[104th Congress Public Law 105]
[From the U.S. Government Printing Office]
<DOC>
[DOCID: f:publ105.104]
FARM CREDIT SYSTEM REFORM ACT OF 1996
[[Page 110 STAT. 162]]
Public Law 104-105
104th Congress
An Act
To amend the Farm Credit Act of 1971 to provide regulatory relief, and
for other purposes. <<NOTE: Feb. 10, 1996 - [H.R. 2029]>>
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled, <<NOTE: Farm Credit
System Reform Act of 1996. Loans.>>
SECTION 1. SHORT TITLE; TABLE OF CONTENTS.
(a) <<NOTE: 12 USC 2001 note.>> Short Title.--This Act may be cited
as the ``Farm Credit System Reform Act of 1996''.
(b) Table of Contents.--The table of contents for this Act is as
follows:
Sec. 1. Short title; table of contents.
TITLE I--AGRICULTURAL MORTGAGE SECONDARY MARKET
Sec. 101. Definition of real estate.
Sec. 102. Definition of certified facility.
Sec. 103. Duties of Federal Agricultural Mortgage Corporation.
Sec. 104. Powers of the Corporation.
Sec. 105. Federal reserve banks as depositaries and fiscal agents.
Sec. 106. Certification of agricultural mortgage marketing facilities.
Sec. 107. Guarantee of qualified loans.
Sec. 108. Mandatory reserves and subordinated participation interests
eliminated.
Sec. 109. Standards requiring diversified pools.
Sec. 110. Small farms.
Sec. 111. Definition of an affiliate.
Sec. 112. State usury laws superseded.
Sec. 113. Extension of capital transition period.
Sec. 114. Minimum capital level.
Sec. 115. Critical capital level.
Sec. 116. Enforcement levels.
Sec. 117. Recapitalization of the Corporation.
Sec. 118. Liquidation of the Federal Agricultural Mortgage Corporation.
TITLE II--REGULATORY RELIEF
Sec. 201. Compensation of association personnel.
Sec. 202. Use of private mortgage insurance.
Sec. 203. Removal of certain borrower reporting requirement.
Sec. 204. Reform of regulatory limitations on dividend, member business,
and voting practices of eligible farmer-owned cooperatives.
Sec. 205. Removal of Federal Government certification requirement for
certain private sector financings.
Sec. 206. Borrower stock.
Sec. 207. Disclosure relating to adjustable rate loans.
Sec. 208. Borrowers' rights.
Sec. 209. Formation of administrative service entities.
Sec. 210. Joint management agreements.
Sec. 211. Dissemination of quarterly reports.
Sec. 212. Regulatory review.
Sec. 213. Examination of farm credit system institutions.
Sec. 214. Conservatorships and receiverships.
Sec. 215. Farm Credit Insurance Fund operations.
Sec. 216. Examinations by the Farm Credit System Insurance Corporation.
Sec. 217. Powers with respect to troubled insured System banks.
[[Page 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. Liability for making criminal referrals.
TITLE III--IMPLEMENTATION AND EFFECTIVE DATE
Sec. 301. Implementation.
Sec. 302. Effective date.
TITLE I--AGRICULTURAL MORTGAGE SECONDARY MARKET
SEC. 101. DEFINITION OF REAL ESTATE.
Section 8.0(1)(B)(ii) of the Farm Credit Act of 1971 (12 U.S.C.
2279aa(1)(B)(ii)) is amended by striking ``with a purchase price'' and
inserting ``, excluding the land to which the dwelling is affixed, with
a value''.
SEC. 102. DEFINITION OF CERTIFIED FACILITY.
Section 8.0(3) of the Farm Credit Act of 1971 (12 U.S.C. 2279aa(3))
is amended--
(1) in subparagraph (A), by striking ``a secondary marketing
agricultural loan'' and inserting ``an agricultural mortgage
marketing''; and
(2) in subparagraph (B), by striking ``, but only'' and all
that follows through ``(9)(B)''.
SEC. 103. DUTIES OF FEDERAL AGRICULTURAL MORTGAGE CORPORATION.
Section 8.1(b) of the Farm Credit Act of 1971 (12 U.S.C. 2279aa-
1(b)) is amended--
(1) in paragraph (2), by striking ``and'' at the end;
(2) in paragraph (3), by striking the period at the end and
inserting ``; and''; and
(3) by adding at the end the following:
``(4) purchase qualified loans and issue securities
representing interests in, or obligations backed by, the
qualified loans, guaranteed for the timely repayment of
principal and interest.''.
SEC. 104. POWERS OF THE CORPORATION.
Section 8.3(c) of the Farm Credit Act of 1971 (12 U.S.C. 2279aa-
3(c)) is amended--
(1) by redesignating paragraphs (13) and (14) as paragraphs
(14) and (15), respectively; and
(2) by inserting after paragraph (12) the following:
``(13) To purchase, hold, sell, or assign a qualified loan,
to issue a guaranteed security, representing an interest in, or
an obligation backed by, the qualified loan, and to perform all
the functions and responsibilities of an agricultural mortgage
marketing facility operating as a certified facility under this
title.''.
SEC. 105. FEDERAL RESERVE BANKS AS DEPOSITARIES AND FISCAL AGENTS.
Section 8.3 of the Farm Credit Act of 1971 (12 U.S.C. 2279aa-3) is
amended--
(1) in subsection (d), by striking ``may act as depositories
for, or'' and inserting ``shall act as depositories for, and'';
and
[[Page 110 STAT. 164]]
(2) in subsection (e), by striking ``Secretary of the
Treasury may authorize the Corporation to use'' and inserting
``Corporation shall have access to''.
SEC. 106. CERTIFICATION OF AGRICULTURAL MORTGAGE MARKETING FACILITIES.
Section 8.5 of the Farm Credit Act of 1971 (12 U.S.C. 2279aa-5) is
amended--
(1) in subsection (a)--
(A) in paragraph (1), by inserting ``(other than the
Corporation)'' after ``agricultural mortgage marketing
facilities''; and
(B) in paragraph (2), by inserting ``(other than the
Corporation)'' after ``agricultural mortgage marketing
facility''; and
(2) in subsection (e)(1), by striking ``(other than the
Corporation)''.
SEC. 107. GUARANTEE OF QUALIFIED LOANS.
Section 8.6 of the Farm Credit Act of 1971 (12 U.S.C. 2279aa-6) is
amended--
(1) in subsection (a)(1)--
(A) by striking ``Corporation shall 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
Corporation.'';
(2) in subsection (d)--
(A) by striking paragraph (4); and
(B) by redesignating paragraphs (5), (6), and (7) as
paragraphs (4), (5), and (6), 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 PARTICIPATION INTERESTS
ELIMINATED.
(a) Guarantee of Qualified Loans.--Section 8.6 of the Farm Credit
Act of 1971 (12 U.S.C. 2279aa-6) is amended by striking subsection (b).
(b) Reserves and Subordinated Participation Interests.--Section 8.7
of the Farm Credit Act of 1971 (12 U.S.C. 2279aa-7) is repealed.
(c) Conforming Amendments.--
(1) Section 8.0(9)(B)(i) of the Farm Credit Act of 1971 (12
U.S.C. 2279aa(9)(B)(i)) is amended by striking ``8.7, 8.8,'' and
inserting ``8.8''.
(2) Section 8.6(a)(2) of the Farm Credit Act of 1971 (12
U.S.C. 2279aa-6(a)(2)) is amended by striking ``subject to the
provisions of subsection (b)''.
[[Page 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
subsections (b) through (e), respectively.
(b) Conforming Amendments.--
(1) Section 8.0(9)(B)(i) of the Farm Credit Act of 1971 (12
U.S.C. 2279aa(9)(B)(i)) is amended by striking ``(f)'' and
inserting ``(d)''.
(2) Section 8.13(a) of the Farm Credit Act of 1971 (12
U.S.C. 2279aa-13(a)) is amended by striking ``sections 8.6(b)
and'' in each place it appears and inserting ``section''.
(3) Section 8.32(b)(1)(C) of the Farm Credit Act of 1971 (12
U.S.C. 2279bb-1(b)(1)(C)) is amended--
(A) by striking ``shall'' and inserting ``may''; and
(B) by inserting ``(as in effect before the date of
the enactment of the Farm Credit System Reform Act of
1996)'' before the semicolon.
(4) Section 8.6(b) of the Farm Credit Act of 1971 (12 U.S.C.
2279aa-6(b)) (as redesignated by subsection (a)(2)) is
amended--
(A) by striking paragraph (4) (as redesignated by
section 107(2)(B)); and
(B) by redesignating paragraphs (5) and (6) (as
redesignated by section 107(2)(B)) as paragraphs (4) and
(5), respectively.
SEC. 110. SMALL FARMS.
Section 8.8(e) of the Farm Credit Act of 1971 (12 U.S.C. 2279aa-
8(e)) is amended by adding at the end the following: ``The Board shall
promote and encourage the inclusion of qualified loans for small farms
and family farmers in the agricultural mortgage secondary market.''.
SEC. 111. DEFINITION OF AN AFFILIATE.
Section 8.11(e) of the Farm Credit Act of 1971 (12 U.S.C. 2279aa-
11(e)) is amended--
(1) by striking ``a certified facility or''; and
(2) by striking ``paragraphs (3) and (7), respectively, of
section 8.0'' and inserting ``section 8.0(7)''.
SEC. 112. STATE USURY LAWS SUPERSEDED.
Section 8.12 of the Farm Credit Act of 1971 (12 U.S.C. 2279aa-12) is
amended by striking subsection (d) and inserting the following:
``(d) State Usury Laws Superseded.--A provision of the Constitution
or law of any State shall not apply to an agricultural loan made by an
originator or a certified facility in accordance with this title for
sale to the 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,
[[Page 110 STAT. 166]]
received, or reserved by an agricultural lender or a certified
facility; or
``(2) limits or prohibits a prepayment penalty (either fixed
or declining), yield maintenance, or make-whole payment that may
be charged, taken, or received by an agricultural lender or a
certified facility in connection with the full or partial
payment of the principal amount due on a loan by a borrower in
advance of the scheduled date for the payment under the terms of
the loan, otherwise known as a prepayment of the loan
principal.''.
SEC. 113. EXTENSION OF CAPITAL TRANSITION PERIOD.
Section 8.32 of the Farm Credit Act of 1971 (12 U.S.C. 2279bb-1) is
amended--
(1) in the first sentence of subsection (a), by striking
``Not later than the expiration of the 2-year period beginning
on December 13, 1991,'' and inserting ``Not sooner than the
expiration 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 Corporation
shall be an amount of core capital equal to the sum of--
``(1) 2.75 percent of the aggregate on-balance sheet assets
of the Corporation, as determined in accordance with generally
accepted accounting principles; and
``(2) 0.75 percent of the aggregate off-balance sheet
obligations of the Corporation, which, for the purposes of this
subtitle, shall include--
``(A) the unpaid principal balance of outstanding
securities 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
[[Page 110 STAT. 167]]
``(C) other off-balance sheet obligations of the
Corporation.
``(b) Transition Period.--
``(1) In general.--For purposes of this subtitle, the
minimum capital level for the Corporation--
``(A) prior to January 1, 1997, shall be the amount
of core capital equal to the sum of--
``(i) 0.45 percent of aggregate off-balance
sheet obligations of the Corporation;
``(ii) 0.45 percent of designated on-balance
sheet assets of the Corporation, as determined
under paragraph (2); and
``(iii) 2.50 percent of on-balance sheet
assets of the Corporation other than assets
designated under paragraph (2);
``(B) during the 1-year period ending December 31,
1997, shall be the amount of core capital equal to the
sum of--
``(i) 0.55 percent of aggregate off-balance
sheet obligations of the Corporation;
``(ii) 1.20 percent of designated on-balance
sheet assets of the Corporation, as determined
under paragraph (2); and
``(iii) 2.55 percent of on-balance sheet
assets of the Corporation other than assets
designated under paragraph (2);
``(C) during the 1-year period ending 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 determined 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
Corporation acquired under section 8.6(e); and
``(B) the aggregate amount of qualified loans
purchased and held by the Corporation under section
8.3(c)(13).''.
SEC. 115. CRITICAL CAPITAL LEVEL.
Section 8.34 of the Farm Credit Act of 1971 (12 U.S.C. 2279bb-3) is
amended to read as follows:
``SEC. 8.34. CRITICAL CAPITAL LEVEL.
``For purposes of this subtitle, the critical capital level for the
Corporation shall be an amount of core capital equal to 50
[[Page 110 STAT. 168]]
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 inserting ``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. <<NOTE: 12 USC 2279bb-7.>> 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 subsection
(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. <<NOTE: 12 USC 2279cc.>> CONSERVATORSHIP; LIQUIDATION;
RECEIVERSHIP.
``(a) Voluntary Liquidation.--The Corporation may voluntarily
liquidate only with the consent of, and in accordance with
[[Page 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
Corporation 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
Corporation 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
Corporation if--
``(i)(I) the authority of the Corporation to
purchase qualified loans or issue or guarantee
loan-backed securities is suspended; or
``(II) the Corporation is classified under
section 8.35 as within level III or IV and the
alternative actions available under subtitle B are
not satisfactory; and
``(ii) the Farm Credit Administration
determines that the appointment of a conservator
would not be appropriate.
``(3) No effect on supervisory actions.--The grounds for
appointment of a conservator for the Corporation under this
subsection shall be in addition to those in section 8.37.
``(c) Appointment of Conservator or Receiver.--
``(1) Qualifications.--Notwithstanding section 4.12(b), if a
conservator or receiver is appointed for the Corporation, the
conservator or receiver shall be--
``(A) the Farm Credit Administration or any other
governmental entity or employee, including the Farm
Credit System Insurance Corporation; or
``(B) any person that--
``(i) has no claim against, or financial
interest in, the Corporation or other basis for a
conflict of interest as the conservator or
receiver; and
``(ii) has the financial and management
expertise necessary to direct the operations and
affairs of the Corporation and, if necessary, to
liquidate the Corporation.
``(2) Compensation.--
``(A) In general.--A conservator or receiver for the
Corporation and professional personnel (other than a
Federal employee) employed to represent or assist the
conservator or receiver may be compensated for
activities conducted as, or for, a conservator or
receiver.
``(B) Limit on compensation.--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
[[Page 110 STAT. 170]]
Credit Administration determines that compensation at
higher rates is necessary in order to recruit and retain
competent personnel.
``(C) Contractual arrangements.--The conservator or
receiver may contract with any governmental entity,
including the Farm Credit System Insurance Corporation,
to make personnel, services, and facilities of the
entity available to the conservator or receiver on such
terms and compensation arrangements as shall be mutually
agreed, and each entity may provide the same to the
conservator or receiver.
``(3) <<NOTE: Claims.>> 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
determine, that shall have priority over any other lien.
``(4) Liability.--If the conservator or receiver for the
Corporation is not a Federal entity, or an 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 omission
constitutes gross negligence or any form of intentional tortious
conduct or criminal conduct.
``(5) Indemnification.--The Farm Credit Administration may
allow indemnification of the conservator or receiver from the
assets of the conservatorship or receivership on such terms as
the Farm Credit Administration considers appropriate.
``(d) Judicial Review of Appointment.--
``(1) In general.--Notwithstanding subsection (i)(1), not
later than 30 days after a conservator or receiver is appointed
under subsection (b), the Corporation may bring an action in the
United States District Court for the District of Columbia for an
order requiring the Farm Credit Administration Board to remove
the conservator or receiver. The court shall, on the merits,
dismiss the action or direct the Farm Credit Administration
Board to remove the conservator or receiver.
``(2) Stay of other actions.--On the commencement of an
action under paragraph (1), any court having jurisdiction of any
other action or enforcement proceeding authorized under this Act
to which the Corporation is a party shall stay the action or
proceeding during the pendency of the action for removal of the
conservator or receiver.
``(e) General Powers of Conservator or Receiver.--The conservator or
receiver for the Corporation shall have such powers to conduct the
conservatorship or receivership as shall be provided pursuant to
regulations adopted by the Farm Credit Administration Board. Such powers
shall be comparable to the powers available to a conservator or receiver
appointed pursuant to section 4.12(b).
``(f) Borrowings for Working Capital.--
``(1) In general.--If the conservator or receiver of the
Corporation determines that it is likely that there will be
[[Page 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
necessary 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 Corporation in any asset acquired
by the conservator or receiver as conservator or receiver for the
Corporation shall be valid against the conservator or receiver unless
the agreement--
``(1) is in writing;
``(2) is executed by the Corporation and any 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
agreement'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) <<NOTE: Government organization.>> Oversight.--The
Office of Secondary Market Oversight established under section
8.11 shall be abolished, and section 8.11(a) and subtitle B
shall have no force or effect, on such date as the Farm Credit
Administration Board determines is appropriate following the
placement of the Corporation in receivership, but not later than
the conclusion of the receivership and discharge of the
receiver.''.
[[Page 110 STAT. 172]]
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 compensation of the
chief executive officer thereof,''.
SEC. 202. USE OF PRIVATE MORTGAGE INSURANCE.
(a) In General.--Section 1.10(a)(1) of the Farm Credit Act of 1971
(12 U.S.C. 2018(a)(1)) is amended by adding at the end the following:
``(D) Private mortgage insurance.--A loan on which
private mortgage insurance is obtained may exceed 85
percent of the appraised value of the real estate
security to the extent that the loan amount in excess of
such 85 percent is covered by the insurance.''.
(b) Conforming Amendment.--Section 1.10(a)(1)(A) of the Farm Credit
Act of 1971 (12 U.S.C. 2018(a)(1)(A)) is amended by striking
``paragraphs (2) and (3)'' and inserting ``subparagraphs (C) and (D)''.
SEC. 203. REMOVAL OF CERTAIN BORROWER REPORTING REQUIREMENT.
Section 1.10(a) of the Farm Credit Act of 1971 (12 U.S.C. 2018(a))
is amended by striking paragraph (5).
SEC. 204. REFORM OF REGULATORY LIMITATIONS ON DIVIDEND, MEMBER BUSINESS,
AND VOTING PRACTICES OF ELIGIBLE FARMER-OWNED COOPERATIVES.
(a) In General.--Section 3.8(a) of the Farm Credit Act of 1971 (12
U.S.C. 2129(a)) is amended by adding at the end the following: ``Any
such association that has received a loan from a bank for cooperatives
shall, without regard to the requirements of paragraphs (1) through (4),
continue to be eligible for so long as more than 50 percent (or such
higher percentage as is established by the bank board) of the voting
control of the association is held by farmers, producers or harvesters
of aquatic products, or eligible cooperative associations.''.
(b) Conforming Amendment.--Section 3.8(b)(1)(D) of the Farm Credit
Act of 1971 (12 U.S.C. 2129(b)(1)(D)) is amended by striking ``and (4)
of subsection (a)'' and inserting ``and (4), or under the last sentence,
of subsection (a)''.
SEC. 205. REMOVAL OF FEDERAL GOVERNMENT CERTIFICATION REQUIREMENT FOR
CERTAIN PRIVATE SECTOR FINANCINGS.
Section 3.8(b)(1)(A) of the Farm Credit Act of 1971 (12 U.S.C.
2129(b)(1)(A)) is amended--
(1) by striking ``have been certified by the Administrator
of the Rural Electrification Administration to be eligible for
such'' and inserting ``are eligible under the Rural
Electrification Act of 1936 (7 U.S.C. 901 et seq.) for''; and
(2) by striking ``loan guarantee, and'' and inserting ``loan
guarantee from the Administration or the Bank (or a successor of
the Administration or the Bank), and''.
[[Page 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
notwithstanding 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
effective.
``(B) Retirement.--The bylaws adopted by a bank or
association under subsection (b) may provide that if a
loan described in subparagraph (A) is sold into a
secondary market after the end of the 180-day period
described in the subparagraph, all outstanding voting
stock or participation 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:
[[Page 110 STAT. 174]]
``(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 during
the 180-day period that begins on the
date of the designation, the provisions
of this section and sections 4.14,
4.14B, 4.14C, 4.14D, and 4.36 that would
otherwise apply to the loan in the
absence of the exclusion described in
clause (i) shall become effective with
respect to the loan.
``(II) Later sale.--If a loan
described in subclause (I) is sold into
a secondary market after the end of the
180-day period described in subclause
(I), subclause (I) shall not apply with
respect to the loan beginning on the
date of the sale.''.
(b) Borrowers' Rights for Pooled Loans.--The first sentence of
section 8.9(b) of the Farm Credit Act of 1971 (12 U.S.C. 2279aa-9(b)) is
amended by inserting ``(as defined in section 4.14A(a)(5))'' after
``application for a loan''.
SEC. 209. FORMATION OF ADMINISTRATIVE SERVICE ENTITIES.
Part E of title IV of the Farm Credit Act of 1971 is amended by
inserting after section 4.28 (12 U.S.C. 2214) the following:
``SEC. 4.28A. <<NOTE: 12 USC 2214a.>> DEFINITION OF BANK.
``In this part, the term `bank' includes each association operating
under title II.''.
SEC. 210. JOINT MANAGEMENT AGREEMENTS.
The first sentence of section 5.17(a)(2)(A) of the Farm Credit Act
of 1971 (12 U.S.C. 2252(a)(2)(A)) is amended by striking ``or management
agreements''.
SEC. 211. DISSEMINATION OF QUARTERLY REPORTS.
Section 5.17(a)(8) of the Farm Credit Act of 1971 (12 U.S.C.
2252(a)(8)) is amended by inserting after ``except that'' the following:
``the requirements of the Farm Credit Administration governing the
dissemination to stockholders of quarterly reports of System
institutions may not be more burdensome or costly than the requirements
applicable to national banks, and''.
SEC. 212. <<NOTE: 12 USC 2252 note.>> 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
[[Page 110 STAT. 175]]
lator, has made considerable progress in reducing the regulatory
burden on Farm Credit System institutions;
(2) the efforts of the Farm Credit Administration described
in paragraph (1) have resulted in cost 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 regulations
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
inserting 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
uniformly 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'';
[[Page 110 STAT. 176]]
(ii) by striking ``for the following calendar
year''; and
(iii) by striking ``subsection (a)'' and
inserting ``subsection (a)(1)''.
(B) Section 5.56(a) of the Farm Credit Act of 1971
(12 U.S.C. 2277a-5(a)) is amended by striking ``section
5.55(a)(2)'' each place it appears in paragraphs (2) and
(3) and inserting ``section 5.55(a)(3)''.
(C) Section 1.12(b) (12 U.S.C. 2020(b)) is amended--
(i) in paragraph (1), by inserting ``(as
defined in section 5.55(a)(3))'' after
``government-guaranteed loans''; and
(ii) in paragraph (3), by inserting ``(as so
defined)'' after ``government-guaranteed loans''
each place such term appears.
(b) Allocation to Insured System Banks and Other System Institutions
of Excess Amounts in the Farm Credit Insurance Fund.--Section 5.55 of
the Farm Credit Act of 1971 (12 U.S.C. 2277a-4) is amended by adding at
the end the following:
``(e) Allocation to System Institutions of Excess Reserves.--
``(1) Establishment of allocated insurance reserves
accounts.--There is hereby established in the Farm Credit
Insurance Fund an Allocated Insurance Reserves Account--
``(A) for each insured System bank; and
``(B) subject to paragraph (6)(C), for all holders,
in the aggregate, of Financial Assistance Corporation
stock.
``(2) Treatment.--Amounts in any Allocated Insurance
Reserves Account shall be considered to be part of the Farm
Credit Insurance Fund.
``(3) Annual allocations.--If, at the end of any calendar
year, the aggregate of the amounts in the Farm Credit Insurance
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 insurance obligations
of the Corporation for the immediately succeeding calendar year.
``(4) Allocation formula.--From the total amount required to
be allocated at the end of a 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,
[[Page 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 obligations of the
Corporation for a calendar year exceeds the sum of operating
expenses and insurance obligations determined under paragraph
(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
subparagraph (A) before expending other amounts in the
Fund.
``(6) Other disposition of account funds.--
``(A) In general.--As soon as practicable during
each calendar year beginning more than 8 years after the
date on which the aggregate of the amounts in the Farm
Credit Insurance Fund exceeds the secure base amount,
but not earlier than January 1, 2005, the Corporation
may--
``(i) subject to subparagraphs (D) and (F),
pay to each insured System bank, in a manner
determined by the Corporation, an amount equal to
the lesser of--
``(I) 20 percent of the balance in
the insured System bank's Allocated
Insurance Reserves Account as of the
preceding December 31; or
``(II) 20 percent of the balance in
the bank's Allocated Insurance Reserves
Account on the date of the payment; and
``(ii) subject to subparagraphs (C), (E), and
(F), pay to each System bank and 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
corporation stock.--
``(i) Sufficient funding.--Notwithstanding
paragraph (4)(A), on provision by the Corporation
for the accumulation in the Account established
under para
[[Page 110 STAT. 178]]
graph (1)(B) of funds in an amount equal to
$56,000,000 (in addition to the amounts described
in subparagraph (F)(ii)), the Corporation shall
not allocate any further funds to the Account
except to replenish the Account if funds are
diminished below $56,000,000 by the Corporation
under paragraph (5).
``(ii) Wind down and termination.--
``(I) Final disbursements.--On
disbursement of $53,000,000 (in addition
to the amounts described in subparagraph
(F)(ii)) from the Allocated 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
disbursement of $56,000,000 (in addition
to the amounts described in subparagraph
(F)(ii)) from the Allocated Insurance
Reserves Account, the Corporation shall
close the Account established under
paragraph (1)(B) and transfer any
remaining funds in the Account to the
remaining Allocated Insurance Reserves
Accounts in accordance with paragraph
(4)(B) for the calendar year in which
the transfer occurs.
``(D) Distribution of payments received.--Not later
than 60 days after receipt of a payment made under
subparagraph (A)(i), each insured System bank, in
consultation with affiliated associations of the insured
System bank, and taking into account the direct or
indirect payment 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
associations.--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 previously 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 funding bank has provided the reimbursement.
``(F) Initial payment.--Notwithstanding subparagraph
(A), the initial payment made to each payee under
subparagraph (A) shall be in such amount determined by
the Corporation to be equal to the sum of--
``(i) the total of the amounts that would have
been paid if payments under subparagraph (A) had
been authorized to begin, under the same terms and
conditions, in the first calendar year beginning
more 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
[[Page 110 STAT. 179]]
date on which the payments would have been paid as
described in clause (i); and
``(iii) the payment to be made in the initial
year described in subparagraph (A), based on the
amount in each Account after subtracting the
amounts to be paid under clauses (i) and (ii).''.
(c) Technical Amendments.--Section 5.55(d) of the Farm Credit Act of
1971 (12 U.S.C. 2277a-4(d)) is amended--
(1) in the matter preceding paragraph (1)--
(A) by striking ``subsections (a) and (c)'' and
inserting ``subsections (a), (c), and (e)''; and
(B) by striking ``a Farm Credit Bank'' and inserting
``an insured System bank''; and
(2) in paragraphs (1), (2), and (3), by striking ``Farm
Credit Bank'' each place it appears and inserting ``insured
System bank''.
SEC. 216. EXAMINATIONS BY THE FARM CREDIT SYSTEM INSURANCE CORPORATION.
Section 5.59(b)(1)(A) of the Farm Credit Act of 1971 (12 U.S.C.
2277a-8(b)(1)(A)) is amended by adding at the end the following:
``Notwithstanding any other provision of this Act, on cancellation of
the charter of a System institution, the Corporation shall have
authority to examine the system institution in receivership. An
examination shall be performed at such intervals as the Corporation
shall determine.''.
SEC. 217. POWERS WITH RESPECT TO TROUBLED INSURED SYSTEM BANKS.
(a) Least-Cost Resolution.--Section 5.61(a)(3) of the Farm Credit
Act of 1971 (12 U.S.C. 2277a-10(a)) is amended--
(1) by redesignating subparagraph (B) as subparagraph (F);
and
(2) by striking subparagraph (A) and inserting the
following:
``(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 (including 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 relating to the
determination.
``(B) Determining least costly approach.--In
determining 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.--
[[Page 110 STAT. 180]]
``(i) General rule.--For purposes of this
subsection, 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 institution 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
Corporation 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 policymaking role for the assisted insured
System bank, as determined by the Corporation, shall be
subject to approval by the Corporation as a condition of
assistance.
``(E) Discretionary determinations.--Any
determination 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
inserting ``Stand-alone assistance.--''; and
(2) in paragraph (2)--
(A) by striking ``Enumerated powers.--'' and
inserting ``Facilitation of mergers or consolidation.--
''; and
(B) in subparagraph (A) by striking ``Facilitation
of mergers or consolidation.--'' and inserting ``In
general.--''.
SEC. 218. OVERSIGHT AND REGULATORY ACTIONS BY THE FARM CREDIT SYSTEM
INSURANCE CORPORATION.
The Farm Credit Act of 1971 is amended by inserting after section
5.61 (12 U.S.C. 2279a-10) the following:
``SEC. 5.61A. <<NOTE: 12 USC 2277a-10a.>> 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
[[Page 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. <<NOTE: 12 USC 2277a-10b.>> AUTHORITY TO REGULATE GOLDEN
PARACHUTE AND INDEMNIFICATION PAYMENTS.
``(a) Definitions.--In this section:
``(1) Golden parachute payment.--The term `golden parachute
payment'--
``(A) means a payment (or any agreement to make a
payment) in the nature of compensation for the benefit
of any institution-related party under an obligation of
any Farm Credit System institution that--
``(i) is contingent on the termination of the
party's relationship with the institution; and
``(ii) is received on or after the date on
which--
``(I) the institution is insolvent;
``(II) a conservator or receiver is
appointed for the institution;
``(III) the institution has been
assigned by the Farm Credit
Administration a composite CAMEL rating
of 4 or 5 under the Farm Credit
Administration 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
parachute 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;
[[Page 110 STAT. 182]]
``(ii) a payment made under a bona fide
supplemental executive retirement plan, deferred
compensation 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 `indemnification
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
Administration to be a participant in the conduct of the
affairs of a Farm Credit System institution; and
``(C) an independent contractor (including any
attorney, appraiser, or accountant) that knowingly or
recklessly participates in any violation of any law or
regulation, any breach of fiduciary duty, or any unsafe
or unsound practice that caused or is likely to cause
more than a minimal financial loss to, or a significant
adverse effect on, the Farm Credit System institution.
``(4) Liability or legal expense.--The term `liability or
legal expense' means--
``(A) a legal or other professional expense incurred
in connection with any claim, proceeding, or action;
``(B) the amount of, and any cost incurred in
connection with, any settlement of any claim,
proceeding, or action; and
``(C) the amount of, and any cost incurred in
connection with, any judgment or penalty imposed with
respect to any claim, proceeding, or action.
``(5) Payment.--The term `payment' means--
``(A) a direct or indirect transfer of any funds or
any asset; and
``(B) any segregation of any funds or assets for the
purpose of making, or under an agreement to make, any
payment after the date on which the funds or assets are
segregated, without regard to whether the obligation to
make the payment is contingent on--
``(i) the determination, after that date, of
the liability for the payment of the amount; or
``(ii) the liquidation, after that date, of
the amount of the payment.
[[Page 110 STAT. 183]]
``(b) Prohibition.--The Corporation may prohibit or limit, by
regulation or order, any golden parachute payment or indemnification
payment by a Farm Credit System institution (including any conservator
or receiver of the Federal Agricultural Mortgage Corporation) 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
violate--
``(A) section 215, 657, 1006, 1014, or 1344 of title
18, United States Code; or
``(B) section 1341 or 1343 of title 18, United
States Code, affecting a Farm Credit System institution;
``(5) whether the institution-related party was in a
position of managerial or fiduciary responsibility; and
``(6) the length of time that the party was related to the
Farm Credit System institution and the degree to which--
``(A) the payment reasonably reflects compensation
earned over the period of employment; and
``(B) the compensation represents a reasonable
payment for services rendered.
``(d) Certain Payments Prohibited.--No Farm Credit System
institution may prepay the salary or any liability or legal expense of
any institution-related party if the payment is made--
``(1) in contemplation of the insolvency of the institution
or after the commission of an act of insolvency; and
``(2) with a view to, or with the result of--
``(A) preventing the proper application of the
assets of the institution to creditors; or
``(B) preferring 1 creditor over another creditor.
``(e) Rule of Construction.--Nothing in this section--
``(1) prohibits any Farm Credit System institution from
purchasing any commercial insurance policy or fidelity bond, so
long as the insurance policy or bond does not cover any legal or
liability expense of an institution described in subsection
(a)(2); or
[[Page 110 STAT. 184]]
``(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 Development Act (7
U.S.C. 1999) is amended--
(a) by striking ``Sec. 351. (a) The'' and inserting the following:
``SEC. 351. INTEREST RATE REDUCTION PROGRAM.
``(a) Establishment of Program.--
``(1) In general.--The''; and
(b) by adding at the end the following:
``(2) Termination of authority.--The authority provided by
this subsection shall terminate on September 30, 2002.''.
SEC. 221. <<NOTE: 12 USC 2219e.>> 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.
[[Page 110 STAT. 185]]
TITLE III--IMPLEMENTATION AND EFFECTIVE DATE
SEC. 301. <<NOTE: Regulations. 12 USC 2001 note.>> IMPLEMENTATION.
The Secretary of Agriculture and the Farm Credit Administration
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. <<NOTE: 12 USC 2013 note.>> EFFECTIVE DATE.
Except as otherwise provided in this Act, this Act and the
amendments made by this Act shall become effective on the date of
enactment.
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.
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