[Congressional Bills 110th Congress]
[From the U.S. Government Publishing Office]
[H.R. 7264 Introduced in House (IH)]







110th CONGRESS
  2d Session
                                H. R. 7264

  To amend the Internal Revenue Code of 1986 to provide for economic 
  stabilization, capital utilization, and enterprise reform, and for 
                            other purposes.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                            October 3, 2008

Mr. King of Iowa (for himself, Mrs. Bachmann, Mr. Linder, Mr. Gingrey, 
Mr. Broun of Georgia, Ms. Foxx, Mr. Rohrabacher, Mr. Poe, Mr. Sali, and 
 Mr. Gohmert) introduced the following bill; which was referred to the 
   Committee on Ways and Means, and in addition to the Committee on 
 Financial Services, for a period to be subsequently determined by the 
  Speaker, in each case for consideration of such provisions as fall 
           within the jurisdiction of the committee concerned

_______________________________________________________________________

                                 A BILL


 
  To amend the Internal Revenue Code of 1986 to provide for economic 
  stabilization, capital utilization, and enterprise reform, 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, ETC.

    (a) Short Title.--This Act may be cited as the ``Reliable Economic 
Stabilization, Capital Utilization, and Enterprise Reform Act of 
2008''.
    (b) Table of Contents.--The table of contents for this Act is as 
follows:

Sec. 1. Short title, etc.
 TITLE I--INCENTIVES FOR ECONOMIC STABILIZATION AND CAPITAL UTILIZATION

Sec. 101. Reduction in capital gain rate for sales and exchanges for 
                            certain troubled assets.
Sec. 102. 5-year carryback of losses.
Sec. 103. Incentives to reinvest foreign earnings in United States.
Sec. 104. Gain or loss from sale or exchange of certain preferred 
                            stock.
Sec. 105. Repeal of Community Reinvestment Act.
Sec. 106. Net worth certificate program.
     TITLE II--GOVERNMENT-SPONSORED ENTERPRISES FREE MARKET REFORM

Sec. 201. Short title.
Sec. 202. Definitions.
Sec. 203. Termination of current conservatorship.
Sec. 204. Limitation of enterprise authority upon emergence from 
                            conservatorship.
Sec. 205. Requirement to periodically renew charter until wind down and 
                            dissolution.
Sec. 206. Required wind down of operations and dissolution of 
                            enterprise.

 TITLE I--INCENTIVES FOR ECONOMIC STABILIZATION AND CAPITAL UTILIZATION

SEC. 101. REDUCTION IN CAPITAL GAIN RATE FOR SALES AND EXCHANGES FOR 
              CERTAIN TROUBLED ASSETS.

    (a) In General.--Part I of subchapter P of chapter 1 of the 
Internal Revenue Code of 1986 (relating to treatment of capital gains) 
is amended by adding at the end the following new section:

``SEC. 1203. GAIN ON TROUBLED ASSETS.

    ``(a) In General.--Gross income shall not include the applicable 
percentage of any gain from the sale or exchange of a troubled asset 
held for more than 1 year.
    ``(b) Applicable Percentage.--For purposes of subsection (a), the 
applicable percentage shall be determined in accordance with the 
following table:


 
                    ``In the case of sales and exchanges--                      The applicable
After:                                    Before:                               percentage is:
Date of enactment of this section.......  End of 2-year period beginning on     100 percent
                                           such date..........................
End of such 2-year period...............  End of 4-year period beginning on     67 percent
                                           such date..........................
End of such 4-year period...............  End of 6-year period beginning on     33 percent
                                           such date..........................
End of such 6-year period...............  ....................................  0 percent.
 

    ``(c) Troubled Assets.--The term `troubled assets' means 
residential or commercial mortgages and any securities, obligations, or 
other instruments that are based on or related to such mortgages, that 
in each case was originated or issued on or before March 14, 2008, the 
purchase of which the Secretary determines promotes financial market 
stability and which are acquired after the date of enactment of this 
section and before January 1, 2010.''.
    (b) Conforming Amendment.--The table of sections for part I of 
subchapter P of chapter 1 of such Code is amended by adding at the end 
the following new item:

``Sec. 1203. Gain on troubled assets.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to sales and exchanges after the date of the enactment of this 
Act.

SEC. 102. 5-YEAR CARRYBACK OF LOSSES.

    (a) In General.--Subparagraph (H) of section 172(b)(1) of the 
Internal Revenue Code of 1986 is amended to read as follows:
                    ``(H) 5-year carryback of certain losses.--
                            ``(i) Taxable years ending during 2001 and 
                        2002.--In the case of a net operating loss for 
                        any taxable year ending during 2001 or 2002, 
                        subparagraph (A)(i) shall be applied by 
                        substituting `5' for `2' and subparagraph (F) 
                        shall not apply.
                            ``(ii) Taxable years ending during 2007, 
                        2008, and 2009.--In the case of a net operating 
                        loss for any taxable year ending during 2007, 
                        2008, or 2009--
                                    ``(I) subparagraph (A)(i) shall be 
                                applied by substituting `5' for `2',
                                    ``(II) subparagraph (E)(ii) shall 
                                be applied by substituting `4' for `2', 
                                and
                                    ``(III) subparagraph (F) shall not 
                                apply.''.
    (b) Temporary Suspension of 90 Percent Limit on Certain NOL 
Carrybacks and Carryovers.--
            (1) In general.--Subclause (I) of section 56(d)(1)(A)(ii) 
        of such Code is amended--
                    (A) by inserting ``and 2007, 2008, or 2009'' after 
                ``2001 or 2002'', and
                    (B) by inserting ``and 2007, 2008, and 2009'' after 
                ``2001 and 2002''.
            (2) Conforming amendment.--Subclause (I) of section 
        56(d)(1)(A)(i) of such Code is amended by inserting ``amount of 
        such'' before ``deduction described in clause (ii)(I)''.
    (c) Anti-Abuse Rules.--The Secretary of the Treasury or the 
Secretary's designee shall prescribe such rules as are necessary to 
prevent the abuse of the purposes of the amendments made by this 
section, including antistuffing rules, antichurning rules (including 
rules relating to sale-leasebacks), and rules similar to the rules 
under section 1091 of the Internal Revenue Code of 1986 relating to 
losses from wash sales.
    (d) Effective Dates.--
            (1) Subsection (a).--
                    (A) In general.--Except as provided in subparagraph 
                (B), the amendments made by subsection (a) shall apply 
                to net operating losses arising in taxable years ending 
                in 2007, 2008, or 2009.
                    (B) Election.--In the case of any taxpayer with a 
                net operating loss for a taxable year ending during 
                2007 or 2008--
                            (i) any election made under section 
                        172(b)(3) of the Internal Revenue Code of 1986 
                        may not withstanding such section) be revoked 
                        before October 15, 2009, and
                            (ii) any election made under section 172(j) 
                        of such Code shall (notwithstanding such 
                        section) be treated as timely made if made 
                        before October 15, 2009.
            (2) Subsection (b).--The amendments made by subsection (b) 
        shall apply to taxable years ending after December 31, 2006.

SEC. 103. INCENTIVES TO REINVEST FOREIGN EARNINGS IN UNITED STATES.

    (a) In General.--Section 965 of the Internal Revenue Code of 1986 
is amended to read as follows:

``SEC. 965. DEDUCTION FOR DIVIDENDS RECEIVED.

    ``(a) Deduction.--
            ``(1) In general.--In the case of a corporation which is a 
        United States shareholder and for which the election under this 
        section is in effect for the taxable year, there shall be 
        allowed as a deduction an amount equal to the applicable 
        percentage of cash dividends which are received during such 
        taxable year by such shareholder from controlled foreign 
        corporations.
            ``(2) Applicable percentage.--For purposes of paragraph 
        (1)--
                    ``(A) In general.--Except as provided by 
                subparagraph (B), the term `applicable percentage' 
                means 85 percent.
                    ``(B) Distressed debt.--In the case of dividends 
                received with respect to which the requirements of 
                subsection (b)(4)(B) are met, such term means 100 
                percent.
            ``(3) Dividends paid indirectly from controlled foreign 
        corporations.--If, within the taxable year for which the 
        election under this section is in effect, a United States 
        shareholder receives a cash distribution from a controlled 
        foreign corporation which is excluded from gross income under 
        section 959(a), such distribution shall be treated for purposes 
        of this section as a cash dividend to the extent of any amount 
        included in income by such United States shareholder under 
        section 951(a)(1)(A) as a result of any cash dividend during 
        such taxable year to--
                    ``(A) such controlled foreign corporation from 
                another controlled foreign corporation that is in a 
                chain of ownership described in section 958(a), or
                    ``(B) any other controlled foreign corporation in 
                such chain of ownership, but only to the extent of cash 
                distributions described in section 959(b) which are 
                made during such taxable year to the controlled foreign 
                corporation from which such United States shareholder 
                received such distribution.
    ``(b) Limitations.--
            ``(1) In general.--The amount of dividends taken into 
        account under subsection (a) shall not exceed the greater of--
                    ``(A) $500,000,000,
                    ``(B) the amount shown on the applicable financial 
                statement as earnings permanently reinvested outside 
                the United States, or
                    ``(C) in the case of an applicable financial 
                statement which fails to show a specific amount of 
                earnings permanently reinvested outside the United 
                States and which shows a specific amount of tax 
                liability attributable to such earnings, the amount 
                equal to the amount of such liability divided by 0.35.
        The amounts described in subparagraphs (B) and (C) shall be 
        treated as being zero if there is no such statement or such 
        statement fails to show a specific amount of such earnings or 
        liability, as the case may be.
            ``(2) Dividends must be extraordinary.--The amount of 
        dividends taken into account under subsection (a) shall not 
        exceed the excess (if any) of--
                    ``(A) the cash dividends received during the 
                taxable year by such shareholder from controlled 
                foreign corporations, over
                    ``(B) the sum of--
                            ``(i) the dividends received during the 
                        base period year by such shareholder from 
                        controlled foreign corporations,
                            ``(ii) the amounts includible in such 
                        shareholder's gross income for the base period 
                        year under section 951(a)(1)(B) with respect to 
                        controlled foreign corporations, and
                            ``(iii) the amounts that would have been 
                        included for the base period year but for 
                        section 959(a) with respect to controlled 
                        foreign corporations.
                The amount taken into account under clause (iii) for 
                the base period year shall not include any amount which 
                is not includible in gross income by reason of an 
                amount described in clause (ii) with respect to a prior 
                taxable year. Amounts described in subparagraph (B) for 
                the base period year shall be such amounts as shown on 
                the most recent return filed for such year; except that 
                amended returns filed after June 30, 2007, shall not be 
                taken into account.
            ``(3) Reduction of benefit if increase in related party 
        indebtedness.--The amount of dividends which would (but for 
        this paragraph) be taken into account under subsection (a) 
        shall be reduced by the excess (if any) of--
                    ``(A) the amount of indebtedness of the controlled 
                foreign corporation to any related person (as defined 
                in section 954(d)(3)) as of the close of the taxable 
                year for which the election under this section is in 
                effect, over
                    ``(B) the amount of indebtedness of the controlled 
                foreign corporation to any related person (as so 
                defined) as of the close of September 26, 2008.
        All controlled foreign corporations with respect to which the 
        taxpayer is a United States shareholder shall be treated as 1 
        controlled foreign corporation for purposes of this paragraph. 
        The Secretary may prescribe such regulations as may be 
        necessary or appropriate to prevent the avoidance of the 
        purposes of this paragraph, including regulations which provide 
        that cash dividends shall not be taken into account under 
        subsection (a) to the extent such dividends are attributable to 
        the direct or indirect transfer (including through the use of 
        intervening entities or capital contributions) of cash or other 
        property from a related person (as so defined) to a controlled 
        foreign corporation.
            ``(4) Requirements.--
                    ``(A) Requirement to invest in united states.--
                Except as provided by subparagraph (B), subsection (a) 
                shall not apply to any dividend received by a United 
                States shareholder unless the amount of the dividend is 
                invested in the United States pursuant to a domestic 
                reinvestment plan which--
                            ``(i) is approved by the taxpayer's 
                        president, chief executive officer, or 
                        comparable official before the payment of such 
                        dividend and subsequently approved by the 
                        taxpayer's board of directors, management 
                        committee, executive committee, or similar 
                        body, and
                            ``(ii) provides for the reinvestment of 
                        such dividend in the United States (other than 
                        as payment for executive compensation), 
                        including as a source for the funding of worker 
                        hiring and training, infrastructure, research 
                        and development, capital investments, or the 
                        financial stabilization of the corporation for 
                        the purposes of job retention or creation.
                    ``(B) Distressed debt.--The requirements of this 
                subparagraph are met if amounts repatriated are 
                invested in distressed debt (as defined by the 
                Secretary) for at least one year.
    ``(c) Definitions and Special Rules.--For purposes of this 
section--
            ``(1) Applicable financial statement.--The term `applicable 
        financial statement' means--
                    ``(A) with respect to a United States shareholder 
                which is required to file a financial statement with 
                the Securities and Exchange Commission (or which is 
                included in such a statement so filed by another 
                person), the most recent audited annual financial 
                statement (including the notes which form an integral 
                part of such statement) of such shareholder (or which 
                includes such shareholder)--
                            ``(i) which was so filed on or before June 
                        30, 2007, and
                            ``(ii) which was certified on or before 
                        June 30, 2007, as being prepared in accordance 
                        with generally accepted accounting principles, 
                        and
                    ``(B) with respect to any other United States 
                shareholder, the most recent audited financial 
                statement (including the notes which form an integral 
                part of such statement) of such shareholder (or which 
                includes such shareholder)--
                            ``(i) which was certified on or before June 
                        30, 2007, as being prepared in accordance with 
                        generally accepted accounting principles, and
                            ``(ii) which is used for the purposes of a 
                        statement or report--
                                    ``(I) to creditors,
                                    ``(II) to shareholders, or
                                    ``(III) for any other substantial 
                                nontax purpose.
            ``(2) Base period year.--
                    ``(A) In general.--The base period year is the 
                first taxable year ending in 2007.
                    ``(B) Mergers, acquisitions, etc..--
                            ``(i) In general.--Rules similar to the 
                        rules of subparagraphs (A) and (B) of section 
                        41(f)(3) shall apply for purposes of this 
                        paragraph.
                            ``(ii) Spin-offs, etc.--If there is a 
                        distribution to which section 355 (or so much 
                        of section 356 as relates to section 355) 
                        applies during the base period year and the 
                        controlled corporation (within the meaning of 
                        section 355) is a United States shareholder--
                                    ``(I) the controlled corporation 
                                shall be treated as being in existence 
                                during the period that the distributing 
                                corporation (within the meaning of 
                                section 355) is in existence, and
                                    ``(II) for purposes of applying 
                                subsection (b)(2) to the controlled 
                                corporation and the distributing 
                                corporation, amounts described in 
                                subsection (b)(2)(B) which are received 
                                or includible by the distributing 
                                corporation or controlled corporation 
                                (as the case may be) before the 
                                distribution referred to in subclause 
                                (I) from a controlled foreign 
                                corporation shall be allocated between 
                                such corporations in proportion to 
                                their respective interests as United 
                                States shareholders of such controlled 
                                foreign corporation immediately after 
                                such distribution.
                        Subclause (II) shall not apply if neither the 
                        controlled corporation nor the distributing 
                        corporation is a United States shareholder of 
                        such controlled foreign corporation immediately 
                        after such distribution.
            ``(3) Dividend.--The term `dividend' shall not include 
        amounts includible in gross income as a dividend under section 
        78, 367, or 1248. In the case of a liquidation under section 
        332 to which section 367(b) applies, the preceding sentence 
        shall not apply to the extent the United States shareholder 
        actually receives cash as part of the liquidation.
            ``(4) Coordination with dividends received deduction.--No 
        deduction shall be allowed under section 243 or 245 for any 
        dividend for which a deduction is allowed under this section.
            ``(5) Controlled groups.--
                    ``(A) In general.--All United States shareholders 
                which are members of an affiliated group filing a 
                consolidated return under section 1501 shall be treated 
                as one United States shareholder.
                    ``(B) Application of $500,000,000 limit.--All 
                corporations which are treated as a single employer 
                under section 52(a) shall be limited to one 
                $500,000,000 amount in subsection (b)(1)(A), and such 
                amount shall be divided among such corporations under 
                regulations prescribed by the Secretary.
                    ``(C) Permanently reinvested earnings.--If a 
                financial statement is an applicable financial 
                statement for more than 1 United States shareholder, 
                the amount applicable under subparagraph (B) or (C) of 
                subsection (b)(1) shall be divided among such 
                shareholders under regulations prescribed by the 
                Secretary.
    ``(d) Denial of Foreign Tax Credit; Denial of Certain Expenses.--
            ``(1) Foreign tax credit.--No credit shall be allowed under 
        section 901 for any taxes paid or accrued (or treated as paid 
        or accrued) with respect to the deductible portion of--
                    ``(A) any dividend, or
                    ``(B) any amount described in subsection (a)(2) 
                which is included in income under section 951(a)(1)(A).
        No deduction shall be allowed under this chapter for any tax 
        for which credit is not allowable by reason of the preceding 
        sentence.
            ``(2) Expenses.--No deduction shall be allowed for expenses 
        properly allocated and apportioned to the deductible portion 
        described in paragraph (1).
            ``(3) Deductible portion.--For purposes of paragraph (1), 
        unless the taxpayer otherwise specifies, the deductible portion 
        of any dividend or other amount is the amount which bears the 
        same ratio to the amount of such dividend or other amount as 
        the amount allowed as a deduction under subsection (a) for the 
        taxable year bears to the amount described in subsection 
        (b)(2)(A) for such year.
            ``(4) Coordination with section 78.--Section 78 shall not 
        apply to any tax which is not allowable as a credit under 
        section 901 by reason of this subsection.
    ``(e) Increase in Tax on Included Amounts Not Reduced by Credits, 
etc.--
            ``(1) In general.--Any tax under this chapter by reason of 
        nondeductible CFC dividends shall not be treated as tax imposed 
        by this chapter for purposes of determining--
                    ``(A) the amount of any credit allowable under this 
                chapter, or
                    ``(B) the amount of the tax imposed by section 55.
        Subparagraph (A) shall not apply to the credit under section 53 
        or to the credit under section 27(a) with respect to taxes 
        which are imposed by foreign countries and possessions of the 
        United States and are attributable to such dividends.
            ``(2) Limitation on reduction in taxable income, etc.--
                    ``(A) In general.--The taxable income of any United 
                States shareholder for any taxable year shall in no 
                event be less than the amount of nondeductible CFC 
                dividends received during such year.
                    ``(B) Coordination with section 172.--The 
                nondeductible CFC dividends for any taxable year shall 
                not be taken into account--
                            ``(i) in determining under section 172 the 
                        amount of any net operating loss for such 
                        taxable year, and
                            ``(ii) in determining taxable income for 
                        such taxable year for purposes of the 2nd 
                        sentence of section 172(b)(2).
            ``(3) Nondeductible cfc dividends.--For purposes of this 
        subsection, the term `nondeductible CFC dividends' means the 
        excess of the amount of dividends taken into account under 
        subsection (a) over the deduction allowed under subsection (a) 
        for such dividends.
    ``(f) Election.--The taxpayer may elect to apply this section to--
            ``(1) the taxpayer's last taxable year which begins before 
        the date of the enactment of this section, or
            ``(2) the taxpayer's first taxable year which begins during 
        the 1-year period beginning on such date.
Such election may be made for a taxable year only if made before the 
due date (including extensions) for filing the return of tax for such 
taxable year.''.
    (b) Clerical Amendment.--The item in the table of sections for 
subpart F of part III of subchapter N of chapter 1 of such Code 
relating to section 965 is amended to read as follows:

``Sec. 965. Deduction for dividends received.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years ending on or after the date of the enactment of 
this Act.

SEC. 104. GAIN OR LOSS FROM SALE OR EXCHANGE OF CERTAIN PREFERRED 
              STOCK.

    (a) In General.--For purposes of the Internal Revenue Code of 1986, 
gain or loss from the sale or exchange of any applicable preferred 
stock by any applicable financial institution shall be treated as 
ordinary income or loss.
    (b) Applicable Preferred Stock.--For purposes of this section, the 
term ``applicable preferred stock'' means any stock--
            (1) which is preferred stock in--
                    (A) the Federal National Mortgage Association, 
                established pursuant to the Federal National Mortgage 
                Association Charter Act (12 U.S.C. 1716 et seq.), or
                    (B) the Federal Home Loan Mortgage Corporation, 
                established pursuant to the Federal Home Loan Mortgage 
                Corporation Act (12 U.S.C. 1451 et seq.), and
            (2) which--
                    (A) was held by the applicable financial 
                institution on September 6, 2008, or
                    (B) was sold or exchanged by the applicable 
                financial institution on or after January 1, 2008, and 
                before September 7, 2008.
    (c) Applicable Financial Institution.--For purposes of this 
section:
            (1) In general.--Except as provided in paragraph (2), the 
        term ``applicable financial institution'' means--
                    (A) a financial institution referred to in section 
                582(c)(2) of the Internal Revenue Code of 1986, or
                    (B) a depository institution holding company (as 
                defined in section 3(w)(1) of the Federal Deposit 
                Insurance Act (12 U.S.C. 1813(w)(1))).
            (2) Special rules for certain sales.--In the case of--
                    (A) a sale or exchange described in subsection 
                (b)(2)(B), an entity shall be treated as an applicable 
                financial institution only if it was an entity 
                described in subparagraph (A) or (B) of paragraph (1) 
                at the time of the sale or exchange, and
                    (B) a sale or exchange after September 6, 2008, of 
                preferred stock described in subsection (b)(2)(A), an 
                entity shall be treated as an applicable financial 
                institution only if it was an entity described in 
                subparagraph (A) or (B) of paragraph (1) at all times 
                during the period beginning on September 6, 2008, and 
                ending on the date of the sale or exchange of the 
                preferred stock.
    (d) Special Rule for Certain Property Not Held on September 6, 
2008.--The Secretary of the Treasury or the Secretary's delegate may 
extend the application of this section to all or a portion of the gain 
or loss from a sale or exchange in any case where--
            (1) an applicable financial institution sells or exchanges 
        applicable preferred stock after September 6, 2008, which the 
        applicable financial institution did not hold on such date, but 
        the basis of which in the hands of the applicable financial 
        institution at the time of the sale or exchange is the same as 
        the basis in the hands of the person which held such stock on 
        such date, or
            (2) the applicable financial institution is a partner in a 
        partnership which--
                    (A) held such stock on September 6, 2008, and later 
                sold or exchanged such stock, or
                    (B) sold or exchanged such stock during the period 
                described in subsection (b)(2)(B).
    (e) Regulatory Authority.--The Secretary of the Treasury or the 
Secretary's delegate may prescribe such guidance, rules, or regulations 
as are necessary to carry out the purposes of this section.
    (f) Effective Date.--This section shall apply to sales or exchanges 
occurring after December 31, 2007, in taxable years ending after such 
date.

SEC. 105. REPEAL OF COMMUNITY REINVESTMENT ACT.

    The Community Reinvestment Act of 1977 (12 U.S.C. 2901 et seq.) is 
hereby repealed.

SEC. 106. NET WORTH CERTIFICATE PROGRAM.

    (a) Establishment; Purposes.--
            (1) Establishment.--As soon as possible after the date of 
        the enactment of this Act, the Board of Directors of the 
        Federal Deposit Insurance Corporation (in this section referred 
        to as the ``Corporation'') shall establish a net worth 
        certificate program under this section to provide capital to 
        insured depository institutions (as such term is defined in 
        section 3 of the Federal Deposit Insurance Act (12 U.S.C. 1813) 
        to assist such institutions to resolve solvency problems.
            (2) Purposes.--The purposes of the net worth certificate 
        program established under this section shall be--
                    (A) to improve the capital position of troubled 
                insured depository institutions with real estate 
                holdings;
                    (B) to provide such insured depository institutions 
                the ability to sell and restructure assets; and
                    (C) to assist such institutions in their recovery 
                without use of taxpayer funds.
    (b) Principles.--The net worth program established under this 
section shall--
            (1) be based upon the Federal Savings and Loan Insurance 
        Corporation net worth program established under title II of the 
        Garn-St Germain Depository Institutions Act of 1982 (Public Law 
        97-320; 96 Stat. 1489);
            (2) be made available only for troubled financial 
        depository institutions that the Corporation determines could 
        be financially viable if provided solvency assistance under the 
        program;
            (3) provide for the Corporation to purchase capital in 
        troubled insured depository institutions in the form of 
        subordinated debentures or net worth certificates in such 
        institutions;
            (4) provide that insured depository institutions 
        participating in the program shall agree to such regulations 
        and terms of the program as the Corporation shall provide, 
        which shall include strict oversight and supervision, including 
        limitations on the compensation of senior executive officers of 
        such institutions and terms for removal of officers for poor 
        management;
            (5) provide that the Corporation shall fund net worth 
        certificates under the program by issuance of Corporation 
        senior notes and obligations to participating insured 
        depository institutions;
            (6) provide that the interest rate on net worth 
        certificates issued under the program and the senior notes and 
        obligations issued under the program by the Corporation shall 
        be identical;
            (7) not involve any subsidy, appropriation of funds, or 
        other cash outlay or use of taxpayer funds; and
            (8) provide that asset sale transactions under the program 
        be held in the private market.
    (c) Regulations.--The Board of Directors of the Corporation shall 
issue any regulations necessary to carry out the net worth certificate 
program under this section.

     TITLE II--GOVERNMENT-SPONSORED ENTERPRISES FREE MARKET REFORM

SEC. 201. SHORT TITLE.

    This title may be cited as the ``Government-Sponsored Enterprises 
Free Market Reform Act of 2008''.

SEC. 202. DEFINITIONS.

    For purposes of this title, the following definitions shall apply:
            (1) Charter.--The term ``charter'' means--
                    (A) with respect to the Federal National Mortgage 
                Association, the Federal National Mortgage Association 
                Charter Act (12 U.S.C. 1716 et seq.); and
                    (B) with respect to the Federal Home Loan Mortgage 
                Corporation, the Federal Home Loan Mortgage Corporation 
                Act (12 U.S.C. 1451 et seq.).
            (2) Director.--The term ``Director'' means the Director of 
        the Federal Housing Finance Agency
            (3) Enterprise.--The term ``enterprise'' means--
                    (A) the Federal National Mortgage Association; and
                    (B) the Federal Home Loan Mortgage Corporation.
            (4) Guarantee.--The term ``guarantee'' means, with respect 
        to an enterprise, the credit support of the enterprise that is 
        provided by the Federal Government through its charter as a 
        government-sponsored enterprise.

SEC. 203. TERMINATION OF CURRENT CONSERVATORSHIP.

    (a) In General.--Upon the expiration of the period referred to in 
subsection (b), the Director of the Federal Housing Finance Agency 
shall determine, with respect to each enterprise, if the enterprise is 
financially viable at that time and--
            (1) if the Director determines that the enterprise is 
        financially viable, immediately take all actions necessary to 
        terminate the conservatorship for each of the enterprises; or
            (2) if the Director determines that the enterprise is not 
        financially viable, immediately appoint the Federal Housing 
        Finance Agency as receiver under section 1367 of the Federal 
        Housing Enterprises Financial Safety and Soundness Act of 1992 
        and carry out such receivership under the authority of such 
        section.
    (b) Timing.--The period referred to in this subsection is, with 
respect to an enterprise--
            (1) except as provided in paragraph (2), the 24-month 
        beginning upon the date of the enactment of this Act; or
            (2) if the Director determines before the expiration of the 
        period referred to in paragraph (1) that the financial markets 
        would be adversely affected without the extension of such 
        period under this paragraph with respect to that enterprise, 
        the 30-month period beginning upon the date of the enactment of 
        this Act.
    (c) Financial Viability.--The Director may not determine that an 
enterprise is financially viable for purposes of subsection (a) if the 
Director determines that any of the conditions for receivership set 
forth in paragraph (3) or (4) of section 1367(a) of the Federal Housing 
Enterprises Financial Safety and Soundness Act of 1992 (12 U.S.C. 
4617(a)) exists at the time with respect to the enterprise.

SEC. 204. LIMITATION OF ENTERPRISE AUTHORITY UPON EMERGENCE FROM 
              CONSERVATORSHIP.

    (a) Revised Authority.--Upon the expiration of the period referred 
to in section 203(b), if the Director makes the determination under 
section 203(a)(1), the following provisions shall take effect:
            (1) Portfolio limitations.--Subtitle B of title XIII of the 
        Housing and Community Development Act of 1992 (12 U.S.C. 4611 
        et seq.) is amended by adding at the end the following new 
        section:

``SEC. 1369E. RESTRICTION ON MORTGAGE ASSETS OF ENTERPRISES.

    ``(a) Restriction.--No enterprise shall own, as of any applicable 
date in this subsection or thereafter, mortgage assets in excess of--
            ``(1) upon the expiration of the period referred to in 
        section 203(b) of the Government-Sponsored Enterprises Free 
        Market Reform Act of 2008, $850,000,000,000; or
            ``(2) on December 31 of each year thereafter, 80.0 percent 
        of the aggregate amount of mortgage assets of the enterprise as 
        of December 31 of the immediately preceding calendar year;
except that in no event shall an enterprise be required under this 
section to own less than $250,000,000,000 in mortgage assets.
    ``(b) Definition of Mortgage Assets.--For purposes of this section, 
the term `mortgage assets' means, with respect to an enterprise, assets 
of such enterprise consisting of mortgages, mortgage loans, mortgage-
related securities, participation certificates, mortgage-backed 
commercial paper, obligations of real estate mortgage investment 
conduits and similar assets, in each case to the extent such assets 
would appear on the balance sheet of such enterprise in accordance with 
generally accepted accounting principles in effect in the United States 
as of September 7, 2008 (as set forth in the opinions and 
pronouncements of the Accounting Principles Board and the American 
Institute of Certified Public Accountants and statements and 
pronouncements of the Financial Accounting Standards Board from time to 
time; and without giving any effect to any change that may be made 
after September 7, 2008, in respect of Statement of Financial 
Accounting Standards No. 140 or any similar accounting standard).''.
            (2) Increase in minimum capital requirement.--Section 1362 
        of the Federal Housing Enterprises Financial Safety and 
        Soundness Act of 1992 (12 U.S.C. 4612), as amended by section 
        1111 of the Housing and Economic Recovery Act of 2008 (Public 
        Law 110-289), is amended--
                    (A) in subsection (a), by striking ``For purposes 
                of this subtitle, the minimum capital level for each 
                enterprise shall be'' and inserting ``The minimum 
                capital level established under subsection (g) for each 
                enterprise may not be lower than'';
                    (B) in subsection (c)--
                            (i) by striking ``subsections (a) and'' and 
                        inserting ``subsection'';
                            (ii) by striking ``regulated entities'' the 
                        first place such term appears and inserting 
                        ``Federal Home Loan Banks'';
                            (iii) by striking ``for the enterprises,'';
                            (iv) by striking ``, or for both the 
                        enterprises and the banks,'';
                            (v) by striking ``the level specified in 
                        subsection (a) for the enterprises or''; and
                            (vi) by striking ``the regulated entities 
                        operate'' and inserting ``such banks operate'';
                    (C) in subsection (d)(1)--
                            (i) by striking ``subsections (a) and'' and 
                        inserting ``subsection''; and
                            (ii) by striking ``regulated entity'' each 
                        place such term appears and inserting ``Federal 
                        home loan bank'';
                    (D) in subsection (e), by striking ``regulated 
                entity'' each place such term appears and inserting 
                ``Federal home loan bank'';
                    (E) in subsection (f)--
                            (i) by striking ``the amount of core 
                        capital maintained by the enterprises,''; and
                            (ii) by striking ``regulated entities'' and 
                        inserting ``banks''; and
                    (F) by adding at the end the following new 
                subsection:
    ``(g) Establishment of Revised Minimum Capital Levels.--
            ``(1) In general.--The Director shall cause the enterprises 
        to achieve and maintain adequate capital by establishing 
        minimum levels of capital for the enterprises,which may include 
        any prudential standards necessary to ensure long-term 
        institutional viability and competitive equity in the market, 
        and by using such other methods as the Director deems 
        appropriate.
            ``(2) Authority.--The Director shall have the authority to 
        establish such minimum level of capital for an enterprise in 
        excess of the level specified under subsection (a) as the 
        Director, in the Director's discretion, deems to be necessary 
        or appropriate in light of the particular circumstances of the 
        enterprise.
    ``(h) Failure To Maintain Revised Minimum Capital Levels.--
            ``(1) Unsafe and unsound practice or condition.--Failure of 
        a enterprise to maintain capital at or above its minimum level 
        as established pursuant to subsection (c) of this section may 
        be deemed by the Director, in his discretion, to constitute an 
        unsafe and unsound practice or condition within the meaning of 
        this title.
            ``(2) Directive to achieve capital level.--
                    ``(A) Authority.--In addition to, or in lieu of, 
                any other action authorized by law, including paragraph 
                (1), the Director may issue a directive to an 
                enterprise that fails to maintain capital at or above 
                its required level as established pursuant to 
                subsection (c) of this section.
                    ``(B) Plan.--Such directive may require the 
                enterprise to submit and adhere to a plan acceptable to 
                the Director describing the means and timing by which 
                the enterprise shall achieve its required capital 
                level.
                    ``(C) Enforcement.--Any such directive issued 
                pursuant to this paragraph, including plans submitted 
                pursuant thereto, shall be enforceable under the 
                provisions of subtitle C of this title to the same 
                extent as an effective and outstanding order issued 
                pursuant to subtitle C of this title which has become 
                final.
            ``(3) Adherence to plan.--
                    ``(A) Consideration.--The Director may consider 
                such enterprise's progress in adhering to any plan 
                required under this subsection whenever such enterprise 
                seeks the requisite approval of the Director for any 
                proposal which would divert earnings, diminish capital, 
                or otherwise impede such enterprise's progress in 
                achieving its minimum capital level.
                    ``(B) Denial.--The Director may deny such approval 
                where it determines that such proposal would adversely 
                affect the ability of the enterprise to comply with 
                such plan.''.
            (3) Repeal of increases to conforming loan limits.--
                    (A) Repeal of temporary increase in economic 
                stimulus act.--Section 201 of the Economic Stimulus Act 
                of 2008 (Public Law 110-185) is hereby repealed.
                    (B) Repeal of general limit and permanent high-cost 
                area increase.--Paragraph (2) of section 302(b) of the 
                Federal National Mortgage Association Charter Act (12 
                U.S.C. 1717(b)(2)) and paragraph (2) of section 305(a) 
                of the Federal Home Loan Mortgage Corporation Act (12 
                U.S.C. 1454(a)(2)) are each amended to read as such 
                sections were in effect immediately before the 
                enactment of the Housing and Economic Recovery Act of 
                2008 (Public Law 110-289).
                    (C) Repeal of new housing price index.--Section 
                1322 of the Federal Housing Enterprises Financial 
                Safety and Soundness Act of 1992, as added by section 
                1124(d) of the Housing and Economic Recovery Act of 
                2008 (Public Law 110-289), is hereby repealed.
                    (D) Repeal.--Section 1124 of the Housing and 
                Economic Recovery Act of 2008 (Public Law 110-289) is 
                hereby repealed.
                    (E) Establishment of conforming loan limit.--For 
                the year in which the expiration of the period referred 
                to in section 203(b) of this section occurs, the 
                limitations governing the maximum original principal 
                obligation of conventional mortgages that may be 
                purchased by the Federal National Mortgage Association 
                and the Federal Home Loan Mortgage Corporation, 
                referred to in section 302(b)(2) of the Federal 
                National Mortgage Association Charter Act (12 U.S.C. 
                1717(b)(2)) and section 305(a)(2) of the Federal Home 
                Loan Mortgage Corporation Act (12 U.S.C. 1454(a)(2)), 
                respectively, shall be considered to be--
                            (i) $417,000 for a mortgage secured by a 
                        single-family residence,
                            (ii) $533,850 for a mortgage secured by a 
                        2-family residence,
                            (iii) $645,300 for a mortgage secured by a 
                        3-family residence, and
                            (iv) $801,950 for a mortgage secured by a 
                        4-family residence,
                and such limits shall be adjusted effective each 
                January 1 thereafter in accordance with such sections 
                302(b)(2) and 305(a)(2).
                    (F) Prohibition of purchase of mortgages exceeding 
                median area home price.--
                            (i) Fannie mae.--Section 302(b)(2) of the 
                        Federal National Mortgage Association Charter 
                        Act (12 U.S.C. 1717(b)(2)) is amended by adding 
                        at the end the following new sentence: 
                        ``Notwithstanding any other provision of this 
                        title, the corporation may not purchase any 
                        mortgage for a property having a principal 
                        obligation that exceeds the median home price, 
                        for properties of the same size, for the area 
                        in which such property subject to the mortgage 
                        is located.''.
                            (ii) Freddie mac.--Section 305(a)(2) of the 
                        Federal Home Loan Mortgage Corporation Act (12 
                        U.S.C. 1454(a)(2)) is amended by adding at the 
                        end the following new sentence: 
                        ``Notwithstanding any other provision of this 
                        title, the Corporation may not purchase any 
                        mortgage for a property having a principal 
                        obligation that exceeds the median home price, 
                        for properties of the same size, for the area 
                        in which such property subject to the mortgage 
                        is located.''.
            (4) Requirement to pay state and local taxes.--
                    (A) Fannie mae.--Paragraph (2) of section 309(c) of 
                the Federal National Mortgage Association Charter Act 
                (12 U.S.C. 1723a(c)(2)) is amended--
                            (i) by striking ``shall be exempt from'' 
                        and inserting ``shall be subject to''; and
                            (ii) by striking ``except that any'' and 
                        inserting ``and any''.
                    (B) Freddie mac.--Section 303(e) of the Federal 
                Home Loan Mortgage Corporation Act (12 U.S.C. 1452(e)) 
                is amended--
                            (i) by striking ``shall be exempt from'' 
                        and inserting ``shall be subject to''; and
                            (ii) by striking ``except that any'' and 
                        inserting ``and any''.
            (5) Repeals relating to registration of securities.--
                    (A) Fannie mae.--
                            (i) Mortgage-backed securities.--Section 
                        304(d) of the Federal National Mortgage 
                        Association Charter Act (12 U.S.C. 1719(d)) is 
                        amended by striking the fourth sentence.
                            (ii) Subordinate obligations.--Section 
                        304(e) of the Federal National Mortgage 
                        Association Charter Act (12 U.S.C. 1719(e)) is 
                        amended by striking the fourth sentence.
                    (B) Freddie mac.--Section 306 of the Federal Home 
                Loan Mortgage Corporation Act (12 U.S.C. 1455) is 
                amended by striking subsection (g).
            (6) Recoupment of costs for federal guarantee.--
                    (A) Assessments.--The Director of the Federal 
                Housing Finance Agency shall establish and collect from 
                each enterprise assessments in the amount determined 
                under subparagraph (B). In determining the method and 
                timing for making such assessments, the Director shall 
                take into consideration the determinations and 
                conclusions of the study under subsection (b) of this 
                section.
                    (B) Determination of costs of guarantee.--
                Assessments under subparagraph (A) with respect to an 
                enterprise shall be in such amount as the Director 
                determines necessary to recoup to the Federal 
                Government the full value of the benefit the enterprise 
                receives from the guarantee provided by the Federal 
                Government for the obligations and financial viability 
                of the enterprise, based upon the dollar value of such 
                benefit in the market to such enterprise when not 
                operating under conservatorship or receivership. To 
                determine such amount, the Director shall establish a 
                risk-based pricing mechanism as the Director considers 
                appropriate, taking into consideration the 
                determinations and conclusions of the study under 
                subsection (b) of this section.
                    (C) Treatment of recouped amounts.--The Director 
                shall cover into the general fund of the Treasury any 
                amounts received from assessments made under this 
                paragraph.
    (b) GAO Study Regarding Recoupment of Costs for Federal Government 
Guarantee.--The Comptroller General of the United States shall conduct 
a study to determine a risk-based pricing mechanism to accurately 
determine the value of the benefit the enterprises receive from the 
guarantee provided by the Federal Government for the obligations and 
financial viability of the enterprises. Such study shall establish a 
dollar value of such benefit in the market to each enterprise when not 
operating under conservatorship or receivership, shall analyze various 
methods of the Federal Government assessing a charge for such value 
received (including methods involving an annual fee or a fee for each 
mortgage purchased or securitized), and shall make a recommendation of 
the best such method for assessing such charge. Not later than 12 
months after the date of the enactment of this Act, the Comptroller 
General shall submit to the Congress a report setting forth the 
determinations and conclusions of such study.

SEC. 205. REQUIREMENT TO PERIODICALLY RENEW CHARTER UNTIL WIND DOWN AND 
              DISSOLUTION.

    (a) Required Renewal; Wind Down and Dissolution Upon Non-Renewal.--
Upon the expiration of the 3-year period that begins upon the 
expiration of the period referred to in section 203(b), unless the 
charter of an enterprise is renewed pursuant to subsection (b) of this 
section, section 206 (relating to wind down of operations and 
dissolution of enterprise) shall apply to the enterprise.
    (b) Renewal Procedure.--
            (1) Application; timing.--The Director shall provide for 
        each enterprise to apply to the Director, before the expiration 
        of the 3-year period under subsection (a), for renewal of the 
        charter of the enterprise.
            (2) Standard.--The Director shall approve the application 
        of an enterprise for the renewal of the charter of the 
        enterprise if--
                    (A) the application includes a certification by the 
                enterprise that the enterprise is financially sound and 
                is complying with all provisions of, and amendments 
                made by, section 204 of this title applicable to such 
                enterprise; and
                    (B) the Director verifies that the certification 
                made pursuant to subparagraph (A) is accurate.
    (c) Option To Reapply.--Nothing in this section may be construed to 
require an enterprise to apply under this section for renewal of the 
charter of the enterprise.

SEC. 206. REQUIRED WIND DOWN OF OPERATIONS AND DISSOLUTION OF 
              ENTERPRISE.

    (a) Applicability.--This section shall apply to an enterprise--
            (1) upon the expiration of the 3-year period referred to in 
        such section 205(a), to the extent provided in such section; 
        and
            (2) if this section has not previously applied to the 
        enterprise, upon the expiration of the 6-year period that 
        begins upon the expiration of the period referred to in section 
        203(b).
    (b) Wind Down.--Upon the applicability of this section to an 
enterprise, the Director and the Secretary of the Treasury shall 
jointly take such action, and may prescribe such regulations and 
procedures, as may be necessary to wind down the operations of an 
enterprise as an entity chartered by the United States Government over 
the duration of the 10-year period beginning upon the applicability of 
this section to the enterprise (pursuant to subsection (a)) in an 
orderly manner consistent with this Act and the ongoing obligations of 
the enterprise.
    (c) Division of Assets and Liabilities; Authority To Establish 
Holding Corporation and Dissolution Trust Fund.--The action and 
procedures required under subsection (b)--
            (1) shall include the establishment and execution of plans 
        to provide for an equitable division and distribution of assets 
        and liabilities of the enterprise, including any liability of 
        the enterprise to the United States Government or a Federal 
        reserve bank that may continue after the end of the period 
        described in subsection (b); and
            (2) may provide for establishment of--
                    (A) a holding corporation organized under the laws 
                of any State of the United States or the District of 
                Columbia for the purposes of the reorganization and 
                restructuring of the enterprise; and
                    (B) one or more trusts to which to transfer--
                            (i) remaining debt obligations of the 
                        enterprise, for the benefit of holders of such 
                        remaining obligations; or
                            (ii) remaining mortgages held for the 
                        purpose of backing mortgage-backed securities, 
                        for the benefit of holders of such remaining 
                        securities.
    (d) Repeal of Charter.--Effective upon the expiration of the 10-
year period referred to in subsection (b) for an enterprise, the 
charter for the enterprise is repealed, except that the provisions of 
such charter in effect immediately before such repeal shall continue to 
apply with respect to the rights and obligations of any holders of 
outstanding debt obligations and mortgage-backed securities of the 
enterprise.
                                 <all>