Farm Credit System Reform Act of 1996
PL 104-105 (H.R.2029), enacted 02/10/1996

110 STAT. 162 
PUBLIC LAW 104-105—FEB. 10, 1996 
Public Law 104-105 
104th Congress 
Feb. 10, 1996 
[H.R. 2029] 
Farm Credit 
System Reform 
Act of 1996. 
Loans. 
12 u s e 2001 
note. 
An Act 
To amend the Farm Credit Act of 1971 to provide regulatory relief, and for other 
purposes. 
Be it enacted by the Senate and House of Representatives 
of 
the United States of America in Congress assembled, 
SECTION 1. SHORT TITLE; TABLE OF CONTENTS. 
(a) SHORT TITLE.—This Act may be cited as the "Farm Credit 
System Reform Act of 1996". 
(b) TABLE OF CONTENTS.—The table of contents for this Act 
is as follows: 
Sec. 1. Short title; table of contents. 
TITLE I—AGRICULTURAL MORTGAGE SECONDARY MARKET 
Sec. 101. Definition of real estate. 
Sec. 102. Definition of certified facility. 
Sec. 103. Duties of Federal Agricultural Mortgage Corporation. 
Sec. 104. Powers of the Corporation. 
Sec. 105. Federal reserve banks as depositaries and fiscal agents. 
Sec. 106. Certification of agricultural mortgage marketing facilities. 
Sec. 107. Guarantee of qualified loans. 
Sec. 108. Mandatory reserves and subordinated participation interests eliminated. 
Sec. 109. Standards requiring diversified pools. 
Sec. 110. Small farms. 
Sec. 111. Definition of an afliliate. 
Sec. 112. State usury laws superseded. 
Sec. 113. Extension of capital transition period. 
Sec. 114. Minimum capital level. 
Sec. 115. Critical capital level. 
Sec. 116. Enforcement levels. 
Sec. 117. Recapitalization of the Corporation. 
Sec. 118. Liquidation of the Federal Agricultural Mortgage Corporation. 
TITLE II—REGULATORY RELIEF 
Sec. 201. Compensation of association personnel. 
Sec. 202. Use of private mortgage insurance. 
Sec. 203. Removal of certain borrower reporting requirement. 
Sec. 204. Reform of regulatory limitations on dividend, member business, and vot-
ing practices of eligible farmer-owned cooperatives. 
Sec. 205. Removal of Federal Government certification requirement for certain pri-
vate sector financings. 
Sec. 206. Borrower stock. 
Sec. 207. Disclosure relating to adjustable rate loans. 
Sec. 208. Borrowers' rights. 
Sec. 209. Formation of administrative service entities. 
Sec. 210. Joint management agreements. 
Sec. 211. Dissemination of quarterly reports. 
Sec. 212. Regulatory review. 
Sec. 213. Examination of farm credit system institutions. 
Sec. 214. Conservatorships and receiverships. 
Sec. 215. Farm Credit Insurance Fund operations. 
Sec. 216. Examinations by the Farm Credit System Insurance Corporation. 
Sec. 217. Powers with respect to troubled insured System banks. 
PUBLIC LAW 104-105—FEB. 10, 1996 
110 STAT. 163 
Sec. 218. Oversight and regulatory actions by the Farm Credit System Insurance 
Corporation. 
Sec. 219. Farm Credit System Insurance Corporation board of directors. 
Sec. 220. Interest rate reduction program. 
Sec. 221. LiabiUty for making criminal referrals. 
TITLE III—IMPLEMENTATION AND EFFECTIVE DATE 
Sec. 301. Implementation. 
Sec. 302. Effective date. 
TITLE I—AGRICULTURAL MORTGAGE 
SECONDARY MARKET 
SEC. 101. DEFINITION OF REAL ESTATE. 
Section 8.0(l)(B)(ii) of the Farm Credit Act of 1971 (12 U.S.C. 
2279aa(l)(B)(ii)) is amended by striking "with a purchase price" 
and inserting ", excluding the land to which the dwelling is affixed, 
with a value". 
SEC. 102. DEFINITION OF CERTIFIED FACILITY. 
Section 8.0(3) of the Farm Credit Act of 1971 (12 U.S.C. 
2279aa(3)) is amended— 
(1) in subparagraph (A), by striking "a secondary marketing 
agricultural loan" and inserting "an agricultural mortgage 
marketing"; and 
(2) in subparagraph (B), by striking ", but only" and all 
that follows through "(9)(B)". 
SEC. 103. DUTIES OF FEDERAL AGRICULTURAL MORTGAGE CORPORA-
TION. 
Section 8.1(b) of the Farm Credit Act of 1971 (12 U.S.C. 2279aa-
1(b)) is amended— 
(1) in paragraph (2), by striking "and" at the end; 
(2) in paragraph (3), by striking the period at the end 
and inserting "; and"; and 
(3) by adding at the end the following: 
"(4) purchase qualified loans and issue securities represent-
ing interests in, or obligations backed by, the qualified loans, 
guaranteed for the timely repayment of principal and interest.". 
SEC. 104. POWERS OF THE CORPORATION. 
Section 8.3(c) of the Farm Credit Act of 1971 (12 U.S.C. 2279aa-
3(c)) is amended— 
(1) by redesignating paragraphs (13) and (14) as paragraphs 
(14) and (15), respectively; and 
(2) by inserting after paragraph (12) the following: 
"(13) To purchase, hold, sell, or a s s i ^ a qualified loan, 
to issue a guaranteed security, representing an interest in, 
or an obligation backed by, the qualified loan, and to perform 
all the functions and responsibilities of an agricultural mort-
gage marketing facility operating as a certified facility under 
this title.". 
SEC. 105. FEDERAL RESERVE BANKS AS DEPOSITARIES AND FISCAL 
AGENTS. 
Section 8.3 of the Farm Credit Act of 1971 (12 U.S.C. 2279aa-
3) is amended— 
(1) in subsection (d), by striking "may act as depositories 
for, or" and inserting "shall act as depositories for, and"; and 
110 STAT. 164 
PUBLIC LAW 104-105—FEB. 10, 1996 
(2) in subsection (e), by striking "Secretary of the Treasury 
may authorize the Corporation to use" and inserting "Corpora-
tion shall have access to". 
SEC. 106. CERTIFICATION OF AGRICULTURAL MORTGAGE MARKETING 
FACILITIES. 
Section 8.5 of the Farm Credit Act of 1971 (12 U.S.C. 2279aa-
5) is amended— 
(1) in subsection (a)— 
(A) in paragraph (1), by inserting "(other than the 
Corporation)" after "agricultural mortgage marketing facili-
ties"; and 
(B) in paragraph (2), by inserting "(other than the 
Corporation)" after "agricultural mortgage marketing facil-
ity"; and 
(2) in subsection (e)(1), by striking "(other than the Cor-
poration)". 
SEC. 107. GUARANTEE OF QUALIFIED LOANS. 
Section 8.6 of the Farm Credit Act of 1971 (12 U.S.C. 2279aa-
6) is amended— 
(1) in subsection (a)(1)— 
(A) by striking "Corporation shall guarantee" and 
inserting the following: "Corporation— 
"(A) shall guarantee"; 
(B) by striking the period at the end and inserting 
"; and"; and 
(C) by adding at the end the following: 
"(B) may issue a security, guaranteed as to the timely 
payment of principal and interest, that represents an 
interest solely in, or an obligation fully backed by, a pool 
consisting of qualified loans that— 
"(i) meet the standards established under section 
8.8; and 
"(ii) have been purchased and held by the Corpora-
tion."; 
(2) in subsection (d)— 
(A) by striking paragraph (4); and 
(B) by redesignating paragraphs (5), (6), and (7) as 
paragraphs (4), (5), and (6), respectively; and 
(3) in subsection (g)(2), by striking "section 8.0(9)(B))" and 
inserting "section 8.0(9))". 
SEC. 108. MANDATORY RESERVES AND SUBORDINATED 
PARTICIPA-
TION INTERESTS ELIMINATED. 
(a) GUARANTEE OF QUALIFIED LOANS.—Section 8.6 of the Farm 
Credit Act of 1971 (12 U.S.C. 2279aa-6) is amended by striking 
subsection (b). 
(b) RESERVES AND SUBORDINATED PARTICIPATION INTERESTS.— 
Section 8.7 of the Farm Credit Act of 1971 (12 U.S.C. 2279aa-
7) is repealed. 
(c) CONFORMING AMENDMENTS.— 
(1) Section 8.0(9)(B)(i) of the Farm Credit Act of 1971 
(12 U.S.C. 2279aa(9)(B)(i)) is amended by striking "8.7, 8.8," 
and inserting "8.8". 
(2) Section 8.6(a)(2) of the Farm Credit Act of 1971 (12 
U.S.C. 2279aa-6(a)(2)) is amended by striking "subject to the 
provisions of subsection (b)". 
PUBLIC LAW 104-105—FEB. 10, 1996 
110 STAT. 165 
SEC. 109. STANDARDS REQUIRING DIVERSIFIED POOLS. 
(a) IN GENERAL.—Section 8.6 of the Farm Credit Act of 1971 
(12 U.S.C. 2279aa-6) (as amended by section 108) is amended— 
(1) by striking subsection (c); and 
(2) by redesignating subsections (d) through (g) as sub-
sections (b) through (e), respectively. 
(b) CONFORMING AMENDMENTS.— 
(1) Section 8.0(9)(B)(i) of the Farm Credit Act of 1971 
(12 U.S.C. 2279aa(9)(B)(i)) is amended by striking "(f)" and 
inserting "(d)". 
(2) Section 8.13(a) of the Farm Credit Act of 1971 (12 
U.S.C. 2279aa-13(a)) is amended by striking "sections 8.6(b) 
and" in each place it appears and inserting "section". 
(3) Section 8.32(b)(1)(C) of the Farm Credit Act of 1971 
(12 U.S.C. 2279bb-l(b)(l)(C)) is amended— 
(A) by striking "shall" and inserting "may"; and 
(B) by inserting "(as in effect before the date of the 
enactment of the Farm Credit System Reform Act of 1996)" 
before the semicolon. 
(4) Section 8.6(b) of the Farm Credit Act of 1971 (12 U.S.C. 
2279aa-6(b)) 
(as 
redesignated 
by 
subsection 
(a)(2)) 
is 
amended— 
(A) by striking paragraph (4) (as redesignated by sec-
tion 107(2)(B)); and 
(B) by redesignating paragraphs (5) and (6) (as redesig-
nated by section 107(2)(B)) as paragraphs (4) and (5), 
respectively. 
SEC. 110. SMALL FARMS. 
Section 8.8(e) of the Farm Credit Act of 1971 (12 U.S.C. 2279aa-
8(e)) is amended by adding at the end the following: "The Board 
shall promote and encourage the inclusion of qualified loans for 
small farms and family farmers in the agricultural mortgage second-
ary market.". 
SEC. 111. DEFINITION OF AN AFFILIATE. 
Section 8.11(e) of the Farm Credit Act of 1971 (12 U.S.C. 
2279aa-ll(e)) is amended— 
(1) by striking "a certified facility or"; and 
(2) by striking "paragraphs (3) and (7), respectively, of 
section 8.0" and inserting "section 8.0(7)". 
SEC. 112. STATE USURY LAWS SUPERSEDED. 
Section 8.12 of the Farm Credit Act of 1971 (12 U.S.C. 2279aa-
12) is amended by striking subsection (d) and inserting the follow-
ing: 
"(d) STATE USURY LAWS SUPERSEDED.—A provision of the Con-
stitution or law of any State shall not apply to an agricultural 
loan made by an originator or a certified facility in accordance 
with this title for sale to the Corporation or to a certified facility 
for inclusion in a pool for which the Corporation has provided, 
or has committed to provide, a guarantee, if the loan, not later 
than 180 days after the date the loan was made, is sold to the 
Corporation or included in a pool for which the Corporation has 
provided a guarantee, if the provision— 
"(1) limits the rate or amount of interest, discount points, 
finance charges, or other charges that may be charged, taken. 
110 STAT. 166 
PUBLIC LAW 104-105—FEB. 10, 1996 
received, or reserved by an agricultural lender or a certified 
facility; or 
"(2) limits or prohibits a prepayment penalty (either fixed 
or declining), 5dela maintenance, or make-whole payment that 
may be charged, taken, or received by an agricultural lender 
or a certified facility in connection with the full or partial 
payment of the principal amount due on a loan by a borrower 
in advance of the scheduled date for the payment under the 
terms of the loan, otherwise known as a prepayment of the 
loan principal.". 
SEC. 113. EXTENSION OF CAPITAL TRANSITION PERIOD. 
Section 8.32 of the Farm Credit Act of 1971 (12 U.S.C. 2279bb-
1) is amended— 
(1) in the first sentence of subsection (a), by striking "Not 
later than the expiration of the 2-year period beginning on 
December 13, 1991," and inserting "Not sooner than the expira-
tion of the 3-year period beginning on the date of enactment 
of the Farm Credit System Reform Act of 1996,"; 
(2) in the first sentence of subsection (b)(2), by striking 
"5-year" and inserting "8-year"; and 
(3) in subsection (d)— 
(A) in the first sentence— 
(i) by striking "The regulations establishing" and 
inserting the following: 
"(1) IN GENERAL.—The regulations establishing"; and 
(ii) by striking "shall contain" and inserting the 
following: "shall— 
"(A) be issued by the Director for public comment in 
the form of a notice of proposed rulemaking, to be first 
published after the expiration of the period referred to 
in subsection (a); and 
"(B) contain"; and 
(B) in the second sentence, by striking "The regulations 
shall" and inserting the following: 
"(2) SPECIFICITY.—The regulations referred to in paragraph 
(1) shall". 
SEC. 114. MINIMUM CAPITAL LEVEL. 
Section 8.33 of the Farm Credit Act of 1971 (12 U.S.C. 2279bb-
2) is amended to read as follows: 
"SEC. 8.33. MINIMUM CAPITAL LEVEL. 
"(a) IN GENERAL.—Except as provided in subsection (b), for 
purposes of this subtitle, the minimum capital level for the Corpora-
tion shall be an amount of core capital equal to the sum o
f
—
-
"(1) 2.75 percent of the aggregate on-balance sheet assets 
of the (Ilorporation, as determined in accordance with generally 
accepted accounting principles; and 
"(2) 0.75 percent of the aggregate off-balance sheet obliga-
tions of the Corporation, which, for the purposes of this subtitle, 
shall include— 
"(A) the unpaid principal balance of outstanding securi-
ties that are guaranteed by the Corporation and backed 
by pools of qualified loans; 
"(B) instruments that are issued or guaranteed by the 
Corporation 
and 
are 
substantially 
equivalent 
to 
instruments described in subparagraph (A); and 
PUBLIC LAW 104-105—FEB. 10, 1996 
110 STAT. 167 
"(C) other off-balance sheet obUgations of the Corpora-
tion. 
"(b) TRANSITION PERIOD.— 
"(1) IN GENERAL.—For purposes of this subtitle, the mini-
mum capital level for the Corporation— 
"(A) prior to January 1, 1997, shall be the amount 
of core capital equal to the sum of— 
"(i) 0.45 percent of aggregate off-balance sheet 
obligations of the Corporation; 
"(ii) 0.45 percent of designated on-balance sheet 
assets of the Corporation, as determined under para-
graph (2); and 
"(iii) 2.50 percent of on-balance sheet assets of 
the Corporation other than assets designated under 
paragraph (2); 
"(B) during the 1-year period ending December 31, 
1997, shall be the amount of core capital equal to the 
sum o
f
— 
"(i) 0.55 percent of aggregate off-balance sheet 
obligations of the Corporation; 
"(ii) 1.20 percent of designated on-balance sheet 
assets of the Corporation, as determined under para-
graph (2); and 
"(iii) 2.55 percent of on-balance sheet assets of 
the Corporation other than assets designated under 
paragraph (2); 
"(C) during the 1-year period ending December 31, 
1998, shall be the amount of core capital equal to— 
"(i) if the Corporation's core capital is not less 
than $25,000,000 on January 1, 1998, the sum of— 
"(I) 0.65 percent of aggregate off-balance sheet 
obligations of the Corporation; 
"(II) 1.95 percent of designated on-balance 
sheet assets of the Corporation, as determined 
under paragraph (2); and 
"(III) 2.65 percent of on-balance sheet assets 
of the Corporation other than assets designated 
under paragraph (2); or 
"(ii) if the Corporation's core capital is less than 
$25,000,000 on January 1, 1998, the amount deter-
mined under subsection (a); and 
"(D) on and after January 1, 1999, shall be the amount 
determined under subsection (a). 
"(2) DESIGNATED ON-BALANCE SHEET ASSETS.—For purposes 
of this subsection, the designated on-balance sheet assets of 
the Corporation shall be— 
"(A) the aggregate on-balance sheet assets of the Cor-
poration acquired under section 8.6(e); and 
"(B) the aggregate amount of qualified loans purchased 
and held by the Corporation under section 8.3(c)(13).". 
SEC. 115. CRITICAL CAPITAL LEVEL. 
Section 8.34 of the Farm Credit Act of 1971 (12 U.S.C. 2279bb-
3) is amended to read as follows: 
"SEC. 8.34. CRITICAL CAPITAL LEVEL. 
"For purposes of this subtitle, the critical capital level for 
the Corporation shall be an amount of core capital equal to 50 
110 STAT. 168 
PUBLIC LAW 104-105—FEB. 10, 1996 
12 use 
2279bb-7. 
12 u s e 2279CC. 
percent of the total minimum capital amount determined under 
section 8.33.". 
SEC. 116. ENFORCEMENT LEVELS. 
Section 8.35(e) of the Farm Credit Act of 1971 (12 U.S.C. 
2279bb-4(e)) is amended by striking "during the 30-month period 
beginning on the date of the enactment of this section," and insert-
ing "during the period beginning on December 13, 1991, and ending 
on the effective date of the risk based capital regulation issued 
by the Director under section 8.32,". 
SEC. 117. RECAPITALIZATION OF THE CORPORATION. 
Title VIII of the Farm Credit Act of 1971 (12 U.S.C. 2279aa 
et seq.) is amended by adding at the end the following: 
"SEC. 8.38. RECAPITALIZATION OF THE CORPORATION. 
"(a) MANDATORY RECAPITALIZATION.—The Corporation shall 
increase the core capital of the Corporation to an amount equal 
to or greater than $25,000,000, not later than the earlier of— 
"(1) the date that is 2 years after the date of enactment 
of this section; or 
"(2) the date that is 180 days after the end of the first 
calendar quarter that the aggregate on-balance sheet assets 
of the Corporation, plus the outstanding principal of the off-
balance sheet obligations of the Corporation, equal or exceed 
$2,000,000,000. 
"(b) RAISING CORE CAPITAL.—In carrying out this section, the 
Corporation may issue stock under section 8.4 and otherwise employ 
any recognized and legitimate means of raising core capital in 
the power of the Corporation under section 8.3. 
"(c) LIMITATION ON GROWTH OF TOTAL ASSETS.—During the 
2-year period beginning on the date of enactment of this section, 
the aggregate on-balance sheet assets of the Corporation plus the 
outstanding principal of the off-balance sheet obligations of the 
Corporation may not exceed $3,000,000,000 if the core capital of 
the Corporation is less than $25,000,000. 
"(d) ENFORCEMENT.—If the Corporation fails to carry out sub-
section (a) by the date required under paragraph (1) or (2) of 
subsection (a), the Corporation may not purchase a new qualified 
loan or issue or guarantee a new loan-backed security until the 
core capital of the Corporation is increased to an amount equal 
to or greater than $25,000,000.". 
SEC. 118. LIQUIDATION OF THE FEDERAL AGRICULTURAL MORTGAGE 
CORPORATION. 
Title VIII of the Farm Credit Act of 1971 (12 U.S.C. 2279aa 
et seq.) (as amended by section 117) is amended by adding at 
the end the following: 
"Subtitle 
C—Receivership, 
Conservator-
ship, and Liquidation of the Federal 
Agricultural Mortgage Corporation 
"SEC. 8.41. CONSERVATORSHIP; LIQUIDATION; RECEIVERSHIP. 
"(a) VOLUNTARY LIQUIDATION.—The Corporation may volun-
tarily liquidate only with the consent of, and in accordance with 
PUBLIC LAW 104-105—FEB. 10, 1996 
110 STAT. 169 
a plan of liquidation approved by, the Farm Credit Administration 
Board. 
"(b) INVOLUNTARY LIQUIDATION.— 
"(1) IN GENERAL.—The Farm Credit Administration Board 
may appoint a conservator or receiver for the Corporation under 
the circumstances specified in section 4.12(b). 
"(2) APPLICATION.—In applying section 4.12(b) to the Cor-
poration under paragraph (1)— 
"(A) the Corporation shall also be considered insolvent 
if the Corporation is unable to pay its debts as they fall 
due in the ordinary course of business; 
"(B) a conservator may also be appointed for the Cor-
poration if the authority of the Corporation to purchase 
qualified loans or issue or guarantee loan-backed securities 
is suspended; and 
"(C) a receiver may also be appointed for the Corpora-
tion if— 
"(i)(I) the authority of the Corporation to purchase 
qualified loans or issue or guarantee loan-backed secu-
rities is suspended; or 
"(II) the Corporation is classified under section 
8.35 as within level III or IV and the alternative 
actions available under subtitle B are not satisfactory; 
and 
"(ii) the Farm Credit Administration determines 
that the appointment of a conservator would not be 
appropriate. 
"(3) No 
EFFECT ON SUPERVISORY ACTIONS.—The grounds 
for appointment of a conservator for the Corporation under 
this subsection shall be in addition to those in section 8.37. 
"(c) APPOINTMENT OF CONSERVATOR OR RECEIVER.— 
"(1) QUALIFICATIONS.—Notwithstanding section 4.12(b), if 
a conservator or receiver is appointed for the Corporation, 
the conservator or receiver shall be— 
"(A) the Farm Credit Administration or any other 
governmental entity or employee, including the Farm 
Credit System Insursince Corporation; or 
"(B) any person that— 
"(i) has no claim against, or financial interest in, 
the Corporation or other basis for a conflict of interest 
as the conservator or receiver; and 
"(ii) has the financial and management expertise 
necessary to direct the operations and affairs of the 
Corporation and, if necessary, to liquidate the Corpora-
tion. 
"(2) COMPENSATION.— 
"(A) IN GENERAL.—A conservator or receiver for the 
Corporation and professional personnel (other than a Fed-
eral employee) employed to represent or assist the con-
servator or receiver may be compensated for activities con-
ducted as, or for, a conservator or receiver. 
"(B) LIMIT ON COMPENSATION.—Compensation may 
not 
be provided in amounts greater than the compensation 
paid to employees of the Federal Government for similar 
services, except that the Farm Credit Administration may 
provide for compensation at higher rates that are not in 
excess of rates prevailing in the private sector if the Farm 
29-194 O - 96 - 7 : QL 3 Part 1 
110 STAT. 170 
PUBLIC LAW 104-105—FEB. 10, 1996 
Credit Administration determines that compensation at 
higher rates is necessary in order to recruit and retain 
competent personnel. 
"(C) CONTRACTUAL ARRANGEMENTS.—The conservator 
or receiver may contract with any governmental entity, 
including the Farm Credit System Insursmce Corporation, 
to make personnel, services, and facilities of the entity 
available to the conservator or receiver on such terms 
and compensation arrangements as shall be mutually 
agreed, and each entity may provide the same to the con-
servator or receiver. 
Claims. 
"(3) EXPENSES.—A valid claim for expenses of the 
conservatorship or receivership (including compensation under 
paragraph (2)) and a valid claim with respect to a loan made 
under subsection (f) shall— 
"(A) be paid by the conservator or receiver from funds 
of the Corporation before any other valid claim against 
the Corporation; and 
"(B) may be secured by a lien, on such property of 
the Corporation as the conservator or receiver may deter-
mine, that shall have priority over any other lien. 
"(4) LIABILITY.—If the conservator or receiver for the Cor-
poration is not a Federal entity, or £in officer or employee 
of the Federal Government, the conservator or receiver shall 
not be personally liable for damages in tort or otherwise for 
an act or omission performed pursuant to and in the course 
of the conservatorship or receivership, unless the act or omis-
sion constitutes gross negligence or any form of intentional 
tortious conduct or criminal conduct. 
"(5) INDEMNIFICATION.—The Farm Credit Administration 
may allow indemnification of the conservator or receiver from 
the assets of the conservatorship or receivership on such terms 
as the Farm Credit Administration considers appropriate. 
"(d) JUDICIAL REVIEW OF APPOINTMENT.— 
"(1) IN GENERAL.—Notwithstanding subsection (i)(l), not 
later than 30 days after a conservator or receiver is appointed 
under subsection (b), the Corporation may bring an action 
in the United States District Court for the District of Columbia 
for an order requiring the Farm Credit Administration Board 
to remove the conservator or receiver. The court shall, on 
the merits, dismiss the action or direct the Farm Credit 
Administration Board to remove the conservator or receiver. 
"(2) STAY OF OTHER ACTIONS.—On the commencement of 
£in action under paragraph (1), any court having jurisdiction 
of any other action or enforcement proceeding authorized under 
this Act to which the Corporation is a party shall stay the 
action or proceeding during the pendency of the action for 
removal of the conservator or receiver. 
"(e) GENERAL POWERS OF CONSERVATOR OR RECEIVER.—The 
conservator or receiver for the Corporation shall have such powers 
to conduct the conservatorship or receivership as shall be provided 
pursuant to regulations adopted by the Farm Credit Administration 
Board. Such powers shall be comparable to the powers available 
to a conservator or receiver appointed pursuant to section 4.12(b). 
"(f) BORROWINGS FOR WORKING CAPITAL.— 
"(1) IN GENERAL.—If the conservator or receiver of the 
Corporation determines that it is likely that there will be 
PUBLIC LAW 104-105—FEB. 10, 1996 
110 STAT. 171 
insufficient funds to pay the ongoing administrative expenses 
of the conservatorship or receivership or that there will be 
insufficient liquidity to fund maturing obligations of the 
conservatorship or receivership, the conservator or receiver may 
borrow funds in such amounts, from such sources, and at such 
rates of interest as the conservator or receiver considers nec-
essary or appropriate to meet the administrative expenses or 
liquidity needs of the conservatorship or receivership. 
"(2) WORKING CAPITAL FROM FARM CREDIT BANKS.—A Farm 
Credit bank may loan funds to the conservator or receiver 
for a loan authorized under paragraph (1) or, in the event 
of receivership, a Farm Credit bank may purchase assets of 
the Corporation. 
"(g) AGREEMENTS AGAINST INTERESTS OF CONSERVATOR OR 
RECEIVER.—No agreement that tends to diminish or defeat the 
right, title, or interest of the conservator or receiver for the Corpora-
tion in any asset acquired by the conservator or receiver as con-
servator or receiver for the Corporation shall be valid against the 
conservator or receiver unless the agreement— 
"(1) is in writing; 
"(2) is executed by the Corporation and any person claiming 
an adverse interest under the agreement, including the obligor, 
contemporaneously with the acquisition of the asset by the 
Corporation; 
"(3) is approved by the Board or an appropriate committee 
of the Board, which approval shall be reflected in the minutes 
of the Board or committee; and 
"(4) has been, continuously, from the time of the agree-
ment's execution, an official record of the Corporation. 
"(h) REPORT TO THE CONGRESS.—On a determination by the 
receiver for the Corporation that there are insufficient assets of 
the receivership to pay all valid claims against the receivership, 
the receiver shall submit to the Secretary of the Treasury, the 
Committee on Agriculture of the House of Representatives, and 
the Committee on Agriculture, Nutrition, and Forestry of the Senate 
a report on the financial condition of the receivership. 
"(i) TERMINATION OF AUTHORITIES.— 
"(1) CORPORATION.—The charter of the Corporation shall 
be canceled, and the authority provided to the Corporation 
by this title shall terminate, on such date as the Farm Credit 
Administration Board determines is appropriate following the 
placement of the Corporation in receivership, but not later 
than the conclusion of the receivership and discharge of the 
receiver. 
"(2) OVERSIGHT.—The Office of Secondary Market Over- Government 
sight established under section 8.11 shall be abolished, and organization, 
section 8.11(a) and subtitle B shall have no force or effect, 
on such date as the Farm Credit Administration Board deter-
mines is appropriate following the placement of the Corporation 
in receivership, but not later than the conclusion of the receiver-
ship and discharge of the receiver.". 
110 STAT. 172 
PUBLIC LAW 104-105—FEB. 10, 1996 
TITLE II—REGULATORY RELIEF 
SEC. 201. COMPENSATION OF ASSOCIATION PERSONNEL. 
Section 1.5(13) of the Farm Credit Act of 1971 (12 U.S.C. 
2013(13)) is amended by striking ", and the appointment and com-
pensation of the chief executive officer thereof,". 
SEC. 202. USE OF PRIVATE MORTGAGE INSURANCE. 
(a) IN GENERAL.—Section 1.10(a)(1) of the Farm Credit Act 
of 1971 (12 U.S.C. 2018(a)(1)) is amended by adding at the end 
the following: 
"(D) PRIVATE MORTGAGE INSURANCE.—A loan on which 
private mortgage insurance is obtained may exceed 85 
percent of the appraised value of the real estate security 
to the extent that the loEin amount in excess of such 85 
percent is covered by the insurance.". 
(b) CONFORMING AMENDMENT.—Section 1.10(a)(1)(A) of the 
Farm Credit Act of 1971 (12 U.S.C. 2018(a)(1)(A)) is amended 
by striking "paragraphs (2) and (3)" and inserting "subparagraphs 
(C) and (D)". 
SEC. 203. REMOVAL OF CERTAIN BORROWER REPORTING REQUIRE-
MENT. 
Section 1.10(a) of the Farm Credit Act of 1971 (12 U.S.C. 
2018(a)) is amended by striking paragraph (5). 
SEC. 204. REFORM OF REGULATORY LIMITATIONS ON DIVIDEND, MEM-
BER BUSINESS, AND VOTING PRACTICES OF ELIGIBLE 
FARMER-OWNED COOPERATIVES. 
(a) IN GENERAL.—Section 3.8(a) of the Farm Credit Act of 
1971 (12 U.S.C. 2129(a)) is amended by adding at the end the 
following: "Any such association that has received a loan from 
a bank for cooperatives shall, without regard to the requirements 
of paragraphs (1) through (4), continue to be eligible for so long 
as more than 50 percent (or such higher percentage as is established 
by the bank board) of the voting control of the association is held 
by farmers, producers or harvesters of aquatic products, or eligible 
cooperative associations.". 
(b) CONFORMING AMENDMENT.—Section 3.8(b)(1)(D) of the 
Farm Credit Act of 1971 (12 U.S.C. 2129(b)(1)(D)) is amended 
by striking "and (4) of subsection (a)" and inserting "and (4), or 
under the last sentence, of subsection (a)". 
SEC. 205. REMOVAL OF FEDERAL GOVERNMENT CERTIFICATION 
REQUIREMENT 
FOR 
CERTAIN 
PRIVATE 
SECTOR 
FINANCINGS. 
Section 3.8(b)(1)(A) of the Farm Credit Act of 1971 (12 U.S.C. 
2129(b)(1)(A)) is amended— 
(1) by striking "have been certified by the Administrator 
of the Rural Electrification Administration to be eligible for 
such" and inserting "are eligible under the Rural Electrification 
Act of 1936 (7 U.S.C. 901 et seq.) for"; and 
(2) by striking "loan guarantee, and" and inserting "login 
guarantee fi*om the Administration or the Bank (or a successor 
of the Administration or the Bcmk), and". 
PUBLIC LAW 104-105—FEB. 10, 1996 
110 STAT. 173 
SEC. 206. BORROWER STOCK 
Section 4.3A of the Farm Credit Act of 1971 (12 U.S.C. 2154a) 
is amended— 
(1) by redesignating subsections (f) and (g) as subsections 
(g) and (h), respectively; and 
(2) by inserting after subsection (e) the following: 
"(f) LOANS DESIGNATED FOR SALE OR SOLD INTO THE SECONDARY 
MARKET.— 
"(1) IN GENERAL.—Subject to paragraph (2) and notwith-
standing any other provision of this section, the bylaws adopted 
by a bank or association under subsection (b) may provide— 
"(A) in the case of a loan made on or after the date 
of enactment of this paragraph that is designated, at the 
time the loan is made, for sale into a secondary market, 
that no voting stock or participation certificate purchase 
requirement shall apply to the borrower for the loan; and 
"(B) in the case of a loan made before the date of 
enactment of this paragraph that is sold into a secondary 
market, that all outstanding voting stock or participation 
certificates held by the borrower with respect to the loan 
shall, subject to subsection (d)(1), be retired. 
"(2) APPLICABILITY.—Notwithstanding any other provision 
of this section, in the case of a loan sold to a secondary market 
under title VIII, paragraph (1) shall apply regardless of whether 
the bank or association retains a subordinated participation 
interest in a loan or pool of loans or contributes to a cash 
reserve. 
"(3) EXCEPTION.— 
"(A) IN GENERAL.—Subject to subparagraph (B) and 
notwithstanding any other provision of this section, if a 
loan designated for sale under paragraph (1)(A) is not 
sold into a secondary market during the 180-day period 
that begins on the date of the designation, the voting 
stock or participation certificate purchase requirement that 
would otherwise apply to the loan in the absence of a 
bylaw provision described in paragraph (1)(A) shall be effec-
tive. 
"(B) RETIREMENT.—The bylaws adopted by a bank or 
association under subsection (b) may provide that if a loan 
described in subparagraph (A) is sold into a secondary 
market after the end of the 180-day period described in 
the subparagraph, all outstanding voting stock or participa-
tion certificates held by the borrower with respect to the 
loan shall, subject to subsection (d)(1), be retired.". 
SEC. 207. DISCLOSURE RELATING TO ADJUSTABLE RATE LOANS. 
Section 4.13(a)(4) of the Farm Credit Act of 1971 (12 U.S.C. 
2199(a)(4)) is amended by inserting before the semicolon at the 
end the following: ", and notice to the borrower of a change in 
the interest rate applicable to the loan of the borrower may be 
made within a reasonable time after the effective date of an increase 
or decrease in the interest rate". 
SEC. 208. BORROWERS' RIGHTS. 
(a) DEFINITION OF LOAN.—Section 4.14A(a)(5) of the Farm 
Credit Act of 1971 (12 U.S.C. 2202a(a)(5)) is amended— 
(1) by striking "(5) LOAN.—The" and inserting the following: 
110 STAT. 174 
PUBLIC LAW 104-105—FEB. 10, 1996 
"(5) LOAN.— 
"(A) IN GENERAL.—Subject to subparagraph (B), the"; 
and 
(2) by adding at the end the following: 
"(B) EXCLUSION FOR LOANS DESIGNATED FOR SALE INTO 
SECONDARY MARKET.— 
"(i) IN GENERAL.—Except as provided in clause 
(ii), the term 'loan' does not include a loan made on 
or after the date of enactment of this subparagraph 
that is designated, at the time the loan is made, for 
sale into a secondary market, 
"(ii) UNSOLD LOANS.— 
"(I) IN GENERAL.—Except as provided 
in 
subclause (II), if a loan designated for sale under 
clause (i) is not sold into a secondary market dur-
ing the 180-day period that begins on the date 
. of the designation, the provisions of this section 
and sections 4.14, 4.14B, 4.14C, 4.14D, and 4.36 
that would otherwise apply to the loan in the 
absence of the exclusion described in clause (i) 
shall become effective with respect to the loan. 
"(II) LATER SALE.—If a loan described in 
subclause (I) is sold into a secondary market after 
the end of the 180-day period described in 
subclause (I), subclause (I) shall not apply with 
respect to the loan beginning on the date of the 
sale.", 
(b) BORROWERS' RIGHTS FOR POOLED LOANS.—The first sentence 
of section 8.9(b) of the Farm Credit Act of 1971 (12 U.S.C. 2279aa-
9(b)) is amended by inserting "(as defined in section 4.14A(a)(5))" 
after "application for a loan". 
SEC. 209. FORMATION OF ADMINISTRATIVE SERVICE ENTITIES. 
Part E of title IV of the Farm Credit Act of 1971 is amended 
by inserting after section 4.28 (12 U.S.C. 2214) the following: 
12 use 2214a. 
"SEC. 4.28A. DEFINITION OF BANK. 
"In this part, the term 'bank' includes each association operat-
ing under title II.". 
SEC. 
210. 
JOINT 
MANAGEMENT 
AGREEMENTS. 
The first sentence of section 5.17(a)(2)(A) of the Farm Credit 
Act of 1971 (12 U.S.C. 2252(a)(2)(A)) is amended by striking "or 
management agreements". 
SEC. 211. DISSEMINATION OF QUARTERLY REPORTS. 
Section 5.17(a)(8) of the Farm Credit Act of 1971 (12 U.S.C. 
2252(a)(8)) is amended by inserting after "except that" the following: 
"the requirements of the Farm Credit Administration governing 
the dissemination to stockholders of quarterly reports of System 
institutions may not be more burdensome or costly than the require-
ments applicable to national banks, and". 
12 use 2252 
SEC. 212. REGULATORY REVIEW. 
(a) FINDINGS.—Congress finds that— 
(1) the Farm Credit Administration, in the role of the 
Administration as an arms-length safety and soundness regu-
PUBLIC LAW 104-105—FEB. 10, 1996 
110 STAT. 175 
lator, has made considerable progress in reducing the regu-
latory burden on Farm Credit System institutions; 
(2) the efforts of the Farm Credit Administration described 
in paragraph (1) have resulted in cost savings for Farm Credit 
System institutions; and 
(3) the cost savings described in paragraph (2) ultimately 
benefit the farmers, ranchers, agricultural cooperatives, and 
rural residents of the United States. 
(b) CONTINUATION OF REGULATORY REVIEW.—The Farm Credit -.:" 
Administration shall continue the comprehensive review of regula-
tions governing the Farm Credit System to identify and eliminate, 
consistent with law, safety, and soundness, all regulations that 
are unnecessary, unduly burdensome or costly, or not based on 
law. 
SEC. 213. EXAMINATION OF FARM CREDIT SYSTEM INSTITUTIONS. 
The first sentence of section 5.19(a) of the Farm Credit Act 
of 1971 (12 U.S.C. 2254(a)) is amended by striking "each year" 
and inserting "during each 18-month period". 
SEC. 214. CONSERVATORSHIPS AND RECEIVERSHIPS. 
(a) DEFINITIONS.—Section 5.51 of the Farm Credit Act of 1971 
(12 U.S.C. 2277a) is amended— 
(1) by striking paragraph (5); and 
(2) by redesignating paragraph (6) as paragraph (5). 
(b) GENERAL CORPORATE POWERS.—Section 5.58 of the Farm 
Credit Act of 1971 (12 U.S.C. 2277a-7) is amended by striking 
paragraph (9) and inserting the following: 
"(9) CONSERVATOR OR RECEIVER.—The Corporation may act 
as a conservator or receiver.". 
SEC. 215. FARM CREDIT INSURANCE FUND OPERATIONS. 
(a) ADJUSTMENT OF PREMIUMS.— 
(1) IN GENERAL.—Section 5.55(a) of the Farm Credit Act 
of 1971 (12 U.S.C. 2277a-4(a)) is amended— 
(A) in paragraph (1), by striking "Until the aggregate 
of amounts in the Farm Credit Insurance Fund exceeds 
the secure base amount, the annual premium due from 
any insured System bank for any calendar year" and insert-
ing the following: "If at the end of any calendar year 
the aggregate of amounts in the Farm Credit Insurance 
Fund does not exceed the secure base amount, subject 
to paragraph (2), the annual premium due from any insured 
System bank for the calendar year"; 
(B) by redesignating paragraph (2) as paragraph (3); 
and 
(C) by inserting after paragraph (1) the following: 
"(2) REDUCED PREMIUMS.—The Corporation, in the sole 
discretion of the Corporation, may reduce by a percentage uni-
formly applied to all insured System banks the annual premium 
due from each insured System bank during any calendar year, 
as determined under paragraph (1).". 
(2) CONFORMING AMENDMENTS.— 
(A) Section 5.55(b) of the Farm Credit Act of 1971 
(12 U.S.C. 2277a-4(b)) is amended— 
(i) by striking "Insurance Fund" each place it 
appears and inserting "Farm Credit Insurance Fund"; 
110 STAT. 176 
PUBLIC LAW 104-105—FEB. 10, 1996 
(ii) by striking "for the following calendar year"; 
and 
(iii) by striking "subsection (a)" and inserting "sub-
section (a)(1)". 
(B) Section 5.56(a) of the Farm Credit Act of 1971 
(12 U.S.C. 2277a-5(a)) is amended by striking "section 
5.55(a)(2)" each place it appears in paragraphs (2) and 
(3) and inserting "section 5.55(a)(3)". 
(C) Section 1.12(b) (12 U.S.C. 2020(b)) is amended— 
(i) in paragraph (1), by inserting "(as defined in 
section 
5.55(a)(3))" 
after 
"government-guaranteed 
loans"; and 
(ii) in paragraph (3), by inserting "(as so defined)" 
after "government-guaranteed loans" each place such 
term appears. 
(b) ALLOCATION TO INSURED SYSTEM BANKS AND OTHER SYSTEM 
INSTITUTIONS OF EXCESS AMOUNTS IN THE FARM CREDIT INSURANCE 
FUND.—Section 5.55 of the Farm Credit Act of 1971 (12 U.S.C. 
2277a-4) is amended by adding at the end the following: 
"(e) 
ALLOCATION 
TO 
SYSTEM 
INSTITUTIONS 
OF 
EXCESS 
RESERVES.— 
"(1) ESTABLISHMENT OF ALLOCATED INSURANCE RESERVES 
ACCOUNTS.—There is hereby established in the Farm Credit 
Insurance Fund an Allocated Insurance Reserves Account— 
"(A) for each insured System bank; and 
"(B) subject to paragraph (6)(C), for all holders, in 
the aggregate, of Financial Assistance Corporation stock. 
"(2) TREATMENT.—^Amounts in emy Allocated Insurance 
Reserves Account shall be considered to be part of the Farm 
Credit Insursmce Fund. 
"(3) ANNUAL ALLOCATIONS.—If, at the end of any calendar 
year, the aggregate of the amounts in the Farm Credit Insur-
ance Fund exceeds the average secure base amount for the 
. ... calendar year (as calculated on an average daily balance basis), 
the Corporation shall allocate to the Allocated Insurance 
Reserves Accounts the excess amount less the amount that 
the Corporation, in its sole discretion, determines to be the 
sum of the estimated operating expenses and estimated insur-
ance obligations of the Corporation for the immediately succeed-
ing calendar year. 
"(4) 
ALLOCATION 
FORMULA.—From 
the 
total 
amount 
required to be allocated at the end of a calendar year under 
paragraph (3)— 
"(A) 10 percent of the total amount shall be credited 
to the Allocated Insurance Reserves Account established 
under paragraph (1)(B), subject to paragraph (6)(C); and 
"(B) there shall be credited to the Allocated Insurance 
Reserves Account of each insured System bank an amount 
that bears the same ratio to the total amount (less any 
amount credited under subparagraph (A)) as the average 
principal outstanding for the 3-year period ending on the 
end of the calendar year on loans made by the bank that 
are in accrual status bears to the average principal 
outstanding for the 3-year period ending on the end of 
the calendar year on loans made by all insured System 
banks that are in accrual status (excluding, in each case, 
PUBLIC LAW 104-105—FEB. 10, 1996 
110 STAT. 177 
the guaranteed portions of government-guaranteed loans 
described in subsection (a)(1)(C)). 
"(5) 
USE OF FUNDS IN ALLOCATED INSURANCE RESERVES 
ACCOUNTS.—To the extent that the sum of the operating 
expenses of the Corporation and the insurance obhgations of 
the Corporation for a calendar year exceeds the sum of operat-
ing expenses and insurance obligations determined under para-
graph (3) for the calendar year, the Corporation shall cover 
the expenses and obligations by— 
"(A) reducing each Allocated Insurance 
Reserves 
Account by the same proportion; and 
"(B) expending the amounts obtained under subpara-
graph (A) before expending other amounts in the Fund. 
"(6) OTHER DISPOSITION OF ACCOUNT FUNDS.— 
"(A) IN GENERAL.—^As soon as practicable during each 
calendar year beginning more than 8 years after the date 
on which the aggregate of the amounts in the Farm Credit 
Insurance Fund exceeds the secure base amount, but not 
earlier than January 1, 2005, the Corporation may— 
"(i) subject to subparagraphs (D) and (F), pay to 
each insured System bank, in a manner determined 
by the Corporation, an amount equal to the lesser 
of— 
"(I) 20 percent of the balance in the insured 
System 
bank's 
Allocated 
Insurance 
Reserves 
Account as of the preceding December 31; or 
"(II) 20 percent of the balance in the bank's 
Allocated Insurance Reserves Account on the date 
of the payment; and 
"(ii) subject to subparagraphs (C), (E), and (F), 
pay to each System bank and association holding 
Financial Assistance Corporation stock a proportionate 
share, determined by dividing the number of shares 
of Financial Assistance Corporation stock held by the 
institution by the total number of shares of Financial 
Assistance Corporation stock outstanding, of the lesser 
of— 
"(I) 20 percent of the balance in the Allocated 
Insurance Reserves Account established under 
paragraph (1)(B) as of the preceding December 
31; or 
"(II) 20 percent of the balance in the Allocated 
Insurance Reserves Account established under 
paragraph (1)(B) on the date of the payment. 
"(B) AUTHORITY TO ELIMINATE OR REDUCE PAYMENTS.— 
The Corporation may eliminate or reduce payments during 
a calendar year under subparagraph (A) if the Corporation 
determines, in its sole discretion, that the payments, or 
other circumstances that might require use of the Farm 
Credit Insurance Fund, could cause the amount in the 
Farm Credit Insurance Fund during the calendar year 
to be less than the secure base amount. 
"(C) REIMBURSEMENT FOR FINANCIAL ASSISTANCE COR-
PORATION STOCK.— 
"(i) SUFFICIENT FUNDING.—Notwithstanding para-
graph (4)(A), on provision by the Corporation for the 
accumulation in the Account established under para-
110 STAT. 178 
PUBLIC LAW 104-105—FEB. 10, 1996 
f
raph 
(1)(B) of funds in an amount 
equal to 
56,000,000 (in addition to the amounts described in 
subparagraph (F)(ii)), the Corporation shall not allocate 
any further funds to the Account except to replenish 
the Account if funds are diminished below $56,000,000 
' 
by the Corporation under paragraph (5). 
"(ii) WIND DOWN AND TERMINATION.— 
"(I) FINAL DISBURSEMENTS.—On disbursement 
of $53,000,000 (in addition to the amounts 
described in subparagraph (F)(ii)) from the Allo-
cated Insurance Reserves Account, the Corporation 
shall disburse the remaining amounts in the 
Account, as determined 
under 
subparagraph 
(A)(ii), without regard to the percentage limitations 
in subclauses (I) and (II) of subparagraph (A)(ii). 
"(II) TERMINATION OF ACCOUNT.—On disburse-
ment of $56,000,000 (in addition to the amounts 
described in subparagraph (F)(ii)) from the Allo-
cated Insurance Reserves Account, the Corporation 
shall close the Account established under para-
graph (1)(B) and transfer any remaining funds 
in the Account to the remaining Allocated Insur-
£ince Reserves Accounts in accordance with para-
graph (4)(B) for the calendar year in which the 
transfer occurs. 
"(D) DISTRIBUTION OF PAYMENTS RECEIVED.—Not later 
than 60 days after receipt of a payment made under 
subparagraph (A)(i), each insured System bsuik, in con-
sultation with affiliated associations of the insured System 
bank, and taking into account the direct or indirect pay-
ment of insurance premiums by the associations, shall 
develop and implement an equitable plan to distribute 
payments received under subparagraph (A)(i) among the 
bank and associations of the bank. 
"(E) EXCEPTION FOR PREVIOUSLY REIMBURSED ASSOCIA-
TIONS.—For purposes of subparagraph (A)(ii), in any Farm 
Credit district in which the funding bank has reimbursed 
1 or more affiliated associations of the bank for the pre-
viously unreimbursed portion of the Financial Assistance 
Corporation stock held by the associations, the funding 
bank shall be deemed to be the holder of the shares of 
Financial Assistance Corporation stock for which the fund-
ing bank has provided the reimbursement. 
"(F) INITIAL PAYMENT.—Notwithstanding subparagraph 
(A), the initial payment made to each payee under subpara-
graph (A) shall be in such amount determined by the 
Corporation to be equal to the sum of— 
"(i) the total of the amounts that would have been 
paid if payments under subparagraph (A) had been 
authorized to begin, under the same terms and condi-
tions, in the first calendar year beginning more than 
5 years after the date on which the aggregate of the 
amounts in the Farm Credit Insurance Fund exceeds 
the secure base amount, and to continue through the 
2 immediately subsequent years; 
"(ii) interest earned on any amounts that would 
have been paid as described in clause (i) from the 
PUBLIC LAW 104-105—FEB. 10, 1996 
110 STAT. 179 
date on which the pajonents would have been paid 
as described in clause (i); and 
"(iii) the payment to be made in the initial year 
described in subparagraph (A), based on the amount 
in each Account after subtracting the amounts to be 
paid under clauses (i) and (ii).". 
(c) TECHNICAL AMENDMENTS.—Section 5.55(d) of the Farm 
Credit Act of 1971 (12 U.S.C. 2277a-4(d)) is amended— 
(1) in the matter preceding paragraph (1)— 
(A) by striking "subsections (a) and (c)" and inserting 
"subsections (a), (c), and (e)"; and 
(B) by striking "a Farm Credit Bank" and inserting 
"an insured System bank"; and 
(2) in paragraphs (1), (2), and (3), by striking "Farm Credit 
Bank" each place it appears and inserting "insured System 
bank". 
SEC. 216. EXAMINATIONS BY THE FARM CREDIT SYSTEM INSURANCE 
CORPORATION. 
Section 5.59(b)(1)(A) of the Farm Credit Act of 1971 (12 U.S.C. 
2277a-8(b)(l)(A)) is amended by adding at the end the following: 
"Notwithstanding any other provision of this Act, on cancellation 
of the charter of a System institution, the Corporation shall have 
authority to examine the system institution in receivership. An 
examination shall be performed at such intervals as the Corporation 
shall determine.". 
SEC. 217. POWERS WITH RESPECT TO TROUBLED INSURED SYSTEM 
BANKS. 
(a) LEAST-COST RESOLUTION.—Section 5.61(a)(3) of the Farm 
Credit Act of 1971 (12 U.S.C. 2277a-10(a)) is amended— 
(1) by redesignating subparagraph (B) as subparagraph 
(F); and 
(2) by striking subparagraph (A) and inserting the follow-
ing: 
"(A) LEAST-COST RESOLUTION.—Assistance may not 
be 
provided to an insured System bank under this subsection 
unless the means of providing the assistance is the least 
costly means of providing the assistance by the Farm Credit 
Insurance Fund of all possible alternatives available to 
the Corporation, including liquidation of the bank (includ-
ing paying the insured obligations issued on behalf of the 
bank). Before making a least-cost determination under this 
subparagraph, the Corporation shall accord such other 
insured System banks as the Corporation determines to 
be appropriate the opportunity to submit information relat-
ing to the determination. 
"(B) DETERMINING LEAST COSTLY APPROACH.—In deter-
mining the least costly alternative under subparagraph 
(A), the Corporation shall— 
"(i) evaluate alternatives on a present-value basis, 
using a reasonable discount rate; 
"(ii) document the evaluation and the assumptions 
on which the evaluation is based; and 
"(iii) retain the documentation for not less than 
5 years. 
"(C) TIME OF DETERMINATION.— 
110 STAT. 180 
PUBLIC LAW 104-105—FEB. 10, 1996 
"(i) GENERAL RULE.—For purposes of this sub-
section, the determination of the costs of providing 
any assistance under any provision of this section with 
respect to any insured System bank shall be made 
as of the date on which the Corporation makes the 
determination to provide the assistance to the institu-
tion under this section. 
"(ii) RULE FOR LIQUIDATIONS.—For purposes of this 
subsection, the determination of the costs of liquidation 
of any insured System bank shall be made as of the 
earliest of— 
"(I) the date on which a conservator is 
appointed for the insured System bank; 
"(II) the date on which a receiver is appointed 
for the insured System bank; or 
"(III) the date on which the Corporation makes 
any determination to provide any assistance under 
this section with respect to the insured System 
bank. 
"(D) 
RULE 
FOR STAND-ALONE 
ASSISTANCE.—Before 
providing any assistance under paragraph (1), the Corpora-
tion shall evaluate the adequacy of managerial resources 
of the insured System bank. The continued service of any 
director or senior ranking officer who serves in a policy-
making role for the assisted insured System bank, as deter-
mined by the Corporation, shall be subject to approval 
by the Corporation as a condition of assistance. 
"(E) 
DISCRETIONARY 
DETERMINATIONS.—^Any 
deter-
mination that the Corporation makes under this paragraph 
shall be in the sole discretion of the Corporation.". 
(b) CONFORMING AMENDMENTS.—Section 5.61(a) of the Farm 
Credit Act of 1971 (12 U.S.C. 2277a-10(a)) is amended— 
(1) in paragraph (1) by striking "IN GENERAL.—" and insert-
ing "STAND-ALONE ASSISTANCE.—"; and 
(2) in paragraph (2)— 
(A) by striking "ENUMERATED POWERS.—" and inserting 
"FACILITATION OF MERGERS OR CONSOLIDATION.—"; and 
(B) in subparagraph (A) by striking "FACILITATION OF 
MERGERS O
R CONSOLIDATION.—" and inserting "IN GEN-
ERAL.—". 
SEC. 218. OVERSIGHT AND REGULATORY ACTIONS BY THE FARM 
CREDIT SYSTEM INSURANCE CORPORATION. 
The Farm Credit Act of 1971 is amended by inserting after 
section 5.61 (12 U.S.C. 2279a-10) the following: 
12 use 
"SEC. 5.61A. OVERSIGHT ACTIONS BY THE CORPORATION. 
"(a) 
DEFINITIONS.—In this section, the term 
'institution' 
means— 
"(1) an insured System bank; and 
"(2) a production credit association or other association 
making loans under section 7.6 with a direct loan payable 
to the funding bank of the association that comprises 20 percent 
or more of the funding bank's total loan volume net of 
nonaccrual loans. 
"(b) 
CONSULTATION 
REGARDING 
PARTICIPATION 
OF 
UNDERCAPITALIZED BANKS IN ISSUANCE OF INSURED OBLIGATIONS.— 
The Farm Credit Administration shall consult with the Corporation 
PUBLIC LAW 104-105—FEB. 10, 1996 
110 STAT. 181 
prior to approving an insured obligation that is to be issued by 
or on behalf of, or participated in by, any insured System bank 
that fails to meet the minimum level for any capital requirement 
established by the Farm Credit Administration for the bank. 
"(c) CONSULTATION REGARDING APPLICATIONS FOR MERGERS 
AND RESTRUCTURINGS.— 
"(1) CORPORATION TO RECEIVE 
COPY OF TRANSACTION 
APPLICATIONS.—On receiving an application for a merger or 
restructuring of an institution, the Farm Credit Administration 
shall forward a copy of the application to the Corporation. 
"(2) CONSULTATION REQUIRED.—If the proposed merger or 
restructuring involves an institution that fails to meet the 
minimum level for any capital requirement established by the 
Farm Credit Administration applicable to the institution, the 
Farm Credit Administration shall allow 30 days within which 
the Corporation may submit the views and recommendations 
of the Corporation, including any conditions for approval. In 
determining whether to approve or disapprove any proposed 
merger or restructuring, the Farm Credit Administration shall 
give due consideration to the views and recommendations of 
the Corporation. 
"SEC. 5.61B. AUTHORITY TO REGULATE GOLDEN PARACHUTE AND 12 USC 
INDEMNIFICATION PAYMENTS. 
2277a-10b. 
"(a) DEFINITIONS.—In this section: 
"(1) GOLDEN PARACHUTE PAYMENT.—The term 'golden para-
chute pa3nnient'— 
"(A) means a payment (or any agreement to make 
a payment) in the nature of compensation for the benefit 
of any institution-related party under an obligation of any 
Farm Credit System institution that— 
"(i) is contingent on the termination of the party's 
relationship with the institution; and 
"(ii) is received on or after the date on which— 
"(I) the institution is insolvent; 
"(II) a conservator or receiver is appointed for 
the institution; 
"(III) the institution has been assigned by the 
Farm Credit Administration a composite CAMEL 
rating of 4 or 5 under the Farm Credit Administra-
tion Rating System, or an equivalent rating; or 
"(IV) the Corporation otherwise determines 
that the institution is in a troubled condition (as 
defined in regulations issued by the Corporation); 
and 
"(B) includes a payment that would be a golden para-
chute payment but for the fact that the payment was 
made before the date referred to in subparagraph (A)(ii) 
if the payment was made in contemplation of the occurrence 
of an event described in any subclause of subparagraph 
(A); but 
"(C) does not include— 
"(i) a payment made under a retirement plan that 
is qualified (or is intended to be qualified) under section 
401 of the Internal Revenue Code of 1986 or other 
nondiscriminatory benefit plan; 
110 STAT. 182 
PUBLIC LAW 104-105—FEB. 10, 1996 
"(ii) a payment made under a bona fide supple-
mental executive retirement plan, deferred compensa-
tion plan, or other arrangement that the Corporation 
determines, by regulation or order, to be permissible; 
or 
"(iii) a payment made by reason of the death or 
disability of an institution-related party. 
"(2) INDEMNIFICATION PAYMENT.—The term 'indemnifica-
tion payment' means a payment (or any agreement to make 
a payment) by any Farm Credit System institution for the 
benefit of any person who is or was an institution-related 
party, to pay or reimburse the person for any liability or legal 
expense with regard to any administrative proceeding or civil 
action instituted by the Farm Credit Administration that 
results in a final order under which the person— 
"(A) is assessed a civil money penalty; or 
"(B) is removed or prohibited from participating in 
the conduct of the affairs of the institution. 
"(3) INSTITUTION-RELATED PARTY.—The term 'institution-
related party' means— 
"(A) a director, officer, employee, or agent for a Farm 
Credit System institution or any conservator or receiver 
of such an institution; 
"(B) a stockholder (other than another Farm Credit 
System institution), consultant, joint venture partner, or 
any other person determined by the Farm Credit Adminis-
tration to be a participant in the conduct of the affairs 
of a Farm Credit System institution; and 
"(C) an independent contractor (including any attorney, 
appraiser, or accountant) that knowingly or recklessly 
participates in any violation of any law or regulation, any 
breach of fiduciary duty, or smy unsafe or unsound practice 
that caused or is likely to cause more than a minimal 
financial loss to, or a significant adverse effect on, the 
Farm Credit System institution. 
"(4) LIABILITY OR LEGAL EXPENSE.—The term liability or 
legal expense' means— 
"(A) a legal or other professional expense incurred in 
connection with any claim, proceeding, or action; 
"(B) the amount of, and any cost incurred in connection 
with, any settlement of any claim, proceeding, or action; 
and 
"(C) the amount of, and any cost incurred in connection 
with, any judgment or penalty imposed with respect to 
any claim, proceeding, or action. 
"(5) PAYMENT.—The term 'payment' meeins— 
"(A) a direct or indirect transfer of any funds or any 
asset; and 
"(B) any segregation of any funds or assets for the 
purpose of making, or under an agreement to make, any 
payment after the date on which the funds or assets are 
segregated, without regard to whether the obligation to 
make the payment is contingent on— 
"(i) the determination, after that date, of the liabil-
ity for the payment of the amount; or 
"(ii) the liquidation, after that date, of the amount 
of the payment. 
PUBLIC LAW 104-105—FEB. 10, 1996 
110 STAT. 183 
"(b) PROHIBITION.—The Corporation may prohibit or Umit, by 
regulation or order, any golden parachute payment or indemnifica-
tion pajonent by a Farm Credit System institution (including any 
conservator or receiver of the Federal Agricultural Mortgage Cor-
poration) in troubled condition (as defined in regulations issued 
by the Corporation). 
"(c) FACTORS TO BE TAKEN INTO ACCOUNT.—The Corporation 
shall prescribe, by regulation, the factors to be considered by the 
Corporation in taking any action under subsection (b). The factors 
may include— 
"(1) whether there is a reasonable basis to believe that 
an institution-related party has committed any fraudulent act 
or omission, breach of trust or fiduciary duty, or insider abuse 
with regard to the Farm Credit System institution involved 
that has had a material effect on the financial condition of 
the institution; 
"(2) whether there is a reasonable basis to believe that 
the institution-related party is substantially responsible for 
the insolvency of the Farm Credit System institution, the 
appointment of a conservator or receiver for the institution, 
or the institution's troubled condition (as defined in regulations 
prescribed by the Corporation); 
"(3) whether there is a reasonable basis to believe that 
the institution-related party has materially violated 
any 
applicable law or regulation that has had a material effect 
on the financial condition of the institution; 
"(4) whether there is a reasonable basis to believe that 
the institution-related party has violated or conspired to vio-
late— 
"(A) section 215, 657, 1006, 1014, or 1344 of title 18, 
United States Code; or 
"(B) section 1341 or 1343 of title 18, United States 
Code, affecting a Farm Credit System institution; 
"(5) whether the institution-related party was in a position 
of managerial or fiduciary responsibility; and 
"(6) the length of time that the party was related to the 
Farm Credit System institution and the degree to which— 
"(A) the payment reasonably reflects compensation 
earned over the period of emplo)mient; and 
"(B) the compensation represents a reasonable payment 
for services rendered. 
"(d) CERTAIN PAYMENTS PROHIBITED.—NO Farm Credit System 
institution may prepay the salary or any liability or legal expense 
of any institution-related party if the payment is made— 
"(1) in contemplation of the insolvency of the institution 
or after the commission of an act of insolvency; and 
"(2) with a view to, or with the result of— 
"(A) preventing the proper application of the assets 
of the institution to creditors; or 
"(B) preferring 1 creditor over another creditor. 
"(e) RULE OF CONSTRUCTION.—Nothing in this section— 
"(1) prohibits any Farm Credit System institution from 
purchasing any commercial insurance policy or fidelity bond, 
so long as the insurance policy or bond does not cover any 
legal or liability expense of an institution described in sub-
section (a)(2); or 
110 STAT. 184 
PUBLIC LAW 104-105—FEB. 10, 1996 
"(2) limits the powers, functions, or responsibilities of the 
Farm Credit Administration.". 
SEC. 219. FARM CREDIT SYSTEM INSURANCE CORPORATION BOARD 
OF DIRECTORS. 
(a) IN GENERAL.—Section 5.53 of the Farm Credit Act of 1971 
(12 U.S.C. 2277a-2) is amended to read as follows: 
"SEC. 5.53. BOARD OF DIRECTORS. 
"(a) ESTABLISHMENT.—The Corporation shall be managed by 
a Board of Directors that shall consist of the members of the 
Farm Credit Administration Board. 
"(b) CHAIRMAN.—The Board of Directors shall be chaired by 
any Board member other than the Chairman of the Farm Credit 
Administration Board.". 
(b) CONFORMING AMENDMENTS.— 
(1) Section 5314 of title 5, United States Code, is amended 
by striking "Chairperson, Board of Directors of the Farm Credit 
System Insurance Corporation.". 
(2) Section 5315 of title 5, United States Code, is amended 
by striking "Members, Board of Directors of the Farm Credit 
System Insurance Corporation.". 
SEC. 220. INTEREST RATE REDUCTION PROGRAM. 
Section 351(a) of the Consolidated Farm and Rural Develop-
ment Act (7 U.S.C. 1999) is amended— 
(a) by striking "SEC. 351. (a) The" and inserting the following: 
"SEC. 351. INTEREST RATE REDUCTION PROGRAM. 
"(a) ESTABLISHMENT OF PROGRAM.— 
"(1) IN GENERAL.—The"; and 
(b) by adding at the end the following: 
"(2) TERMINATION OF AUTHORITY.—The authority provided 
by this subsection shall terminate on September 30, 2002.". 
12 use 2219e. 
SEC. 221. LIABILITY FOR MAKING CRIMINAL REFERRALS. 
(a) IN GENERAL.—Any institution of the Farm Credit System, 
or any director, officer, employee, or agent of a Farm Credit System 
institution, that discloses to a Government authority information 
proffered in good faith that may be relevant to a possible violation 
of any law or regulation shall not be liable to any person under 
any law of the United States or any State— 
(1) for the disclosure; or 
(2) for any failure to notify the person involved in the 
possible violation. 
(b) No PROHIBITION ON DISCLOSURE.—Any institution of the 
Farm Credit System, or any director, officer, employee, or agent 
of a Farm Credit System institution, may disclose information to 
a Government authority that may be relevant to a possible violation 
of any law or regulation. 
PUBLIC LAW 104-105—FEB. 10, 1996 
110 STAT. 185 
TITLE III—IMPLEMENTATION AND 
EFFECTIVE DATE 
SEC. 301. IMPLEMENTATION. 
Regulations. 
12 u s e 2001 
The Secretary of Agriculture and the Farm Credit Administra- note. 
tion shall promulgate regulations and take other required actions 
to implement the provisions of this Act not later than 90 days 
after the effective date of this Act. 
SEC. 302. EFFECTIVE DATE. 
12 USC 2013 
Except as otherwise provided in this Act, this Act and the 
amendments made by this Act shall become effective on the date 
of enactment. 
Approved February 10, 1996. 
LEGISLATIVE HISTORY—H.R. 2029: 
HOUSE REPORTS: No. 104-421 (Comm. on Agriculture). 
CONGRESSIONAL RECORD: 
Vol. 141 (1995): Dec. 19, considered and passed House. 
Dec. 21, considered and passed Senate, amended. 
Vol. 142 (1996): Jan. 3, House concurred in Senate amendment with an 
amendment. 
Jan. 26, Senate concurred in House amendment. 
WEEKLY COMPILATION OF PRESIDENTIAL DOCUMENTS, Vol. 32 (1996): 
Feb. 10, Presidential statement. 
o