[Congressional Bills 104th Congress]
[From the U.S. Government Publishing Office]
[H.R. 2029 Enrolled Bill (ENR)]

        H.R.2029

                       One Hundred Fourth Congress

                                 of the

                        United States of America


                          AT THE SECOND SESSION

         Begun and held at the City of Washington on Wednesday,
   the third day of January, one thousand nine hundred and ninety-six


                                 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 affiliate.
Sec. 112. State usury laws superseded.
Sec. 113. Extension of capital transition period.
Sec. 114. Minimum capital level.
Sec. 115. Critical capital level.
Sec. 116. Enforcement levels.
Sec. 117. Recapitalization of the Corporation.
Sec. 118. Liquidation of the Federal Agricultural Mortgage Corporation.

                       TITLE II--REGULATORY RELIEF

Sec. 201. Compensation of association personnel.
Sec. 202. Use of private mortgage insurance.
Sec. 203. Removal of certain borrower reporting requirement.
Sec. 204. Reform of regulatory limitations on dividend, member business, 
          and voting practices of eligible farmer-owned cooperatives.
Sec. 205. Removal of Federal Government certification requirement for 
          certain private sector financings.
Sec. 206. Borrower stock.
Sec. 207. Disclosure relating to adjustable rate loans.
Sec. 208. Borrowers' rights.
Sec. 209. Formation of administrative service entities.
Sec. 210. Joint management agreements.
Sec. 211. Dissemination of quarterly reports.
Sec. 212. Regulatory review.
Sec. 213. Examination of farm credit system institutions.
Sec. 214. Conservatorships and receiverships.
Sec. 215. Farm Credit Insurance Fund operations.
Sec. 216. Examinations by the Farm Credit System Insurance Corporation.
Sec. 217. Powers with respect to troubled insured System banks.
Sec. 218. Oversight and regulatory actions by the Farm Credit System 
          Insurance Corporation.
Sec. 219. Farm Credit System Insurance Corporation board of directors.
Sec. 220. Interest rate reduction program.
Sec. 221. Liability for making criminal referrals.

              TITLE III--IMPLEMENTATION AND EFFECTIVE DATE

Sec. 301. Implementation.
Sec. 302. Effective date.

            TITLE I--AGRICULTURAL 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
        (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)''.

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, 
    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
            ``(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 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. 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. CONSERVATORSHIP; LIQUIDATION; RECEIVERSHIP.

    ``(a) Voluntary Liquidation.--The Corporation may voluntarily 
liquidate only with the consent of, and in accordance with a plan of 
liquidation approved by, the Farm Credit Administration Board.
    ``(b) Involuntary Liquidation.--
        ``(1) In general.--The Farm Credit 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 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) 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 
    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) 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.''.

                      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''.

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:
        ``(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. DEFINITION OF BANK.

    ``In this part, the term `bank' includes each association operating 
under title II.''.

SEC. 210. JOINT MANAGEMENT AGREEMENTS.

    The first sentence of section 5.17(a)(2)(A) of the Farm Credit Act 
of 1971 (12 U.S.C. 2252(a)(2)(A)) is amended by striking ``or 
management agreements''.

SEC. 211. DISSEMINATION OF QUARTERLY REPORTS.

    Section 5.17(a)(8) of the Farm Credit Act of 1971 (12 U.S.C. 
2252(a)(8)) is amended by inserting after ``except that'' the 
following: ``the requirements of the Farm Credit Administration 
governing the dissemination to stockholders of quarterly reports of 
System institutions may not be more burdensome or costly than the 
requirements applicable to national banks, and''.

SEC. 212. REGULATORY REVIEW.

    (a) Findings.--Congress finds that--
        (1) the Farm Credit Administration, in the role of the 
    Administration as an arms-length safety and soundness regulator, 
    has made considerable progress in reducing the regulatory burden on 
    Farm Credit System institutions;
        (2) the efforts of the Farm Credit Administration described in 
    paragraph (1) have resulted in cost 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'';
                (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, 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 paragraph 
            (1)(B) of funds in an amount equal to $56,000,000 (in 
            addition to the amounts described in subparagraph (F)(ii)), 
            the Corporation shall not allocate any further funds to the 
            Account except to replenish the Account if funds are 
            diminished below $56,000,000 by the Corporation under 
            paragraph (5).
                ``(ii) Wind down and termination.--

                    ``(I) Final disbursements.--On disbursement of 
                $53,000,000 (in 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 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.--
                ``(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. 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 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 
              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;
                ``(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.
    ``(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
        ``(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. 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.

              TITLE III--IMPLEMENTATION AND EFFECTIVE DATE

SEC. 301. 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. 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.

                               Speaker of the House of Representatives.

                            Vice President of the United States and    
                                               President of the Senate.