 
association, in accordance with the voting provisions of sections 
7.0 and 7.6. 
"Ot)) DIRECT LOANS AND FINANCIAL ASSISTANCE.—After an assign-
ment described in subsection (a)— 
"(1) the Federal land bank association shall possess all of the 
direct long-term real estate mortgage loan authority, formerly 
possessed by the transferring bank, in the territory served by 
the association; and 
"(2) the Federal land bank may provide and extend financial 
assistance to, and discount for, or purchase from, the transferee 
Federal land bank association any note, draft, or other obliga-
tion with the endorsement or guarantee of the association, the 
proceeds of which have been advanced to persons eligible and 
for purposes of financing by the association under subsection (a). 
"(c) REGULATIONS.—The Farm Credit Administration shall issue 
regulations that establish the manner in which the powers and 
obligations of the banks that make assignments or transfers are 
consolidated and, to the extent necessary, reconciled in the associa-
tion referred to in subsection (a). Following a transfer or assignment 
under subsection (a), the provisions of section 4.3A shall be ap-
plicable to the association. 
"Chapter 2—Merger of Like and Unlike Associations 
"SEC. 7.7. MERGERS OF UNLIKE ASSOCIATIONS. 
12 USC 2279c. 
"On the merger of one or more production credit associations with 
one or more Federal land bank associations, the bank supervising 
the Federal land bank association shall transfer all of its direct 
lending authority of the bank to such association under section 7.8. 
"SEC. 7.8. MERGER OF ASSOCIATIONS. 
12 USC 2279c-l. 
"(a) IN GENERAL.—Two or more associations within the same 
district, whether or not organized under the same title of this Act, 
may merge into a single entity (hereinafter in this title referred to 
as a 'merged association') if the plan of merger is approved by— 
"(1) the Farm Credit Administration Board; 
"(2) the boards of directors of the associations; 
101 STAT. 1648 
PUBLIC LAW 100-233—JAN. 6, 1988 
"(3) a majority of the shareholders of each association voting, 
in person or by proxy, at a duly authorized stockholders' meet-
ing; and 
-
"(4) the Farm Credit Bank. 
"(b) POWERS, OBUGATIONS, AND CONSOUDATION.— 
"(1) POWERS AND OBLIGATIONS.—Except as otherwise provided 
by this title, a merged association shall— 
fj*jr 
je 'i 
"^^^ possess all powers granted under this Act to the 
associations forming the merged association; and 
Miiiifi 
"(B) bg subject to all of the obligations imposed under this 
Act on the associations forming the merged association. 
Regulations. 
"(2) CoNSOUDATiON.—The Farm Credit Administration shall 
issue regulations that establish the manner in which the powers 
and obligations of the associations that form the merged 
* 
association are consolidated and, to the extent necessary, rec-
onciled in the merged association. Following a merger under 
subsection (a), the provisions of section 4.3A shall be applicable 
to the merged association. 
"(c) STOCK ISSUANCE.— 
i 
"(1) PLAN OF MERGER.—Subject to section 4.3A, the number of 
shares of capital stock issued by a merged association to the 
stockholders of any association forming such merged associa-
tion, and the rights and privileges of such shares (including 
voting power, preferences on liquidation, and the right to divi-
dends), shall be determined by the plan of merger adopted by 
the merged associations. 
"(2) PLAN OF CAPITALIZATION.—The number of shares of cap-
ital stock, and the rights and privileges thereof, issued by a 
merged association after a merger shall be determined by the 
Board of Directors of the merged association, with the approval 
of the supervising bank, and shall be consistent with section 
4.3A and the regulations issued by the Farm Credit Administra-
tion. 
"(3) VOTING STOCK.—Voting stock of a merged association 
shall be issued to and held by farmers, ranchers, or producers or 
harvesters of aquatic products who are or were, immediately 
prior to the merger, direct borrowers from one of the associa-
tions forming the merged association or the supervising bank of 
such merged association. 
"(d) CAPITAUZATION.—The plan of merger shall provide for the 
issuance, transfer, and retirement of stock and the distribution of 
earnings in accordance with the provisions of section 4.3A. 
12 u s e 2279C-2. 
"SEC. 7.9. RECONSIDERATION. 
- - _
. 
- , , , - , 
....-..; .-.a^|j^ f; .f/Js-'' 
"(a) PERIOD.—A stockholder vote in favor of^ 
"(1) the merger of districts under section 5.17(a)(2); 
"(2) the merger of banks within a district under section 7.0; 
"(3) the transfer of the lending authority of a Federal land 
bank or a merged bank having a Federal land bank as one of its 
''• 
constituents, under section 7.6; 
"(5) the merger of two or more associations under section 7.8; 
"(6) the termination of the status of an institution as a System 
c 
institution under section 7.10; and 
"(7) the merger of similar banks under section 7.13; 
, _ 
shall not take effect except in accordance with subsection (b). 
"(b) RECONSIDERATION.— 
PUBLIC LAW 100-233—JAN. 6, 1988 
101 STAT. 1649 
"(1) NOTICE.—Not later than 30 days after a stockholder vote 
in favor of any of the actions described in subsection (a), the 
officer or employee that records such vote shall ensure that all 
stockholders of the voting entity receive notice of the final 
results of the vote. 
"(2) EFFECTIVE DATE.—A voluntary merger, transfer, or termi-
nation that is approved by a vote of the stockholders of two or 
more banks or associations, shall not take effect until the 
expiration of 30 days after the date on which the stockholders of 
such associations are notified of the final result of the vote in 
accordance with paragraph (1). 
"(3) PETITION FILED.—If a petition for reconsideration of a 
merger, transfer, or termination vote, signed by at least 15 
percent of the stockholders of one or more of the affected banks 
or associations, is presented to the Farm Credit Administration 
within 30 days after the date of the notification required under 
paragraph (1)— 
"(A) a voluntary merger, transfer, or termination shall 
not take effect until the expiration of 60 days after the date 
on which the stockholders were notified of the final result 
of the vote; and 
"(B) a special meeting of the stockholders of the affected 
banks or associations shall be held during the period re-
ferred to in subparagraph (A) to reconsider the vote. 
"(4) VOTE ON RECONSIDERATION.—If a majority of stockholders 
of any one of the affected banks or associations voting, in person 
or by written proxy, at a duly authorized stockholders' meeting, 
vote against the proposed merger, transfer, or termination, such 
action shall not take place. 
"(5) FAILURE TO FILE PETITION.—If a petition for reconsider-
ation of such vote is either not filed prior to the 60th day after 
the vote or, if timely filed, is not signed by at least 15 percent of 
the stockholders, the merger, transfer, or termination shall 
become effective in accordance with the plan of merger, trans-
fer, or termination. 
"(c) SPECIAL RECONSIDERATION.— 
"(1) ISSUANCE OF REGULATIONS.—Notwithstanding any other 
provision of this Act, the Farm Credit Administration shall 
issue regulations under which the stockholders of any associa-
tion that voluntarily merged with one or more associations after 
December 23, 1985, and before the date of the enactment of this 
section, may petition for the opportunity to organize as a sepa-
rate association. 
"(2) REQUIREMENTS.—The regulations issued by the Farm 
Credit Administration shall require that— 
"(A) the petition be filed within 1 year after the date of 
the implementation of such regulations; 
"(B) the petition be signed by at least 15 percent of the 
stockholders of any one of the associations that merged 
during the period; 
"(C) the petition describe the territory in which the pro-
posed separate association will operate; 
"(D) if the petition is approved— 
iB j 21 
"(i) the loans of the members of the new association 
will be transferred from the current association to such 
new association; 
101 STAT. 1650 
PUBLIC LAW 100-233—JAN. 6, 1988 
"(ii) the stock, participation certificates, and other 
similar equities of the current association held by mem-
bers of the new association will be retired at book value 
and the proceeds of such will be transferred to the new 
association, and an equivalent amount of stock, partici-
^ 
pation certificates, and other similar equities will be 
issued to the members by the new association; and 
"(iii) the other assets of the current association will 
be distributed equitably among the current association 
and any resulting new association. 
"(3) NOTIFICATION.— 
"(A) IN GENERAL.—Not later than 30 days after the filing 
of the petition for organization, the current association 
shall notify its stockholders that a petition to establish the 
separate association has been filed. 
"(B) CONTENTS.—The notification required under this 
paragraph shall contain— 
"(i) the date of a special stockholders' meeting to 
consider the petition for organization; and 
"(ii) an enumerated statement of the gmticipated 
benefits and the potential disadvantages to such stock-
holders if the new association is established. 
"(C) FCA APPROVAL.— 
"(i) IN GENERAL.—All notifications under this para-
graph shall be submitted to the Farm Credit Adminis-
tration Board for approval prior to being distributed to 
the stockholders. 
"(ii) AMENDING NOTIFICATION.—The Farm Credit 
Administration Board shall require that, prior to the 
distribution of the notification to the stockholders, the 
notification be amended as determined necessary by 
the Board to provide accurate information to the stock-
holders that will enable such stockholders to make an 
informed decision as to the advisability of establishing 
a new association. 
"(D) SPECIAL STOCKHOLDERS' MEETING.— 
"(i) TIMING OF MEETING.—The special stockholders' 
meeting to consider the petition shall be held within 60 
days after the filing of the petition. 
"(ii) APPROVAL.—If, at the special stockholders' meet-
ing, a majority of the stockholders of the current 
association who would be served by the new association 
ir > ^ 
approve, by voting in person or by proxy, the establish-
ment of the separate association, the Farm Credit 
i 
Administration shall, within 30 days of such vote, issue 
a charter to the new association and amend the charter 
of the current association to reflect the territory to be 
served by the new association. 
' 
"Chapters—Termination and Dissolution of Institutions 
12 use 2279d. 
"SEC. 7.10. TERMINATION OF SYSTEM INSTITUTION STATUS. 
"(a) CONDITIONS.—A System institution may terminate the status 
of the institution as a System institution if— 
PUBLIC LAW 100-233—JAN. 6, 1988 
101 STAT. 1651 
"(1) the institution provides written notice to the Farm Credit 
Administration Board not later than 90 days prior to the pro-
posed termination date; 
"(2) the termination is approved by the Farm Credit Adminis-
tration Board; 
"(3) the appropriate Federal or State authority grants ap-
proval to charter the institution as a bank, savings and loan 
association, or other financial institution; 
"(4) the institution pays to the Farm Credit Assistance Fund, 
£is created under section 6.25, if the termination is prior to 
January 1, 1992, or pays to the Farm Credit Insurance Fund, if 
the termination is after such date, the amount by which the 
total capital of the institution exceeds, 6 percent of the assets; 
^,. c; 
"(5) the institution pays or makes adequate provision for 
payment of all outstanding debt obligations of the institution; 
(6) the termination is approved by a majority of the stock-
holders of the institution voting, in person or by written proxy, 
at a duly authorized stockholders' meeting, held prior to giving 
notice to the Farm Credit Administration Board; and 
"(7) the institution meets such other conditions £is the Farm 
Credit 
Administration 
Board 
by 
regulation 
considers 
appropriate. 
"Ot)) EFFECT.—On termination 
of its status as a 
System 
institution— 
"(1) the Farm Credit Administration Board shall revoke the 
charter of the institution; and 
"(2) the institution shall no longer be an instrumentality of 
the United States under this Act. 
« Subtitle C—Approval of Disclosure Informa-
tion and Issuance of Charters by the Farm 
Credit Administration Board 
"SEC. 7.11. APPROVAL OF DISCLOSURE INFORMATION AND ISSUANCE OF 
12 USC 2279e. 
CHARTERS. 
"(a) DISCLOSURE OF INFORMATION.— 
"(1) APPROVAL OF PLAN.—With respect to any plan of merger, 
transfer or assignment of lending authority, dissolution, or 
termination, prior to submission to the voters (voting stockhold-
ers and, where required, contributors to guaranty funds) of such 
institutions, such plan shall be submitted to the Farm Credit 
Administration Board, together with all information that is to 
be distributed to the voters with respect to the contemplated 
action, including an enumerated statement of the anticipated 
benefits and potential disadvantages of such action. 
"(2) NOTICE OF APPROVAL.—On notification that the Farm 
Credit Administration Board has approved such plan for 
submission to the stockholders, or after 30 days of no action on 
the plan by the Board, the submitting institutions may submit 
the plan, together with the disclosure information, to the voters 
for the prescribed vote. 
"(b) NOTICE OF REASONS FOR DISAPPROVAL.—If the Farm Credit 
Administration Board disapproves the plan for submission to the 
stockholders, notification to the submitting institutions shall specify 
91-194 O - 90 - 12 : QL.3 Part 3 
101 STAT. 1652 
PUBLIC LAW 100-233—JAN. 6, 1988 
the reasons for the determination by the Board. If such plan is 
determined to be inadequate, it shall not be submitted to the voters 
for a vote. 
"(c) FEDERAL CHARTER.—Each plan of merger or transfer of lend-
ing authority may include a proposed new or revised Federal char-
ter for the merged or transferee entity. The Farm Credit 
Administration Board shall issue such charter on the approval of 
the plan, as prescribed in this title, unless the Board determines 
that the charter submitted is not consistent with this Act. 
"Subtitle D—Mergers of Like Entities 
12 use 2279f. 
"SEC. 7.12. MERGER OF SIMILAR BANKS. 
"(a) IN GENERAL.—Banks organized or operating under this Act 
may merge with banks in other districts operating under the same 
title if the plan of merger is approved by— 
"(1) the Farm Credit Administration Board; 
"(2) the respective Boards of Directors of the banks involved; 
"(3) a majority vote of the stockholders of each bank voting, in 
person or by proxy, at a duly authorized stockholders' meeting, 
with each association having a number of votes equal to the 
number of such association's voting stockholders; and 
"(4) in the case of a bank for cooperatives, a majority of the 
,^. 
total equity interests in such merging bank for cooperatives 
(including allocated, but not unallocated, surplus and reserves) 
-•i...-. 
held by those stockholders or subscribers to the guaranty fund 
of the bank voting. 
"(b) PROCEDURES.—The provisions of sections 7.2 through 7.4 shall 
apply to bsmks merged under this section. 
(c) BOARD OF DIRECTORS.— 
"(1) IN GENERAL.—After a merger under subsection (a), a 
board of directors shall be created for the resulting bank 
"(2) COMPOSITION.—The board shall be composed of— 
"(A) two directors elected by each of the bank boards, 
with at least one such director from each bank being 
' 
' 
"'" 
elected by the eligible stockholders of, or subscribers to, the 
guaranty fund of the merging banks; and 
"(B) one outside director elected by the members elected 
under subparagraph (A). 
"(3) OUTSIDE DIRECTOR.— 
"(A) QUAUFICATIONS.—The outside director elected under 
paragraph (2XB) shall be experienced in financial services 
and credit, and within the 2-year period prior to such 
election, shall not have been a borrower from, shareholder 
in, or director, officer, employee, or agent of any institution 
of the Farm Credit System. 
"(B) FAILURE TO ELECT.—If the other members of the 
board fail to elect an outside director, the Farm Credit 
Administration Board shall appoint a qualified person to 
serve on the board of directors until such member is so 
elected. 
"(4) BYLAWS.—Notwithstanding paragraph (2), the bylaws of 
the merged bank may, with the approval of the Farm Credit 
Administration, provide for a different number of directors to 
be selected in a different manner, except that the bylaws shall 
., provide for at least one outside director. 
>
; , . ,3 iij*iji< -a/^e 
PUBLIC LAW 100-233—JAN. 6, 1988 
101 STAT. 1653 
"SEC. 7.13. MERGER OF SIMILAR ASSOCIATIONS. 
12 USC 2279f-l. 
"(a) IN GENERAL.—Associations may voluntarily merge with other 
like associations if the plan of merger is approved by— 
"(1) the Farm Credit Administration Board; 
"(2) the respective Boards of Directors of the associations 
involved; 
"(3) a majority vote of the stockholders of each association 
voting, in person or by proxy, at a duly authorized stockholders' 
meeting; and 
"(4) the Farm Credit Bank. 
"(b) PROCEDURES.—The provisions of subsections (b), (c), and (d) of 
section 7.8 shall apply to associations merged under this section.". 
SEC. 414. NONDISCRIMINATION. 
12 USC 2252. 
The second sentence of section 5.17(aX2) (12 U.S.C. 2251(aX2)) is 
amended by striking out "; and the Farm Credit Administration 
shall ensure" and all that follows through "discriminated £^ainst in 
the provision of any financial service and assistance" and inserting 
in lieu thereof ". The Farm Credit Administration Board shall 
ensure that disapproving associations (A) shall not be charged any 
assessment under this Act at a rate higher than that charged other 
like associations in the district, and (B) shall be provided with 
financial services and assistance on the same basis as other like 
associations in the district". 
SEC. 415. CONFORMING AMENDMENTS. 
(a) DISSOLUTION AND MERGER.— 
(1) PART HEADING.—The part heading of part B of title IV (12 
U.S.C. 2181 et seq.) is amended by striking out "AND MERGER". 
(2) MERGER.—Section 4.10 (12 U.S.C. 2181) is repealed. 
(3) BOARDS OF DIRECTORS.—Section 4.11 (12 U.S.C. 2182) is 
(4) DISSOLUTION.—Section 4.12(a) (12 U.S.C. 2183(a)) is 
amended— 
(A) by striking out the third sentence; and 
(B) in the fourth sentence, by striking out "may require 
such merger" and inserting in lieu thereof "Board may 
require an association to merge with another association'. 
(b) ISSUANCE OF OBUGATIONS.—Section 4.2(d) (12 U.S.C. 2174(d)) is 12 USC 2153. 
amended by striking out "each of the 12 districts and the CJentral 
Bank for Cooperatives" and inserting in lieu thereof "each bank". 
(c) DISTRICT AND FARM CREDIT ADMINISTRATION ORGANIZATION.— 
Sections 5.1 through 5.6 (12 U.S.C. 2222-2227) are repealed. 
(d) FARM CREDIT ADMINISTRATION POWERS.—Section 5.17(aX2) (12 
U.S.C. 2252(aX2)) is amended— 
(1) by striking out "; approve mergers of banks" and all that 
follows through "territories" and inserting in lieu thereof "ap-
prove mergers and any related activities as provided for in title 
VII; and the consolidation or division of the territories"; and 
(2) by striking out "4.10" and inserting in lieu thereof "7.0". 
Subtitle C—Other Restructuring Provisions 
SEC. 420. COMMUNICATIONS WITH STOCKHOLDERS. 
Part B of title IV (12 U.S.C. 2181 et seq.) is amended by adding at 
the end thereof the following new section: 
101 STAT. 1654 
PUBLIC LAW 100-233—JAN. 6, 1988 
12 u s e 2184. 
"SEC. 4.12A. COMMUNICATIONS WITH STOCKHOLDERS. 
"(a) PROVISION OF STOCKHOLDER LISTS.— 
"(1) IN GENERAL.—Within 7 days after receipt of a written 
request by a stockholder, a bank for cooperatives, Federal land 
t 
bank association, or production credit association shall provide 
a current list of its stockholders to such requesting stockholder. 
"(2) CONDITIONS.—As a condition of providing a stockholder 
list under paragraph (1), the bank or association may require 
that the stockholder agree and certify in writing that the 
stockholder will— 
"(A) use the list exclusively for communicating with 
stockholders for permissible purposes; and 
^ 
"(B) not make the list available to any person, other than 
the stockholder's attorney or accountant, without first 
' 
obtaining the written consent of the institution. 
"(b) ALTERNATIVE COMMUNICATIONS.— 
"(1) REQUEST TO ISSUE.—As an alternative to receiving a list of 
stockholders, a stockholder may request the institution to mail 
or otherwise furnish to each stockholder a communication for a 
permissible purpose on behalf of the requesting stockholder. 
"(2) WHEN PERMISSIBLE.—Alternative communications may be 
used, at the discretion of the requesting stockholder, if the 
requester agrees to defray the reasonable costs of the commu-
nication. If the requester decides to exercise this option, the 
institution shall provide the requester with a written estimate 
of the costs of handling and mailing the communication as soon 
as is practicable after receipt of the stockholder's request to 
furnish the communication.". 
SEC. 421. ELIGIBILITY TO BORROW FROM A BANK FOR COOPERATIVES. 
Section 3.8 (12 U.S.C. 2129) is amended by striking out subsection 
(2) and inserting in lieu thereof the following new subsection: 
"(b) Notwithstanding any other provision of this section: 
"(1) The following entities shall also be eligible to borrow from 
a bank for cooperatives: 
"(A) Cooperatives and other entities that have received a 
loan, loan commitment, or loan guarantee from the Rural 
Electrification Administration, or a loan or loan commit-
- 
- 
ment from the Rural Telephone Bank, or that have been 
certified by the Administrator of the Rural Electrification 
Administration to be eligible for such a loan, loan commit-
* 
ment, or loan guarantee, and subsidiaries of such coopera-
tives or other entities. 
-' ^ 
"(B) Any legal entity more than 50 percent of the voting 
control of which is held by one or more associations or other 
entities that are eligible to borrow from a bank for coopera-
tives under subsection (a) or subparagraph (A) of this para-
graph, except that any such legal entity, when considered 
together with one or more such associations or other enti-
ties that hold such control, meet the requirement of 
subsection (aX3). 
31. 
"(C) Any legal entity that (i) holds more than 50 percent 
of the voting control of an association or other entity that is 
eligible to borrow from a bank for cooperatives under 
subsection (a) or subparagraph (A) of this paragraph, and 
ifc 
(ii) borrows for the purpose of making funds available to 
that association or entity, and make funds available to that 
PUBLIC LAW 100-233—JAN. 6, 1988 
101 STAT. 1655 
association or entity under the same terms and conditions 
that the funds are borrowed from a bank for cooperatives. 
"(2) Notwithstanding the provisions of section 3.9, the board 
of directors of a bank for cooperatives may determine that, with 
respect to a loan to any borrower eligible to borrow from a bank 
under paragraph (IXA) that is fully guaranteed by the United 
States, no stock purchase requirement shall apply, other than 
the requirement that a borrower eligible to own voting stock 
shall purchase one share of such stock. 
"(3) Each association and other entity eligible to borrow from 
a bank for cooperatives under this subsection, for purposes of 
section 3.7(a), shall be treated as an eligible cooperative associa-
tion and a stockholder eligible to borrow from the bank. 
"(4) Nothing in this subsection shall be construed to adversely 
affect the eligibility, as it existed on the date of the enactment 
of this subsection, of cooperatives and other entities for any 
other credit assistance under Federal law.". 
SEC. 422. SALES OF INSURANCE BY SYSTEM INSTITUTIONS. 
(a) IN GENERAL.—Section 4.29 (12 U.S.C. 2218) is amended— 
(1) in subsection (a)— 
(A) by inserting "(D" after the subsection designation; 
(B) by striking out "of this Act"; 
(C) by inserting "or borrower from" before "any such 
bank"; 
(D) by adding at the end thereof the following new sen-
tence: "A member or borrower shall have the option, with-
out coercion from the bank or association of such member 
or borrower, to accept or reject such insurance."; and 
(E) by adding at the end thereof the following new para-
graph: 
"(2) In making insurance available through private insurers, the 
banks shall approve the programs of more than two insurers for 
each type of insurance offered in the district. The banks may 
provide comparative information relating to costs and quality of 
approved programs and the financial conditions of approved compa-
nies. Associations shall offer at least two insurers for each program 
from among those approved by the Federal intermediate credit 
banks."; and 
(2) in paragraph (2) of subsection (b)— 
(A) by redesignating clauses (i), (ii), and (iii), as subpara-
graphs (A), (B), and (C), respectively; 
(B) by striking out "and" in subparagraph (B) as so 
redesignated; 
(C) by striking out "and" in subparagraph (C) as so 
redesignated; and 
(D) by adding at the end thereof the following new 
subparagraphs: 
"(D) the insurance program has been approved by the 
bank or association from among specific programs made 
available to it by insurers— 
"(i) meeting reasonable fin£mcial and quality of serv-
ice standards; and 
"(ii) licensed under State law to do business in the 
State and local 
State; and 
governments. 
"(E) in making insurance available through approved 
insurers, the board of directors of the association or bank 
101 STAT. 1656 
PUBLIC LAW 100-233—JAN. 6, 1988 
selects and offers at least two approved insurers for each 
type of insurance made available to the members and 
borrowers; and". 
12 use 2218 
(b) CONTINUATION OF PROGRAM,—Notwithstanding the amend-
"ote. 
ments made to section 4.29 by subsection (a), any insurance program 
offered by any bank or association of the Farm Credit System on the 
date of the enactment of this Act that does not meet the require-
ments of section 4.29, as so amended, may be continued until July 1, 
1988. 
SEC. 423. CIVIL MONEY PENALTIES. 
(a) ASSESSMENT AUTHORITY.—Section 5.32(a) (12 U.S.C. 2268(a)) is 
amended by striking out "continues, but" and inserting in lieu 
thereof the following: "continues. Any such institution or person 
who violates any provision of this Act or any regulation issued 
under this Act shall forfeit and pay a civil penalty of not more than 
$500 per day for each day during which such violation continues. 
Notwithstanding the preceding sentences,". 
ft)) NOTIFICATION OF ALLEGED VIOLATORS.—Section 5.32(b) (12 
U.S.C. 2268ft))) is amended by inserting after the subsection designa-
tion the following new sentence: "Before determining whether to 
assess a civil money penalty and determining the amount of such 
penalty, the Farm Credit Administration shall notify the institution 
or person to be assessed of the violation or violations alleged to have 
occurred or to be occurring, and shall solicit the views of the 
institution or person regarding the imposition of such penalty.". 
(c) REVIEW OF FINAL ORDERS.—Section 5.32(d) (12 U.S.C. 2268(d)) is 
amended by striking out the last sentence and inserting in lieu 
thereof the following new sentence: "Final orders of the Farm Credit 
Administration issued under subsection (c) shall be reviewable 
under chapter 7 of title 5, United States C!ode.". 
SEC. 424. LIMITATION ON FCA AUTHORITY TO REQUIRE DISCLOSURE OF 
INFORMATION. 
(a) IN GENERAL.—Section 5.17(aX9) (12 U.S.C. 2252(aX9)) is 
amended by inserting before the period the following: ", except that 
the Farm Credit Administration may not require any System 
institution to disclose in any report to stockholders information 
concerning the condition or classification of a loan— 
"(A) to a director of the institution— 
"(i) who has resigned before the time for filing the 
applicable report with the Farm Credit Administration; 
•>?; 
?.> 
- 
• 
Q j . 
"(ii) whose term of office will expire no later than the 
* "
^ 
date of the meeting of stockholders to which the report 
relates; or 
.
*
< v.i 
"(B) ^
Q g member of the immediate family of a director of 
the institution unless— 
' ' • 
"(i) the family member resides in the same household 
'^ 
as the director; or 
"(ii) the director has a material financial or legal 
"
^ ' 
interest in the loan or business operation of the family 
member.". 
12 use 2252 
ft)) 
REGULATIONS.—Within 30 days after the date of the enactment 
note. 
of this Act, the Farm Credit Administration shall amend its regula-
tions as necessary to implement the amendment made by subsection 
(aX 
PUBLIC LAW 100-233—JAN. 6, 1988 
101 STAT. 1657 
SEC. 425. REMOVAL OF CERTAIN SUNSET PROVISIONS; PROHIBITION 
AGAINST USE OF SIGNED BALLOTS. 
Section 4.20 (12 U.S.C. 2208) is amended to read as follows: 
"SEC. 4.20. PROHIBITION AGAINST USE OF SIGNED BALLOTS. 
"In any election or merger vote, or other proceeding subject to a 
vote of the stockholders (or subscribers to the guaranty fund of a 
bank for cooperatives), conducted by a lending institution of the 
Farm Credit System, the institution— 
"(1) may not use signed ballots; and 
"(2) shall implement measures to safeguard the voting process 
for the protection of the right of stockholders (or subscribers) to 
a secret ballot.". 
SEC. 
4
2
6
. 
FEDERAL 
LAND 
BANK 
LOAN 
SECURITY. 
Section 1.9 (12 U.S.C. 2017) is amended to read as follows: 
"SEC. 
1
.
9
. 
FEDERAL 
LAND 
BANK 
LOAN 
SECURITY. 
"(a) MAXIMUM LEVEL OF LOANS.— 
"(1) IN GENERAL.—Loans originated by a Federal land bank, 
or in which a Federal land bank participates in with a lender 
that is not a System institution, shall not exceed 85 percent of 
the appraised value of the real estate security, except £is pro-
vided for in paragraphs (2) and (3). 
"(2) REGULATION.—The Farm Credit Administration may, by 
regulation, require that loans not exceed 75 percent of the 
appraised value of the real estate security. 
(3) GUARANTEED LOANS.—If the loan is guaranteed by Fed-
eral, State, or other governmental agencies, the loan may not 
exceed 97 percent of the appraised value of the real estate 
security, as may be authorized under regulations of the Farm 
Credit Administration. 
"Ot)) SECURITY.—All loans originated or participated in by a bank 
under this section shall be secured by first liens on interests in real 
estate of such classes as may be approved by the Farm Credit 
Administration. 
"(c) VALUE OF SECURITY.—To adequately secure the loan, the value 
of security shall be determined by appraisal under appraisal stand-
ards prescribed by the bank and approved by the Farm Credit 
Administration. 
"(d) ADDITIONAL SECURITY.—Additional security for any loan may 
be required by the bank to supplement real estate security. Credit 
factors, other than the ratio between the amount of the loan and the 
security value, shall be given due consideration. 
"(e) FINANCIAL STATEMENT.—Each Federal land bank shall re-
quire a financial statement from each borrower at least once every 3 
years, or during such shorter period of time as may be required 
under regulations of the Farm Credit Administration. . 
SEC. 427. AFFIRMATIVE ACTION. 
Part F of title IV (12 U.S.C. 2219 et seq.) is amended by adding at 
the end thereof the following new section: 
"SEC. 4.37. AFFIRMATIVE ACTION. 
The Assistance Board established under section 6.0 and all institu-
tions of the Farm Credit System with more than 20 employees shall 
establish and maintain an affirmative action program plan that 
State and local 
governments. 
Contracts. 
12 u s e 2219c. 
101 STAT. 1658 
PUBLIC LAW 100-233—JAN. 6, 1988 
applies the affirmative action standards otherwise applied to con-
tractors of the Federal Government.". 
SEC. 428. ENCOURAGEMENT OF CONSERVATION PRACTICES. 
-
» 
Part F of title IV (12 U.S.C. 2219 et seq.) is amended by adding at 
the end thereof the following new section: 
12 u s e 2219d. 
"SEC. 4.38. ENCOURAGEMENT OF CONSERVATION PRACTICES. 
"At the time a System institution or an agricultural mortgage 
loan originator (as defined in section 8.0(7)) approves a loan made to 
a borrower that, in the opinion of the institution or originator, 
would be ineligible for a loan made, insured, or guaranteed under 
the Consolidated Farm and Rural Development Act (7 U.S.C. 1921 et 
seq.) by reason of subtitle B or C of title XII of the Food Security Act 
of 1985 (16 U.S.C. 3811 et seq.), the institution or originator, as the 
case may be, shall encourage the borrower to contact the Depart-
ment of Agriculture Soil Conservation Service to obtain information 
about soil conservation methods and practices.". 
SEC. 429. UNIFORM FINANCIAL REPORTING INSTRUCTIONS. 
Part B of title V is amended by inserting after section 5.22 (12 
U.S.C. 2257) the following new section: 
12 u s e 2257a. 
"SEC. 5.22A. UNIFORM FINANCIAL REPORTING INSTRUCTIONS. 
"(a) IN GENERAL.—Each System institution shall comply with 
uniform financial reporting instructions required by the Farm 
Credit Administration, to standardize and facilitate the reporting of 
System data. 
"(b) COMPUTERIZED SYSTEM.—If the financial reports are main-
tained by a computer system, each System institution may develop 
an internal computer system or it may contract out to a vendor 
under open competitive bidding any or all aspects of the computer-
ized system. 
"(c) SUBMISSION OF PROPOSAL.—Within 6 months of the date of the 
enactment of this section, each System institution shall submit to 
the Farm Credit Administration a report on the plan of that institu-
tion to bring the operations of the institution into compliance with 
the uniform financial reporting instructions required by the Farm 
Credit Administration.". 
SEC. 430. COMPENSATION FOR DIRECTORS. 
Section 5.5 (12 U.S.C. 2226) is amended by inserting before the 
period at the end thereof the following: "No director may receive 
compensation under this section during any year in a total amount 
exceeding $15,000.". 
SEC. 431. FARM CREDIT ADMINISTRATION BOARD. 
(a) RULES AND RECORDS.—Section 5.8(c) (12 U.S.C. 2242) is amended 
by striking out the last sentence and inserting in lieu thereof the 
following new sentence: "The Board shall adopt such rules as it 
deems appropriate for the transaction of business by the Board, and 
shall keep permanent and accurate records and minutes of the 
actions and proceedings of the Board.". 
:; "\ 
(b) CHAIRMAN.—Subsection (a) of section 5.10 (12 U.S.C. 2244(a)) is 
it» 
•- :-.... amended to read as follows: 
"(a)(1) The Chairman of the Board shall be the chief executive 
officer of the Farm Credit Administration. 
, „ 
_ 
. . 
PUBLIC LAW 100-233—JAN. 6, 1988 
101 STAT. 1659 
"(2) In carrying out the responsibilities of the chief executive 
officer, the Chairman shall be responsible for directing the im-
plementation of policies and regulations adopted by the Board and, 
after consultation with the Board, the execution of the administra-
tive functions and duties of the Farm Credit Administration. 
"(3) In carrying out policies as directed by the Board, the Chair-
man shall act as spokesperson for the Board and represent the 
Board and the Farm Credit Administration in their official relations 
within the Federal Government. 
"(4) Under policies adopted by the Board, the Chairman shall 
consult on a regular basis with— 
"(A) the Secretary of the Treasury concerning the exercise, by 
the System, of the powers conferred under section 4.2; 
"(B) the Board of Governors of the Federal Reserve System 
concerning the effect of System lending activities on national 
monetary policy; and 
"(C) the Secretary of Agriculture concerning the effect of 
System policies on farmers, ranchers, and the agricultural 
economy.", 
(c) FUNCTIONS AND APPOINTMENTS.—Section 5.11 (12 U.S.C. 2245) 
is amended to read as follows: 
"SEC. 5.11. ORGANIZATION OF THE FARM CREDIT ADMINISTRATION. 
"(a) PouciES OF THE BoARD.—The Chairman of the Farm Credit 
Administration Board, in carrying out the powers and duties vested 
in the Chairman by this Act, and Acts supplementary thereto, shall 
be governed by policies of the Board and by such regulatory deci-
sions, findings, and determinations as the Board may by law be 
authorized to make. 
"(b) APPOINTMENTS.—The Chairman of the Board shall appoint 
such personnel as may be necessary to carry out the functions of the 
Farm Credit Administration. The appointment by the Chairman of 
the heads of major administrative divisions under the Board shall be 
subject to the approval of the Board. 
"(c) PERSONNEL.— 
"(1) APPOINTMENTS BY BOARD MEMBERS.—Personnel employed 
regularly and full-time in the immediate offices of Board mem-
bers shall be appointed by each such Board member. 
"(2) OFFICERS AND EMPLOYEES.—The officers and employees of 
the agency shall be— 
"(A) subject to the Ethics in Government Act of 1978 (2 
U.S.C. 701 et seq.); 
"(B) considered officers or employees of the United States 
.
= / 
for the purposes of sections 201 through 203, and sections 
.- 
• .' :'r 
205 through 209, of title 18, United States Code; and 
"(C) subject to section 5315 of title 5, United States Code. 
"(3) DELEGATION.—The powers of the Chairman as chief 
executive officer necessary for day to day management may be 
exercised and performed by the Chairman through such other 
officers and employees of the Administration as the Chairman 
shall designate, except that the Chairman may not delegate 
powers specifically reserved to the Chairman by this Act with-
out Board approval. 
"(d) FUNDING.—The operations of the Farm Credit Administra-
tion, and the salaries of members of the Board and employees of the 
Administration, shall be funded and paid for from the fund created 
under section 5.15.". 
101 STAT. 1660 
PUBLIC LAW 100-233—JAN. 6, 1988 
(d) ADVISORY COMMITTEES.—Section 5.12 (12 U.S.C. 2246) is 
amended by inserting ", subject to the approval of the Board," after 
"Chairman of the Board". 
12 use 2252. 
(e) POWERS.—Section 5.17(a) (12 U.S.C. 2251(a)) is amended— 
(1) in paragraph (2), by striking out the last sentence and 
inserting in lieu thereof the following new sentence: "The Farm 
Credit Administration Board, after consultation with the 
respective boards of directors of the affected banks, may require 
two or more banks operating under the same or different titles 
to merge if the Board determines that one of such banks has 
failed to meet its outstanding obligations."; and 
(2) in paragraph (15)— 
(A) by inserting "by the Board" after "determined"; and 
! ;" 
(B) by adding at the end thereof the following new sen-
* 
tence: "The Board may not delegate its responsibilities 
under this paragraph.". 
(f) SPECIAL DISTRICT RULE.—Section 2.15 (12 U.S.C. 2096) is 
amended by adding at the end thereof the following new subsection: 
"(c)(1) On request, the Farm Credit Administration Board may 
permit a production credit association, located in a district in which 
there are no more than three such associations, notwithstanding 
any territorial limitation in the charter of such association, to 
provide credit and technical assistance to any borrower who is 
denied credit by a production credit association that— 
"(A) has an adjoining service territory; and 
"(B) is located in the same district, 
if the Board determines that one of the production credit gissocia-
tions in the district is unduly restrictive in the application of credit 
standards. 
"(2) If the Farm Credit Administration Board approves the exten-
sion of credit and technical assistance under paragraph (1), the 
association shall approve or deny the application for credit within 90 
days after the receipt of the application from the borrower.". 
(g) CONFORMING AMENDMENT.—Section 4.12 (12 U.S.C. 2183) is 
amended by inserting "Board" after "Farm Credit Administration" 
each place it appears in subsection (b) other than in clause (5) of the 
first sentence. 
SEC. 432. FARM CREDIT ADMINISTRATION ORGANIZATION. 
i 
(a) OPERATING EXPENSES FUND.—Section 5.15 (12 U.S.C. 2249) is 
amended to read as follows: 
12 u s e 2250. 
"SEC. 5.15. FARM CREDIT ADMINISTRATION OPERATING EXPENSES FUND. 
"(a) DETERMINATIONS REQUIRED.— 
"(1) GENERALLY.—Prior to the first day of each fiscal year, the 
Farm Credit Administration shall determine— 
"(A) the cost of administering this Act for the subsequent 
fiscal year, including expenses for official functions; 
"(B) the amount of assessments that will be required to 
pay such administrative expenses, taking into consideration 
the funds contained in the Administrative Expense Ac-
. f.. 
count, and maintain a necessary reserve; and 
"(C) the amount of assessments that will be required to 
r 
pay the costs of supervising and examining the Mortgeige 
Corporation established under title VIII. ,.., . ^ 
. ,-^i.,, 
PUBLIC LAW 100-233—JAN. 6, 1988 
101 STAT. 1661 
"(2) APPORTIONMENTS.—On the basis of the determinations 
made under paragraph (1), the Farm Credit Administration 
shall— 
"(A) apportion the amount of such assessment among the 
System institutions on a basis that is determined to be 
equitable by the Farm Credit Administration; 
"(B) assess and collect such apportioned amounts from 
^ • 
time to time during the fiscal year as determined necessary 
by the Farm Credit Administration; and 
"(C) assess and collect from the Mortgage Corporation, 
from time to time during the fiscal year, the amount speci-
fied in paragraph dXC). 
"(b) DEPOSITS INTO FUND.— 
"(1) TREASURY FUND.—The amounts collected under subsec-
tion (a) shall be deposited in the Farm Credit Administration 
Administrative Expense Account. The Expense Account shall be 
maintained in the Treasury of the United States and shall be 
available, without regard to the Balanced Budget and Emer-
gency Deficit Control Act of 1985 (2 U.S.C. 901 note) or any 
other law, to pay the expenses of the Farm Credit Administra-
tion. 
"(2) NONGOVERNMENT FUNDS.—The funds contained in the 
Expense Account shall not be construed to be Federal Govern-
ment funds or appropriated moneys. 
"(3) INVESTMENT.— 
"(A) AUTHORITY.—On request of the Farm 
Credit 
Administration, the Secretary of the Treasury shall invest 
and reinvest such amounts contained in the Expense Ac-
count as, in the determination of the Farm Credit Adminis-
tration, are in excess of the amounts necessary for current 
expenses of the Farm Credit Administration. 
(B) RETURNS.—All income earned from such investments 
and reinvestments shall be deposited in the Expense 
i^A ^ 
Account. 
"(C) TYPE.—Such investments shall be made in public 
debt securities with maturities suitable to the needs of the 
Expense Account, as determined by the Farm Credit 
Administration, and bearing interest at rates determined 
by the Secretary of the Treasury, taking into consideration 
current market yields on outstanding marketable obliga-
tions of the United States of comparable maturities.". 
(b) EXAMINATION OF FEDERAL LAND BANK ASSOCIATIONS.—Section 
5.19(a) (12 U.S.C. 2253(a)) is amended— 
12 USC 2254. 
(1) in the first sentence, by striking out "Each" and inserting 
I 
in lieu thereof "Except for Federal land bank £issociations, 
t 
each"; 
(2) by inserting after the first sentence the following new 
sentence: "Each Federal land bank association shall be exam-
ined by Farm Credit Administration examiners at such times as 
the Farm Credit Administration Board may determine, except 
that each such association shall be examined at least once every 
5 years."; and 
(3) by striking out "the Chairman o f each place it appears in 
such subsection. 
(c) POWER TO REMOVE DIRECTORS AND OFFICERS.—Part C of title V 
(12 U.S.C. 2260) is amended by adding at the end thereof the 
following new section: 
101 STAT. 1662 
PUBLIC LAW 100-233—JAN. 6, 1988 
12 use 2274. 
"SEC. 5.38. POWER TO REMOVE DIRECTORS AND OFFICERS. 
"Notwithstanding any other provision of this Act, a farm credit 
district board, bank board, or bank officer or employee shall not 
remove any director or officer of any production credit eissociation or 
Federal land bank association,". 
12 use 2071 
SEC. 433. REASSIGNMENT OF ASSOCIATIONS TO ADJOINING DISTRICTS. 
(a) PETITION OF BANK.—Notwithstanding any other provision of 
this Act, effective for the 12-month period beginning on the date of 
enactment of the Agricultural Credit Act of 1987, each Federal land 
bank association or production credit sissociation, whose chartered 
territory adjoins the territory of another district, may petition the 
Farm Credit Administration to amend the charters of the associa-
tion and the adjoining district bank to provide that the territory of 
the association is part of the adjoining district. 
(b) REQUIREMENTS OF PETITION.—To be considered under this sec-
tion, the petition must be signed by not less than 15 percent of the 
stockholders of the association. Only one such petition may be filed 
by an association under this subsection. 
(c) FCA ACTION.—The Farm Credit Administration shall take any 
action necessary— 
(1) to amend the charters of the association and the district 
bank; and 
(2) to incorporate the petitioning association into the adjoin-
ing district if the reassignment is approved by— 
(A) a majority of the stockholders of the association 
voting, in person or by proxy, at a duly authorized stock-
holders' meeting held for such purpose; 
(B) the board of directors of such adjoining district; 
(C) the Assistance Board; and 
(D) the Farm Credit Administration Board. 
SEC. 434. CONFORMING AMENDMENT. 
Effective 6 months after the date of the enactment of this Act, 
section 1.2 (12 U.S.C. 2002) is amended to read as follows: 
"SEC. 1.2. THE FARM CREDIT SYSTEM. 
"The Farm Credit System shall include the the Farm Credit 
Banks, the Federal land bank associations, the production credit 
associations, the banks for cooperatives, and such other institutions 
as may be made a part of the System, all of which shall be chartered 
.,.^.. - , 
by 
and 
subject 
to 
the 
regulation 
by 
the 
Farm 
Credit 
' ' " 
Administration.". 
TITLE V—STATE MEDIATION PROGRAMS 
Subtitle A—Matching Grants for State 
Mediation Programs 
7 use 5101. 
SEC. 501. QUALIFYING STATES. 
(a) IN GENERAL.—A State is a qualifying State if the Secretary of 
Agriculture (hereinafter in this subtitle referred to as the "Sec-
retary") determines that the State has in effect an agricultural loan 
mediation program that meets the requirements of subsection (c). 
PUBLIC LAW 100-233—JAN. 6, 1988 
101 STAT. 1663 
Qy) DETERMINATION BY SECRETARY.—Within 15 days after the Sec-
retary receives from the Governor of a State, a description of the 
agricultural loan mediation program of the State and a statement 
certifying that the State has met all of the requirements of subsec-
tion (c), the Secretary shall determine whether the State is a 
qualifying State. 
(c) REQUIREMENTS OF STATE PROGRAMS.—Within 15 days after the 
Secretary receives a description of a State agricultural loan medi-
ation program, the Secretary shall certify the State as a qualifying 
BI 
; 
State if the State program— 
(1) provides for mediation services to be provided to producers, 
and their creditors, that, if decisions are reached, result in 
mediated, mutually agreeable decisions between parties under 
an agricultural loan mediation program; 
(2) is authorized or administered by an agency of the State 
government or by the Governor of the State; 
(3) provides for the training of mediators; 
(4) provides that the mediation sessions shall be confidential; 
and 
(5) ensures that all lenders and borrowers of agricultural 
loans receive adequate notification of the mediation progrsmi, 
SEC. 502. MATCHING GRANTS TO STATES. 
7 USC 5102. 
(a) MATCHING GRANTS.—Within 60 days after the Secretary cer-
tifies the State as a qualifying State under section 50103), the 
Secretary shall provide financial assistance to the State, in accord-
ance with subsection O
t
>
)
, for the operation and administration of the 
agricultural loan mediation program. 
0)) AMOUNT OF GRANT.— 
(1) IN GENERAL.—Subject to paragraph (2), the Secretary shall 
4: 
pay to a State under subsection (a) not more than 50 percent of 
the cost of the operation and administration of the agricultural 
loan mediation program within the State. 
(2) MAXIMUM AMOUNT.—The Secretary shall not pay more 
v 
-. 
than $500,000 per year to a single State under subsection (a). 
(c) USE OF GRANT.—Each State that receives an amount paid 
under subsection (a) shall use that amount only for the operation 
and administration of the agricultural loan mediation program of 
the State. 
(d) PENALTY.—If the Secretary determines that a State has not 
complied with subsection (c), such State shall not be eligible for 
additional financial assistance under this subtitle. 
SEC. 503. PARTICIPATION OF FEDERAL AGENCIES. 
7 USC 5103. 
(a) DUTIES OF THE SECRETARY OF AGRICULTURE.— 
(1) IN GENERAL.—The Secretary, with respect to each program 
under the jurisdiction of the Secretary that makes, guarantees, 
or insures agricultural loans— 
(A) shall prescribe rules requiring each such program to 
Regulations. 
participate in good faith in any State agricultural loan 
mediation program; 
(B) shall, on the date of the enactment of this Act, 
participate in agricultural loan mediation programs; and 
(C) shall— 
(i) cooperate in good faith with requests for informa-
tion or analysis of information made in the course of 
101 STAT. 1664 
PUBLIC LAW 100-233—JAN. 6, 1988 
mediation under any agricultural loan mediation pro-
gram described in section 501; and 
(ii) present and explore debt restructuring proposals 
advanced in the course of such mediation. 
^ 
(2) NoNBiNDiNG ON SECRETARY.—The Secretary shall not be 
bound by any determination made in a program described in 
paragraph (1) if the Secretary has not agreed to such 
determination. 
Regulations. 
(b) DUTIES OF THE F A R M 
CREDIT ADMINISTRATION.—The F a r m 
Credit Administration shall prescribe rules requiring the institu-
tions of the Farm Credit System— 
(1) to cooperate in good faith with requests for information or 
analysis of information made in the course of mediation under 
any agricultural loan mediation program described in section 
~r 501; and 
(2) to present and explore debt restructuring proposals 
advanced in the course of such mediation. 
7 u s e 5104. 
SEC. 504. REGULATIONS. 
"'" " '' 
'' ' ''^" '''^'^ ' '^"'"^ *'^'" '' 
Within 150 days after the date of the enactment of this Act, the 
Secretary and the Farm Credit Administration shall prescribe such 
regulations as may be necessary to carry out this subtitle. 
7 u s e 5105. 
SEC. 505. REPORT. 
Not later than January 1,1990, the Secretary of Agriculture shall 
report to Congress on— 
(1) the effectiveness of the State agricultural lo£ui mediation 
programs receiving matching grants under this subtitle; 
(2) recommendations for improving the delivery of mediation 
services to producers; and 
^ 
(3) the savings to the States as a result of having an agricul-
tural loan mediation program. 
7 u s e 5106. 
SEC. 506. AUTHORIZATION OF APPROPRIATIONS. 
There are authorized to be appropriated to carry out this subtitle 
$7,500,000 for each of the fiscal years 1988 through 1991. 
Subtitle B—Waiver of Mediation Rights 
SEC. 511. WAIVER OF MEDIATION RIGHTS BY FARM CREDIT SYSTEM 
BORROWERS. 
r.r >»,: 
Part C of Title IV (12 U.S.C. 2151 et seq.) is amended by inserting 
after the section added by section 107 the following new section: 
12 u s e 2202e. 
"SEC. 4.14E. WAIVER OF MEDIATION RIGHTS BY BORROWERS. 
"No System institution may make a loan secured by a mortgage 
or lien on agricultural property to a borrower on the condition that 
•' 
' 
the borrower waive any right under the agricultural loan mediation 
program of any State.''. 
SEC. 512. WAIVER OF MEDIATION RIGHTS BY FMHA BORROWERS. 
Subtitle D of the Consolidated Farm and Rural Development Act 
(7 U.S.C. 1981 et seq.) is amended by adding after the section added 
by section 619 of this Act the following new section: 
PUBLIC LAW 100-233—JAN. 6, 1988 
101 STAT. 1665 
"SEC. 358. WAIVER OF MEDIATION RIGHTS BY BORROWERS. 
7 USC 2006. 
"The Secretary may not make, insure, or guarantee any farmer 
program loan to a farm borrower on the condition that the borrower 
waive any right under the agricultural loan mediation program of 
any State.". 
TITLE VI—FARMERS HOME 
ADMINISTRATION LOANS 
SEC. 601. AMENDMENT OF CONSOLIDATED FARM AND RURAL DEVELOP-
MENT ACT. 
Except as otherwise specifically provided, whenever in this title 
an amendment or repeal is expressed in terms of an amendment to, 
or repeal of, a section or other provision, the reference shall be 
considered to be made to a section or other provision of the Consoli-
dated Farm and Rural Development Act (7 U.S.C. 1921 et seq.). 
x 
SEC. 602. DEFINITIONS. 
Section 343 (7 U.S.C. 1991) is amended— 
(1) by inserting "(a)" after the section designation; and 
(2) by adding at the end thereof the following new subsection: 
"(b) As used in sections 307(e), 331D, 335 (e) and (f), 338(f), 351(h), 
352 db) and (c), 353, and 357: 
"(1) The term 'borrower' means any farm borrower who has 
outstanding obligations to the Secretary under any farmer pro-
gram loan, without regard to whether the loan has been acceler-
ated, but does not include any farm borrower all of whose loans 
and accounts have been foreclosed on or liquidated, voluntarily 
or otherwise. 
"(2) The term 'loan service program' means, with respect to a 
farmer program borrower, a primary loan service program or a 
preservation loan service program. 
"(3) The term 'primary loan service program' means— 
"(A) loan consolidation, rescheduling, or reamortization; 
^" 
"(B) interest rate reduction, including the use of the 
limited resource program; 
"(C) loan restructuring, including deferral, set aside, or 
writing down of the principal or accumulated interest 
charges, or both, of the loan; or 
"(D) any combination of actions described in subpara-
graphs (A), (B), and (C). 
"(4) The term 'preservation loan service program' means— 
' 
"(A) homestead retention as authorized under section 
352; and 
"(B) a leaseback or buyback of farmland authorized under 
section 335.". 
SEC. 603. SECURITY FOR FMHA REAL ESTATE LOANS. 
Section 307(c) (7 U.S.C. 1927(c)) is amended by adding at the end 
thereof the following new sentence: "A borrower may use the same 
collateral to secure two or more loans made, insured, or guaranteed 
under this subtitle, except that the outstanding amount of such 
loans may not exceed the total value of the collateral so used.". 
101 STAT. 1666 
PUBLIC LAW 100-233—JAN. 6, 1988 
SEC. 604. ADDITIONAL COLLATERAL. 
Section 307 (7 U.S.C. 1927) is amended by adding at the end 
thereof the following new subsection: 
"(e) The Secretary may not— 
"(1) require any borrower to provide additional collateral to 
secure a farmer program loan made or insured under this title, 
if the borrower is current in the pa)mient of principal and 
interest on the loan; or 
"(2) bring any action to foreclose, or otherwise liquidate, any 
such loan as a result of the failure of a borrower to provide 
additional collateral to secure a loan, if the borrower was 
current in the payment of principal and interest on the loan at 
the time the additional collateral was requested.". 
SEC. 
6
0
5
. 
NOTICE 
OF 
LOAN 
SERVICE PROGRAMS. 
Subtitle D (7 U.S.C. 1981 et seq.) is amended by inserting after 
section 331C the following new section: 
7 use 1981d. 
"SEC. 331D. NOTICE OF LOAN SERVICE PROGRAMS. 
"(a) REQUIREMENT.—The Secretary shall provide notice by cer-
tified mail to each borrower who is at least 180 days delinquent in 
the pa3anent of principal or interest on a loan made or insured 
under this title. 
"0)) CONTENTS.—The notice required under subsection (a) shall— 
"(1) include a summary of all primary loan service programs, 
preservation loan service programs, and appeal procedures, 
including the eligibility criteria, and terms and conditions of 
such programs and procedures; 
"(2) include a summary of the manner in which the borrower 
may apply, and be considered, for all such programs, except that 
the Secretary shall not require the borrower to select among 
such programs or waive any right in order to be considered for 
any program carried out by the Secretary; 
'(3) advise the borrower regarding all filing requirements and 
any deadlines that must be met for requesting loan servicing; 
(4) provide any relevant forms, including applicable response 
forms; 
"(5) advise the borrower that a copy of regulations is available 
on request; and 
"(6) be designed to be readable and understandable by the 
borrower. 
"(c) CONTAINED IN REGULATIONS.—All notices required by this 
section shall be contained in the regulations implementing this title. 
"(d) TIMING.—The notice described in subjection (b) shall be 
provided— 
"(1) at the time an application is made for participation in a 
loan service program; 
"(2) on written request of the borrower; and 
' 
"(3) before the earliest of— 
"(A) initiating any liquidation; 
"(B) requesting the conveyance of security property; 
* 
"(C) accelerating the loan; 
"(D) repossessing property; 
"(E) foreclosing on property; or 
' 
"(F) taking any other collection action. 
"(e) 
CONSIDERATION OF BORROWERS FOR LOAN SERVICE PRO-
GRAMS.—The Secretary shall consider a farmer program borrower 
PUBLIC LAW 100-233—JAN. 6, 1988 
101 STAT. 1667 
for all loan service programs if, within 45 days after receipt of the 
notice required in this section, the borrower requests such consider-
ation in writing. In considering a borrower for loan service pro-
grams, the Secretary shall place the highest priority on the 
preservation of the borrower's farming operations.". 
SEC. 606. PLANTING AND PRODUCTION HISTORY GUIDELINES. 
Subtitle D (7 U.S.C. 1981 et seq.) is amended by inserting after the 
section added by section 605 of this Act the following new section: 
"SEC. 331E. PLANTING AND PRODUCTION HISTORY GUIDELINES. 
"The Secretary shall ensure that appropriate procedures, includ-
ing to the extent practicable onsite inspections, or use of county or 
State yield averages, are used in calculating future yields for an 
applicant for a loan, when an accurate projection cannot be made 
because the applicant's past production history has been affected by 
natural disasters declared under the Disaster Relief Act of 1974.". 
SEC. 607. COUNTY COMMITTEES. 
Section 332(a) (7 U.S.C. 1982(a)) is amended— 
(1) by inserting "(1)" after the subsection designation; 
(2) in the second sentence, by striking out "deriving the 
principal part of their income from farming"; 
(3) by inserting before the period at the end thereof the 
following: "before conducting any county committee election. 
The Secretary shall publish any regulation promulgated under 
this subsection"; and 
(4) by adding at the end thereof the following new parsigraphs: 
"(2) The Secretary shall ensure that farmers have— 
"(A) at least 45 days to submit nominations following general 
public notice of any procedure by which to submit nominations 
for county committee elections in each county; and 
"(B) at least 30 days after general public notice of an election 
in each county, before the election is held. 
"(3) Any farmer eligible for a loan made or insured under subtitle 
A shall be eligible to serve as an elected or appointed county 
committee member, subject to section 336(c). 
"(4) Not more than one farmer eligible for a loan made or insured 
under subtitle A may serve on a county committee at the same time. 
"(5) For purposes of this subsection, the term 'farmer' shall in-
clude the spouse of a farmer otherwise eligible under this section.". 
SEC. 608. ADMINISTRATIVE APPEALS. 
Section 333B (7 U.S.C. 1983b) is amended by adding at the end 
thereof the following new subsections: 
"(d) The Secretary shall establish and maintain within the 
Farmers Home Administration a national appeals division, which 
shall consist of a director, hearing officers, and such other personnel 
necessary to the administration of the division, all of whom shall be 
employees of the Farmers Home Administration who shall have no 
duties other than hearing and determining formed appeals arising 
under this section. 
"(eXl) Hearing officers within the appeals division in a State shall 
hear and determine all formal appeals of decisions which are subject 
to this section and are made by county supervisors, county com-
mittees, district directors. State directors, or other employees of the 
Secretary working in the State. Such hearings shall be held in the 
State and local 
governments. 
Disaster 
assistance. 
7 u s e 1981e. 
Regulations. 
101 STAT. 1668 
PUBLIC LAW 100-233—JAN. 6, 1988 
State of residence of the appellant. The decisions of hearing officers 
shall, (m the request and election of the borrower, be reviewed by 
the State director of the State of residence of the appellant or shall 
be referred directly to the director of the national appeals division. 
If the borrower elects review by the State director, the decisions of 
the State director shall, on request of the borrower, be subject to 
further review by the director of the national appeals division. 
"(2) Each hearing before a hearing officer in the appeals division 
shall be recorded verbatim by voice recorder, stenographer, or other 
1
^
, 
method, and a transcript of the hearing, together with all docu-
ments and evidence submitted, shall be made available to the 
appellant, on request, if the decision of the hearing officer is ap-
pealed. The record of the hearing shall consist of copies of all 
documents and other evidence presented to the hearing officer and 
the transcript of the hearing. 
"(3) If a decision of a hearing officer is appealed, the hearing 
officer shall certify the record and deliver or otherwise provide the 
certified record to the director of the national appeals division and 
the Secretary. The national appeals division shall base its review of 
the hearing on the transcript of the hearing and the evidence 
presented to the hearing officer. 
"(f) All hearing officers within the national appeals division shall 
report to the principal officers of the division, and shall not be under 
the direction or control of, or receive administrative support (except 
. y- 
on a reimbursable basis) from, offices other than the national 
appeals division. 
"(g) The Secretary shall ensure that the national appeals division 
has resources and personnel adequate to hear and determine all 
initial appeals in the State of residence of the appellant on a timely 
basis, and that hearing officers receive training and retraining 
adequate for their duties on initial employment and at regular 
intervals thereafter. The Secretary may expend sums available in 
the Farmers Home Administration's various revolving insurance 
funds for the purposes of this subsection in the event that necessary 
appropriations sufficient to fund the division are not available.". 
7 use 1983c. 
SEC. 609. BORROWERS* RIGHT TO INFORMATION. 
Subtitle D (7 U.S.C. 1981 et seq.) is amended by inserting after 
section 333B the following new section: 
"SEC. 333C. PROVISION OF INFORMATION TO BORROWERS. 
"(a) IN GENERAL.—On request of a farm borrower of a farmer 
program loan, the Secretary shall make available to the borrower 
the following: 
"(1) One copy of each document signed by the borrower. 
"(2) One copy of each appraisal performed with respect to the 
loan. 
"(3) All documents that the Secretary otherwise is required to 
provide to the borrower under any law or rule of law in effect on 
the date of such request. 
"(b) (DoNSTRUCTiON OF SECTION.—Subsoction (a) shall not be con-
strued to supersede any duty imposed on the Secretary by any law 
or rule of law in effect immediately before the date of the enactment 
of this section, unless such duty is in direct conflict with any duty 
imposed by subsection (a).".,, ^^^^ 
^ ,„,^ .,^ ^.„, ^..*...... v.«5is ..?^^ 
PUBLIC LAW 100-233—JAN. 6, 1988 
101 STAT. 1669 
SEC. 610. DISPOSITION AND LEASING OF FARMLAND. 
(a) CLASSIFICATION OF PROPERTY.—Section 335(c) (7 U.S.C. 1985(c)) 
is amended— 
(1) by inserting "(D" after the subsection designation; 
(2) by inserting after the first sentence the following new 
sentence: "The County Committee shall classify or reclassify 
real property (including real property administered by the Sec-
retary on the date of the enactment of this sentence) that is 
farmland, as being suitable for farming operation for such 
disposition unless the property, including property subdivided 
in accordance with subsection (eX5), cannot be used to meet any 
of the purposes of section 303 (including being used as a start-up 
or add-on parcel of farmland)."; and 
(3) by adding at the end thereof the following new paragraph: 
"(2) Notwithstanding any other provision of law, the Secretary 
shall sell suitable farmland administered under this subtitle to 
operators (as of the time immediately after such contract for sale or 
lease is entered into) of not larger than family sized farms, as 
determined by the county committee. In selling such land, the 
county committee shall— 
"(A) grant a priority to persons eligible for loans under 
subtitle A, including individuals approved for, but who, £is of the 
date of the enactment of this paragraph, have not yet received, 
such loans; 
"(B) offer suitable land at a price not greater than that which 
reflects the appraised market value of such land; 
"(C) select from among qualified applicants the applicant who 
has the greatest need for farm income and best meets the 
criteria for eligibility to receive loans under subtitle A; and 
"(D) publish or caused to be published three consecutive 
weekly announcements at least twice annually of the availabil-
ity of such farmland, in at least one newspaper that is widely 
circulated in the county in which the land is located until the 
property is sold.". 
(b) DISPOSITION AND LEASING.—Section 335(e) (7 U.S.C. 1985(e)) is 
amended— 
(1) by striking out paragraph (1) emd inserting in lieu thereof 
the following new paragraph: 
"(IXAXi) During the 180-day period beginning on the date of 
acquisition, or during the applicable period under State law, the 
Secretary shall allow the borrower from whom the Secretary ac-
quired real property used to secure any loan made to the borrower 
under this title (hereinafter referred to in this paragraph as the 
'borrower-owner') to purchase or lease such property. 
"(ii) The period for the purchase or lease of real property de-
scribed under clause (i), by a person described in clauses (i) or (ii) of 
subparagraph (C), shall expire 190 days after the date of acquisition, 
or after the applicable period under State law. 
"(iii) The rights regarding the purch£ise or lease of real property 
provided by this paragraph and accorded a person described in 
subparagraph (C) may be freely and knowingly waived by such 
person. 
"(B) Any purchase or lease under subparagraph (A) shall be on 
such terms and conditions as are established in regulations promul-
gated by the Secretary. 
Contracts. 
Public 
information. 
101 STAT. 1670 
PUBLIC LAW 100-233—JAN. 6, 1988 
"(C) The Secretary shall give preference in the sale or lease, with 
option to purchase, of property that has been foreclosed, purchased, 
redeemed, or otherwise acquired by the Secretary to persons in the 
following order: 
"(i) The immediate previous borrower-owner of the acquired 
property, 
"(ii) If actively engaged in farming— 
"(I) the spouse or child of the previous borrower-owner; or 
"(II) a stockholder in the corporation, if the borrower-
owner is a corporation held exclusively by members of the 
same family, 
"(iii) The immediate previous family size farm operator of 
such acquired property. 
"(iv) Operators (as of the time immediately after such sale or 
lease is entered into) of not larger than family-size farms. 
Indians. 
"(DXD If— 
"(I) the real property described in subparagraph (AXi) is 
located within an Indian reservation, 
"(II) the borrower-owner is the Indian tribe that has jurisdic-
tion over the reservation in which the real property is located or 
the borrower-owner is a member of such Indian tribe, and 
"(III) the period in which the right to purchase or lease such 
real property provided in clauses (i) and (ii) of subparagraph (A) 
has expired, 
the Secretary shall dispose of or administer the property only as 
provided for in this subparagraph. 
"(ii) For purposes of this subparagraph, the term 'Indian reserva-
tion' means all land located within the limits of any Indian reserva-
tion under the jurisdiction of the United States, notwithstanding the 
issuance of any patent, and, including rights-of-way 
running 
through the reservation; trust or restricted land located within the 
boundaries of a former reservation of a federally recognized Indian 
tribe in the State of Oklahoma; or all Indian allotments the Indian 
titles to which have not been extinguished if such allotments are 
subject to the jurisdiction of a federally recognized Indian tribe, 
"(iii) The Secretary shall, within 90 days after the expiration of 
the period for which the right to purchase or lease real property 
described in clause (i) is provided in clauses (i) and (ii) of subpara-
graph (A), afford an opportunity to purchase or lease the real 
property in accordance with the order of priority established under 
clause (iv) by the Indian tribe having jurisdiction over the Indian 
reservation within which the real property is located or, if no order 
of priority is established by such Indian tribe under clause (iv), in 
the following order: 
"(I) to an Indian member of the Indian tribe that has jurisdic-
tion over the reservation within which the real property is 
located; 
"(II) to an Indian corporate entity; 
"(III) to such Indian tribe, 
"(iv) The governing body of any Indian tribe having jurisdiction 
over an Indian reservation may revise the order of priority provided 
in clause (iii) under which lands located within such reservation 
shall be offered for purchase or lease by the Secretary under clause 
(iii) and may restrict the eligibility for such purchase or lease to— 
"(I) persons who are members of such Indian tribe, 
PUBLIC LAW 100-233—JAN. 6, 1988 
101 STAT. 1671 
"(II) Indian corporate entities that are authorized by such 
Indian tribe to lease or purchase lands within the boundaries of 
such reservation, or 
"(III) such Indian tribe itself. 
"(v) If real property described in clause (i) is not purchased or 
leased under clause (iii) and the Indian tribe having jurisdiction over 
the reservation within which the real property is located is unable 
to purchase or lease the real property, the Secretary shall transfer 
the real property to the Secretary of the Interior who shall admin-
ister the real property as if the real property were held in trust by 
the United States for the benefit of such Indian tribe. From the 
Contracts. 
rental income derived from the lease of the transferred real prop- 
State and local 
erty, and all other income generated from the transferred real 
lax^™"*^"*^ 
property, the Secretary of the Interior shall pay those State, county, 
municipal, or other local taxes to which the transferred real prop-
erty was subject at the time of acquisition by the Secretary, until the 
earlier of— 
"(I) the expiration of the 4-year period beginning on the date 
on which the real property is so transferred, or 
"(II) such time as the lands are transferred into trust pursu-
ant to clause (viii). 
"(vi) At any time any real property is transferred to the Secretary 
of the Interior under clause (v), the Secretary of Agriculture shall be 
deemed to have no further responsibility under this Act for collec-
tion of any amounts with regard to the farm program loan which 
,, 
had been secured by such real property, nor with regard to any lien 
arising out of such loan transaction, nor for repayments of any 
amount with regard to such loan transactions or liens to the Treas-
ury of the United States, and the Secretary of the Interior shall be 
deemed to have succeeded to all right, title and interest of the 
Secretary of Agriculture in such real estate arising from the farm 
program loan transaction, including the obligation to remit to the 
Treasury of the United States, in repajmient of the original loan, 
those amounts provided in clause (vii). 
"(vii) After the pajrment of any taxes which are required to be 
paid under clause (v), all remaining rental income derived from the 
lease of the real property transferred to the Secretary of the Interior 
under clause (v), and all other income generated from the real 
property transferred to the Secretary of the Interior under clause 
(v), shall be deposited as miscellaneous receipts in the Treasury of 
the United States until the amount deposited is equal to the lesser 
of— 
"(I) the amount of the outstanding lien of the United States 
against such real property, as of the date the real property was 
acquired by the Secretary; 
' (II) the fair market value of the real property, as of the date 
of the transfer to the Secretary of the Interior; or 
"(III) the capitalized value of the real property, as of the date 
of the transfer to the Secretary of the Interior, 
"(viii) When the total amount that is required to be deposited 
under clause (vii) with respect to any real property has been depos-
ited into the Treasury of the United States, title to the real property 
shall be held in trust by the United States for the benefit of the 
Indian tribe having jurisdiction over the Indian reservation within 
which the real property is located. 
"(ix) Notwithstanding any other clause of this subparagraph, the 
Indian tribe having jurisdiction over the Indian reservation within 
101 STAT. 1672 
PUBLIC LAW 100-233—JAN. 6, 1988 
which the real property described in clause (i) is located may, at any 
time after the real property has been transferred to the Secretary of 
the Interior under clause (v), offer to pay the remaining amount on 
the lien, or the fair market value of the real property, whichever is 
less. Upon payment of such amount, title to such real property shall 
be held by the United States in trust for the tribe and such trust or 
restricted lands that have been acquired by the Secretary under 
foreclosure or voluntary trsuisfer under a loan made or insured 
under this title and transferred to an Indian person, entity, or tribe 
under the provisions of this subparagraph shall be deemed to have 
never lost trust or restricted status. 
"(E) The rights provided in this subsection shall be in addition to 
any such right of first refusal under the law of the State in which 
the property is located."; 
(2) in paragraph (3)— 
(A) by striking out subparagraph (A); 
^,, ^ 
(B) by redesignating subparagraphs (B), (C), and (D), as 
' ' ' 
subparagraphs (A), (B), and (C), respectively; 
(C) in subparagraph (B) (as so redesignated), by striking 
''' 
out "give special consideration to a previous owner or 
operator of such land if such owner or operator" and insert-
ing in lieu thereof "determine if the lessee"; and 
(D) by adding at the end thereof the following new 
subparagraph: 
Contracts. 
"(D) The Secretary may enter into a contract with a borrower of a 
farmer program loan made or insured under this title, to provide for 
the subsequent sale or lease of land that will be acquired from the 
borrower in the future, before the Secretary takes possession of such 
land."; 
(3) by amending subparagraph (A) of paragraph (5) to read as 
follows: 
"(A) If the Secretary determines that farmland administered 
under this chapter is not suitable for sale or lease to persons eligible 
for a loan made or insured under subtitle A because such farmland 
is in a tract or tracts that the Secretary determines to be larger than 
that necessary for such eligible persons, the Secretary shall, to the 
greatest extent practicable, subdivide such land into tracts suitable 
for sale under subsection (c). Such land shall be subdivided into 
parcels of land the shape and size of which are suitable for farming, 
the value of which shall not exceed the individual loan limits as 
prescribed under section 305."; 
(4) in paragraph (6)— 
(A) by striking out "and" at the end of subparagraph (A); 
•^'" 
(B) by striking out the period at the end of subparagraph 
(B) and inserting in lieu thereof "; and"; and 
(C) by adding at the end thereof the following new 
subparagraph: 
i 
"(C) provide written notice reasonably calculated to 
inform the immediate previous owner or immediate pre-
vious family-size farm operator of such farmland, of the 
availability of such farmland."; and 
(5) by adding at the end thereof the following new paragraphs: 
"(9) Denials of applications for or disputes over terms and condi-
tions of a lease or purchase agreement under this section are 
apjpealable under section 333B. 
(10) In the event of any conflict between any provision of this 
subsection and any provision of the law of any State providing a 
PUBLIC LAW 100-233—JAN. 6, 1988 
101 STAT. 1673 
right of first refusal to the owner of farmland or the operator <
r
f a 
farm before the sale or lease of Ismd to any other person, such 
provision of State law shall prevail.". 
SEC. 611. INCOME RELEASE. 
Subsection (f) of section 335 (7 U.S.C. 1985(f)) is amended to read as 
follows: 
"(fKD As used in this subsection, the term 'normal income s«ni- 
^' 
rity' means all security not considered basic security, including 
crops, livestock, poultry products, Agricultural Stabilization and 
Conservation Service payments and Commodity Credit Corporation 
payments, and other property covered by Farmers Home Adminis-
tration liens that is sold in conjunction with the operation of a farm 
or other business, but shall not include any equipment (including 
fixtures in States that have adopted the Uniform Clommercial Code), 
or foundation herd or flock, that is the basis of the farming or other 
operation, and is the bsisic security for a Farmers Home Administra-
tion farmer program loan. 
"(2) The Secretary shall release from the normal income security 
provided for such loan an amount sufficient to pay for the essential 
household and farm operating expenses of the borrower, until such 
time £is the Secretary accelerates such loan. 
"(3) A borrower whose account was accelerated on or after Novem-
ber 1, 1985, and on or before May 7, 1987, but not thereafter 
foreclosed on or liquidated, shall be entitled to the release of secu-
rity income for a period of 12 months, to pay the essential household 
and farm operating expenses of such borrower in an amount not to 
exceed $18,000 over 12 months, if such borrower— 
"(A) as of October 30, 1987, continued to be actively engaged 
in the farming operations for which the Secretary had made the 
farmer program loan; and 
"(B) as of the deadline for responding to the notice provided 
for under paragraph (5), requests restructuring of such loans 
pursuant to section 353. 
"(4) The county committee in the county in which borrower's land 
is located shall determine whether the borrower has complied with 
the requirements of paragraph (3XA). 
"(5XA) Within 45 days after the date of the enactment of this 
subsection, the Secretary shall provide to the borrowers described in 
paragraph (3) notice by certified mail of the right of such borrowers 
to apply for the benefits under such paragraph. 
"(B) Belesises under such paragraph shall be made to qualified 
borrowers who have responded to the notice within 30 days after 
receipt. 
"(C) Within 12 months after a borrower has requested restructur-
ing under section 353, the Secretary shall make a final determina-
tion on the request. Notwithstanding the 12-month limitation 
provided for in paragraph (3), releases shall continue to be made to 
the borrower until a denial or dismissal of the application of the 
borrower for restructuring under section 353 is made. The amount 
of essential household and farm operating expenses which may be 
released to any borrower eligible for such releases after 12 months 
may exceed $18,000, by an amount proportionate to the period of 
time beyond 12 months before a final determination is made by the 
Secretary. 
101 STAT. 1674 
PUBLIC LAW 100-233—JAN. 6, 1988 
"(6) If a borrower is required to plan for or to report on how 
proceeds from the sale of collateral property will be used, the 
Secretary shall— 
"(A) notify the borrower of such requirement; and 
"(B) notify the borrower of the right to the release of funds 
-
^
^ under this section and the means by which a request for the 
funds may be made. 
Regulations. 
"(7) The Secretary shall issue regulations consistent with this 
section that— 
"(A) ensure the release of funds to each borrower; and 
"(B) establish guidelines for releases under paragraph (3), 
including a list of expenditures for which funds will normally be 
released.". 
SEC. 612. CONSERVATION EASEMENTS. 
Section 349 (7 U.S.C. 1997) is amended— 
(1) in subsection (cX4), by inserting "and other wildlife habi-
tat" after "wetland"; and 
(2) in subsection (e), by striking out the last period and 
inserting in lieu thereof the following: "or the difference be-
tween the amount of the outstanding loan secured by the land 
and the current value of the land, whichever is greater.". 
SEC. 613. INTEREST RATE REDUCTION PROGRAM; DEMONSTRATION 
PROJECT FOR PURCHASE OF SYSTEM LAND. 
7 use 1999 note. 
(a) EXTENSION OF PROGRAM FOR 5 YEARS.—Section 1320 of the 
7 use 1999. 
Food Security Act of 1985 (99 Stat. 1532) is amended by striking out 
"1988" and inserting in lieu thereof "1993". 
(b) AMENDMENTS TO PROGRAM.—Section 351 (7 U.S.C. 1999) is 
amended— 
(1) in subsection (bXlXC), by striking out "12-month" and 
inserting in lieu thereof "24-month"; and 
(2) by adding at the end thereof the following new subsections: 
"(f) Each Farmers Home Administration county supervisor shall 
make available to farmers, on request, a list of approved lenders in 
the area that participate in the Farmers Home Administration 
guaranteed farm loan programs and other lenders in the area that 
express a desire to participate in such programs and that request 
inclusion in the list. 
Contracts. 
"(g) Notwithstanding any other provision of law, each contract of 
guarantee on a farm loan entered into under this title after the date 
of the enactment of this subsection shall contain a condition that 
the lender of the guaranteed loan may not initiate foreclosure action 
on the loan until 60 days after a determination is made with respect 
to the eligibility of the borrower thereof to participate in the 
program under this section.". 
(c) DEMONSTRATION PROJECT FOR PURCHASE OF SYSTEM LAND.— 
Section 351 (7 U.S.C. 1999) is amended by adding after the subsec-
tion added by subsection (b) of this section the following new 
subsection: 
"(h)(1) During the 3-year period beginning on the date of the 
enactment of this subsection, the Secretary shall establish and carry 
out a demonstration project in accordance with this subsection 
under which the Secretary may issue certificates of eligibility to 
Farmers Home Administration eligible borrowers to reduce the 
interest rate paid by the borrowers on loans obtained from legally 
organized lending institutions and Farm Credit System institutions 
PUBLIC LAW 100-233—JAN. 6, 1988 
101 STAT. 1675 
to purchase acquired properties owned by institutions of the Farm 
Credit System certified to issue preferred stock under section 6.27 of 
the Farm Credit Act of 1971. 
"(2) To be eligible to participate in the project, a borrower must— 
"(A) meet the requirements of subsection (bXD; 
"(B) provide a down payment to purchase the land, using 
personal funds of the borrower, equal to at least 15 percent of 
the purchase price of the land; and 
"(C) meet all conservation requirements for the land that are 
imposed on borrowers of guaranteed farm ownership loans 
under this title. 
"(3) A certificate of eligibility issued under this subsection may be 
used to reduce the interest rate payable by an eligible borrower on a 
guaranteed loan by not more than 4 percent. 
"(4) A certificate of eligibility issued under this subsection shall 
reduce the interest rate on a guaranteed loan for a term equal to the 
outstanding term of such loan, or 5 years, whichever is less. 
"(5) Notwithstanding any other provision of law, if the lender of a 
guaranteed loan assisted under this subsection reduces the interest 
rate payable on the loan by at least 1 full percenteige point, the 
Secretary may guarantee the repajmient of 95 percent of the prin-
cipal and interest due on the loan. 
"(6) In canying out this subsection, the Secretary may— 
"(A) certify the eligibility of borrowers to participate in the 
demonstration project; 
"(B) process applications for participation in the project; 
"(C) provide certificate of eligibility to eligible borrowers on a 
timely b£isis consistent with the availability of acquired prop-
erty owned by institutions of the Farm Credit System certified 
to issue preferred stock under section 6.27 of the Farm Credit 
Act of 1971; and 
"(D) set aside the largest practicable portion of funds made 
available to guarantee farm ownership loans under this title 
(including unobligated funds) to carry out this subsection. 
"(7) To carry out this subsection, the Secretary may transfer such 
amounts as may be necessary from farm operating guaranteed loans 
to farm ownership guaranteed loans. 
"(8) In carrjdng out this subsection, Farm Credit System institu-
tions shall— 
"(A) sell Igind to eligible borrowers under this subsection at 
fair market value; 
"(B) to the extent practicable, set aside each fiscal year land 
acquired or owned by such institutions of the Farm Credit 
System in an aggregate amount not to exceed $250,000,000 at 
fair market value, for purchase by eligible borrowers in accord-
ance with this subsection; and 
"(C) if necessary, subdivide tracts of land made available 
under this subsection into parcels that permit eligible borrowers 
to purchase the parcels consistent with limits placed on the size 
of loans made, insured, or guaranteed under this title. 
"(9) Not later than 60 days after the date of the enactment of this 
subsection, the Secretary and the Farm Credit Administration shall 
develop a joint memorandum of understanding governing the im-
plementation of this subsection.". 
SEC. 614. HOMESTEAD PROTECTION. 
Section 352 (7 U.S.C. 2000) is amended— 
101 STAT. 1676 
PUBLIC LAW 100-233—JAN. 6, 1988 
(1) in subsection (aX3), by inserting before the period ", includ-
ing a reasonable number of farm outbuildings located on the 
adjoining land that are useful to the occupants of the home-
stead, and no more than 10 acres of adjoining land that is used 
to maintain the family of the individual"; 
(2) in subsection (h), by striking out paragraph (1) and insert-
ing in lieu thereof the following new paragraph: 
"(1) The Secretary or the Administrator shall, on application by a 
borrower who meets the eligibility requirements of subsection (cXl), 
permit the borrower to retain possession and occupancy of home-
stead property under the terms set forth, and until the action 
described in this section has been completed, if— 
"(A) the Secretary forecloses, holds in inventory on the date of 
the enactment of this paragraph, or takes into inventory, prop-
erty securing a loan made or insured under this title; 
"(B) the Administrator forecloses, holds in inventory on the 
date of the enactment of this paragraph, or takes into inven-
tory, property securing a farm program loan made under the 
Small Business Act (15 U.S.C. 631 et seq,); or 
"(C) the borrower of a loan made or insured by the Secretary 
or the Administrator files a petition in bankruptcy that results 
in the conveyance of the homestead property to the Secretary or 
the Administrator, or agrees to voluntarily liquidate or convey 
such property in whole or in part."; 
(3) by striking out subsection (c) and inserting in lieu thereof 
the following new subsection: 
"(cXD To be eligible to occupy homestead property, a borrower of a 
loan made or insured by the Secretary or the Administrator shall—^ 
"(A) apply for such occupancy not later than 90 days after the 
property is acquired by the Secretary or Administrator, or for 
property in inventory on the date of the enactment of this 
subsection, the borrower shall apply for occupancy not later 
than 90 days after such date; 
, 
"(B) have received from farming or ranching operations gross 
J 
farm income reasonably commensurate with— 
"(i) the size and location of the farming unit of the 
.,?jjt;: 
borrower; and 
"(ii) local agricultural conditions (including natural and 
:s iK 
economic conditions), in at least 2 calendar years during the 
6-year period preceding the calendar year in which the 
t 
application is made; 
J 
"(C) have received from farming or ranching operations at 
j 
least 60 percent of the gross annual income of the borrower and 
any spouse of the borrower in at least 2 calendar years during 
any 6-year period described in subparagraph (B); 
"(D) have continuously occupied the homestead property 
during the 6-year period described in subparagraph (B), except 
that such requirement may be waived if a borrower has, due to 
circumstances beyond the control of the borrower, had to leave 
the homestead property for a period of time not to exceed 12 
months during the 6-year period; 
"(E) during the period of the occupancy of the homestead 
property, pay a reasonable sum as rent for such property to the 
Secretary or the Administrator in an amount substantially 
equivalent to rents charged for similar residential properties in 
the area in which the homestead property is located; 
PUBLIC LAW 100-233—JAN. 6, 1988 
101 STAT. 1677 
"(F) during the period of the occupancy of the homestead 
property, maintain the property in good condition; and 
"(G) meet such other reasonable and necessary terms and 
conditions as the Secretary may require consistent with this 
section. 
"(2) For purposes of subparagraphs (B) and (C) of paragraph (1), 
the term 'farming or ranching operations' shall include rent paid by 
,, 
, 
lessees of agricultural land during any period in which the bor-
rower, due to circumstances beyond the control of the borrower, is 
unable to actively farm such land. 
"(3) For the purposes of paragraph (IXE), the failure of the 
borrower to make timely rental payments shall constitute cause for 
the termination of edl rights of such borrower to possession and 
occupancy of the homestead property under this section. In effecting 
any such termination, the Secretary shall afford the borrower or 
lessee the notice and hearing procedural rights described in section 
333B and shall comply with all applicable State and local laws 
governing eviction from residential property. 
"(4XA) The period of occupancy allowed the prior owner of home-
stead property under this section shall be the period requested in 
writing by the prior owner, except that such period shall not exceed 
5 years. 
"(B) At any time during the period of occupancy, the borrower 
shall have a right of first refusal to reacquire the homestead prop-
erty on such terms and conditions as the Secretary shall determine, 
except that the Secretary may not demand a payment for the 
homestead property that is in excess of the current market value of 
the homestead property as established by an independent appraisal. 
The independent appraisal shall be conducted by an appraiser 
selected by the borrower from a list of three appraisers approved by 
the county supervisor. 
"(5) No rights of a borrower under this section, and no agreement 
entered into between the borrower and the Secretary for occupancy 
of the homestead property, shall be transferable or assignable by the 
borrower or by operation of any law, except that in the case of death 
or incompetency of such borrower, such rights and agreements shall 
be transferable to the spouse of the borrower if the spouse agrees to 
comply with the terms and conditions thereof. 
"(6) Within 30 days of the acquisition of the homestead property 
securing a loan made or insured under this title, the Secretary shall 
notify the borrower from whom the property was acquired of the 
availability of homestead protection rights under this section. For 
property in inventory on the date of the enactment of this subsec-
tion, the Secretary shall make a good faith effort to notify the 
borrower of the availability of homestead protection rights under 
this section within 60 days after such date."; 
(3) in subsection (d), by adding at the end thereof the following 
new sentence: "Such terms and conditions shall not be less 
favorable than those intended to be offered to any other buyer."; 
and 
(4) by adding at the end thereof the following new subsections: 
"(f) The Secretary may enter into contracts authorized by this 
Contracts. 
section before the Secretary acquires title to the homestead 
property. 
"(g) In the event of any conflict between this section and any 
provision of the law of any State relating to the right of a borrower 
to designate for separate sale or redeem part or all of the real 
101 STAT. 1678 
PUBLIC LAW 100-233—JAN. 6, 1988 
property securing a loan foreclosed on by the lender thereof, such 
provision of State law shall prevail.". 
SEC. 615. DEBT RESTRUCTURING AND LOAN SERVICING. 
(a) IN GENERAL.—Subtitle D (7 U.S.C. 1981 et seq.) is amended by 
adding at the end thereof the following new section: 
7 u s e 2001. 
"SEC. 353. DEBT RESTRUCTURING AND LOAN SERVICING. 
^ 
"(a) IN GENERAL.—The Secretary shall modify delinquent farmer 
program loans made or insured under this title, or purchased from 
the lender or the Federal Deposit Insurance Corporation under 
section 309B, to the maximum extent possible— 
"(1) to avoid losses to the Secretary on such loans, with 
priority consideration being placed on writing-down the loan 
principal and interest (subject to subsections (d) £uid (e)), and 
debt set-aside (subject to subsection (e)), whenever these proce-
dures would facilitate keeping the borrower on the farm or 
ranch, or otherwise through the use of primary loan service 
programs as provided in this section; and 
"(2) to ensure that borrowers are able to continue farming or 
ranching operations. 
"(b) EuGiBiLTTY.—To be eligible to obtain assistance under subsec-
tion (a)— 
"(1) the delinquency must be due to circumstances beyond the 
control of the borrower, as defined in regulations issued by the 
Secretary; 
"(2) the borrower must have acted in good faith with the 
Secretary in connection with the loan as defined in regulations 
issued by the Secretary; 
"(3) the borrower must present a preliminary plan to the 
Secretary that contains reasonable assumptions that dem-
onstrate that the borrower will be able to— 
"(A) meet the necessary family living and farm operating 
expenses; and 
(B) service all debts, including those of the loans restruc-
tured; and 
"(4) the loan, if restructured, must result in a net recovery to 
the Federal (Government, during the term of the loan as restruc-
tured, that would be more than or equal to the net recovery to 
the Federal Government from an involuntary liquidation or 
foreclosure on the property securing the loan. 
"(c) RESTRUCTURING DETERMINATIONS.— 
"(1) DETERMINATION OF NET RECOVERY.—In determining the 
net recovery from the involuntary liquidation of a loan under 
this section, the Secretary shall calculate— 
"(A) the recovery value of the collateral securing the 
loan, in accordance with paragraph (2); and 
"(B) the value of the restructured loan, in accordance 
with paragraph (3). 
"(2) RECOVERY VALUE.—For the purpose of paragraph (1), the 
recovery value of the collateral securing the loan shall be based 
^•>€: 
•
•
• -J 
o n — 
"(A) the amount of the current appraised value of the 
property securing the loan; less 
"(B) the estimated administrative, legal, and other ex-
penses associated with the liquidation and disposition of the 
-. 
loan and collateral, including— 
• t, 
i 
,; R^ 
PUBLIC LAW 100-233—JAN. 6, 1988 
101 STAT. 1679 
"(i) the payment of prior liens; 
"(ii) taxes and assessments, depreciation, manage- Taxes. 
ment costs, the yearly percentage decrease or increase 
in the value of the property, and lost interest income, 
each calculated for the average holding period for the 
type of property involved; 
"(iii) resale expenses, such as repairs, commissions, 
and advertising; and 
"(iv) other administrative and attorney's costs. 
"(3) V A L U E OF THE RESTRUCTURED LOAN.— 
"(A) IN GENERAL.—For the purpose of paragraph (1), the 
value of the restructured loan shall be based on the present 
value of payments that the borrower would make to the 
Federal Government if the terms of such loan were modi-
fied under any combination of primary loan service pro-
grams to ensure that the borrower is able to meet such 
obligations and continue farming operations. 
"(B) PRESENT VALUE.—For the purpose of calculating the 
present value referred to in subparagraph (A), the Sec-
retary shall use a discount rate of not more than the 
current rate on 90-day Treasury bills. 
"(4) NOTIFICATION.—Within 60 days after receipt of a written 
request for restructuring from the borrower, the Secretary 
shall— 
"(A) make the calculations specified in paragraphs (2) and 
(3); 
"(B) notify the borrower in writing of the results of such 
calculations; and 
"(C) provide documentation for the calculations. 
"(5) RESTRUCTURING OF LOANS.—If the value of the restruc-
tured loan is greater than or equal to the recovery value, the 
Secretary shall, within 45 days after notifying the borrower of 
such calculations, offer to restructure the loan obligations of the 
borrower under this title through primary loan service pro-
grams that would enable the borrower to meet the obligations 
(as modified) under the loan and to continue the farming oper-
ations of the borrower. If the borrower accepts such offer, 
within 45 days after receipt of notice of acceptance, the Sec-
retary shall restructure the loan accordingly. 
"(6) TERMINATION OF LOAN OBUGATIONS.—If the value of the 
restructured loan is less than the recovery value and if, within 
45 days after receipt of the notification described in paragraph 
(4XB), the borrower pays (or obtains third-party financing to 
pay) the Secretary an amount equal to the recovery value, the 
obligations of the borrower to the Secretary under the loan shall 
terminate, except that the Secretary may require, as a condition 
of such termination of loan obligations, that the borrower enter 
into an agreement with the Secretary if the borrower sells or 
otherwise conveys the real property used to secure such loan 
within 2 years after the date of such agreement. Any such 
agreement shall provide for the recapture of part or all of the 
difference between the recovery value of the loan and the fair 
market value (on the date of such agreement) of the property 
securing the loan if the borrower realizes a gain on the sale or 
conveyance over the amount of the recovery value of the loan. 
In no event shall any such agreement provide for recapture of 
an amount that exceeds the difference between such recovery 
101 STAT. 1680 
PUBLIC LAW 100-233—JAN. 6, 1988 
value and the fair market value of the property securing the 
a«y. 
loan on the date of such agreement. 
, "(d) PRINCIPAL AND INTEREST WRITE-DOWN.— 
^ 
,;, 
"(1) IN GENERAL.— 
;). , . 
"(A) 
PRIORITY 
CONSIDERATION.—In 
selecting 
the 
restructuring alternatives to be used in the case of a bor-
c 
rower who has requested restructuring under this section, 
the Secretary shall give priority consideration to the use of 
principal and interest write-down, except that this proce-
dure shall not be given first priority in the case of a 
borrower unless other creditors of such borrower (other 
than those creditors who are fully collateralized) represent-
ing a substantial portion of the total debt of the borrower 
held by such creditors, agree to participate in the develop-
ment of the restructuring plan or agree to participate in a 
State mediation program. 
"(B) FAILURE OF CREDITORS TO AGREE.—Failure of credi-
tors to agree to participate in the restructuring plan or 
mediation program shall not preclude the use of principal 
and interest write-down by the Secretary if the Secretary 
determines that this restructuring alternative results in the 
least cost to the Secretary. 
"(2) PARTICIPATION OF CREDITORS.—Before eliminating the 
option to use debt write-down in the case of a borrower, the 
* 
Secretary shall make a reasonable effort to contact the creditors 
of such borrower, either directly or through the borrower, and 
encourage such creditors to participate with the Secretary in 
the development of a restructuring plan for the borrower. 
"(e) SHARED APPRECIATION ARRANGEMENTS.— 
"(1) IN GENERAL.—As a condition of restructuring a loan in 
accordance with this section, the borrower of the loan may be 
required to enter into a shared appreciation arrangement that 
requires the repayment of amounts written off or set aside. 
* (2) TERMS.—^Shared appreciation agreements shall have a 
term not to exceed 10 years, and shall provide for recapture 
based on the difference between the appraised values of the real 
security property at the time of restructuring and at the time of 
recapture. 
"(3) PERCENTAGE OF RECAPTURE.—The amount of the apprecia-
tion to be recaptured by the Secretary shall be 75 percent of the 
appreciation in the value of such real security property if the 
recapture occurs within 4 years of the restructuring, and 50 
percent if the recapture occurs during the remainder of the 
term of the agreement. 
"(4) TIME OF RECAPTURE.—Recapture shall take place at the 
end of the term of the agreement, or sooner— 
"(A) on the conveyance of the real security property; 
"(B) on the repayment of the loans; or 
"(C) if the borrower ceases farming operations. 
"(5) TRANSFER OF TITLE.—Transfer of title to the spouse of a 
borrower on the death of such borrower shall not be treated as a 
conveyance for the purpose of paragraph (4). 
"(f) DETERMINATION TO RESTRUCTURE.—If the appeal process re-
sults in a determination that a loan is eligible for restructuring, the 
Secretary shall restructure the loan in the manner consistent with 
this section, taking into consideration the restructuring rec-
ommendations, if any, of the appeals officer. 
>.ii :-ii. t :ts > 
PUBLIC LAW 100-233—JAN. 6, 1988 
101 STAT. 1681 
"(g) PREREQUISITES TO FORECLOSURE OR LIQUIDATION.—No fore-
closure or other similar actions shall be taken to liquidate any loan 
determined to be ineligible for restructuring by the Secretary under 
this section— 
"(1) until the borrower has been given the opportunity to 
appeal such decision; and 
"(2) if the borrower appeals, the appeals process has been 
completed, and a determination has been made that the loan is 
ineligible for restructuring. 
, ,, -^;; .^^^ r 
"(h) TIME LIMITS FOR RESTRUCTURING.—Once an appeal has been 
filed under section 333B, a decision shall be made at each level in 
the appeals process within 45 days after the receipt of the appeal or 
request for further review. 
"(i) NOTICE OF INELIGIBILITY FOR RESTRUCTURING.— 
"(1) IN GENERAL.—A notice of ineligibility for restructuring 
shall be sent to the borrower by registered or certified mail 
within 15 days after such determination. 
"(2) CONTENTS.—The notice required under paragraph (1) 
shall contain— 
"(A) the determination and the reasons for the deter-
mination; 
"(B) the computations used to make the determination, 
including the calculation of the recovery value of the collat-
eral securing the loan; and 
"(C) a statement of the right of the borrower to appeal the 
. ,,, 
decision to the appeals division, and to appear before a 
hearing officer, 
"(j) INDEPENDENT APPRAISALS.—An appeal filed with the appeals 
division under section 333B may include a request by the borrower 
for an independent appraisal of any property securing the loan. On 
such request, the appeals division shall present the borrower with a 
list of three appraisers approved by the county supervisor, from 
which the borrower shall select an appraiser to conduct the ap-
praisal, the cost of which shall be borne by the borrower. The results 
of such appraisal shall be considered in any final determination 
concerning the loan. A copy of any appraisal made under this 
paragraph shall be provided to the borrower. 
"(k) FUTURE CREDITWORTHINESS OF BORROWER DETERMINED WITH-
OUT REGARD TO RESTRUCTURING.—The creditworthiness of, or the 
adequacy of collateral offered by, any borrower whose loan obliga-
tions are restructured under this section shall be determined with-
out regard to such restructuring.", 
(b) OTHER RESTRUCTURING PROVISIONS.— 
(1) OPTION TO RESTRUCTURE INTEREST RATES FOR CERTAIN 
WATER 
AND 
WASTE 
DISPOSAL 
AND 
COMMUNITY 
FACILITY 
BORROWERS.— 
(A) IN GENERAL.—The item designated "Loan Programs" 
under the subheading "Farmers Home Administration" in 
chapter I of title I of the Supplemental Appropriations Act, 
1985 (7 U.S.C. 1927a; 99 Stat. 296) is amended— 
(i) by striking out "Effective November 12, 1983, and 
^ , 
thereafter," and inserting in lieu thereof "Effective 
October 1, 1981, and thereafter, in the case of water 
and waste disposal and community facility borrowers, 
and effective November 12, 1983, and thereafter, in the 
case of housing and farm borrowers,"; and 
>i;tn;t 
101 STAT. 1682 
PUBLIC LAW 100-233—JAN. 6, 1988 
7 use 1927a 
note. 
7 use 1926 note. 
7 use 2001 note. 
Fraud. 
State and local 
governments. 
7 use 2002. 
Disadvantaged 
persons. 
7 use 2003. 
(ii) by striking out "housing, farm, water and waste 
disposal, and community facility" and inserting in lieu 
thereof "such". 
(B) 
CERTAIN OBUGATIONS EXCEPTED.—The amendment 
^•- 
made by subparagraph (A) shall not apply to any note or 
other obligation sold under section 1001 of the Omnibus 
Reconciliation Act of 1986 on or before the date of the 
enactment of this paragraph. 
(2) INTEREST RATE RESTRUCTURING FOR CERTAIN OTHER BOR-
ROWERS.—Effective July 29, 1987, the interest rate charged on 
any loan of $2,000,000 or more made on such date under section 
306 to any nonprofit corporation shall be the interest rate 
quoted to such nonprofit corporation by the Farmers Home 
Administration on June 22,1987, in the request for obligation of 
funds made with respect to the loan. 
(c) 
LIQUIDATION 
NOT 
REQUIRED 
AS 
PREREQUISITE 
TO 
DEBT 
RESTRUCTURING AND LOAN SERVICING.—Subsection (d) of section 331 
(7 U.S.C. 1981(d)) is amended— 
(1) by inserting "debts or" before "claims"; and 
(2) by adding at the end of the first sentence the following: 
"The Secretary may not require liquidation of property securing 
any farmer program loan or acceleration of any pa5maent re-
quired under any farmer program loan as a prerequisite to 
initiating an action authorized under this subsection.". 
(d) SUSPENSION OF COLLECTION ACTIVITIES DURING TRANSITION 
PERIOD.—The Secretary of Agriculture shall not initiate any accel-
eration, foreclosure, or liquidation in connection with any delin-
quent farmer program loan before the date the Secretary has issued 
final regulations to carry out the amendments made by this section. 
The preceding sentence shall not prohibit the Secretary from taking 
any action with respect to waste, fraud, or abuse by the borrower. 
SEC. 
6
1
6
. 
TRANSFER 
OF 
INVENTORY 
LANDS. 
Subtitle D (7 U.S.C. 1981 et seq.) is amended by adding after the 
section added by section 615(a) of this Act the following new section: 
"SEC. 
3
5
4
. 
TRANSFER 
OF 
INVENTORY 
LANDS. 
"The Secretary, without reimbursement, may transfer to any 
Federal or State agency, for conservation purposes any real prop-
erty, or interest therein, administered by the Secretary under this 
Act— 
"(1) with respect to which the rights of all prior owners and 
operators have expired; 
"(2) that is determined by the Secretary to be suitable or 
surplus; and 
"(3) that— 
"(A) has marginal value for agricultural production; 
V^ ^^ 
"(B) is environmentally sensitive; or 
, .j-f:. 
K^Q^ YiQs special management importance.". 
SEC. 617. TARGET PARTICIPATION RATES. 
Subtitle D (7 U.S.C. 1981 et seq.) is amended by adding after the 
section added by section 616 of this Act the following new section: 
"SEC. 355. TARGET PARTICIPATION RATES. 
"(a) ESTABUSHMENT.— 
PUBLIC LAW 100-233—JAN. 6, 1988 
101 STAT. 1683 
"(1) IN GENERAL.—The Secretary shall establish annual target 
participation rates, on a county wide basis, that shall ensure 
that members of socially disadvantaged groups will receive 
loans made or insured under subtitle A and will have the 
opportunity to purchase or lease inventory farmland. 
"(2) GROUP POPULATION.—In establishing such target rates the 
Secretary shall take into consideration the portion of the popu-
lation of the county made up of such groups, and the availabil-
ity of inventory farmland in such county. 
"(b) RESERVATION AND ALLOCATION.— 
"(1) RESERVATION.—The Secretary shall, to the greatest 
extent practicable, reserve sufficient loan funds made available 
under subtitle A, for use by members of socially disadvantaged 
groups identified under target participation rates established 
under subsection (a). 
"(2) ALLOCATION.—The Secretary shall allocate such loans on 
the basis of the proportion of members of socially disadvantaged 
groups in a county and the availability of inventory farmland, 
with the greatest amount of loan funds being distributed in the 
county with the greatest proportion of socially disadvantaged 
group members and the greatest amount of available inventory 
farmland. 
"(c) REPORT.—The Secretary shall prepare and submit, to the 
Committee on Agriculture of the House of Representatives and the 
Committee on Agriculture, Nutrition, and Forestry of the Senate, a 
report that describes the annual target participation rates and the 
success in meeting such rates. 
"(d) DEFINITION.—As used in this section, the term 'socially dis-
advantaged group' means a group whose members have been sub-
jected to racial or ethnic prejudice because of their identity as 
members of a group without regard to their individual qualities.". 
SEC. 618. EXPEDITED CLEARING OF TITLE TO INVENTORY PROPERTY. 
Subtitle D (7 U.S.C. 1981 et seq.) is amended by adding after the 
section added by section 617 of this Act the following: 
"SEC. 356. EXPEDITED CLEARING OF TITLE TO INVENTORY PROPERTY. 
7 USC 2004. 
"The Farmers Home Administration may employ local attorneys, 
on a case-by-case basis, to process all legal procedures necessary to 
clear the title to foreclosed properties in the inventory of the 
Farmers Home Administration. Such attorneys shall be com-
pensated at not more than their usual and customary charges for 
such work.". 
SEC. 
6
1
9
. 
PAYMENT 
OF 
LOSSES 
ON 
GUARANTEED 
LOANS. 
Subtitle D (7 U.S.C. 1981 et seq.) is amended by adding at the end 
thereof the following new section: 
"SEC. 357. PAYMENT OF LOSSES ON GUARANTEED LOANS. 
7 USC 2005. 
"(a) PAYMENTS TO LENDERS.— 
"(1) REQUIREMENT.—Within 3 months after a court of com-
petent jurisdiction confirms a plan of reorganization under 
chapter 12 of title 11, United States Code, for any borrower to 
whom a lender has made a loan guaranteed under this title, the 
Secretary shall pay the lender an amount estimated by the 
Secretary to be equal to the loss incurred by the lender for 
purposes of the guarantee. 
91-194 O - 90 - 13 : QL.3 Part 3 
101 STAT. 1684 
PUBLIC LAW 100-233—JAN. 6, 1988 
"(2) PAYMENT TOWARD LOAN GUARANTEE.—Any amount paid 
to a lender under this subsection with respect to a loan guaran-
teed under this title shall be treated as payment towards satis-
faction of the loan guarantee. 
"(b) ADMINISTRATION.— 
"(1) Loss B
Y LENDER.—If the lender of a guaranteed farmer 
program loan takes any action described in section 331(d) with 
respect to the loan and the Secretary approves such action, 
then, for purposes of the guarantee, the lender shall be treated 
as having sustained a loss equal to the amount by which— 
"(A) the outstanding balance of the loan immediately 
before such action, exceeds 
"(B) the outstanding balance of the loan immediately 
after such action. 
"(2) NET PRESENT VALUE OF LOAN.—The Secretary shall ap-
prove the taking of an action described in section 331(d) by the 
lender of a guaranteed farmer program loan with respect to the 
loan if such action reduces the net present value of the loan to 
an amount equal to not less than the greater o
f
— 
"(A) the greatest net present value of a loan the borrower 
could reasonably be expected to repay; and 
"(B) the greatest amount that the lender of the loan could 
^ • 
reasonably expect to recover from the borrower through 
bankruptcy, or liquidation of the property securing the 
loan, less all reasonable and necessary costs and expenses 
^ ,. 
that the lender of the loan could reasonably expect to incur 
to preserve or dispose of such property (including all associ-
ated legal and property management costs) in the course of 
such a bankruptcy or liquidation. 
"(3) CONSTRUCTION OF SUBSECTION.—This subsection shall not 
be construed to limit the authority of the Secretary to enter into 
a shared appreciation arrangement with a borrower, or the 
terms and conditions which shall be required of a borrower, 
under section 353(e).". 
7 u s e 1926 note. 
SEC. 620. LEASE OF CERTAIN ACQUIRED PROPERTY. 
Notwithstanding any other provision of law, the Secretary of 
Agriculture may lease to public or private nonprofit organizations, 
for a nominal rent, any facilities acquired in connection with the 
disposition of a loan made by the Secretary under section 306. Any 
such lease shall be for such reasonable period of time as the 
Secretary determines is appropriate. 
7 u s e 1989 note. 
SEC. 621. STUDY AND REPORT TO CONGRESS BEFORE ISSUANCE OF CER-
TAIN FINAL REGULATIONS. 
Not later than 60 days before the Secretary of Agriculture issues 
final regulations providing for the use of ratios and standards as 
part of loan applications or preapplications, for determining the 
* 
degree of potential loan risk on loans insured or guaranteed under 
the Consolidated Farm and Rural Development Act, the Secretary 
shall complete a study and report to the Committee on Agriculture, 
Nutrition, and Forestry of the Senate and the Committee on Agri-
culture of the House of Representatives on the effects of such 
regulations on a representative sample of persons who, as of the 
date of the enactment of this Act, are borrowers or potential borrow-
ers of such loans, and shall demonstrate in such study that the 
implementation of such final regulations will not result in a port-
PUBLIC LAW 100-233—JAN. 6, 1988 
101 STAT. 1685 
folio of borrowers that is inconsistent with the purposes of the 
ConsoUdated Farm and Rural Development Act. 
SEC. 622. CONTINUATION OF LIMITED RESOURCE FARMERS' INITIATIVE. 
The Secretary of Agriculture shall maintain substantially at the 
levels in effect on the date of the enactment of this title, the limited 
^ 
io»i 
resource farmers' initiative in the office of the Director of the Office 
of Advocacy and Enterprise. 
SEC. 623. FARM OWNERSHIP OUTREACH PROGRAM TO SOCIALLY DIS- 
7 USC 1985 note. 
ADVANTAGED INDIVIDUALS. 
The Secretary of Agriculture, in coordination with the limited 
resource farmers' initiative in the office of the Director of the Office 
of Advocacy and Enterprise, shall establish a farm ownership out-
reach program for persons who are members of any group with 
respect to which an individual may be identified as a socially 
disadvantaged individual under section 8(aX5) of the Small Business 
Act (15 U.S.C. 637(aX5)) to encourage the acquisition of inventory 
farmland of the Farmers Home Administration by— 
(1) informing persons eligible for assistance under any other 
provision of this Act of— 
(A) the possiblity of acquiring such inventory farmland; 
and 
(B) various farm ownership loan programs; and 
(2) providing technical assistance to such persons in the ac-
quisition of such inventory farmland. 
SEC. 624. REGULATIONS. 
7 USC 1989 note. 
Within 150 days after the date of the enactment of this title, and 
after considering public comment obtained under section 553 of title 
5, United States Code, the Secretary shall issue final regulations to 
carry out the amendments made by this title. 
SEC. 
6
2
5
. 
SENSE OF CONGRESS REGARDING GUARANTEED LOAN 
PROGRAM. 
It is the sense of Congress that the Secretary of Agriculture 
should issue guarantees for loans under the Consolidated Farm and 
Rural Development Act, to the msiximum extent practicable, to 
?:, • 
i 
assist eligible borrowers whose loans are restructured by institu-
tions of the Farm Credit System, commercial banks, insurance 
companies, and other lending institutions. 
SEC. 626. SENSE OF CONGRESS REGARDING NATIONAL RURAL CRISIS RE-
SPONSE CENTER. 
It is the sense of Congress that efforts by various State and local 
public agencies, citizens' groups, church and civic organizations, and 
individuals to focus attention on and respond to rural problems 
throughout the Nation are deserving of the recognition, encourage-
ment, and support of Congress and the American people for the 
valuable services they provide. 
101 STAT. 1686 
PUBLIC LAW 100-233—JAN. 6, 1988 
TITLE VII—AGRICULTURAL MORTGAGE 
SECONDARY MARKETS 
Housing 
Subtitle A—The Federal Agricultural Mortgage 
Corporation 
12 use 2279aa 
SEC. 701. STATEMENT OF PURPOSE. 
..,2 * ; r: ; Hi-
lt is the purpose of this subtitle— 
(1) to establish a corporation chartered by the Federal 
Government; 
(2) to authorize the certification of agricultural mortgage 
marketing facilities by the corporation; 
(3) to provide for a secondary marketing arrangement for 
agricultural real estate mortgages that meet the underwriting 
standards of the corporation— 
(A) to increase the availability of long-term credit to 
farmers and ranchers at stable interest rates; 
(B) to provide greater liquidity and lending capacity in 
, ^ 
extending credit to farmers and ranchers; and 
- "
x
^ 
(C) to provide an arrangement for new lending to facili-
tate capital market investments in providing long-term 
agricultural funding, including funds at fixed rates of in-
terest; and 
(4) to enhance the ability of individuals in small rural commu-
nities to obtain financing for moderate-priced homes. 
SEC. 702. AGRICULTURAL M
O
R
T
G
A
G
E SECONDARY MARKET. 
The Farm Credit Act of 1971 (12 U.S.C. 2001 et seq.) is amended by 
adding after title VII (as added by section 401 of this Act) the 
following new title: 
"TITLE VIII—AGRICULTURAL MORTGAGE 
SECONDARY MARKET 
12 u s e 2279aa. 
"SEC. 8.0. DEFINITIONS. 
"For purposes of this title: 
"(1) AGRICULTURAL REAL ESTATE.—The term 'agricultural real 
estate' means— 
"(A) a parcel or parcels of land, or a building or structure 
affixed to the parcel or parcels, that— 
"(i) is used for the production of one or more agricul-
tural commodities or products; and 
"(ii) consists of a minimum acreage or is used in 
producing minimum annual receipts, as determined by 
the Corporation; or 
"(B) a principal residence that is a single family, mod-
erate-priced residential dwelling located in a rural area, 
excluding— 
"(i) any community having a population in excess of 
2,500 inhabitants; and 
"(ii) any dwelling with a purchase price exceeding 
$100,000 (as adjusted for inflation). 
"(2) BOARD.—The term 'Board' means— 
PUBLIC LAW 100-233—JAN. 6, 1988 
101 STAT. 1687 
"(A) the interim board of directors established in section 
8.2(a); and 
"(B) the permanent board of directors established in sec-
tion 8.2(b); 
as the case may be, 
"(3) CERTIFIED FACIUTY.—The term 'certified facility' means a 
secondary marketing agricultural loan facility that is certified 
under section 8.5. 
"(4) CORPORATION.—The term 'Corporation' means the Fed-
eral Agricultural Mortgage Corporation established in section 
8.1. 
"(5) GUARANTEE.—The term 'guarantee' means the guarantee 
of timely payment of the principal and interest on securities 
representing interests in, or obligations backed by, pools of 
qualified loans, in accordance with this title. 
"(6) INTERIM BOARD.—The term 'interim board' means the 
interim board of directors established in section 8.2(a). 
"(7) ORIGINATOR.—The term 'originator' means any Farm 
Credit System institution, bank, insurance company, business 
and industrial development company, savings and loan associa-
tion, Eissociation of agricultural producers, agricultural coopera-
tive, commercial finance company, trust company, credit union, 
or other entity that originates and services agricultural mort-
gage loans. 
"(8) PERMANENT BOARD.—The term 'permanent board' means 
the permanent board of directors established in section 8.2(b). 
"(9) QuAUFiED LOAN.—The term 'qualified loan' means an 
obligation that— 
"(A) is secured by a fee-simple or leasehold mortgage with 
status as a first lien on agricultural real estate located in 
the United States that is not subject to any legal or equi-
table claims deriving from a preceding fee-simple or lease-
hold mortgage; 
"(B) is an obligation of— 
"(i) a citizen or national of the United States or an 
alien lawfully admitted for permanent residence in the 
United States; or 
"(ii) a private corporation or partnership whose mem-
bers, stockholders, or partners hold a majority interest 
in the corporation or partnership and are individuals 
described in clause (i); and 
"(C) is an obligation of a person, corporation, or partner-
ship that has training or farming experience that, under 
criteria established by the (Corporation, is sufficient to 
ensure a reasonable likelihood that the loan will be repaid 
according to its terms. 
"(10) STATE.—The term 'State' has the meaning given such 
term in section 5.51. 
•SEC. 8.1. FEDERAL AGRICULTURAL MORTGAGE CORPORATION. 
12 USC 
t,, . „ 
2279aa-l. 
(a) ESTABUSHMENT.— 
"(1) IN GENERAL.—There is hereby established a corporation 
to be known as the Federal Agricultural Mortgage C!orporation, 
which shall be a federally chartered instrumentality of the 
United States. 
"(2) INSTITUTION WITHIN FARM CREDIT SYSTEM.—The Corpora-
tion shall be an institution of the Farm Credit System. 
101 STAT. 1688 
PUBLIC LAW 100-233—JAN. 6, 1988 
12 use 
2279aa-2. 
President of U.S. 
"(3) LIABILITY.— 
"(A) CORPORATION.—The Corporation shall not be liable 
<'•>' 
for any debt or obligation of any other institution of the 
Farm Credit System. 
"(B) SYSTEM INSTITUTIONS.—The Farm Credit System and 
*
^ ' 
System institutions (other than the Corporation) shall not 
be liable for any debt or obligation of the Corporation. 
"(b) DUTIES.—The Corporation shall— 
"(1) in consultation with originators, develop uniform under-
writing, security appraisal, and repayment standards for quali-
fied loans; 
"(2) determine the eligibility of agricultural mortgage market-
ing facilities to contract with the Corporation for the provision 
of guarantees for specific mortgage pools; and 
"(3) provide guarantees for the timely repayment of principal 
and interest on securities representing interests in, or obliga-
tions backed by, pools of qualified loans. 
'SEC. 8.2. BOARD OF DIRECTORS. 
"(a) INTERIM BOARD.— 
"(1) NUMBER AND APPOINTMENT.—Until the permanent board 
of directors established in subsection (b) first meets with a 
quorum of its members present, the Corporation shall be under 
the management of an interim board of directors composed of 9 
members appointed by the President within 90 days after the 
effective date of this title as follows: 
"(A) 3 members appointed from among persons who are 
representatives of banks, other financial institutions or 
entities, and insurance companies. 
"(B) 3 members appointed from among persons who are 
j_^^. 
representatives of the Farm Credit System institutions. 
"(C) 2 members appointed from among persons who are 
farmers or ranchers who are not serving, and have not 
fv 
served, as directors or officers of any financial institution or 
entity, of which not more than 1 may be a stockholder of 
any Farm Credit System institution. 
"(D) 1 member appointed from among persons who rep-
resent the interests of the general public and are not 
serving, and have not served, as directors or officers of any 
financial institution or entity. 
"(2) PouTiCAL AFFiuATiON.—Not morc than 5 members of the 
interim board shall be of the same political party. 
"(3) VACANCY.—A vacancy in the interim board shall be filled 
in the manner in which the original appointment was made. 
"(4) CONTINUATION OF MEMBERSHIP.—If— 
"(A) any member of the interim board who was appointed 
to such board from among persons who are representatives 
of banks, other financial institutions or entities, insurance 
companies, or Farm Credit System institutions ceases to be 
such a representative; or 
"(B) any member who was appointed from among persons 
who are not or have not been directors or officers of any 
financial institution or entity becomes a director or an 
officer of any financial institution or entity; 
such member may continue as a member for not longer than the 
45-day period beginning on the date such member ceases to be 
PUBLIC LAW 100-233—JAN. 6, 1988 
101 STAT. 1689 
such a representative or becomes such a director or officer, as 
the case may be. 
"(5) TERMS.—The members of the interim board shall be 
appointed for the life of such board. 
"(6) QUORUM.—5 members of the interim board shall con-
stitute a quorum. 
"(7) CHAIRPERSON.—The President shall designate 1 of the President of U.S. 
members of the interim board as the chairperson of the interim 
board. 
"(8) MEETINGS.—The interim board shall meet at the call of 
the chairperson or a majority of its members. 
"(9) VOTING COMMON STOCK.— 
"(A) INITIAL OFFERING.—Upon the appointment of suffi-
cient members of the interim board to convene a meeting 
with a quorum present, the interim board shall arrange for 
an initial offering of common stock and shall take whatever 
other actions are necessary to proceed with the operations 
of the Corporation. 
"(B) PURCHASERS.—Subject to subparagraph (C), the 
voting common stock shall be offered to banks, other finan-
cial entities, insurance companies, and System institutions 
under such terms and conditions as the interim board may 
adopt. 
"(C) DISTRIBUTION.—The voting stock shall be fairly and 
broadly offered to ensure that no institution or institutions 
acquire a disproportionate amount of the total amount of 
voting common stock outstanding of a class and that capital 
contributions and issuances of voting common stock for the 
contributions are fairly distributed between entities eligible 
to hold class A and class B stock, as provided under section 
8.4. 
"(10) TERMINATION.—The interim board shall terminate when 
the permanent board of directors established in subsection O
t
>
) 
first meets with a quorum present. 
'G)) PERMANENT BOARD.— 
"(1) ESTABUSHMENT.—Immediately after the date that banks, 
other financial institutions or entities, insurance companies, 
and System institutions have subscribed and fully paid for at 
least $20,000,000 of common stock of the Corporation, the Cor-
poration shall arrange for the election and appointment of a 
permanent board of directors. After the termination of the 
interim board, the Corporation shall be under the management 
of the permanent board. 
"(2) COMPOSITION.—The permanent board shall consist of 15 
members, of which— 
"(A) 5 members shall be elected by holders of common 
stock that are insurance companies, banks, or other finan-
cial institutions or entities; 
"(B) 5 members shall be elected by holders of common 
stock that are Farm Credit System institutions; and 
"(C) 5 members shall be appointed by the President, by 
and with the advice and consent of the Senate— 
"(i) which members shall not be, or have been, offi-
cers or directors of any financial institutions or enti-
ties; 
"(ii) which members shall be representatives of the 
general public; 
101 STAT. 1690 
PUBLIC LAW 100-233—JAN. 6, 1988 
&
B vf " 
"(iii) of which members not more than 3 shall be 
members of the same political party; and 
f«? 
"(iv) of which members at least 2 shall be experi-
enced in farming or ranching. 
"(3) PRESIDENTIAL APPOINTEES.—The President shall appoint 
the members of the permanent board referred to in paragraph 
(2)(C) not later than the later of— 
"(A) the date referred to in paragraph (1); or 
"(B) the expiration of the 270-day period beginning on the 
it 
effective date of this title, 
"(4) VACANCY.— 
"(A) ELECTED MEMBERS.—Subject to paragraph (6), a va-
cancy among the members elected to the permanent board 
in the manner described in subparagraph (A) or (B) of 
paragraph (2) shall be filled by the permanent board from 
among persons eligible for election to the position for which 
the vacancy exists. 
"(B) APPOINTED MEMBERS.—A vacancy among the mem-
bers appointed to the permanent board under paragraph 
(2)(C) shall be filled in the manner in which the original 
appointment was made. 
"(5) CONTINUATION OF MEMBERSHIP.—If^ 
"(A) any member of the permanent board who was ap-
pointed or elected to the permanent board from among 
persons who are representatives of banks, other financial 
institutions or entities, insurance companies, or Farm 
Credit System institutions ceases to be such a representa-
tive; or 
"(B) any member who was appointed from persons who 
are not or have not been directors or officers of any finan-
cial institution or entity becomes a director or an officer of 
any financial institution or entity; 
such member may continue as a member for not longer than the 
45-day period beginning on the date such member ceases to be 
such a representative, officer, or employee or becomes such a 
director or officer, as the case may be. 
"(6) TERMS.— 
"(A) APPOINTED MEMBERS.—The members appointed by 
the President shall serve at the pleasure of the President. 
"(B) ELECTED MEMBERS.—The members elected under sub-
paragraphs (A) and (B) of subsection (bX2) shall each be 
elected annually for a term ending on the date of the next 
annual meeting of the common stockholders of the Corpora-
tion and shall serve until their successors are elected and 
qualified. Any seat on the permanent board that becomes 
vacant after the annual election of the directors shall be 
filled by the members of the permanent board from the 
same category of directors, but only for the unexpired 
portion of the term. 
"(C) VACANCY APPOINTMENT.—Any member appointed to 
fill a vacancy occurring before the expiration of the term 
for which the predecessor of the member was appointed 
shall be appointed only for the remainder of such term. 
"(D) SERVICE AFTER EXPIRATION OF TERM.—A member may 
serve after the expiration of the term of the member until 
the successor of the member has taken office. 
PUBLIC LAW 100-233—JAN. 6, 1988 
101 STAT. 1691 
"(7) QUORUM.—8 members of the permanent board shall con-
stitute a quorum. 
"(8) No ADDITIONAL PAY FOR FEDERAL OFFICERS O
R EM-
PLOYEES.—Members of the permanent board who are fulltime 
officers or employees of the United States shall receive no 
additional pay by reason of service on the permanent board. 
"(9) CHAIRPERSON.—The President shall designate 1 of the 
members of the permanent board who are appointed by the 
President as the chairperson of the permanent board. 
"(10) MEETINGS.—The permanent board shall meet at the call 
of the chairperson or a majority of its members. 
"(c) OFFICERS AND STAFF.—The Board may appoint, employ, fix the 
pay of, and provide other allowances and benefits for such officers 
and employees of the Corporation as the Board determines to be 
appropriate. 
"SEC. 8.3. POWERS AND DUTIES OF CORPORATION AND BOARD. 
"(a) GUARANTEES.—After the Board has been duly constituted, 
subject to the other provisions of this title and other commitments 
and requirements established pursuant to law, the Corporation may 
provide guarantees on terms and conditions determined by the 
Corporation of securities issued on the security of, or in participa-
tion in, pooled interests in qualified loans. 
"(b) DUTIES OF THE BOARD.— 
"(1) IN GENERAL.—The Board shall— 
"(A) determine the general policies that shall govern the 
operations of the Corporation; 
"(B) select, appoint, and determine the compensation of 
qualified persons to fill such offices as may be provided for 
in the bylaws of the Corporation; and 
"(C) assign to such persons such executive functions, 
powers, and duties as may be prescribed by the bylaws of 
the Corporation or by the Board. 
"(2) 
EXECUTIVE 
OFFICERS AND FUNCTIONS.—The persons 
elected or appointed under paragraph (IXB) shall be the execu-
tive officers of the Corporation and shall discharge the execu-
tive functions, powers, and duties of the Corporation. 
"(c) POWERS OF THE CORPORATION.—The Corporation shall be a 
body corporate and shall have the following powers: 
"(1) To operate under the direction of its Board. 
"(2) To issue stock in the manner provided in section 8.4. 
"(3) To adopt, alter, and use a corporate seal, which shall be 
judicially noted. 
"(4) To provide for a president, 1 or more vice presidents, 
secretary, treasurer, and such other officers, employees, and 
agents, as may be necessary, define their duties and compensa-
tion levels, all without regard to title 5, United States Code, £uid 
require surety bonds or make other provisions against losses 
occasioned by acts of the persons. 
"(5) To provide guarsmtees in the manner provided under 
section 8.6. 
"(6) To have succession until dissolved by a law enacted by the 
Congress. 
"(7) To prescribe bylaws, through the Board, not inconsistent 
with law, that shall provide for— 
"(A) the classes of the stock of the Corporation; and 
"(B) the manner in which— 
President of U.S. 
12 use 
2279aa-3. 
101 STAT. 1692 
PUBLIC LAW 100-233—JAN. 6, 1988 
Contracts. 
Contracts. 
Real property. 
12 use 
2279aa-4. 
-jfo Ji 
"(i) the stock shall be issued, transferred, and retired; 
"(ii) the officers, employees, and agents of the Cor-
poration are selected; 
"(iii) the property of the Corporation is acquired, 
held, and transferred; 
"(iv) the commitments and other financial assistance 
of the Corporation are made; 
"(v) the general business of the Corporation is con-
ducted; and 
i;K 
"(vi) the privileges granted by law to the Corporation 
are exercised and enjoyed; 
; f
< 
"(8) To prescribe such standards as may be necessary to carry 
out this title. 
"(9) To enter into contracts and make payments with respect 
to the contracts. 
"(10) To sue and be sued in its corporate capacity and to 
complain and defend in any action brought by or against the 
Corporation in any State or Federal court of competent jurisdic-
tion. 
"(11) To make and perform contracts, agreements, and 
commitments with persons and entities both inside and outside 
of the Farm Credit System. 
"(12) To acquire, hold, lease, mortgage or dispose of, at public 
or private sale, real and personal property, purchase or sell any 
securities or obligations, and otherwise exercise all the usual 
incidents of ownership of property necessary and convenient to 
the business of the Corporation. 
"(13) To exercise such other incidental powers as are nec-
essary to carry out the powers, duties, and functions of the 
Corporation in accordance with this title. 
"(d) FEDERAL RESERVE BANKS AS DEPOSITARIES AND FISCAL 
AGENTS.—The Federal Reserve banks may act as depositaries for, or 
as fiscal agents or custodians of, the Corporation. 
"(e) ACCESS TO BOOK-ENTRY SYSTEM.—The Secretary of the Treas-
ury may authorize the Corporation to use the book-entry system of 
the Federal Reserve System. 
"SEC. 8.4. STOCK ISSUANCE. 
"(a) VOTING COMMON STOCK.— 
"(1) ISSUE.—The Corporation shall issue voting common stock 
having such par value as may be fixed by the Board from time 
to time. Each share of voting common stock shall be entitled to 
one vote with rights of cumulative voting at all elections of 
directors. Voting shall be by classes as described in section 
8.2(a)(9). The stock shall be divided into two classes with the 
same par value per share. Class A stock may be held only by 
entities that are not Farm Credit System institutions that are 
entitled to vote for directors specified in section 8.2(bX2XA). 
Class B stock may be held only by Farm Credit System institu-
tions that are entitled to vote for directors specified in section 
8.2(bX2XB). 
"(2) LIMITATION ON ISSUE.—After the date the permanent 
board first meets with a quorum of its members present, voting 
common stock of the Corporation may be issued only to origina-
tors and certified facilities. 
"(3) AUTHORITY OF BOARD TO ESTABLISH TERMS AND PROCE-
DURES.—The Board shall adopt such terms, conditions, and 
PUBLIC LAW 100-233—JAN. 6, 1988 
101 STAT. 1693 
procedures with regard to the issue of stock under this section 
as may be necessary, including the estabUshment of a maxi-
mum amount Umitation on the number of shares of voting 
common stock that may be outstanding at any time. 
"(4) TRANSFERABILITY.—Subject to such Umitations as the 
Board may impose, any share of any class of voting common 
stock issued under this section shall be transferable among the 
institutions or entities to which shares of such class of common 
stock may be offered under paragraph (1), except that, as to the 
Corporation, such shares shall be transferable only on the books 
of the Corporation. 
"(5) MAXIMUM NUMBER OF SHARES.—No stockholder, other 
than a holder of class B stock, may own, directly or indirectly, 
more than 33 percent of the outstanding shares of such class of 
the voting common stock of the Corporation. 
"(b) REQUIRED CAPITAL CONTRIBUTIONS.— 
"(1) IN GENERAL.—The Corporation may require each origina-
tor and each certified facility to make, or commit to make, such 
nonrefundable capital contributions to the Corporation as are 
reasonable and necessary to meet the administrative expenses 
of the Corporation. 
"(2) STOCK ISSUED AS CONSIDERATION FOR CONTRIBUTION.—The 
Corporation, from time to time, shall issue to each originator or 
certified facility voting common stock evidencing any capital 
contributions made pursuant to this subsection. 
"(c) DIVIDENDS.— 
"(1) IN GENERAL.—Such dividends as may be declared by the 
Board, in the discretion of the Board, shall be paid by the 
Corporation to the holders of the voting common stock of the 
Corporation pro rata based on the total number of shares 
of both classes of stock outstanding. 
"(2) RESERVES REQUIREMENT.—No dividend may be declared or 
paid by the Board under this section unless the Board deter-
mines that adequate provision has been made for the reserve 
required under section 8.10(c)(1). 
"(3) DIVIDENDS PROHIBITED WHILE OBLIGATIONS ARE OUTSTAND-
ING.—No dividend may be declared or paid by the Board under 
this section while any obligation issued by the Corporation to 
the Secretary of the Treasury under section 8.13 remains 
outstanding. 
"(d) NONVOTING COMMON STOCK.—The Corporation is authorized 
to issue nonvoting common stock having such par value as may be 
fixed by the Board from time to time. Such nonvoting common stock 
shall be freely transferable, except that, as to the Corporation, such 
stock shall be transferable only on the books of the Corporation. 
Such dividends as may be declared by the Board, in the discretion of 
the Board, may be paid by the Corporation to the holders of the 
nonvoting common stock of the Corporation, subject to paragraphs 
(2) and (3) of subsection (c). 
"(e) PREFERRED STOCK.— 
"(1) AUTHORITY OF BOARD.—The Corporation is authorized to 
issue nonvoting preferred stock having such par value as may 
be fixed by the Board from time to time. Such preferred stock 
issued shall be freely transferable, except that, as to the Cor-
poration, such stock shall be transferred only on the books of 
the Association. 
101 STAT. 1694 
PUBLIC LAW 100-233—JAN. 6, 1988 
"(2) RIGHTS OF PREFERRED STOCK.—Subject to paragraphs (2) 
and (3) of subsection (c), the holders of the preferred stock shall 
be entitled to such rate of cumulative dividends, and such 
holders shall be subject to such redemption or other conversion 
provisions, as may be provided for at the time of issuance. No 
dividends shall be payable on any share of common stock at any 
time when any dividend is due on any share of preferred stock 
and has not been paid. 
"(3) PREFERENCE ON TERMINATION OF BUSINESS.—In the event 
of any liquidation, dissolution, or winding up of the business of 
the Corporation, the holders of the preferred shares of stock 
shall be paid in full at the par value thereof, plus all accrued 
dividends, before the holders of the common shares receive any 
payment. 
12 u s e 
"SEC. 8.5. CERTIFICATION OF AGRICULTURAL MORTGAGE MARKETING 
2279aa-5. 
FACILITIES. 
"(a) EUGIBIUTY STANDARDS.— 
"(1) ESTABLISHMENT REQUIRED.—Within 120 days after the 
date on which the permanent board first meets with a quorum 
present, the Corporation shall issue standards for the certifi-
cation of agricultural mortgage marketing facilities, including 
eligibility standards in accordance with paragraph (2). 
"(2) MINIMUM REQUIREMENTS.—To be eligible to be certified 
under the standards referred to in paragraph (1), an agricul-
tural mortgage marketing facility shall— 
"(A) be an institution of the Farm Credit System or a 
corporation, association, or trust organized under the laws 
of the United States or of any State; 
"(B) meet or exceed capital standards established by the 
Board; 
"(C) have as one of the purposes of the facility, the sale or 
resale of securities representing interests in, or obligations 
backed by, pools of qualified loans that have been provided 
guarantees by the Corporation; 
"(D) demonstrate managerial ability with respect to agri-
cultural 
mortgage loan 
underwriting, 
servicing, and 
marketing that is acceptable to the Corporation; 
"(E) adopt appropriate agricultural mortgage loan under-
writing, appraisal, and servicing standards and procedures 
that meet or exceed the standards established by the Board; 
"(F) for purposes of enabling the Corporation to examine 
the facility, agree to allow officers or employees of the 
Corporation to have access to all books, accounts, financial 
records, reports, files, and all other papers, things, or prop-
erty, of any type whatsoever, belonging to or used by the 
Corporation that are necessary to facilitate an examination 
of the operations of the facility in connection with securi-
ties, and the pools of qualified loans that back securities, for 
which the Corporation has provided guarantees; and 
"(G) adopt appropriate minimum standards and proce-
dures relating to loan administration and disclosure to 
borrowers concerning the terms and rights applicable to 
loans for which guarantee is provided, in conformity with 
uniform standards established by the Corporation. 
"(3) NONDISCRIMINATION REQUIREMENT.—The standards estab-
lished under this subsection shall not discriminate between or 
PUBLIC LAW 100-233—JAN. 6, 1988 
101 STAT. 1695 
against Farm Credit System and non-Farm Credit System 
applicants. 
"
O
t
>
) CERTIFICATION BY CORPORATION.—Within 60 days after receiv-
ing an application for certification under this section, the Corpora-
tion shall certify the facility if the facility meets the standards 
established by the Corporation under subsection (aXD. 
"(c) MAXIMUM TIME PERIOD FOR CERTIFICATION.—Any certification 
by the Corporation of an agricultural mortgage marketing facility 
shall be effective for a period determined by the Corporation of not 
to exceed 5 years. 
"(d) REVOCATION.— 
"(1) IN GENERAL.—After notice and an opportunity for a 
hearing, the Corporation may revoke the certification of an 
agricultural mortgage marketing facility if the Corporation 
determines that the facility no longer meets the standards 
referred to in subsection (a). 
"(2) EFFECT OF REVOCATION.—Revocation of a certification 
shall not affect any pool guarantee that has been issued by the 
Corporation. 
"(e) AFFIUATION OF F C S INSTITUTIONS WITH FACILITY.— 
"(1) 
ESTABLISHMENT OF AFFIUATE 
AUTHORIZED.—Notwith-
standing any other provision of this Act, any Farm Credit 
System institution (other than the Corporation), acting for such 
institution alone or in conjunction with one or more other such 
institutions, may establish and operate, as an affiliate, an sigri-
cultural mortgage marketing facility if, within a reasonable 
time after such establishment, such facility obtains and there-
after retains certification under subsection (b) as a certified 
facility. 
"(2) 
EXCLUSIVE 
AGENCY 
AGREEMENT 
AUTHORIZED.—Any 
number of Farm Credit System institutions (other than the 
Corporation) may enter into an agreement with any certified 
facility (including an affiliate established under paragraph (1)) 
to sell the qualified loans of such institutions exclusively to or 
through the facility. 
"SEC. 8.6. GUARANTEE OF QUALIFIED LOANS. 
"(a) GUARANTEE AUTHORIZED FOR CERTIFIED FACIUTIES.— 
"(1) IN GENERAL.—Subject to the requirements of this section 
and on such other terms and conditions as the Corporation shall 
consider appropriate, the Corporation shall guarantee the 
timely payment of principal and interest on the securities 
issued by a certified facility that represents interests in, or 
obligations backed by, any pool of qusdified loans held by such 
facility. 
"(2) INABILITY OF FACILITY TO PAY.—If the facility is unable to 
make any payment of principal or interest on any security for 
which a guarantee has been provided by the Corporation under 
paragraph (1), subject to the provisions of subsection (b) the 
Corporation shall make such pa3mient as and when due in cash, 
and on such pa3rment shall be subrogated fully to the rights 
satisfied by such pajrment, 
"(3) POWER OF CORPORATION.—Notwithstanding any other 
provision of law, the Corporation is empowered, in connection 
with any guarantee under this subsection, whether before or 
after any default, to provide by contract with the facility for the 
extinguishment, on default by the facility, of any redemption, 
12 use 
2279aa-6. 
Contracts. 
101 STAT. 1696 
PUBLIC LAW 100-233—JAN. 6, 1988 
, ., equitable, legal, or other right, title, or interest of the facility in 
any mortgage or mortgages constituting the pool against which 
the guaranteed securities are issued. With respect to any issue 
of guaranteed securities, in the event of default and pursuant 
., , otherwise to the terms of the contract, the mortgages that 
constitute such pool shall become the absolute property of the 
Corporation subject only to the unsatisfied rights of the holders 
of the securities based on and backed by such pool. 
"(b) RESERVE OR SUBORDINATED PARTICIPATION REQUIREMENTS.—In 
the case of any pool referred to in subsection (a), the Corporation 
shall— 
"(1) provide a guarantee only with respect to an individual 
pool of qualified loans on application of a certified facility; 
"(2) provide a guarantee only if a reserve, or retained subordi-
nated participating interests, in an amount equal to at least 10 
percent of the outstanding principal amount of the loans con-
stituting the pool has been established in accordance with this 
' 
title; 
"(3) require that full recourse be taken against reserves and 
retained 
subordinated 
participating 
interests 
before 
any 
demand be made by the certified facility with respect to the 
guarantee of the Corporation; and 
"(4) ensure the timely receipt of principal and interest due to 
security or obligation holders only after full recourse has been 
taken against such reserves and retained subordinated partici-
pating interests. 
"(c) STANDARDS REQUIRING DIVERSIFIED POOLS.— 
"(1) IN GENERAL.—To reduce the risks incurred by the Cor-
poration in providing guarantees under this section and to 
further the purposes of this title, the Board shall establish 
standards governing the composition of each pool of qualified 
loans (in connection with which such guarantees are provided) 
over the period during which the commitment to provide 
guarantees is effective. 
"(2) MINIMUM CRITERIA.—The standards established by the 
^ 
Board pursuant to paragraph (1) for pools of qualified loans 
..;•:. 
shall, at a minimum— 
"(A) require that each pool consist of loans that— 
"(i) are secured by agricultural real estate that is 
widely distributed geographically; 
"(ii) vary widely in terms of amounts of principal; 
and 
"(iii) in the case of land used in the production of 
agricultural commodities, are secured by agricultural 
,^ 
real estate that, in the Eiggregate, is used to produce a 
wide range of agricultural commodities; 
"(B) prohibit the inclusion in any such pool o
f
— 
(i) any loan the principal amount of which exceeds 
3.5 percent of the aggregate amount of principal of all 
loans in such pool; and 
"(ii) 2 or more loans to related borrowers; and 
^ 
-,. 
"(C) require that each pool consist of not less than 50 
loans. 
"(3) SMALL FARMS AND FAMILY FARMERS.—In establishing the 
standards described in paragraph (2XAXii), the Board shall in-
. elude provisions that promote and encourage the inclusion of 
PUBLIC LAW 100-233—JAN. 6, 1988 
101 STAT. 1697 
loans for small farms and family farmers in pools of qualified 
loans. 
"(4) CONGRESSIONAL REVIEW.—No standard prescribed under 
this subsection shall take effect before the later of— 
"(A) the end of a period consisting of 80 legislative days 
and beginning on the date such standards are submitted to 
Congress; or 
"(B) the end of a period consisting of 90 calendar days and 
beginning on such date. 
"(d) OTHER RESPONSIBILITIES OF AND LIMITATIONS ON CERTIFIED 
FACIUTIES.—As a condition for providing any guarantees under this 
section for securities issued by a certified facility that represent 
interests in, or obligations backed by, any pool of qualified loans, the 
Corporation shall require such facility to agree to comply with the 
following requirements: 
"(1) LOAN DEFAULT RESOLUTION.—The facility shall act in 
accordance with the standards of a prudent institutional lender 
to resolve loan defaults. 
"(2) 
SUBROGATION OF UNITED STATES AND CORPORATION TO 
INTERESTS OF FACILITY.—The proceeds of any collateral, judg-
ments, settlements, or guarantees received by the facility with 
respect to any loan in such pool, shall be applied, after payment 
of costs of collection— 
"(A) first, to reduce the amount of any principal outstand-
ing on any obligation of the Corporation that w£is pur-
chased by the Secretary of the Treasury under section 8.13 
to the extent the proceeds of such obligation were used to 
make guarantees in connection with such securities; and 
"(B) second, to reimburse the Corporation for any such 
guarantee payments. 
"(3) LOAN SERVICING.—The originator of any loan in such pool 
shall be permitted to retain the right to service the loan. 
"(4) LOANS WITH RECOURSE TO ORIGINATOR PROHIBITED.—Each 
loan in the pool shall have been sold to the certified facility 
without recourse to the originator of such loan (other than 
recourse to any interest of such originator in a reserve estab-
lished in connection with such loan or any subordinated partici-
pation interest of such originator in such loan). 
"(5) COMPUANCE WITH DIVERSIFIED POOL STANDARDS.—The 
facility shall comply with the standards adopted by the Board 
under subsection (c) in establishing and maintaining the pool. 
"(6) MINORITY PARTICIPATION IN PUBUC OFFERINGS.—The facil-
ity shall take such steps as may be necessary to ensure that 
minority owned or controlled investment banking firms, under-
writers, and bond counsels throughout the United States have 
an opportunity to participate to a significant degree in any 
public offering of securities. 
"(7) No DISCRIMINATION AGAINST STATES WITH BORROWERS 
RIGHTS.—The facility may not refuse to purchase qualified loans 
originating in States that have established borrowers rights 
laws either by statute or under the constitution of such States, 
except that the facility may require discounts or charge fees 
reasonably related to costs and expenses arising from such 
statutes or constitutional provisions. 
"(e) ADDITIONAL AUTHORITY OF THE BOARD.—To ensure the liquid-
ity of securities for which guarantees have been provided under this 
section, the Board shall adopt appropriate standards regarding— 
101 STAT. 1698 
PUBLIC LAW 100-233—JAN. 6, 1988 
"(1) the characteristics of any pool of qualified loans serving 
as collateral for such securities; 
"(2) registration requirements (if any) with respect to such 
securities; and 
"(3) transfer requirements. 
"(f) AGGREGATE PRINCIPAL AMOUNTS OF QUAUFIED LOANS.— 
"(1) INITIAL YEAR.—During the first year after the effective 
date of this title, the Corporation may not provide guarantees 
for securities representing interests in, or obligations backed by, 
qualified loans (other than loans which back securities issued by 
Farm Credit System institutions for which the Corporation 
provides a guarantee) in an aggregate principal amount in 
excess of 2 percent of the total agricultural real estate debt 
outstanding at the close of the prior calendar year (as published 
by the Board of Governors of the Federal Reserve System), less 
all Farmers Home Administration agricultural real estate debt. 
"(2) SECOND YEAR.—During the year following the year re-
ferred to in paragraph (1), the Corporation may not provide 
giiarantees for securities representing interests in, or obliga-
tions backed by, qualified loans (other than loans which back 
securities issued by Farm Credit System institutions for which 
the (Corporation provides a guarantee) in an additional principal 
amount in excess of 4 percent of the total agricultural real 
estate debt outstanding at the close of the prior calendar year, 
less all Farmers Home Administration agricultural real estate 
debt. 
"(3) THIRD YEAR.—During the year following the year referred 
to in paragraph (2), the (Dorporation may not provide guarantees 
for securities representing interests in, or obligations backed by, 
qualified loans (other than loans which back securities issued by 
Farm Credit System institutions for which the Corporation 
provides a guarsintee) in an additional principal amount in 
excess of 8 percent of the total agricultural real estate debt 
outstanding at the close of the prior calendar year, less all 
Farmers Home Administration agricultural real estate debt. 
"(4) SUBSEQUENT YEARS.—In years subsequent to the year 
referred to in paragraph (3), the (Corporation may provide 
guarantees without regard to the principal amount of the quali-
fied loans guaranteed. 
12 use 
"SEC. 8.7. RESERVES AND SUBORDINATED PARTICIPATION INTERESTS OF 
2279aa-7. 
CERTIFIED FACILITIES. 
"(a) CASH CONTRIBUTIONS.— 
"(1) CONTRIBUTIONS B
Y ORIGINATORS.—For each pool of loans, 
a certified facility and the participating originators may each 
contribute a share of the minimum reserve required under 
section 8.6(bX2). 
"(2) (COMPOSITION OF RESERVES.—The reserves required under 
this section, other than retained subordinated participation 
interests, shall be held in the form of United States Treasury 
securities or other securities issued, guaranteed, or insured by 
an agency or instrumentality of the United States Government. 
"(3) USE AND DISPOSITION OF ASSETS IN RESERVE.—Subject to 
the requirements of subsection (c), any certified facility that 
establishes a reserve pursuant to this subsection shall be re-
quired by the (Corporation to maintain such reserve as a seg-
: regated account consisting of the amounts contributed (but not 
PUBLIC LAW 100-233—JAN. 6, 1988 
101 STAT. 1699 
the earnings accruing on such amounts) to ensure the repay-
ment of principal of, and the payment of interest on, the 
securities representing an interest in, or obligations backed by, 
the pool of qualified loans with respect to which such reserve is 
established. 
"(b) RETENTION OF SUBORDINATED PARTICIPATION INTERESTS.— 
"(1) IN GENERAL.—A certified facility may meet the require-
ments of section 8.6(bX2) with respect to any pool of qualified 
loans by retaining a subordinated participation interest in each 
loan included in each such pool in an amount not less than the 
amount that is equal to 10 percent of the principal amount of 
such loan. 
"(2) RETENTION OF SUCH INTERESTS BY LOAN ORIGINATORS.— 
Under the terms of the sale of any qualified loan by the 
originator of such loan to a certified facility, the originator of 
such loan may agree to retain a subordinated participation 
interest in such loan and the amount of the subordinated 
interest so retained by such loan originator shall be attributed 
to the facility for purposes of determining whether the require-
ments of paragraph (1) have been met. 
"(3) DISTRIBUTION RIGHTS OF HOLDERS OF SUBORDINATED IN-
TERESTS.—The rights of the holders of the subordinated partici-
pation interests to receive distributions with respect to the 
loans constituting the pool shall be subordinated as prescribed 
by the Corporation to enhance the likelihood of regular receipt 
by the other holders of interests in such pool of the full amount 
of scheduled payments of principal and interest on loans con-
stituting the pool. 
"(c) ADDITIONAL REQUIREMENTS RELATING TO SECTION 8.6(bX2) 
RESERVES.— 
"(1) DISTRIBUTION OF EARNINGS ACCRUING IN SECTION 8.6(bX2) 
RESERVES.—In the case of each applicable loan pool, a certified 
facility shall distribute to originators, at lesist semiannually, 
any earnings on the contributions of the originators to the 
reserve. 
"(2) EXCEPTION FOR WITHDRAWALS THAT WOULD DECREASE RE-
SERVE LEVELS BELOW RESERVE REQUIREMENT.—No withdrawal 
and distribution authorized under paragraph (1) may be made 
to the extent such withdrawal would cause the reserve to fall 
below the amount required to be held in such reserve under 
section 8.6(bX2). 
"(3) SEPARATE LOAN LOSS ACCOUNTING.—Any certified facility 
that maintains a reserve (pursuant to section 8.6(bX2)) to which 
any originator has contributed shall maintain separate loan loss 
accounting for each loan for which a contribution was made by 
such originator to such reserve. 
"(4) LOAN LOSS ATTRIBUTION RULE.—Except for that portion of 
losses absorbed by a contribution of a certified facility to the 
reserve as provided in subsection (aXD, each originator partici-
pating in the pool shall absorb any losses on loans originated up 
to the total amount the originator has contributed to the re-
serve before the losses are absorbed by the contributions of 
other originators who are participating in the pool. 
"(d) AUTHORITY OF BOARD TO ESTABUSH OTHER POLICIES AND 
PROCEDURES.—The Board may establish such other policies and 
procedures with respect to— 
101 STAT. 1700 
PUBLIC LAW 100-233—JAN. 6, 1988 
"(1) the establishment of reserves and the retention of 
subordinated participation interests under this section; and 
"(2) the manner in which such reserves or interests shall be 
available to make pajrments of interest on, and repajonents of 
principal of, securities for which the Corporation has provided 
guarantees, as the Board determines to be necessary or appro-
priate to carry out the purposes of this title. 
12 use 
"SEC. 8.8. STANDARDS FOR QUALIFIED LOANS. 
2279aa-8 
"(a) STANDARDS.—Not later than 120 days after the appointment 
and election of the Board, the Corporation, in consultation with 
originators, shall establish uniform underwriting, security ap-
praisal, and repa}mient standards for qualified loans. In establishing 
standards for qualified loans, the Corporation shall confine cor-
porate operations, so far as practicable, to mortgage loans that are 
deemed by the Board to be of such quality so as to meet, substan-
tially and generally, the purchase standards imposed by private 
institutional mortgage investors. 
"(b) MINIMUM QUTERIA.—To further the purpose of this title to 
provide a new source of long-term fixed rate financing to assist 
farmers and ranchers to purchase agricultural real estate, the 
standards established by the Board pursuant to subsection (a) shall, 
at a minimum— 
"(1) provide that no agricultural mortgage loan with a loan-to-
value ratio in excess of 80 percent may be treated as a qualified 
loan;. 
"(2) require each borrower to demonstrate sufficient cash-flow 
to adequately service the agricultural mortgage loan; 
"(3) contain sufficient documentation standards; 
"(4) contain adequate standards to protect the integfrity of the 
appraisal process with respect to any agricultural mortgage 
loans; 
"(5) contain adequate standards to ensure that the borrower is 
or will be actively engaged in agricultural production, and 
require the borrower to certify to the originator that the bor-
rower intends to continue agricultural production on the site 
involved; 
"(6) minimize speculation in agricultural real estate for 
nonagricultural purposes; and 
"(7) in establishing the value of agricultural real estate, 
consider the purpose for which the real estate is taxed. 
"(c) LOAN AMOUNT LIMITATION.— 
"(1) IN GENERAL.—A loan may not be treated as a qualified 
loan if the principal amount of such loan exceeds $2,500,000, 
adjusted for inflation, except as provided in paragraph (2). 
"(2) ACREAGE EXCEPTION.—Paragraph (1) shall not apply with 
respect to any agricultural mortgage loan described in such 
pareigraph if such loan is secured by £igricultural real estate 
that, in the aggregate, comprises not more than 1,000 acres. 
"(d) CONGRESSIONAL REVIEW.—No standard prescribed under 
subsection (a) shall take effect before the later of— 
"(1) the end of a period consisting of 30 legislative days and 
be^nning on the date such standards are submitted to the 
Congress; or 
"(2) the end of a period consisting of 90 calendar days and 
beginning on such date. 
.., ^<- v,.., . = -r, -:....«. -. ... 
PUBLIC LAW 100-233—JAN. 6, 1988 
101 STAT. 1701 
"(e) NONDISCRIMINATION 
REQUIREMENT.—The standards estab-
lished under subsection (a) shall not discriminate against small 
originators or small agricultural mortgage loans that are at least 
$50,000. 
"SEC. 8.9. EXEMPTION FROM RESTRUCTURING AND BORROWERS RIGHTS 
PROVISIONS FOR POOLED LOANS. 
"(a) RESTRUCTURING.—Notwithstanding any other provision of 
law, sections 4.14, 4.14A, 4.14B, 4.14C, and 4.37 shall not apply to 
any loan included in a pool of qualified loans backing securities or 
obligations for which the Corporation provides guarantee. The loan 
servicing standards established by the Corporation shall be pat-
terned after similar standards adopted by other federally sponsored 
secondary market facilities. 
"Ot)) BORROWERS RIGHTS.—At the time of application for a loan, 
originators that are Farm Credit System institutions shall give 
written notice to each applicant of the terms and conditions of the 
loan, setting forth separately terms and conditions for pooled loans 
and loans that are not pooled. This notice shall include a statement, 
if applicable, that the loan may be pooled and that, if pooled, 
sections 4.14, 4.14A, 4.14B, 4.14C, and 4.37 shall not apply. This 
notice also shall inform the applicant that he or she has the right 
not to have the loan pooled. Within 3 days from the time of 
commitment, an applicant has the right to refuse to allow the loan 
to be pooled, thereby retaining rights under sections 4.14, 4.14A, 
4.14B, 4.14C, and 4.37, if applicable. 
"SEC. 
8
.
1
0
. FUNDING 
FOR 
GUARANTEE; 
RESERVES 
OF 
CORPORATION. 
"(a) GUARANTEE.—The Corporation shall provide guarantees for 
securities representing interests in, or obligations backed by, pools 
of qualified loans through commitments issued by the Corporation 
providing for guarantees. 
"Ot)) GUARANTEE FEES.— 
"(1) INITIAL FEE.—At the time a guarantee is issued by the 
Corporation, the Corporation shall assess the certified facility a 
fee of not more than Vi of 1 percent of the initial principal 
amount of each pool of qualified loans. 
"(2) ANNUAL FEES.—Beginning in the second year after the 
date the guarantee is issued under paragraph (1), the Corpora-
tion may, at the end of each year, assess the certified facility an 
annual fee of not more than ¥2 of 1 percent of the principal 
amount of the loans then constituting the pool. 
"(3) DETERMINATION OF AMOUNT.—The Corporation shall 
establish such fees on the amount of risk incurred by the 
Corporation in providing the guarantees with respect to which 
such fee is assessed, £is determined by the Corporation. Fees 
assessed under paragraphs (1) and (2) shall be established on an 
actuarially sound basis. 
"(4) ANNUAL REVIEW BY GAO.—The Comptroller General of 
the United States shall annually review, and submit to the 
Congress a report regarding, the actuarial soundness and 
reasonableness of the fees established by the Corporation under 
this subsection. 
"(c) 
CORPORATION 
RESERVE 
AGAINST 
GUARANTEES 
LOSSES 
REQUIRED.— 
"(1) IN GENERAL.—So much of the fees assessed under this 
section as the Board determines to be necessary shall be set 
12 use 
2279aa-9. 
12 use 
2279aa-10. 
Reports. 
101 STAT. 1702 
PUBLIC LAW 100-233—JAN. 6, 1988 
aside by the Corporation in a segregated account as a reserve 
against losses arising out of the guarantee activities of the 
Corporation. 
"(2) EXHAUSTION OF RESERVE REQUIRED.—The Corporation 
may not issue obligations to the Secretary of the Treasury 
under section 8.13 in order to meet the obligations of the 
Corporation with respect to any guarantees provided under this 
title until the reserve established under paragraph (1) has been 
exhausted. 
"(d) FEES TO COVER ADMINISTRATIVE COSTS AUTHORIZED.—The Cor-
poration may impose charges or fees in reasonable amounts in 
connection with the administration of its activities under this title 
to recover its costs for performing such administration. 
12 use 
"SEC. 8.11. SUPERVISION, EXAMINATION, AND REPORT OF CONDITION. 
2279aa-ll. 
,<. . „ 
(a) REGULATION.— 
"(1) AUTHORITY.—Notwithstanding any other provision of this 
Act, the regulatory authority of the Farm Credit Administra-
tion with respect to the Corporation shall be confined to— 
"(A) providing for the examination of the condition of the 
Corporation; and 
"(B) providing for the general supervision of the safe and 
sound performance of the powers, functions, and duties 
vested in the Corporation by this title, including through 
the use of the enforcement powers of the Farm Credit 
Administration under part C of title V. 
"(2) (DONSIDERATIONS.—In exercising its authority pursuant to 
this section, the Farm Credit Administration shall consider— 
"(A) the purposes for which the C!orporation was created; 
"(B) the practices appropriate to the conduct of secondary 
markets in agricultural loans; and 
"(C) the reduced levels of risk associated with appro-
priately structured secondary market transactions. 
"(b) EXAMINATIONS AND AUDITS.— 
"(1) IN GENERAL.—The financial transactions of the Corpora-
tion shall be examined by examiners of the Farm Credit 
Administration in accordance with the principles and proce-
dures applicable to commercial corporate transactions under 
such rules and regulations as may be prescribed by the 
Administration. 
"(2) FREQUENCY.—The examinations shall occur at such times 
as the Farm Credit Administration Board may determine, but 
in no event less than once each year. 
"(3) ACCESS.—The examiners shall— 
"(A) have access to all books, accounts, financial records, 
reports, files, and all other papers, things, or property 
belonging to or in use by the Corporation and necessary to 
facilitate the audit; and 
"(B) be afforded full access for verifying transactions with 
certified facilities and other entities with whom the Cor-
poration conducts transactions. 
"(c) ANNUAL REPORT OF (DONDITION.—The (iJorporation shall make 
and publish an annual report of condition as prescribed by the Farm 
Credit Administration. Each report shall contain financial state-
ments prepared in accordance with generally accepted accounting 
principles and contain such additional information as the Farm 
Credit Administration may by regulation prescribe. The financial 
PUBLIC LAW 100-233—JAN. 6, 1988 
101 STAT. 1703 
statements of the Corporation shall be audited by an independent 
public accountant. 
"(d) FCA ASSESSMENTS TO COVER COSTS.—The Farm Credit 
Administration shall assess the Corporation for the cost to the 
Administration of any regulatory activities conducted under this 
section, including the cost of any examination. 
"SEC. 8.12. SECURITIES IN CREDIT ENHANCED POOLS. 
"(a) FEDERAL LAWS.— 
"(1) APPUCABILITY OF CERTAIN FEDERAL SECURITIES LAWS.—For 
purposes of section 3(aX2) of the Securities Act of 1933, no 
security representing an interest in a pool of qualified loans for 
which guarantees have been provided by the Corporation shall 
be deemed to be a security issued or guaranteed by a person 
controlled or supervised by, or acting as an instrumentality of, 
the Government of the United States. No such security shall be 
deemed to be a 'government security' for purposes of the Securi-
ties Exchange Act of 1934 or for purposes of the Investment 
Company Act of 1940. 
"(2) No FULL FAITH AND CREDIT OF THE UNITED STATES.—Each 
security for which credit enhancement has been provided by the 
Corporation shall clearly indicate that the security is not an 
obligation of, and is not guaranteed as to principal or interest 
by, the Farm Credit Administration, the United States, or any 
other agency or instrumentality of the United States (other 
than the Corporation). 
"(b) STATE SECURITIES LAWS.— 
"(1) GENERAL EXEMPTION.—Any security or obligation that 
has been provided a guarantee by the Corporation shall be 
exempt from any law of any State with respect to or requiring 
registration or qualification of securities or real estate to the 
same extent as any obligation issued by, or guaranteed as to 
principal and interest by, the United States or any agency or 
instrumentality of the United States. 
"(2) STATE OVERRIDE.—The provisions of paragraph (1) shall 
not be applicable to any State that, during the 8-year period 
beginning on the effective date of this title, enacts a law that— 
"(A) specifically refers to this subsection; and 
"(B) expressly provides that paragraph (1) shall not apply 
to the State. 
"(c) AUTHORIZED INVESTMENTS.— 
"(1) IN GENERAL.—Securities representing an interest in, or 
obligations backed by, pools of qualified loans with respect to 
which the Corporation has provided a guarantee shall be au-
thorized investments of any person, trust, corporation, partner-
ship, association, business trust, or business entity created 
pursuant to or existing under the laws of the United States or 
any State to the same extent that the person, trust, corporation, 
partnership, association, business trust, or business entity is 
authorized under any applicable law to purchase, hold, or invest 
in obligations issued by or guaranteed as to principal and 
interest by the United States or any agency or instrumentality 
of the United States. Such securities or obligations may be 
accepted as security for all fiduciary, trust, and public funds, 
the investment or deposits of which shall be under the authority 
and control of the United States or any State or any officers of 
either. 
12 use 
2279aa-12. 
Business and 
industry. 
101 STAT. 1704 
PUBLIC LAW 100-233—JAN. 6, 1988 
"(2) STATE UMITATIONS ON PURCHASE, HOLDING, OR INVEST-
MENT.—If State law limits the purchase, holding, or investment 
in obligations issued by the United States by the person, trust, 
corporation, partnership, association, business trust, or business 
entity, securities or obligations of a certified facility issued on 
which the Corporation has provided a guarantee shall be consid-
ered to be obligations issued by the United States for purposes 
of the limitation. 
"(3) NONAPPUCABILITY OF PROVISIONS.— 
"(A) SUBSEQUENT STATE LAW.—Paragraphs (1) and (2) 
shall not apply with respect to a particular person, trust, 
corporation, partnership, association, business trust, or 
business entity, or class thereof, in any State that, prior to 
the expiration of the 8-year period beginning on the date of 
the enactment of this title, enacts a law that specifically 
refers to this section and either prohibits or provides for a 
more limited authority to purchase, hold, or invest in the 
securities by any person, trust, corporation, partnership, 
association, business trust, or business entity, or class 
thereof, than is provided in paragraphs (1) and (2). 
"(B) EFFECT OF SUBSEQUENT STATE LAW.—The enactment 
by any State of a law of the type described in subparagraph 
(A) shall not affect the validity of any contractual commit-
ment to purchase, hold, or invest that was made prior to the 
effective date of the law and shall not require the sale or 
other disposition of any securities acquired prior to the 
effective date of the law. 
"(d) STATE USURY LAWS SUPERSEDED.—Any provision of the con-
stitution or law of any State which expressly limits the rate or 
amount of interest, discount points, finance charges, or other 
charges that may be charged, taken, received, or reserved by agri-
cultural lenders or certified facilities shall not apply to any agricul-
tural loan made by an originator or a certified facility in accordance 
with this title that is included in a pool for which the Corporation 
has provided a guarantee. 
12 u s e 
"SEC. 8.13. AUTHORITY TO ISSUE OBLIGATIONS TO COVER GUARANTEE 
2279aa-13. 
LOSSES OF CORPORATION. 
"(a) SALE OF OBUGATIONS TO TREASURY.— 
"(1) IN GENERAL.—Subject to the limitations contained in 
sections 8.6(b) and 8.1(Kc) and the requirement of paragraph (2), 
the Corporation may issue obligations to the Secretary of the 
Treasury the proceeds of which may be used by the Ck)rporation 
solely for the purpose of fulfilling the obligations of the C!orpora-
tion under any guarantee provided by the Corporation under 
this title. 
"(2) CERTIFICATION.—The Secretary of the Treasury may pur-
chase obligations of the Corporation under paragraph (1) only if 
the Corporation certifies to the Secretary that— 
(A) the requirements of sections 8.6(b) and 8.10(c) have 
been fulfilled; and 
"(B) the proceeds of the sale of such obligations are 
needed to fulfill the obligations of the Corporation under 
£uiy guarantee provided by the Corporation under this title. 
"(b) EXPEDITIOUS TRANSACTION REQUIRED.—Not later than 10 busi-
ness days after receipt by the Secretary of the Treasury of any 
certification by the Corporation under subsection (aX2), the Sec-
PUBLIC LAW 100-233—JAN. 6, 1988 
101 STAT. 1705 
retary of the Treasury shall purchase obligations issued by the 
Corporation in an amount determined by the Corporation to be 
sufficient to meet the guarantee liabilities of the Corporation. 
"(c) LIMITATION ON AMOUNT OF OUTSTANDING OBUGATIONS.—The 
aggregate amount of obligations issued by the Corporation under 
subsection (a)(1) which may be held by the Secretary of the Treasury 
at any time (as determined by the Secretary) shall not exceed 
$1,500,000,000. 
"(d) TERMS OF OBUGATION.— 
"(1) INTEREST.—Each obligation purchased by the Secretary of 
the Treasury shall bear interest at a rate determined by the 
Secretary, taking into consideration the average rate on 
outstanding marketable obligations of the United States as of 
the last day of the leist calendar month ending before the date of 
the purchase of such obligation. 
"(2) REDEMPTION.—The Secretary of the Treasury shall re-
quire that such obligations be repurchased by the Corporation 
within a reasonable time. 
"(e) (DOORDINATION WiTH TiTLE 31, UNITED STATES C O D E . — 
"(1) AUTHORITY TO USE PROCEEDS FROM SALE OF TREASURY 
SECURITIES.—For the purpose of purchasing obligations of the 
Corporation, the Secretary of the Treasury may use £is a public 
debt transaction the proceeds from the sale by the Secretary of 
any securities issued under chapter 31 of title 31, United States 
Code, and the purposes for which securities may be issued under 
such chapter are extended to include such purchases. 
"(2) TREATMENT OF TRANSACTIONS.—All purchases and sales 
, ,
-
^
^ 
by the Secretary of the Treasury of obligations issued by the 
Corporation under this section shall be treated as public debt 
transactions of the United States. 
"(f) AUTHORIZATION OF APPROPRIATIONS.—There is authorized to 
be appropriated to the Secretary of the Treasury $1,500,000,000, 
without fiscal year limitation, to carry out the purposes of this title. 
"SEC. 8.14. FEDERAL JURISDICTION. 
12 USC 
2279aa-14 
"Notwithstanding section 1349 of title 28, United States Code, or 
any other provision of law: 
"(1) The Corporation shall be considered an agency under 
sections 1345 and 1442 of such title. 
"(2) All civil actions to which the Corporation is a party shall 
be deemed to arise under the laws of the United States and, to 
the extent applicable, shall be deemed to be governed by Fed-
eral common law. The district courts of the United States shall 
have original jurisdiction of all such actions, without regard to 
amount of vsdue. 
"(3) Any civil or other action, case, or controversy in a court of 
a State or any court, other than a district court of the United 
States, to which the Corporation is a party may at any time 
before trial be removed by the Corporation, without the giving 
of any bond or security— 
"(A) to the District Court of the United States for the 
district and division embracing the place where the same is 
pending; or 
"(B) if there is no such district court, to the District CJourt 
of the United States for the district in which the principal 
office of the Corporation is located; 
101 STAT. 1706 
PUBLIC LAW 100-233—JAN. 6, 1988 
by following any procedure for removal for causes in effect at 
the time of such removal. 
"(4) No attachment or execution shall be issued against the 
Corporation or any of the property of the Corporation before 
final judgment in any Federal, State, or other court.". 
SEC. 703. GAO AUDIT OF FEDERAL AGRICULTURAL MORTGAGE CORPORA-
TION. 
Section 9105(a) of title 31, United States Code, is amended by 
adding at the end thereof the following new paragraph: 
"(4) FEDERAL AGRICULTURAL MORTGAGE CORPORATION.— 
"(A) AUDITS AUTHORIZED.—Notwithstanding any other 
provision of law and under such regulations as the 
Comptroller General may prescribe, the Comptroller Gen-
eral shall perform a financial audit of the Federal Agricul-
tural 
Mortgage 
Corporation 
on whatever 
basis 
the 
Comptroller General determines to be necessary. 
"(B) COOPERATION OF CORPORATION REQUIRED.—The Fed-
eral Agricultural Mortgage Corporation shall— 
'(i) make available to the Comptroller General for 
audit all records and property of, or used or meinaged 
by, the Association which may be necessary for the 
audit; and 
"(ii) provide the Comptroller General with facilities 
for verifying transactions with the balances or securi-
ties held by any depositary, fiscal agent, or custodian.". 
12 u s e 2279aa 
SEC. 704. GAO STUDIES. 
(a) STUDIES REQUIRED.—The Comptroller General of the United 
States shall conduct studies of the following: 
(1) The implementation of the amendments made by this title 
by the Federal Agricultural Mortgage Corporation and the 
effect of the operations of the Corporation on producers, the 
Farm Credit System, and other lenders, and the capital 
markets. 
(2) The feasibility and appropriateness of promoting the 
establishment of a secondary market for securities representing 
interests in, or obligations backed by, pools of agricultural real 
estate loans for which a guarantee has not been provided by the 
Federal Agricultural Mortgage Corporation. 
(3) The feasibility of expanding the authority granted under 
the amendments made by this title to authorize the sale of 
securities based on or backed by a trust or pool consisting of 
loans made to farm-related and rural small businesses. For 
purposes of the preceding sentence, the term "farm-related 
businesses" means businesses 90 percent or more of the annual 
dollar volume of the sales of which are made to agricultural 
producers. 
(b) SUBMISSION OF REPORT.—Not later than 2 years after the date 
of enactment of this Act, the Comptroller General of the United 
States shall transmit to the Congress a report on the studies re-
quired by subsection (a), including therein such recommendations 
for administrative action and legislation as may be appropriate. 
SEC. 705. CONFORMING AMENDMENTS. 
(a) FEDERAL LAND BANKS.—Section 1.4 (12 U.S.C. 2012) is amended 
by adding at the end thereof the following new paragraph: 
PUBLIC LAW 100-233—JAN. 6, 1988 
101 STAT. 1707 
"(23) Operate as an originator and to become certified as a cer-
tified facility under title VIIL". 
(b) FEDERAL LAND BANK ASSOCIATIONS.—Section 1.15 (12 U.S.C. 
2033) is amended by adding at the end thereof the following new 
paragraph: 
"(22) Operate as an originator and to become certified as a cer-
tified facility under title VIIL". 
(c) FEDERAL INTERMEDIATE CREDIT BANKS.—Section 2.1 (12 U.S.C. 
2072) is amended by adding at the end thereof the following new 
paragraph: 
"(21) Operate as an originator and to become certified as a cer-
tified facility under title VIIL". 
(d) PRODUCTION CREDIT ASSOCIATIONS.—Section 2.12 (12 U.S.C. 
2093) is amended by adding at the end thereof the following new 
paragraph: 
"(21) Operate as an originator and to become certified as a cer-
tified facility under title VIIL". 
Subtitle B—Farmers Home Administration 
Loans 
SEC. 711. IMPROVEMENT OF SECONDARY MARKET OPERATIONS FOR 
LOANS GUARANTEED BY THE FARMERS HOME ADMINISTRA-
TION. 
(a) IN GENERAL.—Section 338 of the Consolidated Farm and Rural 
Development Act (7 U.S.C. 1988) is amended by adding at the end 
thereof the following: 
"(fXl)(A) The guaranteed portion of any loan made under this title 
may be sold by the lender, and by any subsequent holder, in 
accordance with regulations governing such sales as the Secretary 
shall establish, subject to the following limitations: 
"(i) All fees due the Secretary with respect to a guaranteed 
loan are to be paid in full before any sale. 
"(ii) The loan is to have been fully disbursed to the borrower 
before the sale. 
"(B) After a loan is sold in the secondary market, the lender shall 
Contracts. 
remain obligated under its guarantee agreement with the Secretary, 
and shall continue to service the loan in accordance with the terms 
and conditions of such agreement. 
"(C) The Secretary shall develop such procedures as are necessary 
for the facilitation, administration, and promotion of secondary 
market operations, and for determining the increase of farmers' 
access to capital at reasonable rates and terms as a result of 
secondary market operations. 
"(D) This subsection shall not be interpreted to impede or extin-
guish the right of the borrower or the successor in interest to such 
borrower to prepay (in whole or in part) any loan made under this 
title, or to impede or extinguish the rights of any party under any 
provision of this title. 
"(2)(A) The Secretary may, directly or through a market maker 
approved by the Secretary, issue pool certificates representing 
ownership of part or all of the guaranteed portion of any loan 
guaranteed by the Secretary under this title. Such certificates shall 
be based on and backed by a pool established or approved by the 
101 STAT. 1708 
PUBLIC LAW 100-233—JAN. 6, 1988 
Secretary and composed solely of the entire guaranteed portion of 
such loans. 
"(B) The Secretary may, on such terms and conditions as the 
Secretary deems appropriate, guarantee the timely payment of the 
principal and interest on pool certificates issued on behalf of the 
Secretary by approved market makers for purposes of this subsec-
tion. Such guarantee shall be limited to the extent of principal and 
interest on the guaranteed portions of loans that compose the pool. 
If a loan in such pool is prepaid, either voluntarily or by reason of 
default, the guarantee of timely payment of principal and interest 
on the pool certificates shall be reduced in proportion to the amount 
of principal and interest such prepaid loan represents in the pool. 
Interest on prepaid or defaulted loans shall accrue and be guaran-
teed by the Secretary only through the date of payment on the 
guarantee. During the term of the pool certificate, the certificate 
may be called for redemption due to prepayment or default of all 
loans constituting the pool. 
"(C) The full faith and credit of the United States is pledged to the 
payment of all amounts that may be required to be paid under any 
guarantee of such pool certificates issued by approved market 
makers under this subsection. The Secretary may expend amounts 
in the Agricultural Credit Insurance Fund to make payments on 
such guarantees. 
"(D) The Secretary shall not collect any fee for any guarantee 
under this subsection. The preceding sentence shall not preclude the 
Secretary from collecting a fee for the functions described in para-
graph (3). 
"(E) Within 30 days after a borrower of a guaranteed loan is in 
default of any principal or interest payment due for 60 days or more, 
the Secretary shall— 
"(i) purchase the pool certificates representing ownership of 
the guaranteed portion of the loan; and 
"(ii) pay the registered holder of the certificates an amount 
equal to the guaranteed portion of the loan represented by the 
certificate. 
Claims. 
"(F)(i) If the Secretary pays a claim under a guarantee issued 
under this subsection, the claim shall be subrogated fully to the 
rights satisfied by such payment, as may be provided by the 
Secretary. 
"(ii) No State or local law, and no Federal law, shall preclude or 
limit the exercise by the Secretary of the Secretary's ownership 
rights in the portions of loans constituting the pool against which 
the certificates are issued. 
"(3) On the adoption of final rules and regulations, the Secretary 
shall do the following: 
"(A) Provide for the central collection of registration informa-
tion from all participating market makers for all loans and pool 
certificates sold under paragraphs (1) and (2). Such information 
shall include, with respect to each original sale and any subse-
quent sale, identification of the interest rate paid by the bor-
rower to the lender, the lender's servicing fee, whether interest 
on the loan is at a fixed or variable rate, identification of each 
purchaser of a pool certificate, the interest rate paid on the 
certificate, and such other information as the Secretary deems 
appropriate. 
(B) Before any sale, require the seller to disclose to each 
prospective purchaser of the portion of a loan guaranteed under 
PUBLIC LAW 100-233—JAN. 6, 1988 
101 STAT. 1709 
this title and to each prospective purchaser of a pool certificate 
issued under paragraph (2), information on the terms, condi-
tions, and yield of such instrument. As used in this subpara-
graph, if the instrument being sold is a loan, the term 'seller' 
does not include (i) the person who made the loan or (ii) any 
person who sells three or fewer guaranteed loans per year. 
"(C) Provide for adequate custody of any pooled guaranteed 
loans. 
"(D) Take such actions as are necessary, in restructuring 
pools of the guaranteed portion of loans, to minimize the esti-
mated costs of paying claims under guarantees issued under 
this subsection. 
"(E) Require each market maker— 
"(i) to service all pools formed, and participations sold, by 
the market maker; and 
"(ii) to provide the Secretary with information relating to 
the collection and disbursement of all periodic payments, 
prepayments, and default funds from lenders, to or from 
the reserve fund that the Secretary shall establish to enable 
the timely payment guarantee to be self-funding, and from 
all beneficial holders. 
"(F) Regulate market makers in pool certificates sold under 
this subsection. 
"(4XA) Not later than March 31 of each year, the Secretary shall 
transmit to the Committee on Agriculture, Nutrition, and Forestry 
of the Senate and the Committee on Agriculture of the House of 
Representatives a report on the secondary market operations under 
this subsection during the preceding calendar year. 
"(B) Each report under subparagraph (A) shall include— 
"(i) the number and the total dollar amount of loans sold in 
the secondary market and the distribution of such loans by size 
of loan, size of lender, geographic location of lender, interest 
rate, maturity, lender servicing fees, whether the interest rate 
is fixed or variable, and premium paid; 
"(ii) the number and dollar amount of loans resold in the 
secondary market and the distribution of such loans by size of 
loan, interest rate, and premiums; 
"(iii) the number and total dollar amount of pools formed; 
"(iv) the number and total dollar amount of loans in each 
pool; 
"(v) the dollar amount, interest rate, and terms on each loan 
in each pool, and whether the interest rate is fixed or variable; 
"(vi) the number, face value, interest rate, and terms of the 
pool certificates issued for each pool; 
"(vii) to the maximum extent possible, the use by the lender 
of the proceeds of sales of loans in the secondary market for 
additional lending to farmers; and 
"(viii) an analysis of the information reported in clauses (i) 
through (vii) to assess farmers' access to capital at reasonable 
rates and terms as a result of secondary market operations.". 
(b) REGULATIONS.—Within 180 days after the date of the enact-
ment of this Act, the Secretary shall develop and promulgate final 
regulations to implement this section and the amendment made by 
this section. 
(c) POOL CERTIFICATES NOT TO BE ISSUED UNTIL FINAL REGULATIONS 
TAKE EFFECT.—The Secretary of Agriculture shall not implement 
paragraph (2) of section 338(f) of the Consolidated Farm and Rural 
Reports. 
7 u s e 1988 note. 
7 u s e 1988 note. 
101 STAT. 1710 
PUBLIC LAW 100-233—JAN. 6, 1988 
Development Act, as added by subsection (a), until the final regula-
tions governing the administration of such paragraph take effect. 
TITLE VIII—MISCELLANEOUS 
SEC. 
801. OWNERSHIP 
REQUIREMENT UNDER THE CONSERVATION 
RESERVE PROGRAM. 
Section 1235(a)(1) of the Food Security Act of 1985 (16 U.S.C. 
3835(a)(1)) is amended— 
(1) by striking out "or" at the end of subparagraph (B); 
(2) by striking out the period at the end of subparagraph (C) 
and inserting in lieu thereof "; or" and 
(3) by adding at the end thereof the following new 
subparagraph: 
"(D) the ownership change occurred due to foreclosure on the 
land and the owner of the land immediately before the fore-
closure exercises a right of redemption from the mortgage 
holder in accordance with State law.". 
SEC. 802. REPEAL OF PREAPPROVAL AND RELATED AUTHORITIES. 
(a) APPROVAL OF AMENDMENTS TO FEDERAL LAND BANK CHAR-
TERS.—Section 1.3 (12 U.S.C. 2011) is amended by striking out the 
second sentence and inserting in lieu thereof ' The Farm Credit 
Administration shall approve amendments consistent with this Act 
to charters of Federal land banks.". 
(b) FEDERAL LAND BANK POWERS.—Section 1.4 (12 U.S.C. 2012) is 
amended— 
(1) in paragraph (15), by striking out "and approved by" and 
inserting in lieu thereof "in accordance with regulations of; 
(2) in paragraph (21), by striking out "as" and by inserting in 
lieu thereof 'in accordance with generally accepted accounting 
principles, except as may be"; and 
(3) in paragraph (22), by striking out "and approved by the 
Farm Credit Administration". 
(c) LAND BANK STOCK.—Section 1.5 (12 U.S.C. 2013) is amended— 
(1) in subsection (a), by striking out "with the approval of the 
Farm Credit Administration"; 
(2) in subsection (d), by striking out "and approved by the 
Farm Credit Administration"; and 
(3) in subsection (f), by striking out "the Farm Credit Adminis-
tration may approve" and inserting in lieu thereof "may be 
approved by the board of directors of the bank". 
(d) SECURITY FOR FEDERAL LAND BANK LOANS.—Section 1.9 (12 
U.S.C. 2017) is amended— 
(1) in the first sentence, by striking out "approved by" and 
inserting in lieu thereof "prescribed by regulations of'; and 
(2) in the second sentence, by striking out "and approved by" 
and inserting in lieu thereof "in accordance with regulations 
of. 
(e) FCA AUTHORITY OVER FEDERAL LAND BANK ASSOCIATIONS.— 
The last sentence of section 1.13 (12 U.S.C. 2031) is amended— 
(1) by striking out "or by approving bylaws of the 
association,"; 
(2) by striking out "direct at any time changes in" and 
inserting in lieu thereof "approve amendments to"; and 
(3) by striking out "as" and all that follows through "Act". 
PUBLIC LAW 100-233—JAN. 6, 1988 
101 STAT. 1711 
(f) LAND BANK RESERVES.—Section 
1.17 
(12 
U.S.C. 2051) 
is 
amended— 
(1) in subsection (a), by inserting "regulations o f before "the 
Farm Credit Administration"; and 
(2) in subsection (b)— 
(A) by striking out "(1)"; and 
(B) by striking out "hereof, and (2) the approval of the 
Farm Credit Administration". 
(g) ASSOCIATION RESERVES.—Section 1.18(a) (12 U.S.C. 2052(a)) is 
amended by inserting "regulations o f before "the Farm Credit 
Administration''. 
(h) FEDERAL INTERMEDIATE CREDIT BANK, ESTABUSHMENT.—Sec-
tion 2.0 (12 U.S.C. 2017) is amended by striking out the second 
12USC2071. 
sentence and inserting in lieu thereof "The Farm Credit Adminis-
tration shall approve amendments consistent with this Act to char-
ters of Federal intermediate credit banks.". 
(i) FEDERAL INTERMEDIATE CREDIT BANK, CORPORATE POWERS.— 
Section 2.1 (12 U.S.C. 2018) is amended— 
12 use 2072. 
(1) in paragraph (13), by striking out "and approved by" and 
inserting in lieu thereof "in accordance with regulations of; 
and 
(2) in paragraph (18), by striking out "and approved by the 
,,., 
Farm Credit Administration". 
(j) FEDERAL INTERMEDIATE CREDIT BANK, STOCK.—Section 2.2 
(12 
U.S.C. 2019) is amended— 
12 USC 2073. 
(1) in subsection (a), by striking out "with the approval of the 
Farm Credit Administration"; 
(2) in subsection (d), by striking out "and approved by the 
Farm Credit Administration"; and 
(3) in subsection (g)— 
(A) in the first paragraph, by striking out ", with the 
approval of the Farm Credit Administration,"; 
(B) in the second paragraph, by striking out ", with 
approval of the Farm Credit Administration,"; and 
(C) in the first sentence of the fourth paragraph, by 
striking out "under" and inserting in lieu thereof "in 
accordance with". 
(k) NET EARNINGS.—The second sentence of section 2.6(c) (12 
U.S.C. 2077(a)) is amended— 
(1) by striking out "approved" and inserting in lieu thereof 
"established"; and 
(2) by inserting after "Administration" the following "in 
regulations". 
(1) PRODUCTION CREDIT ASSOCIATIONS, CHARTER.—The last sentence 
of section 2.10 (12 U.S.C. 2019) is amended— 
12 USC 2091. 
(1) by striking out "or by approval of bylaws of the sissocia-
tion,"; and 
(2) by striking out "direct" and all that follows through the 
period and inserting in lieu thereof "approve amendments to 
the charter of such association.". 
(m) BANKS FOR COOPERATIVES, ESTABLISHEMNT.—Section 3.0 
(12 
U.S.C. 2121) is amended by striking out the second sentence and 
inserting in lieu thereof "The Farm Credit Administration shall 
approve amendments consistent with this Act to charters and 
organizational certificates of banks for cooperatives.". 
101 STAT. 1712 
PUBLIC LAW 100-233—JAN. 6, 1988 
(n) 
BANKS FOR COOPERATIVES, CORPORATION.—Section 3.1 
(12 
U.S.C. 2122) is amended by striking out "and approved by the Farm 
Credit Administration" each place it appears. 
(o) BANKS FOR COOPERATIVES, STOCK.—Section 3.3 (12 U.S.C. 2124) 
is amended— 
(1) in subsection (a), by striking out ", with the approval of the 
^r, Farm Credit Administration,"; 
(2) in subsection (b), by striking out "with the approval of the 
Farm Credit Administration"; and 
(3) in subsection (e), by striking out "and approved by the 
Farm Credit Administration". 
(p) BANKS FOR COOPERATIVES, RETIREMENT OF STOCK.—Section 3.5 
12 use 2126. 
(12 U.S.C. 2125) is amended by striking out "with approval of the 
Farm Credit Administration". 
(q) OWNERSHIP OF STOCK.—Section 3.9(a) (12 U.S.C. 2130(a)) is 
amended— 
(1) in the first sentence, by striking out "with the approval of 
,, ,^. ^ ^ 
the Farm Credit Administration"; 
' 
^ 
(2) in the second sentence, by striking out ", with the approval 
^' 
of the Farm Credit Administration,"; and 
(3) in the third sentence, by striking out "as may be approved 
by the Farm Credit Administration". 
12 use 2132. 
(r) EARNINGS AND RESERVES.—Section 3.11 (12 U.S.C. 2131) is 
amended— 
(1) in subsection (b), by striking out "as may be approved by 
' 
- ^'-' 
the Farm Credit Administration"; 
tti; 
(2) in subsection (c), by striking out "the Farm Credit 
Administration may approve" and inserting in lieu thereof 
M. "may be approved by the board of directors"; and 
(3) in subsection (d), by striking out "the Farm Credit 
Administration may approve" and inserting in lieu thereof 
"may be approved by the board of directors". 
(s) POWERS OF THE FARM CREDIT ADMINISTRATION.—Section 4.26 
(12 U.S.C. 2212) is amended— 
(1) by striking out "or by prescribing in the terms of the 
charter or by approval of the bylaws of the corporation"; 
(2) by striking out "direct at any time" and all that follows 
through the period at the end of the first sentence and inserting 
£
1 i in lieu thereof "approve amendments consistent with this Act to 
charters or articles of service corporations."; and 
(3) by striking out the second sentence. 
(t) SUPERVISION.—The heading of section 4.27 (12 U.S.C. 2213) is 
amended by striking out "SUPERVISION" and inserting in lieu thereof 
"REGULATION". 
(u) DISTRICT ELECTIONS.—Section 5.2 (12 U.S.C. 2223) is amended— 
• U )i :>r; J ^! 
(1) in subsection (b)— 
3iC£';; 
(A) by striking out "Farm Credit Administration" the 
first place it appears and inserting in lieu thereof "district 
election committee of the district where the election will be 
held"; and 
(B) by striking out "Farm Credit Administration" each 
place it appears thereafter and inserting in lieu thereof 
"district election committee"; 
(2) in subsection (c)— 
(A) by striking out "Farm Credit Administration" the 
first place it appears and inserting in lieu thereof "district 
PUBLIC LAW 100-233—JAN. 6, 1988 
101 STAT. 1713 
election committee of the district where the election will be 
held"; 
(B) by striking out "Farm Credit Administration" each 
place it appears thereafter and inserting in lieu thereof 
"district election committee"; and 
(C) by striking out "(b)" and inserting in lieu thereof 
"(c)"; and 
(3) by redesignating subsections (b), (c), and (d), as subsections 
(c), (d), and (e), respectively, and inserting after subsection (a) 
the following: 
"(b) Each district board shall designate a district election commit-
tee. No member of such district election committee shall be a 
candidate for election to the district board. The responsibilities and 
authorities of the district election committee, delegated by the 
district board, shall be those set forth in this section.". 
(v) 
FARM CREDIT ADMINISTRATION, POWERS.—Section 5.17 
(12 
U.S.C. 2251) is amended— 
12 USC 2252. 
(1) in subsection (a)— 
(A) in paragraph (2), by striking out "amend or modify" 
and inserting in lieu thereof "approve amendments to"; and 
(B) in paragraph (5), by striking out "that meet standards 
and criteria" and all that follows through "refunds by Farm 
Credit System institutions"; and 
(2) by redesignating subsections (b) and (c) as subsections (c) 
and (d), respectively, and by inserting after subsection (a) the 
following: 
"(b) The Farm Credit Administration shall not have authority, 
either direct or indirect, to approve bylaws, or any amendments or 
modifications or changes to bylaws, of System institutions.". 
(w) TRANSITION RULES RELATING TO AMENDMENT OF CERTAIN F C A 
APPROVAL AUTHORITIES.—Part D of title V (12 U.S.C. 2001 note, et 
seq.) is amended by adding at the end thereof the following new 
section: 
"SEC. 5.45. TRANSITION RULES RELATING TO AMENDMENT OF CERTAIN 
12 USC 2275a. 
FCA APPROVAL AUTHORITIES. 
"(a) IN GENERAL.—Any approvals granted by the Farm Credit 
Administration before the date of the enactment of this section shall 
remain in effect on and after such date. 
"(b) AUTHORITY TO ISSUE REGULATIONS.— 
"(1) IN GENERAL.—Any approval authority of the Farm Credit 
Administration that, under the amendments made by section 
802 of the Agricultural Credit Act of 1987, became an authority 
to issue regulations may be exercised only until the earlier of 
the date the Farm Credit Administration issues final regula-
tions under such authority, or 1 year after the date of the 
enactment of this section. 
"(2) ENFORCEMENT ACTIONS.—At the close of the 1-year period 
referred to in paragraph (1), the Farm Credit Administration 
shall not take any enforcement action against any System 
institution with respect to any provision so amended, until the 
Farm Credit Administration issues final regulations under such 
provision. 
"(c) EFFECT OF SECTION.—This section shall not affect the author-
ity of the Farm Credit Administration to exercise any other ap-
proval authority either on a case-by-case basis or through 
regulation, as provided in section 5.17(aX5).". 
101 STAT. 1714 
PUBLIC LAW 100-233—JAN. 6, 1988 
SEC. 
8
0
3
. 
SALE 
OF 
RURAL 
DEVELOPMENT 
NOTES. 
Section 1001 of the Omnibus Budget Reconciliation Act of 1986 (7 
U.S.C. 1929a note) is amended by adding at the end thereof the 
following new subsections: 
"(f) RIGHT OF FIRST REFUSAL.— 
"(1) IN GENERAL.—Before conducting a sale of a portfolio of 
notes or other obligations under this section, the Secretary of 
Agriculture shall— 
"(A) determine whether the issuer of any unsold note or 
other obligation desires to purchase the note or other 
obligation; and 
"(B) if so, hold open for 30 days, an offer to sell the note or 
other obligation to the issuer at a price to be determined 
under paragraph (2). 
"(2) DETERMINATION OF OFFERING PRICE.— 
"(A) AUTHORITY.—The Secretary of Agriculture shall 
determine, in accordance with subparagraph (B), the price 
at which a note or other obligation shall be offered for sale 
under this subsection. 
"(B) PRICE.—Such price shall be determined by discount-
ing the payment stream of such note or other obligation at 
the yield on the then most recent sale of the portfolio, 
adjusted for changes in market interest rates, servicing and 
sales expenses, and the maturity and interest rate of such 
note. 
"(3) PROHIBITIONS.— 
"(A) PURCHASE OF OBUGATION NOT TIED TO PURCHASE OF 
OTHER OBUGATiONS.—The Secretary of Agriculture shall not 
require the issuer of any unsold note or other obligation to 
be offered for sale under this subsection to purchase any 
other such note or other obligation as a condition of the sale 
of any such note or other obligation to the issuer. 
"(B) OFFER TO BE MADE WITHOUT REGARD TO FINANCING.— 
The Secretary shall offer notes or other obligations for sale 
to the issuers thereof under this subsection without regard 
to the manner in which such issuers intend to finance the 
purchase of such notes or other obligations. However, the 
price of sale to any issuer using tax exempt financing shall 
be determined using a yield reflective of the Schedule of 
Certified Interest Rates as published monthly by the Sec-
retary of the Treasury. 
"(g) APPUCABIUTY OF PROHIBITION ON CURTAILMENT OR LIMITA-
TION OF SERVICE.—Section 3060t>) of the Consolidated Farm and 
Rural Development Act (7 U.S.C. 1926(b)) shall be applicable to all 
notes or other obligations sold or intended to be sold under this 
section.". 
SEC. 804. OTHER CONFORMING AMENDMENTS. 
(a) JURISDICTION AND ENFORCEMENT; PENALTIES.— 
(1) JURISDICTION AND ENFORCEMENT.—Section 5.31 (12 U.S.C. 
2267) is amended by adding at the end thereof the following: 
"For purposes of this section, any directive issued under section 
4.30t)X2), 4.3A(e), or 4.14A(i) shall be treated £is an effective and 
outstanding order issued under section 5.25 that has become 
final.". 
(2) PENALTIES.—Section 5.32 (12 U.S.C. 2268) is amended by 
adding at the end thereof the following: 
PUBLIC LAW 100-233—JAN. 6, 1988 
101 STAT. 1715 
"(h) For purposes of this section, any directive issued under 
section 4.3(bX2), 4.3A(e), or 4.14A(i) shall be treated £is an order that 
has become final and was issued under section 5.25.". 
(3) CONFORMING AMENDMENT.—Paragraph (2) of section 4.3(b) 
(12 U.S.C. 2154(bX2)) is amended— 
(A) by striking out "(A)"; and 
(B) by striking out subparagraph (B). 
(b) AMENDMENT TO PART HEADING.—The part heading of part C of 
title IV is amended to read as follows: 
"PART C—RIGHTS OF BORROWERS; LOAN RESTRUCTURING". 
SEC. 805. TECHNICAL AMENDMENTS. 
(a) Section 1.2 is amended by striking out "the regulation" and 
12 USC 2002. 
inserting in lieu thereof "regulation". 
(b) Section 1.15(12) is amended by striking out "or delegated to". 
12 USC 2033. 
(c) Section 1.20 is amended by striking out "by or other" and 
12 USC 2054. 
inserting in lieu thereof "by other". 
(d) Section 2.1(18) is amended by striking out the comma at the 
12 USC 2072. 
end and inserting in lieu thereof a period. 
(e) Section 2.2 is amended— 
12 USC 2073. 
(1) in subsection (d), by striking out "be issued to" the first 
place it appears; 
(2) in subsection (f)— 
(A) by striking out "other"; and 
(B) by inserting "of after "with regard to the payment"; 
(3) in the second sentence of the fourth undesignated para-
graph of subsection (g)— 
(A) by striking out "other" the first place it appears; and 
> 
(B) by inserting "the" before "Farm Credit Administra-
tion"; and 
(4) in subsection (h), by striking out "the Farm Credit 
"•-' •'•-
Administration or". 
(0 Section 2.6 is amended— 
12 USC 2077. 
(1) in subsection (c), by striking out the last sentence; and 
(2) by redesignating subsections (c) and (d), as subsections (a) 
and Qo), respectively. 
(g) The last sentence of section 2.10 is amended by inserting "the" 
12 USC 2091. 
before "Farm Credit Administration" the second place it appears. 
(h) Section 2.13 is amended— 
12 USC 2094. 
(1) in subsection (c), by striking out "to other"; and 
(2) in subsection (d)— 
(A) by striking out "other" the first place it appears; and 
(B) by inserting a comma after "noncumulative)". 
(i) The section heading for section 2.15 is amended by striking out 
12 USC 2096. 
the comma and inserting in lieu thereof a semicolon. 
(j) Section 2.17 is amended by inserting ", except that interest on 
12 USC 2098. 
such obligations shall be subject to Federal income taxation in the 
hands of the holder" before the period at the end. 
(k) Section 3.3(d) is amended by striking out "by" the first place it 
12 USC 2124. 
appears. 
(1) Section 3.4 is amended by striking out "other than stock held 
12 USC 2125. 
by the Farm Credit Administration,". 
(m) Section 3.8 is amended— 
(1) by redesignating subsection (1) as subsection (a); 
12 USC 2129. 
91-194 O - 90 - 14 : QL.3 Part 3 
101 STAT. 1716 
PUBLIC LAW 100-233—JAN. 6, 1988 
(2) by redesignating paragraphs (a), (b), (c), and (d) of the 
subsection redesignated by paragraph (1) of this subsection, as 
paragraphs (1), (2), (3), and (4), respectively; 
(3) by redesignating clauses (1), (2), and (3) of the paragraph 
redesignated as paragraph (4) by paragraph (2) of this subsec-
tion, as clauses (A), (B), and (C), respectively; 
(4) in the clause redesignated as clause (C) by paragraph (4), 
by striking out "(2)" and inserting in lieu thereof (B)". 
12 use 2132. 
(n) Section 3.11 is amended— 
j 
, ; 
(1) in subsection (b)— 
(A) by striking out "(c) and (d)" and inserting in lieu 
thereof "(b) and (c)"; and 
(B) by striking out the last sentence; , .^ ^ ,, 
,j,,„ 
(2) in subsection (c)— 
V 
'r','i ii 
bx 
(A) by striking out "(b) of this section, whichever is 
applicable," and inserting in lieu thereof "(a)"; and 
(B) by striking out "(d)" and inserting in lieu thereof 
"(c)"; 
(3) in subsection (d), by striking out "(b) whichever is ap-
- 
•--'•' 
4ida plicable," and inserting in lieu thereof "(a)"; 
(4) in subsection (g)— 
.
f
e
V
u
i
: te ; .J 
(A) by striking out "or (b)"; and 
(B) by striking out "For any year that a bank for coopera-
tives is subject to Federal income tax, it" and inserting in 
lieu thereof "A bank for cooperatives"; and 
(5) by redesignating subsections (b), (c), (d), (e), (f), and (g), as 
subsections (a), (b), (c), (d), (e), and (f), respectively. 
12 use 2133. 
(o) Section 3.12 is amended by inserting "the" before "Farm Credit 
Administration''. 
12 use 2134. 
(p) Section 3.13 is amended by inserting ", except that interest on 
such obligations shall be subject to Federal income taxation in the 
hands of the holder" before the period at the end. 
12 use 2154. 
(q) Section 4.3(c) is amended by striking out "direct of fully 
guaranteed" and inserting in lieu thereof "direct or fully guaran-
teed". 
12 use 2183. 
(r) Section 4.12(b) is amended by striking out "court, shall" and 
inserting in lieu thereof "court shall,". 
12 use 2202. 
(s) Section 4.14 is amended— 
(1) by striking out "committee(s)" and inserting in lieu thereof 
"committees"; 
(2) by striking out "4.13" and inserting in lieu thereof 
^ 
"'•'--' 
"4.13B'';and 
(3) by striking out "reviews" and inserting in lieu thereof 
"review". 
(t) Title IV is amended— 
(1) by inserting above and before section 4.15 the following: 
, "PART D—ACTIVITIES OF INSTITUTIONS OF THE SYSTEM"; and 
12 use 2211. 
(2) by redesignating part D as part E. 
12 use 2218, 
(u) Title IV is amended by redesignating parts E and F, as parts G 
2219. 
and H, respectively. 
12 use 2221. 
(v) Section 5.0 is amended by striking out "5.17(2)" and inserting 
in lieu thereof "5.17(aX2)". 
12 use 2243. 
(w) The section heading of section 5.9 is amended by striking out "; 
CIVIL PROCEEDINGS". 
12 use 2245. 
(x) Section 5.11 is amended by striking out the last sentence. 
PUBLIC LAW 100-233—JAN. 6, 1988 
101 STAT. 1717 
(y) Section 5.16 is amended by transferring the 4 sentences imme- 
12 USC 2251. 
diately following pareigraph (4) to just before the last sentence of 
such section. 
(z) Section 5.17(a) is amended— 
12 USC 2252. 
(1) by striking out paragraph (13); and 
(2) by redesignating paragraphs (14) and (15), £is paragraphs 
(13) and (14), respectively. 
(aa) Section 5.28 is amended— 
12 USC 2264. 
(1) by inserting "(a)" before "Whenever" the first place it 
appears; and 
(2) in subsection (e), by striking out "(dX3)" £ind inserting in 
lieu thereof'W. 
(bb) Section 5.29 is amended— 
12 USC 2265. 
(1) in subsection (a)— 
(A) by striking out "interest" and inserting in lieu thereof 
"interests"; 
(B) by striking out "the investors in the" and inserting in 
lieu thereof "investors in"; and 
(C) by inserting "the" before "Farm Credit System" the 
third place it appears. 
(2) in subsection (b), by striking out "in Farm Credit System 
obligations" and inserting in lieu thereof "of the institution's 
shareholders or the investors in Farm Credit System obligations 
or may threaten to impair public confidence in the institution 
or the Farm Credit System". 
(cc) Section 5.30 is amended by striking out "subsection (g)" and 
12 USC 2266. 
inserting in lieu thereof "section". 
(dd) Section 5.32(f) is amended by striking out "sections 5.31 and 
12 USC 2268. 
5.32" and inserting in lieu thereof "section 5.31 and this section". 
(ee) Section 5.37 is amended by striking out "claims,". 
12 USC 2273. 
(fD Section 5.41 is amended— 
(1) by striking out subsection (a); and 
12 USC 393. 
(2) by striking out "(b)". 
TITLE IX—REGULATIONS 
SEC. 901. EFFECTIVE DATES. 
12 USC 2001 
(a) ISSUANCE OF REGULATIONS.— 
(1) AUTHORITY.—The Farm Credit Administration Board shall 
issue such regulations as the Board considers necessary for the 
orderly and efficient implementation of the provisions of, and 
the amendments made by, this Act relating to the Farm Credit 
Act of 1971 (12 U.S.C. 2001 et seq.). 
(2) TIMING.—To the extent the Farm Credit Administration is 
required to issue regulations to implement this Act and the 
amendments made by this Act, the Farm Credit Administration 
shall issue such regulations as expeditiously as possible, and, 
except as otherwise provided in this Act, not later than 180 days 
after the date of the enactment of this Act. 
(b) TEMPORARY RETENTION OF CERTAIN REGULATIONS.— 
(1) IN GENERAL.—Except as otherwise provided in this subsec-
tion, the regulations issued by the Farm Credit Administration 
before the date of the enactment of this Act under provisions 
amended by this Act shall remedn in effect, notwithstanding 
such amendments, until the Farm Credit Administration issues 
101 STAT. 1718 
PUBLIC LAW 100-233—JAN. 6, 1988 
I 
regulations to implement such amendments, but in no event 
later than 180 days after such date of enactment. 
(2) CERTAIN REGULATIONS RELATING TO BORROWERS' RIGHTS.— 
The regulations implementing, interpreting, or applying part C 
of title IV (12 U.S.C. 2201) (other than section 4.13(a)) (in effect 
immediately before the date of the enactment of this Act), to the 
extent that such regulations are not contrary to this Act, and 
the amendments made by this title, shall remain in effect until 
January 1,1989. 
(3) 
REGULATIONS RELATING TO DISCLOSURE BY BANKS AND 
ASSOCIATIONS.—Any regulation issued or approved by the Farm 
Credit Administration that implements, interprets, or applies 
section 4.13(a) (12 U.S.C. 2201(a)) (in effect immediately before 
the date of the enactment of this Act) shall remain in effect for 
120 days after such date of enactment. 
Approved January 6, 1988. 
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LEGISLATIVE HISTORY—H.R. 3030 (S. 1665): 
HOUSE REPORTS: No. 100-295, Pt. 1 (Comm. on Agriculture) and No. 100-490 
(Comm. of Conference). 
SENATE REPORTS: No. 100-230 accompanying S. 1665 (Comm. on Agriculture, 
Nutrition, and Forestry). 
CONGRESSIONAL RECORD, Vol. 133 (1987): 
Sept. 21, Oct. 6, considered and passed House. 
Dec. 1, 2, S. 1665 considered in Senate. 
Dec. 2, 4, H.R. 3030 considered and passed Senate, amended, in lieu of S. 1665. 
Dec. 18, House agreed to conference report. 
Dec. 19, Senate agreed to conference report. 
WEEKLY COMPILATION OF PRESIDENTIAL DOCUMENTS, Vol. 24 (1988): 
Jan. 6, Presidential remarks.